Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 07-30-2016, 10:39 AM   #1001
Thinks s/he gets paid by the post
Sunset's Avatar
 
Join Date: Jul 2014
Location: Chicago
Posts: 2,759
I see I have a small error in above.

After 2.4 years the capital gain + VTI = 3.3 years of CHSCM divs.

But of course after 3.3 years the VTI would add more div (58 cents), so you would have to hold the CHSCM longer to end up with the same amount of money. approximately it would be 3.7 years.

This strengthens the argument to sell the CHSCM
__________________

__________________
Sunset is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 07-30-2016, 10:55 AM   #1002
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 1,504
The current yield to call in 2024 for CHSCM is about 4 percent so that is what it is selling on for right now. That is the competition to be looking for to compare against in this instance were the holdings of CHSCM to be sold.

When to sell is a tough question as the interest rate market outlook as shown by market prices are now where Mulligan thoughts were last December so pricing is now equivalent to the thinking at that time and current prices no longer hold a premium on new purchases.

The question I try to satisfy myself with is how long and far will the low interest rate environment hold? An indicator I keep my eye on in the absence of interest rate hikes (which I don’t see in the next 6 months as of now) is gold -- if informed sources and governments become very concerned about future inflation they will purchase gold and force it’s price up. If gold were to break $1800 or $1900 per ounce that would be very concerning to me on holding fixed income. I would use this as an indicator to take a hard look at my fixed income holdings. As of right now I do not see anything that indicates I should sell these holdings as I do not have a good alternative investment. Of interest to me is that gold prices bottomed at $1,060, the same time that Mulligan/Collius became interested in the CHSCM/WFCPL issues as issues that held a very good interest rate that would not be called for years.

The fear of negative interest rates is certainly forcing people to rush into these yield investments but that in and of itself is not a reason to sell. In 2009 government bond purchases pushed people in stocks and likewise that was not a reason to sell stocks at that point either. If interest rates are pushed into the negative yield continuum along the US government curve these fixed income holding would rise even further in price.

For my own holdings then, based on my thinking as above I am in a hold pattern, not seeing a sufficient alternative investment and not willing to hold any more assets than I presently own at near zero percent interest rates.

****Edit to note Sunset argument on VTI****
I view the percentage of stocks I am willing to hold as a separate debate from the holding of preferred stocks. While preferred have stocks in their name I consider them a fixed income investment and my investing in them is in comparison to other fixed income alternatives not stocks. However the argument being made by sunset is now being advocated by many in the stock market camp and has caused many of my dividend stocks to rise quite rapidly in price over the last year. As the negative interest rates come closer the cash flow of dividend payments from any source rapidly gain favor. It is an increased linking of all investment classes forced by the chains of negative interest rates.
__________________

__________________
Running_Man is offline   Reply With Quote
Old 07-30-2016, 10:55 AM   #1003
Moderator
aja8888's Avatar
 
Join Date: Apr 2011
Location: The Woodlands
Posts: 5,632
Quote:
Originally Posted by Sunset View Post
I see I have a small error in above.

After 2.4 years the capital gain + VTI = 3.3 years of CHSCM divs.

But of course after 3.3 years the VTI would add more div (58 cents), so you would have to hold the CHSCM longer to end up with the same amount of money. approximately it would be 3.7 years.

This strengthens the argument to sell the CHSCM
I'm in your camp here and fear a drop of lofty preferreds when interest rates rise.

Interestingly, earlier this year, when we had the decline in the market (Feb?), CHSCM went to the high side of $24. I loaded up at $25 at that time. This move to $29+ is quite quick and I don't understand the fast rise. That's why I am edging toward banking the CG.
__________________
......."Everybody has a plan until they get punched in the face." -- philosopher Mike Tyson.
aja8888 is offline   Reply With Quote
Old 07-30-2016, 11:03 AM   #1004
Full time employment: Posting here.
Coolius's Avatar
 
Join Date: May 2010
Posts: 543
Quote:
Originally Posted by aja8888 View Post
The question I have is what to do with an issue like CHSCM when bought at $25 and now is $29.25? This yield 5.77% currently and I am pondering whether or not it makes sense to sell it in my IRA, keep the capital gain of 17% and re-buy it later when prices fall (or not).

aj, I am in a similar position, except that I bought CHSCL when it was newly issued, at close to par. I also bought some CHSCO at around $28 a while back, don't remember exactly when.

