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Post by FD1000 on May 27, 2023 14:00:58 GMT
( seekingalpha.com/article/4607667-will-pty-ever-return-glorious-days?mailingid=31608672&messageid=2800&serial=31608672.1106) Quote:
"Summary
From its inception to 2021, PTY outperformed overall markets vastly in total returns.
It's been lagging lately due to uncertainties in the economy.
I believe it will return to its glorious days as uncertainties get cleared.
This might take a lot of time and investors may want to stay disciplined and patient, though."FD: while you held PTY and most other CEFs, you missed so much performance compared to SPY since 1/1/2018. Your CEFs total return were lower by 40-80% and that is a lot. I know, you got higher income :-) The chart below is for several Pimco CEFs because Pimco is considered the best FI shop in the world. Attachments:
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Post by Fearchar on May 27, 2023 14:19:10 GMT
FD1000, PTY was hammered near Sept 2021. Did very well up to that point in time. It has not been the same ever since. Any thoughts on what changed? I've got some thoughts, but will hold off.
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Post by FD1000 on May 27, 2023 15:05:08 GMT
FD1000 , PTY was hammered near Sept 2021. Did very well up to that point in time. It has not been the same ever since. Any thoughts on what changed? I've got some thoughts, but will hold off. It's not only PTY, many other CEFs suffered too. There can be several reasons. * Up to 2018, markets were easy. The Fed supported the markets with low stable rates. * When risk/SD is elevated, you find pretty quickly that correlation goes up and why only high-rated bonds COULD help you. In very high risk, only treasuries help you, but treasuries performance isn't good during good markets. * Higher rates make it more expensive to leverage * It doesn't matter what you, I or the experts think or anticipate, the markets are very good telling you what to do. Growth can be great for 10 years, while VALUE can be great for the next 10 years. CEFs were pretty good until 2018. Once upon a time MLP were great. A manager can be great in certain conditions or his/her way of thinking and not so good with other conditions. Example: Buffett has done much better after he bought Apple and now it is a very high %(40+%) of his portfolio. One "stinking" stock made him a winner after decades of staying away from high-tech. The above explanation can be true or not. I don't believe in explanation, because markets behave differently in similar situations. Example: high interest rates are not good for performance: In 2021, the SP500 made over 28%. YTD proved is wrong IF YOU WERE IN THE RIGHT PLACE(SPY is a no-brainer). 1995-2000 also proved it wrong. The solution: stop looking for reasons, just follow markets. I know it's boring by now. This easy concept is difficult for most, they are looking for logical explanation but markets are not. Basically, good trading is the key. It doesn't mean daily-weekly trading, it can be just 2-3 annually. Trading can be used for just 30% of your portfolio. The experts love to tell you the reasons, how can they justify their fee? If they were honest they should sign the following simple contract which I offered many financial advisers. If you manage my portfolio, I will pay you 50% on any additional performance over the SP500. Suppose you managed one million. If the SP500 made 10% and you made 20%, your commission will be $50K. On the other hand, you will pay me just 5% on inferior performance. Looks to me, it's pretty fair 1 to 10 in favor of the financial adviser. Nobody ever took it. |
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Post by richardsok on May 27, 2023 15:13:08 GMT
Bravo, FD. I've copied your post to my personal notes.
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Post by retiredat48 on May 27, 2023 17:07:04 GMT
FD1000 keeps making these posts about how terrible PDI has been.
But he is often cherry-picking his chart start dates with a recent peak in PDI...very misleading.
I can't reproduce the chart, but from Morningstar total return information charts, here are some PDI numbers. Note many of us have held PDI for ten years or so.
Here is growth of $10,000, from M* max date chart, about 11 years ago:
7/31/2012 start.................$10,000
2/29/2020 peak: .............$27,737
3/21/20 low.......................$21,050
12/31/2021 highest peak.....$30,691
5/27/2023 today..................$27,152
-----------------------------------------------
(I reserve a "senior moment" disclaimer, but these are the numbers I get from M*.)
IOW you have a $10,000 investment that grew in eleven years to $27,152 today . Seems like a "keeper" in my book.
