Is this a surprise?  When you live deep in the sea of corporate financials, you have a good take on what is going on in the world.  Unlike many investment advisors across the U.S., Peritus actually builds financial spreadsheets and profiles on each and every company we are looking to own or do own in our client portfolios, whether it be our ETF (ticker HYLD), our separate accounts, or our CBLO’s.

In doing this nitty gritty work you discover how the economy is really plugging along and what is impacting it either to the positive or negative.  You can also decipher the extent of demand for the product or service.  Our index-based/passive brethren and large mutual funds do not do this kind of work.  They put hundreds and hundreds of securities in a fund and then sell you sunshine through an economist and say the water is fine, come on in.  These economists are glorified sales people, as I have heard very few of them talk negatively about the economy.  Why?  They only make a bonus if assets are going up, not if you are selling their fund.

If you look at the data points from the Empire Manufacturing, to jobless claims, to consumer comfort, to Philadelphia Fed, to home sales, you will see that all of these disappointed versus expectations.  This is proof that people are still maintaining their lifestyles, but not spending beyond their means, so there is nothing to drive demand up.

Where do you make money in this environment?  The stock market is up over 30% since the most recent fall on blah economic statistics.  If the economy is growing at 2%, why is the stock market up 30% in 6 months and has doubled in value since the 2008 crisis?  Some of this rebound is expected as prices of stocks and bonds did as they always do: trade to the extreme.  But we see little to justify a further move in equities.  In the corporate bond-land, you only need for your companies/investments to maintain their existing business status to get paid.  If you can lock in a double digit current yield with a duration under four years, why would you not put a big allocation there?  We are seeing these sorts of credits available in the high yield market.

Your job is to find a manager that has a lot of experience in this asset class, and a track record of delivering returns.   You need to have the manager that does due diligence on every company in the portfolio and is not just buying one of everything and saying you are diversified.  You need to have an investment instrument that can deliver this product to you with transparency and liquidity.  Peritus is a manager with these attributes.  Visit www.advisorshares.com/fund/hyld to find additional details.

Happy investing, as we have years more of this economic state.