Today has been an interesting trading day—a fair amount of ups and downs. This isn’t a surprise since daily we have news coming out of the new Trump administration that is either good or bad (depends on your political leanings I guess)–but mostly just leaves one wondering about the outcomes. It doesn’t matter–we have to deal with the hand we are dealt–and for now that is a bit murky.
Interest rates are trading down in the 4.41% area–near the lowest we have seen in many months. I’m not sure of the reasons for the move lower, although the JOLTs (job openings and labor turnover report) came in yesterday showing fewer job openings at 7.6 million versus forecasts of 8 million. On the other hand the ADP employment report today showed 183,000 new jobs in January versus a forecast of 150,000. So once again we have some conflicts in data, but I think all in all the economy is slowing–honestly at about the right pace in my opinion.
Today I bought a position in the Newtek 5.50% baby bond (NEWTZ) issue at $24.63. This issue matures on 2/1/2026–so less than a year. Some one had mentioned it yesterday in comments so I stole their idea to lock down a decent yield to maturity (over 7%).
I continue to look for some issues with short durations but decent yield to maturity since I want to hold something other than CDs, etc. On the other hand, with the new administration in Washington, D.C., I am a bit goosy about where we are headed.
I don’t know if a trend is developing but I am being cautious. Feels like the markets are treading water. So far qtr and end of year reports companies have reported overall good results but are making statements they see margins and profits will be down in the coming year.
Look at the talk here. We don’t have much being posted about opportunities and what our investments are doing. It’s more general talk. I appreciate Lt posting about his thoughts on munis and people posting about bonds , spreads, Treasuries, etc. A little talk about trading the volatility in the market, chasing higher yield, I like the talk about higher risk investments and why someone would want or not want to own.
But, in general I think the risk is greater of a black Swan event just because a lot of people here are more conservative and I don’t see the volume of posts related to investments I normally see.
One account I’m fully invested, 2 others are at 50% cash earning 4.1% with good to call orders against that. On my wife’s accounts, one is at 25% cash with about 2/3rd in GTC and her other account is about 75% cash.
Nothing is real. Announced one day and gone the next. This is BSC.
With that said, I also am not reacting. I learned the 1st go around that the need for attention is much more important than implementing what is announced. So, it gets pulled a few days later.
Not confusing at all, but definitely volatility. A technical trader’s dream. Better luck next time fundamentals which haven’t done much since GFC and even less relevant post Covid….
GAINI may still be worth a look.
Term dated.
7.75%
Over par but by only one payment.
Pickenick, thanks.
Even better, it’s 7.875% coupon.
I enjoyed today’s Confusion
My areas of anxiety – BHFAN and SCE Trusts – presented opportunities to reduce my exposure
Also added to ARCC – a Sock Drawer holding down on weak earning news
Westie, I trimmed my BHFAN as well. Check out ARGO-A near 25.15, ARGD near 21.7, and KMPB near 23.4.
And if you are comfortable w mREITs, RCB has been offered in the low $24 range, a hefty YTM for 1.5 years.
My guess on today, the Treasury Quarterly Refunding came out. After months of promoting the long end, Bessent kept Yellen’s policy of selling the short end in place, thus the bond repricing. As for stocks, market starting to believe tariffs will be a nothing burger, or maybe the same old burger with a fresh pickle on top!
owen-
I read all of the QRA docs…interesting. The reason for the long-end rate move today could well be as you said. It certainly was high on my list. I don’t think Bessent could have changed much this go-around.
The narrative regarding the end of Fed QT is focused on mid-year, and it even mentioned that in the QRA. Treasury seems to have an interest in supplying liquidity to balance QT, perhaps esp. with the RRP close to zero.
Bessent stuck his political statement into the usually more neutral commentary Risks section. That might have been the sum total of his contribution, lol.
