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

[Mulligan]

Brother, can you spare enough for another FIRED brother to buy some wine?

Dont give me that, Winey. You could buy me and Chateau Sainte-Marie out with your cash and still have plenty left over!

 

[pig pile]

Pig, here is a bit of interesting history for you...WGLCP was issued $100 par at 5% in 7/1958 when 10 year was 3.2%.... So you have in essence a 4.95% yield today with a 2.4% treasury. So on relative terms as much as one would find surprising it is a better value deal today than when it was first issued.

Crazy!!!!

 

[Mulligan]

Forgive us for we have sinned....Coolius and I both bought a small amount of MH-A today.

 

[Coolius]

Yes, yes.

Mully & I listened to the siren song and fell right into the cesspool.

MH-A, past first call, selling under par. 8.25% yield.

No risk of loss if called, in fact will be a small cap gain.

The next dividend is in 2 1/2 months time, for $0.50 cents.

Only real and present danger is the BK of Maiden. I looked at the related companies Nat Gen, and AFSI - nothing appears to be bad there ( not that they are pristine companies, far from it ).

This is going way out on a limb for me, I'm usually not this adventurous, LOL

 

[Winemaker]

Let's have full disclosure, I sold MH common to break even some time ago, and own AFSI-A.

 

[brokrken]

In on GWSVP at $26.40

 

[Mulligan]

In on GWSVP at $26.40

Couldnt resist huh, Ken? I hate to do this but I got it in my taxable account in case I get a call slam.

 

[Mulligan]

Let's have full disclosure, I sold MH common to break even some time ago, and own AFSI-A.

I think I am getting confused....There must be 2 Winemakers posting here... One that complains about his low risk 5% preferreds getting called....And a second Winemaker you trades in higher risk casualty insurers.

 

[Mulligan]

I pulled the plug on a few “B” league preferreds and moved more money into LANDP today at $25.88. Goes monthly exD early next week so purchase is really $25.75. This has moved into the number 2 hole on my preferreds having well over a 1000 shares. Anytime I can move into term dated or adjustables it helps reduce my perpetual exposure.

 

[brokrken]

What's the problem with having too much perpetual exposure.....assuming the issues are liquid?

 

[Mulligan]

What's the problem with having too much perpetual exposure.....assuming the issues are liquid?

Liquidity really doesnt matter. Every preferred bought has yield risk, duration risk, and credit risk. A term dated issue eliminates 2 of those and mitigates the length of the 3rd (credit risk). A 100 basis point rise in 10 year treasury will permanently impair $3-$4 of a 6% $25 par issue more than likely. 2013 proved this but peoples memories are short and yields quickly dove tailed so it was forgotten. But economy is considerably stronger than 2013 and rates havent spiked yet. Most people who have bought perpetuals in past 3-4 years dont really have an understanding of what rising yields can do to permanently impair portfolio value. The risk is high enough for me to be cognizant of this, so I am shifting accordingly the best I can.

 

[bobandsherry]

Agree with you Mulligan. Almost all the preferred's I've picked up are adjustable rate. Fixed rate is going to feel the pinch once (if/when) rates move up. Those tied to LIBOR index should make me feel better about them holding their value.

 

[Texas Proud]

I pulled the plug on a few “B” league preferreds and moved more money into LANDP today at $25.88. Goes monthly exD early next week so purchase is really $25.75. This has moved into the number 2 hole on my preferreds having well over a 1000 shares. Anytime I can move into term dated or adjustables it helps reduce my perpetual exposure.

Which good ones do you have that is adjustable I am looking to get a few that have a good + number as I do think rates are going to go up and this will fix the price problem with rising rates....

 

[Winemaker]

I think I am getting confused....There must be 2 Winemakers posting here... One that complains about his low risk 5% preferreds getting called....And a second Winemaker you trades in higher risk casualty insurers.

I was never complaining about issues getting called..... I have too much wine around here.....

My complaint was trying to find good issues that were under par, hence the AHSI-A purchase. A 200 share sour position wouldn't kill me, but it would expose me the heckling and good natured ribbing I get from retired folks on this thread.

 

[capjak]

Liquidity really doesnt matter. Every preferred bought has yield risk, duration risk, and credit risk. A term dated issue eliminates 2 of those and mitigates the length of the 3rd (credit risk). A 100 basis point rise in 10 year treasury will permanently impair $3-$4 of a 6% $25 par issue more than likely. 2013 proved this but peoples memories are short and yields quickly dove tailed so it was forgotten. But economy is considerably stronger than 2013 and rates havent spiked yet. Most people who have bought perpetuals in past 3-4 years dont really have an understanding of what rising yields can do to permanently impair portfolio value. The risk is high enough for me to be cognizant of this, so I am shifting accordingly the best I can.

should I be selling my preferred...AILLL, CNLPL, KTH, CNTHP, WFCPRL?

