Bonds are the worst investment. So say all the learned investment letters I receive.
They are the worst if you think bonds are stocks and think the bonds will go up in time.
They’re not stocks, they’re bonds.
In the old days, learned investment advisors used to recommend percentages like 80-20. 80% in stocks, 20% in bonds. Than as you got older, they’d drop the stock holdings and up the bonds — coming up with 20-80.
Recently interest rates have risen and the value of bonds (like U.S. Treasuries) have fallen. They’ve become volatile like stocks. You’ve lost money on them.
You don’t want bonds long-term if you’re old and a (my favorite hat)
As I’ve written, the stockmarket is not the place to be right now. The Fed is raising interest rates, Don’t fight the Fed.
Fine.
There is a strategy.
Today you can earn 4.7% on a one-year Treasury. But — the big BUT — if you sell it in six months you will lose money. By then interest rates will be higher and the value of your bond will be lower. Yields go up. Price come down. Old rule.
But, if you hold your one-year bonds to maturity — namely 12 months from the day you bought them, you will not lose money. In fact, you will make 4.7% in cash — more than most likely you would earn in the stockmarket — unless you’re a genius at timing and picking stocks, (Which I, sadly, am not.)
Now, there are two types of treasuries (I’m learning) — the normal ones and the Zeros. The normal ones incur state and local income taxes. — a pain if you live in New York, California or Illinois. The Zeros don’t. But they yield less. Hence a lot depends on your tax rate. You pay Federal tax on normals and zeros.
The best news is the interest and principal repayments on my treasuries drop into my Fidelity account automatically. I don’t have to do anything — seriously appealing to someone as lazy as me.
Let me state clearly:
Treasuries are a not long-term solution. But, for one year, I’ll take the 4.7% interest payments and mull in twelve months. Maybe tech will be back in fashion? Maybe Zuck’s metaverse will emerge as brilliant and useful. (?)
Meantime, I am holding a little cash — in case I see a “bargain” — maybe Generac? See below. I nibbled at TSM.
For education purposes. Let’s look at how difficult it’s been in the last year. Here are three charts. Buy any of these at the wrong time, you would lose your shirt::
Apple one year.
XLE — the energy ETF — one year:
Microsoft one year:
You think inflation is anywhere near the Fed target of 2%?
Look at this just in from Apple:
That’s a 40% increase! They’re about to get a disconnect notice from me if I can figure out to do it. I never subscribed. They just signed me up. That’s why I love my new X1 virtual credit card:
All you need to now about FTX and Sam Bankman-Fried
There were two companies.
+ One called FTX was an online broker — think Fidelity, TD Ameritrade, Charles Schwab, etc. FTX one traded crypto currencies for a million unwashed “investors” who had drunk the bitcoin KoolAid.
+ The other was a trading company called Alameda Research which the owners of FTX used to make personal “bets” on trades they thought were “sure things.” They weren’t.
They took investor money which was in FTX and placed bets that went awry.
Think JPMorgan, Bank of America, or Citibank management taking depositor money (yours and my money) and “investing” it in prime real estate in the Antarctic, buying tulip bulbs in Holland, or putting it all on number 17 in Vegas.
It was an $8 billion accident, says Sam Bankman-Fried, 30.
Writes the Financial Times, ” Within the space of a few days, FTX had gone from being the vanguard of a new crypto economy, with a valuation of $32 billion and celebrated by celebrities and politicians, to a humiliating bankruptcy.”
The Economist has a piece “Is this the end of crypto?” It writes, “The high-speed implosion of FTX has dealt a catastrophic blow to an industry with a history of failure and scandals. Never before has crypto looked so criminal, wasteful and useless.” …
“As at the end of any mania, the question now is whether crypto can ever be useful for anything other than scams and speculation. The promise was of a technology that could make financial intermediation faster, cheaper and more efficient. Each new scandal that erupts makes it more likely that genuine innovators will be frightened off and the industry will dwindle. “
“Efficient, decentralised versions of mainstream financial functions, such as currency exchanges and lending, exist. But many consumers, fearful of losing their money, do not trust them. Instead they (those exchanges) are used to speculate on unstable tokens (e.g. Bitcoin). Money-launderers, sanctions-dodgers and scammers abound.”
The Economist’s piece is the best I’ve read on the FTX scandal. Click here.
The moral of this story:
Next time a 30-year old comes calling peddling something that has no substance, no earnings and no likelihood of ever having earnings — like crypto currencies — say NO.
When in doubt, stay out. My friend Todd Kingsley’s sage advice.
Next time you’re in Vegas put all your money on 17. When it wins, send me my comish for my brilliant “investment advice.” (Sic.)
Life tips
+ Newer laptops have touch screens (like an iPad. They’re immensely useful.
+ Goo Gone removed adhesive glue from laptop labels. It’s really useful, especially if you’re like me and don’t like labels.
+ You look better in Zoom when your window is in front of you, not behind you.
+ Always log-out. Don’t close your software with the big X in the top right hand corner. You’ll lose stuff.
+ Keys to health: Drink water. Get exercise. Take naps. Skip bread and desert.
+ Global Entry is amazing. I stood in front of the Global Entry machine. It took my photograph, recognized me an welcomed me back to the U.S. from my few days in Mexico with the family. Global Entry plus Immigration took less than three minutes. I avoid the great unwashed. Get Global Entry. It also includes TSE Pre. Click here.
+ AirBnBing your house can be profitable — if your local greedy community doesn’t tax you into oblivion — which they’re doing in many towns. Yuch.
+ This is still a great hearing aid. I use it every day. I can hear my friends, and most important, Susan, my wife.
Best I’ve every worn. Only $199 at Amazon. Search for EarCentric.
I love our Generac emergency generator
We regularly lose power from our commercial provider NYSEG. Then our Generac kicks in.
More and more people are buying these miracle workers. My personal tips:
+ Get a Generac big enough to power your whole house.
+ Service the thing every six months. That means doing what you do with your car — changing the oil, the filter, checking the battery, etc.. And learning how to start it if it doesn’t automatically kick in.
I used to own the stock, GNRC. But sold it when it dropped 15% or so. Here’s the last year:
You’d think this would happen to a stock with no earnings. But Generac has solid earnings and a solid product. From Yahoo.Finance:
In October, Generac cut its sales growth target for the year to between 22% and 24% from a prior forecast of growth of 36% to 40%. Generac also lowered its net income margin guidance for 2022 to between 9% to 10% from a prior estimate of between 13% to 14%.
OK. I buy that. But that’s brought the stock to an attractive P/E of 15.
Should I buy it now?
Stop Press: The Wall Street Journal just put out a piece
+ Generac’s Generator Sales Hurt by Lack of Installers
Company trims growth forecast, saying its dealers don’t have enough electricians to handle orders, extending wait times for customers
The Wisconsin-based manufacturer opened a new factory in South Carolina last year and has overcome supply-chain bottlenecks and labor shortages that constrained generator production during the Covid-19 pandemic. Now, the company says it needs more dealers and electricians to install its generators as customer orders pile up.
For the Journal’s piece, click here.
It’s making more machines. It’s cleared up its supply chain. In time, it will get installers. I’m buying some GNRC tomorrow.
Good news
Favorite recent New Yorker cartoons
That’s it for Sunday. I’m going back to our flood which has buckled the floor boards in my office and made the basement look like Niagara Falls. Goodbye ceilings. Goodbye insulation. Goodbye floor boards. Emptying buckets of dirty brown water gives excitement a whole new meaning.
I did hit a couple of nice down-the-line backhands today.
— Harry Newton