On several occasions I have offered to recently bet any poster(incl Fido forum), that PDI will outperform in total return, after next five years, any other single fund you want to select, stock or bond fund. So far, no takers!!
R48
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Post by FD1000 on May 27, 2023 19:23:27 GMT
FD1000 keeps making these posts about how terrible PDI has been. But he is often cherry-picking his chart start dates with a recent peak in PDI...very misleading. I can't reproduce the chart, but from Morningstar total return information charts, here are some PDI numbers. Note many of us have held PDI for ten years or so. Here is growth of $10,000, from M* max date chart, about 11 years ago: 7/31/2012 start.................$10,000 2/29/2020 peak: .............$27,737 3/21/20 low.......................$21,050 12/31/2021 highest peak.....$30,6915/27/2023 today..................$27,152 ----------------------------------------------- (I reserve a "senior moment" disclaimer, but these are the numbers I get from M*.) IOW you have a $10,000 investment that grew in eleven years to $27,152 today . Seems like a "keeper" in my book. On several occasions I have offered to recently bet any poster(incl Fido forum), that PDI will outperform in total return, after next five years, any other single fund you want to select, stock or bond fund. So far, no takers!!R48 Until 2021, I didn't post how PDI was a poor investing choice because it was a good one, 2021 changed everything, see the chart below. Since 2012 PDI is 70% behind and that's huge. So here is the deal: PTY did better than PDI+SPY until 2021. Did you own at least 10%? Someone who holds 20+ funds, can do great with one and trails badly with 5 others Since 2021, CEFs did poorly. Did you sell all and buy instead the easiest index, SPY? This is what I call concentrated investing based on your best ideas, AKA 40+% Apple for Buffett. I don't have a dog in this game, the only one is to make more money and not be attached to your laggers.
BTW, I practice what I preach. I started investing in 1995, about 50/50 of these years, I used 2-3/5 funds. I also posted at least 3 times what fund I would use VS PDI. Unfortunately, M* charts are not accurate for CEF price and why your statement above isn't accurate. PDI didn't go to over 30K + 12/31/2021 wasn't the highest point. The chart below shows PDI+SPY from 7/31/2012 to 12/31/2021. Other numbers are not accurate either.
From 7/31/2012 to today: PDI made 155% while SPY made 270.6%. I think SPY is just a "bit" better, see chart. I prefer to make an extra 115%. |
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Post by richardsok on May 27, 2023 22:58:14 GMT
R-48 --
No one here is denying PDI has been a great fund. No one trashed it from 2018 all thru 2019. And yes, after the Covid debacle, it recovered terrifically from Ap 2020 thru mid 2021. Interesting also today's price is almost exactly what it was five years ago, so, for determined B&H, all those distribs and specials have been like the proverbial manna. But you can't deny PDI's price and coverages have been disappointments for recent buyers (with a couple of big headfakes) for going on two years now. THAT'S why attitudes are sour. A lot of people held and even increased positions while prices and coverages were decaying and are now deeply under water. I discussed Pimco CEFs at great length in my book.
Still, as you know, the issue is always NOW what?
Sure, the fund is beaten so low you could now argue it's a compelling value. Suppose the worst -- say PDI slashes the distribution 25%, taking you on a current yield-on-cost dive from 14.5% to 11%. (11% is hardly dismaying.) And, I'd surmise, such a hit to distribs would also hit the price hard, possibly bringing your new money YOC (subsequent buys at lower prices) right back into the teens again.
So, sure -- I'm thinking of making a small buy right here and wait (hope?) for the distribution to be cut -- and then back up the truck.
As I own zero Pimco, I don;t think you and I have an argument.
