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DH, Obviously what I was watching was not correct or I misinterpreted it. I think the better question is, what were you looking at? I am not an overly sophisticated investor, so if you could enlighten me, I would greatly appreciate it.
I do not want to get caught off-guard again. You can bet there will be another leg-up or two in the coming year, but when?
Thanks for sharing!!
The bond market/buyer/brokers are much different then the stock market. The bond market is the family station wagon to the stock market Tesla. The things that tipped me off to the market change were what bond investors look at:
Macro - unemployment rate and fear of inflation
Monetary - Fed meeting in Dec - rate increase
Fundamental - company earnings not as good as expected - companies will try to raise prices (this did not go into my decision)
Political - Trump uncertainty
Technical - the chart in the link I posted and others (this was the final straw that got me to sell)
I sold all my bond holdings last month and am 100% in cash.
So, from the above you can see this trend continuing until after the Fed meeting and possibly until after the State of the Union address.
An area to watch is the 10 year approaching 3%. That is probably the upper limit for this period.
The areas I am watching are: High Yield Emerging Bonds - I am putting a toe into this now - monthly investing. REITS High Yield Corp. Closed End Bond Funds Dividend paying Tech funds
Floating rate funds move almost lock-step with high yield corporates albeit without the volatility (2008 was an exception) They seem now like a no brainer, can't miss, sure thing trade with among other things the Fed expected to raise rates next month and once or twice or more in 2017. Yes, I know how "sure thing" trades always work out - they don't. Although they are about the only survival in bondland the past three months. If high yield corporates surprise to the downside here because of looming defaults triggered by the rapid rise in Treasuries that could be a huge negative to floating rate funds.
Been doing just that since 1985. I never was much for conventional wisdom.
Edit: The above is incorrect. Been doing that since 1966. Just it took me till 1985 to figure out how to turn it into a consistent market beating strategy.
Dollar strength right now is causing some pain in overseas/global stuff. And rising rates are hurting REIT funds. How long can we expect to wait before it all levels-off?
@Crash said "rising rates are hurting REIT funds" Here's some "medicine" for that ailment.
Reefer REIT: Innovative Industrial Properties' IPO Nov. 9, 2016 9:34 AM ET Innovative Industrial Properties, Inc (Pending:IIPR) has filed for an IPO seeking to raise $175 million. Innovative Industrial seeks to become the first REIT to monetize the growing medicinal marijuana industry utilizing sale-leaseback transactions and offer investors an indirect method to capitalize on the sector. In a time where REITs find cap rates compressing in most industries, Innovative Industrial hopes to prove the medicinal marijuana industry is a cash cow for investors. http://seekingalpha.com/article/4021523-reefer-reit-innovative-industrial-properties-ipo ....who would have imagined that there would be a "weed REIT", Innovative Industrial Properties was to list on the NYSE this week. According to the company's website, it "targets medical-use cannabis facilities for acquisition, including sale-leaseback transactions, with tenants that are licensed growers under long-term triple-net leases." Innovative believes this industry is poised for significant growth in coming years, and is focused on being a creative capital provider to this industry http://seekingalpha.com/article/4024483-reit-world-back-business
Innovative Industrial Properties™ Removing Financial Barriers For Licensed Medical-Use Cannabis Growers™ Our Team Industry Leaders Our Market The Licensed Medical-Use Cannabis Industry Our Properties Medical-Use Cannabis Cultivation and Processing Facilities Our Tenants Sophisticated, Best-in-Class Medical-Use Cannabis Growers Our Leases Long-Term, Triple-Net Arrangements http://innovativeindustrialproperties.com/business
DH, thanks for the education; I will have to keep a closer on eye on those factors. You see 3% for the upper limit for this period. That's a pretty significant move from here.
What do you anticipate from there? How much higher can the rates go in 2017? What do you see as the "normalized" rate or "leveling" off rate?
