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Why I Will Never Invest in a Bond Fund

I think that bond funds and bond ETFs are a terrible idea for long term income investors.

by Fred Fuld III

Investors who are looking for income have several investment options, including money market funds, savings accounts, certificates of deposit, dividend-paying stocks, bonds, bond funds, bond ETFs, REITs, royalty trusts, and more.

However, I think that bond funds and bond ETFs are a terrible idea for long term income investors.

I think that all bond funds are terrible investments, even short term ones, and even government bond funds, especially during times of rising interest rates. The problem with bond funds is that there is no yield-to-maturity.

Remember, if you own a bond directly, and the bond drops in value, you will eventually get your money back at maturity.

When interest rates rise, bonds drop in value, and the net asset value drops. Many investors have a tendency to bail out when their investment drops, and when that happens, the fund managers need to sell bonds at a loss in order to handle redemptions, thereby locking in a loss on those bonds. The remaining bonds will eventually be paid off at maturity but that gain won’t cover the established losses.

Just one example of a short term government bond fund is the Vanguard Short-Term Treasury Fund Investor Shares (VFISX). The fund is down 5.4% during the last year, more than offsetting the yield on the fund, which is currently only 1.72%..

If yields drop or remain the same for a long period of time (I personally think that rates will continue higher), then in that case, the principal investment in the fund would be maintained.

However, if you know that interest rates are going to drop, then you should probably be doing some interest rate speculation.

Does anyone really know what the Federal Reserve Board is going to do? Does the Fed even know what the Fed is going to do?

Interest rates have been very low for a long time, and we may see much higher rates in the future.

**Are Interest Rates Due for a Rise Again?**

So what is an investor to do?

There are bond unit investment trusts, also called fixed income UITs, which contain a fixed portfolio of bonds. The trust pays out income monthly. As the bonds mature, the principal is paid back to the investors. Most brokerage firms offer these investment vehicles.

Another alternative is to buy bonds directly. This way, even if interest rates keep rising, the bond will eventually be paid off at par, generally $1000 per bond.

Here is one example. An AT&T 2.45% bond maturing on March 15, 2035 is selling at 84.36. This means that the bond is selling at 84.36% of face value, or for a $1000 bond, it would be selling for $843.60. This gives a rough yield to maturity of 4.13%.

So if interest rates rise, the bond may drop in value, but you will eventually receive $1000 per bond in a dozen years.

Another option includes Series I bonds; however, they don’t pay out interest.

Stocks that pay high dividends may be an alternative, but an investor should consider the market risk and fluctuation over the years.

Here are a few stocks with a strong rising dividend history:

Symbol	Company	Yield
XOM	Exxon Mobil Corporation	3.21%
JNJ	Johnson & Johnson	2.69%
KO	The Coca-Cola Company	2.93%
MCD	McDonald’s Corporation	2.26%

Yields as of 1/24/2023

Maybe some of these ideas will help you increase your investment income.

Disclosure: Author owns KO and MCD.

How Much Can You Lose by Investing in Bonds?

by Fred Fuld III

Have you considered moving out of stocks and into bonds to protect your investment portfolio? Think twice before you do.

Unless you are investing in Series I Bonds, you might want to avoid bonds at this time.

Remember, when interest rates go up, bonds drop in value. As a very simplistic example, If you have a bond paying 5%, and interest rates in general rise to 10%, a 30 year bond would drop to almost half its value.

Of course, you could sweat it out and hold on for 30 years to get your original investment back.

Even short term bonds can drop significantly, far exceeding what interest you have earned on the bond for the year.

You never know what the Federal Reserve Board will do with interest rates. Currently it looks like much higher rate hikes are in the cards due to rising inflation.

It looks like Fed Chairs are pushing for a 75 basis point (3/4%) interest rate increase for their upcoming meeting near the end of July hoping to help offset inflation.

So if rates continue to rise, how will it affect the value of your bonds?

