Fed Chair Powell set a hawkish tone in his Jackson Hole presentation which started 4 minutes ago.
Of course equity markets had set themselves up for disappointment by thinking the Fed would ‘pause’ or slow down rate hikes based on a month or two of just slightly weaker economic news.
The S&P500 fell about 1% as Powell began speaking. Interest rates basically didn’t move.
I think the bottom line is the Fed will hike at 75 basis points in late September.
In the 10 minutes it took me to finish this the S&P500 has jumped–Powell’s speech is over (very short).
Look at historical metals charts over on Kitco http://www.kitcometals.com/charts/aluminum_historical.html
almost every one was in a downtrend this year and a couple months mixed. Demand is trending down, along with bottlenecks in supply and transportation costs. Large users like US and China demand has slowed. Suppliers were out of stock or not knowing when material would come in. Now one of our suppliers called to say the 24oz copper sheet we were pricing came in early. But, we were pricing not ready to buy. Same with 24ga galv. just received a order that will clean out our sheet stock, but we will wait to replace.
Odd fact, cost of Tin is 1/2 of what it was at beginning of the year. Interesting Chart. We can see what we want to see in it. Looking at 25 yr seems to follow the recessions we have had.
https://tradingeconomics.com/commodity/tin
Heard on the news D.R. Horton Builders says new home sales have dropped 60% and they are offering incentives to move inventory.
The market might be forward looking and focused on rates but I would watch for some more drops as we go along
Once again I recommend you keep above market sell orders on any positions you would NOT mind parting with. Best example from today is CCNEP, a $25 face, fixed 7.125% non-cumulative bank issue. The last three months in has traded in the range of 25.40 to 26.40, which is pretty strong considering the downdraft back in June. Today it traded up to 28.85 on one share. A 100 share block traded @ 28.31. 1,337 shares >=27.00. Not enough to buy that new Tesla but woulda bought a steak dinner or two.
We did not own CCNEP in any account so did not participate in any of these trades. We did sell a few shares on another issue that irrationally spike higher.
I only have 70 shares from partial fill so haven’t been following it closely and didn’t notice. Gotta take a look Monday.
When Winter comes Games of Throne style, we will see where inflation and these productivity indicators land then?
I’m somewhat bearish.
So much for “zero Inflation” !
If the market sets treasury rates in a global open environment, somebody explain today’s yield curve:
https://www.ustreasuryyieldcurve.com/
Just sayin nuthin’ makes any logical sense, it’s an indicator of confusion and nonsense in relation to inflation and real investor actions in a free and open market.
“You don’t need the weatherman to know which way the wind blows…”
Maybe Bob Dylan was wrong about that. Chesa Boudin obviously needed more then two Weathermen to save his career.
I’ve always leaned more heavily on his line: How can everyone be right if everyone is wrong.
It seems to capture everything from talking heads, to the Fed Futures Rate to the Market overall
While we’re at it with Brother Bob I could have chosen , “…everything is broken…: Happy Weekend to All! , JA
If the market sets treasury rates in a global open environment, somebody explain today’s yield curve:
Use that same tool and go back to 8/26/81. You’ll see the same crazy inverted yield curve. Even more drastic though. But good lord I wish I could lock in 14.6% on the 30year.
Surprisingly little damage in my preferreds today given the magnitude of the market move. I would of expected carnage in the fixed income preferrds.
An interesting IInV way to see how the market views rates few years from now and later is to see where the two fix-to-float preferred shares of Athene trade.
Today ATH-A the 6.35% coupon that is callable and floats in 2029 is 2.2% lower but the ATH-C the 6.375% coupon callable and floats 9/2025 is lower just 0.3%. Former floats on 3moth LIBOR+ 4.253 and the latter on 5 year treasury +5.97%.
My personal view has tilted towards trying look to buy more and more of fix to floats, especially those that reset rates based on 5 year treasury and do not reset every 3 months.
Would be interesting to hear what kind of preferreds others here are looking to buy in the near future (or waiting to buy).
I do own both though more of ATH-C (having sold most of ATH-A at nice profits in May/June)
M, I waver between, I know nothing and to not bet against Fed this time. Especially since QT has yet to begin. Mostly past month or two tilting towards 4 month CDs and 8 week Tbills (penalty box, time out money), shorter 2-4 year bonds, and owning some “live floaters”. Decided I would rotate out of CUBI-E into CUBI-F, but now have more F than E and didnt follow through on selling many E’s like I should have. Bought 400 more F’s today at $25.25 and only sold 100 Es at 25.61 today. I cant keep all of these so I will have to pare some soon at some point. Have the usual suspects of NSS and NS-B. Bought a chunk more for me of RZA at $25.28 this week. Have a full position of SLMBP. This little Sallie Mae stinker could be on the cusp of 10% by earlier next year, and unlike the others is not par relatively anchored. Also own smaller amount of the insurer nasties SPNT-B and ARGO-A. Up over a buck on the former including divi, down a buck on the latter. Like the others, shameless yield chase with back side help of a higher adjustment when it comes into play down the road.
