1/4 Point As Expected–Markets Not Liking Chair Powell

The Fed Funds is moving up by 1/4% as we all (most) expected.    Obviously the markets, while expecting the hike, did not like the announcement of potentially 2 rate hikes in 2019 as the DJIA has fallen almost 800 points from just before the announcement.

Honestly we think that the markets put too much credence in a statement that is fairly ‘squishy’.  While I have been pretty hawkish on interest rates during 2018 I think the FED will probably be on hold for the foreseeable future–until June.   It was a negative to the market that Powell answered a question as to whether the balance sheet ‘runoff’ might slow–his answer was that he didn’t see that changing.

Prior to the announcement preferreds shares and baby bonds had been pretty steady, but that has reversed a bit now.  We do note that some shippers have been strong today and even the hated Spark Energy preferred was strong earlier, but now has given back the gains as holders couldn’t stand to hold (like I outlined yesterday–as shares base and start moving higher small holders will sell because they are bound and determined to book a loss–the old buy high, sell low strategy–Ha).

Well we have 2 trading days left in the week and we will see if folks ‘get a grip’ on the selling of common shares–who really knows, but it is not helpful to our holdings (talking our book here) when the ‘nervous nellies’ keep bailing for no real reason.


26 thoughts on “1/4 Point As Expected–Markets Not Liking Chair Powell”

  1. Grid,

    CNP-B… Thoughts? 3yr duration, BBB rated, QDI, ute. Right up your alley, or no because of the convertability factor?

    1. Affinity4Investing–thanks for the good tip on that one. Got to get the one on the list of $50 and $100 preferreds.

      1. Hey Tim,

        I got it at the IPO and it’s held up very well, kinda like NISOP is doing.

        Except for the convertibility factor, it certainly does check the boxes of what we income investors look for in a stable security. I also hold the common of CNP.

        NEE-R is another short term duration (9/2019), convertible, BBB rated – option for players in this ute space, but unlike CNP-B, this one isn’t QDI, but is a $50 unit. That could be another to add to your $50/$100 listing.

        I also own the common of NEE and it’s arguably the best UTE on the market, given their financial and credit standings.

  2. Bleeding every day. My investment mojo has been run over by a steam roller. At least I’m only 70% invested. I bailed on a cef 2 weeks ago, it has dropped almost $4 since . Thankful I did.

    1. Maybe it makes you feel better to know that you are not alone. My “green light” for the year is flickering this morning, going to go red if this doesn’t let up. I think it’s more this market than mojo. I feel like Wiley Coyote in those Road Runner cartoons getting steam rolled.

    2. Tech Guy, today has been an awful day. I am looking at a negative return for 2018 across entire portfolio, both taxable and nontaxable. And this, after including dividends received!! :-((

      Can’t wait for 2019 to begin, where one can hope once again for a better performance.

    1. The CHSCP 8% was original issue and always seemed to me like held by firmer hands. The CHSCO 7.9% issue not so much, and it almost touched par today. My belief is that’s probably a good deal taken within the context of the overall market. Now the negatives. As Gridbird has pointed out they had some management issues in the past and trust me, I know that. My belief is those have been addressed but I’m not entirely sure if some skeletons are still in closets waiting to fall out. I think probably not, but it may take them considerable money to clean up the bones from the last ones. The other consideration is that a fair amount has been issued to farmers. Many of those guys are not exactly rolling in money these days, the end of year is approaching, these are liquid. We might see some additional dumping and with a lot of people leery, it could be a bigger sale. Right now I’m just changing the bandages on the burned fingers I got from my last buy.

      1. I share your feelings, P. Something just isnt right here. They keep sagging with no bounce. Im out know, if they can get over 8%, I may play again…Really looking more safer, but only a few as I am mostly pleased with what I own. A couple extreme illiquids, and starring in the whites of the eyes of IPL-D. If it blinks and gets under $21, there will be friction smoke coming off the buy button on my computer.

        1. They have handed these out to the farmers for years and I think a lot got sat on, they paid good and historically were viewed as safe. Combination of the past mismanagement, current hard times for farmers needing extra cash, and the present market meltdown has made a pretty toxic environment. Possible some we could get a blow off before year end. By the way…you got any GJV in that sock drawer of yours?

