The Best of the Best of the Bond Market Weekly – February 16th EditionFebruary 16th, 2013 by David Waring
Learn Bonds: – The all weather portfolio – How Ray Dalio’s strategy works. – The All-Weather Portfolio is an investment philosophy developed by Ray Dalio and the name of fund offered by his hedge fund Bridgewater, one of the largest hedge funds in the world. However, you will also see detailed “all-weather” portfolios on many investing sites. These portfolios don’t mimic the “all-weather” fund offered by Bridgewater, whose exact investments remain secret, but invest based on the “all-weather” philosophy. So are these strategies any good?
Learn Bonds: – Cliffs natural resources – The stock plunges, the bonds don’t. – Dividends do not always provide as predictable and secure of an income stream as many investors believe. There are a whole host of companies in which investors with longer-term time horizons would be better off foregoing the dividends from the stock and instead owning the bonds. Cliffs Natural Resources just provided us with a recent example of why it is one such company.
Learn Bonds: – 5 Ways to increase profits from an emerging markets bond pro. – I recently sat in on a presentation by Luz Padilla who manages the DoubleLine Emerging Markets fund. In the presentation she gave 5 concrete examples of how investors can increase the profitability of their emerging market bond investments.
Learn Bonds: – Should you avoid bank bonds? – A year ago, Learn Bonds was suggesting that investors looking for additional yield might consider financial bonds. But yields of all financial bonds have come down tremendously over the last year compared to non-financial bonds. In fact, the yields on industrial bonds and financial bonds are now comparable. So are financial bonds still a good investment?
Learn Bonds: – The guru strategy for bond investing. – The guru strategy is simple. First pick a really smart investor, like Warren Buffet or David Einhorn then find out what securities they are holding and buy them. For stock investors, there are sites that make this process very easy, but for bonds, the process is more complicated. But don’t worry our very own Marc Prosser shows you how.
Barry Ritholtz: – Stocks beat bonds (finally). – One of the things that this rally has managed to finally accomplish is that it has given stocks a (short term) performance advantage over bonds.
Bond Buyer: – Some gambled big on American Airlines bonds after bankruptcy – and won big. – American Airlines has about $1.5 billion of unsecured municipal bonds. “The bonds are all up,” said Jon Barasch, director, municipal evaluations at Interactive Data, after reviewing trading activity on a series of CUSIPs. “Trading levels strongly indicate that the belief is there will be a full recovery at par for unsecured bondholders,” said one high-yield investment specialist.
WSJ: – Inflows return to emerging-market hard-currency bond funds. – Emerging-market hard-currency bond funds drew inflows in the latest week, recovering from investors’ exit from these funds the previous week, according to fund-tracker EPFR Global.
Barron’s: – Rotation into stocks coming from cash, not bonds, so far. – Much has been written in recent months about a possible “great rotation” into stocks, with investors fleeing bonds as fixed-income returns approach zero and interest rates start creeping higher. This week Jeffrey Rosenberg, BlackRock‘s chief fixed-income investment strategist, joins a growing chorus of observers who find that so far, funds that are moving into stocks are coming from cash, not from bonds.
Bond Buyer: – 2012 municipal market statistics review. – Take a look at how the 2012 muni market stacks up, with the Bond Buyer annual municipal markets review.
Forbes: – Why munis still make sense in 2013, the year of income. – It just keeps on getting better for muni investors; but what’s happening and will 2013 shape up to be the “year of income.”
NASRA: – Facts you should know! State/municipal bankruptcy, munibonds, state/local pensions. – Everything you need to know about state and municipal bankruptcy, municipal bonds as well as state and local pensions. Every munibond investor should read this.
Bloomberg: – BlackRock rushes to short end as Goldman alarmed. – The world’s biggest buyers of corporate debt are seeking refuge in shorter-maturity bonds as concern deepens that a three-decade rally will end in losses as interest rates rise.
ETF Trends: – Short-term bond ETFs for rising rates. – Historically low yields have been around over the past year and speculators are anticipating a rise in interest rates should the economy recover. Investors have congregated into fixed income exchange traded funds as a result, but where should they go next if inflation sets in and bond yields rise?
Barron’s: – Bondholder LBO worries: Overblown, but under-priced. – As if investment-grade bond investors didn’t have enough worries between record-low yields and elevated interest-rate sensitivity, the Dell Inc (DELL) leveraged buyout has brought out some recurring LBO fears that the nice investment-grade company you own could become the target of a big, debt-heavy buyout and those high-grade bonds will disintegrate into junk.
Pragmatic Capitalism: Comparing stock and bond market drawdowns – Not surprisingly stock market drawdowns are more than twice as deep on average than bond market drawdowns.
Bloomberg: – Bridgewater bets on stocks and Eurobonds. – Bridgewater Associates LP, the $140 billion hedge fund founded by Ray Dalio, is wagering on global stocks and European bonds and betting against those in the US, Japan, UK and Australia, the firm’s chart shows. It’s bearish on emerging sovereign credit.
About.com: – Bond market data resources. – If you’re looking for stock market data and statistics, there’s almost no limit to the number of websites that provide this information. But if you need bond market data, you have to do a little more digging. With that in mind, here are some of the best free resources on the web for current and historical bond market data.
Financial IceBerg: Junk bond ETF update - Early Warning Signs : Correction on Huge Volume
CNN Money: – How banks could get blown away by bond bubble. – A Federal Reserve governor is publicly raising concerns about a bond bubble, and he thinks banks could take a big hit.
Silk Invest: – Frontier market fixed income and the end of global negative interest rates. – In our recent outlook for 2013, one of the main points we made was about ‘The end of the global negative interest rates environment’. What we mean by this is that real yields (yield minus inflation) have now turned negative in most developed bond markets. This is an imbalance that eventually will have to be set straight, either by lower inflation or by rising interest rates (unpopular!). And soon we’ll find out what.
Investor Place: – Vanguard finally charts course for international bonds. – For years, Vanguard resisted offering a foreign bond mutual fund, but in 2011 it seemingly caved to investor demand and announced the launch of two index funds — one for foreign developed markets and one for emerging markets. However, as their release date approached, the funds’ introduction was postponed.
Oblivious Investor: – Should you add international bonds to your portfolio? – Adding international bonds to your portfolio could offer a diversification benefit, with the simple reason that interest rates in the US are largely affected by the actions of the Federal Reserve, whereas rates in other countries are going to be more heavily impacted by the actions of their own respective governments.
Bloomberg: – Dividends top bond yields by record as limited pays 10%. – Companies around the world are rewarding shareholders with the highest dividends in more than two decades compared with bond interest payments, even after the best start to a year for equities since 1994.
FT: – BlackRock fixed income chief steps down. – Peter Fisher, the BlackRock executive, is stepping down as head of its powerful fixed income arm, putting the division in the hands of a younger generation, according to an internal memo from chief executive Larry Fink.