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yes sirs. options tradings are extremely bipolar. You can get severely high returns w market tops [up to 50% - 70% even 100% returns in on 6 12 months], but when it crashes your porfolio dig deeper dives for sure. I limit option trading now, limit option spreads these critters definitely can kill your porfolio, lucky got out few wks back near all time high all portfolios. prob do what I did best past 15 yrs - dca buy index /target date funds and more corp bonds. Only sell cash secure puts /cover calls w vehicles I am willing to own long term or happy w/ strike prices to be carried away.
for portfolio definitely add more corp bonds.
Next 3- 7 months: Not sure if SPY to 570 comes first or Spy 550 levels [lol].
Nothing fancy here. We have been increasing total bond index fund since spring. Now shifting some floating rate bonds and high yield to BND and other investment grade intermediate term bonds. It is time to dial down the risk in case things get ugly, i.e. more geopolitical risk.
I haven't paid attention recently to my primary bond fund - DOXIX. I was pleasantly surprised by the fund's trailing 12 month return.
Started to dabble in home builder and builder supply stocks. I started buying BLDR, Builders Firstsource, back in April and have added periodically to it. I've owned this stock multiple times over the years and I like it a lot. Started a position in DHI, D R Horton Co, last week after reading good things in Barrons about the stock that made sense to me. Today, I bought a little PHM, Pultegroup Inc.
Home building "should" take off when interest rates drop. All these stocks started to take off the past couple weeks, so I'm hoping the trend continues. FWIW, individual stocks don't make up a large part of my portfolio. Just what I call my play money.
I don't pay too much attention to sectors, so take the following as questions and observations from someone who knows just enough to be dangerous:
Do homebuilders like Pulte (a name I do recognize from having lived in suburbs) take out short term loans to purchase building materials? The reason for the question is that interest rates for mortgages don't move in tandem with short term rates. In this industry each rate can have an impact.
In looking at companies like BLDR, are you thinking about remodeling or new home construction, or both? I believe that the stock of existing homes has been held down by high mortgage rates - people are reluctant to walk away from low rates they locked in years ago. So many have chosen to make improvements rather than move. When (if) mortgage rates drop significantly, this may change and affect who is buying building materials.
It could also affect the market for new homes, since they'll now be competing with more existing homes than before (acknowledging that there is still an overall housing shortage).
The construction industry seems (from my 30,000 foot vantage point where I rarely look out the window) to be bad at dealing with market cycles. In good times, they build on spec. Though often by the time the construction is put on the market, demand has cooled.
It presents a nice, level headed picture of a well run company. As to the industry prospects, it's looking more than two years out. "Fed governors see short-term rates falling by about roughly two percentage points over the coming couple of years". However, over the next year+, both Fannie Mae and the Mortgage Bankers Association are seeing rates drop by just over 1/2%, from 6.46% (8/22/24 actual) to 5.9% (Q4 2025). https://finance.yahoo.com/personal-finance/when-will-mortgage-rates-go-down-164144910.html
Certainly the prospects for the industry look better now than they have been for awhile (perhaps excepting building materials - lumber prices soared during the pandemic as people spent money on home improvements). How much better, and how much is already priced in, I have no idea.
The sector's raw performance is good. A rising tide lifted all boats. Relatively speaking, not so impressive.
YTD, S&P 500 RE is the third worst (out of 11) performing sectors. The worst sector (Consumer Discretionary) is up over 6% YTD. We won't mention Energy - second worst YTD, and worst by a long shot over the past year, barely in positive territory.
A one year CHART for the major home builders of PULTE, D.R. HORTON, LENNAR, TOLL BROS. AND NVR; in this order in the chart.
One year CHART of 3 widely traded home builders ETF's.
In opinion: these stocks and sometimes the ETF's receive a fair amount of action from hedge funds and other volume traders. It appears that 'options trading' is also available for the ETF's.
interesting article and charts that add food for thought regarding shipping, inflation, interest rate, M2 and GDP.
The continued drop in the M2/GDP ratio says that we should not yet start looking for great things for the shipping industry for another year at least. That message for the freight industry implies continued economic pressures on the economy generally. And the 23-month message for inflation says falling inflation. So there is going to be lots of permission within the economic data for the FOMC to cut rates. How fast the FOMC recognizes that is a separate question.
Weekend Barron's will have a Cover story on the national housing problem. Favorably mentioned are homebuilders DHI, PHM, LEN, and eTF ITB (there is also XHB that includes home improvement businesses).
1 yr Treasuries down to 4%. A bit faster than I expected. Bond yields want Fed to go 50 bps on Wednesday. Should we expect a violent reaction to a 25 bps FF rate cut?
