Thread: F fund

I don't know if there is a better way, but I watch the bond yields during the day. See below. If yields are up, expect the bond fund to be down. If yields are down, bonds go up. The movement is very slow. You won't see the bond fund move percentage wise as you see these rates move. You'll see what I mean.

I can't get these yahoo links to work here so you'll have to cut and paste this link into your browser.

finance.yahoo.com/q?s=^tyx,^tnx,^fvx&d=s

Tom

I use the iShares Lehman Aggregate Bond Fund (AMEX ticker: AGG) as a proxy for the F fund. In fact you can get plots of all 5 funds from bigcharts.

http://bigcharts.marketwatch.com/int...65&time=&freq=
compare to Index S+P 500
compare to Symbols:agg,emw
chart:close backgrd:graph
XX:1771565 plots the I fund
emw is the S fund

Great info. Thanks!

Hey Eukrate. Now I'm even more confused. Tom and I have been discussingwhich ticker to follow to track the I fund. I've been using EFA which is ishares MSCI EAFE Index (Amex). It closed up almost a percent today. It also trades after hours. Tom has been using EFV which is a EAFE Trust Index. It was up a little over a half percent today. Now you've introduced another possibility, another EAFE Index which was down over a half percent today. We've also been discussing the effect of the dollar on these prices. We've accepted an explanation offered on this board that if the dollar is down against the currencies in the fund, that the share prices will rise more than they otherwise would have (and vica versa).

Can you shed any light on the confusion?

Dave

I believe that the XX:1771565 EAFE quote eukrate posted was showingyesterday's price. It must only be updated at the end of the day. I guess you can't follow it intraday although maybe I'm wrong.

Tom

Not sure I can throw much light on this but - when the I fund became available, I did some cross-correlation studies on the EAFE index against various potential proxies.
Some were-

MSCI EAFE Index XX:1771565
Fidelity Spartan International Index FSIIX
Dreyfus International Stock Index DIISX (very poor proxy)
E*TRADE International Index (ETINX)
Scudder EAFE Equity Index Prem BTAEX
Vanguard Developed Markets Index Fund VDMIX
XX:1771565 was the best fit.

Tom may be correct about the once daily update, I don't know.

I think the issue of the dollar exchange rate is irrelevant. Certainly its motion up (or down) detracts
(or adds to) the I fund valuation, but I believe it's a small effect - accounting for less than 10% of the daily change.

eukrate-
We'venoticed pretty signifcant differences in the EAFE quote and the I fund price movement on occassion and I am assuming it is because of the dollar. Take yesterday's action.Check out how much of an affect thedollar had on the EAFE on Tuesday 3/16...

Sorry, the data is inserting very well. Chceck out http://www.msci.com/equity/index2.htmlto see what I'm talking about.

The data is updated once daily. You can see the EAFE index increasein local and US currency for the day. The Daily and month to date (MTD) are off by about 1% for the day and for the month, but in different directions.The dollar dropped yesterday but for the month is upversus several currencies. It seems to be having an affect. I may bemisinterpreting this, but I can't figure out why else this would happen.

Looking at the MSCI data I don't see an effect of the dollar exchange rate. The fact that daily and monthly returns are in opposite directions is commonplace, even without currency conversions. I suspect that any discrepancies you're seeing between various EAFE indices and the final I fund value are due to timing differences - i.e. exactly when each is computed. The effect of the dollar should be small. Look at this simple example.
Id (the index in dollars) = C * Ie (index in foreign currency)
C= conversion rate. Taking variances and partial derivatives, you get var(Id) = Ie^2*var(C) + C^2*var*(Ie)
For an index value of Ie=1000, exchange rate c=0.5 (roughly dollars per pound), standard deviation(c)=.001 and std dev (Ie) = 10 points, the effect of var(C) is nothing relative to that of var(Ie). Of course you need to do this for all the currencies involved, but you get the point..

Thanks again! I guess I have been over emphasizing the influence of the dollar.

I appreciate your input.
Tom

In case no one has noticed, he F fund is the top performer year to date. Taking into account that Japan plunged 75 billion in January into the 10 year note along with another 71 billion in the week Feb 11-18 by NY money center banks(henchmen for the Treas. &the FED), this is telegraphing nothing else other than lower 10/30 yr notes.
Besides, if we don't keep mortgage rates at these and lower levels, the economy is heading for virtual implosion.The FED knows this and basically it is OUT of Ammunition. G/F right now for preservation of capital.

Hi SilverRocket -
This is what I wrote in my March 2nd comments:

"So why the bond fund [now]? I have avoided bonds all year. I have been expecting interest rates to go up this year as the economy heats up. Instead, the bond yields have slowly sloped down over the past several months and it is at a point where the rates will either break down and head lower, or find support and go back up. Kind of the opposite of the S&P situation. When bond yields go down, bond funds go up. I want a break down. It's a bit of a gamble."

I played the gamble and caught two losing days in a row. I decided to go back into the G fund as I wasn't sure when the bond yields would breakdown. No doubt they have done well but I haven't heard anyone say they weren't surprised by the strength of bonds.

I don't like the F fund for the long term (through the end of this year) and in the short term it seems abit bubblish. It may be a good place to hide when you are not in stocks but as I said, I don't like the risk right now. That could just be my ignorance.

By the way, you probably noticed that the S fund took the lead back from the F fund.

Thanks rocket. We seem to be a little weak on the bond discussion so we appreciate your input.

Tom