rumi
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Post by rumi on Sept 27, 2022 10:50:40 GMT
I doubt these high yields will last forever. In other words; these quality PIMCO funds could recover, and people who buy at current prices will be rewarded by monthly distributions as well as capital gains in the next two years or so. I think the worst fears are priced in by now. Although we could always go lower from here. No one really knows the future. One thing we do know is that these funds are already down ~40% from their pre-pandemic highs.
What's your excuse to not buy? Tell me why I'm wrong.
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Post by chang on Sept 27, 2022 11:01:43 GMT
DCS was yielding > 20% before it imploded. Pimco isn’t stupid, but then neither was David Dreman. Just saying.
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rumi
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Post by rumi on Sept 27, 2022 11:03:59 GMT
DCS was yielding > 20% before it imploded. Pimco isn’t stupid, but then neither was David Dreman. Just saying. Interesting. How long did DCS exist? And what caused it to implode? |
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Post by uncleharley on Sept 27, 2022 11:06:48 GMT
The NAV is trending down.
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Post by Norbert on Sept 27, 2022 11:55:50 GMT
 Per Uh's point. Also, the PDI discount is only 2%. |
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rumi
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Post by rumi on Sept 27, 2022 12:41:06 GMT
So NAVs are declining due to higher interest rates. But so is any bond and most stocks. Moreso for PDI as it's leveraged. The real question is: PDI holds 1000+ bonds that are set to mature in the next few years. Will these bonds pay the par-value once they mature? If yes, the declining NAV shouldn't be much of a worry. But if you're expecting a load of defaults, then it's best to stay away. Happy to learn why I'm wrong. |
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Post by fishingrod on Sept 27, 2022 13:03:33 GMT
So NAVs are declining due to higher interest rates. But so is any bond and most stocks. Moreso for PDI as it's leveraged. The real question is: PDI holds 1000+ bonds that are set to mature in the next few years. Will these bonds pay the par-value once they mature? If yes, the declining NAV shouldn't be much of a worry. But if you're expecting a load of defaults, then it's best to stay away. Happy to learn why I'm wrong. My question would not be so much will they mature at par? But were they purchased at a premium? And what premium would that be? If they were bought at par or a discount then not much to worry about. |
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rumi
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Post by rumi on Sept 27, 2022 13:12:31 GMT
My question would not be so much will they mature at par? But were they purchased at a premium? And what premium would that be? If they were bought at par or a discount then not much to worry about. Fair point. I was under the impression that PIMCO rarely buys bonds at a premium. I thought they were known to come in after all hell breaks lose. They often scoop up bonds at steep discounts. Another thing that PIMCO specializes in, is doing their own credit rating research. If S&P gives a company the credit rating of a crackhead, PIMCO might investigate that same company and conclude that it's much more credible than S&P has made it seem, and then buy the high yielding bonds that no one else wants. |
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Post by Norbert on Sept 27, 2022 13:47:03 GMT
So NAVs are declining due to higher interest rates. But so is any bond and most stocks. Moreso for PDI as it's leveraged. The real question is: PDI holds 1000+ bonds that are set to mature in the next few years. Will these bonds pay the par-value once they mature? If yes, the declining NAV shouldn't be much of a worry. But if you're expecting a load of defaults, then it's best to stay away. Happy to learn why I'm wrong. I don't understand the Pimco CEF holdings and can not reply intelligently. But I think the Pimco managers have the tools to deal with various bond market challenges. If the NAV is declining, something may be wrong. I think that Capecod is the guy to ask. He posts at the Fido site, I hear. |
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Post by richardsok on Sept 27, 2022 13:47:08 GMT
My question would not be so much will they mature at par? But were they purchased at a premium? And what premium would that be? If they were bought at par or a discount then not much to worry about. Fair point. I was under the impression that PIMCO rarely buys bonds at a premium. I thought they were known to come in after all hell breaks lose. They often scoop up bonds at steep discounts. Another thing that PIMCO specializes in, is doing their own credit rating research. If S&P gives a company the credit rating of a crackhead, PIMCO might investigate that same company and conclude that it's much more credible than S&P has made it seem, and then buy the high yielding bonds that no one else wants. Appreciate the posts. You two guys are making sense and shining a bit of light into PDI's black box -- but not enough. I thought PDI was hedged and swapped and hard-wired for interest rate changes. Heck, it's not as if we all didn't see it coming. I'm hard put to think it could ALL be small investors bailing. Last months numbers, though still over-earning, had fallen sharply. What do next month's numbers show? Rumi is right -- those high PDI yields can't last -- either via a rally.... or a disty cut. Pimco did it with PTY and one other as I recall. |
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Post by Norbert on Sept 27, 2022 14:32:13 GMT
Just want to add that I'm not an income investor. My interest in fixed income CEFs is as a short- to medium swing trade based a good discount combined with a strong NAV trend. The yield only matters to me insofar as I know that other investors care about it, but it is important in that context.
