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FYI: Bond yields have nowhere to go but up, and that means bond prices will fall. These funds take unconventional approaches to avoiding losses and boosting returns. Regards, Ted http://portal.kiplinger.com/printstory.php?pid=12521
Templeton Emerging Markets Income Fund ("TEI") Announces Dividend (Cut) Fri June 13, 2014 10:41 AM|Marketwire
Beginning with the June dividend, the Fund's quarterly dividend will be adjusted from $0.25 to $0.20 per share. Dividends may vary based on the Fund's net investment income. Past dividends are not indicative of future trends. Over the past few years, interest rates around the globe have decreased in response to the slow growth economic environment. The Fund's dividend adjustment reflects the current environment of historically low interest rates and reduced yields available in government bonds.
The Fund's investment team continues to believe that the current period of accommodative monetary policy by central banks will eventually need to end, resulting in rising interest rates from current record low levels. This poses downside risk for bond prices, so the Fund has been positioned in very low duration and short maturity bonds to mitigate downside risk should interest rates rise. In general, shorter duration and maturity bonds have lower yields than longer duration/maturity bonds. http://seekingalpha.com/pr/10210743-templeton-emerging-markets-income-fund-tei-announces-dividend
@TSP_Transfer It was Friday the 13th, illuminated by a full moon, so hey, with those forces at play, something in the world had to give!
@portal.kiplinger.com Yes, Mr. Goldberg, bond yields will eventually rise, just as the arisen sun tomorrow will eventually set in the West, just as your column will eventually disappear from Kiplinger, and just as you will eventually... die. But to say the odds of them falling are "negligible" and they have "nowhere to go but up"... well, if you have any money "on the sidelines," I would be willing to take the other side of that for awhile, if you'd care to put some of it to work.
Yes, Mr. Goldberg, if bond yields were to rise, then bond prices would fall. However, you seem to have forgotten that MF bond prices (as marked) can fall with no reduction, or a big reduction, in yield (as held). An example of this can be seen already in one of your lower risk, best unconventional recommendations, viz. MWCRX. Note, at the bottom of the "recent" (Mar31, apparently the best MetWest can do) quality analysis graph, a category labeled "D"; there is a number 1.9% beside it. Earlier this year, I think that number may have been higher. Not to pick on MWCRX--- I have seen this in several other bond funds this year (although the figure is quickly swallowed within days into a newly revised category labeled "CCC and below"). Note also the last line of footnote 2 for this graph, which reads: "Holdings ≤ B were purchased at B or better." This indicates that almost 20% of this fund's assets, since purchase, have been downgraded and have probably lost market value.
So, Mr. Goldberg, I think you and other authors who are intent on pulsing the fear factor need to consider hitting the re-balance button. You may be pushing investors, little bit by little bit, unnecessarily too much into territory presently scent-marked by the meanest dog in the junkyard: credit risk.
Some very good points, namely: 1. ""Holdings ≤ B were purchased at B or better." This indicates that almost 20% of this fund's assets, since purchase, have been downgraded and have probably lost market value."
Too bad they put this in the "fine print" at the very end. They need to be more transparent and bring this out of the fine print. Glad you read it and brought it out.
2. "You may be pushing investors, little bit by little bit, unnecessarily too much into territory presently scent-marked by the meanest dog in the junkyard: credit risk."
Yeah, the unconstrained bond funds tend to have a lot of credit risk, which people need to be aware of.
You say, "However, you seem to have forgotten that MF bond prices (as marked) can fall with no reduction, or a big reduction, in yield (as held)."
I would say rather that bond prices can fall with no INCREASE in yield.....not reduction in yield. Bond prices go down when yields increase......
Finally, Mr. Goldberg has an interest rate forecast, and you seem to take the other side of the issue. Your opinion is more along the lines of what Jeffrey Gundlach and Bill Gross currently think.
I'm agnostic about interest rates......I have no idea what will happen. They could go up and eventually we could revisit the 1970's interest rate experience; they could go down and we could visit the Japan experience.......or anything in between those two extremes.
