1. Send comments or questions.
  2. Full Name*
    Please enter your full name.
  3. Company*
    Please enter your company
  4. E-mail*
    Invalid email address.
  5. Phone #
    Invalid Input
  6. Subject*
    Please make a selection
  7. Comments
    Invalid Input
  8. Just a simple security measure to prove you are a human.
  9. * = Required

BEATING BILL GROSS: An Interview with “One of Banking’s Best,” Mark E. Peiler, CFA

November 30, 2001
Mark E. Peiler, CFA, Christopher J. Carney

This article is your preview of an interview that will soon appear in our more widely-distributed Bank Portfolio Manager™ publication. That is why the “interviewer,” Chris Carney, is designated by “BPM.” Our ongoing intention is to give readers of the Disciplined Investor® advance looks at significant BPM articles.

View Full Article

INTRODUCTION

November 27, 2001
Celia T. Wong

Celia is a new analyst with Betzold Investment Group, Inc. who comes to us with a strong engineering background (which includes a B.ApSc and two Master’s degrees, as well as a Certificate in Financial Engineering awarded by Cornell University). We asked her to take a fresh look at one of our perennial topics – duration.

View Full Article

A Call to Action: Leverage by Shape Management℠

November 16, 2001
Craig Johnson

The idea of using excess capital to grow the balance sheet sounds beautiful. The word “leverage,” however, can crumble the confidence of even the most brazen portfolio manager. There is a right way and a wrong way when walking down this seemingly slippery path. Finding that classic leverage is more difficult than simply locating the cheapest asset and liability and then pairing the two off.

View Full Article

Changes in Investment Risk Weightings

November 2, 2001
Girish Patel

Soon it will be time to dust off the investment policy to incorporate a risk based capital change. Last week the FDIC Board approved a draft version of the final interagency rule concerning risk-based capital guidelines among other things. The other agencies have also signed off on the final ruling, which will be published in the Federal Register later this month.

View Full Article

A 30-Year Trick or Treat

November 1, 2001
Mike Coogan

Trick or Treat. The Treasury announced Wednesday that it would no longer sell 30-year bonds. Given a recessionary economy as well as increasing government spending, the bond market was shocked by the news. As of this writing, the 30-year treasury is up 8 points, sending the yield down to 4.69%. The 10-year treasury rallied over 2 points; it now yields 4.11%. The five-year is up ½ point. Yesterday, the treasury market rallied more in one trading session than it has since the stock market crash of 1987.

View Full Article

Freddie Mac Perpetual Preferred Securities

October 25, 2001
John Behof

Although the following paper is not a comprehensive research article on the subject matter, we feel compelled to present our views on this topic in a timely manner in order to warn our customers concerning an issue coming to market. We will continue to research this topic in greater depth and will present detailed total return analysis in the future, if appropriate.

View Full Article

Rates, Advances, and Leverage

October 18, 2001
Girish Patel

Advance rates are the lowest they have been since 1990. In fact they are at the lowest levels since the 1960s. The previous current lows were between September 1992 to December 1993 and October 1998. Does that mean it is a good time to leverage? To better understand the answers to this question, let’s look at what transpired in world history and the financial markets of those eras and how the confluence of events impacted the economy and interest rates.

View Full Article

We’re Here, Now What?

October 17, 2001
Mark Bodett

Well, it happened. Rates went down. Below is the change in the yield curve from January 3, 2000, when the market was preoccupied with how much higher the Fed was going to raise rates, to October 15, 2001, when we are preoccupied with how much lower rates can go. Both preoccupations were and are reasonable as long as we are not so mesmerized that we fail to make good risk/reward decisions and ignore the probability (high or low) that the market will move in the opposite direction.

View Full Article

Finally catching some ZZZs (A Limited Distribution Market Observation)

October 11, 2001
Kurt Fritz

We are coming up on Halloween, and I have been having a lot of trouble sleeping. You may think a normal person would be kept awake by nightmares involving ghosts, goblins, and the like. Of course, I am not a normal person…. it’s not nightmares that keep me awake but bonds. So, instead of catching some ZZZs, I have been kept awake thinking about Z-Bonds.

