HOW ONE iTuliper IS INVESTED?

[Jim Nickerson]

Re: HOW ONE iTuliper IS INVESTED?

Do tax-free muni funds make any sense? It seems to me that with our good friends in DC just waiting to raise taxes, that good quality muni funds may be an acceptable alternative to no yield cash. Comments? Thanks.

Tim

I am not much of a bond person and have never owned a muni-bond. Hopefully someone else can provide you with good opinion.

[ASH]

Re: HOW ONE iTuliper IS INVESTED?

Do tax-free muni funds make any sense? It seems to me that with our good friends in DC just waiting to raise taxes, that good quality muni funds may be an acceptable alternative to no yield cash. Comments? Thanks.

Tim

I am not much of a bond person and have never owned a muni-bond. Hopefully someone else can provide you with good opinion.

I have an opinion; not sure it's good. I tend to offer my opinion based upon scant experience, so Tim -- you have been warned.

Local governments are having revenue problems, and it's going to get worse. I perceive an elevated risk of default, and I think one should at least attempt to be selective about which bonds to buy. I gather the states are likely to get money from the federal government for healthcare and infrastructure spending -- and probably unemployment benefits -- but I don't think payment of their existing debt is necessarily guaranteed. Lord knows how/if the federal money will trickle down to counties and cities. Therefore, my uninformed advice is to stay away.

[Sharky]

Re: HOW ONE iTuliper IS INVESTED?

Do tax-free muni funds make any sense? It seems to me that with our good friends in DC just waiting to raise taxes, that good quality muni funds may be an acceptable alternative to no yield cash.

How do you determine "good quality" munis in this market? Rating agencies? :eek:

A tax cut seems more likely to me than an increase in the short term -- the Republicans certainly seem to be pushing for one.

From my perspective, I would re-word your statement above as follows:

Are questionably-rated munis, insured by firms with probable negative net-worth, and issued by near-bankrupt entities an acceptable alternative to safe but no-yield cash?

[dtimwinn]

Re: HOW ONE iTuliper IS INVESTED?

Rather than buying individual bonds, I am interested in bond funds that hold a basket of bonds, staying away from any bonds issued by any governmental entity in California. I want to be prudent, but need more income than I can get with CD's and money market funds. Where does one go? Thanks. Tim

[Jim Nickerson]

Re: HOW ONE iTuliper IS INVESTED?

Probably someone else has a better answer, but it's possible that being prudent and reaching for yield now may be mutually exclusive desires.

From everything I can tell, "investing" carries risks, as does everything else I can think of right now. There are no "no brainers," despite the apparent ability of some here and elsewhere to claim such.

I ended up spending some of my principal last year, but then I am retired, that was because I lost some of it in "investing."

If I had a job, and if I had expenses, and if I depended upon interest earned to meet my expenses, and if I didn't want to violate my principal then I would have to cut down on my expenses.

[BK]

Re: HOW ONE iTuliper IS INVESTED- Munis

I would have to believe that this is THE Absolute worst time to invest in Munis.

We have two potential scenarios in front of us:

Deflation - in a deflationary world Cities/States/County Governments are in for drastic cuts in their Revenue. Have you notice how many new schools and beautiful playgrounds were funded with Municipal Bond offerings - there has been a Major Credit Bubble in Government Bonds during the last 9 years.
Reduction in Tax collections will lead to some defaults - the Feds could step in and feed cash to the local/State/County Governments this would support Inflation.

Inflation- Inflation will lead to higher Interest rates - you'll have locked into a Muni Fund while Interest rates are rising. That is not a winning formula.

The hardest part of the future in front of us is learning to minimize the downside risk and Munis seem to be full of downside risk.

Good Luck.

[Sharky]

Re: HOW ONE iTuliper IS INVESTED?

Rather than buying individual bonds, I am interested in bond funds that hold a basket of bonds, staying away from any bonds issued by any governmental entity in California. I want to be prudent, but need more income than I can get with CD's and money market funds. Where does one go? Thanks. Tim

A basket of trash is still trash.

One approach for you might be to find some dividend-paying companies in businesses that should be relatively resilient to the economic swings -- ideally where demand is constant or increasing and where they have the ability to raise their prices easily when inflation kicks in.

