Friday Night Volatility

From a satirical account.

I don't know if he's making fun of T-bills and chill or Trinity and chill or something else but after a rough week, trying to find something to just hide in will appeal to some people.

Quoting myself from a long time ago, if gold is your best performer then chances are things aren't going well in the rest of the market. 

In the middle of 2022 you could have found plenty of people who would have said buying managed futures and taking the rest of the year off is looking pretty good. I've been saying for ages not to go too heavy into managed futures in case they don't "work" in some random market event and right on cue from Meb Faber;

The worst 12 month return in the index' history? C'mon, man. As great as I think managed futures is for diversification, 20% was never the right answer. Not while it was going well and not now either. Five-10% (I am nowhere near 10%) is plenty. 

I wanted to check in on the GraniteShares YieldBOOST SPY ETF (YSPY). The fund sells puts on the Direxion 3x SPY ETF (SPXL).

It looks nothing like SPXL but I don't think that really is the right expectation. It is not a proxy for SPXL, you could just buy that fund if you want, YSPY sells SPXL's volatility which will usually be a little different. The 6% decline is a little misleading because it excludes dividends. For now, the three dividends are characterized as ordinary income so not terribly tax efficient. The reason I say for now is that some of the crazy high yielders will recharacterize the distributions later. I have no idea if YSPY will do that or not but any holder should keep an eye on that. 

Factoring in the distributions, the total return has been far from catastrophic.

YSPY came out right before a crazy stretch for markets so it's like a small test for a yield barbell. I don't see myself doing this but it could work for the right circumstance. I don't think YSPY can keep up with the dividend so there would need to be frequent rebalancing. A side note is that apparently the Yahoo chart for YSPY doesn't go back to its inception? Yahoo can be quirky that way. 

And a quick follow up to Morning Coffee With Claude. I got it wrong about how Claude does or does not remember previous queries. 

No, I don't learn or retain information from our conversation. Each time we chat, I start fresh without memory of previous interactions. I also don't use our conversation to update my training or improve my responses for future users.

This means I can't build on things we've discussed in past conversations or remember your preferences over time. However, within our current conversation, I can refer back to what we've talked about earlier in this same chat session.

I either mixed the point up with something else or just flat out was incorrect.

The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.