Such a wild day on Tuesday, but the turnaround in equities we expected Monday finally came yesterday. It is not that we care too much about what common stocks do performance wise, but there is a spillover affect that can occur and in fact did occur Tuesday. With the 10 year treasury falling by a good amount preferred stocks stabilized, but did not rise. A normal expectation would be for income securities to turn higher as the 10 year fell, but we could see all day that “weak hands” were still selling preferreds in spite of the interest rate fall. Quite simply we still had income investors that were trying to get out of the marketplace in an expedited way. How unfortunate that they are out–they won’t be back for years and they will bury their money in the back yard and bitch about the crooks on wall street. Oh well.
Overnight markets around the globe were relatively well behaved. The U.S. futures market shows the DJIA off a modest amount and the 10 year treasury is trading around 2.80%. While we don’t expect volatility to go away we do expect markets to trade in a more orderly fashion.
Today (Wednesday) we are looking for a purchase in the Enhanced High Yield Income Portfolio to help get that model invested. We have our eye on a number of potential issues to buy and we will write more later today as to why we are buying what we are buying.
Additionally today/tonight we will launch the 2nd model portfolio. We will begin the Medium Duration Income Portfolio. This will contain primarily term preferreds and baby bonds with maturities in the next 7 years. This model will be how we personally invest at this point in time. The idea is to receive a reasonable income stream, with lower risk to net asset value. Issues in the model will mature relatively soon and interest rates in general may be (who knows for sure) much higher allowing for reinvestment at higher coupons.
In the next few days we will begin to do a weekly highlighted security. We will be starting with our personal favorites–ones we currently own. This will continue every week on the same day and will be more in depth than we normally write so it can be used by some newer income investors to understand our logic and methodology more clearly.