Bond Squad Makes Sense

We have re-started our blog. This was Bicycle Repairman's (a friend of Bond Squad and knower of all things fixed income) fixed income blog for years. This blog will give Bond Squad Subscribers and potential clients an opportunity to interact with Bond Squad and the greater fixed income community. Although we are on vacation this week, we would like to post a few items. Preferreds: CNBC's Jim Cramer says that the performance of preferreds, especially Dutch preferreds is good indicators of market sentiment. Sorry Jim, preferreds are among the worst indicators. They are primarily retail products and purchased without a good understanding of their risks (primarily duration risk). Many retail investors buy them believing that they will be called in five years (or at their first call dates). That happened during the three decades of rate declines (corporations were able to refinance at lower rates), but those days are gone. This should be painfully obvious!!! Preferreds will do "ok" as long as long-term rates remain low. Move the 10-year yield up 200 basis points and watch preferreds lose a few points of their price. Bond Funds: Investors have been plowing money into bond funds. Much of this has been due to their performance since 2009. What many investors may not realize is that bond funds have outperformed largely because of Fed policies low rates, tighter spreads, etc.)This reminds us when we were young traders and the Fed was easing. It seemed that every day, we would simply profit by marking to market. We would adjust our hedges accordingly and simply rake in the cash. The next year, when the Fed was tightening, we discovered that we had to work for a living. Investors could find themselves "working for a living" in a few years. Those who have laddered their portfolios will probably just need to roll maturing assets. Where on the curve they should invest will depend on rates, spreads and the shape of the yield curve. Bond Squad can help. Sprint: We have long been fans of Sprint bonds. With the fastest network in the industry and management which is now focusing on shedding dead (or nearly dead) businesses, Sprint is an interesting company which could find itself as an acquirer or acquiree. Smith Barney: SB we hardly knew you! Next month, Morgan Stanley will permanently retire the Smith Barney name. This is an inglorious end to an iconic Wall Street name. We enjoyed our time as part of the Smith Barney family. Smith Barney Financial Advisors were among the best trained, most knowledgeable and client-oriented professionals on the retail side of the business. We will not let the traditions of Smith Barney fade away. We will carry on the ethics and focus on customer service which was hallmarks of Smith Barney. We consider ourselves to be a little slice of SB in a Mad, Mad, Mad, Mad World. We will post from time to time during our vacation week. If the response from the field is favorable, we will continue to post snippets. However, Bond Squad subscribers will continue to get in-depth coverage. The blog is good, but it is no substitute for the real thing.