Sales of new single-family homes experienced a significant decline last month, plummeting almost 17% in February on an annualized basis, according to data from the Census Bureau reports. This marks the steepest monthly drop since last May.
Junk Bonds: What to Do Now
The Wall Street Journal | Mar 22
High-yield or “junk” bonds have seen a remarkable rise recently, achieving double-digit returns in both 2009 and 2010, which drove prices up and yields to near-record lows. However, investor interest in risky assets is beginning to wane. For the first time since early December, high-yield bond funds saw net outflows last week amounting to approximately $801.9 million, according to EPFR Global, a Boston-based research firm that monitors fund flows.
ProShares Debuts Short Junk Bond ETF (SJB)
ETFdb | Mar 22
ProShares, known for its comprehensive range of leveraged and inverse ETFs, has launched the first ETF providing daily inverse exposure to junk bonds. The ProShares Short High Yield (SJB) aims to deliver daily results that closely mirror -100% of the daily change in the iBoxx $ Liquid High Yield Index, which underpins the highly popular iShares iBoxx $ High Yield Corporate Bond Fund (HYG), boasting over $8 billion in assets accrued from more than 400 individual junk bonds.
Professor Jeremy Siegel of Wharton, author of the influential book Stocks for the Long Run
Renowned investor Jim Rogers advocates for the abolition of the Federal Reserve. When asked in a recent interview what actions he would take if he were Fed chairman, he stated: “I’d shut it down.”
It is well-known that the Federal Reserve’s balance sheet has ballooned in recent years, primarily as a response to the aftermath of the 2008 financial crisis and the Great Recession. This expansion includes an increased holding of Treasury securities. However, not all Treasuries are equal concerning the maturities on the Fed’s portfolio. According to Fed data, most of the increased government-held debt consists of medium-term Treasuries with maturities ranging from 5 to 10 years. As part of QE2’s unwinding process planned later this year, a significant portion of these assets will likely return to the private sector. Assuming no unexpected issues arise, the market is expected to witness a substantial sell-off of medium-term Treasuries this year.
The Economist raises the question of whether the so-called Yale model, characterized by an aggressive approach to conventional and alternative asset classes, will continue to perform as strongly in the coming years as it has over the past 25 years. Supporters attribute this successful track record to David Swensen, who has managed Yale’s endowment since 1985, consistently delivering impressive results. His methodology, outlined in his 2000 book Pioneering Portfolio Management
● The Little Book of Alternative Investments: Reaping Rewards by Daring to be Different
By Ben Stein and Phil DeMuth
Excerpt via publisher, John Wiley
This book explores the potential of identifying legitimate assets that can help reduce your financial dependence on the volatile stock market. If successful, this approach may lead to a detachment from the ebb and flow of stock prices. During times of soaring stock prices, you may find that you are not experiencing the same highs; similarly, during downturns, you may escape the lows. However, this might create some uncertainty about your financial status on a daily basis, especially if you are accustomed to checking the Dow Jones Industrial Average frequently. It necessitates a leap of faith in recognizing that there are viable financial paths outside of traditional stocks. We hope to encourage you to embrace a higher level of market de-coupling in your financial life than you currently experience.
Supply Disruptions Pose Threat of Stagflation
The Wall Street Journal | Mar 17
Japan’s crisis has ignited a scramble for supplies, which may heighten the risks of stagflation in the U.S. Already, rising oil prices and geopolitical tensions have dampened growth expectations for 2011. The first quarter specifically appears set to conclude on a notably weaker note than anticipated. Morgan Stanley’s recent estimates of annualized real gross-domestic-product growth have been revised down from 4.5% to 2.9% over the past six weeks, while a similar estimate from Macroeconomic Advisers has decreased to 2.5%.
Initial claims for unemployment benefits decreased by 16,000 last week, reaching a seasonally adjusted total of 385,000, according to the U.S. Labor Department reports. This marks the fifth occasion since the end of the recession in June 2009 that claims fell below the 400,000 threshold. Additionally, the four-week moving average, a closely monitored indicator, dropped to just over 386,000, the lowest point recorded since the recovery began.
Consumer price inflation in the U.S. rose slightly last month, according to the Bureau of Labor Statistics reports. The headline inflation rate increased by a seasonally adjusted 0.5% in February, up from 0.4% in January. However, core inflation remained steady, rising by only 0.2% last month, the same rate observed in January.
### Conclusion
In summary, recent trends in various economic sectors indicate a mixed outlook. From the substantial decline in new home sales to shifting sentiments in high-yield bonds and inflation concerns, these developments highlight the complexities of the current economic landscape. Staying informed and adapting strategies accordingly seems crucial for investors and consumers alike.
