Morningstar Still Doesn't Get It

I have been picking on Morningstar for the odd way they look at ETFs and fortunately, in terms of unintentional comedy, Morningstar still doesn’t get it. I looked at a continue ed piece they put out through SPDR. There was a lot to pick on but for today we can just focus on the following.

Deep in the presentation in the part about an “Absolute Return Tool Kit” is an example of a pairs trade that goes long iShares iBoxx High Yield ETF (NYSE: HYG) and short the SPDR Barclays Capital 1-3 month T-bill ETF (NYSE: BIL).

 

 

The chart goes back for as long as BIL has been trading. Despite having been prone to a half dozen bad data points BIL does not move. In BIL’s lifetime we have had an Armageddon scare and it still did not move. In the last three months the trading range has been nine cents. That is the entire three months not one day.

HYG on the other hand has some potential to move around a lot and offer a great return for people who are nimble traders or who can make a timely investment. In looking at the chart how does anyone get the sense that a wrong trade in HYG can be protected by a position in BIL?

There were plenty of other things in the portfolio that made no sense to me as well which I hope to get to write about in the next few days.