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

[Mulligan]

Hello all, new poster here. A preferred nut case is the description that best fit me. Figured this might the thread to introduce myself. I recognize this Mulligan fella from somewhere.

Hey Pig...Long time no "see". Maybe an hour? Lol....Good to see you here!

 

[pig pile]

Hey Pig...Long time no "see". Maybe an hour? Lol....Good to see you here!

thanks, lurked a little bit for last few months. really glad to read others playing this game with me.

 

[MooreBonds]

A preferred nut case is the description that best fit me.

No worries, pig pile. If you know Mulligan already, you are familiar with his schizo holding patterns of a few hours to a few days.

As for me, I suppose you could describe my portfolio as happy go lucky - as in, [-]stupidly[/-] fearlessly diversifying to juice up the yield with a few shippers and finance companies that would give some the heebie jeebies. (although I do definitely try to limit my downside by holding the best of the bunch - which still isn't saying much!

 

[pig pile]

No worries, pig pile. If you know Mulligan already, you are familiar with his schizo holding patterns of a few hours to a few days.

As for me, I suppose you could describe my portfolio as happy go lucky - as in, [-]stupidly[/-] fearlessly diversifying to juice up the yield with a few shippers and finance companies that would give some the heebie jeebies. (although I do definitely try to limit my downside by holding the best of the bunch - which still isn't saying much!

shippers? lol, i have 3 of those bastards right now. conservative by nature, but little bitty steps into 1 shipper suddenly turned into bigger steps into 3. have no idea how that happened. mulligan would be gasping for air with my collection of mREIT preferred's. of which i will be aggressively selling soon.

 

[Coolius]

Welcome to the thread, Pig Pile.

Mulligan has secrets that will take time for you to discover, but well worth your while to pursue. Like the kingdom of the Sock Drawers.

Get him in a good mood one of these days and he'll tell you all about that mysterious land of the elusive Illiquid Utes, where myriad dangers await those who invest recklessly, and brave hunters wait patiently to snare an ute in their traps.

 

[pig pile]

Welcome to the thread, Pig Pile.

Mulligan has secrets that will take time for you to discover, but well worth your while to pursue. Like the kingdom of the Sock Drawers.

Get him in a good mood one of these days and he'll tell you all about that mysterious land of the elusive Illiquid Utes, where myriad dangers await those who invest recklessly, and brave hunters wait patiently to snare an ute in their traps.

yes, i believe it. only took one comment from him in another msg board to send me on a hrs long trek down rat holes chasing a wyatt erp era railroad.

 

[Mulligan]

Dust off them Mreit preferreds and post the tickers with the yield, Pig. It may get Coolius to bite... Then we can here him post about his sleepless nights tossing turning in bed over dreams they went to zero, on him, lol.

 

[pig pile]

Well...
AGNCP
NLY-A
ARI-C
CIM-A
CIM-B

Most likely will sell one of the CIMs before exDiv
Too lazy to look up current yd

 

[Coolius]

pig,

Your MReit list looks like a Zombie apocalypse. A parade of the walking dead, lol.

I used to own CIM-B briefly, but when I emerged from my temporary bout of insanity, I quickly sold it.

I do have one MReit preferred at present - MFA-B. Definitely NOT a cure for insomnia.......

 

[Sunset]

Well...
AGNCP
NLY-A
ARI-C
CIM-A
CIM-B

Most likely will sell one of the CIMs before exDiv
Too lazy to look up current yd

Welcome,

I was not going to mention this as it's not preferred, but your holdings bring up the issue I faced today.

Today I just bought NLY as it is paying 10.5% and has been for years according to other folks elsewhere.
Why buy NLY-A that pays 7.5% ?

 

[pig pile]

Welcome,

I was not going to mention this as it's not preferred, but your holdings bring up the issue I faced today.

Today I just bought NLY as it is paying 10.5% and has been for years according to other folks elsewhere.
Why buy NLY-A that pays 7.5% ?

can't speak for anyone else. but if i'm going to invest in mREITs, I'll do it via preferred as I view it as a little safer. common dividend cut doesn't hurt me whereas as it would kill the common. even with these mREITs I have generally a much lower position that the rest of my preferred's. over the long haul common probably wins but i've decided, just for myself, i could stomach only so much of a stock price fall.

to each his/her own i guess

 

[pig pile]

pig,

Your MReit list looks like a Zombie apocalypse. A parade of the walking dead, lol.

I used to own CIM-B briefly, but when I emerged from my temporary bout of insanity, I quickly sold it.