Hi @hank. I hadn't heard of WEA before so I took a look. That looks like one wild ride when added to the trend chart along-side my usual suspects.
On JMBS, I took some advice from something Junkster noted in another thread. Floating rate and mortgage backed securities may not be the best place to be going forward. Same with HY. The suggestion, as I remember, was high quality corporates and munis (I think). I believe an article in Barrons had the same drift. I'm far from a bond expert so take that with a grain of salt.
@MikeM. It was JBBB that l was worried about - CLO fund. For now at least that worry has been proven wrong as many in that market are back to new highs and I have returned to some CLOs. Still leery though about the floating rate bank loan category. I actually like the MBS market especially the legacy non agency RMBS and hold a fund there. Also hold DHEAX due to its persistency of trend as well as CBYYX among a few others. With CBYYX though, this time of year you are one catastrophic hurricane away from disaster so don’t hold a large position.
But as economist Jim Bianco worries, there seems to be a record number of both the smart money and dumb money bullish on bonds. That seldom ends well.
Is this the last post from Junkster? More than 3 wks ago. Hope he is fine.
1 yr Treasuries down to 4%. A bit faster than I expected. Bond yields want Fed to go 50 bps on Wednesday. Should we expect a violent reaction to a 25 bps FF rate cut?
Mr. Market always overreacts. I've got a limit order in, to buy some regional bank BHB. I knew it would not go through today. I bet it will, on the 18th or 19th, after the rate-cut announcement, because Mr. Market will not have been given everything he wanted. We shall see.
Anxious to see how the bond markets respond to Fed day Wednesday as well as the following day, I usually have an opinion (which thankfully I never base my trades on) but haven’t the slightest idea of how the markets will react Wednesday and Thursday. If forced to wager a guess, still looking for a move down to 3.50% in the ten year and lower by end of 2024.
The past few months have been nirvana for bond traders and investors. And YTD many bond funds are already up double digits. How long can this continue? Besides the two funds I mentioned last month as well as my MBS fund, I also hold an emerging markets debt fund. Rising gold, falling dollar, lower Fed funds ahead of us and investor apathy on the various boards towards emerging markets are just a few of the reasons. I also wanted a fund with more fixed rate debt as much of what I own are funds with a larger proportion to floating rate. The CLOs bond ETFs just keep rolling on as does HOSIX, a CLO OEF. The later has also been great substitute for cash. Curious to see how the CLOs respond this week.
Lastly, wanted some exposure to the subprime non agency RMBS market much akin to IOFIX. But wouldn’t touch that one with a ten foot pole. So found a fund that has a foothold there but with a far better track record YTD than IOFIX.
Edit. To contradict my feelings about the 10 year above. If the economy was weakening why are junk bonds at all time historic highs. Not what you would see if a recession is on the horizon.
I don't know much about bonds except that at the present time I generally like them short.
The equity side has angst operating in all directions. Will they cut too much? A sure sign of a recession to come. Will they not cut enough? That would be sure to cause a recession. Then there are those that note the perilous altitudes to which equity has climbed. A untoward shift in the wind--earnings, M2 supply, war, locusts--could cause problems whether there is a recession, or not. Lots of entrails being consulted these days.
Well. I have lots of room to buy in the taxable if it comes to that. The IRA is 55/45 equity/fixed income. I had hope to get it down to 50/50, but Mr Market threw a couple of tantrums that spiked that plan. I think the hatches are battened about as well as can be hoped for since we don't need the RMD's yet.
>>>> I don't know much about bonds except that at the present time I generally like them short<<<<
@WABAC. You are far too modest. You were the first to go back in THOPX in February. This had been a real popular fund here at one time but shook most out in 2022. You also have or had FCFAX. It is a great fund that is always on my radar yet never have bought. Has lots of CLOs. Some of your other bond picks have also been spot-on.
>>>> I don't know much about bonds except that at the present time I generally like them short<<<<
@WABAC. You are far too modest. You were the first to go back in THOPX in February. This had been a real popular fund here at one time but shook most out in 2022. You also have or had FCFAX. It is a great fund that is always on my radar yet never have bought. Has lots of CLOs. Some of your other bond picks have also been spot-on.</p>
Aw shucks..
I should also give you credit. I often think about your comment about trends persisting with bonds.
I owned THOPX years ago when rates were a little higher. So I was familiar with it. And it was staying pretty close to the top of my bond watch lists at the time.
I think I basically exchanged exchange FCFAX for MANHX. The durations are close, the latter has the lower ER and the higher interest rate.
