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

[Mulligan]

Back when I was a trustee there were a number of issues that would sell the assets that backed up a bond, buy zero treasuries and escrow the call... and pocket a big hunk of cash.... these were mtg securities and some still had 15 to 20 years outstanding on the bonds!!!

No, I am not surprised.... I think companies are now pushing to refi as fast as they can.... if they can...

Now that is some long term planning, Texas!
Coolius, I already got some cash from getting chicken and selling my UMH-A. Gonna skip golf tomorrow and sit in command control central and try to drum up some deep illiquids tomorrow!
I have been very lucky on calls....Havent had one yet this year, and over at SI, as you know they seem to be announcing calls every day. Being largely out of Reits helped avoid must of them though.

 

[Golden sunsets]

What is SI, Mul?

 

[Golden sunsets]

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

18 months ago when prevailing thought was the surety of rising interest rates and the negative impact on securities such as preferred, this issue, which is my favorite has had a total return of 20% from the date of this post which is better even than S&P500 spiders or the Wellington Fund. And a 5 year CD would have yielded you a total of 3 percent if you were parked out in a secure income note awaiting the interest rate hikes protecting your capital.

Now by rising to the current price of 1272, you are only getting current income of 5.92% so nearly 1/2 percent income return has been eliminated and a 10% capital gain has been eliminated as well while the potential for rate increases are still there. In fact I saw it is an 82% chance presently the FED will raise rates again, however the long end has simply not co-operated with the FED hiking short term rates.

This security will very likely provide a 5.92% cash return for a very long time, but that is basically the long term return potential of this issue. However the alternative to wait for a market correction in short term CD’s at 1-1.5 percent returns loses nearly 4.5 percent per year to WFCPL. This continues to illustrate the trap of future expectations that is created by holding interest rates at a prolonged term at zero.

I still have no expectations of selling this preferred and still see the fair market price relative to other securities of it’s kind being 1400.

Still watching and letting actual interest rates tell me what the market is thinking.

http://stockcharts.com/freecharts/perf.php?VWENX,SPY,WFC/PL

Running Man; What think you about the near future for intermediate term rates? I'm very happy with my purchase of WFC-PL back in 2015. Wish I owned more. Also own a tad of Mul's favorite illiquid Utes( Preferreds =1.5% of Investments) The decision I am wrestling with this morning is whether to dump a substantial position in VWITX ( Intermediate Term Tax Exempt =8% of Investments) which has rallied of late back to a MV near my cost, and invest instead in VWSTX Short Term Tax Exempts to ride out an impending slump in bond prices. I have always hated bond funds despite plans to hold the fund for the long term presumably negating losses. All of our other fixed income investments -32.5% of Assets- are in individual bond ladders in our IRA's. I see an opportunity to get out today with no losses and trade that higher yield for a lower safe yield while intermediate term rates travel north at a slow but steady pace. What is your crystal ball telling you?

 

[Mulligan]

What is SI, Mul?

Golden, Its Silicon Investor. A website and the subsection is Income Investing. People will post new preferred issues, calls, and some purchases. Very civil forum there. I usually only look in on the income investing thread, but there are others including stocks.

 

[Mulligan]

Might get kicked out of the club here with this "punt on 3rd down" trade... 600 shares of KYN-F today on a sell off. I bought 200 shares of CNLPL and ate the $54. Goes exD tomm so I really got in around $53.20 which is a divi and half above call.. I still only have 300 issues of this...Never really could get back in it from all the flipping I did with it in the good days that are gone...Im gonna just hold these and let it play out...KYN is just a placecard holder...The money was burning a hole in my pocket!

 

[Coolius]

Mulligan, CNLPL exdiv date is June 7th, not tomorrow.

I also have bids in for CNLPL in the mid $53's, but doubt that I'll get them.

 

[RE2Boys]

Mulligan, CNLPL exdiv date is June 7th, not tomorrow.

I also have bids in for CNLPL in the mid $53's, but doubt that I'll get them.

My bids have been upper $52's but it's been awhile since I've been able to get any (or it's sister CNTHP). Holding about 400+ in each, sometimes got odd lots.

Really have been following this thread and learned a lot but don't have much to add. Have had a good chunk of CHSCM and MNR-C since each first issued. No luck picking up AILLL at all. Had some southern utilities preferred but got called last year.

 

[Mulligan]

Mulligan, CNLPL exdiv date is June 7th, not tomorrow.

