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Interesting Close to the Week

The stock indexes are pretty darned quiet this morning–all morning. The futures markets took a huge tumble of 2-3% at 7:30 am (central) when the producer price index (PPI) was released. PPI came in at .3% versus forecast of .2%—obviously the ‘algos’ didn’t like it, but honestly it is kind of a yawner.

Interest rates (the 10 year treasury) popped on the PPI release–up 6-8 basis points to 3.56% now. Given that it traded as low at 3.40% yesterday 3.56% seems just fine–not sure it should have been at 3.40% anyway.

Consumer sentiment came in better than expected, while inflation expectations held steady at .3%.

Preferreds and baby bonds are red today–maybe 75% of the issues red–BUT the red is most nickels and dimes–mostly nothing severe.

This has probably been the least active week for me in terms of buys and sells–I did nothing–not a single transaction. Next week I will almost certainly do some selling–sales around the edges, to free up some cash. Bargains remain in the high quality sector–6% to 6.50% area. I may dip into the Highland Income Fund 5.375% preferred which is rated A1 by Moody’s–current yield of 6.74% with a yield to 1st call of 18%. Management of Highland had been trying some ‘sketchy’ moves early this year (or was it last year) and I want to do more due diligence before pulling the trigger on this one because obviously the marketplace doesn’t like the issue as it is trading at $19.97.

12 thoughts on “Interesting Close to the Week”

  1. Recommend a LOT more due diligence on HFRO. I think the NexPoint team that manages the fund was spun out of Highland Capital Management. There was a really nasty lawsuit involving the CEO and/or President with a lot of unseemly accusations. I do NOT recall how it all got resolved, nor do I know how Highland transitioned to NexPoint. Maybe it is all good, but you might want to dig in some more before hitting the buy button. Highland managed a fund that basically went to zero IIRC.

    Another reason to be cautious is they are a Texas firm. I hear that Texans are somewhat flaky.

    Not long or short HFRO in any account.

    1. Tex the 2nd–I did some due diligence last night and it didin’t take me 10 minutes to say no–way to much incest going on–I will forgo a little yield and pick up some more utility issues.

    2. Tex,
      lots of funny stuff going on 15 yrs. ago. Country Wide, AIG, Enron etc.
      The people running those businesses, or working upper management didn’t go away. They just found another job to hid in.
      Local bay area company into energy called Calpine, went into bankruptcy in 2005 and came out in 2008
      Headquarters moved from San Jose ca. to Texas
      In 2018 was taken private by Energy Capitol Partners and a group of investors including Canada Pension Plan Investment Board

  2. I was looking at Tims gainers and losers list and the losers looked like everything you wouldnt want in a recession. Is there anything though one would, ha. Overall mine did nothing overall spreadsheet says plus 0.14% but I think I only have 14 preferreds anymore though.

    1. Just bought a 1 year CD @ 4.8% and I get my money back.
      I try to make higher rates give me safer income.

      1. I bought a 4.2% 30 day CD Friday myself. I try to keep money gummed up in some CDs myself to avoid needless market mischief. I even bought a small 12 year CD earlier at 5.375% though of course its callable after one year so the asymmetric risk is on me.

        1. Grid–I have more in CD’s than I have ever had–from 3.8% to 4.95%—nicely laddered over a couple years.

        2. Hi Grid,
          can you please provide a few info where did you buy the cd , is there a minimum , etc.. Anything that can help me buy some ?
          Thank you very much ! As always your expertise is greatly appreciated .

          1. Hey Danny. I use TD or Vanguard through my brokerage accounts. I typically just buy new issuances. But there are secondary “used” CDs you can buy. I havent found them to be competitive with the new offerings though. You typically find them in the bond/cd icon section of your brokerage account. Anywhere from 30 days up to 12-15 year CDs. Though most with longer duration are callable at banks option typically yearly or every 6 months so you have to pay attention to that.
            Typically from my experience you buy in $1000 lots.

  3. Tim, as you suggested a preliminary review over on SA of HFRO has an article by Stanford Chemist and another by George Spritzer
    Interesting reading.

    1. Charles–just read Georges article and will have to look at SC’s. I already decided there is too much incest between Highland and all their nexpoint holdings–I don’t like this cross pollination although of course Moody’s still has them at A1.

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