Brief answer. This is not a time to stretch for yield. If you have any deflationary worries, buy the TLT. I wouldn’t do that here, but might at lower levels.

I know little about tax liens.

David

I am curious about your view on the best way to improve yields on cash equivalent holdings. I have been buying low-investment grade corporates with a duration of less than 18 months to improve my yield profile. I am not willing to go further out than that, for fear of the unknown. I have also been wading into the purchase of high-quality tax liens. Do you have any other ideas or opinions on mine?

Regards.

A while back (I can’t find the exact post), you said investors should prefer corporate bonds over stocks if the BBB yield was at least 3.9% higher than the earnings yield (E/P)

Lately, the “E” in E/P has become a work of fiction writing for many companies. More importantly, the “E” is just an accounting entry – subject to a lot of FASB vagueness and subjective interpretations.

I prefer to look at real cashflows, because those are much more difficult to fudge, at least on a long term basis

If I look at dividends paid (which unlike eps are real money) — what sort of yield spread should an investor look for?

And a related question: if I must look at earnings yield, does the 3.9% spread work when looking at “normalized” earnings? Seems like a 10yr average might be too insensitive / trailing — by the time you saw a 3.9% spread, it would be too late to make a trade

Thank you in advance for your thoughts