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So much for using Futures to diversify. Not looking for THAT kind of volatility. Commodities got slammed today, which is going to happen occasionally after a run-up.
REMIX is off the list.
On the opposite end, CTFAX actually gained +.26%, as bonds had a great day overall.
Yes-I'm glad I only have $1,000 invested in that fund. The 90 day clock(holding period) is running for me on this fund, unless they decide to emulate IOFIX and I have to pay the hostage fee to get out sooner !
Don’t know what REMIX is about - but a number of financial outlets, including Barron’s, have commented lately that the futures markets were overextended. While futures contracts can be used to hedge risk, they also represent a bullish bet from what I’ve been able to read. A lot of funds using futures got hit today. TAIL (which I own) which hedges with puts (seen as more bearish) did OK. Of course, all these gimmick funds are risky longer term.
The inflation hedges, like miners, were whacked hard today. In the oil sector, both NYMEX & BRENT were down over 6%. Not much was spared that I can see. Real Estate & Utilities both hit hard - even as interest rates fell.
Cheer up. I believe this underperformance on the inflation hedges to be only “transitory.” -
For the benefit of mfo members, here’s how some hedge-type funds on my watch list performed today:
SWAN -0.28%
HEGD -1.83%
DOG +2.47%
NUSI -1.25%
DRSK +0.14%
SPDN +2.26%
FTLS -1.84%
DFND -0.10%
TAIL (owned) +2.80%
A couple mutual funds that are more broadly diversified than the above, but which employ some hedging techniques:
Ouch, that's rough for REMIX. That said, I wouldn't say futures necessarily represent a "bullish bet." They're tools that can be either bullish or bearish depending on how they're used. It’s interesting, though, that a significant futures fund, AHLPX, is down 4.2% today. The thing is about such funds is they are trend followers generally, positive or negative. When there's a sudden turn like today, it's hard for them to adjust in time. And it isn't always right for them to adjust immediately, as the turn like today, could be temporary.
Appreciate all the discussion above. I’m trying here to achieve a higher degree of accuracy than my preceding comments represented. SWAN is the type of ETF “futures investment” I was referencing - though the terminology I used wasn’t very accurate.
Here’s a description of that strategy:
“The BlackSwan ETF seeks investment results that correspond to the S-Network BlackSwan Core Index (the Index). The Index’s investment strategy seeks uncapped exposure to the S&P 500, while buffering against the possibility of significant losses. Approximately 90% of the ETF will be invested in U.S. Treasury securities, while approximately 10% will be invested in SPY LEAP Options in the form of in-the-money calls.”
It’s those “LEAP Options” that represent a levered bet (with a small amount of money down) that the S&P will be worth more in the future when the option closes. If it isn’t higher at that date, than the money paid for the option is wasted. But they figure that in that case their 90% weighting in Treasury bonds will profit from “flight to quality” and compensate them for the losses on the call options.
I hope this is 75% correct. It’s a bit complicated to me. While “defensive” in nature (compared to putting 100% of your money into stocks) it’s also net-net a “bullish” market call. Some sources I follow have been pointing out for quite a while that there’s an unusually large amount of money being invested in these types of vehicles - enough that they may not be a timely / prudent investment at present. And, possibly, they may add to any downside market volatility.
Two of my bond funds, DODIX and VUSFX, gained 0.42% and 0.05 % respectively. All my other holdings were down for the day. The biggest losers were VTMSX and IVOO which lost 3.xx%. Today was a shortened trading day with potentially lower liquidity. It will be interesting to see what happens on Monday.
SWAN sounds like it's basically a principal protected note (PPN). Don't have time now to find a good reference for how they're constructed. Such a reference will help provide a better understanding of how these work.
Note that the options don't pay divs, so even though the "participation" is uncapped, it doesn't appear that you're getting the equivalent benefit of actually owning SPY.
The FAQ for SWAN says that the anticipated participation rate is around 70%, meaning that you'll get only 70% of the appreciation of the S&P 500. And none of the dividends.
.... It’s interesting, though, that a significant futures fund, AHLPX, is down 4.2% today. The thing is about such funds is they are trend followers generally, positive or negative. When there's a sudden turn like today, it's hard for them to adjust in time. And it isn't always right for them to adjust immediately, as the turn like today, could be temporary.
Same story with Pimco's trend-following managed futures fund PQTAX, down 4% Friday. Judging from where they report the fund's exposure, it seems likely at least some of that came from their rate positioning; T rates took a substantial dive.
Not everything was down Friday. DKNG, which has stunk up the joint for several months, sliding from mid-$50s to under $35, gained +1.29% yesterday - bucking the trend.
I’ve long since ditched their stock, but with collegiate basketball and NBA in full swing … am using them for another purpose.
