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investments a bear would love
Old 01-10-2005, 11:01 AM   #1
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investments a bear would love

My husband and I have a real estate investment that is selling in about a month. The net to us after taxes is about $170,000. My husband is currently adverse to putting money into most anything because of high valuations. Anyone have any ideas on things I could suggest to him to investigate as possible places to park this money? We already have too much in cash and cash equivalents. We also don't have any real estate deals on the horizon.

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Re: investments a bear would love
Old 01-10-2005, 11:11 AM   #2
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Re: investments a bear would love

Time frame?
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Re: investments a bear would love
Old 01-10-2005, 11:18 AM   #3
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Re: investments a bear would love

Prefer for long term as we have too much sitting in cash and short term bonds.
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Re: investments a bear would love
Old 01-10-2005, 11:29 AM   #4
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Re: investments a bear would love

You and I are in exactly the same position. I've got about a $200-225k house sale happening in the next few months and cant see anywhere good to put the money.

I looked at ibonds and tips. I dont like the returns on either. I'd rather a 3% 11 month cd than an ibond, both paying about the same but the CD feels a little more liquid to me even though I dont think it is. I'm not buying any long term tips at 2.5%...I'll wait for the rates to go up. I considered the approach mentioned (Bob Smith?) to buy secondary market 4% tips and take the higher yield even though I'm paying a huge premium up front to get it. Still not sold on that being a good plan. While rates have risen, bonds have staved off taking the NAV hit that I think has just been delayed. Stocks are almost universally too expensive for my tastes.

I'll probably just park it in a 5 year high rate CD, wait for the next year or two of events to unfold. According to ECRI's leading economic indicators we're going to have a huge drop in the economy in a few months to a near recessionary position. That should paste stocks pretty good and cause the fed to stop raising rates. Bonds might finally do a solid adjust. Some folks might start paying a more reasonable 4-5% interest rate on shorter term cd's. TIPS might break 3% or ibonds 2%, at which point I'd start considering them.

I know that once one starts waiting, one may wait forever, and I just said "maybe" a lot of times, but I've built my portfolio up to ER early by engaging some common sense with regards to investment valuations and getting the heck out when they looked stupid. By the same token, getting in when they look stupid doesnt seem like a good idea either.

I'll take the 5% for a year or two, take the six month hit when things look better, and hopefully come out on top.

TH, the dirty market timer...
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Re: investments a bear would love
Old 01-10-2005, 11:29 AM   #5
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Re: investments a bear would love

Loomis Sayles Bond Funds, if your bond portfolio isn't diverse enough yet.

For retail investors:

LSBRX
LSGLX

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Re: investments a bear would love
Old 01-10-2005, 11:38 AM   #6
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Re: investments a bear would love

I can think of two things that look good to me right now that have little or nothing to do with the equity markets or the economy in general:

- PFCU CDs, which are hard to beat, and

- STON, which I have mentioned before. Not a ton of volatility, lots of yield (which will be partially free of taxes), and shouldn't be correlated with the equity market. Plus mutual funds can now have up to 25% of their income coming from MLPs, so I expectthat the yield hog funds will be steady bidders for most MLPs.
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Re: investments a bear would love
Old 01-10-2005, 11:53 AM   #7
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Re: investments a bear would love

Brewer, what is STON? I must have missed your postings on it before.
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Re: investments a bear would love
Old 01-10-2005, 12:05 PM   #8
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Re: investments a bear would love

STON is a cemetery stock (you know, headSTONes). * I'd watch out for brewer's stock picks, though. * They have a morbid habit of going belly up. * Real portfolio killers. * Although, sometimes he's dead-on.
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Re: investments a bear would love
Old 01-10-2005, 12:06 PM   #9
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Re: investments a bear would love

Now I remember! I must have been brain dead.
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Re: investments a bear would love
Old 01-10-2005, 12:07 PM   #10
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Re: investments a bear would love

I'm waiting for that MLP to hit a coffin corner.

Anyone watch "six feet under"?
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Re: investments a bear would love
Old 01-10-2005, 01:08 PM   #11
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Re: investments a bear would love

Quote:
STON is a cemetery stock (you know, headSTONes). * I'd watch out for brewer's stock picks, though. * They have a morbid habit of going belly up. * Real portfolio killers. * Although, sometimes he's dead-on.
I was prepared to be offended until I caght the awful puns. (groan...)

