5 Preferred Stocks For High-Quality Income [View article]
Hello HighOak,
Thanks for your comment. You raise an excellent point about YTC. I appreciate you pointing it out on my article and for sharing your expertise in this area. I attempted to address the issue that you raised indirectly, but in retrospect it would have been worthwhile if I had elaborated more on the topic.
You are absolutely right on the importance of YTC when it comes to credit analysis in this area of the market. I respect your expertise in this area of the market, so I know you are aware of the points that I'm about to make here. But I include them here for other readers that are likely to have the same question that you have raised.
Basically, there are two assumptions associated with YTC that lessen it's importance in my approach. First, YTC assumes that the security is actually called by the issuer. Also, applying YTC also assumes that I am still holding the security on or after the call date. Instead of accepting these two notions as part of owning these securities, I relax this constraint in my active management process and seek to manage these risks in my process. In other words, I evaluate the security along the way to assess the probability of it being called, and I also intend in most cases to have exited these securities well in advance of the call date to further mitigate this risk.
Another element of YTC is that it cedes the price component of the security and how it might change between now and the call date in the total return consideration and instead focuses only on the two specific price end points at initial purchase and at par once the security is called. The approach that I apply to these and other securities in the space focuses just as much on the price component as the yield. Just as with common stocks, I seek to evaluate these positions for potential price entry points, targeted price exit points and total return objectives that incorporate both capital gains and income. This is why the current yield component is relevant in my approach. When owning the security I am seeking short term trading opportunities based on price, which implies a focus on the appreciation of the price component during the holding period, and the current yield provides a reading of the additional return from income I am attempting to capture beyond the potential price appreciation. This is what I was seeking to illustrate with my point on ALM, but in retrospect I could have done a better job at it.
Thanks again for your comment and for raising this issue. I appreciate it.
A Utilities 6-Pack to Keep Your Stock Portfolio Cool This Summer [View article]
Hello rgperrin,
Thanks for your comment. You're absolutely right and I made an error in writing the article. I had meant to write that Vectren has paid a dividend each year dating back to the Truman administration and raised it each year over the last half century. It turns out that I mistakenly blended the two in my final article submission.
Sorry for any confusion and thanks for pointing this out.
Preferred Stock ETFs: The Downside That Preferred Stock Investors Can Avoid [View article]
Hello Doug,
Thanks for your excellent in depth analysis on the preferred stock market. Your analysis is some of the most comprehensive and in depth in the Preferred Stock/Fixed Rate Capital Securities space, and I've enjoyed reading your recent articles as well as your blog.
I agree with you completely on the point that investors are much better served to take the extra step to select their own preferred stocks (and all of the related exchange traded securities in this area of the market) in order to better manage risk and achieve portfolio objectives. Given that financials so dominate this market space, this approach is the best way to dig in and find those selected non-financial preferreds.
I posted an article yesterday on SA that goes into detail on some of these non-financial preferreds. I've included a link here in case readers have any interest.
5 Preferred Stocks For High-Quality Income [View article]
Hello Dygo,
Thanks for your comment. A good place to go for information on publicly traded Preferred Stocks is QuantumOnline. I've included a link below for reference.
European Policy Meetings: Market May Be Set Up For Disappointment Once Again [View article]
Hello Young,
Thanks for your comment. You have been spot on with your calls in recent months including being way ahead of the market reaction to Operation Twist back in early October. And I think you raise some good points here once again. It should be interesting to see how events play out in the next few days.
The Trouble With Last Week's Stock Market Rally [View article]
Hello Young,
Thanks as always for your great comments and insights. You raise a great point here. If we can reach an environment where political/policy risk is dialed down in capital markets, this would be healthy in supporting higher valuations for risk assets.
The Trouble With Last Week's Stock Market Rally [View article]
Hello Tack,
Thanks for your follow up comment. These are great points. You are absolutely correct too that an investor can maintain the long-term discipline to stick with high yielding positions through any short-term price volatility that the returns resulting from the yield component will vastly overwhelm any shifts in price along the way. And your point about the inverse correlation between yield and price volatility is also excellent. It is one of the reasons that I have always biased toward stocks with yield, particularly those that yield in excess of 2%.
