Mining Funds...one step forward two steps back Another Step Back 3:25 PM Seeking Alpha
GDX
Gold miner ETF sinks to five-year low, gold closes at lowest since July
The Market Vectors Gold Miners ETF (GDX -5.5%) plunges to a fresh five-year low thanks to the newest PMI manufacturing data, which climbed to the highest reading since 2011; BTIG analyst Dan Greenhaus calls the data "stunning,” and bad for precious metals.Comex gold dropped $28.50, or 2.3%, to settle at $1,221.90 for its lowest close since July; the SPDR Gold Trust (GLD) is down 2.5% to kick off December’s trading.Silver slumped 3.7% to $19.29, also the lowest since July.ABX -5.3%, NEM -3.8%, GG -4.6%, KGC -3.4%, GFI -3.5%, NGD -8.2%, EGO -7.5%, AEM -7%, AUY -5.5%, AGI -8.9%, SLW -5.7%.Other ETFs: GDXJ, NUGT, IAU, PHYS, DUST, SGOL, UGL, DGP, GLL, GLDX, DZZ, UGLD, DGL, DGZ, AGOL, GLDI, DGLD, GGGG, RING, PSAU, TBAR, JNUG, UBG, JDST, SLV, AGQ, SIVR, ZSL, USLV, DBS, DSLV, SLVO, USV.
Not a precious metal miner,but a continuing trend:via S A
RIO
Rio Tinto plans to cut capital spending 20% each year through 2015
Rio Tinto (RIO) is the latest miner to guide capital spending lower, announcing a 20% capex cut in each of the next three years to ~$8B in 2015; iron ore output will reach ~350M metric tons/year.In an investor presentation to be delivered tomorrow, RIO says its YTD spending is ~50% lower than in 2012 and has already exceeded its target of $750M in full-year spending on exploration and evaluation.
Casey Research
Rock & Stock Stats
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One Month Ago
One Year Ago
Gold 1,252.10 1,345.50 1,729.50
Silver 20.03 22.49 34.35
Copper 3.19 3.28 3.59
Oil 92.72 98.20 88.07
Gold Producers (GDX) 22.28 25.78 48.04
Gold Junior Stocks (GDXJ) 32.50 39.26 87.60
Silver Stocks (SIL) 11.65 13.32 23.03
TSX (Toronto Stock Exchange) 13.395.40 13,440.61 12,202.85
TSX Venture 934.89 968.44 1,218.38
Rising Interest Rates Weigh On Real Estate Funds From Seeking Alpha
Gundlach: Time to buy interest rate risk
"People are absolutely freaking out about interest-rate risk," says Jeff Gundlach, sitting down with Robert Shiller to size up the investment lands
cape. Ever the contrarian, Gundlach suggests last year's 1.4% low in the 10-year Treasury yield could still get taken out. The catalyst? "You never know until after the fact; otherwise, it would be priced in the market.
But there is no inflation." To see "freaking out" in a picture, check out the price charts of the mortgage REITs, particularly the two proxies for riding the long end of the curve - Annaly (NLY) and American Capital Agency (AGNC). Gundlach: "You can take advantage of pockets of opportunity in what people don't want ... If you're willing to take the interest-rate [risk], you can get yields of 11% in the agency mortgage market."Constructive on housing (but not homebuilders), Gundlach is also bullish on non-agency mortgage paper, calling it the cheapest sector in fixed income on a risk-adjusted basis. Fans of also beaten-up non-agency mREITs like American Capital Mortgage (MTGE), MFA Financial, Dynex (DX), and Two Harbors (TWO) may want to take notice.Mortgage REIT ETFs: REM, MORT, MORLLong-duration Treasury ETFs: TBT, TLT, TMV, TBF, EDV, TTT, TMF, TLH, ZROZ, SBND, DLBS, VGLT, UBT, TLO, LBND, TENZ, TYBS, DLBL
Also A Good Read
Thirdly, monetary policy is being enlisted to try to generate the economic growth that politicians need to meet spending and entitlement pledges made to voters.
"Long term, it's not so much a financial crisis that we face. It's more a political and social crisis because these promises that we have made for ourselves will be broken," King told the BreakingViews conference.
Seen in that light, if the West is in the grip of ‘secular stagnation', as Summers suggested, the welfare state will have to shrink or taxes will have to rise to pay for it.
http://www.reuters.com/article/2013/11/29/us-economy-global-stagnation-insight-idUSBRE9AS03O20131129
Question on Core Bond Funds Regarding DoubleLine Total Return - there are two different issues here. One is whether a MBS fund is a good idea, and the other is whether Grundlach (and DoubleLine) is the best way to get such a fund.
I'll discuss each of these below, but my personal opinion on each question is "no".
Despite being called a "total return" fund, Grundlach (along with his flagship fund) is essentially an MBS bond manager. That's the way he ran TCW Total Return, and the way he continues running his new charge. As good as he is within this sector, a fund like this seems to be what you are asking to escape - a fund that is locked into one sector of the market (albeit able to move along the yield curve within the sector). Also one that makes heavy use of derivatives (like Bill Gross at PIMCO).
Don't get me wrong - I like intelligent use of derivatives. The fact that Bob Rodriguez makes use of interest only bonds (a form of inverse floater) is one of the things that attracted me to FPA New Income (FPNIX). But unlike that fund, which uses derivatives in moderation to reduce risk, Grundlach and Gross seem to make their use a core part of their strategy. These tend to be less liquid and as M* notes (in its analysis of DoubleLine Total Return), puts the funds at more risk in times of stress.