At present PDI meets neither of my trading criteria, unfortunately.
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Post by ECE Prof on Sept 27, 2022 15:41:43 GMT
The NAV is falling hard, and my estimate of today's NAV is about 18.72. 10-year has jumped to nearly 4% today. It is going at 19+ at the moment. It seems that people are buying today with premium. The price should keep falling along with the increased interest rate. After all, PDI has a big UNII number and therefore, PDI has a good coverage ratio at the moment. What holds six months from now? No one, including the "experts" knows.
Add/Edit: The NAV did not fall as much as I expected yesterday. But, as Capital says, Today is another day. I understand that 10-year has hit 4% - the major news.
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rumi
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Post by rumi on Sept 27, 2022 16:49:11 GMT
Rumi is right – those high PDI yields can’t last – either via a rally.... or a disty cut. Pimco did it with PTY and one other as I recall. I think a rally is more likely than a distribution cut. Because distributions are fully covered by income. Remember that bonds are highly forward looking. Bonds started selling off ago, not when the Fed started hiking, but half a year prior, when investors anticipated today's fed hikes. I could be wrong of course. My positions make up 25% of my money. The rest is cash! |
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Post by FD1000 on Sept 27, 2022 18:52:48 GMT
I doubt these high yields will last forever. In other words; these quality PIMCO funds could recover, and people who buy at current prices will be rewarded by monthly distributions as well as capital gains in the next two years or so. I think the worst fears are priced in by now. Although we could always go lower from here. No one really knows the future. One thing we do know is that these funds are already down ~40% from their pre-pandemic highs. What's your excuse to not buy? Tell me why I'm wrong.
PDI paid about 30% income in the last 3 years. It's total returns, including all the distributions, is -18 for all 3 years. VOO (SP500) made 28.5% with total income in 3 years of about 5%. But wait, in March 2020, PDI lost more than VOO and the rebounded only half of VOO. The result ( link) show that PDI had much lower performance + higher risk = worse risk-adjusted return than VOO = double knockout. BTW, if you needed income, you can set the SP500 via a fund(example: FXAIX) to pay a certain monthly amount on a specific date. SP500 was a much better choice than PDI in the last 3-5 years. Remember: just as PDI can rebound, stocks can do it too. The lesson is: higher distributions isn't a guarantee for better performance or better SD/risk.Attachments:
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Post by ECE Prof on Sept 27, 2022 19:17:12 GMT
FD
I have posted a reply on this topic in the other forum. Essentially, there is an irrational buying going on when I expect the PDI's NAV going down today. So, price actions due to irrational buying leads to the fuzzy math. I do pay attention to its NAV. By the way, suddenly, ECC has turned up to 2.5% or more. That is also irrational today. Same thing about CLM too.
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rumi
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Posts: 40
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Post by rumi on Sept 27, 2022 21:24:06 GMT
PDI paid about 30% income in the last 3 years. It’s total returns, including all the distributions, is -18 for all 3 years. VOO (SP500) made 28.5% with total income in 3 years of about 5%. But wait, in March 2020, PDI lost more than VOO and the rebounded only half of VOO. The result ( link) show that PDI had much lower performance + higher risk = worse risk-adjusted return than VOO = double knockout. BTW, if you needed income, you can set the SP500 via a fund(example: FXAIX) to pay a certain monthly amount on a specific date. SP500 was a much better choice than PDI in the last 3-5 years. Remember: just as PDI can rebound, stocks can do it too. The lesson is: higher distributions isn’t a guarantee for better performance or better SD/risk.I suppose you can always cherry-pick a timeframe. To prove my point, here's is PDI vs VOO's performance until 2019 wherein PDI outperformed . Having said that, I agree with the sentiment that there's risks to investments with high yields. There are far more robust strategies such as putting it all in MSCI World, S&P 500, an All-Weather portfolio, etc. Attachments:
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Post by FD1000 on Sept 28, 2022 0:33:49 GMT
I don't want to turn this into why not CEFs. This thread is about CEFs, have it your way.
