Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

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CletusCaddy
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by CletusCaddy »

comeinvest wrote: Wed Aug 31, 2022 6:16 pm
CletusCaddy wrote: Wed Aug 31, 2022 4:59 pm
DMoogle wrote: Wed Aug 31, 2022 3:49 pm
CletusCaddy wrote: Wed Aug 31, 2022 3:42 pm
Harmanic wrote: Wed Aug 31, 2022 3:15 pm What's the difference between buying PSLDX and borrowing money to buy a regular balanced fund, like Wellington? It would seem to have the same end result and purpose.
The difference is PIMCO almost certainly has a lower borrowing cost than you do.
I wouldn't be so sure if financed via box spreads. It's probably not that far off.

That said, box spreads aren't for everybody.
PSLDX borrowing cost from five months ago, roughly 0.6%-0.7%:

...

Box trade implied interest rate for similar duration loan from five months ago, 2.0%:

...
If this is the position statement per 03/31/2022, then it says nothing about the time when the swaps contracts were entered. The rates that you see are the prevailing rates at that time, not the rates on 03/31/2022. In the statement itself, you can read "3-month USD-LIBOR plus a specified spread". USD-LIBOR is typically a spread of 0.x% (varying) above the corresponding T-bill rates. The swaps incur a spread on top of that LIBOR, which already has a spread above T-bills. Box spreads can be sold by individual investors for ca. 0.4% above T-bill rates.
I believe that their implicit financing rates of their 3-months swaps is very similar to the implicit financing rates of futures or options. I think this was also conjectured and largely confirmed for leveraged ETFs in the HFEA thread in this forum. Due to no-arbitrage arguments, it would be hard to believe that any derivative financing rates with similar collateral differ measurably.
You’re right that the PIMCO statement doesn’t say when the swaps were entered into. But you can assume these are rolling contracts and just look at the one with the furthest out maturity date and assume that is closest to the March 31st rate. In this case, the November maturity contract at 0.59% interest rate.

And we don’t have to guess at the Box spreads cost, we can look at the observed data, which shows 2.0%

None of this has anything to do with arbitrage. We’re comparing a rate accessible to a retail investor to a rate accessible to an institutional investor. What would be surprising is if the latter couldn’t access rates lower than the former.

The name of the game here is institutional relationships and preferred pricing.
comeinvest
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by comeinvest »

CletusCaddy wrote: Wed Aug 31, 2022 6:25 pm
comeinvest wrote: Wed Aug 31, 2022 6:16 pm
CletusCaddy wrote: Wed Aug 31, 2022 4:59 pm
DMoogle wrote: Wed Aug 31, 2022 3:49 pm
CletusCaddy wrote: Wed Aug 31, 2022 3:42 pm

The difference is PIMCO almost certainly has a lower borrowing cost than you do.
I wouldn't be so sure if financed via box spreads. It's probably not that far off.

That said, box spreads aren't for everybody.
PSLDX borrowing cost from five months ago, roughly 0.6%-0.7%:

...

Box trade implied interest rate for similar duration loan from five months ago, 2.0%:

...
If this is the position statement per 03/31/2022, then it says nothing about the time when the swaps contracts were entered. The rates that you see are the prevailing rates at that time, not the rates on 03/31/2022. In the statement itself, you can read "3-month USD-LIBOR plus a specified spread". USD-LIBOR is typically a spread of 0.x% (varying) above the corresponding T-bill rates. The swaps incur a spread on top of that LIBOR, which already has a spread above T-bills. Box spreads can be sold by individual investors for ca. 0.4% above T-bill rates.
I believe that their implicit financing rates of their 3-months swaps is very similar to the implicit financing rates of futures or options. I think this was also conjectured and largely confirmed for leveraged ETFs in the HFEA thread in this forum. Due to no-arbitrage arguments, it would be hard to believe that any derivative financing rates with similar collateral differ measurably.
You’re right that the PIMCO statement doesn’t say when the swaps were entered into. But you can assume these are rolling contracts and just look at the one with the furthest out maturity date and assume that is closest to the March 31st rate. In this case, the November maturity contract at 0.59% interest rate.

