Month: March 2020

Although the futures are up quite a bit this morning (700-800 Dow points) I am under no illusion that we have seen the end of the sell offs as announcements of capacity reductions from the major airlines serve to remind one that there will be fundamental pain ahead. Of course no one knows when Covid 19 will peak–I suspect it will be awhile–a month or two.

Yesterday was pretty painful for our personal accounts with losses of 1 – 1.5%—virtually all in the perpetual preferreds that we own.  The ‘sock drawer’ issues we own did well–barely moving.  As we mentioned we snagged 1 CEF preferred yesterday at $24.99-the Gabelli Multimedia Fund 5.125% (GGT-E)–the issue closed the day at $25.46.

Today we will continue to study and watch the CEF preferred–and some short dated maturities in the baby bonds, although I have concerned with some of the BDC baby bonds as they may incur sizable losses if we do fall into recessions later this year.  If I make so buys they will be small positions–no use burning up dry powder as there likely will be plenty of time to find and buy bargains.

As tiring as these markets are everyone needs to stay vigilant.  We will reach a point–maybe in a week or 2 where we tamp down the wild trading and instead only move higher or lower by 1% each day–I would be quite happy with moves this small.

We know there are people that are very scared at this time–whether they are conservative investors or not.

No matter how great the bargains are in the market, folks that are laying awake at night because of fear of their ‘stash’ disappearing must do some thoughtful selling–it is human nature, and laying awake at night is not necessary – one has to do what they have to do.

I’m scared, but I am trying to stay mainly in either high quality, or very short duration (term preferreds and short dated baby bonds). While I may sustain some short term asset value hits I believe in the end it will work out because of high quality.

If one leaves the market the problem is when to get back in. I believe there are quite a few folks that left the market in the 2009-2010 that never re-entered which was a costly move, but folks have to sleep at night so everyone must do what they have to do.

I guess if we wanted a setback in stock prices we should be happy–but certainly we would all have been happy with 1% daily down moves instead of the 6-7% lower opening we are apt to see today.

I guess more worrisome are the plunging interest rates–this absolutely doesn’t bode well for the U.S. and global economy–the signals are quite clear now that we will move into a recession later this year. Lower interest rates are likely to provide modest and temporary economic support as folks refinance their mortgages, but daily mega doses of corona virus and stock market losses are likely to slam consumer confidence soon–we will be watching–this in spite of what is likely to be lower ‘prices at the pump’ for gasoline.

So what to do? AGAIN I will review our holdings this morning–I know I have 1 bad holding for sure and that is the Golar LNG 8.75% preferred–it is only a couple hundred shares. I may sell, but for sure I won’t add–honestly it was a mistake to have stepped into this particular arena to begin with. Last week I unloaded a portion of my overweight on UMH-D 6.375% preferred so will continue to hold this position.

I nibbled on some CEF ‘A’ rated type preferreds last week–BUT likely will not buy today, but this remains to be seen. I really would like some clarity in the markets and I am not seeing much.

So for this morning my plan is to review (for the 100th time) holdings and potentially sell an item here or there, but in addition continue to build shopping lists.

This too shall pass.

With an ‘all out’ oil war at hand and no good news on the Covid-19 corona virus it looks like Monday could be a really rock start for the week.

At 5 pm central time the DJIA futures are off around 980 points. West Texas Intermediate crude oil is trading around $30/barrel–a point at which we will probably see further cuts to any oil drilling. Of course this will benefit consumers, but whether the aid to the consumer will out weight job losses and knock on effects is a debatable point.

I watch Bloomberg futures here.

I am hopeful the market will ‘get a grip’ before tomorrows opening of trading.