I also have bids in for CNLPL in the mid $53's, but doubt that I'll get them.

Whew....you scared me Coolius... I really dont keep track of days anymore like I should....I thought you were insinuating it was today, and I blew it! June 7 is fine...In fact June 12 is fine... I just didnt want it to be today, lol...

 

[Mulligan]

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

My bids have been upper $52's but it's been awhile since I've been able to get any (or it's sister CNTHP). Holding about 400+ in each, sometimes got odd lots.

Really have been following this thread and learned a lot but don't have much to add. Have had a good chunk of CHSCM and MNR-C since each first issued. No luck picking up AILLL at all. Had some southern utilities preferred but got called last year.

I feel a bit boxed in myself RE... Not really scared of rates going up, but dont want to be buying up the old 4.5-5.2% utes either...Started expanding my comfort zone a bit which is not what my original intent was in buying these things. I tried a couple of end arounds this morning and got nowhere.... a grey market bank preferred that has a nice 4.5% libor kicker and a delisted BBB+ baby bond fixed/float issue that basically trades on the "grey bond market". Got nowhere with the bank, as in nowhere, and all they could find was a ridiculous $27.30 price for the baby bond...about a buck higher than what I was willing to do.

 

[Coolius]

My bids have been upper $52's but it's been awhile since I've been able to get any (or it's sister CNTHP). Holding about 400+ in each, sometimes got odd lots.

Really have been following this thread and learned a lot but don't have much to add. Have had a good chunk of CHSCM and MNR-C since each first issued. No luck picking up AILLL at all. Had some southern utilities preferred but got called last year.

RE2, I also own CHSCM ( along with a bigger position in CHSCO ) as well as MNR-C ( bought a few cents above par in late 2016, watched it go down to $23 ).

They are solid issues which I intend to hold indefinitely.

And the usual core holdings of CNLPL & CNTHP. I try not to flip these, as there is every possibility I might not be able to buy them back later.

 

[Texas Proud]

Yea, I had 500 CNTHP but sold half when it was up in the $55 range... was hoping to get back in at $53...

BUT, I see a number of people here are cutting me out!!! Bidding more than I am ... it has not come down as much as I want, so I will move on...

Still have the AES-C money coming in which is my #1 holding by far... not sure what I want to do with the proceeds... I am already higher than I want to be on the risk scale... but the good rated ones just do not have enough yield...

 

[Winemaker]

You guys wear me out with all the ins and outs. I'm still a buy below par and hold guy, although the "good" below pars are scarce. Picked up a few new issues at par, but I'm up 20% from October '14 when I moved a $100k from my 401k.

Carry on without me.....

 

[Mulligan]

Yea, I had 500 CNTHP but sold half when it was up in the $55 range... was hoping to get back in at $53...

BUT, I see a number of people here are cutting me out!!! Bidding more than I am ... it has not come down as much as I want, so I will move on...

Still have the AES-C money coming in which is my #1 holding by far... not sure what I want to do with the proceeds... I am already higher than I want to be on the risk scale... but the good rated ones just do not have enough yield...

That is a shame that one was called, Texas. The good thing about it, this had a "gentle call". No real cap loss counting the accruing divi... Things sure change...It was about 2 years ago they were issuing 6% senior notes...Now 6.75% Junior subordinated notes are getting pulled.

 

[Mulligan]

You guys wear me out with all the ins and outs. I'm still a buy below par and hold guy, although the "good" below pars are scarce. Picked up a few new issues at par, but I'm up 20% from October '14 when I moved a $100k from my 401k.

Carry on without me.....

You run out of wine today or something Winemaker?

 

[Winemaker]

Not at all, you guys make me dizzy in and out of everything. You'd think I drank several of the 1200 bottles in the cellar!

I am enjoying a Scotch Ale aged in a peated bourbon barrel, though.

 

[Mulligan]

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

Not at all, you guys make me dizzy in and out of everything. You'd think I drank several of the 1200 bottles in the cellar!

I am enjoying a Scotch Ale aged in a peated bourbon barrel, though.

