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

[Mulligan]

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

What I think is not understood is that interest rates have been rising for 2 years, and yet we are only at the beginning of the interest rate increase. My nibbling would begin when preferreds like IPL-D and PSA-D are both trading under 19. Then the dividend flow would in an increasing interest rate environment fund even more purchases should rates continue to fall, it is the advantage as rates rise well above the 4 percent level, the amount of interest to apply to reinvestment grows.

RM, Dont hold your breath for IPL-D at under 19....Do you know when the last investment grade perpetual preferred electrical utility was issued at plus 6%? It was the 1990s when 10 year was near 5%. It aint happening near term. That is why i snooze holding AILLL...Outside of a panic 4000 plus share dump coming from me or another friend who owns even more, or Coolius you arent getting it at par. Electrical preferreds unlike banks trade for a higher premium...Heck PPWLM in 1975 was issued BELOW the yield of the 10 year and 30 year bond. $19 is a 6.68% yield for IPL-D...AILLL was 6.625% issued with a near 5%, 10 year back in early 1990s.

 

[Mulligan]

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

CHSCM (CHS) is at a 5 week low of $25.61. Right there it yields about 6.5%. I am add to my position tomorrow.

It got under $25.20 today....The CHS issues bounced a lot today... I will watch, but not ready to pull trigger...Trouble is I already have a lot of issues that wont invite me selling to buy much...I have term dated issues such as CNIGO and CNIGP I am fine holding. AILLL holds an above market relative yield already. Im comfortable holding JBK and ASRVP until maturity if needed. NSS is a live adjustable... Wont sell my AWRY. PFX is a hold until maturity or bankruptcy. Only leaves me a few other options I would seriously consider selling to buy something.

 

[Mulligan]

Those investment grade bank preferred stocks from JP Morgan, Capital One, Wells Fargo are slowly creeping down to the buy zone. This December may be a good time to jump back into those issues if their yields start approaching 6.5-6.75% like they did in late 2013.

Freedom, US Bank preferreds are highly rated but damn they are dumb. They just sent me a credit card access check for 0% (3% access charge) for 19 months. I am going to make them pay. I am moving all my home equity loan and dump it on them for 19 months. They offered me 15 years ago a 0.99% life of loan access check. I maxed that out and milked it for 10 years before they started sending a lot of fine print changes trying to smoke me out. So I just paid it off so they couldnt sneak a nickel by me.

 

[bobandsherry]

Freedom, US Bank preferreds are highly rated but damn they are dumb. They just sent me a credit card access check for 0% (3% access charge) for 19 months. I am going to make them pay. I am moving all my home equity loan and dump it on them for 19 months. They offered me 15 years ago a 0.99% life of loan access check. I maxed that out and milked it for 10 years before they started sending a lot of fine print changes trying to smoke me out. So I just paid it off so they couldnt sneak a nickel by me.

Not so dumb, you are just smarter than the average bear. Maybe lose a couple points on you, but they'll do well with the majority who will carry balance after the promo term and also make a couple late payments and pay $$$ late charge.

 

[Mulligan]

Not so dumb, you are just smarter than the average bear. Maybe lose a couple points on you, but they'll do well with the majority who will carry balance after the promo term and also make a couple late payments and pay $$$ late charge.

Sadly I suspect you are correct. Plus there are a lot of fools who take the “0%” cash, then charge items on top of it which generates immediate interest. When one uses the access check, the credit card has to go on ice until the balance is paid.

 

[Running_Man]

RM, Dont hold your breath for IPL-D at under 19....Do you know when the last investment grade perpetual preferred electrical utility was issued at plus 6%? It was the 1990s when 10 year was near 5%. It aint happening near term. That is why i snooze holding AILLL...Outside of a panic 4000 plus share dump coming from me or another friend who owns even more, or Coolius you arent getting it at par. Electrical preferreds unlike banks trade for a higher premium...Heck PPWLM in 1975 was issued BELOW the yield of the 10 year and 30 year bond. $19 is a 6.68% yield for IPL-D...AILLL was 6.625% issued with a near 5%, 10 year back in early 1990s.

I have the greatest of respect for what you do, I am unable to do so, moving in more the intermediate term, I am letting interest rates tell me what is happening, and I disagree on the likely outcome of this latest move, quietly and without fanfare interest rates have hit a multi year peak and only now is the interest rate crowd starting to sense the loss of capital on their investments. This has been heating up like a frog in hot water.

Being at 20 1/2 in 2013 I do not find another 7 percent drop from there very unlikely and it almost certainly should drop below it's 2013 bottom based on current interest rate activity. In the words of Willie Wonka, " the suspense is killing me, I hope it will last!"

