What are You Doing With Your Cash?

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lawman

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I recently sold my Bond mutual fund and am holding cash. It's presently in the bank drawing .6%. I plan to invest in high quality bonds if and when rates go up but it seems like I could be waiting a very long time before getting 4.5% on investment grade corporate bonds..What are you doing with your cash?
 
^^^same except we laddered about 1/4 of the sold bond funds in treasuries.
 
lawman said:
I recently sold my Bond mutual fund and am holding cash. It's presently in the bank drawing .6%. I plan to invest in high quality bonds if and when rates go up but it seems like I could be waiting a very long time before getting 4.5% on investment grade corporate bonds..What are you doing with your cash?
Click to expand...

If all you want is 4.5% on investment grade corporate bonds, you can get that now.

Here are some examples of short term/medium notes that are very safe. Personally I would wait for higher yields.

Oracle:

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C721793

Western Digital

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C736353

When you buy individual bonds your capital is returned at par or $1000 when it matures just like a CD. Your coupon payments are a contractual obligation between you and the corporation. They cannot suspend coupon payments without defaulting. Both these examples are notes now selling below par and not too long ago funds were buying these notes 11-14% above par. These are real losses that funds have realized with "other peoples money". I believe that both will go lower. When the yield on the Western Digital note hits about 7% or better, I will buy it.

Here are some others to keep an eye on. Both are trading above par but it's a matter of time before they fall below par and the yields rise. A 7-7.5% (or better) yield on these two notes from Ally Financial would be worth waiting for.

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C893889

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C642369
 
I don't have much cash, so I'm not doing anything.
 
I am spending mine like a mad man. Unfortunately not on anything fun just inflated prices for everything I am purchasing when I can find it and services. If I had cash I would be maxing out I Bond limits beginning to pick up deals of toys that I want to get as people begin to unload them, and getting prepared to purchase more equities in the next few months.

In this environment I really don't want to tie cash up in low yielding products. I might gain a little or lose less to inflation but I think your gonna have an opportunity to deploy cash sooner than later. I sure hope I am wrong as I speak.
 
Lemme see what Quicken tells me...

Of the 23% cash allocation, about 1/2 is in Stable Value and I bond. The rest of the cash is sitting in a very low yield T-bill fund to serve as backing to write cash-covered puts, which I need to restrain from doing in this treacherous environment. :)


PS. Done right, the premium from selling cash-covered put options far exceeds the interest from fixed income, Stable Value and I bond included. The reason I keep money in Stable Value and I bond is to keep me from going overboard in writing puts and ending up with 100% stock AA when my prognostication of the market movement proved wrong. :)
 
Last edited:
Freedom56 said:
If all you want is 4.5% on investment grade corporate bonds, you can get that now.

Here are some examples of short term/medium notes that are very safe. Personally I would wait for higher yields.

Oracle:

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C721793

Western Digital

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C736353

When you buy individual bonds your capital is returned at par or $1000 when it matures just like a CD. Your coupon payments are a contractual obligation between you and the corporation. They cannot suspend coupon payments without defaulting. Both these examples are notes now selling below par and not too long ago funds were buying these notes 11-14% above par. These are real losses that funds have realized with "other peoples money". I believe that both will go lower. When the yield on the Western Digital note hits about 7% or better, I will buy it.

Here are some others to keep an eye on. Both are trading above par but it's a matter of time before they fall below par and the yields rise. A 7-7.5% (or better) yield on these two notes from Ally Financial would be worth waiting for.

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C893889

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C642369
Click to expand...

These I understand. This is what I am lookin for to replace my bond fund. I will need a bunch of these because I worry a lot about default..What is FINRA? Is that where you find your bonds? Do I have access to bonds available?
 
If I pay $105.00 for a callable bond and the issuer can exercise that call for $100.00 will I just lose that $5.00 per bond if they call them?
 
3 year brokered CD's with some of my cash/bond portion of investments at 3.15%. I'm sure they will go higher but it fit with my goals and I will ladder over time.
 
I laddered some treasuries that are a year or less. I picked up a few mini bonds that mature two years or less. I’ve been selling a lot of covered calls in my Roth IRA too. We have a good sum in a SV fund in DW’s 401k. I’ll be using some cash to pay taxes for some 401k conversions we’ve been doing too. Then I’ll drink some scotch.
 
Holding 7 years in living expenses in individual Munis, CDs/checking accounts and MM. No plans to do anything with it other than spending it.
 
lawman said:
These I understand. This is what I am lookin for to replace my bond fund. I will need a bunch of these because I worry a lot about default..What is FINRA? Is that where you find your bonds? Do I have access to bonds available?
Click to expand...

This is FINRA:

https://www.finra.org/about

They attempt to protect investors. For buyers of bonds, since there is no central exchange, the trace data FINRA provides trace data for each bond transaction allows you to determine if a broker is overcharging you for bonds. Remember brokerage firms make a lot of money from fixed income trading. How much they make is determined by the bid/ask spread.

