I hold most of my retirement funds in preferred stocks, including 3500 sh. of AEV. Let me share a few comments with you. I subscribe to Richard Lehmann's Income securites news letter. Richard has written for Forbes on income securities for years. He is respected and is an expert on preferrred issues. He started quantumonline.com, the preferred resource library. Comments from June news letter: "I can't remember the last time I got paid 8% to wait for an investment grade issuer to also deliver a capital gain." His July letter was released on July 10, 2008. Recommendations listed below.
SYM. 7-10-08 7-14-08
ALLIANZ AZM 7/10-08 25.00 Today 23.08 RATED A+ ING IGK 7/10/08 24.90 Today 21.84 RATED A
Richard also recommended Aegon pref. months ago in the mid 20's
What's going on, who knows. Could be that there tossing the baby out with the bath water.
There is an issue with Aegon however. In the last several weeks one of the rating firms commented about Aegons holdings. Almost all their insurance capital (equity) is invested in residential mtgs. All are AAA rated and the agency suggested the potential of rating declines and placed Aegon on the watch list.
One final comment and I'll sign off. FNM got 100% support from the US Treas. and the Fed. Treasury went so far to discuss an equity investment. The Fed will open the window at bank rates. Complete support for FNM (To big to fail) What happened to their 8.25 preferred today. 16.54----down .46---Yield: 12.46%----- Go figure.
The scam artists or snake-oil salesmen are honest compared to many Wall Street firms. A scam artist makes you pay too much or buy something worthless but according to Wall Street it seems to be acceptable practice to peddle for example new issues of Preferred stocks (collecting 3 % in fees) and then once the issue has been fully subscribed, start massively selling thereby inflicting great pain on your customers. Most retail customers cannot take the pain and therefore sell out at artificially cheap levels.
Take a look at financial pfds issued recently FRE-Z, FNMS & T, MER-Q, C-M all down big recently. For example FNM-T with IPO 5/13/2008 closed yesterday at 16.54 = down 34 % and now yielding 12,60 %. MER-Q with IPO 4/23/08 closed yesterday 18.26= 27 % down with market yield 11.82 %. In other words A rated securities assumed to be a conservative investment are now trading like junk bonds 700 to 900 basis pts over 10 year treasuries just when more capital is needed.
Of course at some point the public will be fed up with losing money and all this fear and rumor mongering coupled with massive shorting of the stocks will start to negatively affecting capital formation. Just when financial companies need to issue preferred stock (to meet capital requirements) Wall Street firms seem to be too busy downgrading each other sending market yields on preferred stocks to absurd levels.
On one hand I hope Wall Street is not going to get away with it to so savagely chew off the hand that feeds them but on the other hand being long a lot of financial pfds this will hurt my stock holding. Greedy bastards not being content to collect a safe fee for helping to raise capital instead of putting the whole financial system at risk.
PS I also own AEG pfds and the same story - down 25-30 % owning them
Does anyone know a good source of reputable research on the net for preferreds? I also have been mistified by the utter collapse of preferred share prices over the last several weeks. Often (as today with AEG) the preferreds are dropping far more rapidly than the common. Doesn't make sense... If there is a take over or under for that matter the preferreds should do all right. Even Bear preferreds were OK relative to common. I suspect this is a great buying opportunity but I'm just trying to stomach the nerve to keep the ones i have...
I also have a large portfolio of preferreds that has tanked big-time, including a chunk of Aegon. It's as if preferreds are being wiped out as an asset class (although, GE AAA-rated preferreds are holding up). I think this is a mania and a massive buying opportunity, but I am mostly tapped out and would have to buy on margin to increase my preferred holdings (although I am doing lots of re-jiggering of my existing portfolio to take advantage of market distortions).
If you look at almost ANY preferred stock, it is down about 25% the last 3-4 weeks or so. It is mind boggling and sucks since I own a bunch of these. AEF I hold a bunch of along with PIK, PIS (Liberty Media), HJR, PZB (LTD Brands). CWZ which is Royal Caribbean Preferred went from $25 to under $19 in a month.
Anything that is high dividend/income producing is getting killed. Financial or not ... I wish I could put my figure on it. I just keep buying more on days like today, but am wondering what the hell is going on.
One of the world's largest insurance companies with a 11%+ yield is unheard of. I don't think AEGON is having much trouble with the credit crisis.