February 10, 2015
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(Feb 16: We are buying another Corporate tomorrow, check back for details.)
Animated map of what Earth would look like if all the ice melted
Does anyone really give a damn about Brian Williams. Does anyone really watch the evening news. What a joke. This has to be the most stupid fabricated mass media farce I have ever seen.
FOX News Channel ranked number one in all of cable in both Total Day as well as in early primetime (7-11PM) viewers last week. This represents the first time FOX News Channel has topped both metrics since 2013. Meanwhile, both CNN and MSNBC didn’t crack the top 20 in either metric.
As readers know, I like Corporate Bonds and we own individual Corporates and baby bonds. But there is an additional third way to buy Corporates. And it’s NOT buying the run of the mill mutual funds and etf’s that everyone knows about.
BSJJ BulletShares 2019 essentially buys corporate bonds and holds to maturity. It is NOT the typical bond mutual fund or etf.
Most investors are NOT aware of this newer type of bond fund. I DO like the target maturity bond funds like BSJJ. This is like buying individual corporate bonds and holding to maturity. (We have some individual corporates listed in the Core Portfolio.) This also provides the smaller investor the opportunity to buy into the corporate bond segment without having to spend $1000 each for individual bonds. The fund currently holds 146 bonds!!! Wow!!!
BSJJ offers monthly income, final distribution at maturity, broad diversification, (remember 146 bonds) liquidity, transparency, convenience and cost effectiveness. All good stuff!!!! You CAN also sell this fund at any time but you buy this with the intent to hold until maturity.
BSJM pays 5.4% so it provides you a steady and moderate income. Buy BSJJ now before the price goes up.
Try to buy under $25.10 Do NOT overpay.
Guggenheim BulletShares 2019 High Yield Corporate Bond ETF* (BSJJ) seeks investment results that correspond generally to the performance, before the fund’s fees and expenses, of a high yield corporate bond index called the BulletShares® USD High Yield Corporate Bond 2019 Index. The Index is designed to represent the performance of a held-to-maturity portfolio of U.S. dollar-denominated high yield corporate bonds with effective maturities in 2019. The effective maturity of an eligible corporate bond is determined by its actual maturity or, in the case of callable securities, the effective maturity of the security as determined in accordance with a rules-based methodology developed by Accretive Asset Management LLC, the index provider. The Fund has a designated year of maturity of 2019 and will terminate on or about December 31, 2019. BSJJ will invest at least 80% of its total assets in component securities that comprise the Index. Under normal conditions, BSJJ will invest at least 80% of its net assets in high yield securities (“junk bonds”), which are debt securities that are rated below investment grade by nationally recognized statistical rating organizations, or are unrated securities the investment adviser believes are of comparable quality.
Very informative article on preferred stocks from Forbes. I pasted part of it but the link to the full article is:
At least once a year I review the market for preferred stocks to remind income investors that there is an alternative to bonds. Bonds currently have an interest rate cloud hanging over their future, yields are already meager and in the case of junk bonds high risk is a big worry.
Think of preferreds as the Rodney Dangerfield of investments; that’s what makes them such a good buy. They cover seven varieties of securities that can be either debt or equity. They are particularly suited for individual investors because they’re often too small for institutional investors who deal in million-dollar positions.
However, when you ask your broker about them, you usually get a negative response. Most brokers don’t understand these securities well enough to recommend them. This is compounded by the fact that many firms ban their sale by rank-and-file brokers because most preferreds are rated below investment grade. No brokerage firm wants to get tied up in client litigation in the event that one of those preferreds ends up in a bankruptcy. If you insist on investing in preferreds, many advisors will simply steer you into mutual funds, for a fee of course.
My advice is to ignore your broker and selectively buy preferred stocks directly. All the news about Fed rate hikes and their effect on long-term securities is greatly exaggerated. The hikes affect long rates only if our central bank begins selling off Treasurys and mortgages, and this is not even under discussion. When rate hikes come, they will affect short-term paper, probably in one or two 25-basis-point hikes.
Preferreds that pay 5.5% to 7.5% are likely to appreciate in 2015 because long rates will be driven down by the rising value of the dollar. That hurts international companies’ earnings but brings a flood of carry trade and foreign money into the U.S. to invest for yield and currency gains. In fact, the real fear today is that declining oil prices will induce deflation, which also drives interest rates lower.
It is important to diversify your preferreds. Start with CHS Inc. 6.75% Perpetual Preferred (CHSCM, 25), yielding 6.8% with no call until Sept. 30, 2024. I have been recommending securities of this unrated but well-run global agricultural cooperative for a decade. It’s getting hard to find such high coupons with long call protection, and this one is eligible for the 15% tax rate on qualified dividend income (QDI).
For those wanting an investment-grade issue, look at RenaissanceRe Holdings, a Baa2/BBB+/BBB-rated global property and casualty insurer. It has a 5.375% Noncumulative Perfetual Preferred (RNR E, 24) yielding 5.6% (QDI), callable in June 2018. A comparably rated bond currently yields less than 4%.
Financial institution preferreds make up a large amount of the market, and here I recommend Capital One Financial. This medium-size financial services company has a QDI-eligible 6.25% Perpetual Preferred (COF C, 25), which is rated Ba1/BB and callable in September 2019.
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