Monday Morning Kickoff

I am suspending the more normal Monday Morning Kickoff and just touching on more recent news for the day and week ahead.

The average $25 preferred stock and baby bond closed last week at $18.02 which is $1.52 higher than where it was on 3/18 (last Wednesday).

The Fed Balance Sheet has gone parabolic and was up over $300 billion last week. Of course at this point we know it is going massively higher.

Just 30 minutes ago the Fed announced quantatative easing of giant magnitude, buying muni bonds, commercial real estate mortgages and certain investment grade corporate bonds. The Fed took off any limits to the amount they may buy–ramp up those printing presses!!!

With the announcement from the Fed equity futures bounced nicely and right now are up about 1%–much better than overnight when futures were off 5%. I am highly suspect of any bounce as the uncertainty and unknowns are just too high–but just the same a bounce would be good (in spite of the lose I will take on my short position).

I expect to see a steady stream of companies everywhere either slashing or suspending their dividends–liquidity is king. Those companies that suspend now are likely to be around next year—those playing hero with their dividend are fools. As some have noted in comments some companies are going to pay dividends/distributions with stock issuance–seems like a reasonable alternative to cash.

So where do we go and what do we do?

I really doubt any buying should be done in here–there will probably be a number of better opportunities in the future–there are lots of potential bargains out there–but they may be better by the end of the week—no one really knows what 10-15% unemployment looks like—nor do they know what -15% GDP (or some such number) looks like.

Stay safe–lots of dry powder (and for some 100% dry powder). We are around 50% cash—and hope to remain there, but this can change rapidly, so we will see.

30 thoughts on “Monday Morning Kickoff”

  1. Diff Thread Question: What do you think about Canadian Banks? When to get in? Most have another 25%+ to touch 2008, and I don’t think CA banks were even affected that much by the US mort crisis. This is diff. They will be affected. With the exchange rate, I see a double-dip of opportunity but think we still have more down to go. This SSS (society S-show) is not over yet. TD and BNS will look very good for the long term.

  2. I finished selling a few things this morning. Im now at the point mentally I am embracing any future plummets and looking to buy…

  3. Couldn’t help myself – bought AGMpA @20.03 today.

    Hasn’t been there since 2014. If they default, there’s no hope anywhere.

    1. AGMpA is callable this April!

      Trying to learn – why choose AGMpA and not buy AGNpD which is also near its lows in $19.03 last Thu 3/19 and not callable till 2024? Yields 5.91% if you can get it near today’s lows?

      1. Last quote I saw on AGMpD was 21.85, so the short answer is you can’t go back in time and buy it at the moment it sank to 20.07 today, nor predict that it would have hit 20.07 for a single moment in time. Nor can you buy at last Thursday’s price.

        As for the call dates, if AGMpA is callable essentially now, and if they would call it, that would be an immediate 25% capital gain for me. I am not opposed to making 25% in a couple of weeks or so, as highly unlikely as that it is.

        BTW AGMpD would have a current yield much higher than 5.91% at any price today; I am not sure how you calculated that.

        And in the time it took to type this, AGMpD jumped to 23.06. So, when you see a price you like, you have to jump on it.

  4. Most of the green on my screens today is in cash parking (as I call them)- all dropped, but coming back-
    BHK, BHT, JPST, IEF, MGF MIN, SCHO, SLQD, VMBS,
    other green- NGHCN, SOHOO

    I’m also down a lot & a lot more today, but I can’t see selling. When the market turns, it should rocket up– but Congress has to stop the self-dealing, and get the money and aid flowing to families and the health system. Dry powder is itching for action- but not yet.

    Stay healthy.

  5. SJIJ on sale again, I’m assuming a fund selling. Same thing happened last week and it bounced back.

  6. Just read a very long piece from Scott Minerd CIO over at Guggenheim Company. He said that just over 50% of Americans only have about $500 in savings. That one shocked me. He went onto say that even after all these bailouts, or stimulus packages (whatever you choose to call them) certain industries are going to have a very serious struggle to stay alive. He mentioned of course the 4 following as the ones most in trouble: Airlines, Lodging, Retailers, and Energy. Nothing new there but its companies I will stay away from until this thing finds a bottom. Which could be quite a while in my opinion. I sold 4 things this morning and bought just one thing that I know is very financially strong. I’ve been combing carefully thru some of the banks and since I have a friend that is a 30 year banker he has helped guide me to the strongest of the strong. Lastly, again I feel so truly sad for all the 60+ year olds that were not positioned correctly. Not only has their lives been changed forever more but their plans of enjoying traveling etc in their “GOLDEN YEARS” are now also GONE. And again, there were definitely people out there who saw this coming so I think we all realize by now “WE’RE ON OUR OWN”.

