cma

Bond Wars Update: International and Junk

Are there any ultra-long bond ETFs?

A Trend-Follower Positions for 2009

David refers 3 times to inverse and 2ble ETFs. But many posts and articles on Seeking Alpha have shown that these ETFs employ derivatives (mostly long options and swaps) to achieve their stated investment objective over only a 1-day time frame. Over longer periods, such as a one month, let alone several months, these inverse and 2ble ETFs vastly underperform their theoretical returns vs. their tracked index.
Here is a sample article showing the enormus underperformance of the inverse ETFs:

"2008 August through December 19th, the S&P 500 has fallen 30.8%. Many traders would assume that SDS should have returned 61.6% because that is double the inverse of the index, right? Oddly enough, SDS only gained 37.3%, nearly 25% below what many would have thought in less than four months. The ProShares Short S&P 500 ETF (SH) during the same timeframe gained 25.9%; according to the company SH should give investors the inverse performance on a 1-to-1 daily basis."

Life After Citi: Shorting High Yield Bonds

"bulk of the high-yield spectrum continues to trade on yields which reflect, comparatively, near-investment-grade rating".
What world is he living in. High-yields bonds are showing a 20% current yield, hardly reflecting "near-investment-grade rating."
His other methodological error (one he made with Russian equities) is that when the message of two markets (CDX Indexand real yields) are contradictory, CDX index will always be the more accurate predictor. History has shown this to be invalid.

Life After Citi: Shorting High Yield Bonds

The author has just discovered a short in high yield bonds after the spread over Treasuries has widened to historically high levels. He is about 6 months late to the party. Also, junk bond yields imply default rates higher than in 1933.