You would be surprised how many people contact me when they see some financial disaster on TV that cause the stock market to go down. Sometimes they may hear that the Fed is about to make interest rates go up and that bond prices will collapse. I just laugh at them and tell them that they watch too much TV. I am about 6 months away from full retirement so I just sold a large part of my IRA account to pay for my initial retirement plans. We will go into the conclusion of my plan in another blog.
But let’s look at how I did between the beginning of Winter 2008 to Sept. 20, 2013. For this 4 year 9 month time period, my portfolio increased 274.292%. That means my portfolio increased 4.812% per month. You can calculate that I made an average of 57.746% per year. In the past 9 months my portfolio increased 10.155%. This was done with 97% of my portfolio invested in Corporate Junk Bonds.
Why did I do so well?
I did so well because I took advantage of the situation at hand. We went into the first Great Depression of the 21st Century. We are still in this depression regardless of what our political and financial leaders are telling you. I did not try to fight the political news. I did not try to deny that the Great Depression is here. I did not try to claim that one political leader had the answers and the other one did not.
But I studied the last Great Depression from 1929 to 1940. I knew that the real estate industry collapsed first. Then came the layoffs from industry and the stores. From 1926 to 1934 came the banking failures in increasing record numbers. Europe went into the depression first.
Germany was coming out as the United States went in. The United States did not get out of it until 1940 when we started making and supplying arms for World War II. Do you know that the Empire State Building in New York was built in 1929 but was not completely occupied until 1956?
In 1929, as money became more valuable, the bond market went up until the 1940s. This was the key to my success in the bond market in the past 5 years. History has taught me that situations like this makes way to having long bull bond markets.
When business in America was collapsing, and Lehman Brothers filed for bankruptcy, the head of the treasury went into President Bush’s office and gave him the bad news. That is when most bonds in the bond market was selling between 50 to 80 cents on the dollar. This is why in December 2008, I started buying Corporate Junk Bonds aggressively. My return for these bonds was over 52% per year. As time went on, I had to buy bonds from the bond interest given at increasingly reduced rates to where my yield for the past 9 months was only 10.155%. As you know, that is better than bank and CD rates. That is still a great return.
If you read the newspapers and watch financial TV in 2009 through 2012, they claim that buying bonds was too risky. I think that they just did not want people to buy corporate bonds because the brokers makes more money when they handle investors’ money going into stocks. Bonds must be paid before stocks. In bankruptcy, bonds are paid before stock. From this you can see that stock is riskier than bonds. From this you can tell who was and still is controlling what you hear about high finance.
Here is a laugh for you. Quantitative easing (QE) is an unconventional monetary policy used by central banks to stimulate the national economy when standard monetary policy has become ineffective. For the past 10 years, Fiscal Policy has been a failure (Policy by Congress and the President). A central bank implements quantitative easing by buying specified amounts of financial assets from commercial banks and other private institutions, thus increasing the monetary base. This is distinguished from the more usual policy of buying or selling government bonds in order to keep market interest rates at a specified target value. Government bonds rates are the bases for all interest rates in the nation including mortgages, car loans, and my bond investments.
Expansionary monetary policy (Controlled by the Federal Reserve) typically involves the central bank buying short-term government bonds in order to lower short-term market interest rates. However, when short-term interest rates are at or close to zero, normal monetary policy can no longer lower interest rates. Quantitative easing may then be used by monetary authorities to further stimulate the economy by purchasing assets of longer maturity than short-term government bonds, and thereby lowering longer-term interest rates further out on the yield curve. Quantitative easing raises the prices of the financial assets bought, which lowers their yield.
Quantitative easing can be used to help ensure that inflation does not fall below target. Risks include the policy being more effective than intended in acting against deflation (leading to higher inflation in the longer term, due to increased money supply), or not being effective enough if banks do not lend out the additional reserves.
According to the IMF and various other economists, quantitative easing undertaken since the global financial crisis has mitigated some of the adverse effects of the crisis.
