Opening Day!

And the Sweet Sixteen!

What a great day for sports fans. The Padres game started when the stock market closed and finished in time to start watching the NCAA Basketball Tourney games. A few points today from some interesting articles and other observations. 

Larry Fink, the CEO of client holding Blackrock (BLK) thinks Boomers should help the younger generations figure out retirement. He had other thoughts too that you can read here. I am big on older people setting examples or outright helping younger people. I became most aware of this when we first moved to Walker. I've written about this plenty but my earliest involvement with the fire department exposed me to "older" people still able to get it done physically. My Neighbor with a Backhoe was a great example but there were others. This was in my 30's and I perceived 60's and older has being old. I learned that those ages might be old but they do not have to be. These were great lessons for me.

This sort of example setting can pertain to finances too. This is not about being wealthy so much as having your house in order, setting examples related to saving money effectively, avoiding debt, having an emergency fund and being at least close to being on track for retirement. If millennials and Gen-Z are as lost on this stuff as we are led to believe then I think we can help. We have to be smart enough though to convey help in a way that is not received as intrusive. Starting by setting examples that get noticed is a good way to go. 

Barron's interviewed Cliff Asness from AQR. I don't think the interviewer asked very good questions, it felt like a wasted opportunity but there was one point that I would convey. Many of AQR mutual funds, and other vehicles too I believe, struggled for quite a few years but then turned it around in this decade, give or take a few months. AQR is obviously a very smart shop but they struggled and that happens. There is a school of thought that says buying an active manager when they are struggling is the best time to buy because inevitably they will come roaring back. The psychology of actually doing this is extremely difficult but the bounce back at AQR is good example to support theory.

Mark Hulbert, writing for Barron's found a study that seeks to explain the night effect of the S&P 500. We've looked at this quite a few times, basically, most of the gains for the index occur overnight. The market closes at some level today, opens higher the next morning with that gap up accounting for most of the gain for the day. It's a real thing, it just didn't work for the now closed fund that targeted the effect. That fund had symbol NSPY. The study cited by Hulbert isolated news related to earnings as well as 8-k disclosures which tend to happen outside of market hours. 

This got me to thinking about a new fund we mentioned recently, the Roundhill S&P 500 0DTE Covered Call Strategy ETF (XDTE). It seems like it lags the ProShares S&P 500 High Income ETF (ISPY) every day. I have been test driving ISPY in one of my accounts and it also sells 0dte calls. 

When I first mentioned XDTE I compared it to ISPY noting that ISPY sells calls at 2pm the day before they expire and XDTE sells them right at the open on the day they will expire. The chart is useful, it compares XDTE to ISPY, the S&P 500 itself and I threw in JEPY which sells 0dte puts on the S&P 500. On 3/25, XDTE went ex-dividend for $0.20 but none of the others did so you could add 40 basis points to XDTE's result and see it is still behind the others. 

The other post where I mentioned XDTE was March 8, its second day of trading. I guessed that any difference in performance between XDTE and ISPY would be from the night effect. XDTE can capture it, ISPY cannot. Maybe that accounts for the difference over the last three weeks, or maybe not. The methodology allows XDTE to capture the night effect but maybe as was the case when NSPY was trading, the night effect isn't working. I will continue to follow this one.

And finally a quote from Bill Brewster that resonates and that I will try to work into my quarterly letter to clients. 

I'm not a pessimist, I do expect the market to go up most of the time as it always has. But, as Mark Yusko has said, risk happens fast. The S&P 500 will get to 10,000 at some point but maybe there will be multiple bear markets between here and there or maybe a couple crashes or whatever. To me, it makes sense to spend time understanding the prevailing risks and threats and stay emotionally prepared for any air pockets that come along. The perma bulls like Tom Lee and the guy from Carson Financial add no value. No one needs to prepare for everything going right. 

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.