          1. P, you know that is one I never played with…Now I have played with the STRAT sisters, GJO, GJT, and GJP, but never GJV.

    2. Just discoved the existence of this company. I like it, strategic and below the radar. Still thinking about which of their preferred is the best.

      1. Gabriele, just remember the profits basically are coming from energy. It is thought of as Ag, but its profits have been leaning heavily on the energy sector.

        1. And that’s precisely what’s dragging it down, primary to the accounting issues as of late.

          1. Grid,

            CNP-B… Thoughts? 3yr duration, BBB rated, QDI, ute. Right up your alley, or no because of the convertability factor?

            1. Hey G, sorry, no I dont do convertibles…They are truly “fake preferreds”. They are tethered to the common stock too tightly for my comfort.

    3. I picked up small add of CHSCO yesterday when it went under par. Saved a buck or so by waiting. It’s holding up better than I expected but that could change in a heartbeat right now. I’d do another small add for another buck or so and be done. Very interesting article in Atlantic on smaller farms. That was some of the bread and butter for CHS and it’s not a bright future for them.

  3. Whew! Just got off a marathon phone session trying to place some limit orders on Fidelity and want to share what I discovered. Some of the issues I’ve been watching moved down into my buy zone earlier today, but I was stymied by various things until I got to the right place. But by then the Fed reported and the issues had all moved higher and I wasn’t as interested.

    Fidelity does not allow me to open online trades for F2F issues directly. I was specifically interested in IVR-C, PMT-B and TWO-B. These offer the most attractive yield, duration and credit risk for me at this point in my early retirement.

    1. Fidelity fixed income trading desk phone number is 800 544 5372. I tried their primary number and got an associate who was blocked from opening any trades for my issues.
    2. When prompted by the automated attendant for the reason for your call, say “Fixed-Income Trade.” I said “trade” and got to a regular equities trader who couldn’t open any trades on these issues.

    I finally got GTC orders for these issues at my price, but I don’t know if they’ll return to my buy zone or not. I’ve been watching them for a while and found them to be less volatile, likely due to the high demand for F2F issues in this economic climate.

    1. I know Tim coaches patience, but I’m concerned that F2F prices will go higher after the Fed statement. At this point in my life, I’d rather have the income than the cash. Buying these well below par will almost double my money before they are called.

    2. The tickers you mention are hardly penny stocks. The smallest of them has $175 million (par) outstanding.

      You are more patient than I. I would not keep an account with a broker that made it so difficult to trade.

      1. Amen, Bob. I don’t get the loyalty to Fidelity if they ‘won’t let you’ trade what you NEED to trade.

        I’ve never had to call to trade nor had any problems with Merrill and I’ve never paid a dime for any of the hundreds of trades I’ve made over the past 4 years. The trading cost savings alone have saved me many thousands – which just gets reinvested to build that income stream.

    3. Bruce, after several attempts to reach someone knowledgeable at Fidelity I gave up. I finally moved some funds to a new account at Schwab and had no problem booking online trades for fixed-2-floats.

  4. One additional point to consider is that we are in tax loss selling season as these issues drop. I know for me, this is presenting some tough choices, and I might sell in December when I wouldn’t sell in January. If others are experiencing the same issue, maybe January is a more likely time for prices to recover.

    Also, while the market doesn’t like Powell’s statement, I think he is aware of the fact that he can probably increase confidence later by backing off his plan for 2 hikes.

  5. Jay Powell is the worst fed chair in my lifetime. A simple question “”if inflation is as subdued as your are stating and forecasted around 2%, why are you raising rates?” He answer was not clear but he talked about “rate normalization and they can be patient”. He is targeting a specific rate and wants to get to that level as fast as he can.

    With that said, I see no need to panic, Jay Powell’s fed should put the breaks on inflation (unfortunately on growth also)

    1. I can find one very positive for Powell. It will be the monthly press conferences. By Jan/Feb it should become clear that rate hikes next year are not around the corner (if at all). Good we don’t have to wait 3 months

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