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Post by chang on Sept 28, 2022 6:23:24 GMT
DCS was yielding > 20% before it imploded. Pimco isn’t stupid, but then neither was David Dreman. Just saying. Interesting. How long did DCS exist? And what caused it to implode? I’m not well enough informed to answer. Probably leverage, a very high-yield portfolio, and then panic selling…? yogibearbull is the best historian around here. Check out Alpine Dynamic Dividend. There have been lots of high yield funds that disintegrated. |
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Post by johnsmith on Sept 28, 2022 12:31:19 GMT
IF PDI / PTY have to deleverage, they might have to sell bonds at the current low market price - making the current fall in NAV permanent and also reducing income.
As far as distribution cut - it seems a little unlikely as of now as UNII is positive and rising over the last few months (since April 22).
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Deleted
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Post by Deleted on Sept 28, 2022 13:01:40 GMT
IF PDI / PTY have to deleverage, they might have to sell bonds at the current low market price - making the current fall in NAV permanent and also reducing income.
As far as distribution cut - it seems a little unlikely as of now as UNII is positive and rising over the last few months (since April 22).
Neither of your above suppositions seem likely, so why needlessly worry folks. Buying decisions should involve more than yield on price, and experienced investors know that. |
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Post by johnsmith on Sept 28, 2022 13:21:05 GMT
maybe - I don't understand leverage (the way pimco does it) to make an assessment.
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Post by steelpony10 on Sept 28, 2022 16:31:20 GMT
rumi , 1. To good to be true for a majority. 2. Their hobby or addiction would be finished. 3. If they’re in cash they never will have the stomach for any CEF. 4. Ego, they had no plan for this and can’t admit it. What type of manager is that? 5. It’s more fun to criticize the ones who hold CEF’s and had a plan which evidently helps their ego. See 4. 6. In my case I have way to much CEF income and am taking a breather of at least 2-3 years or longer. Our personal inflation rate projects to not catch up to our current cash flow for at least 15 years. I do know it takes about 2-3 years for markets to fully recover from a financial trauma once it hits bottom so there’s still time for this income sale. 7. You’re not wrong. It takes a unique personally to accept the facts in front of them like a professional investor and to adapt as their needs or the investment facts change instead of clinging to speculation, unknowns, criticism and excuses. There’s always a pile of those out there like due for a correction, recession, overvalued, to volatile etc. That’s why many “wait it out”. Every investment has flaws and that’s the environment one works in. Amateurs are known to flee to cash creating opportunities for others like myself or seizing up with indecision. It’s obvious income investing is in the drivers seat at every risk level and cash, conventional bonds plus most equities are dead in the water. For how long who knows.
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Post by retiredat48 on Sept 28, 2022 17:10:00 GMT
Recently posted elsewhere...moved to here:
Couple points on CEFs like PDI.
--If you look at charts from the 2008/9 bear markets, leveraged FI CEFs went way down...followed equities. Then rallied very sharply recovering off the bottom. Distributions were always paid. Expect extreme volatility.
--Unlike a mutual fund, where, when you sell, you are transacting with the fund...at a closing market price of underlying holdings. With CEFs you are transacting with another individual; hence they may be selling out of fear, panic etc, thus driving down prices.
--I use a term with myself called "standback buyers". Means this. No one is forced to buy things; but investors sometimes have to sell things for many reasons. Thus in market severe down moves, the buyers can simply "standback and watch...wait"...while there is always a seller. This can get exacerbated, with new lows being far lower than imagined. Then the assets rebound fast when the buyers return. CEFs are thinly traded and thus more prone to standback buyer downdrafts.
--CEFs with mortgage backed securities are now very interesting. Yes, mortgage rates went up fastest in history...like from 3% to now 7% yesterday on 30 year. This lessens the value of existing mortgages (mark-to-market). Many now below par. Hovever when mortgage is repaid early, it is not at the discount value, but at face value, hence gains if paid early. However, with the sharp rise in rates, existing home sellers feel "locked-in"--will not give up a 3% mortgage to take on a 7% one. So they stay put---increasing the average mortgage maturity from 7 years; thus increasing the duration; thus increasing the negative effects if mortgage rates rise. Another however...unlike financial crisis of 09, homeowners will not be defaulting, with home values at new highs. And if they do default, the home will be easily sold and PIMCO gets its full value returned, with a cap gain.
--Where CEFs hold low quality corporate or country bonds, a severe depression etc will increase default rate, and could hinder asset values and distributions. Fed just took a risky step in increasing terminal or final funds rate by about a point recently...increasing likelyhood of a severe recession.
(Edit to add: PDO and PDI on sharp upward price rebound today...Wednesday. )
R48
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Post by ECE Prof on Sept 29, 2022 13:56:27 GMT
The "expert" traders want to scare people and make them sell at cheaper prices and scoop the shares at attractive low prices. Then, they would say, "oh, it is doing great," so that you can buy at their high prices. It is all human reverse psychology at work. I ain't going for these SA "experts." I am an investor, not a trader.
