Author: Tim McPartland

Cross currents continue–equities are up over 1% this morning based on Tech earnings (and in particular ‘AI’ stories), while interest rates rise a bit based upon the FOMC meeting minutes. At the same time I see ‘headlines’ from Nestle, Mercedes and other low tech businesses warning of slowing revenues and tougher times ahead. I would say something like ‘this won’t end well’–BUT it may be just fine—lots of money out there driving prices up and unlike back in 1999 and 2000 these tech company’s have real revenue and earnings. We’ll see – all I know for sure is that we are better off with stocks melting up than melting down.

Yesterday the average $25 share of preferred stock and baby bond fell 3 cents. Looking back a month the average share is off 7 cents–really quiet on a historical basis. Of course most of us can see in our accounts that February has been flattish after a nice green January. As I have said many times I am very happy collecting dividends and interest while we wait for interest rates to move.

On occasion the B Riley baby bonds catch my eye. I have been warning for 3 years on RILY and have not owned shares in that time–previously I did own some off and on. When I look at the 12% current yields I see on a few of the baby bonds and it is tempting to buy a little–BUT I won’t–even a extra 5% yield can’t lure me into shares.

A little economic news will be released today, but likely not market moving. We have initial jobs claims at 7:30 (central) with the purchasing managers indexes at 8:45 (central). Existing home sales will be released at 9 (central). Today is a tech driven day so these will receive barely a instant of attention.

At this moment the 10 year treasury is at 4.33%–looks like we have left the 3.8-4.2% range behind for the moment. It is hard to envision rates moving much higher–but one can’t predict the moves with certainty–we’ll just play the cards we are dealt.

The 10 year treasury is up 2 basis points–but equities are barely moving. In 30 minutes we have the release of the FOMC meeting minutes from the January meeting. While we know in a general sense what might have been said at the meeting we will have more ‘hints’ at how members are looking at future rate cuts.

Right now the CME Fed Watch tool is only showing about a 6.5% chance of a rate cut in March—after showing a near certainty about a month ago. Also a May rate cut is predicted at just a 29% chance of a cut–June is 52%. So expectations have been severely tempered over the last month or so. Honestly equities have been very patient awaiting the news of a cut–I would have thought we would have seen a more severe sell-off

I expect equities to have a sharp reaction to the news in the 1st 2 or 3 minutes – where it ends up no one knows. We possibly will see a sharp move in interest rates – which way depends on what the minutes specifically say about cuts from individual members. As usual no one knows what will happen. We’ll all wait and see–I pray we don’t get a huge rate spike on the news–we could suffer some losses.

Yesterday we got almost no movement in interest rates and resultantly pretty much no movement in income issue prices. The 10 year treasury yield closed at about 4.275%–and only traded a couple basis points (+/-) from there.

The average $25/share preferred and baby bond moved 2 cents higher yesterday–if you promised me that share prices would always move just 2 cents I would be very happy indeed. Of course prices will move, but typically we need a reason to move.

Today we have Fed yakkers, but the potential market moving event will be the release of the FOMC meeting minutes from January at 1 p.m. (central). While there probably are no major surprises in store for us in the minutes one can’t predict these things–algos will move equity markets, but interest rates are unlikely to move much. We’ll see.

As one might expect CD rates remain in the 5-5.35% area–very tasty still. I am once again about out of cash having bought some preferreds and rolling over a portion of proceeds from CD maturities. If rates maintain these levels I will be rolling over some money from maturities over the next 60 days—I can’t resist 5.3-5.4% for a portion of my funds.

For those watching the nightly ‘Headlines of Interest‘ I publish late in the day Monday through Thursday you probably saw the nice earnings from SiriusPoint (SPNT) – they can be read here. I hold a position in their 8% Resettable Preferred (SPNT-B) – it is highly likely I will add to this position in the month ahead (when I have cash). This reinsurance company is very well run–giving me confidence to add a few more shares.

Well let’s get the day rolling–expecting kind of quiet markets until 1 p.m. and then a little movement as FOMC minutes are released.