IOFIX - I guess it works until it doesn't Alphacentric just released this letter. I'm not sure this relieves my concerns. It doesn't explain the steep drops:
March 20, 2020
Valued Investor,
We appreciate your commitment in the AlphaCentric Income Opportunities Fund IOFIX | IOFCX | IOFAX, especially
during periods of uncertainty and volatility. We believe the Fund is positioned well for this low mortgage rate
environment.
Markets have seen an enormous amount of cash being raised out of fear over COVID-19.
The recent NAV decline in our Fund is largely technically driven. On the flip side, the large draw down in the
corporate world, in both equities and bonds, can mostly be explained through deteriorating fundamentals (ex.
massive drop in airline, hotel, restaurant, retail, travel revenues).
While we are prepared for potential continued technical volatility, longer-term we are as confident as ever in the
fundamentals of our portfolio and believe the current rate environment may accelerate upside returns for our
Fund.
Here are the underlying reasons:
• Legacy mortgages originated back in 2002-2007, are 13-18 years old, why this is important:
o These borrowers made it through the worst housing crisis ever in 2008/2009.
o They have on average 43% equity in their homes today and have spent over a decade building
this equity.
o A good portion of their monthly payment today is on principal.
• YTD mortgage rates have dropped around 17% to historical lows, why this is important:
o Lower rates = increase in refinancing by homeowners and bond calls by service providers.
o Many of the legacy bonds that we paid less than par for are now likely to be paid off at or near
par.
o The increase in refinancing and foreseeable bond calls sets the table for nice price appreciation
over the next 12-18 months, in addition to the monthly income.
o Average price of the homes in the portfolio is around $260k, this segment of the housing market
continues to remain strong with low rates and a shortage of homes.
• Unlike corporate debt, our bonds are backed by hard assets - homes with real equity and in many cases,
the biggest asset a homeowner has.
o 10 out of the last 11 recessions have had minimal impact on housing.
o The Government provided many mortgage assistance programs to keep homeowners in their
house during the last recession and now, more than ever, it is of the utmost importance for
homeowners to stay put in their homes and away from others.
o In many cases, homeowner's two largest expenses, mortgage and energy, just got reduced.
o The Fund has no exposure to CLO's, CMBS, consumer credit, etc...just housing.
This will not continue forever, and as always markets will eventually stabilize. We know that being an investor
today, and during any period isn't exactly a stress-free experience, but we believe value investors should consider
adding to this portfolio.
Please let me know if you have any questions. If you would like to schedule a call with one of the portfolio
managers, we are happy to schedule it.
Thank you,
AlphaCentric Advisors
Garrison Point Capital LLC
IOFIX - I guess it works until it doesn't I see financials at levels I've not seen in years ... BAC under $20, WFC under $30.
I think these are sales for long-term investors.
I suspect the folks at D&C are well prepared and are working overtime to capitalize. But after this past week, I'm thinking it will get worse before better.
Bond mutual funds analysis act 2 !! Have we ever had a case where both stocks and bonds are in the toilet at the same time, like this? Even if monthly divs from my bond funds diminish, it's still something to depend on, while we all slide and get nicked and cut along this razor blade Market. How soon will my Fund Managers finally put the cash they're sitting on to use? A time-frame of YEARS to ride out this coming Depression seems likely. I hope it's more like 2 years, not 8, as with The Great Depression. Could this not be a "Greater Depression," given the high-flying valuations, beforehand? Feels like I'm watching the Fall of Icarus.
Yes, 2008 and treasuries were positive.
Would you buy a 50 year Treasury? @Sven- for
years I believed that I was the most cynical of the MFO group. Now I'm not so sure. :)
Well. I think there's still a healthy difference between skepticism and cynicism. But when I grew up in Missouri, that "show me" attitude was still taken seriously. Maybe it still is.
IOFIX - I guess it works until it doesn't A nibble is definitely not 10% in one shot, way WAY less. I like to look at individual positions and the opportunities presented. My largest holding is VWALX at around 18%. Getting blasted but I doubt the muni bond market will collapse but it could go lower, I'd be a buyer slowly and the lower the price the fewer shares you need to bring your cost basis down. I always try and buy below my cost basis and now is the first time in years that I can. That said, at some point you also need to stop and wait for stability. Don't always need to catch the bottom...and if you do you're probably just lucky. If you're happy with your potions review them one by one and do some buying when your down and the market is down, just go slow and keep your required reserves in cash. For me that's 50% right now but mainly because my other allocations have shrunk do to price declines!
When to start buying IF you're young and have time on your side, this past few weeks has been a fantastic opportunity to embrace volatility and DCA into positions you want to keep for the long-haul. I've incrementally put a significant amount of idle cash to work into both new and existing positions since I've been waiting for such a massive 'correction' for several
years now....firesales like this on quality names don't come along often.
Howdy folks,
You start buying just after you projectile vomit all over your screen.
Start window shopping now for the post virus world. Don't try to play the froth. Go after those that are winning in this nastiness.
