SPDR Barclays High Yield Bond (NYSE: JNK) carries a 7.7% listed yield and is up 0.25% at $39.00 against a 52-week range of $34.09 to $40.93 and it is the primary ETF we look at when it comes to the world of high-yield or junk bonds.  Then there is the iShares iBoxx High Yield Corporate Bond (NYSE: HYG) up 0.1% at $89.69 with close to a 7.7% yield and a 52-week range of $77.90 to $92.85, followed by the PowerShares Fundamental High Yield Corporate Bond Portfolio (NYSE: PHB) that is flat at $18.34 with a yield of about 6% and a 52-week range of $17.00 to $18.76.  You have to consider that the 10-Year Treasury yields close to 2%, but high-yield and junk bonds often pay 7%, 8%, or more.  Here are some of the top closed-end funds, although there are many more out there:

• Blackrock Corporate High Yield (NYSE: HYV): market cap of $396 million with shares up 0.3% at $12.02; 52-week trading range of $10.10 to $12.60; implied yield of 8.5%.
• Pioneer High Income Trust (NYSE: PHT): market cap of $480 with shares up 0.7% at $17.07; 52-week trading range of $14.12 to $18.08; implied yield of 9.6%.
• PIMCO High Income Fund (NYSE: PHK): market cap of $1.5 billion with shares down 0.1% at $12.62; 52-week trading range of $10.52 to $14.88; implied yield of about 8.5%.
• AllianceBernstein Global High Income Fund, Inc. (NYSE: AWF): market cap of $1.2+ billion with shares up 0.9% at $14.47; 52-week trading range of $12.43 to $15.41; implied yield of 8.3%.
• Western Asset High Income Fund II Inc. (NYSE: HIX): shares are up 0.4% at $9.84; 52-week trading range of $8.35 to $10.45; implied yield of about 10.0%.
• Western Asset High Income Opportunity Fund Inc. (NYSE: HIO): shares are up 0.8% at $6.32; 52-week trading range of $5.34 to $6.63; implied yield of 8.0%.

We do advise investors to study the current premium and discount that each closed-end fund trades at compared to the net asset value.  Some are discounts and some are premiums, and these can fluctuate wildly through time for a myriad of reasons.

While that is a composite and while the “BB” is now under 500 basis points over Treasuries, the “B” spread is now under 750 basis points over Treasuries.  Maturities matter here as the longer-dated notes and bonds command higher spreads than most shorter-dated instruments.  Still, this could be the beginning of a wave of continued interest in junk bonds.

What is interesting is that rising yields in Treasuries implies losses on the face value of bonds.  If the yields are rising because of an improving economic picture rather than because of inflation or because of a lack of faith in the underlying creditworthiness of the government, then the bond spreads are likely to contract further and that would drive the interest into high-yield junk bonds.

Be advised that not all junk bond funds are created equally outside of the ETFs.  Some closed-end funds use domestic junk bonds only, while some use international bonds.  Some include foreign-issue sovereign debt at junk levels or trading as though they are junk.  Aslo, some use a bit of leverage while others do not.  The dividend yields are “implied” because ethe closed-end funds pay monthly.

Another caveat needs to be mentioned… Some of the yields on financial quote screens also will differ from our implied yields because we do not include the capital gain distribution that comes with many of these.  They of course count toward your total return, but we like to look at the most recent ‘regular dividend’ when calculating yields.

We have provided a chart for the “JNK” ETF Below so you can see how much this sector has risen since Thanksgiving and then again since the selling climax of stocks and risk instruments (including junk bonds) in early October.

A true chartist would tell you to watch this current level closely.  If prices do not rise from here, it could be representative of a false break-out and that would imply a near-term top.  As long as the “risk-on” mentality prevails, these should do well.  The trick is watching longer-term Treasury yields.  With close to a 2% yield on the 10-Year Treasury Note, investors will seek higher returns as long as those returns are likely to have at least some degree of price stability.  If investors think that Treasury yields are likely to climb suddenly to 3% or even 4%, junk bonds will have some competition from the risk-free trade again.

As you would expect, there is no such thing as a free lunch in the financial markets.

