larkins bond portfolio,anyone using it?

[mathjak107]

i was thinking of giving it a try, any using it?



Larkin's portfolio:
25% iShares Barclays Aggregate Bond ETF (AGG) (Tracks a broad index of high-quality U.S. bonds)
25% iShares iboxx $ Investment Grade Corporate (LQD) (Tracks an index of the most liquid, long-term corporate bonds)
10% Fidelity Floating Rate High Income (FFRHX) (Invests in floating rate bank loans that automatically adjusts to rising short-term interest rates. It offers additional inflation hedge)
10% iShares MBS Fixed Income (MBB) (Tracks a broad index mortgage-backed securities)
7.5% SPDR DB International Govt Inflation-Protected Bond (WIP) (Invests in an index of non-U.S., inflation-linked bonds)
7.5% PowerShares Emerging Markets Sovereign Debt (PCY) (Tracks an index of emerging markets government debt)
7.5% iShares Barclays TIPS Bond (TIP) (Tracks an index of inflation-protected, U.S. Treasury securities)
7.5% iShares Iboxx $ High Yield Corporate Bond (HYG) (Tracks an index of high yield bonds

[LOL!]

Exactly how are dividends going to be reinvested in these ETFs? My understanding is that your broker will collect the dividends, then buy (fractional) shares for you a day or two later using some average price for the ETF that they make up. It is not at all transparent to me.

In contrast with bond mutual fund, the re-invested dividends are used to buy shares at the current NAV. No frictional loss whatsoever.

Of course, maybe you are taking the dividends in cash.

And with all those different types of bonds, you probably ain't gonna do any better than a bond index fund that will have a lower expense ratio. So why make things complicated?

[mathjak107]

im not sure on the reinvested dividends... agg is the bond index pretty much... most of the other parts are more volatile and have higher yields so i guess larkins idea is to enhance the return of the index... expenses are the same pretty much across the board so its just an 8 buck commission on each fund.....


its a pain back tracking this to see the historical returns but going forward that wouldnt mean much anyway

expenses are .33%..while agg the bond index covers alot its weak in many areas... tips, emerging market debt, high yield are just some of the areas ....

it certainly looks like larkin covered all the bases and unlike stocks a 1% difference in return can be alot if the other sectors add more ooomph.

[LOL!]

One only gets more ooomph with more risk. For example, high yield or junk bonds are more correlated to stocks than they are to treasuries, so rather than buy high yield junk, you might as well buy equities.

TIPS go in cycles and can easily be timed because people don't really understand them even though the data is available. They are in the sell range right now.

Mortgage backed securities? I like GNMA's but they are government-backed. MBS are frowned upon unless you like the risk. They may go up, but why bother?

Interest rates aren't gonna go much lower, so a shorter duration is in order here.

Bottom line: This bond portfolio doesn't make sense under the current conditions.

[mathjak107]

i tend to agree with you and thats why i was on the fence about it

[Dennis]

Well, IMO?
1. It's for a Brokerage /Investment Firm to handle so many Bonds
2. I don't think an Individual with Low to Moderate $ needs more than 2-3 Bond funds
3.Short term this yr is in FFRHX
4. GNMA and then maybe some AA Corp.. but Junk bond?
5. my Investment Firm I have an account with has moved into EM Debt Bond Funds
6. Unless you have Quite Alot of Experience in Bonds? A VBMFX and a GNMA might be all you should be in..for LT and a Short Term BF for 1-2 yrs Cash..( FFRHX, VFSTX,)
7. After Retirement and/or Gots Enough $? Wait until Hyper Inflation comes, Then Watch those Newer 30 yr LT Treas. rates go thru the roof, then Go your your nearest Fed. Res. bank and take everything you have and then some and buy them. We could see 8-10% rates on them in the Future..and don't even look at Equities or anything else.. U want (a) 8-10% for 30 yrs or (b) 50% for One yr.and then who knows for the next 29 yrs?

Just look up what they went for during the Carter yrs...

[mathjak107]

i think common sense says we are due for some wicked inflation... but think about this: after world war ii the united states owed 2x gdp for the first time. books were written about the coming hyper inflation...by the 80's we owed 500% of gdp... the soothsayers said we are doomed , higher inflation and rates were a given..... we owed 5x gdp ... well the 2,000's came and we were at 800% of gdp, rates and inflation were still dropping to the surprise of all the crystal ball readers ... we are now at 900% gdp... by all measures we should be like a 3rd world nation by now..... im not so sure once again that whats obvious to all of us will not play out.


theres always something not even on the radar yet that alters the obvious course

[dshibb]

That's because debt and printing money isn't the same thing. Printing money is what causes inflation. During WWII we were on the gold standard, so inflation was never a real problem. It wasn't until after Nixon moved off of it that you had the potential to have high inflation. Our government has printed several trillion in the last year and a half and loaned it to the banks, the federal funds rate has been extremely low which increases the money supply, and recently the fed bought up 1 trillion in treasuries to keep them from rising to fast with printed money(I expect that wont be the only time they do that either). If government debt is bought by domestic investors their is no increase in the money supply. The person that bought the treasuries uses his or her money to buy it, and that shrinks the money supply and then the government spends it and that increases the money supply. The net affect is a wash.

[dshibb]

And our total debt isn't 900% of GDP. It's not even 90%. Our GDP is 14.5 trillion and our total debt is 11 trillion. There is only one time that our debt actually reached 100% of GDP and that was during WWII. We are approaching that amount very quickly today though.

[mathjak107]

ooops i stand corrected, the chart i looked at was way off in calibration, heres a better one

U.S. National Debt Graph: Since Great Depression

[dshibb]

Yeah there you go.

Now I'm going to show you the graph for the money supply and this does create lots of inflation, unlike government debt. Chart of The US Money Supply 1917-2009 | Charting Stocks