Monday Morning Kickoff

The S&P500 moved in a range of 2973 to 3015 last week before closing Friday at 2977–off by over 1%.

The 10 year treasury moved in a range of 2.035% to 2.14%, but has been the case continually for the last number of months any bump higher in interest rates is followed by a drift back lower and it closed the week at the lows.

The Fed Balance Sheet fell by $7 billion last week after rising a couple billion the week before. There hasn’t been too much talk of the continued runoff in the balance sheet, but the chart below clearly shows that there has been no change in pace and direction of the runoff in 2019.

The average $25 preferred and baby bond moved higher in price by 1 penny last week. We now have 161 issues that are trading at $25 or below compared to 170 issues last week. Still heading in the direction that makes investing more and more difficult.

Last week we had just 1 new income issue announced and that is the new 6.20% baby bond from REIT Ready Capital Corp. The issue will trade under ticker RCB when it begins to trade either this week or next. The details on this one can be found here.

51 thoughts on “Monday Morning Kickoff”

  1. For the past 25 years I have refused to consider gold/silver an investment. I had a negative carry and was only worth what someone else would pay you for it. However, I recently have begun to change my mind based on negative interest rates and massive debt. I’m willing to look at it a bit differently and think of it as a hedge. So, I find myself undereducated on the mechanics of owning them. I’d really appreciate any advice you can provide on how/where you purchase/store the asset. Thanks for any help you can provide.

      1. Glad to help Newman. I’ve been sniping it quite a bit here lately, especially as it fell to the 102.48 range. Today was just an outright gift at the yield it’s giving off. Also, keep your eye on CNP-B if the ute convertible world interests you. Good money to be made in this volatile one also, IMO.

      1. Amy – There was a lot of discussion on it in the Reader Initiated Alerts thread. I did a lot of reading and re-reading. I asked him to pull all the DCUE conversation into its own article – so that it wouldn’t be lost when he deletes all the comments from that thread which he hasn’t done in quite some time. And that thread is buried in chit-chat which makes finding anything even more difficult. And unfortunately, that thread is excluded from Tim’s search function. Anyway, you can go look there.

          1. Amy, I only see two comments of mine re: DCUE. One dated 6/14 which is the oldest one in the thread. I sent Tim a reminder (on the spam reporting address) to preserve the DCUE discussion on 6/17 but I don’t know what happened after that. I posted several times in the week prior to 6/14.

            I’m not convinced that we are seeing all the comments in the “Reader Initiated Alerts” thread. I recall that on 7/13, the Comments Feed showed perhaps 30 or 40 chit-chat comments in that thread. I sent a note about it, that’s why I remember the date. But as I look right now, there are no comments dated 7/13 in the thread at all. So I am confused about what we’re seeing in the Alerts thread.

            1. Larry–all comments are here–I just went through and count over 30 comments on the 13th.

              1. Larry–I saw them on my administrator screen, but made some settings tweaks and now see them everywhere.

                1. OK Tim, now I see all the 7/13 comments too. Just letting you know.

                  Are all the comments about DCUE/DOMGL prior to 6/14, gone?

                  1. Yes–I believe they are gone. It was set up to clear at 30 days–now have changed to 50 days.

                    1. There are currently 374 comments on the Alerts page. It’s excluded from your search function. So it’s very hard to find anything.

                      You have requested “We only ask that comments beyond the breaking news be kept to other pages or this page will be ‘out of control’ “. I’m all for that, but the page is being used (heavily!) for general discussion and chit-chat. Again making it hard to find the useful nuggets of information.

                      Some users clearly want a chit-chat sandbox. Can you give them something? Please?

                    2. Larry–I’ll consider something, but for now it is what it is–please don’t beat this “dead horse” too aggressively.

  2. At this rate of ‘runoff’ it will take 15 MORE years to get past the last financial debacle. Who’s buying the runoff? There is a real temptation to add some sort of accusatory commentary here when it is not needed as everybody has their own conclusions! I may have fifteen good years left and am leaning into areas I hope my research and diligence can be justified over long period of time by staying in IG and such. Faith? Credit? We’ll see. The sun came up and the rain came down this morning!