I have other holdings that give me a lot more anxiety ( excitement? ) so have not been looking at them lately - probably a good thing.

Since I am going for income, I will not sell. Don't know what it will be like going forward, but my feeling is farming/agricultural doldrums are close to recovering, and the future looks more positive than it has for the past year.

CHS will reap the benefit of biting the bullet when they canned the fertilizer plant last year; they got out of a money losing project, and in place took on a Joint Venture project which reduces their risk exposure..

I am not aiming for capital growth, but for stability and sustainability of the income stream, my objective when I first bought the stocks.
__________________
Coolius is online now   Reply With Quote
Preferred Stock Investing-The Good , The Bad and The In Between
Old 07-30-2016, 11:13 AM   #1005
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 6,704
Preferred Stock Investing-The Good , The Bad and The In Between

Good points, RMan... But, gee it was so much easier last year to figure out the near term. But after the stampede in from yield seekers, I suddenly dont feel as smart going forward.....
Last year I felt 6% was the safe demarcation line in avoiding "asset value" whipped on a rate turn. But this is now becoming an unreachable goal for future purchases... After researching, I have found, that preferreds could take a further dip in yields after researching the 1940s....Clearly history has shown that high quality preferreds can come to market at even 3.5% and be sold... As historically perpetual preferreds have held a 200 point BP spread...Even with the 5% ers coming on line today that is currently a 350 BP spread...So yes its possible yield can go lower...I still have a lot of 1980s and late 1990's interest rate blood in me, and it is hard to completely go in with a new theory that 5% perpetuals are the new safe 6% issues... That is why I was so pleased to snag 200 shares of EGYKP a few weeks ago at $102.50 or so. Im getting almost 6%. AND under call price, while investment grade. The fact it is an old tiny early 1960s issue makes it more compelling it will not get called. Old tiny issues have historically only been called when mergers occur. Utilities are not as yield sensitive in calling as Reits and banks are, as they are a drop in the bucket on their capital structure, unlike the other 2 industries.


Sent from my iPad using Tapatalk
__________________
Mulligan is offline   Reply With Quote
Old 07-30-2016, 11:20 AM   #1006
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 6,704
Quote:
Originally Posted by Coolius View Post
aj, I am in a similar position, except that I bought CHSCL when it was newly issued, at close to par. I also bought some CHSCO at around $28 a while back, don't remember exactly when.

I have other holdings that give me a lot more anxiety ( excitement? ) so have not been looking at them lately - probably a good thing.

Since I am going for income, I will not sell. Don't know what it will be like going forward, but my feeling is farming/agricultural doldrums are close to recovering, and the future looks more positive than it has for the past year.

CHS will reap the benefit of biting the bullet when they canned the fertilizer plant last year; they got out of a money losing project, and in place took on a Joint Venture project which reduces their risk exposure..

I am not aiming for capital growth, but for stability and sustainability of the income stream, my objective when I first bought the stocks.


Off to the stockades you go, Coolius, for claiming to be an "income streamer". I got proof you are like me... Buying for income, then watching price movements and impulsively becoming a dirty "preferred market timer" and cap gain taker. Its in your blood...You cant change your destiny no matter what you say!


Sent from my iPad using Tapatalk
__________________
Mulligan is offline   Reply With Quote
Old 07-30-2016, 11:34 AM   #1007
Full time employment: Posting here.
Coolius's Avatar
 
Join Date: May 2010
Posts: 543
Quote:
Originally Posted by Mulligan View Post
Off to the stockades you go, Coolius, for claiming to be an "income streamer". I got proof you are like me... Buying for income, then watching price movements and impulsively becoming a dirty "preferred market timer" and cap gain taker. Its in your blood...You cant change your destiny no matter what you say!


