rumi
Ensign
Posts: 40
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Post by rumi on Dec 3, 2022 16:08:13 GMT
No one knows. But what's your best guess? Will CEFs make new lows from here?
I guess it largely depends on 1) interest rates and 2) credit risk in the coming months.
I'm still only roughly 25% invested (25% of my money is in CEFs, the other 75% is pure cash). So I'm hoping for lower lows, but might buy more in case it pumps from here onwards (markets are very forward looking, moreso today than they were in the past).
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Post by uncleharley on Dec 3, 2022 16:35:26 GMT
Some may have bottomed, but credit risk should continue to get worse as a recession develops. Interest rates are still going up. I am fully invested, but very nervous. Fwiw.
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Post by steelpony10 on Dec 3, 2022 17:45:17 GMT
rumi , uncleharley , Nothings been solved yet and speculative headlines seem to still be moving markets. I just keep shopping and spending on all the items on sale. Our muni VWAHX and PONAX/PIMIX, our canaries, have been steadily raising their monthly distributions. Perhaps bond CEF’s could do the same. Institutional knowledge is there to handle rate increases. So if you see distribution increases in any CEF’s you may be right, a bottom has been reached. Keep an eye on PIMCO and other top sponsors. In the short term values should flop around and lag.
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Post by ECE Prof on Dec 3, 2022 22:24:08 GMT
Speaking of CEFs, UTG went to a low below $20/sh one day. I did not buy it then. I bought some around $22/sh and sold it around $25/sh. Guess what, I am paying now close to $30/sh, and the yield has come down from 9.4% to 7.7% recently. The NAV and the price have recovered nicely now, and the price is well above $30/sh, which is around 200-MA. I have a big CG well above the current yield. What a run utilities have had in recent days?
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Post by johnsmith on Dec 4, 2022 3:12:52 GMT
No one knows. But what's your best guess? Will CEFs make new lows from here? I guess it largely depends on 1) interest rates and 2) credit risk in the coming months. I'm still only roughly 25% invested (25% of my money is in CEFs, the other 75% is pure cash). So I'm hoping for lower lows, but might buy more in case it pumps from here onwards (markets are very forward looking, moreso today than they were in the past). Hard to say. If the market starts going down again, it’s very likely that CEFs will fall in sympathy. If they don’t - we may have seen the lows. Personally- I have been investing. I also see newer lows ahead. I don’t believe this was a capitulation bottom. Too many people ready to jump back in. |
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Post by Deleted on Dec 4, 2022 5:51:37 GMT
Illogical question. Remember, CEFs are a type of wrapper of assets, just as OEFs and ETFs are other types of wrappers. The OP question should be about whether some specified asset (or sub-asset) is at its bottom, such as Fixed Income or Utilities or Real Estate or Precious Metals or Large-Cap Growth or .....
And also remember that all this is further complicated in that a CEF market-price is not set directly by the value of its assets, but by (the possible irrationality of) investors.
--- Frank
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Post by uncleharley on Dec 4, 2022 12:11:09 GMT
Illogical question. Remember, CEFs are a type of wrapper of assets, just as OEFs and ETFs are other types of wrappers. The OP question should be about whether some specified asset (or sub-asset) is at its bottom, such as Fixed Income or Utilities or Real Estate or Precious Metals or Large-Cap Growth or ..... And also remember that all this is further complicated in that a CEF market-price is not set directly by the value of its assets, but by (the possible irrationality of) investors. --- Frank What we need is a CEF index that we can track and analyze. |
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Post by steelpony10 on Dec 4, 2022 15:58:30 GMT
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Post by ECE Prof on Dec 4, 2022 17:04:24 GMT
Thanks for the link. I have a link to CEF Analyzer but not this kind of analysis. I had some heuristic ideas that were reinforced by the analysis given in the link. This kind analysis from an investor is the best info, not from the traders (like CC) and "back of the envelope" guys (Clickbaiters) often cited by some posters.
The first point is "Destructive ROC - RoP." A very good point. The prime example is CLM. It has a large destructive ROC and could not sustain the large distributions. It was just a gimmick to attract investments and collect fees. That is why its NAV keeps going down and down, even in a bull market. So, I could use it only as a trade for CG and not for investment like PIMCO CEFS, like PDO or PDI.
The second important point:
"For fixed-income CEFs, we like to look at two data points: 1. The Earnings Coverage Ratio and 2. Relative Undistributed Net Investment Income (UNII) -- when negative, it is often called "over-distributed net investment income."
