Spoiled Brats Take Stocks Lower

Just like a child who is not allowed to play video games 24 hours a day and throws a tantrum, stock traders have taken stocks down by 250-400 Dow points. The 1/4% rate cut was made as expected so all should be happy. They even got an end to quantitative tightening-kind of a double bonus.

But…..

Spoiled brats didn’t like it when Powell said this is not the first in a long series of rate cuts. Give them what they want, but don’t promise more of the same goodies down the road and they throw a tantrum.

Anyway we all know that by tomorrow traders will find a reason to “party on”.

The 10 year treasury is trading down at 2.02% and with the employment report coming Friday we will see if this yield falls below 2%–I believe it is destined to move back below 2% soon.

18 thoughts on “Spoiled Brats Take Stocks Lower”

  1. I never knew anyone who went broke or lost any sleep any sleep having too much “cash” (and 2% cash isn’t that bad compared to only a couple of years ago).

  2. I guess I’m with Joel in that taking profits creates a conundrum of where to find a replacement in a fixed income market that seems fully priced (At least compared to what we’re used to seeing). But at this stage of my life, I’m far more interested in guaranteeing an income stream than capital gains.

    1. Yes, Jersey there are only so many variables you can control. So you have to pick the ones most important to you. On tactic and principal alone, it certainly would be advisable for one to switch safety criteria metrics to maintain yield though unless one knows the risk/reward.
      The one thing one must monitor is call dates. If one is expecting “lower for longer” one could get into a situation where they are in essence eating their own seed corn as the preferred begins its call date descent towards par.
      That is why I added past few months some perpetual noncallables, that in theory can still long term exploit lower rates without call descent occurring.

      1. I have been systematically selling anything up 5-7% and callable in both 2019 and 2020. Also over the last couple of months i have been buying up IG and callable out beyond 2020. I have been holding onto anything with call dates further out even though they are up considerably and i am tempted by capital gains.

  3. Some of my issues are so high now, that it is getting to feel like the end of the dot com era! I’ve taken the money off the table on several issues for now and will look for more reasonable priced issues. What’s that saying Tim has about the birds and bushes? LOL

  4. I had seven issues go xdiv yesterday or today. May be a reason for some selling of overpriced issues on capture, but did not do any other digging. ??
    As I rationalize to my wife, “ok, we sell, here’s the check…what are you going to do with it?” (The Bernanke Conundrum)
    I realized a long time ago the the churn brokers (CNBC, SA, etc) never talk about making a whole bunch of correct decisions in a row if you are an active trader. THAT is what you have to do. Easy to say.

    1. Joel, some I own have just gone crazy. lXP-C went exD yesterday and already closed higher than one could have bought day before exD. GLP-A went exD today and closed a dime under a tradeable price a couple days ago.

  5. Too much money. Almost no place left to put all the money. First we had a bubble. Then we had a recovery. Now we have an expansion. Where oh where did that bubble go? Fixed income smoke in my computer today. I have to get the cats out of the office. Afraid it’s going to catch on fire.

    1. P–when that smoke comes out of the computer and everyday all my accounts go up–day and day, I really kind of worry. I can’t see a huge reason to worry–and that is why I worry–that black swan is lurking somewhere out there.

      1. Tim, My left hand keeps pulling my right hand off the sell button. Seeing multiple years of fixed income divvys just lay there is a mind-bender. Yet prices keep climbing.

        I keep telling myself if they drop all the way back down to our original purchase price, and barring any credit issues, the pfds will still be offering the terms for which we signed-up. And who knows – if rates keep falling, prices may continue to climb. Sure as heck don’t want to sitting in an un-hitched on a price upslope.

        My temptation to sell is rooted in trying to time the market, though as my clairvoyance skills barely cover what’s already happened, not going there. Flips or some arbitrage are fun, but otherwise hunkering down for the long haul.

      2. Tim, lots of very nice people and smart people on your site and I learn a lot from all of them. I’m not the brightest but I think nobody knows the future. It pays to be prudent but that means something different to everybody. To me that means keeping your eyes on big picture and not being a one trick pony. I’m sure a black swan will appear, they always do, but it’s also possible for black swans to make you a lot of money. I say don’t worry be happy because life is short.

