iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
23,471 Blog Posts

Get Your Pocket Squares Ready

Looking over seasonal data for the month of January, one thing is for certain: it is the month of bond funds. I am not talking marginal outperformance. Some muni bond funds have been up 20 straight years, without a downer. Looking over some funds, like EIM, this trade looks very, very tempting.

Municipal bonds are the proverbial canary in the coal mine, for America. Meaning: should the credit of the United States come into question, it will first be expressed in the muni market. I do not think that is the case right now. I believe there is a massive asset allocation switch taking place, year end bullshit.

With regards to S&P versus bond divergence, it is wide as fuck right now; but it never lasts. The two will meet somewhere in the middle, eventually. That means stocks will trade down and bonds will trade up. I expect this trade to be on full blast, starting January.

What’s the trade?

I have a variety of bond funds on my watchlist, all listed inside The PPT‘s Risk Appetite Index. The seasonal factors are too tempting to ignore, especially after such large declines. Plus, Bill Gross just stepped up and dropped $17 mill of his personal fortune into a variety of bond funds. That has to count for something, no?

This bond fund trade is equal to TLT in August or Q in December: flawless.

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22 comments

  1. stinkystank

    awesome insight, thanks!

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  2. Bubbles

    Make sure that square is silk!

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  3. CommonGardenSlug

    The 8.2% dividend looks nice but there’s a lot of potential bad news ahead for muni bonds. There’s a possibility for a whole wave of municipal bankruptcies ahead.

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    • The Fly

      Everything has risk.

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      • The_Real_Hmmm

        Stocks don’t, apparently.

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        • Mike

          Apparently? Why because they have been on a tear upward for a year after a slicing in half? Retail is so short-sighted.

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          • The_Real_Hmmm

            The credit crisis never happened, look at the Naz. We are at 2006 levels on the DJIA, yet crude oil is three times its value since 2003. Companies are reporting record earnings and revenues. We will cut through those bullshit Dow highs from few years ago like a subway wheel through a vagabond.

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        • teapotdome

          You kidding me?

          I won’t touch any stock that is not bound to a commodity right now. I sold out of all tech.

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  4. robert(rob_pvb)

    I saw that tanned guy [George] at Ruthie’s on the mountain at Aspen once. He looked great and played the part perfectly, having really gorgeous but real, wholesome looking girls [not like so many of the primped and phony things out there] on either side of him. Despite that apparent vanity, I give him “good guy” marks. Of course, I have seen many of the so called well known and important at Aspen [and had to listen to their bullshit cellphone calls on the way up in the gondola] , with Ivanka Trump being maybe the most… notorious… Always a bit of a scrum around her with her paid ski [carrier] boys and ass wipers. Too much; what man could put up with that crap?

    Anyway, long live the tanned guy. Maybe Fly will be a ‘tanned guy’ someday, off living the good life.

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  5. TheV.King

    First…

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  6. Quint

    A big move higher in bonds has to coincide with a stock market selloff, and will probably happen as a result of one more than anything else…just a question of will the stock market selloff happen now, or in the beginning of 2011? The market rarely allows you to hold those big equity gains into the next tax year…

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  7. discoordinated

    cleared out of my BIDU and AMT shorts.

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  8. Cascadian

    $17 mil to Bill Gross is like a nickel or a dime. Can int. rates go lower? Don’t bonds go up when int. rates fall?

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  9. Eyenostuff

    Closed-end bond funds worth buying

    High Yield: Buy EAD, HIX and HIO …

    http://eyenostuff.blogspot.com/2010/12/1210-tax-selling-in-closed-end-funds.html

    Muni: Buy NVG, NEA, NIF

    Use CEFConnect fund screener. Select national under Tax-Free Income, sort on Discount/Premium column to get list of funds selling at highest discount to NAV:

    http://www.cefconnect.com/Screener/FundScreener.aspx

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  10. pdf

    but high pitch gross is a billionaire- think he found 17mill in his couch cushions

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