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‘Dazed and Confused’?

I watch the markets trade pretty closely–as I have done for over 50 years–going back to the days of waiting for the daily delivery of the Wall Street Journal so I could see ‘old news’–then in the early 1980’s moving up to some very expensive dial-up data. Now we have second to second information flooding in–probably too much information. What is one to think?

The last couple weeks have seemed to show a market confused – are interest rates going to keep going higher? Can a few tech issues continue to move the S&P500 ever higher? Does it even matter when the Fed makes a cut to the Fed Funds rate? The economy seems to be slowing a little—a little, but not enough to slow inflation much or to panic the FOMC into rate cuts. I think it is fair to say Jay Powell is set in his plan to ‘stay the course’ until we see more economic weakness and I don’t see that happening in a major way anytime soon.

Our accounts creep slowly (very slowly) higher, but driven purely by interest payments on CDs, bonds and baby bonds as well as dividends on preferreds–NO juice left for capital gains. It has been a darned flat marketplace with the average price of $25/share preferreds and baby bonds at the lowest level in 8 weeks with average prices trapped in a 20 cents range (on a weekly close basis).

On Tuesday we had the JOLTs report (job openings and labor turnover report) released and the number of job openings rose a bit from last month–to 8.1 million from 7.9 million the month before–BUT the trend is lower–one month doesn’t make a trend.

Today we get the ADP employment numbers–now more important than in the past–taken more seriously by many, maybe more correct than the ‘official’ numbers to be released on Friday–who knows for sure.

Markets will close early today–noon central time and will remain closed until Friday when we will have the ‘official’ employment numbers released. Lets see if we get some slight slowing in employment growth. Let’s see how markets react!

28 thoughts on “‘Dazed and Confused’?”

  1. I hesitate to commit more of my cash to rushing out to buy preferred and BB’s because I have the fear of missing out and not locking in a yield before rates start dropping and new issues come out with lower yield or existing stocks go up in value. I don’t know what will happen. On one hand I see the possibility of easy landing, not a hard one but either way a recession. I expect (everyone) is expecting at least one rate cut maybe two but what about 7 to 8 months from now?
    I have been holding back waiting for something to jolt the markets and the opportunity to scoop up some deals. I’m fine with earning 5% in a MM fund, but like a lot here I would be happy to snag a good quality preferred and collect 7% return. So I am trying not to get impatient. I have just been rolling over a few holdings. Today I sold my RWAYZ hate to see a 8% go but I respect others here who mentioned concerns about RWAY I am actually hoping to pick the BB back up at a lower cost if the common has issues.

    1. Sorry, I’m overlooking anything on III re concerns about RWAY. I’ve seen a couple of notes on SA. Could you elaborate on the concerns you’ve seen? Thanks!

    1. I researched, and ultimately purchased, a 3-year and a 5-year MYGA. I’m in Florida which has good protections for annuity holders. I sacrificed a little yield in order to purchase from highly-rated companies. The rates were considerably higher than what was available from CDs with the same maturities.
      IMO, Bea is the poster who has the best info on annuities.

      1. Pickler is right-on! sacrificed a little yield for better rated company. I looked at your link, losingtrader (love that moniker! like bea the bagholder! lol).. out of ins 10yrs now and I had no clue who Corebridge was…well it is American General Life! the AIG life co spinoff. Truly a quality name. The 3yr 5.65% rate is very competitive w what other annuity brokers are offering for B++ rated co’s and to me seems like a good offer for a portion of your liquid cash- of course keeping a nice buffer in emergency funds etc as you know.
        American General Life subsidiary of AIG was not ‘tangled’ other than by association w parent AIG in the GFC 2008-9 mess. So ‘Corebridge’ is a quality name. Midland Natl and PacLife are other solid co’s. but the rate slightly less, if I was buying I’d go w Corebridge. To me for ‘safe’ money allocation buying the 3yr guarantee rate/principal is like a solid bb or pfd like GAM-B in our universe.
        Anyway hope this helps a little; I am not a financial advisor, no ins license anymore either/ so DYODD. Bea

