Chronic GNMA problem

I am running Quicken Deluxe 2005 and have a chronic problem with how Quicken handles my Ginny Mae investment downloads. These investments constantly return principle with their periodic payments. Yet, based on the downloads from Smith Barney, Quicken shows the value of these holdings as their face values, which is grossly overinflated and unrelated to their actual value. The monthly statements from the FI obviously show the correct values but these are not reflected in Quicken.

I realize that Quicken shows what it does based on the data that Smith Barney is sending it, but as an end user, I am faced with resolving the problem, otherwise Quicken is revealing false numbers. How can I practically have Quicken show the real value of these securities? It is not practical to enter return of principle amounts going back several years in many separate GNMA holdings. I am not interested in having Quicken keep track of profit and loss on these investments but need it to reflect the true value of the investments instead of the face value when issued. What is a practical way for me to achieve this end result? I am sure I am not the only one faced with the problem.

Thanks.

Jeff

Reply to
Jeff
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I've found out on through Google the answer but I need help implementing it.

What I found out in a message from Pete Prossen is listed below. However I am not sure how to implement it in Q2005 D. Specifically, how do I :

a) edit the present value of a bond (in this case GNMA)? b) prevent downloads or updates re-changing it to the nominal face value? c) is there a way to automate the "factor" (see below) so future price updates become correct?

Could someone help?

Thanks.

Jeff ........................................................ Pete Prossen's email from 2002.

Try thinking of a GNMA as a somewhat specialized bond. Here's how it works:

When you purchase a GNMA security it is, as you say, a bond. And since no individual is likely to purchase the entire pool, it is apportioned to all the investors in some kind of units. It seems to be customary in the bond market to call 100 of these units a "share", perhaps for lack of a better word. In any case, the name matches that of the column in Quicken investment register where you should enter it.

Suppose you purchased your GNMA from, say, Charles Schwab and lets say you purchased 59,500 units (595 shares) at a share price of $100. Through the life of the GNMA, mortage holders will be paying down and refinancing, so the principal amount is gradually recovered. You receive your proportional share of this in the form of Return of Capital payments, and of course the value of the investment declines. So does the size of the fixed-rate interest payments you receive. But your proportion of the entire issue never changes. It will always be 59,500 units and this will always appear on your brokerage statement. Your Quicken register will always show 595 shares.

Since GNMA's can be sold, your brokerage will report a share value each month (not a 100x unit value). Since GNMA's are a relatively stable investment (as compared to .com tech stocks), that share value will hover around the $100 original issue price. How, then, do we cope with the declining value issue?

It's called "the Factor", and your brokerage statement will include it on each monthly statement. Multiply the face amount of the bond by the factor and you will obtain its remaining amortized value. Multiply the current price per share (available daily from your broker's bond desk but not included in Quicken quotes download) and you will have the "factored quote" value to manually enter in Quicken to establish the market value for the GNMA that day.

In summary, treat your GNMA as you would any other bond in Quicken and update the quoted share price manually like you must for any other bond. But if you want to keep the account market value accurate be sure to adjust the quoted share price by the factor. I do this monthly from the data provided on the statements, but I suspect you could examine the downloaded holdings and valuations and deduce the factor for any day of the month for which you download.

Oh, and if your GNMA happens to be held at Schwab and you download account transactions into Quicken, the return of capital transactions will already be marked with the RtrnCapX action code. And of course, the interest component will be marked with the IntIncX action code. Other brokerages, Fidelity for one, aren't yet smart enough to do this. I think they mark the return of capital as Xin, which must be then edited.

Eventually, your returns from the GNMA will slow to a trickle because of those few steadfast mortgage holders in the pool who are determined to pay off their 25-year loan. You'll wonder if it is worth the trouble to keep updating it in the portfolio. .....................

Reply to
Jeff

Jeff,

I have exactly the same problem you describe plus another GNMA problem that seems to be unique to UBS. I'm so frustrated with it that I've considered selling all the GNMA's just to be rid of it.

John Pollard seems to have answered much of your question in his repsonses to your later posting. Here's what I do:

  1. Immediately after downloading from my FI, I use Edit Price History in Security Detail view to delete all the erroneous new GNMA prices. This action then sets the GNMA values back to last month's prices.

  1. When the monthly statement arrives, I go to Portfolio View, set the date to statement date, and enter the correct end-of-month prices from the statement. I find it quicker to make these entries in Portfolio View than one-by-one in Security Detail View, Edit Price History.

  2. To avoid having the multiply the factors x prices each month to get the current market value, I keep each GNMA as 1 share regardless of the number of shares actually held. By that means, I can just copy the current market value from the monthly statement instead of having to do the multiplication.

To set that up, I made a one-time stock split entry for each GNMA. For example, if I actually hold 350 units of a GNMA and they're worth a total of $3500, I split it 350:1 so Quicken thinks I actually have 1 unit worth $3500. Quicken complains each month that the GNMA holdings don't match the FI figures, but I just cancel that.

I certainly don't think this is a good scheme, but as long as Quicken lacks a method to automate the GNMA factors, it's what I do to minimize the manual labor.

Doug

proportional

Reply to
Douglas Dawson

Dear Doug

So glad to hear I am not the only one!! I too considered selling all my GNMA's also just to get rid of the problem.

Thank you. Right now I am just happy to finally (!) get the correct market value in Quicken by editing the Portfolio view. Your additional ideas sound good too and I think I will implement them at the next download from my FI.

What do you mean by "I just cancel that"? I am still not that proficient with Quicken. Do you mean you delete whatever placeholder Quicken places for that GNMA or do you do something different?

Thank you for helping. You at least know how frustrating this is. I hope someone with connections to Quicken brings it up to their tech staff. It is not that rare an investment.

Jeff

Reply to
Jeff

Hi Jeff,

Thanks. "Misery loves company."

You asked about this comment of mine:

Every time you finish accepting downloaded transactions from your FI, Quicken (or at least my Q2005P) automatically compares the holdings listed in your account with the holdings list from the FI. If they match, nothing appears. If they don't match, an Adjust Holdings Amount window appears offering to adjust your account holdings to match those in the FI's list. If you click "Adjust," Quicken will add or remove shares from your account to make it match the FI's figures. Because I keep each GNMA as just one share, Quicken points out the discrepancy between my figures and the FI's each time I finish accepting downloaded transactions. I don't want Quicken to adjust for the GNMA discrepancy, since I deliberately created it, so I just click Cancel and the window goes away without making any adjustments.

If you're curious, you can ask Quicken to make a holdings comparison at any time:

  1. Select Online Center from either the Online or Investing menus.
  2. Select your FI from the drop-down list.
  3. If you have more than one account at that FI, select the account from the drop-down list.
  4. Click the Compare to Portfolio button.
  5. You'll either get a message that everything matches or you'll get the Adjust Holdings Amount window, as above.

Doug

Reply to
Douglas Dawson

Thank you very much. I greatly appreciate all the help.

Jeff

Douglas Daws> Hi Jeff,

Reply to
Jeff

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