Monday Morning Kickoff

What can be said about trading in income issues last week other than “wow”.  Actually we can say – easy come easy go, but of course who has a clue on what the next week really will bring.

The DJIA didn’t have the same great fortune as income issues but did end up 300 points for the week.   The 10 year treasury traded in a range of 2.60% to 2.74% before closing the week at 2.65%.

On the economic calendar last week we had the ADP employment number released on Wednesday and they came in very hot with 271,000 new jobs being created, but since ADP is generally given little credence by the markets and the reliability of the data has generally been suspect markets were not big movers on this data.   The Institute of Supply Management (ISM) manufacturing report for December came in at a soft 54.1% against a forecast of 57% and 59% last month.  Motor vehicle sales came in at a rather strong 17.6 million units annualized versus a forecast of 17.2 million annualized.  On Friday the big report of the week–employment situation for December came in showing a staggering 312,000 jobs were created (versus a forecast of 182,000) and average wages were up a strong .4%..  While this may have been read as a negative because it could cause the FED to continue to hike the Fed Funds rate, instead it was taken as positive and both common stocks and income issues shot sharply higher.

For the coming week there are numerous economic releases–NOTE that some releases may not happen because of the government shutdown in some areas.  Monday we have the ISM non-manufacturing report as well as Factory Orders being released.  On Tuesday we have the Job Openings and Labor Turnover (JOLTS) report.  Additionally on Tuesday we have consumer credit being reported.  Wednesday we have the FOMC minutes from last month being released.  Friday we the Consumer price index (CPI) being released and the forecast is for a negative number.  While normally most of the reports would hold little importance to markets, but we are now at a time when reports are being parsed closer than they had been in 2018, so there is no telling which could set off buying or selling in the common and preferred stocks.  We shall have to wait and see how markets react.

The Fed Balance Sheet fell by a large $17 billion last week so the Fed remains at the $50 billion monthly runoff–as we would expect at this time.

Once again there were no new income issues announced–this is the 4th week in a row where there has been no new issues announced.

Last week the average $25 gained a massive 88 cents–we have never had a gain this large–of course it follows weeks of downward hammerings.  In spite of the large share price gains 278 issues remain at $25 and under in price.

10 thoughts on “Monday Morning Kickoff”

  1. Tim, would it wise to transition out of fixed to float preferreds between now and the end of the year, especially those starting to float in 2022, 23, 24 or sooner? As your FF schedule shows, unless Libor and interest rates move up, the floating rates of most preferreds will be much lower than their current rates. Many seem to think that interest rates will be steady or even start falling in 2020, especially if there’s a recession. Your thoughts about holding FF’s? Thanks, as always.

  2. Tim,
    Thank you for being a voice of calm during a serious market rout. I didn’t panic at the lows, yeah! Look at those CHS issues go :*)

    1. Tech guy–some of us have been here before and hae found out that ‘buying high and selling low’ in a panic is not a great strategy. Decent issues generally pop back up-but not usually this fast which is why I say some ‘backing and filling’ might be expected.

      1. I second Tech guy’s sentiment. Tim, I can’t express enough my gratitude to you and other contributors being a source of sanity and discipline during this frantic period. May wife thinks I am an investing guru now, lol.

  3. I’m surprised the PCG preferreds are holding up as well as they are.

    I sure wouldn’t pay over $10 for any one of them

    1. I wouldn’t either Jacob. I think Gridbird has some experience in this type of issue from years past–maybe he will chime in.

      1. PCG is uninvestible, they just raised liabilities from fires over $30 billion. Ones investing fate is not in ones hands here. Management was implying years before preferreds would be paid and that was before Camp Fire tragedy. I would think for buy and holders any CA ute preferred would not be a place to go. That being said as a small ball play I just bought SCE-G near $19 today. This is just an amuse me trade. As I knew EIX preferreds would sink in sympathy from from the PCG bankruptcy discussions.

        1. Thanks Grid and Tim. I think I will just stay away from Utes for the foreseeable future.

          I look at a company like XCel to get a comparison and I don’t like their financials either.

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