Today's Animal Spirits is brought to you by our friends at Why Charts. I was looking recently at some data in the credit markets on Why Charts, looking at the option adjusted high yield spread, which is just the difference in the interest rates

between what you're yielding on a high yield or junk bond

and it diversified holding of those

versus what you're yielding on a basket of high quality U.S.

treasuries. And that has blown out in the last month by

almost 5% I guess almost 4% I went from 3.5 to 7.3 and

surprisingly not quite as high as it was in 2016, not nearly as much as 2008,

but that's a big blowout in a hurry.

Especially with rates so low.

So you had about three years worth of yields or something like that whatever it is ripped out in about three weeks

J&K is down roughly 14% in a 40% drawdown I thought this was a good way to show people that chasing

yield has actually worked fairly well in recent years and it's actually probably

been a good strategy to do but eventually that risk and return that comes to and this is one of those

times where high yields is just getting massacred and that's sort of what happens when you go for

the higher yield you have that higher risk as well. So all of these periods have been buying opportunities. You look back in time, you look at the charts. I forget who said this. Maybe it was Adam Smith said statistics tell a rather

bloodless tale and what he meant by that was you don't get the experience by

looking at a chart because while all of these appear to be buying opportunities with the benefit of hindsight,

in real time they're really freaking scary.

And it's very easy to say be fearful when others are greedy.

It's entirely something else to actually live that.

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