Day: April 12, 2014

Sorted Weekly Tweets

Sorted Weekly Tweets

US Policy & Politics?

  • Nearly Half of Dodd-Frank Rules Still Unwritten?http://t.co/TwzSawT298?Experiment of regulation by study committees continues albeit slow $$?Apr 12, 2014
  • Banks Given Two Extra Years to Fully Comply With Volcker Rule http://t.co/XVfO9CKMm7?Banks prefer abolition; Fed offers a delay $$ #more??Apr 12, 2014
  • How Big Banks Created a Fed to Serve Their Own Interests?http://t.co/tUlNYE3px5?Fed almost always ends up being a shill 4 the banks $$ $XLF?Apr 12, 2014
  • Angry students snap photos of lunches, tell Michelle Obama: ‘You call this a [expletive] lunch?’?http://t.co/PY4gfa90oI?Food Nazis r mean $$?Apr 12, 2014
  • On equal pay for women, Obama challenges GOP to ‘join us in this the 21st century’ http://t.co/wthQJKwsOO?White House has own disparities $$?Apr 12, 2014
  • When the Messenger Is Worth Shooting?http://t.co/GGuAxpkizc?Fewer & fewer people think teaching financial literacy 2 avg ppl works $$ $SPY?Apr 12, 2014
  • Republicans should be friendly to markets, not to business?http://t.co/YXEWNr9MEh?Big business excellent at co-opt laws 4 their own good $$?Apr 12, 2014
  • Maybe a Gender Pay Gap Is OK?http://t.co/2rtYIZ6MFo?This argumentation isn’t new; economists have been making this argument since the 70s $$?Apr 12, 2014
  • The Best SEC Money Can Buy?http://t.co/wbwBB0CYd4?@ritholtz on Jim Kidney’s excellent retirement speech on the SEC which is worth reading $$?Apr 12, 2014
  • Food Price Shock, 2014 Edition?http://t.co/u79xlrwK1I?Note that the last time this happened, wars & other pains hit developing world $$?Apr 12, 2014

Market Impact

  • Hedge Fund Industry Growing With Pensions To Thank?http://t.co/RF2FTh3YsD?Probably a mistake as hedge funds tend not 2b good w/volatility $$?Apr 12, 2014
  • Hedge Funds Unwind As Growth To Value Rotation Intensifies?http://t.co/XoK1RFKiAg?As growth stocks correct, hedge funds chase performance $$?Apr 12, 2014
  • How Money Managers Fight Their Emotions and Sometimes Lose http://t.co/J0KH06m12P Too Bold? Not bold enough? Tough 2strike right balance $$?Apr 12, 2014
  • The Buys You Can?t Make Yourself?http://t.co/0swRNG0Eyo?@reformedbroker points out the value of @MebFaber ‘s global value ETF $GVAL $$?Apr 12, 2014
  • Humble Student of the Markets: A quant lesson from a technician http://t.co/svQilIRW4m Useful way to understand indicators & mkt regimes $$?Apr 12, 2014
  • 2014 crash will be worse than 1987’s: Marc Faber?http://t.co/Guil41sSvP?Bold w/respect to timing &severity of the next crisis, prob wrong $$?Apr 12, 2014
  • Do ‘rising rate’ ETFs really protect investors??http://t.co/tcx2p4qtuc?I would b wary here; additional yield often carries hidden risks $$?Apr 12, 2014

Rest of the World

  • Kuroda Seen Brewing Yen-Weakening Surprise Action?http://t.co/fVpFvwEiJz?Don’t b shocked if the BOJ does yet more to weaken the yen $FXY $$?Apr 12, 2014
  • This is the bank to watch for a Chinese credit implosion?http://t.co/sKL9NPruZz?Minsheng is an aggressive lender 2the most dodgy credits $$?Apr 12, 2014
  • China?s steelmakers have branched out into shadow banking?which is funny since they owe $484B?http://t.co/Z1IzHBJJ7G?Brief stmt of prob $$?Apr 12, 2014
  • China Pizza Passion Has Fonterra Riding Mozzarella Wave?http://t.co/J4605GnGK4?Pizza is so different than traditional Chinese food $$ $YUM?Apr 12, 2014
  • Ukraine?s Rust Belt Faces Ruin as Putin Threatens Imports?http://t.co/7BYk6ULy3t?Russia has more ec influence on Ukraine thn US on Russia $$?Apr 12, 2014
  • Saudi Banks Reject Algosaibi Meeting on $5.9B Default?http://t.co/6eZwowBlZW?Islamic finance struggles w/debt that isn’t debt but is debt $$?Apr 12, 2014
  • Lavender-Filled Teddy Bears From Tasmania Are a Big Hit in China http://t.co/ubhWoUSnQz?Bobbie Bear touches the hearts of Chinese ladies $$?Apr 12, 2014
  • Top economists warn Germany that EMU crisis as dangerous as ever http://t.co/gsqrbZ5ox0?Overall & banking leverage still higher than safe $$?Apr 12, 2014
  • Fracking’s hottest year in China?http://t.co/5xVoKK6K0d?China finds gas & tight oil in their shale formations. Who knew? $$ $FXI $XLE?Apr 12, 2014

