Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Bonds continued their large decline today. Sold ALL bond-heavy funds except AQRIX. Bought WBMIX and more DODGX...rest in cash for now.
Unfortunately, AQRIX continues its decline. Appears highly correlated to world bond performance. Trust draw down control will kick-in soon or I will be out of it too, as it's below 10 mo SMA along with BOND, RNSIX, MAINX, DODIX.
Yesterday with bonds being collectively down my income area was slightly up; but, that was due mostly to the performance of the hybrid income sleeve (75% of area). Thank you FKINX & AZNAX. I have added EVBAX to my watch list of fixed income funds along with TSIAX to see how they perform over the next couple of weeks before possibly adding. (They both had slightly negative numbers yesterday). I currently hold three short duration funds (THIFX, ITAAX, & LALDX) along with two multi sector income funds (NEFZX & LBNDX) in the income sleeve and looking to add a third either (EVBAX or TSIAX).
I feel fixed income needs close attention ... at this time ... and, I thank you again, Charles, for your weekly updates as they provide meaningful information.
My portfolio overall was slightly up yesteday, thanks to the performance in my growth & income and growth areas, while the Lipper Balance Index was slightly down (0.1%). Mike Holland's balance fund HOLBX was also down (0.22%). Currently, I believe, it holds a slug of cash and mostly large caps on the equity side. Although it was down yeaterday it is one of the better performing balance funds thus far this year and by a good margin.
I have linked a few of its Morningstar reports below for those that might be interested with their on study of the fund to see how it has been positioned.
Reply to @Skeeter: Balance fund, as you know had bonds, equity and cash. An Equity income fund will be mostly holding dividend paying stocks. Perhaps just having equity income or equity only is a way to go. Keep a healthy amount in cash.
Reply to @ron: I'd tend to agree ... it might change in the next week for all anybody knows, but very recently the best allocation would prob'ly be some equities and a bunch of cash, and if you've got bonds, to be in safer, slower-moving, unlevered and un-derivative-d vehicles like DBLTX, MWTRX, etc.
Reply to @ron: re: "Keep a healthy amount in cash." Therein lies the "rub." Your advice is wise. But, suspect our definitions of "cash" have broadened substantially in recent years. Some here have stated cash positions lately as high as 80%. It's unlikely, however, that's all languishing in CDs or money market accounts.
I suspect all of us have expanded our definition of cash - for better or worse. Personally, I split the "cash position" about evenly between TRBUX (up fractionally YTD) and DODIX (down fractionally). The former, an ultra-short, probably meets mosts' definitions for "cash". The latter, a diversified income fund, does not - though they've kept duration very short in recent years. Other substitutes for cash mentioned in recent years have been RPHYX (up 1.27% YTD), RPSIX (up 1.31%), hybrid income funds (TRRIX is up about 4%) and HSTRX (down about 7%).
The above are just a few examples of how all of us have expanded our cash definitions due to circumstances. As long as equities continue to greatly outdistance bonds and most other investments, the widening of that definition is likely to continue - for better or worse as noted. Anybody care to chime in with how they've re-defined "cash"?
(If Catch can pry himself away from the sticky floor tiles or whatever, would sure like to hear his take on this and fixed income in general.)
You must have been reading my mind (or vice versa) because that is precisely what I did yesterday (6/10/23). I had a 30% to 35% weighting in bond funds that were, for the most part, multi sector or unconstrained with little to no exposure to U.S. Treasuries. Despite their flexible mandates, ALL of them have lost 2 or 3% over the past several weeks, a huge move in a bond fund. Additionally, unlike the previous three years, all of them were flat or nearly so over the first five months of the year --- unlike prior years in which these funds appreciated 5% to 10% in addition to the dividends paid.
Clearly, the bull market in bonds has to end sometime and I decided not to hang around long enough to find out precisely when. The risk to reward ratio for ANY bond funds (IMHO) is not favorable and the dividend income is not worth the risk to principal if interests continue to rise rather than bouncing between a 2% to 2.4% range. I am content to let the money sit in cash at zero interest rather than sustain further losses in my bond funds. The funds I dumped were all good ones: RNSIX, MWTRX, MWCRX, PIMIX, PDVDX, and SUBYX. Doesn't matter.
I continue to maintain my 60% weighting in equity MFs, most of which have demonstrated some ability to lose less than other funds in a bear market, specifically: FPACX, AMANX, DLHAX, EAASX, FMIMX, JMCVX, MAPIX, BPAVX, RYSEX, and WSCVX. Incidentally, I have bought into the new Oakseed Fund (SEEDX) and it seems to lose considerably less than other equity MFs on days in which there are steep losses. This fund may be a real keeper.
