Tim McPartland | Innovative Income Investor

Rally Holds Up – Somewhat Surprised

The S&P500 held up well by the market close today after falling to ‘flat’ midday. The 10 year treasury yield which fell to as low as 3.77% early today closed out at around 3.80%. I though we might see some give back, but the soft PPI hammered that thought.

Preferreds and baby bonds were green once again – maybe around 1/2%. My portfolio mirrored the markets.

I tried to ‘nibble’ on 2 issues early today. The MGR 5.875% baby bond from Affiliated Manager (AMG) order was executed. but the order for the Spire 5.9% perpetual preferred (SR-A) did not execute–the hazard of not spending a few extra cents on a limit order–I see the shares ran up 59 cents. I hold current positions in both of these issues.

I see Preferred Stock Trader has a new Seeking Alpha article on B Riley baby bonds for those with access.

Back on Seeking Alpha

As Gridbird mentioned in the comments I have published my 1st article on Seeking Alpha since 2019 and previous to that in 2016.

The article is here.

My intent on publishing there is to ‘represent’ a conservative viewpoint for preferred stocks and baby bonds. There are a couple really knowledgeable writers on there on these issues, but they always seem to be about ‘trading’–i.e. sell this issue to buy that issue.

It is likely I will publish very little on that platform, because I just don’t have the time–I already have a lot of ‘balls in the air’.

PPI Comes In Soft

We have a bit of a party going on in common and preferred shares as the producer price index (PPI) comes in soft at up .2% half the .4% expected. Obviously this is very good news, but with the CPI we now have 2 data points—-2. I think we may be heading to just a 1/2% rate hike in December–or even 1/4% if the November data being released just before the December FOMC meeting comes in reasonable.

The S&P500 is up just shy of 2%, while the 10 year treasury is around 3.78%—down 8 basis points.

I will do nothing unusual today – may nibble a bit on an issue or two, but ready cash is minimal so won’t do too much. To do much I would need to rearrange my t-bills etc and I am less than certain that now is the time to go crazy.

Headlines of Interest

Below are some press releases from company’s which have preferred stock or baby bonds outstanding.

AMMO, Inc. Reports Second Quarter 2023 Financial Results

Pyxis Tankers Announces Financial Results for the Three Months Ended September 30, 2022

Fortress Biotech Reports Third Quarter 2022 Financial Results and Recent Corporate Highlights

Harbor Custom Development, Inc. Reports 2022 Third Quarter Financial Results

Prospect Capital Corporation Announces Launch of Cash Tender Offer For Any and All of its Outstanding 5.875% Senior Notes due 2023

The RMR Group Inc. Announces Fourth Quarter Fiscal 2022 Results

CHICKEN SOUP FOR THE SOUL ENTERTAINMENT REPORTS Q3 2022 RESULTS

Investcorp Credit Management BDC, Inc. Announces Financial Results for the Quarter Ended September 30, 2022, and Quarterly and Supplemental Distributions

Greenidge Generation Announces Financial and Operating Results for Third Quarter 2022 and Provides Operational Update for October 2022

CMS Energy Declares Quarterly Dividend on Cumulative Redeemable Perpetual Preferred Stock

A Digestion Day – Darned Quiet

Well the S&P500 and DJIA are barely moving today – the 10 year treasury yield has moved a bit higher – 5 basis points, as all markets digest the gains from last Thursday and Friday and certainly there is plenty to digest.

The average share of preferred stock or baby bonds are off about 1/2% today – no real surprise after giant gains last week.

Tomorrow we have producer prices – expectations are for +.4%–certainly this could move markets if the actual comes in more than .1 off expectations (either way).

Today the New York Fed released their 1 year and 5 year inflation expectations – they moved both higher from their previous take – 1 year from 5.4% TO 5.9% and the 5 year from 2.2% to 2.4%.

I’ve done nothing at all today–just watching. Maybe a nibble after producer prices tomorrow.

Monday Morning Kickoff

Common stocks rocketed higher last week by almost 6%. The entirety of the gain came on Thursday and Friday after the slightly softer inflation numbers were released on Thursday morning. Futures are off by a tiny amount this morning (6 a.m. central) so maybe we will see a few days of digestion in the markets.

The 10 year treasury yield plunged from the 4.15% area to as low as 3.81% on Thursday–bond markets were closed for the Veterans Day Holiday. Of course rates were reacting to the slightly softer inflation figures from Thursday morning. I believe that we will see rates rise somewhat in the coming week as the reality of the inflation numbers being only 1 data point sinks into investors minds–and enthusiasm subsides. At 6 a.m. Monday the 10 year is at 3.89%–up 8 basis points.

The Federal Reserve balance sheet numbers were not released for last week on Friday as is the norm because of the Veterans holiday–we should see the numbers released non Monday.

The average $25/share preferred stock and baby bonds rode a rocket higher on Thursday last week and to a smaller degree on Friday as the average share rose 90 cents. investment grade issues rose 85 cents, banks by 88 cents and mREITs by 99 cents. Shipper rose by a measly 4 cents.

Again last week we had no new issues priced.

Keep The Bond Market Closed a Few More Days (just kidding)

I had low expectations for income issues today after the crazy rally yesterday–but my expectations have been far exceeded.

With the bond market closed for the Veterans Day holiday observation preferreds and baby bonds have kept the party going–I’m up about 1/2% and my spreadsheets are pretty darned green.

Of course the last 2 days have given me gains in my junky issues–in particular Prospect Capital 5.35% perpetual (PSEC-A)–a real dog, but at least nice gains the last 2 days. Their earnings were released and probably not bad as the nervous nellies had imagined they would be (in fact they were decent). Also Liberty Broadband 7% preferred (LBRDP) bounced nicely as they had stellar earnings (of course bolstered by sales of Charter Communications shares which they sell most quarters—and they have a very low cost basis).

Today we had the U of Michigan Consumer Sentiment released and it came in soft–a reading of 54.7 versus a forecast of 59.5. Next week we have the producer price index coming on Tuesday–likely to be uneventful–but honestly who the hell knows.

Hope everyone had a profitable week–whether income issues or common stock. Rest up on the weekend and get ready for some likely wild action on Monday and Tuesday as we get to see where the bond markets want to take us.

Eagle Point Income Company Releases Monthly Update

Eagle Point Income Company (EIC) has released their monthly update.

The company which is a CLO (Collateralized Loan Obligation) owner is geared to owning the less risky part of the CLO tranches–mostly debt tranches (instead of the riskier equity tranchs) has 1 income issue outstanding–the 5% EICA term preferred issue which is trading at $22.42 for a current yield of 5.58% and a yield to maturity (in 2026) of around 8%.

The update is here.

Let’s Wrap It Up!

Yesterday was spectacular for investors. I assume everyone made money–lots of money.

I think the market melt up yesterday was more than a little overreaction to the minimally improved inflation numbers–once again way too much money out there on the sidelines and folks just couldn’t resist piling in because ‘the top in inflation is in’–well maybe.

On the other hand gains in almost everything is a refreshing pause in the non stop drubbing investors had been taking and folks should take the opportunity to rearrange portfolios if necessary. I have very little cash available for investment right now so can’t do much buying, but in general my course is locked in – whether the markets are up or down I will nibble where I see opportunity (assuming I have cash)- I am not smart enough to call bottoms or tops.

S&P500 futures are up mildly today – 1/2%. Where it finishes no one knows. The bond markets are closed today so we won’t see if the 3.81% 10 year yield holds–and it will exert no influence on equities.

Today we have just the University of Michigan consumer confidence index and inflation expectations number being released at 9 a.m. (central) which should be no influence on markets.