And we don’t have to guess at the Box spreads cost, we can look at the observed data, which shows 2.0%

None of this has anything to do with arbitrage. We’re comparing a rate accessible to a retail investor to a rate accessible to an institutional investor. What would be surprising is if the latter couldn’t access rates lower than the former.

The name of the game here is institutional relationships and preferred pricing.
I first thought that their swaps are 3-months swaps, but as you say, the Nov expiration was 8 months from 03/31. We can therefore not assume anything about when the contracts were entered. I at least can't, from the material presented. 3-months as well as 12-months T-bill yields rose from 0% at the beginning of the year to about 0.5% (3 mo.) and 1.6% (12 mo.) on 03/31.
But let's speculate a little more. The May 2022 expiration on the PIMCO balance sheet shows a rate of 0.51%. If their financing roll strategy has some consistency, I would assume that this contract was entered into at a time when T-bill rates were zero. Under that theory, a spread of PIMCO's financing rates to T-bills of ca. 0.5% sounds reasonable. Which is coincidentally ca. 0.1% higher than what I hear retail box spreads can be sold for on CBOE.
(Your boxtrades.com chart is the 12-month rate on 03/31/2022.)
Coincidentally, the long period of 0% T-bill rates makes the reverse-engineering of PIMCO's financing rates easier. I would bet that the spread is ca. 0.5% with relatively high likelihood.

The swap market and the futures and options markets are accessible and used by institutional investors i.e. for trades between institutions, and separately, dealers compete in the futures and options markets for order flow from both institutional and retail investors and trades. As a result, the implied rates are institutional rates. Every market participant has access to the same quotes in these markets, i.e. everybody is on the same level. The quotes have very narrow spreads, and you can be on either side of the trade (short or long). If there was a measurable difference in implied financing rates for the same collateral, i.e. if a futures or options quote was "mispriced" with respect to institutional discount rates, it would indeed present an arbitrage opportunity.
bbrock
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by bbrock »

For all of you in PSLDX, why that vs. the Hedgefundie Excellent Adventure - UPRO/TMF?
bbrock
gougou
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by gougou »

CletusCaddy wrote: Wed Aug 31, 2022 6:25 pm
comeinvest wrote: Wed Aug 31, 2022 6:16 pm
CletusCaddy wrote: Wed Aug 31, 2022 4:59 pm
DMoogle wrote: Wed Aug 31, 2022 3:49 pm
CletusCaddy wrote: Wed Aug 31, 2022 3:42 pm

The difference is PIMCO almost certainly has a lower borrowing cost than you do.
I wouldn't be so sure if financed via box spreads. It's probably not that far off.

That said, box spreads aren't for everybody.
PSLDX borrowing cost from five months ago, roughly 0.6%-0.7%:

...

Box trade implied interest rate for similar duration loan from five months ago, 2.0%:

...
If this is the position statement per 03/31/2022, then it says nothing about the time when the swaps contracts were entered. The rates that you see are the prevailing rates at that time, not the rates on 03/31/2022. In the statement itself, you can read "3-month USD-LIBOR plus a specified spread". USD-LIBOR is typically a spread of 0.x% (varying) above the corresponding T-bill rates. The swaps incur a spread on top of that LIBOR, which already has a spread above T-bills. Box spreads can be sold by individual investors for ca. 0.4% above T-bill rates.
I believe that their implicit financing rates of their 3-months swaps is very similar to the implicit financing rates of futures or options. I think this was also conjectured and largely confirmed for leveraged ETFs in the HFEA thread in this forum. Due to no-arbitrage arguments, it would be hard to believe that any derivative financing rates with similar collateral differ measurably.
You’re right that the PIMCO statement doesn’t say when the swaps were entered into. But you can assume these are rolling contracts and just look at the one with the furthest out maturity date and assume that is closest to the March 31st rate. In this case, the November maturity contract at 0.59% interest rate.

And we don’t have to guess at the Box spreads cost, we can look at the observed data, which shows 2.0%

None of this has anything to do with arbitrage. We’re comparing a rate accessible to a retail investor to a rate accessible to an institutional investor. What would be surprising is if the latter couldn’t access rates lower than the former.

