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There is nothing that says you deserve your gains, or they will hold up over time.

An Ever Changing World

April 22nd, 2021 by Kurt L. Smith
  • High prices may be a time to celebrate, but they may also be a time for decision making. Nothing illustrates this better than the market for the U.S. Treasury bond bell whether trading at the highwater mark of highwater marks last year and losing all its gains since.

    Last month we discussed the bellwether bond, the 2.375% of 2049 losing it’s 140 price premium, selling at a discount one year later in March 2021. For owners of this bond, it may be a case of easy come, easy go or we may hear “I bought it for the yield (seriously?)” as they continue to own the asset.

    All owners of stocks should take notice. Gains do disappear, though stock investors also may take comfort in making the statement “I bought it for the yield” and continue to buy and hold. Everybody wanted to (and seemingly did) own General Electric, the darling of the 1980’s and 1990’s bull market, but then life happened, and it was not pretty.

    Change will continue to occur, usually at a speed once thought unattainable. The effects will be in prices, asset prices and what you think may be a trend, may turn out to be a blip. Investing is a marathon, and my goal is to help you attain your goals over decades and over many cycles, whatever they may be.

    But there is no doubt in my mind that the interest rate cycle of lower for longer is over. As to the fact lower interest rates have figured into the price of, well, everything, I am looking for significant price changes for asset prices. Yes, this is about leverage and formulas and models that have been utilized and juiced for much of the last three decades. Again, look to General Electric as your leader here.

    General Electric was not your typical company nor the typical stock. It was THE stock led by Fortune Magazine’s Manager of the Century in 1999 seemingly owned by anyone and everyone who wanted to make money in stocks. In 2018 GE was removed from the Dow Jones Industrials average.

    I continue to recommend changes in the way you invest. Beginning with bonds in March 2020 and continuing into less liquid investments you may currently own, changes are called for. Now, with stocks at or near all-time highs, I believe it is time to look at your stock investments. There is nothing that says you deserve your gains, or they will hold up over time.

    The world has changed, and the world is changing. I believe these changes will impact other asset prices as we have seen them impact the bellwether U.S. Treasury bond. Have a plan; implement it.

    Sherman, TX

    Combination Tax and Revenue Certificates, Series 2021

    AA Standard & Poor’s Underlying

    Due 8/15   Dated 5/18/21 Maturity 8/15/51

    $29,025,000 Sold

    Years   Maturity     Coupon      Yield*

    1             2022          5.00%           0.12%

    2            2023           5.00%           0.16%

    3              2024            5.00%           0.26%

    4            2025           5.00%           0.39%

    5            2026           5.00%           0.51%

    6            2027           5.00%           0.68%

    7            2028           5.00%           0.85%

    8            2029           5.00%           0.98%

    9              2030            5.00%           1.08%

    10           2031**      2.00%           1.18%

    11           2032**      2.00%           1.35%

    12           2033**      2.00%           1.50%

    13          2034**      2.00%           1.64%

    14          2035**      2.00%           1.77%

    15          2036**      2.00%           1.83%

    16          2037**      2.00%           1.87%

    17          2038**      2.00%           1.91%

    18           2039**      2.00%           1.95%

    19           2040**      2.00%           1.99%

    20          2041**      2.00%           2.05%

    21           2042**      2.00%           2.07%

    22           2043**      2.00%           2.10%

    23           2044**      2.00%           2.13%

    26          2047**      2.125%         2.23%

    30           2051**      2.00%           2.32%

    *Yield to Worst (Call or Maturity) ** Call 8/15/30

    Source: Bloomberg

    This is an example of a new issue priced the week of 4/19/21

    Prices, yields and availability subject to change

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