Bonds & Interest Rates

Interest Rates to Rise: Grandich - Time Now to Short US Bonds!

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Posted by Peter Grandich - Grandich.com

on Monday, 04 June 2012 05:46

After waiting many months (if not a couple years), I’m going to finally suggest it’s time to “start” shorting U.S. Treasuries. Because there’s still a decent possibility rates can fall another 50 basis points before rising in the next few years many multiples of that (when Greece and Europe move past being the opening act and the U.S. becomes the real horror show), I’m going to suggest holding back fire power and not use ultra leverage shorting strategies.

For now, I’m going to add the following two ETFs to my “Tracking List”:

ProShares Short 20+year Treasury symbol TBF on the NYSE $28.23
ProShares Short 7-10 year Treasury symbol TBX on the NYSE $32.55

Taking such a bearish stance is not intended to be right in the next month or three, but on the belief bonds shall be the worst investment over the next decade.

I fully expect the overloaded boat of gold bears to do all they can to get gold back under $1,600. If by the close on Friday gold is higher than the close of last Friday, I shall almost certainly believe the correction is over.

I wish I could say the same for the junior resource market. While the current show here is much lighter attendance-wise than in quite some time, both the newsletter crowd and companies are either cautious or outright bearish, and the comments I’m hearing I heard at previous bottoms; there’s just too much technical and fundamental damage to suggest a “V”or “U” bottom. L is the most likely bottom (we go mostly sideways for the balance on 2012).

Picture 3


Bonds & Interest Rates

The Best Dividend Stocks for May 31, 2012

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Posted by Dividend Yield - Stock, Capital, Investment

on Wednesday, 30 May 2012 08:38

Here is a current overview of the best yielding stocks with a market capitalization over USD2 billion that have their ex-dividend date on the next trading day. If your broker settles your trade today, you will receive the next dividend. A full list of all stocks with ex-dividend date can be found here: Ex-Dividend Stocks May 31, 2012. In total, 21 stocks and preferred shares go ex-dividend of which 6 are yielding above 3 percent. The average yield amounts to 3.94 percent.

The ex-dividend date is a major date related to the payment of dividends. If you purchase a stock on its ex-dividend date or later, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend. It is important that your broker settles your trade before the ex-dividend date.

.....read about the 9 Dividend Stocks HERE

Visit Dividend's Website http://long-term-investments.blogspot.ca/



Bonds & Interest Rates

Europe's Stress Scenarios And What Goldman Sees As Priced In

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Posted by ZeroHedge

on Tuesday, 29 May 2012 08:26

The pan-European game of chicken continues and with each iteration of this game, the political cost to the two parties involved has increased. Goldman sees three key scenarios from this: Muddle Through, a Fast Exit, or a Slow Exit.

A Slow Exit with a modest 1% hit to Euro-area GDP appears to be priced in:

20120529 gs_0

....read more HERE


Bonds & Interest Rates

Making Money the Old Fashioned Way: These Stocks Yield Up to 13.5%

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Posted by Carla Pasternak: Dividend Opportunities

on Wednesday, 16 May 2012 00:00

These Stocks Yield Up to 13.5%... But I Doubt You Know About Them

My husband Melvin and I bought our first home when we were expecting our first child. After an exhaustive search, we settled on an up-and-down duplex. It was built in the 1940s and had a rental suite in the basement.

The purchase was a good decision from a financial standpoint. Rental payments covered a substantial part of our mortgage, and about two years later we were able to sell it for 20% more than we paid.

But from a lifestyle perspective, it was not ideal. First, the rental suite's bathroom faucet started leaking. Then ceiling tiles came tumbling down. Soon the rent was a week overdue and counting. There was always something.

I learned some important lessons from that experience. First, carefully selected real estate could be highly profitable. Second, I didn't want to deal with the upkeep required by rental properties.

Thankfully, there are real estate investment trusts (REITs).

As an income investor, you likely know plenty about these securities. REITs own leased property, letting investors own a diversified portfolio of properties and letting someone else look after the hassles of managing them. 

As one of my first picks for my premium High-Yield Investing advisory, I added shopping center REIT Simon Property Group (SPG) at $53.00 per share in August 2004. I sold it nearly three years later at $94.95, after collecting $9.06 per share in distributions, for a total return of 96%.

Equity Inns (NYSE: ENN), a lodging REIT added shortly after in January 2005, did even better. Total returns were 118% in just under three years. Sun Communities (NYSE: SUI), which runs manufactured home communities, was added in October 2010 and so far has provided total returns of about 40% in just over a year and a half.

You can see why I like REITs.

There's just one problem. U.S. REITs have been sharply bid up since the spring 2009 bottom. As a result, their yields, which move inversely to prices, have come down. U.S. equity (non-mortgage) REITs are yielding an average 3.4%, according to the benchmark MSCI U.S. REIT index.

The solution? Canadian REITs.

You may not have heard of them, but Canadian REITs (CanREITs) are similar in many ways to their U.S. counterparts. As in the United States, to qualify as a REIT in Canada at least 75% of revenues must come from rental income. CanREITs also pay out most of their taxable income to avoid paying corporate taxes and maintain their REIT status. Better yet, while most U.S. REITs pay dividends quarterly, most CanREITs pay monthly.

One difference between the two is that most U.S. REITs are corporations, but CanREITs are generally unincorporated investment trusts. That means, in case of bankruptcy, unitholders would be responsible for the REIT's liabilities. However, CanREITs typically guard against this possibility by purchasing insurance and excluding unitholders from liability in their loan contracts wherever possible. 

The biggest difference, though, is their size. In the United States, you can choose among dozens of large capitalization REITs. Simon Property Group (NYSE: SPG), for example, has a market cap of around $45 billion. 

