Author: Tim McPartland

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.

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.

Equities are quiet this morning as we await the next piece of economic news which is the consumer price index which is released tomorrow. Forecasts are for a CPI up .2%. Year over year forecast is 3.3% which would be up from last month—core is forecast for up 4.7% year over year. Certainly we could see a number that is a few 1/10ths higher or lower–and either one would likely drive markets substantially. We are now in the ‘data’ gathering period in the run-up to the next FOMC meeting which 5 weeks or so out (September 19-20).

Interest rates seem to be awaiting the CPI as well as the 10 year yield is trading at 4.03% which is virtually unchanged from yesterday–we’ll see what the end of the week brings as we get these inflation gauges.

Earnings season is coming to an end and there weren’t many massive downside surprises that I saw – in particular in the banking sector. Most banks reported softer quarterly numbers but generally I didn’t see massive provisions for losses related to commercial real estate. I think that folks have been looking for these provisions BUT these things take years to play out–not months. The worrys as I understand it is for refinancings that will occur between 2023-2028. I have no idea whatsoever why 2027-2028 matters–I have not seen 1 single ‘forecaster’ who can reliably forecast interest rates for next month let alone 4-5 years out. Most certainly we will see some issues in the next year or two, but to forecast beyond the short term is simply foolhardy.

Almost nightly (Monday through Thursday) I post some interesting ‘news’ for investors in preferreds and baby bonds in the ‘Headlines of Interest’. This is a summary laundry list from a quick scan of the news release services–I try to catch most everything related to companys which have exchange traded income securities outstanding. If you aren’t taking a minute to scan these headlines you may be missing some important news items that could lead to great ideas for investing.

Early yesterday I sold 2 of my bank holdings–locking down respectable capital gains (although only 50% of what they would have been last week). I will write a little blurb this morning yet on my logic.