Grind lower all throughout the 1st 90 minutes, stabilize for a couple of hours and then launch higher.
Watching the charts there has been an epic battle of sellers and dip buyers–fun to watch, but glad to essentially not be involved, although income issues have taken a bit of a hit in the last couple of days. I feel fortunate that we haven’t had a real panic–the one that rips your face off and lays waste to all issues whether they are income issues or common shares.
I do see the 10 year treasury is up 5 basis points right now to 1.78%–I suspect it will remain pegged there until the FOMC meeting wraps up tomorrow—then we will likely see some bigger moves one way or another.
I hope everyone is hanging in there without too much financial damage on their income issues. As I mentioned yesterday most of our portfolios are a bit off there all time highs but not by much–now maybe 1% more or less.
I hope a link is permitted….while all the discussion here is interesting it seems the big picture question is what does everyone think about Jeremy Grantham’s supper bubble prediction.
Below is the link to the full 37 minute interview.
The cognitive dissonance for me is….I agree with everything he says but still can’t really assess whether what he’s predicting will inevitably happen as a consequence of the policies that have brought us to this point in time.
https://www.bloomberg.com/news/articles/2022-01-26/grantham-has-an-even-scarier-prediction-than-his-crash-call?srnd=premium
Grantham always seems to have some cogent writings worth considering however, he’s also one of those gurus the talking heads always seem to trot out for interviews whenever the market begins to get scary….. Next one up will probably be Nouriel Roubini – haven’t heard that name in a while but I’m sure he’s boudn to show up again pretty soon…. It’s perma-bear territory for now – lol
Ooops! Here he is – Roubini at work from Dec 29 – https://www.project-syndicate.org/commentary/economic-market-outlook-2022-by-nouriel-roubini-2021-12
Same with gundlach… bunch of talking heads. I don’t love equities but they aren’t exactly expensive trading at a multiple below 20x.
https://twitter.com/timmerfidelity/status/1486403979676426245?s=21
That is chart is using some very optimistic 2022 OEPS for the S&P500.
4349 / 240 = 18.1
Who is predicting OEPS of 240 for 2022? I thought it was around 225. I read factset and yardeni reports and that estimate is news to me. Historically earnings estimates get revised down as time goes on. Only recently did the burst of activity due to the fed largesse catch people who estimate things off guard and were too low. Now it might be the other way around.
A few names that may be of interest..
Many Preferreds are approaching par. Here are a few that caught my attention.
The DCP Preferreds (b/c) both hit around 24.5. They have a fixed coupon close to 8% for a couple of years then float LIBOR+ ~475 bps. Very solid fundamentals. The company issued 3.25% 10 year senior debt last year. Issues are thinly traded.
Some MREIT Preferreds.
Govvy, tons of coverage- AGNCO and NLY-I both around $25.
Credit – NYMTM at 24.9 and CIM-b around 24.7. Most of the credit is backed by residential or multifamily; both with great fundamentals (unless rates go way above predictions) .
Even SR/a is down to 26.25.
I was out of AGNC and NlY preferreds when the price got too high. Inching back in now but still not liking the low float rates. bought a little NLY-F liked it better than NLY-I for now.
CIM-B is one of my best holdings along with CIM-A uncalled and good for trading within a narrow range. Not a big fan of NYMT I bought NYMTM because it was priced favorably to other NYMT’s but that does me no good if they all fall.
NRZ preferreds have been my best for trading between them.
Yeah, everyone hates NYMT management. My sense is that it’s hard to fathom defaults in resi re in this environment and it’s not gonna change soon. Savings rates are great along w consumer balance sheets, and the cost to build a house is growing. And I really don’t see mortgage rates hitting 4. Why do you dislike NYMT?
I like NRZ prefs as well. The MSR portfolio should be doing good… but I also give them a slight ding for portfolio complexity.
A lot of people won’t touch mreit Preferreds. I actually like the ability to understand book value and assess a cushion for default. It’s like buying a bag of cash, not an operating company . Plus, management is invented to do whatever it takes to survive, even if it’s liquidating assets at low prices. And most of the MREITs now have a healthy slug of term repo to weather the storm.
On second thought NLY-I is better today I didn’t realize it fell so far.
For options players the last two days have been a great time to reel back in call dates using calendar spreads, even to this Friday and at credits. Now it’s time to sit and wait., watch the center ring as the white faced clown (fun clown fact: just learned that the white faced clown is the leader of all clowns, there can only be one) comes into view for the next drama.
Cold as Minnesota in StL this AM! Tim, don’t worry Global Warming is coming your way, prob just when you are ready to fully retire.
Hey Tim – I like the phrase “we haven’t had a real panic–the one that rips your face off “. My face isn’t going to win any beauty contests … but I do need it.
Stay safe in the cold
Bigbear–17 below this morning. The older I get the more this cold weather is detested.
Another morning selloff, another afternoon bounceback. Is the Plunge Protection Team going to show up every day this week?
Ahhh the mythical Plunge Protection Team, LOL.
Or you know, there are other factors at play. Like Corporate buybacks finally being unleashed, buy the dip buyers, lots of money on the sideline looking for a place to land rather than losing purchasing power in thie high inflationary climate
Mythical or not there seems to be a pattern. When I see a pattern I play it until it stops working.
Thanks, Tim.
Actually, I look at these corrections as buying opportunities. I bought a preferred and some commons back in March ’20 and keeping my eyes on a couple on my watch list now.
Ron–agreed. I am going to start some ‘hunting’ today for some potential buys.