Monday, November 19, 2018

High Yield: Well Would You Look at that (HYG, JNK)

A trend appears to be emerging.

HYG iShares iBoxx $ High Yield Corp Bd ETF daily Stock Chart

The Corporate Bond Market Is Getting Junkier
"Huge U.K. Bond Fund Manager Fears High Yield, EM ETF 'Liquidity Blowout', Buys CDS Protection"
"Europe's Junk Bond Bubble Has Finally Burst"
Knowledge@Wharton: "How Junk Bond Funds Can Be an Early Economic Indicator"
"Marxism Has Cornered the Junk-Bond Market"
"Will the 2018/2019 season be the most exciting onion campaign in years?"
"IMF Sounds The Alarm Over Junk Bonds"
Bond Guru Martin Fridson Erroneously Refers To The Financial Times As "Salmon Colored"
Howard Marks' Oaktree Capital Spots A $1 Trillion Opportunity In The Coming Bond Crash
A Couple Comments On Junk Bonds Predicting Equity Moves
"Paul Tudor Jones: Corporate Credit Will Cause the Next Crisis"
In Which FT Alphaville Goes All Oliver Twist on Us
"IMF Sounds The Alarm Over Junk Bonds"
Factors: "Size matters, if you control your junk" Asness et al
Lowest Rated Investment Grade Debt
Following Up On: "The Coming High Yield Downturn Will Be Big, Long, And Ugly" " (HYG; JNK)
The old timers used to get very somber when talking about the 1973-1974 equity bear market.
The thing, they said, was that it just kept grinding lower and lower, for 694 days.

By comparison the 2007-2009 decline lasted 517 days, though deeper at a 54% drop in the DJIA versus 45% (43% on a closing basis) for the index in the earlier bear.
On the London Exchange the 73-74 collapse was 73% in the FT 30 and 68.5% for the wider market.

But then there was the inflation. 
British inflation rose 10.6% in 1973 and 19.1% in 1974. And although lower, the comparable figures for the U.S. were the same order of magnitude, 8.7% and 12.3%. 
The inflation adjusted declines were thus just that much worse and among the worst real returns in history—excluding of course the Berlin Stock Exchange up to 1945 and the FX market for the shekel/denarius cross in the year 70, what with the destruction of Jerusalem and the Temple and all.

Anyhoo, all this is prelude to a simple chart, the SPDR Bloombergg Barclays High Yield Bondd ETF, symbol JNK:
As can be seen, this little beauty is not doing well, not well at all if you own it and if we are reading the portents correctly the next couple years could be even worse for junk bond holders.
Here's June 7's "The Coming High Yield Downturn Will Be Big, Long, And Ugly".
That gets us back to June. Yes we've been a bit obsessive about this.