I normally don’t look at bonds ever so this is a learning experience. I purchased these bonds through Fidelity. I’d been reading about high muni yields and just started poking around fixed income pages of the few brokers that I use (Interactive, Fidelity and Merrill). Fidelity is ahead of the other brokers in this area of muni auction resets. They had about a dozen california bonds resetting each day. As I shopped, I noticed none of the ones they sell are currently “seized” or whatever the term is. All were at least A rated. They get the bonds through Goldman Sachs. They offer very little information on the bonds… just the current rating and a few other trivial details. They provide a link to a company that sells you the prospectus, statements, & some other stuff if you want to dig deeper. As a newbie to bonds I will give you my impression… I AM STUNNED at the lack of information & the difficulty of finding “fundamental” information about what they were offering. I guess people normally just trust in the ratings? They wanted me to PAY to see what I was bidding on?!? Moodys and S&P give you a CRAPPY little report that I’m supposed to trust? It told me nothing. I finally found a few different websites that allowed me to patch together the stuff I need to find out what I was bidding on. The best website I found was munios.com but even it wouldn’t let me feed it a cusip to get the prospectus, i had to try all sorts of tricks and sort through a list of near offerings to find the bond prospectus. The other website that was a little helpful was “investinginbonds.com” as it told me the auction history/volume. What am I missing here? Do you think Goldman Sachs is passing only crappy stuff on to Fidelity? That’s what I thought at first but the bonds look pretty good to me? I don’t pay any fees or commission on the buy or the sell!?
CFA_halifax made a good call to short dollar vs the yen and then say to cover at 107 (it bounced back quite a bit right after it hit 107). However, I have to say the pee is firmly in his face on his “long goog/short Yahoo call”!!! Forgive me if that was someone else who made that… I don’t keep a record. All I know is I called a short on SBUX at 32 while others were buying. Nanny nanny naa naa. No pee on me.
Could you enter a bid? Or were they listed at a certain offer price which you were forced to take? I am a little amazed, as I didn’t think retail really had the opportunity to say “that XYZ school district in '13, yeah, that one, i will pay you, um, 85, for 10m in bonds.” I use schwab and should check that out. I know a lot of these guys have a deal with a number of other dealers to show their inventory, so they probably farm out the odd lots for retail to try to sop up for them. There shouldnt be much of a commission on them, if any, as they are paid through the b/a spread. And, yes, the muni world is pretty opaque. Info on financials is available through the ratings agencies (beyond what they rate them), and you can frequently get info on bloomberg if you have one. Good for you for doing the work to back up the trade, I would guess that most retail investors would not. Thanks for the info.
CFA_Halifax Wrote: ------------------------------------------------------- > I am just at a loss as to why the original poster > has dug up a half-year old post to try and > discredit me. I’m not sure what I said to warrant > that sort of attack? My only point originally was > that when stuff like this is going on in the > market it’s probably a good time to buy LT Well, I didn’t set out to attack. You said you were bearish last summer. So I briefly scanned posts you made last summer to learn more. I honestly did that solely because anyone that accurately warned of a potential 20% pullback last summer would have my undivided attention going forward. I didn’t set out to discredit you. I quoted it in this thread because a buy sentiment that strong on the same topic, well it was pretty relevant. …and frankly your follow up comment about value investing was condescending enough that I felt it warranted a snarky retort. can we hug it out now?
Grover- You can bid on the interest rate but it’s a dutch auction. You place your order and don’t find out what you get until later.
Fido is just acting as agent in all of the auction rate stuff- I definitely wouldn’t worry that GS is passing off crappy issues or anything like that. Where did you hear that Fido was getting them from GS? No commission- they make $$ in the spread. Not sure how much leverage you use on your acct, but just a heads if you like leverage, Fido had reqs at 20 or 25% and upped them to 50% this week. As a retail investor, I’d maybe dissuade you from buying individual issues just due to the $$ you have to put up and your lack of diversification that might come if you only buy one or 2. maybe a closed end muni fund might be the better choice for retail if that’s the exposure you want? Oh, and as for Fido being ahead… maybe in retail… I had no idea they offered to retail, but on the institutional side, since they don’t act in a principal capacity, definitely not super competitive with other big shops. just curious b/c i really don’t traffic in auction rate munis all that much in my world- so you’re trying to pick up the yield as these auctions fail? are the yields better than what you’d be paying out in margin debit? i’m sure they’re better than cash if you just have $ sitting on the sidelines, but… liquidity- if you keep getting sent to the next week’s auction b/c of fails, good enough I guess if you’re just looking for this as a yield vehicle, but what about when you want out? i’d think on the secondary market you’d get smoked if you wanted to sell and then since the auction fails, you can’t elect out and not take the next auction/reset, right? how do you get out?
