I'm Not Gonna Brag, But I Did Recommend STAG [View article]
Thanks, Rich. My life is INCREDIBLY busy right now...I miss contributing...it's out of the question for at least the next 3 months...I am hopeful when life settles down to get back to it in late 2013. Thanks for the shout out...
If you were a contributor, you would be labelled as such. You linked to an entirely different person. I wonder how he would respond if I emailed him your comment.
Your Bond Allocation For 2013: It's Time To Lower Your Risk [View article]
I had to laugh at the fact that you were the biggest seller of beer at Chapel Hill. My husband is from NC and went to Chapel Hill, and UNC is statistically THE most beer-drinking college in the nation. That's saying a lot, considering I'm from Austin and UT might give UNC a run for their money. You must have made out like a bandit ;-).
Your Bond Allocation For 2013: It's Time To Lower Your Risk [View article]
@Gratian - thanks. I really wish I could contribute more. I am in a season of extreme difficulty with my family. I have three teenagers, and it seems I cannot escape from demands, both good and downright heartbreaking, this time in my life brings. The hours and due diligence I pour into my articles is now a luxury of time I don't have. I trust my priorities are in order: in two years, all my chicklings will have flown the coop, and I may wish for a time where life was more demanding...
Your Bond Allocation For 2013: It's Time To Lower Your Risk [View article]
@mike - it will only be a disaster if you are in bond funds or perpetual maturity bonds or preferred shares, or are locked into long bonds with low interest rates.
If you are in short-term bonds or preferreds with a fixed maturity, the market value may get initially slammed but the principal will be returned upon maturity. Not ideal, but not a disaster either.
Your Bond Allocation For 2013: It's Time To Lower Your Risk [View article]
@extreme - I should have used the term "redemption" or "maturity" date, which is what I meant to say, instead of "call", sorry. I look for both a near term call and redemption, although there are precious few of those out there.
Your Bond Allocation For 2013: It's Time To Lower Your Risk [View article]
Sure, if you never intend to sell... The problem comes if / when you need to sell.
With a singular instrument with a fixed call date with a good credit rating, the issuer (and the price you bought the share for) will determine the principal you get back.
With any sort of fund - CEF, ETF, mutual fund - the *market* determines the principal you get back, not the issuer. If you ever want or need to sell a fund, you have no assurance of return of principal.
Another problem with funds is their affinity for lowering distributions. PFF, in fact, just lowered their distribution substantially for 2013. With a fixed single instrument you get the same distribution every time, and with a floating rate, you get a distribution that increases with the CPI or the interest rate.
The recipe of reduced distributions over time PLUS bond funds getting hit hard with an interest rate hike EQUALS bad news if you want to hold PFF long term...
I really think you are better off just owning single preferred shares.
Your Bond Allocation For 2013: It's Time To Lower Your Risk [View article]
I just read one prospectus, for NXE-C, and here is what it says...the answer sounds like "yes" and "no" on tax-exemption:
Tax Exemption. The dividend rate for MTP Shares assumes that each month’s distribution is comprised solely of dividends exempt from regular federal and Arizona income taxes, although a portion of those dividends may be subject to the federal alternative minimum tax. From time to time, the Fund may be required to allocate capital gains and/or ordinary income to a given month’s distribution on MTP Shares. To the extent that it does so, the Fund will contemporaneously make a separate, supplemental distribution of an amount that, when combined with the total amount of regular tax-exempt income, capital gains and ordinary income in the monthly distribution, is intended to make the two distributions equal on an after-tax basis (determined based upon the maximum marginal federal income tax rates in effect at the time of such payment) to the amount of the monthly distribution if it had been entirely comprised of dividends exempt from regular federal and Arizona income taxes. Alternatively (particularly in cases where the amount of capital gains or ordinary income to be allocated to the MTP Shares is small), the Fund will satisfy the requirement to allocate capital gains or ordinary income to MTP Shares by making a supplemental distribution of such gains or income to holders of MTP Shares, over and above the monthly dividend that is fully exempt from regular federal and Arizona income taxes".
Your Bond Allocation For 2013: It's Time To Lower Your Risk [View article]
Quantum lists them as qualified, however quantum also does not list a separate column for "tax-exempt", which one would think would be the case since the preferred is a muni preferred....
Your Bond Allocation For 2013: It's Time To Lower Your Risk [View article]
Yep. Nuveen has put out probably 30 or so of these. You can find them on quantumonline.com. Click the tab to show all preferred shares, and they are on page 7.
The downside is the yield is low - between 2.5% - 3.0%. Last I checked, most are trading right at, or just over par ($10).
The advantage of holding a single bond or preferred is that you get a "pay day" on the par price at a call or redemption. This insures you get your principal back.
As for your remark about getting your CEF "under par"...I think you are confusing NAV with redemption. That you get your fund under NAV has nothing to do with redemption. You are simply getting the fund at a discount. The fund itself is still ***perpetual***, meaning it has no par or redemption price. If the fund goes underwater, so does your principal.
This differs from a fixed redemption date single issue. No matter what price you pay for a single issue bond or preferred, you get back the par or redemption price back. So, if you buy a single issue at $22.50 per share, and it's redeemed in two years at $25.00, you get back $25.00 on the principle. That's a nice pay day of 10+% per share (more if the redemption includes unpaid interest). However, if you pay $23.00 a share on a fund, and it declines 20%, you bear the loss, period. It's perpetual, there is no redemption and no future pay day.
Do you see the problem with funds now, and why so many are advising to get out now, before a rate increase?