The following shows what will happen to a 3% 30 Year Bond:

Value of a 30 year bond
If interest rates increase	30 year bond
Interest rates	3% bond	Drop in value
3%	$1,000.00
4%	$827.08	17%
5%	$692.55	31%
6%	$587.06	41%
7%	$503.64	50%
8%	$437.11	56%
9%	$383.58	62%

The following shows what will happen to a 3% 5 Year Bond:

Value of a 5 year bond
If interest rates increase	5 year bond
Interest rates	3% bond	Drop in value
3%	$1,000.00
4%	$955.48	4%
5%	$913.41	9%
6%	$873.63	13%
7%	$835.99	16%
8%	$800.36	20%
9%	$766.62	23%

The following shows what will happen to a 4% 30 Year Bond:

If interest rates increase	30 year bond
Interest rates	4% bond	Drop in value
4%	$1,000.00
5%	$846.28	15%
6%	$724.70	28%
7%	$627.73	37%
8%	$549.69	45%
9%	$486.32	51%
10%	$434.39	57%

The following shows what will happen to a 4% 5 Year Bond:

If interest rates increase	5 year bond
Interest rates	4% bond	Drop in value
4%	$1,000.00
5%	$956.71	4%
6%	$915.75	8%
7%	$876.99	12%
8%	$840.29	16%
9%	$805.52	19%
10%	$772.55	23%

Why Bond Mutual Funds are Bad

The worst possible bond investment during rising interest rates is a bond mutual fund. The reason?

There is no yield to maturity.

What that means is, if rates rise after you invest and never drop to that level again, then it doesn’t matter how long you hold onto the fund, even 50 years. You won’t get your principal back.

What can make it worse for the funds is if there are a lot of redemptions as interest rates rise and drop in value.

The fund is then forced to liquidate bonds at losses, thereby locking in losses for the whole portfolio.

Summary About Bonds

So if you have bonds in your portfolio, or you are consider buying bonds for your portfolio, make sure that you are aware of the downside.

10 Ways to Make Money in a Bear market

by Fred Fuld III

Although the stock market has been rising for the last several days, some investors and traders believe that this rise is only temporary, and that we are in the beginning of a bear market. If you want to profit from downward markets and falling prices, there are many ways to do so.

Several techniques are available to make money in a bear market, some of which are speculative, and some not that risky. Even if you have a small account, there are ways to protect yourself, and even make money on the downside. Here are some of those strategies.

1. Sell a Vertical Call Option Spread

This strategy is a little complicated, but I listed it first, because it is one of the least risky, since your losses are limited, unlike most of the other strategies listed here. Also, I listed it at the beginning, because I use this trading technique all the time.

If you are familiar with options, then selling a vertical call spread is a great way to make money when a stock drops while protecting yourself if the stock goes up. (This happens to be my favorite strategy.)

This involves shorting an out of the money call option and buying a further out of the money call option at the same time. If the stock drops or stays the same, you make money from the short call which exceeds the loss on the long call. If the stock goes up to the strike price of the short call, you still make a profit. It is only when the stock rises above the strike price of the short call that you begin losing money.

To make it simple, here is an example:

Stock is at 50

Sell (short) one call with a strike price of 51 for 3 (an option that is trading at 3 means $300)

Buy one call with a strike price of 52 for 1 ($100)

If the stock drops to 45, the 51 call drops to $0 and you make $300 because you shorted it, and the 52 call drops to $0 losing $100 because you own or were long it, netting you a profit of $200.

If the stock rises from 50 to 100, you lose $4900 on the 51 call that you shorted, but you make $4800 on the one that you bought, so you only lose $100.

Generally, you want to use options that expire in 40 to 60 days, and close out your position in 15 to 25 days.

Disadvantages of the selling a vertical call spread

Your profit is limited
You need approval from your broker to do option spreads
Both legs of the spread need to be placed simultaneously (easy to do with most trading platforms)
May need to wait 25 or 30 days to see a profit

2. Shorting Stocks

This is one of the most speculative ways of making money in a bear market. In simple terms, you make money when the stock goes down and you lose money when the stock goes up. What technically happens is that you borrow the shares and immediately sell them (this all is done electronically through your brokerage firm) and since you owe those shares, you eventually have to buy them back at some price, hopefully a lower price, in order to return those shares. The difference between your sale price and eventual purchase price is your profit (or loss, if you buy back at a higher price).

Can you make a lot of money shorting stocks in a bear market? Yes. Is it speculative? Very. Can you lose a lot? Most definitely. This is why it is so risky. When you short a stock, the lowest point it can drop to is zero. Whereas, if the stock goes up, the amount it can rise is unlimited. Let’s say you short 100 shares of a stock at $20 a share. If you put up funds equal to 100% of the value of the shorted amount, and the stock drops to zero, you’ve made a 100% return. However, suppose the stock goes from 20 to 100, you end up losing 400% of your money with lots of margin calls along the way. This is called a short squeeze. But even on a short term basis, an investor can lose money very fast.

