INFLATION PROTECTED BONDS: Bob does not recommend TIPS now and has sold all of the Vanguard Inflation Protected Fund (VIPSX) from his Marketimer portfolios. If inflation picks up, he expects the net-asset-values to drop. Moneytalk, February 19th, Bob said: "I don't use them....My personal opinion is that the base rate that is currently being offered on Treasury Inflation Protected is insufficient to justify using them."
INTERMEDIATE TAX-EXEMPT (Vanguard Intermediate Tax-exempt fund). Moneytalk, November 2011, Bob said: "I think the reason I would not be buying that fund is because the level of interest rates is near historical lows...The Fed is committed to keeping them (rates) down as long as the economy is slow, but the reality is, rates are really low."
TREASURYS: Bob said: "I think if you're going to be invested in Treasurys at this juncture, you have to have a hold-to-maturity approach....If you go out and buy a Treasury today at these historically low yields....and if you were to see higher yields you would see a reduction in the value of the principal that you paid for the Treasury....I think you do run the risk of seeing these securities go under water sometime in the next ten years." Last Sunday, Brinker reiterated that investing in laddered FDIC guaranteed Certificates of Deposit is the best way to avoid interest rate risk altogether.
HIGH YIELDING FOREIGN BONDS: Last week, Bob cautioned that there is currency risk when the money is brought back into the country -- for those who live in the United States and spend dollars.
GINNIE MAE BONDS: On the air, Bob always sounds enthusiastic about the Vanguard Ginnie Mae Fund (VFIIX), but in reality, he has lowered his Marketimer model portfolio weightings by over 50%. His income portfolio weighting is now only 15%.
HIGH-YIELD BOND FUNDS: In his Marketimer income portfolio, Bob includes a 25% weighting in Vanguard High-Yield Bond Fund (VWEHX). He has recently told Moneytalk callers how well the fund has done. Last year, Bob added Doubleline Total Return Fund (DLTNX) which contains about 35% low quality bonds.
17 comments:
Darn, I wish I wudda listened to Brinker and sold my TIPS.
Not only do I have to rebalance that 13+% windfall, I forgot to take it outta my retirement accounts, and I don't even have to pay taxes on it now, and support obama's spending habits.
Dopey me even used Vanguard, and I screwed up by not paying those higher fees and 12b1 charges that might be deductible.
Those Brinkers sure are smart fellas, doncha agree?
A good case for stock's "marathon run" going forward. Is this what Bob Brinker sees that makes him so bullish? Excerpts:
"However, one indicator suggests stocks could be on a marathon run. Specifically, the yield on the S&P 500 at 2.1% is currently higher than the yield on the 10-year Treasury at 1.92%."
(SNIP)
Contrasted to bonds, stocks look a lot better as an asset class right now," he says, adding that cheap valuations, strong balance sheets, and signs of economic traction are the fundamental catalysts."
The S&P 500 Indicator Yielding Green Light for Investors
"If you see normalization of interest rates, then you are going to see a decline in bond funds....It can be completely avoided by putting together a ladder of fully insured FDIC certificates of deposit."
Putting together a ladder of CDs isn't worth the bother at these low rates. Of course you can avoid interest rate risk...but you can do that with a sack full of cash too.
Don't worry about the temporary decline in bonds or funds as rates go up in a couple of years. Your interest payments in the fund will also go up and if you just hold tight the bond fund NAV will come back up too.
Go for the higher rates and relax.
JNK
JNK
You may be confusing high-yield bond funds with Treasurys and other bond funds.
They are a different animal. They react to changes in the economy and the stock market much more than they do interest rates -- unless interest rates rise so much that the risk-reward ratio becomes unfavorable.
Mr Pig,
You just need to wise up and stop making your own decisions. :)
Yes, Double Line's fees, etc., are enormous. But so is Bob Brinker's latest stock fund recommendation: AKREX.
AKREX charges 1.45, but the category average is 1.36-- YIKES! This from an advisor who has preached keeping costs to a minimum for 27 years.
Additionally AKREX is NOT diversified. It's top-8 holdings are all over Brinker's 4% rule. The fund actually holds around 10% in several stocks.
This from an advisor who has preached don't hold more than 4% in any individual stock.
After slipping slightly negative for a couple of months, the longer term MACD indicator has once again become positive. So this bull run probably has a ways to go. So 100% invested here...but always ready to pull the plug.
I heard that the Wall Street Journal had a recent article saying that the Treasury is actually considering issuing a bond with NEGATIVE interest! Now there's an offer that would be hard to resist!
"Additionally AKREX is NOT diversified. It's top-8 holdings are all over Brinker's 4% rule. The fund actually holds around 10% in several stocks."
That's doesn't matter unless you have 100% of your portfolio in AKREX whatever that is. Brinker's holdings in those top 8 are way below 4% I would wageer.
There are a lot of non-diversified funds out there and they have ALL notified their shareholders they are NOT diversified. They have to.
What is AKREX anyway?
Smith
Dan, the government has already been selling TIPs with a negative yield. And they are POPULAR. Brinker doesn't like them though.
"A combination of low interest rates and growing fears of rising prices enabled the U.S. government to sell inflation-protected Treasury bonds with a negative yield for the first time ever on Monday.
That means if inflation doesn't appear as investors expect, they could end up paying to lend money to the government."
http://online.wsj.com/article/SB10001424052702304388304575574060921403190.html
"Dan, the government has already been selling TIPs with a negative yield."
Oh darn, how could I have missed that opportunity! And here I'm sitting with all these high yielding, well-performing stocks! How dumb!
Dan G
DAN!!!
So good to hear from you. Sure hope you are feeling better. :)
Thanks HB! Yes, I'm feeling much better. In fact, I got my hands slapped several time yesterday in an elevator. Well, heck. I heard you should reach out and touch someone...so I did! PS--It was worth it!
Anonymous said...
There are a lot of non-diversified funds out there and they have ALL notified their shareholders they are NOT diversified. They have to.
What is AKREX anyway?
Smith
Well Smitty the QQQ is one good example. Both Google and Microsoft are a little bit over 4%. Apple is about 12 to 13% of this ETF.
DanG:
Nice to hear from you again.
--Frankj
Ms Bee says to me:
You just need to wise up and stop making your own decisions. :)
I do make my own decisions, bit I often use the great advice of David Korn and Kirk L in their Retirement Advisor Newsletter.
NOT A PAID ADVERTISEMENT
The Retirement Advisor that David Korn and Kirk Lindstrom publish is a great newsletter that specializes in fixed income investments.
It is very superior to Bob Brinker's son's newsletter, the Brinker Fixed Income Advisor.
Anyone who may have doubts about my objectivity can get free issues of both newsletters and compare.
Hey Honeybee,
You mentioned that Brinker sold all his tips. I never liked the TIP mutual fund, but how about Individual Tips that were purchased before interest went negative. I have one Tip wtith about a 1.7% yield that I purchased at 100.000 dollars and is now worth 128,000 dollars if sold on the open market, but it's inflation component is around 112,000 dollars. I have been debating on selling it, but given what happened in May and what is going on in Europe right now,I can't see them raising rates any time soon.
Mark
Hi Mark,
I will copy your comments and question to my latest post at THIS LINK.
Please look there for a response
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