@rjb112 I added the second part--- reduction in yield--- because, by definition, when bonds default (1.9% of assets, in this example), their yields... ummm.... "tend to" decline. Right?
Another footnote you might what to check out is Footnote (c) under the assets described for D&C Global Bond. It may surprise you. [I'm still quite positive about the new fund, but it may bear closer scrutiny for awhile; be vigilant, assume nothing]
@rjb112 Another footnote you might what to check out is Footnote (c) under the assets described for D&C Global Bond. It may surprise you. [I'm still quite positive about the new fund, but it may bear closer scrutiny for awhile; be vigilant, assume nothing]
Here it is: c) "Data as presented excludes the effect of the Fund’s short position in Treasury futures contracts (notional value = 15.4% of the Fund’s net assets). If exposure to Treasury futures contracts had been included, the effective maturity would be 1.3 years lower."
Yeah, another one you found. What is that doing in the fine print that almost nobody reads? Again they need to be more transparent. They should come right out and say, in the part that everyone can see without microscopic vision: "We are 15.4% short Treasury futures contracts" !!
I've got my eye on that fund as a possible investment candidate in the future.
I imagine D&C Global Bond has the same idea, which is probably common. Since they have exposure to foreign debt in dollars, shorting treasuries actually makes this section of the portfolio less volatile, reducing the possible upside (if rates keep falling) and downside (if they finally start rising.
Fair enough, I say, and also the fine print is probably where it belongs. This fund (DODLX) is also on my radar, though I'm also considering TEI and TGTRX... Hasenstab really impressses me.
@TSP_Transfer It was Friday the 13th, illuminated by a full moon, so hey, with those forces at play, something in the world had to give!
@portal.kiplinger.com Yes, Mr. Goldberg, bond yields will eventually rise, just as the arisen sun tomorrow will eventually set in the West, just as your column will eventually disappear from Kiplinger, and just as you will eventually... die. But to say the odds of them falling are "negligible" and they have "nowhere to go but up"... well, if you have any money "on the sidelines," I would be willing to take the other side of that for awhile, if you'd care to put some of it to work.
Yes, Mr. Goldberg, if bond yields were to rise, then bond prices would fall. However, you seem to have forgotten that MF bond prices (as marked) can fall with no reduction, or a big reduction, in yield (as held). An example of this can be seen already in one of your lower risk, best unconventional recommendations, viz. MWCRX. Note, at the bottom of the "recent" (Mar31, apparently the best MetWest can do) quality analysis graph, a category labeled "D"; there is a number 1.9% beside it. Earlier this year, I think that number may have been higher. Not to pick on MWCRX--- I have seen this in several other bond funds this year (although the figure is quickly swallowed within days into a newly revised category labeled "CCC and below"). Note also the last line of footnote 2 for this graph, which reads: "Holdings ≤ B were purchased at B or better." This indicates that almost 20% of this fund's assets, since purchase, have been downgraded and have probably lost market value.
So, Mr. Goldberg, I think you and other authors who are intent on pulsing the fear factor need to consider hitting the re-balance button. You may be pushing investors, little bit by little bit, unnecessarily too much into territory presently scent-marked by the meanest dog in the junkyard: credit risk.
[@Crash OK, here's where your film fetish kicks in (you know you've got it baaaaaad), and you post a clip from Stephen King's Cudjoe (sic)]
*********Did I do something very bad? I confess I'm not sure what's intended here. Stephen King simply does NOT turn me on. Except for "Shawshank." Stephen King will have me jumping out the window even faster than "Yentl."
@Crash Sorry, didn't mean to disturb, should have ended it with a smiley. It's just that lately you've been posting timely movie clips into threads (you left me breathless, remembering that line from the movie Patton; how you do dat?), so I thought you might see my line about the meanest dog in the junkyard and, well, post a clip of that monster dog in Cudjoe. It was intended as flattery.
@rjb112 re. DODLX. Well, I've filled out the application, I haven't filled out da check. Ex-date for this qtrly payer is June 26. So, whaddayathink? Lick the envelope & stamp, and send it out and get her going? Or give it another qtr of performance and reassess? Short putts with a perfect lay don't seem to be around anymore (huh? Did I just use a golfing metaphor, a sport I detest? what's going on?)