Companies & Industries

  • Time Inc. to Raise $1.4B in Debt for Spinoff?http://t.co/8QUGvyKhrv?I would b careful here; levering up old media not a recipe 4 success $$?Apr 12, 2014
  • Vox Takes Melding of Journalism and Technology to a New Level http://t.co/YdMuuu0ZQC?Vox Media creates a content mgmt system 4 journalism $$?Apr 12, 2014
  • Trailer Parks Lure Wall Street Investors Looking for Double-Wide Returns http://t.co/zym4OmSDP5?Poor people have a hard time moving $$?Apr 12, 2014

Other

  • Stay-at-Home Moms Rise in Reversal of Modern Family Trend http://t.co/sCBErpTIhk?Children deserve attention to help them grow up $$ $SPY?Apr 12, 2014
  • More Moms Staying Home, Reversing Decadeslong Decline?http://t.co/w7bnhw8tQd?Value in efforts 2 produce better children w/more parenting $$?Apr 12, 2014
  • Font War: Inside the Design World’s $20M Divorce?http://t.co/4YpYf1x5UN?Not clearly spelling out a partnership agreement: font of trouble $$?Apr 12, 2014
  • Windows XP Goes Dark; Will Hackers Be Lurking??http://t.co/GPBJKpzdhf?XP has been debugged; odds of significant holes are low $$?Apr 12, 2014
  • After Heartbleed Bug, A Race to Plug Internet Hole?http://t.co/HCBfcHBl5O?A significant part of internet affecting privacy had a hole $$?Apr 12, 2014
  • Global solar dominance in sight as science trumps fossil fuels?http://t.co/BZOdAVwYbA?Can capture 31% of sun’s energy with a 111V Solar Cell?Apr 12, 2014
  • At Gross’s Pimco, El-Erian Says ‘Different Styles’ Stopped Working Well Together http://t.co/vRqPfRA67m?Oil & water eventually separated $$?Apr 12, 2014

Wrong

  • Unsafe: Greece Plans to Issue Long-Term Bond on Wednesday?http://t.co/X4gnld481q?Lust 4 yield guides the behavior of debt investors $$?Apr 12, 2014
  • Misleading: Oklahoma Swamped by Surge in Earthquakes Near Fracking http://t.co/nHfPIWys3q?All quakes r little which avoids big quakes $$?Apr 12, 2014
  • Wrong: Are Safer Cars Worth the Money??http://t.co/1N0Y9aklJb?Misapplies benefit-cost analysis; may b cheaper ways 2 save more lives $$ $F?Apr 12, 2014

Retweets, Replies & Comments

  • ‘ @foxjust Nice going; EEBS is breaktakingly honest with respect to earnings manipulation. cc: @jciesielski $$?Apr 12, 2014
  • RT @ReformedBroker: Reminder: The Fed?s own economic forecasts are basically worse than your dog?s.?http://t.co/uLYirMA5zB?Apr 09, 2014
On Rising Rate Funds, or, Who Remembers ARM Funds in the Early ’90s?

On Rising Rate Funds, or, Who Remembers ARM Funds in the Early ’90s?

In the early 90s, there were not many investment actuaries. ?One of the Holy Grail ideas of the early-to-mid ’90s was creating floating rate funds with yield so that floating rate Guaranteed Investment Contracts could be profitably written. ?I chronicled my efforts there in this article.

One avenue that I went down and rejected was ARM [Adjustable Rate Mortgage] funds. ?There was a minor craze for them in the early-to-mid ’90s, and there were not enough ARMs issued to meet the demand for high floating rates. ?As such, the prices for blocks of ARMs rose above par, sometimes significantly.

One truism of buying mortgages at a premium in the ’90s was that the ability to refinance got sharper and sharper. ?Those willing to buy mortgage securities above par usually took losses as rates fell.

Thus when I read articles about rising rate ETFs, which either invest short-term, or short the bond market synthetically or actually, I think “we’ve been here before.” ?It is difficult to gain incremental yield on short duration instruments without taking on risks like:

  • Credit, including weak covenants
  • Structure (another form of credit & illiquidity)
  • Negative optionality

So be wary here. ?Pay more attention to the return of your principal than the return on the principal.

Theme: Overlay by Kaira