Option Queen Letter By the Option Royals Jeanette Young , CFP ® , CFTe, CMT, M.S. 4305 Pointe Gate Drive Livingston, New Jersey 07039 www.OptnQueen.com [email protected]May 8, 2016 Surprise! Freight rail traffic is down 16.1% for the month of April. In case you believe that this is a fluke number, it is not. The freight rail traffic has been down every month since November. Okay so not everything was down, vehicle part were up as well as coke and chemicals. Petroleum products were down 25.1% and even grain mill products, grains, and pulp and paper were down. Coal, is a disaster, down big every month. 1 Recently the financial news network’s anchors have been blaming the US election process for the weakness in the markets. HELLO! It is earnings guys. The good news is that the US Dollar has weakened and as such we should be more competitive in our pricing. Bad news is that this dollar weakness will not be reflected in earnings until next quarter, that is, if the US DX weakness continues. Right now the US DX is in a trading range and has bounce from a support area. time will tell on this one. As long as multinational earnings are under pressure it is unlikely that they will expand their hiring. Given the cost of health insurance and benefits clearly part- times will be preferred to full-time workers. The bottom line is that the average income earner is still having a very difficult time surviving. A huge concern for the investing public is the treatment of bond holder. Puerto Rico, Chicago, Detroit, Atlantic City, et al are on the brink of failure. Actually Puerto Rico has already failed. The question that bond investor must ask is, will we be paid and when? Puerto Rico, Guam, the US Virgin Islands and others of this ilk have been selling their tax free debt to Americans for years. The municipal bonds from the territories of the United States, for the most part, are tax exempt federally as well exempt from city and state taxes and have been a parking spot for tax free income. The Puerto Rico problem will affect these territories abilities to borrow money in the future. The description of a bond, which used to be on the face of the bond, explains how much interest will be paid, when that interest will be paid, and what income stream will be used to pay the interest and principal upon maturation of the bond. Some bonds are callable, can be redeemed by the issuer before maturation and some are puttable, those bonds can be redeemed by the holder of the bond on given dates. Some bonds are GO’s, which are backed by the taxing power of the entity. GO’s are general obligation bonds. There are hospital bonds, backed by the income
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