I do have one MReit preferred at present - MFA-B. Definitely NOT a cure for insomnia.......

lol, CIM-B looks like the one that is getting sold. i bought that before it went to market so well under par.

 

[MooreBonds]

pig,

Your MReit list looks like a Zombie apocalypse. A parade of the walking dead, lol.

I used to own CIM-B briefly, but when I emerged from my temporary bout of insanity, I quickly sold it.

I do have one MReit preferred at present - MFA-B. Definitely NOT a cure for insomnia.......

LOL...I, too, was among the CIM-B owners, and also came to my senses a few months ago and dumped it given the outsized risks of rising interest rates.

I still own NLY-E, which I didn't realize. NLY seems to be the best of the bunch - but again, not saying much when it comes to mREITs that are leveraged more times than you can count on one hand, and none have existed in a potentially long-term, truly significant rising rate environment. But, it's only a $2,500 position, so I'll only scream and shout for a few hours if it gets whacked, then go back to normal.

 

[Coolius]

Moorebonds, what is your opinion on MFA-B?

I am sitting on a very tiny gain at present, wondering if I should dump or hold? The rate increase next month could well take it down, and I'd hate to see it at a loss at that time.

It's not a big position, but it's outside my comfort zone, so I feel kind of unsettled. Unlike my illiquid Utes.

Added to edit: Just noticed that ex-div is May 31st, for $0.46. That would bring my effective cost basis below par, so that is a consideration I have to include.

 

[Mulligan]

This isnt the Moorebonds, I know... Marriage just totally neuters some people, lol.

 

[Coolius]

Yeah, before Moorebonds got married, he usually responds within minutes.

Guess he had to go help his wife with the laundry, lol. And learn how to use dryer sheets.

 

[pig pile]

LOL...I, too, was among the CIM-B owners, and also came to my senses a few months ago and dumped it given the outsized risks of rising interest rates.

I still own NLY-E, which I didn't realize. NLY seems to be the best of the bunch - but again, not saying much when it comes to mREITs that are leveraged more times than you can count on one hand, and none have existed in a potentially long-term, truly significant rising rate environment. But, it's only a $2,500 position, so I'll only scream and shout for a few hours if it gets whacked, then go back to normal.

I don't usually have enough sense to dump these. But nice rise in CIM-B forces me to do it.

Dummy me, goes out and gets $5000 worth of Glacier Water this morning. I'll call it a Ute.
It's funny, I feel safer with the Glacier Water over any of the mREITs. Will look to double the holding if rates go higher in the future.

 

[MooreBonds]

Moorebonds, what is your opinion on MFA-B?

I'm not big on any of the mREITs. I might hold my NLY for shits n grins, but wouldn't be allocating any new funds to them. If I were you, I'd dump MFA (and I might eventually shed NLY). I just don't see any of them surviving a 2% rise in short-term rates with the long-end rising maybe 1%. If Fed Funds were 3% and 30-year treasuries were 6% this might be a different story....but given where we are at now, any meaningful increase on the short-end won't likely be matched on the long-end.

And with MFA-B only yielding 7.3%....where is the risk premium? I'd much rather have a 6.5% +/- issue that is far more stable, than facing a good shot at getting wiped out with a sizable rate increase. It's just like shipping stocks - day rates may increase enough to float the industry, but it's almost a crap shoot, with a 50:50 chance of going broke or making small profits. At least with the shippers you're getting a substantial bump in yield on the perpetual ones (I still only hold the term-dated shippers because of the risk).

The only hope is that rates slightly fall or stay where they are at. While I'm not personally betting directly on that, having a good exposure to perpetual preferreds kind of makes me lean in that direction (although about 40% of my preferreds have final maturities in 25 years or less, so not as exposed to being trapped if/when rates rise, along with new money invested).

I did own REM for a few months. It's a closed-end fund investing in common shares of mREITs. I got nervous when it did a 4 for 1 reverse split when it was around 10. I figured they were doing it pre-emptively for an interest rate increase that would shave 80% of the value of the underlying mREITs, and cause them to do a reverse split when they were in the low single digits.

Because who does a reverse split when you're at $10/share?

Yeah, before Moorebonds got married, he usually responds within minutes.

Guess he had to go help his wife with the laundry, lol. And learn how to use dryer sheets.

She actually does the laundry (thankfully). The kitchen, however, remains mostly my domain. Again, thankfully.

This isnt the Moorebonds, I know... Marriage just totally neuters some people, lol.

