Employment Report Keeps Us on Track for September Hike

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While the regular media is whining about the ‘poor’ employment numbers 223,000 is just below the concensus of 230,000 and in our minds keeps Yellen on track for a September rate hike (be mindful that we are wrong as much as we are right).  We realize that numbers for April and May were revised lower, but just the same Yellen really wants to let the market know she is in charge.  Additionally, virtually all the economic data in the last number of weeks has been relatively positive.  We chuckle when we see the unemployment rate dropping because bunches of folks are leaving the labor force.  Only last month according to the ‘smart folks’ the rate didn’t drop because of all the people entering the labor force because there were so many jobs available. Honestly we think these numbers are mostly just junk numbers and should receive only mild attention.

On To Other Matters

So Greece defaults on Tuesday and today, on Thursday, it isn’t making the headlines. We will find out how the folks in Greece feel about all of this in the coming days when the ATM’s run dry.  We think a deal will be struck quite quickly.

We have decided to hold onto our shares of Oriental Finance Group preferred (OFG-B) for now.  While OFG is not a pillar of strength we think they will weather the storm.  OFG did take a $24 million write down last quarter for loans to the government owned utility company and we suspect there may be further write downs ahead.  If the situation in Puerto Rico heads further south we will be out of this issue.  We mentioned this issue yesterday.

Continuing a move out of perpetual preferreds we will let the Arbor Realty Trust preferred (ABR-B) go today.  We own only 7 perpetuals and outside of the Oriental Finance issue we believe that Arbor has the most potential downside in a rate hike scenario.  The sale proceeds will go to our cash holdings.

 

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