Let's not forget that it is very close to the end of the month and the end of the quarter. There could have been some window dressing today or buying in expectation of central bank stimulus. The 10 yr Treasury hardly budged, up 0.01, so the risk back on trade is not quite here yet. Besides Puerto Rico's upcoming default on July 1 and more China yuan devaluation probability, fund redemptions in July are another risk.
For those that don't know, TVIX is linked to the term structure of the VIX. As I understand it (and I can be wrong), the VIX futures has different expiration months and the futures VIX price can be higher each month you go out. This can be a problem because TVIX has to continually buy the latest month, so that if that month is more expensive than the month that is rolling off, it means that they are continually buying high and selling low, and then having more of that premium roll off each month. Thus there is a built in price erosion similar to decay on options.
NUGT on the other hand trades based on the NYSE ARCA gold miners index, not the price of gold. The gold miners index could run ahead of the price of gold as they go from being undervalued to overvalued.
Most of the info about any securities product is out there and there are many people on these message boards, the Market Pulse section and seeking alpha who describe the pros and cons of each product. One doesn't have to guess.
Closed end munis continue to outperform. Up 1% today as the 10 yr goes under 1.50%. So far this has been an orderly decline and it's not that bad yet. I fully expect the central banks to step in to bail out stocks if the selloff gets momentum. I continue to watch HYG for any signs that the selloff is getting out of hand and so far, that is only off marginally but is now dipping below its 50 dma.
I disagree about blaming the Brits. If this was just about the stock market, then no one would have any complaints. You can't run any govt or economy just by the level of the stock market and you can't keep the stock market up indefinitely with monetary stimulus alone. At some point you have to have real earnings and value and driving interest rates to negative numbers just so you can value stagnate cashflows at a higher and higher multiple does not work.
Bob, my mom was not a long-term T holder, but it was her first covered call position and I do remember a period during the 90's after break up of the Bell system when it's business stagnated. Not sure if this is completely accurate, but it looks from yahee's long term chart that after spiking in the late 90's from the mid 20's to the high 50's, T roundtripped all the way back to the low 20's. If I remember, there was a great uncertainty around what the future of telecommunications would be and what part the old T would play (did Apple save T with the iphone?). The digital age also wreaked havoc on the stock prices of more than a few giant blue chip stocks, like Kodak, Xerox and Digital Equipment to name just 3 that I remember, so it was by no means a certainty that T would survive and prosper like it has. The interesting thing about that long term chart is that when T corrected in 2002 during the dot.com bust, it looks like it "double bottomed" along a long term trend line until it peaked just over 40 before the '08 crash.
My mom has an even better chart with SCG, the utility out of South Carolina, whose worst correction during the 08 crash was "only" 30% (right to a long term trend line) but which at $72 is now above the upper long term trend line in the high 50's and the lower bound trend line in the high 40's. I think I may have just convinced myself that it may be time to take a little off, but it is so difficult to mess with a long term performer.
Yes, hard to tell if this is another dip buying moment or we have to wait until DH's double bottom holds again, or if this is the Bear Stearns time to get out on the next bounce because the pins are going to keep coming at this bubble and finally likely to succeed.
There were stories that Soros made a ton of money betting against the market while at the same time he was saying the UK should remain.
Stagg, my thoughts on the resilency of the mREITS. First, interest rate hikes are now probably off the table for good. Second, many have been buying REITS in advance of the new market index covering them that will be created in September (I think). But, there is a very good article on seeking alpha that distinguishes the moves in some of the mREITs. I think everyone who doesn't understand the differences in the different mREITs should read it.
But back out the divy and the book is 10.88. So they earned about 2% for the quarter or 8% annualized. Their hedges will be a negative drag as the 10 year rate is going down and rate hikes are likely off the table for the year.
The assets may be great in your opinion, but the debt levels stink and debt rules. If the assets were so great, then buyers would be lining up to overpay for them (as ARP did) or lenders would be lining up to take third liens on them. Not seeing that happen makes me think you are wrong.
I don't know JK, I'm getting a feeling like I did back in 1987 when the market sold off on the Friday before Black Monday. As I mentioned in other posts, today was for the dip buyers who have been right every single time the market has sold off since 2010. The big question is whether the big funds switch their strategy and start buying volatility and selling stocks. Then it's over until we go much lower. For me the tell is going to be HYG.
JK, this market is different than the market that existed before due to all of the algo trading and the different trading strategies that are now employed. DH is way off base suggesting that the market moves with corporations profitability as profits have been down for several quarters and the market is within a few points of all time highs (as he is so often to point out). I am no expert, but what I have been reading says that the current strategy du jour has been to sell volatility and buy the stock indices. This is the strategy that Ray Dalio's Bridgewater (the largest fund in the world) has used and a bunch of other funds too. A recent article suggested that the follow through to Brexit could be a reversal of this trading strategy where funds buy volatility and sell the indices. The really big boys don't bother to buy individual stocks like DH thinks they do. They buy derivatives and futures and hedges where they can employ a much greater degree of leverage (20 to 1 in the futures market).
Not sure exactly how Scotland would stay if it is part of the UK. I'm not the expert that DH is on the EU, but isn't Scotland part of the UK and wouldn't they have to first vote to leave the UK before they could then vote to stay in the EU.
What many people don't realize is that falling interest rates do not necessarily help all REITs. Those mREITS that invest in agency MBS are helped by lower rates, UP TO A POINT, due to something called negative convexity. In layman's terms, at a certain point, the spreads that mREITS earn (from the difference between their investments and borrowing costs) are reduced by lower rates and that eventually leads to divy cuts. And contrary to what some assume, no mREIT is going to stop hedging even if the chances of rate increases are dead (in fact the cost of hedging may be increasing because Fannie and Freddie have had to shrink their portfolios and their hedging). That's why stocks like AGNC ended up cutting their divies a few years back, which led to some big stock price declines.
Now mREITs like NYMT are invested in credit instruments and the price of credit instruments is more closely correlated to high yield instruments which perform better in stronger economies (when rates are usually rising). I look at the junk bond ETF, HYG, to gauge the health of that sector and it is holding up well which explains why NYMT is bouncing back. But anyone investing in mREITs should really understand that they are not all created the same.
The real question is what is the follow through next week. The margin calls on the funds that were on the wrong side won't be sorted out until next week. That's when we could get some renewed selling. Also future rate rises are dead dead dead so money should move into safer plays like utilities that you mentioned in another post. Banks might be iffy since no one knows the exposure to the shaky European ones.
I mentioned this a few months back after Barron's ran a story on it. I bought a little after the initial bump following the story because it was still selling at a discount to NAV and I expected the discount to close once the fear of rate hikes passed. It owns a few UK utilities and some other European stocks, so it could get whacked today, but I expect the ECB, the Fed and the Japanese central bank to "do whatever it takes" to keep the stock markets stable. It pays 35 cents quarterly.
GDO is another one, a bond fund, that pays 11 cents monthly.
Nice call. LOL! Thanks for sharing that opinion of your friend from London who had his hand on the pulse of England.
Since I also own NRZ, I checked the total return using this calculator and got 13%, not 35%. There are some other errors in Stagg's chart, and it appears that he may have pasted the "Annualized Return" not the YTD for some of these. This is what I found (as Stagg said, you just put in the stock symbol).
NYMT 23.49% (will be lower if you use today's closing price)
Still pretty good, except for FRO and SFL.