Reply to @hank: Hi Hank, Similar to your broader definition of what you consider cash, I have included RPSIX (a TRP fund) as a place where my "cash" resides. It seems to have a little less downside risk when I look back at 2008 compared to TRRIX.
Also, I charted TRRIX with PONDX and they sure seem to be moving in unison YTD.
Not a bond fund but selling 1/2 PAUIX ($25,000) and putting into SCHD, Schwab U.S. Dividend Equity. Holding PIMIX, MWTRX, FEHIX. May sell FNMIX, FSICX.
Thank you for your comment. To expand upon your comment I referenced the Fund’s prospectus. Below is what I found.
One of the features of HOLBX is that it has a defensive strategy provision in its prospectus which reads, in part, as follows:
“In response to market, economic, political or other conditions, the Advisor may temporarily use a different investment strategy for the Fund for defensive purposes. Such a strategy could include investing up to 100% of the funds assets in cash or high quality money market securities.”
In addition, under the Principal Investment Strategies provision it reads, in part, as follows: “However, the Advisor has discretion to determine the proportion of the Fund’s portfolio that will be invested in such equity and fixed income securities at any given time depending on the Advisor’s perception of existing and anticipated market and economic conditions.”
In reading the above it appears this gives the Advisor great latitude to position the Fund based upon his outlook.
I wonder if Morningstar will reclassify it from a balanced type fund to another classification since it is now position with about 25% cash and 75% equity with no fixed income as usually found in a balanced type fund or if they will grant a waiver and consider its positioning now as temporary?
I have provided a link to it’s prospectus for those that would like to reference it.
Rather, investors should worry about a less-discussed reality: The structure of the bond market itself is balky and vulnerable to bouts of exacerbated investor losses and trading air pockets, simply because the act of trading corporate bonds among funds and banks has become tougher and less-efficient since the financial crisis.
Inventories of corporate bonds among the big Wall Street banks known as primary dealers totaled $100 billion in 2004 and more than $200 billion at their 2007 peak, according to the Federal Reserve Bank of New York. Today, in a larger overall market, dealers hold just over $50 billion.
“What scares me and really what the reality is, is that there’s not enough balance sheet on the ‘sell side’ to support any kind of warehousing activity if institutional investors want to materially reduce their holdings.”
He’s concerned about a “structural asymmetry” in the fixed-income market: “It’s fine when there are [mostly] buyers, but not when there are sellers.”
Comments
I too am watching my fixed income area closely.
Yesterday with bonds being collectively down my income area was slightly up; but, that was due mostly to the performance of the hybrid income sleeve (75% of area). Thank you FKINX & AZNAX. I have added EVBAX to my watch list of fixed income funds along with TSIAX to see how they perform over the next couple of weeks before possibly adding. (They both had slightly negative numbers yesterday). I currently hold three short duration funds (THIFX, ITAAX, & LALDX) along with two multi sector income funds (NEFZX & LBNDX) in the income sleeve and looking to add a third either (EVBAX or TSIAX).
I feel fixed income needs close attention ... at this time ... and, I thank you again, Charles, for your weekly updates as they provide meaningful information.
My portfolio overall was slightly up yesteday, thanks to the performance in my growth & income and growth areas, while the Lipper Balance Index was slightly down (0.1%). Mike Holland's balance fund HOLBX was also down (0.22%). Currently, I believe, it holds a slug of cash and mostly large caps on the equity side. Although it was down yeaterday it is one of the better performing balance funds thus far this year and by a good margin.
I have linked a few of its Morningstar reports below for those that might be interested with their on study of the fund to see how it has been positioned.
http://portfolios.morningstar.com/fund/summary?t=HOLBX®ion=USA&culture=en-us
http://performance.morningstar.com/fund/performance-return.action?t=HOLBX®ion=USA&culture=en-us
http://quotes.morningstar.com/fund/f?t=holbx®ion=USA
Good Investing,
Skeeter
I suspect all of us have expanded our definition of cash - for better or worse. Personally, I split the "cash position" about evenly between TRBUX (up fractionally YTD) and DODIX (down fractionally). The former, an ultra-short, probably meets mosts' definitions for "cash". The latter, a diversified income fund, does not - though they've kept duration very short in recent years. Other substitutes for cash mentioned in recent years have been RPHYX (up 1.27% YTD), RPSIX (up 1.31%), hybrid income funds (TRRIX is up about 4%) and HSTRX (down about 7%).
