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Post by bobfl on Mar 18, 2023 16:44:23 GMT
I deal only with individual preferreds.
As I said many times, I sold all preferreds when I heard "inflation" and bought back in when they crashed 20-25% in June and Aug.
But here is the problem!
I wanted to get back in quick when they crashed. I quickly surveyed everything that was bbb- up (investment grade) and was qualified. I bought many different investment grade preferreds. I was fully back in.
When the buying was over I started thoroughly reviewing all purchases. As I reviewed company documents, alarms started going off in my head and I started selling back stuff that was rated high by the rating agencies, but I didn't like. LAST SUMMER (2022), I quickly sold back stuff like First Republic, PS Executive Parks, Greenfield Finance, and much more. All crashed after I sold them. The beautiful shiny apples had worms inside.
I determined that some investment grade might not mean much. Junk rated debt instruments and Not Rated is worse.
When I sold, I beefed up banks that were labeled as "too big to fail", like the top 4 banks.
Today my portfolio is up (thank goodness), but has bounced around.
Lesson learned: I always felt PGX might be a good Preferred ETF, if I did not want to buy individual preferreds any more. But today I looked at the yearly performance of PGX. The performance is horrible. I just looked at all the holdings to find out why.... Because they are still holding everything I sold. Funds can't just bail out of crap like we individual holders can.
JPM is my "go to" now; if I sell something I move to them, or maybe BAC. But nothing is guaranteed. Always be prepared to sell. Better to lose a couple percent instead of 50%. Then when you move into higher quality you will make it back.
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Post by FD1000 on Mar 19, 2023 4:12:15 GMT
Trying to learn, let's assume you are a good trader, why don't you trade stocks instead of preferred? What are the advantages?
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Post by bobfl on Mar 19, 2023 18:03:13 GMT
Trying to learn, let's assume you are a good trader, why don't you trade stocks instead of preferred? What are the advantages? It's like after playing in the World Series a couple of times, someone asks, "You are a decent baseball player, why don't you play football?" The answer is, "Because I am not good at football." I was never a good stock picker. For over 25 I owned and learned to love preferreds. Plus I could always live off the income I made from preferreds without ever selling the actual preferreds that I owned for living expenses. I like that with quality preferreds when they are redeemed you will get your money back assuming you bought for under the issue price. |
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Post by retiredat48 on Mar 19, 2023 18:53:19 GMT
bobfl,...I see where PGX (from Invesco) is mostly LARGE BANKS, and other decent companies, for the most part. Seems large banks should be minimal in default risk of preferreds, right? Would you buy PGX now, or wait? Are we not now getting bank preferreds tossed into the "sell now" mix by the crowds. Good opportunity to accumulate now? TIA R48
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comlb
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Post by comlb on Mar 19, 2023 20:40:05 GMT
bobfl, look at PTA? Mainly financial preferred fund w a bit of leverage
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Post by FD1000 on Mar 19, 2023 21:13:39 GMT
Trying to learn, let's assume you are a good trader, why don't you trade stocks instead of preferred? What are the advantages? It's like after playing in the World Series a couple of times, someone asks, "You are a decent baseball player, why don't you play football?" The answer is, "Because I am not good at football." I was never a good stock picker. For over 25 I owned and learned to love preferreds. Plus I could always live off the income I made from preferreds without ever selling the actual preferreds that I owned for living expenses. I like that with quality preferreds when they are redeemed you will get your money back assuming you bought for under the issue price. Again, just trying to learn and pick your brain with no sarcasm. I love to learn new ideas. If you don't want to answer, it's OK too. I will not post again. I have been on several investment sites for over 15 years, read/listen for hours to many sources. I don't remember any investor that is dedicated to only to preferred. Stocks made more millionaires than any other category. Over the years I read plenty about CEFs, they have huge income and sometimes they have better risk/reward, I get it but don't agree. I test PFF(preferred index),SPY,PDI(most popular over the years), PV( link). It shows the following SPY had the best performance, PDI second best with income of 5-8 times greater than SPY, performance is lagging by 30%. PFF performance lagged by close to 70%, income started at twice than SPY and in the last couple of years only about 50% more. We also know that investing and holding just in the SP500 is the easiest way for decades. What made you switch to preferred 25 years ago? 1996-2000 was one of the best performance periods at 20+% annually for the SP500. ============= R48: based on my ST+LT T/A indicators for PGX...it's not even close. My LT indicator signaled a sell since early Feb. No matter what? I never buy anything if at least I don't see a ST buy which is pretty quick. |
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Post by catdog on Mar 19, 2023 23:23:01 GMT
Over the last five or so years I have followed the blog "Innovative Income Investors". They mostly concentrate on Preferred and Baby Bonds. I will confess that I have not yet learned enough to dip my toe into these investments (I'm a little slow and conservative). I can't be sure but some of them seem to have a large part of their portfolio invested this way.