I also held FATRX for a while, but became concerned with duration at some point in the spring. I can stand a down-draft in a fund like FSUTX, IYK, or GLIFX, but bonds give me the chills.
When I subsequently decided to take another look at longer durations, outside a balanced fund, I went with WCPNX. Probably should have stuck with FATRX. Maybe I'll be back in it this time next year.
Regarding CBYYX where a few are invested including me. I re entered this fund in July after Hurricane Beryl had no impact whatsoever. Hurricane Beryl was a cat 5 and broke all sorts of meteorological records. Yet none of the cat bonds got hit. Since Beryl the cat bonds have been the best performers in Bondville even outperforming the S@P. Oddly enough almost all the gains have come on Fridays. Unlike earlier in the season predictions, this has been a historically quiet hurricane and tropical storm season. Partly due to of all things Sahara dust in the atmosphere.
There is another possible cat 4 or 5 storm brewing in the Gulf now to be named Helene. It may prove to be much ado about nothing as it is still developing or it could be another Hurricane Ian. Hurricane Ian was almost two years ago to the date and one of the most destructive on record for the reinsurance market. The cat bonds trading back then plummeted 15% in a matter of a few days. So being better safe than sorry selling out of my cat bond position today. Will probably re enter next week. Going back some twenty years there have only been three hurricanes that have impacted the cat bond market. So the odds of this impeding weather pattern being meaningful is extremely low. But again, for me would prefer to err on the side of caution.
here's a pretty interesting story about how wrong the hurricane predictions have been this year, which is not to say they won't be right very, very soon. https://www.axios.com/2024/09/03/atlantic-hurricane-season-inactive what to do ... what to do. ... batten down the hatches seems like the wisest course of action.
I have a good friend who has always maintained that the model for the weather was flawed; even before any global warming effects were considered. He was convinced that the historical weather patterns were atypical, and they were the basis for the predictions - GIGO.
@Junkster Hope you are ok. Saw the floods in Asheville NC, near your nest. You were correct, Helene developed into a large hurricane. Just hope it didn't cause damage to your homes and Xterra fleet.
Comments
for portfolio definitely add more corp bonds.
Next 3- 7 months: Not sure if SPY to 570 comes first or Spy 550 levels [lol].
I was pleasantly surprised by the fund's trailing 12 month return.
01 mo. - +3.35%
03 mo. - +5.91%
YTD__ - +4.90%
12 mo. - +10.66%
Home building "should" take off when interest rates drop. All these stocks started to take off the past couple weeks, so I'm hoping the trend continues. FWIW, individual stocks don't make up a large part of my portfolio. Just what I call my play money.
RE in general has had a good year.
VNQ
VGSIX
Even FRIFX has moved up 10%ish
Do homebuilders like Pulte (a name I do recognize from having lived in suburbs) take out short term loans to purchase building materials? The reason for the question is that interest rates for mortgages don't move in tandem with short term rates. In this industry each rate can have an impact.
In looking at companies like BLDR, are you thinking about remodeling or new home construction, or both? I believe that the stock of existing homes has been held down by high mortgage rates - people are reluctant to walk away from low rates they locked in years ago. So many have chosen to make improvements rather than move. When (if) mortgage rates drop significantly, this may change and affect who is buying building materials.
It could also affect the market for new homes, since they'll now be competing with more existing homes than before (acknowledging that there is still an overall housing shortage).
The construction industry seems (from my 30,000 foot vantage point where I rarely look out the window) to be bad at dealing with market cycles. In good times, they build on spec. Though often by the time the construction is put on the market, demand has cooled.
I'm guessing that you're referring to this article:
https://www.barrons.com/articles/buy-dr-horton-stock-price-pick-72f0f4e1
(Thank you Google and public libraries; I got free access both ways)
It presents a nice, level headed picture of a well run company. As to the industry prospects, it's looking more than two years out. "Fed governors see short-term rates falling by about roughly two percentage points over the coming couple of years". However, over the next year+, both Fannie Mae and the Mortgage Bankers Association are seeing rates drop by just over 1/2%, from 6.46% (8/22/24 actual) to 5.9% (Q4 2025).
https://finance.yahoo.com/personal-finance/when-will-mortgage-rates-go-down-164144910.html
Certainly the prospects for the industry look better now than they have been for awhile (perhaps excepting building materials - lumber prices soared during the pandemic as people spent money on home improvements). How much better, and how much is already priced in, I have no idea.
FRIFX is a real estate hybrid (unique?) that is less volatile than equity real estate (VNQ, XLRE, etc).