Exactly. I do not care too much about the rest. Can it keep paying me? If yes, I am in. The NAV and prices keep fluctuating, but it is ok to buy as long as they are within a range of 90-day average or 12 month range at the most. You cannot ask for more data. On the UNII data, CEF DATA provides good info, on going up or down.
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Post by retiredat48 on Dec 4, 2022 18:01:19 GMT
Illogical question. Remember, CEFs are a type of wrapper of assets, just as OEFs and ETFs are other types of wrappers. The OP question should be about whether some specified asset (or sub-asset) is at its bottom, such as Fixed Income or Utilities or Real Estate or Precious Metals or Large-Cap Growth or ..... And also remember that all this is further complicated in that a CEF market-price is not set directly by the value of its assets, but by (the possible irrationality of) investors. --- Frank ,@fpajerski ,...perhaps Frank is being a little harsh using the word "illogical" but he makes a good point here. CEFs are just the vehicle for investing. CEFs have several advantages such as money managers do not fret about losing assets due investor sales. CEFs are a way to get leverage...etc. It is the underlying holdings that are key. And opportunities develop if CEFs go to discounts. But I will add: I view fixed income (bond type) CEFs as like all bonds, the underlying assest are contractual agreements, not stocks which can grow, or not, or go to zero. Like, a bond is simply an agreement to borrow a given dollar amount, at an interest rate, for a certain time. Barring default you get your money back, with interest paid. This means if CEFs holding such bonds go down in price, one can buy if it provides a good return to your portfolio for investment and allocation purposes. No need to get exact bottom, or to be in a price uptrend like desired for stocks. As discussed above, you will see in qtrly reports if income (UNNI) is earning the necessary amounts to keep paying dividends. Act on this info if needed. One way to consider owning a PDI, for instance, is you get a current 13% yield, but expect a 1% to 2% decline in NAV price each year due things like defaults etc, giving you a net 11% a year return net. Reinvest the dividends and your holding will be on a generally constant upward total value projection. R48 |
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Post by xray on Dec 4, 2022 20:25:35 GMT
rumi, uncleharley, steelpony10, ECE Prof, johnsmith,@fpajerski, retiredat48, Bottom's are seldom predictable IMHO. With that said.... My current analysis data (just completed) indicates we have previously hit the " BOTTOM" (84% Positive concurrence). This doesn't mean that everything is fine as many very good investments (LGI/DPG/GLP/RVT/THW as good examples) are continuing to rise while some other non-performing CEF's (Securities) are stagnate or not increasing in NAV/Book values/Market values.... Keep in mind that a lot of us are " NOT" investing in the securities themselves but in the " Managers" of these securities (who we follow closely). Their performance can change dramatically if they go to " SUBSTANTIAL CASH" or are " partially/fully invested" (at any point in the time cycle). Most reports to the shareholders are reported " Quarterly" and thus we don't know too much on what is happening unless we follow the insider activity (Examples: CAPL 11/4 18.46 for 7,000sh, GLP 11/25 30.20 to 32.13 for 10,500sh , FSK 11/9 18.76-18.91 for 7,000sh as a "HINT" to buy/sell during any Qtrly cycle or to "establish" our buy/sell minimum/maximum trading values). A example of this was RVT when a insider on 10/5 bought 1600sh @ 13.42 and I alerted the board that this was a very good MktPrc given what we had already learned about RVT through many years now. Some investors have recently bought RVT during November with both the NAV/MktPrc gaining >$0.50. Data shows that RVT is a continual hold for income investors if/when bought <$15.00 currently. Rf is >+1.000 currently with the MKtPrc currently at 15.83 and the NAV @ 15.13.... Analysis data (single opinion of course) shows that we will continue to have volatility in the 1st Qtr 2023 but many securities have already reached what some of us are calling the bottom and we will be establishing a "sine wave pattern" for trading purposes on the new positive numb3rs.... Live Long and Prosper....
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Post by xray on Dec 5, 2022 23:03:17 GMT
rumi, uncleharley, steelpony10, ECE Prof, johnsmith,@fpajerski, retiredat48, We need to watch (closely) the 12/13 CPI coming out at @ 8:30. Tuesday as it is expected to be another up/down volatility day. Many analysts are taking defensive positions until Tuesday.... Many analysts, like myself, believe that we will have a "soft" landing next year.... Live Long and Prosper....
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Post by uncleharley on Dec 5, 2022 23:06:40 GMT
I am not sure I believe we will have a soft landing but I see it as a real possibility.