I havent had that, but I love Scotch Ale beer though! Bought a Vignoles Sunday and told my GF she should come over midweek some day after work this week and drink it with me. She decided that was too long a wait so it has been in the trash can empty since yesterday.
I do juice returns trading...But the main reason it is fun. If I knew for sure I could trade 30 times a day and break exactly even to if I didnt trade at all, I would do it, lol!
I trade a lot but the cast of characters mostly stays the same... I just looked at what I own: AILNP, AILLL, CNLPL, CNTHP, CNIGO, FISSO, DMRRP, BURCP, CTWSO, BGE-B, GBLIL, MHO-A, UMH-B, and KYN-F.
I suspect only a quarter of my money ever really gets moved around.

 

[Winemaker]

I brewed the Scotch ale, and aged it in a 12 gallon barrel from a local distillery. I ended up making it twice for 24 gallons.

Vignoles is a little sweet for me, but DW enjoys it.

I'm just jagging you guys on trading, I tend to KISS. Keep It Simple Stupid.

 

[Winemaker]

I brewed the Scotch ale, and aged it in a 12 gallon barrel from a local distillery. I ended up making it twice for 24 gallons.

Vignoles is a little sweet for me, but DW enjoys it.

I'm just jagging you guys on trading, I tend to KISS. Keep It Simple Stupid.

 

[pig pile]

I'm trader until my free trades are up.

Then hopefully all I am is a buy something when something is called kind of person.

 

[Mulligan]

I brewed the Scotch ale, and aged it in a 12 gallon barrel from a local distillery. I ended up making it twice for 24 gallons.



Vignoles is a little sweet for me, but DW enjoys it.



I'm just jagging you guys on trading, I tend to KISS. Keep It Simple Stupid.

Your getting a bit windy, Winemaker... You dont trade because you are too busy making wine and whiskey, and then all the sampling work that goes with it. [emoji1]

 

[Running_Man]

Running Man; What think you about the near future for intermediate term rates? I'm very happy with my purchase of WFC-PL back in 2015. Wish I owned more. Also own a tad of Mul's favorite illiquid Utes( Preferreds =1.5% of Investments) The decision I am wrestling with this morning is whether to dump a substantial position in VWITX ( Intermediate Term Tax Exempt =8% of Investments) which has rallied of late back to a MV near my cost, and invest instead in VWSTX Short Term Tax Exempts to ride out an impending slump in bond prices. I have always hated bond funds despite plans to hold the fund for the long term presumably negating losses. All of our other fixed income investments -32.5% of Assets- are in individual bond ladders in our IRA's. I see an opportunity to get out today with no losses and trade that higher yield for a lower safe yield while intermediate term rates travel north at a slow but steady pace. What is your crystal ball telling you?

Near Future: I take that time period to be the next 6 months so let’s say from now to the end of the year. It would not surprise me if there was a sharp spike in interest rates of 1-2 percent driving the 5 year treasury to 2.5 to 3 percent or if there was a sudden drop in the 5 year treasury to 1 percent. It will depend on ongoing inflation news.

This is why I have my fixed investments primarily in ladders, overall I would expect the rates to rise because if the FED was being thoughtful they would see that continued low interest rates are going to bankrupt virtually every pension fund in the world.

However, I never expected the FED to allow rates to go to Zero because of the experience the Japanese had with rates and the FED has been equally trapped here for 10 years and getting trapped for another 10 is very easy to occur.

My crystal ball therefore is cloudy but I anticipate most likely (I’ll give it a 65% chance) of a run up in the next 6 months to 3 percent yield on the 5 year treasury.

 

[Mulligan]

How about some conviction with your predictions RM, lol.. No mention of 10 year? That is where my interest really lies and the 30 year.... Im going to stick my neck out and say there is zero percent chance the 5 year hits 3% by end of year. Cant be so bold to say such a thing with 10 year though... Fed dumping long treasuries could cause it to happen. But inflation is heading south again so rate hikes wont come from there near term. Commodity basket index I track is drifting toward 52 week low.

 

[jim584672]

The whole reflation story seems to be deflating. I think deflation has not been slain.

If they start letting the Fed balance sheet shrink that is highly deflationary.

 

[pig pile]

I think the Fed is going to raise this month. But language will indicate they will perhaps be more tepid in the months ahead watching data. I don't see another rate rise until Dec after this one. Bond market still drives the Fed which is against what all the experts have been saying lately with the "activist Fed" talk. The Bond market knows this economy isn't real good.

 

[Golden sunsets]

Well I may have just guaranteed Mulligan's prediction, as I hit the sell button on 8% of our FI allocation invested in VWITX. Will park that money in VWSTX and watch the ride of VWITX with interest but no skin in the game. Thanks for your thoughts RM.