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A great link by Ted that everyone should read. It reinforces something I have been pounding the table about here, there, and everywhere for years and that is on a risk return basis, junk bonds clobber stocks. Over the past 20 to 30 years you have basically the same returns from the S&P as you do from junk bond funds but at only about half the volatility. In my world, volatility kills so that is why junk bonds have been my one true love in the financial arena going back to 1991 when I *luckily* made my first foray into them.
Dear Hiyield007: Can you say GMAC Smart Notes ! Marty Whitman and I made a killing ! I used 007 in bond discussions on the old FundAlarm board. Regards, Ted
Congrats and Thanks to both of you...now let's get back to work...any thoughts on HY offerings for the ucoming year? USHYX and PRHYX are two I have owned...consistency and conserativeness (higher quality) are two qualities I am screening for. This area of investing seems a perfect match for a highly(ield) skilled manager. What's in your junk draw?
Reply to @Hiyield007: our investment team came to the same conclusion in the fall of 2008. we easily saw that the risk-adjusted return on junk would trump that of stocks and allocated significant portions to junk throughout all clients and portfolios we managed at the time. we outperformed the competition on the downside in 2008 and kept equal or better in 2009 and 10. we are still maintaining a chunk in credit. HOWEVER, this time the allocation comes from core fixed income, not equities (since junk is trading close to par, on average, and thus behaves more like traditional fixed income).
Reply to @fundalarm: December 16, 2008 at around 2:15 EST is a day and time that I will always remember till my last breath. It was the loudest risk-on bond bell I ever heard rung in my 47 years of trading and I acted accordingly. And without any hint of sarcasm let me say Ben Bernanke will always be my hero.
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Regards,
Ted