The S&P500 took quite the tumble last week as it fell 9.1% from the previous Friday—obviously a severe fall and costly to most of us. We’ve seen worse falls before and we will likely see worse again. Hopefully we won’t see a repeat anytime soon.
The 10 year Treasury yield tumbled hard as well–hitting a low of 3.89% on Friday before bouncing to close at 4% for the week. This close was 26 basis points lower than the previous week as fear of recession and possibly a ‘flight to safety’ from equities hammered yields lower.
Last week we had monthly employment numbers which were pretty respectable, but reflect ‘old’ data before we had some employment turmoil in particular in the government sector. For the coming week we have a number of big economic news items. We have the release of the FOMC meeting last month and then on Thursday we have the consumer price index (CPI) and on Friday we have the producer price index (PPI).
The Fed balance sheet fell by $17 billion last week–pretty much on target (on a weekly average basis).
The average $25 preferred and baby bond got hit last week in spite of the big drop in interest rates. The average share was off 56 cents, investment grade issues off 33 cents, banks off 44 cents, mREIT preferreds off by a huge 84 cents and shippers were off 69 cents.
Gary; Take a look at my post again. I was talking about MTB+J. Not H.
Chuck, I don’t know if you saw my post over the weekend and CHS
Looking at common stocks and what do well in a recession. Seems even in the great financial crisis. Sales on pet food increased 5.6% even with troubles people made sure their fur babies were fed. In America pets are considered part of the family. Next time you talk to the CFO you might mention they need to get into pet food just like Land O Lakes co-op is.
Tim, I don’t have a lot of common and I prefer fixed income but some common yields are getting attractive: ET at 8.4% and PAA at 9.4%. DOW now yields more than 10.0%. I am adding ET and DOW in nibbles. Naturally, all 3 are sensitive to energy prices.
Potter, even if they have to cut the dividend to pay down debt they will still be around. Look at WHR, just hard to tell where the price would end up especially if sales slow down in a recession and they do have to cut the divy.
I have been having a conversation with a author over on SA who is 1/2 the age of most of us on here. His argument is he will buy when he feels the risk reward is attractive, But he is basing his opinion on past history and not taking into account the what if. He is young enough he can hold and wait for a recovery if it does cut the dividend. I admire him for that.
But he wasn’t buying stocks in 2000 and 2002 when he was 4 to 6 yrs old.
market often responds well to div cut. CCI, in recent memory.
Jb short term no, long term yes. I remember investors selling when KMI converted from an MLP and had nothing to say except bad things. The same with GE. everyone first saying how great it was then saying it was a shell game and blaming the former CEO. Boeing is another one that comes to mind. Better off to wait for the dust to settle. But I’m keeping an eye on a few.
Potter, I owned DOW but sold last week for a small loss, one of the few moves that turned out well. I am uncertain if DOW can maintain the dividend and decided to step aside for now.
Yes that is the risk at a 10% yield. I looked at LYB at around 9.4% but I saw that their operations are long oil and short natural gas. I don’t like that spread.
I sold the $95 puts on UPS this morning just for that reason…it is now paying 6.9% at that level. Plus I can sell covered calls if I get put the stock…
Fingers sore from a flurry of buying this morning.
Just trying to help others if possible. I just added to my position in MTB+J. I added more shares at $25.20. It seems like a pretty solid bank. Not callable until June 15th, 2029. Coupon is 7.5% and according to what the I R Gal told me a week ago there is no reset rate. Just telling you what she told me. The bank has over $208 Billion in assets and the common trades at $153.00. Seems like a good bet to me. Many other preferreds on sale too as well. I’ve been buying.
Chuck-
Why her mention of no reset rate? – it’s a vanilla preferred. MTB-H is a floater.
Gary, this is like a chess or football game. To me it’s obvious one of the players is trying to lower long term rates so they can refinance outstanding debt and new debt to pay for the tax cuts in the new budget. I wouldn’t bet against them but maybe the other players who hold and buy the debt have other ideas.
So for me the J is like the old proverb a bird in the hand is worth 2 in the bush. I know I will be getting at least 7-1/2% for another 4 yrs. While I don’t know what is going to happen to the floater. Besides, I already have enough floaters and fixed rate resets.