JON C. OGG

The thirteen worst big stock and investor stories in 2011 are as follows: Bank of America Corporation (NYSE: BAC); Diamond Foods, Inc. (NASDAQ: DMND); First Solar Inc. (NASDAQ: FSLR); Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR); Hewlett-Packard Company (NYSE: HPQ); Imperial Sugar Co. (NASDAQ: IPSU); iShares Silver Trust (NYSE: SLV); K-V Pharmaceutical Company (NYSE: KV-A); Market Vectors Egypt Index ETF (NYSE: EGPT); Molycorp, Inc. (NYSE: MCP); Netflix, Inc. (NASDAQ: NFLX); Research in Motion Ltd. (NASDAQ: RIMM); and Sears Holdings Corporation (NASDAQ: SHLD).

Are there others? Of course.  We just wanted to review the worst of the biggest and most easily recognized stories out there.  Some of the explanations and criticisms here may seem a bit raw or overly colorful, but with this motley group what more could you expect…

Read Also: Ten Stocks Unlikely To Survive 2012

Bank of America Corporation (NYSE: BAC) has seen almost everything that could go wrong come its way.  The bank cannot shake the Countrywide mortgage woes, it drove away customers with proposed new banking fees, and it has been under fire by more agencies and regulatory bodies than we can easily count.  The company can hardly get in a settlement that is ultimately not challenged by an outside force. It does not seem like it will get to raise its dividend any time soon and the fear is that perhaps it will need to raise more capital on 2012 stress tests.  This was the worst performing stock out of all 30 DJIA components and not even a Warren Buffett investment managed to keep the stock from falling.  So what if it half of book value now.

Diamond Foods, Inc. (NASDAQ: DMND) became a sample of what can go wrong at a high growth food company.  Eventually the growth peaks and valuations come crashing down.  To go from a growing almond and nut products story to a company buying Pringles did not make sense to many, particularly since Diamond was going to be leveraging itself to make the deal.  Then came the accounting woes around payments to walnut farmers, and that was then followed by a director’s suicide who was inside the accounting woes story.  This was a great story that became very cloudy, just like if I poured a glass of their almond milk that I like so much to try to see through it. After running from about $50 to over $95, shares are now in the low $30-range and shares hit a low of $26.11 recently.  They could have found a rat in the milk vats and survived better than the way things turned out for them in 2011.

First Solar Inc. (NASDAQ: FSLR) went from the U.S.’s solar sector poster boy to perhaps the worst performing S&P 500 stock.  It is still the leader of the solar sector and that is why this one precedes all other solar stock implosions of 2011.  Its CEO resignation or firing came in a rather strange and sudden manner and its prospects do not look much better on the margin front for the next year.  Solar panel dumping by Chinese firms and the negative press of the government backing of the failed Solyndra only added to the fears here as short sellers were able to make a fortune here.  Shares closed out 2010 around $130 and shares went briefly north of $175 in February.  Shares are now around $33.00.  First Solar single-handedly turned many 401/K plans into 201/K plans in 2011.

Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR) is one implosion which we debated whether or not should be part of a complaint for the full year.  Its accounting concerns were actually from 2010 and despite the massive share price drop the stock is actually still up for the year.  In fact, shares closed at $32.86 in 2010 and now the stock is around $46.00.  What is so bad is that the stock had been one of the best performing stocks as recently as September and the year high is above $115 for the stock.  Its growth has peaked, its advertising costs are way up, and Starbucks seems to have scored the better end of the deal between the two coffee companies. Because the stock is still up almost 50% for the year, we’ll back off.

Hewlett-Packard Company (NYSE: HPQ) may have started its woes in 2010 after firing Mark Hurd and then hiring Leo Apotheker, the former head of SAP. Still, the baffled decision to even go along with Leo Apotheker’s decision to jettison the PC business was just too much.  And now the decision to keep the PC business seems like it is because the cost of exiting it is just too high.  Palm is now dead too.  The Apotheker decision to acquire the enterprise software outfit Autonomy for $10 billion.  If you overlay a one-year chart as you can see here, you would think that H-P was a bank because its stock tracked the negative performance of Bank of America almost in unison until September.  The verdict is out on whether or not Meg Whitman is right fit here, but frankly the stock has stabilized since she took over.  H-P shares closed out 2010 at an adjusted $41.48 and shares are now close to $26.00 after hitting a low of $21.50.

Imperial Sugar Co. (NASDAQ: IPSU) was looking a lot like a transformation in the making from a sugar company to a sweetener company looking to branch out into new growth markets.  The company even went on a roadshow and got on CNBC to tell its story.  Shares even went from roughly $10 to $25 based upon the hype.  Then over the summer came news of a wider loss and things have slid further from there.  Sadly, it seems that management may have known things were not great when the story changed abruptly and there are class action suits.  Now shares are around $3.50.  This feels like getting drunk at the casino and losing your life savings with the dealers telling you “Thanks for playing.”

