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Bonds
May 22, 2022 1:13:23 GMT
Post by anitya on May 22, 2022 1:13:23 GMT
In case folks have missed, this from Yogi's Barron's summary today -
"Pg 24, Dan IVASCYN, Pimco CIO (PIMIX, PDI, PDO, etc). Peak CPI may be behind us, but it may persist at a high level. There is risk of recession due to FED actions and Russia-Ukraine war. Pimco macro themes are uncertainty, slower growth, high inflation. Nonagency MBS don’t offer opportunities that they once did; agency MBS are more attractive. Securitized credits and corporate credits are now attractive; HY is not very attractive. Pimco funds have lowered duration to lower rate risks. PIMIX is more diversified now compared to its early days, but its objectives remain the same – attractive and consistent income with some preservation of capital. It has Asian exposure but limited Chinese exposure. Exposure to the US credits is also less as that has become a crowded area. Individual investors should be patient with fixed income and should be adding to it now. Housing is not bubbly."
As an aside, based on the context, I think he means US corporate credit when he says US credit.
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Post by yogibearbull on May 22, 2022 1:41:22 GMT
anitya, double checking the interview: Ivascyn is saying that ALL US assets - equity and credit are overcrowded/too popular and that may be changing. So, US credit in this context would be both the US sovereign and corporate. He does say elsewhere that he likes structured credits, corporate credits, agency MBS but not HY and nonagency MBS (too expensive).
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Bonds
May 22, 2022 6:28:10 GMT
via mobile
anitya likes this
Post by chang on May 22, 2022 6:28:10 GMT
Absolu-u-utely. I am way more interested in stable, profitable, high-ROE, low-beta stocks with 2-3%+ dividends, than bonds. I see no near-term future in bonds. Is not that SCHD / SCHY? What prompted you to pick individual stocks? Not satisfied with the funds / ETFs available? Sorry for the confusion; by “stocks” I certainly include funds and ETFs, and indeed SCHD, SCHY are among my top picks. I do have a few individual stocks, but I don’t consider them necessary and my exposure is mainly via funds. (For growth stock exposure, I only use funds.)
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Post by oldskeet on May 22, 2022 10:47:20 GMT
Hi guys, Old_Skeet is happy with his all weather asset allocation. Thus far, it has served me well in retirement.
My all weather asset allocation of 20% cash, 40% income and 40% equity affords me everything necessary to meet my needs now being in the distribution phase of investing. The benefit of this asset allocation is that it provides sufficient income, maximizes diversification, minimizes volatility, and provides long-term returns.
The 20% held in cash area provides me ample cash should I need a cash draw over and above what my portfolio generates plus it can provide the capital necessary to fund a special investment position (spiff) should I choose to open one during a stock market pullback. In addition, cash helps stabilize a portfolio during stock market volatility. Example of investments held in this area are cash, money market mutual funds and CD's.
The 40% held in the income area provides me ample income generation to meet my income needs in retirement. It is a well diversified area that incorporates a good number of income generating type funds. Some examples of investments held in this area are JGIAX, PONAX & TSIAX .
The 40% held in the equity area provides me some dividend income along with some growth, that equities generally provide, that help offset the effects of inflation. Some examples of investments held in this area are AMECX, IDIVX & SPECX.
Generally, for my income distributions, I take no more than a sum equal to what one half of my five year average total return has been. In this way principal grows over time. The past five year rolling average annual distribution yield computes to 5.4%.