The name of the game here is institutional relationships and preferred pricing.
Nobody can borrow money at 0.59% interest rate right now. Only the US government can borrow money at Treasury rate. Box spread rate, being slightly higher than Treasury rate, is pretty much the best anyone else can do right now.

My box spreads were entered at about 0.6% APR. They are expiring soon and I'm looking at 3%+ to roll them forward.
superjames1992
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by superjames1992 »

bbrock wrote: Thu Sep 01, 2022 12:07 am For all of you in PSLDX, why that vs. the Hedgefundie Excellent Adventure - UPRO/TMF?
1. It’s set it and forget, which helps me to avoid the temptation to tinker.

2. I view PSLDX as somewhat less risky than HFEA. To be sure, this fund is still riskier than VTI or VOO (as this year has shown), but I don’t believe it’s quite as susceptible to wipeouts from black swan events like HFEA might be.

Note that I have this fund in my Roth. It’s not suitable in taxable accounts, and if I were to run something leveraged in there I’d probably go HFEA (but I’m just sticking with Total global market and a small cap tilt for now).
bbrock
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by bbrock »

Thx for your input.
bbrock
superjames1992
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by superjames1992 »

Nice day for PSLDX today after a rough start to the week. The quarterly dividend distribution should be announced very soon, right? Last one was announced on June 9th.
iskey
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by iskey »

superjames1992 wrote: Wed Sep 07, 2022 6:04 pm Nice day for PSLDX today after a rough start to the week. The quarterly dividend distribution should be announced very soon, right? Last one was announced on June 9th.
I'm thinking the distribution hit today since it was down 2.45%. Edit: Nevermind I didn't see the updated closing price. Up 3.14%, nice!
Last edited by iskey on Wed Sep 07, 2022 6:13 pm, edited 1 time in total.
superjames1992
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by superjames1992 »

iskey wrote: Wed Sep 07, 2022 6:12 pm
superjames1992 wrote: Wed Sep 07, 2022 6:04 pm Nice day for PSLDX today after a rough start to the week. The quarterly dividend distribution should be announced very soon, right? Last one was announced on June 9th.
I'm thinking the distribution hit today since it was down 2.45%
My broker is showing PSLDX with a +3.14% day today?
iskey
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by iskey »

superjames1992 wrote: Wed Sep 07, 2022 6:13 pm
iskey wrote: Wed Sep 07, 2022 6:12 pm
superjames1992 wrote: Wed Sep 07, 2022 6:04 pm Nice day for PSLDX today after a rough start to the week. The quarterly dividend distribution should be announced very soon, right? Last one was announced on June 9th.
I'm thinking the distribution hit today since it was down 2.45%
My broker is showing PSLDX with a +3.14% day today?
Edited above, my bad
lawyeredCLO
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by lawyeredCLO »

Pimco StockPlus funds will be available in my 401k in the new year. My plan for my 401k allocation in the new year: 20% PSLDX; 20% NTSX; 30% PSKIX; 20% AVUV; 5% AVDV; 5% DGS. I figure that give me a 98/52 portfolio split as follows: 58% US equities with a small cap value tilt; 40% foreign equities, with a bit of a small cap value tilt; 20% US Bonds; 12% treasury bonds; and 30% international bonds.

Might be a bit heavy on the international equities and bonds?
bgf
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by bgf »

PSLDX right now is yielding basically 6% after fees.
Long term bonds SEC yield --> ~5%
SP500 dividend yield --> ~1.5%
fees --> ~0.5%

That is a 6% yield PLUS the full upside of the SP500 price return...

if you can handle the drawdowns and you have the time horizon, it is hard to not like this fund.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"
Tamalak
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by Tamalak »

It looks nice on the backtest but a 1% ER? Yuck.

Can't this be mimicked with lower cost components?
CletusCaddy
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by CletusCaddy »

Tamalak wrote: Tue Sep 20, 2022 4:04 pm It looks nice on the backtest but a 1% ER? Yuck.

