Well I was waiting for the 1 piece of news that would light a fire under the ‘party’ and we got it.
Honestly I expected a party with a softer inflation number–but it is just 1 piece of data–in the big picture nothing to get carried away about, but as always we get overreactions and then pay a price later. But for now my portfolio is flying – so what the hell I am happy.
With the S&P500 up 4% right now and the 10 year treasury yield falling hard–down 29 basis points right now to 3.87% it will be an interesting day. Will gains hold? Or will early gains give way to some give back?
Tim: Thank you for your input as always. In Los Angeles, we are seeing a lot of luxury units come on to the market ie: 2 bedroom to 3 bedroom units from
$3000 to $15000 per month built for the perceived growth in tech workers for companies like Snap. Duplexes and four plexes that are not close to cash flowing seem to lack buyers since speculators may not see a robust demand any longer due to the increases in interest rates. In Northern California, Silicon Valley, I know housing prices in San Francisco and San Jose are having a tough time and that is before the employment layoffs announced by Facebook. Many of the tech companies have cut back quietly on contract labor already. I believe the institutional money coming into the market after this cpi report think that future inflation numbers will be less due to the fall in the inflation number involving real estate as white collar layoffs increase. Clothing, used car prices and other measures also indicate weakness in spending. No more government handouts like last year will also curb a lot of spending other than food and energy among many people who live paycheck to paycheck as 60 percent of Americans live each day.
Some pundits are saying the first thing that turns up in a bear market are bonds. Not that it’s a sign of it coming to and end and buying equities…..just a call to maybe buy bonds. Seeing the blood bath ‘my friends’ have been living thru and big updates are a very welcomed event. It’s been catastrophic for us….
PS those same pundits gave a ‘buy bonds’ call before and were 100% wrong. Then they went mute. Now they are pretending they never gave a buy signal before now. Whatever I read…..its been the worst 11 months for bonds since 1788
A few statistics from today:
Preferreds: 480/556 = 86.3% were up, median for all= +3.26%
Babys/terms: 177/204= 86.7% were up, median for all= +2.44
PFF= +4.49%
Canaries (IG, low coupon) median= +5.54%
1) The largest percent gainers for both were troubled, lower quality issues
SENEM, PEI-*, MH-*, STLA/P all with suspended payouts
QVC*, PBI-B
2) Interesting that PFF is up significantly more than the median issue. Best guess is that since PFF is cap weighted, a lot of the large IG bank issues swayed the results. If I was more industrious, I would analyze all of PFF holdings to be sure.
3) A little surprising at least to me, that about 13% of both that traded today were unchanged to down. A Grid illiquid favorite, BANGN topped the losers list on a massive 6 share trade being down -21.4%.
Tex, that is funny as I didnt pay attention. Those were mine! I actually sold most at a tiny profit a few weeks ago on experts market which is beyond lucky. But the generous expert market bastard didnt buy the last 6 shares. I just put an $80 floor on it, and apparently they went at $98.25. Took a loss on those 6 shares but didnt want loose change in my account. Oddly enough on a crazy up day, KTN briefly dropped below $27 which made it a 7% YTM and I bought up a bunch.
“Crazy up day/yanked a bunch of KTN under 27. “
High-five Grid.
Grid, where/how/with whom do you trade on the Expert Market?
Bur, I think grid was just selling which we can all do for expert. Not buy. KTN is on the NYSE.
I am still confused, I thought he bought KTN? “KTN briefly dropped below $27 which made it a 7% YTM and I bought up a bunch.”
he talked about two securities in his post. Buying KTN and selling 6 shares of BANGN. BANGN is the one that is on the experts market and can only be sold by us mere mortals
Grid – I am not sure if I am missing something or what. Just how did you calculate a 7% YTM on KTN. My calculation using two different calculators comes out at roughly 6% YTM if it was selling at $27. That obviously makes a big difference. Thanks
Mav – Don’t forget KTN pays semi-annually so there’s a hefty amount of accrued that needs to be deducted from the $27 price… Try subtracting .7635 from $27 purchase price and see what you come up with. I can’t get to 7% either but it goes from 5.99% to about 6.80% that way after subtracting that amount of accrued which I think should be the right amount depending on settlement date used.
