Diesel Prices Hit a Record: The Inflation Wildcard Wall Street Is Underestimating

SPEAKER_1 (0:01)

This is InvestTalk from KPP Financial, helping investors make sense of the markets one day at a time. Here's your host, Luke Guerrero.

Luke Guerrero (0:16)

Good afternoon, fellow investors, and welcome back to InvestTalk. I'm your host, Luke Guerrero, and it's Tuesday, September 8th, 2026 Now, I hope each and every one of you listening out there had a restful and relaxing weekend. I know over here in Southern California, it has been particularly hot and humid. In a shocking turn of events, Wednesday, I read the real feels supposed to be 117 due to humidity, so not looking forward to that, but I digress because today's show is, in the same way, every other show is about you, about your finance and investment questions, about your education.

And because that's the case, before we talk about the market today, before we run down our show topics, why don't we tackle this color question now?

SPEAKER_3 (1:14)

I was just wondering what you think of PIMCO Dynamic Income Fund PDI just as a dividend play. Thank you for your answer on the podcast. Thank you.

Luke Guerrero (1:25)

The PIMCO Dynamic Income Fund is a fund that we actually get pretty decent amount of questions on, although it has been quite some time since I have at least received them. Maybe Justin has, but it's a bond fund. It is actively managed by PIMCO. It is 1.1% in terms of its expense ratio. And people like it because of the income component.

Now, it's 30 day SEC yield. For some reason, this number is not on here right now. Interesting. Either way. Okay, so it is about 14 to 15% is what its forward yield is. So that is definitely one of the highest in the market right now. It uses a bit of leverage to amplify returns. It holds high yield bonds. It holds emerging market debt. It holds mortgage backed security. So there's a little bit of credit risk there as well. But the most important thing to know about this fund is it is a closed end bond fund. And so the difference between a closed and open end fund is a closed end fund is a fixed amount of shares, meaning you were buying shares from another investor. Meaning as opposed to an open end fund, where you're buying directly from the mutual fund and a share is created at net asset value for you.

Meaning you can actually get this thing at a premium or at a discount. Now this particular fund typically trades at a premium. Currently at about 7 to 8% it looks like is its premium to NAV. That is definitely below its five year average. But because of the manager being PIMCO, this fund typically does trade at a premium. Another important thing to note, which we always mention as well, is that net investment income only covers about 45% of the distribution. What that means is that in effect, more than half of the payout comes from return of capital or unrealized gains. And NAV has been in a long-term downtrend. The high yield looks great, but your principal is slowly shrinking. So that 14% yield, it's not a 14% return, it is a meaningful portion of it is your money being handed back to you. Now, if your income focused, if you understand what NAV erosion is and the trade-off of NAV erosion, maybe this might make sense for you. But if somebody is seeing this thing and sees 14% yield, you know, 12 to 40% yield and thinks it's risk-free, it's not. If you're worried about a downtrend in the economy, this is a heavily leveraged, high-yield fund. It is one of the riskier places to be. So understand what you own is always the number one rule. In this case, understand the dynamics of a closed-end fund and what that means for your share of its net asset value over time. For most people, I don't think PDI makes sense. That is the PIMCO Dynamic Income Fund. Thanks for the call.

We had a great show for you last Friday. And of course, yesterday, we brought you a best of episode. But last Friday, we talked about something that is thorn in the side of a lot of Gen Z people and they don't realize it yet. That's because sports betting and investing have started to compete for a lot of Gen Z people for their finite capital. We also answered a listener question on ticker SPY. So if you happen to miss it, go check it out. The best way to get every show is to follow InvestTalk wherever you get your podcasts. Now on to today, where our main focus point is about something close to home, diesel prices, because they hit yet another record, and in a lot of ways, fuel inflation, specifically diesel pricing, is a bit of a wild card that Wall Street is underestimating.