First a new, to me, suite of single stock covered call ETF from a provider named Kurv. They have funds for Apple, Amazon, Microsoft. Tesla and couple of others as well as one for the Nasdaq 100. Their Amazon fund symbol AMZP shows a 27% yield, the Apple version shows 78% but I'm not sure that's right. On price basis they seem to land in between the common stock and the YieldMax equivalent. Here are two examples.
And
There's differentiation there but they don't really look like the common. Like YieldMax, I'd say these don't track their reference securities, they are products that sell the volatility of their reference securities. Similar to YieldMax, they appear to be synthetically long (long call/short put) and then sell a call against that combo. The assets are pretty low in these. The reason to mention these at all is if they turn out to have less erosion because of less yield maybe...maybe...then they could be some sort of incremental step to a useable product. The big idea is how to sell volatility safely. That is a difficult needle to thread but staying reasonably current is how to ultimately decide if they are usable in small amounts for a diversified portfolio.
Corey Hoffstein Tweeted that he is hearing more advisors say they don't see much reason to own bonds right now but that most of those advisors don't have a game plan for when or how to get back into bonds. For purposes of this post, I will assume the context is bonds with duration which I've been bagging on for ages. They've become sources of unreliable volatility and are now ineffective diversifiers.
I can't see ever owning something like 30-40% in duration. One path to having a meaningful chunk of the portfolio could be much lower volatility. I've said many time that I think people want very little volatility out of their bonds and duration is on a run of heightened volatility these days. Maybe they've always been very volatile but it's more noticeable because the 40 year one way trade lower in rates is now over. Another path back could be yields that do a better job compensating for that volatility. It's hard to imagine getting back to 7% yields on ten year treasuries. Maybe it will happen, I don't know but bonds in the early 80's at 15% were absolutely hated.
There would be some yield where people would hate bonds due to the huge price declines. A yield close to the long term average of equity growth would be compelling. I'm sure I will continue to write about bonds so if we ever get to the point I describe above, I'm sure we'll talk about it. Sort of chunking around on either side of 5% is not the level I'm talking about. I hate duration right now but it is important to keep tabs on it in case it ever makes sense again.
The first two items in today's post are about ongoing tracking of market segments that we look at frequently. I'll close out with something brand new for me, so I am on square one trying to learn about crypto staking. Staking does not pertain to Bitcoin which is known as proof of work. Staking pertains to proof of stake cryptos like Ethereum and Solana. Again, I am just learning here but staking is vital to the function of the respective blockchains.
When you stake your Ethereum you are giving up liquidity, you still own it, in exchange for interest. Although it's not interest like from a bank, you get more of that crypto, Ethereum in my example which appears to yield just under 7%. The role of staking isn't crystal clear to me yet but staking allows for validation of transactions on the respective blockchain. There's been an Ethereum Staking ETP trading in Europe for a while. Here's how it compares to the underlying Ethereum.
The two are close obviously but there is a little differentiation. Maybe that is the staking yield? The fund hasn't had any distributions, it appears to accrue more Ethereum. I'm not sure I have any real interest in buying a version of this that lists on the American exchanges, who knows though, but I am curious to see what this niche could become. It's not difficult to believe that as an income stream of some sort, it differentiates from other income streams. That doesn't mean it should be bought, I don't know. Will these funds somehow accrue "interest" the way client/personal holding BOXX does? I don't know, this is maybe day two on this for me. I knew that staking paid interest, that was it and even then that isn't quite on the mark.
Taking in new ideas is crucial for long term investment success.
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