Looking at the futures this morning we are getting a bit of a bounce–less than 1% in equity indexes. I see the 10 year treasury is trading up at 3.84%–up 5 basis points or so from the close yesterday.
What was yesterday about? Not much of anything new as far as I can tell–let’s face it equity prices had been marching up and up and up for a number of years and at some point equities go down. In this case folks want to use this minor event to call for emergency rate cuts from the Fed. A 3% pullback in stocks is not the end of the world–especially for us that lived through ‘black Monday’ in 1987 when prices fell many multiples of yesterdays loss.
Yesterday our portfolios took a bit of a hit–maybe around 1/4%. Were bargains created? Only if a security falling 50 cents is a bargain were any bargains ‘made’. I didn’t do anything–buying or selling nor will I today–I want to let things settle a bit. Decent buys today will be there tomorrow and next week. Income security prices are not moving much–they have been flat for weeks so no hurry to dive in further.
Obviously CD and treasury coupons have lost a bit of their luster–in fact I just glanced at Fido and all CD rates are under 5%–nothing available over this mark. I see money market funds are right around 5%–but subject to going lower any minute. So eventually we will see funds ‘forced’ into equities–whether that is this month or next year no one knows.
High volatility often means a bear market coming. I remember 2000 when there was a rapid, sickening correction. Then a quick move to new highs. Everyone said it was over, and back to the sky. Well, we all know what happened a few months later. I knew a few retirees who had to go back to work after that.
Somebody got hurt yesterday. You just know lots of institutions are heavily leveraged again. Some think their hedges will protect them. But we should have learned that in a scare everything just gets sold. So called negaive correlations go out the window.
Agree Harrold.
More interesting to me than the SPX and JNK bounce is the selloff in ZB 30-year treasury futures, currently -1.4% at about 3pm ET on Aug 6. Despite the spike high yesterday, ZB didn’t close above the December high and is falling today.
I have no prediction where long rates are going, but I wonder if the bond market will reassert its concern over the high, ongoing issuance of new debt, especially if/when the Fed starts cutting. Okay, was that BS?
I am using todays bounce to further de-risk the portfolio. Especially the stuff that I don’t feel performed well yesterday. I don’t like how this market smells. Even with yesterday’s “panic” I didn’t find one bargain, which is telling.
At the very least kind of an internal CYA move so I am not slapping myself come September/October when everything is on sale, and I didn’t raise any cash when all my positions were so over inflated the seams were blowing out.
I was down 0.1% yesterday and picked up a few things I had stink bids on so I was pleased at how well everything held up.
Dan-
Right or wrong, I’m in the same camp as you but maybe with a longer timeframe. For my few nibbles I’m avoiding perpetuals and juniors.
it was the ‘Yen/ Bank of Japan’ gray swan messed up things for sure, seems to have settled out to ‘Fed watch” now, they will spin all month, the governors and then Jackson Hole WY conference. ‘carry trade’ got ‘carried’ out to pasture w their ‘bets.’ Fun volatility imo.
To me a gray swan is something everyone should see coming but she blends in so well w the flock that she is ignored. One has to wonder who got really hurt in this, so far no prisoners but I bet some lost a lot. Everything is hedged to the n’th degree and controlled by sentiment and etf flows it doesnt take much to move things as we see!
Tim, interesting thought about where the money will move. Hard to say. Equities may have to move lower if there is a recession. We’ve had the hint of one. If it’s one thing we have seen, people prefer safety. So CD’s and treasuries will have their appeal. Even after the morning panic yesterday investors went back into BB and preferred which rose off their lows.
People are willing to accept a lower yield on the purchase price, maybe myself included. Although I did have 4 buys hit yesterday on a few GTC they may not be long term holds.
CM, yesterday was so interesting. Plenty to study if I had the inclination. All the stock indexes down plus gold, silver, Bitcoin. Agriculture was up some. It would be useful to see what stocks survived yesterday.
I think the bounce will be modest and last about an hour and that equities end the day solidly in the red.
Stephen—I would tend to agree with you–more selling to come.
Stephen and Tim….
That’s what makes “The Market” so interesting
I’ll take the other side of your predictions.
Westie–my short term predictions are as good as a coin toss.
I agree Westie. Scooped up COF preferreds. 11th largest bank by asset size. With rate cuts, these will continue to rise. Picked up more BIZD and GBDC for bdc allocations. Scooped up more CHSCL. Picked up NSA-A, and REXR preferreds on the dip as well… Sold various pinned to par investments for the above. Panic selling is always welcomed. Annual div/interest checks continue to go up. Was not a time to bury head in the sand for me.
How come nobody ever “buys” anything? LOL… We pick up, we grab, we nibble, we add to, we snag, but we never buy. Haha, nothing meant in my comment, but this phenomenon is especially obvious in the real estate world right now where in my particular case nobody even “BUYS” when it comes to my house… Uh oh! My frustration is getting the best of me… I’m going to go outside, sit in dirt and maybe snag me a few weeds……….
2WR, I picture Andy Rooney saying your comment, or perhaps even better, that Sniglets guy from SNL 35-40 yrs ago.
Now, that’s not true 2WR. I know several guys who bought the farm ;o)
Sorry to hear your house is slow selling. I read an article the other day that said my city (just a ways north of you) has one of the hottest housing markets in the country due to everyone moving in.
Are you moving out of state to help counterbalance the influx? If so, it will be our loss.