I use the FINRA site to screen for bonds. Your brokerage sites are useless for trace market aggregate statistics.

https://finra-markets.morningstar.com/BondCenter/TRACEMarketAggregateStats.jsp


I have many more examples on my tracking list. I have been buying fixed income for over 30 years. I have yet to buy a bond that defaulted primarily because I avoid loser industries such as airlines, church bonds, industrials, energy, mining, retail, prisons, and just focus on pharma, technology, telecom, biotechnology, and financials. Remember it's all about the financials of the company. How much free cash flow they generate and how much interest coverage the company has. You can set up "watch lists" of corporate bonds/notes using the FINRA site and watch the yields.

You should never buy a callable bond over par just like you should never buy a preferred stock over par as most have call dates. I never buy any fixed income asset over par period. Take a good look charts and you'll see why it's better to keep cash in short term money market rather than buy short term bonds/notes 11-14% above par yielding 1-1.5%.
 
Freedom56 said:
This is FINRA:

https://www.finra.org/about

They attempt to protect investors. For buyers of bonds, since there is no central exchange, the trace data FINRA provides trace data for each bond transaction allows you to determine if a broker is overcharging you for bonds. Remember brokerage firms make a lot of money from fixed income trading. How much they make is determined by the bid/ask spread.

I use the FINRA site to screen for bonds. Your brokerage sites are useless for trace market aggregate statistics.

https://finra-markets.morningstar.com/BondCenter/TRACEMarketAggregateStats.jsp


I have many more examples on my tracking list. I have been buying fixed income for over 30 years. I have yet to buy a bond that defaulted primarily because I avoid loser industries such as airlines, church bonds, industrials, energy, mining, retail, prisons, and just focus on pharma, technology, telecom, biotechnology, and financials. Remember it's all about the financials of the company. How much free cash flow they generate and how much interest coverage the company has. You can set up "watch lists" of corporate bonds/notes using the FINRA site and watch the yields.

You should never buy a callable bond over par just like you should never buy a preferred stock over par as most have call dates. I never buy any fixed income asset over par period. Take a good look charts and you'll see why it's better to keep cash in short term money market rather than buy short term bonds/notes 11-14% above par yielding 1-1.5%.
Click to expand...

I'm learning the bond offering page on Schwab seems to be a joke..They have nothing even close to those you linked..The only way I can find them on Schwab is to search by cusip #..I need to learn how to use FINRA to identify prospects.. I'm done buying off the crummy offerings on Schwab's bond offerings.
 
My actual cash is in my checking acct. No interest. I can't face the process of shuttling cash back and forth between interest bearing (not much) accounts and my checking acct. But my largest "cash" reserve is in my SVF (Stable Value Fund) within my 401(k). YMMV
 
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lawman said:
I'm learning the bond offering page on Schwab seems to be a joke..They have nothing even close to those you linked..The only way I can find them on Schwab is to search by cusip #..I need to learn how to use FINRA to identify prospects.. I'm done buying off the crummy offerings on Schwab's bond offerings.
Click to expand...

The FINRA site has some good resources that you won't find at any broker site. I have accounts at TD Ameritrade, Schwab, and Fidelity and bond information is pretty limited by design. They want to steer retail investors to funds so that they can collect fees forever. Here are some basics you should read.

https://www.finra.org/investors/learn-to-invest/types-investments/bonds

This link from FINRA allows you to investigate financial advisers and firms. This comes in handy if you are investing in funds and you can run background checks on people managing the funds or associated with the firm and the firm itself.

https://brokercheck.finra.org/

See you can learn a lot without attending some lame adult education course.
 
Freedom56 said:
The FINRA site has some good resources that you won't find at any broker site. I have accounts at TD Ameritrade, Schwab, and Fidelity and bond information is pretty limited by design. They want to steer retail investors to funds so that they can collect fees forever. Here are some basics you should read.

https://www.finra.org/investors/learn-to-invest/types-investments/bonds

This link from FINRA allows you to investigate financial advisers and firms. This comes in handy if you are investing in funds and you can run background checks on people managing the funds or associated with the firm and the firm itself.

https://brokercheck.finra.org/

See you can learn a lot without attending some lame adult education course.
Click to expand...

Does FINRA have a bond offering page showing what is available?
 
lawman said:
Does FINRA have a bond offering page showing what is available?
Click to expand...

They do not have data on what is in inventory at a brokerage firm. Any bond that has seller is available. If it isn't in inventory at your brokerage, you can call the bond trading desk to shop your offer. As a retail investor you cannot buy SEC-144A bonds as they are limited to institutions.
 
Freedom56 said:
They do not have data on what is in inventory at a brokerage firm. Any bond that has seller is available. If it isn't in inventory at your brokerage, you can call the bond trading desk to shop your offer. As a retail investor you cannot buy SEC-144A bonds as they are limited to institutions.
Click to expand...
So how is a guy suppose to find good bonds? They sure aren't on Schwab's offerings page.
 
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