New Stock ETFs Offering ‘100%’ Downside Protection Are Coming Via BBG:
"Calamos Investments filed Monday for so-called “structured-protection” exchange-traded funds that will track a portion of the returns of the S&P 500, Nasdaq 100 and Russell 2000 while hedging 100% of the downside via the options market, according to a Monday filing.
The first fund launching within the suite is the Calamos S&P 500 Structured Alt Protection ETF, which aims to match the price return of the SPDR S&P 500 ETF Trust (ticker SPY) up to a cap of 9.65%.
The catch: Investors looking to reap the full protection will need to buy it on launch day — May 1, 2024 — and hold it, come rain or shine, through April 30, 2025. After that, a new defined period of cover kicks in.
CPSM, like others in the upcoming ETF lineup, will primarily invest its assets in derivatives by buying and selling a combination of call and put options to cushion against market volatility, according to the fund’s prospectus. A regulatory filing notes there’s no guarantee the fund will be successful in providing the much sought-after downside protection."
I'll need to read the prospectus to fully understand the mechanics, but this sounds kind of like those 'Principal Protection Notes' that Wall Street was foisting on retail investors in the years just before the GFC. Back then, with those products, if the index closed even ONE day outside of the collar, you forfeited everything but your principal -- so it became more like an unsecured loan to the issuer. But that said, if someone could guarantee (key word!) that vaunted zero downside and a 9.65% cap on the upside, I'd probably take it.
... of course if/when treasuries get back to 8% or more, that'd be a different story and I'd probably pounce on that. :)
Does Fidelity provide free M* Premium Access? T. Rowe Price overhauled its investor benefits a couple of
years ago. The newer Summit program provides "Complimentary Morningstar Premium membership" at the Select Services ($250K) level and above. The old program used to provide this perk at $100K; I don't know whether this has been grandfathered in.
https://www.troweprice.com/personal-investing/about/client-benefits/index.html(Scroll about half way down for a table of benefits vs. investment amounts)
M* has so crippled its search engine (how can one search for funds with more than 10% in EM now?) that there seems little left of benefit. Portfolio tracking can be done elsewhere (e.g. Fidelity), and as
@Sven commented, reports are available at the library (which I read online). They're also available from Firstrade if you have an account login. (
Years ago, Schwab provided them for free.)
REITS moves in portfolio Thanks
@yogibb and
@crash, We sold VNQ awhile back. The small position in FRIFX we had was swapped for short term HY bonds which did much better. For now, we will watch on the sideline.
Yes, my HY bonds have done rather well for me. Duration is about 3
years. Also started a position in the ETF,
FALN. What's it done since I got in? It's FALLEN. What else??? Crappy snotty.
Rising Auto & Home Insurance Costs In a post above
@Catch22 mentions that even if a vehicle is low-mileage and only a few
years old insurance companies may consider it "totaled" if the air bags have deployed. Exactly that happened to a good friend of mine here in CA- his wife ran their SUV off the road and into a tree- no injuries, not too much front-end damage... not worth repair mainly because of the air bag deployment.
REITS moves in portfolio We left REIT investment when the interest rates rose. In the past, when the rate was kept artificially low, REIT did ok until recently. We have had success with FRIFX and VNQ. Think Devo covered this topic a year ago. Since the pandemic, the commercial RE market has not fully recovered with many empty buildings in prime real estate. Some smaller towns are recovering more slowly based on our travel experience.
Yes, of course: higher rates are no good for Real Estate. But before the sector rallies when cuts begin, I'm thinking this is not the time to exit for good. Still have a paper loss with
PSTL. Their div. Schedule is end-of-month Feb May Aug Nov. I'm betting it will be worth it for me to hold on until after the May divvie. I'm taking a trip off-island in late May, too. First time off Oahu in 5
years.
Buy Sell Why: ad infinitum. RLBGX returns were greater than VWENX returns for the trailing
1 year, 3 year, 10 year, and full periods ending March 2024.
RLBGX returns were higher in 9 out of 14 full calendar years.
During this period, there were two years (2018, 2022) where both funds experienced losses.
The 2018 and 2022 losses were greater for VWENX.
Both funds are appealing.
RLBGX has a minor advantage based on past risk/return data.
Rising Auto & Home Insurance Costs When entire large contiguous communities are at risk because of one single loss situation (especially weather or fire related) that model simply doesn't work.ISTM dental insurance is a similar situation - there the insurance operates more like prepayments (you don't get much more out of it than you pay even when you make claims) because "everyone" gets dental care. At least everyone who buys insurance. It gets you negotiated rates and does spread some risk of catastrophic events. But even that risk sharing is limited because dental insurance payouts are usually capped at $1K - $2K.
@Old_Joe , you noted:
Absolutely- we've had this coverage for over fifty years. I wasn't aware of the need until a friend was sued over a comment that his wife had made publicly. I don't recall the details of that situation, but their insurance did cover the lawsuit claim.
I wasn't aware umbrella insurance could be had for what reads like 'slander'.
Neither was I, but there it is right in my umbrella policy:
"Personal injury" means mJury arising out of one or more of the following offenses, ...
Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services;
One often hears that one should buy as much coverage as one has in assets. I don't have a better guideline, but that never sounded right to me. The supposed reasoning is that a plaintiff will look at the assets you have and sue you for that amount. But if you have insurance, wouldn't you be sued for the value of your assets
plus the amount of insurance you have?
FWIW, the incremental cost of each $1M coverage above the base $1M amount is much smaller than the base premium. Some insurers won't issue an umbrella policy unless you have other coverage with them - I've wound up working with an independent agent to get a standalone policy (at a better rate!). And how much you pay can depend on underlying policies: Are you covering a home or are you a renter; how many cars do you have; what other things are you covering (e.g. motorcycle, RV)?
I just got renewal quotes for umbrella (up 24%) and homeowner (up 0.2% sic). I'm about to get my auto quote which I'm dreading.
REITS moves in portfolio ...Looking for the new Real Estate-oriented destination for the
PSTL $$$, once I do sell PSTL.
This morning, I'm focused on just 2 prospects, trying to keep it simple, and not lose my shirt.
One is Ryman:
RHP.
Per
M* it's today at a -6% discount to NAV.
4.2% dividend.
Per
Stock Rover: 2.4% of float is Short. Doesn't seem like an awful number.
For 2023, the company reported a blow-out year, utterly amazing profits. Record-breaking.
https://www.morningstar.com/stocks/xnys/rhp/quote***************************
Starwood:
STWDReads like more of a R.E.
finance outfit. But they do directly own properties, too.
Per
M*: right now priced at -17% discount to NAV.
Div yield = 9.91%, but no raise in div, going back several
years.
Per
Stock Rover: "Short of Float" =4.9% looks concerning.
https://www.morningstar.com/stocks/xnys/stwd/quote...Just mulling and thinking. No rush.
Rising Auto & Home Insurance Costs @Old_Joe , you noted:
Absolutely- we've had this coverage for over fifty years. I wasn't aware of the need until a friend was sued over a comment that his wife had made publicly. I don't recall the details of that situation, but their insurance did cover the lawsuit claim.
I wasn't aware umbrella insurance could be had for what reads like 'slander'.
@MikeMWe have a $1 million umbrella policy, that applies to extra 'liability(s) that may come forth in a law suite, etc. I believe $1 mil is the common starting number. This policy is in effect for only home and auto extra coverage and is $386/year. I don't know how state and/or location in a state may affect this cost.
Rising Auto & Home Insurance Costs @MikeM asked- Question for the group, I just purchased an umbrella policy. Do others have this insurance? It isn't that expensive, and it keeps you from losing a bundle in a law suit, for example someone badly hurt on your property or in a car accident. Regular HO and car insurance cover to a point, but if God-forbid you are at fault and sued for more than that coverage, it could hit hard on your life savings.
Absolutely- we've had this coverage for over fifty
years. I wasn't aware of the need until a friend was sued over a comment that his wife had made publicly. I don't recall the details of that situation, but their insurance did cover the lawsuit claim.
Rising Auto & Home Insurance Costs @MikeM,
I've had an umbrella policy for several
years now.
My 401K and Roth IRA have excellent creditor protection¹.
For assets outside of these accounts, the umbrella policy offers protection
against large lawsuits which are highly unlikely but potentially very impactful.
This policy provides peace of mind and it's relatively inexpensive as you have mentioned.
¹ IRA / Roth IRA creditor protection varies by state.
Rising Auto & Home Insurance Costs They are. essentially, "cherry-picking" and spreading out their exposure to limit the potential losses to a level that can be supported by premium revenue.
Major insurance companies will not insure our house by the Russian River at Guerneville. I asked our neighbor, an attorney, who he was using, and they have also insured us now for a few years. I am really expecting that company to cancel one or both of us at some point, because if one house burns it is very likely that the other will also. If I was running the insurance company I would be very concerned about such exposure.
To repeat what I said above - When contiguous communities are at risk because of one single loss situation (especially weather or fire related) the present model simply doesn't work. And the fact that there have been no major fires for a long time in any particular area is really meaningless... that was the situation in almost every major fire in California in recent years.
My memory of the first such major incident of that type was the Oakland Hills firestorm of 1991. Ashes from that fire rained down on us out by the ocean in San Francisco. Prior to that, the Oakland Hills had never had a major fire either.
Rising Auto & Home Insurance Costs Following is a reproduction of the insurance-related posts from "The Week In Charts" thread.
Rbrt - April 18
From the blog:Transportation costs remain stubbornly high (+10.7% over last year), with skyrocketing auto insurance rates being a major contributing factor. The 22% increase over the last year is the biggest 1-year spike since 1976.
Insurance inflation is crazy. I need to pay attention more. Thanks.
BaluBalu - April 18
I thought 20+% auto insurance increase is absurd until I received my home insurance renewal notice with a 55% increase in premium. Never made any claims and live in an urban area. I called the insurance company to increase my deductible. For increasing the deductible by $2,500, premium decreases by $80. The insurance co.’s reasoning for increasing the premium by 55% is climate change and increase in material and labor costs. That is the same excuse they used the last two years for increasing it by more than 20% each year.
