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23 Cards in this Set

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KS Bond Call
Hello, this is Arturo, calling from EDJ here in PV. How are you?
Did I catch at a good time? Do you want me to be brief or do you prefer me to call you back?
We have a KS Bond that is paying 4% interest every year. It is Federally tax free and state tax free. If you have the money available I recommend that you buy today
CA Bond Call
I just wanted to give a quick call, we have a tax-free bond right now, it’s a General Obligation, its from CA. Its paying 5%, AAA rated. It is a CA, but is a GO bond. And if you have some money available, at tax free federal I recommend that you invest on it.
You don’t want to put all your savings.
Liquidate TFBd for Medicaid
The only time people are gong to start liquidating TFBd is if they go to a nursing home. If they get to that point they could potentially throw all their money into Medicaid, so it really doesn’t matter at that point anyway.
So, keep some money in short term investments, but if some of this is money you really don’t plan on spending and you don’t want to, then I definitely recommend putting some money in a TFBd, because you get 5% on it. When is all set and done and this ends up being the worst investment you’d ever buy, paying 5% Tax free, life isn’t too bad. So, put some money and do it. If you put 10K tax free, everything else gets better
Bond Maturity?
You have not done TFBd before right? No
Well, the deal with TFBd is this, they are negotiable securities, so they are liquid in any given business day, but you have maturity dates, and the maturity date of this bond is 30 years, and that may sound a little strange. But you don’t want to think of a bond like a CD because is negotiable, meaning that you can sell in any given day.
Bond and Rental Property
So when you think about someone that buys a piece of rental property, they are taking principal they don’t ever intend on spending because they want the income stream, so money that you put in this bond, would be money that you really don’t want to spend, because guess what when you start spending the principal, then you have less interest coming in because you don’t have as much money working for you. So, the money that this would be appropriate for is money that you never plan on spending and you are happy you are getting that income stream for a long as it lasts.
Bonds when you die
Obviously, when you die you can not take the money with you anyway. Even if you put your money in a 1-yr CD or a 30year bond, if you die in six months, it doesn’t matter where it was because you cannot take it with you anyways. You children would inherit the TFBd and at that point they can continue to keep it at that good rate or they can cash it at the market price, they can cash it in.
Bond education appmt setup
I now you have not use one of this, really what would be in your best interest is if we sit down and I can provide some basic education on TFBd. I Can tell you that this one is probably sell out within 24hrs, but I don’t want you to take this one, because I don’t feel that you can understand it enough for me to have it buy it.
So, why don’t we sit down F2F and I can explain how they work.
Bonds loans to municipalities
The way they work is instead of lending your money to the bank you lend it to the municipalities, can be a school, can be a hospital. And you get a fixed rate, it doesn’t change, is tax free, always federal, sometimes state and federal if you buy a KS bond.
Bond Commission
We act as an underwriter, If you buy a bond from us, we get paid the underwriter fee from the issuer, which ranges between 2-3%.
This bond is priced at par and you make 5%. That’s what you pay for it. There is not any fee that you have to pay. But we get 2-3% from bringing the bond public.
Now, when you get your statement the next day, is going to show it’s worth 2-3% less, because what you are seeing is the wholesale quote to sell it in the open market. As long as you keep it to maturity though, it is going to mature at what you put in.
Fluctuating value.
Maturity and interest
A bond that is issued at $1,000, matures at $1,000. Let’s say is paying 5% and you put in 10,000. So that means that twice a year you are going to get a check for $250, so that means you are getting $500 a year. So, as long as you keep this bond to maturity you are going to get $1,000 per bond, and you bought 10 of those so that’s 10,000. They trade in increments of 5000 at a time.
Fluctuating value.
sell before maturity - premium
Why would the price go up and below; think of if this way, if you buy a bond from me today at 5%, and 2 yrs from now, the new bonds coming out are only paying 4.5%, people are going to be willing to pay more for yours, because yours is paying a higher interest rate than what the new ones are paying. If they have the two bonds, they’ll say, well yeah, I’ll pay a premium for yours.
