Preferred Stock Investing-The Good , The Bad and The In Between 2021

[Mulligan]

Thanks for that reminder! Having that floor does take some of the edginess out of the situation.

When I talked to Schwab yesterday, they told me SLMNP was trading in the "expert market" at very low volumes around PAR. They also directed me to their more sophisticated trading platform where I might be able to see more than I do on Schwab.com. That's my project for today.

This whole business is yet another very interesting situation which substitutes nicely for doing the daily crossword puzzle!

Youbet, you can book mark this site and it will tell you individual sells and time and date.
I teed up SLMNP for you here. Just type ticker symbol in that little box and it will show you.

https://quotes.freerealtime.com/quotes/SLMNP/Time&Sales

 

[youbet]

Excellent Mulligan! Thanks!

BTW, one of the five shares that sold so far today was me. I entered online a GTC sell order on Schwab for one share at $1,000. It sold this morning for $1003. Schwab info all updated. So apparently Schwab will show the latest trade activity but no bid/offer info. And I can enter orders online. There was no commission.

It will be interesting to see what activity pops after SLMNP goes ex-div next Thursday.

I think the fog is slowly lifting (my personal fog that is) on how this "expert market" business works. Or at least I'm learning enough to really get myself into trouble!

 

[Texas Proud]

Thanks Mulligan! I didn't understand the exact relationship between Schulman and LYB, but your accounting makes it perfectly clear. It's very interesting that they can incorporate Schulman's financials into the consolidated reporting but keep the ownership of the SLMNP obligation separate. But, so be it. Now I understand. It's a relief! I just couldn't get a handle on why the required reporting couldn't/wouldn't be reported as required by 15c2-11.

I think you are getting confused with the accounting rules and legal rules...


Now, this is only a guess from what I am reading...


Schulman is the legal entity that has the issue outstanding and is legally obligated to pay their bills...


100% or so of the shares of Schulman is owned by LYB... so, Schulman is a legal entity that is now privately owned... so a private company does NOT have to publish financials...


But since LYB is publicly held it has to report its financials with include Schulman's numbers... it would have to consolidate even if it only held 50% of the shares...



Just because LYB owns Schulman does not mean that it has to pay Schulman's bills... just like you would not have to pay the bills of any public corporation that you might own shares in...

 

[pb4uski]

^^^ and further, LYB's SEC reporting does satisfy Schulman's SEC reporting requirement since the registrant for SLMNP is Schulman... if Schulman resumed its SEC reporting then SLMNP could be traded on exchanges.

It is very common that registrant like LYB would have numerous consolidated subsidiaries and that some subsidiaries might also be SEC registrants in addition to the parent if they have issued publicly traded securities.

While it is true that legally LYB isn't financially responsible for SLMNP dividends, it would be rare that a publicly traded parent would allow a subsidiary to default on debt or preferred.... sort of a reputational risk issue.

 

[youbet]

^^^ and further, LYB's SEC reporting does satisfy Schulman's SEC reporting requirement since the registrant for SLMNP is Schulman... if Schulman resumed its SEC reporting then SLMNP could be traded on exchanges.

To heck with the exchanges. I'd be happy if SLMNP would go back to being traded OTC via the pink sheets instead of in the "expert market" as they are now. It's annoying not being able to see any spread info.

Also interesting when trying to research SLMNP is the fact that Schulman has no web page. Going to Schulman.com gets you redirected to LYB's page. If you search for SLMNB there, you get nothing. Not a mention in the investor relation section or anyplace, at least that I could find.

Thanks to both you and TP for your comments.

Darn, this stuff is interesting......


Edit: You said:

and further, LYB's SEC reporting does satisfy Schulman's SEC reporting requirement

Did you mean to say:

and further, LYB's SEC reporting does NOT satisfy Schulman's SEC reporting requirement

 

[pb4uski]

Yes, I miswrote.. I meant not.

 

[Mulligan]

To heck with the exchanges. I'd be happy if SLMNP would go back to being traded OTC via the pink sheets instead of in the "expert market" as they are now. It's annoying not being able to see any spread info.

Also interesting when trying to research SLMNP is the fact that Schulman has no web page. Going to Schulman.com gets you redirected to LYB's page. If you search for SLMNB there, you get nothing. Not a mention in the investor relation section or anyplace, at least that I could find.

Thanks to both you and TP for your comments.

Darn, this stuff is interesting......


Edit: You said: Did you mean to say:

Youbet. Just to clarify. Schulman doesnt exist independently anymore. But also it doesnt exist by itself as an independent subsidiary either. When it got acquired it got folded into a separate subsidiary of LYB.
This is why its called Lyondell Advanced Polymers Inc. I forgot which LYB sub folded in with A Schulman, but they combined them and gave them that name.

