Investors can be the most fickle people in the world—going from ‘everything is great’ to ‘the world is ending’ within a weeks time frame. The drop in interest rates since Tuesday has been mind blowing – down around 40 basis points. The drops in equity prices has been fairly steep—but we can all remember from years past (not recently) where 1-2% moves (both ways) in equity indexes was pretty common and folks are now relearning that prices go both ways. I never like to see continual ‘poundings’ of common shares, because it will eventually bleed over into income issues.
Yesterday and today have been friendly to our portfolios–yesterday we had nice gains while today is pretty flattish. Overall prices have moved higher in preferreds, but mostly modestly. While I planned to hold off doing any buying until I was back at my office I did buy some of the Priority Income Fund 6% term preferred (PRIF-H) which matures in just over 2 years – this is a current holding so this buy is just an addition.
With the 10 year treasury at 3.83% one has to wonder if rates are going to pop higher next week–is this all an over reaction to dovish economic data? I am thinking this is the case Next week is a fairly quiet week relative to economic data so markets may well react in the opposite direction–but of course no one really knows–we’ll just have to wait and see.
Yesterday the VIX spiked to 65 in seconds. Worst move I can remember seeing in such short order! If you look at multi decade graphs of the VIX there is only 1 conclusion. BUY!!!!!!!!!!!!!!
These were levels from 2000 and 2008. Truly blood in the streets. Throwing babies out w the bathwater, Yeah we have to be careful of failed names in bad patterns, but in general we need to add to great positions when the market gives you 15 to 25% IN A DAY!!!
NDX futures off another 1.83% as of 8:30pm ET. Selloff gaining steam. Treasuries bid. Stay tuned…
My preferred holdings, both stock and baby bonds held pretty steady. I made a list that shows the top 1/3 were either no change or gained, middle third very small losses between -.01 to -.04 cents a share and the bottom third lost between -.10 to -.13 cents a share. So, I am going to limit any new buying for the time being to add shares to the top or middle tier only throwing a bit more weight to issues that are not callable for at least 4 years.
This idea is probably what that great philosopher Mike Tyson had in mind when he said “everyone has a plan until they get punched in the nose”.
I’m buying a lot: MFAN, MFAO, AOMN, MITN, RCC
Here is a list for a few ideas. Has good charts for a starting point. I posted this before from the author from his Jan. article. This is an update.
https://seekingalpha.com/article/4702006-main-street-capital-40-plus-big-yield-bdcs-compared
Here is another list from the same author from May, so a little out of date.
https://seekingalpha.com/article/4692023-ares-capital-building-a-big-yield-portfolio-bdcs-cefs-reits
LOL I’ve got 100 positions, none of them!
These are my returns (last 6 years)
15.88%
84.00%
15.25%
36.03%
-27.41%
28.62%
LOL
If you Prefer, same here.
BUT I have the Baby bonds and preferred of some on the list. That was the point of me posting the link for others who are more on the conservative side.
I go down the list, look for what’s appealing, look at 2yr, 5yr, 10yr return, yr to date, market cap. Then I open up Quantumonline and search for BB and preferred then I go back to SA and here to see what people have to say about the company and I read looking for problems especially like increased holdings put on non accrual etc.
I don’t buy the BDC, REIT or the CEF I only look for the next level of safety.
Some good choices. Those new baby bonds are more rangebound than the perpetuals because they have a redemption date so they have less upside less downside. Normally I go for the higher div perpetuals but now the difference is small and the threat of downside seems more real.
The axiom ‘the time to buy is when the VIX is high’ would seem to apply here.
Not high enough yet (imo) but getting close. I’m a cautious buyer above 35.
Citadel-
Buy what?
The other side of buying is selling…and knowing when.
Selling is always a hedge…a short…going to cash…taking gains…paring and gathering fuel…not participating….reducing risk…it’s an equal art….etc….
The fear of selling is always, “Alright kid, now ya have the cash, what are you going to do with it.” I think Clint Eastwood said that.
Like I said, it’s a patient art.
Best for All.
R2S I have had GTC orders sitting out there for months. I had been hoping to see some volatility in June like last year. But nothing is ever the same. People bid up preferred stocks expecting the feds to cut rates. I think, but what do I know? that people are seeing the 2nd quarter reports and companies are reporting lower margins and sales compared to last year and now all of a sudden PE multiples are looking high to people and they are wondering if it can get worse if a recession comes on.
As for people calling for rate cuts just because Canada, England, etc are cutting they forget foreign money moves to where the rates are higher and safer and we need these foreign investors to buy our debt. Even if they will not admit it Even China is probably buying new debt after selling lower yield treasuries just like the banks.
Let’s talk about where opportunities are likely to show up. It’s time to prepare a game plan.
When it comes to most fixed income it appears the game plan was to buy over the last several months. Now my personal current game plan is kind of sit on my rear and see what happens.
I am a buy and hold type person. So I have a wonderful mix of stuff that is in the red, even, and green. I will be mostly looking for short lived anomalies that offer a buying opportunity for quality fixed income securities that yield more then its peers. I have no idea when that might happen. So I would not call that a real game plan but more opportunistic and open to different ideas as they appear.
Consumer spending is still near record levels. Still millions of job openings going unfilled. You can’t convince me we’re in a recession if these 2 things are true. Unemployment may be up, but that may be from millions of migrants coming in. Sure there are layoffs, big ones from old companies that have a lot of dead wood.
Of course in my trading I don’t fight the market. Someone said it can be irrational longer than I can remain solvent.
near record levels in $ terms? If so, isn’t that more difficult to compare to the past when most things have increased in $ terms by 50%-100%?
I said the same thing about why the market has been able to maintain moving to the sky until last week.