It would take some work to find the right stocks -- some might be overseas companies -- but it seems doable to me. It would be a lot less risky than bonds are at the moment, especially munis. Add some diversification, and you should be set.

FWIW, I think the days of being able to safely invest in funds of all kinds are over. Too much risk, too little transparency, too much fraud, etc.

[dtimwinn]

Re: HOW ONE iTuliper IS INVESTED?

Thank you for your valuable input. Would you view be changed at all if one is talking about muni bond funds that hold serveral hundred (maybe thousands) of different bonds -- and that the funds can be liquidated on the NYSE or AMEX on a moment's notice?

[Sharky]

Re: HOW ONE iTuliper IS INVESTED?

Thank you for your valuable input. Would you view be changed at all if one is talking about muni bond funds that hold serveral hundred (maybe thousands) of different bonds -- and that the funds can be liquidated on the NYSE or AMEX on a moment's notice?

I understand what you're saying. While in principal, and certainly according to the old rules, diversification of that type should help reduce risk, in today's market, I'm not so sure. I actually think that shorting muni funds might be an interesting investment, but personally I wouldn't play on the long side.

What would happen to the price of the fund if one (of the thousands) of bonds it holds defaults?

How can you be really sure that the fund even really holds the bonds (ala Madoff)?

How can you be sure that there will be a market for the funds when you want to sell?

If any munis default, even ones not held by the fund, how will that impact the prices of all munis? If you're thinking bailout, look at what happened to the price of Lehman, Freddie, Fannie, GM and Chrysler after bailouts were announced -- still huge losses.

How can you be sure that any the bonds the fund holds are worth what they think they're worth (ratings & insurance issues)?

What will happen to bond prices when inflation returns? You might be earning 5% (or whatever), and then lose 50% on your capital as interest rates rise.

[lakedaemonian]

Re: HOW ONE iTuliper IS INVESTED?

Here's me in a nutshell:

Closely held business representing a BW Top 50 Brand

Sitting on a good bit of cash

FREEHOLD, ZERO debt, but two big facilities in place if needed

Industry leading inventory management

Company is strongly profitable...quite confident about the next 6 months...beyond that is opaque

Average of several fair valuations = $2.75-3 million

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Commercial Property(owned business premises) = $1.7 million

FREEHOLD

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Jointly owned Dairy Farm

My shareholding fairly valued = $1.5 million

My share of the farm mortgage = $650,000

Farm is cash flow positive and is one of the lowest cost producing farms in the lowest cost producing country in the world

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low single digit net worth in gold/silver

low single digit net worth in collectible firearms(hunting/target shooting is my favorite hobby)

single digit net worth in two shares......the only oil refinery in New Zealand as well as a substantial shareholding in one of the few remaining solvent and profitable finance company in New Zealand with strong LONG-TERM prospects.

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Our house, we paid $400k.....outstanding value

Our mortgage is $250k

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Our health is EXCELLENT

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We've had an incredibly goods year.....probably our best ever.....so we want to make the most of it......like putting even more nuts away for "winter".

Our pre-tax cash return was in excess of 12% of total net worth and we've seen some very significant unrealised capital gains on assets in recent years.

We have been marketing our last remaining commercial property for +/- 6 months with a fairly rigid price. Our thoughts being that the lease length is long and the tenant blue chip. We've had some close calls, but have been thus far unwilling to drop our price......we turned down an offer for $1.7, but might strongly consider it when we have our gloom and doom glasses on.

We also receive regular offers of interest in selling our business which we are reluctant to do as we are reluctant to "let down" our fantastic staff....but sometimes seriously ponder.

My concerns are that we are STILL too heavy in property..althought I'm hoping our investment in lowest cost producer food commodity property is a safe(r) long-term bet....we've seen our payout for milk drop back significantly...tightening our belt for a few years is easy.....but seeing food commodity price inflation coming through would ease my mind.

So while it's been a fantastic year, we've spent the better part of 8 very long and very hard years to get to this stage and now I've become quite indecisive as to what's next?

When oil dropped deep into the $30's I was sorely tempted to go big and go long...but again indecisive.

We are also concerned about being overly New Zealand heavy.....we don't want to get caught out in a South Pacific Iceland.....although our Dairy Farm SHOULD provide SOME hedge against that.

