Boxing Day

A reader left a comment asking for my take on the Access Flex Bear High Yield Inverse Fund (AFBIX) as hedge. Assuming it does what it is supposed to do (you need to check this out for yourself if you are interested in the fund) I have to wonder how many do-it-yourselfers have enough high yield exposure that it needs to be hedged. Yield spreads between high yield and treasuries are very low which makes going heavy in high yield relatively risky these days.

That this type of product exists is a good thing and given how narrow spreads are it might make for a good speculation--again if it does what it is supposed to do, which I have not checked.

Another reader asked me what I thought of the Currency Harvest ETF (DBV) as a tool in an enhanced indexing trade. Here I think the reader means (very simplified version coming here) that if you have $100,000 you buy enough futures contracts to synthesize a $100,000 equity portfolio and put whatever is left over into something that pays interest. In theory the returns beat the S&P 500.

He asks if believe the back test, I do and I own the fund but I view the fund as an aggressive cash position, it can go down in value. The idea of using a foreign currency in this type of trade is very appealing to me in an academic sense which might be to say I probably would not do the trade but some combo of SPX futures and a high yielding currency that has a shot of going up against the dollar sounds like a packed product waiting to happen. I had never thought about this before but I really am intrigued so thank you to the reader!

I just left a post on RealMoney about this week being slow but there probably being a lot of Outlook 2007 pieces which could be a great chance to learn process.