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Old 10-05-2012, 12:31 PM   #21
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I"ve owned TR Price's High Yield Fund (PRHYX) in some form or another for almost a decade with no issues.

Stable price over 20 years (low in 08 of $4; but generally between $6 and $7).
Stable yield over 20 years (generally 6%-8%).

You need to know that the price more closely follows a stock price vs inversely and also understand the risk, but I can't say that I lose sleep over this fund.

Junk is junk but a well managed junk fund is a nice thing in times when there is no yield to be found. They closed this fund a few months ago to new investors. Glad I was already there.
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Old 10-05-2012, 12:39 PM   #22
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Stable price over 20 years (low in 08 of $4; but generally between $6 and $7).
You are very undemanding in your definition of stable. Congrats, you must not be a curmudgeon.

Ha
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Old 10-05-2012, 12:49 PM   #23
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You are very undemanding in your definition of stable. Congrats, you must not be a curmudgeon.

Ha
Well, I did buy a big chunk more at $4 so I have a lot of leeway.

As noted, junk bond FUND pricing acts more like a stock and follows stock/Dow/market prices and not inversely.

A monthly dividend annualized to 6-8% pays the bills.
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Old 10-05-2012, 02:47 PM   #24
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I just pulled this from Dr. Pfau's blog on John Bogle: Retirement Researcher Blog: John Bogle Speaks on Retirement Income at the Retirement Income Symposium in Boston

"People may need more income, but bad news: the market doesnít care whether you need more income or not. Efforts to get greater income creates greater risk. The average family should take care and also avoid junk bonds and other riskier but higher yielding investments.
The combined yield on a stock and bond portfolio has never been worse! But thatís the reality today. It would not be a Bogle move to try and pull more out of the market than itís willing to provide at a reasonable level of risk."
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Old 10-05-2012, 02:52 PM   #25
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I just pulled this from Dr. Pfau's blog on John Bogle: Retirement Researcher Blog: John Bogle Speaks on Retirement Income at the Retirement Income Symposium in Boston


The combined yield on a stock and bond portfolio has never been worse!
So, if it's never been worse and I"m doing well right now, can I take comfort in the thought that it can only get better?
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Old 10-05-2012, 03:05 PM   #26
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So, if it's never been worse and I"m doing well right now, can I take comfort in the thought that it can only get better?
I have often had the same thought, but then I keep worrying that my financial state might revert to the mean, meaning to that of typical people out there.

Just this morning, read a Web article on the depressing state of the Spanish economy, the high jobless rate, and just plain misery all around.

PS. Off-topic here, but a recent BBC article discussed how the Spanish problem was not caused by its government, unlike the Greek fiasco. It was the Spanish private sector that caused the real estate implosion, while the Spanish public debt was in fact better than those of other European countries. Reading that, I wonder how the US survived the subprime and real-estate meltdown so well. Or is it simply a delayed problem because the Chinese kept letting us borrow money?
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Old 10-05-2012, 06:14 PM   #27
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So, if it's never been worse and I"m doing well right now, can I take comfort in the thought that it can only get better?
You took that quote out of context - a big NO NO, IMHO. I suggest you read the entire blog, or at least the entire quote.
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Old 10-05-2012, 09:05 PM   #28
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You took that quote out of context - a big NO NO, IMHO. I suggest you read the entire blog, or at least the entire quote.
I just wanted to highlight the point of my comment, not an attempt to take something out of context.

I read the blog. My buddy attended the conference. Chill. It's all good.
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Old 10-05-2012, 11:05 PM   #29
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I just wanted to highlight the point of my comment, not an attempt to take something out of context.

I read the blog. My buddy attended the conference. Chill. It's all good.
Well, consider yourself warned.
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Old 10-05-2012, 11:31 PM   #30
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Actually, I was making a wider point. When we start seeing this kind of crap being issued, it means that terms and conditions on less egregious forms of jusnk have gotten very loose. If you continue to see this kind of garbage being issued, you know what is coming (junk market implosion). It is also a clear sign to start exiting junk funds. I can see changes in terms and conditions in individual bonds. You really cannot see it in funds. Caveat emptor, big time, from this point forward on junk. It will blow up, it is just a matter of time now.
So how does one short the junk market as a whole?

