Posts Tagged ‘Puerto Rico’

Slow Moving Bond Bear To Quicken

October 16th, 2017 by Kurt L. Smith

The trend is indeed your friend and the only friend one has needed these past few years has been the one in stocks. Despite the fact that municipal bonds were the best performing asset class in 2014 (yeah, that long ago), stocks are where the action is. Enjoy it, because trends change.

When it comes to bonds, only two words are needed: low rates. Forget trend change; forget even a price or yield change. When it comes to bonds, low rates is all you need to know. Spoken by stock market pundits, why would anyone be concerned about bonds? Stocks are where the action is.

Rates are indeed low, but they have been lower. The reason we care is because the trend is your friend and when it comes to bonds, the trend has changed. You know it because I keep telling you. Sure it’s a lonely proposition, but the market continues, albeit v-e-r-y slowly, that I am indeed correct.

In June, I believed a 2.13% low on the ten year treasury completed the bond market’s correction of the 1.32% to 2.64% initial move up. Yep, I tried to hurry the market. In September the market hit 2.02%. But last week we were back to 2.40%. I like my proposition!

At rates of 2-this or 2-that, every stock investor will continue to claim the low rate mantra. But after a 1,000 or 5,000 point decline in the Dow, the perspectives will change. The story will change. (more…)

A Buy and Hold World

May 5th, 2017 by Kurt L. Smith

The municipal bond market is not so much of a market as it is a distribution scheme. Each week new issues of municipal bonds are sold, or distributed, to buyers looking for bonds like these offered. The bonds may disappear immediately or usually they are all distributed to buyers over several weeks.

The end result is the bonds are distributed. We can’t control whether or not any bonds are later offered or enter the marketplace. Last month I wrote that it only takes one: one bond coming back into the marketplace that may prove to be worthwhile for us.

This means the bulk of all municipal bonds are bought and held. With long-term bond yields trending down for thirty-plus years (and prices trending higher), a buy and hold strategy has been a winning strategy.

Yet somehow, someway, bonds come into the marketplace each and every day in an attempt to be redistributed. Thankfully not every bond holder buy and holds, so at least we get an opportunity to see if the bonds they are selling are worth buying. (more…)

Our Plan Continues To Come Together

June 14th, 2016 by Kurt L. Smith

There has been no letup in the municipal bond market this year. Yields are low, prices high and firm. Yet we continue to find worthwhile bonds which I believe is a testament to our approach.

Thankfully, the municipal bond market provides a tremendous amount of variety. We have fifty states plus Puerto Rico, Virgin Islands and Guam. We have general obligations, revenue bonds of an almost endless variety, along with debt secured by countless types of assets. All this variety and that’s before we throw on the essentials for fixed income: a coupon rate and maturity.

This variety, the anti-generic, is a crucial component of our approach. It is unique in the investment world and this is tremendously important as the world of investing has largely become one big, high-priced, low yielding world in which returns are piddling, that is when values aren’t plunging.

Asset classes, across the spectrum, are struggling, some plunge and pop, but overall it is downright tough to have a plan to diversify a portfolio and feel comfortable that you are making progress with your investments. Traditional thinking has failed to work, or just plain failed, while unconventional thinking seems to be …conventional. Where are the ideas that work? (more…)

Over The Top

May 16th, 2016 by Kurt L. Smith

For the past several months we have discussed the manic moves of municipal bonds. As one of the best performing asset classes last year, it looked like we would be poised to experience follow-through this year with additional new money flowing into municipal bonds.

Indeed this has been the case. Money flows into tax free municipal bond funds continues week after week. Not only are new deals like the one’s presented at the bottom of each month’s newsletter selling well in the marketplace, we are also seeing intense competition for bonds in the secondary market. In a word, the market in my opinion is “hot”. But after several months of “hot”, the market seems to me to be “over the top”. (more…)

Blessed Are Municipals

April 11th, 2016 by Kurt L. Smith

Rare is my newsletter with good things to say. How about “it is good to be an investor in municipal bonds!” As I wrote several months back, municipals were one of the top performing sectors last year. Now we are going to discover how long the ride may be.

I am not recanting my position that Bonds peaked in price (bottomed in yield) way back in 2012. I stand by my position. But after a quick swoon in 2013, municipal bond prices have been rising and have remained quite firm (low volatility) as they have made their way back towards the highs of 2012.

Low volatility and rising prices…in this market!? This is certainly a recipe for those not familiar with municipal bonds to get acquainted. Municipals appear to be a bright spot, not only in the fixed income markets, but in investing in general. (more…)

Greece, China and Puerto Rico, Oh My!

July 22nd, 2015 by Kurt L. Smith

The mile markers continue to move on by. Kicking the can down the road appears to be running out of steam and now people are truly being hurt as real losses are now affecting millions of people. (more…)

Stocks, Bonds & Optimism

August 8th, 2014 by Kurt L. Smith

Years ago, in the middle of the raging bull market of the late 1990s, I taught a bond class in SMU’s continuing education program. One notable feature I highlighted in the class was how bond performance had matched stock performance since the beginning of the bull market in the early 1980s.

(more…)

“Welcome To The Everything Boom”

July 20th, 2014 by Kurt L. Smith

The July Letter almost didn’t make it as the same old, same old markets continued their gravity defying ways. On July 7th however, The New York Times saw fit to publish this headline as their front-page lead: “From Stocks to Farmland, All’s Booming, or Bubbling.” (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…)

The Fed Chooses To Punt

October 7th, 2013 by Kurt L. Smith

The Federal Reserve Board chose to do more of the same in September and will continue to buy bonds at a $1 Trillion annual pace. All that hub-bub earlier in the summer about pulling back, now coined as tapering, well you can just forget that. The Stock market is at recovery highs and why rock the boat? (more…)

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