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Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
  • Gold down / Settles below the key $1,800 mark in 2nd day of losses
    Here’s a link to a good (interactive) chart of gold prices for those so interested. Note the dip last March 20 which aligned with the stock market mini-crash and severe liquidity issues in short term investment grade paper.
    FWIW - Nothing makes sense to me with the precious metals, including gold’s seeming correlation with those other markets. A puzzle.
    https://www.bullion-rates.com/gold/USD/Year-1-chart.htm
    March 4 Update - Gold smashed through the $1700 level today. Currently around $1690. However, the miners are unchanged for the day as of 2:45 PM.
  • Why do you still own Bond Funds?
    @JonGaltIII et al
    I''m not pushing having bond investments. Too many variables for each individual. The write is about a simple 50/50 of equity and bonds over time.
    I offer this real world example starting in 2006, and will provide the past 10 years return.
    A 529 educational account was established in 2006 with the state of Utah; using Vanguard funds. One may pick an established blend from aggressive-conservative, as set by choices offered by the 529; or one may "build" there own. Please keep in mind that until a few years ago, one could only change the investments 1 time per year. This limitation is now 2 times per year. So, one is at an almost "set and forget it" mode.
    We set our own, being 50/50 with VITPX and VBMPX. The expense ratio for the funds are .02 and .03%. VITPX holds 3,400 equities and VBMPX holds 18,000 bonds. YOW !!!
    The 50/50 ratio is required to auto balance once per year. So, the ratio has never traveled to far outside of 50/50.
    The 10 year total return for this blend of 2 funds is 8.705%.
    I've used FBALX as a benchmark for our own investments to discover how much of a smart arse or dumb arse we may be at any given time. FBALX is high on the list of balanced funds in it's category.
    FBALX has a 10 year annualized return of 10.83%.
    The overview for us being that the 529 is doing well as a quasi conservative/moderate allocation blend.
    Most folks should be very pleased if they can obtain ongoing returns that meet or exceed 8% on an annualized basis. Many trained professionals do not.
    Okay. Away soon to have a very small tubular rod placed into the upper arm and move a bit of vaccine into the muscle. #2 it is.
  • Why do you still own Bond Funds?
    Buffet's Warning on Owning Bonds:
    Can you believe that the income recently available from a 10-year U.S. Treasury bond – the yield was 0.93% at yearend – had fallen 94% from the 15.8% yield available in September 1981? In certain large and important countries, such as Germany and Japan, investors earn a negative return on trillions of dollars of sovereign debt. Fixed-income investors worldwide – whether pension funds, insurance companies or retirees – face a bleak future.
    Buffett doesn’t really offer any alternatives, except to warn:
    Some insurers, as well as other bond investors, may try to juice the pathetic returns now available by shifting their purchases to obligations backed by shaky borrowers. Risky loans, however, are not the answer to inadequate interest rates. Three decades ago, the once-mighty savings and loan industry destroyed itself, partly by ignoring that maxim.
    a-bleak-future-for-long-term-government-bonds
  • Why do you still own Bond Funds?
    @KHaw24
    The below chart is for the 4 funds you noted. The backwards view only goes to May, 2015; which indicates one of the funds had it's inception date in May, 2015. These returns are for total return, which includes all distributions. You will note the short period around March of 2020 when the credit markets became locked up, until central bank intervention.
    Just below the graph you will see a bar indicating 1,462 days for this chart. You may right click this bar to obtain a default list of other time frames. Example: 1 year. If set at 1 year, you may drag this time frame backwards (left), too. This will let you see a view of these funds performance comparison as you travel backwards.
    ALSO, this is an active graph for your own use. You may place and/or replace any of the ticker symbols at the top entry line and then click "go" to built your own chart, which will default to a 200 day view.
    You may also toggle between line graph and bar graph for returns when clicking the "red and green" icon at the far left bottom of the time period bar.
    CHART
    Enjoy,
    Catch
  • 10-Year Closing in on 1.5% (OP) - Blows Right Past - Near 5% (30 months later) - Whee!
    Treasuries yields, Inflation and the Equity Market:
    trillion-treasuries-mystery-is-bedeviling-global-markets
    image
    The Merrill Lynch Option Volatility Estimate (MOVE) Index:
    Many of us are familiar with the VIX Index, commonly referred to as the “Fear Index”. The VIX Index is a measure of “fear” as that relates to equity markets and typically rises during periods of falling prices, sometimes sharply during more precipitous declines.
