2023 Market Sentiment & Positioning

[limster]

Does it mean tax at source like vwrd?

if you see the financial statements and still don't believe it is 0% WHT, i cannot make you believe.....

 

[DevilPlate]

hmm based on ITDL's income statement also don't have any taxation.

VWRD got taxation.

 

[RedsYWNA]

hmm based on ITDL's income statement also don't have any taxation.

VWRD got taxation.

Below is what I had found out a few months back, when I bought ishares ETFs:

American Jobs Creation Act Qualified Interest Income (QII) Percentages for the iShares and BlackRock Funds (2023)

Certain iShares and BlackRock Funds generate qualified interest income and short-term capital gains that may be exempt from United States withholding tax when distributed to non-U.S. holders.

The U.S. tax law permits a regulated investment company (“RIC”) to designate the portion of distributions paid that represent interest-related dividends (commonly referred to as qualified interest income) and short-term capital gain dividends as exempt from U.S. withholding tax when paid to non-U.S. shareholders with proper documentation.

The distributions that have been identified by the iShares and BlackRock Funds as exempt from U.S. withholding tax are disclosed in the table below.

 

[revhappy]

yes, I know...but yield at 4% + is too low for my liking..

Security Term	CUSIP	Reopening	Issue Date	Maturity Date	High Yield	Interest Rate
20-Year	912810TU2	No	08/31/2023	08/15/2043	4.499%	4.375%
30-Year	912810TT5	No	08/15/2023	08/15/2053	4.189%	4.125%

There is one factor to consider though, that is the credit spread. I am sure you know about this, but just putting it out there; in times of stress like during the the covid crash, the credit spreads widen and if you are buying ETF, the bid ask spreads widen. If you are planning to lock in and hold for the long run, then it shouldnt matter.

The advantage of Treasury bonds is they are totally risk free and during times of stress their price goes up and they act as a cushion for the rest of your risk portfolio. I remember how painful it was holding MBH during the covid crash. MBH also crashed and there bid ask was so wide, I would have had to sell for 4% loss compared the precovid price.

I am not sure the yield pick up you are getting over Tbonds of similar duration, compared to historical range, where it stands. Currently vix is pretty low and markets are doing fine, so I would imagine spreads are quite tight.

Edit: I just checked this:

https://fred.stlouisfed.org/series/BAMLC0A0CM
Current spread is 1.22%

 

[homer123]

There is one factor to consider though, that is the credit spread. I am sure you know about this, but just putting it out there; in times of stress like during the the covid crash, the credit spreads widen and if you are buying ETF, the bid ask spreads widen. If you are planning to lock in and hold for the long run, then it shouldnt matter.

The advantage of Treasury bonds is they are totally risk free and during times of stress their price goes up and they act as a cushion for the rest of your risk portfolio. I remember how painful it was holding MBH during the covid crash. MBH also crashed and there bid ask was so wide, I would have had to sell for 4% loss compared the precovid price.

I am not sure the yield pick up you are getting over Tbonds of similar duration, compared to historical range, where it stands. Currently vix is pretty low and markets are doing fine, so I would imagine spreads are quite tight.

Edit: I just checked this:

https://fred.stlouisfed.org/series/BAMLC0A0CM
Current spread is 1.22%

I believe the investment grade Corporate bond ETF is safe enough. .I would not want to buy something that is almost at CPF SA yield. If I buy a bond ETF, it will buy and hold forever..

 

[DevilPlate]

I believe the investment grade Corporate bond ETF is safe enough. .I would not want to buy something that is almost at CPF SA yield. If I buy a bond ETF, it will buy and hold forever..

How about IGIL or ITPS…..im still trying to figure out hows these inflation linked bonds work.

currently, real yield only 2.33% for ITPS and even lower for IGIL which means bond market believe long term inflation is so low……what if inflation stay high….maybe it will adjust?

 

[homer123]

How about IGIL or ITPS…..im still trying to figure out hows these inflation linked bonds work.

currently, real yield only 2.33% for ITPS and even lower for IGIL which means bond market believe long term inflation is so low……what if inflation stay high….maybe it will adjust?

I have no idea.. I bought STIP with my US retirement from my previous job based in US.

 

[limster]

since I already have SSB and T-bills, I think I have enough 'AAA' equivalent fixed income which is why I am not so interested in US treasuries.

So I don't mind taking a bit more risk with corp bonds if the yield is 5%++ . LQDE is 46% BBB, 53% A-AAA, which is not bad.

 

[DevilPlate]

since I already have SSB and T-bills, I think I have enough 'AAA' equivalent fixed income which is why I am not so interested in US treasuries.

So I don't mind taking a bit more risk with corp bonds if the yield is 5%++ . LQDE is 46% BBB, 53% A-AAA, which is not bad.

I think the general concern is the forex risk for foreign fixed income funds as a Singaporean.

For me, i wana change some USD at 1.33x at that point but duno where to park….so i experiment with IDTL and plan to sell it to buy more USD denominated equities IF there is a crisis (other than hyperinflation scenario)

Historically somehow USD/SGD rates also went up during a stock market crash lol.

The risk ofc IDTL can drop further if high inflation persists longer than market expectation and/or 2nd wave of inflation.

 

[stanlawj]

STIP, LQDE charts still sliding lower.

Lower can still go lower.

Bond markets continue to signal no recession.

As Biden Admin pursues onshoring using Federal funds, US workers take this opportunity to strike and demand higher wages.

Lots of money being wasted on useless expensive clean energy ventures, building factories in USA but not addressing core problems in US workers and overpaying management (CEO) fatcats.

