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Frequent Contributor

Re: Pimix div cut??


@EnvEng wrote:

FD, you are a trader, I am not. I invest for FI to cover living expenses. You may recall I asked you a while back about the stability of the Pimix dist and you said it is safe. I am not blaming you. It was my call. But that loss of $250/month hurt us as our medical expenses continue to rise. It is a big deal because of our needs and strategy to meet our needs. Such is life. 


This has nothing to do with trading.  The most important should always be risk/reward and only then high yield, this is true with stocks+bonds.

PIMIX yield was constant for years, it could not keep up anymore.

Until 2018 PIMIX had it all, higher yield + great risk/reward.

In the last 3 years M* Risk = below average (same as 5-10 years) but return = average (used to be 5 yr=above average, 10 yr=High).  And now the yield is down too. 

For other retirees I like to point out they don't have to cover their needs with distributions.  Example: suppose they have about 2.5% distributions from their portfolio and need another 1-1.5%.  They must have stock+bond funds and some bonds have to be ballast.  When stock funds are up they can sell some shares if they need to, when stocks are down, they can use their best performing bond funds and sell some shares.  Easy to do.

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Re: Pimix div cut??

Re: Pimix div cut??

FD, you are a trader, I am not. I invest for FI to cover living expenses. You may recall I asked you a while back about the stability of the Pimix dist and you said it is safe. I am not blaming you. It was my call. But that loss of $250/month hurt us as our medical expenses continue to rise. It is a big deal because of our needs and strategy to meet our needs. Such is life. 

I dont rely on any recommendations or suggestions at this site.  The advice you get is worth exactly the price you pay.  You pay nothing, you get nothing. 

That said, if you want to generate a monthly income, its best NOT to rely on any one specific fund, or stock.     Better, you have several funds, etfs, cefs, or stocks to rely on.  Any stock can cut their distributions to 0 at any time.  Thats not any assurance of a monthly cash flow.  CEFs have been cutting their dividends for years.  Check the history for any muni CEF.   Wanna bet on a stock for income?   See what happened to OXY.  And the story goes on.  

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Re: Pimix div cut??

Sadly, this is all part of the financial cure for our nation during this Covid-19 pandemic.

Because the economy has hit the skids, it's become necessary to cut interest rates.

So, while loans are cheaper, it also means payouts on savings/investments are lower.

Currently, Inflation adjusted Real Risk Free interest rates are negative!

So, technically, there is no longer any real risk free return.

If you wish to beat inflation with your savings & investments, you must assume risk.  There is no way around that.  It will probably be many years before real interest rates become positive.

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Re: Pimix div cut??


@3M wrote:

Sadly, this is all part of the financial cure for our nation during this Covid-19 pandemic.

Because the economy has hit the skids, it's become necessary to cut interest rates.

So, while loans are cheaper, it also means payouts on savings/investments are lower.

Currently, Inflation adjusted Real Risk Free interest rates are negative!

So, technically, there is no longer any real risk free return.

If you wish to beat inflation with your savings & investments, you must assume risk.  There is no way around that.  It will probably be many years before real interest rates become positive.


Exactly. This thread, if read from the beginning does a good job of explaining why PIMIX had to reduce it's dividend payout else the NAV would just continuously erode, i.e., it was NOT earning it's previous payout of $0.0555/share. I fear that there are a host of M* bond-centric investors who are going to get a rude awakening on the subject of fixed-income investing. Many have been led to believe something can be created from nothing without assuming risk. Without a substantial nest-egg or decent pension, annuity, and/or SS income streams, taking on more risk (and by risk I mean some reasonable allocation to equities) may be the best solution to lasting 25-30 years of retirement.

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Re: Pimix div cut??


@VA-Tech wrote:

@3M wrote:

Sadly, this is all part of the financial cure for our nation during this Covid-19 pandemic.

Because the economy has hit the skids, it's become necessary to cut interest rates.

So, while loans are cheaper, it also means payouts on savings/investments are lower.

Currently, Inflation adjusted Real Risk Free interest rates are negative!

So, technically, there is no longer any real risk free return.

If you wish to beat inflation with your savings & investments, you must assume risk.  There is no way around that.  It will probably be many years before real interest rates become positive.


Exactly. This thread, if read from the beginning does a good job of explaining why PIMIX had to reduce it's dividend payout else the NAV would just continuously erode, i.e., it was NOT earning it's previous payout of $0.0555/share. I fear that there are a host of M* bond-centric investors who are going to get a rude awakening on the subject of fixed-income investing. Many have been led to believe something can be created from nothing without assuming risk. Without a substantial nest-egg or decent pension, annuity, and/or SS income streams, taking on more risk (and by risk I mean some reasonable allocation to equities) may be the best solution to lasting 25-30 years of retirement.


@VA-Tech 

I agree with what you have been saying here.  The wild card it the NAV change due to other factors like, perhaps, rate reductions.  Look at all the intermediate bond funds up 7% or more this year as an example.  So it is possible for the NAV to erode without being noticeable.  If a company gives out more yield than the underlying assets produce, than the NAV will always be lower than it would have been if the yield was in line with the actual payout of the underlying assets.

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Re: Pimix div cut??

@Mozart622 

Correct, it is possible for the NAV to stabilize or even increase even if the underlying assets are not earning the payout. This could occur if the underlying assets appreciate in value, such as might occur when bond rates decline. In such a situation, the NAV erosion from dividend overpayment is masked.

Sorta like I could strap a 10lb weight belt on and still potentially win a footrace against my peers; without the encumbrance (pun intended), I would have run even faster!

Bottom line Total Return (TR) is the metric that should be most important to investors, however, cash flow is VERY important to retirees too so I understand the frustration of seeing a distribution erode.

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Re: Pimix div cut??


@hku wrote:
 

 

That said, if you want to generate a monthly income, its best NOT to rely on any one specific fund, or stock.     Better, you have several funds, etfs, cefs, or stocks to rely on.  Any stock can cut their distributions to 0 at any time.  Thats not any assurance of a monthly cash flow.  CEFs have been cutting their dividends for years.  Check the history for any muni CEF.   Wanna bet on a stock for income?   See what happened to OXY.  And the story goes on.  


Just because muni CEF reduced distributions doesn't mean ALL CEFs did.  PCI,PDI are mentioned on M* many times and pay over 12-13%.

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Re: Pimix div cut??


@VA-Tech wrote:


Exactly. This thread, if read from the beginning does a good job of explaining why PIMIX had to reduce it's dividend payout else the NAV would just continuously erode, i.e., it was NOT earning it's previous payout of $0.0555/share. I fear that there are a host of M* bond-centric investors who are going to get a rude awakening on the subject of fixed-income investing. Many have been led to believe something can be created from nothing without assuming risk. Without a substantial nest-egg or decent pension, annuity, and/or SS income streams, taking on more risk (and by risk I mean some reasonable allocation to equities) may be the best solution to lasting 25-30 years of retirement.


+1 on the above. Just because I'm a bond trader and mostly in bond I never recommend people who contact me and ask for an opinion to be at 100% bonds but I never recommended 100% stocks either.  

The key of course, what is bond-centric? is 20% in stocks a good number for a retiree? I can't answer that until I know a lot more. Are all bond funds the same? no.  So, the devil is in the details. I can say that most fall between 20% to 80% in stocks. If someone portfolio is not big enough he/she must have higher % in stocks and many times higher than they like but that's life.

There is a huge difference between 2 people with the similar needs and sources of income but one has 0.5 million in savings/investing and the other has 2 million.

 

 

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