11 Responses to “August 26, 2019”

1. baffled says:

   August 27, 2019 at 9:40 am

   new low , new low , i think instead of continuing to buy i am going to wait until people start paying me to take them off their hands .

2. skeptical says:

   August 27, 2019 at 10:54 am

   An investor should have his/her own internal metrics for deploying funds, especially in a falling market.
   e.g. I’ll deploy 10k at a yield of 5.5%. 20k at 6% yield and 50k at 7% yield.
   Some of the investing greats that I read about had a cheat sheet of their ‘dream’ or target prices at which they’d buy certain securities. When those targets were reached, they’d just commit to buying those, irrespective of the market conditions or the public emotions surrounding.
   And in this field, more than any other, 90% of the game is indeed half mental.
   And it’s possible that prices continue to fall when you have deployed funds, but that’s okay. You are buying based on expected future cash flow and that’s the key. The market will come to terms with that, sooner or later.

3. Castor says:

   August 27, 2019 at 12:52 pm

   Maybe you should edge your rate reset buying and equal $ of ZAG.

4. Walter says:

   August 27, 2019 at 2:05 pm

   Pref shares continue to set new lows every day. What is going on? HPR is a penny or two away from its all-time low.

5. mbarbon says:

   August 27, 2019 at 3:51 pm

   Don’t attempt to catch a falling knife….

6. malcolmm says:

   August 27, 2019 at 4:14 pm

   Sorry but I think “Don’t attempt to catch a falling knife” is terrible piece of investment advice.

   I’ve done better listening to Buffett – “Be fearful when others are greedy and greedy when others are fearful”.

7. Walter says:

   August 27, 2019 at 5:07 pm

   I have been adding to my HPR position since last fall, thinking rates would rise and it would be a hedge to bond and equity positions. It was an expensive mistake and I now have to hold for 4.5 years to make back what I’ve lost in 2019 alone. That is, of course, assuming it doesn’t drop further.

   I know there’s a school of thought that says prefs should be bought for income so you buy it and ignore the price. Intuitively that doesn’t make sense to me because that’s like looking at a rental property that pays you, say $1,000 month and being indifferent as to whether it costs $100,000 (which would be a very good cap rate) or $1,000,000 (which would be a horrible cap rate).

8. jiHymas says:

   August 27, 2019 at 5:31 pm

   Don’t attempt to catch a falling knife….
   “Be fearful when others are greedy and greedy when others are fearful”.

   I prefer my own mantra: Do what is best for your portfolio, taking into account the long term characteristics of the potential investments. The two suggestions above – particularly the first – contain elements of market timing.

   I know there’s a school of thought that says prefs should be bought for income so you buy it and ignore the price. Intuitively that doesn’t make sense to me because that’s like looking at a rental property that pays you, say $1,000 month and being indifferent as to whether it costs $100,000 (which would be a very good cap rate) or $1,000,000 (which would be a horrible cap rate).

   I fear you have misunderstood. Your portfolio should be reviewed on a regular basis and you should always do what you consider best for your portfolio given the long-term characteristics of the asset classes.

   Given your example with a constant expected property income of $1,000 monthly and a property value of either $100,000 or $1-million, let us assume in addition that there are long term bonds available at all times yielding 6%.

   If the property is valued at $100,000, then it is yielding 12% and – barring special circumstances – is clearly the better investment. So you buy it – or keep it, if you already own it – and put your figures away in a drawer until the next review.

   If the property is valued at $1-million, then it is yielding 1.2% and – barring special circumstances – is clearly the worse investment. So you don’t buy it – or sell it, if you already own it – and buy the bonds instead.

   What you should not do, at any time, is be either greedy or fearful. Be analytical and ruthlessly execute plans that will achieve your portfolio objectives. Ask not what you can do for your portfolio; ask what your portfolio can do for you.

   In the current situation, if you bought preferred shares because you thought a 4.5% yield was pretty good, for instance, what has changed with your alternatives that you should now sell them when they’re yielding 6.00%?

9. malcolmm says:

   August 27, 2019 at 7:52 pm

   I agree that both imply some market timing. While I use Buffett’s mantra to give me some confidence in going against the grain, I think Benjamin Graham’s mantra helps me the most – “In the short term the stock market is a voting machine … in the long run it is like a weighing machine.”.

   Weighing the stream of dividends I can get currently in the Canadian preferred share market gives me confidence to be a buyer.

10. Walter says:

    August 27, 2019 at 10:32 pm

    Thank you. I hadn’t thought about the bonds vs preferred shares in that manner. It’s an interesting way of looking at it and I’ll give it some thought. You’re right that my bond ETFs have run up in the same period that my preferred share holdings have dropped.

    As I had always been told to consider preferred shares as part of the “fixed income” side of the portfolio as a counterweight to equities (such that when equities drop bonds go up and vice versa), it surprised me to see them drop along with equities, although I suppose that could be a function of the falling interest rates instead of a flight from equities to bonds.

    Thanks again for your insight, I might fight my fear instinct which is telling me to pare down on my pref shares and instead sell some bond ETFs and rebalance into prefs.

11. mbarbon says:

    August 28, 2019 at 1:40 pm

    Do note that there are different types of preferred shares.. all come with their own risks and rewards….