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Post by chang on Sept 29, 2022 16:21:54 GMT
PDO and PDI are hitting all-time lows today. I just don’t see why anybody needs to wade into charts as ugly as this. Discounts are nowhere near where they should be. Which means these gargoyles might have quite a way further to fall before they get into the 10-15% discount range.
PTY hasn’t broken through its June 2009 low, but it’s getting close.
PDI and PTY are still trading at premiums! I guess it shouldn’t come as a surprise that some people enjoy paying money to be spanked.
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Post by rhythmmethod on Sept 29, 2022 16:34:27 GMT
PDO and PDI are hitting all-time lows today. I just don’t see why anybody needs to wade into charts as ugly as this. Discounts are nowhere near where they should be. Which means these gargoyles might have quite a way further to fall before they get into the 10-15% discount range. PTY hasn’t broken through its June 2009 low, but it’s getting close. PDI and PTY are still trading at premiums! I guess it shouldn’t come as a surprise that some people enjoy paying money to be spanked. |
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rumi
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Post by rumi on Sept 30, 2022 14:16:42 GMT
PDO and PDI are hitting all-time lows today. I just don’t see why anybody needs to wade into charts as ugly as this. Discounts are nowhere near where they should be. Which means these gargoyles might have quite a way further to fall before they get into the 10-15% discount range. PTY hasn’t broken through its June 2009 low, but it’s getting close. PDI and PTY are still trading at premiums! I guess it shouldn’t come as a surprise that some people enjoy paying money to be spanked. I don't understand the focus on discount/premium. Look at PDO, it's been trading at a discount since forever, yet PDO holders got burned regardless because the NAV kept dropping due to rising interest rates. Even if NAVs didn't drop, discounts can become bigger. My point is that discounts aren't everything, and it can help to zoom out and look at the bigger picture. And some CEFs warrant a premium. They've earned it after two decades of proper management and having survived the GFC. |
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Post by retiredat48 on Sept 30, 2022 15:18:21 GMT
That capecod guy just posted this:
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Good post...
On the rest: Your earlier posts got my brain going. I bought some stuff this morning. It may not be the bottom but I had a rethink about the technicals. Why should I be stupid and NOT own a radically overearning 13% asset JUST BECAUSE OTHERS ARE. In short: this time fundamentals may lead technicals.
Regards, Dick
Edit to add:...and this: "I decided to break some rules. There's no reason I have to be as stupid as the crowd driving the technicals. Added back some PDI PTY PDO. All are seriously overearning distributions from 11+ to 13%. They may trade a bit lower,, but these will not be poor income investments over the next few years. Still 60% cash.
Regards, Dick
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Always interesting when experienced investors "re-think, and start re-taking positions."
R48
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Post by ECE Prof on Sept 30, 2022 15:21:32 GMT
That capecod guy just posted this: --------------------------------------------- Good post...
On the rest: Your earlier posts got my brain going. I bought some stuff this morning. It may not be the bottom but I had a rethink about the technicals. Why should I be stupid and NOT own a radically overearning 13% asset JUST BECAUSE OTHERS ARE. In short: this time fundamentals may lead technicals.
Regards, Dick
-------------------------------------------- Always interesting when experienced investors "re-think, and start re-taking positions." R48 Yes, didn't I tell you that yesterday or two days ago about the "experts" of SA. LOL. The chart shows that PDI seems to be turning up today. It always happens the day before and on the day of distribution (Oct. 3, Monday). Wait for next Wednesday and I will see what happens to the chart. It is likely to go up again because the yield seekers will start buying. There are several big banks, who have invested billions in PDI (PIMCO CEFs, in general). They are not stupid. I think that the traders of SA are trying to sell the stuff at higher prices today. |
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Post by retiredat48 on Sept 30, 2022 15:34:00 GMT
I submit that posters who are focusing on just the "premium or discount" should consider that the NAV price of CEFs does not have an easy way to reflect all hidden values in a fund. Two examples:
--The UNNI cash earned buildup that results in a special year end dividend/distribution. I point out that even a new fund, PDO, surprisingly paid a special year end extra distribution last year.
--Facts such as the extreme discounts on mortgage backed securities. When these mortgages are paid off, the homeowner gets no discount...they are paid off in full; thus large cap gains from current market prices. Further, with home prices so far advanced upward, few homeowners will ever default on their mortgage. So credit quality improved without doing anything.
R48
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