Perhaps the biggest market-moving event that seems like an inevitability to market participants in the coming years is the Federal Reserve's exit from quantitative easing. (QE), The bond-buying policy QE has been employed since the financial crisis, in the process growing its balance sheet to over $3 trillion in an attempt to stimulate the U.S. economy.
Right now, the Fed is buying $85 billion of bonds every month, indefinitely: $45 billion of U.S. Treasuries and $40 billion of mortgage-backed securities.
Perhaps the biggest market-moving event recently that seems like an inevitability to market participants in the coming years is the Federal Reserve's exit from quantitative easing (QE). This is the bond-buying policy it has employed since the financial crisis, in the process growing its balance sheet to over $3 trillion in an attempt to stimulate the U.S. economy. Right now, the Fed is buying $85 billion of bonds every month, indefinitely: $45 billion of U.S. Treasuries and $40 billion of mortgage-backed securities. Yet over the past three months, a vicious sell-off has gripped the Treasury market, sending bond yields soaring as fears that the Fed will begin to taper back the amount of purchases it makes each month have permeated the marketplace. The Fed has had QE, QE2, QE3, and QE4.
I see on TV that bond investors like me was in trouble. People would come to me telling me that I should sell before it is too late. Everyone claimed that the economy was picking up and that the Fed would stop its bond buying program. If this happened, yes my bonds in my portfolio would fall like a rock. As a matter of fact, my bonds did fall about 15%. Then the Federal government went on TV and said that the bond buying program (QE) would continue. This made my bonds go back up in price 15% in two days.
The problem for the federal government and the people is that they never studied the Great Depression from a working persons point of view. You take away low rates and these companies will not sell a car, house, or anything else, the collapse will continue. Just the thought by the public that QE was ending made the economy start to slow down. So they announce that QE (I call it QE Indefinite) will continue. That means bond prices will continue to rise. This Great Depression will not end until the 2020 to 2030 time frame so investing in deep discounted Junk Bonds will continue to do well.
Where people go wrong!
People work for a living but only know how to spend money. This is what the media and society teaches most people. They see a movie on TV about making money in the stock market by some movie character and they think that this is how the market works. They see it as an electronic gambling system. You place your money on a stock and in a few days you make millions. This is what people say to me when I start talking about investing.
If what you say is true, you would not be working.
People don’t know that it takes years to make investments grow. At the same time, people like me must eat, pay for a place to live, pay for clothing, and pay for children. If people did not have expenses then they can work for a few years while investing all of their paycheck then never work again. Even at that, don’t get sick because your medical bills will put you in the poor house.
If what you say is true, you should be rich.
Again, that is TV talking. To become wealthy enough to stop working, you have to start very early in your working life, say 21 years old making a good paycheck or at least having few expenses (living at home with parent paying the bills). Not all people who win the lottery is rich.
Some may hit for $1.00. Others hit for $1,000. Neither is enough to make you rich. The word rich is relative to where you are starting. A person who just got a job and has nothing but bills will not be able to start out investing enough with a large enough return to save over a million dollars. Many people who have become rich by investing in the markets did so because they started with millions to begin with. I am 62 years old and I just achieve enough in savings and resources to stop working completely. For 38 years I had other obligations that took priorities.
My investment returns went to these other priorities. If I would have not started a family, stayed away from women, lived at my parent’s house, and worked then gone home for the past 38 years, I would have stopped working 25 years ago.
Talk to me when you make enough money and you don’t have to work.
I tell people how to supplement their income as I am doing it to show that it could be done. Some people don’t want to hear it because they never heard it before. Therefore, it can’t be right. In many societies such as with Black people, talking about money is the same as a person being “in love” with money. This is something that Black people do not do therefore they are left out of the money making process. They complain about Blacks not starting businesses but fail to understand that Blacks can gain control of corporations gaining employment for the next generation, and controlling local communities by investing in stock clubs.
So basically the non-investor is about a lack of education and lack of priorities. In turn they promote the same in their families and in their circle of friends. They are left out of the business political process which controls the public political process. These people are usually followers not leaders.
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