Comment of the Day
Video commentary for December 21st 2022
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: crude oil bounces from 1000-day MA, stocks unwind short-term oversold, VIX contracts, bonds yields hold gains, dollar stable,
Dirty Energy Is the Lone Junk Winner in Credit's Brutal Year
This article from Bloomberg may be of interest to subscribers. Here is a section:
Junk-bond investors had almost no way to avoid losses this year, and shunning dirty energy only made the pain deeper. The best return -- one of very few gains -- was in coal, highlighting challenges for investors who need to perform but also want to be sustainable.
Junk’s 11% loss this year -- the worst since the global financial crisis -- was led by communications and consumer non-cyclical bonds, down 15% and 13%, respectively. Energy performed best in the US high-yield index, down about 5% overall.
Coal -- albeit a very small chunk of the corporate bond market -- is up 3.2%, while oil and gas services debt gained 1.7%. That compares with a global credit market that’s down double digits in most market segments this year, with particularly steep losses for longer-dated debt.
Credit markets are forecast to see a broad-based rebound next year and with many sectors trading cheap to history, junk energy probably won’t be the best again in 2023. But so long as oil prices stay supported by conflict and reopening, it should at least be a buttress for bond portfolios likely to take another beating from inflation next year.
Eoin Treacy's view - The energy sector has been the best performer in S&P500 for two consecutive years. The fact it is also leading performance in the junk bond market is a testament to the strength of commodity prices in a geopolitically tense environment.
China To Correct Past 'Mistaken' Housing Policies
This article from Bloomberg may be of interest to subscribers. Here is a section:
China will roll out supportive measures for the property market in order to correct past “mistaken” policies aimed at curbing the sector’s growth, according to the head of a top economic think tank in the country.
“It seems like the government is going to put forward more concrete measures,” said Yao Yang, the dean of the National School of Development at Peking University, in an interview. “The government has to at least stop the decline of the housing market. There are encouraging signs of it.”
Top officials including President Xi Jinping pledged in a policy meeting last week to support housing demand in 2023. “That is a code word for promoting the housing sector again,” Yao said.
Eoin Treacy's view - CNY $1 trillion was allocated to support the property market in August. In November ICBC made the equivalent of $179 billion available to builders. This is concrete evidence the Chinese government is turning back to supporting the property sector.
Email of the day on the VIX
Hi Eoin, isn't the VIX approaching a level or is already at a level where it is very attractive to go long the VIX? how much downside could there still be?
Eoin Treacy's view - Thank you for this question and I’ve been pondering this same topic myself. One of the primary issues I have been thinking about is the fact the VIX has contracted at the same time as the S&P500 has been falling. That’s quite unusual since the VIX is primarily calculated based on demand for put options.
Eoin's personal portfolio: stock market index positions closed at profit and shorts opened December 6th 2022
One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary on a daily basis until there is a change.