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Old 10-09-2012, 09:50 AM   #41
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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.
Wonder what Bill Gross is doing these days?
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Old 10-09-2012, 09:53 AM   #42
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Wonder what Bill Gross is doing these days?
Talking his book and shamelessly whoring for more AUM, as always.
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Old 10-09-2012, 10:13 AM   #43
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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??
Keep your Vanguard. This fund and one like SPHIX keep their CCC stock levels quite low, which of course reduces yield, but at the same time increases safety.
I would not bail on these two unless I saw quality and duration change dramatically.
However, if stocks take a tumble, these will follow. If I had a crystal ball (I don't, too damn cold here) stocks are what I would watch.
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Old 10-09-2012, 10:28 AM   #44
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Wonder what Bill Gross is doing these days?
Performance of PTTRX is 12.7% for last 12 months. Also good long term preformance: http://performance.morningstar.com/fund/performance-return.action?t=PTTRX®ion=USA&culture=en-US
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Old 10-09-2012, 10:43 AM   #45
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Keep your Vanguard. This fund and one like SPHIX keep their CCC stock levels quite low, which of course reduces yield, but at the same time increases safety.
I would not bail on these two unless I saw quality and duration change dramatically.
However, if stocks take a tumble, these will follow. If I had a crystal ball (I don't, too damn cold here) stocks are what I would watch.


thanks for the reply. I have been watching the yield go down - guess it has to if they are going to keep it on firmer ground. The yield is still better than most places.....
I have lowered my exposure to stocks in the last few weeks - building up some dry powder for the next drop.
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Old 10-10-2012, 03:57 PM   #46
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I hate to say it, but the author of this piece is spot on:

Distressed Debt Investing: An Open Letter to CFOs Across America

"Dear CFO -

I hope this letter finds you well. My name is Hunter and I started and currently run a collection of sites focused on credit - specifically distressed and speculative credit. Our readers come from across the world and include every major U.S investment bank and many hedge funds, law firms, and asset managers in the country. I've spent the majority of my career working in leverage finance as an investor allocating and providing capital to sub-investment grade issuers and companies in bankruptcy.

You might be wondering why I am writing to you today. As an active participant in both the primary and secondary credit markets, I spend a significant amount of time gauging the risk appetite of investors that provide financing in the U.S. bond and bank debt markets, up and down the risk and ratings spectrum. Simply put: You are doing your investors and your company a disservice if you are not tapping the credit markets as soon as possible. If you are not planning a new bond or bank debt offering, call your relationship manager at your preferred investment bank of choice and put the wheels in motion. Whether it be refinancing your capital structure, financing an acquisition, dividend, or share repurchase, or simply stuffing the war chest for a rainy day, I behoove you to issue into this market."
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Old 10-10-2012, 04:38 PM   #47
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Haha, I love it. Hey guys, get down here fast before this wealthy and stupid drunk goes home.

How far we have come in 3 short years. Muchas gracias, Señor Ben!

Ha
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Old 10-10-2012, 04:46 PM   #48
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Haha, I love it. Hey guys, get down here fast before this wealthy and stupid drunk goes home.

How far we have come in 3 short years. Muchas gracias, Señor Ben!

Ha
I keep seeing CCC-rated PIK bonds being issued to fund shareholder dividends. The rate at which this crap is accumulating in high yield bond portfolios is accelerating.
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Old 10-10-2012, 05:06 PM   #49
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I keep seeing CCC-rated PIK bonds being issued to fund shareholder dividends. The rate at which this crap is accumulating in high yield bond portfolios is accelerating.
Is this dividends in industrial corporations?

Ha
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Old 10-10-2012, 05:17 PM   #50
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Is this dividends in industrial corporations?

