Bond Fund Mgrs increasing cash

[eytonxav]

See link about several major bond fund managers increasing their cash positions, although their definition of cash may be something different from the average investor. Interesting nonetheless:

Gundlach Leads Bond Funds Boosting Cash to Most Since 2008 - Businessweek

 

[clifp]

An excellent article over at Morningstar Bond fund cut the cord.

In addition to the pile of cash bond managers are sitting on many of them are investing the maximum allowed in foreign country and emerging market debt. I happen to think these are smart moves by the managers, but if they blow up there very well maybe many surprised and disappointed investor that find out you can lose money in bonds.

 

[utrecht]

I believe I have an age appropriate amount of my assets invested in bonds, but I have to admit that I don't understand them at all which bothers me. I read both of those articles and have no idea if they are inferring that bonds are about to implode and I should run for the hills (if i was a market timer) or if the managers are being smart by attempting to reduce exposure by holding more cash while trying to boost returns by investing in riskier arenas, which in my opinion could be a smart move.

 

[eytonxav]

or if the managers are being smart by attempting to reduce exposure by holding more cash while trying to boost returns by investing in riskier arenas, which in my opinion could be a smart move.

My take is more in line with your above conclusion, however, everything has become so complex, I certainly cannot draw any conclusions/strategy with any degree of reasonable certainty. I have gradually increased my cash position since April from both equities and FI holdings in anticipation of some buying opportunities near term based on my personal view of the macro economic environment, but I am still holding about 27% in equities and 30% in bonds. I suspect most here are buy and hold indexers, so paring back ones allocation as I have done is viewed negatively (dirty market timer).

 

[clifp]

I believe I have an age appropriate amount of my assets invested in bonds, but I have to admit that I don't understand them at all which bothers me. I read both of those articles and have no idea if they are inferring that bonds are about to implode and I should run for the hills (if i was a market timer) or if the managers are being smart by attempting to reduce exposure by holding more cash while trying to boost returns by investing in riskier arenas, which in my opinion could be a smart move.

My take is a bit of both. Bill Gross, a guy from the rating agency side of S&P, and two sharp (or at least they seem to me) woman journalist from the Economist and Financial Times were on Charlie Rose last week.

One of the takeaways I got from their interesting conversation was that a lot of conventional wisdom is being turned on its head. In particular in the old days risk that an emerging countries sovereign debt would default or (I guess the new term is being restructure ala Greece) is much higher than US or Europe. Now days the balance sheets of a China, Brazil, India look sounder than most developed countries, and their growth prospects look vastly better.

Likewise, corporate debt is traditionally viewed as riskier than government debt, but that is changing. I and more importantly professional managers are looking at the corporate and saying, who do I trust more to pay back my bond in 20 years Johnson & Johnson, Exxon or Uncle Sam, Royal Dutch Shell Oil, or Holland, Toyota or Japan, Siemens or Germany.




Anybody who claims certainty in investing in these challenging times is either a liar or a fool, or likely both.