“It’s Just Money”–Hot off the Press

I was just reading about the record deficit the federal government ran during June–just a measly $864 billion. This was above the record April deficit of $738 billion.

During the last 4 week the Fed balance sheet has been falling week after week as 30 day repo’s ran off. This is interesting given the massive deficits since April. Is there no QE?

Looking back I see that the Fed did massive QE in March and April–a grand total of about $3 billion. Now the falling balance sheet makes some sense—all the cash was raised upfront, but has been spent at a much slower pace. My rough calculations show that we could see another few weeks before the Fed will need to start more QE—I mean is there any doubt?

With tax revenue way down–or minimally delayed, obviously we will be running massive deficits for many months to come–and you can be certain congress will approve more ‘helicopter’ money soon.

It is really had to fathom what the future holds for our economic system—I used to like to formulate my ‘outlook’–that seems to be such a waste of my old brain cells now–we are in uncharted waters.

But as I watch stocks go up week after week–‘party on’ and watching the talking heads on the business news totally ignore the hazards out there it makes one very (I mean VERY) uncomfortable. As such I keep plenty of dry powder while dabbling with a few investment grade utility baby bonds or preferreds–I may be ‘dabbling’ for some time to come–you really ‘can’t fight the Fed‘.

49 thoughts on ““It’s Just Money”–Hot off the Press”

  1. I saw a call for reparations, at 160 million per person of color. Could somebody help me with the zeros there? 160,000,000 X 41,000,000……=???

    1. I’ll help you with my zero answer. I’m payin’ nuttin. EVER. That equates to $0.00 in USD.

    2. 6.5 Quadrillion or 10X to the 15th power!

      Don’t get too emotional……It’s just money!

      1. not sure where you heard this, but a recent proposal by Robert Johnson,
        Black Billionaire, came up with an amount of $ 370,000 per person,
        coming to $ 14 Trillion.

        1. The city of Charlotte and Mecklenburg county built a brand new coliseum for this guy when he owned the Bobcats at a cost of $265 million to taxpayers. The school system (CMS) asked to hold high school graduations ceremonies in it the next year. Johnson’s response was sure but wanted to charge the schools system thousands of dollars to do so. He finally agreed to not charge them after the backlash but by then CMS had found other venues. This is how he paid back the community and the young people in it. He is all about himself and money. He didn’t stay a lot longer after this. Lost all support over his greed.

  2. To me the worst part of the stimulus program policy is that trillion dollars and government program are becoming synonymous. Nine months ago the Green New Deal with its trillions sounded like fantasy. Now the libs can say that the GND isn’t that much more😳 than the virus programs, I.e. anything within a range of one to a hundred trillion are pretty similar.

    Does anyone doubt a New Democratic administration will put together an infrastructure bill of a couple of trillion for job ready programs like saving the budget disasters in Ill, Ca and NY? A trillion to beef up school health safety, etc.

    The conservatives lost the right long ago to criticize deficit spending.

  3. Tim, I think there is a type in this post:

    “grand total of about $3 billion.”

    Shouldn’t that be trillion?

  4. Uncharted, unpredictable, un-presidented, flying blind. Throw a black swan torch on this kindling – what could possibly go wrong? Good time to stay safe, stay close to the ones you love and good luck to all of us. Btw, opened small positions today in EPD and UBP-K.

    1. And I closed out my full RCP holding middle of last week for a 20+ percent gain, see where it goes after ex-div. Take care (I’m in Florida).

    2. D–uncharted for sure. After 15 years of almost all preferred investing I thought I had some knowledge–but new situations keep coming up and at my age there is no 2nd chance so staying safe.

        1. D, That line is a Chinese Proverb veiled as a curse indeed.
          Re: The above thoughts from Tim
          Hey when all the govt is really doing is rolling the principal and paying zero interest and the Fed is willing and “legal” to keep buying the refied principal, then what’s the problem? The Fed is a paper shredder. and toilet to flush the contract into. The trick is to inflate the principal away and we KNOW we have had NO Inflation. New Economics!
          “Not a Dylan line but, “Your lips move but I can’t hear what you’re sayin’.”