View Full Article

Some Counter-Intuitive Truths About Prepayments

September 24, 2001
Eric C. Brown

Recently I caught myself in a misconception about prepayments. I knew the truth intellectually, but my intuitive “feel” was definitely wrong. I thought I’d share my “rediscovery” with you, just in case you are where I was.

View Full Article

Interim Shape Management Update

September 21, 2001
Eric Brown, Girish M. Patel

As you know, our plans to run a September 2001 Level Playing Field® were disrupted last week. The good news is we are not allowing evildoers to undermine next week’s (September 26-28) Advanced Course™, which is still slated to be our best-attended event ever.

View Full Article

Big Calls, Thin Trading, Suspect Advice

September 13, 2001
Eric Brown

The Home Loan Bank, Freddie Mac and Fannie Mae are calling bonds like crazy. Nothing like an efficient call. I’m being told the calls are across the curve.

View Full Article

A Call to Action: Trojan Horse Alert!

September 10, 2001
Eric C. Brown

In the last couple of days we have had experienced, knowledgeable customers show us what they believed to be tempting bonds. These bonds are Trojan Horse bonds.

View Full Article

Are You Paying Taxes on Tax-exempt Income?

July 10, 2001
James Lorentsen

Few people enjoy paying taxes. In fact, many institutions take extraordinary measures to minimize their tax liability.

View Full Article

A Call to Action: Assets, Liabilities, and Shape Management

June 26, 2001
Craig Johnson

Earlier this week Mike wrote about the relative valuation of the municipal market and suggested leverage. Offense, either alone or in combination with defense, creates compelling shapes when compared to specific liabilities. We especially like the 3-Year advance.

View Full Article

A Call to Action: Municipals : Lost in the Current Rally

June 20, 2001
Mike Coogan

As rates have fallen, defensive shapes have intrigued us much more than offensive shapes. This is in sharp contrast to most of 2000, when offensive securities proved more interesting. Therefore, a majority of portfolio allocation this year has been directed towards defensive footprints. This includes Price Insulators™ and premium collateral with “friction.” From a shape management perspective, most of us have utilized the math to posture for increased liquidity should rates rise in the future. In other words, we have been purchasing defense.

View Full Article

Shedding Light on Change

June 8, 2001
Nick Betzold

We are pleased to announce a new corporate name for both our NASD member broker/dealer (BBNH) and our SEC registered advisory firm (BBIM)…

View Full Article

Opportunistic Investors, A Review

June 6, 2001
Tory Houriet

The end of April marked the “passing” of a new issue callable agency security that was celebrated in the Wall Street Journal (WSJ) on October 12th, 1998. Let me quote extensively from the WSJ. For those of you who are long-term readers of the B.A.L.L. (predecessor to The Disciplined Investor™), this will refresh your memory. For those of you who are newer readers (within the last two years) to our Disciplined Investor, this will be very interesting and could be quite amazing.

View Full Article

Change in the Freddie Mac Prepayment Cycle

June 1, 2001
Mark Bodett

The July payment on Freddie Mac single family and ARM mortgage pools issued since September 1, 1995 and CMOs backed by those pools will include 30 days of interest and 45 days of principal prepayment. This is a one-time event, with the August payment; they will revert to 30 days of interest and principal prepayment per month. This will put Freddie Mac on the same accounting cycle as Fannie Mae and Ginnie Mae. The change was made to save Freddie Mac some money; however it may cost you money.

View Full Article

A Call to Action: Sell Short Bullet (or Bullet-like) Securities

June 1, 2001
Brad Bonga

In the interest of saving time we will not outline the basics here but feel free to call the office for the basic primer if you need it. What we are going to do is highlight two trades that we made for customers last month because we think that more customers should take advantage of this opportunity.

