Preferred Stock Investing-The Good , The Bad and The In Between 2015 - 2020

[Mulligan]

Your assesment of what you see actually is making a case to buy up the long end. As that is what you buy when economy is heading south. Nationally and globally the trends are stronger though. Just musings on my part. When you snag issues like I did with ASRVP at 26.50 at 8%, the call risk is still more of a concern than rate hikes are.

 

[Freedom56]

Your assesment of what you see actually is making a case to buy up the long end. As that is what you buy when economy is heading south. Nationally and globally the trends are stronger though. Just musings on my part. When you snag issues like I did with ASRVP at 26.50 at 8%, the call risk is still more of a concern than rate hikes are.

Long rates cannot go that much higher. There is too much debt outstanding and now growing with the tax cuts. It will cost too much to service that debt. I will definitely buy back into the perpetual preferred stocks at much lower prices below par. I'm going to be patient. I have a lot of dry powder now and will continue to watch PFF and PGX. The two have a combined $22.8B in assets. If investors and hedge funds continue to sell these ETFs, they can do a significant amount of damage (much more damage than in 2013). Most of my holdings mature in 2018, 2019, 2022, 2024, 2028 and 2031 and are not exchange traded. CD rates are still too low to get too excited about them.

 

[Mulligan]

I need to flesh out your thoughts more because I am not connecting. If long end doesnt move more and the market percieves that as such, then they wont move greatly under par. Under par by itself doesnt mean much to me by itself...IPL-D hit $24 today. I would much rather get a second stab at more ASRVP at 26.50 than IPL-D at $24...Now if it gets under $21, Im looking very hard then!

 

[brokrken]

The 5% liquid issues are starting to head back behind the woodshed I noticed.

Yep, see IPL'D

 

[brokrken]

IPL-D hit $24 today. I would much rather get a second stab at more ASRVP at 26.50 than IPL-D at $24...Now if it gets under $21, Im looking very hard then!

Haha, beat me to it.

 

[Freedom56]

I need to flesh out your thoughts more because I am not connecting. If long end doesnt move more and the market percieves that as such, then they wont move greatly under par. Under par by itself doesnt mean much to me by itself...IPL-D hit $24 today. I would much rather get a second stab at more ASRVP at 26.50 than IPL-D at $24...Now if it gets under $21, Im looking very hard then!

When a fund sells to raise cash into an illiquid market, prices will fall to where ever there is support. I bought JPM-PH at 23.75 and COF-F at 23.92 during a sell-off in 2015. They both rebounded quickly above par in a matter of 2 days. I sold those over $27 last month. I can see that scenario unfolding again for many investment grade preferred stocks. Look at AGO-E. It's back down close to par again. When PFF and PGX move down in higher than normal volume, it's a sign that their holdings will be under pressure It's nothing to do with interest rate fundamentals, but more to do with supply and demand. I would buy IPL-D under $20. EBAYL is a better buy under $24.50 where my original entry point was. EBAYL also has a higher coupon and a BBB+ rating and is a rock solid organization with very little debt.

 

[Mulligan]

Preferred Stock Investing-The Good , The Bad and The In Between

When a fund sells to raise cash into an illiquid market, prices will fall to where ever there is support. I bought JPM-PH at 23.75 and COF-F at 23.92 during a sell-off in 2015. They both rebounded quickly above par in a matter of 2 days. I sold those over $27 last month. I can see that scenario unfolding again for many investment grade preferred stocks. Look at AGO-E. It's back down close to par again. When PFF and PGX move down in higher than normal volume, it's a sign that their holdings will be under pressure It's nothing to do with interest rate fundamentals, but more to do with supply and demand. I would buy IPL-D under $20. EBAYL is a better buy under $24.50 where my original entry point was. EBAYL also has a higher coupon and a BBB+ rating and is a rock solid organization with very little debt.

Speaking of illiquid....Illiquid trade of the day...Unloaded my 105 shares of MSEXP at 182.25 today...A nice $40 profit per share plus 2 divis for holding 6 months...Not bad for a preferred stock trade.
I think we are in agreement but talking from different angles. The genesis of the buy/sell imbalance comes from the expectations of rate hikes in general. But what you are stating I am in agreement with in that is how I do all my trades. I just dont wait for the “great big one”. I go ahead and strike on one day illiquid preferred dumps...Like the INBKL and ASRVP selloff dump the other day. But when I do buy I have to feel comfortable in holding long term if I buy though.
My MSEXP sell today is a perfect reverse example that follows mine and your line of thinking...Buy/sell imbalance...Somebody wanted those 105 shares real bad, so they had to pay up to get mine. and considering there arent but 790 in existence they had to take my price!

 

[Running_Man]

Federal Realty on 9/27 issued a 5% Investment grade preferred, I have a mental note to buy some when the price hits 18.

