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  • Is It Time To Buy Floating Rate Loans CEFs? [View article]
    Not sure that you're making a totally fair comparison between high yield bonds and senior loans. I agree, that a lot of people view them as the same ("peers" as you say) asset class. But they're not. As you point out, senior loans are generally going to be secured and higher in the capital structure (generally the most senior security), giving them a different risk profile not reflected in your charts. That's the main reason to invest in senior loans vs. high yield in my opinion. I'd expect lower returns from senior loans vs. high yield simply from being higher (better protected) in the capital structure. If you are worried about defaults, then I cannot think of a better position in the capital structure to be.

    Both high yield and senior loans, given their non-investment grade profiles, are going to correlate heavily with equities in a large sell-off. That's what you saw in 2008-2009, and the subsequent rebound. As an investor in senior loans, or high yield, you just have to be prepared to weather that storm. If you cannot deal with that profile, then neither of these asset classes are for you.

    One thing not really addressed in the article, is that the senior loan market is really, really different than the market for high yield (or other corporate bonds). Senior loans are a difficult asset class to make broad generalizations about, because virtually every loan agreement is unique. As a result, the investor base is different than high yield (or other investment grade corporate bonds). Many loan deals are "club" deals between smaller groups of investors (i.e., banks, CLOs). This makes the asset class less liquid contributing to higher volatility in pricing vs. more liquid high yield [we can start an entire debate about mark-to-market at this point]. This is a fundamental characteristic of the asset class. If, as an investor, you cannot deal with that, then this is not an asset class for you.

    One other point, responding to a comment about rising interest rate risk increasing interest rate expenses for the borrowers. This is true, although mitigated somewhat by the fact that many loan agreements require borrowers to swap a portion of their floating rate interest expense to fixed to reduce this risk.
    Dec 27, 2014. 09:06 AM | 1 Like Like |Link to Comment
  • Major Asset Classes: December 2013 Performance Review [View article]
    Always appreciate the post.
    Jan 8, 2014. 01:17 PM | Likes Like |Link to Comment
  • EUR/USD - Slight Gains After Sharp German Data [View article]

    "As expected, the US Senate confirmed Susan Yellen as chair of the Federal Reserve by a wide margin on Monday. "
    Jan 7, 2014. 11:01 AM | Likes Like |Link to Comment
  • 2014: The Case For 'Reverse Rotation' Into Bond CEFs [View article]
    "Sure, CEFs are unlikely to return 25-30% a year like equities did this year. They’re also unlikely to fall 50% like equities did in 2000 and again in 2008."

    I basically agree with your points; however, I might say this a bit differently. And, I'd check the performance of some CEFs during 2008 before I assumed they will not fall 50%. Check EFR as a simple example - one I know because I was in it at the time.

    While CEFs dislocated in a big way during 2008 - probably partially due to their less liquid nature - although NAVs dropped pretty significantly too; they bounced back to pre-crisis levels more quickly than equities. So, if you cannot stomach a loss in the short term and stay focused on the bigger picture / fundamentals, I'm not sure CEFs fit your investing profile either.

    Again, I agree with your core statement. People who understand fixed income realize that those securities generally have less upside, but less downside as well - stemming from their position in the capital structure.
    Dec 27, 2013. 09:58 AM | Likes Like |Link to Comment
  • CEF Bond Funds: Value Or Value Trap? [View article]
    Thanks for the article. I'd be interested in hearing your thoughts on individual muni bond purchases here.

    "While investors can also purchase investment grade and municipal credit through a closed-end fund, I feel the long-term fees associated with funds and negligible principal risk make individual bond purchases a better choice for those segments of the market. "
    Oct 10, 2013. 12:31 PM | Likes Like |Link to Comment
  • Major Asset Classes August Performance Review: Global Asset Classes Rebound, With The Exception Of Commodities [View article]
    Thanks for posting.
    Oct 4, 2013. 09:37 AM | Likes Like |Link to Comment
  • Diversification Fallacies, Part 1: Asset Allocation [View article]
    This is really, really nit picking, but I view REITs as a subsector of equities. Similar to the way U.S. large cap stocks or utility stocks would be subsectors of equities.

