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Squeeze 9%-Plus Out Of This Bond Mini-Portfolio

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Bonds are finally an intriguing place for retirement income.

Safe Treasuries still pay a respectable (by their standards, at least) 3.7%. But we contrarians can do better.

Today we’re going to discuss three bond funds ready to rally. They pay 8.6%, 9.1% and—get this—9.6% per year.

Those are not typos. These are fat freaking yields.

Yes, These Bond Yields Are Real. And They Are Spectacular.

And even better still, you can buy these bonds for as low as 90 cents on the dollar! How is that? Well, the cheapest fund trades for just 90% of its net asset value (NAV).

It’s NAV is the street price of the safe bonds it owns. If the fund liquidated today, it would fetch 100% of NAV. But it’s a bear market, so bargains abound. And we can buy it for just 90% of NAV—or 90 cents on the dollar.

Why? Let’s thank our intrepid Fed.

The Fed Gamble

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Bonds have taken an absolute beating in 2022 amid a year’s worth of aggressive Federal Reserve interest-rate hikes—part of Chair Jerome Powell’s action plan to extinguish raging inflation.

For example, the iShares 7-10 Year Treasury Bond ETF (IEF IEF ), a proxy for medium-duration bonds, currently sits near decade-plus lows amid a 15% drop year-to-date. That might not sound like much compared to the beating stocks are taking, but that’s as precipitous a decline as you could reasonably fear in mid-length bonds.

I stress “near” because bonds have been rallying of late. A temporary snap-back? Maybe. But it comes amid budding, albeit uneven, optimism over the past month or so that maybe, just maybe, the Fed’s rate hiking is about to slow.

Just a week ago, the Fed released minutes from its most recent FOMC meeting showing that a “substantial majority” of the central bank’s officials believe it would “likely soon be appropriate” to slow its rate hikes.

And on Wednesday, Powell added more credence to the idea, saying smaller rate increases “may come as soon as the December meeting.”

Bonds aren’t a monolith, either. Short-term and long-term rates can indeed move in different directions, and that matters when determining your bond-buying strategy. Recall what I said a few weeks ago:

“The ‘short end’ (maturities closer to today) of the yield curve is grinding higher because the Fed head has said he has more work to do. Over time, the 2-year Treasury tends to lead the Fed Funds Rate because it anticipates the Fed’s next move. … The ‘long end’ (maturities farther away) of the yield curve, meanwhile, is catching its breath while it weighs the lesser of two evils: inflation today or a recession tomorrow.”

If we are at a point where, perhaps, Powell doesn’t have as much work to do as before, that could be an inflection point for short-term bond rates—and an inflection point for shorter-maturity bond funds.

In other words, the window might be closing on our chance to buy low.

Fortunately, we can make the most of that opportunity by buying not bond mutual funds or bond exchange-traded funds (ETFs), but bond closed-end funds (CEFs). That’s because, in addition to buying while short-term bonds are against the ropes, many of these CEFs are also trading for below their net asset value, meaning we’re buying the bonds for even cheaper than we could by purchasing them individually.

While the fate of these funds is ultimately up to the Fed, here are three intriguing opportunities right now: 3 CEFs yielding 8.6%-9.6% that are trading at high-single-digit and low-double-digit discounts to NAV:

PGIM Short Duration High Yield Opportunities Fund (SDHY)

Distribution Yield: 8.6%

Discount to NAV: 10.1%

As crazy as it might sound, you can wrest a nearly 9% yield—paid monthly, no less—from a bond portfolio with an average maturity of less than three years!

The PGIM Short Duration High Yield Opportunities Fund (SDHY) is a relatively new fund with inception in November 2020, so most of its short life has been spent weebling and wobbling. SDHY invests primarily in below-investment-grade fixed income, and it will typically maintain a weighted average portfolio duration of three years or less and a weighted average maturity of five years or less—the latter is considerably shorter than its target right now, at 2.9 years.

The short maturity helps tamp down on volatility, but SDHY is hardly your average short-term bond fund, including quite a bit more movement.

SDHY packs a mean yield punch in part because of its low credit quality. Just 11% of its portfolio is investment-grade; another 34% is in BB debt (the top tier of junk), and another 35% is in B-graded bonds.

Also helping is a decent amount of debt leverage—17% at last check, which isn’t exceptionally high, but still a fair amount of extra juice to performance and yield.

That juice works both ways, hampering SDHY’s performance during a bear climate for bonds. But clearly, given its performance of late, it has significant potential once the Fed starts slowing its hike pace (and especially once it actually throttles back rates).