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Post by retiredat48 on May 28, 2023 4:39:27 GMT
R-48 -- No one here is denying PDI has been a great fund. No one trashed it from 2018 all thru 2019. And yes, after the Covid debacle, it recovered terrifically from Ap 2020 thru mid 2021. Interesting also today's price is almost exactly what it was five years ago, so, for determined B&H, all those distribs and specials have been like the proverbial manna. But you can't deny PDI's price and coverages have been disappointments for recent buyers (with a couple of big headfakes) for going on two years now. THAT'S why attitudes are sour. A lot of people held and even increased positions while prices and coverages were decaying and are now deeply under water. I discussed Pimco CEFs at great length in my book. Still, as you know, the issue is always NOW what? Sure, the fund is beaten so low you could now argue it's a compelling value. Suppose the worst -- say PDI slashes the distribution 25%, taking you on a current yield-on-cost dive from 14.5% to 11%. (11% is hardly dismaying.) And, I'd surmise, such a hit to distribs would also hit the price hard, possibly bringing your new money YOC (subsequent buys at lower prices) right back into the teens again. So, sure -- I'm thinking of making a small buy right here and wait (hope?) for the distribution to be cut -- and then back up the truck. As I own zero Pimco, I don;t think you and I have an argument. Yes R, we agree. Key point is, it is just not so easy when investing real time to say with assurance one should have abandoned PDI a few years ago, with a 10%+ yield. Was not sure that fed would raise its rates to 5%, a powerful and quick move; or that mortgage rates would double in a year. Any forecasts for this? No. There was an issue with premiums for PDI (30%)being high and thus others (incl me) were buying PCI (0-5% premiums), etc...smart moves. I also feel PIMCO let shareholders down in the handling of the merger--a surprise to me. Final point. It remains to be seen if what Capecod and some others postulate...that PDI has foregone current earned income via swaps that will instead bring cap gains near year end, and thus fortify UNII. Perhaps limiting cut, if any, to the monthly dividend. Like, previous "December special" dividend gets applied to regular monthly divy needs this year. If so, pdi may actually zoom upward some in price. R48 |
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Post by Fearchar on May 28, 2023 13:10:20 GMT
It took a while, but finally found a study from 2015 when I had examined PTY along with a number of other CEFs. Obviously a lot has changed since then, but what is great about PTY is that historical data is available from 2002. I have a number of other projects going on right now, but will update the study and share some thoughts. Here is a screen shot of the Excel file from the 2015:  ... more to follow! |
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Post by yogibearbull on May 28, 2023 13:24:43 GMT
Not everyone will agree on this.
There are several CEFs (PDI included) that can throw reasonably reliable distributions month-after-month while their prices or NAVs fluctuate in a wide band. So long as there isn't a secular decline, that may be fine with many people. PTY at high premium never cleared my screens.
Point-to-point comparisons of everything with SP500 is overrated. That backward-looking data doesn't tell anything about now or going forward.
Most CEFs are at their low point now due to the fear that after moving with a record speed, the Fed isn't done yet. Some CEFs are now near their pandemic panic lows.
The lot of back-and-forth on charts is simply because the M* data showed NAVs (w/reinvestments), the StockCharts data showed prices (reinvestments). All may be right with their data.
Some posters don't want to think or explain anything, but why then come here post the same 1-trick pony stuff here? It gets tiring.
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Post by richardsok on May 28, 2023 15:19:14 GMT
It's not that I disagree with you, yogi. Of course you're correct that chart data gives imperfect hints of the future. And yes, many CEFs are deeply beaten down -- exactly why I have begun buying CEF preferreds and will probably buy a small block of PDI on Tuesday. Beyond that, my problem is that I hardly understand what other points your post is making behind the cloud of euphemisms. Clarify, please?
BTW, a budget agreement might be at hand. My fears may have been misplaced. I guess it will be bitterly attacked by both the demanding far left and irate GOP conservatives. So the agreement, if it can be passed, might be a pragmatic (if smelly) success.
Now then, do we buy on the rumor and sell on the news?
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Post by gman57 on May 28, 2023 16:08:10 GMT
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Post by retiredat48 on May 28, 2023 18:03:13 GMT
Some recent words of wisdom, attributable to Capecod...