These are all great points. Thanks again for your excellent comments.
The Trouble With Last Week's Stock Market Rally [View article]
Hello Tack,
Thanks for your comment. You make a great point here and it is one with which I agree. The events of today are unique relative to past events, and how things play out today will be almost exclusively dependent on how events unfold including the policy decisions made this time around. But where history is useful is providing a informative road map of the range of results we might reasonably expect given the different potential outcomes of the current crisis.
And your point about portfolio allocation is completely spot on. Given the uncertainty, it is best to remain hedged, as events could break sharply in either direction in the coming weeks. I also agree with your point on yield only to add the point which I believe is implicit in your comment that it must also come with relative price stability of the underlying asset and the sustainability of this yield over time.
Thanks for your comment. You raise some excellent points that are important for me to elaborate on in more detail. Thanks for raising this point.
You are absolutely right that I made the decision to exit TLT at the end of October, which was around the point that it first broke support on its 50-day moving average. I've included a link to the article below for reference. Clearly, I was early with this move at the time (which, of course, is another way of saying I was wrong), although it should be noted that this allocation was shifted out of TLT and into TIP and MBB to maintain the overall portfolio diversification benefits with a lower beta tied to this fixed income position. In other words, TIP and MBB have lower price volatility than TLT.
My reasons for selling TLT at the end of October remain largely in tact. At the time, I sold out of the position to defend against the potential for a year end stock rally and the potential launch of QE3 by the Fed in the coming months. Although November played out much differently and TLT rallied back higher, I continue to see downside risks outweighing upside risks to the position at this juncture for these same reasons.
I still very much like TLT and believe I will own it again at some point. And it could absolutely move further to the upside just as it did in November, particularly depending how events play out in Europe. But all else equal, the fact that risks to the downside outweigh risks to the upside at this juncture, my inclination remains to hold off on owning it until the price has moved toward a more favorable risk/reward profile.
But thank you for raising this question. You are absolutely correct to point it out and to challenge me to defend it.
Thanks for your comment. You are right that I've been pro-TLT until recently and still am positive on it in many respects. At some point depending on how events play out in the coming months, I will likely look to reinitiate a TLT position as well, but only after it consolidates recent gains or cools off following another round of aggressive QE.
Silver Likely To Heat Up With The Printing Presses [View article]
Hello Econo,
Thanks for your comment. This is a great savings discipline that you've carried out over the years. And Silver has been a rewarding vehicle to do it in recent years. Excellent work.
Silver Likely To Heat Up With The Printing Presses [View article]
Hello Aubug,
Thanks for your comment. You make a good point that is worth noting. If you are an investor that is already comfortable in the precious metals and commodities space (I am guessing this is definitely the case for you given your SA handle and picture), a higher allocation to Silver is certainly appropriate. And clearly you are managing your portfolio from a fairly sophisticated perspective in this space, so this makes a lot of sense.
As for the 5% movements, we've seen 17 trading days since late April (out of 153 total trading days, or once every 9 days) where the SLV has made an absolute move of greater than 5% either to the upside or the downside. But given the way you are measuring Silver's performance on a relative basis, these moves are likely to be far more muted.
Market Rally: Seize This Opportunity While It Lasts [View article]
Hello winningtrader,
Thanks for your comment and your various good points. I think your spot on in your assessment about the depth and breadth of the crisis that continues to unfold in the developed world. And I think you're exactly right when you say that the real crisis hasn't even started yet. The longer we try to put off allowing the system to cleanse itself, the more painful the final adjustment may be.
The GOP Presidential Race And Stock Market Psychology [View article]
Thanks for your recent comments on my articles. I appreciate your outstanding perspectives and for sharing your thoughts.
Thanks again.
