Monday Morning Kickoff

It could be a wild investing week–and not necessarily in a good way as this “tariff” announcement from last week by the administration seems to have taken a life of its own as it is a hot topic everywhere. The opinions of the announcement range from the belief that the affects will be negligible to other opinions that the economic future of the U.S. is in severe doubt. No one knows–no one has likely even “run the numbers” in any reliable manner to have a believable opinion and certainly we don’t don’t know. Our best guess is the reality is that it is a minor item in the big picture, but it has the potential to turn into a huge rift. We will just have to tolerate ignorant talking heads for the week and see where it takes us. Normally these things blow over in a few days, but maybe this won’t.

Last week the 10 year treasury moved in a range of 2.80% to 2.92% with rates moving lower as the DJIA tumbled. Economic news in and of itself wasn’t enough to move rates lower, but a ‘flight to safety’ was enough. With this in mind we wouldn’t be surprised to see more of the same in the week ahead as the tariff talk keeps the stock market under pressure.

The fall in interest rates did help the average preferred stock move higher by 8 cents to close the week at $25.02/share as compared to $24.92/share the week before. This is the 1st week where the average price closed above $25 since 1/26/18–this shows the bounce back from the hard tumble shares have taken in the last 3 months. While many of the perpetual preferreds had fallen 10% or so since November they have now recouped over half of the loss. When/if the common stock swoon ends we would expect these shares to drift lower again.

In spite of the average preferred share price moving higher we still have 205 different issues trading below $25/share which compares to 204 issues the week before.

Last week there weren’t any new issues of baby bonds or preferred stock announced–during the entire month of February there were just 3 issues announced so maybe we are seeing the effect of higher interest rates where companies are not able to refinance redeemable issues at lower rates.

We added the B Riley 7.50% baby bond (NASDAQ:RILYZ) and the mREIT Chimera Investment 8% Fixed-to-Floating rate preferred (NYSE:CIM-B) to the High Yield Portfolio last week bringing the portfolio to 74% invested.   We will likely remain paused for the week on the next purchase in the portfolio as we await further developments in the marketplace.

The Medium Duration Portfolio remains at 75% invested and after the surprise write down announcement from insurance company Atlas Financial Holdings (NASDAQ:AFH)  we incurred a 6/10% loss for the month.  We are not overly concerned with this at this time but AFH has earned a place on the short leash.  The company had been reporting good earnings in the last number of quarters and the write down based on old potential claims calls into questions the trustworthiness of management.



3 thoughts on “Monday Morning Kickoff”

  1. Great commentary, Tim. Thanks for your insight. Sounds like you are in the “wait and see” camp at this time, leaning towards the short end of the curve. Smart moves…

    Love the new site!

    1. Thanks for the comment GW. Yes for the moment we are wait and see in getting the models totally invested. Personally we are up in that 80-85% invested range in a number of accounts. In Fidelity it is less because they restrict the new issues so heavily we tend to focus on other accounts.

      Good luck


      1. Timing certainly isn’t on your side, that’s for sure. Tough to build a new set or portfolio’s in this tape at this time in history with the rate hikes coming fast and furious. Lots of tough decisions to make!

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