 

[Mulligan]

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

RM, I should have been more specific...It wont sit at 19...You might get a one day sell off dump...As a general rule higher quality preferreds trade between 200-400 basis points above 10 year. That is a pricing hole to drive a mack truck through. So it is a combination of current long end rates, future expectations, and how many feet are running out the door at the same time. But IPL-D sitting at $19 unmolested day after day with a 4% 10 year is just not likely with history dating back to 1950s I have tracked for utility preferreds. Now if it gets over 5% or investors feel it will then those bets are off.
IPL-D didnt sit at 20.50 during taper, it just briefly nose dived and bounced back very quickly. It was about back to $24 within a month. If it gets $21, I will start laying the base down pretty good.
I have largely been repeating the same stuff for 5 years, owning preferreds that have a stiffer backside support. I look at a lot of preferreds like you mentioned that are actually negative for 52 weeks now including dividends. I have none of those. Most of mine are still largely sitting in their upper trading range (allowing for many that just kicked out their divi last week).
They will falter also, but not to the degree most have though.

 

[Mulligan]

RM, I should have been more specific...It wont sit at 19...You might get a one day sell off dump...As a general rule higher quality preferreds trade between 200-400 basis points above 10 year. That is a pricing hole to drive a mack truck through. So it is a combination of current long end rates, future expectations, and how many feet are running out the door at the same time. But IPL-D sitting at $19 unmolested day after day with a 4% 10 year is just not likely with history dating back to 1950s I have tracked for utility preferreds. Now if it gets over 5% or investors feel it will then those bets are off.
IPL-D didnt sit at 20.50 during taper, it just briefly nose dived and bounced back very quickly. It was about back to $24 within a month. If it gets $21, I will start laying the base down pretty good.
I have largely been repeating the same stuff for 5 years, owning preferreds that have a stiffer backside support. I look at a lot of preferreds like you mentioned that are actually negative for 52 weeks now including dividends. I have none of those. Most of mine are still largely sitting in their upper trading range (allowing for many that just kicked out their divi last week).
They will falter also, but not to the degree most have though.

That is the total benefit of buying “yield trapped” issues....Example compare AGO-B to AGO-F...By holding AGO-B and risking call, I am now being rewarded with a stronger price. As it has same priority as F but has a 100 basis point free ride...A 100 basis points is equivalent to $4. The call fear of the above market yield has kept it anchored towards par. Its just common sense, if you find issues that should have been called but werent the “anchoring to par” is what protects one from less capital loss.

 

[Mulligan]

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

RM, I keep going on tangents and am not stating my entire thoughts...I dont disagree with your general viewpoint and appreciate the thought process...That rate fear has only been my real concern as an ongoing basis. But until the other developed countries start letting their rates rise the upper end may stay subdued. The issues that are in PFF are in more danger. But I doubt I own one issue they have (which is why I whip its ass year after year).
But there are ways to mitigate some of the drops you are waiting for. Take my FIISO. This is a very decent quality bank preferred last I checked earnings covered the preferreds by 17 times (that is big) and I collect 8.4% plus year after year as it is a cumulative non callable bank preferred. Nobody can get their paws on anything like that...Gonna take a lot of damage for a decent bank to issue a 8%preferred. And it certainly wont be cumulative...NSS as another example is not going to be tethered to rising rates as its yield actually goes up everytime Libor rises...Call and credit risk are the issues here not rising yields. But with a nice oil tailwind, it will be fine for now. And of course term preferreds of decent quality will minimize long term capital losses also. So there are ways one can mitigate capital losses to a certain degree.
Btw, you got me thinking and will look to tweak a bit...But of course off the beaten path as usual though, lol.

 

[Coolius]

That is why i snooze holding AILLL...Outside of a panic 4000 plus share dump coming from me or another friend who owns even more, or Coolius you arent getting it at par. .

Certainly will back up the truck for AILLL selling below $26. I would be willing to sell ( at loss ) other positions to secure more AILLL.



Unfortunately, other REIT preferreds in my portfolio are getting creamed, so the overall result is rather dismal. But hopefully can focus on the income stream - now probably more secure than ever - and try to uncouple from the declining stock price.

 

[Mulligan]

Certainly will back up the truck for AILLL selling below $26. I would be willing to sell ( at loss ) other positions to secure more AILLL.



Unfortunately, other REIT preferreds in my portfolio are getting creamed, so the overall result is rather dismal. But hopefully can focus on the income stream - now probably more secure than ever - and try to uncouple from the declining stock price.

Since AILLL is essentially 26.18 now going exD tomm, I dont see it going back below 25.50 on any tradeable basis at all. Wouldnt bother me because I know its inherent value. Im not seeing 4% on horizon and the show me attitude has served me well. Yes I have seen drop a lot now that I looked at some. But mine just havent with any noticeable amount except for GLP-A yesterday.

 

[PoorOldCountryBoy]

Freedom, US Bank preferreds are highly rated but damn they are dumb. They just sent me a credit card access check for 0% (3% access charge) for 19 months. I am going to make them pay. I am moving all my home equity loan and dump it on them for 19 months. They offered me 15 years ago a 0.99% life of loan access check. I maxed that out and milked it for 10 years before they started sending a lot of fine print changes trying to smoke me out. So I just paid it off so they couldnt sneak a nickel by me.

