I’ve discussed many times how much I appreciate the arrival of bond ETF’s because it helps retail investors such as myself have a fair shot at trading bonds. It’s amazing to me that in this age of transparency and speed trading, bonds remain an OTC market where buyers and sellers pay wide spreads to enter or exit their positions without truly knowing if they are paying a high price. That has made life miserable for smaller investors who usually end up getting screwed when buying and selling bonds.

It’s Easy To Understand Why Things Have Not Changed

One big reason of course is that the brokers that buy and sell these bonds do not really want to move to electronic trading. Why? There are many different reasons but a big one is the fact that these brokers would see much diminished spreads/profits on their bond trades losing an important part of their profits. Another part of course is that listing bonds is much more complex than stocks as there are millions of listings with different features, etc. That would certainly make things interesting for the exchange.

The Case For A Move To Electronic Markets

I think it’s about time that someone launched a better way to trade bonds. Why?

-Volume is way down: You could argue that part of the story is the lack of volatility and the record low yields that are not attracting buyers. But that is only part of the story. Offering a fair chance for all parties involved would certainly help pick volumes up.

-Added transparency: In an age where regulators are seeking increasing transparency, I think that moving all or most of bond trading to electronic trading would do a lot to increase confidence

-It can be done: A decade ago, traders thought it would be impossible for futures to trade electronically as stocks had done and yet that is exactly what has happened with even the Nymex moving to the 21st century trading world.

-Good for the economy: If companies could get a more clear vision of what their borrowing costs are on the bond market, it would help them better manage their debt more efficiently.

What is the Downside?

Even if not all issues (some are very illiquid) became listed overnight, I still think it would be a good idea and would improve the overall bond markets. Do you agree?

Having a rising stock price is a good sign for any company because, it makes it easier to raise money, take on new debt, attract and retain employees (through stock and options based compensation), etc. I think it’s fair to say that any company would love to have its stock move higher if given the choice.

How To Increase Your Stock Price 101

Standard education suggests that the best way to have a strong stock is to have strong results, a solid balance sheet, transparent operations, excellent management and clear guidance.I don’t think any of you would argue with that right?

How To Increase Your Stock Price 201

It seems like some companies are trying alternative methods (we’ll call them that way for lack of a better term) in order to attract investors to their funds. Some try to appeal to specific investor segments such as dividend investors (by providing a strong and growing dividend), social investors (being green, ethical) and many other types of investors. One thing I had not seen however was a company trying to attract investors by more unconventional methods. Look at the different ads that I’ve seen running multiple times around the internet. If you look quickly, they might look like ads for a dating website, for Hooters or other types of activities geared towards men. But no, these are actually ads for potential investors for Obscene Jeans (OBJE), a low trading, lower priced stock that wants more attention. Needless to say it’s an original way to find potential investors.

Good Idea?

I think there many different ways such a tactic could be viewed:

-Pros:

-Ability to get investors to consider the stock who might have never heard of the company
-Certainly an original marketing plan that might reflect a smart management style

-Cons:

-Is this company really spending funds on this advertising campaign? As a shareholder, I’d much prefer they paid out a dividend
-It does not reflect the most professional

What are your thoughts?

I must confess, I have not always been a dividend investor and while the concept of passive income was something I believed in, it was not something I spent as much time thinking about as I do now. I always receive a lot of comments about the fact that my long and short technology picks are such a big contrast to the safer and consistent passive income approach. It is, but it works very well with me thanks to my buckets approach. Anyway, back to the subject. The fact is that I now see every dollar that I spend as something much more powerful.

Every Dollar Spent Is Lost Future Income

In the context of dividend investing, every $100 spent on a night out could be seen as a choice between a night out, income for years to come, or a bigger sum of income once I reach retirement or start living off of retirement. How do I do the math? Here is the choice explained clearly:

$100 = 1 night out
$100 = $3-4 per year for my entire life
$100 = $20 per year starting in 30 years (assuming it is reinvested at a 6% return)

Once you start to see that night out as an annuity to be paid out for your entire life and that can then be paid out to future generations, it becomes a much more difficult $100 to shell out. Am I the only one that translates even a regular night out as a sacrifice of future income?

Don’t Worry About Me

I know, I know… Using this mentality could lead me to cut almost all expenses and never truly enjoy that passive income. I am very far from that situation. I am simply stating that I now make my choices much more wisely thanks to dividend investing and hopefully I’m not the only one that is getting better at putting current expenses in perspective.

Management System

Personally, it remains a race where the start is everything and because of that, accumulating assets in these earlier years is key in my opinion. That being said, the system that I use is simply to set pre-determined amounts to be set aside and do my best to increase those amounts over time. I have to admit that an early move that turned out to be the best investment of my life is certainly helping in that regard but I still think that the key (at least for me) remains to use a systematic savings and investment method.