End of stimulus spending and heightened expectations of quantitative easing make treasury bond prices ripe for increases. Also housing is resuming price declines, pushing money to risk adverse areas of the market.
Sell Jan 2011 TLT $93 Put for $1.2
Buy Jan 2011 TLT $91 Put for .81
Net credit of .39 with a $2 risk.
Showing posts with label Bonds. Show all posts
Showing posts with label Bonds. Show all posts
Tuesday, October 26, 2010
Thursday, May 6, 2010
Ignore the credit raters! Buy GMAC Senior Debt
The author is adding another safe investment with a US government "put" to support the security. The intent will be to hold until maturity.
The whole investment logic for this one is supported by a quote from Bill Gross, PIMCO, in his May Investment Outlook
“Still, as future bond issuers belly up to the bar with their rating agency seals of approval, it is incumbent on the buying public to treat those IDs with a healthy skepticism. Firms such as PIMCO with large credit staffs of their own can bypass, anticipate and front run all three, benefiting from their timidity and lack of common sense. Take these recent examples for instance: S&P just this past week downgraded Spain “one notch” to AA from AA+, cautioning that they could face another downgrade if they weren’t careful. Oooh – so tough! And believe it or not, Moody’s and Fitch still have them as AAAs. Here’s a country with 20% unemployment, a recent current account deficit of 10%, that has defaulted 13 times in the past two centuries, whose bonds are already trading at Baa levels, and whose fate is increasingly dependent on the kindness of the EU and IMF to bail them out. Some AAA!
Now let’s go the other way. GMAC, that only too recently near-bankrupt finance company, carries recently upgraded B ratings from the rating services. Profiles in courage for all three, I say! I mean the U.S. government has injected $20 billion of capital and owns 65% of the company. It’s the auto industry’s equivalent of FNMA and FHLMC, except those are AAA and GMAC is B with a “positive outlook!” For that, you can buy a GMAC two-year bond at 6½% (8% with what are called “smart notes” that Investment Outlook readers can buy through their broker), while you receive only 1.2% at Fannie and Freddie. Vive la différence!”
The author of this blog has found something comparable to purchase…
NYSE: GKM – GMAC Senior Debt, 7.25% yield at par ($25), currently priced at $20.85 (8.69% yield to maturity) – Callable any time after 2008 and due 2033
NYSE: GJM – GMAC Senior Debt, 7.35% yield at par ($25), currently priced at $21.02 (8.69% yield to maturity) – Callable any time after 2008 and due 2033
I am going to buy a little of both of the above for myself right now. FYI: When they retire the debt, they normally start with the higher yielding one first.
Bought GKM at 20.96 on May 5th and sleeping well.
The whole investment logic for this one is supported by a quote from Bill Gross, PIMCO, in his May Investment Outlook
“Still, as future bond issuers belly up to the bar with their rating agency seals of approval, it is incumbent on the buying public to treat those IDs with a healthy skepticism. Firms such as PIMCO with large credit staffs of their own can bypass, anticipate and front run all three, benefiting from their timidity and lack of common sense. Take these recent examples for instance: S&P just this past week downgraded Spain “one notch” to AA from AA+, cautioning that they could face another downgrade if they weren’t careful. Oooh – so tough! And believe it or not, Moody’s and Fitch still have them as AAAs. Here’s a country with 20% unemployment, a recent current account deficit of 10%, that has defaulted 13 times in the past two centuries, whose bonds are already trading at Baa levels, and whose fate is increasingly dependent on the kindness of the EU and IMF to bail them out. Some AAA!
Now let’s go the other way. GMAC, that only too recently near-bankrupt finance company, carries recently upgraded B ratings from the rating services. Profiles in courage for all three, I say! I mean the U.S. government has injected $20 billion of capital and owns 65% of the company. It’s the auto industry’s equivalent of FNMA and FHLMC, except those are AAA and GMAC is B with a “positive outlook!” For that, you can buy a GMAC two-year bond at 6½% (8% with what are called “smart notes” that Investment Outlook readers can buy through their broker), while you receive only 1.2% at Fannie and Freddie. Vive la différence!”
The author of this blog has found something comparable to purchase…
NYSE: GKM – GMAC Senior Debt, 7.25% yield at par ($25), currently priced at $20.85 (8.69% yield to maturity) – Callable any time after 2008 and due 2033
NYSE: GJM – GMAC Senior Debt, 7.35% yield at par ($25), currently priced at $21.02 (8.69% yield to maturity) – Callable any time after 2008 and due 2033
I am going to buy a little of both of the above for myself right now. FYI: When they retire the debt, they normally start with the higher yielding one first.
Bought GKM at 20.96 on May 5th and sleeping well.
Tuesday, February 23, 2010
What Euro crisis? I smell opportunity. Buy Euro debt
Headline: Fiscal deficits across Europe threaten to blow apart the Euro.
So what? Who cares.
Let's think about this. Germany is right now benefiting from low budget deficits and artificially lower currency base because they belong the Euro. Exports are recovering because Germany is one of the most competitive exporters of the European Union.
Let's look down the road... worst case, one of the PIIGS default. The euro is abandoned by the European countries and the deutsche mark (DM) is reinstated. The DM soars and exports suffer. Another recession ensues. Painful, not a killer.
More likely...the PIIGS are dragged along without "technically" defaulting. A bailout, backdoor or front door, will just continue to dilute the euro trying to regain competitiveness. The German banks will take some writedowns and move on. Is this bad? Bad for Europeans trying to retire. But not bad for the survivor PIIGS who need to export their way out of their recession.
With this said, what could be on sale during this storm?
Long Credit Suisse Subordinate Debt Notes yielding 7.90% at par ($25 Par), buy at $17/share (NYSE:CRP).
Long Deutsche Bank Subordinated Debt Notes yielding 6.35% at par ($25), buy at $13.5/share (NYSE:DUA).
So what? Who cares.
Let's think about this. Germany is right now benefiting from low budget deficits and artificially lower currency base because they belong the Euro. Exports are recovering because Germany is one of the most competitive exporters of the European Union.
Let's look down the road... worst case, one of the PIIGS default. The euro is abandoned by the European countries and the deutsche mark (DM) is reinstated. The DM soars and exports suffer. Another recession ensues. Painful, not a killer.
More likely...the PIIGS are dragged along without "technically" defaulting. A bailout, backdoor or front door, will just continue to dilute the euro trying to regain competitiveness. The German banks will take some writedowns and move on. Is this bad? Bad for Europeans trying to retire. But not bad for the survivor PIIGS who need to export their way out of their recession.
With this said, what could be on sale during this storm?
Long Credit Suisse Subordinate Debt Notes yielding 7.90% at par ($25 Par), buy at $17/share (NYSE:CRP).
Long Deutsche Bank Subordinated Debt Notes yielding 6.35% at par ($25), buy at $13.5/share (NYSE:DUA).
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