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chang
Valued Contributor

Re: PIMIX Income Fund Update: Taking a Patient Approach as Growth Slows


@ElLobo wrote:
The VWEHX NAV was at $10 back in December 1978.  Today, it is at $5.90, or down $4.10 since the fund came about.  A drop of $4.10, starting from $10, is a 41% total drop in NAV over 40 years, or an average of 1%/year.

True. The word "average" is key here. Here's the max-term chart from Yahoo Finance: link

You can see that the NAV is roughly flat from 1979-1987, drops from 1987-1991, rises to 1994, roughly flat 1994-1998, another drop from 1998-2003, flat from 2003-2008, and actually "flat" from 2008-2019 if you ignore the massive 2008-2009 dislocation.

Therefore, the NAV is very far from continuously eroding. In fact, there were two permanent periods of erosion during 1987-91 and 1998-2003. Otherwise, it's been relatively flat subject to noise and volatility. It's not at all clear to me that the NAV must drop 10% over the next 10 years.

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Gary1952
Contributor ○○○

Re: PIMIX Income Fund Update: Taking a Patient Approach as Growth Slows

Didn’t see it mentioned that the old M* charts will show price when you hit the drop-down next to the “growth” tab. 


@yogibearbull wrote:

@Sheryldell wrote:

@yogibearbull 

Thanks Yogi. How did you get that chart to display NAV like that? Using the old PIMIX link I only get the  TR lines on the chart as you posted.

Yahoo is hard to read; for that many years the screen has to be moved/scrolls Lto R to see beginning of period and end.of period.

How do you get the new M* to display NAV chart?


Access old M* Charts from here,   https://community.morningstar.com/t5/forums/forumtopicprintpage/board-id/mf/message-id/283/print-sin...

This is not possible with new M* Charts.

Yahoo Charts are price charts.

Stockcharts allows Growth and Price on the same chart, see VWEHX since 1/31/02 and the effect is quite dramatic,   https://stockcharts.com/h-perf/ui?s=VWEHX&compare=_VWEHX&id=p19986596542

 

 


 

archer
Participant ○○

Re: PIMIX Income Fund Update: Taking a Patient Approach as Growth Slows


@yogibearbull wrote:

@archer wrote:

Anyone know of any charts that plot PF performance daily? PV only plots monthly through the end of the last month.


Use M* Portfolio - My Performance tab.


Thanks Yogi. I was thinking more of hypothetical PF where I can just enter allocations and not have to enter purchase dates and price from the past.

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Mozart622
Participant ○

Re: PIMIX Income Fund Update: Taking a Patient Approach as Growth Slows


@chang wrote:

@ElLobo wrote:
The VWEHX NAV was at $10 back in December 1978.  Today, it is at $5.90, or down $4.10 since the fund came about.  A drop of $4.10, starting from $10, is a 41% total drop in NAV over 40 years, or an average of 1%/year.

True. The word "average" is key here. Here's the max-term chart from Yahoo Finance: link

You can see that the NAV is roughly flat from 1979-1987, drops from 1987-1991, rises to 1994, roughly flat 1994-1998, another drop from 1998-2003, flat from 2003-2008, and actually "flat" from 2008-2019 if you ignore the massive 2008-2009 dislocation.

Therefore, the NAV is very far from continuously eroding. In fact, there were two permanent periods of erosion during 1987-91 and 1998-2003. Otherwise, it's been relatively flat subject to noise and volatility. It's not at all clear to me that the NAV must drop 10% over the next 10 years.


Looks like it "erodes" every time there is an equity bear or some disruption in the high yield class.  So if we see 3-4 drop periods since inception, and that resulted in over a 40% drop in NAV, it seems likely that there will be a large drop in the next bear.  It's not clear when that bear might occur, but within the next 10 year would be a good guess.

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ElLobo
Participant ○○○

Re: PIMIX Income Fund Update: Taking a Patient Approach as Growth Slows


@chang wrote:

@ElLobo wrote:
The VWEHX NAV was at $10 back in December 1978.  Today, it is at $5.90, or down $4.10 since the fund came about.  A drop of $4.10, starting from $10, is a 41% total drop in NAV over 40 years, or an average of 1%/year.

