A disappointing day. Once again my gold positions (DGP, GLD) bailed me out. That’s not a good sign.
Corporate bonds are getting the nod from numerous quarters. I painted that picture last week: junk bonds historically have a 4 1/2% default rate but have recently been priced to indicate a default rate of 21%. Either a huge opportunity or a forecast of what is coming next. I did a little work on junk corporate inventories and found them filled with banks I wouldn’t own or soverign country issuers I don’t understand. I think I’d rather own a fund, but not a mutual fund. I would rather own an ETF that can be quickly sold or a Closed End Fund (CEF). I bought JNK last week after writing about it. It has a scary 15.5% yield. Yield hogs usually get slaughtered so I have a tight stop.
In yesterday’s Barrons two Pimco bond funds were mentioned: PTY which yields 13.8% and PCN, yielding 13.3. Both were up about 4% today, probably due to the mention. I have owned both of these at various times but got scared/stopped out each time. Both trade with a 6-8% premium which can probably be credited to Bill Gross, the well known head of Pimco. You can do homework here:http://www.allianzinvestors.com/closedEndFunds/
LQD is a corporate bond ETF yielding 5.5%. It is only 9% below its 52-week high. Encouraging volume has been building for these shares over the last month.