Sent from my iPad using Tapatalk

Hey, when one is retired, with no paycheck coming in, it's natural to try & skim off a little coin here & there. One has to eat, y'know.

Such as CNLPL - been having some success selling when it hits $55 and above, then buying back at around $54. But not touching my core holdings.

Still watching WFC-L. Sold some at $1,332 - was going to buy back around $1,300 but it never got down there. Now it's back to around what I sold....bummer.
__________________
Coolius is online now   Reply With Quote
Old 07-30-2016, 11:45 AM   #1008
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 11,531
RM, I disagree with your premise that interest rates will not go up for awhile and in fact go negative....

From what I see on the TV, they have priced in a 40% ish chance of a rate rise in Sept and IIRC a 70% (or more) in Dec... I think we will get a 25bp rise sometime this year....


As for AJ, I would book that 17% gain... there are other issues out there that you can buy or as mentioned just park it in a fund for awhile... the probability of having interest rates rise a full 1% in the next two years is pretty good IMO... so prices will should come down.... the only thing that would give me pause (and I have not looked at this issue) is if it were thinly traded... from what I can see a thinly traded issue can have price spikes both ways that do not make sense... but they are usually small when compared to the total price which is why I ignore them...


BTW, I just sold part of one of my holdings with a 5% increase... hoping to get back in at a lower price.... I have put in an limit order and hope to snag it when someone decides to dump....
__________________
Texas Proud is offline   Reply With Quote
Old 07-30-2016, 11:59 AM   #1009
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 6,704
Quote:
Originally Posted by Texas Proud View Post
RM, I disagree with your premise that interest rates will not go up for awhile and in fact go negative....

From what I see on the TV, they have priced in a 40% ish chance of a rate rise in Sept and IIRC a 70% (or more) in Dec... I think we will get a 25bp rise sometime this year....


As for AJ, I would book that 17% gain... there are other issues out there that you can buy or as mentioned just park it in a fund for awhile... the probability of having interest rates rise a full 1% in the next two years is pretty good IMO... so prices will should come down.... the only thing that would give me pause (and I have not looked at this issue) is if it were thinly traded... from what I can see a thinly traded issue can have price spikes both ways that do not make sense... but they are usually small when compared to the total price which is why I ignore them...


BTW, I just sold part of one of my holdings with a 5% increase... hoping to get back in at a lower price.... I have put in an limit order and hope to snag it when someone decides to dump....


Oh no....Another "income investor" becoming a "dirty preferred market timer". Join the club! There has been "froth", but as RM stated is it that or just people catching up to concept that yield is going to be scarce a while? Its really all dependent on central bank buying...Which I have no clue... Traditionally a 2% inflation, 2% economic growth, and sub 5% unemployment does not warrant the interest rate environment we are in... But in the 1940s Feds manipulated market so much treasury yields were at times 6% under inflation...That is a bit worrisome...If they push up short term and long term continues contracting, there are many preferreds that could get destroyed that use leverage like Mreits and BDC's. And all sorts of leveraged funds playing the short/long spread...



Sent from my iPad using Tapatalk
__________________
Mulligan is offline   Reply With Quote
Old 07-30-2016, 12:03 PM   #1010
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 6,704
Some of these issues has just become a giant game of "chicken" to see who gets caught holding the bag... Many of these types but take O-F as an example...You are guaranteed to lose money buying this issue right now...yet people buy it through stupidity or thinking they can flip off at a higher price to another idiot..Does make one ponder...


Sent from my iPad using Tapatalk
__________________
Mulligan is offline   Reply With Quote
Old 07-30-2016, 12:20 PM   #1011
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 1,504
Texas Proud, On the interest rates we will see, I find interest rates are harder to predict in the short to intermediate term even more than stock prices but there is no way in my mind that the Federal Reserve can risk an interest rate increase as more and more global bonds hold negative interest rates. We began this year with 7 trillion in worldwide negative interest rate government debt and that number has now expanded to 13 trillion at the end of July. The 10 year bond fell in yield this week from 1.51 percent to 1.44 percent and began the year at 2 percent. The 5 year treasury fell from 1.15 to 1.02 this week and is pressing up against a 5 year low. The German 10 year bond fell from .65 percent interest from Jan to negative -0.12 on Friday. The German 20 year bond fell to a new low on the year at 0.14% interest down from 1.3% at the start of the year.

