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jahowle

jahowle
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  • More Top Managers Batten The Hatches [View article]
    Prairiedog555 since your post market rates have obviously gone up and will most likely continue up for a bit longer. Why? If you feel the US economy is not improving and/or going declining the then the entire bond market has it wrong and you are right.

    However if the economy is getting better then the manipulation of rates by the Fed will come to an end and rates will move to a more normalized level. You have to separate the market rates from Fed rates and realize that if you own fixed coupon bonds and you believe the economy is getting better then you have to unwind that trade and find someone to buy your bonds. Since just about everyone that ever wanted to own a bond owns some (because the Fed has forced the individual saver out of CDs and money markets) who is an investor going to sell to? Investment banks reported reducing their corporate bond inventories by 78%!

    Rates will go higher and more than likely overshoot due to the lack of liquidity in the bond markets At some point they will find a bid and eventually settle back to somewhere around CPI plus 150bps-200bps.

    Good Luck
    Aug 21 10:51 PM | Likes Like |Link to Comment
  • A Perfect Storm Coming For The Muni Market? [View article]
    Defaults have been falling for the past 3 years. With 50,000 different issuers it is not wise to paint the market with a broad brush.

    Good Luck.
    Aug 21 10:36 PM | 1 Like Like |Link to Comment
  • A Perfect Storm Coming For The Muni Market? [View article]
    Well said.
    Aug 21 10:32 PM | Likes Like |Link to Comment
  • Taking The Under On Interest Rates [View article]
    Thanks for the article Elliott: "Predications about a bond bubble and subsequent bursting of said bubble are nothing new. These types of headlines have been in and out of the financial media since the Federal Reserve first started taking their "extraordinary measures" back in 2008...." Not exactly. These headlines have been around since rates plummeted from 17% to 5% on long Treasuries. The difference this time is that the long Treasury was not at 5% but at 2.50%.

    "A recent research report put out by Raymond James made a statement indicating the rapid movement in bond yields has gotten ahead of itself." (first, full disclosure that I am a 10+ year veteran advisor with RJ and a 30yr veteran of the bond markets) and yes the markets got ahead of themselves and have a bit of a rebound. But markets rarely trade on your, Bill Gross's or Jeff Gundlach's logic they trade instead on fear and greed. Everyone knows that the fixed income trade is a very crowded trade. 3x more money went into bond funds and bond ETFs last year than went into domestic equity mutual funds in 1999 and that was after a 30yr bull run in an asset class with what is basically a finite return.

    Because of this fear I expect that the next sell off will be more volatile than the last.

    I think it really boils down to whether market participants believe the US economy is getting better or worse. If most investors become convinced that the economy is getting better and will continue to get better then I think you continue to see a weaker and weaker bond market. Based simply on the fact that if things really are getting better then buyers know that the fixed income trade is eventually dead for now. An investor can try and time it but with so little liquidity in the fixed income markets getting out on time is nearly impossible. I have said and will continue to say that if you want to reduce duration exposure you have to be early.

    Good Luck
    Jul 15 06:56 PM | 1 Like Like |Link to Comment
  • Treasuries In Free Fall: Are They Cheap Enough To Buy? [View article]
    The markets watch the CPI and PPI so there is not much reason in using a different number. Everyone knows that CPI-U is consistently manipulated to be consistently wrong.
    Jul 9 09:30 PM | 1 Like Like |Link to Comment
  • What Detroit And The Stockton Bankruptcy Mean For Bonds [View article]
    What do Detroit, Illinois, Cal, Harrisburg have in common. They are run by the democratic party. By the votes today with promises of more in the future and then borrow the money later in order to keep the promise.

    It always amazes me that in a market with over 50,000 borrowers everyone likes to focus on only a handful of names that are in trouble due to poor management. You get poor management in corporate America as well and those companies go bankrupt. No one forces investors to lend to these shaky borrowers and yet they chase after yield. If the market would punish them for the mistakes they make there might be change forced upon them but that doesn't happen. Investors have incredibly short memories or they throw their money into a fund or ETF that is forced to buy the stuff the investor would never buy on their own.

    Case in pont is a recent corporate bond issue from Six Flags with a 'B' rating at 5.25%. That rate is lower than senior bank loan debt which makes no sense. The only way that happens is that the funds had so much dumb money dumped into them that they had to put it to work. The corporate CFOs are giddy about being able to borrow money at such a low rate given their shaky business models and weak balances sheets.

    I would say don't lend to borrowers who have over extended their pension obligations and are seeing a net decline in population growth.

    Good Luck
    Apr 4 07:04 PM | Likes Like |Link to Comment
  • More Top Managers Batten The Hatches [View article]
    Good article Howard. I wonder if either manager had any comments or concerns related to liquidity in the corporate market. A recent WSJ article stated that investment banks had cut their corporate inventories by 78%! That makes me wonder who all these bond investors will sell to? Investors poured a record level of dollars into fixed income funds and ETFs last year after a 30yr bull run in what is essentially a finite return market. Connect the dots and you get an ugly picture.

    Thanks and Good Luck
    Mar 17 12:38 AM | Likes Like |Link to Comment
  • Fixed Income: Fewer Places To Hide [View article]
    Thanks for saying that. just about all the levered fixed coupon funds are pulling back. I suspect that there is more to come.
    Mar 17 12:25 AM | Likes Like |Link to Comment
  • Is Now The Time To Buy Municipal Bonds? [View article]
    You should start with The Handbook of Fixed Income Securities, Eighth Edition by Frank J. Fabozzi and Steven V. Mann

    Recently I have read The Strategic Bond Investor by Anthony Crescenzi.

