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Global bond manager Jack McIntyre says central banks around the world are determined to stamp out inflation. Their success will determine the direction of markets and economies. He explains how he is investing for several outcomes.
Investments During a Period of Stagflation:
Stagflation is a period of economic stagnation combined with high inflation. When the economy stagnates, growth slows and unemployment rises. Demand for goods and services may decline as income levels drop. That in itself is bad enough but high inflation compounds the problem, as the income that people do have doesn’t go as far since prices are higher.
This weekend’s guest who recently reopened his fund to new investors because of the “improved opportunity set.” He is Tom Atteberry, now Senior Advisor to FPA New Income Fund having just retired, as planned, from his portfolio manager duties in July of this year. He had been Portfolio Manager of the fund since 2004.
Atteberry will discuss why they have reopened the fund and where they are investing now. He will also share his current preference for asset-backed bonds over Treasuries and corporates.
Animated, interesting. Thanks again! I hold no dedicated SHORT-term stuff, but here's a link to his (former) fund. I see he retired as scheduled in July, '22. Now he has some sort of Emeritus status. https://www.morningstar.com/funds/xnas/fpnix/quote
Doesn't seem like there's much of a case for that fund right now: distribution yield is right at 2%, with capital risk and bonds still under pressure, when you can get that or more in a money market fund (e.g., FZDXX at 2.21%) or T-bill held to maturity, without capital risk (just bought a 13-wk. bill at 2.965%).
FPA New Income fund has done much better than majority of multi-asset bond funds this year, -2.6%. @AndyJ has a good point that money market funds now yield about 2%. After interest rate hike in September (expecting 50 bps), money market funds would yield over 2.5%.
If liquidity is not an issue, short term CDs and treasury (3-9 months) are offering yields over 2-3%. When the Fed starts to cut rates, core bonds will become attractive again.
I had heard about this gentlemen before but never followed him. At the 13 minute mark of the interview, while discussing about the potential for stagflation, he mentioned that we essentially had stagflation during Q1 and Q2 of 2022. After the third revision to Q1 GDP, it was negative 1.6% (real not nominal). We definitely had a decent nominal growth, given the high inflation. I thought stagflation has to have low to no growth, high unemployment, and high inflation. At least one of the elements was clearly missing.
Any thoughts on this interview and what is stagflation?
This week’s guest is a longtime holder of Berkshire stock and has been an avid student of Buffett’s style of value investing since meeting the legendary investor at Stanford Business School in the early 1980s. He is Tom Russo, managing member of the investment advisory firm Gardner Russo & Quinn, where he oversees the Semper Vic Partners Funds, which he launched in 1983 after hearing Buffett address his class at Stanford.
A year ago on WEALTHTRACK, in September of 2021, Research Affiliates’ Rob Arnott made two macro observations. One, he predicted there were “very high odds” of a resurgence in inflation. Two, that the multi-year outperformance of growth over value stocks was probably finally over. He dated the turn to August of 2020.
He proved prescient on the inflation call and so far seems to have gotten value’s comeback right.
Rob Arnott is Chairman of the Board and Founder of Research Affiliates, which is celebrating its 20th anniversary this year. Research Affiliates describes itself as a “research-intensive asset management firm that focuses on innovative products.”
Among the many funds that Arnott created and now co-manages is the PIMCO All Asset Fund, also celebrating its 20th anniversary this year.
In this interview, Arnott shares his outlook on inflation, value stocks, and his cheap diversifiers strategy.
reminds me of a prof i had for a class many years ago. smart, interesting, but with a voice that was smooth and so soothing, i could not help falling asleep. i went back and listened again, twice. that was some great shit. well worth listening to. thank you.... he recommends diversifiers right now, like EM debt. and commodities. even localcurrency EM debt. i'm out of EM debt. have been for a long time. it was PREMX. It once upon a time served me very well. but between PREMX and AGEPX, the latter certainly looks like a better deal today. ... as for commodities: he's been reading my own book: I've been averaging-into NHYDY. Vertically integrated. ALUMINUM. They even mine their own bauxite. cutting back on production lately. expected fall in demand. recession.
"Aluminium is the world's largest exchange commodity for metals in terms of trading volumes. It accounts for nearly a third of all contracts made on the LME."
It’s been a rough year for the markets and Capital Appreciation, although it’s down less than the market and its category. In this weekend’s episode, Giroux will give us his view of the state of the market, its risks, and potential rewards.
