Advisor says corporate bonds still have legs, but currency ETFs are not one of his favorites for the new year.

 

"Big Joe" Clark has his wish list for 2009. And it includes some exchange-traded funds that even Santa Claus might find useful as stocking stuffers.

At the top are corporate bonds. In the coming year, the Anderson, Ind.-based advisor is expecting investment-grade corporates and high yield debt markets to perform like stocks do in more-normal times.

As a result, Clark is buying more of the iShares iBoxx Investment Grade Corporate Bond Index (NYSE: LQD) in client portfolios. It's a fund he held during the latter half of 2008.

At the same time, Clark is initiating new positions in the iShares iBoxx High Yield Corporate Bond Index (NYSE: HYG).

"Both are moving up in terms of prices," he said. "That means their yields are dropping some. But they're still yielding much better than Treasuries

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No surprise from the Federal Reserve.  Well, not really. Bernanke & Co. did as everyone expected them to do and slashed U.S. interest rates. But it was the size of the cut - from 1% to a record low of 0.25% that caught some folks off guard.

You shouldn’t be one of them - at least not if you took our advice to buy gold stocks, as we’ve suggested for some time now.

If so, you’ve likely enjoyed double- and triple-digit returns since September. And there’s more to come for gold. But be careful. The price of gold and gold shares will not move up in a straight line. Here’s why…

Massive Stimulus = Three Huge Rallies In The Next 12 Months

Over the next few months, the talk will be of deflation, not inflation. Actually, what people should be talking about is “disinflation.” That means the slower growth in prices,

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Dan Denning takes issue with the idea that the Fed will be able to mop up the excess liquidity caused by its monetary expansion. Foreign savers are not going to keep funding US deficits forever. And that means the Fed must print more dollars to raise money. And that is super inflationary.

This from The Daily Reckoning Australia

Now to the big subject of the day: Inflation. You’d think evidence of even bigger deficits in the U.S. is clearly inflationary. But not everyone thinks so. The new prophet of doom, Dr. Nouriel Roubini, says at least four factors are setting up what he calls “Stag Deflation” (as opposed to the stagflation of the 1970s, where you had no growth and rising prices).

Roubini’s four forces of Stag Deflation are: a slack in goods markets, a “recoupling” of the rest of the world with the U.S.

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On Thursday, the Federal Reserve issued its weekly H.4.1 report, which provides details of the Fed's balance sheet. Once upon a time, this was one of the least interesting of the government's many releases of data. These days, it's become one of the most exciting.

The essence of the Fed's balance sheet used to be quite simple. The Fed's primary operations would consist of either buying outstanding Treasury securities or issuing loans to banks through its discount window. It paid for these transactions by creating credits in accounts that banks hold with the Federal Reserve, known as reserve deposits. Banks can turn those reserves into green cash any time they desire, so the process is sometimes loosely summarized as saying that the Fed pays for the Treasury bills it buys or loans it extends by "printing money". Before the excitement began, the Fed's assets

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It’s a popular notion when the financial winds are blowing unfavorably: Money is being printed uncontrollably … inflation is the only option … fiat currencies are doomed. The thing is, if you’re buying into this idea, you’re mostly perpetuating a misconception. Actually, inflation isn’t as simple and certain as it’s cracked up to be. Until the global economy recently got tossed on its rear end, prices were rising in most every part of the world. The focus, of course, was on the cost of energy, food and various other raw materials. Central banks in a position to stand firm on monetary policy did so at all costs. Inflation was the real threat. But did that idea get turned around in the blink of an eye or what? Prices for natural resources have ...

Credit fears ease…  Chuck’s thoughts from the road… India cuts rates… China growth slows, but is still 9%… And Now… Today’s Pfennig! Good day…And welcome to what should be another volatile week in the markets. Credit worries eased somewhat over the weekend, which helped push money back into the higher yielding currencies. Today Federal Reserve Chairman Ben Bernanke will head to Congress to share his view on the economy. Should make for a pretty interesting day of trading. Hope you are sitting down and holding on, it looks like we are going to take another lap on the currency roller coaster!

The yen fell over the weekend as investors began moving funds back into the higher yielding currencies of Brazil, Mexico, New Zealand and Australia. I won’t go into the whole explanation of the carry trade again, but suffice it to say that these moves haven’t proven to have much staying

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The $2.66 trillion municipal bond market is embroiled in the overall credit market mess, creating an unusual complex of risks and opportunities.

The supply-demand forces in the municipal bond market have been unfavorable in the past year, causing prices to decline.

click images to enlarge

The mutual funds in this table are Vanguard Admiral class.  The minimum investment is $100,000, but the expense ratio is only 8 basis points.  Their Investor class shares carry a 15 basis point expense ratio.  Either expense is lower than most alternatives.

Negative Forces on Muni Market:

Some of the adverse circumstances impacting muni prices and rates include:

Credit downgrades for municipalities Near-bankruptcy of the muni bond insurers Unwinding of muni bond positions by hedge funds deleveraging Failure of the auction rate muni market Rise in long-term muni issuance as short-term rates became burdensome Rotation from muni to Treasury bonds in flight from risk of all ...

The $700 billion bailout is dead in the water. For now. Does this save working American's tax dollars? Not according to Taipan Daily editor Justice Litle. In the absence of a bailout passing into law, Bernanke & Co will simply crank up the printing press and try to inflate the problem away. This is taxation by another means. It just doesn't feel like it.

The government gravy is at full throttle. And the "big three" automakers in Detroit don't want to be left out . They're close to snapping up $25 billion bailout of their own. This will involve the government juicing up the firms with low-interest loans. It's another nail in the coffin for the dollar, according to Smart Comodities UK editor Garry White. A possible 50 basis point Fed rate cute in by October will also hurt the buck. Garry says that the world's major sovereign wealth funds could start to turn their back on US debt. And this will send gold prices into orbit.

This week has seen the US Government bail out a growing number of Wall Street firms, the largest insurance company in the world, and finally end at printing money without subjecting the backing instruments to international market scrutiny.

(Treasury is now selling T-Bills DIRECTLY to the Fed, no pretense of going through an investment bank anymore)

This is pretty shady stuff, and thats being kind.

To understand why this is BAD, we have to understand why inflation is bad.

Yes of course, inflation is bad because prices go up, but that is not what inflation really is, prices going up is just what happens AFTER inflation occurs.

Put simply, inflation is when you add more currency to the currency supply.

Price increases happen, because when you add more currency then each unit of currency already in existence becomes worth less.

So prices rising arent so much because what you are buying is

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