iShares Lehman 3-7 Year Treasury Bond Fund (IEI)

All Comments on IEI

  • commenter
    sanserve
    Aug 19 08:52 AM
    My Website
    Why I'm Against Fixed Income ETFs [view article]
    All Index funds are risky, especially income funds. Use Managed Closed End Funds instead. Here's some recent research with real ife investment portfolios:

    Good News For Income Investors



    Looking for good news in today's markets is like searching for the proverbial needle in a haystack. Needless to say, practically all investment grade equities and nearly all closed end funds that specialize in providing regular recurring monthly income have been reduced in market value by this prolonged correction. The quake has spread in all directions from its financial epicenter, and the mounting doom and gloom has taken its toll on even the most rational investment decision makers. Try to keep in mind that the purpose of income investing is the income that your portfolio produces not an increase in the securities' market values---



    So here's the good news (and for anyone with a 40% or higher income asset allocation, or an income portfolio being used for living expenses), it really is very good news. Base income levels, from the beginning of the stock market correction in June '07 until mid-July '08, have barely changed at all. In fact, they have probably risen in properly asset allocated portfolios. I have examined the regular recurring monthly income distributed by 56 taxable income CEFs and 61 tax-free income CEFs, and the conclusions are pretty remarkable.



    In spite of the fact that the vast majority of my favorite monthly income producers are lower in market value than I would like, the amount of income they are distributing to shareholders has not moved lower meaningfully--- even though the Federal Reserve has reduced interest rates by approximately 60% during the past twelve months. Here are the numbers: (1) 48% of the taxable-income CEFs are distributing precisely the same amount per share as they did a year ago. Fourteen issues have increased their payouts and fifteen have reduced them.



    The net result is a decrease of just fourteen cents (2.5% of the total monthly payout). The average current yield on the portfolio, as of mid July '07, is 9.86% without considering any capital gains distributions. Additionally, the group is selling at market prices that reflect an average discount of nearly 11% from NAV. Is that special or what? The bonds, preferred stocks, government securities are priced 11% below their current market values.



    (2) The numbers are similar with regard to the 61 tax-free income CEFs: 46% have not altered their payout over the past twelve months; eighteen have reduced their payout slightly, and 15 have increased the monthly dole. The net difference for the group over the past year is less than one cent, or a percentage change of two-tenths of one percent. Remarkable. This group is selling at an average discount from NAV of 9.1% and has a current tax-free yield of 5.51%.



    (3) Of 117 individual issues, about half have produced stable income. The others have accounted for a total payout reduction of less than 15 cents--- a measly 1.7%. Why is this amount of little consequence? Two reasons really.



    First of all, a properly asset-allocated income portfolio does not disburse all of the base income it receives, so there is income available to reinvest in more shares of income producing securities. This process assures a growing cash flow to calm your fear of rising prices. The other reason is a bit more hypothetical. The Fed has lowered rates significantly, a process that normally produces higher prices for income securities. Eventually, those lower interest rates (even if global pressures convince politicians to take back some of the reductions) should produce higher prices (i.e., profit taking opportunities) in these securities.



    Admittedly, even if your asset allocation has been fine tuned for years, lower portfolio market values in this area make stock market valuation shrinkage feel even worse. But the value of stable cash flow becomes painfully clear for investors who misguidedly depend on capital gains for their spending money. Properly asset allocated portfolios contain enough base income generators to pay the bills. The purpose of capital gains is to produce proportionately more base income generators.



    The purpose of this email is simply to bring some needed sunlight into an investment environment that is far gloomier than I think it needs to be. If you want the details, you'll have to request them personally.





    Steve Selengut

    www.sancoservices.com

    www.kiawahgolfinvestme.../

    Professional Portfolio Management since 1979

    Author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"
    Reply
  • commenter
    philq
    Aug 11 09:35 AM
    Bond Ladders vs. Layering with Bond Funds [view article]
    Am I missing something? If I want bonds I just buy nuveen muni-bond closed-end etf's that now yield 5.5-6% federal tax free--like nqs. I think I have seven or eight of them. Avg duration about 7 years. They have some problems with leverage/auction-rate stuff but nuveen will cut through that I think---they've been around awhile. Reply
  • commenter
    ikkyu
    Aug 10 03:07 AM
    Bond Ladders vs. Layering with Bond Funds [view article]
    Greetings Mr. Shaw,

    You are as gentlemanly, as you are informative. Boy, ETFs come out so fast it is hard to stay abreast. I hope it sees some volume too.

    Do you have any recommendations about good bond brokers outside of Treasury Direct, say for Zero coupon bonds and corporates? There is an article on here by Larry Swedroe about the hidden mark-up on bonds in the secondary market that was a real eye-opener:
    seekingalpha.com/artic...

    Thanks. Cheers from Osaka,
    john     Reply
  • commenter
    Richard Shaw
    Aug 09 08:37 AM
    My Website
    Bond Ladders vs. Layering with Bond Funds [view article]
    Thanks John,

    Your right, that is a possibility.

    We need to see how PLW develops. Currently it is less than 1 year old and has only $43 million in assets with thin trading.

    www.invescopowershares...

