Category: General Commentary

Nomad–if you are out there let us know. Many folks are wondering if you are ok since we haven’t heard from you for a while.

Todays near 3% loss on the S&P500 felt pretty darned calm. After opening lower it just kept drifting lower and lower–no panic, just lower.

All of our utility and CEF preferreds and baby bonds remained essentially flat today, while almost all of our junkier issues lost a percent or two–but we are not deep into the less than investment grade issues yet so happy to see them move lower.

I didn’t do any investing today–I hold a modest position in Proshares Ultrashort ETF (SDS) and actually had an overall tiny gain today–a few steak dinners. At this point I am only concerned with ‘hedging’ the junk issues I hold–the utes and CEF issues have been pretty rock solid.

The selloff today and yesterday were essentially what I have wrongly been looking for the last couple of weeks. I hope that there is a realization that the economic damage being done to the economy will be long lasting–no need for investors to panic–just slowly sell off.

I will continue website work this weekend–which I do to a small degree everyday–adding more data and making corrections (never ending it seems) to spreadsheets and individual security pages–not going to spend much time searching for ‘buys’–plenty of time for that during the week.

Yesterday, and again today, we are seeing a slow realization of the severe economic being done in the U.S. and globally by the Covid-19 pandemic.

Today equity markets are off a couple percentage points–but still 20% off of the March lows. Yesterday opened weak and then slowly gained ground until the end of the day when prices sold off again. Today we see prices heading lower, but in a relatively orderly fashion.

Today we see that the congress is near approving another $500 billion aid package and the news that they were very close to approving the package did nothing to boost share prices. This would seem to say that investors are finally starting to accept the notion that we are going to see plenty of pain ahead–more than was accepted earlier.

Now as prices move lower–in a relatively controlled fashion investors will have to make decisions on whether a bargain is a bargain–or whether they will have to wait for the BEST bargains–there is no answer of course. This means one should ‘leg in’ to what they want to own.

I see the investment grade utility issues are off around 1% today–is that a deal? Or will prices move another 1%, 5% or 10% lower?

Some of the mREIT preferreds are off 1-3%–again are these bargains? If you bought them last week 50 or 75 cents higher do you want another bite at the apple today?

I will be mainly watching again today–but it is our belief that we will see lower prices ahead–maybe next month? On the other hand one never knows–if you believe that equity prices being only 18% below their all time highs is presenting bargains then I guess one should buy. If you believe 25-40% below all time highs is more reasonable then one should wait.

The equity markets are up 11% this week before todays ‘party’. I don’t understand it at all–no surprise that someone who sees the chaos going on couldn’t understand stock prices moving toward where they were a month or two ago. Maybe I am all wet–and should be 100% invested at this moment, but I am fine with 60-65%–I think I will have a chance at lower levels.

At some point markets will wake up–I think–but not now. Investors need to use the levitation to continue to get positioned—maybe you have some issues that you aren’t comfortable holding—a good time to lighten up.

A continuation in nibbling is still the plan. I couldn’t help but add more of the Affiliated Manager 5.15% trust preferred issue (AATRL) yesterday–I am overweight, but the 8% is too attractive to me.

The issues I mentioned Monday and the smaller banks I mentioned yesterday are still attractive–for nibbling. Excepting the AATRL issue I noted above it is all about nibbling.

The sharp rise in equities seems to be pretty premature–but markets do what they do and if investors think the pain of Covid 19 will be gone in 3 months they are going to be buyers now.

Unfortunately the pain is just beginning and will likely be with us for the next year-maybe more. Certainly some sectors will be living with the financial repercussions for years.

Many preferreds and baby bonds had big moves yesterday and so I will do some buying today–I am 55% invested and will add 5% more today. The 55% I have invested are almost all investment grade utility and CEF preferred bought at nice discounts–now I will spread out into some junkier issues.

Here is some of my shopping list for today.

I am looking at buying one of the Annaly Capital (NLY) preferred issues giving current yields in the 10% area.

I am going to buy some Brookfield Property REIT (BPYUP) preferreds – BPYUP with a current yield in the 12.49% area.

I will add some more of the American Homes 4 Rent (AMH) issues–in the 6.75% current yield area.

I am buying some Compass Diversified (CODI) preferred with current yields in the 11.41% area.

I have already been trying to place some orders and the spreads are so wide as to be ridiculous–but I am certain by days end I will have bought some of the issues mentioned above–if not all of them.