Monday Morning Kickoff

Last week, which was a shortened holiday work week, the DJIA traded in a range of 25,805 to 26,075 before closing the week at 25,917.  The 10 year treasury traded in a range of 2.87% to 2.95% and closing the week at 2.94%.  This is the highest closing price in a month and reflects the relatively big jump in wages reported to be up .4% during August.

Last week we had the ISM Manufacturing Index which was reported at a hot 61.3% which was way above the consensus of 57.9%, while Vehicle Sales and Construction Spending both came in light of forecast.  The ISM Non Manufacturing Index came in above expectations while Factory Orders fell.  Certainly seems more like a Goldilocks scenario instead of an inflationary one, but one month is not important and we will have to wait another month to see if wages keep rising.  Certainly there is nothing here to worry much about yet–and the Fed has no reason to pause interest rate increases.

For today we have Consumer Credit being released and this one has importance to us (although likely not to markets) as we like to see if the high consumer confidence translate into borrowings.  Wednesday we have the Producer Prices being reported and Consumer Price Index being released on Thursday.  Only the CPI will be considered to be important and we want to follow that just a bit.  Friday there are a number of reports, but as usual none are important from a equity market or interest rate perspective.

The Fed balance sheet assets fell by $10 billion.  We have reached a point where this is running off at a good pace week after week.  In another 5 years or so the Fed will have a balance sheet 1/2 the size of the current level.  Likely we never reach this point as that assumes we don’t have a recession in the next 5 years–highly unlikely.

For a short week we had a number of new income issues priced.  MetLife spinoff Brighthouse Financial sold a baby bond with a 6.25% coupon.  Monroe Capital Corp (a BDC) sold a baby bond with a 5.75% coupon and a short maturity in 2023.  Financial services company B Riley once again came to market with a 6.875% baby bond.  Additionally shopping channel QVC came with a baby bond priced at 6.375%.

The average $25 preferred stock fell by a dime last week–I guess it was a stealth move lower as it didn’t appear to affect anything we owned.  There are now 174 issues trading at $25 or lower compared to 147 the week before–makes sense as the prices fell as the 10 year treasury rose to higher levels.

23 thoughts on “Monday Morning Kickoff”

  1. BTW, has anyone noticed that Spark Energy (SPKEP) 8.75% Preferred has been steadily moving higher since mid-May and going EX date 9/28. Tim, I know you follow this high yielder, any thoughts on a flip toward EX date? Has the company strengthened fundamentally or there is it just yield chasers buying? Wishing you profitable investing, Nomad

  2. Hi Nomad–yes I have noticed it marching higher. Here is a trend I notice–

    XXX company announces lousy earnings—XXX high yield preferred stock tanks along with the common shares. It takes the next quarterly report being reasonable to stabilize the preferred shares and then slowly start to move higher until they reach a point that investors assign (by supply and demand) to be the correct pricing level–in this case it looks like $24.25-$24.50 a couple weeks before the ex-date. After this point it trades in this area until quarterly reports indicate it should be assigned a higher price (because it is perceived as lower risk) or lower price (as it is perceived as higher risk). Maybe with multiple good quarterly reports it moves slowly higher as investors get comfortable with it and begin to trust management again.

    As for a flip I think that if it moves into the upper $24’s by ex dividend it might work to do a flip–on the other hand absent other news it might just be extra trading for nothing. The next earnings report isn’t until the 1st week in November.

    1. After reading about SPKEP on this forum and doing some tire kicking, I’ve got a decent position established and a 3.5% gain. Will be holding on at least until the end of the year for those fat dividends.

  3. Looks like low life LTS went back behind the woodshed again for a bare butt spanking again today…. Bought 500 shares of NSS today after I figured out their refi this fall is to replenish revolver and not redeem. Got a bit lucky selling it a month ago a nickel above the 25.68 I bought today. Got to use the money for some small coin flip money….ASRVP…my favorite trading preferred..Bought at 27.75 a month ago sold at 28.42 today and bought it right back a half hour later at 28.05. Still in line for the interest payment.
    Decided to dabble in an ag bank preferred getting 100 shares of CBKLP today at ask price of $102.25. The stock goes exD this week for $1.51, so limited past call exposure. In essense a plus 6% QDI BBB+ rated preferred by a real rating company, not Egan.

