NEW YORK (TheStreet) -- With the confirmation hearing of Janet Yellen this week, Quantitative Easing has once again become the most popular topic of conversation in the financial media. We are hearing renewed complaints about how the Fed's creation of an artificially low interest rate environment is hurting -- in some cases destroying -- the dreams of retirees and savers. This argument is not only ignorant but misses the true risk to this American demographic.I believe the true risk to the 80-year-old owner of bonds and CDs is not that their income stream today is so low, but that they are being given a once-in-a-lifetime trading opportunity and missing it. When interest rates -- and therefore yields on newly issued debt -- decline, the price of existing, higher-interest paper improves. So even as the current options for fixed income investment and reinvestment (as bonds mature or are called) look about as appealing as the Griswolds' Christmas Turkey, something much juicier may be appearing in the "unrealized gain" column of these portfolios. Below is a chart reflecting the interest rate on the 10-Year U.S. Treasury Bond going back twenty years.
Coupon Envy: Just this week I reviewed a prospective client's portfolio, more than half of which was made up of intermediate- and longer-term municipal bonds. Many of her holdings pay a coupon of 5.00% or more and are trading well over 100 cents on the dollar -- sounds great, right? Well, the coupon payment is simply a percentage the bond issuer is obligated to pay the investor each year. If you bought 100 bonds with a coupon of 5.00%, you will get $5,000 each year. If a bond's price moves higher due to declining interest rates, this has no positive (or negative) impact on your annual income.Keep in mind that many factors -- duration, credit quality, call features (to name a few) -- influence the prices of bonds in your portfolio. Take the money and run: If your portfolio looks anything like the one described above, you are probably feeling pretty good that you have "made money in bonds" -- something only Bill Gross and Jeff Gundlach are supposedly able to do. But when it comes to putting new money to work in fixed income, you may be feeling frustrated that "they just don't make bonds like they used to." You may be cursing Ben Bernanke, and now Janet Yellen, for not taking your future income needs into account. Consider putting your frustrations aside and tackling this problem systematically. Sure, a bond with a 5.00% coupon looks great in retrospect -- but what if it's trading at 115 cents on the dollar? Couldn't that extra 15% (three years' of income) be put to more effective use today? Remember, that's not yours to keep if the bond gets called or if you hold to maturity. Why not provide yourself with options by taking the three years' of income, plus your principal, by selling the bond today? This would allow you either the flexibility of investing a larger amount of principal in a more productive asset class, or just waiting until a better fixed income opportunity arises. There is an element of comfort in knowing "at least I'll get my principal back" when the bond matures. But to whom does the extra 15 points belong? That depends on how long you wait. "Yeah, but I don't want to pay taxes on those gains...." This is a legitimate argument against, but perhaps you can take a loss elsewhere in your portfolio to offset the gain. Plus, long-term current capital gains rates aren't particularly high. Or maybe you have tax loss carry forwards from years past. Every client's situation is a little different, but selling some bonds today may be a proactive alternative to your current fixed income strategy. At the time of publication the author is short TLT. Follow @ArgyleCapital This article was written by an independent contributor, separate from TheStreet's regular news coverage.