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Bonds
May 22, 2022 12:41:01 GMT
Post by FD1000 on May 22, 2022 12:41:01 GMT
Hi guys, Old_Skeet is happy with his all weather asset allocation. Thus far, it has served me well in retirement. My all weather asset allocation of 20% cash, 40% income and 40% equity affords me everything necessary to meet my needs now being in the distribution phase of investing. The benefit of this asset allocation is that it provides sufficient income, maximizes diversification, minimizes volatility, and provides long-term returns. The 20% held in cash area provides me ample cash should I need a cash draw over and above what my portfolio generates plus it can provide the capital necessary to fund a special investment position (spiff) should I choose to open one during a stock market pullback. In addition, cash helps stabilize a portfolio during stock market volatility. Example of investments held in this area are cash, money market mutual funds and CD's. The 40% held in the income area provides me ample income generation to meet my income needs in retirement. It is a well diversified area that incorporates a good number of income generating type funds. Some examples of investments held in this area are JGIAX, PONAX & TSIAX . The 40% held in the equity area provides me some dividend income along with some growth, that equities generally provide, that help offset the effects of inflation. Some examples of investments held in this area are AMECX, IDIVX & SPECX. Generally, for my income distributions, I take no more than a sum equal to what one half of my five year average total return has been. In this way principal grows over time. Its past five year rolling average annual distribution yield is 5.4%. OS, if your portfolio is big enough, you can do whatever, it doesn't mean your portfolio performance or risk-adjusted performance is good. Easy example: suppose your portfolio total performance equals to the rate of inflation(very low performance) in the last 30 years and you need just 1-2% annually, this portfolio can last 50 years. This portfolio might be 20/20/60(stocks/bonds/cash) but if you want more it might be in 80/0/20 or 50/50 or many other combos. My neighbor with over 20 millions portfolio has 90+% in munis(the rest in stocks, hardly any cash) from selling his business since in the early 90s, of course, it worked. He was also lucky that inflation was pretty low and living on $200K annually is a breeze. Suppose average inflation in the next 20 years is 3% and you need 5% annually from your portfolio, how is 40/40/20 going to work for you?
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Post by uncleharley on May 22, 2022 12:53:54 GMT
"Generally, for my income distributions, I take no more than a sum equal to what one half of my five year average total return has been. In this way principal grows over time. The past five year rolling average annual distribution yield computes to 5.4%."
I find this very intriguing because the Wisconsin Pension plan (one of two fully funded pension systems in the nation) uses a very similar calculation to determine what, if any raise their pensioners should get. In other words, someone who retires under the Wisconsin pension system recieves a base pension based on salary and yrs served. That base can be supplemented over time by a calculation based on the success or failure of the returns made by the investment board.
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Bonds
May 22, 2022 15:16:08 GMT
Post by Deleted on May 22, 2022 15:16:08 GMT
"Generally, for my income distributions, I take no more than a sum equal to what one half of my five year average total return has been. In this way principal grows over time. The past five year rolling average annual distribution yield computes to 5.4%." I find this very intriguing because the Wisconsin Pension plan (one of two fully funded pension systems in the nation) uses a very similar calculation to determine what, if any raise their pensioners should get. In other words, someone who retires under the Wisconsin pension system recieves a base pension based on salary and yrs served. That base can be supplemented over time by a calculation based on the success or failure of the returns made by the investment board. etf.wi.gov/news/etf-announces-pension-increases-wrs-retirees"By law, Core annuities will be increased if the annuity reserve surplus provides at least a 0.5% increase. Annuities will be reduced if the annuity reserve shortfall would require at least a -0.5% adjustment." "By design, the WRS does not guarantee an automatic cost-of-living adjustment, a common practice among pension systems to help retirees’ incomes keep up with inflation. Instead, WRS annual adjustments are increased or decreased based on annual investment performance of the WRS trust funds. For five straight years after 2008, Core annuities were decreased due to the Great Recession. Sharing risk among employees, employers, and retirees is a key feature of the WRS to keep it fully funded and positioned to meet benefit promises well into the future. The calculation of the Core annuity adjustment involves recognizing (“smoothing”) investment gains and losses in the fund over a five-year period. Smoothing helps mitigate the effects of market volatility on WRS retirees' incomes from one year to the next. Unlike the Core Fund, investment performance for the Variable Fund is not smoothed, which means the full impact of gains or losses are applied.
