Mid Day Ramble

Quiet day again in the income markets.

We are not seeing any preferred issues down more than a buck

We are seeing most of the regular ‘suspects’ near new lows–i.e. AmTrust Financial preferreds, a JPMorgan 6.70% perpetual (JPM-B) which is redeemable on 3/1/2019 and will undoubtably be called at that time (also it just went ex-dividend).

The 10 year treasury is now at 2.71% and we expect it to move into the 2.60’s if the FED gives a dovish statement tomorrow OR Jay Powell leans dovish during the press conference after the FED meeting announcement. This announcement and press conference are very important to the equity markets–although not too important to the income issue markets.

We will be rebalancing the Enhanced High Yield Income Portfolio which can be seen here.   While we have rebalanced our personal holdings we have left way too much risk in this model. It will end the 1st year with a gain of around 2%–will is totally unsatisfactory. The model is loaded with shipping issues as well as the hated Spark Energy 8.75% preferred. Needless to say if you have a portfolio dominated by these issues you have been spanked quite hard in capital losses–which fortunately have been balanced a bit with the high yield of the issues. While we are not totally negative on the shippers they need to be held in modest quantities–in this small portfolio we have 3 issues–just too much.

9 thoughts on “Mid Day Ramble”

    1. Thanks SteveA–I forgot about that issue–I knew there had to be something to worry about.

    2. Policy and politics are first cousins. Hard to discuss one without the other.

      In my long lifetime this country’s failure to put the balanced budget amendment to a vote of the states is one of the two great public policy failures. What a different country this would be today had we done so.

      And just for giggles, go back and look at who voted for it, and who didn’t.

      Yep, it’s political.

  1. Have you seen SBLK? I can’t figure out the reason for the heavy drop these days. Pity there’s not a preferred and quite peculiar the baby bond SBLKZ stays solid as a rock!

    1. Not any news i can see. But, it is a great high risk company to throw some $$ at. The book are not great at all, but everyone should put some $$ at high risk high return companies, and this fits the bill.

      1. Last I remember Oaktree Capital controls Star Bulk now. Howard Marks is a pretty savvy operator. Oaktree with 124 billion under management is helping to get the ship righted. Even with Howard Marks involved I don’t do shipping any more–I have enough excitement in my life without shippers.

    2. Last I remember Oaktree Capital controls Star Bulk now. Howard Marks is a pretty savvy operator. Oaktree with 124 billion under management is helping to get the ship righted. Even with Howard Marks involved I don’t do shipping any more–I have enough excitement in my life without shippers.

      1. Regarding the shippers, I’m a long-suffering holder of cumulative preferred NM-H. That said, i own SBLKZ (baby bond with 2023 maturity) and TNP-B, with a nasty failure to redeem clause. I hope both of these pan out.

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