Junk Bonds

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How To Make Sense of a Pathological Rally

By Michael E. Lewitt, Global Credit Strategist, Money Morning • @MichaelELewitt - March 20, 2016

Stocks rallied for the fifth consecutive week, erasing the losses suffered by the Dow Jones Industrial Average and S&P 500 to start the year. Fears of recession have receded and investors are now fretting that they may miss out on the next big thing if they don't dive back into the markets.

They should be careful what they wish for.

While it may be gratifying that the market didn't fall completely out of bed in the first quarter, there is still ample reason to believe that we are in a bear market and that recent gains are going to reverse sooner rather than later. One reason stocks rallied last week was that the Federal Reserve once again refused to take an opportunity, when market conditions were relatively stable, to raise interest rates. That leaves only investors to worry about when it might actually decide to do its job.

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Article Index

How To Make Sense of a Pathological Rally

By Michael E. Lewitt, Global Credit Strategist, Money Morning • @MichaelELewitt - March 20, 2016

Stocks rallied for the fifth consecutive week, erasing the losses suffered by the Dow Jones Industrial Average and S&P 500 to start the year. Fears of recession have receded and investors are now fretting that they may miss out on the next big thing if they don't dive back into the markets.

They should be careful what they wish for.

While it may be gratifying that the market didn't fall completely out of bed in the first quarter, there is still ample reason to believe that we are in a bear market and that recent gains are going to reverse sooner rather than later. One reason stocks rallied last week was that the Federal Reserve once again refused to take an opportunity, when market conditions were relatively stable, to raise interest rates. That leaves only investors to worry about when it might actually decide to do its job.

Read More…

What the World's Leading Energy Sector Insiders Fear Most

By Dr. Kent Moors, Global Energy Strategist, Oil & Energy Investor • @KentMoors_OEI - March 14, 2016

There's a lot of conversation about the energy sector's accelerating debt crisis. The bottom line is simply this.

Regardless of where the crude oil price moves from here, there is little likelihood that any rise in the level will be large (or happen soon) enough to save most companies mired in a vicious cycle of ever more debt.

But don't worry, because you'll be prepared. These five charts will help you put the situation into perspective and even prepare for the fallout...

What Are Junk Bonds?

By Jack Delaney, Associate Editor, Money Morning - February 24, 2016

The word "junk bonds" gets thrown around a lot, and investors mainly know about these investments because of the high returns that are promised.

But what exactly are junk bonds, and should one be in your portfolio?

We break down everything you need to know, and we also have alternative investments that you need to be aware of if you want to protect your portfolio...

How to Get Aggressive and Profit from the Junk Bond Market Crash

By Shah Gilani, Capital Wave Strategist, Money Morning • @WallStreet_II - January 4, 2016

You've just got to love the junk bond market. It's sent stocks on a nice year-end rally for us, and the profits have been sweet.

But don't fall in love with those stocks at these highs. The "help" they're getting from high-yield debt isn't going to last.

In fact, I believe the lull in the junk bond market is going to end in the first quarter of 2016. And I think the ugly sell-off will resume, and that storm is going to take stocks all the way back to their August 2015 lows - and possibly a lot lower.

A lot of people could lose big - well into the double digits - but I'm not worried at all. And when you see the perfect trade I'm about to show you, you'll be ready for the sell-off, too.

Now, this is a bold trade for sure, but it's an easy one, with limited downside risk. And even better, it will let us clean up when the carnage hits next quarter...

Sorry, Barron's… The High-Yield Bond Rout Is Just Beginning

By Michael E. Lewitt, Global Credit Strategist, Money Morning • @MichaelELewitt - December 23, 2015

Last week, Barron's recommended that investors start buying beaten-up high-yield bond funds that are trading at big discounts and yielding 10% or more.

Their advice: "Take advantage of this rout in risky debt."

Not so fast! Some stocks are discounted for a very good reason: Buying them could cost you money...

Warning: High-Risk "Junk" Bond Squeeze Headed for Oil Market

By Dr. Kent Moors, Global Energy Strategist, Oil & Energy Investor • @KentMoors_OEI - February 27, 2015

High-risk junk bonds finance large portions of the energy markets. According to the latest estimates, energy-related issuances now account for almost 15% of the total $1.4 trillion junk-bond market.

That's about $210 billion in high-risk debt.

But recent credit rating downgrades could put oil companies and bond investors in a squeeze...

Are Junk Bonds About to Become a Victim of Their Own Popularity?

By Don Miller, Contributing Writer, Money Morning - May 2, 2012

In our current low-interest-rate environment, many investors are widening their search for more income by buying junk.

Junk bonds, that is.

More formally known as high-yield bonds - junk bonds have been on a tear lately.

With the Federal Reserve vowing to keep interest rates at or near zero through 2014, investors seeking higher-yield investments are eyeing junk bond exchange-traded funds (ETFs).

Investors dumped $31 billion into high-yield bond funds during the first quarter of 2012 according to research firm EPFR Global. That's almost four times the global demand for junk-bond funds in 2011.

Here's why.

Junk bonds are offering generous dividends at a time when most other bond investments aren't even matching the rate of inflation.

"Clients are essentially trying to replace the income they used to get from their government bonds," Hans Olsen, head of investment strategy in the Americas for Barclays Wealth, told Bloomberg News.

Indeed, one of the largest junk bond exchange traded funds, the iShares iBoxx High Yield Corporate Bond (NYSEArca: HYG) is currently yielding more than 7%, while yields on the 10-year Treasury note hover just above 2%.

But while robust demand and issuance for junk bonds is a sign of a healthy market, there are reasons for concern.

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