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High Grade Bonds- A Ticking Time Bomb For Investors
Yet another scare story about bonds. You know while there have been lots of such scare stories about bonds recently, the fact is bonds have actually lived up to these negative expectations in 2013. Treasuries, investment grade, emerging markets. Junk will most likely be the next casualty.
Howdy Hiyield007, I have no problem with interest rates rising from what would be normal circumstances of demand for money; as that would likely indicate a more normalized condition. Our mish-mash of bonds only benefited from the perverted monetary scheme that has been in place. I don't believe our portfolio is going to get a large downside hit prior the equity side of the markets having some of its fire removed from current levels. The real roast may come when the central banks just do not have anything else that will benefit anything and greater slow down the funny money; and at that time, equities will not be happy either. This is the real problem that concerns not just our future portfolio; but the overall health and true wellbeing of the economy. If enough more folks who were prior equity investors during the 2008 melt and got burned; and are more bond centered now; as well as moving back into the equity sectors today get burned again.......well, all bets are off. I also suspect that many who remain in any market today, other than those who moved to CD's and related are a lot more touchy about how things are traveling within the markets. This does not mean they will get things correct when moving monies; but move the monies they may. After having our 90% equity portfolio beaten downward and upward in the large swings between Oct. 2007 through May, 2008, we finally sold all but 16% of equity holdings in mid-June of 2008. We watched as the equity markets again continued to fight and moved upward another time. 'Course, during any period like this; one begins to second guess whether the proper action had been taken, and especially when such a drastic action had been taken with such a large percentage of a household portfolio. To add to the burden, is that our work schedules were so heavy with long hours then; that there was little time to perform a better and clear minded overview of weekly actions during the following weeks and months. The choice came to past as the right move then; but was a real interesting journey to the outcome. Such events are the tests one has to deal with when investing; and also determines whether to remain in the game or not. We're still here, and will take our bumps along the pathway.
PDI has recovered much from the early start of the day.
Reply to @catch22: "The real roast may come when the central banks just do not have anything else that will benefit anything and greater slow down the funny money."
That's if they do. You have a world where there does not seem to be much hesitation to print money, despite the results of various money printing efforts throughout history suggesting printing to prosperity doesn't end well. I continue to think - if need be - they'll print money until something breaks.
If you believe that there's going to be a real downturn, I think they'll print money 24/7 instead of facing reality.
Will the markets dip? Probably soon, as sentiment seems extremely/overly positive. However, I think that will be a time to consider adding. Not because I think things are absolutely great, but I do think there are some attractive stories here-and-there (energy/energy export, for example) and I think there will be inflation and continued easy monetary policy for longer than believed.
I hate to use Cramer's phrase "There's always a bull market somewhere", but there are themes that work and in the case of the energy pipelines, that pay a very nice dividend while one waits. Beyond that, if I can own a Kinder Morgan that has 75,000 miles of pipeline and 180 terminals around the country, that's a pretty tremendous collection of real assets that's pretty difficult for someone to come in and replicate. For me it's a long-term holding and not something that I have to babysit, as I'm getting paid to wait and Kinder's collection of productive/useful assets is pretty tremendous and I see no change in needing to transport energy around (and export out of) the country - with all the exploration going on, there's more need for it lately.
That's just an example. I don't have to think things are great in this country at all (and I think there's a lot of issues in this country), but if I can own what is essentially a massive energy superhighway around the country and get paid 4-6% yield (depending on which Kinder Morgan stock), why sell it? I can't see why it isn't going to be needed, so I'll just continue to collect dividends.
I own some consumer staples stocks, as they offer 3+% yield and I don't see people not needing the products anytime soon, so I'll just collect divs.
You can still absolutely own bonds, but if you want to add equity exposure, there are certainly things that don't have to be babysit or time because they're going to be needed for years to come.
Reply to @scott: Indeed, scott. This is the really troubling propostion; as I don't know that "they" have an exit door that will operate normally. A big hole has been dug, eh?
Kaminsky: "Many people are worried about the Fed's eventual exit..." Gundlach: "There's no exit. There's no exit. I think it's more likely that the Fed buys all the treasury bonds that exist. I have no concept of what the Fed exit strategy would look like, nor does an investor or viewer need to have a concept, because it's WAY out in the future. The next move in the Fed chess game is not the Fed exiting, it's the Fed continuing."
You have a government who really has no other idea or desire to come up with another idea than kicking the can and throwing money at the problems that appear. They can't agree on anything, and literally tell Bernanke to do what he does best:
Reply to @catch22: A couple of week ago you stated that due to the project your are working on you would not be posting you 'Fund Boat' returns. Might I suggest you lighten you burden in two ways. Move your portfolio to CD's and let those of us who know something about investing handle MFO. You made your bed, now sleep in it ! Regards, Ted
Move your portfolio to CD's and let those of us who know something about investing handle MFO. You made your bed, now sleep in it !
