A Refreshing Bounce in Income Issues
By: Tim McPartland,
As noted yesterday a bounce in crude oil prices was a necessary requirement to get the income issues turned around–and today we got that bounce. MLP’s and preferred stocks of energy issues jumped big time. While common stocks in general had trouble moving higher we are not affected much as we hold few common stocks.
The junkier preferreds of Miller Energy, Enerjex, Escalera, Gastar and Magnum Hunter all jumped $1-$2.50 a share. The MLP’s were more stupendous to the upside with gains of up to 12%. Given how far the MLP’s have fallen the bounce was welcome. Unfortunately we believe that while energy issues should get some follow through on Friday it is not likely to hold into next week. With a bit of luck the next energy downdraft will come at a slower pace–just slowly trending down–not the $1, $2 and $3 drops we saw in the last week or two. On the other hand if crude prices fail to hold $80 on the next test of the lower end of the range all bets are off–it could spell real disaster for the E & P companies.
Todays big bounce moved our model back up to a positive 9.35% YTD. We are always grateful for gains, but are skeptical of our ability to hold these gains in total. Only time will tell I guess. The new 2014 Short/Medium Duration Income Portfolio is acting perfectly through the 1st couple of days–in a $85,000 portfolio it has traded in a range of -$100 to +270. This is a very tight range and we would expect the tightness to continue.
Lastly new cases of Ebola in the U.S will present a challenge for markets, because we seem to lack common sense in the country. The over reactions we have seen on the news are downright scary to see. Also the seeming unprepared nature of our systems is beyond comprehension.