The Bond King getting Bearish on bonds

[Pete]

Bill Gross: Bonds Will Only Get Uglier From Now on ...



bill gross bonds will only get uglier from now on ... can i introduce you to my new stock funds: Tech Ticker, Yahoo! Finance

 

[ziggy29]

I might be more swayed by his opinion if it didn't come with an announcement of new PIMCO stock funds. That fact makes it sound self-serving.

Though I should add I've had his bond fund in my 401K for a few years and have been pleased with the performance.

 

[Gone4Good]

Bill Gross is certainly well known for talking his book. But I have a hard time reconciling any of his comments over the past six to twelve months as an endorsement for equities. The only thing I hear him pushing lately is German bonds.

 

[IndependentlyPoor]

I coulda, shoulda, woulda bought PIMCO, but I didn't.

He very well might be just talking up his new offerings, but if he really does believe that bonds are in for a rough patch, then he is somewhat of a pickle.

What can he do? Disingenuously talk down the possibility of a bear market in bonds and possible wreck his credibility? Do nothing and watch his NAVs decline and investors flee? Start a funds in areas that he thinks will be profitable?

 

[Gone4Good]

He very well might be just talking up his new offerings, but if he really does believe that bonds are in for a rough patch, then he is somewhat of a pickle.

I agree he's in a pickle. That's because the reason he doesn't like bonds is he expects most developed countries will have difficulties managing their fiscal situations. In some cases he sees potential default. In other cases he sees higher inflation and higher real interest rates. In most cases he sees slower economic growth and asset appreciation undermined by deleveraging.

His "new normal" isn't a good environment for just about anything. Listening to him certainly doesn't get me all bulled up on equities.

 

[chinaco]

Notice.... he is rolling out a Stock fund.

What do you think that means? It surely means he is seeing brighter days in the equity markets.

For Bonds... I think company and interest rate risk can be managed.

 

[yakers]

Bill Gross is one of the smartest investors around. He also says a lot of confusing and even wrong things. But watch what he does not what he says. If he was opening up stock funds and saying buy bonds I would run to buy stocks. In this case I think he is speaking almost straight, not a good time for bonds, better to be in socks although they may not be so great either.

 

[clifp]

I wonder if Bill Gross has been reading my bearish posts on bonds over the last 6-9 months.

Well I am keeping my bond allocation to a minimum 20%

 

[REWahoo]

In this case I think he is speaking almost straight, not a good time for bonds, better to be in socks although they may not be so great either.

At least they'll keep your feet warm.

 

[Onward]

At least they'll keep your feet warm.

Shame on you.

 

[Midpack]

At least they'll keep your feet warm.

 

[IBWino]

Well, the only bond fund in my 401k is PTRAX (PIMCO Total Return Admin), where I currently have 30% of assets. I've been very happy with it thus far. According to Morningstar, current cash and bond positions are -27.3% and 122.7% respectively. Does this mean the fund is leveraged? If so, is that wise in a bubble?

 

[ziggy29]

Well, the only bond fund in my 401k is PTRAX (PIMCO Total Return Admin), where I currently have 30% of assets. I've been very happy with it thus far. According to Morningstar, current cash and bond positions are -27.3% and 122.7% respectively. Does this mean the fund is leveraged? If so, is that wise in a bubble?

This fund tries to exploit what it thinks are mispriced bonds by levering up on bonds they think are undervalued and shorting the ones that they think are overpriced.

 

[IBWino]

Thanks Ziggy. Hard to argue with the approach considering the fund's past performance. It just seemed odd to me in light of Gross's comments regarding bonds.

Regards,
Wino

 

[bigla]

Bill Gross isn't the only one

I have been reading or hearing from a number of sources that bonds are heading for trouble. I am retired with about 53% of my AA in bond funds VG Intermediate, VG Corporate, VG TIPS,, GNMA, and Short term corporate (used for emergencies and current withdrawals). Is it time to move out of these or ride the next bear wave out. Shouldn't be needing any but the short term corp. for 3-4 years.
Larry

 

[clifp]

I have been reading or hearing from a number of sources that bonds are heading for trouble. I am retired with about 53% of my AA in bond funds VG Intermediate, VG Corporate, VG TIPS,, GNMA, and Short term corporate (used for emergencies and current withdrawals). Is it time to move out of these or ride the next bear wave out. Shouldn't be needing any but the short term corp. for 3-4 years.
Larry

If I had a 50% allocation of bonds (which is certainly prudent) my allocation would look a lot like yours. I have VG GNMA , and a smattering of short to intermediate individual corporate issues and few munis. You could consider moving some of the bonds into a CD ladder you can get roughly 3% (far from great but better than nothing) at PenFed.

 

[ripper1]

All my new deferrals go to VTSMX. But I do have a 50% allocation to fixed income which consists of DODIX, VBMFX, and a stable value fund. I would think staying away from long term positions would be prudent at this time.

 

[audreyh1]

I have been reading or hearing from a number of sources that bonds are heading for trouble. I am retired with about 53% of my AA in bond funds VG Intermediate, VG Corporate, VG TIPS,, GNMA, and Short term corporate (used for emergencies and current withdrawals). Is it time to move out of these or ride the next bear wave out. Shouldn't be needing any but the short term corp. for 3-4 years.
Larry

First of all - don't do anything based on the "conventional wisdom". The talking heads usually have it wrong enough that it hurts you to take temporary action based on their "advice".

Second - you are holding these bond funds for the long run. You'll do fine through this event - it will be temporary. It won't cause your income paid out to drop - in fact it will eventually start going up again IF we really do have a huge interest rate spike - which I somewhat doubt.

The short-term corp position may be the most vulnerable - but again you will probably ride it out OK over the long run. If you are using it as a sub for cash you might want to set 1 to 2 years cash aside instead. That's a bit of a risky position for very short term needs.

Otherwise - stay the course and don't let the talking heads fake you out. I mean - what would you do instead? Do you really think you can time your way around this? Putting your entire bond position in cash would be a huge opportunity cost as you would earn NOTHING while waiting for whatever "bad event" to first start, and then to be over.

Audrey

 

[utrecht]

Well, the only bond fund in my 401k is PTRAX (PIMCO Total Return Admin), where I currently have 30% of assets. I've been very happy with it thus far. According to Morningstar, current cash and bond positions are -27.3% and 122.7% respectively. Does this mean the fund is leveraged? If so, is that wise in a bubble?

Have you looked lately? Right now Morningstar shows PTRAX to have 90.1% Bonds, 4.7% Cash and 5.2% Other (whatever that is). I have quite a bit of PTRAX also.

 

[IBWino]

Have you looked lately? Right now Morningstar shows PTRAX to have 90.1% Bonds, 4.7% Cash and 5.2% Other (whatever that is). I have quite a bit of PTRAX also.

Interesting; that's a big swing in a little less than a month. Wish I was smart enough to know what (if anything) it means.

 

[utrecht]

For me it means that I can leave my AA as is even if I was smart enough to know when bonds aren't as strong as they were some months ago (which I'm not), because the fund manager is making adjustments as he sees fit.