4 replies to this topic

[Scott-stock]

Hi has anyone heard from Gary, he is an expert on High Yield Funds? Thanks

[vitaminm]

Hi has anyone heard from Gary, he is an expert on High Yield Funds?
Thanks

What's TA on HYG?

[arbman]

We would all appreciate if he could tell us how he sees the market at the moment, I know he was kind of bearish in early July with respect to the credit markets...

[Gary Smith]

We would all appreciate if he could tell us how he sees the market at the moment, I know he was kind of bearish in early July with respect to the credit markets...

Kisa, junk bonds have historically been the most trend persistent market out there and once trends are in place they usually stay in place (with very little counter trend moves) for extended periods of time. It could be different this time but for that reason I have no incentive to be long junk here as junk topped in late May/early June. I'm referring to the cash junk market as best represented by the open end funds such as PRHYX and not the more volatile closed end funds ala DSU or PHK.

A junk collaspe hasn't necessarily meant the end of the world for stocks. In the worst bear market for junk in 89/90 stocks did fine. The brief 90 bear market in stocks was more from the Irag war than anything to do with the seizing up in junk. Of course, the world now is more dependent upon junk as a financing tool for mergers and acquisitions than back in 89/90 so if junk were to really unravel here it could have more dire consequences. The default rate among junk rated corporations globally is still near 25 year lows. If defaults begin picking up that could certainly have an adverse impact on markets other than junk.

Here's an interesting tidbit I read the other day. Since June 22, 46 leveraged financing deals have been pulled globally representing more than $60 billion in funding. The number of deals pulled last year was zero.

I don't concern myself as much with overall market direction as I only trade individual equities. I try to focus on the rising trenders, cup and handle formations and the like. Hope all is well in your trading.

[arbman]

Thank you, the US markets have been going up with the M&A news for some time, the financing is very important for this reason. Many international tech companies openly said that the depreciation in the USD helped 2% in their bottom line and profit growth last quarter. So, tighter credit should also lift the USD and this is a direct erosion of the earnings growth in the Qs ahead. I can not imagine the market making new highs like 2006 or earlier this year, but rather a trading range for a while at least...