Monday Morning Kickoff

So a month that brought pretty darned spectacular gains to quality preferreds and baby bonds has come to a close. January was spectacular for many of the higher quality preferred stocks, which is somewhat contrary to what one would expect as many times (most times) when a strong rise comes to income issues the junkier high yield issues perform better than the investment grade issue. Oh well it only goes to show that once you think you know everything something new occurs which goes to show all of us that learning never stops.

The DIIA traded in a range of 24,324 to 25,193 before closing at 25,064. The 10 year treasury started the week at 2.76% before falling all the way to 2.63% before rebounding to close the week at 2.69%.

The average preferred stock closed the week at $23.93 which is up 20 cents on the week. There are 226 different $25 issues trading at $25 or less–even after recent strong rises in prices.

Last week we had numerous important economic reports and/or developments. Consumer confidence fell sharply to a reading of 120 against last month 126.6. ADP employment gains came in a 213,000 new jobs versus last months 263,000. Pending home sales dropped 2.2%, which continues to show softness in the housing market. The employment report showed that the unemployment rate rose to 4% even with a huge 304,000 new jobs being created, although there were very large revisions of last months reported last month which kind of neutralized some of the gains. The employment report showed that wages moved higher, year over year, at a 3.2% clip.

Of course the biggest economic news of the week was the lack of any rate hike in FED Funds and a pretty dovish commentary from the Chair, Jay Powell. With the press conference our take is that the FED will actually pay attention to data, instead of having any preset course for interest rate hikes. Additionally Powell mentioned that the size of the balance sheet is being studied. The balance sheet was at around $1 trillion in 2008 and grew to a peak of $4.5 trillion and now stands at $4 trillion after about $500 billion in run off.

For the coming week a few of the numbers that may matter is Factory Orders for December, the Services PMI, Manufacturing PMI, Productivity and Unit Labor Costs. Consumer Credit is also being released. I believe none of these will be held as important–but they aren’t important until someone decides they are important.

There were no new income issues floated last week, although the BDC Saratoga Investment Corp (NYSE:SAR) reopened their 6.25% baby bond issue (NYSE:SAF). Shares took a 50 cent knock on the news. Disclosure-we own this issue.

8 thoughts on “Monday Morning Kickoff”

  1. Good morning Tim…the hated Spark Energy (SPKE) reports on Friday. Lets see if they can make their shares pop with some good news.

  2. Something going on with the two Medley baby bonds MDLX and MDLQ. Both are trading lower by more than $2 in the pre-market. Probably related to the proposed merger with Sieera Income. Can’t tell if these are a bargain or a falling knife. . .

    1. Tex, it’s due to a superior offer for MCC from NextPoint Advisors on the eve of the merger vote with Sierra. The offer would strip MDLY of management. I think is has some aroma, especially with the timing. I also think MDLY will be able to avoid it. Not sure what it will do to the merger vote, though, or what the MDLY bonds will do after the opening bid/ask fall this morning.

    2. Anyone who bought 100 MDLX (18.60 low) or MDLQ (19.01 low) at lows this morning could have made $300 to $400 an hour later.

  3. MDLY is way down in premarket, and so are its baby bonds, MDLX and MDLQ. With the MCC/Sierra/MDLY merger vote later this week, NextPoint has made an unsolicited bid for MCC that would gut MDLY. Not likely to happen. Are the baby bonds a buying opportunity?

    1. “Are the baby bonds a buying opportunity?”

      Only if you think the company survives until 2024…

    2. From what I have read, MDLY management suffers from the same lack of integrity that FSC and other troubled companies did. MDLY mgt. focuses on its obscene fees rather than shareholder returns. Nexpoint wants to throw MDLY out of the game.

      1. Any buyers on the mdly baby bonds?

        And of those of u who own them already (like me with a few hundred shares bot @ around $24): r u holding , waiting to sell a little higher, or dump them now be4 it’s too late?

        Tim: what do u say?

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