I haven’t done any buying the last few days, but with quite a bunch of CDs maturing in the last couple days my hand will be forced soon. With the geopolitical situation in the Middle East I don’t feel particularly motivated, but if anything can get me motivated it would be falling monthly income. I’m not really motivated by money, but I am motivated to garner the best return possible within my risk tolerance.
Right at this moment I am awaiting the jobs numbers for July–150,000 new jobs are forecast to have been created in July and the unemployment rate is forecast to remain steady at 4.2%. The ADP jobs report on Wednesday came in hotter than forecast and the JOLTs (job openings and labor turnover) seemed to indicated that there are plenty of available jobs–what we see in 15 minutes is anyone’s guess.
I do have concerns with interest rates as the 10 year treasury is now trading at 3.87% which is about 20 basis points higher than prior to the Fed Funds rate cut. I had originally guessed that short term treasuries would fall into this month and that the 10 year would rise–this was based on the never ending supply of new debt from the government. Certainly this supply continues–and looks to continue for as far as the eye can see which would seem to indicate to me that rates on long term debt will remain elevated. I know 1 thing for sure and that is I don’t want to see interest rates head above 4%–we will begin to see capital gains erode at this level.
So now I am waiting for the numbers–254,000 new jobs–what hotter than expected and the 10 year treasury has shot way up to 3.96%. The unemployment rate falls to 4.1%. Too hot or Goldilocks?
Couple of thoughts on long-end yields.
One commentor recently suggested that the Fed+Treasury is engineering the rise in long yields as a way to tighten the screws after rate hikes failed to do the job. Me, I wouldn’t know.
Whether rising long yields affect your yield asset’s price might mostly depend on which end of the curve your asset is buttered. And there’s that convexity thing.
“Still Doing Nothing–But Have to Soon”
I was going to say that doing nothing is sometimes the best option……but for my’ ‘friends’ I’m in the exact same boat!!
Nothing doing here either.
Maybe this is the calm before the storm. You have to figure things will get more volatile into the election, right?
Tim, as several others have noted, the Gabelli short term Treasury MM fund might be a good place to roll over your CD’s to.
No one knows the future.
But all of us have our own “view” that determines our investment strategy.
IMHO
Todays jobs data upends many previous trading strategies.
A soft landing is looking more and more probable
I expect only one more 25bps cut in 2024
10 and 20 year T rates will not fall but I expect to circle around 4.0% (10) and 4.25% (20)
If the “view” above pans out, how will that affect my/our investments?
TLT will not be the bonanza so many piled into.
Mortgage REITs will not benefit as much as we hoped
Risky BDC’s will not be threatened by as many defaults in their portfolios
Overall, IG and Conservative prefs wil underperform their riskier/higher coupon compatriots
I’m Mr. Stormy Weather – always preparing for the worst, failing to benefit from sunny skies.
I’m OK with my “view” that risky will win more than less risky in the short term.
I’m staying with my quality holdings and do not plan to pursue the beckoning risk sirens.
The storm is bound to come ….. sometime.
Westie, similar to what I see working out.
I just posted a comment on what if anything I should do to a comment Bea posted on headlines of interest.
Yes, in the past couple weeks I bought a few BDC common. They are the ones not showing much capital gains (yet) why, because they have no issued preferred I could buy.
I’m not selling preferred or BB even if they are not IG because I bought at too good a deal.
My crystal ball is cracked and so am I. Similar to the not so Mad Hatter.
I expect mortgage rates to stay around 6% just tell the younger generation to get used to it. I paid 8% for a very long time. Prices on older homes will have to come down as the Boomer generation has to sell to downsize. Empty nesters who were part of the keeping up with the Jones’s and bought Mac,mansions don’t want them or can’t keep up with them.
Westie, what do they say? trim the sails but not ready to batten down the hatches with one eye on the horizon.
Not many boomers can or want to “downsize”. Many are just making whatever changes need to be made to stay as long as possible in their present homes. Walk in showers and tubs as well as home elevators are in great demand. Yard work now minimized or done by paid gardeners.
