Founding Partner at East Coast Funds Management
Member since: Dec '10 · 85 Opinions
Reset Preferreds. They are issued at $25 and trade in the market wherever the market has them. The reset is an answer for the perpetual preferreds that had infinite interest rate risk. Resets are only extended if it benefits the issuer. If interest rates rise then they get extended at an increased rate spread and if interest rates fall, they are called. You get paid only a fraction of what you should get for the risk you are taking.
Has been under investigation by the SCC. Bill Gross has left. The North American bond markets have been in a bit of disarray for the last two weeks because of this because Pimco manage such a large amount of capital in the bond markets. Huge redemptions have hurt them. A US dollar bond fund and the US strong dollar have benefitted you. It is a traditional bond fund that has done fairly well. The future isn’t fantastic because he thinks interest rates are going to go higher. They have a lot of quite good bond managers there. [The guest cautioned that he is reluctant to advise buying or selling a managed fund - 'out managing the manager']
Markets. It has been 5 years of free money with QE. The markets have been complacent, but now the markets changed as we come to the end of the process. He thinks the Fed will be cautious and not raise the rates quickly. There is a potential for bonds to get out of control when interest rates start to rise. As interest rates rise, corporate spreads narrow. Higher yield bonds are as overvalued as any asset class and will get a double wammy when interest rates go up.