The S&P500 is off a total of 3.2% so far this week–and thus far this morning futures are off about 2/3 %. I think stocks are coming around to the conclusion that the economy will weaken substantially from here–interest rates of course have been signaling this for some time now. The common share selloff has been nice and orderly–whether markets are up or down, just like interest rate movements, as long as price movements remain orderly I am calm.
We have only a few economic numbers today. We have ‘revisions’ to unit labor costs and productivity at 7:30 am (central) and late in the day we have consumer credit growth announced. These typically wouldn’t move markets, but they will be scrutinized closely this time around–unit labor costs and productivity for inflation contributions and consumer credit for growth beyond expectations. Consumers are leaning heavily on credit which may come back to haunt them later depending on general economic conditions.
So I will likely continuing on the side lines in terms of new buys–just no cash available yet. I am fine just watching while my money works for me–every month I am rewarded with dividends and interest and December is a big month.
Still baffled by CEF preferreds. They keep on underperfoming Long bonds. Due to the high ratings they should move more or less in sync but there’s no way . Probably they need time to catch up? Worst quality like AGNCP did a lot better.
Good post, Tim. Your comment “Consumers are leaning heavily on credit” may be an understatement. I just Googled “credit card debt” and found this nugget: “Overall, credit card balances jumped 15% in the third quarter of 2022, notching the largest year-over-year increase in more than 20 years.” I just hope the FED can miraculously engineer a soft landing, we do not want a repeat of 2008-2009. Anyone remember Roger Staubach’s famous Hail Mary pass? We may need the economic equivalent of that.
If credit cards keep offering me 0% interest (3.99% advance fee) and plus 6% CDs ever pop up, Im going to go 100k in CC debt and pick up $2k easy money in a years time!….. Roger Staubach was the best! Had his best statistical year his last year when he retired. Also, may be the only QB to have his last “completed” pass go to an offensive lineman who illegally caught it.
My wife just got her new car (ordered in February (?). I had planned to just pay cash, but when I was doing the paperwork, they offered me 4 year, 0% financing. So, I made a modest down payment, put the rest in T-bills, and will make payments. Love using other peoples money.
Roger Staubach and his wife were on a NFL Hall of Famer’s tour a few years ago overseas, possibly Israel. Organized by the NFL to promote the game around the world. He was on an elevator with Joe Montana and other HOF’ers going up. Elevator stopped and let Joe off. After the door closed, a young local guy said to everybody else left on the elevator: “Do you know who that was? That was Joe Montana, a HOF, Super Bowl winning quarterback, obviously not recognizing Roger and/or the other HOF’ers there. Roger just smiled and said something like: “yeah, we kinda know who that was” and left it at that.
(Story told firsthand by Roger.)
Tex, this was a story I read. A security guard noticed a man who parked his car in an illegal spot on the company complex and told the man to please move his car. The man apologized sincerely and quickly moved his parked car. Another worker watching approached the security guard and asked him if he knew who that man was he told to move. The guard said he didnt, and the co worker said, “That is Roger Staubach, the man who owns this company”.
Grid, I can believe that story. Roger is a very modest, unassuming guy. Recall he graduated from the Naval Academy and did his service commitment before playing for the Cowboys. He built his commercial real estate company from scratch, then ran it until selling it to JLL in 2008. Times have changed a little since he started it in 1970. As the starting QB for the Dallas Cowboys, he made $25k/year and like most NFL’ers had to do outside work to make ends meet. Kinda similar to Tom Brady these days not making enough on the field, so he has to do crypto commercials for FTX. . .
But Tex.. Last time I read, the wealthiest NFL player ever is not Tom, but Roger Staubach. He is worth somewhere near a billion, and just think how much he has given away too. But as you said, he didnt make much of it as a football player. Has anyone ever said a bad word about him ever? Well maybe Clint Longley as Roger clocked him in the lockerroom. Surprised his teammates and they all said Clint had it coming too, ha.
Regarding consumer credit and debt. I hope companies like capital one have enough in loss reserves to cover their loan portfolio. 6% on the preferred seems low to me.
Speaking with some younger people, bankruptcy does not have near the stigma that it once had. If you add in the “student loan forgiveness” and “give me my reparations” attitudes, I can see much of this debt not being paid back in full.
Just my opinion.
Hudson Pacific Properties’ bonds have rating of BBB3 and BBB-. And its preferred HPP-C has the same rating. Normally the preferred has lower rating. I am curious why HPP’s is different?
TIA
Bull,
Schwab show the preferred at BB and BA1, about where you would expect. Not sure why Quantum shows it higher, maybe outdated information.
Its not. Moodys just downgraded a notch two months ago. In this sector and economy its possible it is a slow downgrade descent. I remember PCG getting slow credit downgrades even after anyone with common sense knew they were heading for reorganization. A blind spot in ratings typically is their slow willingness to downgrade in declining cycles.
Downgrades:
..Issuer: Hudson Pacific Properties, Inc.
…. Issuer Rating, Downgraded to Baa3 from Baa2
….Preferred Stock, Downgraded to Ba1 from Baa3
….Preferred Stock Shelf, Downgraded to (P)Ba1 from (P)Baa3
Yes, Gridbird and Fryman are spot on:
Moodys: Ba1
S&P: BB
Gridbird provided the Moody’s data.
Here’s the S&P data, from Sep 26th:
We affirmed all our ratings on HPP, including the ‘BBB-‘ issuer credit rating, the ‘BBB-‘ rating on the senior unsecured notes and the ‘BB’ rating on the company’s preferred stock.
https://disclosure.spglobal.com/ratings/en/regulatory/article/-/view/type/HTML/id/2895792
I have a huge slug of HPP and HPP-Pfds and happy. They issued 5yr debt cheaper than ‘Saint’ Boston Properties did. My basis is near the current low prices. Quality A ofc properties are still trading at 4.5-5% cap rates while A rated building ofc stocks are selling for the equivalent of 8-12% on market-sale-value NAVs. HPP had a lot of recent insider buys in the 11-12 range. While ‘public’ trades of A office are coming in at 7-8%, private buyers like pension funds et al are paying around 5%cap rates. Ofc participation rates are still ticking up weekly. Most midweek buildings are reporting 70% or higher; even 3day/wk folks need a desk. A Office buildings are often destinations and semi enclosed communities w great amenities, open air places to unwind, coffee/juice/bar-bars.. Patience required and will be rewarded imo. Long a lot of ofc REITs and a pfds. Bea
Thanks Grid–will update everything.
Thanks bull1998–will update our info.