Thanks 2WR. Yeah I missed the semi-annual part. I am so used to quarterly. You are right, when you do that it goes to 6.8%
Guys, I was just eye balling and rounding and should have said so. Trusting 2WRs interest accrual which I wont actually figure, and being my purchase price came out exactly 26.90 ave for 800 purchased shares my YTM says it is 6.913%. Im actually pretty proud of my guesstimate, ha. I bought them in the rain on a Myrtle Beach golf course. When I watch this issue I know my target is under $27 for close to 7% so that is why I bought. As you stated 2WR, the 6 month payment is going exD next month so that usually brings on trade opportunities.
Bur, yes they are correct, Im selling certainly cant buy these. Only a one way ticket, thus surprised I came out so well. With interest rates up there was no value in holding this issue if I could sell and make money. So I just amused myself a few weeks ago to see if they would sell and they sold at my price in like 2 minutes. Except oddly for 6 shares, so I just dumped them.
Grid – In real life, my middle initial is actually “A,” but it doesn’t stand for what you might be thinking it ought to right about now…. ha
2wr, Perfect example.
IRR “exactly” auto-solves for this without subtractions, estimates or calisthenics. It also assumes Grid reinvests proceeds; which he does.
Dropping the mic and saying no more! hahaha.
Hehehe – So does that bond calculator you recommended https://quantwolf.com/calculators/bondyieldcalc.html which shows you the amount of accrued and both the “clean” and “dirty” bond yields so you get to choose…… You know that recurring gag Jimmy Fallon does (or did – I haven’t watched in a long long time) where he plays air sax during the sax solo in Bob Segers’s “Old Time Rock and Roll,” and keeps passing the sax back and forth to members of the Roots Band? This is beginning to feel like that…. Thankfully, at least, “Old Time Rock and Roll” is a great song,
https://www.youtube.com/watch?v=AS5-1kP4jtc&ab_channel=AwesomeZone
😎
Some interesting stats actually already posted at Wikipedia of all places . that puts the percentage move today on the NASDAQ into perspective… Today’s percentage move on NASDAQ ties for the 14th highest since 1971. https://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_Nasdaq_Composite
Also I saw someone quote Proverbs 26:11 today on SA… “As a dog returns to his vomit, so a fool repeats his folly.” Not sure what truly to make of that in relation to today, but I also can’t help but picture JP seeing Mr. Market’s reaction to this minor blip of an improvement in a still way too high inflation environment and have him saying to himself, “Oh yeah, Mr. Market? You’re not making my job any easier…. You think 50 basis is coming next month? I’ll show you!” If JP’s essentially trying to bring demand down because he can’t bring supply up, then he’s probably not looking kindly to this kind of upward wealth creating reaction…. Whatever happened to “Don’t fight the Fed?” Still, nice to see some big winners… Nice to own some stocks that went up 3x faster than the general market.
Hope I didn’t miss the party. Lot of what happened today was the growth and other sectors of the market.
Once the exuberance is over and the hangover hits we probably will see another drop in the market. This will take the preferred down with it, giving us another opportunity to buy. Don’t forget as a slowdown kicks in the last quarter reports will be off compared to last year.
Hope the market is up again tomorrow. Close to breaking even on a couple stocks I want to dump after seeing their performance in a down market.
Charles, My guess: wouldn’t worry too much, we may soon get a chance to pony up to the bar and throw back a few more rounds. I’m with Martin G on this: JP was not ambiguous last week. Subtact the media hysteria since then and nothing has changed; except the market is now even further from where JP wants it to be.
Today seemed to make little sense so sold the last 2 to 3 buy-tranches back to the market at loco gains. We’d been buying relentlessly with strategically lower prices/larger buys straight through the recent price-nadir and at close today 19 of 37 full positions have average buy prices below final trade price.
Wild up day but there’s always an axious seller. Phone alerted to one today and we picked up a partial fill (though a measly 50) on thinly traded CNLHO at 11-year lows of 40.02 as an add to another batch near this price a few days ago. May now wait to see if we can grab more in the 30s.
Despite today’s action, suspect more opportunities are ahead. Still waiting for a capitulation. Does not seem we’ve yet been there. If you’re still in, we’ll be throwing them back together.
Ho! Way to hit that Illiquid, man! Do you have alerts on all 14 of Conn’s pfd issues?
Hi Bur, Tracking all/watching 3 closely.
A super-small offering issued in 1956, prizing these as an add to part of portfolio that are rock-solid, low-drama and QDI. Lower-yielders, though in the forever-bucket of anchor issues mostly insulated from whatever the news cycles, economic environments or tumult the future brings.
Alpha, I’m still in the poker game. Have a bunch of picks lined up and a few where almost there to my bid than like a skittish cat everything took a jump. I have maybe a little too much of SCE-PL but I’m not rolling it over as I bought more as it moved down and its been one of my most profitable picks. My wife’s account is still about 75% cash but I’m in no hurry.