Also alluring is a nearly 10% discount to NAV, implying that you’re buying SDHY’s bonds for 90 cents on the dollar. Granted, that’s not much more than its historical discount since inception of 10.3%, but it’s still a bargain no matter which way you slice it.

Western Asset High Income Opportunity (HIO)

Distribution Yield: 9.1%

Discount to NAV: 8.9%

The Western Asset High Income Opportunity (HIO) is a little farther along the maturity spectrum, at an average of 7.3 years, but it’s another compelling high-yield play that’s worth eyeballing in the current environment.

HIO is a classic junk-bond fund whose management team scouts out particularly attractive values. But focus on value doesn’t translate into more credit risk than its contemporaries—sure, its BB exposure of 34% is far less than its benchmark (50%), but that’s countered by some investment-grade debt (2% A, 13% B). (The rest of the portfolio is similar to its benchmark.)

Also, while this CEF is allowed to use leverage, it currently doesn’t. So the higher-than-junk-average yield you see (also paid monthly!) is simply a result of its management’s bond selections.

Despite not using leverage, this CEF’s performance is much more volatile than plain-jane ETFs—historically for the better, though the past year has been miserable for shareholders.

HIO’s 8.9% discount to NAV is attractive, at least in a vacuum—but it’s something of a wash considering that, on average over the past five years, the fund has traded at a 9.1% discount.

BlackRock Credit Allocation Income Trust (BTZ)

Distribution Yield: 9.6%

Discount to NAV: 5.7%

There’s hardly “a final word” with this Fed. Yes, Powell gave his strongest signal yet that rate hikes will slow down. But the Fed has already surprised some economists with its aggression on rate hikes and other quantitative tightening—and if high inflation persists, short-term bonds could remain in the doghouse longer than expected.

But longer-dated fixed income, especially with decent credit quality, could do OK.

The BlackRock Credit Allocation Income Trust (BTZ), which invests primarily in bonds but also other fixed income such as securitized products and bank loans, is an interesting choice here—one with an excellent track record, especially if you can stomach some deeper valleys along with those higher peaks.

BTZ’s average portfolio maturity is a hair over 18 years—not quite at the 20-year threshold for “long,” but plenty long nonetheless. Credit quality is an optimal blend, however: 55% is investment-grade (most, 42%, in BBB-graded bonds), another 22% in top junk tier BB, and most of the rest in B- and C-rated bonds.

This fund is an ideal example of how CEFs benefit from active management and more tools to work with. Managers can hunt down value-priced bonds rather than just plugging in whatever an index tells them to, and they’re also able to scour the credit world for other appealing instruments at times when bonds aren’t the top play.

Also, BTZ is at the high end of the leverage-use spectrum, at more than 28% currently. That can weigh on performance given a high cost of debt, but it can also drastically improve performance in a bond upswing—and that’s how its monthly payout stretches to nearly 10%!

My only gripe right now? BTZ isn’t much of a bargain right now, with its roughly 5.7% discount to NAV coming in higher than its 5-year average of around 8%.

But it still beats buying these bonds individually.

Brett Owens is chief investment strategist for Contrarian Outlook. For more great income ideas, get your free copy his latest special report: Your Early Retirement Portfolio: Huge Dividends—Every Month—Forever.

Disclosure: none

Entrepreneurship

Bitcoin ATM – Learn More About Quick Change Cash to Cryptocurrency

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Cryptocurrencies such as Bitcoins have become a global currency. They are well-known globally and more popular than traditional money, for example American Dollar.

Bitcoin ATM

This article will tell more about Bitcoin ATMS with zero commissions, how to change crypto to cash in a short time or how to find the most beneficial Bitcoin ATMs.

  1. Bitcoin ATM with 0% commission
  2. Bitcoin ATM can change cash on several cryptocurrencies
  3. How to change cash on cryptocurrency?
  4. Where to learn about bitcoin ATMs?
  5. Is it safe to use Bitcoin ATMs?
  6. What are the Bitcoin ATMs locations?
  7. What are the opening hours of Bitcoin ATMs?
  8. Where can you find some information on exchange rates?
  9. Where can you find some more information on Bitcoin ATMs?

Bitcoin ATM with 0% commission

When you want to buy and sell bitcoin you do not have to pay an additional fee in your area like many different bitcoin ATMs charge (even 8%). Every bitcoin ATM provides transactions with 0% commission. What is more, the clients can get various discounts and enjoy higher exchange rates.

