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Bond Market Is Ridiculously Oversold – Jeff Gundlach
Ted, PLEASE get well and come back soon. This is an almost 3 week old link and really old news. Bonds must be even more ridiculously oversold now being they were 2.38 at the time of the interview.
@FundStudent, Thanks for the interview link. I agree with everything JG said, as equities are likely to go higher, and may stall when the 10YR note gets to 3%. JG usually has a good feel for the FI and equity markets.
I continue to hold EM bonds, a pretty good slug. Served me well, even after I took a needed radical step some years ago in order to make-over my portf. Also hold a global bond fund. No more domestic "core" fund, though. I also get domestic bonds via my two balanced funds: PRWCX and MAPOX. Others referred to above are: PREMX and PRSNX. These two, combined, are 25.51% of portf. Reinvesting everything continues, still.
I am confused. If interest rates go up, bonds will go down. Is what he said as well. So bonds are oversold means what? Bond Funds are over sold? And if so, why is that "ridiculous"?
For the longest time everyone has been saying bonds will tank because interest rates can only rise from here. So Gundlach is saying to sell his bond funds now or buy them?
@VintageFreak: Your comments are exactly spot on. Both the media and the investment experts do a piss poor job of explaining bonds.
I'm no bond expert so I will make a shout out to @Junkster, @BobC, @Anyonelse who would like to step into this thread or create other threads/links that provide "bond-ucation".
As simple as these investments (bonds) often are, they sure are hard to understand at times.
I am more of a stock guy than bond fella; and, although I do have a good diverse bond side within my portfolio I understand stocks better. With stocks now being a little overvalued, by my market barometer, this perhaps leave bonds a little undervalued but I don't believe they are so undervalued that they have become oversold.
With this, if your portfolio has become unbalanced with respect to your asset allocation ranges then you might wish to consider this an opportunity to rebalance. Recently, my son brought me his rebalance notice from his 401k provider where they sold off some of his stock funds and bought some bond funds to rebalance his allocation.
For me, I not buying bonds at this time. If I were to rebalance by selling some equities I'd go to cash (or convertibles) with the sell proceeds over buying traditional bonds. I'm thinking with earnings improving I am going to continue to overweight stocks at this time within my own portfolio. Thus far this year my reference sources reflect high yield being the best performer within bonds; but, convertibles have thus far trounced high yield.
I'd simply caution readers that Gundlach was referring to the immediate moment - not longer term. If I understand "oversold" it means a sell-off has gone too far and a correction (period of buying) should soon occur. So, in listening to bee's linked interview and looking at his comments in Barron's, Mr. G sees (saw?) a temporary period of undervaluation in terms of daily trading activity.
Longer term, Gundlach is bearish on rate-sensitive bonds, although he sees opportunities in some floating rate bank notes, some EM bonds, some low grade corporates and some funds. Putnam Primier Income Trust (PPT) and Power Shares Senior Loan Portfolio (BKLN) are two strong recommendations he makes in Barron's (January 23).
PTIAX Performance Trust Strategic Bond Fund 4Q 2016 | COMMENTARY While interest rates and spreads have waxed and waned somewhat since the crisis, volatility has been relatively mild, and the xed-income landscape has not changed fundamentally since the Fund launched in 2010. Consequently, our opinion on where value lies within fixed income has not changed much. Someday it may, but we’re not there yet. We still believe that seasoned non-agency residential mortgage backed securities (RMBS) offer more yield with less real world credit risk than any other sector in the fixed income space. Static Structured Credit “Portfolio Defense” Allocation Performed Well During Rate Rise Increased Tax-Exempt Municipal Allocation Tax-exempt municipal bonds became particularly attractive post-election after the sell-off in bonds. After interest rates rose, we saw tax-exempt municipal bonds as the most effcient way to lock in higher rates http://ptiafunds.com/documents/ptiax_commentary.pdf
Guys, I'm not looking to understand bonds. I don't claim to be at expert at anything, but that's not my question. I'm just trying to understand what the heck the Video was about.
For instance, here's one interpretation I want to offer (and you guys can tell me if that's what he is saying or something else)
People sell bonds when they expect interest rates to rise. If "bonds are oversold", then that means Gundlach thinks people's expectations are not going to pan out in future. In other words, interest rates will not go up meaningfully, and holding bonds and making interest would be a good thing. As to over what "term" he is referring to is anyone's guess. If he is talking short term, then I propose capital punishment for him and everyone at CNBC.
@VF - You are correct. At the time of the interview Gundlach thought the bond sell-off had gone too far. But longer-term he expects rates to continue rising and rate-sensitive bonds to do poorly.