    Did you know that there is a similar index that measures fear within the bond market? That index was developed by Merrill Lynch and is referred to as the “MOVE” Index. The index rises as concerns grow that interest rates are on the march higher. The index will rise more sharply when there are fears in the market that rates may be headed significantly higher as was the case during the 2013 Taper Tantrum.
    https://raymondjames.com/davidolnick/david-chart-of-the-week/2016/11/18/the-move-index
    ICE buys Bank of America Merrill Lynch fixed income volatility indices:
    ice-bank-of-america-merrill-lynch-indices
    Tracking MOVE:
    https://markets.ft.com/data/indices/tearsheet/summary?s=MOVE:PSE
  • Ignoring Energy Transition Realities as We Greenify
    The road to carbon neutral may require carbon to be driven forward...

    At a time when most major companies are working on plans to cut their carbon emissions, one of the darlings of green investing is working to increase its emissions footprint.
    You read that right. Thanks to its explosive expansion in China and a planned car plant in India, Tesla Inc. is in the process of not just increasing the total sum of its emissions—a pretty inevitable consequence of growth in our current carbonized world—but increasing the amount of pollution each of its vehicles generates, too.
    Bloomberg Opinion Piece:
    tesla-should-come-clean-on-the-real-emissions-of-its-cars
  • Why do you still own Bond Funds?
    @catch22 I should have qualified it with "compared to the S&P 500 index". Not necessarily a fair comparison - just a competely different strategy. Invest in equity vs. bonds. Appreciate the responses to this thread and learning different rationale. I'll let others provide some chart its.
    Someone recently sent me a link to a discussion Dave Ramsey was having on "not holding bond funds" and what he believes about proper allocation. I think it's worth a listen (even as it's simplistic and controversial) - he draws a correlation between average life expectancy and what those bond funds can/can't do for you between retirement 65-90 years of age: htt
    ps://youtu.be/yqMCTSnJ6Y4?t=5169 I would argue that his "growth and income fund" does indeed contain some bonds.
    Note: I added two spaces between htt and p so that you could copy and paste. When it embeds in this post - it doesn't fast forward to the spot in the clip where he talks about allocation.
  • Tax Q - Remember you have two different basis-ies for the average cost method.
    Calculating gain on the sale of mutual fund shares is not as hard as it may appear to be. There are just two questions to answer: "you need to determine which shares were sold and the basis of those shares."
    https://www.irs.gov/publications/p550#en_US_2019_publink1000250005
    If one uses average basis, there is no choice in which shares were sold. They are sold oldest first.
    If one uses what the IRS calls "cost basis", i.e. actual cost of the shares, then one must say which shares one is selling and for each of those shares state its cost basis (actual cost). It doesn't matter whether those shares are covered or noncovered, their cost basis is what you paid for them. Pretty straightforward, unless you previously sold some shares using average basis.
    There are three ways to state which shares you are selling:
    • By enumeration - stating explicitly which shares you're selling,
    • Algorithmically - giving a rule to enumerate the shares, e.g. highest cost first (HCFO), or
    • Oldest first (FIFO) - this is just the default algorithm that's used if you didn't specify a different algorithm. So in a sense it isn't even a third way of saying which shares you're selling.
    Where things might get a bit tricky is where, as @BenWP did, you sell some shares using an algorithm to enumerate those shares, and then later sell more shares. You have to know which shares were sold previously to know which shares you've got left now to sell.
    At least you have a paper trail of the shares you sold previously, because you had to report that on your 1040 when you sold them. So just cross them off your list of shares and whatever is left is what you're able to sell going forward.
    To reiterate, covered vs noncovered has no effect on basis if you are consistently using cost basis (actual cost) and not average basis (average cost).
  • Why do you still own Bond Funds?
    Bond funds are essential to most portfolios unless you have the stomach for watching your life savings cut by 50% at any given point in time (as per VTI). Of course as interest rates rise many bond funds won't do well but some will do just fine (e.g., DHHIX, FAGIX). So, in part it depends on what you mean by "bond fund." I like to hold about half in funds (mostly high yield) that will largely follow equities but with less SD, and half with things that will lose as interest rates rise but will likely act as a counterbalance to an equity decline (e.g GIBLX). Also, not to state the obvious, but the idea that interest rates must go up has been a losers bet for years. I saw Minerd on CNBC yesterday who is rather confident interest rates will be going down, a lot. No investment can work in every environment and trying to time which will work best and when has also been a sucker's play for the most part.