How dare you say that?!?!? I am the man of the house. I call the shots. Whatever I say, goes (as long as it's approved by the wife).

 

[MooreBonds]

if i'm going to invest in mREITs, I'll do it via preferred as I view it as a little safer. common dividend cut doesn't hurt me whereas as it would kill the common. even with these mREITs I have generally a much lower position that the rest of my preferred's. over the long haul common probably wins but i've decided, just for myself, i could stomach only so much of a stock price fall.

That's pretty much my take on it, too.

I also owned CIM-B when it first came out, expecting it to rise in price given its terms were more favorable than the existing CIM preferred issue, which was trading at about $25.50. However, I wasn't patient enough, and only made a few pennies/share after commissions. But it was enough to remind me that mREIT preferreds aren't my realm.

 

[pig pile]

That's pretty much my take on it, too.

I also owned CIM-B when it first came out, expecting it to rise in price given its terms were more favorable than the existing CIM preferred issue, which was trading at about $25.50. However, I wasn't patient enough, and only made a few pennies/share after commissions. But it was enough to remind me that mREIT preferreds aren't my realm.

I really am waffling big on this one. CIM-B is actually my preference to keep due to the float later on....much later on. I can see picking it back up and dumping the A. Then again, i expect a complete spanking at some point for even bothering with these. I will say I have a much lower amounts for the mREITs and mainly consider them boosters to yield rather than drivers. Except for ARI-C, for some reason I went to a full position from the outset. I'll be keeping that one but pairing it down a little to go after Mr Mulligan's hard to get illiquids. I expect to be that skeleton at his computer before any of those orders hit.

 

[MooreBonds]

CIM-B is actually my preference to keep due to the float later on....much later on. I can see picking it back up and dumping the A. Then again, i expect a complete spanking at some point for even bothering with these.

But think of this - if LIBOR were, say, 3.0%+....what would that do to the value of CIM as a company? Would they even still be in business with their leveraged holdings, if 30-year rates were at about 3.5%-4%? Would they be on life support? If they are, you can almost guarantee that their preferred values would be in the shitter with the common.

 

[pig pile]

But think of this - if LIBOR were, say, 3.0%+....what would that do to the value of CIM as a company? Would they even still be in business with their leveraged holdings, if 30-year rates were at about 3.5%-4%? Would they be on life support? If they are, you can almost guarantee that their preferred values would be in the shitter with the common.

A good point. Obviously don't really know how they'd do in that environment. I do know that they "claim" to hedge interest rates for whatever that is worth. It's my understanding that a properly managed mREIT can whether interest rate rises and actually excel if they can maintain variable rate mortgages, much like a BXMT does.

 

[Mulligan]

A good point. Obviously don't really know how they'd do in that environment. I do know that they "claim" to hedge interest rates for whatever that is worth. It's my understanding that a properly managed mREIT can whether interest rate rises and actually excel if they can maintain variable rate mortgages, much like a BXMT does.

I get the birds eye view of an Mreit. But the nitty gritty details of this leverage flies over my head. I have read some articles that got into the details and I felt dumber for trying. Im just not a fan of leverage as at some point the spear will have to point in the other direction. And probably when Im bent over and not looking is when it would happen.
Most of my money is in utility preferreds because I understand the balance sheet and the mechanisms that ensure their safety. Mainly having a monopoly moat and greasing the public service commissioners, lol.
Financial preferreds well there is leverage there, but I have to put some money there as they are about 80% of the preferred market now. UMH-A? Well it aint the rock of Gibraltar, but I trust that old codger and his sons running that business as that reit has been around since 1968. There are no mall properties in it and working class and financially strapped seniors have to live somewhere.
MHO-A? I have no excuses for that. A shameless yield grab. Maybe I am too dumb to know it is riskier than an Mreit, lol.

 

[pig pile]

Curious to know what % of portfolio you all have covered with preferred's (or I guess baby bonds as well)?

Right now, for me, preferred universe responsible for 29% of my portfolio, with no 1 issue more than 1.64% (with next highest being 1.23%). My goal is to get it to perhaps 75-80% but that might take 10 years to do at my pace. My hope is a lot of the purchases will be made after interest rates have somewhat normalized (whatever that means at the time, I think Yellen said 3-5%?). What's everybody's plan?

 

[capjak]

My upper end would be 15% of portfolio in preferred right now it is around 7%, with the highest being AILLL at 1.4%. Higher than that and I might get a little nervous