View Full Article

Tale of Two Markets

May 31, 2001
Craig Johnson

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness…”. Many of you probably recall this opening line from the Charles Dickens novel, Tale of Two Cities. Back in the ninth grade, the fine public schools in Minnesota “strongly encouraged” me to read this classic. Up to this point in my life, besides the occasionally answer to a trivia question, I had not given Charles and his writings much thought. Until now.

View Full Article

The May 1998-May 2001 Three-Year Look-Back®

May 25, 2001
Eric C. Brown

The purpose of this teleconference is to validate our methodology by looking back at BALL Vol 5, Number 19, The May 1998 Level Playing Field® (May 20,1998). We encourage you to review that document in preparation for the teleconference. If you no longer have it or have joined us since its publication, please call us and we will be happy to send it to you. (We will also be making reference to The May 1999 Level Playing Field and The May 2000 Level Playing Field articles as well.)

View Full Article

Hello Everyone!

May 23, 2001
Nick Betzold

Is 2001 going by at warp speed for you, too? Don’t look now, but the June BMU: Advanced Course is just around the corner. In fact, it’s only 4 weeks away. I am so enthused about the significant enhancements we have made to our program this year that I’m sending this special Disciplined Investor as a personal endorsement and invitation for you to participate. This year’s program will take you on a journey toward analytical and performance excellence in new and compelling ways. From the opening session, it is designed to grab and keep your attention. I strongly encourage you to take advantage of the enriched content and format being introduced this year.

View Full Article

An Introduction to the Constructive Treasury Ladder Index™

May 18, 2001
Eric Brown

Please take a few moments to examine this article. It might be prudent to keep a copy in an accessible place, since the Constructive Treasury Ladder Index™ will figure prominently in certain analysis going forward. You never know when you might want to recall the details underlying it.

View Full Article

Five Year PACs – The Math and Déjà Vu

May 17, 2001
Mark Bodett

During the April 2001 Level Playing Field® call, we briefly highlighted and discussed the 5-year PAC. The LPF analysis shows the 5-year PAC as an interesting sector. This is largely due to the recent backup in rates and resultant increase in slope of the yield curve. This part of the story relies on “running the numbers”, or objective math. The déjà vu part is slightly more subjective and requires that we exercise our institutional memory. Today’s yield curve is similar to that rate environment in the fall of ’93. Similarly, the 1993 LPF math also highlighted the 5-year PAC. However, by early ’95, rates were up about 300 basis points and those 5-year PACs were under water. Should we be buying 5-year PACs?

View Full Article

A Bond Geek Spots a Bear Trap

May 2, 2001
Tory Houriet

I’ve been an ardent observer and student of the fixed-income markets for roughly 19 years now and I love to compare different fixed-income investments and their relative pricing. As a former fixed-income trader, I love to tear apart bonds and figure out why they price the way they price. I don’t have an MBA or a CFA designation behind my name. Just my own self-invented title: Tory Houriet, B.G.

View Full Article

Shhhhhh… …A Callable Advance We Can Like!

April 6, 2001
Eric Brown

The other day, I was discussing callable advances with George Darling and Frank Farone of Darling Consulting Group (you can contact Frank at (978) 463-0400). We agreed on most things, and agreed to disagree on a couple of points. But the most important thing I want to talk to you about is an opportunity that we definitely agree upon, and its labeling might surprise you.

View Full Article

FHLB Callable Advances: A Sucker Bet?

March 28, 2001
Eric C. Brown

This article on callable advances has been written as a result of our continuing internal research and our ongoing discussions with many of you, including content contributions from Brian Perry of Webster Five Cents Bank, Wayne Patenaude of American Savings, and Bob Felix of First Federal. Thank you for your energy, time and intellectual effort.

View Full Article

The Advanced Course

March 27, 2001
Disciplined Investor®

Please mark your calendars and join us June 13-15, 2001 or September 26-28, 2001 at the Gleacher Center, University of Chicago Graduate School of Business for our annual Bond Math UniversityTM ~ The Advanced CourseTM.

View Full Article

A Call to Action: Stop the Madness!

February 16, 2001
Eric Brown

I am taking a stand and I ask that you hear me out.

