September 20, 2013

Federal Reserve Chairman, Ben Bernanke,  surprised everyone this week by announcing that the Fed would not stop its quantitative easing as Bernanke hinted he would do by the end of the year.  The announcement sent the stock markets to new highs.  Critics say the Fed is sending investors too many mixed messages.

Is this any time to launch a new bond fund?   This week’s Great Investor guest thinks so! Kathleen Gaffney co-managed the legendary Loomis Sayles Bond Fund with bond giant Dan Fuss and branched off this past year to launch the Eaton Vance Bond Fund and serves as the firm’s Co-Director of Investment Grade Income. Gaffney will discuss how she’s positioning the Eaton Vance Bond Fund for the turbulent times ahead!

WEALTHTRACK Episode #1013; Originally Broadcast on September 20, 2013
Listen to the audio only version here:
Kathleen Gaffney

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[wptabs mode=”horizontal”] [wptabtitle]Guest Info[/wptabtitle] [wptabcontent]KATHLEEN GAFFNEY
Founding Portfolio Manager
Eaton Vance Bond Fund[/wptabcontent] [wptabtitle] Newsletter[/wptabtitle] [wptabcontent]Consuelo MackWas this the “sharpest and fastest U-turn in Fed policy history?” That’s what Cornerstone Macro’s top ranked Washington analyst, Andy Laperriere, asked himself after the Fed’s stunning decision to abandon its June pledge to start reducing its bond buying program. Laperriere believes the Fed’s change of position has injected more uncertainty into the markets and therefore more volatility.

The press had a field day with the policy reversal, which is being dubbed the “taper caper.”  Financial Times columnist James Mackintosh had a pithy front page piece on the move this morning. The Wall Street Journal’s lead editorial asked “did we miss Janet Yellen’s nomination to be the next Federal Reserve chairman” since she has “wanted to go even further in the easing direction than Mr. Bernanke” over the last five years.”

The financial markets loved it. There is nothing like the promise of an endless supply of cheap money to keep animal spirits soaring. The Dow soared to a new record of 15,676.94 yesterday, although it pulled back slightly today.

Bond investors have been freaking out ever since May when Bernanke suggested the Fed might start reducing, or tapering its massive $85 billion dollars’ worth of monthly bond purchases.  Even a hint of diminished government support for the Treasury and mortgage bond markets has sent interest rates higher and bond prices lower.

Over the last few months investors across the country have been taking action to avoid feeling anymore pain. According to Morningstar, they have been selling even the most successful bond funds. The world’s largest mutual fund, PIMCO’s Total Return Fund, run by famed bond guru Bill Gross, lost more than 14% of its assets, or $41 billion dollars’ worth in a recent four month period. Redemptions and price declines have also hit legendary fund manager Dan Fuss at the Loomis Sayles Bond Fund.

Recent guest, portfolio strategist Francois Trahan, points out that rates are rising in many places around the world regardless of policy because either economies are improving, as in Germany and the U.K., or governments are tightening to fight inflation,  as they are doing in many emerging markets such as Brazil and Indonesia. Whatever the reason, bond markets are under stress.

So is this any time to launch a bond fund? According to this week’s guest the answer is yes! She is Kathleen Gaffney, founding lead portfolio manager of the recently launched Eaton Vance Bond Fund, as well as Co-Director of the firm’s investment grade fixed income area. She joined Eaton Vance in October of last year after spending more than two decades at Loomis Sayles, where she co-managed the award winning Loomis Sayles Bond Fund with bond legend Dan Fuss.

Kathleen made sure her new fund was “unconstrained,” meaning it has a lot of flexibility to invest in different types of securities all over the world, including stocks. She’ll explain how she is investing in this challenging climate.

We hope you will check out our EXTRA interview with her, which will be available only on our website starting this weekend.

If you are a PREMIUM subscriber however, you can see both the show and  EXTRA starting this evening. We hope you will also share your comments with us on our new  PREMIUM page.

Have a great weekend and make the week ahead a profitable and a productive one.

Best regards,

Mathews Asia[/wptabcontent] [wptabtitle]Action Point[/wptabtitle] [wptabcontent]STICK WITH EXPERIENCED BOND MANAGERS WITH SUCCESSFUL LONG-TERM TRACK RECORDS

Major generational shift in bond market conditions

Not the time to be in passive bond index funds or ETFs


[/wptabcontent] [wptabtitle]One Investment[/wptabtitle] [wptabcontent]GAFFNEY: TECH OPPORTUNITY

Applied Materials Inc. (AMAT)
Price: $16.21 on 9/18/13
52-week range: $9.95 – $16.78
AMAT Chart

AMAT data by YCharts

“So part of what is causing the tapering and making many fixed-income investors uncertain is stronger growth. And what I’m looking for are those corporate fundamentals, markets that are really growing in the global economy, and tech is so much a part of it. But the important part, as you mentioned, about digging into the individual companies, are finding the ones in tech, because obsolescence and the product cycles are so fast you want to identify the companies that have the right product mix, and Applied Materials is just that sort of company, growing in their industry, and we think looks like it has the ability to grow its dividends as well.”

– Kathleen Gaffney


[/wptabcontent] [wptabtitle]Transcript[/wptabtitle] [wptabcontent]This transcript is available to WEALTHTRACK Premium subscribers here. You can also purchase and download this transcript safely and securely with your credit card or PayPal account for $4.99. You will need the free Adobe Acrobat Reader (Mac/Win) or Preview (Mac) to view and print the transcript.
[/wptabcontent] [wptabtitle]Bookshelf[/wptabtitle] [wptabcontent]No books available.[/wptabcontent] [/wptabs]

WEB EXTRA: A Big Job Change For A Great Investor

Kathleen Gaffney from the Archives

April 27, 2012
A bond investor who says stocks are the next best thing! Great Investor Kathleen Gaffney, co-manager of the legendary Loomis Sayles Bond Fund explains why the great generational bull market in bonds is coming to a close and why dividends are becoming the best source of income..
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January 28, 2011
Kathleen Gaffney, co-manager of the Loomis Sayles Bond Fund, and Martin Fridson, high yield guru and Global Credit Strategist at BNP Paribas Asset Management, tell us what to buy and what to avoid in bonds in the year ahead.


February 12, 2010
The investment prospects for the U.S. financial system, post financial crisis. Consuelo discusses the health of the banking system with former Fed official, now co-head of BlackRock’s Fixed Income Portfolio Management Group, Peter Fisher; the outlook for financial stocks with third generation value investor and past Morningstar Equity Manager of the Year, Chris Davis, and where there is money to be made in the bond market with Kathleen Gaffney, co-manager of the Loomis Sayles Bond Fund who, along with her three teammates, was named Morningstar’s Fixed-Income Manager of the Year in 2009.
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September 19, 2008
Are there any safe harbors in the markets’ deleveraging storm? How can you preserve your capital in the months ahead? Consuelo Mack will talk to Merrill Lynch’s highly rated investment strategist, Richard Bernstein, Bridgeway Funds’ multi-style manager John Montgomery, and Loomis Sayles bond fund manager Kathleen Gaffney on this week’s Consuelo Mack WealthTrack.


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