Ha
You name it. Most seem to be controlled by LBO shops, who are generally very savvy about exploiting stupidity on the part of lenders. The most recent deal is an issue from Jaguar Holding Co., which is the LBO of something caled Pharmaceutical Product Development Inc. Not exactly a utility-type business to my way of thinking.
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Old 10-10-2012, 06:34 PM   #51
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Thanks Brewer. I'm surprised at how much the Vg HYCBF yield has dropped recently. It was in the 5.9X% range not too long ago but now down to 4.64% for the admiral shares. It's in my Roth and it's a small allocation about 4 1/2% of the total. I don't mind if the nav dropped as I could go back $1.50 to my purchase point but I'd expect the yield to increase at least to 8-9% then. It was around 12.3% when I bought them IIRC so if it dropped to $4.50 and went up to 9% I'd still be ok. OOTH, if the nav drops and the yield remains in the 5-6% maybe it's time to call it quits. Stay the course for now.
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Old 10-10-2012, 07:11 PM   #52
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Saw this from yesterday. Bonds are dead says Merrill Lynch. BofA Outlines 2013: The Great Rotation from Bonds to Stocks - 24/7 Wall St.

Of course, ML will get a commission every time you sell a bond and again when you buy a stock so they have a vested interesting in pushing the Great Rotation.
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Old 10-10-2012, 08:19 PM   #53
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...the Great Rotation.
The only Great Rotation I see is swirling around the toilet bowl...

I'm about 5% each HYG (junk) and LQD (corp). Been thinking about taking my money and running, though I've liked the divvies. But I don't see the psychology, cloudy crystal ball notwithstanding, for a stampede into stocks.
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Old 10-11-2012, 12:38 AM   #54
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Saw this from yesterday. Bonds are dead says Merrill Lynch. BofA Outlines 2013: The Great Rotation from Bonds to Stocks - 24/7 Wall St.
Business Week, August 13, 1979 - The cover story declared that Equities Are Dead!!! The Dow was about 875 at that time.

Sometimes it's good to be an old curmudgeon a wise and experienced elder who remembers the past.

Really, is this news to anybody? With interest rates at record low levels, is not it obvious that bond appreciation will be tough to come by in the next few years?

What I want is not to be told the obvious, but rather to get a copy of the October 11, 2017 WSJ on my door step tomorrow.
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Old 10-11-2012, 03:51 PM   #55
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This will end well:

Bolivia Hires Goldman, BofA for First Debt Sale Since 1920s - Bloomberg

"
Emerging-market countries that have never sold debt or last did so years ago are issuing bonds to take advantage of the lowest borrowing costs on record. The yield on emerging-market debt fell to a record low 4.68 percent last week, according to JPMorgan Chase & Co., as investors looked for alternatives to near-zero interest rates in the U.S. and Europe.
“People are looking at countries off the beaten path to pick up some yield,” Alejandro Urbina, who manages and gives advice on $800 million of emerging-market assets at Silva Capital Management, said in a telephone interview from Chicago. “They’re coming at a good time.” "
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Old 10-11-2012, 07:22 PM   #56
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This will end well:

Emerging-market countries that have never sold debt or last did so years ago are issuing bonds to take advantage of the lowest borrowing costs on record. The yield on emerging-market debt fell to a record low 4.68 percent last week, according to JPMorgan Chase & Co., as investors looked for alternatives to near-zero interest rates in the U.S. and Europe. .” "
How might this end for countries such as Panama (where I live)?

Panama has a massive number of infrastructure projects going on now: Widening the Panama Canal, hydro electric plants, mining, tons of new roads... GDP is projected to grow at 11% here this here. Inflation running about 6%. They can't get enough warm bodies here to fill the open jobs.

Is this the economic hitman senario, where you load them up with debt that they can never repay and then take back the canal or ?

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Old 10-11-2012, 07:24 PM   #57
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Yeah, baby! Bolivian Bearer Bonds are back!

This will end well, of course. I eagerly await the first bank offering of CDs tied to these.
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Old 10-11-2012, 07:41 PM   #58
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Synthetic CDO's with these as the reference obligation. What could be better than that? I'm sure AIG will be happy to write the necessary CDS.
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Old 10-11-2012, 09:33 PM   #59
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Yeah, baby! Bolivian Bearer Bonds are back!

This will end well, of course. I eagerly await the first bank offering of CDs tied to these.
Bolivian Beever Cheese futures...
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Old 10-12-2012, 01:15 PM   #60
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The bond fund I own myself is has only 9% in high yield, so I am not too worried..........
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