Monday Morning Kickoff

The S&P 500 continued down the road of losses last week with a loss of about 3% last week as trade tensions continue to upset the apple cart. The 10 year treasury closed at the low for the week at around 2.14% after being as high as 2.30%.

The Fed balance sheet fell by $ 9 billion last week $9 billion last week which is a running 3 week total of $51 billion.

The average preferred stock and baby bond fell by 9 cents last week, to $24.76,  as the falling stock market affected these prices in spite of the tumbling interest rates.   There are 233 issues trading at $25 or below as compared to 207 2 weeks ago–obviously we are getting a little set back in here on preferred stocks and baby bonds.

We had no new income issues announced last week, but finally the Algonquin Power and Utilities 6.20% baby bonds began trading under ticker AQNB.  This is a large issue of 14 million shares (bonds) and 12 million were reserved for institutional purchase with just 2 million coming to the retail side.  The shares closed the week at $25.47.

This should be an interesting week with all the politically induced movements going on and the on going debate as to whether the economy is weakening.  Will interest rates continue to move toward the 1 handle range?  And if they do what exactly does that mean?

24 thoughts on “Monday Morning Kickoff”

  1. Hi Tim, actually based upon EW., we should see a pullback to 2400 to 2200 to end wave 4 and then a blow off top wave 5 to take us to 3500+. After w5 we should see a nasty sell off worse than 2008. I don’t have a crystal ball but that’s what I see at this moment, that’s why I hedged above 2900. ATB.

  2. For the last month been busy raising the quality of my preferreds. Trying to get everything at least rated. Dumped Glop- B took a loss.Sold all my REITs . Sold all bdcs some at nice profits. I’m a lot like the market I don’t like uncertainty. The tarrifs are really scaring me. I do know that higher prices means lower demand from econ 101.The only downsize is my interest return rate has dropped. I never talk politics but not knowing what will happen next has frightened me. Plus the 10 year treasury rate is scaring me too.
    China has cut back on buying us treasury bills this could cause I tetrst to rise I just don’t know.

    1. I agree. Just too much uncertainty and too many fires on too many fronts right now. I’m hoping some bargains like we saw in December begin to emerge. I’ve sold a lot in the last 10 days and have a nice war chest waiting. 40% cash.

      More tariffs please!

      1. There are certainly a lot of potential catalysts to move market significantly lower. Uncharted territory. I’m tempted to go “all-cash” but won’t do so. I’ve sold off most of the junk and am building cash as issues are called and dividends paid.

        I (almost) feel bad waiting (hoping?) for the ship to hit the rocks.

  3. I have been getting orders filled on 10 share lots of MTB-PR at prices between $1013-$1015, which is basically getting a solid bank preferred with a coupon of 6.375% around par + one dividend. This is QDI also

    1. I have a few shares of MTB-PR at average price of $1,011 so am right up there along with you.

      Also have a smaller position in the sister issue, MTB-PRC. Both are virtually identical, but MTB-PRC seems to command a slightly higher bid than MTB-PR, no reason that I can think of.

    2. It’s past call date on MTB-PR. Have they declared the dividend for July? I couldn’t find anything regarding that.

      1. Steve, during the depths of the 2008-2009 crises, the 2 MTB preferred series were not called despite rates just as low ( or even lower ) than now.

        Hopefully, they will not be called, but definitely no assurance of that.

        MTB-P and MTB-PR reside in my sock drawer, I do not monitor them, if a call happens, it happens. At that time I will need to go shopping for a replacement but till then I’ll enjoy the dividend.

        Next expected XD date is end July, so I expect the dividend declaration to be in a couple weeks from now.

        1. I have both MTB-PR and MTB-PRC. Fred’s comment indicated that a dividend had been declared for the July time frame and I didn’t think that was true…yet. Hope they don’t call for a long time but it would seem like it would make sense pretty soon if interest rates continue to stagnate or even drop some more.

          1. The dividends for the August 15 pay date have not been declared. I stated that buying the preferred at $1015 is equal to paying par plus one dividend. Even if the preferred was called today, with a 30 day call notice, the stock would be midway through the quarterly dividend cycle and your price risk is about $7.50 per share. I am willing to accept the call risk to acquire a 6.375% QDI coupon from a quality regional bank

  4. JPM is buying EE, expected to close sometime first half next year. Trading about 3% under purchase, divvy coming 10 days, plus however many ones till close. YTC not bad if deal closes and could get very good depending on closing date. These deals almost always close but of course there is risk of overpaying for the utility if it doesn’t. If todays premium drops a bit after the excitement dies down I might park some recent money there instead of back into bonds. Bonds yield have gone too miserly for me.

      1. I sold my (small) position at the open @ 26.33 which was bought at the beginning of the year below par. It’s an OK issue and has some nice protection that was mentioned in the Seeking Alpha article (I’m not a fan of that particular author, btw.) I’d like an issue with lower debt levels given the economic uncertainty but I’d be a buyer a couple of dollars lower if we can get some market stabilization. Just my $0.02.

        1. I also sold last week, based on the YTC being in the low 6s, and using some of that for the Bombardier and Dundee Canadian preferreds I forayed into.

          1. I used the proceeds to start a position in EBGEF. I needed to free up some cash first so I’m a little late to the EBGEF party.

  5. Checking on my portfolio over the weekend I noticed a few wobbling issues. ARR-B, NSS, and my beloved LTS-A all moved down on higher volume on Friday. I remember noticing a similar pattern start to develop before big moves down in December last year. I’d rather sell these wobblers now and miss a dividend, than not have enough cash available to go shopping if the market corrects again in a big way.

  6. Tim,
    Continuing our discussion on BDCs, where can you get information on the various BDC portfolio holdings ?
    Thanks
    Gary

    1. Hi Gary–I will try to put something together tonight. Mostly I get info from their SEC filings.

    2. BDC holdings
      l.The best place is public fillings which are long and complex. Shorter forms would include
      l.Wells Fargo covers bdcs fairly well and does a quarterly which is about the best single review of the companies with lots of comparative data. A very good read. KBW also not bad but wells report carries the day.
      2.BDC Buzz who writes on seeking alpha, does a fairly good job of covering the sector and providing insights into firms. Sean Kennedy at the same site does much more detailed pieces on selected companies. He is a good guy and will respond to messages.
      Good Luck sc

  7. Tim, this week will mark 10 straight days of 3m/10y inversion. That has preceded the last 7 recessions. The Spx peaks 6-18 months later usually in a blow off top. In Elliott Wave it will be wave 5. What comes after that will be a nasty sell off. Something to prepare for. Thank you for your work, ATB. BTW., you have a great name, lol.

    1. So Tim H–you are looking for a “melt up” followed by the sell off? Lots of us Tim’s around.

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