Ha! I assume you’re referring to this article – https://www.knoxnews.com/story/news/local/2024/07/26/knoxville-has-the-fastest-rising-housing-prices-in-america/74528543007/. Yes, and I’m only 50 miles away but I have equal access to two big Tennessee cities both Knoxville and Chattanooga, not just one, because we’re 50 miles from each. Yet we’re apparently a world apart because we’re undiscovered… My house would be worth multiple times the price I have it on the market for in the coastal states – literally… PM me at SA if you like and I’ll show you the listing… And yes, I’m leaving the State, not really leaving the state as opposed to moving TO family…. It’ll still read “GO VOLS!” on my bumper sticker.
Hey 2wr
As a buyer/seller of a historic number of houses…..
– When you are buying, it’s a Seller’s market
– When you are selling, it’s a Buyer’s market
– You first offer is most often the best – don’t lose it
– Be patient. Look at your house/price from the point of view of someone interested in buying. Are you competitively priced.? Would you, a buyer, think Tim’s house was the best value? If not, you’ve either got to find a way to improve your value; lower your price, or be patient.
I’ll inflict on you one experience:
Decent offer within a week of first listing. Realtor said, NO, they’re firm.
Five months, 86 showings later, two offers @ same area as 1st. One offer walked “because the house wasn’t new” on minor inspection problems.
Finally closed.
Tougher than investing.
One of the most incredible places in an idyllic setting I have seen, just incredible, set w Mrs WR charm, some big star from Nville will scoop it up, hope soon, my aunts home sat on the market 1yr after 2010 different times, this too shall pass dear 2WR! My cousin’s palace here only took 3mo to sell this year when rates were 7.25% on the 30yr, the guy wanted something 1/2 way from town to Airport, perfect cul de sac easy access to both. Old ‘wives’ tale bury a St Joseph’s stature in the yard, mom did that in early 2011 and a mo later we had an offer finally!! this is actually on wiki to show you how!! omg.. lol. take care. B
Storybook charm meets Tennessee acreage.
Nashville buyer: 100%.
Scott – I’m a little slow in the saddle to mix metaphors, but I just sent you the link via SA private messaging…. Thanks for asking.
Hello Tim, if it holds I’m happy to be wrong.
Stephen and Tim …….
About today’s bounce predictions:
What interests me about investing is that each Buyer of a security thinks its value will go up, while the Seller is sure it will go down.
Both are firm in their position and willing to put their money where their belief is.
100% of the time, one of them is wrong.
I have been on that Wrong side so often that I have learned to be humble and to follow the philosophy that most players in III profess:
Be conservative, don’t predict where prices will go; focus on value and the income, take advantage when others panic.
Agreed westie. Either be a value investor or a trader. Those who play that game have to be on it all the time. You enter the trade, then stop out fast if it moves against you. Insisting you are right is how to lose a lot of money.
Westie, it’s hard to know what is a value market wise. More what you would consider a value. Then try to ignore the market noise.
I guess a couple examples might be the CHS preferred I am ok with almost a 7% or better with them. I might not catch the bottom in pricing but I feel because they are a co-op they answer to members not to wall street. I just recently started a position in another preferred partly because the stock price has been stable for years hardly going below par. Of course me being me I put in a low ball bid and only got a partial fill in the panic. I’d mention it but I am still trying to fill a starter position.
90% of what I buy I’m hoping to get a good price and hold. I tend to not want to trade unless I am buying to lower my average cost and if I buy more than my max position I will sell the higher cost tranche if it goes to even.
Charles…
I think most on this site develop our own sense of where “value” is.
I think almost all have the majority of our holdings in Sock Drawer type of investments which we feel are solid companies, fairly priced, with good earnings and growth potential.
Some also pursue what we feel are “bargains.”
That could arise from a market panic, earnings shortfall, or volume dump by a large holder.
In this case we are less concerned with long term value. We believe we are getting a bargain and will hold or flip when we believe the bargain has been realized.
My “bargain” weakness is the falling knife scenario where what has been a solid company announces a surprise shortfall. You and I bought ADM on this basis which has turned out well. I think you sold at a nice short term profit – I still hold. CC not so successful for me. I’m OK with my weakness as long as I’m playing with less than 1% of my total.
Westie, I am holding a large group of various companies, their preferred and BB from less than 1% to maybe 2.5%
You are right, I flipped ADM and WHR also, but I have been adding to my BMY on any weakness.
Trying to spread the risk out. I dodged a bullet on ESGR I decided to go with a bond of theirs instead of the preferred and am actually up on my cost on them.
Yesterday brought my wife’s account back up about .24% So recovered some of the loss from Monday. Just a warning of what could happen.
Last night was trying to read through several of the quarterly reports that Tim posts every day, but kept nodding off. GAMCO was solid as far as I could tell. ECC didn’t impress me. I felt they are staying on top of write downs on non performing loans but I don’t like they keep issuing more common and preferred stock doesn’t matter I guess since I don’t hold them, but I do hold the BB of EIC
I wasn’t impressed with the report for UMH I held one of their preferred they called in the past and was looking at getting back in but their issuance of common and preferred by ATM bothers me. When I played 21 in Reno I looked for houses with tables playing single decks and now it’s all in the houses favor with these multi deck shoes. I have a GTC low ball bid in UMH PD I think I will just cancel for now.
Want to go back and read the report for Assurant when I am more awake.
Charles
I also was not happy with ECC.
Looking to exit the preferred and replace with the bond.
Stephen-
Good guess. I keep track of the EOD (5pm ET) price of ES (SPX) and NQ (NDX) futures. Today’s rally evaporated and the both closed flat EOD-EOD.