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Bonds
May 22, 2022 17:42:28 GMT
Post by oldskeet on May 22, 2022 17:42:28 GMT
Hi FD1000 , Responding to your question. "Suppose average inflation in the next 20 years is 3% and you need 5% annually from your portfolio, how is 40/40/20 going to work for you?" In short words. The master portfolio is of ample size along with it's five year average return to meet my income needs and also grow principal. Last year I withdrew only 2.5% with the residual buying additional shares to grow the portfolio's footprint. I realize that everyone does not invest the same. This system was used by my late parents in their retirement years and now by me. I have been an investor since the age of twelve, lived below my means, saved, and now life is much eaiser for me than those who now scramble in the markets through frequent trades to make their life work. For me success has come through organic growth form time invested in the markets over short term timing strategies . My system works for me; and, I wish you continued success in your investing endeavors. Old Skeet
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Bonds
May 22, 2022 18:44:59 GMT
Post by anitya on May 22, 2022 18:44:59 GMT
anitya , double checking the interview: Ivascyn is saying that ALL US assets - equity and credit are overcrowded/too popular and that may be changing. So, US credit in this context would be both the US sovereign and corporate. He does say elsewhere that he likes structured credits, corporate credits, agency MBS but not HY and nonagency MBS (too expensive). Yah. I was able to find the full interview and I think in the beginning he says the US fixed income market is currently fairly valued or overpriced. I think he is referring to spreads, which is easy to overlook given the current absolute yields other fixed income managers are touting on TV. I am surprised Dan is cautious to negative, given he has to make a living selling fixed income products. Also surprising is that he did not talk about MUNI’s taxable equivalent yields which have gotten more attractive relative to Treasuries or agency MBS. AAA MUNI yields in some maturities were higher than Treasuries the last time I checked and that may have since expanded to include more maturities..
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Post by oldskeet on May 25, 2022 11:05:35 GMT
My two muni income funds, nvhax and flaax, are starting to find traction being up over the past couple of days. This is interesting since we are in a rising interest rate environment. Perhaps, they were just merely over sold? However, they both have attractive yields in the 3.2% range!
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Post by fishingrod on May 25, 2022 11:24:19 GMT
My two muni income funds, nvhax and flaax, are starting to find traction being up over the past couple of days. This is interesting since we are in a rising interest rate environment. Perhaps, they were just merely over sold? However, they both have attractive yields in the 3.2% range! I noticed that also. VWALX has bounced 2%+ in past week. It was bound to happen sometime. After falling over 15%-.
Finally the bond market is noticing muni yields being higher compared to Treasuries.
Still the market doesn't believe that inflation will be that bad over the next ten years.
Ten year U.S. Treasury bond still only paying 2.73%. Someone is willing to hold them at least for a while.
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Post by Chahta on May 25, 2022 12:03:17 GMT
My two muni income funds, nvhax and flaax, are starting to find traction being up over the past couple of days. This is interesting since we are in a rising interest rate environment. Perhaps, they were just merely over sold? However, they both have attractive yields in the 3.2% range! Muni ETFs turned up a few days before the OEFs. The funds finally flushed out late sellers and were able to therefore stop redemptions. Regardless it was a welcome “rally”.
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Bonds
May 25, 2022 13:18:01 GMT
Post by FD1000 on May 25, 2022 13:18:01 GMT
Munis turned around in the last several days. My indicators are flashing buy, but I'm skeptic. Same indicators flash a buy for BND. The question is...are Munis going up because it's time and they are cheap enough...or...it's a "normal" reaction for: stocks are down, rates are down and higher-rated bonds are up because if that. Are rates stabilized now, or will continue to rise? Is the Fed not going to raise rates? Right now, the likelihood is at 97% the Fed will raise rate 0.5% in June( link)
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Bonds
May 25, 2022 13:28:03 GMT
Post by fishingrod on May 25, 2022 13:28:03 GMT
Munis turned around in the last several days. My indicators are flashing buy, but I'm skeptic. Same indicators flash a buy for BND. The question is...are Munis going up because it's time and they are cheap enough...or...it's a "normal" reaction for: stocks are down, rates are down and higher-rated bonds are up because if that. Are rates stabilized now, or will continue to rise? Is the Fed not going to raise rates? Right now, the likelihood is at 97% the Fed will raise rate 0.5% in June( link) The FED will raise rates at least 50bps in June which will of course reverberate throughout all bonds of all maturities.
I expect only inflation or high expectations of continued longtime inflation will move longer bonds substantially higher. It seems we don't have expectations of long running inflation at this time.
We are stuck between expectations of inflation and recession.
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Bonds
May 25, 2022 13:28:51 GMT
Post by Chahta on May 25, 2022 13:28:51 GMT
Munis turned around in the last several days. My indicators are flashing buy, but I'm skeptic. Same indicators flash a buy for BND. The question is...are Munis going up because it's time and they are cheap enough...or...it's a "normal" reaction for: stocks are down, rates are down and higher-rated bonds are up because if that. Are rates stabilized now, or will continue to rise? Is the Fed not going to raise rates? Right now, the likelihood is at 97% the Fed will raise rate 0.5% in June( link) The Fed must keep raising rates. If they stop now they have accomplished nothing. The Fed started late so they must catch up. They also must start QT. I read that each $500b sold is like raising the Fed rate .25%. JMHO. Why ask why? You do what Mr. Market shows you.