Can't this be mimicked with lower cost components?
Only 0.6% ER
tj
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by tj »

bgf wrote: Tue Sep 20, 2022 3:54 pm PSLDX right now is yielding basically 6% after fees.
Long term bonds SEC yield --> ~5%
SP500 dividend yield --> ~1.5%
fees --> ~0.5%

That is a 6% yield PLUS the full upside of the SP500 price return...

if you can handle the drawdowns and you have the time horizon, it is hard to not like this fund.
Isn't that basically a choice of investing in long term bonds instead of stocks? Why wouldn't you just invest in stocks if you can handle drawdowns and have a long time horizon?
CletusCaddy
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by CletusCaddy »

bgf wrote: Tue Sep 20, 2022 3:54 pm PSLDX right now is yielding basically 6% after fees.
Long term bonds SEC yield --> ~5%
SP500 dividend yield --> ~1.5%
fees --> ~0.5%

That is a 6% yield PLUS the full upside of the SP500 price return...

if you can handle the drawdowns and you have the time horizon, it is hard to not like this fund.
You forgot the cost of leverage, which is roughly 3.5% these days.

So
5% bond yield -
3.5% leverage cost -
0.6% ER
= 0.9%
+ S&P total return
TXGator
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by TXGator »

CletusCaddy wrote: Tue Sep 20, 2022 4:15 pm
bgf wrote: Tue Sep 20, 2022 3:54 pm PSLDX right now is yielding basically 6% after fees.
Long term bonds SEC yield --> ~5%
SP500 dividend yield --> ~1.5%
fees --> ~0.5%

That is a 6% yield PLUS the full upside of the SP500 price return...

if you can handle the drawdowns and you have the time horizon, it is hard to not like this fund.
You forgot the cost of leverage, which is roughly 3.5% these days.

So
5% bond yield -
3.5% leverage cost -
0.6% ER
= 0.9%
+ S&P total return
Cost of leverage might be 4.25% tomorrow no?
CletusCaddy
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by CletusCaddy »

TXGator wrote: Tue Sep 20, 2022 4:17 pm
CletusCaddy wrote: Tue Sep 20, 2022 4:15 pm
bgf wrote: Tue Sep 20, 2022 3:54 pm PSLDX right now is yielding basically 6% after fees.
Long term bonds SEC yield --> ~5%
SP500 dividend yield --> ~1.5%
fees --> ~0.5%

That is a 6% yield PLUS the full upside of the SP500 price return...

if you can handle the drawdowns and you have the time horizon, it is hard to not like this fund.
You forgot the cost of leverage, which is roughly 3.5% these days.

So
5% bond yield -
3.5% leverage cost -
0.6% ER
= 0.9%
+ S&P total return
Cost of leverage might be 4.25% tomorrow no?
Sure but there is a lag time before that shows up in the fund as it uses swaps that were entered into months ago.

Also if the short rate moves up you should also expect the long rate to move up as well (as it has all the way to 5% today)
bgf
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by bgf »

CletusCaddy wrote: Tue Sep 20, 2022 4:15 pm
bgf wrote: Tue Sep 20, 2022 3:54 pm PSLDX right now is yielding basically 6% after fees.
Long term bonds SEC yield --> ~5%
SP500 dividend yield --> ~1.5%
fees --> ~0.5%

That is a 6% yield PLUS the full upside of the SP500 price return...

if you can handle the drawdowns and you have the time horizon, it is hard to not like this fund.
You forgot the cost of leverage, which is roughly 3.5% these days.

So
5% bond yield -
3.5% leverage cost -
0.6% ER
= 0.9%
+ S&P total return
True, I did neglect to add cost of leverage. Did you calculate 3.5% based off the last statement?
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"
CletusCaddy
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by CletusCaddy »

bgf wrote: Tue Sep 20, 2022 4:32 pm
CletusCaddy wrote: Tue Sep 20, 2022 4:15 pm
bgf wrote: Tue Sep 20, 2022 3:54 pm PSLDX right now is yielding basically 6% after fees.
Long term bonds SEC yield --> ~5%
SP500 dividend yield --> ~1.5%
fees --> ~0.5%

That is a 6% yield PLUS the full upside of the SP500 price return...

if you can handle the drawdowns and you have the time horizon, it is hard to not like this fund.
You forgot the cost of leverage, which is roughly 3.5% these days.

So
5% bond yield -
3.5% leverage cost -
0.6% ER
= 0.9%
+ S&P total return
True, I did neglect to add cost of leverage. Did you calculate 3.5% based off the last statement?
3.5% is roughly what it would cost if they had to roll over their swaps today.