--At 12/31 PDI purposefully entered over $1billion notional counterintuitive swaps that CONSUME large amounts of NII. In return, PDI received a lot of cash --- NOT NII --- but just as good for paying distributions. Consequently, at 12/31 PDI held 15.7% cash ($673mm).....more than double most similar funds. 3 months later cash was down to $511, still plenty to cover monthly distributions totaling $57mm for many months EVEN ASSUMING THE OTHER $7.5 BILLION ASSETS EARN NOTHING!
Obviously, fund boards can do what they please "in the best interests of shareholders," but based on this data, it seems unlikely they NEED to cut the distribution.
-----------------------------------
--Complex portfolios require complex analysis. Currently there are a lot of complicating factors contributing to low NII disclosures. That does not, however, mean there are insufficient cash flows to cover distributions. Consider...
1. Earnings --- if not NII --- are being generated. In April, PDI NAV increased 8c AFTER taking the 22c ex-date hit. NAV increased 30c in April before the distribution.
2. About 40+% of conventional portfolio assets have floating rates that reset with a 1-6 month lag. Increased interest income from recent Fed hikes has not arrived yet because of the reset lags --- but the fund board knows what is coming and can be counted on.
3. The "front leg" of interest rate swaps cannot be counted as NII until paid, but it exists, is computable, and although not reportable NII, it can provide boards with assurance that they WILL have the NII to maintain distributions. Of particular consequence, ALL PDI U$ swaps are now annual or semi-annual pay. There may be enormous non-disclosable NII locked up for a long time.
4. PDI has been holding a $1.1 billion notional 3mo SOFR short futures position. Recent Fed hikes have generated significant NON-NII margin cash flows and ultimately distributable cash gains. More future distribution coverage that can't be disclosed as NII.
5. ...
_________________________
Thanks Dick...
R48
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Post by Chahta on May 28, 2023 18:13:39 GMT
If growth is the ONLY aspect of investing, would no other investing vehicle even exist? Is not an opinion, only an opinion and not a fact for one persons reality?
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Post by Fearchar on Jun 3, 2023 11:38:25 GMT
Extra curricula activities and responsibilities have settled. So, here is my updated analysis and personal observation and thoughts of PTY:  Upper portion of above chart illustrates average total return over 20.4 years is 9.8%; which is great. However, recent performance has been negative or at best neutral since August 2021. Obviously, a great deal of volatility and as such should be either a minor portion of ones portfolio or actively traded to minimize risk. While it would be tempting to conclude that PTY will eventually return to its longer term trend rate of return, please notice the situation in 2007/2008. A long period of under performance followed by a more serious collapse in price. So, one needs to consider more than a simple price trend. Second part of above chart illustrates variations in monthly distribution rates. These have averaged 9.5% over 20 years. So, they account for most of PTY's performance. Standard deviation in distributions is 1.7%. So, +2 sigma would be 12.9% while -2 sigma is 6.2% The distribution of distributions is skewed. That is while -2 sigma is 6.2%, PTY has never really distributed at such a low rate. On the other extreme, +2 sigma of 12.9% is exceeded on several occasions. Using the Excel PERCENTRANK function, 12.9% is calculated to be exceeded 3% of the time. The time periods when the distribution exceeds 12.9% are dominated by the Sept 2008 to June 2009. It also includes the period between March 18, 2020 to April 1, 2020. Also, single day in February 2016. Now, I realize that some people desire a perfect timing system that will signal the exact bottom of every major correction. That of course does not exist. Sorry if this pops anybody's dream. Continuing on, notice that distribution rates below 7% are seldom registered; about 2% of the 20 year time period. Last time was in August 2021. PTY's distribution was cut in August 2021 from 0.130 to the current rate of 0.119. So, there is a risk that the distribution rate calculation could be biased in that time period. None the less, low distribution rates should be considered very carefully. Feedback is always welcomed! |
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Post by retiredat48 on Jun 3, 2023 14:57:30 GMT
From Capecod recently...
In the first 5 months of 2023, muti-asset CEF prices mostly just oscillated sideways. Of course, the return consequences of "sideways" are a lot better at the higher distribution rates resulting from price declines since Fed started tightening. Per cefconnect, the class of multi-asset CEFs YTD through 5/31 had average total returns on both market price and NAV about 4%. Since prices were flattish, most of that TR was from distribution income. Annualized that would be a 9.6% TR. Individual holdings I watch as of 5/31 appear below...