    Enjoy and good luck.
    Mar 3 12:04 PM | 1 Like Like |Link to Comment
  • The 'Great Rotation' And Other Nonsense [View article]
    Very Good. Although I am not sure why you own LQD. Do you expect corporate credit risk to fall allowing the corporate bonds to keep pace with the fall in Treasury rates? I assume you saw what the fund did in 2008.

    I always like to hear an opposing view, so thanks

    Good Luck
    Feb 20 05:40 PM | Likes Like |Link to Comment
  • Bernanke's Kryptonite [View article]
    Don't you guys get the point that neither party gives a damn about you or your opinions. Why does neither party simply pass the legislation they want when they control all three positions? Because that is not their objective. They play a game of king of the hill and we are simply collateral damage. When was the last time they passed any meaningful legislation that solved any of the 'real' issues we have? They can find billions if not trillions to fund a stupid and far too lengthy war or bail out hedge funds, I mean banks, but can't find money to provide for education, low income housing, jobs etc.

    Watch the upcoming reality show known as the Federal Government with this episode titled 'Debt Ceiling Drama'. They seek TV time just like the Kardashians. Would any of us know their names if they just did their jobs instead managing by crisis and creating the media hype. This buys them free TV face time keeping them relevant in the eyes of their backers. It is a show that may be close to 'jumping the shark'.


    Good Luck to everyone.
    Feb 19 11:52 PM | 4 Likes Like |Link to Comment
  • The 'Great Rotation' And Other Nonsense [View article]
    Macro: I take you are long gold and Treasuries and short stocks and high yield bonds.

    I am not sure what your definition of a 'massive bond rally' is but if the 10yr falls all the way to .75% in the next year you make a whole 12% and if the Fed can push it all the way to 0.50% you make a one time whopping 14%. That is not what I would call a massive rally and it is one that will not likely be repeated. If you are calling for a global economic meltdown then there is no reason to be on an investment website. For the massive rally to happen the US economy will have to go into the tank which means so will just about everyone else.

    Data is interpreted in different ways. And I am certain the data can be presented in order to make the opposite case. That is what makes markets.

    How long do you think investors will be willing to lend money at below the rate of inflation, which many people say is under reported?

    Having said that I am always fearful of collapses but I can almost always find some value in the equity and fixed income markets.


    Good Luck
    Feb 19 10:00 PM | Likes Like |Link to Comment
  • The Preferred Stock Marketplace For 2013 [View article]
    PGX has very high interest rate risk. It does not make sense to take on 'high interest risk' when interest rates are near all time lows and near absolute lows. The PGX issuer website shows an average maturity of 35 years and a duration of only 3.10 yrs. That duration is very misleading and should rates rise above the average coupon you will get a huge jump in duration and even more volatility in price. Both PGX and PFF have low quality portfolios made up of junior securities with extremely long maturities and short call provisions. You put all the cards in the hands of a low quality borrower.

    Senior Bank Loans are much better option in my opinion. They are far higher in the capital structure with good yield and almost 'no' interest rate risk. You can also find fixed income funds paying around 5% with little or no interest rate risk.

    Good Luck

    these are my opinions only and should not be construed in any way as the opinion of my employer or its employees. And these opinions are not meant to sell you anything. Thanks
    Feb 19 09:31 PM | 2 Likes Like |Link to Comment
  • Bernanke's Kryptonite [View article]
    Eric: I am not sure if the point of your article was to try and discredit the BLS/CPI figure or to suggest oil prices are going substantially higher. In regards to the CPI figure, that can be debated all day but for investors what matters is how the market is pricing inflation. And yes I agree that the Fed more than likely underestimates inflation as that action helps keep the COLA adjustments lower for all the social programs. So tell us how to take advantage of a higher inflation rate than what is being reported.

    WTI is going lower. It is simply supply & demand. With the many finds in the US we will have to have a robust economic recovery for demand to stay up with supply.

    The only time we have had any sustained high levels of inflation was in the 1970's and early 80's. It is doubtful that we will have inflation again at that level for that same reason which was too many dollars chasing too few goods. With the global flattening we now have an under utilized global workforce and under utilized manufacturing capacity. So in order to get high troublesome inflation it is going to have to come from another source. With labor making up 70% of most companies cost the factors making up the other 30% factors will need to increase dramatically, housing, energy, health care etc.

    That leaves us with a severely declining dollar as the other way to get high inflation. Although we have our problems I don't see our currency taking a dive against the other major currencies.

    Good Luck
    Feb 17 10:53 PM | 2 Likes Like |Link to Comment
  • The Bubble In Bonds [View article]
    Koy: the tracking error on TBT is so wide that the only ones I can see making money are the market maker and the futures traders.

    The fixed income market and the myriad of instruments and derivatives associated with it is rarely understood by the novice investor. The learning curve is simply too steep.

    You can start with reading "Bond Markets, Analysis, and Strategies" (7th Edition) by Frank J. Fabozzi

    My suggestion would be to not try and 'speculate' in the bond market but instead make good loans to good borrowers at what you feel is an acceptable rate. That is essentially what the bond market is.

    I think the bank loan market offers investors a fair risk/return ratio currently.

    Good Luck
    Feb 14 10:05 PM | 1 Like Like |Link to Comment
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