They do a lot of education and you can go back to old articles for research. They are also very respectful of each other which is important.
catdog
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Post by retiredat48 on Mar 20, 2023 15:34:33 GMT
Folks remember poster XLT on M* was almost 100% preferreds on his income investing strategy...with his spreadsheets.
A marginal asset retiree could perhaps get enough income from 100% preferreds, to live on, if he/she ignores capital losses, or no portfolio growth.
My memory is Xlt's (real) portfolio yielded about a $100,000 income a year.
Is Xlt still posting anywhere??
R48
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Post by richardsok on Mar 20, 2023 15:57:01 GMT
Folks remember poster XLT on M* was almost 100% preferreds on his income investing strategy...with his spreadsheets. A marginal asset retiree could perhaps get enough income from 100% preferreds, to live on, if he/she ignores capital losses, or no portfolio growth. My memory is Xlt's (real) portfolio yielded about a $100,000 income a year. Is Xlt still posting anywhere?? R48 He was more than 100%, r. Xot was leveraged into preferreds and the covid crash had to have smacked him hard. Must be taking him a good long while to recover. Haven't heard from him since. I liked the guy. He was generous with his thinking and organized. His was one of the toughest stories on M* b/c he had his intelligent plan & progress laid out beautifully on spreadsheets. My takeaway from all that is the necessity to maintain flexibility, especially when leveraged. There is just no accounting for unseen events. |
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Post by gman57 on Mar 20, 2023 17:57:50 GMT
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Post by johnsmith on Mar 20, 2023 20:25:37 GMT
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Post by retiredat48 on Mar 21, 2023 4:25:48 GMT
johnsmith, gman57,...Thanks. These appear to be spreadsheets of a listing of all preferreds, in categories. Xot used to provide a spreadsheet of what he currently owned. Does he still provide this? R48
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Post by Capital on Mar 25, 2023 18:16:04 GMT
Looking at Regions Preferred Series B. It's non-cummulative but carries a 6.375% dividend. It has recently dropped in price to $21.32 to yield about 7.5%. It is perpetual; however, on 09/15/2024 the rate becomes variable at 3-month LIBOR plus 3.536%. Also on that date it becomes redeemable at the Bank's option at $25.
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Post by richardsok on Mar 25, 2023 19:09:59 GMT
Looking at Regions Preferred Series B. It's non-cummulative but carries a 6.375% dividend. It has recently dropped in price to $21.32 to yield about 7.5%. It is perpetual; however, on 09/15/2024 the rate becomes variable at 3-month LIBOR plus 3.536%. Also on that date it becomes redeemable at the Bank's option at $25. Interesting find. Looks practically iron-clad, bank crisis or no. PE of 8 EPS 2.28 Projected EPS: 2.55 Common dividend: 80 cents Cash/sh: 11.55 ( ! ? ? ) What are they planning to do with all that cash? Price just crashed from 24 to about 17.80. I'd say they were vulnerable to a raider like Icahn. Must have some seriously PO'd investors. |
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Post by Capital on Mar 25, 2023 20:46:28 GMT
Looking at Regions Preferred Series B. It's non-cummulative but carries a 6.375% dividend. It has recently dropped in price to $21.32 to yield about 7.5%. It is perpetual; however, on 09/15/2024 the rate becomes variable at 3-month LIBOR plus 3.536%. Also on that date it becomes redeemable at the Bank's option at $25. Interesting find. Looks practically iron-clad, bank crisis or no. PE of 8 EPS 2.28 Projected EPS: 2.55 Common dividend: 80 cents Cash/sh: 11.55 ( ! ? ? ) What are they planning to do with all that cash? Price just crashed from 24 to about 17.80. I'd say they were vulnerable to a raider like Icahn. Must have some seriously PO'd investors. I've been a customer for 25-30 years. They have treated me right all along. I also own the common. It feels good being in those positions to know that they have a pile of cash. I was buying the common liking the 3.5 yield in the low to mid 20s. At the current prices the common is yielding 4.5%. IMHO their price has been pulled down along with all the other regional banks. I think they will rebound soon after we are on the other side or this. They have a presence in some of the fastest growing parts of the US. |
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Post by bobfl on Mar 26, 2023 13:03:53 GMT
Sorry I have not been back to this post.