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rumi
Ensign
Posts: 40
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Post by rumi on Dec 6, 2022 16:55:19 GMT
Thanks for the replies everyone. One thing I've noticed is that, despite CEFs usually rising and dropping in tandem together with equities, sometimes, a few trading days in a row, CEFs will rise (as well as all the underlying bonds) while equities will drop. I guess it has to do with interest rates dropping. Or perhaps investors buying CEFs in anticipation of special dividends in December.
I guess only time will tell.
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Post by ECE Prof on Dec 6, 2022 17:24:53 GMT
rumi , uncleharley , steelpony10 , ECE Prof , johnsmith ,@fpajerski , retiredat48 , We need to watch (closely) the 12/13 CPI coming out at @ 8:30. Tuesday as it is expected to be another up/down volatility day. Many analysts are taking defensive positions until Tuesday.... Many analysts, like myself, believe that we will have a "soft" landing next year.... Live Long and Prosper.... Wall Street uses different numbers to get our money, such hard landing, soft landing, etc. However, FED is very interested in killing the high rate of inflation, and it is certain that the interest rate will keep going up until the FED is satisfied, not until Wall Street is satisfied or wants to. It is the main street, the FED is worried about, not the Wall Street. I have redeployed most of the cash in HDV, SCHD, UTG, PDI, and ECC. Of course, I have some small amounts in UTSL, XLU, and XLP also. I still have some cash. I bought some yesterday, and I will wait for the prices to go down next week because I find that there are several ex-div dates in the next two weeks, and the prices will drop after that. Because I have taken defensive DIV/Income investment style as opposed to growth strategy until September this year. So, my annual expected income will more than double in the future. Even this year, I expect for income. The bad part is: Pay taxes. It is better to make Uncle Sam richer than lose the money in the Wall Street.
Take PDI for example. If the income is 16%, I get to keep 12.6% after taxes, more than the inflation rate. So, interest rate increase is helpful to overcome the high inflation.
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Post by bb2 on Dec 6, 2022 20:56:34 GMT
TLT seems to hold up just fine against PDO. Seems odd, what with the leverage. And what happened with PDO yesterday/today? Strange.
Those investor vagaries, as mentioned.
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Post by xray on Dec 6, 2022 22:16:10 GMT
bb2, Your: I have redeployed most of the cash in HDV, SCHD, UTG, PDI, and ECC. ---------- You might want to consider reducing your current position in ECC at some point (IMHO) if you are holding a excess of shares. Their current NAV remains in question and the stock is fully valued at the moment which puts them at risk going forward. Their (additional) special distributions are welcome by income oriented investors but any "DROP" in their MktPrc must not exceed their distribution payments: "SPECIAL DISTRIBUTION" For the Company’s tax year ended November 30, 2022, the Company estimates taxable income will exceed the aggregate amount distributed to common stockholders for the same time period. As a result, the Company paid a special distribution of $0.25 per common share on October 31, 2022 to stockholders of record as of October 11, 2022. The Company also declared a special distribution of $0.50 per common share on November 14, 2022, payable on January 24, 2023 to stockholders of record as of December 23, 2022. Based on its preliminary estimate, the Company expects that its final taxable income will exceed amounts previously distributed in respect of the 2022 tax year. The Company’s final taxable income and the actual amount required to be distributed in respect of the tax year ended November 30, 2022 will be finally determined when the Company files its final tax returns. Their NAV per common share of $10.23 as of September 30, 2022, compared to $10.08 as of June 30, 2022. Their announcement of: SUBSEQUENT EVENTS-Paid a special distribution to common stockholders of $0.25 per share on October 31, 2022 to stockholders of record as of October 11, 2022. -Declared a special distribution to common stockholders of $0.50 per share, payable in January 2023. -NAV per common share is estimated to be between $9.66 and $9.76 as of October 31, 2022. What we would want is the special distributions or dividends but we also want to see some growth in the MktPrc maintained. Some securities are considerably undervalued and growing as well as paying special distributions. ECC reported a NAV of 12.64 on 3/31, then 10.79 to 10.89 on 7/31/22, 10.23 on 9/30, and currently 9.66 to 9.76 10/31/22. Their MktPrc is consistently averaging around 11.13. The risk (Rf) is considered very high in any sustained down market activity.... ECC, in my analysis world (sole opinion) remains "Neutral" (5-star).... ---------- ECC in reporting 3rd Qtr reporting results: November 15, 2022 GREENWICH, Conn., November 15, 2022--(BUSINESS WIRE)--Eagle Point Credit Company Inc. (the "Company") (NYSE: ECC, ECCC, ECC PRD, ECCV, ECCW, ECCX) today announced financial results for the quarter ended September 30, 2022, net asset value ("NAV") as of September 30, 2022 and certain additional activity through October 31, 2022. THIRD QUARTER 2022 HIGHLIGHTS-Net investment income ("NII") and realized capital gains of $0.47 per weighted average common share.