Hi Bill,
I think it really depends on where you are.
In silicon valley, we have been seeing a fairly constant exodus of boomers for years because many of them bought houses that are now up 10X from what they paid for them.
They can sell, move somewhere lower cost, and pocket a million dollars plus. If they stay in CA, they can transfer their property tax base and keep paying 1% property tax on a fraction of their original home price.
I helped one of my old business partners do this a couple of years ago. sold a 2000 sq ft house on 1/6 acre and moved about 60 miles inland to a 3000 sq ft home with a pool, 1500 sq ft shop, 6 car garage, on 1.5 acres, and pocketed about $1.5M in the process. His property tax basis is a fraction of the $200K he paid for his original house, so he pays something like $3K/yr in property tax. If half my kids and most of my grandkids didn’t live within a mile of me, I would buy a house next door to him….
We see people in our neighborhood leaving regularly. Californians moving out are really messing up property values in other places (Nevada, Oregon, Utah, etc.) because they bid up housing prices.
Private, down in your area is a nonprofit called Valley Village retirement community. My mother stayed there. Associated with a church group. Look at the prices. Others may want to start their search in their area by looking for something similar.
Just downsized from a 3300sqft house to 1360sqft bungalow with everything outside taken care of for $300/mth HOA. Bagging close to a million in the process.
Should of done it years ago as we could not keep up the old house.
Should “have”, not should “of”.
Well Grammar Police… The word “Should” should not be capitalized as it is not the beginning of a new sentence. The quotation marks should be consistent and properly placed. The comma should be inside the quotation marks.
You should have corrected micahc by stating:
It should be “should have,” not “should of.”
Grammer Wars 2024
Who’s side are ya’ll on?
Grammer/Grammar is what my kids call my Mom. I’m on her side.
I ain’t got no problim with no “should of,” even after wenting to a highfalutin ivy kollich.
… but do you stand with the idiot’s when it comes to apostrophes in German?
https://www.dw.com/en/german-language-body-enshrines-idiots-apostrophe/a-70435316
The only thing I got from this entire thread on grammar is, “a little bit older.”
My dad majored in English, and worked in insurance. He was always a stickler for correct usage. So, I knew it was time he retired when he used “insurances” as in a doctor’s ad “we accept most insurances.”
For 15 years after moving to Las Vegas I heard people say, “supposably” instead of “supposedly.” I’d never heard it spoken before. Then, after making fun of it for 15 years I happened to look it up to prove it’s not a word, but…it IS a word that means ,”capable of being supposed.”
Now, all my friends make an effort to interject “supposably” wherever possible.
There are certainly words out there that ought to mean things other than how they are defined. I know the dictionary definition of “disinterested”, but I’ve always felt English wanted a more aggressive way of expressing your non-interest in a topic, as in
“I’m disinterested in discussing your political rants any further”
Sure one could be uninterested, but I’m a lot more than just uninterested. I stand with Humpty on this one. Supposeably he said
“When I use a word… it means just what I choose it to mean – neither more nor less.”
Dear Grammar Police-
Me seems to be joining whom on the list of nearly extinct words. “It’s the end of the world for Grace and I,” you might hear of late. I’ve always had a place in the bottom of me heart for little old me. What’s going on?
Feeling abandoned,
rocks2stocks
…while your at it (and in the interest of rescuing English from the 21st century barbarians), would you issue a some tickets to folks who use bot instead of bought? TIA
“Todays jobs data upends many previous trading strategies.
A soft landing is looking more and more probable”
Something like 70% of fund managers have been expecting a soft landing and positioning for it. A soft landing is the base case and priced in. What would upend the market and fund manager portfolios is if we didn’t get a soft landing. That’s the scenario the market is not prepared for.
Longer rates going up as short rates go down, slows the economy and cuts all valuations tied to future cash flows. It’s the budgetary comeuppance, as I see it.
I hope not . I don’t gamble on that opinion.
