As I mentioned previously on Monday I lightened up on a number of preferreds and baby bonds that I held–primarily higher quality issues. I did not sell the entirety of any holding. Those I sold are—
Note that a few issues were sock drawer issues and certainly they are extremely safe, but in the interest of preserving capital lightened up on on them a bit.
I put some of the proceeds from these sales in this very short duration security.
I have switched the comments off on the article from yesterday. Commenters were on the edge of politics–honestly not terrible but on the verge (of course everyone has an opinion on what is/isn’t politics). Today is a new day and let’s stick with investing. Thanks all.
The Atlanta Fed GDPNow model is currently showing Q3 estimate of GDP at 3.4%–certainly higher than most economist are forecasting. Of course the forecasting is just ‘guestimating’ a number and we can all do that with about as good of accuracy as most of these folks.
Regardless of the forecast the question I have is how much are income investors on a global basis going to punish debtors (the government) for having too much debt now–and more importantly into the future.
There is little in the way of poor economic news in all the stats we see everyday–employment remains decent while inflation is kind of stuck at current levels. Of course the world is a dangerous place and circumstances could change at any time with the various wars going on, but generally the need for interest rate cuts doesn’t seem dire. Are the equity markets reacting poorly to the potential ‘push back’ Fed Funds rate cuts or are they sensing much higher longer term rates based on the inability of the government to get spending (thus debt) under control?
It seems to me the answer to my question is yes.
Regardless of why markets are acting the way they are currently I believe that it is a good time to rearrange some of my preferreds and baby bond holdings. Given that I held capital gains in virtually everything I held and my own personal view that longer term rates are going higher over the course of the next 6-9 months I see no reason to incur large potential capital losses.
Yesterday I trimmed back many holdings (I will give more detail when I have time to compile my data)–either in baby bonds with low coupons or low coupon perpetual preferreds. I did not touch my holdings in floating rate or high yield issues (i.e. BDC bonds) or term preferreds. This has driven my cash position up quite a bit in 1 of my accounts–where the money will ‘wait’ drawing 4.5-4.7% which should hold until at least the next FOMC meeting in November.
I will await opportunities–preferably high yield at better pricing. We’ll see where we go from here.
