We are entering a "Golden Period" for fixed income investing

[NW-Bound]

They keep telling me that I’m seeing how the sausage is made. I’m not sure I want to keep making sausage

You made my day.

But I am afraid it's all sausage in the investment world. Perhaps something is called embutido, or wurstchen or salsiccia or kielbasa, but they are all the same thing.

 

[Katoslake]

No what I'm saying is:

1- Fire the loser managing your portfolio and stop paying the SMA fee. If they resist, file notify Fidelity that you will file a complaint with FINRA seeking damages.

2- Start managing the laddered bond portfolio yourself. You don't need to sell anything as your are likely going to suffer a loss. Over 12% of your portfolio was invested in a treasury at 0.5% that matures in November 2023 which shows just how incompetent your Fidelity advisor was.

3- If you don't need the coupon payments now to cover expenses, use it to buy CDs or corporate notes. Your ladder already goes out over 30 years so there is no point in adding more long duration notes. Don't buy any CD or corporate note beyond 5 years at this point. You have 12% of your portfolio maturing in November 2023 and you should use the proceeds to buy high grade corporate notes or CDs whichever is better. The November 2023 treasury is approaching maturity and will slowly converge on par value. You have to weigh selling that treasury at a loss which is already reflected in your account and re-invest it at higher yields that are available today. Assuming your bought that treasury at par $100 and sold it at $96, you would have to earn in excess of 4.6875% on your new investment to break even. It's all simple arithmetic.

Making sausage and fixed income investing are two different things. Fixed income is all simple arithmetic. Bonds, CDs, Treasuries are the most predictable assets next to money market funds with a $1 NAV. Don't let Fidelity sucker you into MYGAs and start taking control over own destiny.

I hope that clears up what I was saying.

Also thanks for sharing with others how much damage Fidelity advisory services can do to your wealth and expose that those so called expert advisors are nothing short of incompetent buffoons.

Thanks for your time and advice. I'm pretty sure I've made thousands of dollars worth of mistakes in my evolving relationship with Fidelity advisors.
I put specific details on this site so people could see and evaluate situation.

I know I'll make more mistakes in the future, but hopefully not repeat those of the past 2+ years !

 

[Freedom56]

You made my day.

But I am afraid it's all sausage in the investment world. Perhaps something is called embutido, or wurstchen or salsiccia or kielbasa, but they are all the same thing.

"Sausage making" is now part of the investment community asset management vernacular. I wonder if that means that their clients are being put through the grinder.

 

[MichaelB]

I wonder if that means that their clients are being put through the grinder.

Hasn’t this always been the case with financial advisors?

 

[Freedom56]

Thanks for your time and advice. I'm pretty sure I've made thousands of dollars worth of mistakes in my evolving relationship with Fidelity advisors.
I put specific details on this site so people could see and evaluate situation.

I know I'll make more mistakes in the future, but hopefully not repeat those of the past 2+ years !

After I graduated from university and started my career, I had a full service broker managing my money. I had no background in finance and I worked in the technology sector. All I cared about was designing logic circuits, firmware, and software so our company could get products out to the market fast before it was obsolete. After 3 years of losses, the only person that was gaining was the broker. I soon realized that I needed to take control of my investment decisions. I opened an account at a discount broker and took control of my investment decisions. That was the best decision I ever I made. As I progressed up the management ladder, I had no choice but to learn about managerial finance, management accounting, sales and revenue outlook. For those who work in the private sector and run a company/division or their own business, they understand how businesses function and that it's a game of survival. I learned from my mistakes early in life and I just don't trust these so called "investment professionals". Their number one goal is to make money and their incentive is the bonus even if it is at the expense of their clients. This is the sad reality. Most investment advisors don't even have any background in finance nor any business experience. They are trained to sell products and services with recurring fees. Their total compensation is based on how much in fees they generate. What amazes me is that how little these Fidelity advisors use portfolio hedges to limit equity portfolio losses to no more than 10% and fixed income portfolio losses to no more than 5%.

Good luck with your investments.

 

[Freedom56]

Hasn’t this always been the case with financial advisors?

In general yes. But a very tiny percentage of financial advisors are actually very good but they serve ultra-high net worth clients. You won't find these advisors at Fidelity, Vanguard, Fisher, or Schwab. Morgan Stanley private wealth management in Menlo Park California is among the best in the country. In this world, you get what you pay for.