@expatsp I wasn't reading much of MFO earlier in the year, so thanks mucho for going into the "near archive" and pulling up that MAINX factoid for me. I'm not unfamiliar with that fund--- or so I thought--- but apparently I missed one very salient memo. Interesting.
But really, aren't these yet 2 more examples of the bizarro fxd-income world we jostle? I mean, if we had seen these positions in a bond fund 10 yrs ago, wouldn't we have noticed at least a slight rise in pulse and breathing rate? And now, we see them and notice, at most, a slight lifting of .... an eyebrow. It's soooo wacked!
@heezsafe: yeah, we sure do live in a very different fixed income world. Agree, if we had seen this 10 years ago, it would have evoked a much stronger 'reaction'. Now it's, well, shorting Treasury futures is their way of hedging interest rate risk in case rates rise. 10 years ago they may have just chosen shorter maturity bonds.... I'm on the fence like you. One of my significant hesitations is that to purchase this at a discount brokerage, you have to pay their transaction fee, which can be a bit much if you are going to continue adding to it in smaller installments. To go directly thru Dodge & Cox involves yet another account with another company. It's much simpler keeping everything at one or a few 'fund supermarket' discount brokerages, but the transaction fee makes a 'dollar cost average' or regular purchase approach difficult to swallow.
Comments
Templeton Emerging Markets Income Fund ("TEI") Announces Dividend (Cut)
Fri June 13, 2014 10:41 AM|Marketwire
Beginning with the June dividend, the Fund's quarterly dividend will be adjusted from $0.25 to $0.20 per share. Dividends may vary based on the Fund's net investment income. Past dividends are not indicative of future trends. Over the past few years, interest rates around the globe have decreased in response to the slow growth economic environment. The Fund's dividend adjustment reflects the current environment of historically low interest rates and reduced yields available in government bonds.
The Fund's investment team continues to believe that the current period of accommodative monetary policy by central banks will eventually need to end, resulting in rising interest rates from current record low levels. This poses downside risk for bond prices, so the Fund has been positioned in very low duration and short maturity bonds to mitigate downside risk should interest rates rise. In general, shorter duration and maturity bonds have lower yields than longer duration/maturity bonds.
http://seekingalpha.com/pr/10210743-templeton-emerging-markets-income-fund-tei-announces-dividend
Long-term bonds have been strong so far this year despite early worries about rising rates
http://dailyjournal.net/view/story/9171c8f6087e4462a70d6a9e846466f2/US--Of-Mutual-Interest-Long-term-Bonds/#.U5zUbkCjLs0
http://www.advisorperspectives.com/dshort/guest/Ralph-Dillon-140521-Global-Yields.php
@portal.kiplinger.com
Yes, Mr. Goldberg, bond yields will eventually rise, just as the arisen sun tomorrow will eventually set in the West, just as your column will eventually disappear from Kiplinger, and just as you will eventually... die. But to say the odds of them falling are "negligible" and they have "nowhere to go but up"... well, if you have any money "on the sidelines," I would be willing to take the other side of that for awhile, if you'd care to put some of it to work.
Yes, Mr. Goldberg, if bond yields were to rise, then bond prices would fall. However, you seem to have forgotten that MF bond prices (as marked) can fall with no reduction, or a big reduction, in yield (as held). An example of this can be seen already in one of your lower risk, best unconventional recommendations, viz. MWCRX. Note, at the bottom of the "recent" (Mar31, apparently the best MetWest can do) quality analysis graph, a category labeled "D"; there is a number 1.9% beside it. Earlier this year, I think that number may have been higher. Not to pick on MWCRX--- I have seen this in several other bond funds this year (although the figure is quickly swallowed within days into a newly revised category labeled "CCC and below"). Note also the last line of footnote 2 for this graph, which reads: "Holdings ≤ B were purchased at B or better." This indicates that almost 20% of this fund's assets, since purchase, have been downgraded and have probably lost market value.
