Comments on: Bond-Fund Flows at an All-Time Peak http://www.ritholtz.com/blog/2010/01/bond-fund-flows-at-an-all-time-peak/ Macro Perspective on the Capital Markets, Economy, Geopolitics, Technology, and Digital Media Tue, 14 Feb 2012 21:38:31 +0000 hourly 1 http://wordpress.org/?v=3.0.5 By: SteveC http://www.ritholtz.com/blog/2010/01/bond-fund-flows-at-an-all-time-peak/comment-page-1/#comment-245859 SteveC Tue, 05 Jan 2010 04:40:32 +0000 http://www.ritholtz.com/blog/?p=48132#comment-245859 The money is flowing into high yield bonds. 56% return this year. Junk bonds have become the new tech stocks. IMO the estimates for default or inflation are too low and these late comers are going to get shafted. The money is flowing into high yield bonds. 56% return this year. Junk bonds have become the new tech stocks. IMO the estimates for default or inflation are too low and these late comers are going to get shafted.

]]> By: JasRas http://www.ritholtz.com/blog/2010/01/bond-fund-flows-at-an-all-time-peak/comment-page-1/#comment-245840 JasRas Tue, 05 Jan 2010 02:14:56 +0000 http://www.ritholtz.com/blog/?p=48132#comment-245840 Good point, philipat! Spreads can narrow because Treas. ylds increase, and interestingly not many get that implication... Just think of where that places treasury bonds if they return to historic spreads with munis... CSFB also has a good chart that divies up the money markets between retail and institutional...and surprise, surprise, much of the retail money markets has been re-allocated and is actually at or below '07 levels. It is the institutional money markets that are flooded with cash! I believe Rosie has referred to this chart, as has Minyanville in the past three months... M Bartels at M.Lynch has too. Retail has made commitments with this money as they can not afford the absurdly low yields. The Intelligentsia however, have either bet against this mkt or are using other methods to participate. Good point, philipat! Spreads can narrow because Treas. ylds increase, and interestingly not many get that implication… Just think of where that places treasury bonds if they return to historic spreads with munis…

CSFB also has a good chart that divies up the money markets between retail and institutional…and surprise, surprise, much of the retail money markets has been re-allocated and is actually at or below ’07 levels. It is the institutional money markets that are flooded with cash! I believe Rosie has referred to this chart, as has Minyanville in the past three months… M Bartels at M.Lynch has too. Retail has made commitments with this money as they can not afford the absurdly low yields. The Intelligentsia however, have either bet against this mkt or are using other methods to participate.

]]> By: philipat http://www.ritholtz.com/blog/2010/01/bond-fund-flows-at-an-all-time-peak/comment-page-1/#comment-245828 philipat Tue, 05 Jan 2010 01:10:54 +0000 http://www.ritholtz.com/blog/?p=48132#comment-245828 No surprise to anyone who reads David Rosenberg's research. There has indeed been a massive "Voting with the feet" away from equities and into fixed income by Joe Public. I agree with Mannwich that as soon as this money has come back into equities (And there IS money on the sidelines from the top 10% who control 90% of the wealth and are relatively unaffected), that is the time that Wall St will engineer the next big correction. I don't know if it's just me but I find talking about "Bonds" to be confusing. As per the discussion above, there has been an automatic assumption that Bonds=Treasuries. My understanding is that much of the above money which has flowed into "Bond Funds" is, in fact, into Corporate Bond Funds. As usual, this trend occured after most of the money was already off the table. These funds continue to preach "Spreads are still high and will narrow". The danger, from hereonout, IMHO, is that IF Corporate spreads narrow, there is a very real possibility that they will do so only because Traesury yields increase! No surprise to anyone who reads David Rosenberg’s research. There has indeed been a massive “Voting with the feet” away from equities and into fixed income by Joe Public. I agree with Mannwich that as soon as this money has come back into equities (And there IS money on the sidelines from the top 10% who control 90% of the wealth and are relatively unaffected), that is the time that Wall St will engineer the next big correction.

I don’t know if it’s just me but I find talking about “Bonds” to be confusing. As per the discussion above, there has been an automatic assumption that Bonds=Treasuries. My understanding is that much of the above money which has flowed into “Bond Funds” is, in fact, into Corporate Bond Funds.

As usual, this trend occured after most of the money was already off the table. These funds continue to preach “Spreads are still high and will narrow”. The danger, from hereonout, IMHO, is that IF Corporate spreads narrow, there is a very real possibility that they will do so only because Traesury yields increase!

