It’s sickening (at least to me) to watch how we are keeping our ‘printing presses’ so well oiled up. It is obvious that the Fed Chair believes that keeping the presses running full steam ahead is how to keep the economy afloat–and he may be right.
Modern Monetary Theory (the theory that as long as you have the reserve currency you can print all the money you need) is being embraced more and more each day in the U.S., and why wouldn’t it be, it cures all ills–no harm, no foul I guess. If you have needs and wants just print the money–period–easy peasy!!
This morning MMT provided the fire power behind an excellent 30 year treasury auction which brought the buyers in to buy the 10 year treasury. The 10 year is off 5 basis points right now at 1.62% about 15 basis points off the high from a few weeks ago–and this is after ‘hot’ consumer price index and producer price index numbers.
So I hate current monetary policy–so what!! Just because I hate the policy I am not gathering up my assets to bury in my backyard in a mayonnaise jar–I (and you) have got to keep the money working.
I had posted my watch list about a week or so ago and mentioned this is where I have been hanging out with my ‘dry powder’. My dry powder funds have been moving around at a fairly high velocity–buying and selling and knocking down some good profits most of the time.
This week investors are chasing dividends hard–really hard. In fact they ‘forced me’ to sell numerous issues today–those off my watch list that I have owned for a couple weeks.
The best mover off the watch list was the Compass Diversified CODI-B 7.875% fixed-to-floater which I bought on 3/29/2021.
I bought this for $25.34 looking to hold through the ex-dividend date which is on 4/14/2021 (tomorrow). I sold this issue for just short of a 4% gain in 2 weeks. This value is pure silliness–absolutely too much money chasing. Now I will watch it on ex dividend date and see if I can see another 1% in it–the exchange will mark it down 49 cents tonight for ex-dividend, but will it then continue to fall further? Don’t know but I’ll watch.
The Urstadt Biddle (UBP) preferreds goes ex dividend on Thursday. I had bought a good chunk of both issues (which are here) a few weeks ago. I sold both today choosing not to hold through the ex date as my gains were extremely good.
Unfortunately my watch list is being depleted by the US Cellular (USM) and Telephone and Data Systems (TDS) calls and I will need to find more reliable issues to put on the list.
So even though you hate todays values there are spots to knock down a few extra ‘steak dinners’ and for someone like me who owns no common stocks, holding only preferreds and baby bonds, knocking down a few extra thousand now and then in gains is important.
Best rambling chain of thought provoking ideas lately. Thank you Tim for making it all possible. And no more politics please!
Original D – You’re most welcome D—agreed politics can stay away.
‘Forced you to sell’….which means you made good money…..we should all be so lucky!
I noticed one pfd yesterday it was early April 2020 purchase and was up 10% over purchase price and trading at 1.8ish YTC in fxd to flt not far away. The bid ask was like 50 cent spread! For whatever reason I just ‘had’ to sell hoping the sale would go off somewhere over the bid. A thousand shares sold at 38 cents over the bid. Not going to argue with success. And yes Tim sometimes you are forced!!
Just when you thought nothing could be worse then 2000-2004 we get 2004 to 2008. And unless you love zero percent interest rates nothing could be worse then 2008 to 2021. But wait….we get President Trillions of Dollars who can’t hand out money he doesn’t have fast enough. The truth is that the National Debt is nowhere close to $30 Trillion….with Contingent Liabilities, Off Budget Items, Secret Wars and the Dark Pools of Money to feed corruption the real debt number exceeds $300 Trillion.
What I’d be interested in hearing is some discussion about a place other than the United States to house my assets, in a currency that is not being debased and under a governing body where delusional politics and economic theory are not the norm
Any thoughts?
Instead of mentioning a president, you should probably mention every elected official. You cannot discuss spending without linking it to the equation of revenues vs expenditures, so tax cuts are a part of the problem.
Unfortunately I have yet to see a single elected official in the past 20 years show a plan to reduce debt, so I expect little progress going forward, but sooner or later there will be a trigger that causes interest rates to go up, at which point the discussion will resume.
There is little difference between elected officials when it comes to spending.
Thank you Furcal,
Lets leave politics out unless we spread out the blame. Ballooning debt by cutting taxes, and helicopter money started before the last 4 months. This is just a continuation.
Charles–right on!!
Great recent quote from one of my investment newsletters (I have paraphrased):
Money printing and the debasement of the US dollar is likely a root cause of the civil discord in the U.S today.
Much of the dissent and anger in the country today can be traced to the historic wealth inequality that’s built up over all these years of central bank money printing, that have massively pushed up asset prices (stocks, bonds and real estate), and have primarily benefitted those who own those assets – the already rich.
