[quote=AllREIT] [quote=BondGuy][quote=AllREIT] [quote=BondGuy]

All, were in the business in 94?

[/quote]

Nope, were you there in 1931?
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I asked, because your posts are filled with logic. They struck me as written by someone who has never seen a real bear market, or worse, in the bond market. That's not to say that everything you've written isn't valid, or won't work when the bear comes our way. I hope it does work for you and your clients.

As for 1931, not around for that one. For that reason I'm an avid Alfred Cowles fan.

[/quote]

There's a good chart on the Alliaz/PIMCO site "Understanding Bond Market cycles", since the start of the AGG in the mid 1970s there has never been a rolling 3 year period with a negative total return. This is consistant with how passive bond ladders always coverge to par, even after extreme interest rate shocks.

This also supports Bill Gross's style of trying to be more effecient than the benchmark vs making grand thematic bets.
[/quote]

All good stuff in a balanced portfolio kind of way. I'm not poo pooing your what you're saying here, but when we invest for income we're not trying to beat an index benchmark.  For income buyers the benchmark is much easier to grasp, highest yield for the risk taken always wins.

We're not measuring our income portfolios against a market index. Our benchmark is the client's ability to attain their lifestyle goals. The problem with funds and prof mgrs like Gross, who I respect a great deal, is that they live quarter to quarter. What's in a manager's best interest is not always in the client's best interest. The professional's mind set is always focused on short term total return. And as much as clients might like to, they can't spend total return. A total return that I might add, in the short term is often meaningless. GM comes to mind as do loses in market value( not principal) cause by the down leg of an interest rate cycle and then recovered in the up leg. Gross and company are held accountable for their performance through those cycles. Meanwhile back on mainstreet their shareholders suffer when their income is reduced by a risk adverse mgr shortening up maturities for whatever reason.

[quote=BondGuy]

All good stuff in a balanced portfolio kind of way. I’m not poo pooing your what you’re saying here, but when we invest for income we’re not trying to beat an index benchmark.  For income buyers the benchmark is much easier to grasp, highest yield for the risk taken always wins.

We're not measuring our income portfolios against a market index. Our benchmark is the client's ability to attain their lifestyle goals. The problem with funds and prof mgrs like Gross, who I respect a great deal, is that they live quarter to quarter. What's in a manager's best interest is not always in the client's best interest. The professional's mind set is always focused on short term total return. And as much as clients might like to, they can't spend total return. A total return that I might add, in the short term is often meaningless. GM comes to mind as do loses in market value( not principal) cause by the down leg of an interest rate cycle and then recovered in the up leg. Gross and company are held accountable for their performance through those cycles. Meanwhile back on mainstreet their shareholders suffer when their income is reduced by a risk adverse mgr shortening up maturities for whatever reason.

[quote=ManagedMoney] [quote=BondGuy]

All good stuff in a balanced portfolio kind of way. I’m not poo pooing your what you’re saying here, but when we invest for income we’re not trying to beat an index benchmark.  For income buyers the benchmark is much easier to grasp, highest yield for the risk taken always wins.

We're not measuring our income portfolios against a market index. Our benchmark is the client's ability to attain their lifestyle goals. The problem with funds and prof mgrs like Gross, who I respect a great deal, is that they live quarter to quarter. What's in a manager's best interest is not always in the client's best interest. The professional's mind set is always focused on short term total return. And as much as clients might like to, they can't spend total return. A total return that I might add, in the short term is often meaningless. GM comes to mind as do loses in market value( not principal) cause by the down leg of an interest rate cycle and then recovered in the up leg. Gross and company are held accountable for their performance through those cycles. Meanwhile back on mainstreet their shareholders suffer when their income is reduced by a risk adverse mgr shortening up maturities for whatever reason.

[/quote]

I'm with you on this one.

If a client came to me looking for return, I wouldn't put them in bonds in the first place.  I put them in bonds when they tell me they require, and need to count on, x amount of dollars of income every month.  So, the focus (of this part of the portfolio) is on the income they receive, not the return they are getting.
[/quote]

Well, for portfolio balancing purposes bonds can play a role as a non correlating asset. Which, not to put words in his mouth, is what AllREIT is talking about.

I totally agree on your point when it comes to generating income. When it comes to bonds you are, within the call and redemption features of that bond, delivering an income that the client can count on. Not so with funds where the income can and does change on a regular basis.

"Gross and company are held accountable for their performance through those cycles. Meanwhile back on mainstreet their shareholders suffer when their income is reduced by a risk adverse mgr shortening up maturities for whatever reason."

That is a great point. Although deep down I may have been aware of that dynamic, it makes absolute sense when conveyed like that.

Well, I learned something new today, so I am going to go take a power nap under my desk. 

[quote=blarmston]

Well, I learned something new today, so I am going to go take a power nap under my desk. 

[/quote]

If you were a bigshot at ML, you wouldn't have to nap hidden away under your desk. You'd simply throw your feet onto the top of your desk and lean back in your chair!

Good point- give me a couple years... I already have the office and the leater couch picked out...

But I prefer stretching out, kicking the Allen Ed's off, busting out the couch pillow I brought from home, and throwing on some chillout house and catching 30 minutes of peacefull bliss...

Its great- my director used to F- with me but now he really doesnt say anything...

[quote=BondGuy]

…

I totally agree on your point when it comes to generating income. When it comes to bonds you are, within the call and redemption features of that bond, delivering an income that the client can count on. Not so with funds where the income can and does change on a regular basis.

Am I wrong or is thread suppose to be about 12b-1 fees or your egos?

Isnt it always about egos to some degree???

[quote=Greenbacks]

Am I wrong or is thread suppose to be about 12b-1 fees or your egos?

[/quote]

Oh yeah, 12b-1 fees.

Here's the plan:

Let's have any regulator who wants to do away with 12b-1 fees become an intern for a week. I vote that they intern in any office for the week before April 15th. After pulling their hair out with phone calls from cost basis seeking accountants for a week let'em tell us that we and the MFunds don't earn every dime of that fee.

[quote=BondGuy][quote=Greenbacks]

Am I wrong or is thread suppose to be about 12b-1 fees or your egos?

[/quote]

Oh yeah, 12b-1 fees.

Here's the plan:

Let's have any regulator who wants to do away with 12b-1 fees become an intern for a week. I vote that they intern in any office for the week before April 15th. After pulling their hair out with phone calls from cost basis seeking accountants for a week let'em tell us that we and the MFunds don't earn every dime of that fee.