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

[brokrken]

While I'm not a fan of paying for something in the future that is free now, I guess it isn't likely a move that will have much impact on me. But I sure hope it's not an indicator of more moves away from $0 commissions!

My current holdings aren't impacted to any great extent.

SPLP+A NYSE
MNR+C NYSE
SLMNP OTC
CNTHP OTC
CNLPL OTC
DTB NASDAQ
CHSCL NASDAQ
CHSCM NASDAQ
SCHW+J NYSE

brokrken, you mentioned "Schwab is walking back some of the $0 trades." I didn't see anything other than US and Canadian OTC trades mentioned. Did you see anything else that caused you to refer to "some of the $0 trades?"

youbet, no, that's all I saw referenced. But, like you, I hope it's not a sign of things to come.

 

[aja8888]

What's gong on with QRTEP? It's been in a steady downtrend from $108 to $103.

 

[Mulligan]

What's gong on with QRTEP? It's been in a steady downtrend from $108 to $103.

They have had a few supply issues, but the major event was another huge special dividend given to common stock holders. This didnt help the common either. They are basically telling market most of free cash flow will be returned to shareholders. They are fine keeping company leveraged. I lightened up here a few weeks ago, but still keeping 150 shares.
The preferred market in general has been soft lately too so that hasnt helped either.

 

[aja8888]

They have had a few supply issues, but the major event was another huge special dividend given to common stock holders. This didnt help the common either. They are basically telling market most of free cash flow will be returned to shareholders. They are fine keeping company leveraged. I lightened up here a few weeks ago, but still keeping 150 shares.
The preferred market in general has been soft lately too so that hasnt helped either.

Thanks for the explanation.

 

[Sunset]

What's gong on with QRTEP? It's been in a steady downtrend from $108 to $103.

Perhaps some folks that have $10K to invest decided to buy the treasury I bond as 7% with zero risk is better than less than 7.7% with risk.

 

[aja8888]

Perhaps some folks that have $10K to invest decided to buy the treasury I bond as 7% with zero risk is better than less than 7.7% with risk.

Could be, but that 7% is only for 6 months. (maybe they don't know that?)

 

[bobandsherry]

Could be, but that 7% is only for 6 months. (maybe they don't know that?)

The guarantee is only 6 months, but could be same, higher or lower the next 6 months and every 6 after that. So who knows. Talk of hyper inflation, so who knows what the future rates may be.

 

[youbet]

The guarantee is only 6 months, but could be same, higher or lower the next 6 months and every 6 after that. So who knows. Talk of hyper inflation, so who knows what the future rates may be.

Lots of talk about perhaps sustained high inflation (high by historical standards) but haven't heard anything I'd consider even a tiny bit creditable regarding "hyperinflation." And I sure hope the lack of talk is a good predictor. 50% - 100% - 1000% inflation would make the 4% - 6% rate on my preferred's look kinda pathetic!

From Wikipedia:

Hyperinflation is a term to describe rapid, excessive, and out-of-control general price increases in an economy. While inflation is a measure of the pace of rising prices for goods and services, hyperinflation is rapidly rising inflation, typically measuring more than 50% per month.

Of course, hyperinflation is possible. It's happened in other countries several times in modern history. Let's hope not here..........

 

[bobandsherry]

Lots of talk about perhaps sustained high inflation (high by historical standards) but haven't heard anything I'd consider even a tiny bit creditable regarding "hyper inflation." And I sure hope the lack of talk is a good predictor. 50% - 100% - 1000% inflation would make the 4% - 6% rate on my preferred's look kinda pathetic!

Who can say what a credible source is these days..... Transitory was the buzzword from credible sources, well until last week anyway. Lol. I don't buy into the hyper myself, but did anyone think 7% Ibond rate was possible 6 months ago?

 

[youbet]

Who can say what a credible source is these days..... Transitory was the buzzword from credible sources, well until last week anyway. Lol. I don't buy into the hyper myself, but did anyone think 7% Ibond rate was possible 6 months ago?

I thought Ibond rates could go there. That was just based on thinking that inflation could very well reach current levels with the Fed saying they were targeting levels above 2% to achieve an average of 2%+ going forward. Couple that with COVID and stimulative spending and I'm a bit surprised inflation rates aren't even higher today. Not hyper-high, but back to the late 70's level of "high."

It does sound like the politicians have gotten the message that the public doesn't like what's happening with inflation now so I'm not surprised to see the Fed backing away from such pro-inflation rhetoric. Now, let's see what happens........

