The fixed income market, bonds and preferreds, can provide interesting opportunities at times. We took advantage of these opportunities for the initial thirty-eight years of my career. Gradually, over this period, the opportunities were eliminated. Judges changed the law to benefit debtors over creditors. Investment bankers changed the bond indenture, the bond contract, also to benefit the debtors. Expanded research created competition for ideas and limited investor profits. Brokerage companies limited access of smaller investors to areas that were reserved for institutional buyers. So, we moved on and expanded our share reduction efforts.

The changes were not all bad. New opportunities became available. Options costs declined substantially, and stock commissions declined and then disappeared. Leverage for funds became available, was used to the point of disaster, and is now used in a more responsible manner. A big plus was the ability of exchange traded funds to use stock swaps instead of sales to eliminate capital gains taxes.

Now, after nineteen years with few fixed income opportunities, the dam has broken. A new generation of fund managers have built funds incorporating the positive changes that have occurred. We now have a diverse group of fixed income ideas with above average income and capital gains possibilities. There are times when you just should not buy certain securities. The financial industry has a word for that. It is called diworseification. We now have attractive diversifiers.

Katz Family Financial