Would like to get ALL-B floating note, but I need a buck or more drop to buy there. The 3% plus adjustment isnt getting my financial loins stimulated being its still hovering near par still.
Would love a perpetual fixed rate sell off. It already is occurring but I need more to reenter those again. But Im watching a few.
Dont fight the fed is banging around in my head though..
Grid..I know nothing either, and it is hard to second guess “The Man”, but I wonder if they will go easy on QT to purposely keep the yield curve inverted and thus keep recession expectations elevated, causing a cooling in hiring and business and purchasing activity in general, in an effort to reduce inflationary pressures without tanking the economy too much. I am hoping long rates will go up substantially and present us with some great investment opportunities, which I guess is why I am expecting them not to
Lucky, we dont necessarily have to long rates go up much….Just fear that they do. That is all we need as fixed perpetuals front run anything that would or could happen. The media and market is totally ADD. They have acted like we have had 2 business cycles with recessions this past year before we have even completed the initial cycle. Its trying to front run the next event before the previous one has had a chance to take root.
The Fed is committed to rate hikes, and wont reverse course anytime soon has been my thought since the first hike. This doesnt mean I think they go crazy. I can see up to 100 bps more then sit and watch….But does this mean 3.5% -4% short Tbill instruments and CDs, with 5.5%-6% IG perpetuals still anchored in place slightly above? Its very possible, but I dont like that. But I would like a scare though to create opportunity.
Those low yielding IG perpetuals are grinding back towards their initial lows.
You could possibly see some odd occurrences. Take AllState. Come January are we really going to see ALL-G trading at current 5.6% while sister adjustable note ALL-B trade at 6.6% if Libor keeps rising? Will they redeem B? Will perpetuals drop to align more of that yield? There are several of these scenarios. Be interesting to see how it plays out.
Grid–welcome back–you must have been chasing that little white ball around the pasture.
Ha, you nailed it Tim. Our dozen member geezer tour drove to Lake of Ozarks for a 3 day golf trip this past week.
What bothers you the most? The $4.00+ gallon of gas? The now only 3.5 quarts, once a gallon, orange juice carton? The smaller, but taller, cereal boxes that don’t fit on your shelf? The $5.95, was $3.75, Stouffer frozen lasagna? Whatever it is – Inflation is experienced on a personal level.
Which can explain why 2020’s peaceful dove is now 2022’s screaming hawk aiming right at your 401-K with sharpened talons.
Powell eats yogurt for breakfast. (NYT, 1/28/2020) Yogurt prices were in a band from 2020 to 2021. They jumped in 2022. (+15% YTD, YTY) The Chairman looks at charts at work, but its that pricey yogurt that looks up at him from his cereal bowl every morning. (Blueberries, his favorite topping, seem to have had a similar price pop.)
So forget the talking heads with their tea leaf interpretations of cryptic Fed remarks that sound like they were written by the press agent for the Oracle at Delphi. There are better investing tools available.
Average Price: Yogurt (Cost per 8 Ounces
https://fred.stlouisfed.org/series/APU0000FJ4101
Looks like Powell is serious about this interest rate thing.
Just my opinion.
He is serious until he isn’t–I believe they will back off–maybe end of year or 1st quarter, but I see no particular reason now to send dovish signals.
Tim, My ‘bet’ is 2H23. Line up the books.
What was the name of the band that yogurt prices were in from 2020 to 2021??? Maybe The Curds and Whey Committee??? Sorry ’bout that…. that’s what a down 1k Dow day can do to the mind……..turn it into meaningless babble like this post…
2whiteroses…I believe the band is from Orlando and was named “Yogurt Smoothness”. They featured some great hits like “Slumlord”, “Heavy Cream” and “Live Forever”
Or maybe it was “The Blueberry Yogurt Alarm Clock” and their biggie, “Incense and Inflationmints.” That’ll only make sense depending on how old you are…… lol
They said the same thing they’ve been saying for months. The market was expecting/hoping the Fed would be forced to pivot sooner but the Fed never suggested that. Still may happen but if it does it’s because the economy is in bad shape. Nothing to celebrate. The markets acts like good news is bad news and bad news is good news because it may force a pivot. Powell said Not.
Agreed. Itis interesting that this morning Bullard made a big point about the neutral rate: 2.25% is neutral only in a normal economy, not times like these with heightened inflation.
I wonder if the key relevant target may be the unemployment rate? Does the Fed want to it rise to 5%? Of course, it would be very UN-PC To admit such a target.
I continue to think the fed funds rate is headed to core PCE, currently at 4.6%. Let’s see where this number moves to over the rest of the year.