    1. Chuck, I respect your opinion and I agree. We were always on our own but some were easily mislead. Now they just want to blame anybody but themselves. I wish you ATB.

  7. USP/PRM the 6.5% Coupon yielding 7% with next ex-divd 3/30. Buying some here near day lows – more for a trade than long term hold as I think fixed interest better than these where it converts to floating after a few years…

  8. For those shorting, the easy money has been made. I believe it gets more risky now with the fed almost going all in. They could start buying equity etf’s next like Japan and Europe. They also could ban short selling like ‘08. Be careful, ATB.

    1. Fed’s liquidity efforts will help form a base. I’d previously reported MBS forward locks were essentially seized for last ten days. Overnight action by fed has reduced forward lock on conforming 30-year fixed by 1.1% (other loan tiers remain non-functional). In 30+ years, have never seen a move like this. For those >$510.4K considering a refinance to a lower rate this might be time to call your favorite lender.

    1. I have an order at $20. This week is not starting off very well (stating the obvious). My nibbles are getting smaller, less frequent, and for lower prices.

    2. mSquare–I think this may be a good one–6% coupon is kind of lucrative.

      1. Yes, thanks.

        Though not sure about the ‘not paying dividends’ clause. Normally yes, but in this environment, I guess utility just less likely to pull dividends than a bank? I know you are waiting for better prices ahead on new buys, but appreciate any opinions on this non-payment or postpone of dividend.

  9. Tim, you speculate that companies will slash or suspend their dividends. Are you referring to common, preferred, or both. I’m just trying to gauge the safety of my preferred income – I have mostly investment grade banks, utes, insurance company positions.

    1. AZBob–common shares is what I was thinking, but certainly will be some lower grade issues that will suspend on preferreds–maybe on a long term basis creating opportunity (we’ll see).

  10. Tim .. with the Feds. giving… 0% – .25% to the Banks ,will they be calling the higher rated pref. and BB..? or no movement ..

    1. Georges–assuming rates remain low which I believe they will they will eventually call them–but not until we get by the turmoil–maybe 6-9 months from now–liquidity is king now and I think they will maintain liquidity to the max.

      1. That’s why my IG preferreds are mostly uncallable now, giving up some current yield for lifelong duration. I just don’t want to be fighting over possible scraps in the 2.5-4% range later in some dystopian scenario I can’t even envision. Paid 130 last week for one lonely lot of PPWLM that popped up. I’m fine with it.

        JMO

  11. Market tanking because damned D.C. politicians can’t get together on an “emergency” bill, fueled mainly by personal animus towards Trump. They should be ashamed of themselves.

    1. Stimulus would be a short term pop with mixed long term benefit. When it happens I’m selling the rally.

  12. I continue to find trading opportunities, though some of the buys are lower than the sells. Gradually selling the rally that way.

  13. Here’s some good news to think about: For those of us bothered by an RMD rate higher than what we actually want or need to take from our traditional IRAs, there’s the prospect that, with all these losses, next year’s RMD will be considerably lower.

    1. Jersey – That’s kind of gallows humor I suppose, vinny, but I’ve thought about that too. lol… The other side of that rainbow is that for those of us who have to pay RMD this year as well, we’re going to be paying on the basis of an asset total that most likely no longer exists.

  14. This has nothing to do with stocks then again it might..
    This massive buying by the feds is not good in the long run. We have gotten a taste of what can happen before. In the future, as the Fed try’s to unwind all of these assets it could unsettle the market at that time.
    Couple thoughts, people expect immediate action and don’t understand in today’s world patience.
    I read the president wants to compare himself to a war time president. In a war you don’t worry about the stock market, you worry about the enemy.

    1. Charles M,
      RE: In the future, as the Fed try’s to unwind all of these assets it could unsettle the market at that time.
      Well, we my have to consider that the Fed may never unwind much of whatever they buy if it doesn’t show a gain. They’ll just keep it on the books forever. They are essentially monetizing all these debt instruments. Worries about currency devaluation as a result of the massive creation of digital dollars doesn’t seem to be a concern, certainly not today.

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