Bitcoin ATM can change cash on several cryptocurrencies

Although Bitcoin is the most recognizable cryptocurrency in the world, there are also other cryptocurrencies worth mentioning. What is more, they are also available in the bitcoin ATM. They are the following: Tether (USDT), Litecoin (LTC), Tron (TRX) and Ether (ETH). The whole process – it means converting cash to your favourite cryptocurrency lasts a few minutes.

It is very intuitive and every user can change cash to crypto without any problems.

How to change cash on cryptocurrency?

It is very simple to use the Bitcoin ATM. It is similar to withdrawing money from a standard ATM. The first thing you have to do is to insert cash and then scan qr code. Next, you have to select the transaction details (exchange rate and transaction fee) and finally the cryptocurrency is transferred to your wallet.

It is childishly easy to use the bitcoin ATM. As an outcome, it is also popular in Ukraine where the war with Russia takes place.

Where to learn about bitcoin ATMs?

If you want to get some relevant knowledge on bitcoin ATM and how to buy and sell bitcoin and litecoin you should visit the official social media of bitcoin ATM. There is a tutorial for beginners who have never tried the bitcoin ATM and want to know what bitcoin ATMs are.

The popular social media where you can find the information are You tube and Facebook. Furthermore, it is worth watching it regularly to learn more about special offers or unique discounts for anonymous bitcoin buyers and sellers.

Is it safe to use Bitcoin ATMs?

The clients should feel safe during converting cash to cryptocurrency. That is why, the bitcoin ATMs are located in public places, mainly in the shopping malls where the advance monitoring system is provided. What is more, it is also possible to change cash to cryptocurrencies in independent places. However, in those places the doors are locked and the person who is doing the transaction can feel safe.

Bitcoin ATM
photo credit: Sharon Hahn Darlin / Flickr

What are the Bitcoin ATMs locations?

If you need to change cash to cryptocurrency, you have to see the bitcoin ATM map. There you can find all bitcoin ATMs in your area. What is more, you can get some interesting details about the bitcoin ATM. There is provided the name of the city with a detailed address as well as additional information on the bitcoin ATM. Moreover, you can find there also a picture of the bitcoin ATM and available funds to withdraw at the moment.

What are the opening hours of Bitcoin ATMs?

If you are in Madrid, the capital city of Spain you can check the opening hours of Bitcoin ATMs Madrid online. At the same website where you can check the location of a bitcoin ATM, there is some information about opening hours. The majority of bitcoin ATMs are open 24 hours, 7 days a week and they are available in the shopping malls or independent places. However, some of them are available in limited time.

That is why, it is always worth checking the opening hours before you visit the bitcoin ATM.

Where can you find some information on exchange rates?

The exchange rate is the crucial information when it comes to converting cash to cryptocurrencies. However, it is not a problem when you use the bitcoin ATMs. At the website where the detailed address and opening hours are provided you can also find some information about the current exchange rate.

It is worth selecting the place that offers the best exchange rate before you leave your house.

Where can you find some more information on Bitcoin ATMs?

Before you make a transaction at a bitcoin ATM, you should learn more about the bitcoin ATMs. You can do it at the official website of the device or at one of the YouTube channels where the latest information and detailed tutorial are provided.

You should also visit Facebook and Instagram where the latest news is updated and find out that there are more and more bitcoin ATMs in your location.

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The Future Of Economic And Workforce Development

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Our economic attention currently is fixed on national policy, with growing risks from a debt limit deadlock and debates over inflation versus recession. But economic prosperity also depends on state, regional, and local policy, and now there’s a free guide to some of the best thinking in the field in the newest edition of the Economic Development Quarterly (EDQ).

EDQ is a leading journal overseen by the W.E. Upjohn Institute for Employment Research. It brings together practitioners and scholars through “supporting evidence-based economic development and workforce development policy, programs, and practice in the United States.” (I’m a member of the editorial board, and also a contributor to this new issue.).

The new issue asked experts associated with the journal “what are the key research and policy questions facing economic development and workforce development today?” In order to reach a broad audience, including policy makers, academics, journalists, and the public, the issue is free for a limited time.

There are 15 articles in the issue, and their range and excellence make it impossible to summarize them. Some focus on companies and firms, including how entrepreneurs can be included in economic development, what policies and programs are most effective in supporting businesses and job creation. Other analyze how public economic development and workforce professionals in the field can be most effective in our complex and tangled systems.

Several articles examine changing workforce dynamics. How can policy engage with macro trends like globalization, high housing costs, and changes in commuting and working from home? Can greater inclusion for the workforce be part of an effective economic development strategy? What would economic development look like if it paid more attention to environmental, racial equity, and family and household issues?