Any thoughts?

Any perceived weaknesses?

I know it's a bit different from the rest as our "portfolio" isn't as portable or instantaneously liquid as most.

Welcome to the life of a small business owner!

[Charles Mackay]

Re: HOW ONE iTuliper IS INVESTED?

Ok little update here.

Note that the ETFs (HOU, HNU and HAU) are $CAD hedged and 2x leveraged. The allocation % above accounts for this leverage.

- W.

LW, that still doesn't explain why HOU went from a high of 240 to a low of 10... what happened there?

[rabot10]

Re: HOW ONE iTuliper IS INVESTED?

I thought about getting out of 10% more of my long positions today, that would be most everything I have in equities except HSGFX, but I didn't.

I noted somewhere RickBishop wrote he closed out his long positions last Friday. I am still not sure, but that might have been a very good move, for Rick's sake I hope it is.

Today, I did liquidate my FXF (Swiss Franc ETF for a meager profit) and DBA (meager profit) and added a token of SRS (5K+).

Still basically 70% cash and 30% in market.

Jim I did get out of my longs Friday and felt real smart. I had my best day in the markets Tuesday and gave it all back yesterday. But i live to trade another day.

I am looking at what are the best companys to short when the time comes. Any ideas?

[Jim Nickerson]

Re: HOW ONE iTuliper IS INVESTED?

Jim I did get out of my longs Friday and felt real smart. I had my best day in the markets Tuesday and gave it all back yesterday. But i live to trade another day.

I am looking at what are the best companys to short when the time comes. Any ideas?

Sorry, Rick, no ideas. I just attempting to get a handle on which is the overall way the equity indices are going to move over weeks to months.

[LargoWinch]

Re: HOW ONE iTuliper IS INVESTED?

LW, that still doesn't explain why HOU went from a high of 240 to a low of 10... what happened there?

Charles, my understanding is that HOU.TO (remember, I am based in Canada and this ETF is traded on the Toronto's TSX), peaked at 48.51 in July:



It was down to $1.92 per share, but a reverse split of 5 to 1 occurred a few weeks ago:

http://www.hbpetfs.com/pdf/20081222_hbp.pdf

Noteworthy, is the fact that this ETF is routinely one of the most active share traded on the TSX.

-W.

[Jim Nickerson]

Re: HOW ONE iTuliper IS INVESTED?

Jim I did get out of my longs Friday [THAT WAS ON 1/8/09] and felt real smart. I had my best day in the markets Tuesday and gave it all back yesterday. But i live to trade another day.

I am looking at what are the best companys to short when the time comes. Any ideas?

One of the last people I would thought I'd accuse of "genius" is you, Rick, but as I suggested somewhere before, getting out that day might be a good move, and now with some more time, your move looks like "genius" (surely I should be able to come up with a better word to describe you). At any rate, if you went short in whatever, you'd better stay alert as I added some inverse postions today. So perhaps the current downdraft will cease tomorrow.

Below is my present allocation;

	ALLOCATION
INVERSE	9.03%	SRS, SKF, DXD, SSD, QID, TWM
INTL	0.00%
COMM	2.89%	UNG, USO
PM	1.53%	PHYSICAL
ENERGY	2.13%	TSO, VLO, FTO
CURR	2.21%	TBT, TIP
HEDGED	19.05%	HSGFX
INVESTED	36.84%

Between the 6th and 9th, the market indicators I watch became very overbought, and now it seems that condition is definitely being worked off on what so far has been poor volume by my reckoning. A previous overbought condition on 12/8/08 never really reversed to being seriously oversold before the last spurt up to 931 on 1/2/09. Perhaps this time things will move down into a level of becoming seriously oversold--I hope so if I am to make any money from today.

Three of the last six days have been down 85% or more in volume on the NYSE and four of the six have been down 93% or more in points, with today being down > 90% in points and volume. I take that as negative for the foreseeable future (can't actually foresee the future).

Edit: here are a couple of interesting notes regarding "With a 6.7% decline after nine trading days, the S&P 500 is off to the worst start in its history," and what has happened when the DJI is down five days in a row as it ended today 1/14/09. Second one requires scrolling down page to find. http://bespokeinvest.typepad.com/bespoke/