{"id":19365,"date":"2023-06-07T09:12:51","date_gmt":"2023-06-07T13:12:51","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/the-bond-god-reveals-his-top-10-yielding-pick\/"},"modified":"2023-06-07T09:12:53","modified_gmt":"2023-06-07T13:12:53","slug":"the-bond-god-reveals-his-top-10-yielding-pick","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=19365","title":{"rendered":"The \u2018Bond God\u2019 Reveals His Top 10%-Yielding Pick"},"content":{"rendered":"
\n

Our favorite high-yield bonds just hit a critical buying level. It\u2019s time to make our move, and we\u2019re going to give ourselves an edge by \u201ccherry-picking\u201d 10%+ yielding picks from the top bond minds on the planet.<\/p>\n

And we\u2019re going to pay nothing<\/em> to do so!<\/p>\n

The Titans of the Bond World Give Us Their Best Picks\u2014for Free<\/h2>\n

I hate to hear people say the bond world is boring. If you\u2019ve read about it, you know it\u2019s packed with wild characters who\u2019ve racked up massive fortunes.<\/p>\n

You can\u2019t talk about bonds without mentioning Bill Gross, the so-called \u201cBond King,\u201d who basically invented the idea of trading bonds in the \u201970s. From 2000 to 2009, Gross delivered 7.7% yearly returns for his investors\u2014a huge<\/em> return for bonds\u2014which got him named Morningstar\u2019s
\n MORN
\n <\/fbs-ticker> Fixed Income Manager of the Decade.<\/p>\n

But all<\/em> kings are eventually deposed, and just five years later, Gross\u2019s co-workers were so fed up with him that he decamped from the management firm he founded, PIMCO, for lesser-known Janus Capital.<\/p>\n

<\/fbs-ad><\/p>\n

Gross\u2019s story is told in the fascinating book The Bond King: How One Man Made a Market, Built an Empire, and Lost It All<\/em>. <\/em>I\u2019d highly recommend it to fellow fixed-income geeks.<\/p>\n

From the King to \u201cthe Beast\u201d<\/h2>\n

Gross was replaced by Dan Ivascyn, who stepped up to the plate and began banging out bond doubles himself. (Which is why his work colleagues refer to him as \u201cthe Beast.\u201d)<\/p>\n

No wonder PIMCO let the King walk\u2014they had a Beast in waiting! A money manager of Ivascyn\u2019s caliber will usually cost around 2% annually (plus 20% of profits). And<\/em> it\u2019d take a million bucks or two to get his attention. Beasts don\u2019t come cheap!<\/p>\n

We contrarians, however, don\u2019t pay up for talent. We are our own silent, calculating beasts. And as such, we simply bide our time and cherry-pick funds when they \u201cwaive\u201d their management fees<\/em>.<\/p>\n

That\u2019s happening now with a fund run by yet another<\/em> hero of the bond world. This pro is no mere king\u2014his rule is so deep-rooted he\u2019s known throughout the bond realm as the \u201cBond God.\u201d<\/p>\n

How the \u201cBond God\u201d Built an Empire\u2014One Call at a Time<\/h2>\n

I\u2019m talking about Jeff Gundlach, whose contrarian calls have a record of being right\u2014and profitable.<\/p>\n

Like in 2007, when Gundlach warned investors to get out of subprime mortgages just before the credit markets melted down. And early 2016, when he predicted Donald Trump\u2019s win. And most recently in September 2022, when he let slip to the press that he\u2019d been snapping up US Treasuries.<\/p>\n

What a call that was, as Treasuries bounced some 8% in the nine weeks from the end of September until early December, when interest rates bottomed again (as rates and bond prices move in opposite directions).<\/p>\n

We loved Gundlach\u2019s call because it matches up with the moves we\u2019re making in my Contrarian Income Report<\/em> service.<\/p>\n

Here\u2019s how Gundlach\u2019s (and our) play worked: these days, rates have a 4% \u201cceiling.\u201d Once they hit that level, they roll over, driving bond prices higher on the way down.<\/p>\n

Back in early October, as rates broke 4% and then fell, we profited alongside Gundlach through two ETFs: the iBoxx $ Investment Grade Corporate Bond ETF (LQD
\n
\n LQD
\n <\/fbs-ticker>),<\/strong> which we picked up in the October issue, and the iShares 20+ Year Treasury Bond ETF (TLT
\n
\n TLT
\n <\/fbs-ticker>)<\/strong>, our November buy.<\/p>\n

