Over 5%–the 2 year treasury has headed higher as Jay Powell was plenty hawkish–hinting that rate hikes could go back to the 50 basis point hike next time around—which is two weeks from today. The 10 year treasury is hanging in there at 3.97% (at 5 a.m. central).
This morning we see the JOLTS (job openings and labor turnover report) at the same time Jay Powell will start his second day of testimony–this time to the Senate. Once again–just like yesterday–equity futures are up a tiny amount early. Will the indexes drop like a rock when Powell starts talking? Doesn’t seem that we will get the same reaction as yesterday, but who knows for sure–I mean honestly will there be new news from him?
Isn’t it interesting how times change? I used to spend my time perusing spreadsheets for preferreds and baby bonds that are ‘bargains’. Now each day I spend my time looking at the CD & Bond page on eTrade and Fidelity. It was only maybe 18 months ago that I was thinking–if I could only get a nice safe 5% I would happy. Now that we are there I am thinking I would be very very happy with 6%. I have been mentioning that I have been buying CD’s in the 5-5.15% area (you can get a bit more if you buy ‘callable’ issues)–funded by CD’s that are maturing which carried interest rates in the 3.6-3.8% area bought sometime in the middle of 2022. My recent focus is buying issues that mature in 6 months to 2 years–I want some continual liquidity for the next year–I want to have plenty of dry powder to load up on the higher rates yet to come.
Have you noticed all the chatter around commercial real estate? I notice that Wework is looking for money–these folks will be ‘belly up’ soon. Barry Sternlicht (Starwood) has continued to scream about Fed rates hikes–which he has been doing for at least 5 months–here and here. They all ‘talk their book’, but from what I see the commercial space is a dangerous place to be invested in now. Looking ahead if you think we are heading to recession you should review commercial holdings–i.e. Arbor Realty (ABR), Ready Capital (RC), KKR Realty Trust (KREF) and many others–all have preferreds and baby bonds outstanding and we could see a real blood bath in these issues with a ‘hard landing’ – I have modest positions in many of these, but may either trim or exit as alternatives appear.
Well enough rambling–let’s get the show going.