[1],[2] -NAV per common share of $10.23 as of September 30, 2022, compared to $10.08 as of June 30, 2022. -GAAP net income (inclusive of unrealized mark-to-market losses) of $9.7 million, or $0.21 per weighted average common share. -Weighted average effective yield of the Company’s collateralized loan obligation ("CLO") equity portfolio (excluding called CLOs), based on amortized cost, was 16.29% as of September 30, 2022. -Weighted average expected yield of the Company’s CLO equity portfolio (excluding called CLOs), based on fair market value, was 25.39% as of September 30, 2022.[3] -Deployed $60.6 million in net capital into CLO equity, CLO debt, loan accumulation facility and other investments. -Received $40.8 million in recurring cash distributions[4] from the Company’s investment portfolio. -Issued 4,171,243 shares of common stock and 2,586 shares of Series C Term Preferred Stock pursuant to the Company’s "at-the-market" offering program for total net proceeds of approximately $47.5 million. SUBSEQUENT EVENTS
NAV per common share is estimated to be between $9.66 and $9.76 as of October 31, 2022. Received $31.2 million of recurring cash distributions from the Company’s investment portfolio during October 2022. Deployed $16.4 million in net capital into CLO equity, CLO debt, loan accumulation facility and other investments during October 2022. Issued 1,226,083 shares of common stock pursuant to the Company’s "at-the-market" offering program, for total net proceeds of approximately $13.0 million during October 2022. Paid a special distribution to common stockholders of $0.25 per share on October 31, 2022 to stockholders of record as of October 11, 2022. Declared a special distribution to common stockholders of $0.50 per share, payable in January 2023. ---------- Live Long and Prosper....
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Post by xray on Dec 9, 2022 0:01:14 GMT
Home / Markets
How Long Can Support Levels Hold?
We continue to view recent declines as a normal partial retracement from recent gains.
By GUY ORTMANN Dec 08, 2022 | 10:52 AM EST
How do we interpret this week's declines, specifically on Wednesday?
Importantly, in our view, no support levels were violated Wednesday, nor have they been throughout this week's slippage. We view this action as a normal partial retracement of the substantial gains from the October lows thus far. As such, we remain generally constructive in our outlook and continue to believe buying weakness near support as the best approach. Now, let's take a close look at the charts and data.
All Support Levels Hold on Weakness
Chart Source: Worden
On the charts, all the major equity indexes closed lower Wednesday with negative NYSE and Nasdaq internals on lighter volume. Importantly, in our opinion, no support levels were violated and have stayed intact throughout the week's declines while the near-term trends remain neutral across the board. In fact, the S&P 500, Nasdaq 100 (see above) and Dow Jones Transports closed at support. As noted above, thus far the action appears to be a consolidation of sizable gains from the October lows. The cumulative advance/decline lines for the All Exchange, NYSE and Nasdaq remain neutral as well. We would also note the stochastic levels that flashed bearish crossover signals from overbought conditions at the week's start are now oversold on the Dow Transports and Russell 2000 with the rest very close to doing the same.
-Data Remain Largely Neutral With Some Stochastic Levels Now Oversold
-On the data front, the bulk remains neutral.
-The McClellan Overbought/Oversold Oscillators remain neutral (All Exchange: -30.99 NYSE: -31.80 Nasdaq: -31.04).
-The percentage of S&P 500 issues trading above their 50-day moving averages (contrarian indicator) was unchanged and at 78%. While still in its upper ranges, it is no longer on its prior caution signal.
-The Open Insider Buy/Sell Ratio rose slightly to 47.0, staying neutral.
-The detrended Rydex Ratio, (contrarian indicator) was also unchanged at -0.76, also staying neutral.
-This week's AAII Bear/Bull Ratio (contrarian indicator) is lower at 1.39 but remains bullish.
-Also, the Investors Intelligence Bear/Bull Ratio (contrary indicator) saw a rise in bears and drop in bulls at 31.5/38.4, remaining neutral with bulls outnumbering bears.
