Thursday, July 17, 2014

Gary North: "My Translation of Yellen's Speech on Bank Regulation"

He's right that the Fed chairmen, including Yellen, make themselves deliberately difficult to understand. The only funny thing is that he is bearish on treasuries too.

Both Fed supporters and critics are very bearish on treasuries! The one thing they agree on!

Would you believe that Prechter is even bearish on long bonds??

11 comments:

Nathan said...

Anti-duration sentiment is readily apparent in long bond CEFs. Discounts on a number of bond CEFs I hold, such as NBB and NKX, have widened back to double digits. Interestingly, the former is scheduled to liquidate in 2020, so presumably the discount will vanish at that time. Evidently, that's still not enough to entice buyers.

CP said...

That's very interesting about NBB. What do you think about the credit quality of the portfolio?

CP said...

http://cef.morningstar.com/quote?t=nbb
http://www.nuveen.com/CEF/Product/Overview.aspx?FundCode=NBB

Distribution rate - Market (As of 07/17/2014) 6.86%

Holdings (55% AA rated) http://www.nuveen.com/CEF/Product/Holdings.aspx?fundcode=NBB

CP said...

"Overall, our strategy during this reporting period was to continue to add value by pursuing active management and implementing
relative value trades as we found attractive opportunities. In NBB, we purchased California general obligation (GO) BABs and added to our position in high yielding North Las Vegas water and wastewater improvement BABs, while NBD purchased BABs issued for the Nashville Convention Center. Both NBB and NBD also added a number of 'odd lot matchers,' that is, additions to positions in BABs that we already held in our portfolios, most of which were index eligible. NBB also continued to purchase taxable municipal bonds in the primary market, including bonds issued for Houston public utilities."

CP said...

http://www.nuveen.com/Home/Documents/Default.aspx?fileId=53248

"Shareholders should note that, because there was no new issuance of BABs or similar U.S. Treasury-subsidized taxable municipal bonds for the 24-month period ended December 31, 2012, the Funds’ contingent term provisions went into effect on January 1, 2013. During this reporting period ended March 31, 2014, NBB and NBD were managed in line with termination dates on or around June 30, 2020, and December 31, 2020, respectively, with the distribution of the Funds’ assets to shareholders planned for thos e times. We continued our efforts to maximize the Funds’ liquidity and better position NBB and NBD for termination. Even though t he Funds are scheduled to terminate, we believe the opportunity still exists to add value for the shareholders of these Funds thro ugh active management and strong credit research."

CP said...

Tax Obligation/Limited 24.6%
Tax Obligation/General 22.7%
Transportation 17.7%
Utilities 16.6%
Water and Sewer 13.6%
Short-Term Investments 0.2%
Other Industries 4.6%

CP said...

California 22.0%
Illinois 12.5%
New York 10.3%
Texas 8.8%
Ohio 5.6%
Michigan 4.4%
South Carolina 4.3%
Nevada 4.1%
Georgia 4.1%
Louisiana 3.2%
New Jersey 3.1%
Other States 17.6%

CP said...

"From the time of the program's inception in April 2009, through the end of the program at the end of 2010, a total of US$181 billion of Build America Bonds were issued."

http://en.wikipedia.org/wiki/Build_America_Bonds

CP said...

What about NBD vs NBB?

http://www.nuveen.com/cef/Product/Holdings.aspx?fundcode=NBD

Nathan said...

Re: credit quality

My thinking was that over the next few years the credit quality of these BAB funds would matter much less than other factors. As an example, consider BBN, a Blackrock BAB fund that rose ~2.5% the day Bill Gross recommended buying it. Other BAB funds also rose that day, but not by as much. Since then the discount on BBN has narrowed to ~5% while NBB has stayed closer to ~9%.

Re: NBD

In terms of portfolios, it looks like NBB's top holdings are concentrated in CA while NBD and BBN are concentrated in IL and NJ. If forced to choose between those credits I'd go with CA, simply because it has more untapped taxing power (currently restrained by prop 13). Admittedly, those states are all competing for last place in the "fifty state experiment", so it's hard to have strong feelings either way :)

Anyway, I'd probably sell NBB to buy NDB if the latter traded at a significantly wider discount.

CP said...

The NBD paper looked to be higher rated, on average.