Author: Tim McPartland

Another great week is nearly in the books–and now we wait for the employment numbers to send us into the weekend. Forecasts are for 187,000 new jobs and an unemployment rate of 3.6%. Given that Powell continues to focus on employment as an important piece of data in rate hike considerations it would be nice to see a somewhat weaker number than forecast–say 150,000 new jobs–but who knows–we will know in 30 minutes.

Yesterday I noted I bought some UMH-D perpetual preferred–but I also sold 1/2 my position in closed end fund Royce Value Trust (RVT). RVT is my only CEF holding and I had held it for the better part of 6 months and had added at the lows–so I got a nice capital gain plus some dividends–I will re-buy at lower levels.

Today I am pretty sure I will do no buying today–don’t know about continued trimming–I thought this would end but as prices move higher more trimming opportunities arise.

Ellington Financial (EFC) did price their fixed-rate-reset new issue last night and the coupon is 8.625% for the 1st 5 years with the reset spread at 5.13%–pricing is for 4 million shares. The pricing term sheet is here.

Party On S&P500 and NASDAQ!! The DJIA is lagging, but it really no longer represents the real market which is why I always specify the S&P500.

I just added to a position–UMH-D 6.375% perpetual preferred from UMH Properties. The current yield is just shy of 7%–the issue is currently optionally redeemable as of 1/22/23–but at $23.32 this is no issue.

I posted a presentation from manufactured home REIT UMH Properties (UMH) a couple days ago and I wanted to go through it before adding to what was a 25% position–now a 50% position. The presentation is here.

While this issue is not rated by the major ratings agency I personally assign a higher than average quality to it. Over the years the company has performed well with the manufactured home parks and their history goes back to 1968–so lots of history.

Revenue continues to climb at a nice pace–year after year.

Funds from operation (FFO) have taken a nice bounce in the last year.

All in all the company is now run very soundly and there is plenty of demand for site rental and housing rental. Not a glamorous business, but one which is necessary.

ADDED NOTE–the company continues to have investments in other REITS, but now they are carried on the books at $39 million versus $113 million a year ago.

The 10 year treasury yield is now at 3.39%–obviously the debt markets see something ‘scary’ on the horizon, while equity markets are partying–the S&P500 futures are up 1/2% as big tech announces earnings.

Yesterday ended up being a ‘green’ day for preferreds and baby bonds as folks just seem to keep buying–someone (Charles M I think) mentioned in a comment yesterday that no matter where he looks prices keep stair stepping higher and certainly this has been true. While some of us have been looking for prices to setback some it isn’t a foregone conclusion that this will happen. As I generated some cash in the last week or two my hope was for a 2% or so setback–but I may get stuck with funds in money market for a while, but a 4% yield is not a terrible place to be stuck at for some amount of time.

Today I get back to normal investing–searching for something that meets my needs. My needs are for at least mid level quality with a current yield of 6.5% and 7%–I have 1 issue in my ‘sights’ and need more due diligence before pulling the trigger. It is important to me to have a nicely diversified portfolio with the correct blend of quality. As I have generated cash in the last couple of weeks it wasn’t just to lock in some profits, but was also to balance the quality. For instance I consider Oxford Lane Capital and Eagle Point Credit to be low quality and thus I trimmed my position–I won’t be able to replace the current yields, but I will sleep a bit easier.

I see that 1st time claims for unemployment came in just now at 183,000 which was under the forecast of 195,000–Chair Powell continues to focus heavily on employment when discussing interest rate increases–there seems to be little relief coming from this arena–obviously more news coming on employment tmorrow.

As expected the Fed has raised the Fed Funds rate by 1/4%–but has included somewhat hawkish verbiage in the statement implying more hikes to come. Anyone looking for a pause needs to keep hunting for one I guess.

Stephen in a comment this morning hit it perfectly–“the Fed held the increase to 1/4% (versus 1/2%) in exchange for a hawkish tone”–he hit the nail right on the head.

As expected the S&P500 has gyrated around on the news–interest rates haven’t moved too much yet.

So we have that out of the way until the next meeting which will be March 21/22—so back to ‘normal’ business tomorrow.

In an hour we finally get the announcement on the Fed Funds rate increase, but it will be 2 hours or so before we get all the news out–i.e. Jay’s presser.

This morning we had the ADP employment number come in very weak–for what it is worth 106,000 new jobs created versus a 190,000 forecast–obviously this is like throwing darts–anybody’s best guess. The ‘official bureau of labor statistics comes out Friday and there is a 187,00 new jobs forecast–we will see if the guessing (forecast) on this number is better than the ADP report.

The 10 year treasury is yield is off 5 basis points now to 3.47%–equities are off 1/2% to 1% in a very orderly sell off—I’m sure all the algo’s are ‘locked and loaded’ for 1 p.m. (central) and if the pattern is normal index’s will swing sharply both directions–all likely meaningless moves.

All my accounts are very flat today–I mean really flat. Not dooing anythings at all.

It is a rarity to have gains in preferred stocks like we had in January–the gain was in the 8% area on the average share. Personally I lagged the market by 1.5% as I have an allocation to CDs and shorter maturity treasuries. I am sure many outperformed me since I spend too little time jumping on bargains and rotating around to maximize returns–my market timing typically is bad–so no use chasing around.

Today is the day–I am more interested in Chair Powell’s news conference than in the rate hike announcement as it is a foregone conclusion that the hike is 1/4% – if it is more or less the markets will be very wild. So the unknown is how hawkish will the news conference come off.

Yesterday was a nice day with the S&P500 up 1.5% based upon economic numbers indicating inflation is trending lower. The 10 year treasury yield continues in a relatively narrow range–now (6 a.m. central) at 3.48% down 3-4 basis points from yesterday–I suspect we could see a breakout (down or up) of the 10-15 basis point range we have been in for a few weeks with today’s FOMC rate hike and news conference.

I am back to the do nothing mode. With a bit of cash now available for investing (and earning near 4% for waiting) I will wait for some shares to go on sale–if rates remain in this area and no bargains appear I will forfeit 2% or so on my cash holdings–oh well.