I believe, USD purchasing power has to be sacrificed, bond yields will never catch-up with the devaluation (i.e. longer term bonds earning a real yield rate is a pipe-dream), and I have begun switching the current strong USD to PSLV opportunistically. Bonds only good for short-term < 1 year (T-bills).

(you don't have to follow, just airing opinion)

 

[limster]

Since the bulk of my net worth is in S$, because of stocks property ownership, CPF, I consider USD corporates one form of diversification.

To me, the risk of S$ depreciation is higher than US$ depreciation. A lot of money inflow into SG is 'hot money' which can be taken out as quickly as it is put in. I frankly cannot see S$ continuously appreciating against the US$

 

[DevilPlate]

Since the bulk of my net worth is in S$, because of stocks property ownership, CPF, I consider USD corporates one form of diversification.

To me, the risk of S$ depreciation is higher than US$ depreciation. A lot of money inflow into SG is 'hot money' which can be taken out as quickly as it is put in. I frankly cannot see S$ continuously appreciating against the US$

I prefer to hold USD (if i want some currency diversification) in the form of global index funds like our top fav VWRA

In a way, we are already holding a basket of the world’s currencies within a global index fund.
Unless we are talking about devaluation of fiat currency in general, then we goto buy and store some gold bars liao like what our MAS is doing hahaha.

 

[DevilPlate]

STIP, LQDE charts still sliding lower.

Lower can still go lower.

Bond markets continue to signal no recession.

As Biden Admin pursues onshoring using Federal funds, US workers take this opportunity to strike and demand higher wages.

Lots of money being wasted on useless expensive clean energy ventures, building factories in USA but not addressing core problems in US workers and overpaying management (CEO) fatcats.

I believe, USD purchasing power has to be sacrificed, bond yields will never catch-up with the devaluation (i.e. longer term bonds earning a real yield rate is a pipe-dream), and I have begun switching the current strong USD to PSLV opportunistically. Bonds only good for short-term < 1 year (T-bills).

(you don't have to follow, just airing opinion)

I think there is also a slight possibility that US Fed may do YCC (or other similar form) since we have ongoing de-dollarisation and lesser foreign demand for their longer term treasuries.

Yellen still need to continue issuing tons of Tbonds.

 

[stanlawj]

I think there is also a slight possibility that US Fed may do YCC (or other similar form) since we have ongoing de-dollarisation and lesser foreign demand for their longer term treasuries.

Yellen still need to continue issuing tons of Tbonds.

I believe the intention of Powell is to shrink the oversized top layers of the pyramid to combat inflation, but the problem is that the blue layer (US Treasuries issuance) is increasing as you pointed out, so the pyramid remains top-heavy, and problem of inflation is actually not removed, but actually postponed (to 2026)!

When Powell leaves in May 2026, his replacement will come in cutting rates furiously to save the economy. Meanwhile US banks and their bankers continue to earn profits at the expense of taxpayers since they continue to suck on the tits of the Fed (through RRP, BTFP, successor of BTFP, etc).

So far none of the SVB bank execs and ex-San Franscisco Fed governor got jailed. No clawbacks, no censure, nada..!

 

[elvintay07]

I believe the intention of Powell is to shrink the oversized top layers of the pyramid to combat inflation, but the problem is that the blue layer (US Treasuries issuance) is increasing as you pointed out, so the pyramid remains top-heavy, and problem of inflation is actually not removed, but actually postponed (to 2026)!

When Powell leaves in May 2026, his replacement will come in cutting rates furiously to save the economy. Meanwhile US banks and their bankers continue to earn profits at the expense of taxpayers since they continue to suck on the tits of the Fed (through RRP, BTFP, successor of BTFP, etc).

So far none of the SVB bank execs and ex-San Franscisco Fed governor got jailed. No clawbacks, no censure, nada..!

Serious bo? 2026 cut rates aggressively? Ppl say next 20 years interest stays at 6% lei. 3 years cut rate throw face already lei.

 

[stanlawj]

US real estate pro (also has degree in Economics) gives the same call as Adam Khoo: rents will fall.
This will lower core CPI.
(bullish for stocks).
Note that energy and food is not part of core CPI (so the recent oil and gasoline price rise doesn't affect core CPI).

 

[DevilPlate]

US real estate pro (also has degree in Economics) gives the same call as Adam Khoo: rents will fall.
This will lower core CPI.
(bullish for stocks).
Note that energy and food is not part of core CPI (so the recent oil and gasoline price rise doesn't affect core CPI).

Yap, i also expect core cpi and pce to drop abit but headline cpi to rise instead.

But it will take many months for reduced shelter cost to be reflected in the core cpi calculation.
And very unlikely that core cpi/pce can drop below 3% anytime soon (within 1 yr)

I feel that most of the low hanging fruits have been plucked and increase interest rate further may not have anymore impact. Biden admin has to cut their spending instead but we all know they will only increase spending for next yr election to look good hahaha

 

[stanlawj]

we all know they will only increase spending for next yr election to look good hahaha

If you know, I know, that means even the hedge funds know and they are not going to short the market until something bigger than the banks break.

 

[888888888888]

Yap, i also expect core cpi and pce to drop abit but headline cpi to rise instead.

But it will take many months for reduced shelter cost to be reflected in the core cpi calculation.
And very unlikely that core cpi/pce can drop below 3% anytime soon (within 1 yr)

headline rate expected up to 3.6, w alot of it driven by base effects, leave it to interpret that.
while core to 0.2%.

dollar down slightly, light longs in. dollar strength can return later thereafter.

 

[churnmaster]

Nifty already new ATH today . .