Author: Tim McPartland

After the moves we had last week it is only natural for equities to pause and for interest rates to move back higher–the 10 year treasury is back up to 4.65% – up 9 basis points.

At the same time portfolios are moving a little lower as well – not much, just a little damage done. Some of the bankers are moving pretty good to the upside-in fact the US Bancorp (USB) issues are all 2-3% higher on good volume.

Looks like a good day to just watch–let the market try to figure out which was interest rates are going to move. Without too much news this week maybe we will drift–maybe.

I see CD rates are hanging in there–5.70% 1 year/callable still available from JPM on eTrade. Not going to buy any CDs for now – I have a little dry powder and after the current rate gyrations I might add to a current position (don’t know what that would be).

Again today, for the 3rd day in a row equities and bonds are tossing one hell of a party–giving me a chance to generate a little ‘dry powder’.

I sold my CMS Energy 4.20% preferred (CMS-C) which I held for 13 months and garnered a 20% profit (including dividends). Certainly it met the ‘safety’ standard, but at a current yield of 5.2% the yield is somewhat substandard. If I thought interest rates were going to keep plunging I would have kept it, but my thought is that is a temporary situation (maybe for 6 months or even a year) and higher rates are coming down the road.

Now is the time to ‘rearrange’ your holdings if desired. If we would get a setback of sorts in income issues I want to have some dry powder to buy and I have had darned little for months and months.

Let’s see if folks come to their senses and sell these markets off – at some point buy, buy, buy is going to turn to sell, sell, sell.

There were nice gains for almost everyone this week and it is certainly super to have strong portfolio gains helping to recoup some of the losses from the last many months. My personal gains were great enough to put portfolios back to the 1 1/2% off of all time high levels. Obviously my portfolios have been helped by having a heavy weight in shorter dated CDs and treasuries–but given my lack of dry powder now if we get further gains in preferreds and baby bonds I will underperform. I hope this week has been generous to everyone.

The 10 year treasury is trading at 4.65% right now a basis point or two below the close yesterday–kind of drifting waiting on employment numbers in 30 minutes.

Forecasts are for 170,000 new non farm payroll jobs being created in October–we all know the actuals can come in dramatically different from forecast. One would be silly at this point in time to forecast market reactions to the number–this week has shown that short term movements are impossible to guess–just like long term movements are near impossible. Bring on the CNBC panel – let them prove that they have no clue–just like the rest of us.

Just checking CD rates this morning – they have drifted down 1/10% since the week started (at least on Fido). 5.65% is still available on a 1 year (callable) from JPM–but for a non call 1 year from Goldman you will get 5.45%. We’ll see what happens – I am not in the market for CDs now – I have a truckload already–I am most likely to nibble preferreds and baby bonds.

It’s hard to argue with another very green day–but the spreads on many preferreds are way too wide for me to jump into them. I was able to buy only 1 preferred today – just need to wait a few days for maybe a retracement back down. I have 2 other limit orders in that have not executed-spreads on the bid/ask of 75 cents doesn’t work well in this market-probably will have to wait for a few days.

I added to my Jackson Financial 8% fixed-rate-reset preferred (JXN-A) @ $24.71. Probably one of the best 8% current yields out there yet. Reset is 4 1/2 years out so probably is a good hold for a few years.

I did have one somewhat ‘accidental’ sale on my Associated Bancorp 5.875% perpetual (ASB-E). I had an old (maybe a month) good until cancelled sell order in place as I was looking to sell small banking issues. I had pondered lowering my sell price earlier this week–glad I didn’t. Sold at $18.20/share. I end up with a 6% capital gain, plus a 1 dividend. In hindsight probably could have kept this one.

So like everybody our accounts are pretty damned green today–as they should be with the 10 year treasury yield off 11 basis points at 4.68%. Now we will see how the future data looks and see if the Fed is really done–who knows.

Yesterday was a very good day for income investors–about time we had one to help recoup some of the losses from the past number of months.

Of course the rally was nice for portfolio balances, but it would have been better if I held 100% baby bonds and preferreds, which were up 1-3%, but given less than 50% of my portfolios are in those segments my portfolio was up 1/2%. But those getting the best gains are starting from a much lower level as their portfolios have been hammered hard in the last year.

So have we seen the last hike and have we seen a peak in interest rates for the next 6 months or so? Maybe—firmly a maybe. No one can answer this question with certainty, but it seems to me in the shorter term (less than 6 months or a year) one needs to do a little buying, which is what I will be doing today. I say a little because my dry powder is minimal at this moment. I will write a blurb later today when I figure out what to buy.

My Uhaul Investors Club holdings are getting a much better return nowadays. Recall, for those familiar with the club, that the coupons available 3 years ago were down in the 1.5% to 2.5% area–now 4.5% to 5%. Finally most of my 1.5% holdings are maturing and I have rolled them up to triple the coupon for 3 years. Actually still a substandard coupon, but I like having money spread around and this is a pretty minor portion of our holdings

This morning the 10 year treasury is at 4.71% and holding—if I was one looking for a safe 5 or 5.5% I would probably get some CDs now. I checked the rates on CDs last night and the best was holding around 5.75%–but I suspect this will fade away today or tomorrow. I have plenty of these already and will likely not be rolling over this money into new CDs–but who knows–we’ll see.

Equities are up a bit 1/3 to 1/2% at 6 a.m. (central)–we’ll see if the party continues today–we all know that directions can change in a nanosecond. Economic news is minimal today–we have the weekly jobless claims and this is always interesting – 214,000 initial claims are expected–I am always looking for higher numbers indicating a softening job market–we’ll see what happens.

Just 30 minutes to the highlight of the day – certainly the talking heads can hardly wait – I am sure CNBC has a panel all queued up so they can give their opinions and they can yak about it for at least an hour–maybe more. I will actually turn on CNBC for a couple minutes for the announcement–then mute it until Powell speaks–a person can only take so much balony.

The Q & A after the announcement is all that matters – Powell will say ‘we are on hold this time, but we will continue to monitor data and if warranted we will increase rates as inflation remains above the 2% target’. He is likely to say that interest rates are doing the job for the Fed potentially reducing the need for immediate action from them.

In spite of any surprise from the Fed the algo’s will toss the S&P500 around – just hopefully not too violently–it is just not necessary–don’t need to ruin our nice rally in preferreds and bonds today.