Sometimes, you're just too funny and silly. Perhaps there is not a need to be concerned about your stress level aggravating your health status; as your stress release is here at MFO.
I/we are not loosing any sleep with our portfolio. It is what it is today, and will be a different number tomorrow and into the future months and years. Tis the ebb and flow of such a venture. I know not whether tomorrow, next month or in six months will find the equity markets 10% higher or lower; and the same applies to bonds.
As to handling MFO. I surely wish you had the time to share your knowledge from the many years of investing; and especially for the benefit of the younger one's here at MFO. When the mentors pass away, the knowledge usually becomes lost.
The site, by its very nature and existence; is a teaching and learning site. Please participate more with your written words. Ted, we are sure the knowledge is there and waiting to be shared.
Ok, I guess I can write from the position of Ted gardening me the mutual fund number champion. Perhaps so as I believe in spreading my risk over a greater number that perhaps both Catch and Ted do. But, with my background in credit, that is just me.
I think both Catch and Ted both bring perspectives to the board. It is up to each of us to look at these presentations, as well as the ones I bring, to see if there is a fit for each of us.
Catch has his way, I have my way, and Ted has his way. I'll bet all three of us have taken more from the market, through the years, than it has taken from us. And, folks that is what success is about.
Howdy Skeeter, Heck, I sure don't have a problem with anyone for how and what they choose to fund their portfolio(s). As I noted several days ago, I find no problem with having several multi-sector bond funds, cause they sure don't act the same and one has added more diversity into this portfolio group. Now, if one has several active managed funds in a narrow sector; that may be another cosideration. This could be more true using only etf's or indexes. Skeeter, not unlike your situation; we currently have numerous acct. positions within difference retirement accts using different vendors. These will get the big blend in the near future. You got your groove on handling your mix with your methodology that is providing results. This is the important part, eh? You surely are way out in front of this house's returns so far. Lastly, with the technology we have at our fingertips; it is not difficult to monitor numerous holdings; unless one is a trader using etf's and related. Although we are still in the grips of winter here in MI; I can't believe that Daytona is not far away on the calendar. I didn't get much of a chance last year, to view many races; but will always do this one and 'Dega. Take care down there, Catch
Where I was coming from on my above comment was I don't have a problem with your post nor those of Ted's except for the ones that have directed some harsh words at times towards you and then you respond with a come back which is normal. And with this the zings continue. I have been there and done that myself. But, what concerns me is this keeps feeding itself into something that I don't enjoy reading and it seems to have been going on now for about a month or so.
Somehow, I hope you and Ted can find some common ground and peace between the two of you. I feel you are both too valuable to us at MFO for this activuty to continue and I hope it will soon cease.
Comments
I have no problem with interest rates rising from what would be normal circumstances of demand for money; as that would likely indicate a more normalized condition. Our mish-mash of bonds only benefited from the perverted monetary scheme that has been in place.
I don't believe our portfolio is going to get a large downside hit prior the equity side of the markets having some of its fire removed from current levels.
The real roast may come when the central banks just do not have anything else that will benefit anything and greater slow down the funny money; and at that time, equities will not be happy either. This is the real problem that concerns not just our future portfolio; but the overall health and true wellbeing of the economy.
If enough more folks who were prior equity investors during the 2008 melt and got burned; and are more bond centered now; as well as moving back into the equity sectors today get burned again.......well, all bets are off. I also suspect that many who remain in any market today, other than those who moved to CD's and related are a lot more touchy about how things are traveling within the markets. This does not mean they will get things correct when moving monies; but move the monies they may.
After having our 90% equity portfolio beaten downward and upward in the large swings between Oct. 2007 through May, 2008, we finally sold all but 16% of equity holdings in mid-June of 2008. We watched as the equity markets again continued to fight and moved upward another time. 'Course, during any period like this; one begins to second guess whether the proper action had been taken, and especially when such a drastic action had been taken with such a large percentage of a household portfolio. To add to the burden, is that our work schedules were so heavy with long hours then; that there was little time to perform a better and clear minded overview of weekly actions during the following weeks and months. The choice came to past as the right move then; but was a real interesting journey to the outcome.
Such events are the tests one has to deal with when investing; and also determines whether to remain in the game or not. We're still here, and will take our bumps along the pathway.
PDI has recovered much from the early start of the day.
Take care,
Catch
That's if they do. You have a world where there does not seem to be much hesitation to print money, despite the results of various money printing efforts throughout history suggesting printing to prosperity doesn't end well. I continue to think - if need be - they'll print money until something breaks.
If you believe that there's going to be a real downturn, I think they'll print money 24/7 instead of facing reality.
Will the markets dip? Probably soon, as sentiment seems extremely/overly positive. However, I think that will be a time to consider adding. Not because I think things are absolutely great, but I do think there are some attractive stories here-and-there (energy/energy export, for example) and I think there will be inflation and continued easy monetary policy for longer than believed.
