Hidden Taxes Strangle Fixed Income Investors
Starting with the US Dollar we see that it made lower lows, had lower highs, and closed lower for the week. But it did manage to close well off its intra-week lows. I continue to maintain a bearish dollar position in my clients’ accounts, which was opened on January 4th. The U.S. Dollar posted a late week gain (1/31 week), likely the result of turmoil in the mid-East. This news related buying might continue if the problem is not resolved. However, I think it is wise for us to stay in our profitable position, benefitting from a continuing drop in the US Dollar Index prices.
We entered back into US stocks on 11/5 and 12/17 and both of these have proven to be wise moves as we are riding a 7.54% and 6.27% gain. Often times, the US stock market will have a pullback in February and then really surge in the spring time. It will be interesting to see if there is still enough money to pour into stocks this spring, assuming the investing public continues their wave of optimism.
The most recent change (01/25/2011) I made to my clients’ portfolios was to go back into the US government long bond after closing a profitable short position against this bond. I still believe that interest rates will go lower from where they are now, which means the long bond will go up.
These low interest rates do not benefit everyone, as we often times assume. How low are interest rates? Well, the average 12 month CD is paying just .9%. I remember back at the start of 2007 a $1 million investment in 10-year treasury bonds would provide annual income of $45,600 and a corporate bond (Baa-rated) would pay $62,200 annually. And, get this, 6 month CDs would pay out $53,100 each year.
As of February 1st, 2011 the same $1 million purchase of a 10 year Treasury bond would pay $36,870 yearly. And a corporate bond (A rated and 10 years) would pay $63,000 of interest annually. Meanwhile, a 6 month CD would pay about $2,500 each year. So what is significant about these facts?
Something has got to give, in my opinion. If prices start to rise on people and fixed income investors continue to get paid these very low interest rates then their purchasing power will diminish greatly. This kind of works like a tax on these people. I have already had some conservative clients, in their 60s; decide that they wanted to take more risk with some of their money. They were previously in all fixed income assets and made the decision for me to actively manage a portion of their money using other types of investments with more volatility. Of course, they still have a large position in fixed income where we are at least getting more than CDs.
Another big deflationary drop, like Bob Prechter and Gary Shilling expect, would make sense to me to match our current interest rate environment. I could also see runaway inflation (more popular to the masses right now) where interest rates take off like they did in the early 80s. I am prepared for either scenario with the way I actively manage your accounts. Unlike so many others out there, I am not 100% certain what is going to happen with our economy, so I am preparing for either inflation or deflation. “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.” – Ecclesiastes 11:2.
Eleven Two Fund Management is a Registered Investment Advisor (RIA) located in Marietta, GA. We are proud to be working with Christian Individuals, small business owners, and Families in over 16 states.
Eleven Two Fund Management
3162 Johnson Ferry Road #260-27
Marietta, GA 30062
Toll Free: 800.917.5016
Press Contact: Thomas Cloud, Jr CFP, CHFC
This release was published on openPR.
Permanent link to this press release:
Please set a link in the press area of your homepage to this press release on openPR. openPR disclaims liability for any content contained in this release.
You can edit or delete your press release Hidden Taxes Strangle Fixed Income Investors here
News-ID: 162637 • Views: …
More Releases from Eleven Two Fund Management
The Gold Bull Market-Is it Bull?
The gold bull market is in full force. How long it will continue I have no earthly idea. This gold bull market very much reminds me of the real estate bull market. I have a difficult time recalling all the conversations I had during the technology bull market that ended in March of 2000. But I can certainly remember all of the attitudes and all of the people and
Giving, Saving, Investing
Luke 3:11 - And he would answer and say to them, “The man who has two tunics is to share with him who has none; and he who has food is to do likewise.” Going back to God’s word can often be challenging. And when I read these verses on giving, I feel my faith being challenged. Why did Jesus tell us to do such things? It’s easy for Him to
Investing Notes Sept 2011-Treacherous Waters Ahead
The US stock market hit a peak this year on April 29th, and we have not seen stocks that high since then. Behind much of the stock market’s volatility, at the end of August, are two different investment approaches. One group of investment managers believes that a lack of economic stimulus by governments around the world will lead to a severe recession. They sold on Friday when Ben Bernanke announced
Jittery Joe's and Patient Patty's...Biggest Investing Mistakes Revealed
I just wanted to review some of my thoughts about short term tracking of investment strategies. One of the biggest mistakes I see my clients make is to switch strategies after a few months when their accounts go down. I have witnessed this for years. Then inevitably, right after they switch investment strategies (with me) the investment strategy they just left starts to go up and the investment strategy they
More Releases for Dollar
The Million Dollar Planner
Beacon, NY: Champion Branding Agency LLC is pleased to announce a new resource created to help anyone pursuing big goals The Ready Set Win Playbook. The Ready Set Win Playbook is not your average planner. This 6-month dateless daily planner helps manage time allowing the ability to time block, task batch, day theme, and/or time box your day. The Ready Set Win Playbook is designed to push users to achieve, overcome and
Artist Scratches Million Dollar Paintings
Artist Scratches Million Dollar Paintings 12-17-2020 22:30 PM CET Paris, France Abstract artist John Lally has revealed 3 artworks that have taken 15 years to complete in his studio west of Paris. The Million series is a collection of works that were begun in 2005. Three painting scratched 1000000 times to reveal the figure of 1000000, with the price of 1000000 dollars. The paintings were crafted to convey our shared greed, value, selfishness and
Dollar Fanatic America's Only Exclusively Online One Dollar Store Embracing New …
Dollar Fanatic LLC., is a Ridge Farm, IL based exclusively online retailer selling a unique range of products for $1.00 through their website at https://www.dollarfanatic.com. Dollar Fanatic LLC has been looking over their shoulders a bit recently because of a couple New Players taking some market share online. Being an Online One Dollar Store that is growing and trying to carve their name in the massive Dollar Store Industry assures
Avazoo Licensed for Billion Dollar Raffle
Avazoo Corp announced today that they have been issued their first internet gaming license, clearing the way for the company to launch the world’s first Billion Dollar Raffle. This global event will make one lucky winner a billionaire, more than 100 people millionaires, and 1 in 3 ticket holders will win a cash prize with 40% of net revenue of the company, estimated to be in excess of $2,000,000,000 per
The Dollar Mill Launch
Tuck in your tuxedo and hang up your tie. We are bringing you formal information in an informal way through the recently launched The Dollar Mill site (http://www.thedollarmill.com), an independent analysis source for the most contemporary economic problems that boggle our minds. What we offer? Insight into the thrust and spin, the ride and pride of: Politics, Trading, Stock Market, FOREX, impact news, technical and fundamental analysis, updated reports,
Nusearch announces Million Dollar Keyword Giveaway
Nusearch rewrites the rules of Internet Keyword Advertising, overnight Buoyed up by the the success of their recent relaunch, Nusearch (www.nusearch.com), the UK's first serious global search player, is announcing a new offering designed to cause sleepless nights for the incumbent search engines. The Million Dollar Keyword Giveaway sees the company handing out 10 million ad clickthru's, worth 10 cents each. Having recently launched its free Active Search advertising programme, Nusearch is