Information and Investing and my Muni Bond Holding
I've been reading a lot about people with the virus and people with jobs threatened by the virus and people who have already lost jobs because of the virus. Doing this helps the crisis feel real.
We are holed up in our apartment and there's really no evidence around us that anything is amiss. Some days it doesn't feel real, as if we are inside the Truman Show and somehow there is an outer boundary that we can't see but if we could get there we would see what's really happening.
It goes without saying that information is so important to understanding this crisis. The New York Times coverage has been excellent, The Atlantic coverage, Wired, certain podcasts.
Everyone recognizes income and wealth inequality; I think there is also a significant amount of information inequality in society, or at least information divergence. There are many information sources and, increasingly, different people have different soundtracks playing in their heads.
My Dad was a farmer and an accountant. He's a really intelligent guy, a successful businessman. He understands both balance sheets and tractor hydraulics, it's quite a combination. I have no idea what his information playlist is these days, but I suspect it's quite different from mine. These types of divergences are difficult to overcome when trying to execute a national response to an invisible invader that most of us do not have the expertise to understand.
The point I'm getting at is: I keep reading these stories about the effects of the virus around the country and around the world so that I can understand as much as possible what is happening, and in turn make informed decisions without unknowingly drifting toward undue panic or ignorant complacency.
This could be, after all, the biggest worldwide crisis of my lifetime. Terrorism feels almost containable by contrast.
When it comes to investing, the news and the markets will not always move in sync. Economic news is bad, government intervention is huge. Sentiment will swing wildly. I think I have a fairly good grasp of the macro picture based on my information sources. These lines of code are running in the background and it would be a waste of time to write about them in depth. For the purposes of investing, I want to learn to look more closely at specific opportunities and try to make sound decisions.
It's difficult to get a true information edge in the markets because that's what everyone is trying to do. That said, I think self education can help one avoid big mistakes.
I have personal accounts and in addition my brothers and I invest together and we are in the process of putting money to work in the markets. Thus, I'll be using this blog to think through investment ideas in order to narrow them down and make concentrated bets, and determine which accounts should hold which investments.
I'm going to start with an easy one -- Muni Bonds.
In my personal taxable account, I want to continue to build a position in a Virginia Muni Bond fund (NPV). Why? It pays monthly dividends that are exempt from state and federal taxes. Since this is a fund, it's quite liquid and I can use it as a place to stack money while waiting for other opportunities. In other words, I can use like a beefed up savings account.
Normally, Muni Bonds investments do not need to be timed because they are not especially volatile. They have a narrow price range.
The great thing about having this on my watch list: during the crash, I noticed a big dislocation in the Muni Bond market. From March 6 to March 18, NPV went from 14.60 per share to 11, around a 25% move. This happens in stocks quite a bit; in munis not so much. See the big dip after months of equilibrium.
I've read about the muni bond dislocation ... apparently there was some forced selling, and the Fed has now actually stepped in to buy muni bonds. In my opinion, these are still very low risk and the selloff created an opportunity to buy at much lower prices. The price has already rebounded by almost 20% (again, very unusual for munis), and I can collect the tax free 4% dividend to boot. I really like this fund and plan to keep it as one of my core taxable holdings.
What I'm Reading: Ray Dalio's Linked In newsletters. His book Principles was outstanding if a bit dry.
What I'm Watching: Diary of a Wimpy Kid. Pretty good for 2nd graders, funny show.
Stoic / Mindful Thought: The only way to eat an elephant is one bite at a time.
Final Thought: The weekend has been a lot better than our difficult Friday, mostly because we're not trying to get the kids to study and learn. There's some cabin fever for sure, but they've also played a lot more creatively than usual because there's no real alternative. If the number one goal is health, the number two goal is probably resilience. This is a formative time for all of us.
We are holed up in our apartment and there's really no evidence around us that anything is amiss. Some days it doesn't feel real, as if we are inside the Truman Show and somehow there is an outer boundary that we can't see but if we could get there we would see what's really happening.
Information Inequality
It goes without saying that information is so important to understanding this crisis. The New York Times coverage has been excellent, The Atlantic coverage, Wired, certain podcasts.
Everyone recognizes income and wealth inequality; I think there is also a significant amount of information inequality in society, or at least information divergence. There are many information sources and, increasingly, different people have different soundtracks playing in their heads.
My Dad was a farmer and an accountant. He's a really intelligent guy, a successful businessman. He understands both balance sheets and tractor hydraulics, it's quite a combination. I have no idea what his information playlist is these days, but I suspect it's quite different from mine. These types of divergences are difficult to overcome when trying to execute a national response to an invisible invader that most of us do not have the expertise to understand.
The point I'm getting at is: I keep reading these stories about the effects of the virus around the country and around the world so that I can understand as much as possible what is happening, and in turn make informed decisions without unknowingly drifting toward undue panic or ignorant complacency.
This could be, after all, the biggest worldwide crisis of my lifetime. Terrorism feels almost containable by contrast.
Information and Investing
When it comes to investing, the news and the markets will not always move in sync. Economic news is bad, government intervention is huge. Sentiment will swing wildly. I think I have a fairly good grasp of the macro picture based on my information sources. These lines of code are running in the background and it would be a waste of time to write about them in depth. For the purposes of investing, I want to learn to look more closely at specific opportunities and try to make sound decisions.
It's difficult to get a true information edge in the markets because that's what everyone is trying to do. That said, I think self education can help one avoid big mistakes.
I have personal accounts and in addition my brothers and I invest together and we are in the process of putting money to work in the markets. Thus, I'll be using this blog to think through investment ideas in order to narrow them down and make concentrated bets, and determine which accounts should hold which investments.
Investment Spotlight: Municipal Bonds
I'm going to start with an easy one -- Muni Bonds.
In my personal taxable account, I want to continue to build a position in a Virginia Muni Bond fund (NPV). Why? It pays monthly dividends that are exempt from state and federal taxes. Since this is a fund, it's quite liquid and I can use it as a place to stack money while waiting for other opportunities. In other words, I can use like a beefed up savings account.
Normally, Muni Bonds investments do not need to be timed because they are not especially volatile. They have a narrow price range.
The great thing about having this on my watch list: during the crash, I noticed a big dislocation in the Muni Bond market. From March 6 to March 18, NPV went from 14.60 per share to 11, around a 25% move. This happens in stocks quite a bit; in munis not so much. See the big dip after months of equilibrium.
I've read about the muni bond dislocation ... apparently there was some forced selling, and the Fed has now actually stepped in to buy muni bonds. In my opinion, these are still very low risk and the selloff created an opportunity to buy at much lower prices. The price has already rebounded by almost 20% (again, very unusual for munis), and I can collect the tax free 4% dividend to boot. I really like this fund and plan to keep it as one of my core taxable holdings.
What I'm Reading: Ray Dalio's Linked In newsletters. His book Principles was outstanding if a bit dry.
What I'm Watching: Diary of a Wimpy Kid. Pretty good for 2nd graders, funny show.
Stoic / Mindful Thought: The only way to eat an elephant is one bite at a time.
Final Thought: The weekend has been a lot better than our difficult Friday, mostly because we're not trying to get the kids to study and learn. There's some cabin fever for sure, but they've also played a lot more creatively than usual because there's no real alternative. If the number one goal is health, the number two goal is probably resilience. This is a formative time for all of us.
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