You can be just a bond trader or a debt trader or a preferred trader, etc.
You folks surely have your favorites. Preferreds are mine.
I almost always did preferreds starting when I was mentored by Richard Lehman.
I have also heavily experimented with other drugs like Options (which I no longer do, but like very much), many single stocks, ETFs, was heavy into CEFs, bonds, mm, etc.
But the easiest, simplest has been preferreds. And there are many types of preferreds. I only do preferreds that work somewhat like short duration bonds that are basic debt issuance and that I can sell quick if an event happens.
Over the years, with preferreds, my portfolio value has doubled+, plus the income.
I HOPE that I can continue to do what I have done, that worked: GET THE Hell OUT FAST when things are making a down turn. When fully invested, own only enough companies that I can monitor performance daily in less than a minute using real time spreadsheets. It is not a big deal for me to sell huge chunks of preferreds in a day during a major market event to avoid risk. Don't care if I get out early or a little late.
I like that periodically because I can restructure my strategy when I go back in.
Don't get me wrong, I don't day trade and generally hold for many years until they are called. UNTIL a major market event happens, like now, when I get back in the game.
But I have gotten so conservative, I will no longer reach for yield. Hence I could not use anything on the spreadsheet that was sited in these posts.
Nowadays my number one focus is safety.
I don't plan to revisit this post. What I do cannot help here.
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Post by Chahta on Mar 26, 2023 14:02:58 GMT
Trying to learn, let's assume you are a good trader, why don't you trade stocks instead of preferred? What are the advantages? Why not "trade" them? One is gaining yield, while waiting (living expenses as bob said). It could be years for a trade, not months or weeks. |
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Post by FD1000 on Mar 26, 2023 21:50:08 GMT
Trying to learn, let's assume you are a good trader, why don't you trade stocks instead of preferred? What are the advantages? Why not "trade" them? One is gaining yield, while waiting (living expenses as bob said). It could be years for a trade, not months or weeks. If the price of security with high yield, goes down without distribution, the yield goes up, but TR is still down. You end up with less money. More money is always better than less money, regardless of the yield. More money = more money for living expense. I can't remember any category(not alternatives) where I can't find a trade within months(certainly less than one year), of at least one ETF/funds in this category. Select one year within preferred where there is no trade. |
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Post by bobfl on Apr 9, 2023 16:14:15 GMT
Trying to learn, let's assume you are a good trader, why don't you trade stocks instead of preferred? What are the advantages? Why not "trade" them? One is gaining yield, while waiting (living expenses as bob said). It could be years for a trade, not months or weeks. Chahta, You are correct. They can be traded for cap gains plus income. Like every investment, we want to buy debt low. That means IPO's, economic down turns, and, during my early trading life, when a quality company has some type of bad news. A recent example, which I will not trade in and out of, is SCHW/J. Schwab has been in the news lately. Its preferred moved down slightly. Will the company go out of business (default)? Probably not, so it will go back up, especially when the FED stops. When buying stock, like Costco stock, an owner of that stock has to ask a lot of questions about its recent price drop. But if Costco had debt you would ask one question, "Will Costco go out of business?" No, then buy the debt on bad news, if it slightly goes down. It will go back up because it is quality. But you probably will not make much off trading the debt on slight changes in stock PEs. The odd thing about debt is the "A rising tide lifts all boats" concept during major events, like 9/11 or Covid, etc. The equity market crashes briefly; so does debt even if there is little connection. You could buy either and make money. (I no longer buy high yield because the higher the yield the more questions you have to ask, like is this another SERTA or SVB. Will it default?) With quality, lower yielding debt you should not have to ask, "Will this company default?" Will JPM go out of business? Most likely, "No", but if they come out with an earning surprise the debt can drop a little, you buy and it can quickly go back up. But you probably will not make much. So not worth trading. There is a time when trading makes sense. When FED rates start rising, like now. You can buy at discounts. Problem is you have to have cash and unless you got out at the top you may be stuck riding debt down. The bottom line is regular preferred trading probably would not make you much. I will however move around between preferreds occasionally. If I see a yield that has gotten ridiculously low (price up) like USB did recently I might move to JPM,etc. for a better payoff. Can you lose money with quality debt? Heck yes. The stuff written at 4%, during the almost zero Fed fund rate will probably never fully recover and may not be redeemed because they got billions cheap. But for the long term buyer you can get it at a discount now and I am expecting more capital gains when the Fed pivots. Of course, if the Fed unexpectedly increases rates beyond current expectations, debt will drop in price again. If we get a surprise recession, the tide will potentially move prices down but debt usually recovers faster when the Fed pivots. |
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Post by FD1000 on Apr 9, 2023 22:56:14 GMT
Or you can do what 2 investing giants, Buffett and Bogle, recommended decades ago.
