The world of high-yield corporate bonds has been obediently charging higher for years, right along with equities. However, if you scrutinize what’s been happening recently, you’ll realize that momentum is definitely waning. Look at the three trendlines I’ve drawn below; they’ve all been violated (the red one extending back to the early 2009 bottom). If nothing else, it seems the glory days for gains in the world of stuff like HYG and JNK are behind us for a while.
Just about the only major equity ETF that I’ve been comfortable shorting has been Brazil (symbol EWZ). All eyes are on Brazil now, obviously (sort of like all eyes were on China in the summer of 2008 for the Olympics), and who knows how much of the run-up with Brazil was related to World Cup fever, but the chart is showing far more weakness than what you’d expect, given the insane strength of world markets. We’ve been in about a ten dollar range for the past fourteen months on this instrument, and we’re still very much on the high end of that range.
If there’s one fund that neatly captures the suckitude of being a bear the past 2.5 years, it is the Ranger Equity Bear ETF. It describes itself thusly: “The investment seeks capital appreciation through short sales of domestically traded equity securities. The Sub-Advisor seeks to achieve the fund’s investment objective by short selling a portfolio of liquid mid- and large-cap U.S. exchange-traded equity securities, The Sub-Advisor implements a bottom-up, fundamental, research driven security selection process that seeks to identify securities with low earnings quality or aggressive accounting that may tend to mask operational deterioration and bolster the reported earnings per share over a short time period.”
Well, the bottom-up, fundamental, research-driven security selection produces results like those below, which is no surprise, in a centrally-planned economy like ours (and take note, this is not a leveraged fund!) The brief lifts in 2011 and 2012 have given way to a steady descent, topped off nicely by today’s lifetime low, as Yellen has her tiny hands around the market’s neck.
My “balanced” Slope of Hope continues with another bullish idea – commodities. That is, symbol DBC, shown below, which I am long. In spite of what your government is telling you, inflation is heating up, and as the central banks of the world force their servants/masters (the big banks themselves) into spewing ever-more cash into the economy, you’re going to see this launch like a rocket.
Well, if there’s one thing you can count on in this life, it’s the insatiable, pig-like greed of the American retail consumer, who spends their collective life endlessly acquiring goods to fill the gut-wrenching emptiness of their lost souls (as you will note, I didn’t make the cut as the spokesman for Consolidated Retailers of America). The XRT fund is breaking out of its triangle, suggesting that retail could be in for continued strength.