Ask Rande 10,000+
- Rande
- SPYDR22000
- Rande
- Centigrade233
- Rande
- Centigrade233
- Bernie777
- Rande
- Rande
- mdorsey
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» SPYDR22000 - Re: Re: closed-end municipal bond funds
In response to message posted by Rande:Rande,
What are the negatives that cause you not to be
fan of closed end funds?
-- posted by SPYDR22000
» Rande - Re: Re: Re: closed-end municipal bond funds
In response to message posted by SPYDR22000:
SPY,
In comparison to open-end mutual funds, closed-end funds can sell at a premium or discount to their underlying portfolios depending on market forces. With an open-end fund you have ultimate liquidity in that you know you'll pay the NAV of the fund's holdings when you buy and you'll get the NAV when you sell. Buying a closed-end fund at a discount may seem nice, but there's no guarantee the discount won't just keep getting bigger. Closed-end funds are also generally less responsive to their shareholders as compared to open-end funds. By and large, given a choice between the two types, I'd go with the open-end option all else being equal with respect to expenses and performance. Especially if you're looking at a sector of the U.S. market or something like emerging markets -- if that area falls out of favor, you could end up with a depreciated underlying portfolio AND a hefty discount on top of it. And ESPECIALLY if you're inclined to index the market, then it's a no-brainer to go with the no-load, low expense open-end funds.
When it comes to bonds funds, some closed-end bond funds could have one advantage over their open-end fund equivalents -- since there is not a constant inflow and outflow of cash, the fund can sit tight on higher yielding bonds in a declining interest rate environment. When an open-end fund receives new cash and goes to invest, lower coupons could dillute the higher yield of older bonds. Whether that advantage is enough to overcome a potential premium on purchase or potentially higher expenses is questionable. Finally, closed-end bond funds don't have the same yield reporting requirements as open-end funds so you need to be especially dilligent about investigating yield claims.
-- posted by Rande
» Centigrade233 - Let's talk facts
Rande, I'll refrain from generalities and platitudes if you will. I'll concede that the US economy will grow in the long term, and stock prices will reflect that. In the context of 1973/1974, we can agree that protracted down markets of ten years duration are possible. The current bearish evidence is:1. After peaking in early 2000, the stock indexes have been dropping for a year and a half.
2. Stock valuations are still historically high (A hangover from the recent bubble party)
3. A well diversified, balanced, stock or fund portfolio has been falling for a year and a half, although not as much as the indexes.
4. The lagging indicators, such as unemployment, consumer confidence, and earnings have not yet bottomed.
5. The stock indexes, as leading indicators, are not yet predicting an end to the current recession within the next six months.
6. Ten interest rate cuts have not broken the deflationary psychology. (I'm reminded of the 0% interest rates in Japan.)
7. The news background has upped the risk, rendering the risk/reward equation much less attractive. Other shoes may well drop
8. The risk of a negative news surprise could remain for years into the future in reaction to the failed "half-measure" policies our government has adopted to fight a two front "war".
9. Our unwillingness to "offend" non-citizen aliens is preventing us from removing the terrorists from our midst.
10. Our unwillingness to "offend" moderate Arab nations such as Saudi Arabia is making our "war" effort in Afghanistan ineffective.
In summary, the economy stinks, money supply is shrinking in spite of low short term rates, the risk of bad news is high, and we are still hung over with high valuations. The odds favor more downside.
Now. you tell me where I'm wrong, specifically.
Jean
-- posted by Centigrade233
» Rande - Re: Let's talk facts
In response to message posted by Centigrade233:
Jean,
Are you saying you've developed a model to predict the short-term direction of the market? That based on your review of a handful of indicators you believe you can discern the true value of the market as a whole and that it's time to be out? Are you saying that you'll know in advance when it's time to get back in? Good luck.
-- posted by Rande
» Centigrade233 - Re: Re: Let's talk facts
In response to message posted by Rande:Rande, you are playing games with me, and putting words in my mouth. You did not need a model to know that stocks were out favor for the period 1973 through 1981.
My thesis is that not only has the 1 1/2 year bear market not over, but we could be in for many years of unfavorable investment climate.
Even for a long term investor, the risk/reward equation is unfavorable today. You know that "long term" means at least ten years if you are going to pick a rolling period that guarantees a positive return. That's why investment advisors recommend dollar cost averaging, so you don;t jump in near a top
If you buy today, you will profit in ten years, but perhaps not in one.
I gave you my reasons for being negative. You have given me no reasons to be positive.
And yes, based on 150 years of historical data, stocks are simply too expensive today, especially in this deflationary economy.
-- posted by Centigrade233
» Bernie777 - Time To Get More Aggresive?
Hi Rande,I've been in the Fidelity Total Market Index Fund for a short time. I see the QQQ's going up every day. What do you think of half money going into Rydex OTC or Pro-Fund OTC or Fidelity OTC? All of these similar to QQQ's. I went down with tech and now I think I should ride it up. What do you think of my ideas?
-- posted by Bernie777
» Rande - Re: Re: Re: Let's talk facts
In response to message posted by Centigrade233:
Jean,
The point is that someone else could make a list of reasons to be bullish just as long and, to them, as valid as the one you've put together to support the bearish case.
Now, here's my opinion and my point:
IT'S A WASTE OF TIME
You can go nuts with all the near-term bullish point/bearish counterpoint noise. Inevitably, it leads to action and I'm a firm believer in setting up a prudent investment policy and then taking as little action as possible except to keep things in balance and manage the cash flows.
But, if you get some value out of trying to handicap the market, then by all means go for it and, once again, good luck.
-- posted by Rande
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