Just my plan,
Rono
IF you're young and have time on your side, this past few weeks has been a fantastic opportunity to embrace volatility and DCA into positions you want to keep for the long-haul. I've incrementally put a significant amount of idle cash to work into both new and existing positions since I've been waiting for such a massive 'correction' for several
years now....firesales like this on quality names don't come along often.
Howdy folks,
You start buying just after you projectile vomit all over your screen.
Start window shopping now for the post virus world. Don't try to play the froth. Go after those that are winning in this nastiness.
Just my plan,
Rono
Agree, 100%. Some day this will be viewed as the buying opportunity of our lifetime, by a mile. If that turns out not to be the case, we are all screwed. Those holding all cash will not be much better off...if at all. There will be riots in the street, hyperinflation from failed government stimulus, etc.
When to start buying IF you're young and have time on your side, this past few weeks has been a fantastic opportunity to embrace volatility and DCA into positions you want to keep for the long-haul. I've incrementally put a significant amount of idle cash to work into both new and existing positions since I've been waiting for such a massive 'correction' for several
years now....firesales like this on quality names don't come along often.
Howdy folks,
You start buying just after you projectile vomit all over your screen.
Start window shopping now for the post virus world. Don't try to play the froth. Go after those that are winning in this nastiness.
Just my plan,
Rono
IOFIX - I guess it works until it doesn't best of all, you could post about it here, like those who got out end Feb (or whatever) and went to cash etc etc etc,
unlike those down a half-mil in retirement
The idea of "going to cash" is pretty silly for anyone with real money outside of a tax sheltered account, and very dangerous for those even in a tax sheltered account. The getting out part is relatively easy except for the taxes involved. It didn't take a genius to know we are entering a down period towards the beginning of this month. It's the getting back in part that is so hard. I have used all kinds of charts and techniques over the
years in many sectors (especially playing commodities) and have learned that "get back in" signals can be very false. You think the worst is over and get in...only to drop another 60% from there. Just look at natural gas, for example. Then you're afraid to get back in...only to see a massive (often unexplained) rip to the upside while sitting in your cash. Yes, some will win big with their great calls and will post here. The losers not so much. Every transaction in the history of every market had a buyer and a seller. I'd wager a lot that those who stand still will come out ahead over the long term...I suspect that those staying pat with things like vwenx, vwiax, btbfx, pimix will do fine with their likely "mere" 6-7% returns over the next decade or so after this mess clears. Of course this time may be different (highly doubt it) but I can't live on MM returns. My personal strategy is to always be 30%-50% in cash and to nibble in down periods (especially killer down days) and to stand pat most other times. Down 13% YTD and consider myself "lucky." Good luck all, and stay safe!
Bond mutual funds analysis act 2 !! Have we ever had a case where both stocks and bonds are in the toilet at the same time, like this? Even if monthly divs from my bond funds diminish, it's still something to depend on, while we all slide and get nicked and cut along this razor blade Market. How soon will my Fund Managers finally put the cash they're sitting on to use? A time-frame of YEARS to ride out this coming Depression seems likely. I hope it's more like 2 years, not 8, as with The Great Depression. Could this not be a "Greater Depression," given the high-flying valuations, beforehand? Feels like I'm watching the Fall of Icarus.
Would you buy a 50 year Treasury? @Sven- for
years I believed that I was the most cynical of the MFO group. Now I'm not so sure. :)
Would you buy a 50 year Treasury? No for sure! After 2% annual inflation, investors earn nothing on the 50 years treasury. Larry Kudlow is copy what the European is doing with their 100 years bond and knowing the investors will never live long enough to hold them to maturity.
12 Bond Mutual Funds and ETFs to Buy for Protection Maybe we need (1) more posters putting up useful stories or questions and than (2) some other posters bumping them over into the “Discussions +” side of the board? No bump. No clutter. That was the original intent of the “Discussions +” arrangement. Personally, the volume of stories isn’t too much of an issue for me to wade through.
If folks want to discuss good investing topics I’m “all-ears”. Give it a listen. But I can’t advise on where to shelter any more than the flag pole on the corner can. Pretty much it seems folks are shell-shocked. It took about a year in the 07-09 crash to get to about where we are here in perhaps a month‘s time.Some pretty decent domestic stock funds are off 35% or more YTD. Catch22’s previous observation about the unpredictably divergent market forces still holds true. Rates are swinging wildly. Shorter term stuff’s been murdered recently. Gold’s going nuts as well. Big fall after topping above $1700 month ago. Yesterday miners gained about 15%. Today they gave back half of that. Not much seems to be working. Like to look at various segments of equity markets. Price’s PRLAX (Latin America) was off nearly 40% YTD before today - but actually bounced while the Dow shed 900+ points.
The crash back in 2000 started after the NASDAQ got top-heavy at over 5,000. Today, 20 years later, it broke through 7,000 on the way down. Will it revisit 5000 again?
