What about Bonds or ……??? in
2017?

Jim Quinn (Student Investor)
 February 4, 2017
DISCLAIMER

The content of this discussion is provided
as general information only and should
not be taken as investment advice. All
discussion content shall not be construed
as a recommendation to buy or sell any
security or financial product, or to
participate in any particular trading or
investment strategy.
DISCLAIMER (CONT)

The ideas expressed in this discussion are
solely the opinions of the author(s). The
author(s) may or may not have a position
in any security referenced herein. Any
action that you take as a result of
information or analysis provided in this
discussion is ultimately your responsibility.
Consult your investment adviser before
making any investment decisions.
My Philosophy

Preserve Capital
 Earn Best risk-adjusted Return
 Not a day trader, I am looking for weekly
systems or longer
 I look for systems which meet these requirements
 Focus on ETFs and Mutual Funds rather than
stocks to reduce risk; Mostly ETFs
 I am now focusing more on SIMPLE systems
while ALWAYS watching the Market
My Philosophy (Cont)

I Look for trends
 Visuals (ie charts) are Very Important
 I am not necessarily a Buy & Hold investor, but
would like to be; and Am Getting Closer to being
one
 Am ALWAYS interested in New & Innovative
Approaches to Investing

Questions/Comments: [email protected]
Answering Some Questions from
2016 (with Paraprasing)
What about the Bond “Rout” in 2016?
 “How do I handle Reversion to the Mean??
 What do I Do? My bonds have Lost a Lot of Money.
 NOTE: We will be covering a LOT of info today.
This talk will be on Don’s site for reference.
 I want to take you thru my thought process which
hopefully can be beneficial to you too

#1 - What about Bonds????

Also per NYT 2016 Y/E Issue, Corp. Bonds earned
5.9% in 2016; Not a “Carnage” there
 Some areas got hit; others did WELL!
 The L/T Treasuries did get hit
 So what should we do
 OR….. Should we really be looking at LOW
VOLATILITY INCOME INVESTMENTS
 What are Bond-Like Replacements
 BUT…. Bonds First
2016 Bond Results from WSJ

17%
5.8%
4.3%
1.4%
0.8%
0.2%

If you B & H almost no change
High Yield
 Corp Investment Grade
 TIPs
 Mortgage Backed
 Treasury Bonds
 Munis
What does My ”Bond Expert” (RY)
Thinks & Does
RY Disclaimer
RY Bond Results vs SPY
Richard Young Bond Thoughts
Bond Thoughts From THE
EXPERTS
Allan Roth
RBG Bond Thoughts
Latest RBG Bond Thoughts
Gundlach Bond Thoughts

“Trump Agenda Unfriendly to Bonds…”
Gundlach Bond Thoughts
Bond Thoughts
Bond Thoughts


http://durableportfolios.com/Rethink-FixedIncome?gclid=CJT69o7rotECFZa6wAodRK0ACg
From Durable Portfolio Construction
 Three Bond options for a rising interest rate
environment
Seeking Alpha 1/9/17 Cliff Smith

URL is http://seekingalpha.com/article/4035035lessons-learned-2016-tactical-strategies?ifp=0

an RY FAVORITE; uses Portfolio Visualizer
monthly selection system (FREE)
Seeking Alpha 1/9/17 Cliff Smith
Seeking Alpha 1/9/17 Cliff Smith
Cullen Roche Bond Thoughts

http://www.pragcap.com/repeat-after-me-bondsdont-necessarily-lose-value-when-rates-rise/

http://www.pragcap.com/what-is-the-worst-casescenario-for-bonds/

http://www.pragcap.com/not-your-fathers-6040/
Cullen Roche Bond Thoughts
Cullen Roche Bond Thoughts
Cullen Roche Bond Thoughts
#1a - Kiplinger 2017 Income
Ratings

POSITIVE: Bank Loan Funds, Blue Chips. BDCs
(Business Development Cos.), MLPs, Mortgage
REITs, Munis, Property REITs

NEUTRAL: Cash & CDs, Investment Grade
Corporates, Junk Bonds (High Prices), Treasuries,
Utilities (High Prices)

NEGATIVE: Emerging Market Bonds (strong $)
#1 - NET - NET Bond Thoughts

Bonds or Bond - Alternatives should be a part of
your portfolio to provide a cushion and also a lower
risk alternative to your Market Investments if you
have sufficient Investable $
 We have been in a 30 year Bond “Bull” so might be
in for changes
 Stay tuned!!! As to what OPINIONs are
#2 - Looking for Bond Alternatives

Used FasTrack
 Looked for Reasonable Returns with Reasonable
DrawDowns
 Started with CAGR & Max DD
 Added Ulcer Index (UI)
 Started to look for representative Groups in F/T
An Example sorted on Col 4; 7 yrs
Continued
A group of 212 funds which are “Cautious”
 Measured over last 5 years
 Col 4 = CAGR
 Col 8 = Max DD
 Returns are decent & Drawdowns are good too
 Note ones where CAGR > Max DD!!

