Trade Tensions Rise While Income Securities Remain Firm

In spite of trade tensions ramping up income securities are steady as interest rates are steady with stock prices falling off a bit.  Thus far the tariffs announced are mostly just announced with just a small portion actually in effect, but we really need to see some progress in negotiating with China and the European Union.

We still believe that it is possible in the next month that we will get a sizable stock selloff because of the trade tensions–nervous nellies selling as more tariffs occur.  Massive selling has already occurred in the ag markets, which we watch closely since we live in the midwest–there will be liquidations of farmland occurring at a faster and faster clip if prices don’t turn around by fall.  We already are seeing some liquidations, but they are at prices that are fairly high for this type of a sale–investors remain in the hunt for land at a reasonable price and they are keeping values at levels which are lower, but only by a few percent.

The economy has now ramped up further as we see consumers stepping up to take down huge amounts of debt–this happens when consumers are overly confident of the future for their own financial situation.

Consumer debt which was announced this week jumped by $24 billion in May against a consensus guesstimate of $12 billion.  A larger than normal portion of this was credit card debt.  While we are not going to worry about these types of things now you can be certain items like these are setting us up for a deep recession down the road (who know when?).



7 thoughts on “Trade Tensions Rise While Income Securities Remain Firm”

  1. 6.125% due 7/1/2023 Baby bond (CMNFL) will begin trading today:
    CM Finance Inc Prices Public Offering of $30,000,000 6.125% Notes Due 2023

    NEW YORK, June 27, 2018 (GLOBE NEWSWIRE) — CM Finance Inc (the “Company”) (Nasdaq:CMFN) announced today that it has priced a registered public offering of $30,000,000 aggregate principal amount of its 6.125% notes due 2023 (the “Notes”), which will result in net proceeds to the Company of approximately $28.9 million (or approximately $33.2 million if the underwriters fully exercise the over-allotment option described below) based on a public offering price of 100% of the aggregate principal amount of the Notes, after deducting payment of underwriting discounts and commissions and estimated offering expenses payable by the Company.

    The Notes will mature on July 1, 2023 and may be redeemed in whole or in part at any time, or from time to time, at the Company’s option on or after July 1, 2020. The Notes will bear interest at a rate of 6.125% per year, payable quarterly on January 1, April 1, July 1 and October 1 of each year, beginning on October 1, 2018. The Company has also granted the underwriters an option to purchase an additional $4.5 million aggregate principal amount of Notes to cover over-allotments, if any, on or before July 27, 2018.

    The offering is subject to customary closing conditions and is expected to close on July 2, 2018. The Company has submitted an application for the Notes to be listed and trade on the NASDAQ Global Select Market under the trading symbol “CMFNL”. If approved for listing, the Company expects the Notes to begin trading within 30 days from the original issue date.

    The Company intends to use a portion of the net proceeds from the offering to repay outstanding indebtedness under its existing revolving financing facility with UBS AG, London Branch (the “2017 UBS Revolving Financing”). However, the Company may re-borrow under the 2017 UBS Revolving Financing and use such borrowings to invest in middle market companies in accordance with its investment objective and strategies and for working capital and general corporate purposes. As of June 26, 2018, there were $17.8 million in borrowings outstanding under the 2017 UBS Revolving Financing. Borrowings under the 2017 UBS Revolving Financing, which matures on December 5, 2019, generally bear interest at a rate per annum equal to one-month LIBOR plus 3.55%. The Company intends to use any remaining net proceeds from this offering to fund investments in middle market companies in accordance with our investment objective and for other general corporate purposes.
    Wishing you profitable investing, Nomad

      1. Earnings are erratic to say the least. Revenue declining for 3 years and earnings gyrating wildly up and down. The common has been cut in 1/2 over the past 4 years.

    1. Bea–thats for sure–but it has always been difficult to ponder a purchase with the management team they have.

    2. I confess and bought 200 around close yesterday at 18.20 and 100 more premarket at 19.59 of FPI-B. This was not an investment but a casino gamble, thus the tiny amount dedicated to it. If I had a brain in my head I would sell and NOT pat myself on the back for commingling investment money with casino gambling money.

  2. The critique of United States trade deals goes back at least 30 years. Wall Street is treating tariffs as a negotiating tactic. The Street seems to think that we can get every country in the world to do things they have never agreed to for over 30 years. In other words, the Street believes the trend of the last 30+ years will change. Until proven wrong, I do not invest with some belief that the trends of the past will “magically” change. So, I believe the trade tariffs will not go away anytime soon. With that said, I don’t believe it will impact preferred and ETDS and if it does it’s a good buying opportunity. However, if you believe as I do that tariffs will be longer term, this coupled with oil price increases, a FED that forecasts 3% short term rates in a year ( 2 more increases in 2018, 2 in 2019) makes me want to buy higher quality with a coupon rate of 6% or higher.

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