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Pimco Corporate & Income Opport Message Board

  • dustinflick Jul 13, 2009 11:39 PM Flag

    how safe are PTY's distributions?

    I see in the last annual report their investment income covers shareholder distributions, however the margin of safety has been narrowing but there is a pretty significant cash reserve to act as a cushion to maintain the shareholder distributions.

    PHK, I'm worried that the distribution will definitely be cut, since its investment income is not able to fund the distributions and they'll have to start selling assets and returning capital gains to maintain the distributions, which then means they'll be earnings interest on a smaller asset base. I think their distributions are in trouble and could be cut over the next several months. Same goes for HIX but to a lesser extent than PHK.

    Does anyone share my concern? Do you believe PTY is safe?

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    • DAVE:--Again we have agreement.--Good luck & sucessful trading.

    • jdfunnell Jul 19, 2009 9:02 PM Flag

      Yeah, there's lots confronting us. At least we have always been a nation willing to one foot in front of the other, every day. Eventually, we get somewhere.

      The question about inflation is not whether it happens, but maybe how high it gets and definately how to survive it.

      On the latter point, it's not all that easy, but at least we have a plan. If 30-year treasuries get to 12%, we will buy a 25-year ladder of Treasury Zeros. So, if inflation hits for, say, three or so years, we will be getting top (or bottom, depending on how you look at it) of the market rates locked in for a quarter of a century.

      Of course, in a double-digit inflation scenario, PTY could well be in major trouble, maybe in ARPS-redemming trouble.

      But that should all be a bit out from now. Right now, capacity utilization is so low, demand-pull inflation does not even have a head to rear up. Inflation could come from a debauced currency, certainly.

      So, we shall see. The results of the long, hot summer in DC will be our first indicator..........Dave

    • DAVE:--If what you mean by "animal spirits" is the will to survive & succeed, I think they are saying the emphasis is on "survive" w/ much less thought on "succeed".
      Because when I posted yesterday, I was hurrying to attend a grandson's birthday party I neglected to addesss what I believe is our most pressing problem.

      INFLATION, is in the offing and can be devastating. The budget deficits are historic!--In the past we were able to put our people to work suppling manufactured goods to the world. We cannot do that today. Our greatest weapon against persistent unemployment is missing.--Worse yet, we are borowing enormous sums of money to support a war machine. Defense constitutes 25% of the total budget!!!--This is absurd.---Our pride and ignorance will make it difficult to correct these imbalances which will only lead to rampant inflation. I was surprised to see none of the posters addressed this problem which we must face sooner or later.
      Incidentally, I noted the decline in revenue at GE while they beat the profit numbers. This tells us of the future. Corp. profits will continue, albiet less than before but they will be at the expense of unemployment. The real question as has been stated, is: How can recvovery efforts work if the workers are out of work??
      I guess there are a lot of unanswered questions?
      Your thoughts please.

    • jdfunnell Jul 19, 2009 2:17 AM Flag

      Hey, friendly, I agree with you about McCulley. Reading him is sometimes like what happens when I read a book about physics.....60% of it goes in one eye and out the other.

      I tend to agree with the PIMCO concept that we have moved into a new era of lower leverage, and thus a lower speed limit on economic growth. I remember in late August,2007, I suggested to my wife we had just entered into a new era, which in retrospect would be called "the great unwind."

      What seems to be missing from the PIMCO perspective, be it from the Secular Forum, Mark's, Bill's, Paul's or Mohammed's writings, is Adam Smith's concept of "animal spirits."

      Have they missed something, or by omission are they saying they believe that's lost for now?

      To me, I think PIMCO gets a lot right. But I do believe if they give up on those "spirits"........then they have it wrong............Dave

    • We own 2 Pimco ETFs, PTY @ PGP. We do believe they are safe. We bought PTY in Jul 08 @ 13.57. While it went down to 7 or so, It doesn't seem to stand out of place to other stocks. We owned this stock in previous years and did sell at a profit. We don't show any return of capital the way others we own are doing to us. We intend to ride it out with PTY. Pray for us. If you want to see an ETF doing ROC, Look up JLA. doing 87% ROC, but that is another story.

    • I am concerned only if the NAV drops to or below that required by the loan covenant. Has anyone bothered to compute the required NAV lately?

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