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Let’s Get the Week Going!! Monday Morning Kickoff

I can’t wait to get this week started. The stock market was a bit soft last week for whatever reason–personally I think the corona virus was a good excuse to sell stocks down–they had gotten way ahead of themselves at values that were historically very high.

This in not to say the the corona virus isn’t potentially very serious–because I think it is, but wouldn’t the stock market have been off 10% or 15% or more if the marketplace actually thought the virus was going to cause a recession? Really with the S&P500 closing at 3225 after opening the week at 3247 can we say this drop of less than 1% in the week is a significant move? I don’t think so. Sure the market has dropped 3% from the record highs–but really -just 3% lower–big deal. It is only a big deal in the context of what might follow.

The 10 year treasury dropped to close last week at 1.52% after opening the week at 1.61%. After trading in the range of 1.80% to 1.95% late in 2019 we are now seeing trading at levels last seen in September. What this portends is for others to figure out.

In the end I never try to seriously predict economic activity–why waste the time? There are plenty of highly paid people to get the numbers of wrong. On the other hand I tailor my investing to what I think is occurring–for now that is simply uncertainty–keeping some dry powder and staying in shorter maturities when possible.

The Fed Balance Sheet grew by a measly $6 billion last week and if one didn’t think otherwise you might believe that the Fed was taking away the ‘punch bowl’. As you can see below Fed assets have not grown in 6 weeks–they are at about the same level as mid December. Maybe the stock market fall is related to reduced liquidity.

Last week we had 1 new income issue sold. This was a perpetual preferred from small community banker Dime Community Bancshares. The shares are trading on the OTC Grey Market right now and opened for trading at $25.40 and now are at $25.68.

The average share of $25 preferred and baby bond did rise 3 cents last week, but most sectors were essentially flat.  We do note that shipping preferreds and baby bonds were down about a dime.

The average current yield on $25/shares issues of preferred stocks and baby bonds stands at 6.28%, while the current average yield to worst is around 3.21%. We will chart this data when we have more data recorded in the future.

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