PowerShares High Yield Corporate Bond Portfolio (PHB)

All Comments on PHB

  • commenter
    sanserve
    Aug 06 11:49 AM
    My Website
    Long and Junk Bond ETFs: Stepchildren of Fixed Income Investing [view article]
    Good News For Income Investors

    Looking for good news in today's markets is like searching for the proverbial needle in a haystack. Needless to say, practically all investment grade equities and nearly all closed end funds that specialize in providing regular recurring monthly income have been reduced in market value by this prolonged correction. The quake has spread in all directions from its financial epicenter, and the mounting doom and gloom has taken its toll on even the most rational investment decision makers. Try to keep in mind that the purpose of income investing is the income that your portfolio produces not an increase in the securities' market values---

    So here's the good news (and for anyone with a 40% or higher income asset allocation, or an income portfolio being used for living expenses), it really is very good news. Base income levels, from the beginning of the stock market correction in June '07 until mid-July '08, have barely changed at all. In fact, they have probably risen in properly asset allocated portfolios. I have examined the regular recurring monthly income distributed by 56 taxable income CEFs and 61 tax-free income CEFs, and the conclusions are pretty remarkable.

    In spite of the fact that the vast majority of my favorite monthly income producers are lower in market value than I would like, the amount of income they are distributing to shareholders has not moved lower meaningfully--- even though the Federal Reserve has reduced interest rates by approximately 60% during the past twelve months. Here are the numbers: (1) 48% of the taxable-income CEFs are distributing precisely the same amount per share as they did a year ago. Fourteen issues have increased their payouts and fifteen have reduced them.

    The net result is a decrease of just fourteen cents (2.5% of the total monthly payout). The average current yield on the portfolio, as of mid July '07, is 9.86% without considering any capital gains distributions. Additionally, the group is selling at market prices that reflect an average discount of nearly 11% from NAV. Is that special or what? The bonds, preferred stocks, government securities are priced 11% below their current market values.

    (2) The numbers are similar with regard to the 61 tax-free income CEFs: 46% have not altered their payout over the past twelve months; eighteen have reduced their payout slightly, and 15 have increased the monthly dole. The net difference for the group over the past year is less than one cent, or a percentage change of two-tenths of one percent. Remarkable. This group is selling at an average discount from NAV of 9.1% and has a current tax-free yield of 5.51%.

    (3) Of 117 individual issues, about half have produced stable income. The others have accounted for a total payout reduction of less than 15 cents--- a measly 1.7%. Why is this amount of little consequence? Two reasons really.

    First of all, a properly asset-allocated income portfolio does not disburse all of the base income it receives, so there is income available to reinvest in more shares of income producing securities. This process assures a growing cash flow to calm your fear of rising prices. The other reason is a bit more hypothetical. The Fed has lowered rates significantly, a process that normally produces higher prices for income securities. Eventually, those lower interest rates (even if global pressures convince politicians to take back some of the reductions) should produce higher prices (i.e., profit taking opportunities) in these securities.

    Admittedly, even if your asset allocation has been fine tuned for years, lower portfolio market values in this area make stock market valuation shrinkage feel even worse. But the value of stable cash flow becomes painfully clear for investors who misguidedly depend on capital gains for their spending money. Properly asset allocated portfolios contain enough base income generators to pay the bills. The purpose of capital gains is to produce proportionately more base income generators.

    The purpose of this email is simply to bring some needed sunlight into an investment environment that is far gloomier than I think it needs to be. If you want the details, you'll have to request them personally.


