Thread: Buy or sell any investments?

nebish - 5/13/2020 at 01:49 PM

Wonder if anyone has been active with their investments?

I am selling some GLD I had bought around $110 in a multi-phase approach. First round was when it hit $156. Will look to sell second round when it hits a new high in the mid/upper $160-range and then further chunks if it keeps climbing.

I bought some Waste Management at $89 because it had been on my watchlist for a few years but I didn't want to pay the elevated price it had soared to.

Couple other things I hesitated on and lost the price.

On a side note with WM related to recycling, not sure what the future holds for recycling. Has anyone seen their areas no longer accepting certain plastics? And "contaminating" commingled recycles has led our collectors to threaten to reduce accepting recyclable items - the places that buy the stuff don't like contamination. How about places in Asia buys our recyclables and then just dumps them in the sea. Way to go! Out of sight, out of mind. Right now here they suspended curbside pickup due to coronavirus. More people are probably just putting stuff in the garbage.

Sang - 5/13/2020 at 04:25 PM

Have my quarterly meeting with my adviser next week. Don't own any individual stocks. Since we were already pretty conservative, they aren't looking to make many changes.

I have been doing Roth conversions each year for the last 2 or 3..... looking to see if I should do it now while things are down a little instead of waiting till the end of the year to decide - interested in what they say about the timing.....

oldcoot - 5/13/2020 at 09:39 PM

It was unfortunately obvious because of the current pandemic, but Amazon and Walmart stock were easy options to buy.

Most every day I try to watch Fast Money on CNBC (5:00 eastern). They usually have the same four traders discussing the market and at the end of the show each makes a recommendation sometimes to buy a stock, sometimes to sell. Currently, the traders are at their homes and I noticed something interesting today, hadn't seen it before. Over his left shoulder as he faces the screen, Tim Seymour has a framed album cover of At Fillmore East.

PhotoRon286 - 5/14/2020 at 12:47 AM

My oldest son works for a company that specializes in converting 401ks and IRAs to investment quality coins and bullion.

They have been busy as hell the last two months with the stock market fluctuations and people wanting to get into less volatile platforms.

He usually deals with accounts in the five figure range but they regularly service clients with quarter million dollar

[Edited on 5/14/2020 by PhotoRon286]

nebish - 5/14/2020 at 02:24 AM

Nice catch coot! I like to look around the rooms of the homes these people are video broadcasting from.

Sang if you have any personal interest or time, I wonder how your broker is viewing fixed income? Like Ron mentioned with people trying to mitigate some risk, but just with the balance and diversity some recommend in a portfolio, fixed income, like bonds, specifically muni-bonds - if you have a chance or it comes up I'd be curious of their thoughts. With interest rates being what they are and state budget shortfalls being what they...

gina - 5/15/2020 at 11:21 PM

The word on the street is Moderna Pharmaceuticals will have a vaccine ready in Sept. Stock should go up if that happens. They are in Massachusetts and one of many companies working on it 24 hours a day 7 days a week.

[Edited on 5/21/2020 by gina]

Sang - 5/20/2020 at 10:00 PM


Sang if you have any personal interest or time, I wonder how your broker is viewing fixed income? Like Ron mentioned with people trying to mitigate some risk, but just with the balance and diversity some recommend in a portfolio, fixed income, like bonds, specifically muni-bonds - if you have a chance or it comes up I'd be curious of their thoughts. With interest rates being what they are and state budget shortfalls being what they...

Obviously for me, everything is part of having a balanced portfolio. I have stated before, since I am already retired and have a pension, basically all my investments will go to my wife and then kids. We hopefully won't have to spend any of it. (My wife is 6.5 years younger than me, and is still working part-time). So we have a very moderate mix of 50% stocks 50% bonds. We have a good mix of US and International, since international has been "cheaper" than the US market.

On your question of munis, they mentioned that although McConnell is trying to pass something to let cities declare bankruptcy, they didn't think it would happen. They said in spite of the increased debt (and budget shortfalls) some of the higher rated munis look attractive . Stay with A or AA ratings, but be careful because they are still under pressure. They said they would send me an article by Cooper Howard on the outlook for munis. If they do I will post it for you, or maybe it is online somewhere.

They also mentioned that some junk bonds and high yield preferred bonds were not viewed highly before, but may be attractive if you stay with higher rated ones.

I know Bloomberg came out last week about volatility in commercial real estate. Their opinion was that there are still some areas that will do well, mostly IT related - server farms, cell tower rentals, maybe warehouses used to store goods for commerce, etc.