Unfortunately for those who do their trading in retirement accounts, such as IRAs, shorting stocks is not allowed.

So in summery, do I think you should short stocks? Absolutely not, unless you are a professional trader. The risk is almost infinite. If you understand options real well, hedged short selling might be OK (see the next strategy), as long as you are an advanced trader, and know what you’re doing.

3. Hedged Short Selling

Hedged short selling is a strategy whereby you short a stock and at the same time, you buy a close-to-the-money call option. That way, if the stock shoots up, you are protected with the call option. If the stock drops, you will lose what you paid for the option, but you will make money on your short stock position.

Example: you short 100 shares of a stock that is currently trading at 50 (so you short $5000 in stock), and you buy a call option with a strike price of 52 for 1 ($100).

The stock goes to 40. You make $1000 from the stock dropping from 50 to 40, and you lose the $100 you paid for the call option, with a net profit of $900.

The stock stays the same at 50. You don’t make any money on the short sale fo the stock and you lose $100 on the call option for a net loss of $100.

The stock goes up to 60. You lose $1000 on the short stock, but the value of the call option will increase from 1 to 10 ($100 to $1000), netting $900 on the difference, for an overall loss of $100.

In other words, in the example above, you can only lose $100, if the stock stays the same or goes up, but if the stock drops, the profit can be substantial.

Actually, to be more accurate, if the stock goes to 51 and stays there, you will lose $100 on the short stock sale and $100 on the call option, for a total maximum loss of $200. Even still, it may be worth the small loss in case you are wrong about a bear market.

Disadvantages of the hedged short selling

You need approval from your broker to short stock and buy options
Both positions should be placed simultaneously (easy to do with most trading platforms)

4. Short (Bearish) ETFs

The Exchange Traded Fund known as the Bearish ETF or Short ETF is another option. What these ETFs do is provide a return opposite to the return of the index, sector, or industry that it is tracking.

For example, the Short Dow30 ProShares (DOG) provides a return that is the inverse of the Dow Jones Industrial Average. If the Dow goes down 2%, the DOG is expected to up 2%. The Short QQQ ProShares (PSQ) ETF gives a return that is the inverse of the NASDAQ 100 Index.

The nice thing about these short ETFs is that your losses are limited. Also, if you are long individual stocks that you don’t want to sell, these can be good for protecting your overall portfolio on the downside.

5. Leveraged Bearish ETFs

If you like volatility, you will love the leveraged bearish ETFs. What these ETFs do is provide double, and in some cases triple the inverse return of indices.Some examples include the UltraShort Consumer Services ProShares (SCC) and the ProShares UltraShort S&P S&P 500 (SDS).

In addition there are several triple leveraged bearish ETFs. Direxion Daily MCSI Real Estate Bear 3X Shares (DRV), Direxion Daily Energy Bear 2X Shares (ERY), and ProShares UltraPro Short Russell 2000 (SRTY) are just a few of the many leveraged bearish ETFs.

The volatility of these ETFs is substantial, and so are the wide bid and asked spreads that I’ve seen occasionally.

The advantage of these trading vehicles is that they are a way of shorting on margin, with a limit on the downside. The disadvantage is that the losses can be quick and large, especially with the triple leverage short ETFs.

6. Bear Funds

It may be hard to believe, but there are actually a large number of bearish mutual funds for the long term bearish investors. These include the Grizzly Short Fund (GRZZX), the PIMCO StocksPlus TR Short Strategy Institutional Fund (PSTIX), and the ProFunds Bear Investors Fund (BRPIX). These funds have minimum investments ranging from $1,000 to $5,000,000.

7. Puts

First, a little about option pricing. Puts and calls are priced on a per share basis, so a put at $1 would cost $100 for a 100 share option, or a call at $3.50 would cost $350.

A put is the option to put your stock to someone at a particular price within a certain period of time. In other words, if you own a stock that is trading at 22 and you buy a put at a dollar which gives you the right to put your stock to someone at $20 per share within three months, there are a couple of things that could happen. The stock could tank to $14 a share and you could put your stock at 20, or just resell the put for 6 (the difference between 14 and 20) and collecting the profit. You would be far better off than just doing nothing. And if the stock goes up or stays about the same, you are just out your $100 for the option. Puts can be useful for experienced traders.

