I have noted many times that I wanted to see some sort of deficit reduction in congresses budget bill–looking at the headlines today I am not seeing it–I am just seeing the the deficit grow. Of course many of you have predicted that would be the case.
It is funny that the 10 year treasury yield is off 4 basis points today to be trading at 4.24%—where are the bond vigilantes? The only chance we probably have to get something constructive done is if interest rates shoot higher and right now that appears to be something that isn’t going to happen.
I have in my plan to execute 1 buy this week—originally I planned to buy either a perpetual preferred or a shorter dated baby bond. I had giant sized maturities in my CDs the last few days so I am sitting with bunches of money in the accounts–to move portfolio yields higher I need to buy something with 6%, 7% or higher coupon and right now I am not feeling great about buying anything. Maybe tomorrow. On the other hand I will not make a stupid move just to move the yield higher–confidence is everything and right now I don’t have much.
Tax exempt interest is added back when considering the Medicare surcharge…nothings ever totally free…my wife says…”don’t you ever have anything good to say?” CPA talk
The bond vigilantes know they will be going up against the big banks soon buying treasuries when the SLR ratio is relaxed.
I’m in wait-and-see mode on that, however, traders might be acting on that assumption.
Federal Debt: Total Public Debt
https://fred.stlouisfed.org/series/GFDEBTN
Federal government current expenditures: Interest payments
https://fred.stlouisfed.org/series/A091RC1Q027SBEA
JMO. DYODD.
Brookfield Infrastructure Partners BBB- preferred shares (BIPH) are off 2.8% today. Anyone see any news? The common hasn’t budged.
Likely end of month PFF rebalancing. CHSCL got as low as 25.15 today on big volume I suspect for the same reason.
FWIW, my crystal ball says higher inflation an higher long term interest rates. However, my crystal ball is not always right.
Assuming the forecast is correct.
– Been adding to cash (SGOV) and TIPS (SCHP) in a big way.
– Looking to add to 5 year resets and shorter term baby bonds.
– Have K-1 holdings in the after tax accounts and have been adding to them on dips.
My forecasting is not perfect, so I am holding on to some high quality , low coupon perpetuals and nibbling on dips.
The cash holdings are a higher percentage than they have ever been. The perpetuals are ~20% of the income component of the portfolio.
Greg–you are even more conservative than me—nothing wrong with that at least it should keep you going on the right direction,
Greg, I don’t think your crystal ball is off, but I think it’s showing you 2 to 5 years down the road. Short term I don’t know about inflation and how that will affect rates but the power in Washington said they want lower rates and they have a way of getting what they want.
So short term I think lower yield term and perpetuals will get a boost and you can harvest the capital gains.
I think we are ignoring the time lags in our measurements
Tariff rates have gone from around 3% to more than 15% and we will see that higher inventory cost in our prices over the coming months
Folks are focused on the Fed and hoping they cut rates. They only control short term rates, and the additional debt will make long term debt rise
I fear my crystal ball will be correct at the end of the calendar year
Tim, its never a good idea to watch the sausage getting made. My suggestion would be to get outside and enjoy the nice summer weather ☀️ and let the DC sausage makers do their thing.
CW—I like that idea–actually I did go out and picked up a few groceries a bit ago–always feels good to get out for whatever reason.
Tim! reader alert! look at my post in REIT chat. A Bea & C special.
In regards to the “political wrangling”, “deficit reduction” & “crazy inflation” that was created in DC I after doing my taxes in April have been making BIG Changes in my “personal account”. I use to hold lots of preferreds etc etc. NO MORE. Sold all of them & have been buying lots of “Double Tax Exempt” Nebraska paper from our utilities & Nebr. Finance Mortgage Authority. Getting 5.25% may seem low but when you factor in they are all “Double Tax Exempt” they really aren’t bad. After being incredibly depressed with what I had to pay Uncle Sam this year I decided to do this. Plus having to take those RMD’s really hurts too. Iam paying 37% Fed. & 6% Nebr. so my point being some of you should probably investigate your own state’s muni paper, etc. PS This is NOT POLITICAL but I have totally given up on the clowns in DC. After hearing this morning that Murkowski was a “Hold Out” unless she got her fair share of “PORK” for Alaska I thought to myself this—-This shit is never going to change.
