Tuesday May 20, 2014
Here is a dose of reality on what the economic numbers really mean. As he says, stock prices suggest we are on the cusp of a breakout, but bond prices suggest something is wrong. The FED bond buying put stocks this high rather than fundamentals.
Page One Today
Triple C bond yields fell to the lowest on record, 8.187% on the BA Merrill Index.
Page A 13
Alan Blinder notest the FED really has no idea how to extricate iteself from buying bonds.
Page A2
The gap between CCC bonds and governments is 6.97%, the lowest since Nov 2007. The all time low was 4.14% hit earlier this year.
And of course November 2007 witnessed the top in the stock markets before eveything began to tank.
Franklin AGE High Yield Fund
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How risky is this, well about twice as risky as it was in NOv 2007, ie, the price has about doubled. Unless of course one thinks the rise from 1.20 is 'normal.'
This is the Morningstar evaLuation of AGE, I would disagree with the interest rate sensitiviy but admittedly a high yield fund is a stock in drag, it rises with the stock market. But of course AGE has risen way more as retirees risk their life savings in as shown, the very lowest credit quality bonds.
Utilities and REITs continue to outperform as well as Master Limited Partnerships.
We will be watching the NASD this week for whether as John Murphy suggests it is firming or in fact just teasing investors at its support level.
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