Seems ISM is taking a bit of a beating this week...

Another 15 or 20 cents and i will be scooping some up...
 
Seems odd to see it dropping considering the CPI was higher than expected and inflation fears are on the rise.

Just goes to show that people dont do whats expected of them all the time... ;)
 
brewer12345 said:
Another 15 or 20 cents and i will be scooping some up...
Click to expand...

I've been watching the action on some of these low volume issues today. It's hilarious.

Why would anybody worry about a few bp's on the bid/ask spread? Is somebody really sitting there with a calculator saying "no way will I pay 21.32 -- I'm waiting for 21.20!"
 
Also, real rates on TIPS have been drifting down - so everything else equal, ISM and OSM should be trading up, not down. Do you suppose there are credit issues at SLM?
 
FIRE'd@51 said:
Also, real rates on TIPS have been drifting down - so everything else equal, ISM and OSM should be trading up, not down. Do you suppose there are credit issues at SLM?
Click to expand...

Not bloody likely.
 
FIRE'd@51 said:
Do you suppose there are credit issues at SLM?
Click to expand...

The total world-wide volume for ISM today was 8200 shares. Less that $200K worth. That means that there is zero institutional interest and all of the trading is done among a few people on this forum. I wouldn't read too much into the price changes.
 
brewer12345 said:
Not bloody likely.
Click to expand...

So, basically, it's stupid retail investors dumping the stock because the next 3-month's yield is under 5%.
 
FIRE'd@51 said:
So, basically, it's stupid retail investors dumping the stock because the next 3-month's yield is under 5%.
Click to expand...

We haaaave a winnah!
 
brewer12345 said:
We haaaave a winnah!
Click to expand...

All the better for us. :D Actually, it looks like OSM is slightly more attractive at these prices. To have the same YTM, I calculate that OSM should trade about a dime higher than ISM. Do you guys concur?
 
FIRE'd@51 said:
All the better for us. :D Actually, it looks like OSM is slightly more attractive at these prices. To have the same YTM, I calculate that OSM should trade about a dime higher than ISM. Do you guys concur?
Click to expand...

More or less, on a current yield basis. Practically speaking, if the prices are close it is basically rounding error.
 
What exactly is ISM? I typed ISM into yahoo's ticker lookup but there wasn't a profile to see what it is.
 
OK... looks like they are trading at a discount... but only 2.05% spread... from what I see on TIPS, they are 2.375... am I missing something:confused:
 
Based on the recently published Jan 07 CPI index of 202.4, the April 15 through May 14 payout for ISM will be 4.12% at par.
 
youbet said:
Based on the recently published Jan 07 CPI index of 202.4, the April 15 through May 14 payout for ISM will be 4.12% at par.
Click to expand...

Which would put the YTM right around 6%. This isn't a high-yield play. Just a nice alternative to TIPS that also happens to be very competitive to safe nominal investments.
 
Texas Proud said:
OK... looks like they are trading at a discount... but only 2.05% spread... from what I see on TIPS, they are 2.375... am I missing something:confused:
Click to expand...

The 2.05% + CPI is paid based on the 'par' value of $25/share (which is what they will mature at). So, if you pay $21.xx/share, you'll get interest payments based on $25/share...which will be substantially higher than 2.05% + CPI. Plus, you get guaranteed capital gains (if held to maturity) of buying at $21 and having it redeemed 10 years from now @ $25.
 
You're buying dollars for 84c and at normal levels of inflation you're getting paid like a very decent 5 year CD while you hold it. At higher levels of inflation, even better.

My entire cash position right now is divided between penfed 5 and 7 year 6.25% cd's and ISM.
 
Cute Fuzzy Bunny said:
You're buying dollars for 84c and at normal levels of inflation you're getting paid like a very decent 5 year CD while you hold it. At higher levels of inflation, even better.

My entire cash position right now is divided between penfed 5 and 7 year 6.25% cd's and ISM.
Click to expand...

I can't wait until it goes to $24.75. Then we will be beating the crap out one another to get out, spreading disinformation on the board, etc. .

Ha
 
Interesting little security. I am correct in assuming that this exactly the same as a TIPs bond trading at 14% discount to par. Other than the fact there is a very slight default riska of Sallie Mae going out of business.

Anyone calculated a YTM on this guy. It looks like assuming a 3% inflation rate that is just under 7%.
 
clifp said:
Interesting little security. I am correct in assuming that this exactly the same as a TIPs bond trading at 14% discount to par.
Click to expand...

Not quite. For one thing, the returned principal is exactly $25, regardless
of inflation; so dependng on whether inflation over the next 11 years is
greater/less than 1.6% annually, the principal will under-/out-pace inflation
(since the 11th-root of 25/21 = 1.016). TIPS exactly matches inflation.

For another, the coupon is only 2.05%, not 2.375%. And it's added to inflation
over the last year. TIPS is added to the cumulative inflation since you bought the
thing. So ISM is probably doing better until the cumulative inflation hits 25/21,
and worse afterwards. And ISM is kinda looking at the derivative of inflation, not
the integral. If inflation spikes one year and then becomes low, ISM pays great
dividends during that year, and then not so good; whereas TIPS pays based on
the inflated principal from then on.

Yes, the YTM calculator gives a better number for ISM. But that's because it
gives a number based on zero inflation, with the hand-waving statement that
this is "real yield" (yield above infaltion). Problem is, in the real world where
inflation exists and is probably more than 1.6% on average, inflation adds more
to the TIPS' value than to ISM's. In other words, TIP's yield is "more real"
than ISM's.

That's not to say ISM sucks - it's probably a good diversification of one's inflation-linked
fixed-income holdings (I have about 7% of my FI there now) - just that I don't think
it's as fabulous as people here seem to have convinced themselves it is.

On the other hand, Brewer is a lot smarter than me, at least where bonds are
concerned, and I'd love to be told why I'm wrong !
 
RustyShackleford said:
And ISM is kinda looking at the derivative of inflation, not
the integral. If inflation spikes one year and then becomes low, ISM pays great
dividends during that year, and then not so good; whereas TIPS pays based on
the inflated principal from then on.
Click to expand...

I won't try to tell you why you are wrong, or even that you are wrong, but if one is trying to use ISM to mimic TIPS, then the inflation adjustments should be re-invested into more shares as one goes along. This would be similar to what is done with a TIPS fund.

Ha
 
RustyShackleford said:
Not quite. For one thing, the returned principal is exactly $25, regardless
of inflation; so dependng on whether inflation over the next 11 years is
greater/less than 1.6% annually, the principal will under-/out-pace inflation
(since the 11th-root of 25/21 = 1.016). TIPS exactly matches inflation.

For another, the coupon is only 2.05%, not 2.375%. And it's added to inflation
over the last year. TIPS is added to the cumulative inflation since you bought the
thing. So ISM is probably doing better until the cumulative inflation hits 25/21,
and worse afterwards. And ISM is kinda looking at the derivative of inflation, not
the integral.
Click to expand...
Who said I'd never use calculus after you leave college LOL.

Thanks for clearing this up Rusty. However, my brain is starting to hurt. :confused:
Does the smart bond folks think this is a better alternative to a 2.375% 10 year TIP or worse? My 3.875% TIPs bonds muture in Jan of 2009, I am interested in an alternative.


On the other hand, Brewer is a lot smarter than me, at least where bonds are
concerned, and I'd love to be told why I'm wrong !
Click to expand...

Clearly, I am why down in the pecking order of bond understanding.
 
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