Author: Tim McPartland

We are awaiting economic news at 7:30 am (central) and markets are currently pretty quiet.

The personal consumption expenditures (PCE) is forecast to show year over year inflation at 4.7% which would match last months reading. The core reading is forecast to show a .4% rise compared to .6% last month. This number could put the fed in a real pickle – a hot number begs for more interest rate increases, but with the banking situation a rise of more than 1/4 basis point at the next meeting (May 2-3) is pretty dangerous.

Here is the balance of todays economic news.

As with most days I have no plans to do anything at all today–I have just the 1 open good-til-cancelled buy order and it is more than $1 away from my buy price.

Today we have a blizzard warning in Minnesota – I have had it with this winter–March 31 and we still have a 4′ high pile of snow at the end of the driveway. Certainly we will get no sympathy from the folks out west in the mountains. In mid January we spent a week in Palm Springs–one of our favorite spots and with the benefit of hindsight I wish we would have delayed until February or gone again in March.

Well let’s get this day rolling see if things get crazy or remain calm.

There are plenty of problems in our economy, but there is little showing up in the economic releases.

Today we had 1st time unemployment claims under 200,000 again and continuing claims are at 1.69 million–pretty steady over the last number of months. Sure we have seen layoff notices from a plethora of tech companies announcing sizable layoffs, but in the big picture these have not been substantial.

The final read on 4th quarter GDP was revised down to 2.6% from 2.7% so no major weakness showing. The Atlanta Fed is showing a 3.2% number for the current quarter on their GDP Now model—where is the weakness?

Normally I would look at the bond market for direction–but with the banking fiasco this is probably pretty meaningless in term of economic growth forecasting. Equities remain kind of strong–are equities right this time? Equities are not forecasting much economic weakness–so we continue to just guess on what is ahead – everyone has an opinion.

Yesterday I bought an add-on position in the RiverNorth Opportunities Fund 6% perpetual preferred (RIV-A). Someone did a good sized dump on these shares and it fell to my GTC buy order–hit a low around 22.39 on multiples of normal volume. 6.61% current yield on a CEF A1 rated issue–I’ll take it and will take some more if it falls.

I have no plans for today–but I have a GTC order in on the Gamco (Gabelli) Natural Resources 5.2% perpetual (GNT-A)--now trading at $22.71 for a 5.72% current yield. Low odds this will execute because my order is at $21.50–but I’m ready if someone want to dump some shares.

Well at least looking at the equity futures it must be party time–the banking crisis is resolved and summer is almost here (although it is 9 degrees here in Minnesota)!!

Of course this is so much baloney – reading comments on this website there are plenty of opinions on what is the next issue–commercial real estate, debt ceiling, consumer credit or a plethora of other potential issues. We all know they are out there and we all know they will eventually have to be dealt with – but undoubtedly they will be not be dealt until something bad happens.

As individual investors we have to do the best we can to deal with what we can control – not to fixate on what we can’t control. One thing I can control is my investments – and right now I wouldn’t want to own any preferred stock or debt of commercial real estate related company’s. This means commercial mortgage REITs. I now don’t own any shares at all, although I did through January, but out they went in February. This would include Arbor Realty (ABR), Ready Capital (RC), KKR Real Estate (KREF), TPG Real Estate Finance (TRTX), Acres Commercial (ACRE) and others. The remote work movement is here to stay–and locally we are seeing numerous large employers not renewing leases as they intend to remain remote and have no need to lease the space.

But it is not only the mortgage REITs , but the office REITs such as Hudson Pacific, Vornado etc. that will have big, big issues. Already their preferred shares are trading way, way down. Hudson Pacific preferred closed at $9.52 yesterday. The Vornado issues are all trading in the $10-12/share area. I think some of these will be buys in the future–but this will take years to play out and there is no use trying to catch the falling knife–why buy something today for $10/share when you might get it at $5 later this year or in 2024 or 2025.

I did nothing yesterday except wish I would have bought more Jackson Financial 8% preferred (JXN-A). When I wrote about it on Monday I had bought hundreds (not thousands) of shares–either way a 13% gain in 2 days is very nice, but I suspect there will be setbacks and one can add shares if desired. Shares are now at $23.94 and I would not be surprised to see them at $27 in a month or two–but on the other hand I wouldn’t be surprised to see the share price at $21 if we have an ‘event’ of some sort. We’ll see.

Today I doubt I will do anything, although I have 2 utilities I am looking at – both issues I have current positions in. I’ll write about them in the next week. My plan continues – hold bunches of CDs and treasuries in the 5% area, buy issues of decent quality when the opportunity presents and recycle CD and treasury money on maturity over the course of 3 months to 2 years (although whether some goes back in CDs or into preferreds will be determined based on conditions at that time).

Each day we hear less and less on the banking situation–is it gone? Resolved? Not a chance.

All through the financial system we are going to see band-aids being applied to deep problems–kick the can down the road some more, just like we have been doing since 20 years ago (or more). Regulators? I have little faith in the regulators of banks and insurance company’s – at least on the federal side of regulations – most insurance company’s operate under some sort of state regulators and maybe there is more nerve there to regulate–maybe.

So as we wait for another ‘shoe to drop’ it is near impossible to have huge amounts of confidence in investing–on one hand if you wring your hands and hold cash (or cash equivalents) you may miss out on some huge capital gains and very tasty current yields–on the other hand if you invest heavily and an ‘event’ happens you could get burned badly.

Yesterday I bought a position in the Jackson Financial 8% fixed rate reset preferred (JXN-A) and I added to my Lincoln Financial 9% preferred (LNC-D). These are small positions – 100’s of shares – not 1000’s of shares. I’m pretty conservative – and the odds I am going ‘all in’ on these issues (or similar issues) is exactly ZERO. I may add more in the next month or two, but I really want more data–i.e. earnings reports etc. I would rather look back and see that I missed some gains than to wake up some morning and find an ‘event’ has rocked the financial sector. It takes only 1 bad security to inflict massive portfolio pain on investors so I encourage folks to use caution and ‘leg in’ to positions.

So today we have a number of economic reports hitting starting in 90 minutes with retail and wholesale inventories at 7:30 a.m. followed up by the Case Shiller home price index and the FHFA home price index at 8 a.m. (central) and consumer confidence at 9. Market movers?–not likely too much. Fed vice chair Barr testifies to the house today–supposedly on banking, but who knows where this goes.

Well markets are quiet with little movement n the S&P500–let’s get it going and see if we can keep it quiet.