            1. It was sunny all ’round with stocks in the air.
              When the bears broke free.
              And no one survived from the bagholders for wall street.
              They were all left behind. Most of them broke, some of them going broke.
              And that’s how Uncle Sam took my MONEY from ME

  5. Tim, you just got to accept the world has gone mad. I play the hand Im dealt and keep Pushin’ On as the going has been good…Im still waiting for the currency issues and rampant inflation from Fed 08-09 crisis. But yes its crazy when Im using NGHCO, NGHCP, and UMH-B as my short term “money markets”. Crazy but that is how they are set up to be used from management info, so Im going with it until proven otherwise.
    Jettisoned most of my overloaded positions in SCE-L/J after CA shutdown started again, and rang the nice profit bell. Will keep a smaller position now. Though mostly skewed to very safe and mostly very illiquid, I got a wild cast of characters now. From DMRRP/INPAP all the way to WCC-A.

    1. Yes Grid–I like the term ‘ignorance is bliss’—those that haven’t lived it all do well in markets–I work much harder for less because of history.

      I have noticed you playing in some areas that would be taboo normally–but as you say you have to play that hand.

      1. Tim, If your really worried you just got to get them illiquid enough to where they skirt disaster. Remember 2008-09 market disaster that shredded preferreds? AILNP (which I own) didnt get the message. It went up $2 during that crisis….On one 200 share transaction during that time, lol. With current ask of $200 for 1 share, I will resist the temptation to buy any more for now, ha.
        Just remember anything can happen…You werent alive yet, (and I wasnt either) but in the 1940s there were periods with 12%-16% inflation and the 10 year was around 2%. So, see it can get worse….Of course the Fed had their thumb on the yields then…Sound familiar? 🙂

    2. Grid – What’s the money markety story on UMH-B? Just the high coupon creating a high likelihood of 10/20/20 call or is there something more definitive to the story?

      1. 2WR, Dang right there is more, I wouldnt hold this turd on just a wing and a prayer, lol. Landy’s may be a lot of things but they are honest SOB’s on redeeming preferreds. They gave me a years notice on redeeming MNR-A and MNR-B and I traded them accordingly. Very nice of them!
        Here is part of what the management said on last CC…There is more sprinkled throughout call…
        We are also in discussions with several lenders to create a credit facility utilizing our rental homes are collateral with favorable pricing. We plan to use these sources of capital to redeem our 8% Series B Perpetual Preferred stock generating approximately $5 million of additional FFO or $0.11 annually.

        1. Once I saw “REIT” in UMH’s title, I knew it wasn’t up your normal alley, so I appreciate the scoop…. You know that kind of story appeals to me…. I love the way NGHO and P are acting btw… That’s sure a confidence builder to that story…. WCC-A’s a mystery to me… I’ve got 400 in my Masochistic Securities account after selling 200 in that one runup on 6/30, but how Mr. Market is settling in on this particular price range right now is beyond me.. It’s either worth a lot more or a lot less imho…

          1. 2WR, Yes, when Im discussing preferreds in general, I am not really thinking about the smaller lot “yield spicers” or “dumpster diving” or “yield chasing” issues I have as I keep those small. I only own 200 shares of WCC-A I got around $26.20 after if dropped off.
            Yes, the NGHCO and P are right on que. You still have profit liquidators balancing out the short play buyers. Also many may not quite know these things dont get liquidiated until right around the signing which AllState stated as early 2021 after regulatory clearances. And the SEC filing stated they wouldnt be redeemed until right before closing. Yes we need to give these type of trades a name…Maybe the code should be, “A 2 Whiteroses Special”.

            1. Don;t they have a drop dead date for the merger of something like 4/7? and it can be extended only 3 months? That surprised me as being very short……..

              1. Personally Im shooting for $25.50 ish around the 12/30 exD date and move on. If I doesnt stick, then I will let it play out longer.

                1. Guys – What do you think about CTZ (the rate @6.675%is very close to CTV which they are redeeming) and call date is 9/2020.
                  It is 24 and change and may jump to 25 once they announce redemption. Does Century Link have a history of redemption or was CTV an aberration?

                  1. Jay, CTV was callable for almost 9 months before Century Link pulled the trigger. In light of the current economy I venture a GUESS that they may wait awhile before calling CTZ.

                    1. Thank you both. I might nibble at CTZ as even if it redeemed by end of 2020, I think it is a good buy with 6.685% and 3% in capital appreciation.

                  2. I think with the availability of very cheap financing we’ll see a lot of somewhat sketchy companies able to refinance and call expensive debt. CenturyLink certainly fits that bill.

    3. Grid – I’m wondering if you have ever calculated your portfolio turnover. I used to keep track of my commission outlays but those have gone almost to zero and the number of trades has certainly gone up. I will rarely bid in for more than 100 shares at a single price.

