Don't Do This x 2

Early this morning Matt Miskin from Manulife was on Bloomberg and part of his commentary talked about his belief that quality stocks, as in the quality factor, are underappreciated and undervalued because, he said, they are underperforming this year.

GMO Quality ETF (QLTY) and iShares Quality ETF (QUAL) are the two I look at for blogging purposes as proxies for the quality factor but I think buybacks and shareholder yield are also quality-ish too. On the chart, obviously one is a little ahead of the S&P 500 and one is a little behind. Miskin could end up being exactly right that quality will outperform, I have no idea, and of course if you want to own this factor, go for it but the odds of gaming one factor correctly at the expense of another one are very stacked against you. 

The more likely outcome is chasing last year's best performing factor which will quickly drift into those studies you see that show fund holders lagging far behind the funds they own due to poorly timed trades. I've got nothing negative to say about the quality factor but chasing heat is a self-imposed impediment to successful outcomes, just don't do this.

I listened to another Spaces event on Twitter about YieldMax funds. I was not moved to view them as anything other than a curiosity or more correctly one step on a path to the crazy high yielders in the derivative income space maybe becoming more useable. Or not, I don't know and that is the point.

The Spaces was a good format for letting listeners asked questions. One listener said he was older and a big fan of the product. If I understood correctly, he made it seem like this anyway, he has all his money in a Roth IRA split between five different YieldMax ETFs. He mentioned having NVDY, TSLY, MSTY, one for Bitcoin and I missed the 5th one. Early in his comment, one of the moderators asked "you have a basket of them, you don't just have like two of them?" Again he had said his entire Roth is in them. It was at this point he said five and then named them. I think I could hear the moderator wince a little bit but maybe not. 

We don't actually know if his Roth is the guy's only account, it just seemed like it, but he was clear that his entire account is split between five YieldMax funds. Don't do this. You could stop reading here and that would be the message, do not do that. I have no idea what kind of top down market malfunction would take down this niche but if that unknown malfunction ever happened, this guy would be penniless. Or, if there was ever some sort of problem unique to YieldMax but not the rest of the derivative income space, this guy would be penniless. 

That is a similar line of thought to not owning too many funds from a provider like AQR. There is carryover of the same/similar trades and positions across multiple funds. The risk would be some trade goes really wrong and many funds are impacted. 

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