YTD, S&P 500 RE is the third worst (out of 11) performing sectors. The worst sector (Consumer Discretionary) is up over 6% YTD. We won't mention Energy - second worst YTD, and worst by a long shot over the past year, barely in positive territory.
https://digital.fidelity.com/prgw/digital/research/sector
For more recent 3m RE is 1st, up almost 14%
A one year CHART for the major home builders of PULTE, D.R. HORTON, LENNAR, TOLL BROS. AND NVR; in this order in the chart.
One year CHART of 3 widely traded home builders ETF's.
In opinion: these stocks and sometimes the ETF's receive a fair amount of action from hedge funds and other volume traders. It appears that 'options trading' is also available for the ETF's.
Remain curious,
Catch
https://www.morningstar.com/stocks/what-happens-stocks-when-fed-starts-cutting-rates
The past few months have been nirvana for bond traders and investors. And YTD many bond funds are already up double digits. How long can this continue? Besides the two funds I mentioned last month as well as my MBS fund, I also hold an emerging markets debt fund. Rising gold, falling dollar, lower Fed funds ahead of us and investor apathy on the various boards towards emerging markets are just a few of the reasons. I also wanted a fund with more fixed rate debt as much of what I own are funds with a larger proportion to floating rate. The CLOs bond ETFs just keep rolling on as does HOSIX, a CLO OEF. The later has also been great substitute for cash. Curious to see how the CLOs respond this week.
Lastly, wanted some exposure to the subprime non agency RMBS market much akin to IOFIX. But wouldn’t touch that one with a ten foot pole. So found a fund that has a foothold there but with a far better track record YTD than IOFIX.
Edit. To contradict my feelings about the 10 year above. If the economy was weakening why are junk bonds at all time historic highs. Not what you would see if a recession is on the horizon.
https://fred.stlouisfed.org/series/BAMLHYH0A0HYM2TRIV
The equity side has angst operating in all directions. Will they cut too much? A sure sign of a recession to come. Will they not cut enough? That would be sure to cause a recession. Then there are those that note the perilous altitudes to which equity has climbed. A untoward shift in the wind--earnings, M2 supply, war, locusts--could cause problems whether there is a recession, or not. Lots of entrails being consulted these days.
Well. I have lots of room to buy in the taxable if it comes to that. The IRA is 55/45 equity/fixed income. I had hope to get it down to 50/50, but Mr Market threw a couple of tantrums that spiked that plan. I think the hatches are battened about as well as can be hoped for since we don't need the RMD's yet.
@WABAC. You are far too modest. You were the first to go back in THOPX in February. This had been a real popular fund here at one time but shook most out in 2022. You also have or had FCFAX. It is a great fund that is always on my radar yet never have bought. Has lots of CLOs. Some of your other bond picks have also been spot-on.
I should also give you credit. I often think about your comment about trends persisting with bonds.
I owned THOPX years ago when rates were a little higher. So I was familiar with it. And it was staying pretty close to the top of my bond watch lists at the time.
I think I basically exchanged exchange FCFAX for MANHX. The durations are close, the latter has the lower ER and the higher interest rate.
I also held FATRX for a while, but became concerned with duration at some point in the spring. I can stand a down-draft in a fund like FSUTX, IYK, or GLIFX, but bonds give me the chills.
When I subsequently decided to take another look at longer durations, outside a balanced fund, I went with WCPNX. Probably should have stuck with FATRX. Maybe I'll be back in it this time next year.
IOFIX is dead to me for a couple of years. Instead use SEMMX.
There is another possible cat 4 or 5 storm brewing in the Gulf now to be named Helene. It may prove to be much ado about nothing as it is still developing or it could be another Hurricane Ian. Hurricane Ian was almost two years ago to the date and one of the most destructive on record for the reinsurance market. The cat bonds trading back then plummeted 15% in a matter of a few days. So being better safe than sorry selling out of my cat bond position today. Will probably re enter next week. Going back some twenty years there have only been three hurricanes that have impacted the cat bond market. So the odds of this impeding weather pattern being meaningful is extremely low. But again, for me would prefer to err on the side of caution.
https://www.artemis.bm/news/helene-may-strike-gulf-coast-as-hurricane-this-week-wide-range-of-model-intensity-forecasts/
https://www.axios.com/2024/09/03/atlantic-hurricane-season-inactive
what to do ... what to do. ... batten down the hatches seems like the wisest course of action.
Hope you are ok. Saw the floods in Asheville NC, near your nest.
You were correct, Helene developed into a large hurricane.
Just hope it didn't cause damage to your homes and Xterra fleet.