Thursday March 27, 2014
We suggested yesterday that the long end of the bond market might rally in price and fall in yield. That is exactly what happened today.
Yesterday I bought TLT and sold a June 112 call for 82 cents. Let's see why.
Strike 112
Cost 109.2
Net 2.8
Plus call .8
Gross 3.6
And TLT pays 3% per year so 2.5 months should be worth 3.0 x 2.5/ 12 = .62
Goss 3.6
Int .62
Total 4.22
So that would be 4.22 for a 2.5 month investment or 4.22 x 12/3.0 (call it three months) = 16.88/109.2=
15.45% annualized if I did the math right. Now that is not too shabby. I believe bond prices started advancing especially after today's action, let's take a look.
Long Term Looking Very Positive
Bonds fell from their 2012 peak on Bernanke announcing tapering Now TLT bounced at 100 the previous resistance level and have rallied ten points. We are late to the party but, if we have already moved ten points with the Dow over 16,000, if he market falls as I expect the next two years there shold be plenty of upside.
Short Term
I will admit I only bought 100 shares which is 10,900. The reason is that the market was well advanced. This suggests we may be closer to a low in stocks as bonds just registered a pretty good reversal. That is fine, a pull back will allow us ot get in at lower prices. On blance volume at top turned down and MÅCD at bottom is about to top out.
Closed End Munis
These funds look ready for a pull back as well. But then again, maybe not if this is the start of something bigger.
EEP paying 8.1% and OBV is up
EEP has experienced some fundamental problems but remains a sound company. It is paying 8.1% annually. Here it popped on the two hour chart today. The Aroon at the bottom needs to turn up to confirm but I like the saucer shaped formation of the entire chart.
BTA Municipal Bond ETF
Here is another nice long term potential set up. BTA and others in the Blackrock and Nuveen families have pulled back on this monthly chart. The MACD looks to be bottoming. OBV is turning up at the top. Now why should this be of interest.
This one is trading at an 8% discount to NAV. The yield is 6.89% tax free. The WSJ has had numerous articles on money moving back into munis.
This all starts to make a lot more sense as we continue our survey of stocks to watch. We have noted
APPL, SBUX IBM, and FB (topping) have all fallen back. Now Add GOOG to the list
Okay so it pulled back this much in December but then so did everything else. I have suggested the Dow Industrials are slowly sinking, now the NASD is seeing its top stock sag.
All of this adds up to reasons money is moving into bonds, both government and municipal.
We are trying to locate longer term high yielding investments which are beaten down in price. This page is a good start.
Stay tuned.
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