    After it matures, it may work for those with Treasuries in mind for their ladder. However, with a 25 basis point fee, and with individuals able to buy Treasuries easily without the need to do credit quality research, the fee may be hard to justify versus building the ladder through direct investment.

    In a low interest rate environment, 25 bpt is a significant bite out of return, and with a Treasury ladder there isn't much work to do to create it and keep it up. Treasury ladders are probably a good do-it-yourself candidate.

    The fund does simplify, but the cost of that simplicity is high.

    John, I was not aware of that particular fund, and appreciate hearing about it, as well as your kind words.

    Richard     Reply
  • commenter
    ikkyu
    Aug 08 10:29 PM
    Bond Ladders vs. Layering with Bond Funds [view article]
    Nice article, as always. I think there is a Ryan index laddered 1-30 treasury ETF, ticker PLW. This may simplify things considerably.

    cheers,
    john     Reply
  • commenter
    adan
    Aug 08 08:56 AM
    My Website
    Bond Ladders vs. Layering with Bond Funds [view article]
    great info; many people i've read say it's preferable to own the actual bonds than have shares in bond funds, esp re maturities and safety - thanks! Reply
  • commenter
    apeakay
    Aug 06 09:24 AM
    A 360 View of Returns (July 2008) [view article]
    Finally, a universal overview that gives the reader direction for areas to research for future investment. Great job! Reply
  • commenter
    granger
    Aug 06 04:05 AM
    A 360 View of Returns (July 2008) [view article]
    Thank you, very helpful. Reply
  • commenter
    phinsuntanni
    ng
    Aug 05 04:56 AM
    My Website
    A 360 View of Returns (July 2008) [view article]
    very good job Richard, it gives a sectoral - global view, I learned a lot with the summary! Challenging times Reply
  • commenter
    11worth
    Aug 02 10:20 PM
    Searching for the Best Bond ETF [view article]
    When writing a financial piece, make it a principle to avoid misspelling the word principal throughout the piece-- if you wish to be taken seriously. Reply
  • commenter
    adan
    Jul 31 05:33 PM
    My Website
    Searching for the Best Bond ETF [view article]
    excellent article and information, very educational and useful, thank you

    inflation, of course, is a more than valid concern re return – but assuming inflation will remain a problem forever is like assuming the stock market will rise or fall forever also

    in a deflationary environment, which I believe is more an issue than most people do I think, these type funds of these type interest paying treasuries have been and would be in demand

    the belief in perpetual inflation is useful for someone wanting or trying to create monetary dilution, keeping everyone focussed on spending and accepting inflation as normal

    at my age, and thus for all practical purposes, this may be true :-) however, I tend to believe that deflation alternates w/inflation in our current fiat environment (and may well have under the various gold standards, I’m not sure)

    thus, re the treasuries value, I think, like most everything else, they’ll vary over time

    and gold is great, literally; but I tend to prefer it for insurance at this point, over any increase in value; the insurance being storage of value

    and toilet paper (as per the commentator above), well, I try not to be out of it :-)

    info re international treasury etf's would be interesting, esp if they were for countries w/as close a risk base to that of the u.s. as could be found
    Reply
  • commenter
    mitsuo
    Jul 31 04:48 PM
    Searching for the Best Bond ETF [view article]
    It would also help the credibility of the article and the author if the tickers referred to the correct ETFs. Pretty shallow analysis with a lot of padding.

    Also, where are the international treasury & international treasury inflation-linked ETFs?     Reply
  • commenter
    bearfund
    Jul 31 11:47 AM
    Searching for the Best Bond ETF [view article]
    "Less clear of course is what specifically it will cost an investor to own a piece of this vast market and what that debt is worth in terms of some other asset (such as euro debt or gold)..."

    Or, say, the goods and services you typically buy - rent, food, fuel, electricity, water, clothing, etc. The bond market is obsessed with the "quality" of Treasuries - the certainty, as you point out, that there is no default risk. So what? If you hold an Argentine bond and the Kirchners default on it, how much bread can you buy with the total coupon + principal payments you received? If you hold a Treasury bond paying 4% while prices are rising 12%, how much bread can you buy with that? What if that 12% becomes 20%? That's all that matters: purchasing power. The certainty that you'll get your $1000 back 30 years from now is irrelevant. What will it be worth?

    The market has forced real interest rates on even very long-duration debt deeply into negative territory. It's hard to imagine being sufficiently bearish on the world economy that one would be willing to eat 7% a year in lost coupon purchasing power and the substantial risk of capital loss just to avoid finding something better to do with the money. Buying toilet paper would be a better choice; you'll always need it and it isn't getting cheaper.

    Long PST and TBT. Long gold. Other short Treasury positions.     Reply
  • commenter
    Zooey
    Jul 15 11:38 AM
    Bond Expert: Tuesday Outlook [view article]
    Good review. The markets are about adjust again, this time to lower yields, but soon that changes and we will lose money in bonds and stocks. That should be a bottom for a while until the fall plunge. Reply
  • commenter
    Josh Stern
    Jul 14 11:08 PM
    Bond Expert: Monday Wrap [view article]
    Beyond the sanctuary aspect, the dollar is doing better than expected vs. the Euro because Trichet is humming a happy tune while he drives Europe over the cliff.
     Reply

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