Maybe this is going to be a soft landing for a recession but I have my doubts we have seen a bottom. If we can get 1,000 point swings up in the DJIA then where is the 1,000 point down days ?
It was a LOT more than just growth stocks. Probably half or more of my IRA is common stocks and I would not call any of them pure growth stocks. They are all solid dividend payors, reits, a few MLPs, BDCs, utes, etc. I own nothing that doesn’t pay me a dividend. And they were all up from 3% to 12%
Don’t think I had this much of a daily gain since back in the tech bubble when I had some 6 figure gains on some crazy days.
That all said, while it’s nice to look at the portfolio value, I am focused more on the income stream these days. What the market gives on valuation, it can take back so I don’t get too excited about a day like today. As long as my holdings keep paying me dividends and interest, I am a happy camper. Hopefully all the moves I have made to increase my future income stream continue to pay off
I wonder how great today’s numbers really are. While everyone is partying over the numbers, which don’t consider food and energy, consider that the inflation numbers are down because many people are struggling to get by and to pay for the basics (housing, utilities, food and gas) and have little to spend on other things). I also am skeptical as to whether the Fed hikes are over.
I keep hearing that for inflation to be under control the inflation rate should be the same as the interest rate the fed sets.
They may go from .75 bps to .50 bps – for what that is worth but that still means 4 more hikes to even get to 6%.
By January inflation will not be under 6% IMO
What is worse from a macro economic perspective, there is no real expansion of supply to bring prices down (more energy, housing). So, to bring supply and demand back to even or sorts the only answer for the fed is to destroy demand.
Higher interest rates means people keep money in their pocket if loans and interest on their credit cards are too much for their budget.
Better yet, if unemployment goes up, no jobs is a great way to eliminate demand.
The fed is really a one trick pony, and they may say they have tools (plural) to fight inflation but they don’t. They only have one blunt path forward and it can be the most destructive one.
After todays run up I’m most likely going to add to IG issues in the 5-6% range and plan to hold them as long as possible. 4% par coupon issues from the past year are most likely not called for a long time. I’ll sit and collect and drink my whisky.
Stay safe everyone
Pickle,
Remember that the inflation rate the Fed is focused on is the Core PCE and not the CPI that mainstream press focuses on. It’s currently 5.15%.
https://ycharts.com/indicators/us_core_pce_price_index_yoy
I stand corrected
two more hikes to get to target fed funds rate
thanks
cheers
Can’t recall the last time I came out almost 2.6% ahead in a day- that’s on the 49% of the portfolio in stocks
Green almost as far as the eye can see… but, I think we will be backtracking, ie:
it’s just not over.
But- I’ll take it.
Isn;t it nice for a change Gary. I had around 3% on equities–can’t remember when (or if) a 1 day gain this large occurred.
HELL of a DAY – CONGRATS to all us longs
never saw as much green on my accounts just a little re inforcement i’ve been headed in right direction. only problem I still have cash and all my watch list has dried up.
Same Here Mike
Just a gut feeling:
There are trillions of dollars on the sidelines waiting for an excuse to get in. Some of them had it today.
Along with short covering.
The hedgies going short had their faces ripped off for like the 10th time this year. The shorts keep getting hammered and hammered.
Fredson–you are correct that there is plenty of money looking to get in–and man did they get in.
For every buyer there is a seller. the net cash employed today was the difference between the value today verses the value of all investments yesterday. Yes, much interest but really this big a move on very little change in environment. Take it but look for a retreat soon.
Preferreds and baby bonds are soaring today. Days like this remind me why it is not good to be sitting on the sidelines….these markets can snap back incredibly fast due to their extremely low volume compared to equities. Expect follow through in the days to come. Still many bargains out there since we have been dragged down so low over the past year.
Chris–of course today I was happy to have little cash–of course there is ground to be made up.
Oh, I have a ton to make up as well, but still feel good about the income securities I have…though HCDIP is certainly causing me heart break, lol. I also recently dumped a few issues with deteriorating financials like FATBP and even swapped into NREF-A, which is much better positioned, imo.
Time will tell, but I think we are on a leg up based on the recent inflation news.
Chris – we’ve all seen the studies against trying to time the market, that show that if you miss like 10 big up-days a year, you miss like 80% of the annual gains.
These aren’t the exact numbers but you get the point.
I can’t say I remember a 5.44% up day for many years.
