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A follow-up.

Though preferred stock dividends are fixed like interest on a bond, they are taxed differently. Many preferred dividends are qualified and are taxed at a lower rate than normal income. Except for investors in the highest tax bracket who pay 20% on qualified dividends, most preferred shareholders owe only 15%. People in ordinary income tax brackets at 15% and below pay no tax on qualified dividends.

It's good news that the tax situation isn't as grim as I thought. But the hurdle to achieve a real rate of return after taxes and inflation is still formidable. So let me run the analysis again. Buy a $25 pfd at par, with a 6% coupon, due 10 years out, that pays quarterly non-qualified divs. If the tax rate is 85%, and if inflation runs at an average of 6% per year over the 10-year holding-period, then the "investment" will result in a loss of purchasing-power. (Run the numbers yourself.) But if the coupon is 6.42%, then the investment breaks even on an after-taxes, after-inflation basis.

Depending on whose scanner you use --and whether converts and exchange-traded debt are included in the list-- somewhere between 575 and 730 items will be returned. If you use Stock Market MBA's list and rank the output by coupons, only 45% make the cutoff, which confirms my suspicion that --in the present investing environment-- making a "safe", real rate of return from fixed-income instruments --in Graham's sense of the term 'Defensive'-- is hard to do. If a real rate of return is wanted/needed, then a lot of risk has to be accepted.

So, what are those 'risks'? 'Call risk' (which is easy to manage). 'Tax risk' (which is known and won't likely change). 'Inflation risk', which is a "known "unknown", as is 'interest-rate risk', both of which contribute to 'market risk', which is yet another "known unknown". Whatever the Fed does or doesn't do this week will likely trash the prices of stocks and bonds and set up a negative feedback loop in which rising interest-rates and/or untamed inflation further trashes an already weak domestic economy, never mind the currency wars and sanctions wars that Biden is losing that are eroding the reserve status of the $US dollar.

Yikes! What's a fellow to do? The obvious answer --to me, anyway-- is to start hedging, because the Fed is clueless, the Congress indifferent, and the White House irrelevant. The three of them are going to let the economy crash and blame it on Trump or Putin (or whatever), instead of fixing the problems they themselves created, chiefly, the policies and actions they have funded in the belief that "deficits don't matter", to which the obvious counter-reply is this. "If deficits don't matter, can I stop paying taxes?"

My worry is this. If inflation runs no higher than 6% to 8% per year, and if I do no more than break even on my investments, then my present assets and income-streams fund my retirement to age 113, or one year longer than the world's oldest male, meaning, I won't become a financial burden on my kids or have to go on the dole. The world's oldest woman is/was 122. That might seem extreme or unusual. But my great-uncle, Jack, lived to 103 and his sisters to 109 and 111. So funding a long, long retirement is a problem I've been dealing with a lot of years and why I don't like the uncertainties of the present situation and keep scrambling to figure ways to deal with them.

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