After taking a look at the “GLD” chart the concerns are growing.  Since its major move at the end of 2008 there had not been a single time that the SPDR Gold Trust shares had violated the key 200-day moving average.  If you look at the mining ETF via the Market Vectors Gold Miners ETF (NYSE: GDX), the gold bulls may argue that the mining sector violated the 200-day moving average on multiple occasions and still traded higher!  Some technicians may watch other metrics on the GLD for long-term trends but many will fear that this means that the monstrous run higher at a minimum cannot recover at the same pace.  Other technicians may argue that gold has peaked outright, just like Dennis Gartman has raised concern about recently.

It is at least somewhat interesting that Goldman Sachs recently lowered the ratings of AngloGold Ashanti Ltd. (NYSE: AU) as well as Randgold Resources Limited (NASDAQ: GOLD) this morning, both were downgraded to “Sell” from an already cautious “Neutral” rating. AngloGold is somehow up almost 1% at $41.52 today and Rangold is down 0.3% at $101.50.  Meanwhile, Barrick Gold Corporation (NYSE: ABX) was recently raised to “Sector Outperform” from “Sector Perform” by Scotia Capital.

What is so confusing for many gold bugs and investors alike is that the news headlines would make you think that gold has everything going for it.  Iran flexing its muscle… The Euro Zone debt crisis… The possibility that the Euro disappears or is altered… Sovereign debt credit rating downgrades… China’s central bank buying gold… Uncertainty… and more.  It is the rise of the U.S. Dollar again that is capping gold’s positive aspects.  Besides that, gold reached the point that many market participants just cannot afford to use the metal for anything now. 

If you go back to the “GLD” as the measurement for most spot gold investors today, that would be $157.36 as to where the 200-day moving average is now versus $154.90 after a 0.2% drop today.  The “GLD” chart below from stockcharts.com shows a 3-year history for our readers.

JON C. OGG

Dennis Gartman has already sounded the call for a bear market.  With the news that China was buying more gold and with other central banks adding gold, he said that bullish news not followed by positive price action spells a bear market.  For how long is another issue, but that is the call for now.

The big issue is the rising U.S. Dollar against the Euro as the $1.30 threshold was breached this morning.  The Euro hit a low not seen in almost a year, and frankly it begs the issue over “The Parity Call” again.  We would make the reminder that “not all parities are created equally” as the launch value of the Euro more than a decade ago was $1.18.

As far as the chart, we noted a key breakdown under the 50-day moving average just on Monday.  That has gone from bad to worse.  Much worse, if you look at the stockcharts.com chart below for the performance the 50-day issue is now a sideline event.  GOLD, VIA THE ‘GLD,’ HAS BUSTED UNDER ITS 200-DAY MOVING AVERAGE!!!  If you use static figures, GLD’s 50-day moving average is $166.10 and the 200-day moving average is $157.14.

Gold was above $1700 last Friday and it is down around $1580 now.  The “GLD” was trying to get back above $170.00 just last week, unsuccessfully, with a Friday close of $166.40… If today’s drop holds then the new price is $153.50 or so after a 3% drop yet again this Wednesday.

As a reminder, gold pays no dividend and it is really hard to eat or drink.  That is the most ultimate skeptics will tell you at any rate.

As far as silver, this was north of $32.00 an ounce on Friday and now a 7.5% drop today has silver back around $29.15 per ounce.  The iShares Silver Trust (NYSE: SLV) has fallen from above $31.00 to $28.33 today.  Let’s just say that The Devil’s Metal is becoming a very appropriate name.

If you want to see it even worse… look at the stock option trading in the “GLD” and “SLV” as of Noon today… The GLD put option volume is almost double that of the call volume traded and the SLV is even higher than that.

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The shelf filing will allow for the future sale of any combined securities offerings of Debt Securities, Warrants to Purchase Debt or Equity Securities, Preferred Stock, Depositary Shares, and/or Common Stock.  To support the belief that no capital will be raised, no underwriters were named nor was any size indicated.

The use of proceeds was “for general corporate purposes. General corporate purposes may include repayment or reduction of outstanding debt, financing acquisitions, repurchase of Corning common stock, additions to working capital, capital expenditures and investments. We may temporarily invest the net proceeds from the sale of any securities pending their use for other specified purposes.”