Their actual cost of leverage today is lower because the existing swaps were entered into months ago.
Tamalak
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by Tamalak »

So compared to the S&P, you get 1% more expected return, plus the diversification benefit of bonds? What's the catch?
bgf
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by bgf »

The catch? We’re living through it. When bonds and stocks drop you get the double whammy.
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rascott
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by rascott »

bgf wrote: Thu Sep 22, 2022 11:41 am The catch? We’re living through it. When bonds and stocks drop you get the double whammy.
What's this beast down YTD?
international001
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by international001 »

so 3.5% leverage cost right now
Do we know what is the historic of this? Related to some other rate?
bgf
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by bgf »

rascott wrote: Thu Sep 22, 2022 11:53 am
bgf wrote: Thu Sep 22, 2022 11:41 am The catch? We’re living through it. When bonds and stocks drop you get the double whammy.
What's this beast down YTD?
over 40%. down a good bit today too im sure.
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Talon_Trader
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by Talon_Trader »

Looks like today we broke the all time NAV low. I’m showing 4.460 is the new low for now… :oops:
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firebirdparts
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by firebirdparts »

international001 wrote: Thu Sep 22, 2022 2:14 pm so 3.5% leverage cost right now
Do we know what is the historic of this? Related to some other rate?
I don’t, but LIBOR is built right into the benchmark.
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TXGator
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by TXGator »

Talon_Trader wrote: Fri Sep 23, 2022 12:10 am Looks like today we broke the all time NAV low. I’m showing 4.460 is the new low for now… :oops:
Let's do it again today!
RussellWilson
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Re: Why not 100% PSLDX?

Post by RussellWilson »

hiddenpower wrote: Thu Jun 16, 2022 9:27 am
RussellWilson wrote: Thu Jun 16, 2022 9:22 am So normally with bonds I wouldn't worry because losses should be recovered by the end of the duration period, but I assume the leverage here messes with that, leading to permanent losses such that if bonds and SP500 recovered to their previous combined peak, that PSLDX wouldn't get all the way there? I know about volatility decay and the discussions surrounding leveraged ETFs but is the way PSLDX constructed somehow not as prone to that? Basically, are a good chunk of the recent losses permanent, because of the leverage?
In some ways. You can think each time leverage is reset, you're locking in a loss or a gain. In this case using futures it's going to be quarterly.

So is this to say that were SP500 and bond prices to magically revert to what they were at the beginning of the year, PSLDX would still be significantly down YTD because of the leverage?
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vineviz
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Re: Why not 100% PSLDX?

Post by vineviz »

RussellWilson wrote: Mon Sep 26, 2022 2:29 pm
hiddenpower wrote: Thu Jun 16, 2022 9:27 am
RussellWilson wrote: Thu Jun 16, 2022 9:22 am So normally with bonds I wouldn't worry because losses should be recovered by the end of the duration period, but I assume the leverage here messes with that, leading to permanent losses such that if bonds and SP500 recovered to their previous combined peak, that PSLDX wouldn't get all the way there? I know about volatility decay and the discussions surrounding leveraged ETFs but is the way PSLDX constructed somehow not as prone to that? Basically, are a good chunk of the recent losses permanent, because of the leverage?
In some ways. You can think each time leverage is reset, you're locking in a loss or a gain. In this case using futures it's going to be quarterly.

So is this to say that were SP500 and bond prices to magically revert to what they were at the beginning of the year, PSLDX would still be significantly down YTD because of the leverage?
There's a bit of path dependence that makes it hard to predict how quickly a fund like PSLDX might recover EVEN IF we had some reasonable assumptions about the speed with which the underlying components might recover.

