Ground Hog Day

Though Ground Hog Day was officially February 2nd, I am referencing the 1993 movie starring Bill Murray. I feel like I am reliving the same day over and over again in the market place.

The Dow Jones Industrials traded today at the same level it did six weeks ago. Yet every morning I am seemingly greeted with a new intraday high for stocks. Bonds are scarce, yet every day I hope to scratch and claw my way to several worthwhile pieces.

Last month I wrote that asset prices were Better Than Best. After weeks of Ground Hog Days, guess what?  Prices are still Better Than Best. That is the danger in delaying writing this letter in hopes of writing something new. There is nothing new.

Even when we think there is something new (in Washington or in Wuhan), it is seemingly of little consequence. I don’t write about those types of things anyway, preferring to watch what the markets are telling me. Obviously, they have been telling me the transition from upward trend in prices to downward trend is taking its time. Does that mean six more weeks of this like the groundhog prognosticates? We will know when the markets tell us.

Meanwhile I will continue to scratch and claw my way towards worthwhile bonds. Despite the distractions that of apparently endless Groundhog Days, I cannot lose focus of the daily tasks at hand.

We continue to look for and find the seemingly needle in the haystack. While many bonds do succumb to the utter sameness of low yields and high prices, I continue to work The Select Approach^TM. Yes, our selection is limited, but despite all odds my Groundhog Day involves buying worthwhile bonds. Thank goodness!

Low interest rates and high bond prices have been with us for many years. As such, more and more bonds appear to look similar and trade similar. The bonds however are not similar, even when the market prices them similarly. Bonds are unique and they may perform dramatically differently over the coming year or two and that is where The Select Approach^TM is unique.

As Groundhog Days continue, more and more debt is being issued. Someone owns all of this debt and for one good reason: its value has largely held. After thirty-plus years of what appears to be a never-ending bond bull market, not only has bond prices seemingly always increased, but so has the quantity of this debt. It boggles the mind and yet as I have said, the bond market bull will not continue.

Selection is the key. The Select Approach^TM doesn’t have to include certain bonds the way an index does. More importantly, The Select Approach^TM does not scale so that others can invest their billions and dilute your returns. The Select Approach^TM works because it works for you. Day after Groundhog Day after Day.

Farmers Branch, TX

AA+ Standard & Poor’s AA+ Fitch

Due 2/15 Dated 3/18/20 Maturity 2/15/39

$12,305,000 Sold

1 2021 4.00% 0.98%
2 2022 4.00% 1.00%
3 2023 4.00% 1.03%
4 2024 4.00% 1.05%
5 2025 4.00% 1.09%
6 2026 4.00% 1.20%
7 2027 4.00% 1.28%
8 2028 4.00% 1.35%
9 2029 4.00% 1.42%
10 2030** 4.00% 1.51%
11 2031** 3.00% 1.60%
12 2032** 3.00% 1.65%
13 2033** 2.00% 1.85%
14 2034** 2.00% 2.16%
15 2035** 2.00% 2.23%
16 2036** 2.125% 2.29%
17 2037** 2.125% 2.50%
18 2038** 2.25% 2.57%
19 2039** 2.25% 2.61%

* Yield to Worst (Call or Maturity) ** Call 2/15/2029

Source: Bloomberg

This is an example of a new issue priced the week of 2/18/20

Prices, yield and availability subject to change