A lot to like about this week

Junkster

Not a lot of excitement considering the S&P and Dow are at/or whispers from all time highs. That is always a good sign. Junk bonds at all time highs 4 of the past 5 days and completely ignoring the rout in oil this week. Advancing volume over declining volume one of the best of the year today. Poor junk bonds, they get no respect. Yet since the turn of the new century have beaten the revered VBINX and VFINX. And I don't mean that sarcastically as I believe nearly all investors would be better off in the latter two funds. Instead it seems most investors are more fixated constructing the "perfect" diversified portfolio than accumulating wealth. Some can't seem to shake the fear of another 2008. Witness the long thread about......... which are under water the past 3 and 5 years. I realize I am a short term trader who will not tolerate losses, but still, how does holding funds that are under water 5 years running add to one's retirement nest egg??

SlowLane

What a week for junk! One thing I don't like about the week is that I am not fully invested in corp junk. I still have 30% in muni junk and 10% in PFORX. @Junkster - I like your WAHYX and I also own ABHIX and PYHIX.

Junkster

SlowLane said:

What a week for junk! One thing I don't like about the week is that I am not fully invested in corp junk. I still have 30% in muni junk and 10% in PFORX. @Junkster - I like your WAHYX and I also own ABHIX and PYHIX.

I got off the muni wagon too soon and won't be going back. Junk at least for now is outperforming. I thought they rang a bell several days this week when junk was up in the face of some severe daily oil declines. I ramped up so today was nice. But WAHYX lagged and I hope that was an anomoly. All I have in the bank loan category is RSFYX. Hopefully junk will be less volatile going forward but if oil drops back to 40 who knows. Seems anything with a yield is working this year. Had to look up PFORX. Looks good!

Mindy

Willie Sutton Rule - A somewhat apocryphal axiom that stresses the need for an individual to focus on activities that generate high returns, rather than on actions that might be frivolous or yield lower returns. The rule derives its name from notorious U.S. bank robber Willie Sutton, who when queried by a reporter about why he robbed banks, famously quipped "because that's where the money is." http://www.investopedia.com/terms/w/willie-sutton-rule.asp

heezsafe

Yes, a week of normal breathing and regular heart rate. A nice respite. But as this continues, and the financial MSM only pumps up the positive to keep the momo going (in their service to the industry), it might be smart to start looking for trouble developing under the covers, as all good runs come to an end someday. In that regard, here are some data and commentary I ran across by Wolf Richter on his blog last week; all is not well in the shadows.

http://wolfstreet.com/2016/07/01/investors-fleeing-junk-bond-funds-leveraged-loan-funds/

http://wolfstreet.com/2016/07/06/big-unravel-u-s-commercial-bankruptcies-skyrocket/

catch22

Hi @Junkster
Yup...........several years ago we held about 65% junk for a long time frame. Currently, we hold 52% of total in investment grade bonds (gov't. and corp.) No junk at this time.

YTD to date, today:
--- IEF = +9%
--- HYG = +9.3%
--- LQD = >11%
--- EDV = >30%
--- ZROZ = >31%

'Course, there have been a few time frames since the market melt when most bonds and equity move up together for awhile.
After this initial bump and grind since the BREXIT, equity and bonds traveling similar return rate paths. One and I may find this interesting, almost too interesting.
I expect money traveling in many directions the remainder of this year, looking for the overbought to buy some oversold.
Tis a lot of hot cash still roaming about looking for a bit of value, even if for a week or two.

I believe "bumpy ride" has arrived for a stay.

Regards,
Catch

Junkster

heezsafe First article outdated and reflects the Brexit exit from junk bonds. Have you checked the most recent heavy inflows? And the author is completely off base about how much HYG remains off its 2014 highs. Like so many he is only looking at price, not total return.

catch22 Wouldn't it be nice if you resumed your weekly bond commentary? Many of us enjoyed that.

davidrmoran

FAGIX shows real nice work since Notkin took over, in summer '03. You could make a really strong and fine case for active management and broadish diversification from having been a third in it, FCNTX, and FLPSX the last 13y. Forget balanced funds, make your own.

heezsafe

Junkster Yes, that part of the first article was obviously outdated; I posted the link for the other stuff therein. Good point about TR vs NAV, I hadn't considered that, but then I just don't pay much attention to "highest in 92 weeks!""first time under 52-wk moving average since Nov2014!""lowest spreads since 2012!" kind of ephemera--- because half the time it's just crap wrong, and the other half the time it's not useful/actionable. Just mind clutter. But as catch22 notes, there seems to be a lot of desperatehot money roaming around out there, that doesn't really know what to do with itself in the present bizarre situation, so everything could change again, wholesale, by next Friday.

Old_Skeet

Hi @Junkster,

If I was as good as you are at picking the movement of certain asset classes that trend to have good upward market movement and potential I'd probally be more of a trader as you are. However, the way I've made good money is to put money to work when stock valuations are low and then, over time, sell some off as the market advances with stock becoming overbought. This is the primary reason that I am sitting on a sizeable sum on cash within my portfolio. When stocks have bcome fully and richely priced as they are today I've learned to buy during pullbacks and then rebalance reducing my allocation to equities as they advance and recover. Just about all of my long term investment positions have produced positive returns for me through the years; and, if my largest holding FKINX went to zero on it's nav I'd still have made money because the amount of income distributions I've collected from it through the years.

Althouh, I don't like seeing negative years in the markets they do happen with several five to ten percent pullbacks usually happening each year. One of the things that gives me staying power is the income my portfolio generates as it is more than enough to statisfy my needs and I believe over time the markets will recover plus this provides me an opportunity to do a little buying when the pullbacks come and as the markets recover sell some off (buy low, sell high). Indeed not rocket science, just a strategy.

I sincerely appreciate hearing about the success of others and what they are doing from time-to-time ... you especially. I know you have a good following and I also enjoy reading your post. I sincerely wish you good investing & trading during these difficult markets. Know though, sometimes, fast money has been known to push asset valuations skyward just to sell down these assets and watch the sky fall leaving some in their wake.

Take care ... and, keep posting.

DanHardy

I think the question for stocks is: Are they in a trading range or will they brake out?

I'll go with they are in a trading range. Oil will probably keep it so.

http://www.marketwatch.com/story/oil-falling-below-40-a-barrel-again-isnt-out-of-the-question-2016-07-08

The ^Rut has over 100 pts to go to its last high.

jstr

Junk bonds have performed best in the months of Dec, Jan, and Feb.
Since 1986 using PRHYX *, median 3 month returns = 3.8%
3 loss periods:

1986 5%
1987 6%
1988 7.40%
1989 2.80%
1990 -6.40%
1991 7%
1992 6%
1993 7.10%
1994 2.30%
1995 5.30%
1996 3.40%
1997 4.30%
1998 4.70%
1999 1.40%
2000 2.10%
2001 9.20%
2002 0.0%
2003 3.70%
2004 3.90%
2005 2.30%
2006 2.70%
2007 3.60%
2008 -3.60%
2009 6.70%
2010 4.30%
2011 5.60%
2012 8.80%
2013 3.80%
2014 3.40%
2015 1.20%
2016 -3.20%


* T. Rowe Price High Yield Fnd Inc.