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I think Thoughtful Money is arguably the best financial podcast for retail investors currently on the net . The breadth of guest knowledge about the market,financial instruments and investing is truly comprehensive. Well done Adam, this channel just keeps getting better 👍
What misinformation! These guys have been giving horrible advice for a long time. Bears in the biggest bull market in history - what a disservice to investors.
@VetDingDong where do you get bear. What I get from these musings is intelegence. It is up to ME to make decisions. I am a grown a$$ man and beyond being spoon fed.
Most influential guest I have listened to on your program. Would love to hear deeper dives into the types of private credit and what is doing well and struggling.
I realize Steven Bavaria will be presenting at your conference but please have him on soon afterwards to discuss diversification within the CREDIT markets. He has mentioned that he is more invested in credit than equity markets. Please go in depth with opportunities in credit rather than retelling the premise of the income factory. What has his years of experience taught him about risks within credit. THANK YOU Adam for wealth of information you provide on Thoughtful Money!
What I’ve learned from Steve Bavaria is that he doesn’t recommend buying individual junk bonds but rather etfs that hold many, many such bonds, thus mitigating the credit risk. One I like for its diversification is SJNK.
Thank you Adam and Steve. As a result of your last interview with Steve I joined his Seeking Alpha grouping and am learning so much. Steve is wonderful with sharing his portfolios and responding to questions. I feel very lucky.
My math. 4% default rate, immediately lose 2% of capital and 4% of your income. Future income will be determined by whatever rate you get on 98% of capital. I’d also bet that the borrowers paying the highest interest rate would be first to go bankrupt…. never the less, I have been investing with Steve for about 3 months as an alternative to fixed income via bond portfolio. I got burned badly in 2022, now self-managing.
Reinvesting to stay ahead of the default rate adn then some to compensate for a future higher than average default event such as 10% might help. With stocks the dividend is 1-3% so you could take that as income and reinvest the other 6%. Also remmeber inflation. But yes more income higher risk so you need to know default risk to know how much to reinvest
I was hoping for some new content compared to your first interview with Stephen - no such luck. This was essentially a recap of the first interview. Next time please drill down on, say, half dozen specific tickers and why we should consider adding them to our portfolio.
So true, however those specific tickers and models come at a price...the Income Factory subscription service on Seeking Alpha. I believe it's about $280 a year.
Addem you're gold just for interviewing Steven. I always leaned towards this type of investing but I had many doubts because of all the noise. But then your previous interview with Steven made me read his book and it completely cemented my resolve to build an income factory. and yes Steven thank you very much, I cannot thank you enough for fighting the noise, writing about it and just keep shoving the evidence in people's noses. I myself probably wouldn't have been able to go trough that. So again thank you very much, you probably saved my retirement.
Very interesting. I would love to see data showing how the typical fund holding these kinds of assets performs in good and bad economic circumstances and demonstrating the 8-10% income performance. Some might say this is too good to be true? Why would the world of investment managers be so focused on equities.
This is an amazing channel and I tune in several times per week. As an income investor, I'm always the most excited when Steven Bavaria makes an appearance. This being the 3rd time Steven's been on, I feel like this time Adam really "caught on" and verbalized the soul, spirit, and long-term strategy of our way of investing. Many thanks to both Adam and Steven!
Very helpful in my situation; thank you! In Canada one might end up having a locked in pension account [LIRA]: can't pull more than half out at once until the age of 72, where I reside currently. Once one does take 50% out that one time - if age 72 is not what you wait for - the remaining 50% is forced into an annuity. The annuity is locked in with minimum mandatory withdrawals each year. That here is called a LIF: long term by definition if you're not near age 72, with required withdrawals out of about 2% to 6% per year. An investment income stream like discussed here makes vg sense ASSUMING one understands the volatility enough. 👍
What a great interview! I really had no idea. I am retired now & have been out of the market for quite some time now while happily gobbling up 5% interest. I have been waiting for a real opportunity to go back into the market, but this is something to look at that I never considered.
We are in the same spot. Made the mistake of getting out of the market 2 years ago (with all of the talk of recession) What a mistake. Cost me $300,000-$400,000! But, like you, have been getting 5%. So, now I'm still in cash and waiting for a dip. Of course, I'd love to see a 20% correction. Only a question of when and how much. But the money market will soon start dropping. I should never have tried to time the market.... big mistake!
An interesting advantage to Gold that Bond/Cash does not have is: It doesn’t get taxed yearly in value change. (Neither do Stocks though dividends do) So if one is buying Treasuries, at tax time you must put on your 1040 any interest for that year earned (unless it’s EE Savings/I-Bond). But Gold doesn’t, as there is no tax till sold. So it can compound tax free. And if you’re clever in retirement, you can avoid the Capital Gains tax in many cases as well! Of course if you’re well off - just pay, you can afford to.
