Joseph L. Shaefer

Looking to Invest in Bonds in Troubled Times? Caveat Emptor!

On Apr 23 07:21 AM Living4Dividends wrote:

> Joseph - Many authors on SA ignore comments/questions to their posts. So a big "thank you" for your generous reply.

My pleasure, Sir. And it stimulated me to take a look at your articles, as well, so the communication was worthwhile in both directions, I assure you!
Joe

Looking to Invest in Bonds in Troubled Times? Caveat Emptor!

Question: what do you think of the following ARK PSL. I guess my criteria should be discount to NAV and the fee ratio. Any other criteria you would recommend?

YES. Safety of principal. I note that ARK allocates about 50% of its portfolio in floating rate loans, which are usually non-investment grade. The rest seem to be in relatively senior corporate bonds. For me, personally, I wouldn't allocate much to ARK because I prefer a little less yield -- or the same yield if the purchases are better-timed -- and more safety.

PSL is the sector many advisors suggest buying for "defensive" reasons. I don't. I believe if the Bear is severe enough, EVERY stock gets taken down. Hence my preference, if I believe a serious decline is coming, for inverse ETFs and VERY well-selected deeply-discounted high-yielding securities...

And for the tax issues for a Canadian citizen, you'd have to consult a CPA. They seldom understand investing, and I certainly don't understand the tax laws!

Looking to Invest in Bonds in Troubled Times? Caveat Emptor!

CONTINUED FROM ABOVE...

On Apr 22 10:11 AM living4dividends wrote:
QUESTION: It seems that the US Bond market (25T on 2006) is much larger than than the US Stock Market (appx 17T in 2006)... Even if foreigners held 5T in US Bonds, it would show that US investors held appx 20T in bonds and 17T in stocks. This equates to appx 45% allocation to stocks. However the golden rule has been touted as 60% stocks, 40% bonds. This is is mainly followed by pension funds. As well, it is common wisdom that most individual investors are heavily weighted to stocks... Who is over-allocated to bonds? Do you know where I can look at this data ?
>
In addition, many US institutions are proscribed from holding "risky" investments like equities. Insurance companies that need to pay out benefits must be able to depend on the cash flow certainty of bond interest.

States and municipalities need a place to park funds both short- and intermediate-term. "The credit5 markets" consist of short-term commercial paper, debt swaps, and T-bills, not just ten- or twenty- or more year bonds. There are trillions in "credit" instruments that are used to settle week-to-week transactions.

Many institutional investors want / need the certainty of payback at maturity so they heavily weight their portfolios with bonds. If you have a defined-benefits program and you know you have 10,000 employees retiring in 20 years, you'd be a fool not to have the bulk of your investments to secure those payments in something you believe will still be there.

Would you rather be a creditor to a company or an owner? Creditors get paid off at some percentage of principal; owners are told those are the breaks. Some ownership is prudent but for many institutions, they'd be sued into submission if they didn't follow the "prudent man" guidelines. They might make better returns in equities but the legal fees would kill them.

Finally, what's good for the goose is decidedly NOT good for the gander. Most of the pension funds et al invest far more in bonds than in stocks -- even as they advise YOU to consider a 60/40 split as most appropriate for people still in their working years. Others advise 100 minus your age to be in bonds.

As to where you can get this data all neatly wrapped with a bow -- you can't. But spend a day on the various .gov websites, especially treasury.gov, and you'll come close!

Personally -- I'd rather buy stocks and for my income component, I'll own convertible bonds and convertible preferreds, high-yielding natural resource MLPs and the stocks of a few great utilities in high-growth regions that I bought when their yields were low but growing. I'm more 85/15 today -- and when the bear goes into hibernation it'll be more like 95/5...

Looking to Invest in Bonds in Troubled Times? Caveat Emptor!

On Apr 22 10:11 AM living4dividends wrote:
QUESTION: It seems that the US Bond market (25T on 2006) is much larger than than the US Stock Market (appx 17T in 2006)... Even if foreigners held 5T in US Bonds, it would show that US investors held appx 20T in bonds and 17T in stocks. This equates to appx 45% allocation to stocks. However the golden rule has been touted as 60% stocks, 40% bonds. This is is mainly followed by pension funds. As well, it is common wisdom that most individual investors are heavily weighted to stocks... Who is over-allocated to bonds? Do you know where I can look at this data ?

THANK YOU for an excellent question. The short answer is comprised of a few pieces...
that foreign nations and sovereign wealth funds hold more than $5 trillion in US assets and many of them are proscribed from owning equities.

Looking to Invest in Bonds in Troubled Times? Caveat Emptor!

On Apr 22 09:55 AM oldman wrote:

> any relation to the Stanford in the news?

