Holding Dry Powder, But Getting Antsy

The economy continues to be buffeted from the Covid 19 corona virus–just now I see another 1.3 million new unemployment claims.

Of course if you are investing in common equities you don’t care how poorly the economy will do for the next year or two–you just follow the Robinhood traders into Royal Caribbean (RCL) Delta (DAL) or maybe even bankrupt Hertz (HTZ). I don’t need to go to the casino–just fire up my device. Everyone is an expert on their huge unemployment checks or payroll protection money (PPP).

Activity in new issues has been exceptionally quiet in the last 2 weeks–maybe everybody is so massively levered up there is no need to raise more money. All the ‘zombie’ companies have the balance sheets loaded with 10-12% money–which is why they are going to be zombies–lots of debt payments and no revenue–i.e. airlines, cruise lines etc.

I have been doing virtually no buying and selling–just hanging in there with my 65-70% invested positions of utility and CEF preferreds and baby bonds–but I am getting antsy and likely will do some short term captures of dividends and interest of investment grade issues–just forgoing too much income with the current level of cash.

On the other hand I have little doubt that an ‘event‘ will give us much better buying opportunities ahead–it may be political or investors will wake up 1 morning and decide that it will be years before we see normalcy–who knows–no one.

Even though I am ‘antsy’ my ‘real work’ keeps me working 12 hours a day, 7 days a week–with only 3-4 days off all year–so my ability to stay in tune with markets has been limited. The flip side is I have never in my life put so much money into investment accounts–so the ‘stash’ balances have risen fast–I guess that is the positive of working so much (at a time I swore I would be full time on this website instead of doing ‘real work’).

26 thoughts on “Holding Dry Powder, But Getting Antsy”

  1. Guess I’m on the opposite side….I’m now wondering what to invest in because prices have gone up so much….haven’t had any dry powder since March…too much opportunity

  2. Can someone help me understand bond coupons better? Sorry for the noob question. Is the amount of the coupon subtracted from the bond price when it goes ex-coupon the same way a stock price is reduced by the dividend payment when it goes ex-dividend? Thanks…

    1. No, a traditional corporate bond price (not baby bonds) does not drop on the day the interest payment is due in the same manner that a stock price is adjusted when it goes ex-dividend. When you buy a traditional corporate bond, in addition to the bond price, you also pay the bond holder the accrued interest since the last coupon date. So in that sense the interest accrues daily.

      Baby Bonds on the other hand do have their price adjusted on the ex-date.

  3. Tim, keep up the great work.
    I’ve started using the phrase, “A bull market in stocks and a bear market in happiness.” So much of what makes us happy; sports, events, parties, vacations, just going out with friends, has been taken away from us. Human’s being the adaptive creatures that they are have sought happiness elsewhere, the stock market. I actually believe that a vaccine and true reopening of the economy will lead people out of stocks and back to those things that used to make them happy.

  4. Tim, I have some capital losses that I can use to tax shelter capital gains. I have utilized covered calls to produce capital gains but I was wondering if you had any thoughts about any other strategy or funds or companies that produced significant capital gains?

    1. tomastv-
      Quite a few CEFs use options- much of the fund gains come thru as cap gains. At Cefdata.com go to the fund selector, classification, options drop down list. Douglas Albo of Seeking Alpha writes & covers them too, sometimes has a list of types- but infrequently. One plus- option funds usually use no leverage, unlike most CEFs.

  5. Tim, Near word for word my same playbook. The “To-Do” list is currently about waiting out the next “event”, or at least the next 6 months, while long-standing bid orders are collecting dust. Not chasing this market. We can wait and let the divvies accumulate. As I think you know we are brothers in closely-linked industries and yes, 12+ hours-a-day 7 days a week, and my teams are at absolute full throttle with no end in sight, packing years into months. Incredible.

  6. I have been building cash steadily the last 2 weeks and am at the highest level since March…about 25%. I will deploy over the next couple of months on dips.

  7. Overall, I am trying to stay positive about the economy with the hopes that a vaccine/treatment will be available sometime in the next couple of months – although it will clearly take time to manufacture and distribute to billions of people. Moderna is starting a Phase 3 trial later this month with 30,000 participants and I am hopeful they are just one of many companies that will be able to find a vaccine so that life can get back to “normal” in the next 12 months. There are still a good number of preferreds out there trading well below $25 if investors are willing to be patient.

  8. i thought they stopped production of the broncos because of the billions in lawsuits from the rollovers. I assumed they fixed the rollover problems?

    1. I worked at Ford in the late 80’s. Production wasn’t discontinued. All that happened was that right before the redesigned Bronco II was set to go into production, Ford changed the name of the Bronco II to the Explorer.

  9. Wow, Tim- that’s a busy schedule. Hope retirement is not too far off–if that will make you happy.
    Thanks for all your effort here.
    45% dry powder/cash equivalents

  10. Thanks for Tim for this site and all the work you do to keep it going. When are you going to retire and smell the roses or watch Gopher football? We have been in a trading range in Spx for a while now. The levels I’m watching are 3115 & 3233. A break either way will be telling. ATB

  11. Tim, I can totally relate to this post. I am holding a lot of cash across three portfolios that is earning next to nothing. But what’s a person to do? The elevated prices in most security classes keep me from making any long term commitments to any one issue. The few recent purchases I’ve made have been new offerings that I have been able to snag at par or just below, and I have sold some of my holdings, such as DUK-B, for sizable capital gains. Don’t plan to get back into any of them until that “event” you’re talking about materializes.

  12. Amazing Tim that you can run this website working that many hours – thank you.

    I am still not holding any stocks, just investment grade bonds and a few BB+ bonds. Painful to watch the market go up sitting on the sidelines, but I feel like a panther waiting to pounce on sound securities once your “event” happens.

  13. My sentiment on Ford is changing. Will wait until after the end of earnings in July. Why? I would not be surprised to see another cash for clunkers program in 2021. It worked once before.

      1. No Mikeo

        I exited Ford due to bad shape of the company. I would not invest in Ford unless we had a change in Washington due to bankruptcy concerns. The history of a shift in Washington suggests that Ford would be protected just like GM was in 2008. At least that is my view of the world.

        1. @SteveA

          I also sold my Ford common. In my case it was when they suspended the dividend. It’s going to be a long haul back for them, I think. In every segment of the industry they’re playing catch up. Nice try on the Bronco, though-we’ll see what materializes from that.

          1. Keep in mind, there have been hundreds of automobile companies founded in the U.S. and with the exception of Ford and Tesla, they’ve all gone bankrupt. Not a great track record.

          2. As a lifelong gearhead my view of two upcoming Ford vehicles, the Bronco and then the Mustang Mach-E, is positive. Preorders for both cars have sold out indicating strong consumer interest. If Ford can perform on rollout and delivery I see a more profitable outlook for the company.

        2. Yeah, I thought that too and got stuck holding GM bonds. They were supposed to be at the front of the line and by magical, governmental fiat were moved to the back.

          Learned that lesson the hard way.

          1. Ah Scott. Thank you. Was trying to research what happened to GM bonds with a government bailout. Makes sense on a government bailout with the political thinking of the time, they would make the holders take the loss. I will pass on Ford

Leave a Reply

Your email address will not be published. Required fields are marked *