Sliding Into the Weekend on Uncertainty

Common stocks are slipping by about 1% today as the corona virus takes it’s toll. I think VinL hit the nail on the head in some comments that it is really about uncertainty in China as their information may well be less than transparent and of course stock markets hate uncertainty.

The 10 year treasury has slipped again and is now trading at 1.53%. With uncertainty in the markets yields are likely to slip some as folks like to move to a safer position–or at least what they think are safer positions.

We note today that the U.S. airlines are starting to announce suspensions of service to China with Delta leading the way–others will follow I am sure. We’ll see how far these various disruptions go–and then try to discern whether there will be GDP effects.

I am not seeing any real disruptions in the preferred and baby bond markets. There have been quite a few ex-dividend issues yesterday and today (35 issues more or less), but they have not put much of a damper on prices–on average.

One item I have noted that in recent weeks it is becoming more difficult to try to successfully do a dividend capture. While the ‘capture’ part is easy enough the security exit part is getting much more difficult. My personal idea on a dividend capture is to buy the issue around 2 weeks prior to the ex-dividend date and then hold through the date and look to exit within a couple weeks with a net 1% gain. For instance I bought the B Riley 6.75% baby bond (RILYO) earlier in the month to capture the 42 cent interest payment. Shares went ex dividend on 1/14–and I received the interest payment today. I am now looking for a bounce back in share price but thus far nothing–nothing at all. The bottom line is that I am up by a number of cents–but far from the net 25 cents I am looking to garner. Whether this is simply an issue of being B Riley or one of buying the wrong issue (they have 6 baby bonds outstanding)–or simply not entering soon enough I have no idea–but one gets used to ‘easy pickings’ so when I have to wait to exit I get ‘antsy’. Oh well I will just hold the issue for now.

January has actually been a decent month overall. I always have a modest goal of 7%/annually–and really would be most happy if I could get to 6% this year. Depending how markets close today January should be a gain of around .6-.7%, which would be plenty acceptable to me—I am sure others have done better (and some worse), but as we all know we all have different needs and styles when it comes to investing–not necessarily anything right or wrong–just what works for us.

7 thoughts on “Sliding Into the Weekend on Uncertainty”

  1. Martin I ask myself that question all the time. Different? No idea. Historical? Absolutely as the Fed is indirectly bidding against all of us now.

  2. Tim,
    6% in 2020 would be great! This year I would be happy even with a 5%.

    Despite the uncertainty, so far, how do the III readers feel today when they are up or just slightly down when the dow is -1.8%? Isn’t this why we are here?

    My port. is down only 0.01% today (without the dividends received today it would be -0.12%). As long as panic does not land on preferreds, I am ok with this. Will see how we close for the weekend.

  3. Agree 100% with what you wrote as I normally do. With one small exception “of course, stock markets hate uncertainty”. I have come to really dislike that phrase. It is almost like waving a red flag in front of a bull.

    I used to believe that until we went to 1T+ dollar deficits on purpose as opposed to an economic crisis. No short, medium or long term path to resolving. That sure seems uncertain to me. Wall Street had meanwhile been celebrating and partying. I still cannot resolve and rectify this acceptance by Wall Street of a very uncertain future for myself and my children.

    But your real and most important point is the impact on China and it’s growth which will slow down the world economy. I do believe this is legitimate.

    Great job as always Tim

  4. REIT preferreds keep going up. Apparently interest rate trumps market risk. I exited half of my positions there.

    1. MartinG, Same here. A lot of forced REIT sales because of silly valuations. The cap gains continue to be remarkable but I’d be a lot happier in a steady boring market.

      1. I normally sell with the idea of buying something else. Playing the waiting game is out of my comfort zone. More often than not the price continues to go up. But this time it’s different, right?

        1. I’m with you, Martin. Now that commissions are mostly gone, I invest as soon as funds hit my account, even if only 1,2, or 3 shares. If I can find somewhere to put that money to work, I put it there. Don’t want it lazing around. 😉

          JMO

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