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What Will Markets React to This Week?

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Will it be earnings that drive markets this week or will it be global events? We think it will be some of each.  Earnings will drive only individual issues as the level of parsing that will occur on the overall earnings scene will keep any analysis of the overall earnings picture from being meaningful.  Most importantly the situation in Yemen is so very dangerous that a potential for confrontation getting out of control exists.  Iran could attack Saudi Arabia, a U.S. ship could get sunk, or any number of other scenarios could happen which sends crude oil prices way up–the so called economic benefits of low oil prices could substantially diminish overnight. Additionally Greece continues to teeter on the verge of full out bankruptcy and while we don’t think this has direct consequences that are huge the fear of contagion to Itally, Portugal and even Spain are very real.

On a more domestic note economic numbers are kind of soft, but probably good enough at this moment to continue a Goldilocks type of market. Leading economic indicators which were released Friday came in at a plus .2% versus concensus of .3%, which isn’t great–but just ok.  Jobless claims indicate some softness although it is too early to be a meaningful–if we get a soft employment number on May 8th when April’s numbers are released we will be pretty concerned that the economy is slipping toward recession.

Last week we sold 1 REIT in our blended income portfolio – Store Capital (ticker:STOR) as we moved to harvest a profit and lighten up a bit in the REIT sector which we think is likely to have a setback over the next 6 months.  This setback will be caused by what we think is simply a overvalued situation which needs to be resolved.

Personally we did take a position in the newTeekay Offshore Partners preferred (ticker:TOO-B).  This is a 8.50% coupon new issue and we think will trade up to $26 in the next month.  We will take our profits if that happens as we have no plans to add perpetual preferreds on a long term basis.

At this point in time we have no firm plans for the week for buying or selling, although we maintain a 11% cash position which will allow action if a deal is presented.

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