Munis
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it makes me feel better that fielding and his staff have millions invested in their own funds. they’ll take care of business.
[quote=professional1]
Just think, 40 million consumers will get up at 3am tomorrow to buy stuff half off...we've been doing that with Oppy muni from the convenience of our comfy offices, and getting paid a 293% yield at the same time. Good times, good times..... I'd be careful with Oppy. The fund was at 12 billion one year ago and now they are at roughly 6 billion (asset devaluation anyone?). They also had half a billion in redemptions in Sept. They are too aggressive in my book as leverage is being called away in the bank. I believe they are taking on redemption risk. Not only that, I'd take a look at the addendum that they added to the prospectus on Oct. 21st stating part of their portfolio is illiquid and not properly valued.....I'm just sayin be careful as clients have already been burned badly enough that own this stuff![/quote] I too listened to the call yesterday. Fielding did make a compelling case for purchase. Not in a rah rah bang the drum-buy my fund kind of way. More like- this market makes no sense and savy investors will ultimately see the value in munis and buy. He reiterated that the current market conditions reflect a liquidity crisis, not a credit quality crisis. It is his belief that all the factors affecting the fund are temporary. He makes the distiction that defaults cause permenant damage. As Ranksocks has mentioned the non accrual rate in the fund currently stands at 1.6%. This versus roughly 4% when the fund was a five star super star fund. Fielding used the fact that buyers using CDS to insure their bond positions can insure Campbells Soup corporate bonds for 1/5 the cost of insuring NJ GOs. This makes no sense. He also told us that in his opinion the treas/muni spread ratio is ludicrous and at 160bp, the AMT spread is equally ridiculous. Historically that ratio stands at 15 to 25beeps. YTD, ORNAX has net positive inflows. Oct was an outflow month but Nov again net positive inflows. For those who aren't aware fund flow is a dividend affecting factor. So it is important to watch. This fund has over 1000 issues so has plenty of room to sell without affecting the div, but still something we need to watch. Additionally they have cash reserves and a credit facility to draw on. Again, to his credit, Fielding has no intention of altering his strategy. Judging from the questions asked, I believe this sits well with most advisors. If anything they are worried that Fielding will buckle to pressure to shorten up, or buy higher quality than the warty stuff he thrives on. The fund's death by a thousand cuts will continue until the now thinly traded muni market shows more signs of life. With TSY at zero the market is telling us cash is king for now. +1 on Ranks back the truck up. Not only for this fund but for all munis. Remember: Buy straw hats in winter. Well. it's freaking nuclear winter in the muni market right now. I'll take that 293% return until sanity returns.[quote=AGE2RIA]
Had a client yesterday want to buy a 25 year muni. Schwab Institutional had the 5.75 of 2025 at 94.918. The very same bond at AGE/WS/WFC was offered at 98.088 w/2. I like this RIA gig.[/quote] I am skeptical, what is the cusip? If the bond was that overpriced at WS/AGE, it was certainly a street offerring on bondesk, and not a bond they own. Schwaub doesn't have any institutional muni brokers or traders, don't let the name fool you. If schwaub has any of their own inventory, it is tiny.I will likely buy more munis Monday and the pucker factor will be off the charts - a sure sign I will be doing the right thing.
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What are valuations on client statements going to be? Many market players that normally bid municipals are no longer in business. Reducing liquidity in the secondary market. Bond insurance companies have been downgraded below the underlying ratings of the bonds they insure. Without a norm of a AAA rating to go by, evaluators must rely upon matrices or levels assigned by what few bidders still exist. Treasury bond and note yields, once a benchmark for determining a spread relationship for municipals, have fallen to below 3% on the 30 year bond and federal funds have moved to zero. Municipals that once traded as a percentage of treasury yields now yield 200-350 basis points more than treasuries.Here’s some commentary from Goldman Sachs that seemed to be interesting…
http://www2.goldmansachs.com/gsam/docs/funds/commentary/commentary/si-18_high_yield_municipal_bonds_retail.pdf
Today was the first day muni funds had an uptick. It’s about freakin’ time to get on a roll! How’s that for a technical analysis?
I think we are on day three of an upswing. EANAX was yielding 8% and they’ve had no defaults. If conventional thinking (munis = screaming buy) comes around, I am expecting 20% total returns. I just pulled that number out of the air, I’d take 10%.
GG,
We seem to be at a point where the muni market (and broader economy and markets) either A) Crumble or B) Rally like a MF’er. If it’s A, we are all in the wrong line of work, obviously.
The longer this scheisse lasts the more A) seems like a possibilty. B) is the only option in my book. I have been playing it chicken with the funds, buying more of the shorter duration/high credit quality stuff like Evergreen and MFS versus the Oppenheimer/Eaton Vance swing for the fences stuff.
I have been focusing on individual muni issues. Can’t argue about the possibility of A) at this point. Call me a dreamer as a soldier on anyway.
Have you checked out the site “Municipal Market Advisors” website? A wholesaler turned me on to it, not a bad tool.
[quote=BondGuy]
Gordon, that’s as good as anything i’ve read.
[/quote]Thanks for the feedback. I don't know as much about the sector as you, but it sure as heck struck me as pretty compelling stuff.