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If you’ve been following my writings, you know I remain extremely wary of the bond market. I believe bonds are overowned, overvalued, and at significant risk of price declines.
Heck, they’re already dropping substantially! Long-term Treasury bond futures prices just sank again to 10-month lows, while many of the bond ETFs I warned about (MBB, AGG, etc.) have been tanking since the fall!
At the same time, the bond alternatives I’ve been headlining are killing it!
Higher-yielding, Steady Eddie companies in sectors like consumer staples, utilities, and energy storage and transmission continue to rally in price, while throwing off significant amounts of income. And the good news is, you still have time to profit from both these trends!
My Recommendation:
Buy the Best, Sell the Dreck!
In this environment of suppressed Treasury yields and near-infinite central bank bond buying, it’s hard to find safer sources of significant income.
Treasury prices are as wildly inflated as I’ve seen in my entire career, while government bond yields are hugging the floor. Junk bonds look risky too, as do mortgage bonds. At the same time, plenty of companies are spinning off healthy dividends in safer sectors. They’re taking significant steps to boost shareholder value, and that’s leading to substantial gains!
So what’s an investor to do? I prefer a double-barreled approach: Buy the best and sell the dreck!
Specifically, in my Safe Money Report, I’ve been recommending a specialized exchange-traded fund that rises in value as bond prices decline. It currently looks like a coiled spring — one that’s ready to explode higher.
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| Consumer staples continue to rally. |
On the other side of the ledger, I’ve been recommending a handful of higher-yielding stocks and ETFs in those stable sectors I mentioned earlier. One of those is very close to setting a four-and-a-half year high, while another just surged to its highest level since January 2008.
I can’t share specific trading details here — buy and sell points, names, etc. That wouldn’t be fair to my paying subscribers (Editor’s Note: If you want to get Mike’s signals — for just 13 cents per day! — you can simply click here or call us at 1-800-291-8545.)
But suffice it to say that you can find a wealth of sector ETFs and mutual funds in utilities, consumer staples, the master limited partnership spaces, and more. Morningstar’s web site has a mutual fund screener that allows you to search by sector online. Or you can find sector ETFs from companies like State Street Global Advisors.
What to Look for Next
from the Bond Market
As for bonds, the anchor on many a portfolio in this era of rising rates and falling prices, what’s coming next? Well, 30-year Treasury yields recently topped 3.2 percent, then pulled back closer to 3 percent, before starting to rise again this week. The yield on the 10-year note flirted with 2 percent, pulled back, then started climbing again too.
I continue to believe we’re at a critical juncture in the bond market. If we breach these key levels … due to renewed deficit fears or a pick up in inflation or employment that spooks more Federal Reserve policymakers … I believe the move could be explosive. I’m talking about at least 100 basis points or more in a relatively short amount of time.
So please continue to avoid mutual funds or ETFs with high duration and average maturity readings. They’re going to cost you big time if we get the kind of rate rise I’m expecting!
Until next time,
Mike
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
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“Higher-yielding, Steady Eddie companies in sectors like consumer staples, utilities, and energy storage and transmission continue to rally in price, while throwing off significant amounts of income. And the good news is, you still have time to profit from both these trends! ”
How you have changed your tune! Welcome back, Mike. Glad you are no longer advocating shorting the markets.
Mike: Thanks for the warning on Junk Bonds…….They still keep climbing so far..I will watch closely for a quick exit……….