Profound apologies, DI, for missing the "Happy Post" and thus losing the opportunity to be the first to respond.  I think I was deep into the old thread when this one went up--and besides, it isn't October yet, at least here in Connecticut it isn't.  I hope you are consoled by the fact that the S&P is up 3% and the VIX down 13% as I write--see what an influence you have? 

I suspect, as is often the case, that the post will be prophetic--lots of storms but hopefully better weather in a bit.  I wish I had a little more cash to put into GE.

One of the things I've been learning more about than I wanted to know is the difference between the credit markets and equities.  It's the former that are the unexpected drag on my portfolio at the moment--my big bond funds (DODIX and LSBDX) are a mess.   I don't mind sitting patiently on the equity mutual funds but I'm beginning to wonder if I should cut my losses in bonds--or rather in bond funds; I don't care about the face value of my bonds and so far I haven't had any defaults.

DrH  

I am struggling with a similar question DrH and was hoping some of our T/A gurus could provide a little timing insight.

I used to have most of my domestic bond exposure through DODIX, but as I've increased my concentration in OAKBX over the past year or so I don't need any more as a fairly young "accumulator."

My plan is to sell DODIX at some point and move those holdings into El-Erian's "Global Advantage" fund for the long term, since I am getting enough domestic US bond exposure through my balanced funds and at some point when the spread looks more favorable will likely add a small LT % into TIPS as well.

As such, would it be better to sell DODIX now and sit on the cash, or just continue to ride it out until El-Erian's new fund opens (no idea on the timing for that).

Thanks in advance for any insight or ideas.

-JavaJoe

uncleharley:

The USD seems to be abandoning the head & shoulder pattern which we discussed this past weekend so I will let the precious metals rest until we have more clarity on the future.

Do I get my prize yet? ;-)

The weekly chart was bullish and that seems to be defining the overall bias. 

But I won't get too cocky.  The dollar is going up on strong volume today, but the volume is not as heavy as it was at 76.  So there's still a chance of a retest.

And we're approaching 80 very rapidly.  We'll have to see how it reacts to hitting decades-long resistance.

Still, the "trend is your friend" on the weekly chart seems to be working as a good guide.

DI, Do you still have your ALD?  Any plans for it?

uh

Yeah. I still hold a very small position in ALD  --- way less than one half one percent. The Ciena bankruptcy really hurt them since they had guaranteed the Ciena line of credit. Given the price drop today I'll probably wait now until the smoke clears. My guess is divvie cancellation can't be far away. At the present price it is not much more than a perpetual option anyway.

javajoe:

As such, would it be better to sell DODIX now and sit on the cash, or just continue to ride it out until El-Erian's new fund opens (no idea on the timing for that).

I think there's a forum that focuses on bonds.  My take, however, is that DODIX hasn't done too badly considering that it holds few or no treasuries.  It looks like D&C did a "Gross" and loaded up on FNMA bonds.  Your guess is as good as mine concerning the performance of corporates going forward from here; they'll be some risk but D&C seems to be handling it.  If the credit picture improves you'll get more upside here than in treasuries.

A brief response to the question/comment posed by Dr. H on the previous thread...

I am not claiming to have special insight into credit markets and bank capital structure but the proposal to relax mark to market requirements would have some benefit to banks as follows:

1.  Mortgage backed securities would not be marked down to distressed fire sale prices and would reflect more of their true, natural long term value

2.  Fewer write-downs would make it easier for banks to remain above their regulatory capital requirement ratios

3.  There would be less of a need to raise additional capital, which is dilutive to existing shareholders

4.  There would be less of a need to sell good performing assets to raise additional capital

I concur with those that would state that fire sale prices more accurately reflect what these assets are worth today but in the past, proper accounting required that asset valuations be synched with the life expectancy of an asset, i.e. what will an asset be worth if held to maturity. 

In our current post-Enron world, we now have SARBOX and mark to market.  Regulatory reform may be needed but we should also be concerned about unintended consequences.  Perhaps a more complete discussion should be relegated to another thread.

Just my opinion.

BytheNbrs

I checked Fidelity website for current offering of high yield bonds. National city is yielding 191%.

Q. Some of the companies like CIT, ILFC are yielding close of 30%. Does that mean they are in trouble spot?

I had read ILFC is one of the profitable subsidiary of AIG even they may face more down time with cancellation etc. But it it yielding like 26%. Countrywide (AA rated) is now part of BOA and it is yielding like 17%.

Q. Is ILFC and countrywide worth investment given the risk and reward?

one or 2 days ago there was lot of debt from GM, F and GMAC with very high yield and now it is gone. Is there any bailout plan for automakers too?