And the Poundings Continue

The poundings of common stocks continue to take place today, but with a totally different bond market reaction.

With the S&P500 off just over 1% the 10 year treasury is moving sharply lower as well–off 13 basis points (13/100 of a percent) to 1.70%. Yesterday with the S&P500 off just less than 1% the 10 year treasury was actually up 6 basis points from last weeks close–this made no sense. Obviously the bond market was betting on a trade deal–which was in conflict with stocks.

I though for sure I would find some preferred stocks and baby bonds beginning to fall in sympathy with common stocks today–but NO–they are virtually unchanged, on average, over yesterdays prices. Both junky issues and investment grade preferreds and baby bonds are actually about even (although taking out the CBL and Just Energy issues from the picture shows prices up a couple cents).

We do note that the Pennsylvania Real Estate Investment Trust (PEI) perpetual preferreds are off 8-10% (1.50 to 2.00) in sympathy with CBL no doubt. You can see the PEI issues here.

An income issue holder has to be happy right now with the reaction of our issues to this rocky market. BUT this could change. Remember last December–I went into the month with a nice gain for the year and ended the month with a 1% loss for the year–11 months worth of work up in smoke in 30 days. Fortunately this year has been kind and thus far I am happy with gains, but have plenty of dry powder available.

11 thoughts on “And the Poundings Continue”

  1. Last December’s swoon was largely because of rising rates. Not the problem this year. Preferred stocks fall because of bankruptcy risk, short of that they’re not as sensitive to decreased earnings as common stock. Maybe it’s a flight to fixed rate dividends. Though they often do fall with the tide.

  2. The Dow is currently down 350 points. I have 137 positions in my portfolio and am down a whopping 33 bucks on the day. Pretty happy about that!

    1. I have about 70 prfds and baby bonds and I am currently up a few hundred $$. However, that will all change tonight when my Target 2020 fund kicks in with a 1K+ loss.

  3. Seasonality is against us until mid-December. Dec is usually one of the strongest months of the year, especially in an up year but many forget that there’s often a dip in the middle of the month before the Santa Claus rally. Week after Thanksgiving is often peak tax loss selling as well (although some don’t bottom until just before X-mas).

  4. Ah Tim, most investors would have killed for -1% loss at end of year last year!

    The bond whupping we got in Sept/October showed me how capricious the fixed income market can get. Again.

    1. Hster, last December was the perfect example of why I love illiquids. They dont track the daily craziness and very few sellers come out and the standing bids stay firm. I just rotated out of those and bought into the cratered ones and rode them back. And then flipped right back out of them back into as many illiquids that were fair value. So I was actually up nicely last year.
      But unfortunately I am more exposed presently because I am not as deep into illiquids as I was last year. Its been too hard to burrow deeply into them because they are priced too high.

  5. I had a bunch of lower quality energy/shipping preferreds that had paper gains. i had trimmed some earlier, but still held on to quite a bit. Today I just puked them all out and took profits. I had been on the fence about de-risking for awhile…. Dynagas, Costamare, etc….

  6. Meh, being off a few percent is hardly a “pounding” when you are up over 20% on the year. There is going to be a lot of tax harvesting and shuffling.

    We will see if it develops into a correction, which I guess we are about due for. I kept some money off the table for this very scenario though. It is a good options trading time for sure, and if it continues we will see some other bargains as well. I am still kicking myself for not buying more during last December’s downturn.

    1. Scott–it is a pounding if you listen to the talking heads who only know up and think they deserve to have only up markets. To me it is nothing–now I remember black Monday in 1987–now that was a true pounding.

      1. I remember the day, too. Went into a meeting when the Dow was off 100 points and when I next checked later in the day it was down 500.

        I thought it was a typo.

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