]]> By: JasRas http://www.ritholtz.com/blog/2010/01/bond-fund-flows-at-an-all-time-peak/comment-page-1/#comment-245817 JasRas Tue, 05 Jan 2010 00:14:17 +0000 http://www.ritholtz.com/blog/?p=48132#comment-245817 BR, I am confused by your comments that yields are practically zero... Very few fixed funds are playing that close to the short end, so their yields are higher than that. I also think if you could find a break down into what kind of fixed funds are being bought, you'd see these are not Govt. Income funds... the funds being bought are either "go anywhere" (Pimco tot. ret.) or Corp bond funds, or "Strategic income", or international bond funds... Don't know anyone wanting govie funds... Another interesting thing that no one seems to be speaking of: Monies are going into "flexible" funds as well as fixed. Investors did learn a lesson; flexibility is a positive trait, not a negative one. The worries about "style drift" killed a lot of people b/c so many prospectus had written in strict investment guidelines after the huge Jeffery Vinnick/George Vanderheiden drift in the 1990's (when the Magellan fund had a 20%+ position in long term treasuries, remember?). Flexible funds place the decision to overweight equity or fixed in the hands of someone that is supposedly trained to do so... So all this hub bub about equity outflows is slightly overblown. It is big no doubt, but the back out international equity purchases and flexible funds and it isn't as terrible as the media portrays... BR,

I am confused by your comments that yields are practically zero… Very few fixed funds are playing that close to the short end, so their yields are higher than that. I also think if you could find a break down into what kind of fixed funds are being bought, you’d see these are not Govt. Income funds… the funds being bought are either “go anywhere” (Pimco tot. ret.) or Corp bond funds, or “Strategic income”, or international bond funds… Don’t know anyone wanting govie funds…

Another interesting thing that no one seems to be speaking of: Monies are going into “flexible” funds as well as fixed. Investors did learn a lesson; flexibility is a positive trait, not a negative one. The worries about “style drift” killed a lot of people b/c so many prospectus had written in strict investment guidelines after the huge Jeffery Vinnick/George Vanderheiden drift in the 1990′s (when the Magellan fund had a 20%+ position in long term treasuries, remember?). Flexible funds place the decision to overweight equity or fixed in the hands of someone that is supposedly trained to do so… So all this hub bub about equity outflows is slightly overblown. It is big no doubt, but the back out international equity purchases and flexible funds and it isn’t as terrible as the media portrays…

]]> By: Jerry 369 http://www.ritholtz.com/blog/2010/01/bond-fund-flows-at-an-all-time-peak/comment-page-1/#comment-245773 Jerry 369 Mon, 04 Jan 2010 21:14:02 +0000 http://www.ritholtz.com/blog/?p=48132#comment-245773 @km4 Agree, I like the quotes,but what causes the break? When no-one,I mean, the word stocks will be looked at with disgust,sickness in the stomach. When the last long throws in the towel,then you buy. This depression could be almost "light"if we let it start in2000{Tech Wreck},now it will get nastier. When you see the union's not willing to give an inch{state/local/teachers}and an administration cowing to them,well the purge that will come will be violent. De-leveraging "must"occur. The intervention by the fed/treasury will not help,only deepen the hole. Gold isn't forecasting inflation,its more worried about the depression we are following Japan into. Woe to you who don't learn from others mistakes! This week will be a great chance for one to be right,bulls or bears.This time next week we will have a greater view of what's ahead. Jerry @km4 Agree, I like the quotes,but what causes the break? When no-one,I mean, the word stocks will be looked at with disgust,sickness in the stomach. When the last long throws in the towel,then you buy. This depression could be almost “light”if we let it start in2000{Tech Wreck},now it will get nastier. When you see the union’s not willing to give an inch{state/local/teachers}and an administration cowing to them,well the purge that will come will be violent. De-leveraging “must”occur. The intervention by the fed/treasury will not help,only deepen the hole. Gold isn’t forecasting inflation,its more worried about the depression we are following Japan into. Woe to you who don’t learn from others mistakes! This week will be a great chance for one to be right,bulls or bears.This time next week we will have a greater view of what’s ahead.
Jerry

]]> By: km4 http://www.ritholtz.com/blog/2010/01/bond-fund-flows-at-an-all-time-peak/comment-page-1/#comment-245760 km4 Mon, 04 Jan 2010 20:15:36 +0000 http://www.ritholtz.com/blog/?p=48132#comment-245760 Jerry 369 Says: We are just to foolish/arrogant to believe that all the problems of the past 20 years are cleansed away and we are all sunshine and lollipop’s! “The question then is who is going to finance the U.S. government” Stiglitz said. "I wonder if there has ever been a society so badly deluded as ours"....James Howard Kunstler The US economy can defined today as super long on fiat, with mixture of and schizophrenic, and mostly dysfunctional going forward unless major structural changes are undertaken. Jerry 369 Says: We are just to foolish/arrogant to believe that all the problems of the past 20 years are cleansed away and we are all sunshine and lollipop’s!

