Author: Tim McPartland

Yesterday I added a ‘taste’ of the Lincoln Financial Group (LNC) 9% non cumulative preferred (LNC-D). I already had a position in this issue and it fell $3/share in the last 2 weeks. This buy came off a GTC buy order.

All insurance issues have been hammered fairly hard because of the banking crisis and the ‘mark to market’ debate. This issue is investment grade and was issued after the company took some massive write downs which destroyed the company equity. With a new CEO I believe they will do just fine–over time.

I guess we should expect anything different than a drifting market–both stocks and bonds as we await the FOMC results. You can be certain that the algos will drive prices sharply in both directions at 12:59 p.m. (central).

Preferreds and baby bonds are mostly drifting we a slight tilt upward.

Did you see the operating update from lodging REIT Pebblebrook Hotels (PEB) that I posted last night in the Headlines of Interest? PEB has been one of the few lodging REITs that I have liked over the years and seem worthy now of some deeper due diligence–with 4 preferreds outstanding with current yield in the 8.5% area I might take a nibble if they pass muster. On the other hand if we are truly facing a recession is now the right time? Don’t know but am going to check them out. Here is their update.

Markets are very calm right now with equity futures pretty flat. Interest rates are universally higher with the 10 year at 3.62% which is up 14 basis points on the week.

The FOMC will announce the interest rate hike (or no hike) at 1 p.m. central time. But really the main event will be what Powell has to say at his news conference at 1:30 pm-central. Does Powell spook the market at the presser? Will he send mixed signals? We have no idea on these questions, but it is one of the few times we will have the TV on for a few minutes.

Yesterday we finally had buyers step in to the income arena with prices up a bit on the day. We had plenty of nervous nellies selling early yesterday at ‘get me out!’ prices. Hennessy Advisors baby bonds 4.875% (HNNAZ) is my best example. The issues fell $2.36/share on a 1000 share trade at $19.80, but a couple buyers (literally) stepped in and the issue closed at $22.96.

Yesterday one of my Tri-Continental preferred (TY-P) orders executed at $47.50. I have another GTC buy order at a lower price. I have another GTC buy order in on the GAMCO Natural Resources 5.2% preferred (GNT-A) at $21.xx–the issue bounced yesterday to close at $22.42.. My orders will remain in place–for the sock drawer.

So let’s get this day going and see what Jay Powell has to tell up in 6 hours.

The Hennessy Advisors 4.875% baby bonds just fell $2.36/share on a 1,000 share ‘get me out trade’. Very thinly traded issues can get hammered–for no real reason.

The bid is now $21.00 with an ask of $22.50.

Whoops–just as I was typing this someone stepped in with a 200 share purchase at $21.78. So now off 38 cents instead of $2.36.

Yesterday was a green day for common stocks, but the beatings continue for preferred stocks and baby bonds. I did not calculate the average loss for yesterday, but it was plenty big–certainly at least 1%.

You would expect to see the bankers get beaten up given the situation. On the other hand to see closed end fund preferreds getting pounded down is just silliness (I’m talking my book here of course). I own a modest position in GAMCO Natural Resources, Gold and Income Fund 5.2% preferred (GNT-A) A2 rated with an asset coverage of 461% as of 2/28/23. This issue fell $1.65 yesterday–on 3250 shares of volume. While these moves are frustrating the best way to handle this is to put in a good-til-cancelled BUY order which is exactly what I will do today. Current yield is now 5.9% and at 6% I’ll take some more.

Yesterday I was late entering my GTC buy order for the Tri-Continental preferred (TY-P) and shares dropped on selling before bouncing back up later in the day–I missed my buy but some on this site picked up some shares in the $47.29 area. Oh well my order remains in tact waiting on the next nervous nellie to sell to me.

So the FOMC meeting starts today and the incessant yakking about will they raise 25 basis points or will they pause is in full bloom on the business TV channels. Who the hell knows!! No one. We all have opinions but no one knows what they will do, but in the age of around the clock news I guess they have to fill the hours with blabbering.. I don’t watch CNBC or Fox News during market hours–I switch them on for an hour early in the morning–then off they go.

Futures are again strong this morning, but as we saw yesterday strong common stocks didn’t translate to income issues. We’ll have to see where things go–the income price movements are not correlated to interest rate moves now–so we will see where the nervous nellies take us.