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A Decent Start to a New Year

While equities fell near 1/2% yesterday income issues got off to a green start as the 10 year treasury yield fell by 10 basis points to close the day at 3.79%. Yields are off another 10 basis points early today – 3.69%. The 10 basis point moves (up and down) seem to be the standard move lately. My accounts were green yesterday by 1/3% or so–no giant move but green is green.

I see that refinancing mortgage applications are down 87% year over year while mortgage applications for purchases are down 42%. From the perspective of the Fed this is indicating slowing—folks have always refinanced for 2 reasons—to lower their interest rate and/or they suck out equity in the form of a ‘cash out’ transaction. With current interest rates available consumer spending power is being curtailed—down the road a quarter or two this will translate into a slowing economy. On the other hand equity is still being accessed via home equity lines of credit, but at very high interest rates (relatively speaking)–as a homeowner accessing equity now may be kind of dangerous as we have potential falling values (some areas have already fallen in values–in the midwest we are fairly stable leaning toward softening). You best have solid employment if you are pulling equity now.

Yesterday I bought 5 shares (yes 5) of the PS Business Parks 4.875% perpetual preferred (PSB-Z) for $11.50/share–current yield of 10.69%. Of course you all know that the 3 PSB preferreds are being ‘delisted’ on or around 1/13/2023. This is purely a research/educational purchase–I have never owned a delisted issue and the only way I will keep track of this saga is to own a few shares.

At 9 a.m. (central) today we have the JOLTS (Job Openings) report release and 10.1 million openings are expected versus 10.3 last month–don’t think this is a big market mover but who knows for sure. Then at 1 p.m. (central) we have the release of the FOMC meeting minutes from the last meeting–this will move markets one way or the other even though it is old news for the most part.

Well here we go–equity futures are up a bit–mostly meaningless of course, but better up than down.

13 thoughts on “A Decent Start to a New Year”

  1. Has anyone else noticed that with the new year, the investment firms, and financial media outlets have pivoted their message from Santa Clause Rally to Recession, in unision? Curious…but expected

      1. The economy is what it is no matter what label they slap on it. Definiton of recession is arbitrary and the redefiniton is for political posturing. Our economy is too important to be playing politics with it instead of dealing with it. No matter what some partisan or pundit wants to label it.

  2. Tim,

    Did more than 2/3s of any series get tendered in the recent transaction for PS Parks preferred?

    That may influence how your ‘research’ ends up 🙂 and be a good opportunity or not.

    1. legend.vs–it was around 2/3rds I believe. It is 66 bucks so not too concerned one way or another.

  3. There is still 2yr./10yr.yield inversion, expect more down side to come. I am keeping my powder dry with 4.26 % MM yield at CS. Wait till there is blood on the street and pounce quickly like a puma.

    1. I think the same so I’ve taken profits today on a bunch of issues bought near 52 week lows – DDT, KREF-A, TDS-V, T, WCC-A, MPW, KMBP, HWCPZ.
      Bought more XFLT-A just below par (ex-date next week) and SAJ which pays 69 cents in five weeks. Also bought EPR Properties 12/14/26 bond @ 7.9% ytm. Feel like a kid in a candy store. Hope to have 10-15% cash for the next downturn.

      1. Joel,
        Just curious, how long have you held these ? I didn’t look to see when these hit their 52 week lows but a lot of preferred I have been watching did so about June. I am assuming you reaped a couple dividend payments and about a $1.00 + in profit in share price.

        1. Most of the issues were bought just in the past few weeks. Look at the charts and you’ll see a steep decline last month followed by an upsurge in the past few days. I’m particularly pleased with MPW which I loaded up in the low 10’s recently on bankruptcy fears of their largest tenant. The tenant announced that it’s bank credit has been extended and wallah MPW jumped 20%. I was lucky last week to snag HWCPZ at its 52 week low of $22.24 on a large bid-ask spread. TDS-V was also bought in the past couple weeks in the low 13’s. Overall, it is plain to me that the many income issues were severly pressured by tax loss selling last month.

      2. GRJ – Do you have the ticker / cusip for the EPR bond?

        Also, Tim, I do not see any of the EPR preferreds on any of the lists – not the master, not the REIT specific list. I can only find them if I type in the parent ticker. Not a huge deal, but when you have a few spare minutes…… 😉

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