Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

Preparing your Portfolio for Rate Cuts

12467

Comments

  • For sure... hope all is ok with Junkster.
  • edited September 29

    @Junkster
    Hope you are ok. Saw the floods in Asheville NC, near your nest.
    You were correct, Helene developed into a large hurricane.
    Just hope it didn't cause damage to your homes and Xterra fleet.

    Right on Helene but at least so far wrong on the cat bonds as they didn’t skip a beat, All well here in KY. In the NC High Country around Beech Mountain/Banner Elk where I hike they are without power and water for the next 1 to 2 weeks, Many stuck in their homes with all the roads impassable. I believe the National Guard has been called in.

  • Terrible hurricane, more than 90 confirmed dead... I love my CATs, but I sold 80% of them on Friday. Strangely, they jumped up happily when Helene passed through: on Friday, EMPIX was up 0.19%, CBYYX was up 0.35%, and SHRIX was up 0.44%. Maybe they did not have time to respond, or people became optimistic that Helene hit the less populated area and was no longer a threat. But today, some sources estimated a total loss of about $20 billion, whereas others estimated total damage ~ $100 billion, though only a small part of it may hit CATs. Hopefully tomorrow will bring some clarity.
  • @Junkster- very happy to hear that you got through this OK.
    OJ
  • Thanks @OJ. Appreciate it,

    @finder my thinking too that Friday the cat bonds didn’t see the full impact of Helene. But who knows, these bonds seem impervious to about any disaster.
  • I'm in a North suburb of ATL. The weather guys were warning us for days, but luckily we just had heavy rain for 3 days and it passed. ATL and the GA coast hardly ever get hit.
    In 2 days we are vacationing about 1.5 hours north of Ashville. I'm not going to drive thru Ashville and will take I-81.
  • edited September 30
    I am trying to understand the CAT bond funds' behavior, why do their NAVs sometime have a sudden drop not associated with any insurance related event or dividend / distribution payouts?
  • balubalu: here's what happened last may, tho i don't fully understand it: https://www.artemis.bm/news/cat-bond-market-suffers-one-of-its-biggest-non-loss-event-weekly-declines-icosa/. other than that drop, i don't see any other significant ones in the past year or two.
  • There is another disturbance in the Caribbean with a 40% of developing into a named tropical depression, tropical depression "12" 600 miles west of Cape Verde islands that will probably become a hurricane and a another disturbance nearer the Cape Verde islands with an 80% chance of forming a tropical depression.
    All from FEMAs daly email
  • linter said:

    balubalu: here's what happened last may, tho i don't fully understand it: https://www.artemis.bm/news/cat-bond-market-suffers-one-of-its-biggest-non-loss-event-weekly-declines-icosa/. other than that drop, i don't see any other significant ones in the past year or two.


    Thanks for the link / article. It is a poorly written article is why you do not fully understand. With the quality of writing, I am not sure how much to rely on the reasoning provided. BTW, SHRIX did not flinch from the presumed beginning of May reasoning.
  • My wife and I were vacationing in Asheville during the storm. Our hotel was on Tunnel Road. On Saturday morning we decided to at least attempt to leave the area and head for home even though we were literally in the dark with no TV news and no working cell phones. We did have a near full tank of gas, otherwise, I'm not sure we could have risked leaving not knowing when or where we would be able to get gas again. Our initial route was blocked by a flooded road. We ended up heading south towards South Carolina on RT 26 and just north of Spartanburg, SC we took RT 85 east towards Charlotte. Long lines at gas stations that were open along Rt 85. We didn't stop for gas until just west of Charlotte in Belmont and drove right up to a pump. We still had a half a tank at that point, way to go Honda Accord! Our cell phones started working again in that area as well and boy was that a nice feeling. We spent the night in Wytheville, VA on Saturday before making it home to Ohio by Sunday afternoon.
  • Terrible images on TV... And yet, CAT bonds are up, both on Friday and today. When Hurricane Ian hit in September 2022, CAT bonds fell almost instantly. Now, they are jumping up, at least in the beginning. Time will tell...
  • edited September 30
    For five or six years prior to 2023, CAT bonds (index) returned a total return of 4% or less per year on average. That is not enough return for the risk over such a long period of time. I am guessing the risk premium had to change, increasing the yield (not counting the higher risk free rate) for market to continue to exist for these bonds. Keep us posted so we know when the next cycle starts.