Bannisja, First, the bond guy at Fido said there is no secondary market. Like you say, my primary risk is that I just get stuck with them (yay!)…if that’s the case they’ll be paying me 12% tax free. He also told me they get them from Goldman. I don’t use any leverage, this was cash on the sideline. I looked at bond funds and I have noticed yields improving but none were as good as this at participating in this current “liquidity event”. I did a little due diligence on the bonds I was buying. As a comparison, I remember I did some due diligence on corporate bonds held by a cef I used to own and these bonds look about 3 zillion times better. I have a question for you since you sound like you know bonds… when the issuer wants to refinance it will probably take them some time to do all the paperwork. What’s the timeline like and will I get any sort of warning? They have the right to call these and ii’ve heard they’re doing the paperwork to call them and issue fixed rate/fixed term bonds. If all these muni issuers are refinancing their auction rate securities to get the rates down… isn’t that going to be a lot of work & $$$ for their i-banks?
virginCFAhooker Wrote: ------------------------------------------------------- > CFA_halifax made a good call to short dollar vs > the yen and then say to cover at 107 (it bounced > back quite a bit right after it hit 107). > However, I have to say the pee is firmly in his > face on his “long goog/short Yahoo call”!!! > Forgive me if that was someone else who made > that… I don’t keep a record. All I know is I > called a short on SBUX at 32 while others were > buying. Nanny nanny naa naa. No pee on me. I am not sure if I started the thread but I certaintly endorsed the idea. Once again, pissy face! Yes I remember I said to cover that was back in August I believe, right around exam release day. I was looking at this yesterday coincidently when I saw how close the Yen was getting to 100. I’m such a bear on the dollar long-term, but I’m not sure how much longer the BOJ will allow this sort of movement…then again with rates at 0.5% I’m not sure what they can do from a monetary point-of-view. I like The Economist’s “Japain” term!
slouiscar Wrote: ------------------------------------------------------- > CFA_Halifax Wrote: > -------------------------------------------------- > ----- > > I am just at a loss as to why the original > poster > > has dug up a half-year old post to try and > > discredit me. I’m not sure what I said to > warrant > > that sort of attack? My only point originally > was > > that when stuff like this is going on in the > > market it’s probably a good time to buy LT > > > Well, I didn’t set out to attack. You said you > were bearish last summer. So I briefly scanned > posts you made last summer to learn more. I > honestly did that solely because anyone that > accurately warned of a potential 20% pullback last > summer would have my undivided attention going > forward. > > I didn’t set out to discredit you. I quoted it in > this thread because a buy sentiment that strong on > the same topic, well it was pretty relevant. > > …and frankly your follow up comment about value > investing was condescending enough that I felt it > warranted a snarky retort. > > can we hug it out now? Deal. But I did the make the value comment after the BSC post LOL. I’m sorry I get a bit hot-under-the-collar from time to time. I think it’s because of the many many bad calls I’ve made (Bonds, BSC Google/Yahoo, liking the CAD at like 1.10, saying the market would tank last summer when it didn’t start until November etc.) that I feel I must hang on to my few wins!
virgin- i acually don’t know very much about fixed income at all. i do, however, sit maybe 25 feet from whoever you must’ve talked to on the phone, since i’m pretty sure that even the fidelity retail flow for stuff like that would wind up in our capital markets area. as for your question- i was reading an article that lots of folks now were trying to switch to some sort of fixed rate bonds now, and i think it was a mass general spokesperson or something similar while speaking about their bonds who was asked about why you’d want to go and pay the same IB’s that aren’t backstopping these auctions and allowing them to fail the $$ now to underwrite fixed rate bonds and get out of the auction rate stuff. the answer was something like, it’s hard to find an IB out there who isn’t in the auction rate biz and isn’t screwing us right now and we have to do something. i guess we’ll see how this all plays out, but I can’t imagine this lasting very long. even if the municipalities do have to pay up to get out of this mess, i think a solution must come soon. i guess enjoy your yield while it lasts!
Personally, I think it’s getting dang close to all-in on financials. Too many companies are trading close to, at, or under BV. I think the market has gone nuts with liquidity crunches everywhere and have entrenched way too much. As somebody who’s looking to layer on billions in ABS exposure, spreads are getting fricking nice. Companies are moving up on run rate and offering gobs of upfronts to get liquidity. Provided you have support from your bank, it’s good to be buying floating rate securities.
virgin, you will not get a whole lot of notice. maybe a couple days, if you are able to catch that news release. we just had a large position called and i was surprised with the three week notice we got. perhaps they frequently issue public plans to call them, but you have to watch like a hawk to find that news (particularly with issuers that come to market frequently and have a gazillion issues outstanding). and, it is not likely a large undertaking for them to call the bonds. as many people are out there who want to buy these there are bankers who want to collect the fees for terming out the debt. there will be buyers for the term debt, as all the muni guys i talk to say they are frustrated with the lack of supply, so a deal shouldnt be a problem. these opportunities will not be around for long. check the call schedule, my guess is that they are continuously callable, so you don’t even have the luxury of a monthly or quarterly call schedule.
Virgin, I would also check out dacbond.com for information on select muni’s. If an issuer is listed on the site and they have an outstanding bond issue, you will have access to the Official Statement as well as up-to-date financials and other info. Also, if you have access to a Bloomberg terminal, they will have up-to-date financial information on each issuer. There is currently a mad rush to refinance out of the auction rate mode. The notice you are required to be given before the borrower calls the bonds is outlined in the Official Statement. It is a fairly long process to issue new bonds but many issuers are going to banks for bridge lines of credit to retire the ARS before the refinancing.