I recently did this really awesome educational video for you on Bonds, but unfortunately I described the characteristics of bond mutual funds in layman terms without a bunch of disclosures, and approval from a higher up regulatory agency is required (come to find out). So that got me thinking about rules and regulations. Should we have more or less, are they a cure-all panacea, and most importantly, what are the unintended consequences? Click on the video below to hear my crazy thoughts on regulations. All right, they’re not really crazy, but I think the question of more or less is ... Read More
As volatility has increased in the past 3 weeks, I want to keep you well informed of my thoughts. Are the past weeks normal, have the fundamentals changed, or is this the canary in the coal mine we’ve been waiting for? These questions are answered in my video. Hi, Mike Brady here with Generosity Wealth Management, a comprehensive, full service wealth management firm, headquartered right here in Boulder, Colorado. I last spoke to you a couple of weeks ago and at that time, I talked about the third quarter. I said it’s been a tough quarter, very volatile and it ... Read More
Pimco is a mutual and ETF firm with a huge bond fund that has been the player in that space for the past 40 years. Bill Gross founded the firm in 1971, and it is now around $2 trillion dollars under management. Last week Bill Gross decided to leave the fund and move to Janus. This is important because of the disruption to the bond market as huge sums could (and I say could) move from one firm to another. The bond market doesn’t get as much coverage as the stock markets, but this is a pretty big change, equal ... Read More
Defined: The acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition. Often, the assets of the company being acquired are used as collateral for the loans in addition to the assets of the acquiring company. The purpose of leveraged buyouts is to allow companies to make large acquisitions without having to commit a lot of capital. Read More
Defined: A high paying bond with a lower credit rating than investment-grade corporate bonds, Treasury bonds and municipal bonds. Because of the higher risk of default, these bonds pay a higher yield than investment grade bonds. Based on the two main credit rating agencies, high-yield bonds carry a rating below ‘BBB’ from S&P, and below ‘Baa’ from Moody’s. Bonds with ratings at or above these levels are considered investment grade. Credit ratings can be as low as ‘D’ (currently in default), and most bonds with ‘C’ ratings or lower carry a high risk of default; to compensate for this risk, ... Read More
Defined: U.S.-dollar denominated deposits at foreign banks or foreign branches of American banks. By locating outside of the United States, Eeurodollars escape regulation by the Federal Reserve Board. Despite the name, Eurodollars do not have to be in Europe, and they are priced in U.S. dollars. Read More
As I mention in my video, the price of bonds (in general) have decreased causing yields to increase. The above graph shows comments from the Fed which has led so many people to have speculated they’d cut back on the bond buy back. As of last month, the Fed Chairman has stated the bond buy back will stay in place. For more graphs and a discussion, here’s the full article. Full Article and Graphs Read More
By far the easiest and best chart I’ve seen to explain the European problem was published last weekend in the New York Times. If you’ve been wondering if you’re the only person confused by what all the hub bub is about, this is your opportunity to get caught up. Click for an outstanding chart on the European problem Read More
One of the effects of a US Government downgrade is a municipal downgrade to follow. If you’ve been following my newsletters over the past few years, you know I’ve advised you to watch your municipal holdings closely if you have any at all. The free (relatively) capital market ultimately determines the cost municipals will have to pay to borrow money. Municipals to be Downgraded? – Link Read More
If the US Gov’t is downgraded (I argue when not if) then 7,000 municipal bonds will be automatically downgraed as well. At least according to Moody’s. This really hurts retirees as they’re the largest part of this market. 7,000 Muni Bonds at Risk of Automatic Downgrade — Link Read More
One of the big drags on the economy in the coming years will be our fiscal deficits and budget problems. I’ll be writing this summer about the US ability (and struggles) to sell bonds and finance the debt, particularly as QE2 ends and the Chinese bubble bursts (at some point in the future). This article talks in depth about an issue we may see more of in the future–US debt being downgraded. This is from a German, not US, rating agency, but it could be just the beginning. LINK TO FULL ARTICLE Read More
This article is good because it talks about Household and Consumer Debt as the underlying problem with our financial problems, not the banking regulations. I happen to agree personal consumer debt has been a huge problem for our country and will continue to be a major factor in the next crisis. What can you do? Get your personal debt under control and as low as possible. If you need help with strategies around this, please let me know me. LINK TO FULL ARTICLE Read More
I’ve been negative on the finances of state and local governments for some time, and continue to believe it will get worse before it gets better. This article takes a contrarian view, particularly on the debt, which I want to present to you. He argues there are “diamonds in the rough”, which is almost always true. I’m still quite negative on municipals in general, but it’s good to see the other point of view. LINK TO FULL ARTICLE Read More
Bonds go up and down in value based on interest rates, credit quality, and simple supply/demand. The first quarter was a bumpy ride for US Treasuries (as I mention in my video which you should have listened to already), and essentially ended flat to slightly negative. Much of what will happen in the next quarter will be dependent on the ending of quantitative easing in June and whether the Federal Reserve increases interest rates. What to do? Stay tuned and be diversified. Too much of an allocation to any category can be negative. Too many Treasuries may lead you to ... Read More
You’ll see me in the coming months talk about the bond markets, particularly as the Quantitative Easing (QE2) comes to a close this summer. We have a huge federal deficit. We need people to buy Federal bonds to lend money to the government. With the huge influx of money from the Fed in the past few months, foreign investors were squeezed out. Will they come back? The answer is not as simple as you’d think. I’ll be writing more and more about this as the year goes by, particularly it’s impact on you. CLICK FOR FULL ARTICLE Read More
Japan has been in a continued recession for the past 20 years. The deficit levels of the Japan government are among the highest of the developed countries, and expected to increase in the coming years. This is not good news for Japan. As the rating decreases, the extra premium paid to borrow money goes up. So, a 3% cost of borrow might increase to 4%. Anyway, this is something to watch as the United States deficit to GDP is increasing rapidly. CLICK FOR FULL ARTICLE – S&P DOWNGRADES JAPAN FROM AA TO AA- Read More
You’ve been reading my newsletters and saying “boy, that Mike Brady knows everything”. That may be true, but it’s good to remember the markets have a mind of their own. The Euro has rallied against other currencies recently. Do I think this is a short term rally? Yes. Do I think the Euro and Europe in general still have long term problems? Yes. CLICK FOR FULL ARTICLE – JUST WHEN YOU THOUGHT THE EURO WAS OUT Read More
If you’ve been listening to my videos and reading my newsletter, you are minimally affected by the Municipal Bond declines over the past 2 months. Yeah! Outflows are huge right now and I anticipate they will continue while states determine how to balance their budgets. To do: Continue to avoid Municipal Bonds unless you’ve really done your homework CLICK FOR FULL ARTICLE – MUNI FUND OUTFLOWS Read More
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