Category: General Commentary

Finally we get some news we have been waiting for on Tariffs–the claim that the administration has a number of tariff deals well underway–of course the China deal has gone no where at all. No matter what happens here my understanding is that the 10% base tariff will remain in place so there is still potential for inflationary price hikes of an unknown amount.

Additionally it would appear that DJT is backing away from his incessant threats to fire Jay Powell. We all know this can change in a nanosecond, but for now it is positive news.

These events have totally fired up investors – for now and honestly if this direction continues we may see some lower interest rates, but we need to see inflation news before Fed Funds is lowered–the Fed is going to stick to their guns. The key is the 10 year treasury which has a yield that is down 11 basis points right now at 4.29%.

I took the opportunity presented to make 3 buys–2 yesterday and 1 early today.

I bought shares in the following issues.

WR Berkley 5.7% baby bonds (WRB-E)

UMH Properties 6.375% perpetual preferred (UMH-D)

GAMCO Global Gold and Natural Resources 5% perpetual preferred (GGN-B)

Obviously I am looking for capital gains with these purchases, but they are 3 issues I am comfortable holding even if the capital gains don’t come. It is noted that the UMH Properties is not a high quality issue, but manufactured house parks are good businesses to be in–generally good demand through good times and bad so I am comfortable with the lower quality.

Well, let’s see if we can hold these levels in the equity markets. Accounts are nicely green right now, and I would be happy to see things hold.

For no particular reason the market is grinding higher today–buy the dip I guess.

Interest rates are pretty steady in the 4.40%, but when we get a nice equity rally it lifts all boats so our accounts are a little green right now (not much).

Did you see the earnings from WR Berkley (WRB) last night? Not a record this last quarter but pretty darned good. This is an insurance company that is extremely well run and their ratios of losses remain at very nice level, although up a little from recent numbers. I hold a small position in the WRB-E 5.7% baby bond—and just may add a little bit to be as time goes by—average in to a larger position–currently trading at $21.50. Decent capital gains potential or even a ‘call’ if we could get rates under 4%–maybe.

Well let’s see how the next 4.5 hours go–maybe we can get through the day without market disruptions caused by various politicians.

Nothing pre market today indicated that the S&P500 would be lower by 2.70% (right now), but markets are taking the administration seriously about getting rid of Fed Chairman Powell.

At about 9:40 a.m. (central) DJT tweeted–

“Preemptive Cuts” in Interest Rates are being called for by many. With Energy Costs way down, food prices (including Biden’s egg disaster!) substantially lower, and most other “things” trending down, there is virtually No Inflation. With these costs trending so nicely downward, just what I predicted they would do, there can almost be no inflation, but there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW. Europe has already “lowered” seven times. Powell has always been “To Late,” except when it came to the Election period when he lowered in order to help Sleepy Joe Biden, later Kamala, get elected. How did that work out?

And down equities go–more.

We can debate Powell all day long–good or bad–but these tweets could be ended, although that is not going to happen. In the end the uncertainty is what drives the markets and we have plenty of that to go around.

Interest rates are really not moving on DJT tweets–but right now the 10 year yield is up about 4-5 basis points. Preferreds and baby bonds are ever so slightly red–but really hardly moving. Let’s see what the afternoon brings.

The S&P600 fell last week in a holiday shortened trading week last week–by about 1.5%.. Honestly not a hugely wild week, but the level of volatility in the marketplace is far from over as we still have tariff issues to deal with, then we have lots of budget issues to deal with. Then we have potential fireworks being caused by the administrations differences with the Federal Reserve over interest rates–and the independence of the Fed.

The 10 year Treasury closed the week at 4.33% which was 16 basis points lower than the closing treasury yield the previous week. The economic news last week was not of major importance and for the coming week we don’t have news that has historically been given a lot of importance, but in the current environment each piece of data is being scrutinized very closely and one can’t predict when news of a minor nature previously is assigned a high level of significance. Leading economic indicators is released today with the purchasing managers index (PMI) and durable goods orders later in the week have not been important in the past to markets–but now? We do have consumer sentiment being released on Friday–and personally I think this is an important indicator given that the consumer drives the economy. We’ll see.

The Fed balance sheet was basically flat last week. You can certainly see that the run-off has slowed and in theory this should be slightly supportive of somewhat reduced pressure on interest rates.

For a change we had the average $25/share preferred stock and baby bond move higher in price last week by 34 cents. Investment grade issues were up 17 cents, banking issues higher by 36 cents, CEF issues 8 cents higher, mREIT issues higher by 43 cents and shippers were 23 cents higher.

That is exactly what I have been doing this morning–without any real success. Yes I am fussy about any buys right in here–we have no clue what is going to happen in the month ahead (or even the week ahead) so how can one go crazy with buying. To be the hero you go all in–but you darned well better be right or you will be the zero–and so will your accounts.

I reviewed all of my holdings because that is where I most likely would add at this time–if I was going to add and I certainly could if a dump happened with my holdings. Part of the problem I have is that I have at least 3 issues where I am overweight–and I feel good about them, BUT it only takes 1 bit of fraud or some other unlikely event to torpedo any position so I really am avoiding making more buys in these 3 issues. The issues are–

XFLT-A XAI Octagon 6.50% term Preferred

GGN-B GAMCO (Gabelli) Global Gold and Natural Resources Gold 5% perpetual

HNNZA Hennessy Advisors 4.875% baby bond

If we had a inkling that interest rates would be stable or heading lower the baby bonds from Affiliated Managers and WR Berkley would look mighty tasty for capital gains potential. But not yet in my mind, although a slow leg in to a position might be reasonable.

There will be no trading on stock and bond markets tomorrow – gives everyone a rest from wild movements. Today with the exception of United Health (UNH) markets are kind of quiet of course I said this yesterday before markets imploded so we will see what the next few hours brings.