    1. Joel

      I sat with a neighbor this weekend who spent 20 minutes telling me the advantages of Modern Monetary Theory where debt doesn’t matter. If debt doesn’t matter then the Fed’s doesn’t matter either. My neighbor is not alone in her thinking which is very scary.

      1. Not trying to be a Debbie Downer here….. but…’s not just your neighbor. Add to the list US Congress, US President, US Fed, US investors, and US citizens only focused on that 2.5% and no money down car. No credit? Bad credit? No problem!!! Just give us a call, lol.

        1. Reminds me times past–not so long ago (2008-2010) and we are moving down the path again.

          1. It was the best of times, it was the worst of times. I’d settle for another one like it, I profited, and there are worse possibilities.

      2. Two things I have preached all my life: you can’t repeal the laws of physics and you can’t repeal the laws of economics.

        The notion that debt can have no consequence, even at the national level, is silly. You simply can’t consume more than you produce in perpetuity.

    2. Joel–at the rate the Fed government is spending money I truly believe at some point (long after I am gone I hope) they will have a giant bonfire of government bonds at the Fed. I used to say we are “Greece”, but maybe we are 1930’s Germany.

        1. That was a good one, Camroc! So maybe you need to barbell your investing approach of IG wheelbarrow company preferreds with Canadian floating reset preferreds. 🙂

      1. Tim, it’s probably more like the adage of “when being chased by a bear, you just have to be faster than the slowest person”. For the avalanche of debt, your country just has to be relatively better than everyone else. So as long as the US is among the better looking/cleaner pigs in the pigpen, everyone’s moolah will gravitate towards us when they start their bonfires elsewhere.

        At least, I sure hope so. Because if I have to grow my own food, my past gardening experience means I’ll be one lean vegetarian.

        1. Gentlemen… the National Debt… is paid.”
          That sentence has been uttered in Washington DC exactly one time ever, by a Senator announcing that the US government was officially debt free.
          That was on January 8, 1835 when the debt that the United States government had accrued since its birth was finally paid off.
          Never again would the United States be debt free.
          It took 174 years for the debt to rack up to a mind boggling $11 TRILLION in 2009.
          And then it took only ten years to balloon ANOTHER $11 trillion.
          Today the national debt is larger than the entire economy of the USA, $22 trillion.
          It took 147 years to get a trillion dollars into debt. The USA now routinely adds at least $1 trillion in debt every 365 days.
          And why exactly are we adding all this debt? These are the good times!
          The economy has been growing for a decade. The stock market is pumping up to all time highs. Almost every asset class is practically bursting with wealth. We’ve even seen record tax revenues.
          And still, routine spending is a trillion dollars more than the government collects.
          Any semblance of financial restraint is not even an afterthought on politicians’, or their constituents’, mind.
          This is really insane
          The US Government just crossed $22.5+ TRILLION of debt! Talk about kicking the debt can down the road…
          Ouch, Nomad

          1. Nomadicmist said: “The US Government just crossed $22.5+ TRILLION of debt!”

            Nomad, we can only wish the cumulative debt was that low. When you net present value thr future Social Security and Medicare benefits, it is something north of $200 TRILLION. Lawrence Kotlikoff of Boston College has written about this extensively. If the US government does not pay those benefits as promised, it certainly constitutes a “default” to the beneficiary. Just the same as if the US treasury did not pay dividends and principal on bonds.

            Lord knows if any of this will make a difference in our lifetimes. So far, the most accurate macroeconomist in the world was Dick “Deficits don’t matter” Cheney.

      2. Tim, this is EXACTLY why I have continued to buy physical gold, silver, platinum and palladium. If you don’t trust gold (as all of the largest governments on our planet do), do you trust the logic of taking a beautiful pine tree, worth about $4,000 – $5,000, cutting it up, turning it into pulp and then paper, putting some ink on it and then calling it one billion dollars?
        Because gold is honest money it is disliked by dishonest men.
        Be my friends, Nomad

        1. Nomad–I hear you. I stick to silver–sometimes silver eagles because they are “pretty” and sometimes just bars or rounds.

          My wife doesn’t get it–I told her when everything implodes we can carve off a little for a loaf of bread–not sure still that she “got it”.

