Stock Prices Rally on Employment News

Some days you think you can understand the movement in the stock market while other days, like today, you have to scratch your head a bit and simply go with the flow.

After 2-3 strong days where our somewhat conservative portfolios rose by almost 2% one would think that some ‘backing and filling’ would be normal –it doesn’t happen.  One can’t argue with strong gains–it gives one comfort to start the year off with a bang and a chance to do a little selling into the strength to rebalance the portfolio–the problem being that the items you want to rebalance into just keep going higher–I’m not chasing them for the most part.

The employment report today with 312,000 jobs being created was almost beyond belief–and maybe they are incorrect and will be adjusted next month.  BUT the thought was a modest report–in the 175,000 area would play into the FED pause theory–but 312,000 doesn’t play into that story very well.  Also the .4% wage increase would imply wage inflation–we had written about our belief that was wage inflation was coming, but finally tossed in the towel last month on the wage inflation story line.

So with todays rally in the equity markets it looks like for now ‘good news’ is actually ‘good news’–never mind that next week traders/investors might change their mind and decide ‘good news’ is ‘bad news’ and that they should sell everything off–I guess we will find out.

For now, as we mentioned earlier this week, we have done some rebalancing in the portfolios to alleviate some overweight positions.  In particular we sold off some of our Gladstone Investment 6.375% term preferred (GAINL) where we had way too many shares.  We did manage to snag a couple issues before the buying drove prices too high.  We have purchased a modest position in the Brookfield Property REIT 6.375% perpetual (BPRAP) which has a current yield of over 7% so that boosts income just a bit.  Additionally, we have added the VEREIT 6.70% month pay preferred (VER-F) at a nice price with a current yield at purchase of over 7%.  Right now we are trying to sell just a bit of the GasLog Partners GLOP-C issue where we are overweight–we got a little ambitious on this one when it IPO’ed and need to get it right.

Everyone should enjoy the ride because I’m sure there is a fair chance the ride will end soon.


40 thoughts on “Stock Prices Rally on Employment News”

  1. Was hoping the buying spree I went on was going to pay off. Too many websites, communities, blogs… everyone was panicking, and blood in the streets. Great time to buy. Many weeks ago I sold 10,000+ shares of KYN-F and SSWN so I could use for this buying spree. I think in the next few weeks (the blogs are say everyone is buying), I will drift back and slowly get into short term bonds again.

    Wow, what a tremendous run in unrealized gains. I made my salary in 2 weeks. I still can’t believe what some preferreds and baby bonds sold for, especially the rated ones. I believe many investors did market orders to get out. I can’t thank those investors enough as I sell the stocks back to them at $2+ gains.

    1. I have only sold one – AQNA. Just a tad bit under investment grade, $1.20 gain, and went back to where a decent fair value is. Paid for the ribeye dinner tonight. Looking forward to re-selling them back to the owners that are getting back in fear of missing the rally.

  2. Couple of weeks ago Fed: we are raising rates. Couple weeks ago yields go…. down. Today Fed: maybe we won’t raise rates. Today yields go….. up. Couple of weeks ago equity: panic sell. Today equity: panic buy. Reality will overcome rhetoric. It’s all very humorous right now but this is not investing.

    1. P, It’s amazing really – everything’s backwards. In an odd sort of way I was happier in December when we were all shooting fish in a barrel. Sitting on my hands through this round.

      1. Alpha
        I was very busy through the sell off, pawned everything so to speak, with intent to reconfigure more conservatively. It meant picking up some issues I didn’t really want but thought were way too cheap and those would eventually go to cash to replenish my cash allocation. No garbage, just not exact fit. I was shocked by how short the turnaround time was on those, but I’m thrilled. Finished reconfigure today and ended with a bit of extra cash. The mouse got the cheese this time. I bought 9mo BBBs at 3.5% average today to keep my hands off the extra cash. I had conviction both when buying and when selling. Now I got nothing, so I’m with you now.

        1. Good for you P. It will be interesting to see what awaits your BBB cash in 9 months. Like you, I’ve been climbing the credit ladder and focused on IG term-preferreds, duration issues with mid-level IG close to 7%, and to a lesser extent a few bond-like equities when they’re in panic sell mode (VTR/WELL). I’ve been able to flip those a couple of times now though am happy to hold LT. My problem is we’ve been focused on hard assets (buildings) for the last 20 years. I only arrived in the financial markets early 2018 thinking “DGI’ until seeing the valuations drifting past the Int’l Space Station. Found a home in the preferred/debt arena. Worked hard in 2018 but am still 60% cash so yes have been thinking about equivalents to your 9 mo BBB at 3.5% as a bridge. You know – the increasing debt spreads may be sending early signals about credit availability in a low to zero margin environment. Less bank credit, more debt issues. That would put us in the driver’s seat – maybe around the time your 9 mom BBBs mature. lol

          1. Alpha
            I recommend reading yesterday reply Tex to Tech guy question if you haven’t already. It brought back a lot of memories for me.

            1. Yes thank you P. I did read that twice (OK I confess, three times) as well as Grid’s add-on comment. Being able to add 1 and 1 is no substitute for the intellect gained from experience.

  3. Tim, between the 2 issues you recently added – BPRAP and VER-F – which is a “better” buy if you were forced to choose?

    I’m putting some spare cash, and thinking of either one of those. Kind of leaning towards VER-F, but would appreciate your point of view.

    1. Inspbudget–of course they are both REITS and I happen to think pretty decent quality and both really large companies. With VER this is uncertainty until they can get the lawsuits all settled.

      All be near equal I like VER because I love monthly payers–just me.

      1. Thanks for the reply, Tim. I just had an order filled, BPRAP @ $23.05. Only a starter position of 100 shares, we’ll see how it plays out.