8. Cash

There is one other way to make money in a bear market. Sell everything, and keep your money in cash, with the safest way being a T-bill money market fund, that only owns T-bills. (Money market funds that invest in repos are supposed to be just as safe, but I consider them slightly more risky than T-bills.) The advantages are that you can’t lose money and you can receive an income from the investment.

The alternative cash investment is putting your money in a bank certificate of deposit or savings account. Your money is safe up to the FDIC limits, but the interest rate will be very low.

9. Anti ETFs

The Anti-ETF is a new investment vehicle that has cropped up recently. The goal of these ETFs is to provide the reverse return of another popular actively managed exchange traded fund, as opposed to the bearish ETF which attempt to track the inverse of an index, like the ProShares Short S&P500 ETF (SH).

The most popular is the Tuttle Capital Short Innovation ETF (SARK), which has a goal of achieving the inverse of the return of the popular ARK Innovation ETF (ARKK) managed by Cathie Wood.

10. Series I Bonds

If you think the bear market will last for a year or more, Series I bonds are the way to go. These bonds never drop in value and currently pay 9.62%. Plus, they are backed by the U.S. Government. For more information on these bonds, check out the article Series I Bonds Now Paying over 9%.

There are obviously additional risks involved with shorting stock and options, which you need to delve into with your broker before utilizing those strategies. If we are in a bear market, hopefully you can protect your portfolio and make some money on the downside.

Author does not own any of the above mentioned securities.

Series I Bonds Now Paying Over 9%

by Fred Fuld III

How would you like to own the following investment:

It currently pays 9.62%
It is backed by the United States Government
It has an inflation factor
There is no commission
You can own it either electronically or in paper form
The interest is exempt from state and local income taxes
Interest earnings may be excluded from Federal income tax when used to finance education
The investment never drops in price
There is no minimum investment (well almost no minimum, you can invest less than $100)

So what kind of investment is this? No, it is not Forever Stamps. Sound too good to be true? It is called the Series I Savings Bond.

Here are the details.

What is an I Bond?

A Series I savings bond is a security issued by the United States Government that earns interest based on both a fixed rate and a rate that is set twice a year based on inflation. The bond earns interest until it reaches 30 years or you cash it, whichever comes first.

What’s the interest rate on an I Bond I buy today?

For the first six months you own it, the Series I bond is currently paying interest at an annual rate of 9.62%. A new rate will be set every six months based on the bond’s fixed rate and on inflation.

Special Benefits of Series I Bonds

You can own a bond in the name of a living trust. I know, because I’ve done it. It will be tied to you Social Security number.

For those that want to invest a lot of money in these bonds, they need to be aware that there is a $10,000 limit per calendar year per person. So a married couple could buy $20,000 now. Then next January, they could buy another $20,000, for a total of $40,000 in less than a nine month period.

In addition, there is another way they could buy more. An additional $5,000 per year can be invested in Series I bonds, using their tax refund. If you haven’t done your taxes yet (like me; I filed an extension, and yes, I’m still getting 1099s in late May), and you are expecting a refund of over $5,000, then $5,000 can be applied towards I bonds.

For next year, if you aren’t anticipating a big refund, you can always overpay your taxes by $5,000 so that you can get the maximum amount in Series I bonds for next year.

So assuming all things are in place, a married couple could theoretically invest $50,000 in I bonds in less than a year.

Who may own an I Bond?

Individuals

Yes, if you have a Social Security Number and meet any one of these three conditions:

United States citizen, whether you live in the U.S. or abroad
United States resident
Civilian employee of the United States, no matter where you live

To buy and own an electronic I bond, you must first establish a TreasuryDirect account.

Children under 18

Yes, if they meet one of the conditions above for individuals.
Information concerning electronic and paper bonds:

Electronic bonds in TreasuryDirect. A child may not open a TreasuryDirect account, buy securities in TreasuryDirect, or conduct other transactions in TreasuryDirect. A parent or other adult custodian may open for the child a TreasuryDirect account that is linked to the adult’s TreasuryDirect account. The parent or other adult custodian can buy securities and conduct other transactions for the child, and other adults can buy savings bonds for the child as gifts.
Paper bonds. Adults can buy bonds in the name of a child.