Valuation Gap Narrows
-The forward 12-month consensus earnings estimate from Bloomberg for the S&P 500 rose slightly to $225.52 per share. As such, its forward P/E multiple stands at 17.4x while remaining at a narrower premium to the "rule of 20" ballpark fair value of 16.6x.
-The S&P's forward earnings yield rose to 5.73%.
-The 10-Year Treasury yield closed lower at 3.41% and below support. It is in a downtrend with new support at 3.29% with resistance now at 3.69%.
Our Market Outlook
We believe the charts show a normal consolidation of gains while the prior cautionary data has moderated as the valuation premium has declined. Thus, we remain buyers of weakness near support.
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Comment: My current analysis data concurs with their above assessments even though we use different analysis methodology to reach our individual conclusions.
Bottom Line: The better securities will continue to go up in any favorable markets (decline less in downturns) and the securities in current trouble will continue to decline until changes are made by the either the Companies or CEF's IMHO)....
Live Long and Prosper....
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Post by Deleted on Dec 9, 2022 0:45:49 GMT
Home / Markets How Long Can Support Levels Hold?
We continue to view recent declines as a normal partial retracement from recent gains. By GUY ORTMANN Dec 08, 2022 | 10:52 AM EST How do we interpret this week's declines, specifically on Wednesday?Importantly, in our view, no support levels were violated Wednesday, nor have they been throughout this week's slippage. We view this action as a normal partial retracement of the substantial gains from the October lows thus far. As such, we remain generally constructive in our outlook and continue to believe buying weakness near support as the best approach. Now, let's take a close look at the charts and data. All Support Levels Hold on WeaknessChart Source: WordenOn the charts, all the major equity indexes closed lower Wednesday with negative NYSE and Nasdaq internals on lighter volume. Importantly, in our opinion, no support levels were violated and have stayed intact throughout the week's declines while the near-term trends remain neutral across the board. In fact, the S&P 500, Nasdaq 100 (see above) and Dow Jones Transports closed at support. As noted above, thus far the action appears to be a consolidation of sizable gains from the October lows. The cumulative advance/decline lines for the All Exchange, NYSE and Nasdaq remain neutral as well. We would also note the stochastic levels that flashed bearish crossover signals from overbought conditions at the week's start are now oversold on the Dow Transports and Russell 2000 with the rest very close to doing the same. -Data Remain Largely Neutral With Some Stochastic Levels Now Oversold -On the data front, the bulk remains neutral. -The McClellan Overbought/Oversold Oscillators remain neutral (All Exchange: -30.99 NYSE: -31.80 Nasdaq: -31.04). -The percentage of S&P 500 issues trading above their 50-day moving averages (contrarian indicator) was unchanged and at 78%. While still in its upper ranges, it is no longer on its prior caution signal. -The Open Insider Buy/Sell Ratio rose slightly to 47.0, staying neutral. -The detrended Rydex Ratio, (contrarian indicator) was also unchanged at -0.76, also staying neutral. -This week's AAII Bear/Bull Ratio (contrarian indicator) is lower at 1.39 but remains bullish. -Also, the Investors Intelligence Bear/Bull Ratio (contrary indicator) saw a rise in bears and drop in bulls at 31.5/38.4, remaining neutral with bulls outnumbering bears. Valuation Gap Narrows-The forward 12-month consensus earnings estimate from Bloomberg for the S&P 500 rose slightly to $225.52 per share. As such, its forward P/E multiple stands at 17.4x while remaining at a narrower premium to the "rule of 20" ballpark fair value of 16.6x. -The S&P's forward earnings yield rose to 5.73%. -The 10-Year Treasury yield closed lower at 3.41% and below support. It is in a downtrend with new support at 3.29% with resistance now at 3.69%. Our Market OutlookWe believe the charts show a normal consolidation of gains while the prior cautionary data has moderated as the valuation premium has declined. Thus, we remain buyers of weakness near support. --------- Comment: My current analysis data concurs with their above assessments even though we use different analysis methodology to reach our individual conclusions. Bottom Line: The better securities will continue to go up in any favorable markets (decline less in downturns) and the securities in current trouble will continue to decline until changes are made by the either the Companies or CEF's IMHO).... Live Long and Prosper.... The above article doesn't mention CEFs. |
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Post by bb2 on Dec 9, 2022 2:41:50 GMT
So many Cefs. Bonds, uts, you name it.. But when someone says CEF, I think bonds, first. Not the bottom. Short term buy.=, IMVHO.