 

[pb4uski]

An interesting WSJ article on the impact of the new SEC rule. It may be behind a paywall.

https://www.wsj.com/articles/an-sec...-ensued-11633705328?mod=wsjhp_columnists_pos1

... That’s because a rule from the Securities and Exchange Commission went into effect at the end of September, generally preventing brokers from providing public price quotations on securities issued by companies that don’t release current financial information. Ladenburg, acquired by privately held Advisor Group Inc. in early 2020, no longer provides financial statements to the general public.

Under the SEC rule, many brokers have stopped offering price quotes on Ladenburg and thousands of other companies that don’t provide public information. And OTC Markets has classified Ladenburg’s securities as ineligible for public quotation.

Just like that, Mr. Wetzel’s holding was flash-frozen. He would love to buy more of what he believes is a bargain, but can’t. The last week of September, online forums like Silicon Investor and InnovativeIncomeInvestor.com erupted in complaints and commiseration from individual holders of OTC securities that became unbuyable in the blink of an eye.

“We find ourselves in a situation where there are real opportunities sitting in front of us,” says Mr. Wetzel, “but we can’t take advantage of them!”

The SEC intended the rule to protect individual investors “in these markets where retail presence is significant and, unfortunately, pump-and-dump and other frauds are too common,” then-SEC Chairman Jay Clayton said last year.

There’s a chance the regulation might protect small investors from fraud, but it was half-baked. The result is pandemonium. Small investors are enraged and professionals are trading what those individuals no longer can. ...

 

[RicDee]

Guys, WTREP is untradeable now. No ticker symbol. The pricing on brokerage account may go to zero due to stale pricing. Im fine holding my approx. 2k shares. I dont know of many issues with near IG credit with a 7% floor and higher if rates go up. I would be surprised if it makes it to the new year though without being redeemed.
Side note, if you are looking for extra safe and 5% for a year have you considered IBONDs? 10k max each year per person but you could get 5k more through a tax refund. IBonds track inflation. You would get 3.5% annualized for 6 months and about 6.5% annualized falling 6 months if bought before end of Oct.

Hey Mulligan,
How do you calculate the 6.5%?
Ric

 

[Mulligan]

Hey Mulligan,

How do you calculate the 6.5%?

Ric

This may be more clear… Ibonds pay yield of 6 month CPI rate. If purchased in next day or two you get 1.77% true amount for 6 months (that is 3.55% ish annualized). Then after those 6 months, you get 3.56% true amount (7.12% annualized). So for 12 months you get 5.33% yield return.
If you wait and buy Nov. 1 you get 3.56% for 6 months, and undetermined for following 6 months as that cycle wont be known until April (Nov. through Mar. CPI).
I dont know why I wrote that 6.5%, I wasnt drunk when I wrote it so I have no excuse. I meant to say 7.12% annualized (6 months only) if you wait and purchase after Nov. 1.

 

[Sunset]

Unfortunately I-bonds limit a person to $10K per year.
DW and I have bought 10K each of the 3.55% ones, and will do it again come January (new year).

Pretty crazy to feel good about nearly keeping up with inflation

 

[Mulligan]

Unfortunately I-bonds limit a person to $10K per year.
DW and I have bought 10K each of the 3.55% ones, and will do it again come January (new year).

Pretty crazy to feel good about nearly keeping up with inflation

This guy doubles his limit via a revokable trust.

https://thefinancebuff.com/buy-more-i-bonds-treasury-direct-trust.html

Also you can overpay to IRS and get 5k worth of paper Ibonds via your tax refund when you file taxes.

 

[Sunset]

This guy doubles his limit via a revokable trust.

https://thefinancebuff.com/buy-more-i-bonds-treasury-direct-trust.html

Also you can overpay to IRS and get 5k worth of paper Ibonds via your tax refund when you file taxes.

It is also allowed to buy them as a sole proprietorship, although I haven't done this yet.

Normally setting up a trust is expense as most folks use a lawyer, here in IL even the free ones are complex with lots of signatures in front of a notary.

Overpaying taxes seems like an easy way.

 

[Mulligan]

It is also allowed to buy them as a sole proprietorship, although I haven't done this yet.

Normally setting up a trust is expense as most folks use a lawyer, here in IL even the free ones are complex with lots of signatures in front of a notary.

Overpaying taxes seems like an easy way.

Yes, I read about that method also. I just threw out the trust thing as several people inquiring me actually had them set up. I just have a will, and my accounts just have beneficiaries set up for them. I really have no need for a trust so buying Ibonds that way doesnt work for me.
I have actually bought Ibonds before via tax refund. But Im going to owe this year and dont have a clue how much I will owe, so its too much guess work for me this year. I will just buy more in January.

