Markets Tumble as Rates Rise

Geez what a difference 1 day makes. The talking heads were pondering the plateauing of interest rates just yesterday. So of course rates jump and the Fed chair says they probably will move forward with 3-4 interest rates hikes in the coming months barring soft economic data–gee what a surprise–NOT. This is what they have been saying for 6 months. Whether we agree or not that is their plan.

No surprise to us and no damage was done to our holdings by the tick up in interest rates–they closed at 2.91% today. Fed Chair Powell will testify at the Senate on Thursday.

We made 1 purchase today and we will write further at length tonight on our thoughts on the purchase.

14 thoughts on “Markets Tumble as Rates Rise”

  1. As a young kid, and even as a early adult, I used to love roller-coasters for the feel they gave me…….now, in my seventies, all I need to do is own some stock. Pretty much the same thing.

    1. Now we spend way to much time watching the roller coaster. I remember waiting for the Wall Street Journal to check the stock prices–or in the early 80’s logging into compuserve at $1/minute to check.

  2. Tim, what do you think of the NuStar preferreds? they seem to be more secure in light of the common distribution cut and consolidation of NS/NSH? do you know if they are K-1 or 1099? Thanxx Bea

    1. Bea, dont fall trap to the allusion of safety that provides….It doesnt…Its all in the numbers going forward. I recomend you signing up with Moodys and reading latest report. This company is not in great shape and is still searching for a bottom. NSS is my largest holding, but no interest in preferreds. Plus I am not an SA writer nut who loves losing money chasing yield in such beautys as FTR, CBL, and Wheeler. I will keep a close eye on NS. This is not a true play MLP pipleine. A lot of bad parts here. If they dont get their act together, soon and arrest the problem, I will sell them all and move on.

  3. Hi Bea—I kind of like them (kind of given that I buy few perpetuals). I have owned the NSS (debt issue) issue for years. NSS (Nustar Logistics–a division of Nustar Energy) is a fixed-to-floating rate debt issue with a spread of 6.734% plus 3 month libor (1.95%ish). It has just entered the floating rate period so will pay 8.70 or so–it is trading at 25.31. HIgher up the food chain is my choice always – all things being equal.


    1. thanx Tim, does NSS issue tax reporting via K-1 or 1099? I believe from the website the pfds do a K-1 like the common but what about the NSS issue? Bea

  4. Gridbird–I have watched them for years and there is no real reason why they can’t get the businesses pointed in the right direction–as long as the have decent cash flow things are fixable. But I am tiring of how long this has been going on–I think it has been a couple years. The dividend ‘reset’ (or cut–unless you are management) is a good step in the right direction.

    My NSS position is modest – just my normal position size.

    1. Historically Tim, I suspect my comfort level has been less tolerant than yours. There was a time in recent past where I wouldnt have bought a preferred unless it had a 75 times dividend coverage….Yes, 75 times!
      I am hopeful like you of NS turning it around, but the bottom line is the numbers and credit ratings continue to deteriorate. And this is despite the distribution cut occurring. Things have not bottomed out yet and management has not performed to their stated goals. I like yield, but am not risking my capital for 100-200 bps. I beat the crowd out the door. I dont get caught holding the FTRPR bag many do who chase yield. Hopefully it wont get to that point….But my ear is to the ground!

  5. I think we are very similar in style–a lot of safe stuff and then a few higher yielding issues. I am very comfortable with the term preferreds–and I continue to add to them above normal position sizes. I was going through the gladstone preferreds in my accounts last night and out of 5 accounts they are heavy players in 4 of them–hope they do well or I am toast.

  6. The common units as well as the preferreds will get you a K-1. NSS a 1099. Do NOT put the common or the preferred in an IRA or similar. The distributions are almost pure UBTI and you will have a mess on your hands.

      1. thanx to all
        seems like these will be called to me and replaced not a very big issue and wont cost them much to get out of this.. 3mo LIBOR seems to be going up .0002-3/day! a warning for those in levered CEF’s too..most of the leverage is tied to 3m LIBOR..

        as an aside, stumbled on these sites an mlp info site mostly free and a basic info site free.. w SA going all paywall on us, looking round .. people gotta eat but .. glta. Bea


  7. Hi Bea–yes NSS may be called soon, but as long as it is trading at 25 plus ‘accrued’ there is just a tiny call risk.

    I see SA is backing off the paywall for up to 5 articles per author–guess they got the ‘word’.

    Am familiar with Will check the other one out.

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