 

[bobandsherry]

Where did ya see someone predicting or even talking about hyperinflation in the USA?

A few "experts" on various shows have spoke the word. Don't know if Mr Wonderful is an expert, just a rich dude, but he whispered that word just recently.

https://www.cnbc.com/2021/11/23/kev...ack-better-plan-inflation-hyperinflation.html

And don't know if Jack Dorsey is an expert (another really rich dude), but he mentioned it too about a month ago.

https://fortune.com/2021/10/25/jack-dorsey-warns-of-hyperinflation/

So dribs and drabs here and there for sure.

 

[youbet]

A few "experts" on various shows have spoke the word. Don't know if Mr Wonderful is an expert, just a rich dude, but he whispered that word just recently.

https://www.cnbc.com/2021/11/23/kev...ack-better-plan-inflation-hyperinflation.html

And don't know if Jack Dorsey is an expert (another really rich dude), but he mentioned it too about a month ago.

https://fortune.com/2021/10/25/jack-dorsey-warns-of-hyperinflation/

So dribs and drabs here and there for sure.

I wouldn't give much credit to those two! OTOH, treading carefully to not step on a political landmine, there does seem to be a trend towards viewing inflation as desirable in Washington, until the voter push-back that is.

Oh well. This isn't an inflation thread beyond the fact that taking on the risk of preferred stocks to gain higher interest rates that are just barely, or perhaps not, keeping up with inflation takes some of the fun out of the game.

 

[Mulligan]

Perhaps some folks that have $10K to invest decided to buy the treasury I bond as 7% with zero risk is better than less than 7.7% with risk.

I owned IBonds for a few years about 10 years ago then sold when rates got really low…But this time around, I liked them so much, I bought 10k of them and then decided I would ignore the limit and buy 10k more. Come January I will buy 10k more. I bought in September so I am on 3.56% for 6 months, then I will get the 7.12% afterwards.

 

[Texas Proud]

Considering that the fixed rate portion of an I Bond is zero I do not think I will buy any...


I have preferred shares that are tied to LIBOR and usually LIBOR goes up if there is inflation... and my fixed is like 5 to 6%....

 

[Sunset]

I owned IBonds for a few years about 10 years ago then sold when rates got really low…But this time around, I liked them so much, I bought 10k of them and then decided I would ignore the limit and buy 10k more. Come January I will buy 10k more. I bought in September so I am on 3.56% for 6 months, then I will get the 7.12% afterwards.

You could overpay the feds some estimated taxes to earn a $5K refund and have it returned as I-bonds.

Allowing a person to get a legitimate $15K in I-bonds each year.

 

[Mulligan]

You could overpay the feds some estimated taxes to earn a $5K refund and have it returned as I-bonds.

Allowing a person to get a legitimate $15K in I-bonds each year.

Yes, I did that a couple times about 10 years ago. I did my taxes manually and it was easy then. Now I got Turbo, and would have to think…And overpay. And I already owe over 5 figures but have no clue to what it is.
And then you gotta get them and link them to put online with others.
My method was a heckuva lot easier!

 

[Mulligan]

Considering that the fixed rate portion of an I Bond is zero I do not think I will buy any...


I have preferred shares that are tied to LIBOR and usually LIBOR goes up if there is inflation... and my fixed is like 5 to 6%....

Im not really seeing my Ibond purchases as a direct competition with buying preferreds (I still own them). I just think of it as taking some risk down to preserve some capital and yet Ibonds will still earn a return off of the defensive measure.

 

[finnski1]

Could be, but that 7% is only for 6 months. (maybe they don't know that?)

I bought my first I bonds ever last week. I am aware that the 7.12% is only for 6 months. However I am pretty sure the inflation portion won't go to zero at the next adjustment and I figured even if I could get a blended rate of 4-5% or so for the first year that it was well worth it as opposed to sitting in one of my fixed accounts at much less than 1%. I will reevaluate after one year and hope to keep for 5 years or more to avoid the 3 month interest penalty although even that would not be a deterrent for cashing in early.

 

[Sunset]

I bought my first I bonds ever last week. I am aware that the 7.12% is only for 6 months. However I am pretty sure the inflation portion won't go to zero at the next adjustment and I figured even if I could get a blended rate of 4-5% or so for the first year that it was well worth it as opposed to sitting in one of my fixed accounts at much less than 1%. I will reevaluate after one year and hope to keep for 5 years or more to avoid the 3 month interest penalty although even that would not be a deterrent for cashing in early.