  • Why do you still own Bond Funds?
    Hi @JonGaltIII

    but for the last 10 + years it was a bad mistake
    I'll play "chart it". Give me 5 bond fund tickers that you're not happy about over the past 10 years. They don't have to be anything you hold or have held. What would you prefer to be charted as a baseline, the comparative? A balanced fund, a blended equity fund?
    And yes indeed, there have been and will be bond funds that are never properly managed or the mandate tended to be out of favor for too long.
    Not any different than equity funds that look good as a concept but timing or management get things wrong.
    'Course, what one is attempting to do with a bond fund is critical, too; relative to a total portfolio.
    Take care,
    Catch
  • Why do you still own Bond Funds?
    I’m just slow to change. 20 years ago bond funds comprised 30% of my portfolio. Than 10 years ago it went to 25%. This year I cut it to 20%. Oh - I’ll get down to 0 eventually ...
    Of course, if you sell those bond funds you need to move the $$ into something else. So those much smarter than me here can comment on where to move that money. I’m not convinced cash today will beat even the very low returns of short duration bonds.
    Yes - you can bury your money in a tin can in the back yard. I suppose. Or, on a wing and a prayer , you can throw everything at stocks - even though you’re nearing 80. Stretching out the time horizon is an option. Maybe to 95? Or 110? Doing so would allow you to maintain a higher level of portfolio risk.
  • Ignoring Energy Transition Realities as We Greenify
    Aside from the environmental waste disposal problem and labor/community radiation exposure problem, the cost advantages of nuclear don't appear to be there. From the previous link:
    Existing nuclear plants have relatively low operation, maintenance, and fuel costs compared to many fossil fuel plants; however these routine costs still make nuclear power economically uncompetitive in comparison with natural gas, wind, and solar.
    New nuclear plants are another matter altogether; their continuing high construction costs make them uneconomical. Between 2002 and 2008, cost estimates for new nuclear plant construction rose from between $2 billion and $4 billion per unit to $9 billion per unit, according to a 2009 report by the Union of Concerned Scientists. In reality, even those astronomical projections have been surpassed. The two new units at the Vogtle Plant in Georgia, the only new nuclear construction in the United States, are now years behind schedule and projected to cost more than twice their original budget of $14 billion. Similarly, it was estimated that Duke Energy’s proposed Levy County Nuclear Power Plant in Florida would cost $5 billion, but projections ballooned to $22 billion. The project was canceled in 2017, and Duke Energy decided to focus on solar energy expansion instead.
    Reactors also typically require a long period of planning, licensing, and building. The 2019 World Nuclear Industry Status Report (WNISR) estimates that since 2009 the average construction time for nuclear reactors worldwide was just under 10 years.
    The WSINR report also estimates that the cost of generating nuclear energy ranges between $112 and $189 per megawatt-hour (MWh), while solar power costs between $36 and $44 and onshore wind power comes in at $29 to $56.
  • Highland Socially Responsible Fund to be reorganized
    update:
    https://www.sec.gov/Archives/edgar/data/891079/000119312521065141/d128745d497.htm
    497 1 d128745d497.htm HIGHLAND FUNDS II
    HIGHLAND FUNDS II
    Highland Socially Responsible Equity Fund
    Supplement dated March 2, 2021 to the Summary Prospectus, Prospectus and Statement
    of Additional Information (“SAI”) each dated January 31, 2021, as supplemented from time to time
    This Supplement provides new and additional information beyond that contained in the Summary Prospectuses, Prospectus and Statement of Additional Information and should be read in conjunction with the Summary Prospectuses, Prospectus and Statement of Additional Information.
    IMPORTANT NOTICE
    The following information supplements and supersedes any information to the contrary contained in the Summary Prospectus, Prospectus and/or Statement of Additional Information of Highland Socially Responsible Equity Fund, a series of Highland Funds II (the “Trust”), each dated and supplemented as noted above.
    As previously disclosed on October 28, 2020, and as supplemented on January 31, 2021, the Board of Trustees (the “Board”) of Highland Funds I (the “HFI”) and Highland Funds II (the “HFII”) unanimously approved an Agreement and Plan of Reorganization (the “Plan”) for the reorganization of Highland Socially Responsible Fund (the “Acquired Fund”) into NexPoint Merger Arbitrage Fund (the “Acquiring Fund,” and together with the Acquired Fund, the “Funds”).