KIO: TR on mkt px = 7% and TR on NAV = 7%
PDI 5% and 5% PDO 4% and 2% PAXS -0- and 1% PHK 5% and 3% PTY 12% and 5% WDI 7% and 6%
Bottom line: YTD bond-ish multi-asset CEF returns have actually been better than they "felt" (to me at least).
Regards, Dick
--------------------------------
R48
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Post by retiredat48 on Jun 3, 2023 16:33:05 GMT
Fearchar,...Hi...thanks for posting...some feedback comments you requested: --The 2007/8 time period was one where the actual credit risk of holdings was the key concern. That is, will bond payments be made to support distributions. However, today that risk is much reduced. PTY appears to own 33% government related holdings; 20% mortgage backed securities. Default risk low here...no? Like, with mortgage holdings, who is giving up their 3.5% mortgage in foreclosure with prices zooming upward...not many. --M* and PIMCO show an average weighted price of (mark-to-market) holdings at 81% to par. This means current holdings are at deep discount from face value. As bonds are paid off at maturity, a goodly capital gain is built in. --PIMCO shows 3.5 years as an "effective leveraged duration"...and 7 years as "effective maturity". Even using seven years, the 19% (100 - 81) discount to par means an average capital gain built in of 19/7...about 3% a year! Barring defaults, when the loans mature there is no discount...pimco gets the full face value monies. --I note PTY paid a December Special divy last year, 2022. Wonder if any accumulation will occur this year, especially as some "swaps", which gave up income early this year, get cap gain returns at end of year. R48
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Post by bb2 on Jun 3, 2023 17:22:53 GMT
PTY - Don't know if they sold but the largest holding as of April, EOM, Wesco Aircraft Holdings Inc. 10.5%, at 3+% just went bankrupt. Wesco was bought by Pattonair and then together became Incora, which appears to be in bankruptcy as of a couple days ago. www.reuters.com/legal/aircraft-parts-supplier-incora-files-bankruptcy-2023-06-01/ The company was CCC+ with a negative outlook by S&P last August. Yea, as FD said, rates up, bonds down. What else to say? |
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Post by Fearchar on Jun 3, 2023 18:00:07 GMT
Thanks retiredat48 , All valid points. I'm curious though, do you own any PTY? If so, how much % wise have you allocated to it? PTY is currently distributing around 11%. That places it in the 88% percentile. Not too shabby/risky. Here's a handy chart ranking distribution rates:  |
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Post by FD1000 on Jun 5, 2023 3:50:40 GMT
Fearchar, PDI pays over 14% and blew up thru your chart. It must be a great "bargain". 
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Post by retiredat48 on Jun 5, 2023 4:07:03 GMT
Thanks retiredat48 , All valid points. I'm curious though, do you own any PTY? If so, how much % wise have you allocated to it? PTY is currently distributing around 11%. That places it in the 88% percentile. Not too shabby/risky. Here's a handy chart ranking distribution rates: View AttachmentI do own some PTY...not singularly a major holding. But part of my fixed-income theme investments...part of my CEF holdings. As posted elsewhere, these CEF holdings are: My Current CEF Holdings:
DSL (small holding) HPS JPI NTG PDI...largest holding PDO PFN PTY ------------------------------------------------------------------- Past month...after a couple years of spending the dividends (RMD's), changed the PIMCO holdings to "auto divy reinvest.". R48 |
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Post by Fearchar on Jun 5, 2023 11:10:38 GMT
Fearchar, PDI pays over 14% and blew up thru your chart. It must be a great "bargain". I am too bearish to jump to that conclusion. PDI has was launched in 2012. So, only 11 years ago and no record thru the great financial collapse of 2008-9. Overall performance has been meager. It distributes too much; overall much more than total return. So, that is another delta. Lots of leverage, lousey coverage and rising borrowing costs does not seem like a great recipe to me. |
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I didn't read it.
