Author: Innovative Income Investor

I’ve been watching markets today and each time one might think we will get a bounce it is short lived–lots of folks wanting to hit the exits today–at least in common stocks.

Let’s face it–no one knows exactly what is sending share prices lower–simply there are folks that want to book some profits after the crazy runup in tech prices. Oh well I am quite sure that the ‘smart folks’ will say it is a buying opportunity–doesn’t matter whether it is or isn’t story is almost always the same. Of course if you follow Harry Dent you are saying ‘I knew it was going to start heading lower’—forget that there are always those folks taking advantage of the sky is following crowd. Forget that they have been wrong for the last 5 years and if you took their advice you now have no money left to invest.

The economic news today is mixed–inflation on target or maybe a 1/10% hot, but 1st time unemployment claims fell to a level seldom seen in recent years a the job market remains pretty decent according to the numbers. Once again we have crosscurrents in the news and there is no certainty as to where we head next.

The 10 year treasury popped higher to the 4.33% area and has since set back to 4.27% as we await the ‘official’ jobs numbers tomorrow. Will they beat estimates? These numbers are a pure guessing game as they are supposed to include the unemployed in Florida and North Carolina because of the hurricanes. The strong ADP numbers yesterday count those unemployed because of the storms as employed if they remained on the company roles so we are talking apples and oranges when comparing the numbers.

Just glancing through the preferreds and baby bonds I see a lot of red, but mostly in the 15-25 cent area–not disasters. The Babcock & Wilcox 7.75% preferred (BW-A) is one issue that is getting spanked–off around $1 and trading at $13.25. BW is another one of the ‘gems’ brought to you by B.Riley.

As I mentioned I am watching–that is about it. I find no compelling reason to do anything at the moment.

Here we go! A critical piece to the interest rate puzzle will be released in a short time–the 1st read on gross domestic product (GDP).

The final forecast from the Atlanta Fed’s GDPNow tool is for a 2.8% growth rate which is a drop of 1/2% since last week. The concensus forecast is at 3.1%. With the FOMC meeting next Tuesday/Wednesday this report will either bolster the decision made or will leave folks asking ‘why’? A low read will bolster the FOMC decision to lower rates while a hot number will leave economist and investors asking why a rate cut is necessary given the strength of the economy.

I believe that we WILL get a rate cut of 25 basis points next week based on what appears to be a bit of softness developing in the jobs market (we will have ADP jobs in a couple hours and official government employment numbers on Friday). Additionally I think the Fed has painted themselves into the proverbial corner by continual ‘hinting at’ rate cuts. Honestly these folks need to discontinue shooting their collective mouths off.

This morning the 10 year Treasury yield is trading at 4.23% which is off from the high of 4.34% yesterday–we’ll see where this day goes after economic data is released.

I remain mostly paused. With a goal of 7% annual gains in our accounts one will not be able to own just CDs and money markets (obviously), although it is preferable to taking sizable capital losses. I am focused on high yield and short duration issues–the term preferred and baby bonds list with near term maturities is here.

Each time we have a number of pieces of economic data released in a day we seem to have contradictory information.

This morning the number of Job Openings announced in the JOLTs report came in at 7.44 million–way below forecast which was 7.99 million and way below last month which was at 7.86 million. Seemingly showing some softening in the economy–OR maybe it shows that the ‘fake jobs’ that were rumoured to be listed back when we had such a severe shortage are being removed from being active finally.

Then we had the consumer confidence numbers released by the conference board which came in at 108.7–above the 99.5 forecast and 99.2 last month. Seems contrary to the JOLTs report.

We also had the Redbook sales report released and it showed sales up 5.6% growth in the last year–I guess folks are still spending, whether it be with excess cash or simply running up their credit cards. Regardless the economy seems to be humming along.

I’m sitting tight and not really doing much in the markets—I’m going to let the situation play out some more with the employment numbers being released on Friday.

The 10 year treasury continues higher and now up about 5 basis points with the yield now at 4.32%—is topping out? Or will data later in the week send it shooting higher?