Well we all knew what the Fed was going to do and honestly about what Jay Powell would say–but I don’t think that most of us knew that the fast money was going to use it as an excuse to sell the hell out of the markets. Normally on Fed day we get big pops both directions for a few minutes after the announcement and then a moderate move in one direct or the other. Today–NO. The trip down was long and steep with hardly a 5 minute respite all afternoon. About a 3% loss on the day. Adding a little insult to injury the 10 year treasury yield closed at 4.49%–up 11 basis points on the day–the highest close since May.
Of course in the income issues it is the low coupon, high quality perpetuals that took the biggest knock. Looking through the investment grade issues I would guess maybe 90-95% RED–some just a few cents, but a lot of them down 1-3%.
Personally I took some losses in all investment accounts–although they were minor–maybe 1/5% owing to having cut back on many issues a few months ago–but just the same no one likes losses. We all know that trying to react on a day like today is a mistake–just sit back and take a deep breath, sleep on it and make rational decision later. I am thinking maybe I have a couple issues to trim back a bit–in particular the 2 Brighthouse Financial issues I hold–on the other hand with investment grade issues with current yields over 7% maybe I will just ‘ride it out’–we’ll see.
“A mere fleshwound!” Today was the 6th worst day this year for the canaries, which are low coupon yield, ~ higher quality issues. They had a median loss of -1.43%, all preferreds were off -0.52%, babys/terms were -0.40%. Also note that four of the top ten were in November, so you can argue today just continues that trend. Year to date canaries are -4.17% with preferreds at +3.02%.
Here are the top ten worst days in 2024, sorted by worst canary loss.
CSV format is date, canaries, prefs, babys/terms
4/15/24,-2.48%,-1.09%,-0.66%
4/10/24,-2.41%,-0.77%,-0.48%
11/12/24,-1.72%,-0.51%,-0.27%
2/13/24,-1.64%,-0.76%,-0.44%
11/6/24,-1.56%,-0.41%,-0.24%
12/18/24,-1.43%,-0.52%,-0.4%>>>>>>>>>>>>today
11/11/24,-1.38%,-0.37%,-0.21%
11/1/24,-1.25%,-0.31%,-0.06%
5/8/24,-1.2%,-0.45%,-0.38%
4/25/24,-1.14%,-0.36%,-0.27%
Tex-
You say worst, I say jump and I will catch you.
Thanks for the interesting data Tex
My “foggy” crystal ball thinks the markets will be fairly quiet until the New Year arrives. Sellers taking year-end tax losses have probably already done so. Buyers will probably wait until January and slowly dip their feet into the water to judge its temperature. If the government’s temporary spending bill approval gets stopped by Trump/Musk, that will be even more reason to step aside until the dust settles. JM2C I’m often wrong, but almost never in doubt.
Dave, haven’t been following Brighthouse closely and I’m far from an expert. Don’t remember why I bought BHFAL instead of BHFAN. Haven’t looked at why BHFAL is doing better. Up 10% from beginning of year. BHFAN down about 12% since Oct high while BHFAL only down about 5%.
BHFAL is a bond but mature date is 2058 and it’s Junior Subordinated Debentures so nothing special. Also Brighthouse preferreds have higher coupon rates than BHFAL. Don’t know why BHFAL is holding up better.
Need to examine closer. Maybe time for a switch.
Not sure – but perhaps BHFAL owners think it could be called? 15 mo past call- down a whole ¢ today. A year to go for BHFAN.
Still have a 10% profit on my BHFAL, holding on.
danzeb –my 2 worst performers are Brighthouse preferreds–haven’t decided to whether to lighten up on them or buy more of them. The company is performing just fine–but not well liked I guess.
I’ve watched this TLT movie in 2022-2023. Looks like a sequel. Support areas the same now as back then. This time a credit event may happen so if you add in support areas, at least pick the best of the junk or lower investment grade stuff versus the real junk.
Until government wants to actively try and devalue the US dollar, no surprises here.
I’ve been trying to figure out the Brighthouse deal — in my case, BHFAN — notably down ~10% in 2 months… bummer. Oh well, the market goes up, it goes down, it goes back up — generally falling faster than it rises. Such is life. No point having a knee-jerk reaction…
Dave in Texas–I feel your pain as Bill Clinton would say. My 2 worst performers are BHF–my question to myself is lighten up or buy more?
I also own BHFAP and recently bought some BHFAO and both down quite some.
Perhaps being an insurance company wonder if they have some long term investments bought few years ago in the low-rate era such as US long dated treasuries which are under water – similar to what brought troubles in SIVB and other regionals last year?
That shouldn’t bother the insurers the way it bothers banks. Annuity insurers match up their payment obligations, which are long term and somewhat predictable, against investments. Banks have demand deposits and have always had a hot money issue. (Jimmy Stewart does a good job of explaining this in The Bank Run scene in It’s A Wonderful Life.) Disclaimer: No knowledge of BHF
— If you read some of the press releases here, you’ll see that some banks are quietly facing up to the problem by selling off low rate Treasuries, taking a write off and replacing them with higher coupon paper. ( “KeyCorp to book $700 million loss on sale of securities” – MarketWatch, Sept 9 )
JMO. DYODD.
The MET spinoff BHF has variable annuities. It is shrinking but still quite a bit. There are market situations for them which can go either way. Big profits or hard times. Thus it is complicated to figure out. They are trying their best to get this under control but why invest in BHF when other companies are rocketing to the moon? Thinking 7 to 12 years down the road is difficult for many people. Annuities are not something you can adjust in 12 months. Everything takes many years to straighten out for a more predictable business.
Msquare,
These days , any reputable insurer has purchased reinsurance on fixed annuities, and can hedge the risk on variable annuities using” flex” options.
All of those policies that are tied to the stock market–both life and annuities, particularly those where you participate in upside and have limited downside risk, can be hedged on an individual policy basis if so desired.
I also see these used with many of the structured products offered by brokers. A relative with Chase Private Wealth management,who should know better given his education, pitched me on an NVDA structured product during Thanksgiving meal.
Here’s a good primer:
https://www.cboe.com/tradable_products/equity_indices/flex_options/
The biggest issue with these insurers is trying to fiigure out how much they are reinsuring, and how much risk has been ceded to other companies.
AIG was a mess in 2008, with so many of their subs reinsuring their own risks. My dad and brother both worked in the industry…and my dad, at 94, still advises corporations on commercial risk.