I don't think the idea of "permanent losses" is the right frame to apply, but certainly it's possible - or even likely - that the rebound of PSLDX will be slower than any rebound in unleveraged the stock and bond indexes.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
superjames1992
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by superjames1992 »

Another rough day. Now down 33% on my position. Mildly concerned about the amount of money I pumped into this now, but I figure it’s time to ride it out. But if the market drops another hefty bit I’m going to be in bad shape!
DubiousInvestor
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by DubiousInvestor »

superjames1992 wrote: Mon Sep 26, 2022 11:17 pm Another rough day. Now down 33% on my position. Mildly concerned about the amount of money I pumped into this now, but I figure it’s time to ride it out. But if the market drops another hefty bit I’m going to be in bad shape!
Same, although I'm down 49%, got in at the covid highs, I could average down but would rather get other things. Just have it set on DRIP and forget about it. Meant to be held long term so some downtimes are expected
bgf
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by bgf »

superjames1992 wrote: Mon Sep 26, 2022 11:17 pm Another rough day. Now down 33% on my position. Mildly concerned about the amount of money I pumped into this now, but I figure it’s time to ride it out. But if the market drops another hefty bit I’m going to be in bad shape!
I’m not concerned about the stock market. It goes up and down and there has been nothing out of the ordinary.

The moves we’ve seen bonds however are unprecedented. This is bonkers.

We are experiencing the worst drawdown in Treasuries across the curve in over 70 years.
Last edited by bgf on Tue Sep 27, 2022 9:15 am, edited 1 time in total.
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Tamalak
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by Tamalak »

bgf wrote: Tue Sep 27, 2022 9:11 am
superjames1992 wrote: Mon Sep 26, 2022 11:17 pm Another rough day. Now down 33% on my position. Mildly concerned about the amount of money I pumped into this now, but I figure it’s time to ride it out. But if the market drops another hefty bit I’m going to be in bad shape!
I’m not concerned about the stock market. It goes up and down and there has been nothing out of the ordinary.

The moves we’ve seen bonds however are unprecedented. This is bonkers.
Yeah. This was a "historic" year when BND was down 10%. Now it's down 15%. What is going on? Why is market pricing-in being so slow and ineffective?
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by bgf »

Look at this chart.

https://twitter.com/newriverinvest/stat ... EdvVYP7U0w

How many times have we heard on this site that in a stock bond portfolio the gross majority of risk is on the stock side?

Lol not this year!!
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Random Musings
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by Random Musings »

Reminds me of the ARKK thread which started at the wrong time. Since the start of this thread PSLDX has underperformed Wellington, Wellesely, and Target Retirement Funds.

Fund inflows, of course, were very beefy near the top in late 2021. When it's a "sure thing", it may not be for a while.

RM
I figure the odds be fifty-fifty I just might have something to say. FZ
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by bgf »

Random Musings wrote: Tue Sep 27, 2022 9:25 am Reminds me of the ARKK thread which started at the wrong time. Since the start of this thread PSLDX has underperformed Wellington, Wellesely, and Target Retirement Funds.

Fund inflows, of course, were very beefy near the top in late 2021. When it's a "sure thing", it may not be for a while.

RM
You’re really forcing a narrative if you’re comparing PSLDX to ARKK.
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by Random Musings »

bgf wrote: Tue Sep 27, 2022 10:16 am
Random Musings wrote: Tue Sep 27, 2022 9:25 am Reminds me of the ARKK thread which started at the wrong time. Since the start of this thread PSLDX has underperformed Wellington, Wellesely, and Target Retirement Funds.

Fund inflows, of course, were very beefy near the top in late 2021. When it's a "sure thing", it may not be for a while.

RM
You’re really forcing a narrative if you’re comparing PSLDX to ARKK.
No, I believe that PSLDX is a far better product than the various AARK funds (which reminds me of the Janus Funds when they all collapsed). More of a comment on the timing of the posts.

RM
I figure the odds be fifty-fifty I just might have something to say. FZ
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by bgf »

Random Musings wrote: Tue Sep 27, 2022 12:22 pm
bgf wrote: Tue Sep 27, 2022 10:16 am
Random Musings wrote: Tue Sep 27, 2022 9:25 am Reminds me of the ARKK thread which started at the wrong time. Since the start of this thread PSLDX has underperformed Wellington, Wellesely, and Target Retirement Funds.

Fund inflows, of course, were very beefy near the top in late 2021. When it's a "sure thing", it may not be for a while.

RM
You’re really forcing a narrative if you’re comparing PSLDX to ARKK.
No, I believe that PSLDX is a far better product than the various AARK funds (which reminds me of the Janus Funds when they all collapsed). More of a comment on the timing of the posts.

