Clippings 2012

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Park
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Re: Clippings 2012

Post by Park » 26 Dec 2012 10:21

http://seekingalpha.com/article/1081411 ... -for-yield

An interview with Larry Swedroe. IMO, his ideas on fixed income are definitely worth reading.

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Bylo Selhi
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Re: Clippings 2012

Post by Bylo Selhi » 26 Dec 2012 10:46

Note that Swedroe was a professional bond-trader before he became a financial advisor/author. Also tax-free status for municipal (or any other kind of) bonds doesn't exist in Canada.
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Re: Clippings 2012

Post by Bylo Selhi » 26 Dec 2012 22:24

Vanguard exec shares outlook, fears bond bubble
Gus Sauter wrote:Q: What about the outlook for bonds?
A: The best predictor is the current yield to maturity. The yield now on a 10 year Treasury bond is a little under 2 percent. So you might expect 2 to 3 percent a year from a bond portfolio. That's if you include some higher-yielding bonds where's there's greater credit risk than in the Treasury market. Two to 3 percent is certainly less than we have experienced historically from bonds, and it's significantly less than what we've seen over the last 30 years of a bull market for bonds.
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Bylo Selhi
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Re: Clippings 2012

Post by Bylo Selhi » 26 Dec 2012 22:34

Goodbye safe, dull government bonds
Keith Ambachtsheer has made a living advising pension funds on the best way to meet their obligations to retirees...

With the yield from long-dated bonds barely outpacing the inflation rate, the director of the Rotman International Centre for Pension Management says the safer investment for pension funds – and any long-term investor – is blue chip stocks...

Trading in dull but dependable government bonds for inherently riskier stocks seems contrary to sound risk management. Yet, Mr. Ambachtsheer has a lot of company. The Caisse de dépôt et placement du Québec and GMO LLC, the Boston asset manager led by famed investor Jeremy Grantham, recently have said they are substantially reducing their holdings of bonds with long maturities.

“I’m pretty sure the odds of making money on bonds over a five-year horizon are zero,” added Leo de Bever, head of Alberta Investment Management Corp., the province’s public investment fund manager. “I agree being in high quality stocks is probably a better alternative to bonds. Five years ago I wouldn’t have said that.”...
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ghariton
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Re: Clippings 2012

Post by ghariton » 27 Dec 2012 00:55

Morningstar:
With just one month left in the year, outflows from actively managed U.S. stock funds had already surpassed the record level of outflows during 2008. At close to $115 billion, outflows during the first 11 months of 2012 are already $6 billion higher than they were during 2008 and more than $14 billion higher than they were last year, which was the second-highest year of outflows on record (according to data provided by Morningstar Direct).

<snip>

While actively managed U.S. stock funds remain in net redemption mode, index funds and ETFs dedicated to the category are on pace not only to surpass the level of inflows that were seen during 2011, but also post their best year since 2008.

<snip>

With investors continuing to favor fixed income over just about every other asset class, flows into actively managed taxable bond funds had been on pace this year to surpass the record level of $330 billion in 2009, when investors jumped into both actively managed funds ($255 billion) and passively managed index funds ($36 billion) and ETFs ($38 billion) in response to the financial crisis.

<snip>


more than $300 billion in net inflows into taxable fixed-income funds in a year when the market was up more than 15% is pretty astounding to us and highlights the aversion that many investors continue to have toward equities. All told, inflows into bond funds overall (which would include both taxable and tax-exempt fixed-income funds) is set to exceed $350 billion this year, compared with just over $400 billion in 2009. This compares with net outflows for more than $25 billion for equities--U.S., sector, and international stocks funds combined--during 2012, which is on par with last year's results and twice as high as flows in both 2008 and 2009.
So people are still piling into bonds. Are they wrong? Ambachtsheer says so (see Bylo's link above), but remember that he is primarily an adviser to (large) pension plans. To meet their objectives, these plans are pretty well being forced ionto taking higher risk. By contrast, individual investors' situations will differ widely. Risk that is acceptable to a pension fund manager may be unacceptable to an individual investor. It is the latter who is liable to panic during the next market downturn, doing significant damage to his or her portfolio.

ISTM that the role of bonds, in today's environment, is preservation of capital, not increasing one's net wealth. Remember that matching inflation does preserve capital, at least in a tax-advantaged account, smoothes out the ride, and is a great anti-panic medication.

It's also worth remembering that, in the twenty-five years from 1945 to 1970, in half of those years, real returns on government T-bills were negative. (That's how governments of the day solved their debt problems.) By contrast, we aren't doing too badly these days.

YMMV

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Bylo Selhi
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Re: Clippings 2012

Post by Bylo Selhi » 27 Dec 2012 09:08

ghariton wrote:So people are still piling into bonds.
That's my concern, as it is when people pile onto any asset. It worries me because I'm human. On a more rational level I realize there's little to worry about so long as I don't join the madness on the way up or the panic on the way down.
ISTM that the role of bonds, in today's environment, is preservation of capital, not increasing one's net wealth. Remember that matching inflation does preserve capital, at least in a tax-advantaged account, smoothes out the ride, and is a great anti-panic medication. It's also worth remembering that, in the twenty-five years from 1945 to 1970, in half of those years, real returns on government T-bills were negative. (That's how governments of the day solved their debt problems.) By contrast, we aren't doing too badly these days.
Psst... don't tell Finance, but I could even live with a small real reduction as the premium for capital preservation. That said, I hope we don't ant time soon encounter sufficiently bad times where the general public agrees with that sentiment.
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Re: Clippings 2012

Post by Shakespeare » 27 Dec 2012 09:19

don't tell Finance, but I could even live with a small real reduction as the premium for capital preservation
Note that the ytm of the 2021 RRB is currently 0.00%, but it has frequently been slightly negative recently.

reportonbusiness.com: Bonds
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Re: Clippings 2012

Post by scomac » 27 Dec 2012 16:09

Slow death of equities as more investors abandon stocks in 2012.
Defying decades of investment history, ordinary Americans are selling stocks for a fifth year in a row. The selling has not let up despite unprecedented measures by the Federal Reserve to persuade people to buy and the come-hither allure of a levitating market. Stock prices have doubled from March 2009, their low point in the Great Recession.

It's the first time ordinary folks have sold during a sustained bull market since relevant records were first kept during World War II, an examination by The Associated Press has found. The AP analyzed money flowing into and out of stock funds of all kinds, including relatively new exchange-traded funds, which investors like because of their low fees.
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Re: Clippings 2012

Post by CROCKD » 28 Dec 2012 18:22

How a stock promoter (pumper) and his Chinese backers used reverse takeovers (RTO) to fleece gullible investors.
Who is the Canadian linked with 11 reverse-merger failures?
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