True. The word "average" is key here. Here's the max-term chart from Yahoo Finance: link

You can see that the NAV is roughly flat from 1979-1987, drops from 1987-1991, rises to 1994, roughly flat 1994-1998, another drop from 1998-2003, flat from 2003-2008, and actually "flat" from 2008-2019 if you ignore the massive 2008-2009 dislocation.

Therefore, the NAV is very far from continuously eroding. In fact, there were two permanent periods of erosion during 1987-91 and 1998-2003. Otherwise, it's been relatively flat subject to noise and volatility. It's not at all clear to me that the NAV must drop 10% over the next 10 years.


I absolutely agree, Chang.  You're forgetting that we have been in the great bond bull market over the last 40 years (falling interest rates).  All indications, over the last 10 years, are that interest rates have bottomed out, so I expect the next great bond bear market to be in it's infancy.  I expect the VWEHX NAV to start back up and rise up to $10, by 2060!!!   8-))

Today's current yield, 5.46%, also indicates this.  I expect VWEHX yields to be back up to 10% by 2060.  After all, income is more certain than growth, as Taylor used to say. so to speak!

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ElLobo
Participant ○○○

Re: PIMIX Income Fund Update: Taking a Patient Approach as Growth Slows


@Mozart622 wrote:

@chang wrote:

@ElLobo wrote:
The VWEHX NAV was at $10 back in December 1978.  Today, it is at $5.90, or down $4.10 since the fund came about.  A drop of $4.10, starting from $10, is a 41% total drop in NAV over 40 years, or an average of 1%/year.

True. The word "average" is key here. Here's the max-term chart from Yahoo Finance: link

You can see that the NAV is roughly flat from 1979-1987, drops from 1987-1991, rises to 1994, roughly flat 1994-1998, another drop from 1998-2003, flat from 2003-2008, and actually "flat" from 2008-2019 if you ignore the massive 2008-2009 dislocation.

Therefore, the NAV is very far from continuously eroding. In fact, there were two permanent periods of erosion during 1987-91 and 1998-2003. Otherwise, it's been relatively flat subject to noise and volatility. It's not at all clear to me that the NAV must drop 10% over the next 10 years.


Looks like it "erodes" every time there is an equity bear or some disruption in the high yield class.  So if we see 3-4 drop periods since inception, and that resulted in over a 40% drop in NAV, it seems likely that there will be a large drop in the next bear.  It's not clear when that bear might occur, but within the next 10 year would be a good guess.


High Yield, aka 'junk' bonds, weren't around until the last 70's, as a major asset class.  Remember Michael Milken?  Howzabout Ivan Boesky?

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Mozart622
Participant ○

Re: PIMIX Income Fund Update: Taking a Patient Approach as Growth Slows


@ElLobo wrote:

@Mozart622 wrote:

@chang wrote:

@ElLobo wrote:
The VWEHX NAV was at $10 back in December 1978.  Today, it is at $5.90, or down $4.10 since the fund came about.  A drop of $4.10, starting from $10, is a 41% total drop in NAV over 40 years, or an average of 1%/year.

True. The word "average" is key here. Here's the max-term chart from Yahoo Finance: link

You can see that the NAV is roughly flat from 1979-1987, drops from 1987-1991, rises to 1994, roughly flat 1994-1998, another drop from 1998-2003, flat from 2003-2008, and actually "flat" from 2008-2019 if you ignore the massive 2008-2009 dislocation.

Therefore, the NAV is very far from continuously eroding. In fact, there were two permanent periods of erosion during 1987-91 and 1998-2003. Otherwise, it's been relatively flat subject to noise and volatility. It's not at all clear to me that the NAV must drop 10% over the next 10 years.


Looks like it "erodes" every time there is an equity bear or some disruption in the high yield class.  So if we see 3-4 drop periods since inception, and that resulted in over a 40% drop in NAV, it seems likely that there will be a large drop in the next bear.  It's not clear when that bear might occur, but within the next 10 year would be a good guess.


High Yield, aka 'junk' bonds, weren't around until the last 70's, as a major asset class.  Remember Michael Milken?  Howzabout Ivan Boesky?


Yes, I remember.  The summer and fall of 1990, the asset class had a near collapse.  The economy was going into recession Demand for high yield bonds disappeared.  This is called liquidity risk.  Many junk bonds lost 25% during that period in just 3 months.  VWEHX lost about 6% that year, IIRC, its second largest loss next to 2008.  The next year it made about 30% and several good years after that.