Adam, if your other guests are right and credit spreads blow up soon, I have to assume high yield debt ETFs have to go on discount then, creating a great opportunity to buy? (Lower price / higher yield)
The stated return of CEFs is net of any fees. If a fund advertises 10%, that is what you get. CEFs are actively managed, vs many ETFs and Mutual Funds, and therefore charge management fees. I've never understand why this is an issue, if the net distribution still beats other income alternatives.
Great podcast! Steven's insights are eye opening. I don't believe your investment advisors at the end understand this space though. An example is investing in the credit vs equity of non-investment grade firms. A good question for them would be if they only invest in the equity of 'investment grade' firms? If not, then how does that match up with the 'high risk' they mentioned with HY bonds (which by the way are not the only credit mentioned, i.e. Sr Loans)?
Next time please ask about tax consequences of of various types of CEFs, and differences of purchasing and selling within IRAs, Roth’s, and regular brokerage accounts
It's hard to invest in corporate bonds because the funds who do it for you are too expensive and we are not all accountants to pick the right ones ourselves. I think it's in the best interest of Pimco and other firms to keep it that way.
I am looking at the suggestions in the Income Factory and many have expense ratios 3% to 5% which seems to cut the stated distributions by 1/3 to 1/2. Am I reading this wrong? One example CSQ dividend is 7.22% but the expense ratio is 4.09% leaving a net yield of 3.13%. Can anyone comment that these expense ratios seem very high?
Okay, I did a little research and I found that SEC yields are net (after) expense ratio. Or in other words they are already factored in. So if the yield is good or acceptable to the investor what does it matter what the expense ratio is? In other words if I am satisfied with a fund paying me 7% why should I care if the expense ratio is 4%?
Most commenters are ignoring the key fact that most companies on the stock market are 'non-investment grade', and oddly have no problem buying their stock but then think the debt is too risky to purchase. Literally all mid and small caps are non-investment grade 😂
One district advantage of the income factory approach might be for retired investors, say age 70-80, who might be considering buying an income annuity (SPIA). Building an income portfolio yielding 7-8% would generate approximately the same monthly income, but allowing the investor to retain control of their capital (in exchange for a bit more risk).
I’ve explored annuities several times and could always build a simple bond ladder that would do better, even considering the insurance factor. This is logical because the insurance company pays big commissions to sales ppl and makes a profit at customers’ expense.
@@blktauna hi, I’m not sure what you are referring to, but I don’t like annuities. For fixed income, I prefer to use ETFs and CEFs. I would also consider buying bonds directly -laddering duration to suit the purpose-but that requires more time and effort and is not as liquid in case you want to sell.
Look at the net asset value vs the market price. If the NAV is lower than the market price, the fund is selling at a discount, if higher than it is selling at a premium
Putting well-earned money into the stock market can't be over emphasised for first-time investors, unlike a bank where interest is sure thing! Well, basically times are uncertain, the market is out of control, and banks are gradually failing. I am working on a ballpark estimate of $2M for retirement, and I have a good 6-figure loaded up for this, could there be any opportunity for a boomer like me??
Personally, I would say have a mentor. Not sure where you will get an experienced one, but if your knowledge of the market is limited, it seems like a good bet.
I haven't heard any differentiation between private equity debt and public stocks. FWIW there have been several analysts warning investors on the private equity side.
It’s Bloomberg, OF COURSE they will say this…that’s exactly what CLOWNS actually say:)) Love the guests valuable info…it got me thinking outside the box.
In general if yields up and stays up the price of asset has to go down or will go down as big as everything else when all assets crash and yield percentage will stay same but will have less cash flowing …It’s simple mathematics
Buying a bond fund ( open, closed , etf, whatever) is nothing but a bet on the direction of intetest rates. If rates rise the bonds get marked to market and the fund price goes down. Buying individual bonds allows holding to maturity but that was not recommended. Sounds like bad advice to me.
Not exactly. You're also getting the average interest return from the assets in the bond instrument. Interest rates can and should move over time, but you'll get a credit spread relative to the risk of your bond instrument.
A concern - many of the BDC/Funds that Steven describes do pay a significant dividend (8-10+% returns). However, look at the principal value of these firms/funds. They degrade over time (capital losses offsetting high dividend distributions). When you look at the financials, one reason might be - they are raising capital in an ongoing basis by selling treasury shares into the market. Many of these look like a perpetual pyramid scheme. As you move down the return spectrum you find corporate bond etf/funds that do not operate this way, and they are consistently in the 5-6% range, not the 8-10%+ range. It looks like the higher return is generated by significantly higher risk and chicanery. This does not seem like a better trade off on the risk return scale.
