Author: Tim McPartland

The pause in rates was as I expected and the hawkish statement was also mostly as I expected. Although the hypocrisy of the statement – with numerous members expecting to see a need for further rate hikes, never ceases to amaze me.

For years these folks have made policy errors which were obvious – zero rates for years even when inflation started to roar – and now they (some members) think they have the ability to foresee the future – where did data dependency go?

My worry with the super hawkish statement is how many more banks will be seized – of course I am ‘talking my book’ since I own numerous banks without current financial information as to how they are performing which turns things into something of a crap shoot – I guess that is the ‘risk/reward’ and all of us know full well that there is plenty of risk in most banking issues. I had already pulled away from buying more bankers and this certainly will temper my desire to own incremental shares.

Well actually ‘day of reckoning’ is probably overstating the long term importance of today. Sure it matters whether the FOMC raises the fed funds rate–but whether it is raised or paused life will go on tomorrow. With the CPI being reported yesterday at or slightly below forecast no doubt the FOMC has cover to pause rate hikes which is what I think they will do–of course they could move rates up by 1/8%–there is no rule movements have to be in increments of 1/4%.

So we will see the producer price index in a few minutes–not likely to surprise or be a factor in today’s interest rate decision. Through the rest of the week the economic news is fairly minor – to me the most important news will be 1st time unemployment claims tomorrow–employment will determine where we are going – over time – with this economy.

No action in my portfolio yesterday – my portfolio just drifted no real gains or losses – with a bunch of CDs, treasuries and money markets portfolios move very modestly.

So we have the FOMC meeting starting in a few hours, but leading on to the meeting we will have the consumer price index (CPI) released in less than an hour–the final piece to the puzzle before a interest rate hike/pause. Likely only a massive surprise (either higher or lower) will make a difference in the rate hike decision – as I have mentioned I think that the FOMC really wants to raise rates – but likely will pause. We’ll know in about 30 hours.

Markets are fairly quiet today with equities barely moving–although yesterday the S&P500 index was up about 1% – if you were to believe the pundits these markets are pretty darned overvalued and we could see a might tumble soon. Well no one knows for sure and I don’t fixate on that possibility – just like the coming ‘recession’ which never seems to arrive trying to forecast the macro movements is a fools errand and only causes one to cower in the corner and not act.

Once again I did nothing at all yesterday – no buying or selling. I am thinking that I have most of the banking issues I want/need and need to move onto a new sector. Some have suggested business development companys (BDCs) and it looks to me like that sector does hold some great opportunity–in the baby bonds not the common shares. I will be honing in on a few shares soon–without a doubt I will buy the new Capital Southwest Corp (CSWC) 7.75% baby bond when it becomes available.

It has been quite some time since we have seen issues with the quotes coming from Google–it used to be somewhat of a regular occurrence. Unfortunately issues are back with some missing quotes etc.

I can’t do much at this time with these issues BUT if history is repeated they should correct themselves in a day or two–I hope.

Yesterday I bought more than I have in a single day in the last couple of months.

No I didn’t go ‘hog wild’, but added to 5 positions that I already had positions in and which I believe to offer the best relative ‘bargains’–although banking issues have moved up sharply so buys today aren’t as sweet as they were in weeks past.

I bought–

Bridgewater Bank 5.875% Preferred (BWBBP)

Merchants Bancorp 6% Fixed-to-Floating Preferred (MBINO)

Jackson Financial 8.00% Fixed Rate Reset Preferred (JXN-A)

Associated Bancorp 5.875% Perpetual Fix Rate Preferred

XAI Octagon Floating Rate Term Trust 6.5% Term Preferred

As always these are not recommendations, but just what I have done.

Jobless claims came in at 261,000 versus 235,000 expected – is this a little bit of a sign that the layoffs we have seen around the country are starting to bite a little bit? This is the higher number in around 20 months. We had speculated that jobs were plentiful previously and this folks laid off were not showing up in the jobless claims numbers–and if one were to believe the JOLTs (job openings and labor turnover) numbers there are very substantial numbers of openings out there. Regardless it is a tiny bit of a vote for a ‘pause’ net week in interest rate hikes.

It is interesting that there was a news blip on the national news that big tech is rescinding job offers to new graduates–given the major layoffs these companys have had in recent months is this a surprise? I think it is called ‘welcome to the real world’. I think the younger folks believed that the gravy train would last forever – or maybe it is just because I am an old fart I think they should have to endure just a little bit of ‘character building’. Maybe the days of quitting a job every year and hopping to a new one will be over soon–maybe.

For the balance of the week we don’t have economic news of any consequence.