All About Bonds

[coolhand]

I'm interested in starting a new thread that deals exclusively with the bond market. I am not a bond guru by any stretch of the imagination, but I have come to believe that bonds are not as boring as some might think.

You're probably familiar with or at least heard about Mutual Funds and ETFs, but have you ever heard about Closed End Funds (CEF)?

Here is some starting information:

http://www.cefconnect.com/Education/WhatIsACEF.aspx

Advantages/Disadvantages?

http://www.cefconnect.com/Education/AdvantagesCEF.aspx

Stategies:

http://www.cefconnect.com/Education/TypesStrategiesCEF.aspx

If you're interested, take some time to explore the website and all the CEFs that are available on the market. Of course there's more info out there, but I'd like to start here for now and continue to explore this segment of the market.

 

[coolhand]

Here is a closed end fund I put in my portfolio earlier this month. It's a high yield taxable fund in the mortgage sector, but it is diversified. I was attracted to it because it had been dramatically beaten down and for the past year has been moving sideways and up with little volatility. I am led to believe that those that are holding it want the income stream, but it looks like a good bet for some sizable capital gains some years down the road.

This fund was trading over $20/share in June of 2007, so you can see how much it's fallen. Yield is currently 9.48% and it is currently trading at a discount of 9.43% to NAV.

View attachment 9763

 

[tsptalk]

That IS a nice chart. It looks like a cup and handle that is about to breakout.

 

[coolhand]

That IS a nice chart. It looks like a cup and handle that is about to breakout.

That's what I'm afraid of. I want an opportunity to accumulate this one before it moves up much higher.

 

[crws]

Boy, that one did get spanked hard.
What kind of fees do you pay when buying CEF's?

 

[coolhand]

Boy, that one did get spanked hard.
What kind of fees do you pay when buying CEF's?

I have not found any that are loaded, but fees vary from fund to fund.

If you go to my first post in this thread, I pointed to website I use to screen funds. They give you a lot of info regarding each fund.

 

[coolhand]

A quick update on that fund I bought a couple weeks ago. It's up over 8%. I hadn't expected such a fast run, and it's obviously early and may not last, but it is what it is. Here's the chart:

View attachment 9783


Another fund I bought at the same time (CIK) is up over 6%. In fact, I'm seeing the junk sector moving higher in general. That's usually associated with an economic recovery.

 

[coolhand]

'Junk' Bonds Hit Record

http://online.wsj.com/article/SB100...1072.html?mod=WSJ_hpp_LEFTWhatsNewsCollection

 

[Bullitt]

My thing with bonds here are the amount of offerings. JNJ just had a huge offering and Norfolk Southern just offered a 100 year bond. These guys are smart. They aren't going to sell until they believe there is a selling opportunity and some of the smartest minds in the business believe that corporate gold has been hit at these low interest levels.

The guys who make these decisions are insiders.

JNJ: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aVYOIQrYJ4r4&refer=home

Norfolk: http://www.bloomberg.com/news/2010-...year-bond-since-05-amid-record-low-costs.html