The above are just a few examples of how all of us have expanded our cash definitions due to circumstances. As long as equities continue to greatly outdistance bonds and most other investments, the widening of that definition is likely to continue - for better or worse as noted. Anybody care to chime in with how they've re-defined "cash"?
(If Catch can pry himself away from the sticky floor tiles or whatever, would sure like to hear his take on this and fixed income in general.)
12.5 bil outflows from bond funds
6.2 bil outflows from stock funds
You must have been reading my mind (or vice versa) because that is precisely what I did yesterday (6/10/23). I had a 30% to 35% weighting in bond funds that were, for the most part, multi sector or unconstrained with little to no exposure to U.S. Treasuries. Despite their flexible mandates, ALL of them have lost 2 or 3% over the past several weeks, a huge move in a bond fund. Additionally, unlike the previous three years, all of them were flat or nearly so over the first five months of the year --- unlike prior years in which these funds appreciated 5% to 10% in addition to the dividends paid.
Clearly, the bull market in bonds has to end sometime and I decided not to hang around long enough to find out precisely when. The risk to reward ratio for ANY bond funds (IMHO) is not favorable and the dividend income is not worth the risk to principal if interests continue to rise rather than bouncing between a 2% to 2.4% range. I am content to let the money sit in cash at zero interest rather than sustain further losses in my bond funds. The funds I dumped were all good ones: RNSIX, MWTRX, MWCRX, PIMIX, PDVDX, and SUBYX. Doesn't matter.
I continue to maintain my 60% weighting in equity MFs, most of which have demonstrated some ability to lose less than other funds in a bear market, specifically: FPACX, AMANX, DLHAX, EAASX, FMIMX, JMCVX, MAPIX, BPAVX, RYSEX, and WSCVX. Incidentally, I have bought into the new Oakseed Fund (SEEDX) and it seems to lose considerably less than other equity MFs on days in which there are steep losses. This fund may be a real keeper.
Hi Hank,
Similar to your broader definition of what you consider cash, I have included RPSIX (a TRP fund) as a place where my "cash" resides. It seems to have a little less downside risk when I look back at 2008 compared to TRRIX.
Also, I charted TRRIX with PONDX and they sure seem to be moving in unison YTD.
Hi Ron,
Thank you for your comment. To expand upon your comment I referenced the Fund’s prospectus. Below is what I found.
One of the features of HOLBX is that it has a defensive strategy provision in its prospectus which reads, in part, as follows:
“In response to market, economic, political or other conditions, the Advisor may temporarily use a different investment strategy for the Fund for defensive purposes. Such a strategy could include investing up to 100% of the funds assets in cash or high quality money market securities.”
In addition, under the Principal Investment Strategies provision it reads, in part, as follows: “However, the Advisor has discretion to determine the proportion of the Fund’s portfolio that will be invested in such equity and fixed income securities at any given time depending on the Advisor’s perception of existing and anticipated market and economic conditions.”
In reading the above it appears this gives the Advisor great latitude to position the Fund based upon his outlook.
I wonder if Morningstar will reclassify it from a balanced type fund to another classification since it is now position with about 25% cash and 75% equity with no fixed income as usually found in a balanced type fund or if they will grant a waiver and consider its positioning now as temporary?
I have provided a link to it’s prospectus for those that would like to reference it.
http://www.thehollandfund.com/documents/pdfs/holbx-pro-20130128.pdf
Good Investing,
Skeeter
Inventories of corporate bonds among the big Wall Street banks known as primary dealers totaled $100 billion in 2004 and more than $200 billion at their 2007 peak, according to the Federal Reserve Bank of New York. Today, in a larger overall market, dealers hold just over $50 billion.
“What scares me and really what the reality is, is that there’s not enough balance sheet on the ‘sell side’ to support any kind of warehousing activity if institutional investors want to materially reduce their holdings.”
He’s concerned about a “structural asymmetry” in the fixed-income market: “It’s fine when there are [mostly] buyers, but not when there are sellers.”
http://finance.yahoo.com/blogs/michael-santoli/balky-bond-market-plumbing-big-hidden-risk-145357441.html
It's always the unknown unknowns that blindside.
Holdings RNSIX, MAINX down 4-5% in selloff (more than a year's yield)...RPHYX, SUBFX, FFRHX down two or three hundred bips.