Author: Tim McPartland

Recent trading in equities (of all sorts) has been about as rock solid as we have seen in recent years. The movements in equity prices have been in spite of movements higher in interest rates. The 10 year treasury is trading at 4.13%—up from 3.79% about a month ago and during that same time frame the average $25/share preferred and/or baby bond is up 1/2%. Historically the 10 year treasury is very correlated with preferreds and baby bonds—so I guess we can expect movements to bring this correlation back into historical norms–or can we?

Yesterday we had the leading economic indicators released and as has become ‘norm’ in the last number of months the number came in better than anticipated at -.1% the expectations was for -.3%.

Today we have no important economic news–but tomorrow we have PMI (purchasing managers index). Then on Thursday we have the 1st look at GDP for the 4th quarter–very important–forecast are for growth of 2% which would be quite a slow down from the previous quarter–let’s see if the economy has slowed that much or if once again an economic number comes in ‘hotter’. We then wrap the week up with the PCE (personal consumption expenditure)–once again very important–at this time next week we could have a 10 year treasury at 4.3%–or at 3.7%–we’ll have to wait and see.

Yesterday I made a sale–I sold my entire position in Enterprise Financial 5% Perpetual Preferred (EFSCP) at $17.68. With a couple dividends my return was around 15%. Interestingly EFSC released very earnings after the market close yesterday and they were solid–no major bad loans announced etc. As is normal they did pay a relatively large FDIC special assessment as all banks have to replenish the FDIC insurance fund. I will try to write today on my thoughts on this sale (why did I sell it?).

Markets are looking kind of quiet this morning with the S&P500 up a tiny amount. Earnings are driving these indexes this week–this morning 3M and P&G reported. No reason to think we will see anything of significance in markets today–Goldilocks reigns!!

Plenty of news out there today to add a little excitement to the day.

As usual all the folks on the website are on top of the news—mostly found in the Readers Alert Section. You can always count on someone to be right on top of the news–crowd sourced I guess you could call it.

MLP Nustar (NS) is being bought by Sonoco LP (SUN) is a $7 billion deal. Nustar has a number of preferreds outstanding as well as a fixed to floating rate note. Most of the issues are trading down this morning as it appears they will be redeemed in the deal. The Sunoco press release is here.

Also B Riley (RILY) is making news again with continued short seller reports on irregularities in some of their deal making—which of course RILY continues to deny. As happens all of their baby bonds and common share are trading lower. A Bloomberg article is here.

Lastly is CHS going to merge with another cooperative? Here is an article from late last week.

Markets seem confused–rate cuts, no rate cuts. Not sure why there is confusion–either there is data dependency or there is not. Data keeps coming showing the economy keeps chugging along –weakening maybe, but a fair distance from slowing sharply. Yesterday we had 1st time unemployment claims come in at 187,000 versus forecast of 208,000 while continuing claims fell as well. Housing starts and building permits came in above expectations. Retail sales, which were released on Wednesday, came in hotter than predicted–let’s face it rate cuts are not warranted now or likely in March. We do have bunches of data to come in before the March FOMC meeting–things could change.

The 10 year treasury yield continues is now trading around 4.13%–about 1 month ago the yield was 3.78%. With this sharp rise we should have seen a setback in income issues–but it was very minor which surprised me–over time preferreds and baby bonds inversely follow the 10 year treasury closely, but for now they have disconnected a bit-fine with me.

Equity futures are up this morning—who knows where they will be by days end. We are in earnings season and I have paid attention to bank earnings and am seeing about what I expected with earning lower year over year as net interest margins have been reduced and special assessments from the FDIC have been biting. I did notice that 1 bank reported record earnings–Bank OZK. Thus far bad loans have been manageable – hurting yes – disaster no.

The last couple of days I have barely even looked at my accounts–yesterday I did glance at them after the market close and was prepared for lots of red–surprise – accounts were off, but not in a large manner–very minor.

Today I will do no buying–selling? I have been pondering locking down more profits in bankers and select insurance companys, but I don’t want to sell just out of boredom (to do something)–what is the point? I am building my list for next month (and March) when I have bunches of CD maturities. The list will center around issues I already own–my list of holdings is here. Of course short term CDs are still attractive in the 5-5.25% so this is an option–we’ll see.