Trust, estate, corporation, partnership and some other entities

Electronic bonds (in TreasuryDirect): Yes
Paper bonds:

Trusts and estates: In some cases, Yes
Corporations, partnerships, other entities: No

How can I buy I Bonds?

Two options:

Buy them in electronic form in our online program TreasuryDirect
Buy them in paper form using your federal income tax refund

What determines who owns an I Bond and who can cash it?

How you register the bond at purchase determines who owns the bond and who can cash it. The registration is the name of the owner (either a person or entity), the Taxpayer Identification Number, and, if applicable, the second-named owner or beneficiary.

What do I Bonds cost?

You pay the face value of the bond. For example, you pay $50 for a $50 bond. (The bond increases in value as it earns interest.)

Electronic I bonds come in any amount to the penny for $25 or more. For example, you could buy a $50.23 bond.

Paper bonds are sold in five denominations; $50, $100, $200, $500, $1,000

How much in I Bonds can I buy for myself?

In a calendar year, you can acquire:

up to $10,000 in electronic I bonds in TreasuryDirect
up to $5,000 in paper I bonds using your federal income tax refund

Two points:

The limits apply separately, meaning you could acquire up to $15,000 in I bonds in a calendar year
Bonds you buy for yourself and bonds you receive as gifts or via transfers count toward the limit. Two exceptions:
- If a bond is transferred to you due to the death of the original owner, the amount doesn’t count toward your limit
- If you own a paper bond issued before 2008, you can convert it to an electronic bond in your account in TreasuryDirect regardless of the amount of the bond. (The annual limit before 2008 was greater than today’s limit of $10,000.)

Can I buy I Bonds as gifts for others?

Yes.

Electronic bonds: You can buy them as gifts for any TreasuryDirect account holder, including children.

Paper bonds: You can request bonds in the names of others and then, once the bonds are mailed to you, give the bonds as gifts.

How much in I Bonds can I buy as gifts?

The purchase amount of a gift bond counts toward the annual limit of the recipient, not the giver. So, in a calendar year, you can buy up to $10,000 in electronic bonds and up to $5,000 in paper bonds for each person you buy for.

Disadvantages

The disadvantages, although minimal are:

The bonds are Federally taxable
There is a maximum amount that you can buy
Minimum term of ownership is one year
Early redemption penalties if redeemed before 5 years, forfeit interest from the previous 3 months

So if you are looking to boost your yield on some of your cash, and getting more from a bank savings account, certificate of deposit, brokerage cash account, or treasury bond, you should seriously consider a Series I Bond.

How To Earn 7% US Government Guaranteed (No, It’s Not Forever Stamps, It’s a Real Bond)

by Fred Fuld III

How would you like to own the following investment:

It currently pays 7.12%
It is backed by the United States Government
It has an inflation factor
There is no commission
You can own it either electronically or in paper form
The interest is exempt from state and local income taxes
Interest earnings may be excluded from Federal income tax when used to finance education
The investment never drops in price
There is no minimum investment (well almost no minimum, you can invest less than $100)

So what kind of investment is this? No, it is not Forever Stamps. Sound too good to be true? It is called the Series I Savings Bond.

Here are the details.

What is an I Bond?

What’s the interest rate on an I Bond I buy today?

For the first six months you own it, the Series I bond sold from November 2021 through April 2022 earns interest at an annual rate of 7.12%. A new rate will be set every six months based on this bond’s fixed rate (0.00 percent) and on inflation.

Who may own an I Bond?

Individuals

Yes, if you have a Social Security Number and meet any one of these three conditions:

United States citizen, whether you live in the U.S. or abroad
United States resident
Civilian employee of the United States, no matter where you live

To buy and own an electronic I bond, you must first establish a TreasuryDirect account.

Children under 18

Yes, if they meet one of the conditions above for individuals.
Information concerning electronic and paper bonds:

Electronic bonds in TreasuryDirect. A child may not open a TreasuryDirect account, buy securities in TreasuryDirect, or conduct other transactions in TreasuryDirect. A parent or other adult custodian may open for the child a TreasuryDirect account that is linked to the adult’s TreasuryDirect account. The parent or other adult custodian can buy securities and conduct other transactions for the child, and other adults can buy savings bonds for the child as gifts.
Paper bonds. Adults can buy bonds in the name of a child.

Trust, estate, corporation, partnership and some other entities

Electronic bonds (in TreasuryDirect): Yes
Paper bonds:

Trusts and estates: In some cases, Yes
Corporations, partnerships, other entities: No

How can I buy I Bonds?

