|Dow||-26.91 to 17,086.63|
|S&P 500||+3.48 to 1,987.01|
|Nasdaq||+17.68 to 4,473.70|
|10-YR Yield||-.002 to 2.464%
|Gold||-$0.80 to $1,305.50|
|Crude Oil||+$0.61 to $103|
Dump your junk!
It’s a mantra that’ll help you clear out the clutter in your garage, your attic and your life. And it’s also one investors sure seem to be taking to heart!
After binging on a record $361 billion in junk bonds (euphemistically known as “high yield”), they just yanked more money from high-risk bonds in a single week than they have in any other week all year. The $2.7 billion worth of fund outflows has put junk bonds on track for their first monthly loss in 11.
This chart of the SPDR Barclays High Yield Bond ETF (JNK), one of two major junk bond exchange traded funds, shows the sharp declines we’ve seen the past couple of weeks. They helped drive JNK down to a six-month low.
Me? I’ve felt for a while now that junk bonds simply don’t offer enough yield to compensate you for the credit risk you take on when you buy them. After all, these are companies with thin cash cushions, low credit ratings, operational challenges, and other significant risk factors.
“The $2.7 billion worth of fund outflows has put junk bonds on track for their first monthly loss in 11.”
Instead, if you’re looking for income, one of my favorite options is energy master limited partnerships. MLPs are companies that make money from distributing, storing and transporting oil, gas and gas liquids.
Those businesses spin off hefty amounts of cash, regardless of the price level of the underlying commodities. And the companies use that cash to pay out handsome dividends to shareholders.
If you look at charts of the Alerian MLP ETF (AMLP) or JPMorgan Alerian MLP Index ETN (AMJ), you can see that these kinds of stocks are absolutely on fire. The combination of yields that are much better than Treasuries (recently 5.8 percent for AMLP and 4.3 percent for AMJ), and exposure to the booming domestic energy sector, make them very hard for a smart investor to pass up.
What’s more, I have personal favorites that offer even better growth and income prospects than you get from those diversified ETFs! I can’t wait to share more details about how you can profit from them.
Bottom line: If you haven’t done so already, ditch your junk! Then go shopping for some MLPs!
So have you taken advantage of the relatively high yields and strong underlying business of MLPs? Do you have favorites in the sector you’d like to share with your fellow investors? What are the risks of these investments, and how do you think those risks compare with the risk of other high-yield alternatives like junk bonds? Share your insights at the Money and Markets comments section here.
|OUR READERS SPEAK|
The discussion is still going strong when it comes to the Russian tension, as well as the prospects for energy companies going forward.
Reader David said: “Prior to emigrating to the U.S. from England in 1981, I lived and worked in 17 different countries. It is my experience that ALL governments, read politicians, give us the slant on the news that they want us to believe; usually the one that suits their own agenda.
“It is frightening to hear our government claiming that President Putin needs to be punished for supporting the separatists in the Ukraine, while we support separatist movements in other countries that follow our rules.
“I have no idea who shot down the plane, but don’t see how it would help the separatists, or Russia — unless we think they want to start WWIII, which makes no sense. But I do know who started the overthrow of the elected government of Ukraine — we did. We need to recognize that our actions have consequences that we can’t always control.”
Meanwhile, with regards to the advantages of investing in energy, Reader Sam W. said: “I figured out two months ago that oil prices were going to rise dramatically. I’m retired from a major oil co. I ran the largest crude unit in the world.”
“Bought KMP after Rachel Maddow did her hatchet job. Bought two of Sandridge’s oil trusts that pay 20/25 percent dividends. My unit had used Permian Basin oil since forever, when I started, WTI was $2.60 a barrel. Higher oil prices mean higher royalties. I agree with the author there are many ways to profit in this atmosphere.”
Reader Vinnie also weighed in on some of the negative side effects of rising energy prices, and what you can do about it. His comments: “As gasoline prices rise, so will the cost of transporting everything, and that includes not only consumer goods but the costs of utilities. My solar system allows me to save on utility increases and use my limited funds for other essentials.”
Finally, Reader Thomas makes it clear he’s no fan of the Golden Arches — their food or their stock! He said: “Has anyone out there actually eaten at a McDonalds lately? The food is awful! I have been selling off my holdings in this loser!”
Keep those comments and investment tips coming, folks. All you have to do is go to the comment section here.
|OTHER DEVELOPMENTS OF THE DAY|
Fighting is continuing to rage in the Ukraine, with two government fighter jets shot down by separatist rebels in the troubled east.
Meanwhile, yet another air disaster struck in Asia. TransAsia Airways said one of its twin-engine turbo prop planes went down near a Taiwanese airport. The flight had 58 passengers and crew on board, and dozens are feared dead. Bad weather in the area reportedly force the pilot to attempt a second landing.
I’ve never been much of a golfer. My grandfather and father tried to teach my brother and I the sport as kids, but it didn’t stick. And in the past several years, I’ve only been to the driving range once.
Turns out, I’m not alone. Waning interest in the sport just prompted Dicks Sporting Goods (DKS, Weiss Ratings: B-) to slash more than 400 golf workers who previously offered lessons at its stores.The number of Americans reporting a trip to the links has declined for five straight years.
Investors snapped up shares of Apple amid optimism about the upcoming launch of the iPhone 6, pushing it to within a couple bucks of an all-time high. But Boeing struggled amid lackluster demand for military aircraft. That happened despite solid orders from the U.K. air show I discussed last week.
Reminder: You can let me know what you think by putting your comments here.
Until next time,