RM
Ah, yea, maybe. Fund flows are informative, but I think with a niche fund like PSLDX a good deal of increasing flows over the years is likely due to it simply becoming more well known and more available to investors. Personally, I can still only purchase it with Schwab. Merrill edge, TIAA, and Robinhood don’t allow me to purchase it…

So, while some of it may be pure performance chasing, I wouldn’t say that tells the whole story.

At the end of the day, this fund does little more than a standard Boglehead portfolio other than it just owns more of the same stuff.

Right now, Long duration treasuries, which are appropriate for those with 20+ year time horizons, have returned -20% over the past 5 years. Think about that.

Vanguard total bond index, a bedrock of boglehead portfolios, is down over 13% for the past 5 years and over 17% the past year alone.

Why don’t we hear about performance chasing of them? Why do I only hear it about HFEA, PSLDX, and NTSX?
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superjames1992
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by superjames1992 »

DubiousInvestor wrote: Tue Sep 27, 2022 8:04 am
superjames1992 wrote: Mon Sep 26, 2022 11:17 pm Another rough day. Now down 33% on my position. Mildly concerned about the amount of money I pumped into this now, but I figure it’s time to ride it out. But if the market drops another hefty bit I’m going to be in bad shape!
Same, although I'm down 49%, got in at the covid highs, I could average down but would rather get other things. Just have it set on DRIP and forget about it. Meant to be held long term so some downtimes are expected
I entered in early April, so I’m not down quite as bad (35%), but it’s still been brutal. I thought my entry point was pretty good at the time as the fund was already down quite a bit at that point, but alas, haha…. I’m actually split between PSLDX and PISIX (international USD hedged version of PSLDX). I’m “only” down 14.5% on that one, at least. Fortunately, I got the USD hedged international fund instead of the unhedged one (PSKIX), which has gotten massacred this year as the US Dollar has been going parabolic.
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by RosieQ »

This has indeed been a brutal holding. I am comforted that the components are all very reasonable long term holds and the fundamental tenant of the fund hasn't changed.

One question for the crowd though. Assuming a standard bond fund, so long as you are able to hold the fund for a longer duration than the yield one would expect to begin to recoup the loss incurred by rising yields so far. Is that still true for the leveraged bond fund? Retirement is still 30+ years away for me so I'm still holding (but burned and not buying more).

I wonder how many have bailed out and long term expected returns can recover vs just take this as a lesson learned and change to total market fund and call it a day.
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by zdjelar »

Let’s say you could go in right now with >$1M+ (tax advantaged account) at the current historic low, would you do it? How would you project the future scenarios?
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by kevinf »

RosieQ wrote: Tue Sep 27, 2022 8:32 pm One question for the crowd though. Assuming a standard bond fund, so long as you are able to hold the fund for a longer duration than the yield one would expect to begin to recoup the loss incurred by rising yields so far. Is that still true for the leveraged bond fund?
The fund holds real bonds and equity derivatives, with the option to move to straight equities at the fund manager's discretion written in the prospectus. Essentially, it's the stock side that's leveraged, unlike NTSX in which the bond side is leveraged.
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by comeinvest »

kevinf wrote: Wed Sep 28, 2022 12:59 am
RosieQ wrote: Tue Sep 27, 2022 8:32 pm One question for the crowd though. Assuming a standard bond fund, so long as you are able to hold the fund for a longer duration than the yield one would expect to begin to recoup the loss incurred by rising yields so far. Is that still true for the leveraged bond fund?
The fund holds real bonds and equity derivatives, with the option to move to straight equities at the fund manager's discretion written in the prospectus. Essentially, it's the stock side that's leveraged, unlike NTSX in which the bond side is leveraged.
... which I think is a problem. Equity index derivatives have an implied financing spread to treasuries of ca. 0.5%, while treasury futures (that NTSX uses) have a financing spread of about 0.2% - 0.35%. So all other things being equal, NTSX has an edge.
Of course, PIMCO tries to compensate for that with their actively managed bond portfolio. (We all know what bogleheads think about active management.) And they might outperform. But most if not all of the outperformance goes into PIMCO's pockets. (I think we discussed that very high up in this thread.)
Also, surely corporate bonds have higher yields than treasuries and perhaps even higher returns in the long run, but at higher risk, and treasuries are less correlated to stocks than corporate bonds, giving them and edge in a combined portfolio.