The penalty is funny, because if interest rates dropped low and equaled online bank rates currently 0.5%, it means the actual penalty in $ will also be very low when timed correctly.
So I have no worries about the penalty. Example 3 months of 0.5% interest.

I also bought our first I-bonds, I bought $20K as I bought one, and my proprietorship bought one.
Come January, I'll buy another $20K.
I view them as a secure, interest deposit, much better than my 0.5% bank rate.

 

[Mulligan]

The penalty is funny, because if interest rates dropped low and equaled online bank rates currently 0.5%, it means the actual penalty in $ will also be very low when timed correctly.
So I have no worries about the penalty. Example 3 months of 0.5% interest.

I also bought our first I-bonds, I bought $20K as I bought one, and my proprietorship bought one.
Come January, I'll buy another $20K.
I view them as a secure, interest deposit, much better than my 0.5% bank rate.

I have in past treated this like an investment selling when yield was pitiful. But this time I am going to consider it an “investment” for first year, then become a default extension of my checking account. In other words keep a lower balance with most cash in Ibonds. When you have a years worth that money can be considered the reserve part of checking account and just deposit more annually and adjust as needed.

 

[brokrken]

Any opinions on NYCB-U? I currently own it, but am thinking about adding to my position. At current price, it yields around 5.75%, is uncallable and the company is Baa3/BB+ rated. I, like everyone else, just can't find yield, so looking internally to add. Any reason I should avoid that I'm missing? I know there is a stange warrant provision, but that seems unlikely to get exercised at current stock price.

 

[youbet]

For those, like me, still holding some Monmouth Real Estate........

I own both the common (MNR) and preferred (MNR+PRC). Received my proxy to vote yea or nay for the acquisition by LTCI. In a nutshell, the proposal is that we get $21 for common and $25 for preferred shares.

If you're interested in the details:

https://investors.mreic.reit/filings-reports/sec-filings-details/default.aspx?FilingId=15434983

 

[youbet]

^^^^^^

LTCI must really be interested in ensuring the acquisition occurs. I just got a phone call (an actual, live person) from McKenzie Partners encouraging me to vote my shares. No pressure on which way to vote, but lots of encouragement to fill out the proxy and send it in.

If the acquisition vote succeeds, I'm sure gona miss this one. Nice divs for several years. But there will be a significant cap gain on both the common and preferred vs my acquisition cost to help me get over the loss of the divy.

 

[Mulligan]

^^^^^^

LTCI must really be interested in ensuring the acquisition occurs. I just got a phone call (an actual, live person) from McKenzie Partners encouraging me to vote my shares. No pressure on which way to vote, but lots of encouragement to fill out the proxy and send it in.

If the acquisition vote succeeds, I'm sure gona miss this one. Nice divs for several years. But there will be a significant cap gain on both the common and preferred vs my acquisition cost to help me get over the loss of the divy.

MNR management was yakking a year ago about redeeming it themselves and that was prior to takeover talks. So Im guessing somewhere it will be redeemed one way or another this year, unless rates spike just enough where it isnt worth their time and money to redeem.

 

[Mulligan]

Any opinions on NYCB-U? I currently own it, but am thinking about adding to my position. At current price, it yields around 5.75%, is uncallable and the company is Baa3/BB+ rated. I, like everyone else, just can't find yield, so looking internally to add. Any reason I should avoid that I'm missing? I know there is a stange warrant provision, but that seems unlikely to get exercised at current stock price.

Ken, I didnt answer because we are kind of at a POSSIBLE tipping point where preferreds could drop from yield hike talk. They largely have ignored it which is surprising. This being a fixed issue could suffer some drop. You can look through the years of other yield environments to show where this could fall pricing wise.
Its just kind of tough out there. A while back I rotated into a lot of adjustable, resets, and fixed issues to try to mitigate the blow back some.
Just as an example.. The $1000 dollar EIX par 5.375% reset issue. It presently trades at $1050 give or take. The YTC in 2026 is about 4.3%. Not horrible. But.. these issues if reset cannot be called until next 5 year reset. The 5 year is what 1.50% now? The adjustment is 4.698%. So add that together and that is a reset to almost 6.2% off par. That is considerably higher than what it was issued at even at slightly elevated pricing to par. And of course if 5 yr rises more the reset goes higher. Those are the type that interest me.