FRTEB
11 Feb 2018
Re: Danger An interesting discussion. But where else are you going to get a comparably safe yield of 7.45% (based on Fridays close of 59.2p) ? That level of yield offers a degree of cushion against slow and steady interest rate rises. Faster and/or larger interest rate rises present more of a challenge for NCYF (et al.) to compete with but how much are base rates likely to increase, realistically, during the course of the next 12 months? And gilts? I wouldn't advocate buying NCYF at any price, obviously, but buying in tranches on pullbacks and reinvesting the dividends (for the first few years at least) could be argued to be a sound strategy. In fact, that's my strategy. Why? Nothing is certain. Stock markets are only just off all-time highs and might zig-zag further up or might zig-zag further down. Interest rates might rise a bit or might rise a lot. Who knows? Not me. Add in Brexit, Rocket Man, Uncle Vlad, the sane genius and the ongoing mess in the middle east and anything could happen. I primarily hold income producing shares and ITs but holding a reasonable stake in high yield bonds seems to be a sensible hedge. Corporate bond prices might ease (or might not) but if you're overly concerned about shorter-term fluctuations then you shouldn't be putting your money anywhere near the stock market anyway.
sound money
10 Feb 2018
Re: Danger Thanks,Foe what it's worth I think BP is a pretty sound investment, just hitting the sweet spot at these levels. I'm a long term holder.You might also consider NRR, L &G, and Phoenix at these levels. All generate cash and are well managed.M
IOMINVESTCOM
10 Feb 2018
Re: Danger Hi Sound Money,Thank you so much for your lengthy reply to my question and adding some meat to the bone with your info.I have only recently added these to my watch list after a decent write up in the Money week but even with the attractive yield on these I have not commited to buying any. I do not have much experience in buying corporate debt and my only other exposure has been an investment in Multi asset fund ADIG which has some bond exposure.No problem with your reply and I very much appreciate you taking the time to post a meaningful response. I think from what you have said and from my own doubts I will move on to sticking with individual companies that I feel more comfortable with. Friday I added to some BP with it's improving cashflow and yield of 6.4 with no premium suits my style of thinking.I think your note of caution was well merited.Thank you for that and it highlights the benefit of sharing thoughts and thinking on these type of boards.Have a good weekend.atb
sound money
10 Feb 2018
Re: Danger IOMIN, As with all investing you have to have a big picture perspective first.My view is that we are inching back to "normality" which is a word that covers a wide spectrum of conditions. What it does not include is negative to low interest rates, deflationary conditions and quantitative easing. We will likely never see this again, well not all at the same time.There is still spare capacity in the world economy that will probably keep excessive inflation at bay. Trouble is it's very difficult to determine how much. That's where the risk is.Inflation is a bit like a man putting elastic round a brick then pulling. Nothing happens at first but when it does there is no control it just rushes at you.My view is that since the crash central bankers have kept the show on the road and at this point they have not mucked up. Ideally what we want is very slow but consistent rate increases over several years. This will be good for the world economy but not for bonds at the long end. Yields will rise but capital will be lost because of the inverse relationship between yield and price.This will spill over into Corporate debt. If guilts and treasuries only go to say 4.5% in the cycle bearing in mind treasuries were 1.5 % ish in the last year what would happen to high yield bonds? The yield must go up to maintain the risk premium.If this could take several years total return may be OK because of the high yield offsetting capital loss. But what if not, suppose we have an inflation spike and Central banks worry more about inflation than at present?Either way bond prices are now moving to the downside, risk has now increased for the fixed interest rate investor. Remember historically funds like this always traded traded at a discount. We haven't seen that for a very long time but that used to be normal.In answer to your question I would only re-enter if I thought inflation had peeked and the interest rate cycle had peeked with the next rate movement being down. You would have to access the risk premium of the funds assets against the certainty of government debt.If we dont get a serious crash then selected equities with high yield could do better.Sorry if some of this is a bit Janet and John but we all need to have a clear focus on what's happening. The important thing is remember what used to happen when conditions were normal because it will give us a guide.M
IOMINVESTCOM
10 Feb 2018
Re: Danger thanks Sound money for sharing your thinking.it's the premium up to now that has put me off and was wondering if we got down to sub 57 or as low as 52p then maybe the premium would go and then worth picking up a few.what sort of conditions would get you more keen to 're purchase - Do you think if the 10 year stabilise at 3% then these would be ok for a while longer or too much riskatb
sound money
09 Feb 2018
Danger Think carefully guys. The bull market in bonds has finished.I have sold out. I don't expect to buy back in soon.I have tremendous respect for the management here but the mood music has changed.Interest rates and inflation are going higher from an incredibly low base. No one alive today has ever seen this.This is still at a premium, that will disappear IMO. I have no doubt that the cycle of rate increases will be small from a historic perspective but it is likely to be higher than the market expects, It always is.If you sell, look for an entry point at a discount to NAV. You need to think about these funds from a pre 2008 perspective. The funny money is over.Look for those that will benefit from rate increase like banks. Lloyds could be good although more volatile than here.The world has changed and you don't want to be playing catch up. M
IOMINVESTCOM
08 Feb 2018
Re: Timing Hi Marktime1231,You might get your chance to dip into these if you are still keen at 57.5p or less tomorrow.atb
marktime1231
06 Feb 2018
Re: Timing Thanks. CQS and other holders acting to establish secure claim on whatever the bonds are "secured" on, and to get trading credit restored. In the meantime New Look Q3 has reversed Q2 woes by way of discounted stock fire sale. That has stopped some of the rot, but I was astonished to read that Brait the private equity owner and Chariman of New Look has written their entire investment off. A UK High Street under-35's hero to zero in a couple of years! Missed out on the move online.Still haven't seen to what extent NCYF is on the hook, but until otherwise reported I think we can say less than 1.5%. A complete write off would take maybe 1p off NAV, not the 6p shed in a week.