        1. I notice from looking at North American’s financials, they hold $50 billion in avg BBB bonds. The insurer is rated A+, I assume because insureds have priority and there’s quite a bit of equity to fall back on , as well as earnings/ My dad has been in insurance 70 + years and isn’t a big fan of relying on state guaranty funds in case the insurer fails. That said, if HYG dumped, you know the insurer isn’t much better off

          1. Yes waiting in line for disbursement for failed insurers from a state fund which is funded by ‘fees’ on insurers..well no one wants that, same as we don’t want to wait in line for FDIC or SPIC action. Long Term care insured holders have seen this the most in recent years where co’s went and now state plans provide some coverage.
            I am sure like many on this site- when rates were so low, insurers had to reach for some yield to fund long term actuarial obligations of policies. Sammons, a private company, owns Midland and North American. Comfort level is important when giving over 100k or more to any company.

            I think many would be surprised what BBB bond names are these days.. Verizon, Oracle, CVS, Energy Transfer, ATT, Dow, Duke Energy, Waste Management… a true cavalcade of ‘stars.. Bea (edit) https://www.ishares.com/us/products/318688/ishares-bbb-rated-corporate-bond-etf/

            1. Bea, I just recently became aware of annuities that meet the requirements of the Pension Protection Act. As I understand it the annuity must be purchased with after-tax money but distributions are tax free once a physician declares a person requires qualified senior living facility. The state of NC carries $300K in protection coverage for insurance failure. I am trying to determine TN protection.
              What is your experience/opinion on these annuities? TIA

              1. TNT, I am not sure about those circumstances and again I no longer have an ins license or E&O insurance or state specific knowledge. I am not up on being in skilled nursing and the tax implications thereof..

                one concern I have about those w limited assets is going into a LTC facility and then the assets/money runs out and a person has to go on Medicaid.. more common than you think in the world of 10k+ a month for LTC in a decent facility for room and board and expenses.

                Money put into an annuity to try to avoid the Medicaid 5yr lookback is still considered ‘money’ and opens up a can of worms especially if the annuity has no withdrawal provision.. https://annuity.com/annuities/the-impact-of-annuities-on-medicaid-eligibility/#:~:text=Medicaid%20Look-Back%20Period%3A%20It%E2%80%99s%20important%20to%20consider%20the,to%20reduce%20countable%20assets%20to%20qualify%20for%20benefits.

                I would recommend meeting w an advisor w a big firm like MS, Janney et all who has ins license and specialists in this area or elder law attorney of reputation here. Sorry I don’t have more help here.

                I think this is the site you want for state insurance protections in the event of bankruptcy etc. https://www.nolhga.com/factsandfigures/main.cfm/location/statedetail/stateID/44

                My personal expertise was in life/estate planning and wholesaling said to advisors to be honest and I always passed off Annuity stuff to specialists at the firms I worked for. a LOT to consider for sure. You are on top of things I am sure you will get seek out the best help!! take care. Bea

                1. TNT to further expand on planning LTC/SNF needs w Annuities, there was an article this AM on Yahoo on some of this; https://finance.yahoo.com/news/nursing-home-savings-250k-ira-133540731.html

                  one of the links was on Medicaid Annuities

                  https://smartasset.com/retirement/medicaid-annuity.. using your money to fund nursing home pmts.. complex things and again I recommend a specialist in this area or planning dept of a major brokerage like Morgan Stanley or Janney, Baird etc. or an Elder Law atty. The real key is getting it done while healthy and trying to avoid the 5yr lookback for Medicaid if your assets are somewhat limited.

                  Sometimes we need a professional of course! sorry to go on about this but w a 90 yr old mother I am caring for at home w limited assets it helps me to go over all these nuances. Bea

                  1. Bea, Many thanks for the information. I will reach out to advisors and such. I fear bias as each professional normally has allegiance if not financial interest in these products.
                    Your mother is blessed to have you as a daughter as I am sure you feel blessed to have her as your mother. Peace be with you.

