COVER STORY “It’s Time to Stop Crying About BONDs and Buy Them Instead”. 2023 may (hopefully) end the worst-ever 3-yr stretch for TREASURIES. Other investment-grade bonds have also suffered. But the RATES are peaking, and focus should be on what comes next (rather than crying over the spilled milk). Hedge-fund manager Bill ACKMAN has covered his Treasury shorts. Yields are much higher now, and much of the bond return is from their starting yields. Bond prices are related to DURATION and longer-term bonds have more kick (up/down). Taxable bonds are oversold and are more attractive than comparable munis. INFLATION-expectations are moderate around +2.5%. Investment-grade bonds may resume their traditional BALLAST role and 60-40 portfolios also look attractive. RISKS include higher persistent inflation, the FED losing control to BOND VIGILANTES, reduced global DEMAND for Treasuries and DOLLAR. The high short-term yields won’t last and it’s time to extend duration/maturity through intermediate-term bonds and/or bond ladders. Mentioned are funds representing a broad spectrum: VMFXX, PFIAX, AGG/BND, OSTIX, BASIX, BINC (new).
Long-Treasury etf TLT is having a lousy year again (3rd), but investors continue to pour money into it (#3 etf inflows YTD) in the hopes of a turnaround soon (2024?). The better performing HY JNK may do the opposite.
(At MFO, ETF incorrectly hyperlinks to something. So, using etf to avoid that. @Charles)
INCOME. Attractive consumer-staples include CLX, HLN, KVUE (JNJ spinoff), LW, PG; etf XLP.
FUNDS. Ouch! If you own bond index funds, then you are suffering from a 3rd bad year. Indexing is difficult for bonds. Many issues are illiquid and may not trade often. Active bond funds may be desirable in specialized FI areas.
Core – Indexed AGG, BND
Core – Active VCORX
Multisector PONAX (these combine sovereigns, corporates, HYs, EMs)
HY – Indexed HYG
HY – Active BHYAX, RSIVX, VWEHX
Munis – Indexed MUB
Munis – Active HMOP, MDNLX, VWAHX
(by @LewisBraham at MFO)
FUNDS. BERKOWITZ’ LC value FAIRX is doing well YTD due to its 82% of assets in FL real estate developer St Joe/JOE (extreme concentration). Almost 33% of the $340 million AUM fund is held by Berkowitz’s family members and they don’t mind paying 1% ER. The AUM peaked after Berkowitz was named Manager of the Decade by M* in 2010, but there have been persistent outflows since then. Institutional holders may redeem the fund for JOE stock. Investor/personal returns (M* statistic on asset-weighted returns) have been poor. (by @LewisBraham at MFO)
Byron WIEN passed away at 90 (1933-2023). He was well-known for his annual lists of 10 Surprises, 20 Life Lessons, Summer Lunches in Hamptons, etc. His philosophy on predictions (and he made many) was that they were meant to be thought-provoking contemporaneously and it didn’t matter whether they turned out to be right or wrong (and he didn’t keep score himself, but others did). A world traveler, his mobility recently was limited by a hip injury, and he relied on Zoom. A nerdy Chicago kid, he was lucky to get into Harvard. His long career was at Morgan Stanley/MS (retired in 2001), Pequot, Blackstone/BX (2009- ). He was quoted often in the media and in Barron’s which did a Cover on him in 2016. He noted that sleep is more critical than diet or exercise. A multimillionaire, he lived modestly – he flew commercial; brought leftover restaurant food home; didn’t move from NYC to FL “because” he wasn’t a billionaire to avoid taxes. His philanthropy was for people who needed help and support rather than for arts and museums. He did endow 2 professorships at Harvard and also funded several scholarships there. He was married twice but didn’t have children and had many godchildren.
RETIREMENT. According to a study by MetLife/MET, 75% of employees could benefit from high-deductible health plans (that is poor naming/framing) and HSAs. But only 45% of employers offer HSAs and only 29% of employees use HSAs. The employee benefits are from lower plan premiums and because the HSA funds can be used tax-free for qualified medical expenses and in retirement (so, it’s like a super-401k/403b). HSAs are also portable. But HSA contribution must stop when Medicare begins; however, the HSA-funds can still be used for medical expenses. (Incorrect MFO hyperlink for HSA)
https://ybbpersonalfinance.proboards.com/board/12/market-insights