    The shareholders of the Acquired Fund approved the reorganization at a special meeting of shareholders held on February 26, 2021. The reorganization will take effect on March 2, 2021. Effective immediately, the Acquired Fund will be closed to new and existing investors.
    Please contact the Adviser at 1-877-665-1287 if you have questions about the Reorganization or your account.
    For more information regarding the Acquired or Acquiring Fund please call 1-877-665-1287 or visit the Funds’ Web site at https://www.highlandfundadvisors.com/.
    INVESTORS SHOULD RETAIN THIS SUPPLEMENT WITH THE SUMMARY PROSPECTUS,
    PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FOR FUTURE REFERENCE.
    HFII-HPE-SUPP-0321
  • the March issue is live ... and thanks!
    Hi, guys.
    Shared a Launch Alert for the Humankind US Equity ETF in your honor. I thought the discussion of it was thoughtful and productive, and so decided to share. Thanks for it!
    It also spurred, in part, the article on the fallacies of a "green bubble." It is the panic du jour among those scraping for clickbait articles. At base, the argument is "all of that money flowing into green investments" is creating a bubble. There are a couple problems with the argument. One is that the numbers underlying the bubble argument are sort of invented, which is why I stayed with the conservative $50 billion in inflows angle. The other is that funds are just a vehicle for accessing investments, they aren't the investments themselves. As a result, the funds can't be in a bubble ... though fund managers can choose whether or not to invest in wildly priced stocks.
    Part of the question for next month is whether it's even worth mentioning the fallacy of the underlying stats? Depending on what you read, the amount investing in ESG sorts of ways might be $10 trillion ... or $20 trillion, $30 trillion or just north of $40 trillion which does sort of imply some methodological problems in the calculations.
    Lots of "A" tier managers retiring, Fuss, Browne and Puglia among them. Much greater shift in the industry away from liquidation and toward M&A activity. You could, I think, make the argument that the mid-market is actually the death zone. Niche managers with distinctive products (Seafarer, Grandeur Peak) have a chance. Mega-firms have a chance. But all of those guys with 20-50 funds seem to be folding, mostly by selling to guys with 50-70 funds.
    Wishing you a joyful month,
    David
  • "Take Deposits Elsewhere": What is money really worth if banks don't want it?
    It seems like an alternative to a bank for Germans would be a Money Market fund, perhaps in a brokerage account.
    Unless the MM will also charge to hold your money.
    David
    (a) In order to avoid a negative yield, Fidelity Management & Research Company LLC (FMR) may reimburse expenses or waive fees of Fidelity® Government Cash Reserves. Any such waivers or expense reimbursement would be voluntary and could be discontinued at any time. There is no guarantee that Fidelity® Government Cash Reserves will be able to avoid a negative yield.
    FDRXX Summary Prospectus
    The only reason why most MMFs in the US aren't already charging investors money is that they're being subsidized. What's the motivation to subsidize returns in a country where the banks are charging savers to hold their cash?
    Even in the US, I've seen small company 401(k)s offering MMFs with negative yields. These were 401(k) annuities. Though the MMFs themselves had a positive return, once the annuity wrapper fee of the 401(k) was added in (or should I say subtracted out), the net return was negative.
  • "Take Deposits Elsewhere": What is money really worth if banks don't want it?
    Note that in general, Germans do not invest heavily in the stock market, rather they invest very little, more like on average 15% of their wealth
    Most invest in insurance type products from Allianz etc or regular savings
    Stock market is considered very risky and goes against the practical german approac
    I believe Lewis B had a recent comment where he stated he found it interesting that many americans put their life savings into the stock market and its unknown, non guarantee return
    Best,
    Baseball Fan
  • Tax Q - Remember you have two different basis-ies for the average cost method.
    I first asked about this in 2011, when the "covered" vs "non-covered" reporting legislation came into effect. It seemed clear that I needed to divide my transactions into two bins, one for "non-covered" and one for "covered" going forward. But, I never did so since I hardly sold anything in a taxable account. Now for 2020 tax season this is biting me big time:
    Remember, even if you use the average cost method, the mutual fund companies all seem to calculate two different bases - one for "non-covered" (pre-2012) shares and one for "covered" (2012 and later.) For example:
    2010: Buy 100 sh XYZZX at $10 (non-covered)
    2015: Buy 100 sh XYZZX at $30 (covered)
    2020: Sell 100 sh XYZZX at $50 (will be non-covered shares, the non-covered bin is emptied first)
    2021: Sell 100 sh XYZZX at $50 (will be covered shares)
    They are going to report your sale from the uncovered bin first - so the basis for your 2020 sale will be $1000, for a $4000 gain. For 2021, the shares are covered; they will report a basis of $3000 to the IRS and a $2000 gain.
