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11 comments:
Are you predicting or simply preparing readers for the down side should it occur?
I am actually getting rather optomistic, although that optimism is tempered by the fact that volatility will not go away any time soon
i believe there will be one or two more fast runs down, but i do not think they will take it meaningfully below the ixisting low, bracing clients offering it up to non client readers for consideration
Roger,
I was curious if you had seen El Erian's new global asset fund and if so if you saw this as a way to play the alternative category?
http://www.pimco-funds.com/ff_reports/Global%20Multi-Asset%20Institutional.pdf
Hi Roger,
A question - Morningstar interviewed two fixed income specialists (from T Rowe Price and Pimco), who in both their opinions, said that fixed income High Yield looks mispriced currently - suffering from liquidity issues - rather than credit issues.
They say the market is pricing this as if defaults will reach 15%, as opposed to the current 3.3% rate. Yet when I try to find any funds at 15%+ yield, can't seem to.
Am I misreading how these default rates are imputed into the overall yields?
Thanks
Jay Walker
The Confused Capitalist
Roger,
I thought you may find this review interesting. It talks about RYMFX, NARFX and HSGFX.
Have you ever considered adding hussman's fund to your client portfolios?
http://www.fundalarm.com/rydex01.htm
Have to agree I don't see any compelling reason to believe this is 'the' bottom yet; still some very bad news out there waiting for the markets attention IMO. Obviously could be wrong but I do not plan to increase equity exposure further until I see more evidence of sponsorship and less evidence of volatility.
WRT high yield, Accrued Interest discusses at http://tinyurl.com/5785hj
The (pardon the expression) money quote is "[I]f high-yield defaults follow the 'normal' recessionary pattern of about 10% defaults, but [automakers] default as well that would bring total defaults to about 17%"
FWIW I agree with his assessment that entering the high yield arena at this point should be treated as an equity rather than a bond play w/ the trade sized accordingly.
default rate at 15% does not equate to yields at 15%. Two completely different things. Not an expert here but as I understand these sorts of comments they are spread related. wider spreads mean greater fear, generally, of failures. I do not know what sort of spread equates to 15% failure rate.
I will look at the links left and if it makes sense I will blog about them.
i have not thought about using a hussman fund across the board. it is actively managed so i do not know what it exactly owns right now or obviously in the future which makes it tough to work in with other holdings.
Roger,
Do you use NARFX for clients? If so, does this not pose the same issue as Hussman in not knowing the holdings? thanks
use narfx in a few smaller account where i cannot own 40 different stocks.
NARFX is an absolute product, Hussman sometimes is and sometimes is not--not a dig as his track record is excellent but Hussman can be un hedged where as NARFX is very unlikely to be unhedged.
Roger,
Couple of thoughts in response to your video post.
If it is unwise to listen to someone who has been consistently wrong, is it not at least somewhat foolish/dangerous to ignore someone who has been consistently right?
Nouriel Roubini comes to mind...
Also, the "folks are feeling good" comment tends to leave me feeling a bit left out. Especially after reading the article on TSCM re "Hang On, the Hedges Aren't Done Selling" (http://www.thestreet.com/story/10444398/2/hang-on-hedge-funds-arent-done-selling.html).
I had surmised that some of the precipitous "after 3pm" drops in the past week or two were hedge fund liquidations, but a fund manager tells me that those sales are from the mutual funds (who have already identified (by 3p) the amount of cash they need to pay out the redemptions for the day). My fund manager friend says there's no way to predict who/when a hedge will be forced to liquidate as it all depends on the investment/subscription agreement with the investor.
But he did say that the recent price improvements don't begin to scratch the surface of the trouble that our financial institutions are in - that in fact, the leveraged loan market (which has just recently seen Aaa tranches selling in the 70s) alone represents more wealth destruction than is contemplated in the current phase [all?] of the bailout.
I'm not saying I know that the SPX is headed for 600, I'm just saying I've only heard one shoe drop, and I feel like I'm in a giant shoe store straddling the San Andreas Fault.
My trading antennae are seeking out signs of a value trap here. If short interest is waning, we may be taking the brakes off the roller coaster at just the wrong moment.
R in NY
PS: Did I miss your take on Iceland being declared (by the UK) a terrorist nation? Does that sort of action not reek of "unintended consequences" (even beyond Vlad's suddenly having a friend in the north atlantic???)
The simple rule is when everybody sell, you should buy. But which stock is good buy? I have been using the chart in www.myminter.com to decide the buy day and use its fair value of the stock to see which one is good value to buy as a long term bet.
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