The Justa & Lars Honors Bob Brinker Investment Club Message Board

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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club

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To: Justa Werkenstiff who wrote (11823)	2/9/2000 6:06:00 PM
From: Robert	Read Replies (2) of 15132

Justa and all -- I am a newcomer to this thread, and thus I apologize if my question is a silly one, but I am a bit confused by the enthusiasm here for the Vanguard GNMA fund. Why are Bob and you all here so high on this fund? Ginnie Maes are admittedly much better than Fannies and Freddies due to the federal government backing, but they seem to me to cheat the investor of the fruits of his analysis. In short, if the fund investor's market call is right and bond prices rise/yields fall (perhaps due to severe weakness in the stock market, leading to a flight-to-quality), the Ginnies won't rise much at all because of the mortgage prepayment risk -- lower interest rates = greater prepayments. So if you are bullish on bonds, why choose GNMA as Treasuries would at least seem to give the investor the biggest bang for his buck? The GNMA yields are slightly higher, but is that really a compelling enough reason? Any and all input/analysis is welcome. Thank you in advance! -- Robert

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