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1st Quarter 2021 Trade Review - The Danger Of Low Interest Rates



  • The heading refers to the number of times I had holes made in my Baby Bonds/PFDs ladder due to Calls and the trades I had to do to fix it.
  • The biggest "trades" during the quarter were the ones I failed to pull the trigger on. These “mistakes” are covered.
  • I have decided to change which account to do my conversion trades with. The logic for that will be explained.
  • A short review of my various account allocations and performance will close this article.

Businessman pointing arrow graph corporate future growth plan. Business development to success and growing growth year 2020 to 2021 concept
Photo by marchmeena29/iStock via Getty Images


The warning shot was made in late 2020 when Capital Southwest Corporation (CSWC) called part of their 2022 5.95% PFD. They completed the Call in 2021 and it was followed by four other BDCs

This article was written by

Retired Investor profile picture

Retired Investor has been investing since the 1980s and has a background in data analysis and pension fund management. He writes articles to help others prepare for retirement by investing in CEFs, ETFs, BDCs, and REITs. He is a long only investor and shares strategies for trading options with a focus on cash-secured-puts.

He is a contributing author to the investing group Hoya Capital Income Builder. Hoya specializes in the portfolio management of publicly traded real estate securities and dividend ETFs. Learn more.

Analyst’s Disclosure: I am/we are long WAMVX, SWAN, OXLCM, OXLCP, JEMD, NMCO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (10)

Thanks for the update. Will peruse more carefully when have more time, but at a first glance I noticed parallel holdings to my accounts so am very interested in reading more.
Retired Investor profile picture
@malka I look forward to sharing ideas and strategies. Thanks for reading.
Market Map profile picture
Although many investors prefer to have large numbers of holdings and exotic investments in their portfolios, I prefer to keep the "size" of my portfolio holdings small, portfolio activity "low", and my income stream simple and flexible by having exposure to large cap value, large cap growth (ex financial), and companies in "water industry" related functions.

Research shows that the "large cap value" equity asset class has generated a reliable, time tested income stream. Using a "sale of shares" (dividends reinvested ) method of income harvesting, large cap value has sustained a "7%" inflation adjusted annual income withdrawal, accompanied with terminal portfolio growth, over seventy one rolling 20 year periods since 1932 https://tinyurl.com/y6key3v5 .
A modern investor is fortunate to have available expertly managed and well diversified, large cap value index funds ( such as the low expense Vanguard Value ( VTV ) which holds 300 plus companies, or the DFA Large Cap Value ), which may be used for this purpose.

However, an investor who may require a higher rate of income and growth, may want to consider the addition of large cap growth and water industry related stocks.
The large cap growth "tech" asset class has been well established, since 1986, vis a vis the long existence and track record of the Nasdaq 100 index (QQQ Trust ETF representing the underlying ). A portfolio diversified across the Nasdaq 100, Large Cap value, and water industry companies, has outperformed benchmark ( and even Berkshire Hathaway ), while providing a "10%" inflation adjusted annual income withdrawal, accompanied with terminal portfolio growth, over sixteen rolling 20 year periods since 1986 ( charts 11 and 12 https://tinyurl.com/yya2x6kt ). And this performance was produced with reasonably less volatility ( water industry related stocks have tended to move in "negative correlation" to the Large value / large growth tech ).

History shows that a portfolio such as this has been "hard to beat" in terms of it's cash flow, terminal portfolio growth, and volatility.
mfposa profile picture
@Market Map From the linked paper on large cap value supporting 7% inflation adjusted income:
"Over the course of the 1932 - 2019 test sample, seventy one “rolling” 20 year periods were tested ( each starting at the beginning of the “calendar year” ) in order to determine the efficacy and sustainability of a 7% income withdrawal. Eleven periods, or 15% of total, ended with the portfolio balance falling to “zero” ( failure ) at some point along the period. "

We only get one 20 year period. 15% failure rate is fairly high.
Donggle profile picture
Best tax plan is to spend cash, save on taxes and let it build back up in the Roth or IRA. Maybe being called is a blessing if rates rise. Also count tax savings as part of your portfolio return. Having lots of dry power does not matter if your income is keeping up. Also Advantage Medicare plan can save you about 10k annually! Thats is equal to 200k making 5% you can take out of the market. Do not forget the loss of one social security or LTC, is something to hedge for. I bought an annunity that can replace SS and has a long term care doubler! Insurance is never fun to buy!
dimage54 profile picture
Good article to read but I prefer your option articles.

I am retired and selling calls and puts to generate income and cash flows to purchase additional dividend paying stocks. I have both a regular IRA and two Roth IRA’s along with 4 regular taxable trading accounts.

I find it best to do covered calls in the retirement accounts (though I do calls in taxable accounts too) as long term holdings mean nothing. So I am selling not too far OTM and don’t care if they get called.

Look forward to more option articles.
Retired Investor profile picture
@dimage54 Thanks. These trades are more LT trades. Options for fun and income. My goal is two option articles each quarter so look for one next month.
Thanks for the update. My situation is similar to yours, though most of my fixed income is in old fashioned bond funds. I’ve thought about laddering but have yet to act on it. I’ve also done a small Roth conversion (in 2019), and I’m still debating on whether or not to continue.

I had one preferred stock (out of 5) called in late 2020, didn’t realize it was getting so common. I’m seriously considering sticking with common stocks and stock funds going forward.
Retired Investor profile picture
@glinsight Getting Called is picking up and until rates climb, will continue. Bought my first over Par one this week as YTC was still over 5%. SACC.
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