It’s a typical slow time of year economically speaking with the holidays and days surrounding the holidays—stock and bond prices are relatively quiet with stocks creeping slowly higher and bond yields slowly drifting lower. I love these drifting markets, as I collect dividends and interest, but just the same I worry.
I looked back 10 years at an article I wrote and it is amazing that I had many of the same worries now that I had then. It was just over 10 years ago that I launched a new ‘version’ of the ‘Yield Hunter’ website and on my wall in my office I have a permanent metal version of that day – that home page. I wrote about the Federal government debt ceiling–as congress was fighting over the debt ceiling–sound familiar? I wrote–‘it is just a matter of time before we become another Greece’. I also wrote that ‘foreign and domestic bond buyers are getting damned tired of actions of the U.S. Government and the ever growing welfare state’. Back then the website had no commenting and obviously I took the liberty to be more political–which we don’t allow here, but the point is that the exact items I was writing about back then I am writing and worrying about today–guess it is my job–worrying.
Regardless as we observe markets today it would seem to me that we can see maybe 3 months out – economically speaking. Obviously there are ‘black swans’ lurking out there, but of the items we can see I don’t see huge changes in the next 3 months. Energy prices remain reasonable, employment remains strong, consumer prices (CPI) are getting under control and retail sales remain strong. Seems to me these could spell a market (stocks and bonds) fairly well in control–a drift lower in interest rates and a drift higher in stocks. I am hoping the Fed will NOT lower rates until after March–with what we know now that would seem premature. This would allow income investors to buy some CDs and bonds if they chose–with reasonable returns and to collect dividends at a fairly high current yield–Goldilocks.
I mentioned that yesterday I sold a chunk of my Bridgewater Bancorp (BWB) 5.875% non cumulative preferred–could not resist taking a profit of over 20% in just over 1 month. I continue to hold this issue as I sold just 1/3 of my position. At the same time I bought more of the XAI Floating Rate Term Trust (XFLT-A) 6.50% term preferred which was presenting a yield to maturity (mandatory redemption in March 2026) of over 8.25%. I am more than full up with this issue–can’t buy more. I updated my ‘laundry list of holdings’.
There is no scheduled economic news this morning. The 10 year treasury yield is down a couple basis points at 3.86% and the S&P500 futures are up the tiniest of amounts. I will be finishing painting my office today–these markets are like watching paint dry–and I will literally be watching paint dry in my office. There is nothing more satisfying than a fresh coat of paint on a wall–and nothing cheaper that one can do.