Maybe it’s just me, but nothing in the market seems confusing to me. Is this simply a frustration of lack of signals as to the direction of the market that seems confusing? I’m confused about your confusion. Nobody can predict the market, or rates. Where is the chaos that was promised us leading to 10Yr at 6%? All the talk before the inauguration was of the hellacious deficit. Now that Trump is doing his damndest to put a lid of wasteful spending, all we hear now are crickets. Did we want to do something about the deficit or not? Could the move in longer term rates be that something is actually being done about the Gov’t spending, which in turn could relax inflation expectations going forward? I don’t know, just a random thought. I believe headlines and talking heads has you all expecting one thing and when it doesn’t happen you move on to the next set of expectations that end up also being wrong. Entirely too much type and time worried about political happenings, at least in my very humble opinion.
Pig pile this is the kind of information I look at and interpret. Tim if I remember correctly used to be involved with the food processing business.
I’m a little concerned right now on big food manufacturers and the ag commodity business. I have been watching because these are companies that are long term investments and might be worth picking up in a down turn in the stocks. Problem is when to get into them and where is the bottom?
Recent news, China has been supporting and expanding in country food production. Even going as far as damming rivers and diverting water to arid regions to grow crops. They had a successful harvest of wheat and corn another crop they are growing. They are selling wheat already on ships heading to China or pushing back shipments while they try to sell the loads to other Asian countries. They buy about 6% of world production mostly from Australia and the US and Canada. How this is going to affect prices the farmers get and commodity business like
ADM, and CAG, and oh don’t forget the shippers etc. this is making me hold off on opening positions in these stocks.
adm has the usaid contract btw in Lincoln nebraska. Ive been buying … farmers overproduce….then under produce…repeat. the adm guys I used to work with said they like volume and volatility…it ain’t gonna grow any faster than our appetite for the commodities but they make money and the valuation isn’t bonkers. if wheat corn gets too cheap they can make wallpaper paste instead while we wait for farmers to rotate crops. cheap crops don’t even help the consumer since the cost of driving to the store is higher than the loaf.
jbosch, I had not thought of that angle. See I knew there was a reason for the drop in price on ADM and you might see more layoffs if Cargill has contracts cancelled. Like I said, savvy investors had probably seen this may happen with USAID contracts cancelled, with the government cutting funding to UNESCO and other groups buying grains like rice, corn and wheat cutting back on purchases due to funding cuts. My wife saw on Facebook the local Catholic charities just had funding cuts. A lot of people want to see government cut expenses as long as it isn’t their funding getting cut.
I am under the impression that the usaid contract was not especially remunerative. I work for the various Catholic and Lutheran entities that carry the mantle of the government service where the government chooses to abdicate responsibility and I was always under the impression that those entities got the contracts because the government was inefficient and there was no money to be made providing the service, so it’s odd to me that they are being being pilloried since outsourcing the government work is a tenant of good government….anyway I think adm and Cargill just suffer when the commodity price tracks down and isn’t volatile, since they make money on carry and spread and basis but are less like a pipeline since they rely on the trading opportunities…some of them hold negative margin sales accounts just to keep business so they can find opportunity grain that might make it profitable. the commodity has so little value it doesn’t really affect the American consumers pocketbook, the only people negatively affected by high prices are the foreigners with poor currencies.
USAID does some good, like the ones you say seem to be. And then they do the work of the CIA overthrowing and destabilizing governments we don’t like, setting up fake media companies like in Ukraine who tell the US public what to think, etc. Those are lot more questionable. Here are half a dozen we know about along those lines –
https://timesofindia.indiatimes.com/world/us/from-cuba-to-brazil-how-usaid-became-a-political-interference-tool-in-various-countries/articleshow/117921098.cms
When I was working in south/southeast Asia, we got involved in a lot of charity/relief work. I thought the help provided by the religious charities (the Mormons and the Catholics, especially) was generally far better than the government programs.