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Bonds
May 25, 2022 13:56:04 GMT
via mobile
Post by chang on May 25, 2022 13:56:04 GMT
Munis turned around in the last several days. My indicators are flashing buy, but I'm skeptic. Same indicators flash a buy for BND. The question is...are Munis going up because it's time and they are cheap enough...or...it's a "normal" reaction for: stocks are down, rates are down and higher-rated bonds are up because if that. Are rates stabilized now, or will continue to rise? Is the Fed not going to raise rates? Right now, the likelihood is at 97% the Fed will raise rate 0.5% in June( link) Whatever chart you’re looking at, zoom out to 1 year. The recent “bump” looks like a typical sawtooth in the profile of a falling chart. Frankly I’ve been surprised how bonds have plummeted so smoothly with hardly any up-days at all. I suspect now we’ll see the typical, jagged sawtooth decline: 8 days down, 2 days up, etc. Does anyone really think we just saw a V-shaped bottom and it’s uphill from here?
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Bonds
May 25, 2022 14:13:07 GMT
Post by fishingrod on May 25, 2022 14:13:07 GMT
Munis turned around in the last several days. My indicators are flashing buy, but I'm skeptic. Same indicators flash a buy for BND. The question is...are Munis going up because it's time and they are cheap enough...or...it's a "normal" reaction for: stocks are down, rates are down and higher-rated bonds are up because if that. Are rates stabilized now, or will continue to rise? Is the Fed not going to raise rates? Right now, the likelihood is at 97% the Fed will raise rate 0.5% in June( link) Whatever chart you’re looking at, zoom out to 1 year. The recent “bump” looks like a typical sawtooth in the profile of a falling chart. Frankly I’ve been surprised how bonds have plummeted so smoothly with hardly any up-days at all. I suspect now we’ll see the typical, jagged sawtooth decline: 8 days down, 2 days up, etc. Does anyone really think we just saw a V-shaped bottom and it’s uphill from here?
I don't expect a straight line up from here, but I do not expect a continued downward spiral that has recently happened.
Do you think that we are heading for another 10% to 15% drop in value for intermediate and long muni and treasury funds?
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Bonds
May 25, 2022 14:16:01 GMT
Post by chang on May 25, 2022 14:16:01 GMT
Do you think that we are heading for another 10% to 15% drop in value for intermediate and long muni and treasury funds? I wouldn't put a number on it, but I expect further NAV declines, which dividends won't compensate for. I don't see how it can be otherwise. I would love to be proven wrong.
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Post by fishingrod on May 25, 2022 14:28:25 GMT
It can only go so high before it starts getting bought up.
One of the cleanest dirty socks in the hamper. It will continue to be driven down/bought by other countries, insurance companies, etc. IMO
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Bonds
May 25, 2022 14:35:34 GMT
Post by Chahta on May 25, 2022 14:35:34 GMT
Whatever chart you’re looking at, zoom out to 1 year. The recent “bump” looks like a typical sawtooth in the profile of a falling chart. Frankly I’ve been surprised how bonds have plummeted so smoothly with hardly any up-days at all. I suspect now we’ll see the typical, jagged sawtooth decline: 8 days down, 2 days up, etc. Does anyone really think we just saw a V-shaped bottom and it’s uphill from here?
I don't expect a straight line up from here, but I do not expect a continued downward spiral that has recently happened.
Do you think that weis out of the question are heading for another 10% to 15% drop in value for intermediate and long muni and treasury funds?
At some point the market must become oversold. I don't see all bond declines as totally tied with Fed rate increases. The Fed rate goes up .75% and funds decline 8%? That is a whole lot of leverage. The bond market prices itself based on what is going on around them as well. Part of the problem I have read is bond fund redemptions have hurt (like in 2020). I don't think a bond rally is out of the question. Now treasuries may be a different animal. Aren't they sold for what bidders are willing to pay? Currently NHMAX is paying over 5% TAX FREE. These things are bought by most, I believe, for income not CG.