Meanwhile, real (inflation adjusted) wages of average Americans have been in decline. A study of the participants involved in the Capitol riot found that most of them have had financial difficulties. Wall Streeters were not part of that mob. The rioting and looting that occurred in many major cities last year were set off due to perceived racial injustices, but there was an undercurrent of anger born from the wealth inequality too.
The Fed’s continuous money printing, in a hidden and insidious way, is gradually undermining the great American economic system and government.
Hi Robert–no harm, no foul—just tiptoe carefully around political discussion as we don’t want the board ‘going off the rails”.
Maybe the new China digital currency…ha!
Robert,
Completely agree with what you stated. To answer your question on thoughts, consider the Swiss Franc and this gem of very interesting stats regarding Switzerland:
https://www.eda.admin.ch/aboutswitzerland/en/home/wirtschaft/uebersicht/wirtschaft—fakten-und-zahlen.html
Note the public debt-to-GDP figure. Amazingly different from what’s been going on over here.
They are also, IME, the best country in the world when it comes to privacy and personal rights. They are not nannied (governed) by media and big tech. The options off to the left side of that screen will give you much more interesting information. The Wikipedia page also has some interesting info and stats, for what it’s worth.
Switzerland is not owned by the Chinese, either. No apology tours. Another amazing difference…
Interest rates have been basically zero since 2009. The one time the fed tried to raise to 2% since then, the market fell off a cliff. There’s so much debt in the world at this point that you can never raise rates without bankrupting the world. The only option is to print even more and force rates to stay at zero.
Personally, I don’t think very highly of preferreds or baby bonds or any type of fixed income right now. I’m younger so I’m mostly in common stocks. I’ve sold a lot of my preferreds as of late and I’m at a higher level cash balance. Ive added a decent about of TBT as well which shorts longer term treasuries. I don’t see a lot of preferreds that I feel comfortable holding at current levels. The current pricing looks really rich on most past call liquid preferreds. For example, I got rid of all of my IPLDP at $26.30-26.45. I was buying a couple months ago much closer to par stripping out the accrued dividend. Can’t justify holding when it’s trading that high.
I’m the kind of guy who likes other people to tell him he’s right so I’m curious if there are others that have taken a similar approach. 🙂
No, DW, I don’t do that. I just keep it steady as she goes: about a third of my holdings in solid–I mean solid–illiquids. They’re all either noncallable or with a basis below redemption price. I might shift some around a little to gain a few basis points of yield, but the portfolio of illiquids stays between 30-40%.
Same for MLPs. Then about 15% in low-leveraged CEFs that I think will continue to pay, regardless. A few old high-floored treasuries I’m not about to part with either before maturity.
Cash? Trash. I don’t keep enough in my portfolio to buy decent hamburgers out for me & the missus. As soon as it hits my accounts, I look for the best place at the time to reinvest it.
All I ask is that things I hold or covet in the markets keep paying me. Then I’ll keep buying the best available when the divvies hit. Trying to time or anticipate the market is way beyond me and something I gave up on a long time ago. Not that I won’t sell something, you understand, if you insist on giving me an outrageous price for it. 😉
But everyone’s gotta do what lets them sleep at night. That’s what it has come down to for me.
JMO
Can’t go wrong selling at a profit when there’s not much upside left. A lot more people trade common stocks but not on this board, we’re focused on preferreds. Do what works for you.
I get antsy holding cash for too long, which can lead to bad decisions. Better to wait for the market to come to me.
I don’t like TBT. It’s a short term hedge at best, not a good moneymaking scheme. Short funds are losers if held long term. Ultra shortfunds in particular are inferior in anything but a market going straight down. If you’re determined to go short it’s mathematically better to buy a 1x short fund with proportionally more money. Ultra short funds should be avoided, in my opinion.
Commons are great too, especially if you can find those that grow the dividend. What looks like a purchase dividend at 4% in a few years turns into 10% based on your purchase price as they grow the dividend (not to mention the common appreciation). But don’t worry about others telling you that you’re right, that’s how you miss the BIG opportunities. Markets do become irrational and that’s your opportunity.