 

[Mulligan]

I flipped out of the CLP issues around $56...Bought a bunch more AILLL at 26.40 a while ago and some CNIGO. You will pry them from my cold dead hands. These issues wont drop as much being plus6% par high quality. If CLPs get back in 53 range I will sell what I can and buy back in. I still think of these as lifetime cores issues and ditch the other perpetuals if rates go north.

 

[Mulligan]

Cap, I was on my phone answering your question, so I might not have stated it with clarity. I personally consider the CLP core issues to hold thick and thin and wouldnt let the rise in interest rates bother me. I just dont own any because I was having fun squeezing a bit more money out of the pricing...I consider AILLL, CNLPL, CNTHP to be the same thing. If Im selling one it is just going into one of the other two...If CNLPL dropped under $54 and I could get near $27 out of AILLL, I would sell those and buy CNLPL. They just rotate around to goose returns a bit, but that money never leaves those 3. That allotted money will not leave those three no matter what interests rates do...Which wont be a heck of a lot anyways....So for the buy and holder I dont see big losses...WFC-L may head south a bit more on rates hikes...Or at least history has shown that.

 

[Mulligan]

I was never complaining about issues getting called..... I have too much wine around here.....



My complaint was trying to find good issues that were under par, hence the AHSI-A purchase. A 200 share sour position wouldn't kill me, but it would expose me the heckling and good natured ribbing I get from retired folks on this thread.

I bet you secretly bought 500 AHSI-A, Winemaker, but was afraid the ribbing may get too out of hand, ha!

 

[Coolius]

should I be selling my preferred...AILLL, CNLPL, KTH, CNTHP, WFCPRL?

Capjak,

I own the same issues you have, and I regard them as income streams, not for cap growth.

Just like a rental property; if the house value goes down based on mortgage rates going up, would you get concerned and quickly sell, even though you have a good tenant? Maybe some would, but not me.

So that is how I look at CNLPL, CNTHP, WFC-L and AILLL. The biggest risk, in my opinion, is the risk of call ( not for WFC-L ). And should I think the call threat has risen, then yes, I would consider selling.

But I, like Mulligan, sometimes give in to temptation and flip out issues hoping to buy back in later.

 

[capjak]

Cap, I was on my phone answering your question, so I might not have stated it with clarity. I personally consider the CLP core issues to hold thick and thin and wouldnt let the rise in interest rates bother me. I just dont own any because I was having fun squeezing a bit more money out of the pricing...I consider AILLL, CNLPL, CNTHP to be the same thing. If Im selling one it is just going into one of the other two...If CNLPL dropped under $54 and I could get near $27 out of AILLL, I would sell those and buy CNLPL. They just rotate around to goose returns a bit, but that money never leaves those 3. That allotted money will not leave those three no matter what interests rates do...Which wont be a heck of a lot anyways....So for the buy and holder I dont see big losses...WFC-L may head south a bit more on rates hikes...Or at least history has shown that.

Thanks for the clarification

 

[capjak]

Capjak,

I own the same issues you have, and I regard them as income streams, not for cap growth.

Just like a rental property; if the house value goes down based on mortgage rates going up, would you get concerned and quickly sell, even though you have a good tenant? Maybe some would, but not me.

So that is how I look at CNLPL, CNTHP, WFC-L and AILLL. The biggest risk, in my opinion, is the risk of call ( not for WFC-L ). And should I think the call threat has risen, then yes, I would consider selling.

But I, like Mulligan, sometimes give in to temptation and flip out issues hoping to buy back in later.

Thanks

 

[brokrken]

Just like a rental property; if the house value goes down based on mortgage rates going up, would you get concerned and quickly sell, even though you have a good tenant? Maybe some would, but not me.

+1 to this. I have no plans of selling my preferreds if a rate increase causes their value to decrease.

 

[Mulligan]

+1 to this. I have no plans of selling my preferreds if a rate increase causes their value to decrease.

Its counter intuitive to me and prospects dont excite me....But I really should hope they drop. As all I do is reinvest proceeds anyways, plus add additional dollars monthly. So lower prices would equal higher income payments going forward.

 

[Golden sunsets]

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

CNLPL, CNTHP, AILLL and WFC-L are the only preferreds I own (thanks Mul and Coolius for your contributions to this thread over the last 3years) and the only individual preferreds my Mom owns.... So I guess I'll hang tough and not try to venture further into the category. My Mom does own some PFF though, has for years, and I'm debating selling out of that position.


Sent from my iPad using Early Retirement Forum

 

[Texas Proud]

I had asked before but got no answers....


Any recommendations on a variable issue?


I had bought NSS, but I just looked and their rating is going down... with negative outlook as they are putting on more debt and pref..... I will probably keep it for now....