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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Chip McVickar who wrote (7294)	1/11/2006 11:45:03 PM
From: Edscharp	Respond to of 33421

Chip, Thanks for your reply and my apologies for not posting recently. I did find an interesting book which explains much that I wanted to know about bond trading. The book is entitled The Bond Bible by Marilyn Cohen. It's available at Amazon.com and used versions can be had at abebooks.com. I haven't quite finished the book yet, but I think I've got all the basics down. Some bond issues can get quite complex and are beyond my ability to research properly thus my decision to stay with funds and or etfs who have experts at the helm. One interesting bond play has intrigued me. Buying bonds through closed-end funds (CEFs). As you may know CEF's trade on the stock exchange like stocks. At any given moment a CEF may be out of favor with investors and thus can sell at a considerable discount. For instance there is a Dreyfus long term bond fund (symbol: DHF) which sells at an 11% discount (11% below the fund's actual book value) and is currently paying about a 9% dividend. Perhaps not too surprising for a junk bond fund, however I was very surprised to find out that many tax-free municipal bond funds have fallen out of favor. One in particular that caught my eye was a Putnam fund (symbol: PGM). It is currently trading at a 12% discount and pays about 5% (about 7% tax bond equivalent). What makes this particularly interesting is that the fund concentrates on investment grade bonds (not junk bonds). My view at the moment is that inflation is not a problem therefore these funds may represent some excellent values. Furthermore, even if my timing is less than perfect I can still collect some decent dividends until these funds come back into favor. Most of the funds that I looked at have a history of rotating from discounts into premiums (in which case they are priced above their book value). I think the very patient investor can make some nice capital gains by buying bond funds at times of distress and waiting for better days. Of course, I understand completely that if new inflation fears suddenly loom my wait may be considerable and my investments worth less than I might've hoped. By the way, the information on discounts and dividends on CEF's can be found at etfconnect.com Regards, Ed S.