So, Mr. Goldberg, I think you and other authors who are intent on pulsing the fear factor need to consider hitting the re-balance button. You may be pushing investors, little bit by little bit, unnecessarily too much into territory presently scent-marked by the meanest dog in the junkyard: credit risk.
http://www.mwamllc.com/funds/unconstrained_bond_fund_characteristics.php
[@Crash OK, here's where your film fetish kicks in (you know you've got it baaaaaad), and you post a clip from Stephen King's Cudjoe (sic)]
1. ""Holdings ≤ B were purchased at B or better." This indicates that almost 20% of this fund's assets, since purchase, have been downgraded and have probably lost market value."
Too bad they put this in the "fine print" at the very end. They need to be more transparent and bring this out of the fine print. Glad you read it and brought it out.
2. "You may be pushing investors, little bit by little bit, unnecessarily too much into territory presently scent-marked by the meanest dog in the junkyard: credit risk."
Yeah, the unconstrained bond funds tend to have a lot of credit risk, which people need to be aware of.
You say, "However, you seem to have forgotten that MF bond prices (as marked) can fall with no reduction, or a big reduction, in yield (as held)."
I would say rather that bond prices can fall with no INCREASE in yield.....not reduction in yield. Bond prices go down when yields increase......
Finally, Mr. Goldberg has an interest rate forecast, and you seem to take the other side of the issue. Your opinion is more along the lines of what Jeffrey Gundlach and Bill Gross currently think.
I'm agnostic about interest rates......I have no idea what will happen. They could go up and eventually we could revisit the 1970's interest rate experience; they could go down and we could visit the Japan experience.......or anything in between those two extremes.
Another footnote you might what to check out is Footnote (c) under the assets described for D&C Global Bond. It may surprise you. [I'm still quite positive about the new fund, but it may bear closer scrutiny for awhile; be vigilant, assume nothing]
c) "Data as presented excludes the effect of the Fund’s short position in Treasury futures contracts (notional value = 15.4% of the Fund’s net assets). If exposure to Treasury futures contracts had been included, the effective maturity would be 1.3 years lower."
Yeah, another one you found. What is that doing in the fine print that almost nobody reads? Again they need to be more transparent. They should come right out and say, in the part that everyone can see without microscopic vision: "We are 15.4% short Treasury futures contracts" !!
I've got my eye on that fund as a possible investment candidate in the future.
I imagine D&C Global Bond has the same idea, which is probably common. Since they have exposure to foreign debt in dollars, shorting treasuries actually makes this section of the portfolio less volatile, reducing the possible upside (if rates keep falling) and downside (if they finally start rising.
Fair enough, I say, and also the fine print is probably where it belongs. This fund (DODLX) is also on my radar, though I'm also considering TEI and TGTRX... Hasenstab really impressses me.
Ex-date for this qtrly payer is June 26. So, whaddayathink? Lick the envelope & stamp, and send it out and get her going? Or give it another qtr of performance and reassess? Short putts with a perfect lay don't seem to be around anymore (huh? Did I just use a golfing metaphor, a sport I detest? what's going on?)
@expatsp I wasn't reading much of MFO earlier in the year, so thanks mucho for going into the "near archive" and pulling up that MAINX factoid for me. I'm not unfamiliar with that fund--- or so I thought--- but apparently I missed one very salient memo. Interesting.
But really, aren't these yet 2 more examples of the bizarro fxd-income world we jostle? I mean, if we had seen these positions in a bond fund 10 yrs ago, wouldn't we have noticed at least a slight rise in pulse and breathing rate? And now, we see them and notice, at most, a slight lifting of .... an eyebrow. It's soooo wacked!
I'm on the fence like you. One of my significant hesitations is that to purchase this at a discount brokerage, you have to pay their transaction fee, which can be a bit much if you are going to continue adding to it in smaller installments. To go directly thru Dodge & Cox involves yet another account with another company. It's much simpler keeping everything at one or a few 'fund supermarket' discount brokerages, but the transaction fee makes a 'dollar cost average' or regular purchase approach difficult to swallow.