As Summer Ends Will Markets Change

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As much as the talking heads in the media want one to believe that the dog days of summer are meaningful to the price action of securities it should make no difference to the income investor.

The income investor needs to be hunting for reasonable risk/reward all the time—there are no seasons that are good or bad—just never ending review of holdings and tweaking in a fashion that reflects ones view of where the economy (and interest rates) are heading.  Even though we know that the fall can be a ‘dangerous’ time for stocks and bonds we can’t liquidate holdings and wait until November rolls around to re-invest.  It is a fools game to think you are so smart that you know what will happen in the next week–let alone the next month or year. When we were younger we thought we were so smart that we ‘knew’ a crash was coming or that a big rally was just around the corner–but as we said that was when we were younger.  If nothing else the stock market of the last 5 years should prove how foolish it is to crawl in a hole and hoard your investment cash.

The above being said we continue to transition to shorter duration securities when they are available.  The transition is marked by slowly moving from some ‘perpetual’ preferreds into debt issues or ‘term’ preferreds.  This is a slow transition and to date we have moved only about 4-5% from perpetuals to shorter duration securities.  Maybe over the next month or two we can do another 4-5%, but it is likely that we will not be able to go much further as the available issues to switch into are very limited.

YTD the portfolio is up 11.01% with all of the August dividends and interest included.

Model Portfolio Format Tweak

We have separated the ‘term’ preferreds from the perpetual preferreds on the spreadsheets.  We have done this because we view the ‘term’ preferreds more like debt than as a preferred (make no mistake though-they are preferreds) as they have maturity dates and lacking a company disaster we should see redemption on a date certain.

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Bryan Perry Dividend Income Expert Bryan Perry

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