Ask Rande

Top 1769. Aug 13, 1999 6:25 AM

» RandeS - We had a couple of days where the 6.

We had a couple of days where the 6.25% yield "target" presented a wonderful opportunity to buy the 2025 zero fund at AmCent. Hope some took advantage. For now, "we're makin' coin." But, should rates back up again, don't worry. You won't hear, "we're gettin' wiped out." If you believe rates will be substantially lower, not higher, six-to-twelve months from now the zeros could turn a nice profit in the IRAs. Then, back to the short-intermediate range for me (somewhere in the low 5s on the yield). In the meantime anything at 6.25% or higher still represents a pretty attractive rate as far as I'm concerned. Whether we get back there is problematical -- next week's CPI, FOMC ahead, and more beyond present continued uncertainty. No risk, no profit potential. Do what's best for you.

-- posted by RandeS

Top 1770. Aug 13, 1999 7:22 AM

» Thruhiker - up, up and away?

Didn't catch her name or the fund family, but yesterday CNBC was interviwing a "equity side economist" about the 6.25% yield. Her prediction was that the yield will eventually hit 6.75%.

-- posted by Thruhiker

Top 1771. Aug 13, 1999 7:27 AM

» JenL_3 - Yikes!!

Thruhiker - 6.75???? How soon is "eventually"?....Jen

-- posted by JenL_3

Top 1772. Aug 13, 1999 7:34 AM

» RandeS - Anything can happen, even 7% is not out of the realm of possibil

Anything can happen, even 7% is not out of the realm of possibility. When making a forward-looking decision, investors have to do their best to discern between possibilities and probabilities. There is a lot of disagreement on what the "high-end" might be for bonds in here. Brinker recently upped his range to 5.5-6.25, while Rukeyeser was calling bonds a buy at around 6.15% on the yield. Always best to make your own decisions, but if you're going to rely on what the gurus say, then it's not a bad idea to check their track records over the past 5 years or so, throw out the outliers (bonds going to 4% right away or headed to 7% before you know it) and try to reach a reasonable consensus. My conviction is well-known -- believe the potential for low 5% yield levels in the next 6-12 months is much greater than for the high 6-low 7% levels. As long as you don't bet the farm, should be interesting. Still recommend short-to-intermediate (laddered) range for long haul.

-- posted by RandeS

Top 1773. Aug 13, 1999 9:30 AM

» TONYBRIG - Options

Rande:

You may have answered this b4 but I couldnt find it.
You have indicated that options are all short-term capital gains.
But when does the implication start? When I sell the call or at
expiration.
It seems logical to me at expiration.

Jen:

About the Employment report in Barrons dtd 8/2 pg mw8
"The Striking Price" paragraphs 7 & 8

vbolhh

-- posted by TONYBRIG

http://www.irs.ustreas.gov/forms_pubs/pu...

Top 1774. Aug 13, 1999 10:07 AM

» RandeS - Tony,

Tony,

My bad -- might have thought we were just talking about writing options. We need to narrow down the rules a little. If you are a HOLDER (i.e., long position) of a call or put option, AND you either dispose of the option in a capital transaction or allow it to expire unexercised, the resulting gain/loss will be capital in nature and will be short or long term depending on the holding period. Of course, most options (except for LEAPS and warrants) don't have a life long enough to qualify for long-term treatment. When you are the WRITER of the option, either put or call, any capital gain or loss is ALWAYS short-term (same as with any short sale, no matter how long the position is open). All this and more you can find in IRS Publication 550, "Investment Income and Expenses," including the rules on what to do with options (whether it's an adjustment to basis or proceeds or a capital gain/loss or short or long term -- depending on type of option, how long held, and whether exercised, expired, or bought/sold at the end). Check it out:

Finally, there is the issue of how to report written option transactions that remain open from one year to the next (proceeds received in one tax year, but transaction not closed until next). This isn't as much of a problem as with regular short stock sales, since option transactions are not reported to the IRS on Form 1099-B.

-- posted by RandeS

Top 1775. Aug 13, 1999 10:46 AM

» RandeS - Bond yields all over the map today -- down to 6.

Bond yields all over the map today -- down to 6.11 from 6.26, then back up to 6.20, now back down to 6.14. Stocks acting manic too. Sure looks like it's being overdone a little.

-- posted by RandeS

Top 1776. Aug 13, 1999 11:15 AM

» RandeS - I'm as bullish as the next guy, but can't quite figure out why

I'm as bullish as the next guy, but can't quite figure out why the market is so exuberant today on just the PPI. Maybe investors figure they can allways reposition on Monday prior to the CPI on Tuesday (why else the big bet going into the weekend prior to this report)? I just can't help but think about April when the PPI came in fine only to be followed by a .7% CPI. Not expecting that on Tuesday, and feeling positive overall (got into zeros at 6.26% on the long bond because I thought rates were headed materially lower down the road), but today might be too much too soon.

-- posted by RandeS

Top 1777. Aug 13, 1999 2:26 PM

» TONYBRIG - Options

Thanks Rande!

Will check out that publication.
Guess I have to consider more carefully when
I write options.
Market kicked in nicely and we will test the
theory of when they take it home big-time for
the weekend.
My theory says it goes up more next week.
Pretty good track record on this system cept
for one time when the feds got in the way.
Thanks again!

vbolhh

-- posted by TONYBRIG