We used to see lots of silly USAID programs that (IMHO) made the US look stupid (e.g. promoting transgender programs in countries where people were starving) or that were structured to allow local officials to siphon off a lot of money (just plain old corruption). There just didn’t seem to be any “adults” in charge to filter out or shut down those kinds of programs. “Your tax dollars at waste”.
We ran into a few really good USAID folks (really dedicated to helping people and to promoting the image of the US through meaningful aid), but we also ran into a lot of USAID folks who were much more interested in wasting US taxpayer’s money to foster their own (mostly far left) political views or who wouldn’t think about how to provide aid in a way that didn’t devastate the local economy (e.g. destroying the market for small local farmers). Too many people who wouldn’t get out into the field to get to know the people they are supposed to be helping.
Personally, I think the US should provide charity to the poor, but IHMO, USAID has mostly lost its way and needs to be reformed. The current administration’s approach is probably not the way to do it, but at least it is bringing focus to the problem.
Hello Private, I am concerned India is beginning to be like China. So many foreign companies don’t seem to succeed in doing business there and it’s made difficult to compete. I know several companies have pulled out of there, Whirlpool comes to mind. For this reason I am not tempted to invest in overseas in certain parts of the world.
Private-
Your experience and insight are wonderful.
yeah I have been sort of operating under the assumption that using soft influence to topple regimes and peddle ideas was as American as apple pie and one of the few bipartisan ideas left….never ceases to amaze. I think adm will be ok
pig-
Yes, there is a developing narrative that Musk+Trump are going to cut gov’t spending thus reducing inflationary pressure and moving bond yields lower. Since the results of budget cutting efforts and their collateral effects won’t be known for some time, it’s just a narrative at this point.
Narratives move markets, but this particular one is just one of several possibilities for today’s rate drop. One that popped into my head is wondering if the bond market is getting edgy about the stock market. With generally strong earnings, you might have expected a more bullish reaction., but there’s still time for that.
I don’t feel confusion either. I do find it interesting to watch how markets absorb the flow of news. Are trends developing?
If I may chime in, maybe “confusion” could be replaced with “uncertainty”……
But if the spending cuts are to fund tax cuts, then we don’t really gain any ground on deficit spending.
It’s going to take months, if not years, for the collateral effects, as R2S so eloquently put it, to be understood.
In the meantime, I am just nibbling at opportunities, raising cash when the opportunity arises, and trying to not get caught up in the drama of the news cycle.
I wonder if there is an ETF of lawyers. I think they are the ones who are going to make out best in all of this with the torrent of lawsuits being filed.
Mark-
“we don’t really gain any ground on deficit spending.” Great point.
“an ETF of lawyers”…LMAO!
R2s I’m not confused about the news or the market and I interpret what I am reading. So actually I look forward, which is what I have learned over the years the market does at least the more savvy investors. The rest of the investors are the herd and I try to think ahead and jump at the opportunities when the herd panics.
What would have been a decent hold at one time when we thought we knew what was going on became a flip trade.
I bought PSTL thinking it might be a good reit hold for the yield. Then reading how the wind is blowing I realized there’s a good chance USPS gets privatized and there could be issues. I don’t consider I am being skittish, but more being prudent looking forward and not waiting for it to happen but plan that it could be a possibility.
I took the upcoming ex dividend date to flip the stock knowing or hoping the market wouldn’t spook the dividend chasers and I made a quick buck.
But I changed my mind as a long term hold until I see how things go.
TIM; Along your post & thinking I will say that Corp. Bond Yields are coming down almost daily. Atleast it sure feels that way. I was looking at a solid Corp. Bond (6.5% coupon) just a couple of weeks ago and it was priced at $103.5 but I felt it was just a tad too expensive. Now the darn thing is trading at $106.4. My point is these things can move away from you quite quickly. I’ve also noticed that when a new corp bond comes out the yields are horrible in my humble opinion. Iam talking about “investment rated grade”.