Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: MCsweet who wrote (51503)	5/8/2013 1:07:15 PM
From: deeno	Respond to of 78777

You and I have some similar feelings about CEF and Bond funds. This one does give some pause. On the positive side, as an ETF you have tracking errors rather than discounts to NAV. Though I have seen huge tracking errors on others like PGF and PFF they tended to be short lived, through the financial crisis. Certianly a move up in rates might bring a pretty big shakeout to "funds" which are in bonds, but I cant imagine it could be worse then the leveraged CEF's. Its 4.7% and as you say, if ya got ta have yield, well.........Also it seems to me the more likely scenario for rising rates from here would be economic recovery, so senior debt of junk bonds ought to fair well as far as quality. But a couple of things to look out for. A number of these senior issues are trading at the floor. So an increase in rates would not only have the 30/60/90 day lag but may not go up at all for a number of percentage points. Disappointing bond holders is not a good thing. Also since this ETF is trying to match some index, I would guess most of the loans are seasoned. could be much higher floors both because of age and popularity with other CEF and fund managers to keep the cash flow up. They trade at pretty good premiums. Sometimes it pays to have someone watching the herd. Not only are the companies invested in, dynamic in risk, but the terms of senior rate notes can be pretty diverse with varying shades of market risk. Having someone adjusting the terms of the portfolio as rates move, up or down, along with proactive company risk management, might provide real value over the ETF's.