Tim McPartland | Innovative Income Investor

I’m Loving It!! Party On Garth!!

Well once again we are nicely green today—although my brain tells me it won’t last, but at least I can enjoy it while it is here–almost feels like the olden days.

The employment report was stronger in most ways than expected–more jobs created than expected, a lower unemployment rate (at 3.5%), but the wage portion was moderate at up just .3% – so markets proclaimed it is party time I guess. Interestingly interest rates took a massive tumble – now down 13 basis points to 3.58%. I would like to find the ‘smart person’ (i.e. talking head) who claims they knew this would happen.

On eTrade the 1st page that pops up is the one showing individuals issues and the gains or losses on the holdings. Today the 1st 2 on my list are the 2 Federal Agricultural Mortgage (AGM-D and AGM-E) issues which I only recently bought–1 is up 4.49% and the other 3.10%—even a blind squirrel finds an occasional nut. Of course it would have been better if I owned 1000 shares each–but alas I was just nibbling because of the lack of available funds. Of my 9 top movers 8 are green.

I hope everyone is getting a bit of a rally in their portfolios–it is a great way to head into the weekend.

Awaiting Employment Numbers

Once again an important economic number is set to be released in 30 minutes–the monthly employment report.

Expectations are for 200,000 new jobs created in December with the unemployment rate staying flat at 3.7%. Yesterday ADP reported 235,000 new jobs versus a forecast of 153,000 (for what ADP is worth).

Yesterday was another green day for most preferreds and baby bonds—3 in a row. Whether we will see a 4th up day is totally dependent on the employment report–we will likely see wild swings in equities today—right now futures are totally flat. Interest rates are up 1-2 basis points.

Below you can see many economic items will be released today and we will have a plethora of Federal Reserve yakkers–hopefully they won’t be controversial–but who knows for sure.

Heads Up to Atlas Corp (Seaspan) Preferred Holders

It is likely that if you hold one of the 3 old Seaspan preferreds (now Atlas Corp) you are up to speed on the acquisition by Poseiden Acquisition Corp.

I had posted a note on this back in August when EWS3 and Dave had highlighted the take private proposal.

I had just looked over the ‘going private’ document filed with the SEC on 12/7/2022 which contains the following–

Each preferred share issued and outstanding immediately prior to the Effective Time will be unaffected by the Merger, will remain outstanding and no consideration will be delivered in respect thereof. The Company’s Series D 7.95% Cumulative Redeemable Perpetual Preferred Shares, par value of $0.01 per share, the Company’s Series H 7.875% Cumulative Redeemable Perpetual Preferred Shares, par value of $0.01 per share, and the Company’s Series I Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Shares, par value of $0.01 per share, are expected to continue to trade on the New York Stock Exchange immediately following the completion of the Merger.

The SEC document is here.

My intention with this note is to simply tee up this subject for any holders or potential holders given the recent PS Business Parks preferred debacle.

I hold none of these issues.

Headlines of Interest

Below are press releases from company’s with preferred stock or baby bonds outstanding–or just general news of interest.

FAT Brands Inc. Announces First Quarter Cash Dividend on Class A Common Stock and Class B Common Stock

BOK Financial Corporation announces fourth quarter 2022 earnings conference call

Midland States Bancorp, Inc. to Announce Fourth Quarter 2022 Financial Results on Thursday, January 26

ARMOUR Residential REIT, Inc. Confirms January 2023 Common Share and Series C Preferred Share Dividends and Reports Preliminary Common Stock Information

Hersha Hospitality Trust to Report Fourth Quarter 2022 Earnings on February 15, 2023

Global Ship Lease Announces Further Adjourned 2022 Annual Meeting of Shareholders

PacWest Bancorp Announces Fourth Quarter Earnings Release Date and Conference Call

RiverNorth Capital and Income Fund, Inc.* Announces Final Results of Repurchase Offer

RenaissanceRe Schedules Fourth Quarter and Year-End 2022 Financial Results Conference Call

Plymouth Industrial REIT Provides Activity Update for Fourth Quarter 2022; Announces Details for Fourth Quarter Earnings Conference Call

Atlas Declares Quarterly Dividends on Common and Preferred Shares

WesBanco, Inc. to Host 2022 Fourth Quarter Earnings Conference Call and Webcast on Wednesday, January 25

ASHFORD TRUST SETS FOURTH QUARTER EARNINGS RELEASE AND CONFERENCE CALL DATES

Strong Jobs Report Knocks Stocks Down – But Interest Rates Near Flat

Once again we had a strong jobs report today – or at least we had fewer initial jobless claims than expected. One more arrow in the quiver of the Fed for a 50 basis point rate hike on 2/1. Initial claims came in at 204,000 versus a forecast of 223,000.

