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Monday Morning Kickoff

When money is sloshing around the globe you sure can’t expect stock markets to retreat by any significant amount, but markets are seemingly struggling a bit to gain major traction to move ever higher. The Standard and Poor’s 500 moved up by just 18 points last week—about .4%. In the ‘olden days’ any investor would be most happy moving up by .4% in a week–I know I sure would–but in the world we live in it seems like kind of a ‘yawner’.

Interest rates moved lower on the week (as measured by the 10 year treasury)–a full 10 basis points. Never mind that the CPI moved up .6% (versus a .5% forecast)–no one really cares at this moment–everyone (almost) has bought into the “transitory” inflation storyline. Anecdotally it seems like a serious situation–inflation. Wage inflation is under severe pressure. In Minnesota virtually every restaurant one goes to they have signs apologizing for slow service, because they are short of help. 1 restaurant we tried to go to in Duluth was simply closed with a sign–no help available. We’ll see what happens as job openings were listed at 9.3 million available in April versus 8.3 million in March.

The Federal Reserve balance sheet moved higher by a paltry $17 billion last week–but each week that it moves higher it is a new record high—and I can confidently predict it will move to new records every month for the next couple of years. Oh well–does it even matter–we know where it is going–higher and higher.

As long as we are mentioning the Federal Reserve I will note that the overnight (3 day on the weekend) reverse repo operation of the Fed hit $547 billion on Friday. Wow!! So banks were looking to off load over 1/2 trillion in cash – talk about money sloshing around with no where to go.

Last week, as you would expect the average $25/share preferred and baby bonds moved higher. Like common stocks the move higher was a bit labored as the average issue was up 6 cents. Investment grade issues moved up 5 cents, mREIT issues up 13 cents.

Last week we had 6 new issues priced. I keep a log of new issues here.

REIT TPG RE Finance Trust (TRTX) priced a new issue of 6.25% perpetual preferred which is now trading on the OTC grey market under ticker TRTXP. This issue closed Friday at $25.15.

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Self Storage giant Public Storage (PSA) sold a new issue of preferred stock with a coupon of 4%–the issue is strongly investment grade. The issue is trading under OTC grey market ticker PSALL and closed on Friday at $25.20.

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Bank of Hawaii (BOH) sold a new issue of non-cumulative preferred stock with a coupon of 4.375%. The issue is investment grade. Trading under the OTC grey market ticker BHWIL the issue closed Friday at a very strong $25.73.

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Specialty lender Atlanticus Holdings (ATLC) priced a high yield perpetual preferred with a coupon of 7.625%. No OTC grey market ticker has yet been assigned and there is a possibility that the issue may not trade on the OTC grey market. I am not aware of any trading in this issue yet.

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Globe Life (GL) sold a new issue of debentures with a coupon of 4.25%. Being debt there is no OTC grey market trading. If an investor would like shares of this issue prior to exchange trading they will have to call their broker with the CUSIP shown below.

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Lastly collateralized loan obligation investor Eagle Point Credit Company (ECC) sold a new issue of 6.50% term preferred stock. This is a monthly payor and will be popular with investors. The OTC grey market ticker is ECCPP.

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15 thoughts on “Monday Morning Kickoff”

  1. ATLCP is actively trading. I bought this higher risk shameless yield flip play this morning for $24.55

    1. Glad I wasn’t the only one. Not sure how much to expect, but am hoping to get a relatively quick flip out of it.

      Still waiting for ECCPP to come back to me too. It was hot out of the gate, but has cooled some. Not chasing it.

      1. I just dumped a couple thousand SESCF at $25.31/.30 so I was itching for a home for some of it. B Riley sure has the hots for the company. I feel comfortable hanging around long enough for the volume to dry up and then see if I can dump it then.

        1. Grid – a little surprised you are dumping SESCF at $25.31 – won’t the interest payment be at least $.36/share if the redemption occurs on 7/12/21?

          1. No. WTREP went XD today and the next pay is 6-30. You get zero additional dividend until we are past the 6-30 date. Callable on 30-day notice. If called today for 7-14 you would get 13 days worth of dividends or about 7 cents.

            1. To my comrade in Delaware:

              Are you confusing SESCF and WTREP? With so many calls and redemptions going on, it is easy to see why!

              1. Vegas – I get your comment, thanks. With all the XDs occurring today it was a busy and confusing weekend.

          2. Rob, I just move on when its over. I will give someone else the nickel for the month hold and use the cash to buy something else. I had no cash, so it was easier just to dump this to get raise the cash since the party is over.

  2. If inflation is “transitory” does that mean that inflation in financial assets is also transitory? That is the trillion-dollar question. The Fed has rescued us from the economic collapse of Covid-19 by blowing up their balance sheet buying assets of all types, especially Treasuries. On the strength of both home and stock market appreciation, household net worth has reached a high of $136.9 trillion.
    And as John Maynard Keynes wrote, “Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continued process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become “profiteers,” who are subject to the hatred of the bourgeoisie, whom the inflationism has impoverished. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.”

    1. ChrisW:

      The Fed is still relentlessly buying $40 Billion/month of residential mortgage-backed securities.

      They are essentially doing their part to subsidize the single family housing market while homes sell for all-time high prices/square foot. I know several first-time home buyers that are getting outbid on homes with 50+ offers well over asking price.

      Now you have companies like Blackrock paying 25%+ over asking price while they try and build a single family rental portfolio.

      My favorite quote from brokers in new listings is statements like, “Offers will only be accepted on Wednesday.”

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