I did move a portion of my bond holding to BL, but I'm inclined to agree with you and put the rest in CASH/Money Market fund, at least I can make 2/3 percent in a MM and still have the flexibility to buy when the time is right, without incurring any restrictions or fees!
There's so much uncertainty since the election. I don't think any of us have a clue where things are heading. If Trump gets the kind of infrastructure stimulus package from Congress which many seem to think he intends, along with higher borrowing and tax cuts, that's bearish for bonds and bullish for just about everything else - at least for a year or two until the rising debt shocks us back into austerity. But he has Congress to deal with. Many commodities, notably copper, have turned up in recent days anticipating some type of stimulus. Big military buildups, as Trump appears to desire, also bolster an economy short term - especially the Northrups, Lockheeds, General Dynamics and Boeings of the world.
On the other hand, the first year of a new President's term usually isn't that good for equities. Both the Pres and FOMC like to get the the tough love out of the way early. The Pres., especially, wants things improving as the next election nears.
Bonds to some extent self-correct. As rates rise there's more income in the pockets of investors helping mitigate declining values. At some point bonds again begin to look attractive to new investors. I'd think, however, that going long on bonds (durations over 10 years) would have been foolish in recent years. It may take decades for those investors to break even. And yes - there were plenty of warnings here and elsewhere about the dangers of longer term bonds when the 10 year was yielding 2% or less. ---
I haven't made any changes to portfolio in recent months - except that a few weeks ago I shifted some $$ intended for near-term household expenses from Price's money market fund to their ultra-short bond fund. The new govt. money market regs caused money market fund yields to suffer even more, but pushed up rates on ultra-short high grade corporates. Even with the sharp sell off, TRBUX held at $5.01 - which surprised me. Since the election I've lost a half-percent on my investments. Balanced and energy/commodity related funds drifted higher. But my meager exposure to bonds - especially the international variety - got hammered. So it goes.
As part of a diversified portfolio, I believe inflation-adjusted bonds have their place.
I said this a few years ago but I still believe it that when inflation does appear it may be quick and vicious. We are spending a ton of money and the Fed is keeping the lid on.
@Crash said "And rising rates are hurting REIT funds. How long can we expect to wait before it all levels-off?" Real Estate Review:Nov. 20, 2016 3:21 PM ET Hoya Capital Real Estate REIT valuations in 2016 have been driven almost entirely by movements in US interest rates, but this pattern has diverged since the Trump election. REITs have held up surprisingly well in the face of sharply higher interest rates. Residential REITs struggled this week amid stronger-than-expected construction data and comments from President Elect Trump on a possible deportation of 2-3 million people. While we don't expect mass deportations, we do expect a slowdown in net migration into the United States, which would be a drag on apartment and self storage demand. Public Storage (NYSE:PSA) and Apartment Investment Management (NYSE:AIV) fell 5% each. The re-pricing continued this week, as investors in residential REITs had to weight the possibility of sharp declines in net migrations into the United States as a result of stricter immigration policies. Rent inflation, though, remains strong, a signal of continued tightness in the multifamily rental market. Rent inflation rose 0.4% month over month and is up 3.5% year over year. 30-Year Mortgage rates, which tend to track movements in medium and long term Treasury bonds, surged higher this week and are at or above 4% for the first time since late 2015. All else equal, higher mortgage rates puts downward pressure on house prices and home sales, as it pushes marginal buyers out of the market. This may be a positive for apartment REITs. We won't know the effects on home prices, new home sales, or new construction for several weeks or months. Labor markets have shown signs of continued strength. Initial jobless claims data was better than expected. Data this week showed the lowest jobless claims since 1973. Retail sales showed continued strength in October. Retail sales excluding auto gained a strong 0.8% in October, following an upwardly revised 0.7% in September. Retail sales have risen in seven of the past nine months and are now up 4% year over year. Digging deeper into the data, we see strength in grocery stores, clothing stores, miscellaneous retailers, and sporting goods stores. Online retail (non-store retailers) continues to show strength. Department stores continue to struggle, but their pace of decline has moderated. http://seekingalpha.com/article/4024976-real-estate-review-reits-stabilize-construction-strong-yields-mortgage-rates-surge Also Real Estate Implications Of Trump's Win Nov. 17, 2016 3:55 PM ET|4 comments | About: iShares U.S. Real Estate Etf (IYR), Includes: AMZN, AVB, EQR, GGP, PAC, PLD, PSA, SPG, VNQ Hoya Capital Real Estate Hoya Capital Real Estate http://seekingalpha.com/article/4024392-reits-picked-winners-2016-real-estate-implications-trumps-win Bond Rally and Rout to Nowhere Posted on November 21, 2016 by David Ott Acropolis Investment Management, ...although 2016 feels like a year where anything can happen – bond returns are almost exactly what you would have expected back in January.