An Example sorted on Col 4; 7 yrs
Continued
A group of 461 funds which are “Moderate”
 Measured over last 5 years
 Col 4 = CAGR
 Col 8 = Max DD
 Drawdowns are much higher

Moderate over last 10 years
What Income did WELL in 2016
What Income ETFs did WELL in
2016
#2a - One MEASURE of Investing
Value We Use

When we look for Advisors we ask?
 What has been your CAGR?
 What was your Max DrawDown?
 We apply this to Advisors;….. But why not to Funds
/ ETFs / Stocks also
 A REALLY AHAH!! Moment
 Now became MUCH more Focused
A “Typical” F/T SpreadSheet
Analysis & Explanation

Important Columns are:
 Col 2 - TickerSymbol
 Col 4 - Ann(ual) Return = CAGR
 Col 8 - MAX DD %
 Col 10 - Total Return over investing Period
 Lower Righthand Corner- Investing Period
 UI & UPI – Ulcer Index & Ulcer Performance Index
Best VG Low Vol 1/24/17; Sorted
on Col 4 Last 10 years
My Search Becomes More Focused
Best Cautious 1/25/17 by Max DD
Best VG Low Vol 1/24/17
Best PIMCO Low Vol 1/24/17
Best Fixed Income Low Vol 1/24/17

From All Income
 10 Yr Return > 5.7%
 Max DD < 15%
Best Fixed Income Low Vol 1/24/17
Best Fixed Income Low Vol 1/24/17
(Cont)
How About Stocks (and ETFs)???
Best High Volume Stocks 1/24/17;
Sorted on Col 4; higher MAX DD
Best L/C Blend Stocks 1/24/17 10
yrs sorted by MAX DD; Better But…
Best L/C Blend Stocks1/24/17; Last
5 yrs thus “more Normal Market”
Best L/C Blend Funds1/24/17 5 yrs
Best ETFs by MDD 1/24/17 5 yrs;
Good CAGR to MAX DD ratio
Best ETFs by CAGR 1/24/17 5 yrs
Basic ETFs Last 5 Yrs by MAX DD
Continued
Basic ETFs Last 10 Yrs
YTD (Col 15) CAGRs & MAX DDs
Sorted on MAX DD (Col 8)
Basic ETFs over last 13 months;
includes1/16 DD; by CAGR (col 4)
CAGR over last 12 months without
1/16 DD; (In good Market) by col 4
SPY Variants 1/31/17
Seeking Alpha 1/9/17 Plutos


URL is http://seekingalpha.com/article/4035038-1517-strategy-consistently-beat-market?ifp=0
Focus on NOBL & RSP
 Equal Amount of each
Seeking Alpha 1/9/17 Plutos
Seeking Alpha 1/9/17 Plutos
NET-NET #2 Bond Alternatives

A LOT of Very Good Funds out there with GOOD
returns and REASONABLE MAX DDs
 ETFs more Volatile but still good
 Some Stocks but even more Volatile
 But….Do Your HomeWork
#3 - Is this your account!!!!!!
Nominal Investor / Investment
Returns over the last 20 Years
BlackRock Cash Surveys
Potential VG MMFs from #2(CAGR)
Potential MMA Subs (VG) 1/24/17

Could be Money Market Alternatives
 Just from VG
 Best Max DDs
 No Instl
 Could extend this to ALL INC groups
Potential MMA Subs (VG) 1/24/17
Sorted by Max DD (Col 8)
Potential MMA Subs (Floating Rate)
1/25/17 Sorted by Max DD (Col 8)
#4 - What All This has done for me
I am usually FULLY invested; BUT ……
 I feel I have an emotionally sufficient % of Bond or
Bond-Like pieces such that I really don’t seem to
care about Market Swings
 I NEVER take $ for my day-to-day from the Market;
ONLY from The BOND Portion
 Hence Market swings don’t bother me
 It depends on your 2 NUMBERS; What $ you have
& What $ you need which should be the basis of
your investing plan
 INTERESTING!!!

ALWAYS remember this Chart!!!
#5 - NET - NET Thoughts

If we take this approach, there seem to be a TON of
good M/Fs out there to provide a decent return
without too much of a DrawDown
 NOTE: M/Fs are LESS volatile than ETFs or Stocks
 Some of these M/Fs could potentially be used as
“Cash” alternatives
 There are also many M/Fs which can also provide a
better return but at a higher DrawDown
 Probably a Topic for More Investigation
 RBG???
#6 - When do I Sell?; I am afraid of
Reversion to the Mean!!

We have talked in the past about SELL strategies
 Use a fixed % (i.e. 8%) or Dr Don’s 75 MA thru 300
 Remember the DD REALLY Applies to the Market
portion of your Portfolio; Hopefully balanced by
Bonds, cash etc
 Even in a 60/40 a 25% Market drop implies 15 %
portfolio drop if Bonds hold
 If an 8% drop implies a 4.8% Portfolio drop
Your Two most Important Numbers

No matter how you invest, you MUST understand
your Financial Situation & Have a FINANCIAL
Plan
 Two numbers are MOST important to me: 1) how
much you need to live on and 2) how much you
have to invest
 I discuss this in detail at the URL:
 http://www.aaiilosangeles.org/tools-hints.htm
 In the 11/1/2014 PPT “Á Retirement Tome”
Speaking of The Market
Market as of 1/26/17
Thoughts

Did You sell in 8/15 and/or 1/16?
 Could you have lasted thru the 8/15 & 1/16 DDs
with some of what we discussed today??
Future Topics

Look at RY Timing Methods using Portfolio
Visualizer (FREE)
 Similar Exercise for Floating Rate Bonds
 “Green Swans”
 More Non-Bond Alternatives
 How could we handle more volatile ETFs & Stocks
 RBG MA Approach to exit??
Bond Thoughts