High-yield bonds vs the stock market

High-yield bonds became very popular in the 1980`s and is better known as junk bonds, and that is an interesting investment which is widely used for corporate takeovers. It became popular because high-yield bonds outperformed traditional bonds on average.

30 years earlier (1950`s), high-yield bonds were fallen angels. Companies that had issued bonds when they were healthy was falling on hard times, and high-yield investors were buying bonds in turnarounds.

High-yield bonds were financed unproven businesses in the 1980`s, and was issued for speculation, and now those bonds are issued by highly leveraged companies. High-yield bonds on the market today is with a high degree of variety, and they trend with the stock market, but can act like bonds other times.

To show this, I have printed out iShares iBoxx $ High Yield Corporate Bond (HYG) with SPDR S&P 500 (SPY).

Chart

The Yield line is inverted. If yields on corporate bonds rise, then stock prices will fall, and in times when money leaves corporate bonds, it can flight to safety, which sometimes could be Treasuries. That money would also leave stocks. That means stocks can go up in periods of flat or rising yields. The key to this anomaly is risk.

This has happened before. During periods of rising risk appetite among investors. We saw it in 1998, the dot-com boom and during the subprime boom. Two of them were the building of bubbles, but all of them correlated with times when the investors hunger for risk rose.

It happens because money leaves bonds during periods of risk appetite and goes into stocks, which means stocks don`t fall when corporate bonds yields rise. The stock market is booming because investors aren`t afraid to take reasonable risks. The money flows into stocks, not Treasuries. Yields are 50% greater compared to 10-year Treasuries.

HYG is not acting like stocks but it`s not acting like a bond investment either. SPY is moving higher while HYG is declining. It was a correlation before 2011, but after that it all changed. The above should be on every investors mind. Many investors said the rally in junk-rated bonds is in a bubble or close to one, and HYG ETF and the SPX should be in the forefront of Equity Traders minds.

Some say that high-yield isn`t an good opportunity anymore. Watch out for this chart and look out for RS of HYG to SPY for signals of a market top. Look out for HYG outperformance. Weakness in equities is often preceded by a loss of momentum in credit markets. HYG need to stabilize. If not, equities will tumble. The disconnect between stocks and bonds probably means more pain ahead. Will the junk bond bubble burst, or stocks tumble? I`m exited about the end of the trading year. China cut the rate today, and the U.S markets are all up.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Bentley expect a new record year in 2014

Bentley Motors Limited is a British luxury automaker, founded by Horace Millner Bentley 18 January 1919. Bentley is now a wholly owned subsidiary of the German Volksvagen AG. Bentley started the brand in Crecklewood (near London) and was acquired by Rolls-Royce in 1931.

2014-bentley-continental-gt-v8-price

(Picture: Bentley  Continental GT V8 2014)

Bentley Motors Limited is the direct successor of Rolls-Royce Motors, which Volksvagen AG purchased in 1998. The rights to use the Rolls-Royce name and logo is still owned by Rolls-Royce Holdings plc, which is later licensed to BMW AG. They paid £40m for the license.

Volkswagen AG`s principal activity is the design, engineering, manufacturing and distribution of luxury automobiles sold under the Bentley marque, and the Bentley cars are largely hand-built in Zwickay, Germany.

As you probably know, Europe is in trouble and many of the economical reports doesn`t look good, but despite that, Bentley is not effected, and expect a new record year in 2014. Bentley`s biggest market is USA and the second biggest is China. despite the recession in Japan, Bentley is not effected by that either. So, Bentley has a stable market.

The luxury segment is good no matter what happens in the stock market or the economy at all. Rich people will always have money, so they will still buy luxury products like Bentley. Cheaper oil price will probably help the middle class and boost the car sale in that segment, but the luxury segment will still go strong. Rich people do not care about the oil and gas price. But in 1929 during the Wall Street Crash, Bentley saw the demand for its expensive products declining by the Great depression.

Porche have had a massive hit with their big SUV, and Bentely is out with a brand new SUV next year, and the price is $200,000. The test version of the brand new SUV is already on the road, and Bentley know that 95% of their customer already have a SUV in their garage, so they expect to enlarge their customer group.

The new SUV can boost Bentley`s sales by 50% to 70%, so the effect will be enormous for the firm. They produced 10,000 cars last year and expect to sell about 6000 to 7000 examples of their new SUV annually once the production is fully ramped up.

The new SUV sits on the same platform underpinning the third-generation Porche Cayenne, as well as Audi Q7 and Volksvagen Touareg. Lamborghini will spin the production version of is Urus SUV concept off the same architecture.

Bentley`s former boss Wolfgang Durheimer pushed hard for the development of diesel models, so it looks likely that there will be a compression-ignition version, but a plug-in-hybrid will follow shortly afterward as the first part of Bentley`s stated ambition to configure 90% of its cars as plug-ins by the end of the decade. What a competition on the SUV market next year.

Tesla will release their new SUV next year. In competition with Audi Q7, Lamborghini Urus, Porche Cayenne Turbo S, Land Rover Range Rover V-8 Supercharger and Rolls-Royce future SUV. But what is important to the customers? gasoline driven cars, hybrid or battery?

