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Has Goldilocks Arrived?

We go through periods of near perfect conditions for income investors–stable interest rates and low-moderate growth rates. All of a sudden it appears we have entered one of those periods–the 10 year treasury which I thought might assault 5% is down to 4.46% this morning. BUT this move lower in rates is highly suspect to me–all of a sudden I am reading that ‘analysts’ now expect 2 rates cuts yet this year on moderating growth and a softening economy. The problem is we need to see more data on inflation–I am concerned with stagflation–it seems to me this is the likely outcome. With high inflation and a massive need to raise money for debt I don’t think that rates are going much lower–but who really knows?

Last night M&T Bank (MTB) priced a new issue of perpetual preferred with a coupon of 7.5%. The issue is low investment grade. M&T is a $200 billion dollar banking company–so good sized. They are selling $750 million in shares–wow that is a big issue.

Yesterday all of our accounts closed at new highs–barely. It is quite amazing what a constant stream of interest payments from CDs will do for the accounts over time. I have been almost exclusively a fixed income investor for 18 years and the last year has been a great time for income investors–will it last?

I didn’t do a thing yesterday, although there is a modest amount of cash available. As mentioned a hundred times any move toward equity purchases (as compared to new CDs) will be slow–very slow. Those 5.35% CDs don’t move investors much to buyer riskier assets.

Today looks like a very quiet day in markets with the S&P500 futures barely moving–maybe it is Goldilocks after all–at least for a couple days.

3 thoughts on “Has Goldilocks Arrived?”

  1. Maybe banks like M&T and SYF are assuming higher rates are here to stay and they are starting to adjust to that with these recent preferred offerings.

  2. Tim: M&T appeared on a list of “maybe” banks I saw a week or 2 ago. Don’t recall the source. SYF on same list. And, SYF just floated a big offering north of 8%. Seemed kind of high, said I to me, but hey, don;t look the gift horse etc etc. Took the risk.

    I suspect M&T has become a bit “concerned” or, given the size of this, a lot concerned. 7.5 seems rich. Wall St firms are paying around 6% for their notes.

    They are local in Peoples republic of NY so I might try their brokers as vanguard won’t allow sales on it yet.

  3. Been a long time since I looked at Foreign markets. Right now most are in the green from last night. Going to be a long week ahead, and futures look like our markets will open weaker with commodities all in the red. I wish gas prices would go down too, I paid $5.25 at the pump last Saturday and it felt normal. Last time gas was around $5.00 the economy slowed.
    Let’s see as we get closer to the end of the qtr. and companies start reporting, what will happen. Sometimes you think one thing will happen and the opposite happens. If reports show a slowing economy then maybe the market goes up more as people see a Fed rates cut more likely. I suspect we will see most banks to have lower earnings, other sectors I don’t know.
    I do know some of my buys of low coupon stocks the prices are starting to recover and I am out of the red and up on quite a few. But nothing outstanding. Should I lock in some profits or buy more or just wait and let it ride?

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