Innovative Income Investor | Innovative Income Investor

Monday Morning Kickoff

Last week the S&P500 moved lower by a hefty 2.6% as market participants began to realize that the Fed would be moving interest rates ‘higher for longer’.

The 10 year treasury yield moved higher by 12 basis points to 3.95%, but the yield was knocking on the door of 4% as it hit 3.98% a couple of the days last week. Most economic data is coming in ‘hotter’ than expected and inflation was shown to heat up during January as shown by the personal consumption expenditures index (PCE)

This week we have have plenty of economic data being released, but we do not have inflation and employment data being released this week which are key items that markets and the Fed focus on. As usual we have plenty of Fed yakkers sharing their ‘wisdom’.

The Federal Reserve balance sheet showed that assets fell by a measly $2.5 billion.

The average $25/share preferred stock or baby bond fell in price by 16 cents. Investment grade issues moved lower by 17 cents, banks lower by 14 cents, mREIT issues fell 14 cents. The only sector blipping higher was shipping which moved up 3 cents.

Last week we had no new income issues priced.

Waiting on PCE and Fed Yakkers

We are waiting on the Personal Consumption Expenditures (PCE) inflation data–this could be a huge market mover today–either up or down.

Then after PCE we have at least 5 Fed yakkers who could pile on to the data in a hawkish way–most of their speak lately has been hawkish so we will see if the PCE data gives them reason to ‘pile on’. Actually ‘hawk’ Loretta Mester already was interviewed on CNBC this morning and she reiterated her hawkish views–but also claims she is data dependent.

It’s boring–but I continue to watch. I guess boring is preferred to doing something stupid which I have the ability to do. Honestly given my outlook on interest rates I can see doing darned little for the next month. The next FOMC meeting doesn’t occur until March 20/21 and with lots of data between now and then, but we will have a fair idea of the rate hike for March based on CPI, PCE and employment data that we see in the next 3-4 weeks.

Buckle up–with equities down about 1/2% this morning we’ll see if the data reverses the move lower OR if the data sends stocks much lower. The 10 year is at 3.92% and strong PCE data will send the rate over 4%.

Headlines of Interest

Below are press releases from company’s with preferred stock or baby bonds outstanding–or just general news of interest.

Mortgage Rates Trend Up

Alta Equipment Group Announces Date of Fourth Quarter and Full Year 2022 Financial Results Release, Conference Call and Webcast

Great Ajax Corp. Schedules Its Fourth Quarter and Year End 2022 Financial Results Release for Thursday, March 2, 2023

Spirit Realty Capital, Inc. Announces Quarterly Cash Dividend for Common and Preferred Stock

Edison International Reports Fourth Quarter and Full-Year 2022 Results

US Mortgage Performance Ends 2022 on Strong Note, CoreLogic Reports

Plymouth Industrial REIT Reports Fourth Quarter Results

Pebblebrook Hotel Trust Completes Sale of The Heathman Hotel

Chatham Lodging Trust Announces Fourth Quarter 2022 Results

SiriusPoint Reports Significant Progress Made During 2022 and Aims to Achieve Double-Digit Return on Average Common Equity by 2024

FTAI Aviation Ltd. Reports Fourth Quarter 2022 Results, Declares Dividend of $0.30 per Ordinary Share

SiriusPoint Announces Dividend on Series B Preference Shares

CTO Realty Growth Reports Full Year and Fourth Quarter 2022 Operating Results

Kind of a Quiet Day

All around it is kind of quiet today–equities off a little bit and the 10 year treasury off 2 basis points to 3.90%–looks to me like everyone is waiting on the personal consumption expenditures (PCE) tomorrow–we could have some real fireworks.

A quick glance at my accounts show they are just about as flat as the rest of the market–barely moving. Well at least I will see a modest level of dividends and interest early next week as the month ends. Of course I am doing nothing at all with buying or selling.

I see we had 2 Fed yakkers today with 1 still speaking–guess they didn’t have anything bombastic to say as markets are not moving herky/jerky. As has been the case for weeks and weeks the 1st time unemployment claims numbers came in lower than expectations–employment continues. 4th quarter GDP numbers were adjusted a bit–but not market moving.

Looks like I spoke too soon on the Fed speakers as Mary Daly from San Francisco is speaking and the S&P500 just took a decent jump (at 1:15 central) and the 10 year treasury yield dropped 2 more basis points.–she must have a dovish tone to her speech.

Bond King Gundlach Calls for ‘Hard Landing’

Jeff Gundlach – the so-called bond king is calling for ‘hard landing’ in the economy, of course, caused by the Fed’s aggressive raising of interest rates. It’s interesting to me that Gundlach and many others are calling for the bad outcome, while it is obvious that the equities markets aren’t buying that scenario. It is very difficult to reconcile the S&P500 at 4,000 with any recession, let alone a ‘hard landing’. Who knows? Not me–obviously I have found out that trying to forecast (also called wild ass guess) these things is a coin toss of sorts. I can say that record credit card debt by consumers and a never ending federal budget deficit isn’t going to end well–but whether this is next week or next decade I have no clue.

Right now I am seeing the 10 year treasury yield at 3.95%–poised to head over 4% once again–all it takes is one more piece of stronger than expected economic data. Today we have jobless claims coming out and it is unlikely this will move rates over 4%–but tomorrow we have the personal consumer expenditures (PCE) index coming out and if it comes out hot ‘hello 4%’. We also have 5–yes 5 Fed yakkers tomorrow-always a wild card of sorts.

Yesterday was a slightly green day for preferreds and baby bonds–not a very green day, but a green day just the same. I watch–that is all–watch–why do anything else?