They are the first sign of an imminent financial crash.
Looks like 9/11 anniversary false flag and nuking of Chicago maybe be well-timed.
"Like stocks, junk bonds show investor jitters" by Steve Rothwell | Associated Press August 13, 2014
Jitters?
We are at record highs, the economy is roaring, and the rich are doing fabulously!
Jitters!
The stock market isn’t the only place that’s been seeing jitters among investors. The $2.3 trillion market for US corporate debt that’s deemed risky has also been under pressure.
Related: Corporations Sitting on $1.8 Trillion in Cold Hard Cash
It is now up to 1.95 trillion, so the second quarter must have been huge for them!
Last month, a five-year rally in junk bonds stalled abruptly. As with other higher-risk investments, investors have pulled back mainly because they worry about the end of the Federal Reserve’s policy of near-zero interest rates. Investors expect the central bank to raise rates sometime next year, and that means the value of bonds currently held in portfolios will fall.
Junk, or high-yield, bonds are sold by companies with relatively high debt in comparison to income. If yields on safer bonds like Treasurys were to climb, they would draw more investor interest. Companies selling junk bonds would then have to increase their yields to compensate investors for the higher risk. Doing so would diminish the value of junk bonds currently in circulation.
*****************
Junk-bond yields have fallen so far that many investors now feel the risks outweigh the potential return.
I wonder who is selling short out there.
Five years ago, the average junk bond yield was 11.5 percent. By June, it had dropped to a record low of 4.83 percent, according to Barclays. As a result, investment advisers have become less enthusiastic about junk bonds.
There is often some role for high-yield bonds in investors’ portfolios, but ‘‘there’s a time to dial it up, and a time to dial it down,’’ says Darrell Cronk, at Wells Fargo Wealth Management. ‘‘Now is a time to dial it down.’’
Cronk says junk bonds may continue to slump as the economy improves and investors push up Treasury yields in anticipation of the Fed nearing its first interest rate increase since May 2006.
‘‘The risk-reward trade-off is not that attractive anymore,’’ says Collin Martin, with the Schwab Center for Financial Research. ‘‘We just don’t think that investors are being compensated for the risks involved in high-yield bond investing.’’
Related: Investors Pull $7.1B From Junk Bond Funds
The market for risky bonds has become more mainstream since the 1980s, when trading was dominated by Michael Milken and his now-defunct firm Drexel Burnham Lambert. In those days, the market made headlines for helping to fund takeovers of companies such as RJR Nabisco. Milken’s reign as the king of junk bonds ended in 1989, when he pleaded guilty to securities fraud, defrauding a mutual fund, and other felonies.
Investors plowed $55.01 billion into junk bond mutual funds last year, more than double the $22.1 billion total for 2009, data from the Investment Company Institute show. The signs now suggest that investors have started pulling back. As the high-yield market started to wobble in June, investors withdrew $4.9 billion, according to ICI data.
The recent outflows came after Fed chairwoman Janet Yellen said she was concerned that investors were becoming complacent about the risks of investing in high-yield bonds.
In June, Yellen said the market was showing evidence of ‘‘reach-for-yield’’ behavior, when investors focus on return irrespective of risk.
I'm sure you will bail them out.
*****************
Some investors say the fall in junk-bond yields is justified because the risk of companies defaulting on their debt has declined.
Then why are people pulling money out?
Company executives have taken a more cautious approach to managing their businesses, says James Keenan, a managing director at BlackRock who oversees its corporate bond business. Instead of spending money on expansion, they’re focused more on paring debt. Many companies have used the proceeds from bond sales to refinance their existing debt at lower rates.
How many jobs does that create?
‘‘We’re in an overall pretty healthy economic environment, and most of these corporations have pretty stable balance sheets,’’ Keenan says.
Related:
“If you ignore high levels of unemployment and inequality, is the economy has been performing very well.”
That just about sweeps things up.
The number of companies defaulting on debt has fallen significantly since the Great Recession ended in June 2009. That year, 195 US companies defaulted on $516.1 billion of debt, according to Standard & Poor’s. By 2013, the total had dropped to 45 companies defaulting on $64.9 billion.
I can imagine one default is good, but whatever. Is there anyone who gives a $hit what lies money-junkies and their ma$$ media mouthpieces tell anymore?
Investors should see the recent sell-off as an opportunity to buy, providing that defaults remain low, says Gershon Distenfeld, director of high-yield debt securities for AllianceBernstein. Since the sell-off, the average yield on junk bonds has climbed from the record low it reached in June to 5.64 percent.
But investors should also expect lower returns. Junk bonds have delivered a sizzling average annual return, including interest payments, of 12.6 percent over the past six years, according to Barclays. In coming years, Distenfeld foresees returns averaging between 5 and 7 percent for high-yield bonds.
‘‘Unless you can time it really well, you’re going to be better off having stayed in the marketplace, as long as you recognize that you’re going to have more modest returns than you once had,’’ Distenfeld says.
Yeah, leave your money in the hands of Wall Street and their handlers.
--more--"
I'm having my own jitters today because I'm withdrawing from the Boston Globe. Didn't buy one today. Why buy elitist propaganda that you read less and less?