@AndyJ Yep, that sounds like good detective work. They were probably long stocks in a positive trend, and short long-term Treasuries in a negative trend. But what a reversal for Treasuries, up 2.4% on Friday: https://morningstar.com/funds/xnas/vustx/quote
Likely going to take another Schmeissing today, meaning REMIX/BLNDX.
I'm out. His models obviously did not pick up swift change in trend. I don't have the facts and could be wrong as I do NOT know the details but it appears that the fund mgr had a large downdraft in 2nd half of 2018 in his old Managed Futures fund...a real arse kicking...hope that doesn't happen here. Almost like indexed across all equites and then leverages to commodities and currencies which are very difficult to get right...wrong model, wrong turn, less dough in pocket.
Any time, drawdown ~8% within a week or so, buh-bye.
Some think that 4500 on the SPY is the line in the sand for those technical indicator types...
Me? With Powell talking like he did today, maybe taking the pnch bowl away quicker than many think...of course he could be just jaw boning....inflation kinda out of control...no way this is slowing down anytime soon....talk to folks who do procurement, sourcing etc. They know what is going on. Don't like the smell of any of it.
My spidey sense, so called experience recalls many times when you get this yo-yo...more like a spring going back and forth and than boing....could be biggly boing to the downside. Very dangerous.
For certain, I have no clue what is going to happen but I am playing it safe investment wise.
I think the script has been somewhat apparent for a while now. First the fed denies there’s serious inflation; than they realize they can’t ignore it any longer. However, I was a bit surprised by the vehemence of Powell’s stance today (even discarded “transitory”). Past experience suggests the fed will reverse course and become more accommodative once the markets revolt. But, this time might be different.
The “rock & hard-place” analogy has been overused by pundits. But, yes, I think that’s where the fed now finds itself. To play on Lewis’ “yo-yo” comparison - possibly the fed is now at the end of its “string” because interest rates have gotten so low there’s no place to go but up.
No, I think today is about Moderna's announcement that the existing vaccine won't work on Omicron so well. Actually, on second thought, it looks like both.
I was up late last night when the Moderna comment came out. Yes - the markets did an abrupt U-turn. Dow futures were off over 700 in the very early morning. Somehow I think that was a trigger for something deeper & potentially more serious.
Hang in there @Derf. I suppose your buying-the-dip thread must be busy about now!
Think we don’t have sufficient patient data to confirm the impact of Omicron on the broader population and demographic. Moderna news from Financial Times said one thing (somewhat negative) and BioNTech provided a more positive news with their vaccine. The comments in Financial Times article are well worthwhile to read. https://ft.com/content/27def1b9-b9c8-47a5-8e06-72e432e0838f
COVID situation has elevated to the top since last Friday. Will we re-visit last spring when many countries underwent lockdown? Personally I don’t think so, with the advancement on prevention (vaccines), treatment (antibodies, antiviral drugs and steroid medication). Restrictive travel has already deployed in Europe, Asia and US and that is good. Testing of air travelers and contact tracing are being used. All these practices will slow down the virus spread while buy times for the medical community and government to response. The coordination between the countries is highly encouraging.
Learned from last spring, I will stay put and make small adjustments if necessary.
Yes, it looks ugly. Markets always overreact both to the upside and the downside. Ever since I started paying attention, 2 decades ago. I will make no new decisions based on two or three days of Market action. I suspect some Fund Managers with some dry powder handy will wait just a little longer and then BUY. I'm going to watch the movie classic, Quo Vadis and drink The Balvenie doubleWood 12 year old. Single Malt. https://www.imdb.com/title/tt0043949/?ref_=nv_sr_srsg_3
As some here opined recently, the fund was long oil and petroleum products at the time the Omicron news hit. It appears that the bets on oil have been closed out. I found it somewhat soothing to know that the fund is betting on the price of coffee; I contribute ever so slightly to the demand by regularly ordering 5 pounds of organic dark roast Honduran Marcala elixir.
Comments
The inflation hedges, like miners, were whacked hard today. In the oil sector, both NYMEX & BRENT were down over 6%. Not much was spared that I can see. Real Estate & Utilities both hit hard - even as interest rates fell.
Cheer up. I believe this underperformance on the inflation hedges to be only “transitory.”
-
For the benefit of mfo members, here’s how some hedge-type funds on my watch list performed today:
SWAN -0.28%
HEGD -1.83%
DOG +2.47%
NUSI -1.25%
DRSK +0.14%
SPDN +2.26%
FTLS -1.84%
DFND -0.10%
TAIL (owned) +2.80%
A couple mutual funds that are more broadly diversified than the above, but which employ some hedging techniques:
HSGFX +2.44%
TMSRX (owned) -0.47%
Try to have a good weekend, Derf
Here’s a description of that strategy:
“The BlackSwan ETF seeks investment results that correspond to the S-Network BlackSwan Core Index (the Index). The Index’s investment strategy seeks uncapped exposure to the S&P 500, while buffering against the possibility of significant losses. Approximately 90% of the ETF will be invested in U.S. Treasury securities, while approximately 10% will be invested in SPY LEAP Options in the form of in-the-money calls.”