    I view equity as a position in the capital structure. I'd view a REIT as a company - that happens to mostly own real estate - but can own other things. Therefore, being a shareholder of a REIT simply means you have ownership in company that owns real estate. You could own shares in a C-Corp that owned that same real estate - and you'd basically get the same result. Being structured as a REIT does not in and of itself make it another asset class, imho.

    From Investopedia:
    Definition of 'Equity '
    1. A stock or any other security representing an ownership interest.

    Maybe that's not the right way to look at it?
    Jul 17, 2013. 10:47 PM | Likes Like |Link to Comment
  • Diversification Fallacies, Part 1: Asset Allocation [View article]
    I guess I'm objecting to the use of the term asset allocation in the context that you're using it. It seems like you're just trying to pick a few diversified stocks. If that's not the point of your article, I'm sorry. I did read it; maybe you should write a clearer, better written article.

    Well, if you want to get technical, WY went from $86 to $19 - before the dividend. My point was that you blew off WY's economic risks like it didn't have any - they will just keep their trees and be happy.

    I agree with JasonC and Tickerman below; your arguments are misleading and not well supported - even though you claim otherwise.
    Jul 17, 2013. 04:27 PM | 5 Likes Like |Link to Comment
  • Diversification Fallacies, Part 1: Asset Allocation [View article]
    Given your title, I thought you were talking about "Asset Allocation" as in diversification across asset classes. Your portfolio seems to be ignoring most asset classes and only focusing on equities.

    WY was at $86 in 2006 and trades at $29. Just saying...
    Jul 17, 2013. 12:05 PM | 2 Likes Like |Link to Comment
  • It's Time For Investors To 'Like' Facebook Stock [View article]
    "we expect that the data mining they have been doing is now transforming into revenue and profit growth that Wall Street doesn't yet see."

    You need a more in-depth analysis of how they are going to monetize this data mining to make a more convincing case.
    Mar 7, 2013. 04:12 PM | Likes Like |Link to Comment
  • Outlook 2013: Americans Are Going Broke [View article]
    Fortunately, we don't study grammar too much.
    Dec 31, 2012. 02:17 PM | 15 Likes Like |Link to Comment
  • A Bull Market In Fear [View article]
    People work the welfare system just like companies work the corporate tax code and loopholes. If you create a system, it will be worked by someone.

    Not saying its right, just saying stop being surprised by it and don't let the small percentage of bad outcomes deter you from attempting to do the right thing.
    Dec 15, 2012. 10:33 AM | 1 Like Like |Link to Comment
  • Bill Gross Is Buying PIMCO Closed-End Funds Again - Should You? [View article]
    We got our sell-off in CEFs.

    Not sure if it is over yet.

    Flight From Risk Extends Beyond Apple

    A sharp sell-off in an array of closed-end funds may be canaries in the increasingly risky coal mine of the market.
    Nov 18, 2012. 09:33 AM | Likes Like |Link to Comment
  • Obama Wins Is Likely Headline [View article]

    Propaganda = an answer you don't like.

    Btw, assuming Florida gets called for Obama today, Nate Silver was 100% accurate.

    So even if he is biased and works for a liberal media outlet, he is a really good forecaster. I care about the latter more than the former.
    Nov 7, 2012. 08:07 AM | 1 Like Like |Link to Comment
  • Obama Wins Is Likely Headline [View article]
    Great website for numbers geeks.

    It's up to 86% for Obama today.

    I waited in line for three hours to vote last night in Akron. Very, very strong minority and democratic turn out.

    I think virtually every state poll in Ohio shows Obama leading. It will be very tough for Romney to win the election without winning Ohio.
    Nov 5, 2012. 12:32 PM | 3 Likes Like |Link to Comment