Thursday, September 3, 2009

And the strongest trending ETF is..... LQD?

Click for a sharper view of LQD's 6 month chart.

I drew the blue line to suggest the trend. The truth is, that although this trend is irrefutable and strong, the asset class has no where to go. Over a decade, the value of this ETF has not breached 113$. The current Yield is a miserable 5.59%. For corporate bonds? Because we all trust blue chips to pay their debt back?! No way.

This is as artificial as it gets. Whatever is driving this, it is calculated - and it supports a view that governments are working behind the scenes to revive cheap credit to big corporations to allow the economy to restart.

Considering the turmoil we have seen over the last decade, from the tech bubble, Enron, Worldcom-MCI, Lehman and subprime mortgage meltdown - do you want to lend your money for only a 5.59% yield?

There's always room for higher yielding bonds in a portfolio - but as this asset class is reaching a 'priced for perfection' moment - it's time to consider the allocation percentage in a portfolio.

Just my two cents.


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