Innovative Income Investor | Innovative Income Investor

Economic News Remains So-So. What’s Next?

We got some economic news this morning which is likely being mostly ignored by investors. The JOLTs (job openings and labor turnover) report softened a tiny bit from last month–7.568 million jobs open compared to 7.762 million last month. I would have thought this would have softened more with all the tariff uncertainty. ISM Manufacturing softened, but didn’t fall off a cliff–49 versus 50.3 last month, although the price component of the report came in fairly hot.

Regardless of the economic numbers the 10 year treasury yield has tumbled by 10 basis points all the way down to 4.14%. Is it a flight to safety or is it a recession being sniffed out? Maybe both.

Preferreds and baby bonds are not acting typical–where big falls in interest rates shove prices higher—looks to me like the green/red ratio is about 50%. Folks are exiting many preferreds in spite of lower interest rates. This tells me maybe I need to buy more high quality low coupon shares today with a potential capital gain coming at some point in time. No use hurrying–with the sour mood out there nothing is going to shoot straight up–unless it is caused by a surprise redemption.

Well now is the time that we start to wait for more tariff news—is the big ‘package’ of tariffs going to hit tomorrow? I suspect some will hit and some will be delayed as negotiating is taking place. Guess we just have to wait and see what happens.

Headline of Interest to Holders of Preferred Stock and Baby Bonds

Below are press releases from companies with preferred stock and baby bonds outstanding. Additionally, news of a more macro economic importance may be posted. Earnings season has essentially ended so news will be slower until we get into mid April when some earnings will start to appear.

NewtekOne, Inc. Declares a Quarterly Dividend of $0.19 per Share

Costamare Inc. Announces Costamare Bulkers Holdings Limited Virtual Analyst And Investor Day April 9

Tri-Continental Corporation Announcements Regarding 95th Annual Meeting of Stockholders

Popular, Inc. to Report First Quarter Results and Hold Conference Call on Wednesday, April 23, 2025

Hudson Pacific Completes $475 Million CMBS Financing

American Financial Group, Inc. Announces Agreements to Sell Charleston Harbor Resort & Marina

TPG RE Finance Trust, Inc. Closes $1.1 Billion Commercial Real Estate CLO

Pinnacle Financial Partners Announces Dates for First Quarter 2025 Earnings Release and Conference Call

Equitable Holdings Schedules Announcement of First Quarter 2025 Results

Presidio Property Trust, Inc. Announces Earnings for the Year Ended December 31, 2024

Wintrust Financial Corporation Announces First Quarter 2025 Earnings Release Schedule

Fortress Biotech Reports 2024 Financial Results and Recent Corporate Highlights

The Only Correct Strategy is the One That Works Best for YOU

Are interest rates heading up or heading down? Is there a recession just ahead or is GDP going to head higher–irrespective of what GDPNow says (current GDP forecast for the 1st quarter is -2.8%)?

Should one buy perpetuals or should they by term preferreds and/or baby bonds?

How many CDs as a percentage of my portfolio should I hold? How much should I leave in money market funds?

The questions go on and on—and certainly the more ‘seasoned’ folks on the website have their plan of attack–and likely have been dealing with all of these questions for decades. So what is the right strategy?

We know (or we should know) that each and every one of us has our method of investing–some folks do better than others, of course, but is it luck or skill? I have no idea–I only know what works for ME–and what allows me to get a good nights sleep. There is not another single person on this website that I would ever say to do this or do that–it is just not possible to know what is best for others.

All I know for sure is I want 6-7% year in and year out and I am pretty darned conservative. I write about what I am doing–but that is just what works best for ME–no one else.

My method has worked well for me–but I am certain I lag many folks in performance because they are somewhat more aggressive–that is just fine–as long as I reach my goals I don’t care if I lag others.

So don’t hesitate to post what you are doing–it is right for you hopefully and while others may disagree because it is not right for them it is of no consequence.

Weekly Kickoff

Last week we saw the S&P500 fall – by just 87 points (about 1 1/2%). The total trading range was around 200 S&P500 points–just shy of a 4% range. Have we seen the bottom? Have we seen a ‘flush’? I don’t think the bottom is in and with continuing talk of tariffs and global threats of more and more tariffs I think the pain is likely to continue. But of course this is just my guess, but I think it is more likely to continue to see the affects of the tariffs and we could easily get unemployment numbers or inflation figures that shock some folks and then we see a flush. Last Friday watching the index grind lower and lower without even an attempt to bounce higher it reminded me a bit of the Friday before black Monday in 1987. Friday was bad–if I remember down 90 Dow points (massive at the time)–but nothing compared to the Monday drop. Let’s hope we don’t see the same result tomorrow. Who knows? We’ll see.

The 10 year treasury closed about flat with the yield the previous Friday–4.26% last week versus 4.25% the week before, but rates did trade up to 4.39% during the course of the week. As one of our commentor’s noted last week there seemed to be a flight to safety (from equities to U.S Treasuries). Yields falling sharply after fairly hot inflation numbers released seemed a bit odd.

This week we employment data on Wednesday (ADP) and official government numbers on Friday.s At what point do the numbers start to worsen with various DOGE activities? This will happen, but when it will ‘hit’ – I have no idea. Can’t forget we have the JOLTs report hitting Tuesday. The big market mover this week will be tariff news–supposed new tariffs hitting Wednesday–who knows for sure?

The Fed balance sheet fell by $15 billion last week as it continues lower, albeit at a pace which should slow substantially over the coming months as the Fed announced a slowing of the ‘run-off’ at the last FOMC meeting.

In spite of flat interest rates last week investors tossed many of the preferreds and baby bonds out with the bath water as the average $25 share fell by 22 cents. Investment grade issues fell by 30 cents, banks by 27 cents with mREIT issues off just 7 cents and shippers off 2 cents. So we had quality issues sold off while high yield held up better.

Markets Remain ‘Dazed and Confused’

Equity markets are down sharply–not a giant surprise with personal consumption expenditures numbers which were a bit hotter than expected–not supportive of interest rate cuts ahead.

On the other hand interest rates fell fairly sharply–the 10 year treasury is now off 8 basis points to 4.29%. I am not certain why rates should move lower. We did have University of Mich consumer expectations and sentiment come in soft, but that same survey come in with higher inflation expectations.

Strange market at the moment–but one never has to do anything at all investment wise if you are well positioned.

I have been watching the investment grade closed end fund preferreds-some are getting really close to a buy zone for me. I am talking about primarily the Gabelli family of funds (this includes the Bancroft Fund (BCV) and the Ellsworth Growth Fund (ECF)). I’m targeting at least a 6% current yield to be a buy–also this with dovetail with a potential for a 5-15% capital gain in the next year–so let’s say 11-20% total return IF we can get the 10 year treasury down around 3.75%. Of course this is the million dollar question.

I own the GAMCO Global Gold 5.0% perpetual preferred (GGN-B) which is trading right around $20.80–I paid an average price of almost exactly this price so I have just been collecting my measly 5% (6% at my cost). Here is a multi year chart of the issue.

I think it is pretty easy to imagine a 5, 10 or even 20% capital gain if interest rates moved down 25 or 50 basis points. Current yield is 6.01%.

Just now bought a few more shares at $20.78. If I am going to tiptoe into a few perpetuals they will be high quality shares with potential for some really substantial capital gains. This is one of the best in my opinion to get some upside if rates move lower–note the coverage ratio is over 900%.

I also own a bit of the Bancroft Fund 5.375% perpetual (BCV-A) although most of it was sold 80 cents higher back in December. Current yield is 6.02%–maybe next week–I’m in no hurry.