In Canada, the selection is more limited. The largest REIT by market cap is RioCan (TSX: REI.UN; OTC: RIOCF), a shopping center developer with a market cap of $7 billion. Only 16 CanREITS have market caps over $1 billion.


But at this point, many Canadian REITs are yielding higher than their U.S. counterparts. The average Canadian REIT pays a 5.0% yield, compared to 3.4% for U.S. REITs. This includes Canada's Scott's REIT (TSX: SRQ.UN; OTC: SOREF), which owns buildings leased to KFC, Taco Bell, Subway, and Shell gas stations, among others. Right now the shares yield more than 13.5%.

Meanwhile, Canada has a healthy housing market, strong banks, and effective government policy that underlie a healthy business environment. 

As measured by the S&P Case-Shiller U.S. Home Price Index, housing prices in the U.S. have declined 26% as of the end of 2011. In contrast, housing prices across Canada actuallyincreased 17% during that period, as measured by Canada's National Bank Home Price Index Composite.

Of course, the key to successful REIT investing is selecting the specific property sector most likely to benefit from the current economic environment. 

There's no guarantee, but in my view the two strongest Canadian REIT sub-sectors right now are office space and apartments. 

In many Canadian cities, the going market rate for office rents is now higher than lease rates. When these leases expire, therefore, rents should rise, driving REIT cash flow higher and potentially boosting distributions for office REITs.

Meanwhile, there's a lack of new multi-family supply in Canada. Consistent and stable demand is based on population growth and the housing needs of new immigrants. Proposed legislation to make underwriting standards harder for first-time home buyers may also lead to more people remaining as renters.

One more thing...

You might think it's difficult to buy Canadian stocks. However, the vast majority of large-cap Canadian REITs are inter-listed and trade on an over-the-counter (OTC) exchange in the United States. Many U.S. brokers, such as T.D. Ameritrade and Interactive Brokers, provide easy online access to the Toronto exchange, but some brokers may require you to place a phone order. You can also trade Canadian REITs over the counter in the United States, but liquidity is more limited than if you trade directly on the Toronto exchange. 

Good Investing!

Carla Pasternak's Dividend Opportunities

P.S. -- If you haven't already seen it, don't miss StreetAuthority's report -- Top 5 Income Stocks for 2012. These five select investments pay dividend yields of 7.5%... 8.8%... even 11.5%. For more details on these investments you can visit this link.

Disclosure:  StreetAuthority owns SUI as part of High-Yield Investing's model portfolio. In accordance with company policies, StreetAuthority always provides readers with at least 48 hours advance notice before buying or selling any securities in any "real money" model portfolio. Members of our staff are restricted from buying or selling any securities for two weeks after being featured in our advisories or on our website, as monitored by our compliance officer.


Bonds & Interest Rates

Waving the White Flag

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Posted by John Mauldin

on Sunday, 13 May 2012 12:55

Waving the White Flag

Viva Los Rescates Financieros de los Bancos

Contagion is Real
It Doesn’t End With Spain

New York, Atlanta, and Philadelphia

A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools.

- Douglas Adams, The Hitchhiker's Guide to the Galaxy

For quite some time in this letter I have been making the case that for the eurozone to survive, the European Central Bank would have to print more money than any of us can now imagine. That the sentiment among European leaders was that they were prepared for such a move was clear – except for Germany, which is haunted by fears of a return to the days of the Weimar Republic and hyperinflation.

When Germany agreed to a fixed monetary union and a European Central Bank, it was with the clear understanding that it would be run along the lines of the German central bank, the Bundesbank. The members of the Bundesbank and the German members of the ECB were most outspoken about the need for a conservative monetary policy that would keep a clamp on inflation.

However, as I have previously noted, the Bundesbank was a toothless tiger. Germany has two votes out of 23 on the ECB, and the loud drumbeat from most of Europe, which is experiencing the difficulty of austerity accompanied by too much debt, is for a far more accommodating ECB.

The simple fact is that Mario Draghi, the Italian president of the ECB, created €1 trillion euros to help fund European banks, which promptly turned around and bought their respective countrys' sovereign debt. Germany's Angela Merkel forced the Bundesbank to "play nice" and go along with what was seen as the only way to solve a growing banking crisis in Europe. Everyone breathed a sigh of relief, thinking that this at least bought a year during which things could be sorted out. But it turns out that a trillion euros just doesn't go as far as it used to. The "relief" lasted about a month. The last few weeks have presented yet another budding crisis, as least as large as the last one. Where to get the next trillion?

This week the German Bundesbank waved the white flag. The die is cast. For good or ill, Europe has embarked on a program that will require multiple trillions of euros of freshly minted money in order to maintain the eurozone. But the alternative, European leaders agree, is even worse. Today we will look at the recent German shift in policy, why it was so predictable, and what it means. This is a Ponzi scheme that makes Madoff look like a small-time street hustler. There is a lot to cover.

At the end of the letter I will mention a few upcoming speaking engagements, in Atlanta, Philadelphia, and a webinar I will be doing next week. Now let's jump over to Europe.

Waving the White Flag

It is the world's worst-kept secret: Germany does not want inflation but wants to abandon the European Union even less. And as we will see, the eurozone simply does not have enough money to keep itself together without massive ECB intervention.

"Cry havoc," wrote Shakespeare in Julius Caesar, "and let slip the dogs of war." The military order "Havoc!" was a signal given to the English military forces in the Middle Ages to direct the soldiery (in Shakespeare's parlance "the dogs of war") to pillage and incite chaos.

The cry is much the same in Europe today, though it is not the dogs of war that will ravage the land but the hounds of inflation. The English edition of Spiegel Online today carries a story with the headline "High Inflation Causes Societies to Disintegrate."




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