These Safe Bonds Pay 4.2%: Buy Before 2023 Recession

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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

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The Cheapest 8.8% Dividend on the Planet

The Bank of England has recently aroused financial animal spirits with its on and off and on again buying of long-dated bonds. Which has this 8.8% payer—and more like it—ready to rally like crazy.

But wait, isn’t this a bear market? Brett, the financial media is telling me that interest rates are going to the moon. And that my cheap bonds are about to get even cheaper.  

They don’t call us contrarians for nothing! It’s our job, as original thinkers, to identify inflection points in the market. And we have one that is setting up for a big bond bounce.… Read more

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The Best Bonds to Buy in a Recession

Generally, recessions are bullish for bonds. Which makes this 3.8% bond yield a “best recession bet.”

Why are we talking bonds in a year where 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 for the year, 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

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Did the Stock Market Bottom Last Week?

Have we seen the lows yet?

Well, we’re oversold and due for a rally. Overdue, really. (Stop me if you’ve heard this before…)

Assuming we get a bounce, I’m still inclined to sell any rips higher that we see.

Someday we’ll buy this dip. Heck, we’ll back up our dividend truck. I just don’t think it’s time yet.

First, I’d like to see market breadth begin to improve under the surface. This is often what typically happens before markets bottom. We see individual stocks begin to “act better” than the Dow or S&P. These leaders quietly establish their lows and begin to rally.… Read more

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Are Your Bond Dividends Safe? An Easy Way to Check

“C’mon daddy.”

Pause. And a sigh.

“I’ll pay you back?”

Ah, there it was. The fiscal responsibility we’ve been working to instill in our seven-year-old clicking in. An acknowledgement that money does not grow on trees.

(Everyone knows that greenbacks only grow on the Federal Reserve’s balance sheet!)

My daughter’s intentions were sweet. She had successfully lobbied to reroute the “daddy bus” to a boutique retail store. The young boss had her eyes on a toy, and offered to buy one for her sister, too.

Well, I should clarify. Initially she offered me the opportunity to purchase both. Your income strategist offered a compromise:

“How about you pay for your own.… Read more

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Name a Bond Fund: It’s Probably Down. Here’s Why.

If you own a bond fund, it’s probably down in recent months. Let’s talk about why and walk through three popular fixed-income ideas from worst to first.

We’ll start with the iShares 20+ Year Treasury Bond ETF (TLT). TLT is the knee-jerk investment that many “first-level” investors buy when they are looking for bond exposure. Unfortunately, there are two big problems with TLT:

  1. It only yields 2.1%.
  2. Worse yet, its 19-year duration is drubbing its total returns.

Any kid knows that 19 years is “way too long” to hold a bond when inflation is running a hot 7.5%. (Please, somebody get these TLT investors a Contrarian Income Report subscription!)… Read more

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My Four-Year-Old is Smarter Than This Bond ETF

“Daddy. Can you come play with me in the playroom?” my four-year-old asked.

“Sure. I’ll be right in,” I said. “Once I get done unloading the dishwasher. Would you like to help me unload?”

“No thanks,” my daughter replied. No surprise, but one day I hope to catch her off-guard.

She walked to the playroom. Barely. And reappeared.

“Daddy. You’re taking for ages.”

For ages is the equivalent of forever in our house. I think. Then again, given her level of exasperation, she could be telling me I’m taking longer than forever.

She’d make a good bond trader. With long rates rising every day, few income investors want to hold any bonds for any amount of time.… Read more

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Earn 6.6% Without Ever Sweating the Fed Again

The market isn’t doing fixed-income investors any favors right now. But one of my favorite funds—in one of the best cash flow niches in the market—is delivering a gaudy 6.6% yield at today’s prices.

And it does that by holding some of Wall Street’s most boring, stable and dependable securities.

How can we bank this 6.6% “free lunch” when 10-year Treasuries still pay less than 2%? By tapping into an income stream that most individual investors rarely think about: Preferreds.

The Power of Preferreds

If we wanted to own a piece of a company, say JPMorgan Chase (JPM), we’d go out and buy a few shares of JPM.… Read more

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This 5% Dividend Will Bounce on the Rising-Rate Scare

We’re contrarians first and foremost here at Contrarian Outlook, so when we hear the latest “sure thing” from the mainstream crowd, we get more than a little suspicious.

So it goes with the recent round of selling on the stock markets, which has been driven by the “certainty” that interest rates will skyrocket, and higher rates will crush demand for stocks, especially the tech stocks that have driven the market’s rebound from the March 2020 crash.

Does this view stand up (sneak preview: no)? And what should we contrarians do in response (sneak preview: buy what everyone else is selling—particularly through a group of funds sporting some very impressive dividend yields).… Read more

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Floating Rate Bonds: The Retirement Play for 2021?

My friends and I couldn’t have been more excited about our college commencement speaker. Fresh off an electrifying cameo in the 2003 comedy movie Old School, James Carville’s next act was Cornell University.

At 21 years old, we had no idea what Carville actually did for a living. (Answer: Political consultant.) And though he was an engaging and entertaining speaker, I don’t remember a single word the “Ragin’ Cajun” said. Too bad, because he has had some major wisdom to impart.

Ten years earlier, Carville made an observation that is more prescient now than ever. After watching bond investors rebuff President Clinton’s economic stimulus proposals because they demanded a higher interest rate for US Treasuries, Carville coined this gem:

“I used to think that if there was reincarnation, I wanted to come back as a president or the pope or as a .400 baseball hitter.

… Read more

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