Sold JPM-J and bought JPM-L and picked up .29% in yield difference.
Is this significant?
I think yes as income from these invested $ went up 5.3%.
Just as good as a dividend increase.
Not the first time I’ve done something like this and hopefully not the last.
Fixed income is only 6.2% of my portfolio.
John
Downside: I have a short term capital gain on the J shares.
John,
JPM has six pfds. I think what you gained in CY by swapping JPM-J for JPM-L, you might have lost in YTC. Note: the prices are as quoted by Schwab at market open and are now stale. Hence, the CY’s and YTC’s will have changed.
Were I me, I’d have bought JPM-M to minimize my price risk and to maximize my possible YTC. But then, each investor has his/her own way of looking at things.
Arindam
**---------------------------------------------------------------------------**
**Symbol Callable CPN CY YTC Last**
**JPM/PRD 12/01/23 5.75 5.78% 6.19% $24.85**
**JPM/PRC 03/01/24 6.00 5.87% 4.62% $25.55**
**JPM/PRJ 12/01/24 4.75 5.59% 12.03% $21.23**
**JPM/PRK 06/01/26 4.55 5.80% 11.46% $19.61**
**JPM/PRL 06/01/26 4.63 5.84% 11.28% $19.79**
**JPM/PRM 09/01/26 4.20 5.64% 12.09% $18.62**
I noter that these are non-cumulative preferreds. I suppose that with JPM that’s probably a minor concern, but it’s not nothing. What do you guys think about that?
A,
Let’s remember that the YTC matters only if you think interest rates and rate forecasts are such that the preferred will be redeemed on the FTD (First call date).
In the analysis of J and L shares I believe that if interest rates are such that the J shares are redeemed on 12/1/2024 then the L shares will be trading near/at/above par too. Selling at the same time the J shares are redeemed would generate a superior overall return during the investment life. If I sold my L shares on 12/1/2024 (J FCD) for $24.75 then my L shares YTS (Yield till sold) would be 13.7%.
When it comes to significantly under par fixed income I’ll take the bird in the hand (current yield) versus the two in the bush (total return during investment life guesses).
I do note that when I originally bought the J shares that the yields of J and L were nearly identical.
The real question for me is just how much (little?) differential in yield is sufficient to make a no risk swap in preferred shares. I got .29% increase in yield for zero change in risk. This is certainly enough for me.
John
The “non-cumulative” nature of bank preferred shares allows them to be eligible for 15% (max20%) income tax rate.
I consider the “non-cumulative” status a plus for these. Remember the company must pay ZERO common stock dividend before the preferred dividends can be suspended. Remember during the 2008/2009 meltdown the banks reduced their dividends to near zero, but kept them at some nominal amount to comfort the bond/preferred holders.
I do remember buying some CFC (countrywide bought by BAC) preferred shares at 25% yield. Really sad day when those got redeemed.
John
“But with that idiot and pervert, Biden, losing the currency war he launched against Russia,”
What a stupid ignorant thing to say on a financial discussion board. And totally unnecessary to the case you are making.
All your other points and concerns are valid but "the US’s lying, bulling, and invasions " doesn’t belong to any particular administration. It’s endemic to the US as a culture.
No rec for you for that post (and I usually rec your posts practically as a habit - they are always insightful). I’ll chalk it up to you having a bad day.
John,
This is the way I see the current investing landscape.
The CPI --which is economic propaganda and not a useful measure of price increases at the household level-- is printing at 8.6%. The PPI --a far better estimate of coming consumer prices-- printed at 10% something. Therefore, jumping from a pfd with a CY of 5% something to a different one pays pays a mere 29 beeps more is the financial equivalent of rearranging deck chairs on the Titanic. BOTH OF THEM OFFER A NEGATIVE CURRENT YIELD, even if the tax rate were zero (instead of 15%).
But again, as I said earlier, each investor worries about different things.
Arindam
Neuro,
My comment on Biden was neither “stupid” nor “ignorant”. I despise the man. But I would concede that alluding to his well-documented crimes was unnecessary to my argument that the current administration’s foreign and domestic polices are likely to beggar us all, making moot discussion about whether JPM-J or JPM-L is “the better” bet.
I’m not a gold bug. But many of those guys do sound analysis, and they have a better understanding of how financial markets discount info than what is offered by the so-called “mainstream” press. Burns had to take interest-rates to 11% --and Volker, to 21%-- to break the back of inflation. The bond market is already calling Powell’s bluff, and they counting on him to resume printing in order to save the Demos in the midterms. Either way, the US is facing a recession/depression. When that happens --not if–, worrying about tiny, 5% something CY’s becomes pointless.
Arindam
“The bond market is already calling Powell’s bluff, and they counting on him to resume printing in order to save the Demos in the midterms.”
We’ve had uncontrolled asset inflation for decades, and as long as that inflation was padding the wallets of elites the republicans were happy with Fed policies. Once that inflation started hitting consumer and producer prices, suddenly it’s the demoncrats that are to blame. This is too easy a taek. Money has been easy through several administrations, Republican and Democratic.
My comment on Biden was neither “stupid” nor “ignorant”. I despise the man.
No one cares. Leave it off this board.