Monday Morning Kickoff

Here we go again–another week that is bound to be exciting as the stock markets are at record highs–party on!! Forget the massive debts of the U.S., the weak economy in Europe and now in China–all that matters is that the markets have a “Fed Put” to make sure all goes well (just joking here-kind of).

Last week the S&P 500 moved to record highs closing the week at 3014 which was the high of the week. The low for the week was 2963 so the index was up over 1% for the week.

The 10 year treasury traded in a range of 2.01% to 2.12% before closing the week near the high of 2.11%. The 10 year treasury had been trading under 2% the week before, but strong employment numbers that week put an end to the fall in rates-for now. Core consumer inflation numbers came in a bit hot last week at +.3% which helped to hold interest rates up from the prior week as well.

The Fed balance sheet rose by $2 billion last week, which is kind of the normal trend – fall for 3 weeks and then have 1 week of a slight rise.

The average $25/share preferred stock and baby bond moved higher by another 5 cents to close at $25.04. There are now 170 issues trading at $25 or below compared to 179 last week and 206 the week before.

Once again we had no income issues announced for the 2nd week in a row.

Bank of America did announced the redemption of their BAC-W non cumulative preferred issue on 9/9/2019–the 1st date it is callable. This issue has a 6.625% coupon–no surprise they would redeem this issue.

2 thoughts on “Monday Morning Kickoff”

  1. I have included the top Economic News following our Latest Fixed Income Rates. View our latest Investment Ideas and Individual Rates Sheets at Bond-Yields.com

    Good morning!

    It was an “old movie” that long-time stock investors have seen before: the chair of the nation’s central bank calmed the fears of skittish investors and all but guaranteed that a rate cut would occur in the coming weeks, causing stocks to surge. Alan Greenspan, Fed Chair from 1987-2006, did it so often it became known as the “Greenspan Put,” i.e., whenever a financial crisis arose, the Fed would come to the rescue by lowering interest rates. Current Fed Chair Jerome Powell oversees an economy with a historically low jobless rate, low inflation and a stock market already at record levels, but he is still concerned that global speed bumps may eventually work their way into our economy – thus the need now for a rate cut in the near term (source: BTN Research).

    Stock investors celebrated Chairman Powell’s comments to Congress last week by pushing the S&P 500 above 3,000 for the first time ever. The stock index closed at 3014 on Friday (7/12/19), its 10th record close this year and 217th in the ongoing 124-month bull run that has produced a gain of +453% since March 2009, equal to an annualized return +18.0% per year. Rumor has it that bulls don’t last forever, but that fact has been lost for now on this streak of more than 10 years (source: BTN Research).

    OPEC, once the king of global oil production, has seen its status diminish with the boom of American shale oil. The 15-nation cartel was the source of just 29.8% of the world’s daily production of oil as of July 2019, its lowest total by percentage in almost 29 years, i.e., since September 1990. OPEC generated 39.5% of the world’s oil in April 1998 (source: International Energy Agency).

    Notable Numbers for the Week:

    WHERE DID THEY GO? – The number of publicly listed companies, i.e., companies traded on an exchange, has dropped from a peak of 8,090 in 1996 to just 4,336 today (source: theglobaleconomy.com).

    WANT A PENSION? – 83% of full-time state and local government employees were participants in a defined benefit pension plan in 2018. Just 16% of full-time workers in the private sector were participants in a defined benefit pension plan in 2018 (source: Urban Institute).

    – The top 1% of wage earners in the US reported at least $480,804 of pre-tax income in 2016 and own an estimated 29% of the total wealth in the country (source: Survey of Consumer Finances).

    GRAY HAIR OR NO HAIR – An estimated 56 million Americans will be at least 65 years old by the year 2020, i.e., 1 out of every 6 Americans. An estimated 73 million Americans will be at least 65 years old by the year 2030, i.e., 1 out of every 5 Americans (source: Census Bureau).

    I welcome any and all communication, because we want to help you in any way we can. Also, if you enjoy this letter then please forward this email to your friends so they may also sign-up.

    Always putting your interests first,

    Randy Durig
    Registered Investment Advisor
    DIR 971-732-5119
    Rdurig@durig.com

  2. I surprised by the dearth of new offerings. I thought that when rates dropped, we would see a wave of issuers refinancing higher coupon preferreds. For example, I can see companies where there are outstanding callable preferreds where the coupon is 80-100 basis points higher than the current stripped yield on some of their preferreds, so they ought to be able to refinance the high coupon preferred and get their offering costs back in a reasonable time. But it just doesn’t seem to be happening. Any thoughts on why? One explanation I could understand would be that management thinks rates are going to continue to drop in the next six months, and they are better off paying the higher coupon for a quarter or two because they might end up with a coupon that is 150 basis points lower if they wait. Seems a bit speculative, but maybe. Or maybe it just takes a while to get the prospectus ready. But perhaps those of you who have been doing this longer have a better explanation.

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