Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Preferred Stock Investing-The Good , The Bad and The In Between
Old 09-19-2016, 07:44 PM   #1321
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

To add to RM's thoughts, I have noticed (from afar as I do not invest in high yield preferreds) that some common stocks get roasted over time in price and/or divi cuts, while the preferred stays strong from that company. MReits are a prime example of what RM is referring to.
__________________

__________________
Mulligan 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 09-20-2016, 11:55 AM   #1322
Thinks s/he gets paid by the post
MooreBonds's Avatar
 
Join Date: Aug 2004
Location: St. Louis
Posts: 1,950
Picked up some GBLIZ baby bonds at 25.66 today, yield to call (Aug 2020) about 6.9%. Final maturity 2045. It's a re-insurer. I think I only have two other insurance company preferreds in my stable (AFSS and NGHCZ).
__________________

__________________
Dryer sheets Schmyer sheets
MooreBonds is offline   Reply With Quote
Old 09-21-2016, 01:13 PM   #1323
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 1,504
So no increase by the FED as at least I expected, the FED also has cut their 3 year economic growth rate to under 2 percent. Now on CNBC they are SURE, SURE SURE that rates will be raised in November or December. Meantime Krugman is giving Bank of Japan advice over the weekend to lower interest rates to below negative one percent, (if you want some good entertainment go read his comments and that his justification is that even if inflation were to get out of hand and implode the value of bonds it will make the level of debt irrelevant and save Japan in that manner) and Ben Bernanke is giving advice that the FED should be studying on how to implement negative rates. So now we can start another 3 month cycle—— remember in January Janet Yellen stood up in a press conference and stated that she believed there would be 4 rate increases in 2016. The economy is in a deflationary environment, everything being done is to lower prices with the exceptions of rent and health care.

So for me for now the holding of preferred stocks continue to be a valid fixed income asset class.
__________________
Running_Man is offline   Reply With Quote
Old 09-21-2016, 03:01 PM   #1324
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 1,504
And looking at the FED’s outlook on expected short term interest rates at the start of the year the expected interest rate by the end of 2017 was 2 percent it is now 1 percent end of 2018 was 3.25 percent and now is just under 2 percent. And there is talk from economists that these forecasts should be ceased because these forecasts have been so poor. The FED has said in the space of nine months, while saying the economy is growing nicely….. the expected increase over the next 2-3 years is only 1.5%, in response to a question Janet Yellen let stand the assumption by forecasts coming down in essence the FED is tightening by keeping interest rates the same. At the forecast rate, which I still feel is overly optimistic even with the FED cutting their forecast by 1/2 percent per year in just the last 2 months, you are talking worst case of a 4 percent 30 year treasury meaning 6 percent preferreds will still be a very good investment.

Those that got the MNR-C under par did well it has moved to 25 1/4 along with other preferred taking a move up as the threat from competing rise in rates has been disapated.
__________________
Running_Man is offline   Reply With Quote
Old 09-21-2016, 05:09 PM   #1325
Recycles dryer sheets
 
Join Date: Jan 2013
Location: Santa Clarita
Posts: 55
raising rates will just result in an inverted yield curve which is good for perpetual preferred stocks and mid to long term bonds.
__________________
Freedom56 is offline   Reply With Quote
Old 09-21-2016, 05:13 PM   #1326
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 6,704
To concur with you Freedom, I dont see a 2013 "Taper Tantrum". Back then yield owners were convinced rates were going back "to normal" and bailed fast... I don't see that panic talk this time...At worst some very modest price droppings, but not the $25 to $21 that happened then.
__________________
Mulligan is offline   Reply With Quote
Old 09-21-2016, 05:31 PM   #1327
Recycles dryer sheets
 
Join Date: Jan 2013
Location: Santa Clarita
Posts: 55
Quote:
Originally Posted by Mulligan View Post
To concur with you Freedom, I dont see a 2013 "Taper Tantrum". Back then yield owners were convinced rates were going back "to normal" and bailed fast... I don't see that panic talk this time...At worst some very modest price droppings, but not the $25 to $21 that happened then.
30% of my current holding were purchased around tax loss selling season (November/December) 2013. 20% was purchased in 2008. Another 30% of my current holdings was purchased August 2015. The balance was purchased from February 2016 through September 2016 mainly to re-invest called securities and interest and dividend income. Unless there is a political shock November 8 causing treasury yields to spike, it should be smooth sailing for the next 6 months. I'm going look into various ways I can hedge my bond and preferred portfolio before November 8 at a reasonable cost.
__________________
Freedom56 is offline   Reply With Quote
Old 09-21-2016, 06:53 PM   #1328
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 11,532
One of the guys on TV was talking about the Fed... he said that they stopped inventing an excuse not to raise rates as they have done so often in the past... they basically are saying 'we just do not want to raise them'... no real reason...


Rates need to be normalized at some time... or we risk falling into the Japanese way with no growth and with nothing that can be done to fight the next downturn...
__________________
Texas Proud is online now   Reply With Quote
Old 09-21-2016, 08:55 PM   #1329
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 6,704
Texas, what do you consider normal for fed funds and 10 year? I mean you personally...
__________________
Mulligan is offline   Reply With Quote
Old 09-21-2016, 09:24 PM   #1330
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 11,532
Quote:
Originally Posted by Mulligan View Post
Texas, what do you consider normal for fed funds and 10 year? I mean you personally...

