Delojozafado

Corporate Bonds Haven’t Been This Cheap Since 1932

Bill Gross called the end to the bull market in bonds in the Spring of 2007! Bill Goss's Pimco is the sponsor of PMX. PMX is among a half dozen of Gross's Pacific Investments funds that have gotten their investors trashed. Share prices have been cut in half and dividends recently suspended. The M stands for Municipal . Hey what could be safer than state and city government debt? Corporate bonds? "the derivitives market has made it a bit more complicated..." Duh...

Corporate Bonds Haven’t Been This Cheap Since 1932

I had 70% of my pension buyout invested in an "investment grade" corporate bond ladder. One issue has already defaulted while three others have lost +35% of their valuations. That leaves the rest of the portfolio of "relatively safe" bonds down by 12%. As these bonds continue to mature I am moving out of corporate bonds and over to the preferred/converts of commodity producers like ADM-PRA, FCXPRM and CHKPRD. I am also buying Master limited partnership funds like KYE, MTP and BSR.
The TIP fund WIA appeals to me when after they just cut the dividend the price drops back, to once again yield +6%. Quantitative easing and Temporary Reciprocal currency agreements (TRCAs) are just the New Speak of a brave new world heading down the road to hyper inflation. How does rolling over these TRCAs every 60 to 90 days make them temporary? The TRCA is a geat example of Quantitative easing going on world wide. "They say" this means they are printing money. In reality there is a much more dangerous thing going on. Money is being created electronically at a 10,000 times faster rate than any printing presses could ever hope to achieve. Investment grade Corporate bonds have proven only marginally safer than stocks so far. Inflation will destroy what safety is left of that safety margin. These investment grade bonds should be selling at a huge premium to par given where treasury rates have gone! There are closed end funds of global blue chip stocks like BDJ,EXG,IGD,FAV, and LGI that make bonds look pathetic at this point with yields from 11 to 23%. Then there are the RCC and BEP that while closed end and also selling at HUGE! discounts to NAV have date specific dissolution dates when the assets will be liquidated at NAV and distributed to shareholders. Of course you have risk with return of capital, likely dividend reductions coming, and even the overall averages exceeding the 10/10 lows. With LGI you can even get an emerging markets currency exposure. When legitimate ratings agencies emerge and corporate bond rates stabilize in line with real risk for inflation and credit risk a return to bond laddering will at some point be a sabrient strategy once again. In the meantime it would seem wise to start working towards at least a 10% position in DGP any time gold slides below $800. I would also recommend investing in Canadian and Australian utility shares. Even the AECPRC is starting to look attractive for it's international (currency) footprint.