Sir, I believe you've got this completely backwards. Your bear case has continued to be wrong for over a year. The Fed/Treasury can lose by fire or ice (inflation or UST dysfunction/depression). Evidence shows they have repeatedly chosen the former. They are not going to allow UST market dysfunction, which means they will prop up Japan, US banks, etc. Sure Powell seems like he would like to manage for inflation, but reality is he is managing for UST mkt function. Yellen has been fighting him for a year at least. Additionally, high rates have proved to be inflationary vis a vis Boomers receiving interest payments. We are on the precipice of a continued run. Kamala and Trump are going to spend. How do you expect this to pop the bubble exactly? Confer the work of Luke Gromen, Lyn Alden, James Lavish, Jeff Booth, Jeff Ross, Larry Lepard, Preston Pysh, Jeff Booth, etc.
The question is what if they don’t? And what if Brice begins to put the squeeze on us. We have nothing but land to back our debt. Only war comes if we keep printing
Fears of overvaluation are exactly the wall of worry that keeps pushing equities up. Equities are not going to make that big top that permabears are always looking for/fearing except in the form of an actual blow-off top where everyone and their dog is in. Major bull cycles do not rollover with so much negative sentiment i.e. when so many are worried about it and preparing for it.
Adam I can’t thank you enough having Steven and New Harbor to talk about his strategy. I wish New Harbor would offer a strategy like this to manage the investment and do the research and properly invest.
I do think that junk bonds and senior loans can be an important part of a diversified portfolio. However, junk bonds in particular will do horrible when interest rates are rising and when the economy is going into recession and credit spreads blow out. "Thinking about" junk bonds differently does not make them different. They still go up and down just like stocks. The junk bond fund JNK pays 6.5%, which means you are taking on significant risk for a return that is not very far above inflation. If you are interested in junk bonds, consider a CLOSED END fund. Closed end funds often trade at a discount to net asset value, and they can use some leverage to boost yield (and risk). Some closed end funds I like right now are EAD, MMT, and PHT. Just remember, these funds will go down significantly during a recession as credit spreads rise.
As you don't know what companies have under their balance sheets, and therefore don't know who will survive after the tide goes out, his investment policy seems like an unnecessary reckless gamble.
Yes! When the economy tanks these companies will not pay off their debt, they will bankrupt. If he can invest as a senior loan investment then he gets paid first if the company goes down, but he will still lose something. Credit investment is great during good times, but not now.
@Marcus1954s The same is true for investing in equities... worse even as equity investors will get zero if the company goes bust while credit holders will recover something. So what you're saying in reality is only invest in solid, established large caps and always avoid smallcaps. This would be a very conservative model.
It would be nice if these strategies were compared with straight equity investing. These strategies are not appropriate for younger people, nor do they make sense when you have high income. These videos prey on people that don’t know any better and it’s gross.
Income model defiantly as good or better an a capital gains model especially in a tax deferred model like IRA or 401k which eliminates the tax advantages of the 15% cap gains rate vs normal income rate. In short better for little guy coming up who has 30-40 years in tax deferred account vs day trader who takes profit all along and wants the lowest current tax rates. 😮😮😮
Do you invest in smallcaps or the Russell 2000? Most people do, even if only through an Etf. These are the companies with 'junk' status. If you don't trust their credit status, why invest in the company?
I'll say until I'm blue in the face. Michael Preston should be a monthly guest on this show. Not come after your guest but be the main guest. Once a month please!
High Yield Bonds is only a portion of the Debt Market Steve is talking about. Senior Loans, BDCs and CLOs as serveral other types of debt like MLPs plus more. One thing you don't him suggesting is cyrpto-currency... LOL
@@backliteyes Exactly. You essentially just woke up and said it yourself. That is the illusion. Buying treasuries is buying into the fictional belief that you have an asset. In reality, you are giving up your rights to all assets. They are taking your time and energy and giving you gaming tokens that they slowly reduce the value of everyday, making you spend more and more time and energy to play the game. Bitcoin is the only way out. Vote with your pockets. Otherwise go ahead and have fun the casino where all odds are against you, the rules can change at any moment and you’ll almost always lose more than you can win through illegal and corrupt design.
@@SomeUserNameBlahBlah That’s kind of my point. Debts still count as assets - that doesn’t mean that the value of assets can’t decline. Including Treasuries, equities, gold, or anything else. If we have a real crisis the veggie garden “asset” in the backyard will be worth more than most things. As will the tools in your garage.
This logic implies that idle cash balances are safest of the safe, especially with continuing deflationary high cost of borrowing and variable rate loans outstanding. As firms default and do under, under is where holders of cash balances can buy assets, good assets for the future, but tanked now due to Powell's constraints on purchasing power and debt-paying power in the real domestic economy loop of consumers, producers
Rich people own stocks." Exactly right... Cashflow and dividends is the blood of survival and a business... Speaking about business, It's practically a must for every person to start a business. Weather it's a lnvestment, A actual store, or anything that produces cashflow. Very important...my net worth has increased by $500k in the last 1 years. I appreciate the woman you recommend me to.......
