Month: October 2020

Dave in Texas mentioned the big pop in CIT Group common shares early today–well how about their 5.85% preferred – up $2.32 on 12 times regular volume. Turns out that CIT is being acquired by regional lender First Citizens (FCNCB).

I personally noticed the PennyMac FTF preferreds popping on large volume–3 and 5 times normal volume–both issues up around 3%. I had held a modest speculative position and needed this pop to unload it–collected 1 dividend and 75 cents on the pop–not really looking to hold long term. I see no news to account for the pop.

You can see these issues on the large volume spreadsheet here.

I think what we are seeing is some bargain hunters no being forced to dip a bit lower in the quality rankings to find issues under $25–of course this means many of the mortgage REITs could pop–at least those that hold agency paper. You can peruse the mortgage REITs here.

Only last week the 10 year treasury popped into the .80% area–but as has been the case all year, there is no follow through on anything higher–pop and drift lower–pop and drift lower. Right now rates are at .70% which has been the settling point for weeks and weeks.

Common shares today fell on the open by around 300 Dow points–but now have clawed their way back as the eternal optimists believe in the almighty stimulus package to come bail them out–and they are likely correct–at some point prior to the election congress will decide to spend massive amounts of money. I can hardly wait to receive money I don’t need (sarcasm intended)–more money to salt away for a rainy day I guess. I would think that interest rates will again pop higher when/if a stimulus is announced.

I read kaptain lou’s Seeking Alpha piece and it motivated me to throw caution to the wind and buy some mid level quality preferreds yesterday (versu just investment grade). I bought a full position in UMH Properties (UMH-C) 6.75% perpetual, Monmouth Real Estate 6.125% (MNR-C) perpetual and finally I bought a full position of the RiverNorth Specialty Finance 5.875% term preferred (RMPL-P or RMPL.PR or RMPL- depending on your broker).

Nothing in common with the above different issues, but I am very familiar with the companies and thus comfortable holding them. Honestly after having a stellar September because damned near everything I owned paid their quarterly dividend I was hungry to add more fuel to the fire.

I did note today that the Compass Diversified (CODI) preferreds went ex-dividend yesterday and today they are off more than a buck from Tuesday–so they have fallen about twice their ex-dividend amount. Maybe an opportunity here. Note–CODI is a partnership so they do issues K-1’s.

My headline says ‘time to move interest rates higher’–but honestly it is way past time to move them higher. Going way back to 2012 or so the Fed refused to cut back QE (quantitative easing)–honestly they have screwed up in this respect for 8 years now. Because there was a ‘taper tantrum’ once is no reason to keep doing the wrong thing.

The Federal Reserve, by proclaiming interest rates are going to remain low for years, is simply prolonging some pain, which can be alleviated, to a small degree, right now.

If the economy is so bad that we need to have the 10 year treasury at .77% why do stock prices keep going up and up?

The Fed needs to get out of the way–start cutting back asset purchases (in the last 2 months they have bought $130 billion in assets) NOW. We need the 10 year treasury to move to at least 1.50% in the next 6 months.

Through the asinine actions of the Fed insurance companies and pension funds throughout the country are all going to be on the verge of bankruptcy within a couple years. They will be the next bailouts–it’s coming, just a matter of time.

From my reading virtually all pensions systems use a totally unachievable rate of return to calculate their pension contributions and payouts–usually 6-7%–not going to happen when low risk assets such as corporate and muni bonds are paying 1-3% and over time, just like individual income investors, their achievable returns are going to fall dramatically.

Like pension systems, insurance companies, depend on safe income assets to fund their business–they live on the ‘float’–and the float isn’t paying much, if anything, right now.

It’s time for the Fed to quit kissing ass on Wall Street and do what they have to do for the good of the country.