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Down We Go But I’m Not Buying

Markets are taking a leg lower as folks wake up a bit from the never ending ‘v recovery’ chant.

I’m doing nothing really. I have been selling a bit in the last week around the edges–i.e. for some of the utility baby bond issues which I held full positions in I have taken a portion off the table. Really they were pretty extended–and given my expectations for better buying opportunities ahead I just banked some profits.

I had held a full position in the Wintrust 6.875% Fixed Rate Reset preferred issued on 5/2/2020 and I unloaded that for 2-3% gain. I am not enamored by any of the smaller community banks issuing high yield preferreds (i.e. 7%+/-). When I look at the exposure they have to ‘main street’ and in particular lodging and retail I think I can safely predict they are going to take some pretty massive write downs.

Bottom line is I think that we will see some nice buying opportunities in preferreds and baby bonds, but it is likely that until we start seeing 2nd and 3rd quarter earnings (or losses) we won’t have any real fundamental data to base investments on–or at least fundamental data that I can hang my hat on.

Right now 3 of 4 accounts we have are in the black–one is in the red yet by 5% so don’t know if I can get back to even this year on this one–the good part is this account had a nice double digit gain last year so likely my 6-7% annual average will remain intact.

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