So last week was a terrible week for equities with the DJIA losing over 1000 points. We have too much uncertainty in the markets right now and the massacre in the oil trading pits has done substantial damage to energy related stocks and in particular to the high yield LNG ship owners. LNG shippers while not directly damaged by lower crude prices will suffer the real (or perceived) potential for less demand down the road as over time (a year or two) a large mispricing of 1 commodity (crude) can damage demand for LNG.
Interest rates continued to drift lower as the 10 year treasury fell as low as 3.03% before closing the week at 3.05%. We are now at the lowest level on the 10 year since mid-September.
Last week we had a bunch of housing numbers released and generally they were so-so. Building permits were below expectations, while home starts were above (a very small amount). The home builders index dropped a good amount–to 60 from 68–no surprise to us and likely to slow building of new houses over the winter. Durable goods orders were below expectations. Crude oil inventories built by over 4 million barrels after a build of over 10 million barrels the previous week (no wonder oil prices are dropping). Consumer sentiment continues to drop with a reading of 97.5 in November–we need to watch this closely as the consumer drives the economy.
For the coming week we have Consumer Confidence announced on Tuesday and on Wednesday we have 3rd quarter GDP announced. On Thursday we have the minutes from the last FOMC meeting being released and this always provides fodder for the talking heads. And of course we always have more than enough yakking from the various Fed officials, but the big one this week is that Chair Powell will be speaking on Wednesday and this will be parsed to no end. Late in the Week Trump will be in Argentina and meeting with Xi—this will be a big deal to the various markets next Monday and of course no one has a clue as to what will happen with these talks.
The Fed Balance sheet data from last week has not yet been updated (holiday week) so we don’t now how much the balance sheet changed last week.
There was only 1 new income issue announced last week and that is a term preferred issue from OFS Credit Corp (NASDAQ:OCCI). While the company made the preliminary filings they have not as of yet priced the terms and coupon on the issue.
The average $25 preferred share fell all the way to $23.72 last week which is a 18 cent drop on the week–obviously showing that preferred have been moved a bit lower with common stocks dragging them down. We now have 261 issues trading at $25 or lower which is 8 more than the previous week.