Slope of Hope Blog Posts
Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.
Howdy, folks. Just a couple of comments from me.
First off, I am tantalizing close to crossing the 6,000 mark for Twitter followers. If you use Twitter, be sure to click the Twitter icon on the upper-right corner of the blog so you can follow me. And if you're one of the twelve people on the planet not yet on Twitter, sign up!
As for GLD, I have been avoiding precious metals recently, but today the price got so tantalizing close to the apex I've highlighted that I've created a medium-sized short position. I'll supplement the position if it moves in my direction.
Hedging a High Yield Long Idea
Hey Fellow Slopers,
In a post Wednesday morning ("High-Yield Long Idea Idea Continues Strong"), Tim noted the strong performance of his long position in the SPDR Barclays High Yield Bond ETF JNK. Back in August, I looked at the cost of hedging JNK, but I thought it might be worth taking another look after seeing Tim's post. It turns out JNK is pretty inexpensive to hedge right now. The table below shows the cost, as of Wednesday's close, of hedging it against a greater-than-20% drop over the next several months.
For comparison purposes, I've added six of the most actively traded ETFs to the table. First, a reminder about what optimal puts are, and a note about decline thresholds; then, a screen capture showing the optimal puts to hedge JNK.
Well that was a wild Fed day yesterday and the news was that the Fed is so confident that current policies won't work that it will leave real interest rates negative until the end of 2014. Equities surged on what passes for good news nowadays. Bernanke was surprisingly candid in the questions afterwards, and admitted that current interest rate policies were in effect a massive redistribution from savers to borrowers. No getting anything past that guy it seems. In a country so resistant to tax rises it seems remarkable that this (in effect) massive redistributive tax on savers, worth a conservative $300m per year to the government alone, attracts so little attention. Funny old world.
Are we in a new bull market? Surely the Boyz would like us to believe that. Remember that time in not so distant April 2011 when the famous perma bear David Rosenberg capitulated and accepted that may be a new bull market has started. Ironically that was the top of the market.
What we see today is pure and simple irrational exuberance. Nothing Uncle Ben said today was new, except that they will maintain the ZIRP till 2013 or infinity. There was no talk of QE3. On the other hand, everything that we know in TA is way out of sync and over extended. But we have been in such set up many times before and yet our collective memory is no better than a goldfish. As much as we talk of being a contrarian investor, we still fall victim of collective emotion and greed.