To All, Maximum Income Strategies. In this series of notes, I will mention my stategies and where my portfolio is right now. I move rapidly in this area. In fact, if I were a broker, I'd probably be accused of churning. But there is a reason for that. If you expect to make 25% a year on a strategy, and you make 12% in a month, my feeling is you punt and look for and even wait a while for another 25% opportunity rather than hold on for 11 months to collect, you hope, the other 13%.
There is a lot of stuff here, so I hope I don't bore everyone. I plan to do this in fairly digestible segments.
1. The Collateral Base. As you will see below and in future days, many of my strategies use margin which is provided by cash from the base and other marginable strategies. I tend to keep the collateral base small as it is either very bullish or low yielding. I certainly do not want to have too much money in low yielding stuff and I am not always bullish. Okay, who just said "duh!" out there? <g>
Money markets make up some of the base all of the time. When I transfer cash, I like there to be cash available. I usually use Treasury or govt. money funds that take delivery of repoed securities, or T-Bills. I will go out to a year on Bills. This portion is about 5% right now, but has been as high as 25%, especially when I've just closed out a lot of profitable trades in the Maximum Income account.
If I am bullish on the bond market, I may add long bonds or long domestic closed end bond funds, deeply discounted, of course, to the mix. If I am negative on bonds, I tend more toward shorter maturities. If I am negative on the dollar, I tend toward funds like TGG and Salami Bros World Income 2008. First Australian Prime, with an 18% discount to NAV, is starting to catch my eye again. These are mainly used in the IRA and other tax deferred portfolios. Right now I have some notes with an avg. maturity of under 3 years, some TGG for about a 7% total weighting in the tax deferred accounts.
In taxable accounts, I will use some muni CEFs. Right now I have some Blackrock Insured 2008. This one uses leverage, which I hate, but I figure being insured with an 8 year maturity and nearly a 10% discount works in my favor. I have had some good luck with Smith Barney Intermediate Muni fund, but dislike the lack of insurance or a redemption date to keep fund managers in line. I have none at this time. I have also used some of Blackrock's single state insured funds with set redemption dates. Again, the 2008 date is one I can live with and the Florida fund actually yields more than the national 2008 fund. Hey, same insurance cos. These represent about 4% in the taxable accounts.
My favorite collateral play, for both accounts, are the tax advantaged closed end fund preferred shares. These are not tax free, but most of the dividend is in the form of long term gains. They are AAA rated and coverage is superb for all of the ones in existence. There are a couple of tricks. First, most of them have a buyout price of $25 a share where you have to sell, so you don't want to be buying much above that number. |