I hate to use Cramer's phrase "There's always a bull market somewhere", but there are themes that work and in the case of the energy pipelines, that pay a very nice dividend while one waits. Beyond that, if I can own a Kinder Morgan that has 75,000 miles of pipeline and 180 terminals around the country, that's a pretty tremendous collection of real assets that's pretty difficult for someone to come in and replicate. For me it's a long-term holding and not something that I have to babysit, as I'm getting paid to wait and Kinder's collection of productive/useful assets is pretty tremendous and I see no change in needing to transport energy around (and export out of) the country - with all the exploration going on, there's more need for it lately.
That's just an example. I don't have to think things are great in this country at all (and I think there's a lot of issues in this country), but if I can own what is essentially a massive energy superhighway around the country and get paid 4-6% yield (depending on which Kinder Morgan stock), why sell it? I can't see why it isn't going to be needed, so I'll just continue to collect dividends.
I own some consumer staples stocks, as they offer 3+% yield and I don't see people not needing the products anytime soon, so I'll just collect divs.
You can still absolutely own bonds, but if you want to add equity exposure, there are certainly things that don't have to be babysit or time because they're going to be needed for years to come.
Indeed, scott. This is the really troubling propostion; as I don't know that "they" have an exit door that will operate normally. A big hole has been dug, eh?
Kaminsky: "Many people are worried about the Fed's eventual exit..."
Gundlach: "There's no exit. There's no exit. I think it's more likely that the Fed buys all the treasury bonds that exist. I have no concept of what the Fed exit strategy would look like, nor does an investor or viewer need to have a concept, because it's WAY out in the future. The next move in the Fed chess game is not the Fed exiting, it's the Fed continuing."
You have a government who really has no other idea or desire to come up with another idea than kicking the can and throwing money at the problems that appear. They can't agree on anything, and literally tell Bernanke to do what he does best:
http://www.forbes.com/sites/afontevecchia/2012/07/17/senator-chuck-schumer-to-ben-bernanke-get-to-work-mr-chairman/
I'll also add:
http://www.bloomberg.com/news/2013-01-24/credit-bubble-seen-in-davos-as-cohn-warns-of-repricing.html
Regards,
Ted
You noted: Sometimes, you're just too funny and silly. Perhaps there is not a need to be concerned about your stress level aggravating your health status; as your stress release is here at MFO.
I/we are not loosing any sleep with our portfolio. It is what it is today, and will be a different number tomorrow and into the future months and years. Tis the ebb and flow of such a venture. I know not whether tomorrow, next month or in six months will find the equity markets 10% higher or lower; and the same applies to bonds.
As to handling MFO. I surely wish you had the time to share your knowledge from the many years of investing; and especially for the benefit of the younger one's here at MFO. When the mentors pass away, the knowledge usually becomes lost.
The site, by its very nature and existence; is a teaching and learning site. Please participate more with your written words. Ted, we are sure the knowledge is there and waiting to be shared.
Hey, take care down your way.
Catch
He was the main linkster at FundAlarm and was a nice contributor to some discussions there.
I think both Catch and Ted both bring perspectives to the board. It is up to each of us to look at these presentations, as well as the ones I bring, to see if there is a fit for each of us.
Catch has his way, I have my way, and Ted has his way. I'll bet all three of us have taken more from the market, through the years, than it has taken from us. And, folks that is what success is about.
Any takers?
Peace be with you ... and, you.
Skeeter
Regards,
Ted
Heck, I sure don't have a problem with anyone for how and what they choose to fund their portfolio(s).
As I noted several days ago, I find no problem with having several multi-sector bond funds, cause they sure don't act the same and one has added more diversity into this portfolio group.
Now, if one has several active managed funds in a narrow sector; that may be another cosideration. This could be more true using only etf's or indexes.
Skeeter, not unlike your situation; we currently have numerous acct. positions within difference retirement accts using different vendors. These will get the big blend in the near future.
You got your groove on handling your mix with your methodology that is providing results. This is the important part, eh? You surely are way out in front of this house's returns so far.
Lastly, with the technology we have at our fingertips; it is not difficult to monitor numerous holdings; unless one is a trader using etf's and related.
Although we are still in the grips of winter here in MI; I can't believe that Daytona is not far away on the calendar. I didn't get much of a chance last year, to view many races; but will always do this one and 'Dega.
Take care down there,
Catch
Thanks for your response(s).
Where I was coming from on my above comment was I don't have a problem with your post nor those of Ted's except for the ones that have directed some harsh words at times towards you and then you respond with a come back which is normal. And with this the zings continue. I have been there and done that myself. But, what concerns me is this keeps feeding itself into something that I don't enjoy reading and it seems to have been going on now for about a month or so.
Somehow, I hope you and Ted can find some common ground and peace between the two of you. I feel you are both too valuable to us at MFO for this activuty to continue and I hope it will soon cease.
Peace
Skeeter