 

[pb4uski]

This may be more clear… Ibonds pay yield of 6 month CPI rate. If purchased in next day or two you get 1.77% true amount for 6 months (that is 3.55% ish annualized). Then after those 6 months, you get 3.56% true amount (7.12% annualized). So for 12 months you get 5.33% yield return.
If you wait and buy Nov. 1 you get 3.56% for 6 months, and undetermined for following 6 months as that cycle wont be known until April (Nov. through Mar. CPI).
I dont know why I wrote that 6.5%, I wasnt drunk when I wrote it so I have no excuse. I meant to say 7.12% annualized (6 months only) if you wait and purchase after Nov. 1.

I get a 4.59% annualized rate for a 15 month hold since if you redeem before 5 years there is a 3 month early withdrawal penalty. I bought $10k today. If I redeem on 1/2/23, since the interest is paid back to the 10/1/21 that would be 15 months.... on 1/2/23 I would get $10,539 ($10,000*(1+3.54%/2))*(1+7.12%/2) for an IRR of ~4.59% for 15 months. That sounds pretty good for no credit risk and no interest rate risk.

Will probably go into the old sock drawer.

 

[Mulligan]

I get a 4.59% annualized rate for a 15 month hold since if you redeem before 5 years there is a 3 month early withdrawal penalty. I bought $10k today. If I redeem on 1/2/23, since the interest is paid back to the 10/1/21 that would be 15 months.... on 1/2/23 I would get $10,539 ($10,000*(1+3.54%/2))*(1+7.12%/2) for an IRR of ~4.59% for 15 months. That sounds pretty good for no credit risk and no interest rate risk.



Will probably go into the old sock drawer.

Yes, if you withdraw, that needs to be factored in. Mine is technically less as I deposited late last month. So I got a full months interest depositing 2-3 days before end of month. So technically your return would be higher off that method.
There is a lot of inflation that hasnt been passed on as some has been ate by companies, and others have stated more increases are on the way. Rent and gas are big components and they keep rising too. So I am expecting the following 6 month cycle will be worth holding and likely as much or more than the current 3.5% annualized is paying.

 

[pb4uski]

I suspect that you are right and for at least a while the returns will be attractive. We'll try to do $25k a year for the next 5-10 years as ballast... money that will grow wiht inflation that most likely we'll never use.

 

[bobandsherry]

Maybe the Ibonds should move to its own thread? Good info that a lot of people may not be aware of being hidden in the Preferred's thread that they may never look at.

Might be interesting to see what happens with inflaton come December and people either need to get vax'd or out of a job. Depending on decision path it could temper inflation considerably.

 

[Sunset]

There is an I bond thread, we just got off track here

 

[RE2Boys]

Interstate Power & Light Series D ( IPLDP ) called on Dec 15, 2021

See SEC notice at: https://www.sec.gov/ix?doc=/Archives/edgar/data/52485/000035254121000091/lnt-20211103.htm

 

[pb4uski]

Nuts! That's two calls that I learned of today... PUK- and IPLDP.

And that is in addition to a call of PSB-W that I was unaware of the hit my brokerage account today.

Luckily, I'll have done well on IPLDP and PUK-... 4% and 2.5% respectively and about 1% on PSB-W... so all positive thankfully.

I'm starting to wonder if it is better to give up on individual preferreds and just invest my preferred money in EPRF and declare victory.

 

[Born2Fish]

Nuts! That's two calls that I learned of today... PUK- and IPLDP.

And that is in addition to a call of PSB-W that I was unaware of the hit my brokerage account today.

Luckily, I'll have done well on IPLDP and PUK-... 4% and 2.5% respectively and about 1% on PSB-W... so all positive thankfully.

I'm starting to wonder if it is better to give up on individual preferreds and just invest my preferred money in EPRF and declare victory.

Had hoped IPLDP would have lasted a while longer. 2% net for me.

What's next?

 

[pb4uski]

... What's next?

I am tiring of these calls... I think as individual preferreds get called and cash becomes available I'll just put it in ERPF. EPRF invests in investment-grade preferreds and the EPRF returns for 2019, 2020 and 2021 YTD are similar enough to my preferred portfolio returns that perhaps it isn't worth the time and effort of trying to find individual preferreds to invest in.

 

[aja8888]

I am tiring of these calls... I think as individual preferreds get called and cash becomes available I'll just put it in ERPF. EPRF invests in investment-grade preferreds and the EPRF returns for 2019, 2020 and 2021 YTD are similar enough to my preferred portfolio returns that perhaps it isn't worth the time and effort of trying to find individual preferreds to invest in.

Same here. I've had a few called and now IPLDP. I may just sell all remaining preferreds I have and book the capital gains before they evaporate through a call.

I have some PFFD in my Roth and it's done well so that may be a good choice for the preferreds in my TIRA.

 

[pb4uski]

I'll check out PFFD as well.