We see that the DJIA is up by 350 points as we write this note–we are back into a “all news is good news” phase. The equity markets are flying based upon a potential China trade deal–forget that part of the government is shut down and that Consumer Sentiment fell by a fairly large amount.
Consumer Sentiment, which we believe is one of the most important economic indicators, fell to a reading of 90.7 from a previous reading of 98.3 and expectations for a reading of 97.5. We have to always remember that the consumer drives 2/3rds of the economy and the longer the government shutdown remains in place the lower the reading on sentiment will go. At some point in time (I have no idea what that time frame is) you can pummel consumers back into their ‘economic hole’. Our best guess on this whole situation is that the TSA employees will finally tire of their situation and will decide to shut down the nations airways–we’ll then have action–quick.
Interest rates are up a couple tics today–oh well, this is not a factor to be concerned with now–it is simply too low to matter. We would be more concerned if rates began falling a bunch now as it would reflect substantial economic weakness.
There are virtually no new lows in baby bonds and preferred stocks on the ‘near new lows’ list. We show a Seaspan and Scorpio Bulker baby bonds trading around par (and showing up as new lows) as they are near redemption so are locked into the $25 area. The 3.50% Kayne Anderson MLP term preferred is showing up on the near new low sheet as it will trade right around $25 as it moves closer to a 2020 mandatory redemption.
We seem the new 8% issue from Chimera Investment is trading at $24.70 while the new JPMorgan Chase 6% issue is trading right at $24.99. We see the Chimera issue having maybe 30 cents of upside in it for the next month while the JPM issue will trade a little higher (10 or 20 cents)–most of the currently outstanding JPM issues are trading around 5.95%.