Hope that helps.

nebish - 5/21/2020 at 01:08 PM

That is good, Sang. Appreciate it.

I meet with a broker usually twice a year, already met earlier this year before the world went to hell in a handbasket.

I've tried to steer away from multinational corporations in most cases, ones that can outsource jobs here so they can boost their margins and returns. That philosophy has led to some lower growth, but it aligns with my philosophy. So I have plenty of Ohio tax free munis and some from a couple other states we felt were in good financial shape. Individual laddered bonds, not bond mutual funds. I may inquire about some higher yield, maybe just a small sampling - states aren't really going to go bankrupt are they!? I'm not risk adverse, but try to be safe. I really don't know much about the fundamentals, I rely on suggestions and then try and find other positive outlooks and agreement from different sources on names.

I had been pretty big on REITs, have done really well through the years. I have six different REITs. Some are a little iffy right now, but I did just buy two along the lines your broker likes IT/servers - CyrusOne (CONE) which has rebounded and Digital Realty Trust (DLR) has been ok still, but volatile. I had passed on cell tower REIT, but I may look back into it.

I don't own a ton of individual stocks, but do have some related to the construction and infrastructure industry. Would be nice if we can get something accomplished on that front, not for my sake, just for the jobs and the improvements.

Anyway, I got two takeaways from your post. Take care Sang!

Sang - 5/21/2020 at 06:28 PM

Here is the article from Cooper Howard...

Why State Bankruptcies Are Unlikely

Senate Majority Leader Mitch McConnell caused a stir in the municipal bond market by saying on April 22nd that he would be in “favor of allowing states to use the bankruptcy route” rather than providing them additional federal aid.

We believe Sen. McConnell’s statements are likely a political move in advance of negotiations for future aid. In our view, it is very unlikely that states will declare bankruptcy despite the economic fallout from the COVID-19 pandemic. Moreover, no state is in need of bankruptcy protection today, especially after the lifeline they’ve received from the Federal Reserve.

We don’t suggest investors avoid munis because of Sen. McConnell’s statements. In fact, we think munis can offer attractive yields relative to other fixed income investments today. Below are seven reasons why we think a state declaring bankruptcy is unlikely.

1. Congress would have to change the bankruptcy code. States are unable to file for bankruptcy protection because there is no bankruptcy provision that allows them to do so. Congress would have to pass a law changing this. Given the current makeup of Congress, we see this as extremely unlikely.

Congress did pass legislation in 2016, known as PROMESA,1 that allowed Puerto Rico and many of its covered entities to enter into a bankruptcy-like protection. Technically it wasn’t bankruptcy, but it afforded the territory many of the same rights under the bankruptcy code. Since filing for protections under the new law in 2016, Puerto Rico and some of its public entities are still under that protection. It has been a long, complicated legal process, and one that arguably most states would try to avoid.

2. Recent bankruptcy cases have favored pensioners over bondholders. McConnell’s statement appeared to be in favor of allowing states with high unfunded pension liabilities the ability to file for bankruptcy so they could reduce or eliminate their pension liability. Recent bankruptcy filings, however, have favored pensioners over bondholders.

Bankruptcy is a legal process under which all creditors negotiate for the limited resources of the city or local government. This includes individuals who receive pension payments, whose claims compete against those of bondholders. Historically, claims by pensioners have received higher recovery rates than claims by bondholders, so allowing states to file for bankruptcy would likely not achieve the apparent goal. For example, in Stockton, California’s bankruptcy, the judge allowed retirees to recover all of their future pensions including the unfunded liability, while lowering the recovery rates for bondholders.

3. No state has signaled it is in need of bankruptcy protection at this point. The slowdown in economic activity as a result of the coronavirus crisis is likely to inflict economic damage on many states. Moody’s Analytics, which is separate from the ratings agency Moody’s Investors Service, estimates that the combination of lower revenues and increased expenses to reduce the spread of COVID-19 could be between 18% and 23% of general fund revenues.

The good news is that many states have been preparing for an economic downturn, and rainy-day funds are at historically high levels. Nineteen states have large enough rainy-day funds and general fund balances to absorb the economic hit, under Moody’s Analytics baseline scenario. However, there’s wide variability, as illustrated in the map below.