NickDog
06 Feb 2018
Re: Timing Hi MarkThis is the article in full. Its short on detail though:Bondholders of New Look have appointed the Rothschild investment bank to protect their interests in the event of a financial overhaul at the struggling fashion retailer.In further signs of trouble on Britain’s high streets, the company is expected to report continued losses and falling sales when it publishes a trading update this week.Only three months ago Brait, its South African owner, wrote down New Look’s value to zero, less than three years after it had paid £780 million for the business. Brait is one of the investment vehicles of Christo Wiese, the South African investor embroiled in the Steinhoff International affair.New Look was founded in 1969 in Taunton, Somerset, and expanded internationally into a chain of more than 1,000 stores. In the past year a mix of cash-strapped consumers and the continuing shift to online shopping have left it reeling. Hedge funds have been buying its senior secured debt as a potential route to gaining control.Now a group of those bondholders — understood to include Carlyle, the private equity firm, CQS and M&G Investments, the asset managers, Alcentra, an investment firm, and Avenue Capital Group, a distressed-debt investor — have formed an ad hoc committee to protect their interests amid expectations of a financial restructuring of the company, according to people familiar with the matter.They are understood to be concerned about further weaknesses at the chain, whose debts stand at more than £1 billion, after the withdrawal of credit insurance to some of its suppliers at the end of last year. The insurance protects suppliers against the risk of a customer going bust between the point of accepting an order and payment being made. Without it, suppliers may seek upfront payment for goods.New Look has not breached the terms of its loan agreements, but the bondholders are understood to be concerned about the potential for a deterioration in liquidity if there are further problems with credit insurance. At present, the bonds are trading at 45p in the pound.In November, New Look reported a half-year loss of £10.4 million, against a £59.3 million profit the previous year, after its sales fell by 8.5 per cent. Alistair McGeorge, executive chairman from 2011 to 2013, who was brought back last year to help to turn the company around, admitted that much of the chain’s trouble was self-inflicted as it had become “too young and too edgy”.
marktime1231
06 Feb 2018
Re: Timing I have had a hunt around and can't see that NCYF has a significant exposure to New Look, not among the top 25 holdings according to Morningstar and so any position would be less than 1.5%. I couldn't get past the wall to see where that newspaper article was pointing.The July 2017 factsheet for NCYF says ..."the recent large rally in Matalan 8 7/8% 2020 allowed us to exit the retailer and partially switch into New Look 6 ½% secured bond 2022 at an attractive level."The Sep 2017 factsheet says ..."we added to holdings in New Look 6 ½% 2022" and that was despite poor trading news from New Look in early Aug 2017.The bond price has tumbled from where NCYF entered at c. 70p down to 35p and back to about 45p today, eg highly distressed. Not sure what is securing the bond, but this is either a terrific snapping up of a bargain or pouring money down the drain.[link] Look reported Q3 results today of -6% revenues and operating losses, but the bond price was up nearly 3% ... so maybe bad news coming to an end, or confidence in a recovery is misplaced.[link] poised over NCYF, a first buy under 57.5p perhaps.
NickDog
05 Feb 2018
Re: Timing I am a long term holder for the income generated. One story that may be relevant was in the Times today saying CQS and some other bond holders were concerned about New Look. New Look don't show as a top ten holding and may be it affects other CQS funds.[link]
marktime1231
05 Feb 2018
Timing Investing some say is not about timing, but like you NCYF has been on my radar for a few months and Buy is now lit ... extra strong looking yield, the premium has rubbed off, nothing fundamentally worrying that I can see in underlying positions. And yet this might have 55p or even 52p in sight while markets in general are slumping.Competing with several other candidates, SQN and its monthly payout is still calling me on to the rocks, and the protection of SIPP or ISA has only so much space available. I guess the clever thing to do would be to spread the buy over two or three chunks ... or wait and see a bit longer.
devonplay
04 Feb 2018
3 Monthd Down almost 6% down over 3 months.I’ve been watching this one for a little time.Still at premium, like many income focused, vehicles I’m wondering if any short term lift in the share price will erode as we start to focus on rate rises and 2019 maturity wall?Slightly tempted, but I just may hold off a little longer.I bought REC during January. I was aiming to buy 42, ended up paying 44 ( wasn’t paying enough attention and rather than “cancel” hit the “buy” button - duh! )My preference for REC still holds, almost 5 yield and I’m showing a slight profit on Jan purchase. I believe REC remains a buy round 42.For now, I’ll be watching this one and see if we loose that premium and see more weekness. DL
Krayl
03 Feb 2018
Re: Current Weakness Very interesting article - thanks DS.It has to be an increase for my income portfolio at 7.4% return. Not sure whether to watch it for a day or two to see if I can buy it a bit cheaper.
Damp Seaweed
03 Feb 2018
Current Weakness An interesting read.It might also explain recent weakness[link] View thread 8 Respond Neighbourhood Watch