But that was then and this is now.  An SEC yield of 4.47 is a little thin for me, when the Corporate bond index has almost the same YTD return.

There is a lot more junk out there now

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norbertc
Contributor ○○○

Re: PIMIX Income Fund Update: Taking a Patient Approach as Growth Slows


@bilperk wrote:

@norbertc wrote:

@bilperk wrote:


Actually, if we go back to 5 full years from Jan 2014 through Dec 2018 the NAV went from 6.03 to 5.23  That is a 2.7% NAV drop per year.  So even though the market has a 10+% CAGR over the last five years and VWEHX is up 14% this year alone, it is still eroding.  What do you think will happen when the bear comes?


Bill,

Why do you think NAV is important when looking at VWEHX?  Why not focus on total returns? 

TIA,

N.


I don't think it is too important.  But I think it is important to recognize that it exists and not suggest that 5 years of stable NAV means anything.

You have shown that the TR didn't fall much during the 2000-2002 tech crash.  Yet the NAV fell 25% during that period.

So while TR is all that matters, one should recognize that the entire return, on average, comes from income distributions.  And those distributions are lower than I have ever seen them. 4.47%.

So in a coming bear, will the 4.47% yield be able to overcome the NAV drop?

This started because outandabout asked if the income was safe, like PIMIX.  I don't know if PIMIX income is safe, bet VWEHX income has been in decline since inception.

...


Hi Bill,

Thinking about the VWEHX declining price (NAV), I charted it against VWINX since inception:

ScreenHunter 681.pngPrice Chart

Unlike VWEHX, VWINX has maintained a rising price.  Here's a total return chart of VWEHX vs. VWINX:

ScreenHunter 683.pngTotal Return Chart

VWINX has about double the total returns of VWEHX since inception.  VWEHX may have a higher yield, but it doesn't come close to Wellesley's performance. 

I'm starting to think that High Yield has no place in my portfolio, excepting maybe at opportune moments when credit spreads have exploded for some reason.  At present they are low. 

Multi-sector bond funds are a different story.

I've read your posts on VWEHX for about a decade and think you have a good handle on HY trading. 

N.

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ElLobo
Participant ○○○

Re: PIMIX Income Fund Update: Taking a Patient Approach as Growth Slows


@Mozart622 wrote:

@ElLobo wrote:

@Mozart622 wrote:

@chang wrote:

@ElLobo wrote:
The VWEHX NAV was at $10 back in December 1978.  Today, it is at $5.90, or down $4.10 since the fund came about.  A drop of $4.10, starting from $10, is a 41% total drop in NAV over 40 years, or an average of 1%/year.

True. The word "average" is key here. Here's the max-term chart from Yahoo Finance: link

You can see that the NAV is roughly flat from 1979-1987, drops from 1987-1991, rises to 1994, roughly flat 1994-1998, another drop from 1998-2003, flat from 2003-2008, and actually "flat" from 2008-2019 if you ignore the massive 2008-2009 dislocation.

Therefore, the NAV is very far from continuously eroding. In fact, there were two permanent periods of erosion during 1987-91 and 1998-2003. Otherwise, it's been relatively flat subject to noise and volatility. It's not at all clear to me that the NAV must drop 10% over the next 10 years.


Looks like it "erodes" every time there is an equity bear or some disruption in the high yield class.  So if we see 3-4 drop periods since inception, and that resulted in over a 40% drop in NAV, it seems likely that there will be a large drop in the next bear.  It's not clear when that bear might occur, but within the next 10 year would be a good guess.


High Yield, aka 'junk' bonds, weren't around until the last 70's, as a major asset class.  Remember Michael Milken?  Howzabout Ivan Boesky?


Yes, I remember.  The summer and fall of 1990, the asset class had a near collapse.  The economy was going into recession Demand for high yield bonds disappeared.  This is called liquidity risk.  Many junk bonds lost 25% during that period in just 3 months.  VWEHX lost about 6% that year, IIRC, its second largest loss next to 2008.  The next year it made about 30% and several good years after that.

But that was then and this is now.  An SEC yield of 4.47 is a little thin for me, when the Corporate bond index has almost the same YTD return.

There is a lot more junk out there now


Actually, traditional 'trading' on HY is whenever the spread between quality and junk is high enough to compensate for the additional risk of default assumed by the investor.  I haven't followed that tradition for ages, focusing mainly on the distribution cash thrown off by the fund.  Whenever I last looked in detail at VWEHX (back around 2000), the fund had experienced only 2 defaults in it's history up until then, at least according to Vanguard, whom I contacted about this.

