Well the CPI came in cooler than expected and interest rates have initially plunged–the 10 year falling 15 basis points. To me this is a ‘party’ number — as in ‘lets party’. By the end of the day we may see interest rates creep back up to a more reasonable number – say 4.55%. We should see a reasonable rally in income securities as folks believe that the odds of a December rate hike on 12/13 have become less likely–although we have much data to come in in the next month. We’ll just have to wait and see.
Personally this is the time one wishes they were 100% invested in baby bonds and preferreds–any rally today in income markets will outperform my portfolio since I am only 50% (maybe it’s 40% or maybe 55%) in those areas. To think one can ‘time’ the exact bottom and top is a fools errand. For now I will have to be happy with a gaggle of CDs at 5.25% to 5.75%–and honestly I am very happy. In spite of the potential rallys in income issues I am looking at buying a number of ‘pinned to par” issues with my minor dry powder and they will not experience the rally of the general markets–i.e. the SiriusPoint 8% preferred (SPNT-B) purchased last week which should trade plus and minus 50 cents from $25 based on an anticipated redemption in a couple years. I’m happy to collect a solid 8%.
Well today we will have the consumer price index released -markets are holding flattish awaiting the news. The forecast is for a very tame number – up .1% from last month and 3.3% from year ago. The core rate is forecast firmer at up .3% and 4.1% year over year. Markets are really focused on these numbers – with earnings season over folks have to fixate on something.
The 10 year treasury is trading at 4.62% right now down 1 basis point from yesterday. I could easily see this moving 10 basis points higher or lower, but more likely we will see a minor range of plus and minus 5 basis points. We’ll see if markets are reasonable/logical.
Yesterday was actually a pretty quiet day–unless you were invested in B Riley (RILY) securities (common, preferred or baby bonds) which took quite a ride. Of course their related securities also took rides–Babcock and Wilcox (BW) common shares closed at 99 cents – their preferred is trading around $11 with the baby bonds at $15 and $18. Whether there is an fraud occurring anywhere (Franchise Group etc) isn’t known, but investors haven’t wanted to wait around. What I know for sure is Bryant Riley participates in more marginal deals than anyone I have seen in recent years–although back in the 70’s and 80’s we had some really sketchy investing banking. As I mentioned I won’t be involved in these securities, although there could be some real bargain to be had–but who knows for sure.
Yesterday was slightly green for my accounts – very slightly. I have a bit of dry powder available and still looking to buy (whether it is a nibble or somthing bigger isn’t know). My CD ladder missed a rung in November so I will have just my current dry powder stores for a few weeks then I will have CDs maturing monthly for at least the next 6 months. In a perfect world my CD money would all be deployed elsewhere – but it isn’t a perfect world so we simply have to play it week to week and month to month. My personal thoughts are for drifting lower interest rates for the next year, but then rates move higher as the treasury floods the market with debt. I am wrong at least 50% of the time on economic forecasts so one has to be flexible.
Well we are 40 minutes from data time – let’s see if markets remain calm or if silliness prevails. I may determine whether to buy today – we’ll see.
Below are press releases from companys with preferred stock or baby bonds outstanding – or just of general interest. Once again I am adding some small bank earnings in during earnings season.
Shares are all tanking badly on potential fraud mostly relative to the Franchise Group take private and the CEO of Franchise Group Brian Kahn. I posted links last week–here is a recent posting on Yahoo Finance.
My question is whether it is a super bargain now or will we see the fraud charges come to fruition? I certainly will not be involved, but maybe some brave souls will be.
Overall it was a relatively quiet week last week. The S&P500 moved in a range of 4343 to 4418 a range of less than 2%. The close was right near the high at 4415 a gain of 1.3% from the close the previous Friday.
Interest rates remained muted as compared to a few weeks ago. The 10 year treasury traded in a weekly range of 4.50% to 4.67% – closing at 4.63% on Friday. Economically speaking there was not too much important news during the week so rates are looking for direction.
This week we have important economic news which may move markets substantially. We have the consumer price index (CPI) on Tuesday and the producer price index (PPI) on Wednesday. We also have retail sales being reported and numerous housing reports. Then of course we have the typical political fights in Washington and a looming government shutdown. Lastly we have a seemingly never ending stream of Fed yakkers.
The Federal Reserve balance sheet moved lower by $44 billion–the balance sheet assets now stand at $7.87 trillion.
The average $25/share preferred stock and baby bond moved lower last week after a massive rally the previous week. The average share fell 21 cents with investment grade issues falling 30 cents, banks off 15 cents, mREIT preferreds off 9 cents and shipping preferreds off 11 cents.
Last week we had business development company New Mountain Finance price a new issue of baby bonds. The issue carries a coupon of 8.25%. I don’t find it trading at Fido or eTrade, but some folks have noted it is trading.
Financial firm B Riley (RILY) is getting whacked again today – the common shares are down $3.75 to be at $26.27 which is down $15 in the last 5 days.
Their baby bonds and 1 preferred issue are getting spanked as well–down 1 to 4%.
This is purely a trust issue – ‘we don’t trust you Bryant Riley’. I have written very extensively about the incestuous relations that B Riley has at play. They have had their fingers in so many marginals ‘deals’ including one of the most recent which was the Franchise Group ‘take private’. Other deals are with Babcock-Wilcox, Synchronoss Technologies, Maven (Now Arena) and many others. The latest is that Brian Kahn who was the found/CEO of the Franchise Group may have been involved (a co-conspirator) in a major securities fraud. That article is here.
My initial clue as to problems stems for a number of years ago – my wife worked for a company that James Heckman ran – here.More is here. B Riley stepped in to ‘bail out’ a new company Heckman founded (Maven). After that point Rily seemed to be involved in many very dicey financing – some of you know the story. They were involved with iMedia (which had a baby bond outstanding) that filed for BK in July.
If you are a holder be very careful—I’m not saying that where there is smoke there is fire–but there might be.
Of course all parties are innocent until proven otherwise.
While the wheels fell off the equity rally yesterday it was still a very quiet week. My accounts didn’t move much this week (down a bit yesterday)–and that is just fine. To receive dividends and interest payments almost every week is my ‘heroin’–with the large number of CDs I hold my interest income is continual – sometimes large payments, sometimes smaller receipts (monthly payers). Still not quite back to ‘all time highs’ in accounts, but a little push in November and December could get me there by year end. We’ll see.
Today we have consumer sentiment news–but that is all. We do have Fed yakkers (3 of them) which could move the market a bit, but honestly investors are tiring of their blather-we all know their lines by now so go back to your office and come back in a month (for a day).
Interest rates are moving around 4.63% this morning after moving higher yesterday on comments from Powell. Apparently demand at a 30 year treasury auction was weak yesterday which was not helpful to rates. I will be most curious to see the consumer price index (CPI) next week–a new piece of meaningful data. Yesterday initial jobless claims came in near expectations at 217,000 so kind of goldilocks–we need it weaker.
No plans to do anything today–selling or buying. I have modest amounts of dry powder–some of which I used for the SiruisPoint purchase yesterday, but I see no reason to rush in. I have sold a large share of my small bank holdings, but continue to hold Minnesota banking company Bridgewater Bancorp preferreds (BWBBP) now trading at $16 for a current yield of 9.25%–the company has solid financials, but is small with $4 billion or so in assets. My current position is small and a nibble here and there might be worthwhile–no rush as it is a disliked security–we’ll see.
Below are press releases from companys with preferred stock or baby bonds outstanding – or just of general interest. Once again I am adding some small bank earnings in during earnings season.