We have already called Corning a very oversold stock and the company’s latest warning does not change the belief that this company will get a severe boost in the future.  The Korean customer’s backing out of its obligations was not well received because it was not modeled in by those who follow Corning.  The move caught us by surprise as well.

All things being equal, we would not expect that Corning will be raising capital in any serious manner unless the company has identified a significant game-changing acquisition opportunity.  Anything is possible.  The company has a huge buyback plan and we belive that the company will be aggressively buying shares now that shares fell again. 

Corning has a very capable management team that understands how to deal with competition and it also knows how to deal with adversity in the market place.  Going back to 1936, it has seen its fair share of ups and downs in the economy.  Corning carries only about $2 billion in long-term debt and it actually trades at a discount to its book value now that shares are back at $13.34.

Technicians will show how its chart is not a pretty one.  Actually, that point cannot be argued against if you look at the stockcharts.com chart below.  Instead of the stock ramping higher and trying to challenge its 50-day moving average, now it has busted under its 200-day moving average all over again.  It is an ugly chart all over again.  While we see the value as attractive and while we think Corning’s stock price will go higher, we also would not expect any immediate recovery.  Shares could even soften further in the near-term.  The good news is that there is still major support down only 10% or so from current prices.

Our take… Corning remains oversold, was sold off too harshly during and after the summer, and should ultimately be able to get back up to $20.00 over the long haul.  Will that happen tomorrow? No way.  It will take quite some time.  We also do not expect any merger analysis to matter at or under book value because the near-$20 billion price tag is just too high for most companies and private equity can no longer cobble together enough capital for a premium merger.  The chart is ugly, but there is a solid valuation here for patient investors.

Shares are up almost 1% at $13.39 today, but that is down over 10% from just two days ago. It is pretty sad when you have a move like we saw on Wednesday and the stock fails to participate in the rally.  That is called unlucky timing of the bad news.

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JON C. OGG

Shares are down 3.6% at $5.07, and the new 52-week low (hit today) gives a new 52-week range of $5.03 to $15.31.  Thomson Reuters still lists $9.76 as the consensus price target.  We would note that this is such a high number that it just has not been ratcheted down further.

Warren Buffett invested heavily in Bank of America over the summer.  Now the big question is whether or not Bank of America’s stock can stay above $5.00.  If the $5.00 barrier is breached, the fear is that some mutual funds will not be able to hold the stock any longer.  Some investors may also not be able to buy BofA shares on margin either.  Those are two big fears that used to be far more prevalent but are still considered by some investors.

A 2% drop from here puts BofA’s stock back under $5.00, and the last time the stock was down that low was during the peak of the crush-depth selling during early 2009 at the peak of the market panic.  The new stress tests and reported indications that regulators want BofA shoring up more capital and possibly even coming up with a break-up plan are not helping the stock out.

The stock chart from stockcharts.com pretty much says it all…

JON C. OGG

We asked our technical affiliate Candlestick Forum for a chart reading on the crazy silver… The Devil’s Metal.  “Silver has slowly moved back up and just ran into resistance at the 50 day moving average. A Doji, followed by bearish confirmation at the 50 day moving average, indicates a wave three to the downside could take silver prices down into the $22 area if the run goes to the most extreme band. The 20 day moving average at the $33.25 level will be an important support level that needs to be breached for prices to move to much lower levels.”

While that call is only an “if, then” and offers only the most extreme band, the current silver price needs to be watched closely because there may be much larger downside price risks in the devil’s metal if it cannot recover from the current levels. Watch these moving averages…

Our own take is rather simple.  Gold is trying to find its footing again but it has an identity crisis.  It is not trading every day like a reserve currency now as international investors are choosing to buy dollars again on days when they get scared about sovereign risks in Europe.  Other days it trades like an equity-based asset class no different from cyclical stocks.  We expect a resolution over the next week or so to determine where gold is ultimately going.

Tracking the CurrencyShares Euro Trust (NYSE: FXE) is easy for the currency relationship between the Euro and the U.S. Dollar.  As far as the future of reserve currencies, our poll this week is now over but the indication is that the Euro in some form or fashion is toast.  Only 14% of our respondents answered “the Euro is here to stay as it is today” and the rest of the responses can be seen here.

If the Euro slides, it is going to be harder for gold to maintain that reserve currency status that it was exhibiting before.  It is hard to imagine that the dollar may be king again.