Two options:

Buy them in electronic form in our online program TreasuryDirect
Buy them in paper form using your federal income tax refund

What determines who owns an I Bond and who can cash it?

What do I Bonds cost?

You pay the face value of the bond. For example, you pay $50 for a $50 bond. (The bond increases in value as it earns interest.)

Electronic I bonds come in any amount to the penny for $25 or more. For example, you could buy a $50.23 bond.

Paper bonds are sold in five denominations; $50, $100, $200, $500, $1,000

How much in I Bonds can I buy for myself?

In a calendar year, you can acquire:

up to $10,000 in electronic I bonds in TreasuryDirect
up to $5,000 in paper I bonds using your federal income tax refund

Two points:

The limits apply separately, meaning you could acquire up to $15,000 in I bonds in a calendar year
Bonds you buy for yourself and bonds you receive as gifts or via transfers count toward the limit. Two exceptions:
- If a bond is transferred to you due to the death of the original owner, the amount doesn’t count toward your limit
- If you own a paper bond issued before 2008, you can convert it to an electronic bond in your account in TreasuryDirect regardless of the amount of the bond. (The annual limit before 2008 was greater than today’s limit of $10,000.)

Can I buy I Bonds as gifts for others?

Yes.

Electronic bonds: You can buy them as gifts for any TreasuryDirect account holder, including children.

Paper bonds: You can request bonds in the names of others and then, once the bonds are mailed to you, give the bonds as gifts.

How much in I Bonds can I buy as gifts?

Disadvantages

The disadvantages, although minimal are:

The bonds are Federally taxable
There is a maximum amount that you can buy
Minimum term of ownership is one year
Early redemption penalties if redeemed before 5 years, forfeit interest from the previous 3 months

PINES and QUIBS and PD’s Oh My! How About Minibonds for Income Investors?

by Fred Fuld III

Have you ever considered Minibonds™ for an income portfolio or your retirement plan? (Not muni bonds, mini bonds.) These are bonds that are traded just like stocks on the New York Stock Exchange, American Stock Exchange, or NASDAQ for around $25 per share.

They are almost like preferred stocks except that they pay interest instead of dividends and they generally have a specific maturity date. In addition, they usually pay interest quarterly instead of semi-annually. Sometimes they are referred to as PINES (Public Income Notes) or QUIBS (Quarterly Interest Bonds) or QUICS (Quarterly Income Capital Securities) or QUIDS (Quarterly Income Debt Securities). There are even a few that are issued as Perpetual Debt, which means that there is no maturity date.

The advantages of Minibonds to the corporate issuers are that the interest is deductible to the corporation (unlike dividends which are not deductible).

The advantages to the investor are as follows:

The bonds are ‘safer’ than preferred stocks (in other words, if the corporation goes out of business, the bonds are generally paid off first before the preferred or common stock).
The Minibonds (with the exception of the perpetual debt bonds) have some limited protection against inflation versus preferred stocks in that if interest rates go up, their value will drop, yet the par value (usually $25) will be still paid back at maturity. Whereas, preferred stocks have no maturity.
The small denomination is a benefit, especially when looking at an annual IRA investment.
A fourth benefit is that since they are traded like stocks, there is more liquidity than buying or selling a $5,000 bond. However, these are still very illiquid investments. Most have a very low daily volume.

Here are a few worth reviewing in no particular order. Keep in mind that the stock ticker symbol shown may differ depending on which financial website you are looking and and which brokerage firm you are using. When you enter a quote on these with your broker and it doesn’t look right, you may need to call them to make sure you are using the correct symbol. For example, I found three different symbols for the Ford note, depending on the web site and broker.

Ford Motor Company 6.20% Notes due 6/1/2059 (F-B) (F-PB) (FpB)

Duke Energy Corp., 5.625% Junior Subordinated Debentures due 9/15/2078 (DUKH)

Chicken Soup for the Soul Entertainment, Inc. 9.50% Notes Due 07/31/2025 (CSSEN)

Bank of America Corp, 6.45% Income Capital Obligation Notes ICONS due 12/15/2066 (MER-K) (MER-PK)

AT&T Inc., 5.625% Global Notes due 8/1/2067 (TBC)

Pitney Bowes, Inc., 6.70% Notes due 3/7/2043 (PBI-B) (PBI-PB)

QVC Inc., 6.375% Senior Secured Notes due 9/13/2067 (QVCD)

Just remember, even though these muni bonds are exchange traded, they are not anywhere as liquid as the stocks of the companies that issued them.

