Adjusting our View on Only Purchasing Short and Medium Duration Securities

By: ,

We have focused almost exclusively on the purchase of short and medium duration securities (debt and term preferreds) in the last year as we expected some level of interest rate increases from the FED. We are now shifting away from this as our primary focus–our economic viewpoint is tilted negatively and more and more we are thinking that Yellen will have no economic basis for raising rates as inflation remains tame. The global economy remains  tepid everywhere.

We are now adjusting our view – we would like a rate hike by the FED–if for no other reason than to show it can be done without massive harm–BUT even if we were to get a 25 basis point hike in the near future (6 months) it would do little harm to income securities.  Maybe there would be a short term negative reaction, but it likely would not have lasting affects.  Any hike in rates would be a 1 and done (at least for a while) as we can see no real chance of a global growth explosion which would warrant higher rates.

With our adjusted view we will be adding a couple perpetual preferreds yet this week to the portfolio.  We have plenty of cash available and while we won’t get carried away buying it no longer makes sense to wait for interest rate hikes before getting cash deployed.  





Related Posts:

Tim McPartland

Connect with Tim McPartland

Tim McPartland
Tim McPartland is a private investor with over 45 years of investing experience. His analysis, research and writing is devoted to the hunt for income producing securities of all types, but in particular specializing in preferred stocks, exchange traded debt and Master Limited Partnerships.
Search Dividend Investor