Author: Tim McPartland

Well we had Fed Chair Powell in a Q&A at the Economic Club of Washington yesterday and I thought his answers were very balanced–some leaning dovish and some leaning hawkish–in the end my perception was that there was nothing new. This was one of the few times I actually watched the Q&A–normally I don’t bother, but I wanted ‘my’ take on what was said. This is one of those times that everyone has there own take on what was said–no one really agrees with what was said-some say dovish–some say hawkish–I say balanced.

Today we have a bunch of federal reserve yakkers—5 of them on the schedule. I think (but no one knows) that after Chair Powell yesterday these should not move markets, but we all know that any one of them is capable of tossing a grenade—I hope at the end of the day we hear nothing of their speeches–who really needs their baloney.

Equity markets are looking a little soft–off about 1/3% on the S&P500. Interest rates are off maybe a basis point at 3.64%–just maybe a quiet day in interest rates.

Yesterday I did nothing. Personal accounts were basically flat on the day–as I mentioned recently I think we will need to depend on dividends and interest as we look ahead–the giant capital gains are behind us. Now we need to try to hold the January gains and depend on the interest and dividend payments–last time I calculated my yield on cost it was just over 7%–now probably less as I trimmed various gainers.

Did you notice the Prudential Financial (PRU) earnings yesterday–a loss of over a billion dollars for 2022. Assets under management fell $600 billion to $1.54 trillion. Like almost all insurance company earnings they took losses on investments over the last year as stocks and bonds tumbled. I suspect they will have some hefty gains in the current quarter as they benefit, as all of us have, from rising equity markets and lower interest rates. There earnings release is here.

After 13 or 14 green days in a row in income issues one hates to see share prices sell off, but nothing moves in one direction forever. The S&P500 was off 6/10% yesterday. Income issues were off 1/2%, on average, as the 10 year treasury yield rose 10 basis points to 3.63%. Right now markets are mostly flat in the futures market.

Unfortunately today we have Fed Chair Powell speaking at 11:40 a.m. central–while markets are quiet now there is no telling what will happen come mid day. Powell is likely to continue his hawkish tone so we could see negative reaction–but who really knows.

I am watching the Federal Agricultural Mortgage (AGM) preferred shares. I bought positions in 2 of these issues a couple months ago–currently I have gains of 8 an 10%–but am looking to add a little more. These issues have fallen 4% in the last couple days so maybe I will nibble today (or tomorrow).

Did you see the earnings release from Affiliated Managers (AMG)? Stellar!! While assets under management were down (all asset managers have seen large AUM drops) the company has managed to hold the line on net income–one of my personal favorite company’s–ver well managed. The earnings are here.

As might be expected when you have a ‘blow-out’ new jobs number (over 500,000 new jobs) interest rates have taken a pretty big jump higher–up 12 basis points on the 10 year treasury yield to 3.52%. While in years past a 12 basis point move higher would likely send prices of income issues tumbling hard–that is not the case now.

Overall prices are generally red, but maybe only by 15 cents or so – on average. My accounts are negative, but only by maybe 1/5%. There are still buyers out there stepping in to make buys–keeping losses pretty minimal. I do note that the investment grade AIG-A 5.875% perpetual preferred is off $1.50/share in the last 2 days and now yielding 6.10%–I assume it is off based on the sacking of the CFO a couple days ago. This is a decent issue if one can get it here at $23.98 or so.

The employment number sets Jay Powell and the FOMC committee for another rate hike on March 22nd (the end of the next meeting). We will have substantially more data , including more employment numbers, by the time the next meeting rolls around but I think it is highly unlikely that the FOMC will be deterred from further hikes.

So on to the weekend–I am looking forward to it – mostly because the temperature will rise here in Minnesota to the 30’s–right now it is almost 1 p.m. and it is still -4 degrees – too cold for old people like me.

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.