investment grade corporate bond ETFs are madness. how much they yield 6-7%?GSE debt yield 5% guaranteed by the government. too big to fail bank debt yield 6-8.5%
After coming across this thread a few weeks ago I forgot about it. Although zero percent interest has been favorable to being invested in the stock market (or most other markets) this year, I don't like my money sitting there waiting for the bank to fail. What about a money market etf? Seems like a good idea (assuming they don't break the buck)? I came across this story on them, anyone care to comment? http://www.etfcommentary.com/2008/04/money-market-etfs.html
The investment-grade etf have gone up a little over 10% in the past two weeks, plus, at the time of my entry, the dividend was about 7%. Since the rise, it is about 5.5%. The preferred etf has gone up about 7.5% and paid, at the time of my purchase, about 11%. I even bought a worldwide government bond etf. It too has gone up about 10% and paid 8% of dividends at the time of purchase. So, obviously, the smart money is going to these sectors, for nothing can be earned from treasuries. In addiiton, it is nice to see CNBC guests touting the investment-grade bonds and of course Warren buffet's foray into preferred stock of GS (financial sector). If you fear inflation in the near future, then worldwide TIPS come into play. As a matter of fact, they too have gone up, although the yield isn't that great (3.5%) compared to the other etfs mentioned.
for Ib traders who use margin borrowing ,I believe that the rate charged by IB is the lowest I have ever seen charged by any broker
I'm glad the Fed has created an environment where saving money = stupidity. Didn't low interest rates get us into this problem in the first place? It is unbelievable that they are reaming the retired this way and encouraging speculation when it should be the other way around.
It's not like this is the first time either. As socialist as it sounds (and anti free market) I don't think we'll see any real fixes unless the gov't reins in executive compensation. Those guys running these companies have a true incentive to destroy their companies in exchange for their own short term gains then leave the problem to others. A-Rod gets $30 million a year because nobody else can do what he does. I don't think that can be argued of any of the CEOs on wall street. Sure they can do good jobs, but is there really someone else who'd be willing to work for a reasonable salary who can't do that job? I don't think so. I guess I'll be buying some money market etfs tomorrow, it beats converting to AUD and watching my interest disappear into fx rate losses.
One theory has it that the Fed is trying to force risk taking with these ludicrous rates. Bernake personally suggests a Madoff Account. I also notice the bond quotes where I've looked (a small sample) to be very sparse with the new provider. Is anyone actively trading bonds and finding liquidity on a daily basis?
The best ETF I could find that trades Investment-Grade Corp bonds is LQD. The current yield is about 5.00%. This is certainly higher than what IB pays. Also, the margin is 1/3 the value of the ETF, so minimal money is tied up. I noticed yesterday that Rick Santelli of CNBC put up a chart of LQD and recommended it to the viewers. Check it out on the ishares website. If you believe that the top 10 holdings will fail to pay, then stay out of it. Top Ten Holdings: INTERNATIONAL BUSINESS MACHINES CO 8.00 10/15/2038 A1 /A+ PEPSICO INC 7.90 11/1/2018 Aa2 /A+ JOHNSON & JOHNSON MEDICAL KK 5.95 8/15/2037 Aaa /AAA ABBOTT LABORATORIES 6.15 11/30/2037 A1 /AA JOHNSON & JOHNSON 5.55 8/15/2017 Aaa /AAA WAL-MART STORES INC 6.50 8/15/2037 Aa2 /AA GLAXOSMITHKLINE CAPITAL PLC 6.38 5/15/2038 A1 /A+ JP MORGAN CHASE & CO 6.40 5/15/2038 Aa2 /AA- ASTRAZENECA PLC 6.45 9/15/2037 A1 /AA- AT&T INC 6.80 5/15/2036 A2 /A Trades about $1M shares day, so there is liquidity.
bil and shv are the closest etf's to a money market fund, but they are yielding 0.2% and 0.4% respectively. "investment-grade corp bonds" are not in the same risk category as a money market fund and shouldn't be considered an alternative. ib should have offered money market funds in their fund list but they don't for some reason.