Notice
May 2nd, 2005 - 10:33 pm
Busy here working off what little ass I have.
Two muni bonds I’d owned for a decade came due, and I’m trying to find something to replace the 6% tax-free income I’d been getting — and in today’s market, that ain’t easy. Well nigh impossible.
So I’m working too much, playing too little, and blogging not at all. Not to mention really, really cranky.
Grr.
PS If I haven’t answered your email, it’s because I’ve barely looked at my inbox the last two weeks. It’s been that kind of time. When you’re spending the principal on the mortgage instead of the income, email becomes a luxury. Grr, again.
Reinvesting muni cash in long dated instruments could have a pretty high opportunity cost. Short rates are up 200 basis points over the last year and long rates have barely budged. The spread between two year and ten year bonds is currently pretty small and I don’t think you’ll see short rates come down much anytime soon. Which suggests it is long rates that will rise and send the price of your muni’s down the tube.
I am not an investment advisor (nor do I play one on TV) so take it with a grain of salt, but you might want to consider hiding in a short duration muni index fund for the next 6 to 12 months.
Don’t I know it!
Problem is, those short-duration funds are getting, what, 2% if you’re lucky?
Where I once got 6k, I’d have to settle for 2k. Grr. No wonder I’m grumpy.
Then again, there are some excellent offshore funds, if I don’t mind the increased risk and complete taxability. Methinks the dollar will get weaker before it gets stronger, so that could make a lot of sense.
As you’ve probably already guessed, my life these last couple weeks has revolved around spreadsheets and phone calls.
And I never, never trust my broker. Oh — and I trust bond calculators even less.
Grr.
Forgot to add.
The cash is sitting in UMB’s tax-free overnight fund right now. And that ain’t earning even 2%. Not even close. Cash is cheap these days.
Mm. What about investing in some real estate? Make that low interest rate work *for* you.
Real estate is good here in C.S.- I recommend it! Very good returns.
Sorry, not much sympathy from this corner. I’m still trying to pay off my 22% credit card debt I ran up while unemployed.
That said, I got burned with REITs in the late ’80s and missed the recent good times. Also not being an investment adviser, real estate seems risky: It’s too obvious. Too much money chasing it. btw: Actually owning rental property, as opposed to REIT shares, isn’t an investment – it’s a job.
Good luck.
I have been watching Enerplus Res Fund (ERF) for two years now. I still don’t own any, but I am sore tempted. They just look to good to be true. They are currently paying a 9.5% dividend on a monthly basis. I am not sure what the Tax would be as they are a foreign fund. (Calgary AB). They do trade on the NYSE.
1) Energy stocks (we need more energy)
2) Health care stocks (baby boomers are getting gray)
Which ones, is up to you.
DONT BUY GM!
the only 6 % deals you can get in muni land right now are of the non rated variety. we sell plenty of them to institutional investors, but very few to the public.
Ya know, if you were a true RWDB, conflict diamonds and munitions stocks would cover you.
I’d be thinking financial services stocks… more people are finding more ways to get between our money and the things we want/need to buy these days, and I don’t see that trend reversing. But that is about as much an amateur opinion as you can find…
And here I thought you got nicked by the IRS.
Via Econopundit, Fairmodel’s been updated:
—Inflation: Inflation as measured by the growth of the GDP deflator (GDPD) is predicted to be between 3.5 and 3.7 percent in 2005 and 2006. These values are higher than those in the past few years, and so inflation is predicted to increase.
Monetary Policy: The estimated interest rate rule (equation 30) is predicting that the three month bill rate (RS) will rise to 2.9 percent by the end of 2005. It then rises to 3.4 percent by the end of 2006.–
My dad owns FLA Power, I think, he’s been happy w/it.
And while not at 6%, HSY, but I’ve been in it a long, long time.
Bob Brinker now has a fixed income letter available.
Don’t know if there still is, but there used to be a 4.75 shorewood, IL park district bonds, very short term, tho.
General Motors bonds.
