Cruising Into the Weekend With Minimal Damage

What a wild and crazy week we have been through this week–every day saw big moves in stocks (including preferreds) although interest rates just kind of sat without movement. While stocks traded with 100 or 200 point swings the 10 year treasury moved in a 6 basis point range closing the week a few basis points lower.

While one would have thought that income securities would have been flat to up a bit this week that was not the case.  We have been in somewhat of a ‘liquidation’ market with many participants ‘tossing the baby out with the bath water’.  We have gone through times in the past when interest rate movements had no correlation to preferred stcosk and exchange traded debt prices–and we have just come through a 10 day period where that was the case.  We hope you all survived as well as we did through the turmoil.

It would appear that the move toward term preferreds and exchange traded debt issues, while eliminating MLP’s was a smart (or lucky) move.  We have never seen days with so many MLP’s down by 3-5% as we have this week. Some of the moves were because of secondary offerings coming to market while other moves were caused by investors waking to reality (in particular the frac sand producers–which have taken massive drubbings this week).  Hi-Crush started the week at $62 and fell to $52.  Emerge Energy started at $123 and fell to $109. Needless to say frac sand is not a technologically insulated commodity (of course these are so far above their IPO price holders may well have great gains).

The model fell by a couple 1/10ths of a percentage this week, but being a big dividend month we are at 9.9% YTD–down from the peak in the 11% area.  Our common share holdings have been disasterous–B&G Foods and Transcanada are down bunches–but common stocks are just 11% of our holdings.  Our Term Preferreds performed perfectly–not moving at all, but they are just 6% of the model.  But all in all we are quite happy.

We added more Independent Realty Trust (ticker:IRT) to the model yesterday–just in time for a nice bounce today.  We had unloaded Compressco Partners and Vanguard Natural Resources last week helping to avoid further loses on those MLP’s.

We end the week with a 10% cash holding and will opportunistically deploy as events unfold–and bargains become available.