Hey Dick, I ‘m over 70 so here’s an older perspective. I don’t understand the all the fixation here with preferred’s and baby bonds at the present. Do what your comfortable with but don’t get stuck. I’ve always been a fixed income guy dating back pre Roland Reagan buried in a 55% tax bracket then. Soup of the day then was tax free muni’s. Changing times interest rates and retirement made me constantly re evaluate where and how to invest. Never really been into growth more interested in positive cash flow there fore preferreds. bonds cd’s dividend stocks &etf’s Mlp’s are pieces of my puzzle. not stuck on any one thing. I’ve done real well with preferred’s but right now not much hope? Did well over the last year in common stocks, not generally my style but taking whats been given? Selling now realizing multiyear equivalent gains in just a year. I fail to see any fixed income worth considering here. I’m waiting on a comeback in build america bonds or build america back “better” bonds from uncle Joe . More helicopter money but spread some of it around to retirees, lets give the money to the solvent states not those in worse debt than the federal government. P. S. to Roberts post I’ve got a sizable stake in Cananda. May not be any better than US, But we do speak the same language?
The “fixation” with prefereds and baby bonds is because that’s the main focus of the board. I trade them because that’s what I’ve done best at and where my interest lies. So I found this forum of similar minded investors. If I had a different investment style I might be hanging out in a different forum.
Just to throw another data point in the mix, I’m 58 and have 60% in common stock (conservative blue chip and dividend payers), 15% Preferred, 15% Muni and 10% cash. I live off the income generated.
I’m here for knowledge on the 15% preferred portion and couldn’t be happier with what I’ve learned here.
Dick–Everyone has do to what they think is right for their situation–no rights or wrongs. As long as I can get my 6% – by hook or crook–I’ll stick to preferred and baby bonds. That’s just me for my situation at age 67
DW,
I’m younger (47) as well and feel the same way. I’ve been reducing my personal holdings of preferreds, but do hold a few things I bought in the depths of last year (CEQP-R, WFC-L, DCP-B). I do manage my parents money for them and have a much higher weight in preferreds there (40%).
I don’t know what is going to happen, so my mix is 45% equity (5% in preferreds), 15% credit (BDCs), 5% cash, 5% gold/miners, 10% hedge funds, 20% real assets (public/private REITS, MLPs, utilities, infrastructure). Probably overdiversified, but sleep well and grind higher.
I understand Camroc’s aversion to cash, but I”m building my cash position. I like having dry powder to deploy.
Dick, everyone is different with different goals, timeframes, needs. I myself am retired in my late 50’s. I have a portfolio that works for me. Various components to it:
CDs (while I am not one to like to hold lots of cash, I do have plenty here as part of my overall strategy after retiring early. In essence I have enough in CDs aside to fund living expenses for the next 5 -6 years. So I can invest my other funds as I see fit and not worry about market fluctuations. Plus neither my wife nor I will need to draw SS until we are at least 65)
Accounts I manage – a taxable and a rollover IRA – split between preferreds (40% to 50%), Common stock dividend payors (higher quality dividend aristocrats or others along the same line), REITS, BDCs, just 2 Common Stock MLPS (EPD and EVA). I only own one individual issue that does not pay dividends.
Other retirement accounts – basically I have left funds in retirement plans my wife and I had at our last employer. So I can get access to other stocks / bonds through different funds I have invested in. Plus I have a decent allocation to Real Estate thru TIAA CREF along with some guaranteed annuity fund.
Basically all of this gives me a lot of diversity and allows me to think long term while sleeping well at night.
But again, everyone’s situation is different so you have to determine your needs and goals and the best way to meet them with the risk tolerance you are comfortable with
I think your approach is very sound. I’ve been doing this for about 35 years, both individually and professionally, and have shifted my overall asset allocation over the last couple of years from 60/40 to 75/25. The yield pick-up in high-yield and preferreds just doesn’t justify much of an allocation. Equities and cash provide a better risk reward tradeoff. As my fixed-income is called away I’m more interested in cash and equities. There will be a time to come back its just not now.
Tim; I don’t know your age and that is a big factor but I would just say if we have another big selloff down the road maybe you should own a couple of commons after the dust settles. Iam probably much older than you and Iam still around 17% in commons. But I do stick to what I call the Super Blue Chips.
Chuck P – I have pondered a few common issues and simply have not settled on anything at these lofty levels. I stick to what I have succeeded in.
I am 67–and I know you are a bit older–but you are also wealthier.
I thought the idea behind MMT is that you don’t have to sell treasuries as you just print new money and it’s not debt. The down side being if you create too much money then you have to deal with inflation.
I moved to commons about 2 months ago when i could not find much to buy in preferreds. So far it has worked out well accept like you Tim i am tempted to sell. Good luck.
Tim,
Thanks for the watch list. It adds to the discussion here on the site.
Charles–the more the merrier!!
Tim,
The lofty levels are going to get a lot loftier. You haven’t seen anything yet. A lot retail investor ARE JUST RETURNING and the stimulus has just started.