Down goes the Dow

Yea, stick with your historic 100 year assumptions. It will all work out.

what do you all think about hiding out in high yield bonds now? On the thesis that the year's returns are largely already in the bag, but I don't want to hide out too conservatively either.

Get 2/3rds of the return of the stock market with what? 40% of the risk? Something like that? With the thesis that the economy is solid but stocks are ahead of themselves.

But I know the yield spread between treasuries and HY is not attractive either.

agip,

Perhaps floating rate/bank, which as you know are high yield. Preference for floating rate/bank loan is the indexing of the loans to LIBOR or PRIME, and short duration. Also, the loans are secured by plant, equipment or a stream of income. Any category of high yield in this cycle is going to be covenant lite. If your assumption is that the economy is OK your thesis would be correct. As you know I question that assumption. I think one of the unique characteristics of this cycle is the large amount of debt issuance, and that includes companies with "sketchy" business models or deteriorating business models.

Igy

40% of the risk? Do you know that Italian government bonds are currently yielding less than 1%? Are you kidding me?

Bond yields do not accurately price risk.

Once again, you and I disagree on one of your assumptions, that "the economy is solid"--especially when you consider all of the various economies in which high-yield bonds exist.

Yes regarding that economy, even with the rampant GDP fudging, isn't Q1 only looking like 1.8%? And that's way too high, it reflects price inflation not real economic growth.

I stick to my now-long-held assessment that "the economy" is in deep schitt.

I like floating rate, but someone pointed out to me that you are basically buying high yield bonds but asking for less interest. So what's the point.

as for GDP...how is this kind of job creation and wage growth a result of a non-growing GDP?

I think the evidence is that current measures of GDP undercount growth - I mean we have a labor shortage, there is building inflation, wage growth, interest rates are rising somewhat, the stock market is surging...that doesn't sound like an economy not growing.

Maserati wrote:

40% of the risk? Do you know that Italian government bonds are currently yielding less than 1%? Are you kidding me?

Bond yields do not accurately price risk.

Once again, you and I disagree on one of your assumptions, that "the economy is solid"--especially when you consider all of the various economies in which high-yield bonds exist.

I'm talking about high yield corporate bonds in the USA, purchased through ETFs.

We've been through all of this before--

stock market = price inflation, unless you actually believe that Snap represents more economic activity than Sony, HP, Praxair, etc.

interest rates - response to, not a driver of, perceived growth

inflation = price inflation, not economic expansion

wage growth = negative; US real wages continue to decrease, which is the only significant economic measure because it means less money for the consumer, and it is the US consumer who ultimately drives economic growth not only in the US, but to a significant extent globally

unemployment = labor force participation rate brutally historically low, which is the only significant economic (not fiscal) measure

etc. etc.

Let's just agree to disagree and see how all of this pans out. I would still stay away from high-yields, I personally don't own any.

virtually everything you just wrote is wrong in some way

but whatever

agip wrote:

Maserati wrote:

40% of the risk? Do you know that Italian government bonds are currently yielding less than 1%? Are you kidding me?

Bond yields do not accurately price risk.

Once again, you and I disagree on one of your assumptions, that "the economy is solid"--especially when you consider all of the various economies in which high-yield bonds exist.

I'm talking about high yield corporate bonds in the USA, purchased through ETFs.

OK that's different. I'm still very wary of underwriters, their operations have been exposed. I would never purchase debt from any entity that has something tangible to put up as collateral, without securing that collateral, and I mean that in a very specific sense. YMMV, and there are lots of types of bonds, I guess you would have to look at the ETF.

agip wrote:

ok, except saying that there is an 'average return of the market' is not really true - you can measure the market in many different ways. Dow, SP500, Total stock market market weighted, total stock market equally weighted.

Right, however a total market index fund like VTI, by definition is going to be at the average return of the market as a whole.