Assertion: The Federal Home Loan Banks’ callable advance offers are BAD.

View Full Article

A Call to Action: In This Case, a Plea for Selective IN-Action

January 17, 2001
Eric C. Brown, Brad Bonga

During the January 2001 Level Playing Field® Teleconference, we asked you to expect “Calls to Action” from us, in which we would provide “specific and real LPF implementation illustrations” representing “urgent portfolio and investing opportunities.”

View Full Article

A Call to Action: New Leverage Opportunity

January 11, 2001
Brad Bonga, Dave Richter

Yesterday, we helped a banker put on a leverage strategy. He took out a 3-year fixed rate advance at 5.36%. Funded with this liability, he bought an asset with total returns that we projected of 5.95%, 6.36%, 6.66%, 6.35%, 5.43% on a 3-year horizon for down 300 to up 300.

View Full Article

The 2000 Christmas Letter: Counting Our Relational Blessings

December 21, 2000
Nicholas W. Betzold, Jr.

This year’s BBIM Christmas Letter comes right here at the end of the second millennium. It is certainly a time of reflection on the past, but also a time when we look into our future and wonder what it brings, personally, relationally and professionally. As the nature of this letter has always been more personal than our other writings, I would like to share a few things many of my friends & I, here at the firm, are thankful about, giving some examples from my own experience…

View Full Article

Notes from the Desk

December 19, 2000
Michael Coogan

The strength of the recent bond market rally has surprised many portfolio managers. Back in June, declining market values pressured portfolio managers. As you may recall, Fed Funds had gone to 6-1/2% in May, and many expected that rate to go higher. Market rates on five-year bullets approached 7-3/4%. Longer-term munis were available at 5-3/4%. One thing has not changed over the past six months - Fed Funds are still at 6-1/2%. Now, the expectation is for the Fed to eventually lower that rate. Five-year bullets are now at 6-3/8%. Longer munis are just a touch over 5%. Needless to say, market values are no longer the issue they once were. Income at market, however, is not quite so attractive.

View Full Article

A Call to Action Part 2:A Unique Leverage Opportunity or Declare Victory, You Decide.

December 14, 2000
Brad Bonga

It is now possible to buy a 5-year PAC and fund it with a floating rate advance without picking up any spread!

View Full Article

A Call to Action Part 1: It's Easier Than Ever To Dump Your Junk

December 5, 2000
Brad Bonga

We have consistently asserted that callable agency bonds are not good risk-rewards. Before automatically tuning this out as a refrain that you are tired of hearing from us, please take three minutes to read this article and determine for yourself if we are presenting new information.

View Full Article

An EFFICIENT Market?

December 1, 2000
Christopher J. Carney, Jason A. Elder

A few years ago a well-known Professor of finance was walking across the cold, windy University of Chicago campus discussing the efficient market theory with one of his students. The professor was a staunch advocate of market efficiency, and was giving the young protégé some of his best evidence to support the theory. Suddenly, the pair stumbled upon a twenty-dollar bill, stuck fast to the frosty ground. As the student bent to pick it up, the professor stopped him and said “No, don’t pick it up, this has to be a mirage or hallucination of some kind, since we know that in an efficient market no one would leave a twenty dollar bill lying on the ground …”

View Full Article

FAS 133 Opportunity Knocks One More Time

October 4, 2000
James V. Lorentsen, CPA, Douglas G. Wilding, CPA

In June of 1998, the Financial Accounting Standards Board issued Statement No. 133, (“FAS 133”) “Accounting for Derivative Instruments and Hedging Activities”.

View Full Article

An Historical Fable

May 26, 2000
Rich Berg and Brad Bonga

In 1989, the owner of a small commercial real estate firm in Chicago was in the business of buying office buildings and hotels and financing them with a first mortgage, second mortgage and limited partnership equity. The owner controlled approximately 200 million dollars worth of real estate and his personal net worth from these properties was estimated to be in the 25-30 million dollar range..

View Full Article

201720162015201420132012201120102009200820072006200520042003200220012000