5 Preferred Stocks For High-Quality Income [View article]
Thanks for your comment. You raise an excellent point about YTC. I appreciate you pointing it out on my article and for sharing your expertise in this area. I attempted to address the issue that you raised indirectly, but in retrospect it would have been worthwhile if I had elaborated more on the topic.
You are absolutely right on the importance of YTC when it comes to credit analysis in this area of the market. I respect your expertise in this area of the market, so I know you are aware of the points that I'm about to make here. But I include them here for other readers that are likely to have the same question that you have raised.
Basically, there are two assumptions associated with YTC that lessen it's importance in my approach. First, YTC assumes that the security is actually called by the issuer. Also, applying YTC also assumes that I am still holding the security on or after the call date. Instead of accepting these two notions as part of owning these securities, I relax this constraint in my active management process and seek to manage these risks in my process. In other words, I evaluate the security along the way to assess the probability of it being called, and I also intend in most cases to have exited these securities well in advance of the call date to further mitigate this risk.
Another element of YTC is that it cedes the price component of the security and how it might change between now and the call date in the total return consideration and instead focuses only on the two specific price end points at initial purchase and at par once the security is called. The approach that I apply to these and other securities in the space focuses just as much on the price component as the yield. Just as with common stocks, I seek to evaluate these positions for potential price entry points, targeted price exit points and total return objectives that incorporate both capital gains and income. This is why the current yield component is relevant in my approach. When owning the security I am seeking short term trading opportunities based on price, which implies a focus on the appreciation of the price component during the holding period, and the current yield provides a reading of the additional return from income I am attempting to capture beyond the potential price appreciation. This is what I was seeking to illustrate with my point on ALM, but in retrospect I could have done a better job at it.
Thanks again for your comment and for raising this issue. I appreciate it.
A Utilities 6-Pack to Keep Your Stock Portfolio Cool This Summer [View article]
Thanks for your comment. You're absolutely right and I made an error in writing the article. I had meant to write that Vectren has paid a dividend each year dating back to the Truman administration and raised it each year over the last half century. It turns out that I mistakenly blended the two in my final article submission.
Sorry for any confusion and thanks for pointing this out.
Preferred Stock ETFs: The Downside That Preferred Stock Investors Can Avoid [View article]
Thanks for your excellent in depth analysis on the preferred stock market. Your analysis is some of the most comprehensive and in depth in the Preferred Stock/Fixed Rate Capital Securities space, and I've enjoyed reading your recent articles as well as your blog.
I agree with you completely on the point that investors are much better served to take the extra step to select their own preferred stocks (and all of the related exchange traded securities in this area of the market) in order to better manage risk and achieve portfolio objectives. Given that financials so dominate this market space, this approach is the best way to dig in and find those selected non-financial preferreds.
I posted an article yesterday on SA that goes into detail on some of these non-financial preferreds. I've included a link here in case readers have any interest.
http://seekingalpha.co...
Thanks again Doug.
5 Preferred Stocks For High-Quality Income [View article]
Thanks for your comment. A good place to go for information on publicly traded Preferred Stocks is QuantumOnline. I've included a link below for reference.
http://quantumonline.com
Another source that may be of interest is PreferredsOnline:
http://bit.ly/v0A5HV
Hopefully this information is useful.
European Policy Meetings: Market May Be Set Up For Disappointment Once Again [View article]
Thanks for your comment. You have been spot on with your calls in recent months including being way ahead of the market reaction to Operation Twist back in early October. And I think you raise some good points here once again. It should be interesting to see how events play out in the next few days.
Thanks again for your comment. Hope all is well.
The Trouble With Last Week's Stock Market Rally [View article]
Thanks as always for your great comments and insights. You raise a great point here. If we can reach an environment where political/policy risk is dialed down in capital markets, this would be healthy in supporting higher valuations for risk assets.
Thanks again. Hope all is well.
The Trouble With Last Week's Stock Market Rally [View article]
Thanks for your follow up comment. These are great points. You are absolutely correct too that an investor can maintain the long-term discipline to stick with high yielding positions through any short-term price volatility that the returns resulting from the yield component will vastly overwhelm any shifts in price along the way. And your point about the inverse correlation between yield and price volatility is also excellent. It is one of the reasons that I have always biased toward stocks with yield, particularly those that yield in excess of 2%.
