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Interest Rates Rise as Equities Fly

Cross currents continue–equities are up over 1% this morning based on Tech earnings (and in particular ‘AI’ stories), while interest rates rise a bit based upon the FOMC meeting minutes. At the same time I see ‘headlines’ from Nestle, Mercedes and other low tech businesses warning of slowing revenues and tougher times ahead. I would say something like ‘this won’t end well’–BUT it may be just fine—lots of money out there driving prices up and unlike back in 1999 and 2000 these tech company’s have real revenue and earnings. We’ll see – all I know for sure is that we are better off with stocks melting up than melting down.

Yesterday the average $25 share of preferred stock and baby bond fell 3 cents. Looking back a month the average share is off 7 cents–really quiet on a historical basis. Of course most of us can see in our accounts that February has been flattish after a nice green January. As I have said many times I am very happy collecting dividends and interest while we wait for interest rates to move.

On occasion the B Riley baby bonds catch my eye. I have been warning for 3 years on RILY and have not owned shares in that time–previously I did own some off and on. When I look at the 12% current yields I see on a few of the baby bonds and it is tempting to buy a little–BUT I won’t–even a extra 5% yield can’t lure me into shares.

A little economic news will be released today, but likely not market moving. We have initial jobs claims at 7:30 (central) with the purchasing managers indexes at 8:45 (central). Existing home sales will be released at 9 (central). Today is a tech driven day so these will receive barely a instant of attention.

At this moment the 10 year treasury is at 4.33%–looks like we have left the 3.8-4.2% range behind for the moment. It is hard to envision rates moving much higher–but one can’t predict the moves with certainty–we’ll just play the cards we are dealt.

9 thoughts on “Interest Rates Rise as Equities Fly”

  1. JXN A is over 27.5 which is 5.5 current yield. That’s running out of steam and you should look to trim perhaps

  2. I read the denial letter from Riley. You know you can trust someone who makes a firm, public denial.



    (had to add both to avoid being too political)

    Seriously, I have no interest in playing with Riley. I try to avoid doing business with someone I wouldn’t let hold my coat at a bar fight.

    That said, best of luck to those jumping in to try and make a buck on the bounce. You have to take those opportunities where you find them.

  3. Normally I am one who takes a flyer with a small position but the whole RILY thing is way to much drama even for me. Hard Pass. I tried reading up on it in detail and I could not figure out if RILY did anything wrong. Not enough information to even make a guess. Left very confused except they deal with some slimy clients.

  4. Yesterday I bought some RILYM.
    B Riley Financial 6.375% Senior Notes Exp 28th Feb 2025.

    1. Right behind you Pep…planning to roll the proceeds from the RILYO redemption into RILYM. I’ll DCA in over the next two months. Hopefully there will be some more ‘scary’ news in the interim. 😉

  5. Can you elaborate on your thoughts of the RILY’s bonds? The company’s balance sheet is strong, it has diversified income streams and RILY’s fee-based business is sufficient to service their debt, which is completely separate from the investment segment that all the drama has been centered on

    1. Mhug:

      I would not say the balance sheet is “strong”, but I did take a shot yesterday and bought a tiny position in the RILYMs as a trade after they broke the November 23 lows, as the selling was beyond relentless (it is good to be good, but better to be lucky).

      But my advice is to take a detailed look at their Statement of Cash Flows. It is a very unique company (really a small cap private/public equity fund with an investment banking side business), but their operating cash flow always seems to be crap and they seem to pay out way too much in common dividends.

      Would never own any of their securities long-term. Good luck!

    2. When everyone is talking about RILY being high risk I’m guessing it’s factored into the price. 3rd quarter report showed loss but things look manageable to me but I’m far from an experienced analyst. 12+% on RILYZ was worth a small investment so I bought. Now it’s up 13% today so I sold. I was expecting to hold as I watched events this year but sometimes you get lucky.

    3. Mhug89—my thoughts are more along the lines of knowing management and some of the folks they have borrowed money to over the years. I think there is PROBABLY money to be made on the bonds, but I am concerned with what we don’t know–various potential frauds etc. My wife worked with a related company a number of years ago–and I know all too well how shady some of them were–may or may not be relevant today, but one could clearly see many of the investments in equity and loans they were making were of very low quality–and that has proven to be true.

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