Monday, April 17

US Equities picked up some of their losses from before the holiday weekend, despite bearish economic data. A reasonable assumption from this is that actual investor consensus for economic data (housing and manufacturing) were lower than general analyst consensus – today we are seeing a correction as the market price faces reality and investors return from the holiday weekend.

Crude prices finally fell today but a generally bullish market kept this from having a serious impact on energy based equities (though MLPs were hit somewhat, like our holdings in GPP). The energy sector in general did lag the market as a whole, leading us to lag the general market somewhat. It’s consistently obvious that our portfolio is only lightly exposed to the financial sector, healthcare, and real estate. While this isn’t exactly a problem, it will reduce our correlation to the market (also not exactly a problem).

As expected, the preferred shares of Frontier Communication are tracking the market price of the common stock as the price normalizes after the last distribution. Unless something changes we won’t see any action in that position until after the next distribution in June. When that occurs it’s possible that we could close the position early, or increase our stake if the preferred shares lose enough value relative to our projection for the underlying common stock.

Tomorrow we can expect a continued market rally, with financials continuing to lead the way. Energy equities will most likely fall somewhat, and our position in Pattern Energy will gain a bit more. In the next few weeks PEGI will start to approach it’s target price, but with recent increases in distributions (7.83% as of today’s session) we will revise our target before considering closing that position.

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