Sounds too risky. How is this less risky than investing in the S&P exactly? In a recession or downturn ALL companies suffer including his "credit" companies who may struggle to pay you the 8% coupon he is touting. No need to ovethink this. We have a very strong inflation current underpinned by a HUGE amount of liquidity spurred by money printing, pointing only to the devaluation of your purchasing power as expressed by the US Dollar. This means only one thing like Luke Gromen has been preaching for a while: all asset prices go up because they are inversely correlated to the purchasing power of the US Dollar. Stay invested in the market and forget this nonsense he is peddling.
The comparison of investing in mid cap equity vs debt is meaningless. Nobody invests in a mid cap company to get a 8-9% return, moreover the upside in these companies is unlimited compared to the debt. So a completely different P/L and risk profile. This guy is either clueless or a liar. In either case you want nothing to do with him even if there are great opportunities in high yield debt.
The people who invested in bonds 15 years back is miserably affected by inflation. Now if we follow his instruction we will be very poor because of inflation. SO just dump his ideas
How many hours do I have to listen before this guy tells us where in his fantasy land he’s getting 8,9,10%? Does he mean junk bonds? They’re sub 8 and default rate approaching 4.
WANT HELP CREATING YOUR OWN INCOME FACTORY? Schedule your free consultation with Thoughtful Money's endorsed financial advisors at www.thoughtfulmoney.com
I think Thoughtful Money is arguably the best financial podcast for retail investors currently on the net . The breadth of guest knowledge about the market,financial instruments and investing is truly comprehensive. Well done Adam, this channel just keeps getting better 👍
What misinformation! These guys have been giving horrible advice for a long time. Bears in the biggest bull market in history - what a disservice to investors.
@VetDingDong where do you get bear. What I get from these musings is intelegence. It is up to ME to make decisions. I am a grown a$$ man and beyond being spoon fed.
Steven rocks. I bought his book the last time he was on here. Super helpful + I appreciate his thinking and process
Most influential guest I have listened to on your program. Would love to hear deeper dives into the types of private credit and what is doing well and struggling.
Adam you have some great questions for your top tier guest , Bravo. 💯
I realize Steven Bavaria will be presenting at your conference but please have him on soon afterwards to discuss diversification within the CREDIT markets. He has mentioned that he is more invested in credit than equity markets. Please go in depth with opportunities in credit rather than retelling the premise of the income factory. What has his years of experience taught him about risks within credit. THANK YOU Adam for wealth of information you provide on Thoughtful Money!
What I’ve learned from Steve Bavaria is that he doesn’t recommend buying individual junk bonds but rather etfs that hold many, many such bonds, thus mitigating the credit risk. One I like for its diversification is SJNK.
Dividend isn't much, 7.4%. Given the turmoil ahead it may be better to buy Treasury bills.
SJNK - the 10 year return is just over 4% when you include the degradation in principal.
Thanks for the tip on the SJNK! Worth watching. Buying it, well, maybe at some point.
SJNK is not on Stevens recommendation list. I have been in his seeking alpha group for 2 years now and he has about 40 that he recommends.
@@jonathanleigh4036 Alright I'll look at options also (no pun intended)
Thank you Adam and Steve. As a result of your last interview with Steve I joined his Seeking Alpha grouping and am learning so much. Steve is wonderful with sharing his portfolios and responding to questions. I feel very lucky.
This helps me fast from news and social media. Income factory doesn't depend so much on headlines. So my mental health is much better this way.
Brilliant discussion, thanks or having Steven back!
My math. 4% default rate, immediately lose 2% of capital and 4% of your income. Future income will be determined by whatever rate you get on 98% of capital. I’d also bet that the borrowers paying the highest interest rate would be first to go bankrupt…. never the less, I have been investing with Steve for about 3 months as an alternative to fixed income via bond portfolio. I got burned badly in 2022, now self-managing.
Hello what etf was it?
Reinvesting to stay ahead of the default rate adn then some to compensate for a future higher than average default event such as 10% might help. With stocks the dividend is 1-3% so you could take that as income and reinvest the other 6%. Also remmeber inflation. But yes more income higher risk so you need to know default risk to know how much to reinvest
I was hoping for some new content compared to your first interview with Stephen - no such luck. This was essentially a recap of the first interview. Next time please drill down on, say, half dozen specific tickers and why we should consider adding them to our portfolio.
So true, however those specific tickers and models come at a price...the Income Factory subscription service on Seeking Alpha. I believe it's about $280 a year.
Excellent interview. Thanks Adam & Steven
I love the portfolio vs factory analogy.