I do the same thing with a Fidelity credit card - then set up automatic payment to make sure they don't get a chance to hit me with fees. I learned the hard way that additional charges trigger the fees (not stated clearly before where I double checked everything) and had to get them to reverse the fees. Now the card gets hidden away until all is paid off. 3% fee is easy to do.

 

[Mulligan]

Country Boy, it is certainly a cat and mouse game on who can hose who over first.

 

[Golden sunsets]

Mulligan/Coolius; I haven't been paying attention for several months. Just tried to look at the trade history of AILLL on Bigcharts, but the format doesn't seem to show the history of recent trades like I remember. Did something change or am I doing something wrong?

 

[Coolius]

Mulligan/Coolius; I haven't been paying attention for several months. Just tried to look at the trade history of AILLL on Bigcharts, but the format doesn't seem to show the history of recent trades like I remember. Did something change or am I doing something wrong?

Bigcharts appears to be operating normally, I tried to paste the graph here, but was unsuccessful - AILLL has been in trading range for a while. Today is XD day, and stock is down only $0.16, which is a "gain" of $0.24, with only 250 shares traded. Solid as a rock in the face of a sea of red today - the panic selling is in full force it seems. 10 yr Trsy @ 3.22% earlier today.

 

[Mulligan]

Golden you have to be careful of charts with illiquids as they are wrong. For example it shows its 52 week low for year was 25.10...Total BS. I had a standing order at time for 26.40 and Coolius did too...It showed a 100 share trade at 25.10 by passing all bids..The very next trade later in day was well over my bid.

 

[Golden sunsets]

Got it. But my memory is of a website that listed each individual trade, for a ticker, number of shares, price, time of trade, line by line. What website was that?

 

[Freedom56]

My shopping list for preferred stocks and some baby bonds when they drop below par and yields are in the 6.5-6.75 range (preferred stocks) and 7%+ for baby bonds. All are pretty solid companies.

ALL-D
ALL-E
ALL-F
AFC
BAC-C
COF-F
COF-P
COF-C
COF-D
C-S
JPM-H
JPM-E
JPM-B
FRC-E
LMHA
EBAYL
SNHNL
RNR-C
WFE-A
DLR-I
DLR-C

This movie is replaying once again. PFF and PGX go into liquidation, forced selling causes these bargains. Those holding short and intermediate term bond funds are going to get smoked. Most of them are yielding less than 2.9%.

 

[Coolius]

Got it. But my memory is of a website that listed each individual trade, for a ticker, number of shares, price, time of trade, line by line. What website was that?

Golden, you are probably referring to freerealtime.com. You can get quotes in the format you want by using the Time & Sales format.


Here is the link for AILLL:



https://quotes.freerealtime.com/quotes/ailll/TimeAndSales

 

[Golden sunsets]

Golden, you are probably referring to freerealtime.com. You can get quotes in the format you want by using the Time & Sales format.


Here is the link for AILLL:



https://quotes.freerealtime.com/quotes/ailll/TimeAndSales

Thanks Cool; I had the format wrong. Thanks!

 

[Mulligan]

AGO-B is a perfect example of why I prefer above market yeild past call issues..Compare it to its equal standing sister issue AGO-F. My B is down 0.22% past 5 trading days. F however is down 2.67%...Plus I still have 90 basis points in my pocket over F still. Take away GLP-A which is actually up today, my issues havent really done anything. Ideally these would stay firm and then roll into the rocked issues when the appropriate time would come.

 

[Mulligan]

Coolius, almost fell asleep today...Thinking I might sneak in more AILLL and just realized it went exD today. So its actually up today, not down...

 

[Coolius]

Coolius, almost fell asleep today...Thinking I might sneak in more AILLL and just realized it went exD today. So its actually up today, not down...

Yes. IN a day of bloodletting in fixed income issues, AILLL stands out like a lighthouse in the storm.


With my latest recent purchases at around $26.75 and thereabouts, my average cost basis now is $26.38 - not a great cost basis, but this does not include the many dividends I have received.


I expect to receive a lot more dividends as we progress along, and maybe I can lower that cost basis bit by bit as I add more shares.

 

[Mulligan]

I just havent seen the sell off at all. With AILLL trading up today on exD, I am actually up this week, just nothing really going on outside of GLP-A dipping, but even it recovered some today.
None of the sell off in any issues I would be interested in induces me to do anything. Only have an interest in snagging a few illiquids, but zero luck so far.

 

[Mulligan]

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

Yes. IN a day of bloodletting in fixed income issues, AILLL stands out like a lighthouse in the storm.


With my latest recent purchases at around $26.75 and thereabouts, my average cost basis now is $26.38 - not a great cost basis, but this does not include the many dividends I have received.


I expect to receive a lot more dividends as we progress along, and maybe I can lower that cost basis bit by bit as I add more shares.

I thought IEH was getting interesting as I saw a $25.15 trade from yesterday. But it must have been an inter dealer trade as it was showing $25.90 today. Would get pretty serious about this one in the $24 range.