      1. Bob, Alot, ha…Now if you just randomly backtracked various days past 4-5 years you might not think I trade a lot. I tend to own many of the same issues for years and years on end….Just not every day, ha.

        1. Grid – if anybody backtracked on here various days past 4 or 5 months or years, they’d definitely never think that you DON’T trade a lot…. HA! You de Trade King! Tough to flip, wash, repeat without being da Trade King…. It’s good to be the King…

          1. I did a 2WR trade today. I added a couple hundred more UMH-B today at 25.23. I preferred getting them at 25.18 last week like I did, but that chance may be done. I have enough “time out money” now in the NGH and UMH-B now….I do have one issue I have held non stop past 4 years. A smaller amount of PFX that I bought to hold until bankruptcy or 2032 maturity and am sticking to it. It should have been the first thing I sold, ha. The price goes down equal to the interest payments. I havent made a nickel on that thing, but its gonna pay off eventually or go “poof” one way or the other.
            BTW, I replied to you on SA but Im blocked out on all Rida articles (though I got a couple Pendy slams in on him in another persons article, ha). Anyways concerning Amtrust, that guy is wrong. It is not A rated. Its subsidiaries that pay claims are. The baby bonds are the holding companies responsibility and were last rated bb+ by AM Best. Which means “fair ability to pay” and 6th on a line of 9 in terms of safety with 1 being safest. bb+ for AM Best is considerably lower than BB+ is for S&P so one shouldnt get confused between the two.

            1. Gridbird, I bought PFX shortly before the buyout was completed and investors dumped it because it was going to be delisted. I’ve wanted to sell ever since but the price never got high enough to give up that nice coupon. So I’m resigned to maturity or bust, like you. Positive sign that they are buying some back on the open market after not doing so for a while, at least.

              1. Karma, A small consolation is we should be getting another interest payment in a day or two…. I hope.

                1. I don’t think there is an imminent concern of default on PFX at all. Long-term, sure. The one concern I have right now is if they were reaching for yield in their portfolio and owned too many dodgy credits when the coronavirus hit. Hard to tell by looking at the financial statements.

            2. Yeah, I got started on UMH-B today but in order to be sure I got started, I bot at 25.25 then hoped for a dip to 25.22 that didn’t happen… Like NGHCN, it does look like it’s acting the way it should so not likely to see much of a dip from here imho – unless for some reason the wheels should fall off (pun intended).
              That guy on SA who brought up AmTrust is so wrong that I actually found myself agreeing with Pendy on something! LOL You saw what I found on AM Best. I guess the bb+ you knew was before they withdrew their rating all together.

              1. 2WR, It dropped an ask to $25.24 late in day and I hit market order and got the bid $25.23. The b/a spread had been real high and many days only a few hundred shares would sell. Appeared a seller was out yesterday as 7000 shares were dumped with lower ask. I wouldnt procrastinate too long with exD now a month out……….Amtrust… So many poeple are wrong on insurer ratings. Even “Panick Investor” SA writer Richard Lejuene who is supposedly had some long investing career is fooled on this and also posting in past its “A” rated safety. Shows you all the buffoons in the investing community. My experience and expertise of insurance and investing begins and ends with backing into a car and filing a claim… And yet, even I know the difference that they dont…..Pea brains!

            3. PFX traded under 11 back in March for a yield of about 17%. Trades amazingly good volume for a delisted issue.

              1. Bob, some of those trades are interdealer swaps. You think the bond market is a ripoff, try buying delisted baby bonds on bond market. Try getting any shares at the trading price. These are like annuities, they are meant to be bought not sold. They will rip you off either way and your trade will personally fund the bond dealer office party. I tried buying delisted IEH in March when last trade went off at $14. All they were offering me was $24. Such sweathearts they are!

                1. Grid – yes about interdealer but it’s still good volume. At FINRA the interdealer trades are marked.

                  If I’m buying unlisted issues, and have to go through the bond desk, I give them the shares I want and the price I will pay, based on reported transactions at FINRA. The bond desk doesn’t like doing that but I usually get filled.

                  But I don’t think that process will work on the sell side. You accept the dealer’s ridiculously low bid or you hold on. I view PFX as a one-way trade. So its 2032 or bust.

  6. To paraphrase the late, great Sen. Everett Dirksen, “a trillion here, a trillion there; pretty soon we’re talking about real money!”

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