After 2 days of inflation data and sharply falling interest rates it would appear that we will have some quiet markets for Thursday and Friday–we do have tons of Fed yakkers and they will probably speak the ‘party line’–‘while inflation is improving it remains above our target and we stand ready to raise rates’. There will not be any hints of reducing the Fed Funds rate from the yakkers.
Equity futures and interest rates are nearly dead flat at 5 a.m. central–like watching paint dry–yawn–I love quiet days.
So I continue with minimum cash ‘dry powder’ – I really want to be nearly fully invested in preferreds and baby bonds as CDs mature. My personal thoughts, as I have laid out, is for interest rates to fall through a portion of 2024 and then flatten and finally rise late in the year. This view is based upon massive issuance of debt by the U.S. Treasury. My thoughts are 50% wrong–no better than a coin toss, but that is the premise I am running with now. So with this I invest my cash in preferreds or baby bonds when it is available–I haven’t bought a CD in weeks and weeks although the coupon offered is still decent at up to 5.6%. Really want 6.5% on the low end and 8% on the high end with the 6.5% being relatively high quality and 8% being mid level quality.
Have you looked at the fixed to floating issues that are now paying 9% to 12%? Would it pay to build a ‘basket’ of these issues–say 5 issues with modest exposure to each. Some of these issues are fairly solid – like a Global Partners (GLP), Energy Transfer (ET), Customers Bancorp (CUBI), Aspen Insurance (APO–Apollo). I know some of you own these–but my conservative nature has kept me away except for a modest CUBI position. I might do it–don’t know. The good part is most of these are ‘pinned to par’ (not really par–most preferreds are not $25 par–but $25 liquidation value)–so share price movement is minimal.