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.
I don't have any exposure to high-yield bonds, mainly because I do not understand them well. It would be interesting to hear the take from experts on this forum.
hi Kaspa any vehicles/equities/bonds, etc... have their own risks. The fundamental of economy is much better compared to Fall 2008, banks maybe starting to lend, more confidence are back in market, corporations sitting on mountains of cash and maybe hiring soon. These factors could be favorable for HY bonds and maybe good headwinds from now. We also had a small corrections and more investors are jumpin' back into HY. We do have record low interest rates which give bonds yields more attractive comparing to CDs. We have less and less corporate defaults going forward and these conditions highly favor corporate junkie bonds. The chance of most of corporations heading toward bankruptcy are also much lower today.
However, there are risks and these bonds that are BB or lower have ~ 15s-20s% default given long term studies.
The differences between corp HY ETFs/funds versus single private bonds are ETFs & funds are more diversed and you are more protected and one bond gives more returns but also has more risks in return
I do have lots of privatized corp bonds, I mostly buy BB+ or higher and the chance of bankruptcy are much less
One example - I did have some TXU bonds but sold it - once was the largest energy provider in Texas but due to low natural gas prices this company has lost lots of $$ and they may face default and perhaps bankruptcy... If one bond default you may loose all your $$ [pending legal court actions and you may get cents on the dollars back]. If you have JNK [junk ETFs] you certainly get the monthly dividends but the NAV would be highly correlated with everyday's price and you may not get all the capitals back if some of the holding bond mature.
I'm a big fan of Gundlach and own his DBLTX/DBLEX and RNSIX. I recall of few of his comments on HY and they were all negative. That stopped me from making a play for them via an ETF or otherwise at this time in a search for yield. I would be very discriminating and selective here with HY. But this also plays into my negative view of the economy and my deflation bias. More suffering to come, I believe.
Comments
any vehicles/equities/bonds, etc... have their own risks. The fundamental of economy is much better compared to Fall 2008, banks maybe starting to lend, more confidence are back in market, corporations sitting on mountains of cash and maybe hiring soon. These factors could be favorable for HY bonds and maybe good headwinds from now. We also had a small corrections and more investors are jumpin' back into HY. We do have record low interest rates which give bonds yields more attractive comparing to CDs. We have less and less corporate defaults going forward and these conditions highly favor corporate junkie bonds. The chance of most of corporations heading toward bankruptcy are also much lower today.
However, there are risks and these bonds that are BB or lower have ~ 15s-20s% default given long term studies.
The differences between corp HY ETFs/funds versus single private bonds are ETFs & funds are more diversed and you are more protected and one bond gives more returns but also has more risks in return
http://en.wikipedia.org/wiki/Bond_credit_rating
http://www.etftrends.com/2011/08/etf-chart-of-the-day-peritus-high-yield-hyld/
I do have lots of privatized corp bonds, I mostly buy BB+ or higher and the chance of bankruptcy are much less
One example - I did have some TXU bonds but sold it - once was the largest energy provider in Texas but due to low natural gas prices this company has lost lots of $$ and they may face default and perhaps bankruptcy... If one bond default you may loose all your $$ [pending legal court actions and you may get cents on the dollars back]. If you have JNK [junk ETFs] you certainly get the monthly dividends but the NAV would be highly correlated with everyday's price and you may not get all the capitals back if some of the holding bond mature.
good luck
I will second fundalarm's below....."huh?" Desota, have you a document or an explanation of your statement? "We" don't understand the statement.
Thank you and take care,
Catch