IOFIX - I guess it works until it doesn't From a M* article posted today--
The most vulnerable strategies in the current environment have been flashing red well in advance. For example, AlphaCentric Income Opportunities (IOFIX), a multisector bond fund that has invested the majority of its assets in mezzanine subprime MBS, has experienced heavy redemptions in recent weeks. Given that the portfolio was roughly 95% invested in nonagency residential mortgage credit, it’s highly unlikely the managers were able to raise cash to meet those redemptions without locking in losses in the current environment. The fund has erased more than 40% of its value for its shareholders since the beginning of March, with most of those losses coming in the last several trading days.
But that fund’s highly aggressive approach already made it an outlier relative to competitors in the multisector bond category, which is home to funds with a greater appetite for credit-sensitive sectors. Its portfolio chock-full of subordinated mortgage credit avoided by other fund managers, its indeterminate credit quality profile (most of the fund’s holdings were nonrated), and absence of high-quality holdings to provide liquidity should have raised concerns for any investor. The fund’s chart-topping returns in recent years--its trailing three-year annualized return of 10.4% through February 2020 outpaced its next closest competitors’ by a full 300 basis points--should have also raised questions about the risks its managers were taking to achieve those results.
brief market news https://finance.yahoo.com/news/stock-market-news-live-updates-march-26-2020-221723808.htmlGood morning,
Market very confusing still: unemployment numbers shatter previous records, multiple deaths remain high with COVID19, many more infected/many more counting and still remain critically ill. Hot spots open up in several countries.
Dows still up today after all those news, think bottom maybe when Dows at 18750s levels last wk?
maybe good to tiptoe in, DCA and watch closely.
The Fed Goes Nuclear Powell is appearing on mainstream media providing reassurance the public. Here is a little detail:
Jerome Powell says the Federal Reserve would provide essentially unlimited lending to support the economy as long as it is damaged by the viral outbreak.
The economic rescue bill approved by the Senate early Thursday includes $425 billion that the Treasury could use to backstop the Fed. That would allow the Fed to boost its lending programs to an astronomical $4.25 trillion.
“Wherever ... credit is not flowing, we have the ability in these unique circumstances to temporarily step in and provide those loans and we will keep doing that, aggressively and forthrightly," Powell said.
When asked if the Fed would run out of ammunition to support the economy, Powell said no.
https://marketbeat.com/articles/fed-chair-powell-says-will-provide-nearly-unlimited-lending-2020-03-26/
Negative rates come to the US: 1-month and 3-month Treasury bill yields are now below zero
TRP Floating Rate - Risk vs Reward Take a look at the historical returns for high yield and floating rate funds in 2008 and 2009. Most of them lost big in 2008 but had huge gains in 2009, in some cases as much as stock funds. However, there are no guarantees that history will repeat for stocks or bonds.
In a somewhat related matter, muni bond funds and high yield munis also lost big recently (and in 2008). Muni funds had huge increases today — 3-5% — which is unheard of for munis. Personally I think most of the recent bond fund drops were due to liquidity issues from traders selling bonds, after stocks dropped so much, and overwhelming the markets.
Treat with caution: rocketing stocks aren't cause for comfort
TRP Floating Rate - Risk vs Reward @Tarwheel. You have officially proved I'm an idiot. I did bloody read, BUT I never read properly. maybe because I read it on my phone. The "Risks" and "Rewards" sections are flipped on TRP website but "Rewards" are in left column. I never read the right column else I would never have invested in this fund. Like I mentioned it's for my MIL who's 80 years old.
Straight from TRP website.
The floating-rate feature virtually eliminates interest rate risk.
Bank loans typically rank higher in the capital structure for repayment.
Low historical return correlations with other asset classes, including high-yield bonds, make bank loans a diversifier for equity and fixed-income portfolios.... AND ...
The loans and debt securities held by the fund are usually considered speculative and involve a greater risk of default and price decline than higher-rated bonds.
