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Amid the optimism (or complacency), the question remains: Why would a rational investor buy bonds that yield well under the rate of inflation?”
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I’ll submit here, for what value it may hold, Randal Forsyth’s opening salvo in this week’s “Up & Down Wall Street” (Barron’s June 14).
“Amid the optimism (or complacency), the question remains: Why would a rational investor buy bonds that yield well under the rate of inflation?”
“Why would a rational homeowner buy homeowner’s insurance knowing there’s a higher than 90% probability he will lose all the premiums paid in without ever reclaiming a single dime?”
Given the global warming, flood insurance is on the rise on southeast coast as the major cities faces several hurricanes per year. Living in Pacific Northwest we experienced wildfires last year.
I don't know of any other fund that has managed interest rate volatility as well and as consistently as CLMAX. Over the past five years, annual total returns have fluctuated nicely within a range of 5.2 and 8.9%, and YTD it's up 6.1%. In the Nontraditional Bond category, M* determined that the fund's 3-year and 5-year total returns rank in the top 1%.
In the meantime, I hold the following three dedicated bond funds in my portfolio: NVHAX, RCTIX and TSIIX, with very pleasing YTD total returns of 5.9%, 3.6% and 1.8%, respectively. So far, so good.
At a glance, I’d say these guys know how to short bonds & employ leverage thru derivatives. I like to check returns back to at least 2008 when possible. This one’s less than 10 years old. I’m sure there’s a place for a fund like this in some folks’ portfolios. But if you hold bonds for the “old fashioned” reason - to hedge against economic calamity (like 2008) - than shorting investment grade bonds ISTM probably isn’t going to achieve the desired effect. Possibly these guys are quick on their feet and good at changing course.
Bonds today are a bit of a mystery. Just when everybody and his brother was expecting the 10-year to rise from around 1.7% to 2% it reversed course and fell all the way down to 1.46% (at last look). I’ve heard 2 reasons put forth: (1) Even these low rates look attractive to foreign investors; (2) Corporate pension funds are again healthy because of the hot stock market and need to lock-up funds in bonds to meet obligations 30 + years out. So they’re pouring stock gains into fixed income products.
Stay Kool, Derf
Here’s the gist:
“Due to our expectations for higher bond yields in the second half of the year, we continue to suggest investors keep the average duration in their portfolios below their normal benchmark. For example, for an investor with a portfolio of core bonds that is similar to the Bloomberg Barclays U.S. Aggregate Bond Index, which has an average duration of 6.5 years, we would suggest reducing it to the three- to five-year region. If yields do move higher, with real yields in positive territory, we would view it as an opportunity to gradually extend duration through a laddered approach.”
I just dug up the MaxFunds take on CLMAX:
Score: 9 / 100 "Poor"
Best Case: 22
Worst Case: -30%
Always - 2 sides to every proposition.
I’ll be the first to admit Ol’ Max Ferris (proprietor of MaxFunds) seems to have a dour disposition when it comes to grading funds. Few that I own score very highly there. But I like to look at a fund from as many different perspectives as possible before buying. It’s not the only place I look, but I value their opinion nonetheless.
In the last 4 + 12 weeks, CLMAX ranks at 94+72 and lagging badly with 0% + 0.9%.
CLMAX has a good record in the riskier specialized securitized when you look at 3 years, but as a trader I'm looking at a shorter-term.
Generally, I like Schwab take on fixed income more than most others (VG, Fidelity) but I hardly ever use it for my trades.