* giggle *
why dont you go out and insure small opners of GM bonds.. say.. 1 year terms…
I would avoid real estate. You should know this because everyone is talking about it, just like China. Remember what everyone was talking about in 1998? Exactly! Bonds are tough right now with the rising interest rate environment. You may want to look at a laddered cd portfolio, though I would look at equities considering your relative youth. One idea is PPH (Amex: 75.13), a pharmaceutical holder with a yield of 2.24% and a crazy bullish chart pattern. Note, I am not trying to solicit business in case the SEC or NASD sees this! I mention this because I have been looking for ideas for my clients as well. The oil universe has done well, but I see oil testing the low 40s pretty soon and the E&P stocks will get hurt. Financials can also suffer in a rising interest rate environment, though there are several worth taking a look at such as AHL (NYSE: 27.55). I see the dollar weakening a little bit, but I am a little inclined to take the contrarian view since everyone assumes that the dollar is going to plummet. On a final note, if you don’t trust your broker then find one you can. What is the point of having a broker if you can’t build a solid foundation with him/her?
If you’re looking to park the money and for ~6% return and have a mortgage or HELOC (home equity line of credit) it might be a good idea to use the money from the bonds to pay off some of the principal.
If you’re looking for long-term appreciation and don’t need monthly interest payments, I’d suggest buying land. Other than raw land I’d be very cautious about buying real estate right now though.
income trusts in canada, focused on oil and many other things are looking fairly good. stuff like encana. could think of doing a broken trust deal, investing $ into firms that have cratered their stock by cutting distributions. you still get a good (high) yield and also have a decent chance of making some decent cap gains on as they prove their way back. though some of them are very sick (energy trusts not making distributions as their costs are high and they’ve hedged too much production, missing out on the high prices. they could make huge rebounds when the hedge runs out and they start making full distributions again: increases in distributions plus big cap gains. downside: ridiculously risky and nowhere near comparable to your low-risk tax free munis.)
no one is making 6% tax free these days. sorry, it sucks. just like the people trying to roll over 1985 t-bills: nowhere can you get 18% risk free rates.
On the subject of energy income trusts, look at the dividend of Petrofund Energy Trust, symbol PTF.
Distributes regular as clockwork.
My employer (a midwest-based bank) offers a CD at 4.48% for 48 months. Decent rate, but not tax free. Dunno where you can do much better.
Our MMDDA is at 3.5% for over $100,000.
And, no, according to the lastest reports I’ve seen we are not begging for deposits to stave off insolvency like dear departed Superior Bank.
You could always invest in Blogger News Network. I mostly guarantee that very little of your money will be spent on cocaine and hookers, and you might even see some of it again someday.
–but I am a little inclined to take the contrarian view since everyone assumes that the dollar is going to plummet.–
According to today’s WSJ – Buffet’s betting $21 BILLION it’s going down, down, down.
He and BH stockholders lost about $300m so far.
There’s some 3.5% shorter-term CDs in my neck of the woods.
You’re fortunate you had bonds that weren’t called and refunded at lower rates in the last 2 or 3 years.
That doesn’t help you figure out what to do next, but it is a silver lining.
Poor baby. Are people who actually work for a living supposed to feel sorry for you?
I have an investment opportunity in Nigeria that’s totally risk free.
You can find savings accounts that pay 3% or better (e.g., ING), the 91-day treasury is returning a mostly tax-free 2.931%, and the mostly tax-free I bond is at 4.8%.
It’s not 6%, but you could do worse (see GM, above).
Lemme know if you want some action on The Derby this Saturday. A wee bit speculative as an investment, but, on the other hand, a pack of thoroughbreds thundering down the stretch is a wee bit more aesthetically pleasing than a spreadsheet.
If you really don’t trust what your broker is peddling, just get in touch. I’ve been doing munis for 23 years, as a trader not a salesman, and I give advice to my friends all the time without writing any tickets with them.
One thing I stink at is Colorado land bonds, though. If you’re not out there you shouldn’t screw with those.
Take 4 1/2% or sit on the sidelines a while. After all, if they all say interest rates are going up, well, then they have to, right?
still waiting in lower Manhattan
Real Estate
Real Estate
Real Estate
and oh yea
Real Estate
what are you guys talking about, the economy is doing great! i’m living GREAT! God, everything seems so CHEAP!!!
There’s a 10-month 3.75% CD available down the block. Don’t know the specifics/hook or minimum.