Addem you're gold just for interviewing Steven. I always leaned towards this type of investing but I had many doubts because of all the noise. But then your previous interview with Steven made me read his book and it completely cemented my resolve to build an income factory. and yes Steven thank you very much, I cannot thank you enough for fighting the noise, writing about it and just keep shoving the evidence in people's noses. I myself probably wouldn't have been able to go trough that. So again thank you very much, you probably saved my retirement.
Part of an Income Factory is investing in Covered Call funds too.
Very interesting. I would love to see data showing how the typical fund holding these kinds of assets performs in good and bad economic circumstances and demonstrating the 8-10% income performance. Some might say this is too good to be true? Why would the world of investment managers be so focused on equities.
He changed my investing life thx for all he does.I listen to his book 3 times a year to refresh.Happy investing/stacking.
Good point... you must do what the masses are NOT doing in order to (possibly) outperform them: buy individual corporate bonds and hold to maturity
This is an amazing channel and I tune in several times per week. As an income investor, I'm always the most excited when Steven Bavaria makes an appearance. This being the 3rd time Steven's been on, I feel like this time Adam really "caught on" and verbalized the soul, spirit, and long-term strategy of our way of investing. Many thanks to both Adam and Steven!
Always good to hear from Steve. Practical action versus economic theory.
Very helpful in my situation; thank you! In Canada one might end up having a locked in pension account [LIRA]: can't pull more than half out at once until the age of 72, where I reside currently. Once one does take 50% out that one time - if age 72 is not what you wait for - the remaining 50% is forced into an annuity. The annuity is locked in with minimum mandatory withdrawals each year. That here is called a LIF: long term by definition if you're not near age 72, with required withdrawals out of about 2% to 6% per year. An investment income stream like discussed here makes vg sense ASSUMING one understands the volatility enough. 👍
What a great interview! I really had no idea. I am retired now & have been out of the market for quite some time now while happily gobbling up 5% interest. I have been waiting for a real opportunity to go back into the market, but this is something to look at that I never considered.
We are in the same spot. Made the mistake of getting out of the market 2 years ago (with all of the talk of recession) What a mistake. Cost me $300,000-$400,000! But, like you, have been getting 5%. So, now I'm still in cash and waiting for a dip. Of course, I'd love to see a 20% correction. Only a question of when and how much. But the money market will soon start dropping. I should never have tried to time the market.... big mistake!
An interesting advantage to Gold that Bond/Cash does not have is:
It doesn’t get taxed yearly in value change. (Neither do Stocks though dividends do)
So if one is buying Treasuries, at tax time you must put on your 1040 any interest for that year earned (unless it’s EE Savings/I-Bond). But Gold doesn’t, as there is no tax till sold. So it can compound tax free.
And if you’re clever in retirement, you can avoid the Capital Gains tax in many cases as well!
Of course if you’re well off - just pay, you can afford to.
Steven's philosophy and approach is excellent. Thank you.
Does Steven have his own fund? Great discussion!
Need more detail on the funds and number required for diversity.
Can anyone post the the first interview video with Steven Bavaria?
ua-cam.com/video/roua_2qTJek/v-deo.htmlsi=B8ypbqTBTWpN0Tvf
@@adam.taggart thank you Adam for taking the time for doing this!
How do you spot a dividend trap? Negative return?
Thank you very much...
"It does not matter how slowly you go so long as you do not stop" - Confucius 😊
😂 The corollary to this rule is "When you're walking through hell, walk fast."
“He who farts in church
Sits in own pew”
-Socrates
Yeah, and then we have high yield products again and sell it to pensioners. Great idea.
Adam, if your other guests are right and credit spreads blow up soon, I have to assume high yield debt ETFs have to go on discount then, creating a great opportunity to buy? (Lower price / higher yield)
Fundamentally this about total return and volatility. Few will hold that exceptional stock for decades even if they find it.
Thing to be watched with closed-in funds are fees. Some are pretty stiff.
Are you in for over 5 figures in one? IF not its still fairly nominal
The stated return of CEFs is net of any fees. If a fund advertises 10%, that is what you get. CEFs are actively managed, vs many ETFs and Mutual Funds, and therefore charge management fees. I've never understand why this is an issue, if the net distribution still beats other income alternatives.
Interesting would enjoy future discussions on this subject
Great podcast! Steven's insights are eye opening. I don't believe your investment advisors at the end understand this space though. An example is investing in the credit vs equity of non-investment grade firms. A good question for them would be if they only invest in the equity of 'investment grade' firms? If not, then how does that match up with the 'high risk' they mentioned with HY bonds (which by the way are not the only credit mentioned, i.e. Sr Loans)?
Long term inflation expectations rising in the setting of government deficit spending creates a REAL problem for nominally priced bonds.