We’ve also seen how fast they can obliterate prices. That’s why most of us are still way down. Haven’t lost anything until you sell. That’s why positions should be taken based on an individuals goals and risk tolerance.
Today has been a good day for flipping recent purchases.
Thank you Mr. CPI
I’m thinking that the massive rally (both in fixed income and equities) goes well beyond what makes sense by the slight dip in expected inflation. If you look at the inflation chart, it’s impossible to come to the conclusion that inflation has topped out and is now on the way down. The rally is mostly computer driven as 70% of trading volume is now that way. It just feeds on itself. I hope inflation has peaked. Perhaps it has, but it also might stay at close to current levels for quite some time. For me, there’s nothing to do but sit tight and see what transpires. I have plenty of cash, but am hesitant to buy. If I sell into the rally, I would still be suffering large losses. I think Il go to the gym, relieve some tension and take a look at the close.
“The rally is mostly computer driven as 70% of trading volume is now that way.”
Meaning it is not real, durable, clever or meaningful?
I would say that everything now is mostly computer driven, rallies, drops, steady markets, crazy, nice, nasty, etc, so attributing a rally (or any other movement) to mostly computer trading is not saying much, as though that gives evidence that the rally is not real (as its not human, but computers), but I think that saying this is sisyphean , because the market is the bots, and a rally is a rally. When the market drops after a rally, that is also computer driven.
In the past us humans beating the market was the goal; now we should aim to beat the bots (which dictate most of the market), imo an increasingly difficult goal. Maybe I will still be alive when it will be compelling to fire my financial advisor and just use an app in my cellphone (which btw will do the trading automatically too, thus freeing my time to do whatever. It will probably also do my taxes!).
III investing is attractive to me because it apparently stays somewhat more distanced from the bots.
“sisyphean”
Had to look that one up; denoting or relating to a task that can never be completed. “the pursuit of perfection is a Sisyphean task”
Learn something new everyday here!
windyducat,
It comes from the greek mythology where Sisyphus was punished and he had to carry a rock uphill every day, but the rock rolled back down, so he spent all his efforts but never accomplished the goal — similar to what happens to many of us trying to invest but seldom reaching the goal of beating the market. Albeit sisyphean, for some of us, it keeps us busy playing the game (sometimes at a significant cost), with hope dying last. 🙂
Gee, just 20 more days like this and I will be back to even!
The inflation number should be a lot lower than what they are reporting since a significant number keeping the rate as high as it is due to a .6 gain in real estate owner implied rent increase. Does anyone around the USA show that real estate is increasing in value to justify a .6 gain for the month? Clothing has substantially fallen along with other categories. Food and energy are not calculated in the calculation. Thanks to Samuel Bankman Fried and others like the Ontario Canada Teachers pension fund, the crypto market as a whole has lost an estimated trillion dollars of investors money. Spending by all the young guys in cargo shorts trading crypto in their basements should come to an end further cutting spending and inflation!
We will hodl crypto in our khaki cargos till the day we die… b/c at this point there’s no use in selling ha, well, some ppl can’t sell b/c it’s locked on bankrupt exchanges.
Woke up from a Red-eye flight to stocks surging. Like stated in a comment in another post, who would have thought there would be so much celebration over inflation still being over 7%. I’ve have a few dollar bills left until my 3-month Treasury tranche is up mid-January. I may go ahead and spend the last bit of cash I allowed myself on several A1/Baa1/2 bonds that are still resting at October lows. If today’s # truly is cause to pivot, then I re-entered the market (Oct/Nov) at a swell time, yet still holding too much cash due to Covid Crash PTSD. No worries tho, CD rates often trail peak interest rates by 2-3 months so I could likely capture mindless risk-free returns that would still be losing to inflation. Oh, the irony. Eh. It’s one number today. We shall see as the day may give back gains, and Powell may bless our nation with higher rates in Dec.
followthemoney–rents are skyrocketing in the small income space–i.e. duplexes and their values continue to rise.
Yes there are still many atrocious factors to consider which is why I locked up a tranche of short-term treasuries. With only 5k or so left of cash I was willing to part with before next year. I dumped it on some Schwab & BAC bonds @ par for 6.xx% callable in 2024. My shortest maturity dates by 15 but tired of doing research for everything else I purchased recently so time to keep the apps closed till January.
The inflation numbers are past history, not what the current market conditions are. That is the real problem and why the Fed will most certainly over react with higher rates. They will never learn that what they do takes months to work through the economy. The same reason they were to slow to start the rate increases.
Gary–hey maybe this is the start of something big!!