Your Bond Allocation For 2013: It's Time To Lower Your Risk [View article]
Bluelight makes a good point. If you bought single issue bonds or preferred shares which have a future call or redemption, and you are not concerned with how the market evaluates your principle, then why worry? You just need to be prepared to hold fully until redemption, and even DCA when the market finally prices in a discount.
FUNDS are the issue. I hold a handful of muni CEFs that have done well, but I will be looking soon for an out. I am looking instead to a handful of preferred share munis for replacement. I will put in a GTC order for under par, DRIP them, and hold until redemption. That way if there is an interest rate hike I will get future DRIP shares at a discount.
I would wait to go all in, given that an interest rate hike will happen at some point, but I need diversity as to tax-sheltering my dividends (I also DRIP my MLPs, which I will also hold ad infinitim).
Klein I.S.D. Are you in The Woodlands? If so, please tell your school to stop beating up Klein Collins in football playoffs. We'd like to get past the first round already ;-).
I'm Not Gonna Brag, But I Did Recommend STAG [View article]
I'm Not Gonna Brag, But I Did Recommend STAG [View article]
It's Time To Buy Some Gold Miners [View article]
It's Time To Buy Some Gold Miners [View article]
Your Bond Allocation For 2013: It's Time To Lower Your Risk [View article]
Your Bond Allocation For 2013: It's Time To Lower Your Risk [View article]
Your Bond Allocation For 2013: It's Time To Lower Your Risk [View article]
If you are in short-term bonds or preferreds with a fixed maturity, the market value may get initially slammed but the principal will be returned upon maturity. Not ideal, but not a disaster either.
Your Bond Allocation For 2013: It's Time To Lower Your Risk [View article]
Your Bond Allocation For 2013: It's Time To Lower Your Risk [View article]
With a singular instrument with a fixed call date with a good credit rating, the issuer (and the price you bought the share for) will determine the principal you get back.
With any sort of fund - CEF, ETF, mutual fund - the *market* determines the principal you get back, not the issuer. If you ever want or need to sell a fund, you have no assurance of return of principal.
Another problem with funds is their affinity for lowering distributions. PFF, in fact, just lowered their distribution substantially for 2013. With a fixed single instrument you get the same distribution every time, and with a floating rate, you get a distribution that increases with the CPI or the interest rate.
The recipe of reduced distributions over time PLUS bond funds getting hit hard with an interest rate hike EQUALS bad news if you want to hold PFF long term...
I really think you are better off just owning single preferred shares.
Your Bond Allocation For 2013: It's Time To Lower Your Risk [View article]
Tax Exemption. The dividend rate for MTP Shares assumes that each month’s distribution is comprised solely of dividends exempt from regular federal and Arizona income taxes, although a portion of those dividends may be subject to the federal alternative minimum tax. From time to time, the Fund may be required to allocate capital gains and/or ordinary income to a given month’s distribution on MTP Shares. To the extent that it does so, the Fund will contemporaneously make a separate, supplemental distribution of an amount that, when combined with the total amount of regular tax-exempt income, capital gains and ordinary income in the monthly distribution, is intended to make the two distributions equal on an after-tax basis (determined based upon the maximum marginal federal income tax rates in effect at the time of such payment) to the amount of the monthly distribution if it had been entirely comprised of dividends exempt from regular federal and Arizona income taxes. Alternatively (particularly in cases where the amount of capital gains or ordinary income to be allocated to the MTP Shares is small), the Fund will satisfy the requirement to allocate capital gains or ordinary income to MTP Shares by making a supplemental distribution of such gains or income to holders of MTP Shares, over and above the monthly dividend that is fully exempt from regular federal and Arizona income taxes".
...and there's more that I didn't copy/paste...
Your Bond Allocation For 2013: It's Time To Lower Your Risk [View article]
Time to read some prospecti, I presume ;-).
Your Bond Allocation For 2013: It's Time To Lower Your Risk [View article]
Your Bond Allocation For 2013: It's Time To Lower Your Risk [View article]
The downside is the yield is low - between 2.5% - 3.0%. Last I checked, most are trading right at, or just over par ($10).
The advantage of holding a single bond or preferred is that you get a "pay day" on the par price at a call or redemption. This insures you get your principal back.
As for your remark about getting your CEF "under par"...I think you are confusing NAV with redemption. That you get your fund under NAV has nothing to do with redemption. You are simply getting the fund at a discount. The fund itself is still ***perpetual***, meaning it has no par or redemption price. If the fund goes underwater, so does your principal.
This differs from a fixed redemption date single issue. No matter what price you pay for a single issue bond or preferred, you get back the par or redemption price back. So, if you buy a single issue at $22.50 per share, and it's redeemed in two years at $25.00, you get back $25.00 on the principle. That's a nice pay day of 10+% per share (more if the redemption includes unpaid interest). However, if you pay $23.00 a share on a fund, and it declines 20%, you bear the loss, period. It's perpetual, there is no redemption and no future pay day.
Do you see the problem with funds now, and why so many are advising to get out now, before a rate increase?
Your Bond Allocation For 2013: It's Time To Lower Your Risk [View article]
FUNDS are the issue. I hold a handful of muni CEFs that have done well, but I will be looking soon for an out. I am looking instead to a handful of preferred share munis for replacement. I will put in a GTC order for under par, DRIP them, and hold until redemption. That way if there is an interest rate hike I will get future DRIP shares at a discount.
I would wait to go all in, given that an interest rate hike will happen at some point, but I need diversity as to tax-sheltering my dividends (I also DRIP my MLPs, which I will also hold ad infinitim).
Just How Risky Are REITs? [View article]