Assuming you are referring to "Sir" Allen Stanford, the Texas/Antigua banker accused of running a Ponzi scheme by the SEC, and not the university or any of some other 15,000 Stanfords, NO. Herewith, a not entirely without tongue in cheek comparison of our two firms…

Allen Stanford of Stanford Financial Group…
Organized in Antigua, one of the more “liberal” islands for lax banking laws

Joe Shaefer of Stanford Wealth Management LLC…
Disorganized at Lake Tahoe, and subject to lifelong SEC, NYSE, FINRA, State of Nevada and peer review scrutiny

Allen Stanford of Stanford Financial Group…
Knighted in Antigua, not England. Gained his title of “Sir” Allen by spreading joy and Franklins around Antigua -- which gave him a title and passport in return

Joe Shaefer of Stanford Wealth Management LLC…
Got his titles (Private, Lieutenant, etc.) the old-fashioned way. Earned ‘em. Some in spots slightly less idyllic than Antigua.

Allen Stanford of Stanford Financial Group…
A dual citizen of the US, where he was born, and Antigua, where he plied his trade until the US Attorney asked him to not leave the US.

Joe Shaefer of Stanford Wealth Management LLC…
An American and proud of it. I don’t need no steenking “escape” passport.

.
Allen Stanford of Stanford Financial Group…
Owns the Stanford Superstars, Antigua’s cricket team and, according to the company’s website, also sponsors Vijay Singh and many other professional golfers.

Joe Shaefer of Stanford Wealth Management LLC…
Once played cricket on Barbados. Watches golf occasionally, but would rather ski, kayak, mountain bike, etc.

Allen Stanford of Stanford Financial Group…
Claims to have assets under management of $50 billion. Unfortunately, some of that may have been garnered from new investors wowed by hypothetical returns presented as if they were actual returns. (This according to former employees who FOR YEARS tried to get the SEC to investigate, all to no avail. Note to SEC: How many employee affadavits does it take to get you out of your offices to check out FRAUD? Can you spell P-O-N-Z-I??)

Joe Shaefer of Stanford Wealth Management LLC…
Stanford Wealth Management has a slightly lesser amount of assets under management. On the other hand, our assets are real.


Allen Stanford of Stanford Financial Group…
Personal fortune estimated by Forbes at $2.2 billion.

Joe Shaefer of Stanford Wealth Management LLC…
Inexplicably, Forbes neglected to include Joe on the most recent list of US billionaires. I’ll contact my friend Steve Forbes and see what the problem is.

Allen Stanford of Stanford Financial Group…
“Sir” Allen is separated from his wife and six children, but has a girlfriend, Andrea Stoelker, he may or may not have been with for 7 years. He may or may not have fired her recently from her “job” as president of the Stanford Super Series (Caribbean cricket) after she did or did not have a “liaison” with Chris Gayle, the captain of the Stanford Superstars cricket team and a somewhat more athletic specimen than Sir Allen. He (Stanford, not Gayle) was also recently the defendant in a paternity suit in Miami, the plaintiff with whom he may or may not have had two additional children.

Joe Shaefer of Stanford Wealth Management LLC…
Positively boring by comparison. He’s been married to the lovely and talented Heather Williams for 14 years. Ms. Williams has also been thoroughly reviewed and registered with the SEC, the NYSE, the NASD, etc., etc. She is the Chief Compliance Officer of Stanford Wealth Management, LLC, and keeps its books, records, and policies in complete conformity with all regulatory rules and guidelines. I’ll bet right about now, “Sir” Allen wishes he had someone like Heather to keep him from having to hire fancy-pants lawyers to defend him against angry investors. You have chosen poorly, grasshopper.

Does this answer your question, sir?

JS

Looking to Invest in Bonds in Troubled Times? Caveat Emptor!

THANK YOU for your comment, Toeser. You are correct -- if you hold to maturity they can only get you on the buy side. There will be no shenanigans on the sell side. Also, most discount brokerages will seek bonds for just a $5 or so commission per bond. Regrettably, they don't carry inventory so they are often at the mercy of bond trading desks as well...

On Apr 22 08:16 AM Toeser wrote:

> The author is generally correct, but you do not need to be deterred from investing in bonds as an individual, particularly if you limit your purchases to bonds you will hold to maturity. Learn how to use the tools on www.finra.org/Investor... where all bond trades are reported.

Looking to Invest in Bonds in Troubled Times? Caveat Emptor!

"you-know-who" ?????
I don't believe I look a bit like Voldemort! //grins//

> Good column, but the "physical resemblance" (at least according the picture being used here) to you-know-who is startling... At least
shave the mustache!