Author: Innovative Income Investor

We have the 1st read on GDP in about an hour–the forecast is for a 2% growth rate–the growth rate last quarter was 2.6%.  This number could move interest rates a bit–but with the 10 year treasury now at 3.43% can a slowing economy move this much lower?  Or maybe we get a super surprise on the strong side we could launch rates higher.  Regardless after these numbers we will have the personal consumption expenditures (PCE) being released tomorrow and I expect the 25 basis point rate hike for next Wednesday will be confirmed barring a major surprise.

Since it is Thursday we have 1st time unemployment claims being released at 7:30 a.m. (central).  It’s funny how what used to be somewhat of a throwaway number has become very closely watched–I guess that’s what happens when your Fed chair, and really all the Fed officials, continually hint that they want employment to slow.  Today we have a forecast number of 249,000 claims which is heading in the upward direction, but far from being super soft.

Earnings continued to be released yesterday and the driver of higher equity prices this morning are earnings from META (Facebook)–I guess they were pretty good (at least markets think so) as shares are zooming higher–up $23/share at 5:30 a.m.  Tonight we have Amazon and Intel reporting so we will see equity reaction to those numbers.

I continue to be somewhat fixated on the regional/community banks.  The earnings reported by the smaller banks have been ‘ok’ and on the surface (and in normal times) one would jump on more of the 8% current yields from their preferred issues.  BUT you still need to ponder ‘bank runs’.  I can’t quite figure out how a bank can avoid a run – folks will react before they know facts which seems silly, but it is what it is.  Maybe the answer is simply to buy a basket of these preferreds keeping the total exposure equal to a normal full position.  No rush on this decision since this problem will be with us for some time to come.

So I expect to do nothing investment wise today (buying/selling), but I will nail down a decision on a lodging REIT preferred to buy.  Hersha Hospitality (HT) and Pebblebrook (PEB) reported earnings last night–not that pretty. Right now I have either Pebblebrook (PEB) or RLJ Lodging (RLJ) preferreds in my sights – maybe both. Remember if you wait for the company’s to be firing on all cylinders their preferreds will no longer be ‘bargains’.

I study, study, study and find no clear investment direction to take other than the one I have chosen.  Lots of CDs and treasury notes with maturity dates ranging from 3 months all the way out to 5 years (minimal at 5 years maturity).  Then  some preferred shares in the mix to help to goose the portfolio current yield.  There are really only so many ‘tricks’ one can play to try to maximize yield (within one’s risk tolerance). Up until a year ago one of my younger brothers and I would speak fairly frequently and we would always express the desire to ‘just earn a safe 5%’–well we are there, albeit with inflation. I see lots of what I consider ‘bargains’ out there–i.e. the regional and community banks preferreds, but so much danger lurking and I need more time to pass to consider adding much to the current modest positions. I just reviewed current CD and money market rates and find them pretty attractive and continuing to creep higher–very nice.

I do have good until canceled orders in on 6 issues–only to buy if someone wants to give me a ‘fire sale’ price.

Well earnings continue to roll out and Microsoft and Alphabet  reported and while growth rates are modest earnings are decent and Microsoft is ‘flying’ this morning–with the banking companies they are setting the tone for equity trading today–and that tone is pretty flat–we’ll see if that holds.  Also last night California regional banker Pacwest (PACW) reported earnings and they were pretty dreary.

Yesterday we had new home sales reported at a much higher level than forecast–683,000 versus 634,000 forecast.  Case-Shiller showed that prices of homes continue higher on a year over year basis. Consumer confidence came in weaker than expected.  So the mixed signals continue with economic data.  Today we have durable goods and wholesale and retail inventories being reported in 30 minutes so we will see what kind of numbers we get.

Well let’s get this day going!