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Bonds
May 25, 2022 14:47:15 GMT
Post by fishingrod on May 25, 2022 14:47:15 GMT
Two types of bids are accepted: for Treasury bonds "With a noncompetitive bid, you agree to accept the interest rate determined at auction. With this bid, you are guaranteed to receive the bond you want, and in the full amount you want. With a competitive bid, you specify the yield you are willing to accept. Your bid may be: 1) accepted in the full amount you want if your bid is equal to or less than the yield determined at auction, 2) accepted in less than the full amount you want if your bid is equal to the high yield, or 3) rejected if the yield you specify is higher than the yield set at auction. To place a noncompetitive bid, you may use TreasuryDirect, a bank, or a broker. To place a competitive bid, you must use a bank or broker." www.treasurydirect.gov/indiv/research/indepth/tbonds/res_tbond.htm
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Bonds
May 25, 2022 14:50:51 GMT
Post by fishingrod on May 25, 2022 14:50:51 GMT
"Currently NHMAX is paying over 5% TAX FREE" Now you got 'em looking.
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Post by chang on May 25, 2022 14:51:37 GMT
Currently NHMAX is paying over 5% TAX FREE. These things are bought by most, I believe, for income not CG. ING is paying almost 10%, and stands to gain in share price. Isn't that more attractive? (Sorry if that sounds like a non-sequitir; my point is that 5% doesn't really seem that enticing ... for an extremely aggressive HY fund with a 12-year duration.)
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Bonds
May 25, 2022 14:53:10 GMT
Post by Chahta on May 25, 2022 14:53:10 GMT
Link from a yogibearbull post on MFO. Excellent post Mr. YBB. I am no expert but doesn't that create desirability at some point?
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Bonds
May 25, 2022 15:05:12 GMT
Post by Chahta on May 25, 2022 15:05:12 GMT
Currently NHMAX is paying over 5% TAX FREE. These things are bought by most, I believe, for income not CG. ING is paying almost 10%, and stands to gain in share price. Isn't that more attractive? (Sorry if that sounds like a non-sequitir; my point is that 5% doesn't really seem that enticing ... for an extremely aggressive HY fund with a 12-year duration.) Possibly but as always there is never one answer. Personally I do not buy single stocks. NHMAX has a 15 yr. return of 3.48% and 1 down year (2022) in 9 years. All of this is only food for thought.
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Bonds
May 25, 2022 15:07:15 GMT
Post by chang on May 25, 2022 15:07:15 GMT
I'm hearing people talk about buying bonds as if they were fishing for a bottom. "Oversold", "getting bought up", "rally", etc. - these are trader's terms, not the lingo of an investor looking for stable income.
If you can snag an oversold bond and ride the bump, that's great. But there are plenty of stocks that offer the same opportunity. I look at bonds as something where NAV doesn't vary on average, and you collect a regular dividend. From that perspective, it seems early.
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Bonds
May 25, 2022 15:09:58 GMT
Post by chang on May 25, 2022 15:09:58 GMT
NHMAX has a 15 yr. return of 3.48% and 1 down year (2022) in 9 years. I know I'm repeating myself, but I think the rear view mirror is completely useless when it comes to bonds. Yields declined steadily from 1985 to 2020. We are in a new world.
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Bonds
May 25, 2022 15:14:36 GMT
Post by fishingrod on May 25, 2022 15:14:36 GMT
ING looks pretty bad. Maybe I am looking at wrong stock. Down 35% over last 5 years. I would have rather owned BND.
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Bonds
May 25, 2022 15:15:14 GMT
Post by Chahta on May 25, 2022 15:15:14 GMT
ING crashed in 2007 never to cover. It has been mostly flat (up, down) for 15 years. How long would someone wait for a price increase? But could have traded along the way for a gain I suppose.
That is one huge cash cow company. The BOD must be doing something wrong to not grow with that much cash to blow.
Rear view mirrors are all we have, other than crystal balls.
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Post by chang on May 25, 2022 15:21:27 GMT
ING looks pretty bad. Maybe I am looking at wrong stock. Down 35% over last 5 years. I would have rather owned BND. I didn't mean to create a diversion. I was speaking in an opportunistic vein, since that's how (it seems to me) people are talking about getting into bonds. Disclosure: I bought ING at $10 a few weeks ago. It's a Fitch A+ rated, giant/stable European bank, and looks to me to be underpriced. If the NAV never moves, I collect a 10% dividend. If the NAV doubles, I'm happy, too. European banks (as I am only too well aware) screw their clients left and right. If I have to be a customer, at least I can also be an owner.
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