I think it does depend on the economy.... but a more normal rate with the growth etc. that we have would be in the 3% range... up to 4% even...

Look at the chart here... the rate has never been this low and is mostly above 4%... lots of times above 5%...

https://www.thebalance.com/fed-funds...s-lows-3306135


Not sure about 10 year as I have not followed it but I would bet around 3% higher... well, had to look it up to see... not far off... you can expand this chart out to many many years...


https://fred.stlouisfed.org/series/T10YFF/
__________________
Texas Proud is online now   Reply With Quote
Old 09-21-2016, 09:35 PM   #1331
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 6,704
My thought of "normal" was 3% on 10 year also...The majority of my money was on preferreds issued when 10 year was 4-5%. Therefore because they are yield trapped close to par from call risk, I see little price degradation on upward rate hikes towards normalization. It fact I would like rates to rise a bit to ensure safety of my issues.
__________________
Mulligan is offline   Reply With Quote
Old 09-21-2016, 11:07 PM   #1332
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 11,532
Quote:
Originally Posted by Mulligan View Post
My thought of "normal" was 3% on 10 year also...The majority of my money was on preferreds issued when 10 year was 4-5%. Therefore because they are yield trapped close to par from call risk, I see little price degradation on upward rate hikes towards normalization. It fact I would like rates to rise a bit to ensure safety of my issues.

Just to make sure... you mean 3% HIGHER than the FF rate

So, with a 3% FF rate that is a 6% 10 year....
__________________
Texas Proud is online now   Reply With Quote
Old 09-22-2016, 06:37 AM   #1333
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
Just to make sure... you mean 3% HIGHER than the FF rate

So, with a 3% FF rate that is a 6% 10 year....


No, I mean 3% range for 10 year treasury....
__________________
Mulligan is offline   Reply With Quote
Old 09-22-2016, 06:41 AM   #1334
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 Mulligan View Post
No, I mean 3% range for 10 year treasury....


Ms Yellen has already said a low path on funds rate to normalization. 3 % Fed Funds would be years way. Heck we are over due for a recession anyways is my thought.
__________________
Mulligan is offline   Reply With Quote
Old 09-22-2016, 09:24 AM   #1335
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 11,532
Quote:
Originally Posted by Mulligan View Post
Ms Yellen has already said a low path on funds rate to normalization. 3 % Fed Funds would be years way. Heck we are over due for a recession anyways is my thought.
But that is part of the problem.... a 3% FF rate is more normal than what we now have...

And a 3% spread from the FF rate to the 10 year (meaning 6%) is also more normal...

Having 3% on 10 year is NOT normal... looking at a chart, it was in the 4% range back in the early 60s.... then went up from there... the next time it was less than 4% was in '02... (recession) and then went back up until '07 when they tried to deflate the housing bubble...


So, a long history of it being above 4% and a short history of being less than 3% would indicate that the normal rate minimum is 4%....
__________________
Texas Proud is online now   Reply With Quote
Old 09-22-2016, 09:52 AM   #1336
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 6,704
It depends on ones reference point of normal is. Historical normal yes. I would suspect we are closer to 1940s normal at this point in time. But, ever since I bought preferreds my eye has always been on the 4% normal...When I have issues that went to market at par with 4% and higher, my concern is less. But that has been my thoughts from the beginning....Chase yield by call risk, not lower quality issues.
__________________
Mulligan is offline   Reply With Quote
Preferred Stock Investing-The Good , The Bad and The In Between
Old 09-22-2016, 05:12 PM   #1337
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

Texas, I did some quick digging to verify my thoughts...High quality 6% plus preferreds hold up considerably better than the 5% issues do. I went back to January 2007 when 10 year was 4.76%. I will show examples of issues I own as they also traded back then also...

RNR-C 6.08% par... $25.35 today, $24.25, 1/2007
AES-C 6.75% par... $51.10 today, $49, 1/2007
AILLL 6.625% par... $26.70 today, $24.50 1/2007
IPWLK 5.65% par... $100.60 today, $90, 1/2007
I don't own this one but I checked a lower one CNTHO 5.28% par... $51.70 today, $44.75, 1/2007.
So anything above 6% that I own, I am quite comfortable with those amount of losses if Treasury returns to 4.76%... But I am not losing any sleep over that happening for quite a while...
__________________
Mulligan is offline   Reply With Quote
Old 09-22-2016, 08:08 PM   #1338
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 11,532
CRAP....

Was going to sell some CVB since the price is high and call risk....

Sold a total of ONE share
__________________
Texas Proud is online now   Reply With Quote
Old 09-22-2016, 08:17 PM   #1339
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 6,704
Ive never sold one share before....But I am a not so proud owner of one share of HE-U when I tried to buy 200 earlier this year... I cant even trade for you... Mine is worth $26 yours is only $11, ha!
__________________
Mulligan is offline   Reply With Quote
Old 09-22-2016, 10:56 PM   #1340
Thinks s/he gets paid by the post
Sunset's Avatar
 
Join Date: Jul 2014
Location: Chicago
Posts: 2,766
Quote:
Originally Posted by Texas Proud View Post
CRAP....

Was going to sell some CVB since the price is high and call risk....

Sold a total of ONE share
So how does somebody buy 1 share
__________________

__________________
Sunset is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 4 (0 members and 4 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 10:23 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2016, vBulletin Solutions, Inc.