    Steve Selengut
    www.sancoservices.com
    www.kiawahgolfinvestme.../
    Professional Portfolio Management since 1979
    Author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"
    Reply
  • commenter
    Adanenberg
    Apr 27 04:24 PM
    Shorting Homebuilders - A Sure Thing [view article]
    I would agree if it were May 2006. Since then, the ITB reached a low of $13.40 on January 9, 2008 with a loss of -73% from its high in May 2006. It's certainly not a "sure thing" at this point. As a matter of fact, I believe ITB is a buy for long-term investors. Reply
  • commenter
    JDan
    Apr 24 03:04 AM
    Shorting Homebuilders - A Sure Thing [view article]
    Another "sure thing" article is one of the strongest indicators that I can think of to go long the XHB at this point. Reply
  • commenter
    Ames
    Tiedeman
    Apr 23 10:39 PM
    My Website
    Shorting Homebuilders - A Sure Thing [view article]
    This looks promising. I do not know how any of these builders will make any money this year or in 2009. Reply
  • commenter
    fbrothers
    Apr 23 02:25 PM
    Shorting Homebuilders - A Sure Thing [view article]
    The problem will also be rising interest rates. And interest rates are going higher. In order to stop the bleeding U.S. dollar. So far, the only companies to meet or exceed earnings are the ones that have benefited from the weak dollar. Reply
  • commenter
    Govitman
    Apr 23 12:39 PM
    Shorting Homebuilders - A Sure Thing [view article]
    Alan...I am in total agreement with your post. I am short homebuilders myself. With that said, whenever I hear someone mention "a sure thing" I start to get a little worried.

    Sorgmot...I am confused by your comment on short positions being risk and not making as much money as long one. Unless all your long are averaging 100%+ returns, shorts can be just as profitable as longs with the same risk. Can you please explain your reasoning     Reply
  • commenter
    sorgmot
    Apr 23 11:32 AM
    My Website
    Shorting Homebuilders - A Sure Thing [view article]
    Stop by our site to see our experimental short portfolio of 30 stocks across many industries.

    Our advice is to know a date or a price at which you will cover.
    Fit your shorts to the business cycle. Make any short position a very small part of your portfolio. Short positions are risky even if successful, do not make as much money as long one.

    Reply
  • commenter
    ringy
    Apr 23 10:02 AM
    Shorting Homebuilders - A Sure Thing [view article]
    I don't know about real estate taking decades to turn around. Having lived through the 80s in Dallas when oil prices went from $17/b to a nose-bleed $33/b ;) Real-estate tanked massively. Condos that once went for mid-80s sold for 20K. Yup you read it right - 20K. It took about 8 years for the mess to clean up. But it did. So depends on your level of patience. But $ cost averaging into XHB may not be a bad thing. Reply
  • commenter
    Mule
    Apr 23 07:12 AM
    Shorting Homebuilders - A Sure Thing [view article]
    There are a few more "non-homebuilder&... items not mentioned which makes shorting homebuilders compelling. Owning a home is becoming less affordable to the masses every day. Property taxes increase every year, heating & cooling costs are going through the roof. Some areas of the country you can't even get homeowner's insurance. Reply
  • commenter
    SeekingAlpha
    Editors
    Apr 06 05:23 AM
    My Website
    General Discussion on PHB
    Is this a buy or a sell? Reply
  • commenter
    ray hendon
    Jan 08 02:30 PM
    Long and Junk Bond ETFs: Stepchildren of Fixed Income Investing [view article]
    Indexor:
    Thanks for your comments and kind words. Personally I think the short and intermediate ETFs you hold are about right. With BND you do go out the yield curve a little, but you also get rewarded a couple of points of yield for doing it. If you can stick with it during periods of rising interest rates, then you will maximize your dividend income and probably keep ahead of inflation.

    I'm not completely in agreement with the 1-Y T idea. It condems the holder to a low yield, and at times will not keep up with inflation. To me, the weak spot for Dimensional Funds is on fixed income. I may be wroing, but I don't think they have very good imagination on fixed income products. On the other hand, there is always some good in being conservative in your holdings.

    There is validity on their take on this subject, but validity depends much on the needs of the individual investor. It may be true for some, but not the best idea for others, depending on their personal situation. I certainly do not like it as a blanket prescription.

    Best wishes,

    Ray     Reply
  • commenter
    Indexor
    Jan 08 02:20 AM
    Long and Junk Bond ETFs: Stepchildren of Fixed Income Investing [view article]
    Excellent thoughts, probably because I agree with most of your ideas. While I no longer use junk bonds, I do use iShares 1-3 year Treasuries (SHY), Vanguard Total Bond (BND) and SPDR Lehman International Treasury Bond (BWX). 10 years ago I read an interesting white paper by Dimensional Fund Advisors (DFA) that claimed all bond holdings should be placed in 1-year Treasuries with the rest commited to equities. It makes sense from a portfolio protection perspective as well as increasing returns in upward markets. I wonder if that concept still isn't valid today. I'd love to see new research on that topic. Reply

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