Next time please ask about tax consequences of of various types of CEFs, and differences of purchasing and selling within IRAs, Roth’s, and regular brokerage accounts
His book explains this
Thanks Adam
It's hard to invest in corporate bonds because the funds who do it for you are too expensive and we are not all accountants to pick the right ones ourselves. I think it's in the best interest of Pimco and other firms to keep it that way.
Just buy Pimco funds and get a cut 😅
Wa
@@rosspiano88 yes, wa
Liked all of the specific examples and underlying specifics. LOL
I can’t believe you don’t have a million subscribers
Working on it
Adam will you be recording the fall conference? So if we purchase the tix can we go back & listen? Where is the line up of speakers?
Yes, everyone who registers will receive a replay of the entire event. You can find the full roster of speakers at thoughtfulmoney.com/conference
I am looking at the suggestions in the Income Factory and many have expense ratios 3% to 5% which seems to cut the stated distributions by 1/3 to 1/2. Am I reading this wrong? One example CSQ dividend is 7.22% but the expense ratio is 4.09% leaving a net yield of 3.13%. Can anyone comment that these expense ratios seem very high?
Okay, I did a little research and I found that SEC yields are net (after) expense ratio. Or in other words they are already factored in. So if the yield is good or acceptable to the investor what does it matter what the expense ratio is? In other words if I am satisfied with a fund paying me 7% why should I care if the expense ratio is 4%?
@@arniet5257 you shouldn't. I learned this from Armchair Income. A lot of the high expense ratios are simply due to accounting rules.
What about Senior Loan funds which many are 'Floating Rate' what happens as the FED cuts rates?
Most commenters are ignoring the key fact that most companies on the stock market are 'non-investment grade', and oddly have no problem buying their stock but then think the debt is too risky to purchase. Literally all mid and small caps are non-investment grade 😂
What are good investment grade companies?
Closed end bond funds and MLP's are most interesting. Great guest with a perspective we all should learn about true risk.
One district advantage of the income factory approach might be for retired investors, say age 70-80, who might be considering buying an income annuity (SPIA). Building an income portfolio yielding 7-8% would generate approximately the same monthly income, but allowing the investor to retain control of their capital (in exchange for a bit more risk).
I’ve explored annuities several times and could always build a simple bond ladder that would do better, even considering the insurance factor. This is logical because the insurance company pays big commissions to sales ppl and makes a profit at customers’ expense.
exactly this
An annuity will NOT generate 7-8% yield, maybe 4% at the most.
@@twarnekewhere are you getting that on bonds or annuities?
@@blktauna hi, I’m not sure what you are referring to, but I don’t like annuities. For fixed income, I prefer to use ETFs and CEFs. I would also consider buying bonds directly -laddering duration to suit the purpose-but that requires more time and effort and is not as liquid in case you want to sell.
What is the easier way to tell if the assets are greater/less than the fund price?
Look at the net asset value vs the market price. If the NAV is lower than the market price, the fund is selling at a discount, if higher than it is selling at a premium
Putting well-earned money into the stock market can't be over emphasised for first-time investors, unlike a bank where interest is sure thing! Well, basically times are uncertain, the market is out of control, and banks are gradually failing. I am working on a ballpark estimate of $2M for retirement, and I have a good 6-figure loaded up for this, could there be any opportunity for a boomer like me??
Personally, I would say have a mentor. Not sure where you will get an experienced one, but if your knowledge of the market is limited, it seems like a good bet.
I haven't heard any differentiation between private equity debt and public stocks. FWIW there have been several analysts warning investors on the private equity side.
What about real estate note ?
It’s Bloomberg, OF COURSE they will say this…that’s exactly what CLOWNS actually say:))
Love the guests valuable info…it got me thinking outside the box.
In general if yields up and stays up the price of asset has to go down or will go down as big as everything else when all assets crash and yield percentage will stay same but will have less cash flowing …It’s simple mathematics
Buying a bond fund ( open, closed , etf, whatever) is nothing but a bet on the direction of intetest rates. If rates rise the bonds get marked to market and the fund price goes down. Buying individual bonds allows holding to maturity but that was not recommended. Sounds like bad advice to me.
Not exactly. You're also getting the average interest return from the assets in the bond instrument. Interest rates can and should move over time, but you'll get a credit spread relative to the risk of your bond instrument.
A concern - many of the BDC/Funds that Steven describes do pay a significant dividend (8-10+% returns). However, look at the principal value of these firms/funds. They degrade over time (capital losses offsetting high dividend distributions). When you look at the financials, one reason might be - they are raising capital in an ongoing basis by selling treasury shares into the market. Many of these look like a perpetual pyramid scheme.
As you move down the return spectrum you find corporate bond etf/funds that do not operate this way, and they are consistently in the 5-6% range, not the 8-10%+ range.