Despite all of the action, not much has really changed, which is why we try not to focus too much on the short-term movements. http://acrinv.com/bond-rally-rout-nowhere/
Comments
The things that tipped me off to the market change were what bond investors look at:
Macro - unemployment rate and fear of inflation
Monetary - Fed meeting in Dec - rate increase
Fundamental - company earnings not as good as expected - companies will try to raise prices (this did not go into my decision)
Political - Trump uncertainty
Technical - the chart in the link I posted and others (this was the final straw that got me to sell)
I sold all my bond holdings last month and am 100% in cash.
So, from the above you can see this trend continuing until after the Fed meeting and possibly until after the State of the Union address.
An area to watch is the 10 year approaching 3%. That is probably the upper limit for this period.
The areas I am watching are:
High Yield Emerging Bonds - I am putting a toe into this now - monthly investing.
REITS
High Yield Corp.
Closed End Bond Funds
Dividend paying Tech funds
What are your thoughts?
Derf
Edit: The above is incorrect. Been doing that since 1966. Just it took me till 1985 to figure out how to turn it into a consistent market beating strategy.
Here's some "medicine" for that ailment.
Reefer REIT: Innovative Industrial Properties' IPO
Nov. 9, 2016 9:34 AM ET
Innovative Industrial Properties, Inc (Pending:IIPR) has filed for an IPO seeking to raise $175 million. Innovative Industrial seeks to become the first REIT to monetize the growing medicinal marijuana industry utilizing sale-leaseback transactions and offer investors an indirect method to capitalize on the sector. In a time where REITs find cap rates compressing in most industries, Innovative Industrial hopes to prove the medicinal marijuana industry is a cash cow for investors.
http://seekingalpha.com/article/4021523-reefer-reit-innovative-industrial-properties-ipo
....who would have imagined that there would be a "weed REIT", Innovative Industrial Properties was to list on the NYSE this week. According to the company's website, it "targets medical-use cannabis facilities for acquisition, including sale-leaseback transactions, with tenants that are licensed growers under long-term triple-net leases."
Innovative believes this industry is poised for significant growth in coming years, and is focused on being a creative capital provider to this industry
http://seekingalpha.com/article/4024483-reit-world-back-business
Innovative Industrial Properties™
Removing Financial Barriers For Licensed Medical-Use Cannabis Growers™
Our Team
Industry Leaders
Our Market
The Licensed Medical-Use Cannabis Industry
Our Properties
Medical-Use Cannabis Cultivation and Processing Facilities
Our Tenants
Sophisticated, Best-in-Class Medical-Use Cannabis Growers
Our Leases
Long-Term, Triple-Net Arrangements
http://innovativeindustrialproperties.com/business
What do you anticipate from there? How much higher can the rates go in 2017? What do you see as the "normalized" rate or "leveling" off rate?
I did move a portion of my bond holding to BL, but I'm inclined to agree with you and put the rest in CASH/Money Market fund, at least I can make 2/3 percent in a MM and still have the flexibility to buy when the time is right, without incurring any restrictions or fees!
My gut tells me the we will find a new quieter range of rates but for how long??????
