Jeff Gundlach, about the only bull on 10 year bonds at the beginning of 2014, was interviewed today on CNBC. The takeaway is Yellen doesn't want to raise rates and they should remain stable for the rest of 2014. He said he was looking for 2.20 to 2.80 a few months back and we are now at the mid-point of that. I believe we hit 2.31 intraday a little while after that call so pretty good on his part once again. Tucked in his interview was he said the bottom for long term rates had already been hit and they will now rise but at a VERY, VERY slow clip. I respect Gundlach but never listen to the talking heads because in the end the only way to win at this game is to listen to the action of the market and act accordingly. I certainly wasn't a bull at the beginning of 2014 and believed like everyone else that rates had only one way to go and that was up. But the action at the beginning of January 2014, especially in junk muniland proved me wrong so I acted accordingly. I haven't a clue where the market - stocks or bonds - will be at the end of 2014 (opinions and predictions will only kill you) but will let the market dictate my actions.
Edit: I sure haven't liked the action of bonds recently, mostly the 10 year, especially in light of Friday's employment report. So will remain diligent in case we get some unexpected spike upward.
Comments
Regards,
Ted
http://video.cnbc.com/gallery/?video=3000309118
Agree, too much sideways in most bond areas recently (excluding the HY muni area you've written about). The only blip of value was when things were a bit more rough with the Russian moves.
'Course, the big question is where does the "big" money run to, to hide for awhile???
Thank you for continuing to be here.
Take care,
Catch
U.S. 10-year bond rates will remain between 2.2 and 2.8 percent for the rest of the year, bond guru Jeffrey Gundlach told CNBC on Tuesday.
"The low in U.S. rates was in July 2012, so U.S. rates are rising. They're just rising very slowly and I think that's going to remain the case for a couple more years," Gundlach, CEO of DoubleLine Capital, said ....
That July '12 low was ~ 1.40 on the 10yT, way below the recent low of ~ 2.33. He continues to use the 2.2-2.8 range for the rest of the year that he's been talking about for months, so, with the rate higher than 2.2 now, he isn't saying the low is necessarily in for this year. Essentially there's nothing new from JG here.
"Ya can't trades the markets ya wish for, ya have to trades the markets ya have." I suspect Big Money is trying to weaken our resolve and scare us out of all our bonds. Sorry, Banksters, you can't have them, you'll have to recapitalize your off-balance sheet Rule 157 losses some other way.
I got in too late to listen to his webcast but guess the above sums up his feelings on Treasuries. Another link shows he said he is not afraid of junk corporates here and added a bit. I am real afraid of junk corporates. I'm not a chartist, but talk about a perfect double top in the Merrill Lynch High Yield Master II Index last week and it has been all down since.
Hope those who listened caught Gundlach's comment about the sweet spot in bonds being funds that have higher yield : duration ratios, which is essentially the same thing the Pimco-ites and other sources (e.g., Sam Lee at M*) have been saying in different terms for a while. Shorter but not supershort duration, lower end of IG and upper end of non-IG fits that bill apparently. JG showed a chart that IG corporates are the most overvalued they've been in a lo-oo-ong time.
Does it properly diversify an equities heavy portfolio? Do these bonds play the typical role that people want bonds to play, that is, to diversify equities? Articles I read written by Larry Swedroe and William Bernstein strongly favor only very high quality bonds, saying that below investment grade bonds do not provide proper diversification and risk reduction for equities.
Perhaps what they are saying is that someone with a 100% bond portfolio might gain valuable diversification from junk bonds. But someone using bonds for what John Bogle calls "ballast" and "an anchor to windward" might need only investment grade bonds for this purpose.
If junk bonds tend to perform somewhat similarly to equities, how are they providing the diversification? Yes, I know these are short term junk bonds, but the general principle is still there.
Appreciate your comments on this Bob.
thanks.
YTD, 1-month, 1-year, 3-year
DLTNX 4.81 -0.07 6.35 4.64
DLFNX 5.48 0.27 7.92 4.29
DLTNX is getting VERY crowded. It's been getting that way for quite some time. That's ONE reason I chose the other. I couldn't do for myself what JG is doing for me. Still, a lot more people have chosen to go with the other product. I habitually go and look to compare DLFNX with DODIX.
DODIX 4.56 0.07 7.18 4.49
So, given 3 year compounding, DODIX wins by a hair or two.