Boy, did these moves pay off:<\/p>\n

Fast-forward to today and the yield on the 10-year is around 3.6%. That\u2019s still below 4%, sure, but no matter\u2014rates are topping again.<\/em> The Fed is making noises about a pause and there\u2019s still<\/em> a banking crisis going on. Plus inflation is in retreat and, yes, we\u2019re looking at a recession, likely in just a few months.<\/p>\n

That means bond yields have further to fall. And our price upside is just getting going.<\/p>\n

This is where Gundlach\u2019s DoubleLine Yield Opportunities Fund (DLY) <\/strong>comes in: it\u2019s yielding 10% (with a dividend that rolls out monthly) and sporting a 6.8% discount to net asset value (NAV, or the value of the bonds in its portfolio).<\/p>\n

That discount\u2014which you can only get through closed-end funds (CEFs) like DLY\u2014means we\u2019re getting Gundlach\u2019s bond picks for 93 cents on the dollar! And remember a second ago, when I said that we wait until our CEFs waive their management fees<\/em>? Well, DLY has done just that.<\/p>\n

As I write, DLY\u2019s fee is 2.6%. That\u2019s high, but Bond Gods don\u2019t come cheap! Fees like these are why many folks skip CEFs and default to ETFs, which charge hardly any fees because they\u2019re run by algorithms that simply track an index.<\/p>\n

But going with ETFs is a big mistake, especially in the bond world, for many reasons.<\/p>\n

For one, the bond market is small and its key players are well connected. So pros like Gundlach get the first call when an attractive new issue comes out. Algorithm-driven ETFs just can\u2019t compete.<\/em><\/p>\n

Second, we never see a \u201cbill\u201d for Gundlach\u2019s fee\u2014it\u2019s simply taken out of DLY\u2019s NAV. The best part is we don\u2019t even have to worry about that<\/em> because Gundlach\u2019s 2.6% \u201ccut\u201d is far below the fund\u2019s 6.8% discount to NAV. In other words, as long as that deal persists, we\u2019re getting \u201ccomped\u201d for Gundlach\u2019s services!<\/p>\n

Let\u2019s be honest\u2014it\u2019s unlikely even Gundlach\u2019s family can get that deal. But we can<\/em> through CEFs.<\/p>\n

Finally, let\u2019s talk dividends, because this is where CEFs really<\/em> shine: DLY, for example, has kept its 10% payout rolling since its inception in February 2020, just before the societal dumpster fire that was about to ensue.<\/p>\n

Not many folks realize this, but that discount has a role to play in keeping the payout steady. That\u2019s because DLY\u2019s 10% yield is calculated by dividing the total yearly payout by the discounted<\/em> market price. But when you divide by per-share NAV (or the portfolio\u2019s \u201ctrue\u201d value), you get a lower number\u20149.3% in this case.<\/p>\n

That simply means Gundlach needs to earn less to keep our 10.1% payout rolling in.<\/p>\n

Put it all together and we\u2019ve got a situation where bond yields are high, valuations are cheap (thanks to discounted CEFs like DLY), we can get top management for \u201cfree,\u201d and rates are rolling over. An ideal setup for buying bond CEFs, in other words. Especially those run by the \u201cBond God\u201d himself.<\/p>\n

Brett Owens is chief investment strategist for <\/em>Contrarian Outlook<\/em>. For more great income ideas, get your free copy his latest special report: <\/em>Your Early Retirement Portfolio: Huge Dividends\u2014Every Month\u2014Forever.<\/p>\n

Disclosure: none<\/em><\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Our favorite high-yield bonds just hit a critical buying level. It\u2019s time to make our move, and we\u2019re going to give ourselves an edge by \u201ccherry-picking\u201d 10%+ yielding picks from the top bond minds on the planet. And we\u2019re going to pay nothing to do so! The Titans of the Bond World Give Us Their […]<\/p>\n","protected":false},"author":1,"featured_media":19366,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-19365","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-markets","tag-featured"],"yoast_head":"\nThe \u2018Bond God\u2019 Reveals His Top 10%-Yielding Pick | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Our favorite high-yield bonds just hit a critical buying level. 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