    If you mistakenly combined both purchases into the same bin and calculated the average basis, you might be tempted to report each of the sales with a $2000 ($20 per share) basis. Since the 2020 sale is not covered, you might report a $2000 basis for it, for a $3000 gain, which the IRS won't know about. But for 2021, you will also need to report a $2000 basis, for a $3000 gain, which is different from what you will get on your 1099-B. This could get you a letter from the IRS.
    For some reason how this two-bin basis calculation works is not documented or explained anywhere online, or by any of the fund companies' tax guides. Best bet: just assume that all the numbers on your 1099-B are right, even for non-covered shares you have had a long time. You might want to break out non-covered vs covered bases now, before you exhaust your un-covered shares. Those can probably be fudged a little, as log as all the bases you have used for all the sales in each bin add up to the amount that you paid in to the fund.
    Another way is to use FIFO or some other method. In retrospect, that might have been easier than average cost.
  • 10-Year Closing in on 1.5% (OP) - Blows Right Past - Near 5% (30 months later) - Whee!
    @Derf No fishing yet. Wifey wants to go after the big fish. Maybe I'll join her, I dunno. Catfish out of the pond are my speed. But there's just one place on Oahu for freshwater fishing. I looked into it. The requirements and arrangements are silly, ridiculous. I just want to buy a license and GO. But no, that's not enough... ORK! But I sure am enjoying some fabulous sashimi, since getting here. :). Ahi, mostly.
    https://www.istockphoto.com/photo/hooked-yellow-fin-tuna-fish-underwater-gm173315513-25525805
  • "Take Deposits Elsewhere": What is money really worth if banks don't want it?

    Banks in Germany Tell Customers to Take Deposits Elsewhere
    Below are a few edited excerpts from a current article in the Wall Street Journal:
    Interest rates have been negative in Europe for years. But it took the flood of savings unleashed in the pandemic for banks finally to charge depositors in earnest.
    Germany’s biggest lenders have told new customers since last year to pay a 0.5% annual rate to keep large sums of money with them. That is creating an unusual incentive, where banks that usually want deposits as an inexpensive form of financing, are essentially telling customers to go away.
    The pandemic has changed the equation. Savings rates skyrocketed with consumers at home. And huge relief programs from the ECB have flooded banks with excess deposits. Banks also have used the economic dislocation of the pandemic to make operational changes they have long resisted.
    According to price-comparison portal Verivox, 237 banks in Germany currently charge negative interest rates to private customers, up from 57 before the pandemic hit in March of last year. Charges range between 0.4% and 0.6% for deposits beginning anywhere from €25,000 to €100,000.
    The ECB’s deposit rate, which it charges banks, is minus 0.5%. The central bank has signaled it is unlikely to change that level anytime soon.
    Banks in Germany are particularly hit by negative rates because Germans are big savers. About 30% of all household deposits in the eurozone are in Germany, according to the ECB. Last year, deposits in the country rose 6% to a record €2.55 trillion as people became wary of spending under the pandemic or simply had nowhere to spend, with restaurants closed and travel restricted.
    In Denmark, where interest rates were cut to below zero two years before the eurozone, banks have gone from charging wealthier clients to smaller ones over the past year. The Danish central bank estimates about a quarter of the country’s depositors are currently being affected.
    Nordea Bank Abp recently lowered the deposit threshold for a 0.75% charge to 250,000 danish krone, equivalent to $41,000, from 750,000 danish krone as the pandemic will likely prolong the era of negative rates.
    The flip side for customers there, is that in some cases, while they pay to deposit money, they don’t have to pay anything to borrow. Nordea in January started offering 20-year mortgages at 0%.
  • 10-Year Closing in on 1.5% (OP) - Blows Right Past - Near 5% (30 months later) - Whee!
    @AZRph : For the older folks, one should surely keep an eye on their 2025 & earlier funds as far as bond return is concerned.
    @Crash : To my thinking you are receiving part of your distribution from bonds as you're removing the funds from a balanced fund.
    I was wondering if you'd had a chance to wet a line lately.
    stay safe,Derf