Or should we just Google the keyword phrases "junk bonds"+"John Paulson"?
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Old 10-05-2012, 11:37 PM   #31
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So how does one short the junk market as a whole?

Or should we just Google the keyword phrases "junk bonds"+"John Paulson"?
Like everything else, junk is tough to short. You can short an ETF, but it might be a long, expensive wait. I generally find it wiser to hop out amd wait with some cash on the sidelines to buy the babies that inevitably get tossed out with the bathwater.
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Old 10-06-2012, 06:13 AM   #32
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Well, consider yourself warned.
Oh, my, yes! I didn't know about that rule. I had seen others do that and assumed (you know what happens when you 'assume'!) it was the thing to do.

From now on, I'll make sure to post the entire original quotation even if it's a couple dozen paragraphs and just let the next reader figure out what particular comment within that quote I was refering to.
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Old 10-06-2012, 06:59 AM   #33
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I think Brewer was speaking of being warned about a pending bond market implosion, not about any rules for posting quotes. From the point of view of the moderators, we prefer that you not post entire articles, but rather post only the relevant portions that you are commenting on.
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Old 10-06-2012, 07:21 AM   #34
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I think Brewer was speaking of being warned about a pending bond market implosion, not about any rules for posting quotes. From the point of view of the moderators, we prefer that you not post entire articles, but rather post only the relevant portions that you are commenting on.
Thanks. One of the challenges of email/written word.

I was just being snarky on the posting quotes part. Apologies.
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Old 10-06-2012, 10:50 AM   #35
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Bernstein wrote an article on junk bonds in 2001: Credit Risk

There is a nice chart of Junk-Treasury spreads there.
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Old 10-06-2012, 11:16 AM   #36
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I have a fair amount in VG high yield fund - got in about 4 years ago. What do you suggest as an alternative to junk bonds??
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Old 10-06-2012, 11:36 AM   #37
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I have no specific knowledge, but that does make sense to me. Junk is still paying a good yield (>6%) - where can you get that? Bonds and CDs are very low, stocks have had a big run up, getting people to think about re-balancing.

So that can lead to a bubble of people piling into junk. And bubbles burst.

I guess a good indication might be how much money is flowing into the big junk funds? IIRC, Vanguard closed their junk fund to new investors a few years back?

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Vanguard closed their junk bond fund around May 2012 IIRC. The SEC yield as of 10/5 is just 4.64% (BASED ON HOLDINGS' YIELD TO MATURITY FOR LAST 30 DAYS.)

Like some here I'm unclear what this means to the Vg HYCBF? I bought it when the nav was in the mid $4 range so I have a long way to go before it drops to my purchase point and if the nav is dropping wouldn't the yield increase? The yield when I bought it was in the 12% range!
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Old 10-06-2012, 11:39 AM   #38
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So how does one short the junk market as a whole?
Don't junk bonds have a high correlation with equities? Perhaps some out of the money S&P puts would be a good hedge.
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Old 10-06-2012, 11:52 AM   #39
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So, if it's never been worse and I"m doing well right now, can I take comfort in the thought that it can only get better?
No. As it "gets better", it also gets worse for current owners.

Ha
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Old 10-08-2012, 11:09 PM   #40
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Vanguard closed their junk bond fund around May 2012 IIRC. The SEC yield as of 10/5 is just 4.64% (BASED ON HOLDINGS' YIELD TO MATURITY FOR LAST 30 DAYS.)

Like some here I'm unclear what this means to the Vg HYCBF? I bought it when the nav was in the mid $4 range so I have a long way to go before it drops to my purchase point and if the nav is dropping wouldn't the yield increase? The yield when I bought it was in the 12% range!
What it means for VG high yield and all high yield funds is that they will either have to accept lower yields, buy dangerously poorly underwritten bonds, or both. It will take time, but as existing bonds get called they will get replaced with crap unless the market recovers its senses.

Personally, I am bailing and either holding cash or redeploying the money to other asset classes.
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