Equity and Bond funds are being forced down in large part because of the high number of customers calling for redemption of their accounts as they move into CASH

Mr. P.

I agree. EVERYTHING that can be sold to raise CASH is being sold.These hedge funds are looking at mass redemptions and they need CASH!!  Gold, Oil, Bonds, EVERYTHING gets sold..It has nothing to do with value. This is all about FEAR..

 This is what happens when you base the economy on 30 to 1 leverage...
 

thanks guys....makes sense, tho i wouldn't have thought the masters of the universe would be interested in boring old munis, and i wouldn't have thought individual muni fund investors would be panicking like stock investors....shows what i know....tom

Are these recent NAV losses permanent, or should they bounce back to their previous levels if/when conditions stabilize? 

Playbook.

The reason I am so concerned about my short term bond exposure is that I have over 3/4 of my retirement portfolio in one fund: ASBAX.  I parked it there temporarily.  It's down $13,000 already.  I planned to liquidate the fund next spring.  Aside from interest rate risks, I assumed the fund's NAV would not change much with AAA credit rating, 1.8 years duration.  The fund's holdings look save enough, except I really can't tell what the 30% cash consists of.  I assume there's some commercial paper in there.

I assume that the fund's NAV has lost because of two primary reasons:

1.  huge redemptions in some funds selling bonds that ASBAX also holds driving the price down

2.  buyers of corporate bonds (AAA and AA) demanding significantly higher yields than usual for the preceived risk, resulting in lower prices for those bonds to meet the yields.

  I would like to believe (and maybe this is just a hope) that AMECX has not had huge redemptions and continues to hold these affected bonds, albeit at a temporarily reduced price.  At some point the bonds' prices will return to fair value or they will mature and the fund will be paid in full.  Is this just wishful thinking or I have probably permanently lost $13,000 and counting?

Playbook.

 

Correction to previous post: should have been ASBAX not AMECX in last paragraph.

Playbook.

The 20 month duration should allow the NAV to rebound fairly quickly once the market gets it's feet under it again.

 

The ONLY thing that escaped this panic was CASH..This can only end in one of two ways.. The markets will recover, or they won't and we go all the way to the bottom and paper money will become worthless. I would wait a week before I hit the panic button and see what happens...BUT IT'S YOUR MONEY, NOT MINE...

 

This is what happens when you have 29 year olds who drive Massaratti's  in charge of Wall Street....

I'm someone who is staring at 40% share price losses in california muni CEFs.  NAVs are down between 12% and 20% depending on leverage.

 OK, so why do I bring this up in a thread talking about 3% drops in muni funds on Friday? Because the leveraged funds must hold 200% coverage of outstanding preferreds in assets. Managers are likely being forced to sell muni assets to cover high leverage costs, dividend payout, and to hold the coverage amt. I don't know this to be the case. I just strongly suspect it.

I added position to a unleveraged muni cef on Friday. I think muni cef holders could possibly make a killing here IF (<-- a big IF) municipalities don't start defaulting because they can't get funding. Leveraged funds would do even better IF (<--- another big IF) they can maintain their coverage levels without liquidating assets until the muni market turns around. Otherwise it's a death spiral.

 The debt offering coming out of California next week will be an important event to watch.

 --Les

asbax

this is fine..you shouldn't worry. short term bonds. aaa quality. i just checked the portfolio.

If you were to diversify between two bond funds consider adding pttax (pimco total return). gross is almost always right. but it also has gone down some.

sleep well with asbax. it will weather any storm.

 make sure you have six months of cash (in FDIC protected account) sitting around though..we all should do that these days....

 

nantucket9:

asbax

this is fine..you shouldn't worry. short term bonds. aaa quality. i just checked the portfolio.

If you were to diversify between two bond funds consider adding pttax (pimco total return). gross is almost always right. but it also has gone down some.

sleep well with asbax. it will weather any storm.

 make sure you have six months of cash (in FDIC protected account) sitting around though..we all should do that these days....

 

\

Thanks for the encourgement.  Unfortunately the fund is down again today.  By comparison many other bond funds I track are up today.  Most of them are intermediate.  Even the high yields were up today.  I just dont get it. 

 

Playbook.

the MA muni funds were down over 2% today. i have no idea if that is specific to MA. the gov is talking about budget cuts and there is a ballot initiative to eliminate the state income tax. i wish i knew if that was driving the poor performance....tom