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extremebanker

extremebanker
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  • Are Bonds For Dummies? [View article]
    Gratian: I like closed end funds better than ETF's when it comes to bonds. I prefer individual issues over both but it is difficult finding decent yielding bonds in this market. Closed end funds don't have to deal with the problem of redemptions and new money coming in so they are able to maintain a more steady yield. I also own NUV, a non leveraged muni bond fund.
    Jun 8 09:10 AM | Likes Like |Link to Comment
  • My Fear As A Dividend Investor [View article]
    Many people get wealthy with just one stock. I remember very clearly the day Microsoft went public and I wanted to get some but I got tied up doing something else and never got around to it. I think $5000 invested in 86 would be worth over 2 million today.

    There are numerous examples of this. Companies like Phillip Morris and others. People have made fortunes from just buying one or two good stocks.

    Two biggest mistakes investors can make.

    Don't invest at all!

    Sell a real winner too quickly!
    Jun 8 08:47 AM | 5 Likes Like |Link to Comment
  • My Fear As A Dividend Investor [View article]
    Companies may not blow up overnight but they can deteriorate very quickly. Wachovia was a reasonable example of this. No way to get at the data that killed this franchise. I know a lot of locals who were getting $60,000 or more per year from dividends. Their income really got cut. Of course they had too much invested in one company but that is often the situation with successful investors. They invest in a bunch of companies but one really takes off and it winds up being half of the portfolio. I've seen a lot of smart people make a fortune from concentrated portfolios only to lose it later on.

    If you are going to have dozens of companies and rebalance then you might as well do a dividend fund. Probably won't be a lot of difference. You have a better chance of beating the market if you have a more concentrated portfolio. Over 8% of my portfolio is invested in the company I work for even though I haven't bought any shares for years and I have constantly been adding other positions. This is too much but it just happened over time. It pays a good dividend and had very nice growth. I have 30 posiitions so it's not like I tried to have so much in one company. Out of 30 positions 6 total over 60% of the portfolio. It just happpens!

    So the question becomes one of selling your best performing positions to rebalance your portfolio or take the additional risk and allow a more concentrated portfolio.

    Just a thought!
    Jun 8 08:37 AM | 7 Likes Like |Link to Comment
  • Dividend Stocks Give Rewards For Putting Up With This [View article]
    Dividends and interest can soften the blow from a real bear market but I realized in 87 that I did not have the emotional capability of sitting through a full fledged bear market with a 100% equity portfolio. It's one thing to write about but something else when you are watching hundreds of thousands of dollars evaporate from your net worth.

    This is why I use a combination of strategies rather than just one.
    Jun 7 03:20 PM | Likes Like |Link to Comment
  • Are Bonds For Dummies? [View article]
    I bought some of this yesterday after reading some comments by Gratian and others. It does have a good track record. I will add to this position until I reach 1% of my portfolio.
    Jun 7 02:26 PM | Likes Like |Link to Comment
  • Are You A Buyer Or A Seller In This Market? [View article]
    David: You are correct. A sample reversion to the mean trade would be when a security is trading below it's 200 day or some other moving average. It is bought with the idea that it will revert back to it's moving average. I prefer to buy dividend stocks when they have declined a good amount in price since I plan to hold them for a very long time. I consider this part of my "value" strategy. Also, I like to buy dividend stocks when their yield is higher than their five year average. They will probably revert to their average yield and offer me some profit in addition to income.

    Robert: This technique does not guarantee anything but it does help me be a little bit more patient on my purchases. I plan to hold these stocks for a very long time and I want to pick a good entry point.

    This strategy is contrary to my growth strategy where I invest in funds that are trending higher and are sold when that trend is broken. When I cash out some of my "growth" funds it frees up money to use for "value" investments. This way I am not frustrated by not having cash when the bargains are plentiful. My portfolio is divided between real estate, cash, fixed income, value and growth equities. The real estate, fixed income and value portions are buy and monitor. The growth and cash portion are trading positions.
    Jun 6 09:30 AM | 2 Likes Like |Link to Comment
  • Are Bonds For Dummies? [View article]
    Bonds offer negative correlation that equities can't.

    Bonds can offer higher current income than growth stocks or equity income. Of course, this is partially determined by the bonds you pick.

    One simple fact about interest rate risk and long term bonds. The yield curve is positively sloped from the lower left to the upper right. Many times when the fed starts raising interest rates the yield curve flattens. There is no parallel shift. In this case, long term bonds will suffer the least amount of decline.