The big difference I think: Gundlach is a bond trader. Most of us are not. Another difference: His bond universe is very wide, including bonds and bond derivatives for which rising rates wouldn't necessarily be a problem
(The CNBC clip didn't make that very clear. He explains it better in The Barron's interview discussed in another thread.)
@hank - ok then. Like I said, capital punishment for CNBC and Gundlach. First print authors had quotas, not Gundlach also has quota to appear on TV from his marketing team.
Utter nonsense. I hope this is not suggestion subpar performance from Gundlach going forward. I recall a certain fund manager who did too many appearances in media for no freakin' reason and then sucked up the place mightily.
Comments
3% on the 10 year - I said that!
Kevin
Any idea on how DoubleLine Total Return and Core bonds are doing?
DLFNX 3 mos: -1.35%
For comparison: DODIX, 3 mos: -down 0.74%.
MWTRX 3 mos. -1.88%.
For the longest time everyone has been saying bonds will tank because interest rates can only rise from here. So Gundlach is saying to sell his bond funds now or buy them?
Your comments are exactly spot on. Both the media and the investment experts do a piss poor job of explaining bonds.
I'm no bond expert so I will make a shout out to @Junkster, @BobC, @Anyonelse who would like to step into this thread or create other threads/links that provide "bond-ucation".
As simple as these investments (bonds) often are, they sure are hard to understand at times.
For my part I will link a well written, 8 part series on bonds. Part 4 is titled - Bond Basics: Yield, Price and other Confusion
investopedia.com/university/bonds/bonds3.asp
With this, if your portfolio has become unbalanced with respect to your asset allocation ranges then you might wish to consider this an opportunity to rebalance. Recently, my son brought me his rebalance notice from his 401k provider where they sold off some of his stock funds and bought some bond funds to rebalance his allocation.
For me, I not buying bonds at this time. If I were to rebalance by selling some equities I'd go to cash (or convertibles) with the sell proceeds over buying traditional bonds. I'm thinking with earnings improving I am going to continue to overweight stocks at this time within my own portfolio. Thus far this year my reference sources reflect high yield being the best performer within bonds; but, convertibles have thus far trounced high yield.
Skeet
Here's their site. A bond ladder can be evaluated (created) using their bulletshare bond etfs. Each etf is sold (distributed) in the year it matures.
Overview:
gi.guggenheiminvestments.com/products/etf/bulletshares
Build your own Bond Ladder using Bulletshares:
gi.guggenheiminvestments.com/products/etf/bondladder?utm_source=intermediary&utm_medium=button&utm_content=bond%20ladder&utm_campaign=BulletShares%20Home
Longer term, Gundlach is bearish on rate-sensitive bonds, although he sees opportunities in some floating rate bank notes, some EM bonds, some low grade corporates and some funds. Putnam Primier Income Trust (PPT) and Power Shares Senior Loan Portfolio (BKLN) are two strong recommendations he makes in Barron's (January 23).
Performance Trust Strategic Bond Fund
4Q 2016 | COMMENTARY
While interest rates and spreads have waxed and waned somewhat since the crisis, volatility has been relatively mild, and the xed-income landscape has not changed fundamentally since the Fund launched in 2010. Consequently, our opinion on where value lies within fixed income has not changed much. Someday it may, but we’re not there yet. We still believe that seasoned non-agency residential mortgage backed securities (RMBS) offer more yield with less real world credit risk than any other sector in the fixed income space.
Static Structured Credit “Portfolio Defense” Allocation Performed Well During Rate Rise
Increased Tax-Exempt Municipal Allocation
Tax-exempt municipal bonds became particularly attractive post-election after the sell-off in bonds. After interest rates rose, we saw tax-exempt municipal bonds as the most effcient way to lock in higher rates
http://ptiafunds.com/documents/ptiax_commentary.pdf
For instance, here's one interpretation I want to offer (and you guys can tell me if that's what he is saying or something else)
People sell bonds when they expect interest rates to rise. If "bonds are oversold", then that means Gundlach thinks people's expectations are not going to pan out in future. In other words, interest rates will not go up meaningfully, and holding bonds and making interest would be a good thing. As to over what "term" he is referring to is anyone's guess. If he is talking short term, then I propose capital punishment for him and everyone at CNBC.
What say you?
The big difference I think: Gundlach is a bond trader. Most of us are not.
Another difference: His bond universe is very wide, including bonds and bond derivatives for which rising rates wouldn't necessarily be a problem
(The CNBC clip didn't make that very clear. He explains it better in The Barron's interview discussed in another thread.)
Utter nonsense. I hope this is not suggestion subpar performance from Gundlach going forward. I recall a certain fund manager who did too many appearances in media for no freakin' reason and then sucked up the place mightily.
I'm not buying any more DSENX.