It looks like the higher return is generated by significantly higher risk and chicanery. This does not seem like a better trade off on the risk return scale.
i suggest you listen more closely
Sir, I believe you've got this completely backwards. Your bear case has continued to be wrong for over a year. The Fed/Treasury can lose by fire or ice (inflation or UST dysfunction/depression). Evidence shows they have repeatedly chosen the former. They are not going to allow UST market dysfunction, which means they will prop up Japan, US banks, etc. Sure Powell seems like he would like to manage for inflation, but reality is he is managing for UST mkt function. Yellen has been fighting him for a year at least. Additionally, high rates have proved to be inflationary vis a vis Boomers receiving interest payments. We are on the precipice of a continued run. Kamala and Trump are going to spend. How do you expect this to pop the bubble exactly? Confer the work of Luke Gromen, Lyn Alden, James Lavish, Jeff Booth, Jeff Ross, Larry Lepard, Preston Pysh, Jeff Booth, etc.
The question is what if they don’t? And what if Brice begins to put the squeeze on us. We have nothing but land to back our debt. Only war comes if we keep printing
BRICS
Jeff Ross the celebrity roast guy?
Fears of overvaluation are exactly the wall of worry that keeps pushing equities up. Equities are not going to make that big top that permabears are always looking for/fearing except in the form of an actual blow-off top where everyone and their dog is in. Major bull cycles do not rollover with so much negative sentiment i.e. when so many are worried about it and preparing for it.
This has been bagholder channel since the one before it.
Do opposite and profit. Tom Lee was the only good guest.
What advisor would follow Income Factory approach?
It’s easy enough to do it yourself! Steven outlines how to build a portfolio in his book and includes CEFs to use.
One that is not looking to line his own pockets first?
Adam I can’t thank you enough having Steven and New Harbor to talk about his strategy. I wish New Harbor would offer a strategy like this to manage the investment and do the research and properly invest.
I do think that junk bonds and senior loans can be an important part of a diversified portfolio. However, junk bonds in particular will do horrible when interest rates are rising and when the economy is going into recession and credit spreads blow out. "Thinking about" junk bonds differently does not make them different. They still go up and down just like stocks. The junk bond fund JNK pays 6.5%, which means you are taking on significant risk for a return that is not very far above inflation.
If you are interested in junk bonds, consider a CLOSED END fund. Closed end funds often trade at a discount to net asset value, and they can use some leverage to boost yield (and risk). Some closed end funds I like right now are EAD, MMT, and PHT. Just remember, these funds will go down significantly during a recession as credit spreads rise.
Did you not listen to what was said?
As you don't know what companies have under their balance sheets, and therefore don't know who will survive after the tide goes out, his investment policy seems like an unnecessary reckless gamble.
Yes! When the economy tanks these companies will not pay off their debt, they will bankrupt. If he can invest as a senior loan investment then he gets paid first if the company goes down, but he will still lose something. Credit investment is great during good times, but not now.
He mentioned extreme examples when there were 10% bankruptcies in 2008 and how unlike equities the bonds are first in line and generally recover 60%.
The last ones to get anything when the "tide goes out" is literally equity holders
@Marcus1954s The same is true for investing in equities... worse even as equity investors will get zero if the company goes bust while credit holders will recover something.
So what you're saying in reality is only invest in solid, established large caps and always avoid smallcaps. This would be a very conservative model.
It would be nice if these strategies were compared with straight equity investing. These strategies are not appropriate for younger people, nor do they make sense when you have high income. These videos prey on people that don’t know any better and it’s gross.
The boring truth. Thank you Tortoise.
Tell me about men's warehouse!!! Investment grade. Pandemic happened and i went bust......
It must be said that the funds he invests in will definitely take a hit in a bear market.
Thank you for this quest
Works great with a pension and Roth
If they are willing to manipulate the Data, what else are they doing?.
Audio mixing was subpar this interview - his audio was way too loud
They wont know a bottom if it hit them upside the head. They will stay short and out forever.
Consider ECC.
Interesting
Select an allocation and stick to it! Anything else is market timing.
Unless the gold is in my hands, its not something I will hold.
If it is government debt, you get nothing in bankruptcy
Actors Studio does investing
Is this interviewee talking about owning corporate bonds? Why doesn't he just come out and call it that instead of calling it credit investing?
its not solely corp bonds
when its not working? when inflation is higher than 10%
Need to add 9% gold and 1% bitcoin to take out the 'existential risk' aka the USD/ gov't are gone. Then you're much better protected from all risks.
Income model defiantly as good or better an a capital gains model especially in a tax deferred model like IRA or 401k which eliminates the tax advantages of the 15% cap gains rate vs normal income rate. In short better for little guy coming up who has 30-40 years in tax deferred account vs day trader who takes profit all along and wants the lowest current tax rates. 😮😮😮
1st, 22 August 2024
Invest in junk bonds just before the economy enters a recession. LOL. No thanks.
