http://www.funds.reuters.wallst.com/US/etfs/performance.asp?YYY622_G33B++xjN5AzUc4z1D4ErazCbDBLcGXIWzlyYCETzzYLmgzyAfnbo2oYm86Tdu3iA pundit I watch mentioned PFIX (Lipper score card above) as a potential buy 3-4 weeks ago. So I’ve been tracking it, just as I sometimes track funds folks here mention or buy.
The idea behind this fund makes sense. Profit from the increase in interest rates everybody and his brother (or sister) expect to be coming by shorting longer dated bonds. This fund attempts to do that. I haven’t studied the mechanics. And don’t own it. Judging by the dismal 4 week results it must be using some leverage.
Since inception (May 10, 2021):
-18.9%Last 4 weeks:
-13%Not to flagellate a fund (or anyone who might have thought it a good idea). But might be sobering, possibly instructive, for all of us to consider the difficulty “calling” interest rates. Just because everybody agrees they’re going to rise doesn’t mean they will - at least anytime soon.
Comments
He designed PFIX as "fire insurance" against the damage the rising interest rates can do to financial commitments that are interest rate sensitive, ie Intermediate and Long Term Bonds, or an adjustable rate mortgage for example.
https://www.convexitymaven.com/wp-content/uploads/2021/06/convexity-maven-fire-insurance.pdf
He sees this a a $50,000 insurance premium against a $1,000,000 portfolio of intermediate bonds, that will pay off if interest rates shot up. If you believe inflation is truly "transitory" then you do not need this insurance. Some of us remember the 70's, however.
I think this represents the biggest tug of war going on now: Will inflation truly be transient, and all of the price increases are only the result of Covid disruptions to supply chains et. The "no increased rate or inflation" view is best summarized by Lacy Hunt at Hoisington Management, who believes Treasuries will continue to rally.
But he thinks this will happen because the feds are sucking all available capital out of the system to pay for the deficit. This does not bode well for the economy either.
Of course we might get both: Collapsing growth and higher rates ie stagflation.
Sorry, I was abbreviating 'Volatile as f---k' in that post as a snarky play on its name.
http://www.funds.reuters.wallst.com/US/etfs/overview.asp?symbol=DUST.K
DUST is down nearly 50% since inception (2010) and has lost more than 70% of its value over the last 3 years. This one bets against gold, employing 2X leverage.
(“Rules by Which a Great Fortune May Be Reduced to a Small One”)
With both of these funds, I think they’re meant more to be traded by experienced hands in the game than average investors. Read somewhere that some die-hard gold bulls use DUST temporarily to hedge their gains after a big run up in gold’s price. A bit disillusioning to know that some actively followed gold bulls may be shorting the stuff whille continuing to preach its virtues to their followers..
All the above is too complex for me. I’ll stick to a conservative static allocation with occasional underweighting or over-weighting of a component plus regular rebalancing.