Coolius
Full time employment: Posting here.
- Joined
- May 15, 2010
- Messages
- 862
In typical thin trading action, AILLL has rebounded from the sell this morning. Bid is now 500 @ $26.25. A good example of strong hands not panicking and selling just because of one Nervous Nellie who wanted out for whatever reason.
To address Cooch96 question, yes, there is always interest rate risk. If rates went back up to 5%-6%, no doubt the stocks we have been discussing would be adversely affected. But so would everything in the income universe - and much of the growth universe - and the bond universe.
But if one were to take the position rates will rise slowly, taking perhaps 2-3 years to reach 3%, then holding a 6% yielding preferred continues to make sense.
As Mulligan has stated, long term charts of such Trapped Preferreds have shown price stability and resilience during periods of high interest rates; perhaps that is not good enough for many investors, and they decide to stay away. And that's a sensible decision for them, they have to be comfortable and be able to sleep well at night.
But its good to do your own DD, and come to a conclusion that you can live with, accept the risks, and be within your comfort zone.
To address Cooch96 question, yes, there is always interest rate risk. If rates went back up to 5%-6%, no doubt the stocks we have been discussing would be adversely affected. But so would everything in the income universe - and much of the growth universe - and the bond universe.
But if one were to take the position rates will rise slowly, taking perhaps 2-3 years to reach 3%, then holding a 6% yielding preferred continues to make sense.
As Mulligan has stated, long term charts of such Trapped Preferreds have shown price stability and resilience during periods of high interest rates; perhaps that is not good enough for many investors, and they decide to stay away. And that's a sensible decision for them, they have to be comfortable and be able to sleep well at night.
But its good to do your own DD, and come to a conclusion that you can live with, accept the risks, and be within your comfort zone.