This fund could have greater price declines than a fund that invests primarily in high-quality bonds or loans.The ones highlighted line led me to believe the fund was invested in government securities only. Next time I see "interest rate risk" I'll know better.
I dunno why I assumed "floating rate" with safety. Thinking I will make 0.1% when rates were very low and about 3% when rates were about that. Then again, I somehow don't believe I'm the only one who's stupid. I can't imagine why any sane person would invest in floating rate funds. The risk/reward is simply not there and simply plotting say PBDIX a
gainst FFHRX shows that. "Diversification" like this I don't need.
David Sherman's updates (and offer) on RiverPark Short Term High Yield Hi David, You noted:
Long-Term Treasuries have both returned more in four weeks than they normally would in an entire year.
Chart, SP500, TLT, EDV, ZROZ starting Nov. 4, 2009 (limited by fund inception date) through March 24,
2020.
TLT, EDV, ZROZ
returns chart , Jan. 2 -March 9,
2020. March 9 is the initial date when Treasury issues began to be "non-normal" in pricing relative to the whack down in the equity markets.
QQQ versus EDV crossover points. One may drag and slide the 3,090 day line at the bottom area of the chart, from the left (oldest date) to the right towards the current date to find many other crossover points. EDV and QQQ generally perform inverse to one another.
Ok, away to listen to
Bolero and then meditate.
Take care,
Catch
David Sherman's updates (and offer) on RiverPark Short Term High Yield All I want now is people stop calling RPHYX as a proxy for "cash". And then "interpret" it. It's like any other fund you invest in which holds bonds.
Serves me right for trying to grow a brain and invest in bond funds. I never did it pre-financial crisis. Now I know I should never have. Going forward I never will. Really have to rethink my FPNIX investment as well.
I think someone has said investing in bonds is harder than investing in stocks. No kidding! Perhaps it's also because stocks can be manipulated easily by news or otherwise than bonds. Or maybe I'm wrong there as well. In any case, no more 007s in my life. I'll stick to balanced funds at best. At least I know my tax loss candidates for 2020 since hindsight is now also 20-20. Hah!
Recapturing Portfolio Loss I have not lost confidence in ARTGX or TBGVX-YAFIX I'd like to replace them with similar as temporary parking place to harvest the losses - ( i am still working - at least I hope so !) DDVIX ( value) and LCEYX dividend - both under performed before the deep dive, but I held on - not wanting to take the gains . All advice wellcome !
PIMCO CEF Update | It's 2008 Redux Relax, breathe easy for now at least for today. By Alpha General
Capital at Seeking Alpha
Summary° The PIMCO UNII report showed some modest progress on coverage and UNII levels.
° Obviously, the traditional looks at this report are less important given what is happening in the markets and with these funds specifically.
° We expect distributions to be maintained in most of the taxable bond CEFs from PIMCO and that the muni funds are investable for the first time in years.
° Most funds earned their distribution in the month according to NII production with small shortfalls in the others. Nothing concerning.
The Report
TRP Floating Rate - Risk vs Reward You may want to checked again on TRP website. YTD as of 3/20/2020 is -17.2% ! Floating rate bonds are BBB and below rated bonds, i.e. junk bonds. Junk bonds move in the same direction as equities, thus has no downside protection.
The Fed Goes Nuclear Here is an article that discusses some of the reasons the Powell Put Act 2 announcement on Monday may turn out to have been significant....
Powell’s message is that the Fed’s support for U.S. business is unlimited, “in the amounts needed to support smooth market functioning,” as a Fed statement Monday put it. His basic rationale is simple: Nobody caused this crisis, and nobody is to blame. The government-ordered lockdown affects every company and worker, and the government should protect people until the crisis eases. Any other concern is secondary.
https://washingtonpost.com/opinions/2020/03/24/one-institution-washington-is-working-fed/