Still don't get 'em. Volitile beasts with big divs. Over my head but have bought just to keep an eye. Last 15 years? - forget 'em.
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Post by steelpony10 on Dec 9, 2022 11:51:19 GMT
@haven ,
If one owned CEF’s distributing 8% and ones personal inflation rate was 3% to supplement SS and any other retirement income it would take to your early 90’s to catch up to that cash flow. The whole financial and business broadcasting industry would run out of yo yo scare tactics.. The broadcast advertising segment might take a hit. The longer one tries to drag out their retirement portfolio the more maintenance, processing fees and sales pitches. It’s the mother of all business models. Buy and holding CEF’s kills that.
Dead is dead and you could leave piles of unspent cash to heirs or pass it along to the LTC industry, values be damned.
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Post by Deleted on Dec 9, 2022 13:00:24 GMT
@haven , If one owned CEF’s distributing 8% and ones personal inflation rate was 3% to supplement SS and any other retirement income it would take to your early 90’s to catch up to that cash flow. The whole financial and business broadcasting industry would run out of yo yo scare tacts. The broadcast advertising segment might take a hit. The longer one tries to drag out their retirement portfolio the more maintenance, processing fees and sales pitches. It’s the mother of all business models. Buy and holding CEF’s kills that. Dead is dead and you could leave piles of unspent cash to heirs or pass it along to the LTC industry, values be damned. I've been holding this year, but not reinvesting distributions as I have in the past. My personal inflation rate must be above 3%. AMEX sent me an email this morning announcing an unsolicited increase in my credit card limit. There were some large items from my move and getting settled. My grocery expenses have doubled, insurance, and gas heating bills are way up. Not worried with good monthly income. |
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Post by xray on Dec 9, 2022 16:37:23 GMT
InvestorPlace
Why the Stock Market Shrugged Off Friday’s Red-Hot Jobs Data
Luke Lango
Mon, December 5, 2022, 10:50 AM
Friday was a very important day for the stock market. And we believe it could signal the end of the 2022 bear market – and the start of a big new bull market. November jobs data came in red-hot on Friday. Every time we’ve gotten a red-hot jobs report in 2022, the stock market has usually collapsed. That’s because a big jobs number means more rate hikes – which means more pain for stocks. It looked like history was going to repeat on Friday. We got super-hot jobs data at 8:30 a.m. Eastern. Stock futures immediately sank. Stocks opened lower and traded down more than 1% early in the day. It was going to be another ugly day on Wall Street.
Then it happened…
Fifteen minutes after the open, stocks stopped falling. The markets bottomed and spent the next seven hours rallying. By the end of the day, the Dow Jones was in the green. It was an intraday reversal for the books. But why did it happen? And what does it mean for stocks going forward? Let’s take a deeper look.
The Last Hot Jobs Report
This most recent jobs data was red-hot. No question about it. But it is likely the last hot jobs report we see for a while. The price action tells us that the market believes November’s jobs report was the “final bad data report” before a string of positive data in the next few months. It also means the stock market is ready to rally big in 2023. All leading indicators of employment are pointing down. The strongest of those indicators – the Conference Board’s Leading Economic Indicators index – peaked in April 2021 and has been collapsing for the past 19 months. It now sits deeply in negative territory. And every time this index has plunged into negative territory over the past 70 years, it led to labor market destruction. The typical lag? Somewhere between 18 months and 24 months. The LEI index peaked 19 months ago. That means that 70 years of historical economic data suggests the labor market will start shedding jobs sometime between December 2022 and April 2023.
With layoff announcements soaring and economic confidence indicators plunging, the bulk of evidence seems to suggest the labor market will start showing significant weakness either this month or in January 2023. Oddly enough, that’s very bullish for stocks. Every time the labor market starts to crack, the Fed pivots. And a Fed pivot is the exact medicine the stock market needs to bounce back into a bull market next year.
The Crack in the Fed’s Façade
Here’s the thing about the Fed: It doesn’t care about stock prices, home prices, or billionaire hedge funds’ performance fees. But it does care about the average American’s job. And when Americans start losing jobs, it starts acting differently. That is, the Fed has played the “tough guy” all year long. That’s because it’s easy to play the tough guy when the only negative consequences of your rate-hikes are falling financial asset prices. Financial assets were in a bubble anyway. They needed to drop. They’ll rebound. All is fine. But it’s very hard to play the tough buy when people are losing their jobs. That’s why the Fed has actually never stayed tough when unemployment rises. Over the past 50 years, every time the labor market started to crack and folks began losing their jobs, the Fed gave up the tough guy act. It started cutting interest rates to stem the job loss.