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Home Depot earnings report tomorrow morning

Home Depot (HD) is a do-it-yourself home improvement retailer. The firm operates The Home Depot stores, which are a full-service, warehouse-style stores. HD stores serve three primary customer groups; do-it-yourself (D-I-Y) customers, do-it-for-me (D-I-F-M) customers and professional customers.

homedepot

In February 2013, HD acquired Measurecomp LLC and HD components LLC. About one year later, in January 2014, HD acquired Blinds.com.

It`s only a few companies left to reveal their earnings this time, and tomorrow morning Home Depot (HD) will report their latest earnings. Last time HD reported earnings they had an earnings growth of 23%, but this time it is estimated an earnings growth of «only» 21%.

That will be down two ticks, but that`snot bad, because a 21% boost to the bottom line will be the second best quarter last year. The growth seems to continue, as the retailer has seen some solid growth on the bottom line over the past two years.

HD reported a sales growth of 3% and 6% in the first two quarters, and this growth is expected to decline to 5%. Analysts consensus is expecting $1,13 in earnings per share. Revenue is $20,500 billion YoY.

When HD reports positive earnings report Q3 like the one we will see tomorrow, it usually boost the stock price. It is expected to see similar things to happen and HD will continue to lead the industry.

Some analysts belive that the industrial retail sales companies like HD will lose market shares against the online sales. It will simply kill the market sector, but despite that, it is expected to see solid earnings report from HD tomorrow morning. Positive news for HD tomorrow is good news for long perspective investors. The stock is up 19% YTD, and 17% last three months.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Who is Lei Jun?

Lei Jun is born 16 December 1969, Xianto, Hubei in China. Jun graduated from Mianyang Middle School and began attending Wuhan University, where he holds a Bachelor of Science in Engineering.

Lei Jun

He is known for founding Xiaomi Tech, which is one of China`s largest technology companies. This is a big star in China, which is also referred to as the Steve Jobs of China. As you can see on pictures, he often wear jeans and black t-shirt. A typical Steve Jobs style.

He founded Xiaomi on 6 April 2010. The company is only four years old and now on of the biggest tech companies. He is also founder of Amazon China. Jun also founded Joyo in 2000 which is an online retailer. He sold the company in 2004 to Amazon for $75 million.

Lei Jun is Executive Director of Kingsoft and Chairman, UCWeb Inc and YY.com and Great Wall club. Kingsoft is an antivirus software company were he served as its CEO from 1998 to 2007. He remains chairman of the board and are owner in the company.

Kingsoft was founded in 1988 by the JinShan company in Hong Kong. Kingsoft latest version of Kingsoft Office 2013 is a freeware office suite which includes Kingsoft Writer, Kingsoft Presentation and Kongsoft Spreadsheet. Kingsoft has established collaborative relationships with Dell, Intel and IBM.

Tencent became a 15,68% ($892 million) shareholder in Kingsoft in 2011. Another great company, Lenovo, became a shareholder in 1998 and Kingsoft was reorganized. Kingsoft made the list of the Hong Kong Stock Exchange in 2007, and their Kingsoft Antivirus became freeware in 2010.

At the age of 43 he became a billionaire and is one of China`s richest. Steve Jobs also reached $1 billion at the age of 43 (1998). He was a key investor in China`s early Internet scene and is seen as an angel investor.

Xiaomi develops and sells smartphones, mobile apps and consumer electronics and has over 3,000 employees, mainly in mainland China, Malaysia, Singapore and is expanding to other countries such as India and Indonesia. Xiaomi`s revenue in 2013 came in at $5,4 billion.

Lei Jun, worth about $4 billion was inspired by the late Apple co-founder at an early stage. He read «Fire in the Valley», Paul Frieberger and Michael Swaine`s account of the early days of the PC industry and vowed to follow in Steve Jobs` footsteps. He said in an interview with New York Times in 2013 that he was greatly influenced by that book, and he wanted to establish a company that was first class, so he made a plan to get through college fast.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Singles’ Day is the world’s biggest online retail sales day

Singles day (Guanggun Jie) is a day for people who are single and are the biggest online shopping day in the world, celebrated today on November 11 (11/11). The day is chosen for the connection between singles and the number 1.

singles-day

This day is very popular among young Chinese people, while singles organize parties and karaoke to meet new friends or try their fortunes. For breakfast on Singles day, singles often eat Youtiao which is deep-fried dough sticks. The day is also called Anti-Valentine`s day.

China`s Singles day has surpassed the U.S`s Black Friday by $9 billion in sales in just 24 hours. It makes the day the most profitable manufactured holiday in history. Alibaba is the biggest online company in China, and will profit from this day. Alibaba reported that they surpassed $2 billion after just 60 minutes today.

Jack Ma said in an interview that Alibaba will deliver about 260 million packages over the next three days, compared to 17 billion a day. Alibaba`s sales on Singles day have grown by 5,740% the last four years.

In 2011, Alibaba reached only $820 million, and in 2012, they did $3,04 billion. A great jump from 2011 to 2012, but in 2013 they reached $5,75 billion. Pretty impressive that too, but today they expect about $8,65 billion, according to industry tracker IDC.

IPO price for Alibaba was $68 per share and the stock is up 70% since their IPO day. Shoppers on the social media platform Weibo (China`s Twitter) complained the online deals were too good, tempting them to spend money they didn`t have.

The Singles day is expected to grow at an annual rate of 25% next year from $390 billion this year to £$719 billion in 2017. Singles day is by many retailers earmarked as an event like Christmas and Chinese New Year`s day.

Alibaba`s CEO expect the Single`s day to become a global holiday within five years.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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