As mentioned before, I am speaking of the average return of the market as a whole, as reflected by VTI and similar, and the average price of either large cap or small cap sectors (index funds) not any price of any single stock that might be in "the middle," nor the size of any hypothetical stock that might be in "the middle."

My questions in previous post were alluding to your statement about possibly selling small caps as you feel big ones are doing better now. Let's presume you're speaking of something like IJR small caps fund, vs an SP500 fund, IVV or something like that, your choice, you define it. In this regard, I'm interested to see what your logic and plan is regarding them, if you'd care to discuss this, as I feel we have contrary views; however I'm interested to see what yours are.

I'll stop discussion of what VTI means as to the 'average return of the market.' but I will say it sounds like you don't quite acknowledge the massive difference between market cap weighting and equal weighting.

as to your question, I'm a momentum guy. I see small caps vastly underperforming big caps and my immediate reaction is to get out of the way - to listen to the market and not insist I am smarter than what the market is telling me.

Sure that doesn't always work - small caps could rip and tear for the next year. But I am not a dig in my heels sort of investor.

The twist is that I am far overweight small and midcap, compared to benchmarks. So all i am really doing is taking off that overweight. So even if I am wrong, it just means that I will perform more in line with the major market cap weighted indices.

yes in my haste some was convoluted, i apologize, am busy.

wages - super-reduction in purchasing power

unemployment--labor force participation rate going back down to levels before women entered the workforce, yet household commitments are not falling and wages are not rising concomitantly

Also M2 velocity tanking.

sorry too busy today to carry on like usual :)

agip wrote:

I'll stop discussion of what VTI means as to the 'average return of the market.' but I will say it sounds like you don't quite acknowledge the massive difference between market cap weighting and equal weighting.

I have simply stated what I was referring to, and what I was not, without wasting time discussing whatever it was that I wasn't.

as to your question, I'm a momentum guy. I see small caps vastly underperforming big caps and my immediate reaction is to get out of the way - to listen to the market and not insist I am smarter than what the market is telling me.

May I ask what index you're using to measure large caps? I'm using IJR for small caps, and would like to compare these to see what vast difference you're speaking of. Thanks

Neiman Marcus, the Texas-based luxury retailer with 42 stores around the country and two Bergdorf Goodman stores in Manhattan, is in no immediate risk of bankruptcy, the sources told Reuters on Friday, though it has hired investment bank Lazard Ltd to help restructuring its nearly $5 billion in debt.

When this news emerged, Neiman Marcus unsecured bonds due in 2021 plunged 7% to 54 cents on the dollar, according to Thomson Reuters, and its $3 billion term loan fell 5% to 77 cents on the dollar.

Strategies ` wrote:

agip wrote:

I'll stop discussion of what VTI means as to the 'average return of the market.' but I will say it sounds like you don't quite acknowledge the massive difference between market cap weighting and equal weighting.

I have simply stated what I was referring to, and what I was not, without wasting time discussing whatever it was that I wasn't.

as to your question, I'm a momentum guy. I see small caps vastly underperforming big caps and my immediate reaction is to get out of the way - to listen to the market and not insist I am smarter than what the market is telling me.

May I ask what index you're using to measure large caps? I'm using IJR for small caps, and would like to compare these to see what vast difference you're speaking of. Thanks

VV

I showed above that small caps year to date are something like 500 bps behind large caps

Perhaps I missed something, and what you're referring to is the total market (emphasis large caps), in comparison to small caps, therefore VTI in comparison to IJR. If so, I'll check the recent results you refer to out later and get back to you.

Strategies ` wrote:

Perhaps I missed something, and what you're referring to is the total market (emphasis large caps), in comparison to small caps, therefore VTI in comparison to IJR. If so, I'll check the recent results you refer to out later and get back to you.

you are getting all tied up in knots

go find the returns of

VV for large caps

IJR for small caps

you will see a roughly 500 bps return difference year to date. Large caps are doing much better than small caps in 2017