Getting “Called Away”!


Just this last week I had my 3rd preferred stock or baby bond called away this year. I just can’t remember the last time I had a preferred or bond called away other than at an expiration date. Luckily it was a small position in my IRA, I had bought it at a discount under par a year or so ago and immediately sold it for a few pennies over the redemption price. I’ll take the 8% dividend. 

Here is the email from Fidelity:

As you can see the original call date was still 2 years out. So why would Star Bulk call this 8% baby bond (exchange traded debt), ticket SBLKL, which was trading at slightly above par? What they did was to anticipate a higher cost of future money and extend out the “loan” so to speak.  To do this they previously released a 8.30% senior note due 2022, ticker SBLKZ.  This new issue is callable on 05/15/2019, and matures on 11/15/2022. The transaction extended debt out 3 years at a cost of .3% extra on the interest side. 

The message here is that there is still a lot of money available even to companies out on the risk curve like Star Bulk by those of us seeking higher yields. These companies see interest rates rising in the future are willing to pay up now to lock in the cash they need. 

I took my proceeds from the sale and added to my position in Main Street Capital, ticker MAIN, a BDC with an excellent track record. The yield is a little lower but there is a lot of room for capital appreciation. Here is a pretty nice chart, and the chart does not include a 7% yield (including 1-2 special dividends every year)


GOP Tax Plan – What You Get & What You Lose

Tax Man

Here is a summary of the GOP Tax Plan, see what you lose and what you’ll be getting.

In almost all cases most of us will pay less taxes in 2018. All of this is of course subject to all sorts of changes. As of today here is a list of key items.

What you lose:

  1. All personal exemptions.
  2. All deductions are eliminated except for charitable contributions, mortgage interest (capped) and state and local taxes deduction (SALT) would be replaced by a property tax deduction with a $10,000 cap.
  3. Medical costs are no longer deductible.
  4. Adoption tax credit worth up to $13,750 per child.
  5. Tax preparation fees would no longer be deductible.
  6. Alimony would no longer be deductible by the payor for decrees issued after 2017. Anyone receiving alimony payments would still get it tax-free.
  7. Teachers can no longer write off the cost of supplies they buy.
  8. Sports fans would no longer be able to deduct 80% of the cost of donations to colleges if they are made only to become eligible to buy seats for games or get preferences such as prime parking spots.
  9. Moving expenses, moving 50 or more miles to take a new job is no longer deductible.
  10. Student loan interest is no longer deductible
  11. Repeal a rule that allows you to reverse or “recharacterize” Roth IRA conversions.
  12. Vacation or 2nd home mortgage interest deduction would eliminated.
  13. Tuition discounts for college workers would become taxable income.

What You Get, or Keep:

  1. $24,000 for standard deduction, married filing jointly.
  2. Lower tax brackets, married filing jointly, No tax on AGI $0-$24,000, 12% on AGI portion from $24,000 – $90,000, only 25% on AGI portion $90,000 – $260,000.
  3. Repeal the Alternative Minimum Tax.
  4. Maintain the “step-up” in basis, which allows heirs to receive stocks at the market value on the day the original owner died. For example, they sell immediately and pay NO taxes on gains.
  5. The American Opportunity Tax Credit (college costs) would be extended from four years to five, gives you another $1,250 credit for a fifth year.
  6. Same rules apply to dividends and capital gains.
  7. Small business “pass through” income maximum rate is 25%.
  8. 401K, IRA and HSA contributions can still be tax-advantaged.