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!!!