March Monday Musings

Yes, it is March 1, 2021. Two of the many bonds in my investment portfolio pay me in March and September; one of those, a municipal bond from our former state of residence, pays me today. Most bonds, corporate or municipal, pay their interest twice a year, such as in March and September. Some bonds pay every month.

The interest from that muni bond is no longer exempt from state income tax. A small part of me wanted to sell it after we moved to Arizona, but I don’t think it’s wise to sell a AAA-rated bond with a 4% coupon with the US 10-year Treasury yield at less than 1.5% simply because the interest will now be subject to state income tax.

The other bond that pays me in March/September has an interesting story. Its coupon is in excess of 7%; I paid 103% of par for it initially. After some false news about the issuing company broke some years ago, the price of that bond plummeted to 58% of par. I doubled my position; it’s now trading at 130% of par. (The yield on most bonds has dropped in the last year–until quite recently–and that means that bond prices have increased. Of course, the causation really goes the other way.) Transactions like that explain how, for more than the last decade, our fixed income investment portfolio has more than doubled the average annual rate of return of the fixed income benchmark used by our brokerage company.

I have been investing in bonds for a long time as I have always been more risk averse than the average investor. My wonderful wife now has an extensive bond portfolio, but didn’t when we married. Not too long ago I bought one bond for her IRA (not a muni bond, obviously) whose price increased by 33 percent in the first 23 months she owned it. I sold half the position. Bulls make money, bears make money, but hogs get slaughtered.

Companies that pay dividends on their stock can decrease or simply stop paying the dividend at any time. A bond is a contract in which the issuer agrees to pay a fixed amount on a fixed schedule until the bond matures. Which is the safer source of income?

******************

From an email sent to me by my friend and former neighbor, MB:

 

******************

See the source image

 

From canadianautoreview (an unsecured site) comes a picture of the new Maserati MC20. Like all manufacturers should do, this car is available with an internal combustion engine (ICE) OR electric motors.

The 3-liter twin-turbo V-6 will produce 621 HP/538 LB-FT of torque and propel the car from 0-60 MPH in 2.9 seconds. This engine has 12 spark plugs and 12 combustion chambers. The “pre-chamber” system was originally developed for Formula 1 racing engines. By the way, the ICE engine for this car was developed by Maserati and not by Ferrari. From The Drive another picture of the same car:

 

See the source image

 

Every regular reader knows of my long-time affinity for Maserati. Starting at more than $200,000, it’s out of my price range, but I would love to have this car.

 

#MondayMusings

#BuyingBonds

#Socrates

#MaseratiMC20

#somanycarsjustonelife

#disaffectedmusings

If you like this blog please tell your friends and share the blog URL (https://disaffectedmusings.com). Thanks.

 

 

4 thoughts on “March Monday Musings

  1. The make whose symbol is the Trident, has some wonderful automobiles.

    Thou are preaching to the choir WRT municipal bonds. Our own portfolio has an account strictly with bonds. Since most of ours are Arizona munis, our tax burden on the bonds is nonexistant. Our biggest tax burden is the taxes on the dividend cash income and the capital gains taxes from the stocks account. I have always worked to find ways to minimize the tax theft from our assets.

    One of the projects on which I worked as an engineer for the public utility was working with the company bond counsels and the IRS to prove that some of the equipment we financed for the nuclear plant was a “sewage treatment plant”, which in 1984 qualified for municipal bond interest rates under the original “industrial development bonds” program. Engineers get involved in some weird things sometimes. It ended up requiring two trips to Washington DC.

    Like

    1. Thanks, Philip. With the recent increase in equity indices, our portfolio is about 60% stocks, 40% fixed income and cash. I guess that’s the “classic” model. My wonderful wife is more aggressive than I am so I doubt we will ever be 70%-80% fixed income and cash.

      Like

  2. You reminded me today of someone whom I hadn’t thought about in years. I used to listen nightly to Bruce Williams. He hosted a syndicated call-in radio program. People called in to ask business and investment questions. One of his favorite sayings was the one you quoted, “Bulls make money…”
    Thanks for the memory.

    Like

Comments are closed.