Next year will not be an exception to the trend. As the labor market starts to crack and Americans start to lose their jobs in early 2023, the highly anticipated and long-overdue “Fed pivot” should finally arrive. When it does, the labor market and economy will stabilize. And stocks will soar into a new multi-year bull market.
The Final Word on Friday’s Hot Jobs Data
Remember: Bear markets don’t die when everyone starts buying. They end when everyone stops selling. On Friday, we got our clearest sign yet that the selling has stopped. The stock market was given every single reason to absolutely collapse. It was up massively from its lows, running into both its 200-day moving average and bear market downtrend resistance line. Then it was hit with shockingly and uncomfortably hot jobs data. That’s a recipe for a stock market crash. But while stocks dropped sharply at the open, investors spent the day buying the dip. By the closing bell, the market was basically flat. That’s bullish. If that jobs data – delivered on the heels of a massive rally and with the indices trading at super-critical technical levels – didn’t kill the recent stock market rally, what will? At this point, probably nothing.
We are increasingly confident that this was the last strong jobs report and that over the next few months, inflation rates will collapse, the labor market will start shedding jobs, the Fed will pivot on its monetary policy stance, interest rates and yields will fall, the economic outlook will improve, and stocks will rally. Clearly, the market is starting to think so, too. Why else did we not collapse on a hot jobs report like we have every other time in 2022?
The worst of the inflation crisis is behind us. Better times are ahead. The bear market is likely over. A new bull market could be getting started right now.
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Live Long and Prosper....
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Post by Deleted on Jun 18, 2023 5:13:18 GMT
In response to the OP, thoughts now from our friend on the Cape about the effect of falling, rising, or steady interest rates on FI CEFs. The effect of interest where leverage (ranging from 0 to 50%) is present is not addressed, perhaps just monitoring the NAV suffices in this regard. .... ( and please, no too-large multi-page info-dumps in here which make it difficult to scan thru and see other posts!! ) :
Hi lefty. That's an interesting and timely question at this point in time....
1. Most multi-asset CEFs popular among folks in this forum have modest to heavy allocations to floating rate assets, and the floating rates reset with lags typically between 1 and 3 months. So rising short rates tend to increase income for these CEFs, and that's a real positive for income investors. However, as rates rise, the market value of traditional fixed rate securities in the portfolio drop, resulting in lower NAVs....and we watched that unhappily over the past year+. JUST NOW, as we appear to approach to policy rate peak, there's a good chance that lagging floating resets will continue to increase portfolio income, and NAVs are likely to remain stable or rise as the dream of lower rates next year impact longer dated securities in the portfolio.
2. A more abstracted view (mine)....well-managed multi-asset CEF portfolios are changing all the time in response to changing market narratives and dynamic markets, so I really don't know exactly what's going on inside the portfolios until months after any changes --- and then ONLY IF I imagine I can evaluate complex portfolio strategies (likelihood anywhere between maybe-sometimes and LOL). But I can monitor NAV as frequently as I want, and income generation usually monthly to assess BROADLY whether the CEF is fulfilling my objectives. So I tend to evaluate / assess the EARNED distribution yield and stability+ of NAV --- viewing the whole CEF as an asset in my portfolio. By way of example....
PDI had the **** kicked out of its NAV and market price as Fed rapidly hiked rates. In recent months, NAV has tended to stabilize and there is consistently growing evidence that the generous distribution is earned. So: This ASSET in my portfolio has a pretty stable NAV and market price and yields 14+%. I'm happy to own a 14+% income asset as policy rates are peaking at 5% or 5.25%, 2yr Treasurts are 4.5-5%, 10yrs are 3.5%-4%, and inflation is undesirably high but nonetheless just 4 to 5%. At current and expected Fed funds and inflation PLUS about 10%, I'm happy to own it.
--- 30 ---
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Post by richardsok on Jun 18, 2023 12:24:55 GMT
Good post, FP. A glance at the cefconnect 3-yr chart reminds me that for ALL of 2022 thru spring 2023, PDI's NAV was a slow-moving catastrophe -- and it's ironic that for many of those months PDI was showing great UNII growth. But recently, with sub-par coverage, the NAV has stabilized nicely. So: double irony. I'm sure a lot of small investors were lured by those big UNII growth numbers, -- and for those who held on in the teeth of falling NAVs, I'm guessing there's some bitterness out there. I'm holding a recently acquired block of it. (R48 says it's his biggest single CEF.)
