Tuesday Morning Kickoff

Now with the fall season at hand it is likely that we are going to get lots of excitement in the months ahead after a summer that has been pretty darned quiet.  For September we have a FED rate hike to deal with and we have elections just 5-6 weeks after which could very well change the political landscape of the country.  Additionally we have the Chinese trade situation to deal with and that singular item has the ability to disrupt the economy in a significant manner.  Oh well, our crystal ball has never been that great, so we aren’t going to try to predict the future–just deal with it.

The DJIA traded in a range of 25,882 to 26,167 before closing at 25,965–another quiet week.  The 10 year treasury traded in a range of 2.83% to 2.89% before closing the week at 2.85%.  The super strong consumer confidence number on Tuesday juiced the 10 year, but of course in this day and age once again investors forgot the news once it was 48 hours old and thus rates dropped back from the highs by weeks end.

Last week we had the Case Shiller home price index released on Tuesday and it showed a weaker than expected price increase–this dovetails with our personal observation that housing prices are peaking.  As mentioned above the consumer confidence index was way above expectations–this pretty much tells us we probably won’t have to worry about a recession anytime this year.  On Wednesday we had the 2nd revision of 2nd quarter GDP and it came in a tenth higher than the original reading.  We also had pending home sales which came in weaker than expected–again no surprise to us.   On Thursday we had personal income and personal spending both came right in on consensus at .3% and .4% respectively.  Core inflation came in slightly above expectations at .2%.

For the coming week we have the normal number of data being reported, but all eyes will be focused on the employment report which is coming on Friday and with this report the average hourly earnings will be reported.  Of course ADP will report their employment numbers of Thursday–which no one considers “official”.  Even these important numbers will likely be ignored as long as they are in the “zone”.

The Fed balance sheet fell by $10 billion last week and this run off continues to have no affect on interest rates.

In a confirmation of how quiet market have been we had no new income issues announced last week.  We did have the new 6.25% Saratoga Investment baby bond begin train (ticker:SAF) and it moved nicely higher to close the week at $25.34.  We purchased this issue in both personal accounts and model portfolios.

The average $25/share preferred stock gained all of 1 penny last week and there are now 147 issues trading at $25 or below. Just like the interest rate markets these number are holding really steady.

 

10 thoughts on “Tuesday Morning Kickoff”

  1. Tim, I am so glad to have finally found you after the Yield Hunter. I had been following you for several years before that, so I was very excited to have found your web site. I really appreciate your incite and commentary on preferred and baby bonds. My portfolio is mostly made up of these and a few CEF’s. Thank you for starting you own web page!

  2. Thanks for the Tuesday morning kickoff! This fall I am hoping (but not holding my breath) for some new REIT preferred issues. There have not been any in months and I’d like to see a few new ones in the 7-7.5% range. Considering commercial mortgage rates are increasing, a few companies may want to lock in fixed-rate preferreds.

    1. Hi kaptain lou–I have been watching for REIT preferreds, but all I see is offering after offering of common shares–seems like there is an insatiable appetite for common so I am guessing they will sell shares until the demand is exhausted.

      1. Tim, it certainly appears that REITs are issuing more common shares, even though many companies are trading premium prices. However, for us fixed income investors, it’s been a little frustrating as some of my best issues have been called in the past two years. I’m hoping a few REITs make some large purchases in the next couple of months and will use preferreds to help finance the acquisition.

        1. Lou, here is your tip of the day….Buy quality issues that DONT get called, lol…I bought almost 1000 more shares of AILLL… I will take 6.2% QDI, 100 times coverage all day long. Flipping has been very good for me again this year, but I am starting to hunker down now and just collect income….and worry about calls, lol….AILLL, ASRVP, BANFP, OSBCP, etc…So I gotta lot of worrying to do!
          I dont care, I stepped up and bought the only 100 shares available of CNIGP, I will look to keep adding despite having a relative outside position already. I would like to know of ANY convertible preferred that is conversion accretive instantly beside this one. It was issued $20.75 par, three years ago when common was under $16 on a 1-1 conversion. Common last traded at 18.75 and now conversion feature is 1 for 1.2 common shares now…I will hold these and hope within 6-8 years it gets over 25 and then convert with a nice relative payoff with the 1.2 conversion ratio. I will be like Gabelli and CEO who own over half the float, and just sit on them and wait….and wait.

          1. Grid, at least for me in the REIT world, the quality issues normally get called. While I Flip and Trade too, at least a few issues have not been called including my 1,500 shares of ARI-C. However, I would not buy them at the current price as I think the YTC is negative.

            The fixed income investors like us must be pretty foolish, as the new SA article by Brat Thomas recommends buying a REIT with a yield of 4.3% can turn you into a millionaire. Maybe I am just stupid and really need to follow the guy !!!!!

          2. Brad should Rida as he is making him look like Peter Lynch…..Rida Moron is really doing well with his reco’s….CBL divi safe!…Uhm wrong it got cut…AMID divi safe! Uhm no he was wrong it got cut also….LXP divi is safe! Uhm strike three that one is looking to get shaved next year with todays announcement. I might have you one…I gots to investigate though. Got a tip and need to see if its of decent quality.

  3. Hi Tim, Thanks Tim for your excellent coverage on baby bonds and other fixed interest investments. I have been a follower of yours for a long time.I am still sad over the calling of the GWSVP glacier trust units. I had these since 2012. I read your daily updates about twice a day. Somehow I missed your update to sell the units as you thought they would be called. I had 2500 units and got caught in the call. Oh well it sure was a nice run on those units. Today I sold my OXLCO preferred I had bought at 24.60 and sold today and last week for around 25.45 I was afraid of a call.
    Again thanks for all you do and all the comments from the other investors and I will try to speak up a little more often.

    1. Hi Bob–yes Glacier Water was an ‘old friend’–a great run while it lasted. Glad to have you here.

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