A few blog viewers it appears looked like this guy, per my positions of being “LONG” High Yield mutual funds (junk bonds) and “SHORT” Government Bonds (TBF)…….AT THE SAME TIME! I received several emails and a few comments, wondering why long one type of bonds and short another?
Some seem to think these two act the same or have high correlations. Check out the action of JNK and TLT over the past couple of years!
CLICK ON CHART TO ENLARGE
Couple of thoughts…#1 First and foremost, I look at patterns for each, as individual holdings. #2 Please note in the above chart that sometimes these two move up together at (1), move down together at (2), move the opposite at (3).
I have suggested to own HIGH YIELD FUNDS for MONTHS….due to price action; nothing more than that. I suggested to BUY TBF (inverse bonds) due to yields hitting the bottom of the 17-year falling channel and creating a bullish falling wedge; suggesting higher rates, lower govt. bond prices were in store. (see this post).
Hope this helps viewers see that I am looking at what the “Power of the Pattern” can accomplish for us, with no assumptions per correlations or lack thereof! Sorry for any confusion…I know I am good at it. Will work on being less so!!!
You trying to ruin my Christmas??? 😉
They have worked for over a year, above all resistance, above all key moving averages, new highs for the year for all of the funds. Crowded? Very well could be. Working? Big time!!!
I am amazed how many struggle with the 500 index’s back and forth and at the same time they have missed this smooth ride, plus good dividends. I just don’t get it! Just like the quiz, if you didn’t know what these charts were (of the high yields) what would you do….they would own them, yet due to some info they have read….oh stay away! Even though price action is excellent.
As you have seen me say, “my goal is to inflate portfolios, regardless of market direction!” Many sure have missed the opportunity on this category.
I rent versus own this, if the worm turns… harvest!
The trend may last awhile longer but high yield bonds are a very crowded trade.
maybe a quick primer in correlations and their meaning/use is in order so that people who are unfamiliar with the terms become less confused.
But regardless, as we learned in 08/09: when the poop hits the fan, all correlations go to 1!
So junk bonds (riskier) parallel the stock market (riskier), but 20+ year Treasuries (safer) don’t, at least within the timeframe of the graph, which overall is a period of low interest rates?
Ever since I became a patient grasshopper, I’ve been doing a lot better in the markets trading futures contracts.
Yes it helped. Excellent explanation.
Did this help any? I have worked on the charts for 20-years, sometimes decent in that art form. Creating clear messages, I can IMPROVE!!!
Keep the questons coming so I can get better.
Excellent. Thank you.
Too good at confusion? Nah. You are just too good at what you do. It’s a case of the professional and the amateur.