Have A Very Yieldy Christmas

From T Rowe Price on ten year Treasuries. 

And from a different Bloomberg article quoting the same CIO.

We've talked about this plenty of times. I don't know about volatility relative to other sovereigns but US treasuries have become more volatile than they used to be and that volatility is now less predictable than it used to be. There was a stretch there earlier in the year where a lot of pundits were saying to lock in yields for intermediate and longer dated treasuries. 

Yes, the chart is price only but there was no need to take on equity like volatility back then or now (TLT and TLH have higher standard deviations than the S&P 500 this year) for yields in the fours. There are plenty of yield sources with comparable or better yields with nowhere near that kind of volatility. 

YieldMax launched two new funds this week in partnership/agreement with Dorsey Wright. The first one is the YieldMax Dorsey Wright Hybrid 5 Income ETF (FIVY). The process looks at the YieldMax fund universe and selects the five best underlying common stocks based on momentum, target weighted at 8% each and then adds the five corresponding YieldMax ETFs at 12% each. For example it has Netflix (NFLX) common stock and YieldMax NFLX Option Income ETF (NFLY). The other four stocks are Microstrategy, Meta, Tesla and Nvidia. So FIVY blends common stocks and their corresponding covered call ETF.

The other fund is the YieldMax Dorsey Wright Featured 5 Income ETF (FEAT) and it just owns those same five YieldMax covered call ETFs target weighted at 20% as follows.

Who knows if blending momentum with derivative income in FIVY will have some sort of positive effect but the idea is interesting to me. We've looked before at pairing a small slice of one of these with a "normal" allocation to the underlying common stock. The ratio FIVY is using would seem to still have deterioration unless the dividends are reinvested but even then might not look so great.

That's the year to date of all the YieldMax funds in FIVY. The next chart compares what FIVY is doing with my idea from earlier this year and just owning 100% TSLA. Dividends are not reinvested in this one. 

Does the 90/10 combo make any sense? That's not clear to me but for anyone really wanting Tesla with some income, the 90/10 combo turns it into a 4% yielder based on 2024's payout thus far. 

A few days ago, I stumbled into a useful way to think about the YieldMax ETFs. They are not really proxies for their reference equities, the are products that sell volatility on their reference equities. 

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