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Plenty of Pain Today

With the hotter consumer price index this morning interest rates moved a full 12 basis points higher—up around the 4.50% area—ouch.

Holders of high quality, low coupon perpetuals and baby bonds with LONG dated maturities are experiencing some pain–the amount of pain is dependent on the construction of your portfolio. Short dated maturities have experienced significantly less pain. Even with my conservation portfolio construction I am off around .3% today and that is plenty painful.

For instance 2 of my bigger losers are the WR Berkley 5.7% baby bond (WRB-E) with a maturity way out in 2058—off 60 cents last I looked. The other larger loser is the Affiliated Managers Group 5.875% baby bond (MGR) with a 2059 maturity–off 54 cents.

IF one thought this was the high in interest rates one might say there are bargains being created today. Unfortunately I don’t believe we have seen the high–so of course i am not a buyer of long dated maturities in baby bonds or perpetual preferreds.

Certainly, I am not a seller of anything today–some issues which are falling I wish I didn’t own TODAY—but they are solid and will, over time, bounce back. This is simply life if you invest in anything at all.

3 thoughts on “Plenty of Pain Today”

  1. Tim.. Here comes the Bargains…ATHS .. just got it for $24.99.. .and up already. Georges

  2. This is the first break I’ve had since the opening bell. Busy day! I dipped my toes in and started shorting last Wednesday. I’m 21% short but that’s still a lot of downside pain. This morning was mostly swapping short positions and booking gains. This afternoon, I’ve been picking up some 60-70 cent down shares (perpetuals). That may bite me if your higher long term rate thesis is correct Pain is inevitable when you invest… I’ve survived this before and will do so again.

  3. Tim- what if anything that may have dropped in price today from your Laundry List do you feel is a buy/add?

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