March 8, 2015
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This corrupt government continues to publish bull crap jobs numbers. Of the 295,000 jobs listed in the report, 40% were fabricated out of thin air based on the “birth-death” model that they use. And the rest of the jobs are bartenders, and remodeling of apartments, NOT houses. This is pure BS. Be aware. If you want to know more go to this link:
UPDATE: WE SOLD ALL FLOATING RATE POSITIONS.
Investors have been anticipating rising rates for years……….yes for years. And it has not happened.
Now the good (but manipulated and fake) jobs report on Friday has everyone thinking that maybe, finally, rates really will go up….probably very slowly. Who knows. And my always wrong crystal ball certainly doesn’t know.
My strategy has been to own PFLT PennantPark Floating Rate Capital, a business development company that invests primarily in floating rate loans. We have had this in the Core Portfolio for a long time steadily collecting a very nice yield, currently 8%. Not bad.
The interest rates on floating rate loans adjust to keep pace with rates…so you receive a higher yield.
NOTE: If you do not own a floating rate position you should consider buying. PFLT is scheduled to go ex-dividend March 13 and it is very possible you could get shares at a lower cost….BUT with the sudden concern about rising rates these funds may head higher. You may want to buy NOW.
I plan on adding to our PFLT holding. We also hold PHD in the Core Portfolio which you could consider….and BKLN is another option.
I have copied part of an article from morningstar.com below which describes this segment of investments.
The Bull Case: Bank loans–or floating-rate loans–behave differently from most other bond types. Conventional bonds have fixed interest rates, and that means they’ll tend to lose value when prevailing bond yields rise; the presence of new bonds with higher yields decreases demand for the older, lower-yielding bonds. By contrast, the interest rates on bank, or floating-rate, loans adjust on a regular basis to keep pace with short-term interest rates. That means that when bond yields go up, bank-loan owners receive a higher yield–not immediately, but eventually. For that reason, bank-loan securities may also appreciate in value during periods of rising interest rates. Moreover, considering that interest rates often increase in periods of economic strength, bank loans may also appreciate during a rising-rate period because investors assume that there’s less of a risk that the companies borrowing via the bank-loan market will have trouble meeting their obligations. Finally, investors have been pulling assets from bank-loan funds over the past year, to the tune of $21 billion in outflows in the one-year period through December 2014. The fact that other investors have been leaving doesn’t automatically mean that there’s no froth in the sector, but big outflows from a given category can be a contrarian indicator.
What Could Go Wrong: Bank loans face risks under a few different scenarios. One is what we’ve experienced recently: When interest rates decline, the returns from bank-loan funds will be meager alongside investments with greater interest-rate sensitivity. As intermediate- and longer-term bonds have rallied on interest-rate declines over the past year, bank-loan funds have done just a little better than stand still, gaining only 1.6%, on average, versus a nearly 5% return for the Barclays U.S. Aggregate Bond Index. Perhaps the bigger concern with bank-loan funds, however, is if the economy were to weaken unexpectedly. Because many bank-loan borrowers have low credit qualities, they’re at greater risk of default in a weakening economic environment. The typical bank-loan fund lost 30% of its value in 2008’s financial crisis, for example. Given their junky credit profiles, bank loans aren’t likely to provide as much diversification in an equity-market sell-off as high-quality bonds would.