Happy investing!

Disclosure; Author didn’t own any of the above at the time the article was written.

The Day the Markets Roared: How a 1982 Forecast Sparked a Global Bull Market

by Fred Fuld III

The book, The Day the Markets Roared: How a 1982 Forecast Sparked a Global Bull Market, by Dr. Henry Kaufman, provides the reader with the background of how the author predicted and sparked one of the biggest bull markets in history, and how the past can give insight into the future. The book was released this week.

If you are not familiar with Kaufman, he was a former economist at the Federal Reserve Bank of New York who later became a senior partner, managing director, chief economist, and director of research at Salomon Brothers, the most profitable investment bank in the world at the time.

The older generation should remember him as a frequent guest on Wall Street Week with Louis Rukeyser.

The book goes into great detail about the events leading up to the beginning of the 1982 bull market and what happened afterwards. The Day the Markets Roared discusses the background of how Kaufman went from bearish to bullish.

At times, he received much criticism and threats for his opinions. These included physical threats, which even involved the FBI. My favorite chapter was Chapter 6 – Critics, Threats, and Humor, where he covers the extensive criticism he received from the press and even a death threat.

Probably the most important chapter is Chapter 10 – New Realities, which is a fascinating and unique analysis of the present day economy. Kaufman goes into detail about how COVID-19 has affected businesses, individuals, and state and local governments in the United States.

He also emphasizes how overall credit quality has been affected. Did you know that today, only two business corporations have a triple-A rating versus 61 in the 1980s?

Plus, there is extensive information on the past and present moves by the Federal Reserve Board.

Kaufman has a strong track record, and he has intriguing opinions about where the American economy stands now and where it is headed.

Therefore, I highly recommend that you get The Day the Markets Roared as it was released this week. It just might save your portfolio.

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Who Owns the Treasury Securities that Make Up the National Debt?

If you ever wondered who owns the U.S. Treasury bonds, notes and bills that are loans to the United States Government, here is a list with a rough estimate of the amounts that the U.S. owes.

US Investors $6,890 billion
US Government $5,730 billion
Federal Reserve $2,380 billion
Japan $1,261 billion
China $1074 billion
United Kingdom $446 billion
Ireland $330 billion
Luxembourg $267 billion
Hong Kong $266 billion
Brazil $264 billion

The rest includes many other countries, such as Switzerland, Cayman Islands, Belgium, India, France, Saudi Arabia, etc.

Using Google Ngram Viewer to Analyze the Interest in Stocks, Bonds, and Gold

Have you ever used Google’s Ngram Viewer? It is an incredible tool. Free, of course. If you don’t know what an ngram is, Wikipedia defines it as “an online search engine that charts frequencies of any set of comma-delimited search strings using a yearly count of n-grams found in sources printed between 1500 and 2008.”

If that is not clear, I will try to define it in very simple terms. It is a chart of the popularity of a word or term or person. For example, I produced a chart of stocks, bonds and gold since 1900.

The top green line represents gold. Notice how it went up during the roaring twenties and continued up into the middle of the Depression. Bond had a bit of fluctuation, but stocks, surprisingly, didn’t vary much and even during the Depression, remained relatively flat. (Please remember, none of this has to do with the prices of these items, only the popularity of these terms.)

Looking at the chart from 1960, stocks, bonds, and gold seemed to drop off, except from the year 2000, gold started to move up.

What else can you find with n-grams? How about the popularity of Warren Buffett?

Other that a very slight drop-off from 2005 to 2006, Warren Buffett’s chart has been constantly rising.

Want some more interesting charts? How about Artificial Intelligence?

Look how it started to take off around 1980 and started to drop off in 1989.

Robotics had a similar run but flattened out at a much higher level than previously.

Finally, lets look at the stock market by itself, without comparing to bonds or gold.

It has been generally in an uptrend, but in 2001 it started dropping and continued to drop.

So where can you find this great tool? just go to:

https://books.google.com/ngrams/graph

Remember, it can be used for searching anything, not just investment information. You can look up topics related to politics, literature, education, and anything else.

One last one for your amusement and especially financial historians:

“bull and bear”