Posted by: Tom McKeon on April 19, 2018
In this issue: 1Q-2018 Review & Outlook, OH...That Volatility, Portfolio Activity, Update on Clothier Springs Capital Partners, The Index Revolution Continues--Not Your Father's Portfolio, Alpha, Schmalpha
1Q-2018 Review and Outlook
As the graphic above shows, the markets finally took a little breather in 1Q- 2018. Only the emerging markets equities managed to eke out a small gain. Volatility--as measured by the VIX Index--spiked sharply higher in early February after several years of declining alongside growing investor complacency.
Market volatility was front-page news this quarter with market turmoil and the historic spike in the VIX. After spending most of January in the 10.00 to 12.00 range, the VIX soared to near 35.00 almost overnight as a brief market rout caused much consternation and short-covering of short VIX future positions. Being short the VIX futures had worked so well for so long that more than one hedge fund was launched to simply short the VIX.....it worked until it did not.
We added two new positions in most portfolios during 1Q-2018 and just after the quarter end as we reviewed portfolios. The Volatility Index (VIX) has been made tradeable though the creation of VIX futures. Due to the nature of futures and the construction of ETFs that hold them (VXX, VXZ), they suffer a constant erosion of value due to the “negative roll yield’ of maintaining a constant maturity futures position in the ETF.
Update: Clothier Springs Capital Partners
Our partnership for private investment in the real estate and related markets commenced operations on February 15 2018 with the first placement of partnership assets with a Merchant Cash Advance business. We contracted for a three-year note, paying the partnership 18.0% annually, with monthly distributions of income.
The Revolution Continues: Not Your Father's Portfolio
When I was still laboring as a market maker in the foreign currency markets at the Philadelphia Stock Exchange in the 1980s and I started to make a little money that needed to be invested, I met and engaged a broker from a well-known national brokerage firm—think who is “bullish on America.” I felt the need to work with a broker because even then I recognized that what I did for a living— trading—was not remotely similar to investing. So I sought guidance.
Year-End 2018 Odds & Ends
January 2, 2019
New Highs, Party Poopers & Financial Engineering
August 30, 2018
PremiumPoints 2Q-2018 Issue: "Structure IS the Strategy"
July 19, 2018
We’re in the Client Outcome Business, Not the Investment Performance Business
May 23, 2018
10 + 1 Things to Degrade Your Investment Outcome
April 27, 2018
PremiumPoints 1Q-2018 Issue
April 19, 2018
Alpha, Schmalpha and the Persistence of Sub-Optimal Business Models and Investment Advisory Offerings
March 19, 2018
PremiumPoints 4Q-2017 Issue
January 23, 2018
Of Dot-Com's, Internet Bubble and Pseudo-Currencies
December 7, 2017
Cryptocurrencies, Intrinsic Value and Greater Fools
November 1, 2017
The Pain in Active Management Land Must Be Unbearable…
October 9, 2017
PremiumPoints 2Q-2017 Issue
August 17, 2017Tweets by @clothiersprings