        1. Inspbudget-this darned thing kind of ran on us–to bad you and I couldn’t have picked the shares up on Monday. I’m not as nimble as Grid on these things.

          1. Tim, I ran out of nimbleness today. I was golfing and looking…But nothing going on for me. I was like Alpha, sitting on the outside today. No bids or sells hit today for me.

              1. Alpha, I should have quit after 3 holes as I was 1 under. Train fell off the track and derailed and shot 84… That is almost as bad as Rida Moron on SA, recommending leveraged issues packaged into a 2X leveraged note and calling that an investment suitable for people to buy and hold for income, lol…

      2. I’ve owned VER-F for years. When ARCP blew up, the common divvy was suspended for months, but the pfd kept shedding monthly cash like a dog does hair. Continuing to hold this good mo’payer!

  4. I tried picking up some of those GAINL shares that Tim has too many of. “No can do” said the FIDO website. They will allow you to enter an online sell order if you already have some in your acct; but buy new shares? No, sir. Gee… I thought that in order to have efficient markets you needed a buyer for every seller. But then what do I know. May be time to open an acct with IB.

    1. This may be the same issue I ran into the other day when trying to add to my CHS position (opened in 2015 with no problem). Is GAINL a fixed-to-floating issue? I called Fidelity and a helpful trader told me that as of sometime in 2017, they require a trader to make sure you’re aware of the fixed-to-floating provision. He executed my trade commission free, and he gave me his direct number for any future concerns or needs.

      1. Larry–most of the time Fido restricts the Gladstone term preferreds–don’t know why-it is not fixed to floating.

        1. Fidelity is a “Mother Hen” brokerage. They think they know what’s best for you. Maybe they’ve been sued by buyers who didn’t know what they were doing and lost money. I say, just put a disclaimer in front of every trade that places the buyer (or seller) as the responsible party and that Fidelity is just a disinterested intermediary and have them check a box saying they agree before the trade will execute.

    2. Artemisa–yes you are correct. I sold a bunch out of there, but to buy you have to call–what a pain.

  5. BPRAP is callable since 2/13/18, 6.375% coupon, 6.88% current yield.

    How does it compare to another diversified equity REIT that I hold,
    CLNY-PE, callable 5/15/19, 8.75 coupon, CY=9.08%. The bid/ask is down near $24 which I am surprised to see on something that will likely be called in only 4 months?

  6. Up 0.47% for the year as of 12:05pm(total market index). Some profit taking likely by end of day since we have a weekend coming. Think, we will be at 0% for stock market gains at the end of the day.

  7. Everything is looking good today except that SPKEP is down 7.5% at the moment and paying 11+% div. While SPKE is up. Hard to figure.

    1. danzeb–seems there was a low ball trade way down-500 shares but it jumped right back up.

      1. Prob GB!
        Gonna have to do some trimming here. I stationed out a lump sum in Jan and Spring to do some shopping, I stage it out in CDs to keep me walled off from irrationality.
        Tim’s site has been very helpful to me as I have liquidated some archive positions in another asset class and received a step-up recently. Allocating new cash here can be a ‘challenge'(read:bitch)’
        Here’s a share of some digging to throw back in idf it’s worth it; just leads no complete work here: Good “sock drawer” material:
        CBB disliked, was nice for me to flip into after Dec tax loss selling. Now being watched (not stopped).
        PartnerRe Rated A- Surprise
        ACGLO and sister rated A Surprise
        AEB has lesser sisters to add and watch.
        EBBNF has a nice seniority upgrade that No one mentions: EBNA. I need to learn to share not withhold.
        In the spirit pf the Holidays, my propensity is to hold my ‘diggings’ close and not give away a claim and a personal rephrase, “…God blesses us, Everyone!”

        Any experienced inputs on these would be appreciated. JA

        1. Yes, you need to speak up, Joel. Yes, EBNA is a good one to mention. It would have been a good recent flip also. Tax reasons is largely why I didnt consider it. The vast majority of my money is taxable and my retirement income puts me in 24% bracket (used to be 28% before tax cuts so I need to remember that) so I really only hunt in taxable accounts. I dont have a lot of HSA and Tax free money and I really guard it as I dont like cap losses there.
          In fact EBNA probably may be more suitable for more people than the preferreds. I want the QDI and I also want a shot at a better higher reset off way below par purchases that also happen sooner than EBNA would provide for me. But the slightly better cap stack of subordinated debt, liquidity, and yield may make it better for people…Good mention!

          1. Grid, Interested in researching EBNA, though have not been able to locate it on Quantum, FIDO or TD. Is it only listed on TSX?

              1. P, you are exactly right. Joel wrote ticker wrong, I just followed what he wrote because I knew exactly what he meant and didnt pay attention. He meant ENBA, the subordinated note that Enbridge offers on US exchange…Yes, I dont think there is an Enbridge EBNA…But there are so damn many OTC tickers of their Canadian reset preferreds, I cant say that with 100% certainty, lol…
                The issue doesnt have a great appeal for me, but that shouldnt mean anything to someone else, as we should be buying for what our own needs are.

        2. Enbridge is a veritable supermarket of debt and preferred issues. Senior, junior, fixed, float, US$, C$, corporate, subsidiary. You name it, they got it. Just know what you’re buying; look beyond the yield.

          Reinsurers are an interesting lot. They generally trade at a yield that seems high for their ratings. The inherent risks of the reinsurance market. A BBB reinsurer is not the same as a BBB regulated utility. If you like rough rides try holding reinsurers when hurricanes are roaming in the Atlantic.

  8. Tim
    We have a trade war, exploding deficit, government shutdown, rising rates, and now reports showing a slow down in manufacturing, housing, and profits. But one uncorrected employment report is all that matters today. It’s nuts.

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