Nineteen states have large enough rainy-day and general fund balances to absorb the economic shock

(There is a map of the US here that I can't copy that shows which states)

Some muni pundits have incorrectly stated that when Congress passed legislation allowing Puerto Rico bankruptcy-like protection, it would be the playbook for other states. We disagree with this view, because no state is currently in the financial position that Puerto Rico was at that time. At the time Puerto Rico filed for protections it suffered from a combination of high unemployment, a declining population, a high unfunded pension liability, and an unsustainable debt load. This is unlike any state today. When Puerto Rico filed for protections, its general obligation bonds had been rated below investment grade for more than two years. Currently, no state is rated below investment grade.

4. Bankruptcy and default are two different things. Although they often may be intertwined, bankruptcy is a legal process that allows for renegotiation of liabilities. Filing for bankruptcy does not guarantee that bondholders will receive less than was originally promised. In fact, the average issuer recovery rate for Moody’s rated munis has been 61% since 1970, with some bondholders receiving 100% of what was originally promised.

If a state gets into a situation where it doesn’t have all of the financial resources to meet its liabilities, it would have to raise taxes or reduce expenses. A general obligation bond is generally backed by the full taxing power of the issuer, and contains many strong legal protections that other liabilities do not. For example, in Illinois, debt service has to be pre-funded. Illinois general obligation bonds also have a first-priority draw on all state taxes.

Moreover, debt service tends to account for a low percentage of states’ revenues as illustrated in the map below. This illustrates that other expenses, such as payments to pension plans, are not currently crowding out payments to debt service. It’s worth noting that these percentages were generated prior to revenue declines that states likely will experience due to the COVID-19 crisis.

Debt service generally accounts for a low percentage of states’ revenues

Source: Moody’s Investors Service, as of 6/3/2019

5. Bankruptcy is usually a last resort. Filing for bankruptcy protection can be a long and complicated process, and ultimately results in higher borrowing costs. In other words, most issuers don’t file for bankruptcy unless it’s absolutely needed. An early sign of distress for a state would be lack of access to the capital markets. That’s currently not happening.

6. Recent congressional aid and programs set up by the Federal Reserve should help states. The recently passed CARES Act provides direct aid to states to help mitigate the economic impact of the coronavirus. Each state is eligible for at least $1.25 billion and potentially more based on the population of the state. There are restrictions on how the states can use the funds, but it should help to alleviate some credit pressures.

The Federal Reserve recently announced the Municipal Liquidity Facility, which should assist states with short-term financing needs. The facility can purchase eligible notes up to 24 months in maturity from states, cities with populations greater than 1 million, and counties with populations greater than 2 million. There are other restrictions and limitations, but the facility should help with the short-term financing needs to states. The CARES Act pushed the tax filing deadline back to July 15th, which will negatively affect states that rely on income taxes. This new facility serves as a bridge loan for those states until they can receive those tax revenues.

Moreover, we would expect that if a state were facing the need to file for bankruptcy—even though it isn’t technically allowed to under the current laws—the state would access this facility to help with funding needs. The bottom line is that no state is in need of bankruptcy protection at this point—and if any were, the Fed just threw them a lifeline.

7. This is likely a political move in advance of negotiations for future aid. It’s likely that Congress will provide some form of additional aid in response to the novel coronavirus crisis. We view McConnell’s statement as a political move signaling that there’s a limit to the aid that congressional Republicans will support.

What investors can consider now
We continue to view munis as a defensive asset for investors in higher tax brackets. Here are some actions that we think investors can consider now.

Consider adding to investment-grade muni exposure. Yields for highly rated munis are attractive now. One metric to evaluate the attractiveness of municipal bonds is the municipals over bonds (MOB) spread, which compares the yield on an index of AAA-rated munis to that of a Treasury of equal maturity. When the MOB spread is wide, munis are more attractive. As illustrated in the chart below, the 10-year MOB spread is well above its five-year average. We think there are opportunities in higher-rated munis.
The 10-year MOB spread is well above its 10-year average

Source: Bloomberg, as of 4/23/2020. The 10-year average yield ratio is 95%. Past performance is no guarantee of future results.

Focus on higher-rated issuers. Higher-rated issuers—those rated Aa/AA or above—are generally in a better financial position to manage through an economic downturn. We suggest focusing on issuers that are less reliant on sales taxes or near-term economic activities.
Have a plan and don’t panic. At the most basic level, a plan means having an asset allocation that’s appropriate for your risk tolerance and time horizon. A plan can help you resist the urge to sell when the market is volatile.

1 PROMESA, formally known as the Puerto Rico Oversight, Management, and Economic Stability Act, was signed into law on June 30, 2016.

Important Disclosures:

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market or economic conditions. Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance.

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