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Posts Tagged ‘The Select Approach’

Slow Moving Bear

October 9th, 2018 by Kurt L. Smith

Having a plan and executing it can be worthwhile in a market in which yields on almost all bonds are rising and their prices are falling. Three quarters into 2018 and yields are up and prices are down on almost all kinds of bonds and across all maturities.

Take a look at this month’s featured municipal bond issue, Eagle Pass, TX, below, and compare it to January’s yields. Yields are higher across all maturities, from short-term to long-term, of at least one half of one percent.  Higher yields mean lower bond prices but yet that message is not is not making a huge dent in performance.  The reason is speed.  Yes, interest rates are up but the speed of change has not had an appreciable negative effect on bond market performance.

Looking at municipal bond indexes we see this.  The S&P Municipal Bond Index is essentially unchanged from January 1st.  Same for the Bloomberg Barclays Municipal Intermediate to Short Total Return Index or their US Municipal Bond Index for that matter (all per Bloomberg).  Check your favorite yardstick and compare.  The reason this is so is because the interest earned so far has been keeping up with principal (price) loss. (more…)

Depths of Summer

August 6th, 2018 by Kurt L. Smith

Heady days and bond markets rarely go together. Nor do the terms ‘bond market’ and ‘news’. Add summer and vacations into the mix and the bond market becomes French. Absent.

I may exaggerate but not much. Thankfully we are not looking to keep up (or primarily down) with any bond index, we are not burdened by scale or the inability to find worthwhile bonds. Every day I get to practice and build my skills and every day things come together. Except in the summer, things come a bit more slowly.

Last month I discussed how the markets are poised for a fall. One more month without the Bond Crash of 2018, but the first of August brought ten year US Treasury note yields back to 3% for the first time in several months.  Most of 2018 has so far been a correction of the dramatically higher yields (and double-digit price losses of longer bonds). Whether we begin the next phase of higher rates and lower prices immediately or whether it takes a few more months, is not important. What is important is you are prepared and you are prepared because you own the proper asset, chosen by The Select ApproachTM. (more…)

It Only Takes One

April 10th, 2017 by Kurt L. Smith

After four months of sideways price (yield) action in bonds, one might tend to believe nothing has changed or nothing is happening. Thankfully the municipal bond market offers us tens of thousands of unique opportunities over a similar timespan.

Ten year treasury notes doubled in yield from 1.32% to 2.64% in the second half of 2016, but for 2017 the market has traded in a narrow range. This corrective phase may already be complete or we may have more time to diddle. The important takeaway is that I believe the market for longer-term bonds will resolve into much higher yields and much lower prices. (more…)

What? Municipals on Top?!

January 15th, 2016 by Kurt L. Smith

Happy New Year!  Municipal bonds were one of the best performing asset classes for 2015*.  That doesn’t happen often (ever?)!  Municipal bonds didn’t post stellar returns but compared to the sub-par performance of almost every other asset class, municipal bonds came out on top.

Obviously we don’t invest in municipal bonds because we think they will be the top performing asset class each year.  We like the income, particularly tax-free income.  Municipal bonds may not have the sex appeal of other, perhaps higher yielding investments but they also do not have some of the risks.  In this era of low (to no) interest rates we have seen others chasing yields in all kinds of asset classes from master limited partnerships (MLPs) to high yield junk bonds and even in higher dividend stocks.

2015 saw some investments for yield really take it on the chin.  According to The Alerian MLP Index, Master Limited Partnerships (MLPs) as an asset class lost about forty percent of their value last year.**  Forty percent is enough to whack off many years of projected income and price fluctuation is but one of the risks associated with MLPs.  Sure the yield (income) investors were hoping to grab is still there…unless the MLP cuts the dividend rate, another risk associated with MLPs.  No doubt MLPs performed well for many years prior to 2015, but then, bam, the trend moves in another direction leaving MLP investors to try and salvage their investment. (more…)

Scratching & Clawing

April 8th, 2014 by Kurt L. Smith

My firm belief that market conditions will (eventually) change gives me the optimism to approach each day as if today is that day.  Then comes my monthly Municipal Market Letter writing day and of course it seems as if nothing has changed…ever.  The first quarter of 2014 is gone and what has changed?  While I know that this is not altogether true, the mileposts seem to be moving hardly at all. (more…)

A Point & Click World

March 7th, 2014 by Kurt L. Smith

I found myself thinking I have lived through this time before.  Stocks are at all-time highs (again), homes are being torn down for new ones (again), internet stocks and their firms are cool (or hot, again) and the idea of trading municipal bonds via point and click is not only a reality but seemingly continues to gain momentum. (more…)

The Great Wait May Be Over

February 11th, 2014 by Kurt L. Smith

The optimism, the good news, the earnings reports and everything else wonderful has culminated in the beautiful rise in stock prices.  Climbing the Wall of Worry?  There is no worry as this one way freight train moves only in one direction smashing all the remaining bears with it. (more…)

High Prices Be Damned

December 20th, 2013 by Kurt L. Smith

For some things in life, the price is the price.  You must pay it because you have to or you need to pay it.  With one son in college and another on his way next year, I know all about prices one must pay.  Some people look at investing the same way: the cost is the price one must pay. (more…)

Great Success

November 11th, 2013 by Kurt L. Smith

The financial markets spent most of October peaking so why should I add my usual dose of downer?  Instead, in the spirit of thanks and Thanksgiving, why not look back at some of our successes and revisit why we choose the path we do. (more…)

Exceptional Exceptions

August 30th, 2013 by Kurt L. Smith

In a world that includes dozens of US Treasury bond issues (but just one credit) or hundreds of Corporate bond issuers, Municipal bonds offer tens of thousands of different credits, terms and conditions.  It is these differences, rather than their similarities, between issuers and issuances that account for the robustness of the municipal bond market. (more…)

NEWS FEED

The $247 trillion global debt bomb washingtonpost.com/opinions/the-2…