Adding more to 6 month T bill and RSIIX, River Park Strategic Income, Institutional. This fund is on NTF platform at Vanguard whereas Fidelity charges $50.
David provided a detailed write-up on RSIIX/RSIVX.
https://mutualfundobserver.com/2023/04/riverpark-strategic-income-fund-rsivx-april-2023/

Until the end of May 2023, I traded HY Munis. Since then, I'm in funds with short duration and low volatility.
I don't listen to a perma bear such as David Rosenberg. Most generic typical core funds can't handle the situation too well. DODIX, a good fund, made YTD just 1.6% with high volatility of 4% from peak to trough, while MM=VMFXX made 2.8% and RSIIX/RSIVX+CBLDX did a much better job.
see (https://schrts.co/mnyiJCSG)

@davidsherman RSIVX/RSIIX appear to no longer be available at Vanguard. A couple of weeks ago, they were listed under Riverpark funds, but I could not place an order presumably due to the change in advisor. Now they have disappeared from the Riverpark list, but Crossing Bridge is not listed as a possible fund family. Any chance these funds will be available at Vanguard again?

On April 17th, I simulated the @davidsherman contest with some mad money, by investing in both RSIVX and OSTIX. So far, they are neck ‘n neck.

Hi, sma!
Hmmm ... I may have lost my claim to being a Weeble ("Weebles wobble, but they don't fall down!") but I'm still moving forward more than back.
Working on setting up manager interviews. Seafarer Value (the only EM fund that didn't crash last year, top 3% since inception), Osterweis Strategic Income (they're one of the shortlist for my rebalanced toward bonds, RSIVX would be an option but I like spreading manager risk a bit), Leuthold Core (in an ongoing effort to give folks an option in a market that refuses to make sense; their portfolio makes frequent small shifts in response to outputs from their quant model) and Standpoint Multi Asset (for about the same reason, just with a shorter track record).
I need to think about what I need to ask. My worst screw-ups come when I simply listen to the sweet song of a passionate manager or become enchanted by "the story." My better work starts with getting the facts down then pursuing the two or three questions that the public record doesn't allow me to answer.
Then there's a mystery of North Star Microcap, a fund that Morningstar agrees has a micro-value portfolio but which, in the face of that, they moved to small-core. Up until 2022, they booked double-digit absolute returns in the prior two years when they had bottom tier relative ones. Then 2022 and a complete dump. Hmmm ...
Oh, right. Also grading, rebuilding the Honors program and meeting a new faculty member and three student research groups today!
Life's a party.
David

Great tip, @carew388. All my TRP stuff is sequestered and married to TRP in the T-IRA. I will be saving-up cash and hopefully buy RSIVX via my brokerage.... *Edited to add: the divs. look lean, but of course, it's Total Return that matters. Thanks, again.

Crash if you're committed to the high-yield sector RSIVX has lost less than half a percent. My Fidelity screener indicated that short-term HY has lost less than HY, and funds from Fidelity, Janus and MetWest have been hammered like TUHYX

The M* bank loan category lost money YTD.
By category return, M* means "simply the average of the returns for all the funds in a given category. The standard category average calculation is based on constituents of the category at the end of the period."
For bank loan funds YTD, I offer two figures:
Daily return through April 8, 2022: -0.23%
Quarterly return through March 31, 2022: -0.55%
Data source:
https://performance.morningstar.com/fund/performance-return.action?t=FDAAX
(See the category line in the Trailing Total Returns section; click on quarterly tab for quarterly data.)
Certainly there are some bank loan funds that made money YTD. The link above (FDAAX) is one such fund. There are also bond funds in several other categories that made money YTD, including:
High yield bond, e.g. RSIVX 0.50%/0.83% (daily/quarterly)
Inflation protected, e.g. EARRX 0.17%/0.36%
Multisector, e.g. ICMUX 0.05%/0.16%
Muni short, e.g. FHMIX 0.08%/0.07%
Nontraditional, e.g. RPIEX 3.98%/2.98%
Short term, i.e. CMFIX 0.10%/0.29%
Ultrashort, e.g. REPOX 0.08%/0.07%
World bond, e.g. TPINX 1.14%/1.14% [sic]

