Category: Mid Day Ramble

We have lots of forecasters (guessers) that are forecasting Fed Funds rate hikes, pauses or cuts—of course not a one of them has a track record to prove they have a clue as to what is really going to happen.

But today we can see with our own eyes that the 10 year treasury is up another 7 basis points to be trading at 4.92% and there should be no doubt it isn’t pretty in the perpetual preferred and long dated maturity baby bonds. I feel damned fortunate to hold lots and lots of CDs and treasuries—and a much reduced (from normal) position in perpetuals and long dated bonds.

I am not tempted whatsoever to buy anything today–it may be 3 months or it may be 9 months before this whole story plays out and CDs at 5.7% are looking pretty damned good. I’m watching for higher rates in CDs as it looks like we may be relegated to that arena for a while–of course who really knows.

So we have the ‘beige book’ being released in 30 minutes or so – maybe it will boost stocks and bonds—or of course maybe it will slap them down even harder—who knows, but you can be relatively certain that we will have a market reaction.

Wow – it is just occasionally we get quality issues absolutely hammered, but today is the day. We have quite a few issues down 4%, including baby bonds and preferreds from DTE Energy (DTE) and CMS Energy (CMS)–the saving grace for me is small position sizes for these types of issues.

Additionally we are seeing the same type of losses in some of the community and regional banker issues. CNB Financial (CCNE) preferred (CCNEP) is off almost 5%.

I’m certainly not selling into this fall–but of course I am not buying either. As boring as it is to do nothing for now it is the right thing to do. My portfolios are off .3 or .4% but the world won’t end with those losses–but it certainly hurts.

I guess the best way to look at this pain is that it is preparing us all for future true bargain hunting.

We are very close to the point where most house sales will come to a halt. Yes there will always be some activity because sometimes folks have to move–for jobs etc. But from my close up view in Minnesota, what was already a fairly slow market is slowing further and properties for sales are remaining on the market longer. Prices are high–and coupled with mortgage interest rates that have moved up 20 basis points just this week means the moment of truth is just about upon us.

Today I am working on 2 properties that are sales—both family related (sold by parents to children or grandchildren), so they are special circumstances. Also I have a plate full of orders that are all home equity loans–yes there are a few lenders that require an appraisal for a home equity loan versus just going off the tax assessed value or some similar value. I have no idea what interest rate they are paying–but it would seem those will grind to a halt soon as well.

So my point is that the marketplace may well take care of slowing the economy without a need for incremental Fed Funds rate hikes. If builders in our area aren’t slowing construction they are pretty foolish–it looks like a good year to ‘take the winter off’—we’ll see.

Well interest rates are popping once again–trading around 4.62% which is just off of the high for the day of around 4.635%. Looking at my accounts the losses are minor — mostly attributed to the more modest dollar holdings of fixed income preferreds and baby bonds. Definitely is a good day to be watching markets and not participating in an active way.

Certainly it is not helpful that west Texas intermediate oil is up $3 bucks at around $93/barrel—this is going to make the trips to the pump kind of painful–just as we were backing off from $4/gallon a few weeks ago.

Just as I am typing this the S&P500 is getting a really good bounce – time for game playing and algo movements–with interest rates popping I don’t think equities are going to move up too much–once the game playing is over.

Going to sit back and see how the next 90 minutes plays out.

I’m not even hunting for ‘bargains’ today–what is the point of looking to buy unless you are locking in some short maturity baby bonds or term preferreds?

Income issues are pretty much all red today–fortunately only by nickels and dimes for the most part. The 10 year treasury is at 4.55% and in my mind is going to go higher – whether it be from stronger than expected economic news or from the massive supply from the treasury.

I see JPM still has a 5.75% 1 year callable CD hanging out on eTrade–I’m not even interested in that since my modest cash levels are getting 4.98%–which isn’t to shabby while ‘waiting’.

Housing numbers were soft today–but I wouldn’t call them a disaster–675,000 new houses sold versus 695,000 forecast. Consumer confidence softened a bit–but honestly all things considered 103 versus 105.5 expected and 108.7 last month isn’t really terrible–with gas prices, interest rates and the Washington clowns you would think folks would retrench further.

Well let’s see how the last 3 hours play out today — with the S&P500 down 1% anything could happen.