In this week's Barrons, Gross recommends Pimco's High Yield Income CEF, PHK.....Current yield north of 20%; priced at a premium to NAV of 22%( go figure; I can't); has imho a rather high fee structure, 1.32%..........anyone have an opinion on this fund? Methinks it's a bit too early to be getting into a high yield bond fund, but wdik?
I have an opinion on PHK.1. No one should ever pay a 22% premium for a closed end bond fund. The average premium for this fund for the last 5 years has been .084% or essentially zero. In the last 12 months it has traded at a discount of over 17%.2. PHK's 1 year NAV return has been negative 46%, worse than most other high yield bond funds.3. The expenses are not out of line, however, since this is a leveraged fund and the costs of borrowing are included in the expenses. The manaagement fees are about 1%.If and when you are interested in closed end bond funds, look for a discount to NAV and sell when you are able to command a premium.If I owned PHK now, I would sell and reinvest in a competitive fund trading at a discount.
I began buying some HIO. Another closed end high yield fund, but w/o the premium and lower expenses. It is a Loomis Sayles fund.
Gross recommends Pimco's High Yield Income CEF, PHKIsn't there a basic rule of thumb about how to respond when someone recommends their own product?In general, this may be a great time to buy junk or a junk fund. It may be a great time to buy stocks. It may be a good time to buy investment grade corporate or munis. There are also plenty of risks.
PHK, along with PTY and PCN, were all brutally traded down recently too their Nov. level or even lower. The reasons behind this is they now suspended dividend paying, at least for now due to the auction rate stuff (?, preferred shares, I have no idea). Junk bond is not qualified as a buy and hold class, in my opinion. You have to trade that. There are some well known techniques by Merriam or Appel (?). validfi.com tracks some of these strategies (look at their so called fixed income strategies). You get much better return using the timing trading without being slaughtered.my 2 cents.
Loki,Gross is notorious about "talking up his book", just as Jeff Vinick was (who got bounced as Magellan's fund manager).For those who haven't heard the term before, "talking up your book" means, praising what you own (and what you'd like to sell), because you think it's going down. You talk it up at the front door, all the while blowing it out the back door to the suckers listening to you. Gross is called "The Bond King", and his eponymously-named biography is an interesting read. He comes to bond investing from playing Black Jack. Apparently, he was good enough to make a living at it. But I think his partner, McCully, offers more useful opinions on present-day markets. Is now a good time to buy anything? Who knows? Will the future be a better time, or worse? Who knows? "Bond King" or not, he doesn't either. He's guessing and trying to move markets in his favor as he had done repeatedly in the past. (IMHO, 'natch)
Loki,Gross is notorious about "talking up his book", Yes, but in a world where pretty much NO ONE talks about bonds, Gross usually makes sense and provides balance. Before I found Loki and you, it was Gross I went to when I wanted some balanced opinion to equities. I still go to his website about once a month. I thought the article (not his -- I think the guy who worked for the Yale Funds) there on the Japanese market/banking meltdown and 10 years in a "waste land" was the best I'd read about that and its relation to what we're going through now.Hockeypop
Hockeypop,With regard to reading what other bond investors have written (to learn how to do bond investing for yourself), you need to distinguish between essential reading and optional reading. IMHO, what Gross writes is the latter, just as what Buffet writes is the latter. Both are witty, informed, even informative, but what they have to say doesn't scale. Both are running gigs --taking huge positions to exploit small inefficiencies-- that small investors can't emulate. If you want essential reading, try Marty Whitman, John Maudlin, and a good Austrian School economist, in that order. Regard everything else, me especially, as entertainment. ----------------------A note to all, before anyone goes ballistic, because I seem to be capping on one of their favorites. What I say shouldn't matter to you. You know your own path. Me having a different point of view shouldn't be upsetting. There's no one right way to do any of this stuff. Even if you know I'm pursuing a fool's path, just let me be. Charlie
Charles,Which Austrian School economist are you referring to? Do you follow mises.org?I also believe rgemonitor is a good read, at least so far
"Which Austrian School economist are you referring to?"This is going to sound awful, but to me, those who write from an “Austrian School” viewpoint are pretty inter-changeable. (They've all drunk the kool-aid.) Where I run into their writings is at Lew Rockwell's site, which means more disclaimers. (I don't share their anti-global warming hysteria, etc.)Where I do find their writings informative is on the topics that would interest a bond investor: interest rates, inflation, the misbegotten role of central bankers, the economic pointless of wars, the real causes of the Great Depression, the current mishandling of this one, etc.Wikipedia suggests ” The Austrian School now lies somewhat outside the mainstream, and currently contributes relatively little to mainstream economic thought. “ But I see that “apartness” as their usefulness. If I want mainstream economics, I can open any econ text, turn on the evening news, pick up any financial magazine, etc. “Mainstream econ” is ubiquitous and over-represented. E.g., of the 100 senators and 435 congressmen currently making policy, how many have a clear sense of how money and markets work? Just one, right? Help! Save me! Save us all! So that's why I recommended to Hockeypop that he drop Gross and pick up someone else. Not only will he get a viewpoint he won't get elsewhere, but on the issues that matter to a bond investor, the vonMises crowd seem to have it right. (IMHO, 'natch)
No offense taken at all. I don't spend a great deal of my time studying investing. I DO spend a lot of time studying what I work at and I'm good at it. You have giving me more to go out and read though.I like Gross and Buffett because I like to see how their mind works. One of my favorite things to do is to figure out what people were thinking in either good or bad decisions. It may be a rationalization, but the one thing that improved me most was when I realized that I had to think about things, and not get embarrassed by being on the Motley Fool website, or reading a trashy novel, or staring out of the train window for about six hours last night and just letting things run through my head. My meeting in 50 minutes will be better because it's still running around my head as I type now.So, I enjoy seeing how Loki, you, Gross, Buffett and many more successful folks approach problems. My decisions are strictly my own, but that's ME trying to play around in YOUR head. ;-)Hockeypop
Hockeypop,You offer an even better response (on how to evaluate information sources) that I could have hoped for. My decisions are strictly my own...Curiously, that's something that has gotten lost at TMF compared to the old days when the expressed goal of the Gardner brothers was to beard the the lion (of conventional wisdoms) in his den. Now they seem to be worshiping at the same altars as Wall Street.Read what you chose to read. You won't hear from me a clucking tongue. Charlie
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