My (non)understanding is on a rough par with yours, at best.... but have learned to pay less attention to PDI's coverage numbers and more to the NAV.
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Post by mnfish on Jun 19, 2023 11:33:56 GMT
"heavy allocations to floating rate assets, and the floating rates reset with lags typically between 1 and 3 months. So rising short rates tend to increase income for these CEFs, and that's a real positive for income investors. However, as rates rise, the market value of traditional fixed rate securities in the portfolio drop, resulting in lower NAVs"
In my simplistic view, one is assuming that the "payers" of that floating interest rate can afford to stay in business to pay the interest.
On June 14 Powell said - “We’ve covered a lot of ground and the full effects of our tightening have yet to be felt”
From a PDI portfolio post on May 5, 2023 at 7:32am
From the recent (March 31) PDI holdings spreadsheet - I chose some with 2% or higher positions
They certainly go out on the risk spectrum - Some of these are emerging from bankruptcy or some sort of reorganization - All are rated junk as far as I can tell via Google search
Name Yield % %Net Assets
Profrac Services LLC 12% 2.053%
Envision Healthcare Corp. TBD% 2.097%
Promotora de Informaciones SA TBD% 2.516%
Syniverse Holdings, Inc. TBD% 2.269%
Voyager Aviation Holdings LLC 8.5% 2.181%
Intelsat Jackson Holdings SA 6.500% 2.676%
Wesco Aircraft Holdings, Inc. 10.500% 4.032%
Orient Point CDO Ltd. 5.024% 2.850%
Gateway Casinos & Ent TBD% 1.990%
So, call it 21.8% of assets that may(?) disappear after the "full effects" are felt?
From a post in the Bond Brigade forum
Mar 7, 2023 at 6:29am Post by mnfish on Mar 7, 2023 at 6:29am
Interesting note from Wells Fargo on why HY bonds have not yet seen the much-anticipated stress due to rising rates. Mostly due to the lack of near-term debt maturities. In 2023, only $60B will mature, 2024 is $114B and by 2025 that grows to $212B. Most companies try to refinance 12-18 mos prior to maturity so expect some stress to show up soon. BB rated will refinance at the highest rates in over a decade and B rated and lower may struggle to find rates that are affordable at all
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nobhead
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Post by nobhead on Jun 19, 2023 14:45:48 GMT
" heavy allocations to floating rate assets, and the floating rates reset with lags typically between 1 and 3 months. So rising short rates tend to increase income for these CEFs, and that's a real positive for income investors. However, as rates rise, the market value of traditional fixed rate securities in the portfolio drop, resulting in lower NAVs" In my simplistic view, one is assuming that the "payers" of that floating interest rate can afford to stay in business to pay the interest. On June 14 Powell said - “We’ve covered a lot of ground and the full effects of our tightening have yet to be felt” From a PDI portfolio post on May 5, 2023 at 7:32am From the recent (March 31) PDI holdings spreadsheet - I chose some with 2% or higher positions They certainly go out on the risk spectrum - Some of these are emerging from bankruptcy or some sort of reorganization - All are rated junk as far as I can tell via Google search Name Yield % %Net Assets Profrac Services LLC 12% 2.053% Envision Healthcare Corp. TBD% 2.097% Promotora de Informaciones SA TBD% 2.516% Syniverse Holdings, Inc. TBD% 2.269% Voyager Aviation Holdings LLC 8.5% 2.181% Intelsat Jackson Holdings SA 6.500% 2.676% Wesco Aircraft Holdings, Inc. 10.500% 4.032% Orient Point CDO Ltd. 5.024% 2.850% Gateway Casinos & Ent TBD% 1.990% So, call it 21.8% of assets that may(?) disappear after the "full effects" are felt? From a post in the Bond Brigade forum Mar 7, 2023 at 6:29am Post by mnfish on Mar 7, 2023 at 6:29am Interesting note from Wells Fargo on why HY bonds have not yet seen the much-anticipated stress due to rising rates. Mostly due to the lack of near-term debt maturities. In 2023, only $60B will mature, 2024 is $114B and by 2025 that grows to $212B. Most companies try to refinance 12-18 mos prior to maturity so expect some stress to show up soon. BB rated will refinance at the highest rates in over a decade and B rated and lower may struggle to find rates that are affordable at allI may be wrong but it looks like Wesco Aircraft Holdings, Inc. has filed for bankruptcy protection. See link www.kccllc.net/incora
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