RSIVX Riverpark Strategic Income Fund is a unique fund in that it invests in various debt securities (some less liquid and many non-rated), distressed debt, with a decent allocation to foreign, some convertibles, and a 15% slug to equities.
Some holdings are duplicated from RPHYX, which is Riverpark's short-term HY fund. That's probably the more conservative sleeve.
As @Junkster had mentioned earlier, its held up quite well recently. I think that it's energy and utility investments might have helped there. Its up +0.44% YTD, and over 6% for the past year.
RSIVX is kind of a "go anywhere bond fund", but with a small allocation to stocks added on. Its been working pretty well in this environment.

Fixed income has definitively been a total return blood bath since 3Q21; the math is simple - price moves conversely with duration. Some spread widening has occurred which can be partly attributed to Fed attempts to reduce balance sheet.

But no bloodbath in your income fund - RSIVX. Curious what lit a fire under it last year and how it is positive YTD this year. You are certainly doing something right.

. Also RiverPark has RSIVX…somewhat longer duration than RPHYX, but performing relatively well this year it seems.
Honestly, if you’re ok with courting risk, IOFIX is as steady as they come ....

RSIVX is doing great this year; hadn't thought about it in a long, long time. It's been a dog for most of its life, but must be doing something right this year. Will look into it.
Agree on IOFIX too. Several other securitized OEFs have fallen off the pace lately, but it's keeping on keeping on.
JD's RCTRX suggestion looks pretty good in securitized, too - never heard of it till this thread.

OSTIX, Osterweis Strategic Income (TF at most brokerage houses)…..or ZEOIX, Zeo Short Duration Income (also TF). Also RiverPark has RSIVX…somewhat longer duration than RPHYX, but performing relatively well this year it seems.
Honestly, if you’re ok with courting risk, IOFIX is as steady as they come (the once-in-a-decade, plus, COVID crash notwithstanding….). 4-5% yield and it generally goes up or stays flat most days. I know it’s not high yield! Don’t kill me for suggesting it haha.

Not a particular judgement on the funds, but simply matter of not wanting to pay taxes because of all my put income this year. Some of them have indeed stunk up the place, though. In a market they are supposed to excel, they have been found wanting.
Would like to hear from others which funds they gave up on because I don't want to land in those funds without having the full picture.
At this point completely out of these funds
BPRRX, BGRSX (to cut a long story short ...no pun intended)
APPLX (selling each of last 3 years...what the effing F)
GRSPX (meh...)
MDISX, MQIFX (last of the funds I fell in love with the idea of owning, gotten over that the day I sold HSGFX)
All Artisan funds I owned with "value" in the name but looking to buy back (still one I own, see below)
RPHYX, RSIVX, WMCNX (Sorry people, I can do better selling puts)
PRIJX (hoodwinked into the emerging markets value will do well idea, was in my MILs account)
PVFIX (found alternative, see below)
Funds I sold partially and still hold
FMIMX
ARTKX (if I sell it will generate capital gains)
COBYX (my condolence to the manager's family who passed, but really when are you going to turn around?)
Funds looking to sell at least some off to capture tax loss, hard decisions
IVWAX (my bad luck has to be excellent, manager has to leave, and with all that cash still stinks)
VGPMX (not "golden" any more)
VSIAX (bad timing)
WHGIX, FEVAX (not too worried, but since I don't reinvest dividends, have a loss on cost basis)
Moves that paid off
TMSRX (For MILs account)
PVCMX (Mr Cinnamond, you are not allowed to closed and then re-open new fund any more, it's illegal)
VLAAX, VALIX (lucky timing)
ONERX (Jeff Wrona found God. M* says NEGATIVE. F Them. Rock On)

Out of curiosity, why do you hold so many funds? I'm ballparking statistically here, but if most funds fail to beat the market, aren't you raising your chances of under performing the market with each fund you add?