          1. Good job Tim, it will always be a “real” legacy as opposed to a digital illusion of wealth. I am definitely a physical silver buyer and like the US Mint boxes of 500 Eagles that are green and sealed.
            Commodities such as gold and silver have a world market that transcends national borders, politics, religions, and race. A person may not like someone else’s religion, but he’ll accept his gold.” – Robert Kiyosaki
            All the very best, Nomad

            1. Nomad, I missed the investment of a lifetime about 15 years ago compliments of our US Government. The Treasury was trying to push into circulation dollar coins. They would mail them free and would take credit card orders. A small cottage industry developed of people using special credit card offers of limited 5% cash back on purchases. They literally would max order, dump them off at the bank and get cash, then receive their 5% return from CC…Rinse and repeat…And of course the bank would dump them right back unto the Government, lol… They sure got them circulated didnt they!

              1. Grid, I did exactly that and got over 100,000 Marriott points from buying dollar coins on my credit cards with zero markup or delivery fee. My bank wasn’t happy, but it was an incredible deal…

                1. Nomad, Ah, I missed that one… That could have been a full time gig economy job for me. Grid, “What do you do for a living?”….”Well I buy government issued coins and sell them back to the government and keep the cash back spread money”.
                  BTW, I read more than one good story about the banks not loving this “deal”.

                  1. Grid, I use to have part of my staff go to banks in our area and buy $5-$10K worth of half dollar coins (again the banks were not happy) and search for 40% and 90% silvers. They would do the searching with slow times each day and in between calls. I would bonus them when they found silver coins (split half the profit). We use to drop the non-silvers at TD Bank when they had their coin counters in their branches. I must have hundreds of silver coins from doing it. With a few of my businesses, I offered my employees to do it last year and had no takers (everyone in our economy is rich now)!

              2. What’s know in B-school parlance as a risk-free arbitrage. Not too may of them around.

              1. Pete, that’s truly an excellent question. The green boxes of 500 US Silver Eagles with white straps on should be worth more because they are untouched. I’m sure IF someone wanted to break up (or keep it intact) the box they should be able to sell these sealed rolls of 20 Eagles as unsearched. There could be many graded MS 70 coins inside these untouched and unsearched rolls. I have sealed boxed since 1990 and try and buy a sealed box every year; I have years that I have missed. My issue now is that I am running out of room in my safes. I am moving in a year or two to follow my son to where he goes to Medical School (hopefully in a warm climate) and the moving of these boxes will be easier (well not “easy”) because they are in intact sealed boxes and not loose. I hope that helps…
                Be well my friend, Nomad

                1. Thanks- I just bought my first box a few weeks ago and couldn’t resist the urge to open it up and look. Also, do you see silver as an equal to gold as a wealth preservation vehicle? Ie: does the price ratio between silver and gold remain fairly stable? I guess I could just look at the charts but I like experienced opinions also. Thanks.

                  1. Pete, (AG) Silver often tracks the gold price due to store of value demands, although the ratio can vary. The crustal ratio (coming out of the earths crust) of silver to gold is about 17.5:1. The gold/silver price ratio is often analyzed by traders, investors and buyers. In Roman times, the price ratio was set at 12 or 12.5 to 1. In 1792, the gold/silver price ratio was fixed by law in the United States at 15:1, which meant that one troy ounce of gold was worth 15 troy ounces of silver; a ratio of 15.5:1 was enacted in France in 1803. The average gold/silver price ratio during the 20th century, however, was 47:1. Currently, the ratio is a whopping 87.31(!) and many feel that either silver is grossly undervalued or gold is very overvalued because of this current ratio.
                    I do not open my silver boxes, but understand the temptation to do so and the coins are just beautiful works of art. I also have yellow Silver Canadian Maple Leaf boxes that also come in 500 coins, but have rolls of 25 instead of 20’s like US Silver Eagles. The premiums on silver Maples are definitely lower than US Eagles and I have good friends that only are looking for more silver weight and will buy whatever is the lowest premium.
                    Pure gold does not rust. Only gold alloys do so. You may have golden dreams. But if you go in the company of toxic people, you become “a gold alloy” and what that means is that you can rust at any time! ― Israelmore Ayivor