Putting everything together, I would prefer NTSX over PSLDX. (I personally use equity index and treasury futures.)
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by superjames1992 »

comeinvest wrote: Wed Sep 28, 2022 1:43 am
kevinf wrote: Wed Sep 28, 2022 12:59 am
RosieQ wrote: Tue Sep 27, 2022 8:32 pm One question for the crowd though. Assuming a standard bond fund, so long as you are able to hold the fund for a longer duration than the yield one would expect to begin to recoup the loss incurred by rising yields so far. Is that still true for the leveraged bond fund?
The fund holds real bonds and equity derivatives, with the option to move to straight equities at the fund manager's discretion written in the prospectus. Essentially, it's the stock side that's leveraged, unlike NTSX in which the bond side is leveraged.
... which I think is a problem. Equity index derivatives have an implied financing spread to treasuries of ca. 0.5%, while treasury futures (that NTSX uses) have a financing spread of about 0.2% - 0.35%. So all other things being equal, NTSX has an edge.
Of course, PIMCO tries to compensate for that with their actively managed bond portfolio. (We all know what bogleheads think about active management.) And they might outperform. But most if not all of the outperformance goes into PIMCO's pockets. (I think we discussed that very high up in this thread.)
Also, surely corporate bonds have higher yields than treasuries and perhaps even higher returns in the long run, but at higher risk, and treasuries are less correlated to stocks than corporate bonds, giving them and edge in a combined portfolio.

Putting everything together, I would prefer NTSX over PSLDX. (I personally use equity index and treasury futures.)
Isn’t NTSX only leveraged at 90/60 compared to PSLDX’s 100/100 leverage for the stocks/bond components? Also, unlike with stocks, there is some compelling evidence that active management can beat passive when it comes to bonds/corporate bonds.
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by vineviz »

superjames1992 wrote: Wed Sep 28, 2022 8:34 am
Isn’t NTSX only leveraged at 90/60 compared to PSLDX’s 100/100 leverage for the stocks/bond components?
Yes.

PSLDX functions sort of like a portfolio of 100% VOO + 100% BLV - 100% SHV - expenses.

superjames1992 wrote: Wed Sep 28, 2022 8:34 am Also, unlike with stocks, there is some compelling evidence that active management can beat passive when it comes to bonds/corporate bonds.
No. Active bond management is just as hamstrung as active stock management.
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by seiyafan »

The best timing would be waiting for market to bottom and 30-yr bond to stabilize.
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by bgf »

seiyafan wrote: Wed Sep 28, 2022 9:07 am The best timing would be waiting for market to bottom and 30-yr bond to stabilize.
Some stability would be nice…

Meanwhile, thirty-year gilt (British bond) yields closed more than 100 basis points lower at 3.934% after they rose to 5.092% in early trading.

I mean… wow. It’s hard to overemphasize how ***** insane that is.
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by kevinf »

comeinvest wrote: Wed Sep 28, 2022 1:43 am ... which I think is a problem. Equity index derivatives have an implied financing spread to treasuries of ca. 0.5%, while treasury futures (that NTSX uses) have a financing spread of about 0.2% - 0.35%. So all other things being equal, NTSX has an edge.
Can you unpack this for me? The leverage is cheaper for NTSX but the expected return is also less for Treasurys than for equities. You expect to get more return per dollar of leverage for equities, and with PSLDX having more leverage on top of that I'd consider PSLDX to have the edge (in total return).
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Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

Post by firebirdparts »

zdjelar wrote: Tue Sep 27, 2022 9:17 pm Let’s say you could go in right now with >$1M+ (tax advantaged account) at the current historic low, would you do it? How would you project the future scenarios?
I contemplate exactly that. In fact, one of the things I do in my idle time is to guess how long we continue to struggle here. I kinda think it'll be a year, but the main point is that it's not really urgent. But sometimes I am tempted.

FWIW I have held PSLDX probably longer than the rest of you, and I don't know what all my purchase dates were, but right now, I'm down to where I started with zero gains according to Fidelity's accounting of the purchase history.
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