Author: Innovative Income Investor

So the consumer price index came in right about as expected—must be time for equities to party at least that is what is happening. Back in July the S&P500 had a setback of about 5%, but other than that there have been no setbacks that are worth noting. Buckets full of money overcome everything–and there remains plenty of cash rolling around to fuel stocks even higher. Even as equities go higher and higher the amount of money in money market funds continues to grow. ‘Katie bar the door’ if we get any kind of shift in allocations of these funds. I don’t see that happening with rates in the 4.50% area—maybe below 4% we will see some movement—no one knows, but for now I like a 4.5% rate for idle cash.

This is a monthly chart on money market funds.

Interest rates are flat or up or down 1 basis point. The talk now is a cut and then a pause by the FOMC–even heard talk of a reversal and potential for rate hikes next year. The latest forecast from the Atlanta Fed is for 3.3% GDP growth for the current quarter—with decent employment and good GDP growth, but inflation numbers above target, it is hard to make a strong case for rate cuts.

The uncertainty for the next few months keeps me from going ‘all in’ on perpetuals, but with plenty of shorter duration baby bonds out there to buy with yields in the 7-8% area I am not going to lose sleep over allocations too much right now.

Both the equity markets and interest rate movements have been fairly tame this week, but today we have the potential to see some fireworks. In about 30 minutes we will have the CPI (consumer price index) released and while we have no real reason to believe we are going to see big movement since last month one can’t predict these things with any real confidence. Forecast are for relative flat prices–any movement, up or down, more than .1% could spark big moves. We will have producer prices (PPI) released tomorrow.

Next week we have the FOMC meeting to likely confirm a 1/4% Fed Funds rate cut–obviously a higher than expected CPI would call into question that rate cut–as of now the cut is pretty well baked into investors minds.

Yesterday, as I wrote earlier this week, I did by move of the CHS preferred 6.75% (CHSCM) at $25.18. My reasoning is twofold–it is near my 7% target and the share price should remain fairly stable and I like price stability. I had trimmed back quite a few preferreds a few months ago and that appears to have been a decent move–but maybe now is the time to get a few more shares backs in the portfolio.