    1. Hi Grid–yes I have been watching the LTS saga–have no idea why Dr Frost would be mixed up in penny stock stuff.

      Hope to have time to do some more flipping (and not flopping) soon–I have been working on a lawsuit for a guy—lots of work–not much money and it has been eating up every spare moment I have.

      By the way I bought a few hundred GLIBP at 24.62–and wish I would have bought more.

      1. Did you get GLIBP a few days ago to get that price? You probably been so busy you had not had time to even check. I really dont know what we got here. I usually like to know what I got when I buy. Pleased its up about 50 cents since I got them though. I like the fact it isnt a bank, energy, or reit though…Something different.
        Dr. Frost aside, LTS is a mess balance sheet wise, even if he is squeaky clean. I cant stand companies that load up on preferreds to hide debt and dont ever make real profits.

        1. Got the GLIBP at that price on 9/5–yes most happy to have a 50 cent gain.

          I hadn’t dabbled with any LTS stuff for quite a while so no damage there, but I had owned the monthly ‘A’ issue some time back and it was good to me when I had it.

          1. Tim, while I tried to post earlier this evening, my fifth article on was published this evening on SA. It was brief, but a solid article.

            Unlike some of the other writers, my small proceeds will go to my local animal shelter instead of lining my own pockets.

        2. I picked up some LTS/PA for $23.25 and just flipped it for $24.72…also missed getting a second tranche by a penny as LTS/PA made a low yesterday of $23.01.

          Terrible company…bad chairman!

          1. Congrats Citadel! Reach around and give yourself a pat on the back for the courage to make a nice hit and run profitable trade.

      1. Leonard, at last conference call, CEO said they had to refi some debt this fall. Well since so debt is maturing until 2020, the only other debt was NSS, so i assumed this was what he was referring to…..I assumed wrong…Look at page 25 of link below. They recently presented this info and at botton of page 25 it states they are going to issue a senior bond to replentish revolver credit that was used to redeem a past April maturing bond. I assumed that was taken care of long ago…It wasnt..Therefore CEO was referring to the revolver debt refi and NSS had nothing to do with it. In fact if you look at link on one of the pages it still shows it as maturing in 2043.
        https://seekingalpha.com/article/4199803-nustar-energy-ns-presents-citi-one-one-mlp-midstream-infrastructure-conference-slideshow

        1. Thanks Gb – I jumped back in @ $25.70. Will add more at lower prices if the opportunity arises.

          1. I hope I am right…That is sure the way they presented it. Not much loss exposure here worst case scenario. I also bought more today with my ASRVP proceeds.
            BTW….Its official, GLIBP is QDI… Preferred Stock Trader from SA contacted their investor relations and they told it was QDI.

    2. Grid – if I may ask where did you pick up CBKLP? Neither Vanguard nor Schwab will take an order, online or by phone. I don’t believe it’s registered but it’s obviously leaked out over time.

      1. Bob, CBKLP is a tradeable preferred but some have blocked it…I bought through TradeKing…An online friend said he spent considerable time today yelling at TD reps, and they finally unlocked it for everyone. They said no one had asked to buy it since 2016. Now CBKLP, has some untradeable sister preferreds such as CBKPP, CKNQP, and cousin AGRIP that are 144A preferreds which means you must be “qualified” to buy them. I can never get qualified, and brokerages wouldnt go into detail other than to say they wouldnt qualify me. But if CBKLP meets your price point and goal, raising hell by calling in appears may work.

    1. Hi kaptain–yes I had gotten a notice in my mailbox on it yesterday. I also understand the sentiment on payment and the animal shelter etc.

      1. Whoops, sorry about the repetitive comments. They did not appear to be posting last night, but must have finally been added a little later.

          1. Hi Grid–and kaptain. Yes when there are links I have to personally approve. If I turn this off then we would get all the junk stuff. Thus far it has been pretty good, but I have had a number of comments in German that I have deleted.

        1. Hi kaptain. Yes when there are links I have to personally approve. If I turn this off then we would get all the junk stuff. Thus far it has been pretty good, but I have had a number of comments in German that I have deleted.

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