Buy and hold the SP500 for a very long time, with no trades, make a very nice return, and beat most funds/experts. No expertise is needed.
Preferred just like FI CEFs have high volatility/risk as stocks sometimes, especially in market crashes.
I understand and agree with some of your points, after all, I invest and trade mostly bond ETF. The main reason is to have good performance with extremely low volatility/risk.
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Post by Deleted on Apr 9, 2023 23:37:51 GMT
People don't consider the possibility that a market can be in decline for decades. Those people should look at the Nikkei 225. Pundits(I'm sure) were declaring in 1987 that the Nikkei 225 was the only investment ever needed.
I doubled my investments in preferreds in early March, and the income it produces is a very welcomed piece of the total return of my portfolio. I think retirees being totally dependent on capital appreciation to fund retirement is a foolish and unnecessarily risky approach. The same goes for an income only approach.
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Post by bobfl on Apr 10, 2023 12:50:57 GMT
People don't consider the possibility that a market can be in decline for decades. Those people should look at the Nikkei 225. Pundits(I'm sure) were declaring in 1987 that the Nikkei 225 was the only investment ever needed. I doubled my investments in preferreds in early March, and the income it produces is a very welcomed piece of the total return of my portfolio. I think retirees being totally dependent on capital appreciation to fund retirement is a foolish and unnecessarily risky approach. The same goes for an income only approach. I agree. With a portfolio built on income only one achieves a comfort level when, for example, you get 6.26% income and only need 4% and roll over the rest. It compounds. The main thing that income investing did for me is let me hold off on SS until 70. Now the investment income all rolls over. I am very thankful. |
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Post by Chahta on Apr 10, 2023 13:03:42 GMT
"I think retirees being totally dependent on capital appreciation to fund retirement is a foolish and unnecessarily risky approach."
I agree but not sure who does that. A portfolio that has income and growth is what I hear recommended always.
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Post by Deleted on Apr 10, 2023 13:30:07 GMT
"I think retirees being totally dependent on capital appreciation to fund retirement is a foolish and unnecessarily risky approach." I agree but not sure who does that. A portfolio that has income and growth is what I hear recommended always. I think FD1000's S&P 500 recommendation is a capital appreciation approach. |
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Post by FD1000 on Apr 10, 2023 14:05:57 GMT
The following only discusses ETF/Funds which is what most investors hold. Buying stocks is a completely different game.
The questions of course, what is growth, income, goals and portfolio size?
Is the SP500 growth, income, is it going to stay more growth in the next 30 years? The SP500 is a blended index. History shows that the SP500 changed according to the price of the underlined stocks, and these were the best performing stocks.
If you look at typical income stocks ETFs/funds, they pay 2 to 3.5%, nothing close to 4+% and definitely not 5+%, and not LT. If their prices go up, the dist go down.
When someone says "recommended" I always wonder who recommends these very high dist ETFs/Funds? Did the father of value investing, Graham, or Buffett recommend very high dist stocks or maybe preferred/MLP/leverage CEFs? How can it be that the smartest people in the world with fast computers and lots of data didn't come to this "easy" conclusion about high dist vehicles. How can it be that we don't have hundreds of ETFs/Funds with LT record to prove it? Are the that run VG, Fidelity, Schwab and other funds are all clueless?
