Bill Gross, manager of the Janus Henderson Global Unconstrained Bond Fund, best known for his time managing the Pacific Investment Management Co.’s Total Return Fund, has decided to retire. Gross has spent over forty years changing the way people invest in bonds. Bloomberg reports: Gross, who announced his retirement Monday, struggled in the last four years as head of the Janus Henderson Global Unconstrained Bond Fund. His performance failed to match the stellar track record he achieved while building Pacific Investment Management Co.’s Total Return Fund into a bond giant. “I look back … [Read more...]
Young Research & Publishing has been providing research and insights on bonds to institutional investors, corporate financial officers, business owners, and individual investors for over four decades. Richard C. Young started Young Research & Publishing in the 70s to publish the authoritative Young’s World Money Forecast, a 50-page monthly investment report for institutional land high net worth investors. Today, our research on bonds is geared toward investors in or nearing retirement who are looking to preserve and protect wealth.
A 2019 Survival Guy Investment Strategy
Last year Vanguard GNMA made just under one percent or 0.87% for 2018 as interest payments offset a decline in bond prices from rising interest rates. As I’ve written to you before, you don’t want to be in the interest rate prediction business. You simply want to collect your interest payments and let the chips fall as they may. When you near retirement your success as an investor depends on a nine to five mentality—work nine to five to steadily save money for retirement and invest to keep what you’ve saved. It’s that simple. A survival guy investment strategy helps you to win the war … [Read more...]
American Municipalities Offer Less Info, More Debt
You might think that after the blunders of the recent past, public borrowers would have learned the lessons of 2008, but that would be wrong. Rather than increasing the information available, municipalities are providing less transparency to lenders. Gunjan Banerji and Heather Gillers write in The Wall Street Journal: U.S. cities and counties are using fewer ratings to assess the risks of the bonds they sell, providing investors with just one opinion on an increasing amount of new debt. Roughly 25% of the dollar value of all municipal debt issued this year carried a single grade from one … [Read more...]
Junk Bonds Get Trashed
Investors are running from junk bonds, with spreads widening to the highest levels since 2016, and junk bond funds losing suffering withdrawals of $11 billion over just the last six weeks alone. At Bloomberg, Kelsey Butler reports on the rout: Pummeled by expectations of slower growth, outflows and dropping oil prices, junk bonds are poised for their worst returns in more than seven years. High-yield bonds are returning -2.64 percent in December, on track for the worst month since September 2011. The asset class has lost 2.59 percent so far this year, set for the biggest loss since returns … [Read more...]
Why We Favor Laddering Bonds
Yesterday I asked readers Do You Know this about Vanguard Wellington and Wellesley Funds? I explained that we have not soured on the funds, but that their effective maturities are longer than we'd like. I also wrote that at Young Research we recommend laddering bonds. One of the reasons we favor laddering bonds is to help strip-out interest rate risk. When you own a bond outright you have control over your holding period. Duration measures a bond’s sensitivity to interest rates. For example, a bond with a 15-year duration will decline by 15 percent with every one percent increase in … [Read more...]
Vanguard GNMA and a Winter of Political Polarization
Anyone who tells you politics has nothing to do with investing is simply not paying attention. In this winter of political polarization—a deep freeze—politics matter. Case in point. Look at Vanguard GNMA. For most of 2018, Vanguard GNMA has been sledding from a peak of $10.45 in January. Guess when the trough, or bottom was hit? November 6th the day of the midterm elections. Since then, as you’ve witnessed, stocks have been twitching like a desperate squirrel working through that last nut for the winter. Not Vanguard GNMA. It has been steady, up close to two-percent, closing at … [Read more...]
Here’s the Minimum You Should Invest in Fixed-Income
Back in May of 2002 I warned readers of the dangers of market timing, and of investing too much of their portfolio in equities. I wrote: Your Focus: Dividends & Interest In this issue, I re-emphasize why I think conservative investors must focus laser-like on fixed-income interest and dividends from common stocks. No matter what hype you read in the media or hear from brokers, stocks in general are not cheap—far from it. When all you get from the average big company stock is a 1.5% yield and you pay nearly 30 times earnings in the process, you are not looking at bargains. As you know, … [Read more...]
The Last Debt Domino to Fall?
Leveraged loan investors are heading for the door. Loans have their place in investment portfolios, but as late cycle assets to hold, these are not great. The Wall Street Journal's Sam Goldfarb calls them the "last domino to fall," in debt markets. He writes: While mutual funds represent just one source of demand for loans, the recent outflows have had a big market impact, leading to sharp declines in the prices of existing loans and prompting more investor-friendly terms on a shrinking supply of new loans entering the market. To some extent, loans—often referred to on Wall Street as … [Read more...]
Are You Investing in the Armored Truck of Financial Markets?
Are your investments characterized by the flash and speed of a supercar, or the reliability and protection of a Brinks truck? There’s nothing wrong with a super powered automobile made to take on curves at maximum speed, but the power that makes those machines exciting, is also what breaks their parts. All that torque can be hard on an automobile. Meanwhile, the massive diesel engines and reinforced steel protective bodies of armored trucks make sure its cargo reaches the destination. Back in 1990 I called Treasuries “the armored Brinks truck of financial markets.” I was responding to … [Read more...]
Are Catastrophe Bonds Worth the Risk?
Investors who purchased catastrophe bonds from PG&E now have the fate of their investments lying in the hands of investigators searching for the cause of the Camp Fire in California. If PG&E is found to be at fault for the fire, those investors are likely to lose everything. Markets will surely have to reevaluate the risk posed by such catastrophe bonds, and adjust yields demanded accordingly. Nicole Friedman reports on the bonds in The Wall Street Journal, writing: Those who follow the catastrophe-bond market are already anticipating the worst. The PG&E wildfire bond was quoted … [Read more...]
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