“An investment in knowledge pays the best interest.” — Benjamin Franklin
The following is not a recommendation to purchase any security or bond.
In September of 2000 I went to work for Edward Jones in Lubbock Texas. I passed my series 7 and 63 exams and was invited to St Louis to the Edward Jones headquarters. Before I went, I had to go door to door ‘introducing myself’. I gathered names and numbers of people and told them I would call if something interesting came across my desk. I knocked on hundreds of doors. When I got my securities registrations, I called the folks I had visited in the door knocking from a phone room in Edward Jones home office with a 100 other stock brokers doing the same thing.
No one in the class actually did any business. It was an exercise to break call reluctance and to build potential client relationships. That is no one except me. I called a retired dentist that was confined to a wheel chair due to Parkinson’s named Joe. I told him I had a 7% coupon GTE2 bond. He said, “well big boy get me $100,000 of that.” I opened the account on the phone and bought $100,000. (100 bonds) The room of Jones brokers were stunned. I was the only one who got a sale, from a cold call no less. (If someone got a sale it was from ‘Grandpa’ if you know what I mean.) I did a victory lap around the room, so I rubbed it in a little. When I got back to Lubbock, Joe sent me to Morgan Stanley’s office to pick up the check.
Yeah, that was hilarious. I also got his mail and picked up his meds too.
The following month Joe invested another $100,000 in a 7.25% CMO3 bond.
That was 2000, in 2001 interest rates dropped from 6.5% in May of 2000 to 1.75% by December 20014. The was due to 9/11 terrorist attack on the twin towers.
When the interest rates where cut, Joe’s bonds appreciated 20%. So, he was sitting on a capital gain (a big one) while collecting over $14,000 in interest from his bonds. I was in the top of my Edward Jones class. I went on to receive the prospecting award for opening over 120 accounts in my first year. (The award is in the conference room on the wall.)
A bond is referred to as a fixed-income instrument. Since bonds traditionally pay a fixed interest rate (coupon) to debtholders… Bond prices are inversely correlated with interest rates: when rates go up, bond prices fall and vice-versa.1” We saw bonds pretty much lose money over the last couple of years as rates went up. But when interest go down like in 2001, the value of existing bonds appreciate in value5. The Federal Reserve sets the rates. If they cut rates as some are saying they will have to do or risk a recession then we are at potentially high rates now. We are buyers of bonds in this environment.
At the risk of sounding political, voters are not happy with our President. I am not even going to provide sources on this since President Biden’s approval rating has been at all-time lows since he was elected. Most ‘voters’ are not thrilled with the economy to say the least. The ‘Feds’ don’t want a nasty recession adding to the discontentment.
Social Security Hacks
Getting Help with Social Security
You need help with Social Security, what about going down to the local friendly Social Security office? “The SSA local office will help me, that is why they are there but to help,” you say. Let me break it to you Italian Guido style; “Don’t be asking for no stinking help. Take a number, ask your question and don’t cry on my desk or it might get ugly.”
For context most SSA offices have armed security in the waiting room. Armed! Wow, what customer service for age 62+ people looking to start retirement benefits and the disabled looking for disability! What is going on?
Why the SSA is this way can be supported by a quote from the 22,000-page SSA Program Operations Manual System (POMS): “Social Security representatives are instructed to explain that “individual employees who administer the program are not at liberty to substate their own judgement or opinion for rulings, regulations, or the law …Do not attempt to explain the rationale for any particular operational guidelines, nor go to any great lengths to justify them.” You need a representative that can advice you on the complex nature that is Social Security. As a Registered Social Security Analyst, I am trained tested and supported for that purpose.
Radio Show update: We have had our show preempted for Football the last couple Saturdays. Sorry to those who missed our witty content
Sources Citations Bibliography:
1. Quoted from Investopedia.com ‘Bond: Financial Meaning With Examples and How They Are Priced’
2. GTE was General Telephone & Electronics Corporation. Bell Atlantic merged with GTE on June 30, 2000, and named the new entity Verizon Communications.
The bonds I sold were still called GTE though honored by Verizon.
3. A collateralized mortgage obligation (CMO) refers to a type of mortgage-backed security that contains a pool of mortgages bundled together and sold as an investment. -Investopedia What Is a Collateralized Mortgage Obligation (CMO)?
4. Source: Forbes Advisor Federal Funds Rate History 1990 to 2023 Published October 17, 2023
5. Other factors can affect the prices of bonds, like credit rating change of the issuer.
6. US Inflation Calculator.com
7. USA Today Powell says Fed could raise rates further if inflation doesn’t continue to ease. 12/1/23
8. thewealthadvisor.com US Bond Investors Brace for Fed Rate Cuts in 2024 November 30, 2023
9. Preferred Stocks- Because of their characteristics, they straddle the line between stocks and bonds. Technically, they are equity securities, but they share many characteristics with debt instruments.Investopedia.com
Supplemental Disclaimers:
This article is informational only and is not investment advice. This is not an offer to buy, hold, or sell investments like securities or insurance products.
Securities and Investment Advisory Services are offered though Toro Bravo Investment Advisors, LLC. Life Insurance and Annuities sold as an insurance broker are not a fiduciary relationship and are not offered by Toro Bravo Investment Advisors, LLC.
Securities or Insurance are not FDIC/SIPC insured and investments contain risk plus could be subject to loss.
Losses could be short term or permanent. Numbers and figures illustrated are hypothetical in nature and past performance is not a guarantee or indication of future results/performance.
We are not affiliated with the Social Security Administration (SSA), Internal Revenue Service (IRS), or any Governmental Agency.
Do not rely solely on the Legal, Tax, or Financial information presented for it may not be suitable for your individual situation.
Consult your legal, tax, and/or financial professional before acting on any strategy or recommendation (i.e. major changes or before initiating the purchase, hold, or sale of any investment or investment strategy). Every individual’s strategy can differ depending on current circumstances and goals.