These are all great points. Thanks again for your excellent comments.
The Trouble With Last Week's Stock Market Rally [View article]
Thanks for your comment. You make a great point here and it is one with which I agree. The events of today are unique relative to past events, and how things play out today will be almost exclusively dependent on how events unfold including the policy decisions made this time around. But where history is useful is providing a informative road map of the range of results we might reasonably expect given the different potential outcomes of the current crisis.
And your point about portfolio allocation is completely spot on. Given the uncertainty, it is best to remain hedged, as events could break sharply in either direction in the coming weeks. I also agree with your point on yield only to add the point which I believe is implicit in your comment that it must also come with relative price stability of the underlying asset and the sustainability of this yield over time.
Great points. Thanks again for your comment.
The Two Troubles With TLT [View article]
Thanks for your comment. You raise some excellent points that are important for me to elaborate on in more detail. Thanks for raising this point.
You are absolutely right that I made the decision to exit TLT at the end of October, which was around the point that it first broke support on its 50-day moving average. I've included a link to the article below for reference. Clearly, I was early with this move at the time (which, of course, is another way of saying I was wrong), although it should be noted that this allocation was shifted out of TLT and into TIP and MBB to maintain the overall portfolio diversification benefits with a lower beta tied to this fixed income position. In other words, TIP and MBB have lower price volatility than TLT.
http://seekingalpha.co...
My reasons for selling TLT at the end of October remain largely in tact. At the time, I sold out of the position to defend against the potential for a year end stock rally and the potential launch of QE3 by the Fed in the coming months. Although November played out much differently and TLT rallied back higher, I continue to see downside risks outweighing upside risks to the position at this juncture for these same reasons.
I still very much like TLT and believe I will own it again at some point. And it could absolutely move further to the upside just as it did in November, particularly depending how events play out in Europe. But all else equal, the fact that risks to the downside outweigh risks to the upside at this juncture, my inclination remains to hold off on owning it until the price has moved toward a more favorable risk/reward profile.
But thank you for raising this question. You are absolutely correct to point it out and to challenge me to defend it.
Thanks again.
The Two Troubles With TLT [View article]
Thanks for your comment. You are right that I've been pro-TLT until recently and still am positive on it in many respects. At some point depending on how events play out in the coming months, I will likely look to reinitiate a TLT position as well, but only after it consolidates recent gains or cools off following another round of aggressive QE.
Thanks again.
Silver Likely To Heat Up With The Printing Presses [View article]
Thanks for your comment. This is a great savings discipline that you've carried out over the years. And Silver has been a rewarding vehicle to do it in recent years. Excellent work.
Thanks again.
Silver Likely To Heat Up With The Printing Presses [View article]
Thanks for your comment. You make a good point that is worth noting. If you are an investor that is already comfortable in the precious metals and commodities space (I am guessing this is definitely the case for you given your SA handle and picture), a higher allocation to Silver is certainly appropriate. And clearly you are managing your portfolio from a fairly sophisticated perspective in this space, so this makes a lot of sense.
As for the 5% movements, we've seen 17 trading days since late April (out of 153 total trading days, or once every 9 days) where the SLV has made an absolute move of greater than 5% either to the upside or the downside. But given the way you are measuring Silver's performance on a relative basis, these moves are likely to be far more muted.
Thanks again for your comment. Great points.
Market Rally: Seize This Opportunity While It Lasts [View article]
Thanks for your comment and your kind words. I really appreciate it.
Happy Holidays to you too.
Market Rally: Seize This Opportunity While It Lasts [View article]
Thanks for your comment and your various good points. I think your spot on in your assessment about the depth and breadth of the crisis that continues to unfold in the developed world. And I think you're exactly right when you say that the real crisis hasn't even started yet. The longer we try to put off allowing the system to cleanse itself, the more painful the final adjustment may be.
Thanks again for your comment.