Plunging Interest Rates Along with Continuing Weak Stock Prices

The 10 year treasury was trading at a yield of 2.09% a few minutes ago and unlike a few years ago, preferred stocks, as a group, are not reacting positively. The weakness in sectors such as the energy markets and perceived (real or perceived?) global economic weakness have kept energy and shipping fixed income securities heading down while the balance of the issues pretty much are ‘treading water’.

Only a couple days ago we warned for the hundredth time (well at least it has been quite a few–who is really counting) that a conservative income seeker should not be dipping into the energy sector yet. The 2 outstanding Gastar (ticker:GST) preferred issues which were trading at $14 and $16 on Sunday when we wrote are now at $10.50 and $12 in just 4 trading days–a drop of 25%. We continue to be extremely negative on energy issues—sure there will be a ‘bottom’ at some point in time, but given that most of these issues need at least $60/barrel WTI to remain viable a bottom won’t be adequate. Sure shares will begin to move higher prior to good news being known for sure, but we are conservative income investors, not speculators.

The grinding down in common stocks continues–and we hate watching the drop, but we are smart enough to know that if one wants some upside potential you have to have a few issues in your portfolio. We are not smart enough to know when, or if, a move higher is just around the corner.  For now we depend on our reduced Proshares Ultrashort SP500 (ticker:SDS) position to cushion the losses.  We continue to try to be positioned in the correct sectors and that remains helpful to the portfolios.