New Trade of Decade: Favor Bonds Over Stocks

Our Archive

Search completed

New Trade of Decade: Favor Bonds Over Stocks

Three years ago, I wrote to you from the La-Z-Boy in my kids’ room. Which wasn’t unusual. We were all stuck at home staring at whatever immediate family we were sheltered in place with. It was April 3, 2020.

(Ah, 2020. Family walks were the highlight of the day. Our investment strategist—and survivalist father—took no chances when leaving the house. Here’s one from the archives that recently resurfaced on my wife’s phone…)

Six packs in a stroller? The norm. What was unusual was the content of the note I penned to you before the big walk. Favor Stocks Over Bonds was the topic, strange coming from a guy who writes about bonds for a living.… Read more

Read More

Fitch Slapped: Nifty 9.5% Dividend is Discounted, Ready to Rise

Everyone hates bonds right now. Perfect—let’s buy this nifty 9.5% payer while it’s discounted!

Why the sale? A bearish narrative, of course. In 2023, we have a narrative for everything, after all.

Last week, the Bank of Japan (BOJ) announced it is softening “yield control” efforts for 10-year Japanese government bonds (JGBs). Inflation is finally picking up in Japan, and the BOJ is still printing money to buy JGBs.

Ironic? Yes. But the BOJ, the money-printing addict, is finally admitting it has a problem. We can think of this as step two of a potential multi-step inflation recovery effort.… Read more

Read More

The Best Muni Bonds for 2023 Trade at 14% Discounts

As we head towards the most telegraphed recession in recent memory, US Treasuries are receiving a lot of attention. And rightfully so.

In recessions, interest rates go down. This boosts bond prices (which trade opposite rates).

But not all bonds are created equal—especially during recessions. Slowdowns tend to make the safest bonds the most attractive.

After all, it can be a slippery slope from slowdown to meltdown, so many investors prefer the safety of Treasuries. In 2008, for example, the S&P 500 sank 38% but US Treasuries rallied sharply. The iShares 20+ Year Treasury Bond ETF (TLT) delivered a 28% gain for the year:

In 2008, T-Bonds Did Great 

I don’t think we’re in for a repeat of ’08, but this “buy Treasuries before a recession” trade has worked superbly since we called it in November.… Read more

Read More

Fast Trading Profits via Secure Dividend Stocks? You Bet

Federal Reserve Chairman Jay Powell is scared. First, it was UK pension funds. Now, the entire banking system has liquidity issues.

Fourteen years of quantitative easing is a tough habit to break! We are one year into the Fed’s attempt to tighten monetary conditions.

Should we buy bargains? Or sell now and go shopping later?

Fellow contrarians want to know! Our Contrarian Outlook customer service line has been hot. Today, we’ll put on our short-term thinking caps and discuss your dividend trading questions.

Q: Do you see any good buys among the regional banks where the “baby got thrown out with the SVB bathwater?”… Read more

Read More

This Safe 4% Bond Yield is a “Best Recession Bet”

Generally, recessions are bullish for bonds. Which makes this 4% bond yield a “best recession bet.”

Why are we talking bonds when, over the past 18 months, they have all been crushed? Well, that’s the reason. The cure for poor bond performance is the high yields that are now staring us in the face. We look forward, not backward.

If you took our cue and used cash under your mattress as a bond proxy lately, then you are sitting pretty. Because now, we finally have attractive fixed-income yields!

Granted, safety is the key here. Remember, we are picking an economic slowdown as our catalyst.… Read more

Read More

5 Easy Steps to Retire Early on $500K

$500K can be enough money to retire on. Even as early as age 50!

The trick is to convert the pile of cash into cash flow that can pay the bills. I’m talking about $35,000 to $40,000 per year or more in dividend income on that nest egg, thanks to 7% and 8% yields.

These are passive payouts that show up every quarter or, better yet, every month. Meanwhile, we keep that $500K nest egg intact. Or, better yet, grind that principal higher steadily and safely.

Got more in your retirement account? Cool—more monthly dividend income for you!

We’ll talk specific stocks, funds and yields in a moment.… Read more

Read More

This Fund Pays 12.8%, Will Dish 13 Dividends in 2023

Last week in these pages we sang the praises of bond god Jeffrey Gundlach. His DoubleLine Income Solutions Fund (DSL) looked poised to pop:

DSL investors have three ways to win here. First, the fund pays an electric 11.5% yield. Next, its NAV is likely to rise as both short and long rates decline. And finally, the fund trades today at a 4% discount, which means we are getting paid to ride shotgun with Gundlach.

DSL: 3 Ways to Win (Last Week’s View)

We also discussed that DSL dishes its dividend monthly. Which is almost 1% every 30 days! Unheard of.… Read more

Read More

Tomorrow’s Bond Headlines, Today, Right Here

“Get tomorrow’s Bloomberg headline, today, at Contrarian Outlook!”

Our new slogan for 2023? Perhaps. I bring it up because our bond recession trade has already gained steam into an outright bandwagon.

Just three weeks ago, we contrarians shouted alone in the dividend woods. “Buy these safe bonds paying 4.2% before a 2023 recession!”

Our logic was simple. The 10-year Treasury bond hadn’t paid 4% or more in 14 years. With stocks looking shaky (to say the least!), the 4-handle coupon was attracting some whale buyers, including our man the “bond god” Jeffrey Gundlach (more on him in a moment).… Read more

Read More

SEC Yield Calculation (and Why It’s Better Than TTM Yield)

“Hey Brett. How’s the weather out there in California?”

My usual reply is “warm and sunny.” Simple. Gives the asker what they expect and keeps the pleasantries moving along.

If I was one for small talk, I would be tempted to mix in a confusing and way-too-detailed response. Like this:

“The weather? Well, Sacramento hit a low of 27 degrees in the early morning hours of February 24. And we cooked at an extreme 116 degrees on September 6. It has been quite the 12 months!”

Twelve months? Who cares about 12 months? Well, bond funds do.

Last week, we highlighted the iShares 20+ Year Treasury Bond ETF (TLT): “It (TLT) boasts a 4.1% yield and has some serious upside potential.”… Read more

Read More

These Safe Bonds Pay 4.2%: Buy Before 2023 Recession

One week ago, money-printer-turned-inflation-hawk Jay Powell told the world he was going to keep hiking interest rates. And more than he thought his Federal Reserve needed just two months ago.

Yes, even higher interest rates. Obviously more bad news for bonds, right?

It depends. Let’s explore the second level take, because Jay’s outlook is actually bullish for a select slice of fixed income.

Our inspiration, as always, is renowned value investor Howard Marks, chief of Oaktree Capital Group, with $164 billion under management. Marks’ writing has won acclaim from legendary peers such as Joel Greenblatt, Jeremy Grantham, Seth Klarman and even Warren Buffett.… Read more

Read More

Categories