While equites fell pretty hard on the jobless news and have stayed down interest rates which ‘popped’ 5 basis points are now down around unchanged–actually up 1 basis points.

A quick scan at the preferred stocks and baby bonds finds them mostly green–again. It is obvious that bargain hunters are on the hunt after the December sell off – there remains decent buys out there even after this nice bounce. I see that the Affiliated Managers investment grade baby bonds are still yielding around 6.6% to 6.7%–they were 6.9 to 7% last week.

Haven’t looked at my accounts today, but expect to see them green–doubt I will do anything today.

Let’s Go For 3!!

Yesterday was the 2nd nicely green day in our portfolios for the year–overall up 1/2%. With lots of dividends and interest hitting accounts late last week and the nice rally this week a person could get spoiled quickly. I was surprised how many issues in the portfolio were up 2-4%–I am sure many of you experienced the same gains.

This mornings we have the 10 year treasury yield around 3.70% flat from yesterday. Equity indexes are also flattish—with economic news out shortly we will likely see larger market movements. Also at noon today Fed official Bullard is speaking and he could say something entirely crazy–he is known to stoke the fire.

Yesterday I did nothing–in fact while I pay attention to ‘markets’ in general I didn’t check preferreds and baby bonds until after the market closed. My google sheet was so green I reloaded it to make sure the numbers were correct. I doubt I will do much today, but I do have some cash available for some nibbling–we’ll see.

Headlines of Interest

Below are press releases from company’s with preferred stock or baby bonds outstanding–or just general news of interest.

CTO Realty Growth and Announces Record 2022 Transaction Activity and Provides Corporate Update

Terreno Realty Corporation Acquires Property in Rancho Dominguez, CA for $22.4 Million

Atlantic Union Bankshares Corporation To Release Fourth Quarter and Fiscal Year 2022 Financial Results

Alta Equipment Group Announces Preferred Stock Dividend

Compass Diversified Declares Fourth Quarter 2022 Distributions on Common and Series A, B and C Preferred Shares

Silvergate To Provide Select Preliminary Fourth Quarter 2022 Financial Metrics and Host Business Update Conference Call

First Internet Bancorp to Announce Fourth Quarter 2022 Financial Results on Wednesday, January 25

Job Openings Still Too Hot

While tech layoffs seem to get all the ‘press’ and headlines and make it appear that the job market is worsening, you wouldn’t know it from the JOLTS (job openings) report today.

The report came in at 10.5 million jobs being open versus expectation for 10.1 million and versus 10.5 million jobs last month.

While we may be exchanging tech jobs for burger flipping jobs the report would seem to indicate there are plenty of jobs out there. I looked at some of the breakdowns in category’s and didn’t see anything way out of line.

The S&P500 dropped almost a percent on the hot jobs news, but has climbed back to near the high of the day. The 10 year treasury yield didn’t initially react, but now is at 3.71% which is 5 basis points or so above the low yield for the day.

It is 12:45 pm central time and we will have the FOMC minutes released in 15 minutes and I would expect market movements (for no real reason except games being played).

A Decent Start to a New Year

While equities fell near 1/2% yesterday income issues got off to a green start as the 10 year treasury yield fell by 10 basis points to close the day at 3.79%. Yields are off another 10 basis points early today – 3.69%. The 10 basis point moves (up and down) seem to be the standard move lately. My accounts were green yesterday by 1/3% or so–no giant move but green is green.

I see that refinancing mortgage applications are down 87% year over year while mortgage applications for purchases are down 42%. From the perspective of the Fed this is indicating slowing—folks have always refinanced for 2 reasons—to lower their interest rate and/or they suck out equity in the form of a ‘cash out’ transaction. With current interest rates available consumer spending power is being curtailed—down the road a quarter or two this will translate into a slowing economy. On the other hand equity is still being accessed via home equity lines of credit, but at very high interest rates (relatively speaking)–as a homeowner accessing equity now may be kind of dangerous as we have potential falling values (some areas have already fallen in values–in the midwest we are fairly stable leaning toward softening). You best have solid employment if you are pulling equity now.

Yesterday I bought 5 shares (yes 5) of the PS Business Parks 4.875% perpetual preferred (PSB-Z) for $11.50/share–current yield of 10.69%. Of course you all know that the 3 PSB preferreds are being ‘delisted’ on or around 1/13/2023. This is purely a research/educational purchase–I have never owned a delisted issue and the only way I will keep track of this saga is to own a few shares.

At 9 a.m. (central) today we have the JOLTS (Job Openings) report release and 10.1 million openings are expected versus 10.3 last month–don’t think this is a big market mover but who knows for sure. Then at 1 p.m. (central) we have the release of the FOMC meeting minutes from the last meeting–this will move markets one way or the other even though it is old news for the most part.

Well here we go–equity futures are up a bit–mostly meaningless of course, but better up than down.