Voting is in full swing across our nation and I am sure you will be voting as well if you haven’t already. While we all care about our election, the market does not.
In a world filled with varying narratives, not to mention conflicting narratives, narratives do not move markets. News, breaking or not, also does not move markets. Yet markets move, even in ways that may convince you that something, or someone (or several someone’s) may be responsible.
(more…)Over the past couple of months, we have witnessed what it is like to be winners. Investors of stocks and bonds have watched their portfolios move higher with interest rates at or near historic lows, bond prices are unbelievable high. And the effects of high bond prices have reverberated across asset classes.
I pick on bonds because they are “fixed income”. There is only so much income a bond generates (it’s coupon amount) and for only so long (it’s maturity). So, when interest rates are near zero, the price of the bond is approximately, or near, the sum of all of its cash flows (coupons plus maturity or par amount).
A 1% ten year noncallable bond that sold at 100, would be priced at 110 if interest rates moved to 0%. At .50%, the bond would be priced at approximately 105, still a nice 5% gain from no-or-low interest rates to even lower rates.
(more…)Unfortunately, there is no finish line for investing. If there was, we could now declare stocks a winner, bonds a winner, gold a winner, real estate…well, you get the idea. But there is tomorrow to deal with, not to mention next year and years from now.
Investing is a longer period endeavor. Bond investors know this as every bond you buy reminds you with a maturity date. What will happen over the next year, or two, five or ten or more years? Bond investors confront this reality with every purchase.
Wherever you want to draw the line, financial assets have been winners. Year-to-date, last year or two, last five…they, for the most part, have been good times for you as an investor of financial assets.
All of that is in the past; investing is about the future. If investing were a race, it would be an endless one as time marches on. Decisions made can be worthwhile as well as decisions not made. Second-guessing can be debilitating and is to be avoided. That is why it is important to make sound decisions.
(more…)Last month’s letter highlighted the opportunity available in managed fixed income funds. March 6th was a pivotal moment with record low US Treasury bond yields and historically low spreads for other bonds, such as municipals, that I believe fixed income fund performance may be negative for years to come.
The high prices for bonds on March 6th, I believe, are the bond corollary for the record highs in stock prices in February. The dramatic swoon down in prices in early March affected both asset classes. Diversification between the two offered little safety.
Now, approximately six weeks from the March lows, prices have bounced back strongly. Taking a long-term approach, both stocks and bonds remain near their record highs. Looking backwards, the patient investor appears to be sitting in a good place atop decades of bull market bond and stock performance.
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