Per the note from Monday (below)...Thursday brought the real panic in "safe assets" like bonds, preferreds, real estate and Gold.
The pace of the recent stock market declines rivals the1987 crash...and we are now seeing how the ease of trading (see many ETF's) of structurally non liquid assets can wreak havoc.
All for sake of being able to trade at our finger tips...thank goodness for the marriage of ignorance and convenience.
We have taken the opportunity to swap amongst closed end funds (that own primarily mortgage bonds) as they opened up material discounts to their underlying Net Asset Value.
We model Price vs. NAV for our closed end positions daily. Price performance this week has been terrible (per Monday note) but underlying asset values have only been about 1/3 of stock type drawdowns.
Similarly, preferred stocks were crushed on Thursday - generally a signal of smaller, income investors panicking.
We will continue to favor: Bonds, Gold, Real Estate, and Preferred securities; we prefer to be higher in the capital stack (see below) and have contractual cash flow.
While we take the known and unknown risk incredibly seriously, we believe the financial system can weather Covid 19.
For readers...you may find the most recent letter from Howards Marks (Oaktree-Brookfield) and interesting diversion from the Panic.
Please reach out if you have any questions. 704-608-3100