SOURCE
It’s those “LEAP Options” that represent a levered bet (with a small amount of money down) that the S&P will be worth more in the future when the option closes. If it isn’t higher at that date, than the money paid for the option is wasted. But they figure that in that case their 90% weighting in Treasury bonds will profit from “flight to quality” and compensate them for the losses on the call options.
I hope this is 75% correct. It’s a bit complicated to me. While “defensive” in nature (compared to putting 100% of your money into stocks) it’s also net-net a “bullish” market call. Some sources I follow have been pointing out for quite a while that there’s an unusually large amount of money being invested in these types of vehicles - enough that they may not be a timely / prudent investment at present. And, possibly, they may add to any downside market volatility.
All my other holdings were down for the day.
The biggest losers were VTMSX and IVOO which lost 3.xx%.
Today was a shortened trading day with potentially lower liquidity.
It will be interesting to see what happens on Monday.
Note that the options don't pay divs, so even though the "participation" is uncapped, it doesn't appear that you're getting the equivalent benefit of actually owning SPY.
Other names: equity-linked CD, equity indexed annuity, market linked note, equity linked note, ....
The FAQ for SWAN says that the anticipated participation rate is around 70%, meaning that you'll get only 70% of the appreciation of the S&P 500. And none of the dividends.
I’ve long since ditched their stock, but with collegiate basketball and NBA in full swing … am using them for another purpose.
I'm out. His models obviously did not pick up swift change in trend. I don't have the facts and could be wrong as I do NOT know the details but it appears that the fund mgr had a large downdraft in 2nd half of 2018 in his old Managed Futures fund...a real arse kicking...hope that doesn't happen here. Almost like indexed across all equites and then leverages to commodities and currencies which are very difficult to get right...wrong model, wrong turn, less dough in pocket.
Any time, drawdown ~8% within a week or so, buh-bye.
Some think that 4500 on the SPY is the line in the sand for those technical indicator types...
Me? With Powell talking like he did today, maybe taking the pnch bowl away quicker than many think...of course he could be just jaw boning....inflation kinda out of control...no way this is slowing down anytime soon....talk to folks who do procurement, sourcing etc. They know what is going on. Don't like the smell of any of it.
My spidey sense, so called experience recalls many times when you get this yo-yo...more like a spring going back and forth and than boing....could be biggly boing to the downside. Very dangerous.
For certain, I have no clue what is going to happen but I am playing it safe investment wise.
Good Luck to ALL,
Baseball Fan
The “rock & hard-place” analogy has been overused by pundits. But, yes, I think that’s where the fed now finds itself. To play on Lewis’ “yo-yo” comparison - possibly the fed is now at the end of its “string” because interest rates have gotten so low there’s no place to go but up.
Derf
Hang in there @Derf. I suppose your buying-the-dip thread must be busy about now!
https://ft.com/content/27def1b9-b9c8-47a5-8e06-72e432e0838f
https://ctvnews.ca/health/coronavirus/biontech-ceo-says-vaccine-likely-to-protect-against-severe-covid-19-from-omicron-1.5687229
COVID situation has elevated to the top since last Friday. Will we re-visit last spring when many countries underwent lockdown? Personally I don’t think so, with the advancement on prevention (vaccines), treatment (antibodies, antiviral drugs and steroid medication). Restrictive travel has already deployed in Europe, Asia and US and that is good. Testing of air travelers and contact tracing are being used. All these practices will slow down the virus spread while buy times for the medical community and government to response. The coordination between the countries is highly encouraging.
Learned from last spring, I will stay put and make small adjustments if necessary.
https://www.imdb.com/title/tt0043949/?ref_=nv_sr_srsg_3
https://us.thebalvenie.com/our-whisky-range/view/doublewood-12/
Not saying the markets can't rally short term from here, but we are now in a bear market for the next 12 months.
I'm not buying anything.
https://www.standpointfunds.com/fund/documents/under-the-hood-november-2021
As some here opined recently, the fund was long oil and petroleum products at the time the Omicron news hit. It appears that the bets on oil have been closed out. I found it somewhat soothing to know that the fund is betting on the price of coffee; I contribute ever so slightly to the demand by regularly ordering 5 pounds of organic dark roast Honduran Marcala elixir.
JQHAXJHQAX was mentioned in this and other threads as worthy of consideration. In which brokerage is this fund available to new investors?