We have been reviewing our holdings this morning and pondering raising a little cash–I’m talking a few percentage points more. We already have plenty in the money market (either FDRXX in Fidelity at 1.88% today or GABXX at 2.14% today) as well as plenty of Kayne Anderson 3.50% Mandatory redemption preferred (KYN-F) which serves as a ‘cash’ proxy for us. The question is when to deploy it in a more productive manner (higher yield). This is always the $10,000 question.
With equities down over 450 points, at this moment, we are wondering if we will see ‘the baby thrown out with the bath water’ if we get that down 1000 point DJIA day. Obviously we have no idea whether this would happen, but if you look at the number of preferreds down by 1-4% today it is large—losers are far greater than winners. Additionally as we look at the number of new lows (or near new lows) the number is growing in the preferred arena. All of this is occurring as the 10 year yield remains flat or even off a bit.
What to do, what to do? Most likely the answer is nothing at all.