    Just a thought!
    Jun 5 01:46 PM | Likes Like |Link to Comment
  • Are You A Buyer Or A Seller In This Market? [View article]
    It is profitable for DG investors to buy when blood is in the street.This reversion to the mean investing style can help increase income quicker and generate long term excess total return.

    It would stand to reason that foreign markets (especially Europe) would hold some of the most depressed stocks around. For example we can compare IDV to DVY. IDV is 25% off of it's 52 wk hi and yields over 5%. DVY is down 6% from it's 52 wk hi and yields 3.37%. Seems like foreign markets may be offering the greatest value at this time.

    Just a thought!
    Jun 5 01:22 PM | Likes Like |Link to Comment
  • Retirement: Beginner Blunders (Part 4) [View article]
    Trend trading can be profitable, reversion to the mean or contrarian trading can be profitable and carry trades can be profitable which is why I like all three and when combined they can substantially reduce risk.
    Jun 4 07:21 PM | Likes Like |Link to Comment
  • Why Dividend Stocks Can't Take The Place Of Bonds (II) [View article]
    CPA; You seem to believe that the only market factor involving bonds is interest rates. This is simply not true. NUV is a closed end, non leveraged bond fund. The fact that it traded at a 9% discount to NAV in late 07 and a 9% premium in early 09 has very little to do with interest rates. These market prices fluctuated based on supply and demand.
    May 31 09:10 AM | 4 Likes Like |Link to Comment
  • 4 Brand New Corporates Hitting The Market [View article]
    I want much higher yields and coupons to invest in longer dated bonds.

    I own JPM 7% 11/1/39 currently trading a little over 101
    I own COF 10.25% 8/15/39 trading a little over 104
    May 30 11:13 AM | Likes Like |Link to Comment
  • Why Dividend Stocks Can't Take The Place Of Bonds (II) [View article]
    "I am for education in all asset classes and moving between them when they are mispriced, to the best of our ability"

    AMEN!

    I think it could be safely said that Treasury yields are mispriced when compared to corporate or muni bonds and good DG stocks trading at reasonable valuations.
    May 30 08:34 AM | 3 Likes Like |Link to Comment
  • Why Dividend Stocks Can't Take The Place Of Bonds (II) [View article]
    This morning Options Express is showing the following yields:

    20 yr treasuries 2.82
    20 yr agencies 3.84
    20 yr AAA corp 4.70
    20 yr AAA munis 4.39

    That is a spread of 188 basis points from highest to lowest. I have seen these spreads balloon to 300 basis points or more.
    May 29 12:17 PM | Likes Like |Link to Comment
  • Why Dividend Stocks Can't Take The Place Of Bonds (II) [View article]
    CPA: You are not missing anything. It would probably be difficult to find a suitable swap substitute for this bond at this time. However, markets change. Spreads narrow and widen with the news flow.

    A practical example of a swap would be to sell a AAA treasury 3.125 due 2/15/2042 with a yield of slightly more than 2.837 and buy AAA Microsoft 5.2 due 6/1/2039 with a yield of 3.783. Of course, this assumes you have a nice profit in the treasury. The ratings are the same and the new purchase has less interest rate risk with the higher coupon and shorter maturity. Not my favorite trade but OK as an example. In addition, the long term capital gains get favorable tax treatment.
    May 29 10:10 AM | Likes Like |Link to Comment
  • Why Dividend Stocks Can't Take The Place Of Bonds (II) [View article]
    Yes, I invest in governments, tax free munis, taxable munis, corporates and MBS. These are all spread products. As spreads narrow or widen opportunities are created to perform profitable swaps. Anyone holding treasuries at this time can create a profitable swap with most other bond categories. Spreads have narrowed but there is still quite a bit of spead between treasuries and tax free munis of equal duration and rating.

    One of the best opportunities I have exploited was last year when the "blonde" made her predictions of widespread bankruptcy in the muni arena. I sold some very profitable corporates and bought higher yielding munis with better ratings and similar maturities.

    Many casual bond investors do not realize the benefit of bonds rolling down the yield curve or bonds rolling down the ladder. This is a very profitable total return strategy.

    Bill Gross has been very successful applying total return bond strategies to his bond portfolios.

    Another simple total return strategy is to invest more in munis when you think rates are going to rise. Treasury prices will fall quickly with increasing rates. Muni prices will generally fall 2/3rds as much due to their tax free nature. They have a lower standard deviation than taxable bonds.

    Markets are continously changing and to maximize yield and profit one must change with them.

    I hope everyone has a great weekend!
    May 27 02:30 PM | 3 Likes Like |Link to Comment
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