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Post by bobfl on May 2, 2022 19:45:38 GMT
Haven't seen discounts in investment grade, qualified preferreds like these since 08. Last time the Fed rate was up, pre-covid, I would have to fight to get 6% on investment grade, qualified preferreds. Could only get them by stalking IPOs and grabbing them before the price went up, which happened fast.
Now, plus 6% is everywhere because even the 4.5% preferreds dropped so low in price that so many are yielding well over 6%.
I feel that the benefit of buying the 4%ers, as I am buying, is that they should not be called.
So many of the ones actually written at 6% were called when the 5 years was up and the companies could refinance at a lot lower rates because of the zero rate Fed environment. Just like a house mortgage.
Sure, what I am buying could drop lower. I am not timing the bottom. But they will pop back up when the Fed signals they will stop raising rates.
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Post by bobfl on May 2, 2022 22:02:59 GMT
I think I see what's happening. The volumes are off the charts. Not retail sellers. People are exiting the ETFs and funds that hold these, and ETFs and funds have to unload. The question is when will that slow down.
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Post by bobfl on May 3, 2022 11:08:07 GMT
Example: marketchameleon.com/Overview/T-A/Summary/Hit the "historical" tab. Pretty typical at this moment. Caution: Don't start trading this stuff unless you have done it before. It is heavily affected by the Fed rate cycles. The value can go down when the fed rate goes up; then correct up when they stop raising or drop rates. No telling how high or long this cycle will be. You might see your losses and sell at the wrong time. I will buy, collect the interest and not look at my account summary until I hear the word that the fed will stop raising rates. www.macrotrends.net/2015/fed-funds-rate-historical-chart |
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Post by Deleted on May 3, 2022 14:11:29 GMT
What is freaking me out is the performance of floating rate preferreds. Some were down over 5% yesterday. To me, an investment that should be rising with the prospect of higher rates that is falling signals a real fear of servere recession.
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Post by bobfl on May 3, 2022 18:04:09 GMT
What is freaking me out is the performance of floating rate preferreds. Some were down over 5% yesterday. To me, an investment that should be rising with the prospect of higher rates that is falling signals a real fear of servere recession. Certainly makes sense to think floating is better. But guess if it has a 4% base people don't know how to calculate libor. Everything was down big time yesterday. I am really trying to add more today, just not as many bargains. Maybe did 10 trades today. Usually do 1000 shares at a time. A severe recession causes the fed to stop raising and lower rates, then this stuff pops up. I really think most of this is bought and sold by the etfs and funds. Maybe they don't focus on "variable rate" ones. All this 200,000 daily volume on each is not mom and pop. I had the BAC variables on my spreadsheet. Their rates are staying so low, I'm not buying them when I can get heavily discounted regular BAC preferreds. |
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Post by bobfl on Jun 8, 2022 21:29:54 GMT
Disregard this entire post. Sure it was a no brainer to buy when I made this post, but the prices have rebonded.
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Post by retiredat48 on Jun 9, 2022 16:38:07 GMT
bobfl,...why disregard the post. I own for instance HPS...leveraged preferreds fund. About a month ago (your OP time) a gentleman from Capecod suggested not owning preferred cefs. I respect his views, but I kept mine. Since then, the PDIs of the world have sunk a lot; the preferreds have held ground and some gone up. I'm not sure why I should sell now?? Please elaborate in more depth... My gameplan is to hold a diversified grouping of higher yield products such as PDI...HPS...PFF, Income builder funds, and junk bond funds (currently own zero junk). R48 R48
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Post by bobfl on Jul 6, 2022 21:49:45 GMT
" bobfl ,... I'm not sure why I should sell now?? Please elaborate in more depth..." I am not saying to sell. These preferreds have gone up since I bought around the first of May, some near a 10% increase, but that is nothing compared to where they will go up when the FED stops raising. After that (or when people feel that the Fed will stop) they will jump up significantly, like always. But I will keep them because I bought them for the yield. I locked in my target rate. I didn't think they would hit it so fast, but in the first few days of May they hit my target and I went all back in. Are they still bargains, absolutely, just slightly less. I peek at a couple to make myself feel good but will not look at my entire portfolio until the Fed signals they will stop or we go into a real recession. A recession usually means that the FEDs will soon slow down and that also makes this stuff go up. This inflation is weird, likely to ease. BUT if inflation is not where the FED wants it, they may go higher in rate hikes. If that happens the credit stuff like preferreds and bonds might go down briefly again then bounce up. I said to disregard the post because I felt it was about buying at the bottom. I think maybe that was it. But it really depends on how aggressive the FED has to get to fight inflation. The market has their expectations regarding the normal FED rate. If they have to temporarily go higher than that, again there will be a brief buying opportunity. But I am all in now, so will collect my yield and frankly that's all I want. As I said before I only got the stuff that I don't expect to be called (for the first time in my life). So as long as companies like BA and JPM don't go out of business, I can relax. |
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