Innovative Income Investor | Innovative Income Investor

Now That Was a Common Share Setback

Well we all knew what the Fed was going to do and honestly about what Jay Powell would say–but I don’t think that most of us knew that the fast money was going to use it as an excuse to sell the hell out of the markets. Normally on Fed day we get big pops both directions for a few minutes after the announcement and then a moderate move in one direct or the other. Today–NO. The trip down was long and steep with hardly a 5 minute respite all afternoon. About a 3% loss on the day. Adding a little insult to injury the 10 year treasury yield closed at 4.49%–up 11 basis points on the day–the highest close since May.

Of course in the income issues it is the low coupon, high quality perpetuals that took the biggest knock. Looking through the investment grade issues I would guess maybe 90-95% RED–some just a few cents, but a lot of them down 1-3%.

Personally I took some losses in all investment accounts–although they were minor–maybe 1/5% owing to having cut back on many issues a few months ago–but just the same no one likes losses. We all know that trying to react on a day like today is a mistake–just sit back and take a deep breath, sleep on it and make rational decision later. I am thinking maybe I have a couple issues to trim back a bit–in particular the 2 Brighthouse Financial issues I hold–on the other hand with investment grade issues with current yields over 7% maybe I will just ‘ride it out’–we’ll see.

Waiting For What We All Know is Coming

Markets–and in particular interest rates are quiet–the 10 year treasury yield is less than 1/2 basis point from the close yesterday.

I am pretty certain that we all know there is a 1/4% rate coming and then the Jay Powell presser will stress that GDP is decent and employment is strong and there may be a need to ‘pause’ further rate cuts. This would give the markets almost exactly what they are looking for right now. The CME Fed Watch tool is at 98% for a 1/4 point cut today, but only at 19% for January for a cut. Unless we see something drastic happen in the economy the FOMC will not cut in January with numbers like that. The Atlanta Fed GDPNow has 4th quarter GDP at 3.2% as of today–not exactly a soft growth picture. Let’s get this noise behind us so we can invest.

Did You Know? General American Investors

I have held shares in the 5.95% General American Investors (GAM-B) for a long time–I think it has been years–certainly off and on for years.

GAM is a solid closed end fund with $1.6 billion in assets and the only leverage they use is this issue of preferred shares—they have a asset coverage ratio of 837% as of 6/30/2024.

The interesting item of note is that the Board of Directors has a buyback in place for the preferred shares anytime they are under $25/share. They have authorized up to 2 million shares being bought (original issue was 8 million shares)–thus far to date they have bought just shy of 400,000 leaving lots of dry powder for further purchases.

Does this buyback authorization help to keep this high quality modest coupon price above $25? Not positive of the answer, but I do know that it doesn’t hurt.

‘Caching Issue’ Causing Problems on Site

As some know the website is experiencing issues with a ‘plugin’ which is causing issues in items I post. I took down a post from yesterday as it was only partially published and it repeated itself 3 times. Hopefully before the day is out I will have this resolved.

Headlines of Interest to Holders of Preferred Stock and Baby Bonds

Below are press releases from companys with preferred stock and/or baby bonds outstanding–or just news of general interest. Earnings season is pretty much over so we will have slow news days for a month or two.