When the trading partners of the US continue to have falling interest rates a higher rated entity like the US government yielding 2-3 percent more causes trade issues and they would be exasperated in the face of a US interest rate increase on the short end. So my personal forecast is for none in the next 6 months. But I believed that back in December when they raised that there was no economic basis for the increase which caused the short term value opportunity in many of these preferred issues.

As I view fixed income as income streams the one area where CHS is favored is the fact it is not callable for 8 years so that while that is providing a basis for pricing of the security right now @ 4.3% I think if interest rates were to rise 3 percent over the next eight years that would place CHS around 24 as a price in 8 years meaning you would continue to earn the 5.77% on your investment as priced today for a considerable longer period of time than the original 8 years planned. I am not adept enough in jumping in and out of interest rate sensitive issues as many others are here, though I think there is agreement among many of us current pricing of preferreds is not a value proposition. It is just I fear having cash trapped in Yellen hell of ZIRP and continued promises ZIRP is ending for the next 2-3 years and then being forced into VTI by TINA.
__________________
Running_Man is offline   Reply With Quote
Preferred Stock Investing-The Good , The Bad and The In Between
Old 07-30-2016, 01:39 PM   #1012
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 6,704
Preferred Stock Investing-The Good , The Bad and The In Between

RM, you are giving Coolius and I a bit too much credit on jumping in and out of interest sensitive preferreds. We really only do in a select few and the illiquid ones...I mean the ones that sometimes do not trade for days at a time...This is relatively simple provided you have another issue of similar quality that dipped while the other one was over bid. 200 shares can make a difference between an issue rising or falling 50 cents to a buck below normal trading range. The more liquid ones such as the CHS issues are way more problematic in trying to dip in and out of as 200 shares will have no impact on it.
For example it has been a no brainer for me to buy PFK (although this one is a bit more liquid) around $25.50 collect a 7 cent monthly divi and flip when it hits $25.80... Rinse and repeat..Some times in just a matter over a few weeks. My one criteria is am I willing to hold if the flip opportunity would not happen. In the case of PFK, I am perfectly fine holding it.
Another type of example was the BGLEN share dump a month or two ago....A total no brainer, shooting fish in a barrel. The key is having the ones on your radar list and be ready if opportunity presents itself. Already sold over half off at a $3-4$ gain plus a $1.76 divi in hand for holding less than a month.


Sent from my iPad using Tapatalk
__________________
Mulligan is offline   Reply With Quote
Old 07-31-2016, 11:18 PM   #1013
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 1,504

Dudley Fed President in Jan 2016 saying Fed would have several rate hikes in coming year

Fed‚€™s Dudley points to interest rate hike in June or July - MarketWatch

In May said definitely looked like June or July for rate hike

New York Fed President Dudley says Federal Reserve may hike interest rates faster than the market expects

Now in July says really investors should not be ruling out a rate hike by end of the year it is still possible



I do not/ did not believe him at any of these points......................
__________________
Running_Man is offline   Reply With Quote
Old 08-01-2016, 07:47 AM   #1014
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 6,704
That is an excellent point on why near term risk of buying 5% issues is minimal. Plus, throw in the fact that we are historically past due for next recession which also keeps a lid on rates.


Sent from my iPad using Tapatalk
__________________
Mulligan is offline   Reply With Quote
Old 08-01-2016, 08:58 AM   #1015
Full time employment: Posting here.
 
Join Date: Jun 2014
Posts: 908
Quote:
Originally Posted by Running_Man View Post

Dudley Fed President in Jan 2016 saying Fed would have several rate hikes in coming year

Fed’s Dudley points to interest rate hike in June or July - MarketWatch

In May said definitely looked like June or July for rate hike

New York Fed President Dudley says Federal Reserve may hike interest rates faster than the market expects

Now in July says really investors should not be ruling out a rate hike by end of the year it is still possible



I do not/ did not believe him at any of these points......................