(And I have no comment on how the NAV of a bond fund falls whenever there were no defaults.  I fully understand how that happens with respect to buying and selling bonds on the secondary market, YTM, and so forth, especially with respect to VWEHX!)

At any rate, my 'contribution' to this thread was only with respect to the average long term performance over its 40 year history.  I haven't been in the fund for probably 10 years or so now, where, at one point, it was about 60% of my retirement portfolio.

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norbertc
Contributor ○○○

Re: PIMIX Income Fund Update: Taking a Patient Approach as Growth Slows

 

VWEHX yields are about 4.5% at present.  Overall, the HY sector yields a bit under 6%.

ScreenHunter 684.png

HY to Investment Grade spreads are low at about 4%, but under 3% for VWEHX.  Although delinquency rates are low too, we're not getting paid very much to take the additional risk VWEHX carries relative to an Investment Grade bond fund. 

N.

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3M
Explorer ○○

Re: PIMIX Income Fund Update: Taking a Patient Approach as Growth Slows

Thanks for posting this information.

I see there is both the Options Adjusted Spread and the Effective Yield.  They both tend to move in unison.

Aaa corporate bond yield is essentially at an all time low.

My thoughts are that someday, we'll see the Options Adjusted spread back over 7%.  That will require a lot of patience.

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Mozart622
Participant ○

Re: PIMIX Income Fund Update: Taking a Patient Approach as Growth Slows


@norbertc wrote:

 

VWEHX yields are about 4.5% at present.  Overall, the HY sector yields a bit under 6%.

ScreenHunter 684.png

HY to Investment Grade spreads are low at about 4%, but under 3% for VWEHX.  Although delinquency rates are low too, we're not getting paid very much to take the additional risk VWEHX carries relative to an Investment Grade bond fund. 

N.


Spread between the Vanguard intermediate high yield bond fund (VWEHX) is less than 2% from the yield of the Vanguard intermediate corporate bond index( 2.78%).  So we are getting even less payment for the additional risk.

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Mozart622
Participant ○

Re: PIMIX Income Fund Update: Taking a Patient Approach as Growth Slows


@ElLobo wrote:

@Mozart622 wrote:

@ElLobo wrote:

@Mozart622 wrote:

@chang wrote:

@ElLobo wrote:
The VWEHX NAV was at $10 back in December 1978.  Today, it is at $5.90, or down $4.10 since the fund came about.  A drop of $4.10, starting from $10, is a 41% total drop in NAV over 40 years, or an average of 1%/year.

True. The word "average" is key here. Here's the max-term chart from Yahoo Finance: link

You can see that the NAV is roughly flat from 1979-1987, drops from 1987-1991, rises to 1994, roughly flat 1994-1998, another drop from 1998-2003, flat from 2003-2008, and actually "flat" from 2008-2019 if you ignore the massive 2008-2009 dislocation.

Therefore, the NAV is very far from continuously eroding. In fact, there were two permanent periods of erosion during 1987-91 and 1998-2003. Otherwise, it's been relatively flat subject to noise and volatility. It's not at all clear to me that the NAV must drop 10% over the next 10 years.


Looks like it "erodes" every time there is an equity bear or some disruption in the high yield class.  So if we see 3-4 drop periods since inception, and that resulted in over a 40% drop in NAV, it seems likely that there will be a large drop in the next bear.  It's not clear when that bear might occur, but within the next 10 year would be a good guess.


High Yield, aka 'junk' bonds, weren't around until the last 70's, as a major asset class.  Remember Michael Milken?  Howzabout Ivan Boesky?


Yes, I remember.  The summer and fall of 1990, the asset class had a near collapse.  The economy was going into recession Demand for high yield bonds disappeared.  This is called liquidity risk.  Many junk bonds lost 25% during that period in just 3 months.  VWEHX lost about 6% that year, IIRC, its second largest loss next to 2008.  The next year it made about 30% and several good years after that.

But that was then and this is now.  An SEC yield of 4.47 is a little thin for me, when the Corporate bond index has almost the same YTD return.

