The geopolitical events in Russia and Ukraine are causing a bit of a move to the ‘safety trade’ as the 10 year Treasury interest rates heads lower–it is trading at 4.37% down from yesterdays close of 4.41%. Equity indexes are lower by .3%. Neither moves are giant sized, but they are a taste of what may come in the next number of weeks and months –just what we need is another factor to move prices around (not really).
Whether it is geopolitical events or economic events that move markets my actions won’t change much–if any. At this time I simply am not going to buy perpetual preferreds or extremely long dated baby bonds –my preference is to not lose capital and for the time being the threat of higher rates means potential capital losses. The losses I have taken in the last month or so have been in perpetual preferreds–they down as much as 4-8%. Percentage wise the Brighthouse 5.37% (BHFAN) perpetual preferred is trading around $19.15 which is down from $21.30 6 weeks ago. With the current yield just over 7% I am tempted to buy more–BUT I won’t right now—maybe it will be $18 next month. For those looking for a solid income stream this might be a good one right now even with a threat of capital loss.
Money market and CD rates are holding fairly firm at 4.5% to 4.7% depending on terms. Not a bad yield relative to a decade of zero and a good ‘hiding spot’. A good flow of interest payments has kept my portfolio in decent shape–off the highs, but not by much.
Outside of some housing stats there won’t be much economic news today–although the geopolitical events could crop up at any moment. Let’s get the day going and see were the markets take us.
Tim
My minimum current Buy threshold is 2.0% over similar maturity T’s for investment grade; 2.5% over for below IG.
When the issue has an early call option, buying below these levels just makes me a chump.
An old investing mantra is “If you wouldn’t buy it at that price, you should sell.”
Tougher to follow.
Not so disciplined. Like the dividends/interest.
But, if Mr Market is telling me something (as in, price keeps dropping)
then it is time to pull the trigger.
Tim I think the safety is in the preferreds with reset rates and shorter term baby bonds. The longer duration stuff is getting hurt.
But even longer duration baby bonds with resets seem to be doing okay, such as KMPB which resets 3/15/27
Absolutely Eben. We have discussed this at length over the years – probably before you arrived. The shorter maturity issues–those maturing in say 2-5 years (baby bonds or term preferreds) always are more stable than perpetuals for instance the nearer they are to the ‘date certain’ time of redemption the less volatile they are.
Tim yes probably way before my time. Learning here and have a ways to go! Question, is there a way to download the baby bond and or preferreds lists in sheets or excel or ?? Also is there a way to know if someone has responded or mentioned me in a comment? Thx
Tim, just calculated and for approximately the same 6 weeks I calculate one account is down by about 1%
Probably would be lower if it wasn’t for a couple trades. Now back to about 20% cash.
Charles–not too bad–you must have been well positioned.
Hey Tim,
If you want to see another economic force pushing the global economy, take a look at the report that Bain published a few days ago.
https://www.bain.com/about/media-center/press-releases/2024/businesses-accelerate-reshoring-and-near-shoring-amid-heightened-geopolitical-uncertainties-and-rising-costs-bain–company-finds/
We have been seeing the the same thing in our practice (although mostly from the opposite side of the table) and I have commented on it here a few times. I can’t publish our research, but Bain covers the ground.
Terrible time to be invested in China (IMHO).
This ongoing exodus will certainly not help the Chinese economy recover, even with the “stimulus” the central gov. has been crowing about, much of which is not really stimulus but simply allowing local/regional governments take a lot of their “off books” or “secret” debt and move it into public view.
Lots of interesting views in China about what their world will look with the return of Trump.
Ain’t it wonderful to live in interesting times?