Bankruptcies are definitely on the rise.
Do you invest in smallcaps or the Russell 2000? Most people do, even if only through an Etf. These are the companies with 'junk' status. If you don't trust their credit status, why invest in the company?
@@robertharrelson5024 yet so many analysts and youtubers are saying smallcaps will take off and rise faster than large caps in the market. 🤷🏻♂️
Maybe you’re not paying close enough attention
Almost all income ETFs have NAV erosion over time unfortunately which eventually reduce dividends income unless you reinvest dividends.
I think your premise is not wholly correct
What happens to your bonds when the feds take out their money bazooka again?
I'll say until I'm blue in the face. Michael Preston should be a monthly guest on this show. Not come after your guest but be the main guest. Once a month please!
Hope Adam you didn’t send those pizzas from ya bet!
FYI Folks. No tickers unless you pay. Last interview we got UTG and BIZD.
47 minutes in and this guy has not given one specific tip.
High Yield Bonds is only a portion of the Debt Market Steve is talking about. Senior Loans, BDCs and CLOs as serveral other types of debt like MLPs plus more. One thing you don't him suggesting is cyrpto-currency... LOL
Lets get the dude on with the thesis that the bundesbank will run out of money from last year. That was an interview worth while
DO NOT BUY DEBT. I repeat. Do not buy debt. Investing is hard enough. Debt is not an asset.
So, don’t buy Treasuries? The entire banking system will be upset to discover that none of their loans or Treasury holdings count as assets.
@@backliteyes If the Treasury goes bankrupt we all have much bigger problems than money.
@@backliteyes Exactly. You essentially just woke up and said it yourself. That is the illusion. Buying treasuries is buying into the fictional belief that you have an asset. In reality, you are giving up your rights to all assets. They are taking your time and energy and giving you gaming tokens that they slowly reduce the value of everyday, making you spend more and more time and energy to play the game.
Bitcoin is the only way out. Vote with your pockets. Otherwise go ahead and have fun the casino where all odds are against you, the rules can change at any moment and you’ll almost always lose more than you can win through illegal and corrupt design.
Sovereign debt crisis anyone? 🎉
@@SomeUserNameBlahBlah That’s kind of my point. Debts still count as assets - that doesn’t mean that the value of assets can’t decline. Including Treasuries, equities, gold, or anything else. If we have a real crisis the veggie garden “asset” in the backyard will be worth more than most things. As will the tools in your garage.
??? WTF ???
This logic implies that idle cash balances are safest of the safe, especially with continuing deflationary high cost of borrowing and variable rate loans outstanding. As firms default and do under, under is where holders of cash balances can buy assets, good assets for the future, but tanked now due to Powell's constraints on purchasing power and debt-paying power in the real domestic economy loop of consumers, producers
I don’t trust anybody, gov, or company to repay a loan in this environment.
Rich people own stocks." Exactly right... Cashflow and dividends is the blood of survival and a business... Speaking about business, It's practically a must for every person to start a business. Weather it's a lnvestment, A actual store, or anything that produces cashflow. Very important...my net worth has increased by $500k in the last 1 years. I appreciate the woman you recommend me to.......
So true. l Started lnvestment business over a years ago with just a few thousand.
Sounds too risky. How is this less risky than investing in the S&P exactly? In a recession or downturn ALL companies suffer including his "credit" companies who may struggle to pay you
the 8% coupon he is touting. No need to ovethink this. We have a very strong inflation current underpinned by a HUGE amount of liquidity spurred by money printing, pointing only to the devaluation of your purchasing power as expressed by the US Dollar. This means only one thing like Luke Gromen has been preaching for a while: all asset prices go up because they are inversely correlated to the purchasing power of the US Dollar. Stay invested in the market and forget this nonsense he is peddling.
you did not pay attention
The comparison of investing in mid cap equity vs debt is meaningless. Nobody invests in a mid cap company to get a 8-9% return, moreover the upside in these companies is unlimited compared to the debt. So a completely different P/L and risk profile. This guy is either clueless or a liar. In either case you want nothing to do with him even if there are great opportunities in high yield debt.
The people who invested in bonds 15 years back is miserably affected by inflation. Now if we follow his instruction we will be very poor because of inflation. SO just dump his ideas
this is not 3% bonds friend... Are you a threatened day trader?
How many hours do I have to listen before this guy tells us where in his fantasy land he’s getting 8,9,10%? Does he mean junk bonds? They’re sub 8 and default rate approaching 4.
I use his menthod and am on 9%. Ready his book, it goes into deep specifics.
I'm at 7-8%. And those instruments appreciate too make up the difference.
No discussion of inflation and it's impact :-/