Without getting to technical, the price of your bond goes high enough, so if someone buys it here at a premium, their yield to maturity is in line with what the new rates are paying which is 4.5% a year. Mathematically, is goes up enough to where the yield to maturity, when you factor the premium they are paying, is going to be equivalent to the new bonds.
Fluctuating value.
sell before maturity - discount
Why would it go down here, two years from now. Well let’s say the new bonds are coming up paying 5 ¼%. Yours is paying 5%, and you want to sell it. People are not going to want to pay full price for yours. So, if they buy it here at a discount, is going to be enough discount to where their YTM is going to be 5 1/4 %. So, if you say what if I want to sell this early, there is not a penalty to sell it early, you are going to get whatever the current market value is at the time. Throughout the life of this bond, I would be very reluctant to see if at some point this bond is trading higher or lower than 5% of what you paid for it.
Inflation. Are interest rates going to be higher later?
- There is no perfect investment and that is why we try to build a balanced portfolio. Some of it in short term CDs, some of it in longer term BDs and some of it in growth investments like mutual funds.
- I suggest to put some of your money in BDs to lock in a very good, safe and predictable rate.
Money tight up for a long time!
- There is no perfect investment.
- Two years ago we where able to get a CD that was perfect, because it was 5% and it was only one year.
- When we renewed it a year ago, we only got 3.5% and when we renew it now we only get 1.5%.
- So, that perfect investments of short term CDs has drop your income by about 75%. At least this provides a predictable income year after year.
What if I need the money before.
- I recommend a balanced portfolio with investments that are ST, LT and Growth. That’s why we keep some in MM and CDs.
- You can buy/sell on any business Day. There are good days and bad days to sell it.
- –talk about the market fluctuation and what creates the value to go up and down-.
- There is not perfect investment and I would never put all my money in one particular type.
Risk of doing nothing
- If you buy 20,000, you would be making approx 1,000. Would you want to miss out on that?
Commission
- There is no fee for this bond. That means if you invest 10,000, you receive a bond for a value of 10,000. So you probably wonder how I get paid. EDJ buys large quantities of this bond at wholesale, and we sale it at retail, so we make 2cents on every dollar.
I don't have the Money right now.
It is not due until the X of the month, so you don't have to come up with the money until then, but I would need to reserve it today in order to ensure that you don't miss out.
I'll think about it.
I am not trying to put preassure on you, but this bond is very popular and every financial advisor in EDJ is calling their best clients on it. I think you should buy today, before it is exhausted.
CDs are liquid
That is absolutely right, and it is guaranteed too, it is FDIC insured.
But you know what the difference is?
Say you invest 10K, instead of getting 500 a year for the rest of your life, for which you don’t have to pay any taxes, you are going to get 100 dollars from the bank.
So you can get 5 times more interest with me. And you know what else is true about those $100 that you are getting from the bank? Your are going to give 30 to the state, so you really are only getting 70. So, I don’t know, which would you rather have, a 1% CD or you would rather test me out with a 5% tax free?
Is it Safe?
Have you ever seen the rating chart that shows how bond are rated? I will mail you one today. And I don’t know if you know this, it is AA, one notch off from the highest rating possible. It’s # 2 in the rating scale. I don’t sell bonds unless they are rated A or better. So, when I tell you AA, it means high quality, it is safe. It is not insured like a CD, but you have a good rate and it’s appropriate. My friends Dad is 75 and buys these bonds like they are going out of style.
What if I need the money immediately?
Don’t you have money in emergency cash some where? How much?
You are fine, If you needed more than 20k, I would not put 30k in this bond, I would put 25k.
New bond
I had another one (TFBd) that came up this week.
-It’s what is call Ad valorem, which means that if they need to, they can raise taxes to pay back.