Monthly Archives: September 2008

Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke are on the Hill trying to sell their $700 billion bailout to lawmakers. Yesterday Secretary Paulson and Chairman Bernanke testified before Congress that the bailout must be passed quickly and cleanly in order to prevent further economic crisis.  Chairman Bernanke warned that inaction by Congress would lead credit markets to continue to seize up, meaning lost jobs, higher unemployment and more foreclosures.

While most parties freely recognize that these are unprecedented times and that the economy is on the brink, not all are willing to accept the Bush Administration’s bailout proposal.  Many commentators have labeled the plan a “knee-jerk” reaction being pushed using scare tactics.  Most in Congress want at least more time to evaluate the plan.  That certainly should be a reasonable expectation when one is talking for taxpayer money at these levels.

It is critically important that the plan be designed and implemented to succeed with its purpose-to assist in the recovery of the US economy and turn the current tide.  If the taxpayers are going to foot the bill for the mistakes and greed of Wall Street, they should be confident that whatever proposal is ultimately put in motion will have the desired effect.  This plan must benefit those on Main Street and not simply bailout the very parties responsible for the mess in the first place.

Wall Street and its executives made hundreds of millions of dollars by creating the exotic mortgage-related securities cited as the cause of the current financial crisis.  It is understandable that many in this country are suspicious of a bailout that in any way rewards the greed and bad behavior that created the mess we are in.  Unfortunately the plan as proposed does not seem to adequately address the concerns of either the common citizen or Congress. 

This plan must be properly vetted and Congress must be allowed to address its concerns before the taxpayers give the Treasury a $700 billion blank check.

The John Hancock High Yield Bond Fund has made the list. Just not the list its fund managers would like.

On September 8, 2008, the Wall Street Journal listed its Leaders and Laggards. The Hancock Fund ranks near the top in the worst-performing bond fund category. It shares this distinction with three Morgan Keegan bond funds and Charles Schwab’s YieldPlus fund.

The Hancock High Yield fund (JHHBX) holds $644.7 million in assets. In the past year, the fund has lost 17.8% of its value. For typical bond fund investors seeking income, these returns are tremendously shocking and unacceptable.

Once again three Morgan Keegan Bond Funds top the list of Wall Street’s worst-performing bond funds.  The RMK Select Intermediate Bond Fund, High Income Fund and Short Term Bond Fund share this distinction for yet another time.

These funds have lost 84.5%, 77.6% and 50.8% respectively in the last year.

On July 29, 2008, Hyperion Brookfield Asset Management assumed the duties as asset manager of these funds. Hyperion took over for Morgan Asset Management and manager James Kelsoe.

Under the management of Kelsoe, these funds saw losses far exceeding the losses of other similar funds. The primary reason for the incredible losses was the over-exposure of the RMK funds to the subprime mortgage market.  

Many investors purchased the RMK funds as safe, income-producing investments. Certainly losses of up to 84% do not constitute safe, income-producing investments.

Even with the change in management, it may take some time before the RMK bond funds loose their hold at the top of the worst-performing list.