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Thank You Jay Powell!!

I have to thank Fed Chair Jay Powell for the nice boost in my portfolios yesterday–about .4% up (50% invested in preferreds and baby bonds). On the other hand (I’m talking my book here) I really don’t want lower interest rates so quickly–the largest chunk of our CDs don’t mature until March, 2024 so if the 10 year treasury moves lower too fast – by March a bunch of the income issues move higher will be past us. What a whiner I am – I am only going to realize 5.xx% from my CDs (poor me)- it was only less than 2 years ago that an income investor got ZIP on their cash – just have to accept one can’t time these things perfectly. Portfolios are at record highs–can’t really legitimately complain.

Right now the 10 year treasury is at an amazing 3.94% which is off maybe 25 basis points from the highs yesterday. Powell was obviously much more dovish than most folks thought he would be which set off the party in stocks and bonds. It looks like we will have a minor ‘after party’ this morning. For those that are looking to ‘lock in’ decent CD rates you can get up to 5.35% this morning on eTrade and 5.35% on Fido–these short term (3 months to a year) rates will go away when Fed Funds get cut.

I mentioned I bought the PennyMac 8.50% senior notes (PMTU) and the Gladstone Land 5% term preferred (LANDM) with a 8%+ YTM. Last week I bought the General American Investors 5.95% (GAM-B) investment grade perpetual with a current yield around 6%. This is the blend I am after – some high yield and some safe, sock drawer, like issues. I also have a couple good til cancelled buy orders in for some of the Connecticut Light and Power $50/share issues in that 6.25% to 6.5% area–very illiquid so these may/may not execute.

Today we have jobless claims numbers and retail sales. Important to me, but after yesterdays dovish Fed move they seem less consequential–Jay Powell seems on a dovish flight path.

21 thoughts on “Thank You Jay Powell!!”

  1. I listed the following last summer as possibilities for future stock market/ interest rate/preferred price changes:
    Black swan/Geopolitical world event – 1 missile away
    Huge amounts of paper coming in 2024 – will world demand higher returns?
    Year end tax loss harvests
    Fund rebalancing
    End of rate hikes/inflation under control
    Election year in 2024 politics
    After Powell’s repeated statements of higher for longer, I am more than a little shocked at his sudden dovish tone and announcement of 3 rate cuts next year. All of the reports I’ve seen lately show basically no changes in the inflation for the last several months and these last reports seem very dependent on the decrease in oil prices seen drastically at the pump. What happens in a month or two when oil rises. I can only see one of my possiblities as the reason for the sudden dovishness. I’d love to see discussion on other possiblities for price changes that I have not mentioned. Also, where’s Tex2? Thanks for any thoughts.

  2. I generally invest for the long run and do not trade, but it sure makes one feel brilliant when cash is deployed against unreasonably low asset prices, as we saw for 6-8 months this year. In the last 8 weeks, I’ve hit my year goals. Hope it holds – it was bleak in some of the previous months.

    Thank you to Tim, and the many contributors to this site. I only hope that I’ve also provided some value.

    In my world bubble, I only see commercial real estate as a hole, and I don’t invest in that. And even here, it is select <A grade assets and office space. With boomers going, employment should remain strong, and thus, the economy should at least trudge along. With rates level or dropping, 2024 could be a good year (as often happens in an election year). As long as the economy stays positive, and we get net + immigration/population, then the debt shell game should continue. All the above IMHO.

    Happy Holidays to all, and thanks again for the conversations.

  3. I currently have 44 preferred stock, debt, and REIT issues; today 42 of them are higher, including some securities that have been real stinkers this year.

    It’s like watching the dead come back to life.

    I was thinking about taking some losses for tax purposes, but every time I look at them, they are going higher in price.

    Something tells me this will not end well, but my experience tells me you can’t time an exit from this kind of mania. So, neither buying or selling this year-end exuberance.

  4. Thank you .. Tim…for all your courage ,all those bargain Preferreds , are now turning posative ..Georges

    1. Georges–for me it is courage because I am so conservative it takes plenty of fortitude to be a buyer – normal folks it is not a big deal, but 52 years of this has taught me to be cautious—as long as I have a roof over my head and groceries in the pantry. Thanks for being around for years!

  5. Alliant Credit Union has an 18 mo 5.35% Jumbo (75K+) CD, still keeping most of our taxable savings in 6 mo T-bills at TD due to state tax exemption.

    1. Sallie Mae bank has a 15 mo cd at 5.55, and 12-13 mo at 5.5. Beats anything on offer at my brokerages today.

  6. 3mo SOFR of course pretty stubborn which most floating debt is charged and things like lines of credit 5.3777%. With the 10yr under 4% to me that is the next domino that has to fall, more dependent on FED Funds. Oh well bargains will appear, making my list, checking/deleting the names/adding maybe. Retail sales up in Nov .3% oops! people workin spendin, the American Way! Bea

    1. Bea–economic numbers today didn’t show much softness (as in none). You are right bargains will appear and to the extent I have some cash I am a buyer.

      1. Tim , With rates headed down at least short term it’s interesting to look at my holding in TRSTX. The share value is up but the return should be going down, so today I moved about a 1/4 of it into the trading account.
        Still think , ( or hoping ) for a market hangover after the holidays.
        Shout out to Bea, thanks for TFSL Don’t normally do a bank common.

    2. Bea:

      The “American Way” from 2000 – 2020 was essentially lower rates and eventually ZIRP.

      So Powell seems to be all so willing to join the party (again). Forget about taking away the punch bowl, he will be spiking it with more Don Julio Blanco tequila.

      Assuming the Fed starts cutting rates in March with the equity indices all at all-time highs (DOW already at all-time high), he will be the first to do that since Greenspan in 1999 due to Y2K. Truly brothers in arms!

      But all of us that started more aggressively buying perpetuals this Fall really need to send him a Christmas card (with 2 turtle “doves” on the cover)!

      1. well I bot a Grid name small buy 200sh only PGC.PRA 20.25 7.47% yield, not too much in bargain ville out there this will be a hold for me. $100/yr over cash yield in extra bucks coming in for new car or Subaru rust repair (!!!). BeaBentley

          1. MFZ, a benefit to it is there is more liquidity and it always will be a lower yield typically so its all relative in terms of pricing. But the others will hop all around more being more illiquid. For me I own PCG-I at a $13.85 cost basis recently along with PCG-B at $17.34 bought a few weeks go. I own 1000 of the latter and 500 of the former. A bit more aggressive than Bea. But on the other hand I was probably more aggressive buying CDs too, lol. So I am not all that daring overall.

            1. Grid, I own both PCG-A and PCG-D. You are correct the liquidity of A is higher than D. That probably explains the difference in yield.

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