12 Bond Mutual Funds and ETFs to Buy for Protection In this stressful time, which cries for serious and thoughtful information exchange, why MFO is being cluttered with garbage like this is completely beyond my comprehension. It echoes the performance from the very top of the present administration: let's keep on chattering about how everything will be just fine very soon, and keep up all of the ridiculous happy-talk. Unbelievable.
Ego, more than likely. "If I keep on shouting, maybe somebody will notice me". Again, following the example from the top.
People deal with stress in different ways. That’s what you’re seeing OJ. Nobody’s diminishing the dire straits the nation finds itself in. Some folks want to keep buying as markets fall. Nothing to make you forget about the 15-20% week’s loss in your IRA than placing a bet on a new pony or two. Some people drink or turn to entertainment. Since the board is dedicated pretty much to financial matters, you’ll find it here - the good investment stories, the bad ones, and everything in between, even though we know that the health crisis vastly overshadows those pursuits.
I watch or read 4, 5, 6 hours news daily - a real junkie, always been. Bloomberg’s on a lot. Usually catch both the ABC & CBS network wrap-ups evenings. A bit of CNN and MSNBC. Overall, I’ll give them high marks on this one. Good objective reporting and advice. CNN had a hellova good discussion the other night with several top medical people along with the deliberate David Gergen, a veteran commentator with DC experience I’ve always respected. But a lot of people refuse to listen because the “news” networks have for so many
years saturated the audience with sensational overly hyped “man-bites-dog” stories designed to pull in high ratings so that when the
crisis of our lifetimes comes along, many dismiss it as just another sensationalized episode that will be over in a couple weeks.
Shopping today in an area supermarket the folks I encountered seemed oblivious to what’s going on. Bemused that anyone was concerned about the C Virus, which is progressing northward toward them. I don’t know how typical that is. A lot of people here have taken this seriously and likely are staying away from stores and other places people congregate. So, the ones I met are likely atypical - but do represent a certain element. I suppose only when our Governor declares a lockdown in maybe another week and / or their loved ones take ill will they face up to the situation.
Unfortunately (perhaps fortunately) this isn’t a political discussion board. My sense from the news I digest is that there’s a lot of blame to be placed on our national leadership for getting a late start in this, ignoring the seriousness early on and misrepresenting certain facets of the evolving situation even today. When you fire the competents who are willing to stand up to you and surround yourself with say-nothing incompetents, than these eventualities are likely to occur. So I’m angry. Am I gonna waste my time rolling around in the mud with the “other side”? No. Got more than enough to worry about right now and deeply concerned about many friends and loved ones spread across this vast land - many of whom I’ve been in touch with.
God bless California and New York. God help us all.
IOFIX - I guess it works until it doesn't Down another 17% today.
So, clearly, everybody running for door (including me) and no willing buyers.
Extraordinary 5 years, until it wasn't, like Mona posted.
Really, really hard couple days.
Oh, boy! Am I glad I didn't invest! I was going to in my IRA, but I bought ANGLX instead. Pray for me.
IOFIX - I guess it works until it doesn't Down another 17% today.
So, clearly, everybody running for door (including me) and no willing buyers.
Extraordinary 5 years, until it wasn't, like Mark and Mona posted.
Really, really hard couple days.
From the "We Have Your Backs" Department Few years back I recall someone bringing a bill to congress which would make it illegal for members of Congress to trade on insider information. The bill was soundly defeated.
First, the fact that someone even had to bring such a bill to Congress. Suggests what's illegal for the common man may not be illegal for Congressmen. Maybe there are some laws that only apply to members of Congress and therefore some laws don't apply automatically to them unless they are also explicitly ratified.
Second, maybe the bill was brought to Congress only to be defeated so that now we accept that it's not illegal for them to trade based on insider information, but merely "unethical" which means diddly.
The people to blame are the people who elect these people to office. Accept it.
As an aside, if the Congressmen had simply bought some PUTs and then sold them, would anyone have discovered them? Maybe the 4 congressmen are stupid and shameless or both, and there are the rest are only shameless, but we don't know about them because we cannot "see" if they sold any stock, because they profited differently from the stock market decline.
Are Municipal-Bonds Always a Safe Haven Hi sir
@old_joe. Perhaps you are right sir,
If near retirement, probably need to sell everything Monday and put in 100%cash/CDs...nothing is working
If still have many
years probably continued to buy and DCA
Maybe best time to buy new car or home in 4-6months if there is severe USA Recession
From the "We Have Your Backs" Department @NumbersGal - please point us to the NY Times article showing Loefflers investments being sold from a blind trust. All I've been able to find is an opinion piece.
Edit: AND I did search for something/anything similar prior to my original post.
She just said on CNBC that her investments, for
years, have sat in a blind trust so she has zero discretion on any investment activity.
IOFIX - I guess it works until it doesn't Looking at MFO almost every day, I've been feeling really stupid ever since going to 95% cash about a year ago. I felt that at 80, with a very decent pension & SS income, we didn't need the market exposure. I'm not feeling so stupid now, at least about finances.
For you younger folks, hang in there- everything will be just fine in five or ten years, just like after 2008.