JON C. OGG

Gold has lost its runaway status.  The safe-haven trade has gone dark.  The margins were raised and the dollar became the world reserve currency again as the Euro bubble has been popped.  The SPDR Gold Shares (NYSE: GLD) has come off more than $25.00 from its highs.  A basic look at the chart puts resistance back around $165 to $167… iShares Gold Trust (NYSE: IAU) is back above $16.25 but is finding some resistance around the $16.50 mark again.

So, does this make the cash to endlessly bash gold?  No, not at all.  We are tracking gold via the SPDR Gold Trust (NYSE: GLD) and this one tanked after peaking in August.  What is so interesting is that as stocks have recovered now that Europe is going to do a bank bailout of its own we have seen gold actually rise again. 

Gold may not be a safe-haven trade now, but it has been acting like a “risk-on” trade again.  If you use “the GLD” as the benchmark another “risk-on” resistance will come into play as the price gets closer to $170.  At that point, anyone who bought gold on the last pullback during the last month will be profitable.  All of those investors (or speculators) who were caught long and wrong at the top start to run back into their breakeven levels at about $175 and we would look for more resistance there.

If you look at the chart from stockcharts.com for the GLD, the 50-day moving average is up around the $170.45 level where big resistance comes in.  The floor today is wad down at $150.04 and just above that $150 mark (say $152) had been the resistance level before gold went parabolic in early July.

So, our take… Gold has lost the safe-haven status but the bounce of late has been for buyers buying the risk trade again.  For now…

JON C. OGG

All you have to do is look at the exchange-traded funds and closed-end which track the emerging markets and the BRIC nations (and those surrounding the BRICs).  Ugly is not quite the right description and we will explain more after showing just how bad the carnage is.  Greece is no emerging market, but it is on the path to default faster than emerging markets used to default.

The ETFs for the broad emerging markets is not a good signal for their equity markets.  The revolutions of early 2011 did not help, nor did the food inflation, but the economic slowing is taking a hit here left and right.  iShares MSCI Emerging Markets Index (NYSE: EEM) closed down 2.1% at $34.36 and the 52-week trading range is $34.29 to $50.43 (52-week low was Monday).  Vanguard Emerging Markets Stock ETF (NYSE: VWO) closed down 1.75% at $35.20 and the 52-week trading range is $35.13 to $50.92 (52-week low was Monday). 

We have included the most active ETF chart on each from Stockcharts.com at the end of this report.  The data on the BRICs is almost shocking…

BRAZIL

Brazil may have energy independence and the Olympics headed its way, but the implosion there has been massive.  The BOVESPA lost 2.9% of its value on Monday and let’s just say that its high-flyers are now grounded due to more than just weather.  It seems that minerals and forestry are not going to generate cash, just like it missed out on royalties from the term “Brazilian” in personal grooming. 

iShares MSCI Brazil Index (NYSE: EWZ) closed down 2.1% at $50.89 and the 52-week trading range is $50.71 to $81.77 (52-week low was Monday).  Market Vectors Brazil Small-Cap ETF (NYSE: BRF) closed down 3.15% at $37.96 and the 52-week trading range is $37.73 to $63.78 (52-week low was Monday).  iShares MSCI Chile Investable Market Index (NYSE: ECH) closed down 3.8% at $51.16 and the 52-week trading range is $50.92 to $80.38 (52-week low was Monday).  Aberdeen Chile Fund, Inc. (NYSE: CH) closed down 4.9%  at $13.45 and the 52-week trading range is $13.37 to $26.56 (52-week low was Monday).

iPath S&P 500 VIX Short-Term Futures ETN (NYSE: VXX) is up 5.6% at $56.40 and the iPath S&P 500 VIX Mid-Term Futures ETN (NYSE: VXZ) is up 2.9% at $75.33.  These ETF prices are both higher than at the peak of selling you see on the actual VIX index chart because of how they trade with futures.

Technicians and technical analysts try to not look at anything other than the charts and the internal market statistics.  Fundamental investors are smart to at least take note of what the charts are saying, but they try to look at what the economic and company fundamentals are going to be in the next quarter to next year.  Right now the market is at a point where the technicians are in charge on the downside when the fundamentalists cannot agree whether or not we are entering (or have already entered) the next (or double dip) recession.

As you will see, here is the current VIX chart going back three years to show the S&P 500 SPDR (NYSE: SPY) after that.

JON C. OGG