      3. Tim, in early trading hours, there is some sign of black swan seems to flying near. Then when the Dow and SP going up, there are still some life left for the longest bull market as CNBC pundits believe. I were “experimenting” with eREITS. Some are bad, e.g. APLE, JCAP (with lots of unrealized loss), I believe that the retiring Founder said in the last Earnings call that he managed sold ATM with huge premium to NAV; I should read the transcript more carefully, but dividends are safe, it always gap up in the morning and then close in the red). UTG works well for me SO FAR. Thanks to Grid, MNR-C a non retail eREIT with 6.125% came alive nearing ex dividend date.
        AHT preferreds seem to come back. I do not have much remnant, some from my daughter. Colony Capital (CLNY) and all preferreds open low and came back alive now. Of course, in a recession, these are very risky. Someone at Doug’s has increased his holdings on SPKEP. I am holding onto my rather holdings on SPKEP and some JE-A too. Lots of GLP-A, Bought almost 600 shares of NEWTL yesterday perhaps paid a few pennies too much. As long as Mr. J. Powell does not lower the Fed rates to strength the stock market, we should be okay at least for now. I believe that he is doing the right thing and the Street gets greedy and selfish IMHO. BTW, there is some weakness generally. CIM reported lackluster Quarter: No negative reaction to the Quarterly report. HT (Hersha) hotel is not so lucky, missed both earnings and revenues, below forecast on new development plus Huricane loss resulting in dismal forecast for rest of 2019, insisting on maintaining low leverage if even it needs to sell off some assets if the general market turns sour. Market punishes the common, slight decline in preferreds.
        I just noticed that Rida Morwa has two articles: UTG (should buy earlier BEFORE the Fed’s rate cut or when 10 Yr Treasury was POSITIVE) and LTS. I am not going to read his articles. Funny thing is Jussie Asloka (left Rida long ago, aided by a “retired” West Point man (who does have some good ideas) wrote a positive article on SKT (Tangier Factory Outlet), Brad Thomas’s worst pick (Brad has some good stuff). It went down 2.74%. Richard Hill has now joined Brad Thomas. Yesterday Julian Lin wrote an article on PEI, claiming that the dividends were not covered or a long time and still not covered with two opposing views (Marel: SA contributor) and one other. PEI went down 10% all preferreds followed. Today the Earnings Call transcript suggests that the Management failed to forecast the extent of bankruptcies and should have reduced the dividends to the common (I bought $2000 worth of common without any due diligence). Earlier today the commons went down some more, now stabilized. The same guy wrote an article back in October 2018, claiming CBL preferreds have 800% coverage. Grid is absolutely correct: Read SA at our risks. LOL. So far, JCAP is 1.5% up, not sure how it would end up with. The NAV was around $19.

        1. johnkcal–it appears you read a lot more on SA than I do. I follow 3-4 people and glance at there stuff at times–but mostly I own baby bonds and term preferreds so there is little of value to me on there–plus I like to be a long term holder–I don’t have time to jump around all the time like some on SA would imply you should do. An occasional dividend capture or flip, but virtually all the portfolio is for longer term holdings.

          I like to blame one person for a bad investment–me. I can do poorly at times without help from Rida.

          Of course when the tide goes out we will see who really has no underwear on–it takes no genius to make money during bull markets or during the time of never ending falling interest rates. When stocks are falling and interest rates rising we will find out who really the ‘smart people’ are.

          1. Tim, I totally agree with you on (1) one has no one else to blame except oneself if the position failed to work. (2) I am equally nervous on inflation or rising interest rate SOMEDAY. I read a lot because my investment style continue to follow my mentor on business, i.e. ” a Ph.D. from Texas who was general manager of 400+ people with 33 direct reports, spending 12+ hour daily plus some weekend emergency lab work by himself”, who told me “don’t count the beans (money) , just make them.” Hence, I have so many different positions and never counted them or analyzed the percent allocation or performance of each. Therefore, SA would alert me some article on each. I started preferred stock investing after losing money following various newsletter (common stock) writers back in 2006, without knowing anything except bought some Credit Suisse preferred and then some Deutsche Bank trust preferreds. I still have very few common stocks except went big on SBUX (Starbucks coffee). Added more on PZE and got burned. From Rida, I own lots of ARCC (added more recently and have almost immediate unrealized loss with the spin off its UpJohn legacy subsidiary) and PEGI (Wind) and started new position on BEP (Brookfield Wind and Sun) and AY (Atlantica Wind and Sun). plus some EPD and ET (Energy Transfer), sold off all Rida’s awful MLP. Still held on Dynagas Preferred B shares plus TOO-E, fearful of Brookfield taking it private. Small legacy shares of Amtrust Financial and CBL-D and lots of Colony Financial preferreds. BTW, the market is extremely sensitive to the Trade War Fear. when I ate my late breakfast/lunch, CNBC all pointed out that the Dow immediately went 200 shares down when the president talked about his take on China. Schwab.com believes that it probably would end up neither there nor here sort of thing. Who knows? I just play the DRIP. Doug Le Du always says on Taper Fear, “what is the problem? You get the same dividends/interest regardless how the market values your holdings. You can get the dividends and buy more shares at lower price.” Of course, this could work UNLESS, the position becomes Ras Financials or many of the upstream MLP’s such as Vanguard Resources etc.

            1. Oh, CTL Century Link and its baby bonds (Qwest Corp; one of the same) seem to be rallying on news its Level 3 CEO Storey has redeemed another convertible bonds working on deleveraging. I have commons following Morningstar plus tons of positive (vs. equal number of negative) articles on SA. What works was my increasing portfolio for one of their intermediate bonds now trading above par getting some 6.7% still more than the liquid baby bonds. Still have quite a few baby bonds. Level 3 has problem with old tech, declining revenues but it does have lots of new tech including the 5 G. envied by its large competitors like AT and T and others.

      1. 40 million participated in qualifiers leading up to World cup. Better chance of winning WSOP.

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