Not a particular judgement on the funds, but simply matter of not wanting to pay taxes because of all my put income this year. Some of them have indeed stunk up the place, though. In a market they are supposed to excel, they have been found wanting.
Would like to hear from others which funds they gave up on because I don't want to land in those funds without having the full picture.
At this point completely out of these funds
BPRRX, BGRSX (to cut a long story short ...no pun intended)
APPLX (selling each of last 3 years...what the effing F)
GRSPX (meh...)
MDISX, MQIFX (last of the funds I fell in love with the idea of owning, gotten over that the day I sold HSGFX)
All Artisan funds I owned with "value" in the name but looking to buy back (still one I own, see below)
RPHYX, RSIVX, WMCNX (Sorry people, I can do better selling puts)
PRIJX (hoodwinked into the emerging markets value will do well idea, was in my MILs account)
PVFIX (found alternative, see below)
Funds I sold partially and still hold
FMIMX
ARTKX (if I sell it will generate capital gains)
COBYX (my condolence to the manager's family who passed, but really when are you going to turn around?)
Funds looking to sell at least some off to capture tax loss, hard decisions
IVWAX (my bad luck has to be excellent, manager has to leave, and with all that cash still stinks)
VGPMX (not "golden" any more)
VSIAX (bad timing)
WHGIX, FEVAX (not too worried, but since I don't reinvest dividends, have a loss on cost basis)
Moves that paid off
TMSRX (For MILs account)
PVCMX (Mr Cinnamond, you are not allowed to closed and then re-open new fund any more, it's illegal)
VLAAX, VALIX (lucky timing)
ONERX (Jeff Wrona found God. M* says NEGATIVE. F Them. Rock On)

I've moved on from bond funds. I never understood them, and I made that clear several times on MFO. With my newly discovered freedom selling puts, I have absolutely no use for them.
The only out and out bond funds I owned were RSIVX and RPHYX. I expect to lose them by EOY. SIRIX and SSIIX I have to think about. I might get rid of some balanced funds as well. This year I'm going to greatly reduce the number of funds I own. I have previously belittled nonsense about owning "too many funds". I still don't have issue with it. Just that I've found a better mousetrap.
Most of all, I'm sorry to say WFH due to Covid has been good to my health as well as wealth. I will not apologize for it. 007 can take a hike AFAIC.

Just reporting, I've sold my RPHYX and RSIVX in my IRA. I will be doing options trading for generating income. After approximately a month of doing so in my taxable account, I feel quite comfortable I can exceed the returns either / both funds can provide and with a KNOWN level of risk. In other words, I've decided to trust myself instead of a fund manager.
Going back to my stance prior to buying outright bond funds. No more.
PS - Just to close out the situation with Vanguard. Getting options approval is so painful, I'm just not doing it. I have approval at Fido and Schwab, so I'm moving money out of Vanguard and will do options with them at other brokerages.

I have Merrill Edge. If there is one, they are making a good job of hiding it. Frankly as I mentioned on another thread, I've resorted to learning how PUT options work and selling "way out of the money puts". I'm getting comfortable with doing so and really, really close to ditching even RPHYX and RSIVX as well.
I'm expecting very very low yield environment. Election year, stock market has to be pumped up, Corona is not a beer anymore, and fed doubled down on printing money = rates going to zero.

commisions are non-existent. you only pay by # of contracts you trade. And it is 65 cents at Schwab, Fidelity and TD Ameritrade. At Vanguard it is $1.0
I made $500 selling OTM puts in SPY last week in my fidelity account. SPY has 3 expiry dates every week. I just sold PUTs the day before each expiry. It was ridiculously easy.
There is something called beginners luck. I'm going to give this couple of months. If I continue to generate this kind of money I don't need RPHYX and RSIVX.

@MikeM and @expatsp you are right. However, RPHYX *was* touted as a cash substitute. For RSIVX I can take 100% of the blame.
Looking on the positive side, this market has taught me 2 things.
Don't effing buy what you don't understand. I still wanted to own some bonds and paid the price.
Diversifying with more long-short funds is not the same as diversifying with equity funds.
I own NCLIX and I own RMBFX at Schwab. One doing the trick, one not. i expect to reduce one fund, no guesses for which.