Down 45 cents today to 23.90 from a recent price of $25.50 the 5% preferred are really taking a beating. 5.9 points to go... the Public Storage which I bought last year for 21 and sold for a little more than 25 is down to 23 and change and really there is no reason for it not to be below where it was a year ago and would expect it to get there shortly. Reality on interest rates is starting to hit the long end.

As prices fall further for the higher quality issues as time passes, you take a note with a short term possible call and high quality and greatly expand the length of time it can be held for that interest rate as the call price gets away from the market price. Much better for holdings than over call price issues in my book.

It would be especially helpful though if the stock market held up during the interest rate increasing period. Saw where Treasury is issuing the most debt in a quarter in 8 years, only difference is 8 years ago FED bought 1/2 of it so this is like twice as much issuance as then.

 

[Freedom56]

The S&P PE ratio is not sustainable at these levels. We have all seen this movie before - 2000-2003, 2008-2009. It's a matter of time before the supply of cash runs out and there is no-body left to buy the narrow group of stocks that are pulling the market up we will have a correction.

 

[Mulligan]

The S&P PE ratio is not sustainable at these levels. We have all seen this movie before - 2000-2003, 2008-2009. It's a matter of time before the supply of cash runs out and there is no-body left to buy the narrow group of stocks that are pulling the market up we will have a correction.

Im content with you just being able to wave your wand and get me a 25% sell off in water utilities. Get it done for me, and I know where half my money is going! Try to shut them down, Amazon, lol.

 

[Mulligan]

Down 45 cents today to 23.90 from a recent price of $25.50 the 5% preferred are really taking a beating. 5.9 points to go... the Public Storage which I bought last year for 21 and sold for a little more than 25 is down to 23 and change and really there is no reason for it not to be below where it was a year ago and would expect it to get there shortly. Reality on interest rates is starting to hit the long end.

As prices fall further for the higher quality issues as time passes, you take a note with a short term possible call and high quality and greatly expand the length of time it can be held for that interest rate as the call price gets away from the market price. Much better for holdings than over call price issues in my book.

It would be especially helpful though if the stock market held up during the interest rate increasing period. Saw where Treasury is issuing the most debt in a quarter in 8 years, only difference is 8 years ago FED bought 1/2 of it so this is like twice as much issuance as then.

Dont disagree RM, but we are not there yet. They need to fall more and I will stick with my past call, above par, higher than market yield trapped by call risk issues.....Or term dated... But yes, my strategy is to follow, but patience on my end is needed...NSS, ALLY-A, ASRVP arent going to sink like the others are. Then we get a nice rotation trade.

 

[bobandsherry]

Dont disagree RM, but we are not there yet. They need to fall more and I will stick with my past call, above par, higher than market yield trapped by call risk issues.....Or term dated... But yes, my strategy is to follow, but patience on my end is needed...NSS, ALLY-A, ASRVP arent going to sink like the others are. Then we get a nice rotation trade.

I get why NSS and ALLY-A won't sink based on rates, but why wouldn't ASRVP hold it's value?

 

[Mulligan]

I get why NSS and ALLY-A won't sink based on rates, but why wouldn't ASRVP hold it's value?

Anything can sell off for any reason. ASRVP has shown a history of being solid. It never dipped below par even during the wild 2013 Taper Tantrum. These arent the type I recommend anyone to buy but for myself. I dont mind reaching above par to clip 8% from a bank that never missed a payment even during 2008-09 crisis. Its not a great bank, its just so mediocrely mediocre, the issue lives on. It could get called any day.
And there are rate scenarios where Ally-A and NSS drop, company health issues aside....If Fed quits raising short term rates and long end rises they could drop. As they only benefit from Libor change, not long end movements. There used to be a preferred that had a kicker plus 30 year bond yield. I wish there were some of those, but that one got called a few years back and I dont know of any now.

 

[bobandsherry]

Anything can sell off for any reason. ASRVP has shown a history of being solid. It never dipped below par even during the wild 2013 Taper Tantrum. These arent the type I recommend anyone to buy but for myself. I dont mind reaching above par to clip 8% from a bank that never missed a payment even during 2008-09 crisis. Its not a great bank, its just so mediocrely mediocre, the issue lives on. It could get called any day.
And there are rate scenarios where Ally-A and NSS drop, company health issues aside....If Fed quits raising short term rates and long end rises they could drop. As they only benefit from Libor change, not long end movements. There used to be a preferred that had a kicker plus 30 year bond yield. I wish there were some of those, but that one got called a few years back and I dont know of any now.

