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  • Myths Vs. Realities: Understanding Current Fundamentals Of The U.S. Bond Market  [View article]
    Nicholas, On a risk vs. reward assessment of interest rate movements in the future, it is virtually impossible to justify purchasing zeros at current prices or not taking profits on previous purchases now at a profit. The delta probability of -1% drop in the 10 yr. vs. a +1% move upward is far greater on the latter than the former. One IS an interest rate speculator as a holder of "zeros" without question.
    Feb 25, 2015. 01:51 PM | Likes Like |Link to Comment
  • Myths Vs. Realities: Understanding Current Fundamentals Of The U.S. Bond Market  [View article]
    One might consider that a "strip" does NOT respond in current value to a regular bond in the face of either rising or declining interest rates. Just Google up a chart and take a look. "Strips" are bonds on steroids. If one is averse to owning stocks on margin, then one should be equally or greater fearful of owning "strips" when interest rates rise. Of additional concern is that there are no interest payments made on zero coupon there is no cushion to the evaporation of current value in rising interest rate environment. Surely investors can hold bonds to maturity and regain their original investment. But in a rising interest rate market, what does that same dollar value purchase at maturity? In fact, a zero coupon owner is an interest rate trader...not an investor, unless there is very strong evidence that interest rates are going to drop long and hard until the maturity of their "strip". This is virtually impossible from any part of today's yield curve.
    Feb 19, 2015. 06:39 AM | 2 Likes Like |Link to Comment
  • 48 MLPs For Income: Are The 10% To 20% Yields For Real, Or Too Good To Be True? Part 4  [View article]
    Potentially Congress can, and probably will, attack the tax structure consideration of MLP's (and potentially REIT's as well) in the near future. This will be devastating in many ways to investors who have sought out yield to bolster their retirement income. Few MLP's have the capacity to do what Kinder Morgan so wisely's almost like KM had an inside track on watching legislation being drafted which would kill MLP's.
    Dec 5, 2014. 05:38 AM | Likes Like |Link to Comment
  • Rates And Reality  [View article]
    The answer is to do the same thing if there continues to be NO inflation (the majority of that reported number comes from wage inflation)....measure your need for cash flow versus your risk of having either minute bond yields (with potentially declining principal value) or tax favored dividends which historically have increased.
    Aug 20, 2014. 08:44 AM | Likes Like |Link to Comment
  • Dividend Stocks Are Not Bond Proxies  [View article]
    Obviously emerging market debt has more yield and more upside...but certainly more downside as well....currency risk included. If not in equities, then why in U.S. bonds at all?? Is 1.75% yield with risk better than 0.25% (money market) yield or perhaps a bit higher in CD's with virtually none? Remember the duration risk you must take in corps or tsys to get any yield. What's it take to eradicate the 1.5% differential? Not why bother. A "barbell" type portfolio strategy of cash/CD's and dividend aristocrats makes absolute sense...and with a very conservative beta. There will even be a time when that cooling cash will be a very deployable asset.
    Apr 15, 2013. 06:30 PM | Likes Like |Link to Comment
  • Dividend Stocks Are Not Bond Proxies  [View article]
    The truly wonderful thing about fixed income is that in maturities of less than about 30 years, you are GUARANTEED to be a loser. Taxes and inflation anyone? That is hardly worth the "buffer" IF the markets tank again. While the dividend aristocrats have 30+ year histories of increasing dividends over time (perhaps a TRUE buffer to inflation at least), they also have upside to their values. All that can make a bond appreciate is an upgrade or a declining interest rate environment. On the other hand, increasing interest rates will decimate a bond portfolio...GUARANTEED, unless you keep your duration very short...and then, once again you are a loser because taxes and inflation outpace your coupon. Pick your poison, depending upon how much income you need to derive from your investment portfolio. I for one do not like GUARANTEED losses, be they in principal value or buying power. Leave that to the overweighted cash and bond portfolios.
    Apr 14, 2013. 08:51 PM | Likes Like |Link to Comment
  • The Rising Risk Of Investing In Bond Funds And ETFs  [View article]
    Any significant rise in interest rates will greatly outstrip the additions made to TIP principal values...especially when the government controls assumptions of CPI. One must remember that with TIPs you still essentially just own a U.S. Treasury bond...and now with virtually no yield...anyone note a lack of TIP payout? Understand that the government didn't create this product with the intent of protecting its buyers....but of creating a larger market for sale of greater debt.
    Feb 24, 2013. 09:16 AM | 4 Likes Like |Link to Comment
  • Corporate Bond ETF Risk Eases Up  [View article]
    'Ever think that the bonds in the ETF's are trading at a premium (a circumstance resulting from declining rates) and that the principal value (NAV) will be dropping as these bonds within start to reach maturity or call dates? Go check out closed end funds and find far greater yields, particularly on the tax-free side, and see the ETF situation even more magnified.
    Nov 6, 2010. 08:40 AM | 3 Likes Like |Link to Comment