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My contribution draws on my new book, Unequal Cities: Overcoming Anti-Urban Bias to Reduce Inequality in the United States. The book outlines how America depends on cities for innovation, growth, and productivity, but also how our political systems—regional, state, and national—are biased against cities.

That pervasive bias holds down both regional and national productivity and growth. And it perpetuates racially stratified inequality in jobs, economic growth, housing, and education.

Wealthy (and predominantly white) suburbs capture the lion’s share of urban economic growth while not paying their fair share of the costs. That ongoing and structural racial bias is perpetuated over time by our public policies and fragmented metropolitan governments. This in turn makes it very hard for cities to address these problems on their own.

I argue that hyper-mathematized models in urban economics divert energy from more empirical engagement on our economic and workforce problems. We need multi-disciplinary analysis of policy, with special attention to how seemingly neutral policies generate racial and other forms of inequality. And we must recognize how our metropolitan fragmentation and segregation hold back shared economic prosperity.

Although there’s a wide range of policy viewpoints in the EDQ issue, all of the authors use research and analysis to help improve the places where we live. That distinguishes this work from much of mainstream urban economics, which is skeptical of place-based policies. Standard urban economics favors individually-based approaches emphasizing education and skills, and encouraging mobility by companies and people.

Of course, education and skill development are essential components of sound policy, and several of the EDQ articles suggest how to improve it. But in the real economy, experts like those at the Economic Policy Institute show our policy bias towards individualized and company-focused approaches hasn’t led to shared prosperity.

Instead, as watchdog analysts like Good Jobs First point out, we far too often see wasted tax subsidies going to firms that don’t need them, without good jobs and other benefits that were promised in return for the tax breaks. Public education mirrors the unequal fragmentation of regional governments, with suburbs creating better education from their higher property tax bases and wealth while core cities struggle to generate adequate educational funding.

So if you’re interested in economic and workforce development, national and regional and city prosperity, and how equity and growth can be combined in public policy, get your free issue of Economic Development Quarterly. I’m proud to be in such distinguished company, and there’s a lot to learn from them.

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Finance

What To Expect From Altria’s Q4?

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Altria (NYSE: MO) is scheduled to report its Q4 2022 results on Thursday, January 26. We expect MO stock to see little movement, with its revenue and earnings aligning with the street expectations. Although the company should continue to see a decline in cigarette volume, given the declining market and higher inflation, pricing growth will likely help offset the revenue loss from volume. While we expect little movement in MO stock based on its Q4 results, it has more room for growth from a valuation perspective, as discussed below. Our interactive dashboard analysis of Altria Earnings Preview has additional details.

(1) Revenues expected to align with the consensus estimates

  • Trefis estimates Altria’s Q4 2022 revenues to be around $5.2 billion, reflecting a low single-digit y-o-y rise and in line with the $5.2 billion consensus estimate.
  • Altria sells its tobacco products in the U.S. Revenue is generated from selling cigarettes, oral tobacco, and smokeless products.
  • While the company is expected to see continued pricing growth, lower volume/mix will likely weigh on its top-line growth.
  • Looking at Q3 2022, the company reported net revenue of $5.4 billion, marking a 2% decline over the prior-year quarter.
  • The decline in revenue can be attributed to lower cigarette volume (down 9%) and the sale of its wine business in October 2021.
  • Our dashboard on Altria Revenues has details on the company’s segments.

(2) EPS likely to be in line with the consensus estimates

  • Altria’s Q4 2022 adjusted earnings per share (EPS) is expected to be $1.17 per Trefis analysis, aligning with the consensus estimate. This compares with the $1.07 figure the company reported in the prior-year quarter.
  • The company’s net income of $2.3 billion in Q3 2022 reflected a modest rise from the $2.3 billion figure seen in the prior-year quarter due to a 90 bps y-o-y rise in operating margin to 58.9%.
  • For the full-year 2023, we expect the adjusted EPS to be higher at $5.11 compared to the EPS of $4.61 in 2021 and an estimated $4.83 in 2022.

(3) MO stock looks like it has some more room for growth

  • We estimate Altria’s Valuation to be around $52 per share, which is 16% above the current market price of $45.
  • At its current levels, MO stock is trading at a little under 9x forward EPS estimate of $5.11 in 2023, compared to the last three-year average of about 10x, implying that it has some room for growth.
  • If the company reports upbeat Q4 results and provides a 2023 outlook better than the street estimates, the P/E multiple will likely be revised upward, resulting in higher levels for MO stock.

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While MO stock looks like it has some room for growth, it is helpful to see how Altria’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities, which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for Ecolab vs. Philip Morris.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Invest with Trefis Market-Beating Portfolios

See all Trefis Price Estimates

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