I guess I don't understand. In 2007 ASRVP dropped below par, as low as $14.51 in 2008. It didn't get back to par until 2010. 1999 until 2004 it was below par as well. So that's why I was a bit confused, but understand your point. Thanks

 

[Mulligan]

Preferred Stock Investing-The Good , The Bad and The In Between

I guess I don't understand. In 2007 ASRVP dropped below par, as low as $14.51 in 2008. It didn't get back to par until 2010. 1999 until 2004 it was below par as well. So that's why I was a bit confused, but understand your point. Thanks

Bob, the reason why I omitted that was it was a financial crisis preferred plummet not a straight vanilla rate hike fear. Rates around 2000 were unbelievable higher than today as I am not predicting a 5-6% 10 year bond.....If that happens, yep its going UNDER, lol...Also around 2003 the bank got in trouble. They converted 2/3 of ASRVP into common stock. So there is only about 13 million float left. Kind of odd to talk about a bank almost going under in 2003 but making it through the crisis in fairly good fashion compared to a lot of banks. But the little important ace in the hole for me is its maturity date of 2028. This is not a perpetual and will trade less and less like one as it gets closer to maturity provided it doesnt get called.

 

[bobandsherry]

^^- Thanks Mulligan. I was in banking for my entire career, so aware of the banking crisis issues, several of them. Recall 15% repo's in the 80's? Oh, those were the days if you were an depositor/investor, not so much if you were a borrower

 

[Mulligan]

^^- Thanks Mulligan. I was in banking for my entire career, so aware of the banking crisis issues, several of them. Recall 15% repo's in the 80's? Oh, those were the days if you were an depositor/investor, not so much if you were a borrower

Bob you can appreciate this trivia tidbit about ASRV bank....Their employees are unionized. Last I heard there was fewer than 10 banks in US that had unionized bank employees. That is why they are not an extremely profitable bank. They have to actually give their workers a raise, lol.

 

[bobandsherry]

Bob you can appreciate this trivia tidbit about ASRV bank....Their employees are unionized. Last I heard there was fewer than 10 banks in US that had unionized bank employees. That is why they are not an extremely profitable bank. They have to actually give their workers a raise, lol.

Hmmm.... according to Glassdoor, those workers need a better union. Glassdoor shows that teller salaries are $12-13, that's less than my mega corp bank was paying their tellers. Figure those tellers are paying dues, then well they are really sucking wind. The benefits are a bit suspect as to accuracy of what's shown, but if it's only half true those benefits are a joke.

Just looked up the financials for ASRV. Pretty good NIM, but their ROA and ROE shows just how mediocre they are. Don't see much chance of them calling the preferred based on their financials. Or maybe they are just looking to be acquired.

 

[Mulligan]

Hmmm.... according to Glassdoor, those workers need a better union. Glassdoor shows that teller salaries are $12-13, that's less than my mega corp bank was paying their tellers. Figure those tellers are paying dues, then well they are really sucking wind. The benefits are a bit suspect as to accuracy of what's shown, but if it's only half true those benefits are a joke.



Just looked up the financials for ASRV. Pretty good NIM, but their ROA and ROE shows just how mediocre they are. Don't see much chance of them calling the preferred based on their financials. Or maybe they are just looking to be acquired.

They did have pensions though...Though they are trying to weed that out. They are on the hook for 3% raises next 3 years. Salaries arent going to be high there as they are in a less than robust economic area. But they make more than our local tellers due, lol.
I read about the acquired possibility but researchers said that would not be likely as banks do not want to get involved with absorbing a union.

 

[Mulligan]

Texas did you ever get into PFX? I guess I should have bought more...It has jumped 10% in past 2 days.... Sold my INBKL today. Collected over 2 dividends holding a week. Bought some CNIGP the other day to compliment my CNIGO.

 

[MooreBonds]

New baby bond for a BDC: GECCM, 2027 final maturity, yielding a hair under 7% currently ($24.40). I picked up a few.

 

[Texas Proud]

Texas did you ever get into PFX? I guess I should have bought more...It has jumped 10% in past 2 days.... Sold my INBKL today. Collected over 2 dividends holding a week. Bought some CNIGP the other day to compliment my CNIGO.

No, did not have the money I wanted in the account and also have been dealing with a problem at Vanguard (look in the other thread).... edit to add... looked at it and it seems someone is buying a large position... I bet it will come back down when they are finished...

Will probably be looking for a different broker for my IRA... any suggestions from people here? I was looking at Merrill as you can get free trades with a large enough account, but nobody seems to put anything down about this one...

 

[gwraigty]

Will probably be looking for a different broker for my IRA... any suggestions from people here? I was looking at Merrill as you can get free trades with a large enough account, but nobody seems to put anything down about this one...

We have taxable accounts at Schwab and Fidelity and 2 Roth IRAs at Fidelity. No problems with either firm.

 

[Winemaker]

I have accounts at Fido ($4.95/trade), and an orphan 401k that I moved to Merrill Edge($6.95/trade).

 

[Coolius]

Will probably be looking for a different broker for my IRA... any suggestions from people here? I was looking at Merrill as you can get free trades with a large enough account, but nobody seems to put anything down about this one...

I have been satisfied with Merrill Edge. The free trades are nice, as I do not get upset if someone sells me 1 share out of a 300 share order ( or if someone buys 1 share out of my 300 share sell ).

Their Customer Service has been pretty good, they have never attempted to push any product on me.