Are Google, Microsoft, and Amazon old companies now with lots of dead wood?
JP Morgan and Citi are now both predicting 50BP cuts in September and November and 25BP in December.
Talk about a broken clock…
The markets just had a paper cut and now people who follow daily news blurbs are in panic mode. Wake me up when it’s down 10 to 15%. Most preferreds and baby bonds have barely budged.
For the group….
Do current conditions (anticipated drop in interest rates, market volatility) make a good case to load up on the sock drawer standards of TY.PR?
I’m showing 5.33% yield right now and a quarterly payment of .625 going back a long ways https://www.nasdaq.com/market-activity/stocks/ty.pr/dividend-history
Won’t be able to “T Bill and Chill” much longer so thinking this may be good small nibble.
Surfer Dude, my advice is worth squat. But I like the idea.
First I wouldn’t load up to a full position. Look at the chart and the 52 week high and low. When the market gets nervous people move into perceived safer stocks. But when they really panic they sell. You still might get the opportunity to buy lower. If you are good with that return you’re the only person you need to convince. Just be ready to buy another tranche if it goes lower.
Thank you!
Someone on here, I can’t remember who mentioned when there is a large sell order sitting out there and your bid hits to put a lower bid in to see if it hits and if it does put in an even lower bid until you find the lower limit the seller is willing to take.
10/21/2022 45.45
10/21/2022 45.25
10/21/2022 45.30 ( moved it up because it didn’t seem to be any takers)
10/21/2022 45.20 end of day
I own 1 share of TY-. It never went low enough for me to be more interested. I bought that 1 share to track it.
I would not accept it as a good purchase when I can buy GDV-K which is Aa3 rated and at the current price yields 5.8%.
With a bit more solid research/possible patience I think you should even be able to get a bit closer to 6%, A rated, and possibly all QDI payments. If things continue the way they are that window may be closing for now though.
Surfer, my humble opinion, TY- a 5.32% CD. Fantastic investment. Might be fully priced right now, even a little ahead of itself. I view it as an essential anchor holding in my portfolio, always ready to buy more if price were to drop. I wouldn’t be a buyer at this price but I’m certainly not selling.
Pig safe 6% is the AIL and UEP preferred but very illiquid up in that A rating. I have a little in a few but not a lot
Charles, agree wholeheartedly. Always have my fair share of those.
yak yak, fed stinks, yak, yak ,yak some more, fed stinks, but let’s ignore the fact that ppl have been calling a recession for 3 yrs now, and the fed has staved it off thus far. Good job powell, you have done what you can given what cards you have been dealt.
There are people who have correctly predicted 27 of the past 2 recessions.
We’ve had plenty of bad news, market just now decided bad news should be treated …. badly
Thanks Tim. Please keep your CD alternative picks coming!
On the CD front, I see where the best one year CD offered at Fidelity now is 4.50% and 4.75% at Schwab…. That of course is depending upon how you search at Schwab because searching another way it’s only 4.40%…… I know at the start of the day you could still buy @ 5.05% at Fido… And all these are callable..
FWIW – I just checked and if anyone cares, Synchrony Bank is still offering a 13 month non callable CD at 5.15% APY….. https://www.synchronybank.com/banking/cd/?UISCode=0000000
Oh Joy, are we starting that rollercoaster ride or this the warm up?
One account was down less than a 1/2% Wednesday then back up 1/4% Thursday.
Actually probably wouldn’t have been down even that much if it wasn’t for some common we hold.
Let the games start!
The only thing “sticky” is the Fed: they stuck too long with “transitory” inflation and now with “higher and longer”. They should have cut in June and now obviously in July.
The Dow is down 950 points as I write, markets may be expecting a recession fairly soon.
You are 100% correct. Now, it will be until late in Oct until they can cut 0.50% . In plain english, that is “restrictive rates”. In late Oct, assuming a 0.50% cut we will get to the highest end of neutral rates 4.75% – 5%
Of course, they could cut 0.5% in September or do a 0.25% rate cut NOW between meetings but they have their pride. Screw everything and everybody else.
Clown show. A soft landing was in their grasp and they most likely muffed it.
This entire time, the Bond market has been telling the Fed they overshot the rate hikes. Everybody knew, except the Fed apparently. The Equity market knew as they rallied in the face of nice GDP numbers holding steady, a declining inflation rate, and a bond market who remained calm and well below what the Fed should have been doing. So, if Jay Powell says he needs data, yet everyone knew, it leads to the question of what data, exactly, is he looking at? It’s certainly not the data everybody else seems to know.
Oh, and perhaps overlooked in today’s carnage is the fact they revised employment numbers down again for last 2 months. No surprise there as it’s a popular topic.
Just one additional point. Powell and the cast of clowns even had the policymakers in Canada and Europe cutting rates. They intentionally decided to ignore the data and every other analysis done by people in similar roles. That is pure arrogance. Screw you all, we know best.
FWIW, the bond market has been hinting for years—since the grand pandemic days when treasury yields went topsy-turvy—that the U.S. was on a one-way train to Recessionville. According to the “experts,” an inverted yield curve was the harbinger of doom. And yet, here we are, still standing years after these predictions. But some folks are still desperately trying to conjure up a recession with their incessant chatter. Bond market doesn’t always get it right.
The markets, every month, have shrugged off positive signals, dismissing them as mere blips on the radar. But today, one little hiccup and the market are like rats fleeing off a sinking ship. Rational market my arse.
Does anyone else think FED policy might be geopolitically oriented? Definitely hurting China and capping commodity exporting nations like Russia. Just a thought but we may intentionally be pursuing a strong dollar policy right now.
I don’t know. I’ve given up trying to second guess their motives better to just stay nimble and react to whatever they do.