This was a good episode. At the start of 2022, approx. two-thirds of the PRWCX fixed income portfolio was in short-duration bank loans. This positioning really helped fund performance - especially on the fixed income side. Historically, Mr. Giroux has purchased Treasuries only three times in his career. There were no Treasuries in PRWCX at the start of the year but they (5 Yr Treasuries) now comprise ~10% of the portfolio. Mr. Giroux currently likes analog semiconductors - NXP, TXN. He also likes several big tech companies - AAPL, MSFT, GOOG.
@Observant1, thank you for the great summary on Giroux’s interview. His timing coming into 2022 is impeccable with his positioning of the portfolio. He repeated “recession” several times even though he does not believe it. However, moving 10% of fixed income to 5-yr treasury indicated he is seeking something more than merely the higher yield (4.2% as of 12/14/22). Still he has a healthy % in bank loan and a few investment bonds. He reduced the overweighting of utility to fund the cyclical stocks including the semiconductors and other quality growth stocks (3-5 years horizon). Discussion on GE stock helped to clarify why he still holding 3% of it. Clearly he knows his holdings (40 stocks) well and move in and out based on their valuation. Still he don’t like energy stocks.
For full disclosure, PRWCX is one of our largest holdings. I will get his book for Christmas.
He recommends Texas Instruments these days, at the end of that 2nd conversation. TXN. (PRWCX is my largest holding.)
Not much of a discount now, according to Morningstar, but Morningstar always offers a low-ball fair value number. Healthy dividend. Net Margin 43.59. TXN.
Comments
https://clearbridgeinvestments.com.au/perspectives/anatomy-of-a-recession/
Investments During a Period of Stagflation: https://smartasset.com/investing/how-to-invest-during-stagflation
For a Global Bond choices, RPIEX, looks interesting
MFO Discussion Linked here:
https://mutualfundobserver.com/discuss/discussion/comment/152569/#Comment_152569
https://www.morningstar.com/funds/xnas/fpnix/quote
If liquidity is not an issue, short term CDs and treasury (3-9 months) are offering yields over 2-3%. When the Fed starts to cut rates, core bonds will become attractive again.
I had heard about this gentlemen before but never followed him. At the 13 minute mark of the interview, while discussing about the potential for stagflation, he mentioned that we essentially had stagflation during Q1 and Q2 of 2022. After the third revision to Q1 GDP, it was negative 1.6% (real not nominal). We definitely had a decent nominal growth, given the high inflation. I thought stagflation has to have low to no growth, high unemployment, and high inflation. At least one of the elements was clearly missing.
Any thoughts on this interview and what is stagflation?
Next week, David Giroux will be the featured Wealthtrack guest.
"Aluminium is the world's largest exchange commodity for metals in terms of trading volumes. It accounts for nearly a third of all contracts made on the LME."
https://investor.morningstar.com/quotes/0P000102MI
https://investor.morningstar.com/quotes/0P00002PHU
https://www.wsj.com/market-data/quotes/NHYDY
Forgot Real Estate. PSTL.
https://www.barrons.com/market-data/stocks/pstl/research-ratings?mod=quotes#subnav
And here's one I continue to track but do not own: SCHN.
https://www.marketwatch.com/investing/stock/schn
***Confirmation bias, anyone...????????? Hmmmmm? ***
Anyhow, I can't take credit for following Arnott's advice before ever hearing it.
At the start of 2022, approx. two-thirds of the PRWCX fixed income portfolio was in short-duration bank loans.
This positioning really helped fund performance - especially on the fixed income side.
Historically, Mr. Giroux has purchased Treasuries only three times in his career.
There were no Treasuries in PRWCX at the start of the year but they (5 Yr Treasuries)
now comprise ~10% of the portfolio.
Mr. Giroux currently likes analog semiconductors - NXP, TXN.
He also likes several big tech companies - AAPL, MSFT, GOOG.
https://www.amazon.com/Capital-Allocation-Principles-Strategies-Shareholder/dp/1264270062
He will be the guest again, next week. Looking forward.
His timing coming into 2022 is impeccable with his positioning of the portfolio.
He repeated “recession” several times even though he does not believe it. However, moving 10% of fixed income to 5-yr treasury indicated he is seeking something more than merely the higher yield (4.2% as of 12/14/22). Still he has a healthy % in bank loan and a few investment bonds.
He reduced the overweighting of utility to fund the cyclical stocks including the semiconductors and other quality growth stocks (3-5 years horizon).
Discussion on GE stock helped to clarify why he still holding 3% of it.
Clearly he knows his holdings (40 stocks) well and move in and out based on their valuation.
Still he don’t like energy stocks.
For full disclosure, PRWCX is one of our largest holdings. I will get his book for Christmas.
Not much of a discount now, according to Morningstar, but Morningstar always offers a low-ball fair value number. Healthy dividend. Net Margin 43.59. TXN.