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Wow, what's up with junk bonds today?
12-18-2008, 11:57 AM
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#1
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Wow, what's up with junk bonds today?
HYG (a junk bond ETF) is up 6.6% today. Maybe it's only a head fake, but junk bonds and small caps are often the first asset classes to start rising in a market recovery. May bear watching for a while. If it looks like junk and small caps are outperforming for a while, it could be a good sign.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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12-18-2008, 12:01 PM
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#2
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Moderator Emeritus
Join Date: May 2007
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That could be a nice change for VWEHX... Down 27%+ this year.
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12-18-2008, 12:56 PM
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#3
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Give me a museum and I'll fill it. (Picasso)
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Ya I bought VWEHX a month ago and It promptly went down almost 10%, and the GNMA fund I (partially) sold went up 1%. With an SEC yield of 13+%, it looks a bit more attractive than the 0% T-bills, perhaps people are getting greedy again.
Either that or the value of VWEHX and HYG, Detroit 3 bonds rose a bit.
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12-18-2008, 02:21 PM
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#4
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Give me a museum and I'll fill it. (Picasso)
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people have figured out that it is a better place to put your money than US treasuries for interest and appreciation.
HYG was pricing in a depression - people now thinking that might not happen.
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12-18-2008, 03:19 PM
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#5
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Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 2,610
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Seems to be a reasonable concern that MM funds could get close to or at 0% yield..Tons of bucks hiding there that is probably looking for a home.
I bought some FHIFX today --yield ~ 13%
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12-19-2008, 08:43 AM
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#6
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Recycles dryer sheets
Join Date: Aug 2005
Posts: 380
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Yesterday's rise prob due to leaks about the bailout of auto industry announced today. HYG prob holds paper from this sector.
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12-19-2008, 12:19 PM
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#7
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Give me a museum and I'll fill it. (Picasso)
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 Quote:
Originally Posted by SteveL
Yesterday's rise prob due to leaks about the bailout of auto industry announced today. HYG prob holds paper from this sector.
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Well, it IS a junk bond high-yield bond fund...
But the Lord giveth, and the Lord taketh away. Both TIP and HYG are down today...
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12-19-2008, 12:22 PM
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#8
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Give me a museum and I'll fill it. (Picasso)
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Quote:
Originally Posted by HFWR
Well, it IS a junk bond high-yield bond fund...
But the Lord giveth, and the Lord taketh away. Both TIP and HYG are down today...
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Small caps are still way up, though, and outperforming recently.
Continue to watch these two sectors -- small caps and junk. As I said before, these asset classes often lead market recoveries.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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12-19-2008, 12:46 PM
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#9
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Recycles dryer sheets
Join Date: Aug 2005
Posts: 380
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There is an economist on Tech Ticker today who has called correctly most of what has happened in the economy. Anyway, he says no recovery before 2010, and then only maybe!
http://finance.yahoo.com/tech-ticker/article/149057/He-Saw-the-Crash-Coming-What-Gary-Shilling-Sees-for-2009?tickers=^dji,^gspc,^ixic,SPY,DIA,TLT,UUP
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12-19-2008, 12:52 PM
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#10
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Give me a museum and I'll fill it. (Picasso)
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I put little stock in the people who have "correctly called" most of this bad market and economy, especially since so many of them have been making this "call" for a decade or more. A broken clock is right twice a day, but that doesn't mean I always want it keeping time for me.
Elaine Garzarelli made a career out of "calling" the crash of 1987 and for a while after that, she was the bees knees in the financial media. Everyone wanted her opinion of everything. As often as not, it turned out to be wrong.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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12-19-2008, 12:55 PM
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#11
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Moderator Emeritus
Join Date: Feb 2005
Location: San Diego
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Quote:
Originally Posted by SteveL
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Hmm, I wonder what "called correctly most of what has happened in the economy." means? Depending on how you quantify that most everyone on this board could claim this statement.
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12-19-2008, 05:01 PM
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#12
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Moderator Emeritus
Join Date: Dec 2002
Location: Oahu
Posts: 26,860
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Quote:
Originally Posted by laurence
Hmm, I wonder what "called correctly most of what has happened in the economy." means? Depending on how you quantify that most everyone on this board could claim this statement.
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I think that would have to read "retired on his Caribbean yacht with his retinue of servants & retainers..."
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12-19-2008, 07:56 PM
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#13
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Give me a museum and I'll fill it. (Picasso)
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The high yield index currently yields ~22%. At that yield you'll break even if you assume a 75% default rate over the next 5 years and a 20% recovery in default . . . we're pretty much pricing in the Apocalypse. That doesn't mean that prices can't continue to fall and price in the Apocalypse^2, but bonds are cheap.
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