Anyway, I have bought a chunk of STON for my taxable account (gotta keep MLPs out of IRAs). Time will tell, but this thing was a steal under 20 and is a good value where it currently stands. Their business has almost nothing to do with the economy (you drop dead regardless of whether its a recession or expansion), and in each local area they operate, they don't have a lot of competition. They are also set up to feed off the Boomers as they do their estate planning.
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Re: investments a bear would love
Old 01-10-2005, 01:33 PM   #12
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Re: investments a bear would love

Quote:

They are also set up to feed off the Boomers as they do their estate planning.
As in Soylent Green?
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Re: investments a bear would love
Old 01-10-2005, 03:29 PM   #13
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Re: investments a bear would love

I think year over year CPI is about 3.5% right now.
Thus it seems likely to me that I-bonds will yield
at least 4.5% at the next adjustment. Real rates
have been creeping up a little the past week also
so there is a chance that the real rate of 1% could
go up a tad.

It seems to me that you could buy I-bonds, hold
them until the increase in real rates makes it
worthwhile to upgrade. You would only forfeit
3 months of interest if held for 1 to 5 years and
nothing if held more than 5 years. Three months
interest on a base of the current 3.67% would be
about 0.92% giving you a yield of about 2.75%.
for 1 year. That's what ING is paying for a 1 year
CD last time I looked. IMHO, TIPS might beat
PFCU 5.25% over the next 5 years and could do
significantly better if inflation takes off.

Of course TH and Martha are talking about investing
more than the $120k max per couple in 1 year so
this might not solve their problem.

Let me know if this does not compute.

Cheers,

Charlie
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Re: investments a bear would love
Old 01-10-2005, 03:35 PM   #14
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Re: investments a bear would love

I just closed out some positions and have a similar pile. I am still pondering the potential of just dumping it into the VG High Yield Corp fund VWEHX - (actually high grade junk bonds) - Already have some and they pay 7.5%+... don't have the problem of devaluing when interest rates go up - also, as rates go up they are unlikely to be called in - and they are actively traded.

Just a thought when other fund valuations are sooo high.

JohnP
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Re: investments a bear would love
Old 01-10-2005, 03:47 PM   #15
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Re: investments a bear would love

Well John, let me state the obvious ..... junk bonds
have been doing good lately because the default
rate is way down. Look out when the economy goes
soft again!

Cheers,

Charlie

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Re: investments a bear would love
Old 01-10-2005, 04:14 PM   #16
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Re: investments a bear would love

Quote:
I'm not buying any long term tips at 2.5%
You couldn't if you wanted to. The best you can get now is 1.9% - 2%.

Quote:
I'll wait for the rates to go up
I have considered selling and pocketing the profit on the TIPS I bought (12-13% gain in just a few months) and buying in again when/if the price declines. But then I look at historical real returns on T-Bonds. In modern times the real return has averaged about 2.2%, and there have been decades long stretches when real returns have been negative. So I don't think I can count on real rates going to 3%. Maybe they will, but I think the odds are better we won't see 3% for awhile. But even if we do see 3%, it won't hurt me because I plan to hold to maturity. I'm not suggesting anyone buy TIPS, but for me they're ideal for a portion of my bond allocation. I wouldn't buy them at 1.9% though.
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Re: investments a bear would love
Old 01-10-2005, 04:17 PM   #17
 
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Re: investments a bear would love

Hi Charlie. I am an eternal optimist, but a confirmed
cynic. Some junk works for me just fine. If
circumstances lock me in, that's okay too. I'll just
cash my monthly interest checks and press on. Honestly,
defaults are the least of my worries.

JG
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Re: investments a bear would love
Old 01-10-2005, 04:23 PM   #18
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Re: investments a bear would love

Quote:
Honestly, defaults are the least of my worries.JG
Worries and risks are not the same.

Risks don't care whether you worry about them or not- they just go on affecting your life.

Mikey
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Re: investments a bear would love
Old 01-10-2005, 04:29 PM   #19
 
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Re: investments a bear would love

Hi Mikey! That's true! Not real profound, but true

JG
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Re: investments a bear would love
Old 01-10-2005, 04:58 PM   #20
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Re: investments a bear would love

Hey folks,

I just checked the following link and found an
inflation indexed security that pays 7.5% for
the first year, then 1.5 x CPI until 2020.
The security is rated AA- by S&P. The issuer
is ABN-AMRO Bank N.V.

http://www.fisn.com/CDalternatives.htm

Is there a gotcha?

Charlie
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