I would never want to be right less often than the weatherman.


Sent from my iPhone using Early Retirement Forum
__________________
dallas27 is offline   Reply With Quote
Old 08-01-2016, 10:54 AM   #1016
Moderator
aja8888's Avatar
 
Join Date: Apr 2011
Location: The Woodlands
Posts: 5,632
Quote:
Originally Posted by dallas27 View Post
I would never want to be right less often than the weatherman.


Sent from my iPhone using Early Retirement Forum
He's 50/50 on most things (rain or not rain?). Plus, no accountability. Same as my friend's "financial guy" at Ameriprise.
__________________
......."Everybody has a plan until they get punched in the face." -- philosopher Mike Tyson.
aja8888 is offline   Reply With Quote
Old 08-01-2016, 05:00 PM   #1017
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 11,531
Well, I just sold one of my pref for a bit over one year of divis...

This is one that is not one of Mulligans... is traded a lot and is volatile... I will hold off an pick it up when the price goes down again...

I just checked and have been doing this since 2007... not often, less than once a year... the first time I bought it I held for almost 3 years... skipped a year, etc. etc...
__________________
Texas Proud is offline   Reply With Quote
Preferred Stock Investing-The Good , The Bad and The In Between
Old 08-01-2016, 05:07 PM   #1018
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 6,704
Preferred Stock Investing-The Good , The Bad and The In Between

Alright Texas, we just dont kiss and not tell.....We kiss AND tell! Pull up the Big Boy pants and toss out the ticker symbol!


Sent from my iPad using Tapatalk
__________________
Mulligan is offline   Reply With Quote
Old 08-01-2016, 06:07 PM   #1019
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 11,531
Quote:
Originally Posted by Mulligan View Post
Alright Texas, we just dont kiss and not tell.....We kiss AND tell! Pull up the Big Boy pants and toss out the ticker symbol!


Sent from my iPad using Tapatalk

I had told it to you awhile back.... you did not like it..

JSM
__________________
Texas Proud is offline   Reply With Quote
Preferred Stock Investing-The Good , The Bad and The In Between
Old 08-01-2016, 06:07 PM   #1020
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 6,704
Preferred Stock Investing-The Good , The Bad and The In Between

Ok, while Texas is still contemplating my "challenge" (teasing you know), I will lay it out there with what I did today as it risky in this environment... I bought the 200 shares today that traded on the AILLL today. Everything has risk, but I thought up 6-7 good reasons why it will never be called anything short of a negative interest rate environment... I have bought a few 5% ers, but have largely side stepped the issue. History shows high quality 6% issues are just fine in a 3-4% 10 year treasury environment and I am doing my damnedest to stay there and what I want to be in...
I wanted two obscure little issues, but after a couple days I gave up on one as it had only traded 200 shares this year and had an ask of 1 share at $175. So I focused on the other after a few days and all be darn if the other one hit 50 shares today at a price I had and pulled...I was mad!!!
I have found one other obscure one that religiously pays $4 annual divi and the shares left are uncallable. It hasnt traded in over 6 years maybe 10-15 years...A long ago issue that was sent packing to the Grey market years ago which means no bids and asks... I think in the next few days I am going to round up some cash and get broker to call down and dig and offer $25 dollars above last traded price and see if I can get some...That would still net me a perpetual 6% if I got lucky... Its worth a shot...


Sent from my iPad using Tapatalk
__________________

__________________
Mulligan is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Preferred or not preferred lja0703 Stock Picking and Market Strategy 19 02-19-2015 10:52 AM
Fixed to Float Preferred Stock Richard4444 FIRE and Money 5 11-04-2013 06:43 AM
Choosing Between Pre-tax and After-tax Investing ClockWatcher Hi, I am... 10 05-09-2013 08:05 PM
How to sell individual Municipals and Preferred stock JB Stock Picking and Market Strategy 5 12-27-2007 03:28 PM
Third Party Preferred Stock Tony Tampa FIRE and Money 1 04-25-2006 03:47 PM

 

 
All times are GMT -6. The time now is 01:44 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2016, vBulletin Solutions, Inc.