Series 7 Hour Power Notes

Buy Bonds:

Rich People-

Poor People-

Wimps-

Rich People- Municipal

Poor People- Corporate

Wimps- Treasuries

“Long & Low”

Long-term bonds move more that medium and short- term bonds & Low Coupon   (Price or NY) move more than medium and short-term bonds

“The Lower the Coupon, deeper the discount, the more the bond will fluctuate”

Zeros move the most! (Coupon = Price or NY) 

What makes bonds fluctuate or move?

Interest rates, Inflation, Credit ratings, and Market conditions

Discount Bond

Lowest yield so, If yields (YTM / YTC) are higher than coupon (NY or Price)

Premium Bond

Highest yield so, If yields (YTM / YTC) lower than coupon ( NY or Price)

Accretion

Raising Cost basis yearly on a discount

“OID you must Accrete”

Original Issue Discount must accrete (zero coupon must accrete)

Municipal Accretion-

Corporate Accretion-

Government Accretion-

Municipal Accretion- Might be taxable

Corporate Accretion- Is taxable

Government Accretion- Is Taxable

Amortization

Lowering cost basis on the premium

Who needs to Amortize?

ONLY Premium Municipal bonds

Corporate and discount Municipal bonds can but don’t need to

C R I M E (Revenue Bonds)

Covenant, Rate, Insurance, Maintenance, Engineering

“Corpret- 8- tion” Corporate Bonds

Measured in 1/8

Treasury

Measured in 1/32 and Always in Decimal or Dash

100 Basis Points =

$10 per bond or 1% = 1 point

AMP Current Yield

Annual Over, Market, Price Annual / Market Price

Treasuries - U.S Government

Shorter & Safer = More Liquid (Liquidity Questions)

T- Bills

Very Liquid, Short-term (1 year or less)

T-Notes

Medium- Term ( 2-10 years)

T-Bonds

Long-Term (20 to 30 years)

TIPS

(5, 10, 30 years) Treasury, Insured, Protection, Security (Hedge Inflation)

STRIPS

Separate, Trading, Registered, Interest, and Principals of Securities Interest is striped into Interest payments & sold as Zero Coupons (very volatile)

“Entities Tax Themselves” Federal and Municipal Taxes

Federal Taxes: T-Bills, T-Notes, T-Bonds, TIPS, & STRIPS

Municipal (State): Go Bonds, Revenue Bonds etc. (Depends on State if Taxed)

PRETTY GORLS DRIVE MERCEDES Order of Allocation

Presale, Group, Designated, Members

PRETTY BOYS DRIVE FERRARIS Types of Rates

Prime Rate, Broker Loan Rate, Discount Rate, & Fed Fund

Which Rates does the Fed Control?

Discount Rate- Rate at which the Federal Reserve Lends to Banks

Federal Reserve Primary Goal?

Want smooth ups and downs - Need to control Expansion (up) and Contraction (Down)

DORM (M) Tools the Fed Gov. Has to control economy

Discount Rate, Open Market Operations, Reserve Requirements, Margin, & (moral persuasion)

“Do the Do” Which tools are used by Federal Reserve?

Discount Rate & Open Market Operations are the only tools used (mostly)

Expansion = Economy is Growing

Sell Treasuries & Raise Rates to borrow $

Contraction = Economy is Shrinking

Buy Treasuries & Lower Rates to borrow $

“ $ flows downhill” China Lowering Currency Value

People buy products because they are cheap

What do we do when USD gets Weaker?

We export more because more people will want to buy our cheap products

What do we do when USD gets Stronger?

We import (buy) more because other countries things are cheaper

Best tool to Fight inflation?

Equities

DERP Timeline for Dividends

Declaration (Record Date), Exdividend Date, Record Date, Payable Date

Equity Examples

Mutual Funds, Variable annuities, Stock, ETFS