Author: Innovative Income Investor

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?

Yesterday turned out to be more negative than one could have anticipated. After interest rates jumped higher last week on economic data and Fed yakker talk the PMI (purchasing managers index) came in higher than forecast yesterday–let’s face it the economy is simply stronger than anyone anticipated.

‘Don’t fight the Fed’. I had raised some cash in the last month–and of course if we would have raised more we would be better off since yesterday was very negative with the average $25/share off 1.5%—and with the Fed no doubt planning ‘higher for longer’ we will likely see more days like yesterday soon. “Don’t fight the Fed’–no use rushing to deploy the dry powder. I am a poor market timer so I tend to ‘leg in’ and out of positions–buying numerous times in a given security, but it seems obvious that now is not the time to do any buying–just wait and get paid for waiting.

Yesterday I mentioned the Federal Agricultural Mortgage (AGM) preferred issues were on my watch list–finally they dropped a couple percent yesterday–not buying yet. Others I am watching include the Spire 5.90% preferred (SR-A) issue which fell 2% yesterday to $23.93. All the CMS Energy baby bonds all of which fell 2%ish yesterday. I already have positions in these issues. The MGR 5.875% baby bond from Affiliated Managers (AMG) fell over 3% yesterday-this is now down over $2/share in the last 2 weeks.

So the list of potential buys is growing rapidly–very rapidly. I will not be buying a thing for the foreseeable future–don’t fight the Fed means it may be a couple months before we get back in the sweet spot to buy.