Where do you find most of the recommendations? in places such as seeking alpha and/or financial analysts that try to convince you they got something special and they will charge you extra for that. Why not create funds that do it and prove their superiority, we can check their history and find out performance, SD, max loss, Sharpe and all the good stuff.
Sure, if someone wants to invest in higher income, it can be a fine choice. Investing in very high income, above 4-5%, and you are looking for extra risk/SD. If you invest based on market conditions, and a good trader, you will do well, but you will do well trading typical stocks too. I'm talking about buying the 4-5% and holding for at least 5-10 years.
Another way for most is to use core and explore.
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Post by Deleted on Apr 10, 2023 14:57:01 GMT
IMO, The Target Date Income funds produced by the geniuses at Vanguard and Fidelity totally failed to produce adequate income for most retirees, although they are fine if you are ok with a "spend down" strategy.
I think it's perfectly logical to tilt towards income and dividends in retirement, and maybe tilt heavily later in retirement. IMO, it's far superior to the annuities pushed by financial professionals. The idea that financial companies only produce what's in the best interests of their clients is laughable.
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Post by bobfl on Apr 10, 2023 15:36:25 GMT
"Are they that run VG, Fidelity, Schwab and other funds all clueless?" Good question! This company is one of the best in class, 99.33% shares owned by institutions. finance.yahoo.com/quote/BXP/holders?p=BXPLook at the performance since March 01 2022 and current dividends. finance.yahoo.com/quote/BXP?p=BXPI feel V, F, S, etc. are forced to own shares in their big funds. What would Vanguard replace their 23 million shares of BXP with to avoid the 50% decline in a year? Did they know REITs decline when there is a threat of a recession? Of course, they did. Could they bail? Maybe that is not their job. Their job is not to have one great REIT in their REIT funds, rather a basket of REITs. |
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Post by FD1000 on Apr 10, 2023 20:31:16 GMT
IMO, The Target Date Income funds produced by the geniuses at Vanguard and Fidelity totally failed to produce adequate income for most retirees, although they are fine if you are ok with a "spend down" strategy. I think it's perfectly logical to tilt towards income and dividends in retirement, and maybe tilt heavily later in retirement. IMO, it's far superior to the annuities pushed by financial professionals. The idea that financial companies only produce what's in the best interests of their clients is laughable. I don't have a bone in this. I'm looking for a paper that proves your point. Why is it logical to tilt toward income/div? Does it have better performance or better risk? Why later in retirement? Actually later in retirement, you should invest for the next generation. VG, Fido and Schwab are supermarket of funds + have their own funds. Why they all have very low ER index funds? because they work based on research. Fidelity has more investment options because they think they can add something not found within indexes and want to charge more. Many of these researchers are found in universities, they would love to find nuggets no one else found. Buffett is pretty old and have so much money, why wouldn't he tell the world about the preferred secret? "Special" funds, such as alternatives are more common at small companies, these mangers would love to perform better and make more based on AUM, why not? If there is a superior way to make money, billions would go toward it. PIMIX had a good start in 2008, it took just several years and AUM jumped to over $140-150 billions, because distributions were over 6%, SD was still low, while other bond funds paid much lower yield with lower performance. Here is the proof. See PV( link) of 4 years for 01/2010 to 12/2014. PIMIX performance was better than VBIAX (60/40), and much better than PFF(preferred) + DODIX (good bond funds). But wait, it paid a very nice income too, preferred had the worse Sharpe(= to risk-adjusted returns) +Sortino. I have noticed that the best investors in very high income are mostly traders, and definitely spend a lot of time researching. Remember, many experts have been looking for the best risk-adjusted returns, and will keep doing it for many years. |
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Post by habsui on Apr 10, 2023 20:56:45 GMT
Why does almost every thread degenerate into an income vs TR discussion? IMHO, some preferreds look interesting right now for the interim..
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Post by Deleted on Apr 10, 2023 21:09:50 GMT
Good Lord, Buffett never had worry about how he would pay the bills if the stock market declined for a prolonged period. Buffet is not representative of the average retiree.
I won't argue this anymore. If you think the average retiree should have the same portfolio of a 21 yr. old, that a 70 year old needs to take on the same risks as a young person, arguing this is a waste of my time.
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