Hey, how about picking up some GMAC DANs, 7-8%, 3-5 yr upper level junk paper.. be brave.. don’t think GM will implode in the next few years do ya? better yet check out closed end muni funds.. (BBK for example)6.5% tax free , but some leveraged interest rate risk,, but who cares, you just want the tax free income , don’t ya? or try some closed end MLP energy funds (fiduciary claymore or tortiseenergy –5.8-6.2% yield and energy play
“feel your pain” or similar. Better to miss out on 4k per 100k in potential income than to stretch for yield by extending duration and risk beyond your “natural” comfort zone. Generally you get what you pay for…or in this case, you get paid for what risk you take.
A short duration low fee muni fund probably matches your risk profile better than active investments in individual stocks or “hard” assets like commodities or real estate. If you can give up the tax advantaged part, there are lots of taxable bond funds that are very low management fee.
If you are feeling like a risk taker, look at a fund that can buy busted convertable bonds. The convertable arbitrage market is about to blow up and there will be a good number of arb funds that will have to liquidate to meet redemptions. Selling oxygen to guys stuck underwater can be profitable.
If you really want to swing for the fences, I’ve got a great “can’t miss” 1999 vintage VC fund that i’d resell you for about 5 cents on the dollar… (just kidding…that is my personal pain).
If you worked instead of sitting around being a pseudo-yuppie (trust fund subbing for working as a professional), you wouldn’t have to worry about principal and mortgages so much, would you?
I’d be curious to know what you mistrust about bond calculators.
I recommend investing in something red, preferably manufactured in Italy.
Doesn’t do much for the wallet, but it works wonders for the sanity.
So far as securities go, I’ve never lost money on AAPL after buying, say, a month or so before the next major product release. Go figure.
Dirk Diggler
mcenroe — piss off. it just rankles me when people of good fortune publicly flout their wealth and moan about the hardships of inheritance. the true gentleman doesn’t boast of his own — that sort of thing. your insinuations are the product of a predictable and unimaginative mind, you ignoble clotpole.
Speaking of really expensive investments….. A Long Time Ago (yesterday) in a Galaxy, well, country, not too far away
Our beloved Chancellor Palpatine demonstrates that either he is the sublime Sith master, using Jedi mind tricks to stifle irony, or he is as obtuse as a SovInformBuro apparatchik in the ’30s.
“Stable, prosperous democracies are good neighbors, trading in freedom and posing no threat to anyone.”
The president pointedly said, “The United States has free and peaceful nations to the north and south of us” and “we do not consider ourselves to be encircled.”
“All free and successful countries have some common characteristics – freedom of worship, freedom of the press, economic liberty, the rule of law and the limitation of power through checks and balances,” Mr. Bush said.
“The idea of countries helping others become free, I hope that would be viewed as not revolutionary, but rational foreign policy, as decent foreign policy, as humane foreign policy,” Mr. Bush said.
Hello Jedi mind fuck.
OK, riddle me this, Batman: Is he saying that the United States is NOT a “stable, prosperous democracy”? What did he really mean by “trading in freedom”? Was it, trading freely? Or was it more like Steve McQueen said in “The Magnificent Seven”—”We deal in lead, friend.” America really poses no threat to anyone? You just can’t make this shit up.
http://theinternationalsprawl.blogspot.com/
I’d think twice before investing in real estate in Colorado Springs, because historically our community has been subject to extreme boom-and-bust cycles. Also, many properties are ridiculously overpriced. You need to have a healthy cash reserve to survive the next downturn, or wait until the bottom drops out of the market to pick up bargains.
Consider a solid REIT stock, I have TSY Trustreet Prop. (formerly USV). Has paid at least 8% dividend for years.
OK, riddle me this, Batman: Is he saying that the United States is NOT a “stable, prosperous democracy”? What did he really mean by “trading in freedom”? Was it, trading freely? Or was it more like Steve McQueen said in “The Magnificent Seven”—”We deal in lead, friend.” America really poses no threat to anyone? You just can’t make this shit up.
He’s not talking to you- he’s talking to the foreign-policy Realists, like Rumsfeld, Rice, and Cheney. THOSE guys deal in lead- it’s the Neocons who ‘trade in freedom’.
Did you really think the Bush Administration was a group operating in lockstep with a monolithic foreign-policy ideology?