 

[Freedom56]

Here is a study conducted a few years ago on financial advisors titled:

Financial Advisors: A Case of Babysitters?

The conclusion should not surprise anyone unless they happen by chance to find a good financial advisor.

The abstract reads:

We use two data sets, one from a large brokerage and another from a major bank, to ask: (i) whether financial advisors are more likely to be matched with poorer, uninformed investors or with richer and experienced investors; (ii) how advised accounts actually perform relative to self managed accounts; (iii) whether the contribution of independent and bank advisors is similar.

For those who want the 2 minute read, just jump to the conclusion on page 23.

"Our findings imply that many financial advisors end up collecting more in fees and commissions than any monetary value they add to the account. This raises the further question of whether advisors overcharge and should be regulated. While the case for regulation seems much clearer when advisors are matched with inexperienced investors, negative effects appear even
when the tendency is for experienced investors to be using an advisor. In such cases, it may be that investors are inattentive and fail to monitor the advisors effectively; or that they face high opportunity costs of running accounts by themselves and are willing to pay a luxury premium to have their advisors run their accounts. What distinguishes these two cases is customer awareness of the financial advisor incentives and effects. Even if regulation is not warranted in both cases, transparency and information on the role and outcome of financial advice seem crucial."

Is anyone shocked?

 

[Sunset]

Thanks for your time and advice. I'm pretty sure I've made thousands of dollars worth of mistakes in my evolving relationship with Fidelity advisors.
I put specific details on this site so people could see and evaluate situation.

I know I'll make more mistakes in the future, but hopefully not repeat those of the past 2+ years !

Many of us were fooled at first.

I put all my trust in the FA at the bank, little did I know that person is not even an employee of the bank.
I invested in a fund with a 5% front end load
It sucked and I was stuck for 5 years in it.

Thankfully, I learned I could open a brokerage account and invest directly by myself.

 

[Freedom56]

Another webinar's this week (all free) from Fidelity. The presenter from outside Fidelity so there is a good possibility that it will be more informative.

"Interest rates and the economy are inherently linked in a hand in glove relationship. This webinar will describe Federated’ s assessment of the current state of both the U.S. and global economies and the opportunities available in the fixed income markets in light of that assessment."

"Join Bill Ehling , CFA®, Market Strategist Client Portfolio Manager, Vice President from Federated Hermes present an economic outlook and forecast for interest rates. Finding opportunities in fixed income given the path of the Fed and interest rates."



https://fidelityevents.com/economicassessmentandfixed-inc?cc_source=em_Publications_892366_167_0

So what is Fidelity's ulterior motive for bringing in a fund manager from outside Fidelity? A quick check and the reason is clear, front end load funds.

"For Class A Shares of the Federated Hermes funds, load figures reflect the maximum sales charge of 4.5% for fixed income funds and 5.5% for equity funds (except that returns for Short-Term Income Fund, Short-Intermediate Total Return Bond Fund, Short-Intermediate Municipal Fund and Floating Rate Strategic Income Fund reflect the maximum 1% sales charge, returns for Government Ultrashort Fund, Municipal Ultrashort Fund, and Ultrashort Bond Fund reflect the maximum 0% sales charge, and returns for Michigan Intermediate Municipal Fund reflect the maximum 3% sales charge). For other share classes, load figures reflect the maximum sales charge of 1% for Class F Shares and the maximum contingent deferred sales charge of 5.5% for Class B Shares, 1% for Class C Shares, and 1% for Class F Shares."

I would listen to what he has to say and don't even consider buying any funds from Federate Hermes.

 

[lawman]

This morning I received notice from Schwab of offerings from Oracle, Humana and Ally. These offerings I get from Schwab are usually closed within a few hours. Anyone here ever participate in these?

 

[Freedom56]

This morning I received notice from Schwab of offerings from Oracle, Humana and Ally. These offerings I get from Schwab are usually closed within a few hours. Anyone here ever participate in these?

They filed them today but they are not priced yet.
https://www.sec.gov/Archives/edgar/data/1341439/000119312522278525/d376101d424b2.htm

Oracle is rated BBB but there is nothing wrong with the company but the coupon better start with a "7" digit or the yield will get there on the secondary market.

