Author: Tim McPartland

I study, study, study and find no clear investment direction to take other than the one I have chosen.  Lots of CDs and treasury notes with maturity dates ranging from 3 months all the way out to 5 years (minimal at 5 years maturity).  Then  some preferred shares in the mix to help to goose the portfolio current yield.  There are really only so many ‘tricks’ one can play to try to maximize yield (within one’s risk tolerance). Up until a year ago one of my younger brothers and I would speak fairly frequently and we would always express the desire to ‘just earn a safe 5%’–well we are there, albeit with inflation. I see lots of what I consider ‘bargains’ out there–i.e. the regional and community banks preferreds, but so much danger lurking and I need more time to pass to consider adding much to the current modest positions. I just reviewed current CD and money market rates and find them pretty attractive and continuing to creep higher–very nice.

I do have good until canceled orders in on 6 issues–only to buy if someone wants to give me a ‘fire sale’ price.

Well earnings continue to roll out and Microsoft and Alphabet  reported and while growth rates are modest earnings are decent and Microsoft is ‘flying’ this morning–with the banking companies they are setting the tone for equity trading today–and that tone is pretty flat–we’ll see if that holds.  Also last night California regional banker Pacwest (PACW) reported earnings and they were pretty dreary.

Yesterday we had new home sales reported at a much higher level than forecast–683,000 versus 634,000 forecast.  Case-Shiller showed that prices of homes continue higher on a year over year basis. Consumer confidence came in weaker than expected.  So the mixed signals continue with economic data.  Today we have durable goods and wholesale and retail inventories being reported in 30 minutes so we will see what kind of numbers we get.

Well let’s get this day going!

With First Republic Bank (FRC) announcing earnings yesterday it took a little time for investors to digest it all and an hour ago FRC common shares took a huge tumble from $11.40 to $8.50. Obviously investors believe there are dire circumstances.

Needless to say the preferred shares which were already battered are now off $1-$2 per share to be trading in the $4.xx area. I certainly have no interest in any of these shares.

All banking preferreds are being dragged lower–a sea of red. It is a good time to stand aside – although as I mentioned this morning I so badly want more banking shares–but adding at this time may be way premature.

It is funny that some of the ‘smart people’ on CNBC said this morning ‘the banking crisis appears to be in the rear view mirror’. NOT!!

The earnings are rolling in this week and while I don’t  try to  do deep dives on most of them I do pay attention on a macro level—and most of them are pretty damned good.  I was surprised, in particular, how strong McDonald’s (MCD) revenue and earnings came out–just from a personal perspective we don’t stop there much anymore, but I guess many don’t agree with our assessment.  General Motors (GM) had stellar earnings-Mary Barra has been and is one of the best CEO’s in the country in my opinion. If we are near a recession most company’s didn’t get the message.

First Republic (FRC) is tumbling this morning after their earnings release late yesterday–the banker has plenty of challenges as they lost 40% of their deposits last quarter.  It will be many quarters before preferred dividends are paid on their preferred stock issues–if they ever are paid.  In recent years it seems that it has become more acceptable to screw preferred holders and being non cumulative will FRC ever feel compelled to pay preferred dividends?  

Today we have housing related economic news on tap.  We will have the Case Shiller Price Index and FHFA price index both being released at 8 a.m. (central).  Then we have new home sales and consumer confidence at 9 a.m.  My own observations on the housing market is that everything being built is being sold – no huge subdivisions of unsold properties at this point in time.  It will take a substantial jump in unemployment to shut down housing–everyone has a job who wants one.

Yesterday, as has become typical for me, I didn’t open my accounts at all – will do that before markets open, but obviously I didn’t buy or sell anything yesterday.  Honestly I want to add to my regional bank preferred holdings–great current yields are available in the 7-8% area, but I am resisting at this point in time.  As Tex the 2nd reminds us any bank can been seized by the FDIC in an instance–all it takes is a Twitter and Facebook fueled bank run–and I need to wrap my mind around this fact and determine the correct level of commitment to this sector.

Well let’s get this market rolling–yesterday was another day of ‘paint drying’–will today be a day with market movement or will be have another enjoyable day watching paint dry?

Depending on your source we have at least 4 – and as many as 7 Fed yakkers today.  Unlike past times when there were disagreements in policy I think the Fed folks will generally be in agreement that another ¼% rate hike is needed in May–and I think we will see that hike. 

Today we have economic news that could move markets.  We have the weekly 1st time unemployment claims at 7:30 a.m. (central)–forecast is for 244,000 versus 239,000 last week.  Continuing claims were at 1.81 million last week–and both new claims and continuing claims have been climbing slowly.  Also at that time we have the Philly Fed Manufacturing number–forecast is -20 after a -23 last month.  Remember we had a huge bounce higher in the New York manufacturing survey recently so we will see if these are in sync–or just pure baloney numbers.  At 9 a.m. we have leading economic indicators (LEI) forecast at a -.7% versus -.3% last month.

Last night we had earnings from Zion Bancorp (ZION)–deposits fell by 16%, but commercial loan losses were manageable and the company pointed out their commercial loan portfolio is well diversified by sector and geography.  I hope that all of these regionals are managed by competent folks as they have their job cut out for them especially if the recession arrives.  

I did nothing yesterday–not even opening accounts until after market close.  With my current portfolio composition I see a very much reduced amount of movement on a day to day basis and that is comforting.  We’ll see how that changes as CDs and treasuries mature–my laddered holdings range mostly from 3 month to 3 years with maturities virtually monthly–although I did go ahead and lock down small CDs as far out as 5 years.

Well let’s get this day going–equities looking a bit soft, but who knows whether that is how the day goes.