    I am just a bystander on this investment.

    Yes, terrible plight for the people going through hurricane.
  • I'll take my chances with an earthquake any day.
  • If I may ask @Old-Joe, which side of the San Andreas Fault do you occupy ?
  • edited September 30
    A single cat-bond doesn't have much upside - principal + promised rate + interest on the pool kept in Treasuries - expenses. But the downside is huge - principal could be wiped out if the trigger event causes huge losses.

    So, in a pool of cat-bonds, downside may be limited too - not all disaster would strike at once. That is the pooling principle of insurance.

    Insurers are resorting to cat-bonds because their reinsurers would charge too much to insure certain risks.

    So, I don't see what is attracting retail investors to cat-bonds.
  • I got very lucky...just a little water in my basement and a few trees down on my winding driveway. Mine and a few others only one without a tree crashed thru or on the roof. Just south of downtown Asheville. Biltmore village maybe 15 min from house. I got a great neighbor who looks after my property. Folks couldn't get off the mountain. Roads to washed out or impassable . No water, no electric. No food. Walked down the mountain and called me when he briefly got cell reception. I don't spend a lot of time there but planned to go for leaf season in a few weeks.

    Mountain folks are tough as nails and will pull thru this... everyone looking after families with kids and the elders. Told my neighbor to raid my pantry and extra water stash to distribute to the neighbors if need be as well as where my cash stash is and combo to my gun locker.
  • Told my neighbor to raid my pantry and extra water stash to distribute to the neighbors if need be as well as where my cash stash is and combo to my gun locker.
    You're a good soul.
  • edited October 2
    In a nod to all those still parked in short term and / or floating rate stuff,

    Stan Druckenmiller at the Grant’s conference yesterday -

    “Bipartisan fiscal recklessness is on the horizon.”

    He’s short bonds equivalent to 15-20% of his portfolio.

    “George [Soros, Stan's ex-boss / mentor] would be embarrassed of me” for not making it a bigger bet.

    Obviously, I do not know Stan's time horizon for this bet and may differ from your criteria. So, please do not take the above as my commentary against anyone who is making a different bet. I am clueless about the bond market.
  • @Derf- The San Andreas Fault lies in the ocean about five miles to the west of our house.
  • YBB:
    So, I don't see what is attracting retail investors to cat-bonds.

    FD: any time I see a bond fund with 8% potential per year with a smooth uptrend, I join it.
    If the fund makes 10+%, I dance. I don't know many retirees who wouldn't love this.
    This is not a recommendation, just an observation.
  • BaluBalu said:

    In a nod to all those still parked in short term and / or floating rate stuff,

    Stan Druckenmiller at the Grant’s conference yesterday -

    “Bipartisan fiscal recklessness is on the horizon.”

    He’s short bonds equivalent to 15-20% of his portfolio.

    “George [Soros, Stan's ex-boss / mentor] would be embarrassed of me” for not making it a bigger bet.

    Obviously, I do not know Stan's time horizon for this bet and may differ from your criteria. So, please do not take the above as my commentary against anyone who is making a different bet. I am clueless about the bond market.

    Saw the article. Color me clueless, but I hear they're supposed to provide safety; so I'm staying mostly short, not shorting, and not floating.:)
  • @WABAC, Stan is nodding at you!
  • Mr. Market at all time highs ! I'll stick with CD's & T-Bills. Back me up 20 years & I'd still buy the market.
  • "Back me up 20 years & I'd still buy the market." Not sure I follow. Do you mean you want it to be 2004 to buy into equities / bonds?
  • If Derf is looking at this the same way that I do he just means that if he were twenty years younger he'd be in the market, but as an older person it may not be a good choice at this time.
  • Old_Joe said:

    If Derf is looking at this the same way that I do he just means that if he were twenty years younger he'd be in the market, but as an older person it may not be a good choice at this time.

    If I was 20 years younger, we'ld be scraping money together for the mortgage and daycare.
  • edited October 3
    Bought a new GMC pickup 20 years ago. Still drive it. $16,000 price tag. I hear they’ve gotten more expensive.

    :)
  • @hank Gal pal priced out a new GMC Yukon Denali last year. If memory serves me it was right around $104 K. Need - less to say, that purchase didn't happen! She bought a Yukon '24, still a bit pricey , but a lot less than $104K.
    @ Old_Joe , You're right on, where I was coming from.
Sign In or Register to comment.