Monthly Market Review
“Bonds Have More Fun”
(An Exercise in Contrarian Thinking)
March 21, 2013
Kevin M. Wilson, ChFC, PhD
President/CEO/CIO
1405 Medical Arts Building
324 W. Superior Street
Duluth, MN 55802
Dheenu Sivalingam, MBA
AVP/CCO/Senior Analyst
Ted A. Pavlovich, WMS
VP Wealth Management
1
Office: 218-464-4399
Toll Free: 877-327-5062
Fax: 218-464-4397
Email: info@bluewater-cap.com
www.bluewatercapitaladvisors.com
INTRODUCTION
TED A. PAVLOVICH
2
BOND, JAMES BOND
What Markets Fear
TED A. PAVLOVICH
3
Fed Interventions Have Supported Treasuries
4
Bonds Are Seemingly Quite Risky Now
5
No One On Wall Street Likes Long Bonds,
But Look How They’ve Done!
6
Uncertainty Has Kept The Public
Buying Bonds For Safety & Yield
7
BOND TRADING
OPPORTUNITIES
KEVIN M. WILSON
8
Models Projecting A Rise
In Yields Assume Normal
Recovery From Here - And
At Some Point It Will Happen
9
But There Are Reasons For A
Treasury Rally First – Especially
If Stocks Fade
10
Treasuries Will Help Offset the Risk of Stocks
11
History Also Suggests Yields Can Go Lower
As Economy Pays Off Debt Bubble Excesses
12
Fed Also Wants Debt Service
To Stay As Cheap As Possible
13
Massive Buying By Fed
Won’t Stop Because of
Continued Deficit Spending
14
Fed Has Caused A Supply Problem,
Which Provides Support For Higher Prices
15
The European Crisis
Also Drives Demand
For US Treasuries
16
Other Bonds That Should
Do Well If Interest Rates
Stay Low Include “Build
America Bonds” and
Mortgage-Backed Bonds
17
Corporate Bonds Should Continue To Do Well
18
High Yield (Junk) Bonds Also May Rally,
But Are Extremely Risky At This Level
19
Convertible Bonds Will Rally
When Stocks Go Up…
…And Bank Loan
Securities Are Less
Risky Than In The Past
20
EMERGING MARKET BONDS
DHEENU V. SIVALINGAM
21
The Case For Emerging Markets Bonds



More than 80% of the world’s 6.5 billion people live in
emerging markets such as Brazil, Mexico and Indonesia.
Many of these markets have young, expanding populations, a
rising middle class, and improving economic and political
stability leading to growth opportunities in these economies.
Most surprising to investors, many emerging market
countries now offer greater fiscal stability than many
developed markets.
22
23
Conversely, the world’s developed markets
have experienced a surge in debt levels, slow
growth and downgrades of many advanced
economies.
24
25
26
27
SUMMARY/Q & A
1)
2)
3)
4)
When the Next Stock Pullback Occurs, Long Treasuries Will Do Well
Mortgage-Backed Bonds Will Do Moderately Well At The Same Time
Build America Bonds Will Likewise Do Well
When the Stock Pullback Ends, All of These Will Sell Off Again,
But The LT Yield Trend May Continue
5) At Which Time It Will Pay To Buy CB’s, BLB’s, HYB’s, & EMB’s
KEVIN M. WILSON
28
Disclaimer
This report is provided for informational purposes only and does not constitute an offer or solicitation to purchase or sell any
security or commodity and is not intended to provide specific advice or recommendations for any individual. To determine
which investment(s) may be appropriate for you, consult your financial advisor prior to investing. Any opinions expressed
herein are subject to change at any time without notice. Information has been obtained from sources believed to be reliable, for
its accuracy and interpretation are not guaranteed.
Investing in securities involves risk, including possible loss of principal. Past performance should not be taken as an indication
of guarantee of future performance and no representation, express or implied, is made regarding future performance.
The firm does not provide tax advice; clients should contact their attorney, accountant, or other tax adviser regarding tax
matters.
“BWCA is a state registered investment adviser in all states in which it is required to be registered. All Blue Water Capital
Advisors’ customer assets are held in the customer name with Fidelity Institutional Services, clearing through National
Financial Services (NFS), Member SIPC, a Fidelity Investments Company as Qualified Custodian.”
29