Archives for November 2016
The Invesco Value Municipal Income Trust (ticker: IIM) has had a big sell off recently along with treasuries and other bonds.
I think this closed ended fund is now oversold.
IIM is trading at a discount of 11% to it’s Net Asset Value. That is like paying 89 cents for a 1 dollar bill. Buying the fund will also net you a 5.21% tax free yield. Because this is a muni fund you do not have to pay federal income taxes on the yield. You will be hard pressed to find this type of deal anywhere.
The fund will likely bounce off the $14 level.
Action: buy IIM, sell if the fund closes below $13.90.
Buying the fund allows us to collect a great dividend with limited down side. Please use a 18% trailing stop as well as sell if it drops below $13.90.by
It is really quite astounding. For those that do not follow Martin Armstrong’s blog his computer predicted a Brexit a long time ago. He himself doubted that it would happen, he thought the vote would be too close and would result in favor of Brussels as they would tip it to themselves. However, his computer was correct.
His computer then predicted a Trump win as Trump was the outside candidate and that this type of win was due in the cycle. Again, even while everyone thought Hillary would win, including many dynamic predictive sites like fivethirtyeight.com it now looks like Trump will be the winner.
I’m now listening to news anchors try and explain the results and confess that they were incorrect. From Armstrong’s blog last week:
I still “believe” that they will rig the election to prevent a Trump victory despite the fact that our computer projects a Trump victory and more importantly, that this is a major clash with people who want their country back. Already, Texas has broken all records for the number of people coming out to vote early. This seems to confirm our computer will be right on that forecast that this should be the biggest turnout for the past 23 elections.
Our computer has NEVER been wrong except one time – the election of 2000. There the Supreme Count handed the election to Bush and would not wait for a recount, which ultimately showed Gore should have won. So a Clinton victory will send us into war and the economy down hard and dirty. That appears to be more likely from the market perspective with the bubble top in bonds. But this will be a rigged outcome and that will send what she calls the “deplorables” into rising civil unrest.
Note in the above quote Armstrong gave his opinion, but states what his computer says. This is a often theme as he often is surprised by what the computer is telling him stating, “that can’t be right”. You can find similar posts through out his blog during the election year.
So what now as the market is dropping fast? His computer predicts a 3 day reaction, at that point it’s watching bullish and bearish reversals related to timing going forward.
If the DNC wanted to win they should have LISTENED to what the people wanted. The DNC establishment and the establishment in general fought against Bernie. Wasserman Shultz was exposed to be actively fighting against Bernie thanks to Wikileaks. Wasserman had to leave the DNC because of the scandal and Hillary hired her the next day.
Who needs fiction? Hat tip to Martin Armstrong. I highly recommend you follow his blog.by
I remember back toward the end of high school when grocery store club cards first came out enabling customers to receive discounts in the store without paper coupons. We all joked and laughed how the government would be tracking what we bought.
Well laugh no more!
It turns out that King County government in Washington State (which covers Seattle) started matching up people buying pet food and those that do now have a pet license and sending the citizens mail stating that they will be fined.
RECENTLY, some King County residents received a letter from the government reminding them they are required by law to register their pets. The letter was sent to a mailing list generated by a marketing company that gets its information from various sources, including grocery-store loyalty cards. Wait! The government is contacting people who buy pet food to say they are suspected pet-license scofflaws? What’s next? A letter from the health department noting purchases of ice cream and potato chips?
And from the original Seattle Times article:
“On the outside, it’s stamped ‘Time sensitive. Open immediately,’ and it’s got a pink return address, which usually means something is overdue in payment,” she said.
The writing was terse, “threatening” even, Twadell said.
Heaven forbid buying pet food for a friend!
Twadell called a number on the notice and asked why she received the letter. Grocery-store club cards are tracked, she was told. Twadell recalled buying a dog toy for a friend’s pet and wondered, was Big Brother scanning her grocery list? Not exactly. “We used direct-mail lists,” said RASKC Manager Gene Mueller. “The same way a pet store or veterinarian would.” Here’s what that means: The county hired a Seattle mailing company named Lacy & Par, which retrieved a list of prospective pet owners from another data firm. The county took that list of possible pet owners, compared it against an internal database of licensed pets, and — voilà! — had a list of Fido lovers who might be stiffing the county. Out went the letters
You can expect federal and local governments to ramp up their continue for the hunt for money.by
I highly recommend watching this. Porter Stansberry explains why stocks are over valued today when measured bye enterprise value (adding on corporate debt and subtracting cash for the market cap). He believes the corporate bond bubble is worse than the 2000 tech bubble.by
Bill Bonner had a good chart today in his blog highlighting what pensions needed to earn a 7.5% yield in 1995 compared to today.
In 1995 a pension could put everything in the 30-year treasury and be just fine. By 2015 the 30-year could only make up 12% of the overall pension in order to get the same 7.5% return.
The above highlights what Martin Armstrong has been stating for the cause of driving down bond yields. The 2008/2009 crisis scared even more people into government bonds causing the melt up.
Pension funds WRONGLY assumed that government debt was safe, and as a result, many pension funds simply bought 30-year bonds in an effort to match maturity dates for pensions. That led to a strong bull market and the break-even was 8%. They kept bidding to try to lock in rates for pension payment in the future and their lack of management skills led to this 35-year bull market. Rather than picking stocks, they just believe government is the best thing since sliced bread. Now, they can no longer survive with rates this low, which is why the Fed keeps saying we must “normalize interest rates” for we will see a massive wholesale collapse in pensions. Yes, the 2007-2009 crisis helped create the final Phase Transition into a major long-term high in bonds (5,000 low in rates), but it obviously is not responsible for the 35-year bull market in bonds (decline in rates).
Now, if we are quickly approaching the end of the bond market bull run this last part from Porter Stanberry on bond duration will leave you even more squeamish.
Bonds with longer maturities generally have higher durations. This means they’re more sensitive to changes in interest rates. For example, according to Wall Street Journal data, one-year U.S. Treasurys have effective duration of 0.959 years. In simple terms, this means that one-year Treasurys will fall about 0.96% in price for every percentage point increase in yield. By comparison, 10-year Treasury notes currently have a duration of 9.184 years (representing a 9.2% decline for every percentage increase in yield) and 30-year Treasurys have a duration of 20.692 years (representing a 20.1% decline for every percentage point increase in yield).
Putting all the above together: GET THE HELL OUT OF GOVERNMENT BONDS.by