On the other hand, the first year of a new President's term usually isn't that good for equities. Both the Pres and FOMC like to get the the tough love out of the way early. The Pres., especially, wants things improving as the next election nears.
Bonds to some extent self-correct. As rates rise there's more income in the pockets of investors helping mitigate declining values. At some point bonds again begin to look attractive to new investors. I'd think, however, that going long on bonds (durations over 10 years) would have been foolish in recent years. It may take decades for those investors to break even. And yes - there were plenty of warnings here and elsewhere about the dangers of longer term bonds when the 10 year was yielding 2% or less.
---
I haven't made any changes to portfolio in recent months - except that a few weeks ago I shifted some $$ intended for near-term household expenses from Price's money market fund to their ultra-short bond fund. The new govt. money market regs caused money market fund yields to suffer even more, but pushed up rates on ultra-short high grade corporates. Even with the sharp sell off, TRBUX held at $5.01 - which surprised me. Since the election I've lost a half-percent on my investments. Balanced and energy/commodity related funds drifted higher. But my meager exposure to bonds - especially the international variety - got hammered. So it goes.
I said this a few years ago but I still believe it that when inflation does appear it may be quick and vicious. We are spending a ton of money and the Fed is keeping the lid on.
Real Estate Review:Nov. 20, 2016 3:21 PM ET Hoya Capital Real Estate
REIT valuations in 2016 have been driven almost entirely by movements in US interest rates, but this pattern has diverged since the Trump election. REITs have held up surprisingly well in the face of sharply higher interest rates.
Residential REITs struggled this week amid stronger-than-expected construction data and comments from President Elect Trump on a possible deportation of 2-3 million people. While we don't expect mass deportations, we do expect a slowdown in net migration into the United States, which would be a drag on apartment and self storage demand. Public Storage (NYSE:PSA) and Apartment Investment Management (NYSE:AIV) fell 5% each.
The re-pricing continued this week, as investors in residential REITs had to weight the possibility of sharp declines in net migrations into the United States as a result of stricter immigration policies.
Rent inflation, though, remains strong, a signal of continued tightness in the multifamily rental market. Rent inflation rose 0.4% month over month and is up 3.5% year over year.
30-Year Mortgage rates, which tend to track movements in medium and long term Treasury bonds, surged higher this week and are at or above 4% for the first time since late 2015. All else equal, higher mortgage rates puts downward pressure on house prices and home sales, as it pushes marginal buyers out of the market. This may be a positive for apartment REITs. We won't know the effects on home prices, new home sales, or new construction for several weeks or months.
Labor markets have shown signs of continued strength. Initial jobless claims data was better than expected. Data this week showed the lowest jobless claims since 1973.
Retail sales showed continued strength in October. Retail sales excluding auto gained a strong 0.8% in October, following an upwardly revised 0.7% in September. Retail sales have risen in seven of the past nine months and are now up 4% year over year.
Digging deeper into the data, we see strength in grocery stores, clothing stores, miscellaneous retailers, and sporting goods stores. Online retail (non-store retailers) continues to show strength. Department stores continue to struggle, but their pace of decline has moderated.
http://seekingalpha.com/article/4024976-real-estate-review-reits-stabilize-construction-strong-yields-mortgage-rates-surge
Also
Real Estate Implications Of Trump's Win
Nov. 17, 2016 3:55 PM ET|4 comments | About: iShares U.S. Real Estate Etf (IYR), Includes: AMZN, AVB, EQR, GGP, PAC, PLD, PSA, SPG, VNQ
Hoya Capital Real Estate Hoya Capital Real Estate
http://seekingalpha.com/article/4024392-reits-picked-winners-2016-real-estate-implications-trumps-win
Bond Rally and Rout to Nowhere
Posted on November 21, 2016 by David Ott Acropolis Investment Management,
...although 2016 feels like a year where anything can happen – bond returns are almost exactly what you would have expected back in January.
Despite all of the action, not much has really changed, which is why we try not to focus too much on the short-term movements.
http://acrinv.com/bond-rally-rout-nowhere/