Human is rated BBB+ and again the issue was filed but not priced nor are the durations determined at this point.

https://www.sec.gov/Archives/edgar/data/49071/000119312522278574/d388171d424b5.htm

 

[lawman]

They filed them today but they are not priced yet.
https://www.sec.gov/Archives/edgar/data/1341439/000119312522278525/d376101d424b2.htm

Oracle is rated BBB but there is nothing wrong with the company but the coupon better start with a "7" digit or the yield will get there on the secondary market.

Human is rated BBB+ and again the issue was filed but not priced nor are the durations determined at this point.

https://www.sec.gov/Archives/edgar/data/49071/000119312522278574/d388171d424b5.htm

So how does it work? Do they wait for people to bid or do they just set some arbitrary rates?

 

[lawman]

The books are now closed on Oracle

 

[Freedom56]

So how does it work? Do they wait for people to bid or do they just set some arbitrary rates?

They first see if there is any institutional interest and if there is not enough demand, they solicit retail investors. I would wait for this to price completely. Supply and demand will determine the final coupons.

 

[dreamchaser]

Forgive my ignorance here, but where are you guys finding all this information? I have been searching on Schwab for these Oracle, Humana and Ally new issues. I’ve also been trying to pinpoint the BOA, JPM… 1-2yr bonds, with YTM of ~7% that Freedom mentioned earlier in the thread, but I’m clearly doing something wrong.

 

[lawman]

Forgive my ignorance here, but where are you guys finding all this information? I have been searching on Schwab for these Oracle, Humana and Ally new issues. I’ve also been trying to pinpoint the BOA, JPM… 1-2yr bonds, with YTM of ~7% that Freedom mentioned earlier in the thread, but I’m clearly doing something wrong.

I'm not much help here as I'm sure you know more about this stuff than I but on your account page there is a way to sign up for notice of new corporate bond offerings..I was able to do that but I'm not able to tell you exactly how I did it..

It seems Schwab seldom has the secondary issues that Freedom discusses. I've tried calling the bond desk but that has not worked well for me.

 

[lawman]

The books are now closed on Humana.

 

[REWahoo]

The books are now closed on Humana.

So Mutual of Omaha isn't the only supplement carrier doing this, eh?

 

[Willers]

A sort of related question: so who are the buyers of the shorter-term (<5-year) AAA corporates? An investor can get the same or better return from CD's and treasuries and vastly reduce the default risk. Are they institutional investors and funds that have to maintain a certain portfolio?

 

[NomDeER]

Could someone please help me understand the pros and cons of this new issue five-year Wells Fargo bond that has a multi-step coupon?

Cusip 95001DCM0

The coupon has a higher YTM than most new corporate bonds. But, wouldn't the step increases slowly increase the chances of the bond being called? And have a higher chance of being called than a bond with a lower YTM that has a fixed coupon? What else should I be considering?

Thanks!

 

[lawman]

Looking at Ally CUSIP 02005NBH2 yielding 6.06% maturing 5/24/24...Anything wrong with that?

 

[lawman]

I would like to know how to sell a bond or treasury on the secondary market through Schwab..I would like to go through the process of requesting a bid.. Is there any reason I should not request a bid just so I am familiar with the process..I assume no transaction would take place until I accepted an offer..

 

[Freedom56]

A sort of related question: so who are the buyers of the shorter-term (<5-year) AAA corporates? An investor can get the same or better return from CD's and treasuries and vastly reduce the default risk. Are they institutional investors and funds that have to maintain a certain portfolio?

This question was brought up before. There is no value in going above A rated corporates. AAA corporates have nowhere to go but down and they don't pay any premium of treasuries or CDs. GE used to be AAA rated and now BBB+ rated. Only two companies Microsoft and J&J have full AAA ratings. Their coupons are far too low.

 

[Freedom56]

I would like to know how to sell a bond or treasury on the secondary market through Schwab..I would like to go through the process of requesting a bid.. Is there any reason I should not request a bid just so I am familiar with the process..I assume no transaction would take place until I accepted an offer..

You may hit the wrong button and accept the offer and sell it at a loss.

 

[Freedom56]

Looking at Ally CUSIP 02005NBH2 yielding 6.06% maturing 5/24/24...Anything wrong with that?

Schwab is ripping you off.

ALLY FINL INC NOTE CALL MAKE WHOLE3.87500% 05/21/2024

It is trading at a YTM of 6.4%. The order book at fidelity is close to that yield.

Look at the trades today:

https://finra-markets.morningstar.c...26581&startdate=11/07/2021&enddate=11/07/2022

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C826581&symbol=ALLY4835691