http://news.morningstar.com/articlenet/HtmlTemplate/PrintArticle.htm?time=93026709Sorry if this article was posted before, but I just read it and thought it was very informative on where 2 very good bond managers see income opportunities in the future. A couple interesting points, some of which have been stated by MFO posters:
* both suggest staying away from treasuries. they can't predict when when inflation will hit, but the fall in treasuries will come.
* you will have to go global to get returns on bonds. Fuss says that his LSBRX fund is constrained to 20% maximum "non-U.S., non-Canada holdings outside the US". He concedes that he is some what handicapped because of that (limiting global exposure).
* both Fuss and Hasenstab believe investors will have to take added risk in order to get decent returns. Fuss - adding equity-type risks with common stock and convertibles--is the key to successful bond investing. Hasenstab- "Whether it's credit risk or whether it's currency risk, there's no way to get returns without taking some degree of risk..."
* where they differ: Fuss has concerns about the HY sector. Hasenstab likes HY US . corporate bonds.
Comments on how you intend to place your income producing bets are welcome. For myself, I've added a couple funds such as PGDPX and RPSIX into the income side of my portfolio. Added risk yes, but hopefully better return in the future.
Comments
Original link didn't link.........this should be good.
Fuss and Hasenstab M* interview
Regards,
Catch
The fund name should be Templeton Global ex-U.S. bond fund.
Mr. Hasenstab notes from the article:
Hasenstab- "Whether it's credit risk or whether it's currency risk, there's no way to get returns without taking some degree of risk..."
And this statement is what has kept him away from U.S. Treasury issues? It also has affected the portfolio performance for a few years, too. I am sure he no longer looks at capital appreciation from the 7-30 year Treasury issues; and I am also sure he could care less about what I think.
Oh, well; I sure can't argue against his thinking in the same light; as he has forgotton more knowledge about the bond sector; than I have ever known in my life, during the time it took me to write this statement.
I wish both of us well, going forward with our bond sector choices..........
And for all who would like a real ringer of a time in the bond world; purchase the Spanish and/or Italian 10 yr issues. The yields may be close to the top edge.
May be some easy money sitting with these; if one can stay ahead of JPMorgan or GS or.
"Spanish and/or Italian ... yields may be close to the top edge."
This is a good example of why I don't make short term predictions or trade on them. (Not picking on you in particular, it's just that this one stood out as I looked at the headlines today.)
From Reuters: Spanish bond yields hit a new euro-era high above 7% and Italian yields jumped on Monday. ... The swift reversal in sentiment ... Yields on the 10-year Spanish bonds rose ... 23 basis points on the day. ... Italian debt ... push[ed] yields up 15.5 bps ... but the selloff was deeper in Spain."
You might still wind up being correct (but early). Seems like a crap shoot, though.
Well.......yes, I was just kinda mess'in around with outloud thinking placed into words here.
As you noted, the bonds I mentioned still could move much higher in yield and we too; do not play in this area of trading.
My fantasy thinking with these particular bonds and their yields (of which, our house places close attention) is that, my best guess is that if either of the yields become much higher........well, there is going to be much more stress in financial systems and I still don't know what the various entities in Europe can do to fix the situation.
The scary part of this for these two countries and the affects spread over the entire Euro financial system, is that I can't imagine how any country being deep into the "do-do" of monetary affairs can afford to pay these yields.
Not unlike one who has a high credit card balance and finds the notation about the minimum monthly amount required and what the payback period and amount will be if one only makes the minimum payment.
Still a pretty nasty situation.
Take care,
Catch