                    1. Bea and Tntownda,

                      thanks for this discussion. It is enlightening and it prompts me to delve into the subject.

      1. Yes Gary the MYGA annuities are direct obligations of the corp’s you buy them from. Once you buy them it is you and the insurer.

        That said, Brokerage firms like Fidelity and Schwab ‘broker’ annuities and get a fee for selling them just like an independent advisor, annuity specialist firm would or insurance agent. Most advisors these days have ins licenses..MorganStanley folks, Janney et al. They can help you shop too if you use one. I wholesaled and Janney was one of my biggest accounts. They have to be competitive to keep your biz of course.

        But they would not come under your SIPC coverage at the broker. Again direct obligations of the insurer. and again not advice, DYODD but hope it helps. Finally ‘we’ have options w decent returns somewhat safely vs yrs of having to push out into risk. Bea

  2. Tim …Dazed …but, so many A rated …preferred yielding 7% +…2-3 dollars below Par,, still shopping for bargains. ..Georges

    1. Georges, take S&P and Moody’s A ratings with a understanding that those can change with market conditions and companies business conditions. These ratings can also lag what’s actually happening with a company.

      1. Charles, Also like to look at an issue’s rating history – as in two points of data may indicate a trend. Not often one goes from A to C in a single step, nor C to A.

        BBB to BBB- is especially problematic (for me anyway) as the next rung down (BB+) triggers forced selling by many rules-based institutional holders.

        1. Thanks Alpha, appreciate that. Yes I have been sluming as low as BBB- to BBB+ myself the need for speed, excuse me. The need for yield. I know you are a investment grade guy.
          My common sense tells me there’s very few preferreds and Baby bonds that are giving me a 7% return and are below par with a chance of capturing some capital return. Even playing in Grid’s playground of illiquids I been seeing 6.2 to 6.3% return. And a lot of those are not rated investment grade but we know they have been paying a dividend for our lifetime which to me makes them investment grade.

  3. Still possible for a rate cut to happen end of this month.

    I would suggest for some who want to play it safe to lock in yields soon.

    1. Not seeing a rate cut in July. Seeing first drop in Sept. then Dec, Perhaps banks are seeing it too. Nice CD rates are less nice. Recent fat finger CD mistake went from buyer’s remorse to regret about not buying more. Seeing short call protection (~3 months ) on high teaser rate CDs where ~6 months was findable before. JMO. DYODD.

      1. In my view, it doesn’t really matter whether its July or September. You should be locking in 6 month – 2 yr yields right now.

  4. Tim, I agree with you.
    My accounts are growing at a 5.35% clip.
    I see the CD yields are falling fast. 😒
    If this trend continues, I’ll have to adapt.
    I have big CD’s coming due by July 31st and I may have to start buying Term Preferred again.
    I’ll be reading the boards closely these next few weeks

    1. FYI…
      Still a working stiff, and have quarterly tax payments…
      For my short-term cash management, I’ve been laddering short-term Bonds at >5.25% state tax-free.

      1. Quarterly Tax Payments did not go away as I retired. Just the Social security will get you close to paying a little tax. If you haven’t socked everything away in a Roth the RMD’s will eventually add to your taxes owed unless you have very little in retirement, which I suspect is not the case, so you may have to get used to those quarterly tax payments! I suspect most of the III’s here did very well in their working careers and also invested wisely overall. Myself, I have been converting the max every year from my conventional IRAs to my Roth to the point I have more in Roth now. That means I have quarterly estimated tax payments. My thoughts are taxes are historic lows and have nowhere go except up. However, our politicians may go utterly mad and whack them even more while spending like a drunken sailor after at sea for months at port. Whoops! I may be violating the no politics rule! I will give myself ten lashes as punishment……

        1. dj,
          I know someone who has extra tax withholding on his annual (December )IRA withdrawal.
          Enough tax withholding to make up for the RMD and other income.
          It works for him since the IRS counts tax withholding on 1099R,W2’s as timely paid.
          Besides the benefit of collecting interest on his quarterlies, it requires one action.
          Does any III concur on that?

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