There is a lot more junk out there now


Actually, traditional 'trading' on HY is whenever the spread between quality and junk is high enough to compensate for the additional risk of default assumed by the investor.  I haven't followed that tradition for ages, focusing mainly on the distribution cash thrown off by the fund.  Whenever I last looked in detail at VWEHX (back around 2000), the fund had experienced only 2 defaults in it's history up until then, at least according to Vanguard, whom I contacted about this.

(And I have no comment on how the NAV of a bond fund falls whenever there were no defaults.  I fully understand how that happens with respect to buying and selling bonds on the secondary market, YTM, and so forth, especially with respect to VWEHX!)

At any rate, my 'contribution' to this thread was only with respect to the average long term performance over its 40 year history.  I haven't been in the fund for probably 10 years or so now, where, at one point, it was about 60% of my retirement portfolio.


I agree.  The best time to buy VWEHX is when one of those NAV drops coincides with higher yields, like in 2009. And then sell when things begin to "normalize".

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ElLobo
Participant ○○○

Re: PIMIX Income Fund Update: Taking a Patient Approach as Growth Slows


@Mozart622 wrote:

@ElLobo wrote:

@Mozart622 wrote:

@ElLobo wrote:

@Mozart622 wrote:

@chang wrote:

@ElLobo wrote:
The VWEHX NAV was at $10 back in December 1978.  Today, it is at $5.90, or down $4.10 since the fund came about.  A drop of $4.10, starting from $10, is a 41% total drop in NAV over 40 years, or an average of 1%/year.

True. The word "average" is key here. Here's the max-term chart from Yahoo Finance: link

You can see that the NAV is roughly flat from 1979-1987, drops from 1987-1991, rises to 1994, roughly flat 1994-1998, another drop from 1998-2003, flat from 2003-2008, and actually "flat" from 2008-2019 if you ignore the massive 2008-2009 dislocation.

Therefore, the NAV is very far from continuously eroding. In fact, there were two permanent periods of erosion during 1987-91 and 1998-2003. Otherwise, it's been relatively flat subject to noise and volatility. It's not at all clear to me that the NAV must drop 10% over the next 10 years.


Looks like it "erodes" every time there is an equity bear or some disruption in the high yield class.  So if we see 3-4 drop periods since inception, and that resulted in over a 40% drop in NAV, it seems likely that there will be a large drop in the next bear.  It's not clear when that bear might occur, but within the next 10 year would be a good guess.


High Yield, aka 'junk' bonds, weren't around until the last 70's, as a major asset class.  Remember Michael Milken?  Howzabout Ivan Boesky?


Yes, I remember.  The summer and fall of 1990, the asset class had a near collapse.  The economy was going into recession Demand for high yield bonds disappeared.  This is called liquidity risk.  Many junk bonds lost 25% during that period in just 3 months.  VWEHX lost about 6% that year, IIRC, its second largest loss next to 2008.  The next year it made about 30% and several good years after that.

But that was then and this is now.  An SEC yield of 4.47 is a little thin for me, when the Corporate bond index has almost the same YTD return.

There is a lot more junk out there now


Actually, traditional 'trading' on HY is whenever the spread between quality and junk is high enough to compensate for the additional risk of default assumed by the investor.  I haven't followed that tradition for ages, focusing mainly on the distribution cash thrown off by the fund.  Whenever I last looked in detail at VWEHX (back around 2000), the fund had experienced only 2 defaults in it's history up until then, at least according to Vanguard, whom I contacted about this.

(And I have no comment on how the NAV of a bond fund falls whenever there were no defaults.  I fully understand how that happens with respect to buying and selling bonds on the secondary market, YTM, and so forth, especially with respect to VWEHX!)

At any rate, my 'contribution' to this thread was only with respect to the average long term performance over its 40 year history.  I haven't been in the fund for probably 10 years or so now, where, at one point, it was about 60% of my retirement portfolio.


I agree.  The best time to buy VWEHX is when one of those NAV drops coincides with higher yields, like in 2009. And then sell when things begin to "normalize".


The bond market is very efficient.  I don't believe there was ever a period of time, certainly long term, where the return of high quality intermediate terms bonds was higher than VWEHX, where VWEHX failed to 'beat the spread'!  Intermediate term has always been the sweet spot in terms of this additional risk premium.  I remember, Bill Bernstein doing a piece on this a few decades ago.

(But I may be wrong.  You never really know until after the fact.  The two defaults Vanguard told me about didn't affect the fund NAV one iota, as I recall!)

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