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Author: Innovative Income Investor

The Fear Trade is Alive and Well

While todays moves in stocks is NOT really too scary, the further plunge in the 10 and 30 year treasury bond yields has to give one a bit of a startle. In addition gold is spiking a bunch higher – up $29 last I looked.

The 10 year treasury yield fell as low as 1.44% before bouncing a bit to 1.47%–we are not quite at new record lows, but at this pace it could happen soon. The 30 year bond was at 1.91% last I looked which is a record low–can you feel all of your investment grade investments being ‘refinanced’ soon? These falling yields are in the face of reduced liquidity from the Fed–obviously the fear trade is overwhelming other factors.

This corona virus issue is started to take hold in a big way–I mean riots in the streets in Ukraine overnight shows the power (and maybe danger) of social media. Information–both factual and ‘fake’ moves very fast.

Then on top of the virus issue we see that the purchasing managers index at 49.4 showing a slight potential in the economy slowing. It was only earlier this week that the Philly Fed Manufacturing Index came out extremely hot—everyone will have to make their own determination as to what the hell is going on for sure.

1 thing I know–if I was holding shares in either Triton International (TRTN) or CAI International (CAI) I would be studying trade disruptions carefully. Both of these companies are huge providers of containers moving back and forth between Asia and the rest of the world. Thus far the common stock of the company’s have not really reacted to virus related trade disruptions–certainly their preferreds haven’t suffered–all 6 issues are trading really strong. Certainly if the disruptions are a short term item the companies will do just fine–but a larger spread–who knows–these companies carry a ton of debt and need a continuous flow of revenue to make their payments–no room for error.

Looking over $25/share preferreds and baby bonds today I see mostly green. Investment grade is up 2 cents, while overall shares are up 3 cents. There is a lot of complacency in the income arena so it seems.

This is one of those days to fasten your seat belt into the close of the markets in 2 hours–with the weekend ahead will folks unload their risk assets (stocks)?

141 Preferreds and Baby Bonds That are Potentially Dangerous to Your Wealth-Updated

UPDATE–I have tweaked the spreadsheet removing some issues with redemption dates in the future with incorrect calculations on the YTW.

Below is a spreadsheet that lists 141 preferreds and baby bonds that are either currently redeemable or will be within a couple of months.

I have arranged these with the worst yield to worst on the top–potentially the most dangerous of them all.

I am not saying any of these in particular will be called now–but a high percentage of them could be–do you hold them?

The last time I published a list of these I used just investment grade issues–this list covers any and all $25/share issues no matter the rating.

Note that the yield to worst calculation is off by a small amount (less than 1/2%) as it doesn’t figure accrued dividends and interest in the calc.

You need Google Sheets to open this spreadsheet.

Here is the spreadsheet.

A Little Market Excitement, But Little Damage

I look at the ticker after the market open today and see stocks off to another modest move higher–that’s all I need to see–I don’t watch minute by minute each day–maybe once per hour.

The next hour I look and the DJIA is off 373 points, so I did turn on the TV to see what was going on–as typically happens all I find is folks speculating on what happened–no one really knows. 1 explanation I heard was that traders all of a sudden realized stocks were out of sync with interest rates and gold prices–well no kidding–this has been the case for a very long time.

More interesting is that the 10 year treasury had dropped to 1.51%–off 6 basis points–we just keep getting closer and closer to all time lows in the 1.36% area–to me this is pretty scary–and I always take bond prices/yields more seriously than stock prices.

Oh well, checking our accounts I find no damage in the issues I own so I guess I am not too concerned about today’s action, but lower interest rates do concern me as I really wonder how long the economy can keep moving higher in the face of the Fed reducing liquidity and the unknown affects of the corona virus. Guess we will just have to keep watching.

I note today that the new Brookfield Renewable Partners 5.25% issue, which is trading under temporary ticker BKFRF is trading in the $25.70 area–fast out of the gate. I had an interest in this originally, but I am not paying this price–I am interested if it would tail off a bit in price.

Today we are seeing a little bounce back from yesterdays modest sell off in preferreds and baby bonds. Overall shares are up 5 cents with investment grade up 3 cents.

Adding Insult to Injury

While I shouldn’t have been surprised that Morgan Stanley is acquiring eTrade, it feels a bit like adding insult to injury.

All of us have had to fight to try to earn a decent return and after being with eTrade for around 25 years it now looks like I will have be concerned with how our accounts will be handled.

I have used eTrade as my ‘go to’ account given that our accounts at Fidelity are generally less versatile–i.e. not allowing us to buy certain securities.

Oh well–when the time comes I will just review all the commenters chat on which brokers they prefer. I guess Morgan Stanley will have to earn our business–too many changes–and in particular too many restrictions, and we will be gone.