          2. Isn’t the history of gold as a store of wealth over centuries and centuries a fascinating study of human nature? I mean there’s no denying its appeal, but when it really comes down to it, it’s a worthless metal with no inherent value to anyone other than it’s shiny and pretty and humans have coveted it throughout history for absolutely no other reason other than that…. It’s so ironic. I’m not denying the strategy, I just find the concept so absurd and yet so undeniable when you boil it down. I mean in that circumstance your wife describes, Tim, would you really want to accept a shaving off a bar of silver in exchange for a slice of bread???? Humans are truly fascinating animals, aren’t we…

            1. 2whiteroses, and the world’s printed fiat currencies make “real” sense? Gold and silver have been used as payment for many thousands of years (long before the printing of paper “money” or digital illusions of wealth on a computer screen). Silver is the second most important commodity on the planet behind oil…What is a printed green dollar really worth? What really backs it? Why do the world’s largest governments continue to buy up all the gold this planet produces?
              Smile, Nomad

              1. Nomad – Not disputing the strategy or what’s considered the inherent value of gold and silver or the fact that it’s backed by thousands of years of it working… I think I have a hard time explaining my point. I just think it’s a fascinating point of the human condition that what’s been valued so dearly and has held its value throughout is really something, anything, whose only true value is that other people have always value it too. Maybe it’s a sociological or anthropologic point I’m trying to make. It’s certainly not an economic one as I share and understand your view but I’ve always wondered how odd it is that it’s been gold and silver not sticks or mud (to be silly) or something else with a finite supply that has acted as this store of wealth throughout history given the uselessness of each metal in of their own…. Heck silver has more practical use than gold, yet it’s gold that’s considered the, uh, gold standard of wealth preservation… At the most fundamental level, it’s just so odd…

                1. 2whiteroses, societies have always valued “unusual” things: coal (diamonds), Tea Bricks (From the 9th century until World War I, tea bricks were used as currency in China, Mongolia, Russia and Tibet. Tea leaves were pressed together to form tea bricks), shells in Africa (some parts of the Solomon Islands still use these as currency today) , beaver pelts (warmth), salt during the time of the Romans (seasoned meats and used as an antiseptic), Candy (Back in 2008, Buenos Aires suffered from the huge lack of coins. This was because businesses that took in a lot of loose change sold them in the black market, which led people to use candies as a form of payment.) and Cheese ( Believe it or not, several banks in Italy take Parmigiano-Reggiano as form of money. This dates back to several hundreds of years, and allows cheese makers to take out small loans, using cheese as the collateral for the debt. There are some banks that have millions of euros worth of cheese), Wampum, One of the earliest currencies used in America, the wampum beads (traditional shell beads) were adopted by Europeans to trade with the native residents of New England and New York. Beginning from 1637, wampum was a legal form of currency in New England until 1661, while it was the official currency in New York till 1673 and in Canada “fish”, In the mid-1600s, during the early decades of English settlement in Newfoundland, cash form of money was almost non-existent. So, people began accepting dried cods in exchange of goods. In 1834, the Newfoundland Savings Bank was established, which enabled the government to authorize the printing of currency for the first time…
                  Gold and silver became de facto money around 600 BC when they were struck in Lydian coins as stores of value used for trade. For over 2500 years, silver and gold monies have proven themselves as the ultimate monies.
                  Silver & Gold indeed have the best historic track records as money. These two precious monetary metals, by their inherent natures, are human beings’ most excellent monies. On August 15, 1971 the world for the first time began being operated on a 100% fiat currency reserve and faith based monetary system. This was the date when former U.S. President Richard Nixon cut the last ties between gold and the U.S. Federal Reserve note (mistakenly called U.S. dollars to this day).
                  Today all physical and digital government issued currencies are fiat, their creation conjured by a computer and printing presses. Their values are based on people’s faith and confidence.
                  Kinda makes silver and gold seem “normal” now, Nomad

                  1. Nomad – Fun history lesson, thnx. So what do you think of CEF as a way to own gold without having to build a vault, a moat or an underground bunker? Not a good enough way to go?

                    1. 2whiteroses, if you can’t touch it you don’t “own” it. I would ONLY buy/invest in physical metals and never ETF’s or synthetic metals…
                      Smile, N9mad

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