August 16, 2017
NOTICE: Before buying any bond or stock, check out Core Portfolio to see CURRENT positions.
(Update: ECCY spiked up in price right after we purchased. We suggest you do NOT buy at current prices, which is $25.54 as we type. If it drops down to $25.25 or below, which we do not expect, you could buy.)
In this tough market we typically buy positions that we like, but don’t really love.
Well in this case we love the bonds from Eagle Point.
Eagle Point Credit Company (NYSE:ECC), an externally managed closed-end management company, recently sold a small baby bond issue ($25/bond) with a 6.75% coupon.
While the coupon is a little below what we want, the issue’s maturity in 2027 makes it attractive to us. Specifically, 1.1 million bonds will be offered with an additional 165,000 available for broker overallotments, with proceeds totaling $30.63 million.
As a closed-end fund, ECC is registered under the Investment Company Act of 1940 (the Act), which means the company must have an asset coverage ratio of 300% of debt securities. We call this a “margin of safety” for holders of these baby bonds. The beauty of the “Act” is that holders of company debt will have approximately $4-5 of assets for each dollar in debt — only an event of mammoth proportions would render this debt worthless.
Link below for more info:
If you believe “fake news”, Amazon, all by itself, is killing retail. Well…..that is not true. Here is an interesting article we came across this morning.
Retail stocks have been annihilated recently, despite the economy eking out growth. The fundamentals of the retail business look horrible: Sales are stagnating and profitability is getting worse with every passing quarter.
Jeff Bezos and Amazon get most of the credit, but this credit is misplaced. Today, online sales represent only 8.5 percent of total retail sales. Amazon, at $80 billion in sales, accounts only for 1.5 percent of total U.S. retail sales, which at the end of 2016 were around $5.5 trillion. Though it is human nature to look for the simplest explanation, in truth, the confluence of a half-dozen unrelated developments is responsible for weak retail sales.
Our consumption needs and preferences have changed significantly. Ten years ago we spent a pittance on cellphones. Today Apple sells roughly $100 billion worth of i-goods in the U.S., and about two-thirds of those sales are iPhones.
Consumer income has not changed much since 2006, thus over the last 10 years $190 billion in consumer spending was diverted toward mobile phones. Between phones and their services, this is $340 billion that will not be spent on T-shirts and shoes.
But we are not done. The combination of mid-single-digit health-care inflation and the proliferation of high-deductible plans has increased consumer direct health-care costs and further chipped away at our discretionary dollars. Health-care spending in the U.S. is $3.3 trillion, and just 3 percent of that figure is almost $100 billion.
Then there are soft, hard-to-quantify factors. Millennials and millennial-want-to-be generations (speaking for myself here) don’t really care about clothes as much as we may have ten years ago.