I’m certain most of you are aware that the $20/share Hawaiian Electric preferred shares took a real beating the last few days as blame for (or blame for contribution to) the Maui fire came home to roost. This is a replay of the California blame game from a few years ago – I wouldn’t touch these shares with a 10′ pole. There is an awful lot of emotional pain on Maui right now and this is going to get very ugly and trying to take advantage of low prices is a very bad idea (in my opinion) – over the course of years these could go to zero.
Equities are tumbling this morning – and as we all know a soft start doesn’t mean a down day as the buy the dip folks are out there. The weakness apparently stemming from weakness in the Chinese economy which has lead China to cut interest rates to try to stimulate. This is just 1 more arrow in the quiver of the ‘here comes the recession’ club.
Interest rates are moving higher this morning with the 10 year treasury yield is now around 4.23%. As I noted in the Monday Morning Kickoff yesterday the average $25/share preferred and/or baby bond has barely moved in the last 8 weeks–I feel fortunate. Personally my portfolio values have backed off a tiny amount in the last month – but it is a tiny amount, maybe 1/4%-destined to worsen if these rate increases don’t slow down a bit.
Oil prices remain elevated and near the high of the year–although overnight west Texas has backed off a buck. When I fill my vehicle with gas and it cost $70 it is painful to a ‘cheapskate’ like me. I am glad that I don’t have a giant sized pickup. Recall in June 2022 west Texas was $106 so we aren’t even close to that high–ouch.
I continue to do nothing – no buying or selling, but now I am looking at some potential buys based on ‘yield to maturity’. I think there are some opportunities out there for over 8% on some issues that are in my ‘wheelhouse’ of risk. I plan to write on 1 or 2 of these yet this week. Checking CD rates this morning I see JP Morgan is offering 5.55% on a 1 year callable–not terrible, but unlikely to move me much since my cash position is meager.
Last week was a near flat week in stocks as the S&P500 traded in a range of 4443 to 4527–closing at 4464 which was 14 points lower than the previous Friday.
Interest rates moved in a about a 22 basis point range in the 10 year treasury (3.95-4.17) closing the week near the high at 4.16% which was 10 basis points higher than the close the previous Friday. Rates were buffeted by an on target consumer price index, but the next day rates were sent higher by a producer price index which came in hotter than anticipated.
This week we do not have the normal market moving economic numbers being released, but on Wednesday we have the FOMC meeting minutes from the July meeting which will be closely reviewed by all – of course it is all really old news, but the algo’s will send equities either sharply higher or sharply lower.
The Federal Reserve balance sheet grew by $2 billion last week – a rare increase in a downward trending balance sheet.
Last week–for the 8th week in a row $25 preferred stocks and baby bonds barely moved–the average share was 4 cents lower. In the last 8 weeks the average share has moved in a 21 cent range. Investment grade issues were 4 cents lower, banks were 12 cents lower, CEF preferreds were down 5 cents, mREIT issues moved 4 cents higher with shippers off a nickel.
Last week we had 1 new income issue priced as junky business development company Great Elm Capital (GECC) priced a new issue of baby bonds with a coupon of 8.75%–the issue is not yet trading, but look for it to trade this week.
Investors are piling into stocks this morning after the consumer price index came in about as expected. Investors who have ‘sat out the rally’ are dumping money in as fast as they can and the S&P500 is up 1.25% at this moment.
The CME FedWatch tool has the chance of a rate hike at the September FOMC meeting at 9% now – there is an awful lot riding on this number given that the meeting is 40 days away yet. But as always investors do what they do. As in all rallys there are always some who will say the sky is falling and that equities are dramatically overvalued–of course this doesn’t matter if the great majority say ‘buy, buy, buy’.
Interest rates are falling a bit with the 10 year treasury now back under 4% at 3.98%–just can’t seem to hold above 4%. Helping interest rates to lower levels were 1st time jobless claims coming in higher than expected–but honestly 1 weekly number means very little–1 is not a trend.
I nibbled into a bit more of the Jackson Financial 8% perpetual–at $24.97. It is about the best 8% yielder I can find out there. For the time being I have given up hoping for higher CD rates – seems like the bankers have all the deposits they need for now.
My logic here is simply to raise a little cash by selling a few issues which I believe will present another buying opportunity in the months ahead. Moodys is pounding on the banks and there are predictions everywhere of issues with the banks. While this may all be BS in the short term there could be (is) some pain.
I was fortunate in my timing on Tuesday because my GTC orders executed early in the day as banking issues got beaten later in the day. Numerous issues which I hold have given up 50% of my gains, although 100% of them remain in the green–although some only 1-2% (plus dividends).