Even the CHS Chuck? I don’t mind paying my fair share of taxes but 37% seems extreme.
Charles M. I own something like 19,000 shares in several different IRA’s. Have never sold even one share my friend. But in my “Personal Account” which some people refer to as a “Taxable Account” I have done a serious House Cleaning. I had to pay well over $250K in taxes in April & was quite sick & depressed over it for quite a while my friend. I know they have several issues, the only one I own is the CHSCL.
Thank you, Chuck P, for your service to the nation. Hope you still have enough to eat and a roof over your head.
OD…please. Easy with the snark. I and many others appreciate Chuck P’s insight. So what if he’s in a different tax bracket? Makes it all the more informative.
We already lost Gridbird to this site. Don’t want to lose any more when it is SO avoidable.
Adrian, I agree, unwarranted snark on my part, my apologies to one and all. I miss Grid Bird, and his occasional snark, too.
Original D no apology needed, it was only a baby “snark”
Thanks Chuck. My bet is the report coming up is not going to have good things to say, just my gut feeling. No use calling IR they will not be able to comment ahead of time. I’m holding tight with about 5,000 shares of 3 in different accounts. I am underwater, but I bought them for the income and plan to hold. If I had available funds I would buy more when the report is released if I’m correct.
I do QCD’s with my forced IRA withdrawal each year. Then it doesn’t count as income. We sold inherited land last year, and the capital gains taxes were pleasing to the gov’t I guess, but not to me.
Haven’t you seen the new way the Senate republicans are able to say the deficit is actually being reduced?
https://www.msn.com/en-us/news/politics/democrats-fail-to-overturn-ruling-that-tax-cuts-in-gop-megabill-don-t-add-to-deficit/ar-AA1HHn7C
I am with you , having 35% in munis. Luckily, I can hold any state munis as NV has no income tax. I hold a bunch of the Nebraska Mortgage Finance AMT paper that yielded over 5% on 8-10 year debt tax free when I bought it
5.25% is pretty darn good for muni. I can do a search in MA for double tax exempt and all i see are 5.0 (just a few, like 3-4 earlier today) and then it starts at 4.8 and keeps going down. So your state may vary!
Edited to add: screen out hospitals and other lesser ones that is my result.
Greetings – what site are you using for searching to find double tax exempt? I am in CA. Thanks for the info – I’m a newbie to muni’s.
ChuckP – consider moving to Michigan. Would you believe the Democratic state government a couple years ago made virtually all retirement plan distributions tax-free for the baby boomers. Also, SS benefits are tax exempt and property and sales taxes are moderately below average. My annual income is in the six digits and I don’t pay a dime in state income tax. I really lucked out. A few years ago I thought about moving out of state due to Michigan taxing retirement benefits and now its one of the best states to retire in financially speaking. Gotta say the winters suck bigtime though!
jshsky,
I also live in Michigan and agree with everything you said. The summer and fall are outstanding. Living in a detached condo allows me he luxury of spending the winter in Florida, to avoid the horrible winters, and not worrying about my Michigan home.
The political wrangling has begun to win over the holdouts at all costs. Amazing to me how the holdouts often fold with no real gains on their part.
Tim, as Tex said awhile back all the bond vigilantes are in a display at the museum. Switzerland just lowered its rate to zero again so the demand for yield from foreign investors for our debt must still be there.
You are seeing the results from the market as the bill gets closer to being done. My crystal ball thinks everyone is tired with the suspense and will be glad it gets done no matter what. I think we will get a relief rally in July. After that who knows? maybe a hangover after the party ends unless Powell cuts rates and the market gets hit with nitro.
Short play with the market is buy longer dated preferred’s that may have capital gains but don’t bet on them holding the gains.
I don’t like playing the game, rather be a buy and hold investor.
Murkowski received some sort of special provision, exemption, whatever for Alaska to get her to vote for the bill.
Remember that the bill also “fixes” the debt ceiling problem (in a way), so it takes some of the pressure off to pass another debt ceiling increase. creates some odd political pressures.