Sell Bonds

The Select ApproachTM believes the bond market correction of the past nine months is now over.

Last month we talked about the giddiness of bonds and that giddiness delivered bonds onto the front pages of the major dailies. The New York Times on August 28th probably marked the high prices with this headline “While Wall St. Talks of a Recession, Bond Investors Make a Killing. You should have bought bonds. They’re going great.”

The NY Times also included a nice chart of year to date returns. “Thirty year Treasury bond +26.4%, Long-term bonds +23.5%, Investment-grade corporates +14.1% and Ten Year Treasury notes +12.6%.” Indeed, stellar returns essentially describes the bond market correction of the past nine months.

In order to reap the rewards of this year’s bond market moves, one must sell. Not your Select ApproachTM bonds, but everything else. This market move was a trade, and a short-term one at that, and now it is over. The bond market is in a long-term bear market since 2012. Prices move down (yields rise) setting the trend and in order for the market to continue to lower prices, a correction needs to occur. Ebb and flow happens but the important part is the direction of the trend for bond prices is lower.

This means the next leg down for bond prices begins now. Bonds now join stocks where we discussed their next leg down in last month’s letter. After, selling off 2000 Dow points before last month’s letter, stocks spent most of August attempting to climb back. Attempting may be a key word, but again, the next move for stocks is probably down.

We can also add gold to the list and while we are at it, the dollar. Everything it seems is high priced in their cycle and everything is poised to tumble. Yes, we led with sell bonds, but now we conclude with sell all assets.

Years ago as I began my career in bonds I could confidently tell you and everyone else that you should buy long-term bonds. Why? Because no matter how many you had, you did not have enough. Even if you had some you were also probably not buying the right kind (notice the differences in the NY Times bond performances above).

Today we are in a much different place. Investor’s funds are spread out widely and investors are fully invested. So now I say to sell. It too is a blanket statement like my “buy long-term bonds” because I know all investors need to sell. Investors have not sold enough; sell more.

Every other investor feels as if they do not have a choice. They feel they must remain invested because this is their retirement, their nest egg. But you have a choice with The Select ApproachTM. Our strategy is not short-term, it doesn’t involve trading, it stymies volatility and it works.

Asset prices (stocks, bonds, gold) have all topped together here in the past few weeks. This is a time to act as these asset prices have aligned in a topping process together. Take a look at your investments and begin to sell. Unlike every other investor out there, when it comes to your investments, you do have an alternative. Take advantage.

Mansfield Independent School District, TX

Aaa (Aa2 Under) Moody’s AAA (AA+ Under Fitch)

Permanent School Fund Guaranteed

Due 2/15 Dated 9/1/19 Maturity 2/15/49 $155,820,000 Sold

Year Maturity Coupon Yield*

1 2020 2.00% 1.11%
2 2021 2.00% 1.12%
3 2022 5.00% 1.18%
4 2023 5.00% 1.19%
5 2024 5.00% 1.23%
6 2025 4.00% 1.26%
7 2026 4.00% 1.31%
8 2027 5.00% 1.37%
9 2028** 5.00% 1.43%
10 2029** 5.00% 1.47%
11 2030** 5.00% 1.53%
12 2031** 5.00% 1.60%
13 2032** 4.00% 1.84%
14 2033** 5.00% 1.70%
15 2034** 4.00% 2.00%
16 2035** 5.00% 1.78%
17 2036** 4.00% 2.08%
18 2037** 4.00% 2.12%
19 2038** 4.00% 2.15%
20 2039** 5.00% 1.91%
25 2044** 4.00% 2.36%
30 2049** 4.00% 2.42%

*Yield to Worst (Call or Maturity) **Call 2/15/27

Source: Bloomberg

This is an example of a new issue priced the week of 9/9/19

Prices, yield and availability subject to change