“The question then is who is going to finance the U.S. government” Stiglitz said.

“I wonder if there has ever been a society so badly deluded as ours”….James Howard Kunstler

The US economy can defined today as super long on fiat, with mixture of and schizophrenic, and mostly dysfunctional going forward unless major structural changes are undertaken.

]]> By: sharkbait http://www.ritholtz.com/blog/2010/01/bond-fund-flows-at-an-all-time-peak/comment-page-1/#comment-245756 sharkbait Mon, 04 Jan 2010 19:59:30 +0000 http://www.ritholtz.com/blog/?p=48132#comment-245756 @Jerry "If the dollar was stable" - Wow. If pigs could fly. Sound as a pound. @Jerry
“If the dollar was stable” – Wow. If pigs could fly. Sound as a pound.

]]> By: Jerry 369 http://www.ritholtz.com/blog/2010/01/bond-fund-flows-at-an-all-time-peak/comment-page-1/#comment-245755 Jerry 369 Mon, 04 Jan 2010 19:47:55 +0000 http://www.ritholtz.com/blog/?p=48132#comment-245755 ooops......Got so torqued up I forgot my point! The supposed money on the sidelines,just waiting to flood the equity markets,its been going into the bond market. The intel{as stated above}has been going on all year. Almost no inflows{mostly outflows}into equity funds. Now we are to believe all this cash is going to flood the stock markets? Actions speak volumes,this is not happening. As the dollar falls,we will get killed with higher oil/gas/heating costs,etc...Wheres the liberals screaming their asses off? Oil at $80 a barrel,in today's economy,is insane.If the dollar was stable,oil should be closer to$45/60 a bbl,{risk premey}included.... Jerry ooops……Got so torqued up I forgot my point! The supposed money on the sidelines,just waiting to flood the equity markets,its been going into the bond market. The intel{as stated above}has been going on all year. Almost no inflows{mostly outflows}into equity funds. Now we are to believe all this cash is going to flood the stock markets? Actions speak volumes,this is not happening. As the dollar falls,we will get killed with higher oil/gas/heating costs,etc…Wheres the liberals screaming their asses off? Oil at $80 a barrel,in today’s economy,is insane.If the dollar was stable,oil should be closer to$45/60 a bbl,{risk premey}included….
Jerry

]]> By: sharkbait http://www.ritholtz.com/blog/2010/01/bond-fund-flows-at-an-all-time-peak/comment-page-1/#comment-245752 sharkbait Mon, 04 Jan 2010 19:39:49 +0000 http://www.ritholtz.com/blog/?p=48132#comment-245752 Bonds (funds) not "safe". Can/will lose $ in bond funds - vs. bonds held to maturity. I wonder if this pt. is lost on the retail investor? MMkt is "safe", except now, may not necessarily be able to redeem at will: http://www.zerohedge.com/article/government-your-legal-right-redeem-your-money-market-account-has-been-denied Equity MF MM's mostly all in now, and so that is likely a major source for buying to date. Kinda risky to be buying in from here though IMHO. Any asset (bonds incl.) can be a "crowded trade" (DXY carry trade, pork bellies, house prices, etc.) IMHO. $0.02 Bonds (funds) not “safe”. Can/will lose $ in bond funds – vs. bonds held to maturity. I wonder if this pt. is lost on the retail investor? MMkt is “safe”, except now, may not necessarily be able to redeem at will:

http://www.zerohedge.com/article/government-your-legal-right-redeem-your-money-market-account-has-been-denied

Equity MF MM’s mostly all in now, and so that is likely a major source for buying to date. Kinda risky to be buying in from here though IMHO.

Any asset (bonds incl.) can be a “crowded trade” (DXY carry trade, pork bellies, house prices, etc.) IMHO.

$0.02

]]> By: Ny Stock Guy http://www.ritholtz.com/blog/2010/01/bond-fund-flows-at-an-all-time-peak/comment-page-1/#comment-245751 Ny Stock Guy Mon, 04 Jan 2010 19:33:47 +0000 http://www.ritholtz.com/blog/?p=48132#comment-245751 BR: Chasing yield? Its practically zero! ------------- Sure, but it beats the -30% they got in '08 from their TotalValueGrowthBlendedCapBalancedSelectYield fund BR: Chasing yield? Its practically zero!

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Sure, but it beats the -30% they got in ’08 from their TotalValueGrowthBlendedCapBalancedSelectYield fund

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