As a sector, MBS bonds command a somewhat higher yield, because of their lower (or even negative) convexity. This works to one's advantage in a stable, or even gradually and smoothly rising interest rate environment, but these bonds can take a pounding when interest rates are unstable or rapidly rising. Not a risk I would personally take now, at least not one where I would place 100% of my money as DoubleLine does.
For the past few years, there's been an anomaly in the market that has mitigated some of the normal MBS risk. With many homes under water, people were less able to refinance, so mortgages behaved more like "normal" bonds. Housing prices have recovered in many (albeit not all) parts of the country, so MBS securities may be approaching their traditional risk levels.
Assuming one does want a MBS fund, why Grundlach? One has to ask whether his old charge TCW Total Return, would be a better choice. With the latter, you get MetWest, which you seem to like as a management company. While Grundlach did better out of the gate (2H2010-11), that was with heavy use of derivatives - see above - and with a much smaller fund. He's now got a fund that's 4.5x as large as TCW, and has underperformed the MetWest team in 2012 and 2013. (Except for 2Q 2013, he's underperformed each quarter.)
It's not as though he's using a different strategy - various attributes of the two funds' portfolios - sectors, duration, credit ratings, are extremely similar (though TCW seems to have a small but not insignificant amount of short maturity bonds that are lacking in the DoubleLine portfolio).
Fundamentally though, I don't see any MBS fund meeting your interest in a fund that makes use of the full bond market. And I think their risk is rising as the possibility of "tapering" increases (simply because that roils the market).
sticking w/ dodge cox stock pays off big Reply to
@Ted: Who said otherwise? It looks great, but greater than it arguably is, because it's just es
caped that bad window period. Do the math, check the graphs, rather than attempting to contradict something illusory. You of all analytic types here would snort at a valentine article about 'sticking with something pays off' without sufficiently noting sample periods, reversion to mean, risk-adjusted returns in detail for tough times, overall risk compared with peers, and the like. Patience required, as M* puts it. Some would ask about its ulcer index compared with YAFFX, say.
A Measure Of Active Management Not having read the studies, I may be way off base, but IF active managers show persistence in exceeding their benchmarks, the citations in other older posts that almost no fund managers exceed index funds through two market cycles seems contradictory. Either the number of active funds is so small or the funds are so small that they escaped notice and weren't compared to indexers or the quoted study didn't include enough cycles. My vague recollection is that fewer than 1% of funds exceeded the index funds through three market cycles, but that could be an invented memory.
Alternatively, the successful funds attracted so many assets that they had to fail due to a dearth of good ideas, requiring money to be shoved into "safe" stocks and returning to their benchmark.
Risk Management with MF portfolio Decided to go with the CAPE or PE10 slopes and sold most of my recent mutual fund gains while keeping the base positions (probably should have sold more, but I can't make myself leave good funds). I didn't sell the L/S funds, but I may reconsider the long predominant funds.
Plan to put most of it into RSIVX and try to control my impatience.
My pending buys require a 10% correction.
Haven't reduced my stocks, probably a mistake, but I'm not paying 1-1.5% a year for them, and most pay a dividend.
Didn't sell in 2008-9, but was younger then. Won't sell if it happens within 3 years. Plan to be more balanced after that.
Fund managers generally did no better than the indexes in 2008-9. Those with significant cash now are preparing for the next correction, so they might be worth buying.
Depending on your age and risk acceptance, using index funds with 50-70% US stocks and the remainder of your stocks in international indexes, and 20% (high risk acceptance) in bonds (most writers suggest all US, but I like some international thru Vanguard), or 40% bonds (usual ratio)) has been good in the past. If near retirement, Social Security represents a bond equivalent, as per John Bogle, who has a lot more experience and is older than I, so you should shade your investments more toward stocks.
Foreign Bond Exposure Reply to
@willmatt72: Thanks for the question. I've used RPIBX only sparingly in the past and currently hold only Oppenheimer's OIBAX in that segment, which I think is the better fund. Yes - lackluster performance as you say
Let me guess: (1) Price's fixed income funds weren't very good up until around 2004 or 2005 when Mary Miller became head of their fixed Income division. (She has since left for a position at Treasury.) Apparently, Mary's positive influence somehow es
caped this fund. (2) Price's foreign investing over the years hasn't been a strong suite either, and that may have impacted this fund. (3) RPIBX holds little, if any, in lower quality and EM debt, sticking pretty much with investment grade paper. In the past this resulted in its lagging funds like OIBAX, which holds a sizable chunk of such debt. While it's true EMs have suffered this year, higher quality paper in interntional markets hasn't es
caped damage either as the Dollar soared against major world currencies - a consequence of rising rates at home and falling rates abroad (especially in the developed nations of Europe where RPIBX has significant holdings.) Higher credit quality tends to increase a bond's sensitivity to interest rates and currency fluctuations.
Those are my three best guesses as to what's going on there. It's likely some combination of all three. Let me say: I'd never expect RPIBX to be a sector leader, mainly because Price is a conservative house who generally won't play games to enhance returns in its fixed income funds (an area where additional risks are often taken in search of yield). Nonetheless, I would expect RPIBX to rank somewhere among the top 25% - 35% of its peers - which it presently does not. And all this said, I still recommend Spectrum Income (RPSIX) as a very good fund that might meet your needs. Price seems to excell at making allocation decisions. And the other international income fund it holds, PREMX, is generally very well regarded.