I think we all know deep down that’s exactly how this is going to end.
Prices on conservative preferred stocks are insane.
https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202410
20 year US Treasury yields 4.33% compared to discounted JPM preferred stocks yielding about 5%. The spread being this narrow is crazy unless one believes that Jamie Dimon will eventually become Emperor.
af – I certainly agree the spreads or lack of same are crazy, but not being familiar with the link you included, can you really prove the 20 yr spread to JPM preferreds you mention specifically from the link? There’s no way to do that, is there? Not doubting the actual spread, just wondering if there’s more to that link than I see at first blush.
You are the yield savant — not me.
If you go out to August or November of 2044, the 20 year Treasury actually appears to yield 4.37%.
https://www.wsj.com/market-data/bonds/treasuries
The JPM.PRM appears to yield less than 5%.
https://www.preferredstockchannel.com/symbol/jpm.prm/
Now you can explain the nuances that I am missing.
af – you’re misunderstanding what I’m asking – I’m not doubting the spread you mention, I’m merely wondering if it can be discerned from the link you introduced – https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202410. I don’t see how to do it if it’s possible… just trying to get the most I can out of your link.
The link only provided official Constant Maturity Treasury rates.
Perhaps you are looking from wrong view point….. Dimon definitely won’t become Emperor, but JPM is better run than the federal government. That give you a little different perspective on why the spread so narrow 🙂
af- Given the two big risks of such preferreds are reasonable- credit risk for which JPMs are almost nil, and interest rate risk for which we are certainly headed lower eventually- people like me are piled in. Although I’ve been amassing WFCs for little more yield(400bps) than JPMs. WFC is still in the G-SIB too big to fail bucket.
Public retail knowledge of preferred stock is still low. In my circle of friends and acquaintances (besides a friend’s father), I’m the only person that buys them. I imagine if more retirees caught on, these spreads could get even more pitiful. I still have JPM CD’s 1/2% higher than the preferreds.
AF
JPM C a 6% is 25.48. Strip accrued interest and price is even lower. And many other 6’s flirting with par or low 25. Thats not insane, rich yet, but not crazy
Gabelli GABXX is now 5%- 7day.
Poppy bank has a big billboard next to the freeway advertising a 5% CD for 6 months. Washington Federal Bank finished their acquisition of Burbank savings. Stupidest name for a bank. WaFd, well at least it saves them money on the letters on the sign of the building and it allows them to be extra large.
5 Year TIPS are up to 1.6%. I agree that the ten year won’t go much lower and I expect inflation to surge back some within 12-18 months. I have a lot of fixed preferred so TIPS might be a decent hedge for some of that exposure?
Tim – I hate to continue being a nudge, but could you please comment on the status of the “Like Button?” This is my third request to find out if it’s going to remain as it is now where older messages get “Like Button Notice (PRO tariff plan allows to show maximum 25 button(s) per page. Upgrade your website plan on LikeBtn.com. To remove such notices uncheck Show Info Notices chekbox on plugin Settings tab.)” notices instead of we readers being able to see how many “Likes” an older post has received. I don’t believe in the past that the number of active Like buttons had been limited. Is it going to go back to having unlimited Like buttons?
mine does not do that with the Like button – strange.
I am at least relieved for now that the dock worker’s strike is pushed out to January. It could have played havoc.
I wonder how Joe and Jane Sixpack like 15 and 30 year mortgage rates actually going up after the Fed announced rate cuts.
Might see a 4% print on the 10 year yield later today or early next week.
Yeah, the high so far this morning was 3.980% – quite a change from near 3.7% earlier this week!
Legend, ripple effect. Builders, forest products and building suppliers will feel the affects as well as mortgage lenders if demand stays down.
Charles,
I see significant demand for those products coming in the near term from Helene in the SE.
Greg, I agree it will support common stock prices, just don’t like the yield. So no interest. But there are others.
Air conditioning for one
And, should fortify the jobs numbers for the next several months.
I think it’s now Joe and Jane Fivepack — shrinkflation!