Thursday June 27, 2013
We have been preparing you the last couple of years for an outpouring of negative social mood. Here it is!
The period of 1966-1984 was marked by numerous protests. The kick off came in the early 1960s as the Civil Rights Movement got underway. By the time of the Democrat Convention in 1968, protesting had become a national sport.
Protests Riots: Why You Should Brace for More The 'analysts' in this article totally miss the point. We are in the midst of an 18 year period of economic stagnation. Such periods are marked by soaring social mood such as the last five years followed by plummeting mood. We are entering another downturn in mood.
Protests are not only the order of the day in Turkey and Brazil but here in Texas as well.
And in Washington DC, rival groups protest whatever the Supreme Court decides on gay marriage.
Nancy Pelosi was booed by far left Netroots Nation.
It goes all the way to the top! The Obama Administration protests China and Russia handling of the Snowden Affair.
Vladimir Putin, however is not protesting, he is just peachy keen happy to embarass the USA, his stated goal in life along with restoring Russian influence over the Eastern Bloc.
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Markets tend to be up in advance of national holidays. I could be wrong but it looks like this is the third day of an up stock and bond market. While most readers were not taken with my idea of slowly acquiring high yield munis for a couple of months, it seems to be paying off.
A Strategy for Transitioning to Higher Rates
If the bull market in bonds has not ended it is at least tranistioning to higher rates for now. My suggestinon for how to play this is as follows.
While TLT is a widely followed bond choice, it pays 2.72% at current prices. MUH by contrast is paying 7% and does so montly if one buys before the ex date. Last month this was June 12. It moves just like TLT and is priced in the teens while TLT is well over one hundred dollars. So my suggestion for the long side is BTA, MUH, or MHD, or there are Nuveen Funds with similar characterisitcs. In an individual account it is even better as the dividends are at this time still exempt from Federal Income Tax. This raised the yield further. If one is in the 28% bracket, it becomes 7% / 1-.28 = 7/.72 = 9.72%. Those are annualized rates.
When bond prices area falling the choice would be TBF. It move 1x to the 20 year Treasury.
The next two charts demonstrate how I took positions in MUH as TBF topped out. I have dividied trades among these three bond funds as they differ slightly in their reactions to bond price movements.
I look forward to reader reaction to this strategy.
MUH
This is a screen print 8:46 AM thursday. The MACD is just turning up on the daily. and price jumped again. 15.50-16.25 seems a reasonable target. I managed to buy June 11 with the ex dividend date June 12 so will earn the dividend from last month. I added more yesterday. The idea will be to grab some gains and dividends on these counter trend bounces.
Buying dips in muni bonds as we move to higher rates and using TBF o n the short side as bond prices fall seems a logical way to play this for the time being.
TBF
Reversal Action in TBF seems to be confirming the correctness of our move here. We hope this strategy will have an appeal to readers seeking a way to transition to higher rates.
Just as an example of the value in the mining sector and is similar to your prior GM example when GM was trading for less than cash value.
SSRI: silver minor with pristeen balace sheet trading at 40% of book value and below its cash in the bank. Over 6 bucks in cash and trading at 5.7 ish. Current ratio > 9 .
Posted by: Robert Takacs | June 27, 2013 at 01:20 PM
Thanks Robert, a great post by another Market Perspective alert reader, I will check that out
Posted by: Dennis Elam | June 27, 2013 at 10:58 PM