KIE, the insurance ETF has a TR of 32% over the last 3 years. Over the three year period, my home insurance premium more than doubled. How to better protect against increasing insurance premiums?
Derf - April 19@BaluBalu ; Time to look elsewhere for insurance FWIW ! Do you have Erie in your neck of the woods ?
MikeM -April 19 @BaluBalu, I just moved my State Farm policies, 2 cars and my HO. I was with them for 10
years which really is a big mistake in the insurance game. Went to an independent broker a friend recommended who deals with several companies. Ended up saving ~$1000/year. Used some of that savings to buy a $1million umbrella policy which I've been meaning to buy for a while. Bottom line, staying faithful to an insurance company will cost you a lot of money.
Erie is a very good option. I got the best price with NYCM, which is only available in NY state I believe
Old_Joe -April 19
Thinking that there's somewhere to hide in the ongoing insurance disaster is very wishful thinking. Plain and simple: the major risk factors have increased to the point where the old models no longer work.
The basic concept of insurance is that any specific loss situation will be confined to relatively few claimants, covered by affordable premium income from the larger insured community, with room for profit left over.
When entire large contiguous communities are at risk because of one single loss situation (especially weather or fire related) that model simply doesn't work.
The reality is that the insurance model as we have known it is disappearing piece-by-piece, and no major financial or government entity has yet advanced a sustainable replacement model. California and Florida are your coal-mine canaries.
BaluBalu - April 19
Thanks for the replies. I hope I am not ruining this thread with comments not directly related to the OP.
There is a lot of BS practiced by insurance companies' leadership. Most of us understand what risk assumption and risk diversification means.
In my small town, I have not seen a single fire in the 14 years I have been here. We have two fire stations for a 4 sq miles town and I have not seen a fire truck on the roads in years. (I see them when I drive by the fire station.) But I pay in increased premiums for the fire hazards caused by PG&E (wild fires!) and others in places with big, old trees and overhanging power lines. My neighborhood has neither of those. Evidently, I have to pay higher premiums for fires and risks in Hollywood, Napa, and other places in the country. But when you look at auto insurance and health insurance premiums, they vary by zip code. Poorer zip codes pay higher premiums for both auto insurance and health insurance - I know this because I moved around. I will not be surprised if home insurance premiums are also higher in poorer neighborhoods because my extended family members who live in richer neighborhoods with 50% more house size pay only 10% more in home insurance premium. They live only 15 miles away from me so material and labor cost differences do not explain. We can always explain away anything or build a story around any outcome if we are not interested in progress. Whose progress? you ask!
We are at the mercy of politicians and lobbyists (business leaders).
None of the above helps in figuring out how to protect ourselves from increasing premiums during my life time. (We can hope for some slow (hardly) moving social reforms but that is for another day.)
I buy insurance through a broker and I asked them yesterday and they said (after checking) I am getting the best deal in the market place. I shall call a different broker.
Old_Joe - April 19@BaluBalu- Be sure to keep us informed of your findings- maybe a new thread devoted to the insurance situation?
BaluBalu - April 19Good idea. May be
@Observant1 / thread moderator can move our recent posts from this thread to the new thread so this thread stays clean so it is easier for others to access old Week in Charts posts.
Observant1 - 11:37AM
I created the new "Rising Auto & Home Insurance Costs" thread in Other Investing.
Requested that posts for auto and home insurance in this thread be moved to the new thread.
OK, that should get us off and running on Insurance matters.
The MOVE Index - Please Share your Insight I checked it
years ago and I could not prove it helped me and why I stopped following it, my link includes what have worked for me very well...but...I looked again and now I see that MOVE > 110 has a nice correlation to high volatility in bonds and in most cases typical high-rated bonds don't do well.
On 3-2-2020 it was at 125 = sell everything = correct. The week before it was already over 110.
End of 02/2022 it was over 130 = sell and continue to get higher with some lower volatility.
Also at the end of 2007, it was over 130 and higher in 2008.
OK, I was wrong.(
link)
Key TakeawaysThe bond market tends to signal significant changes ahead of the equity market
MOVE is 'the VIX for Bonds, by having a history of solid signals regarding the sentiment of the bond market
MOVE can be used in conjunction with the VIX (explained below) to define general market risk and investor sentiment
CD M-mkt regulations are quite tough now. Look around, there are hardly any small m-mkt funds - they have been merged or liquidated. It was unheard of just few years ago for firms to offer m-mkt funds from other firms, but now, some even offer a menu of m-mkt funds from other firms (ML/BoA, E*Trade/MS, etc). Sure, Fidelity, Schwab, Vanguard still offer their own m-mkt funds, but many firms don't have that choice.
And m-mkt reforms are ongoing, especially for gates for retail-prime m-mkt funds and other aspects for institutional-prime m-mkt funds (with floating NAVs).
I don't worry about government m-mkt funds with $1 NAV. Without the fear of gates, retail-prime m-mkt funds with $1 NAV will be fine too.
For liquid part of fixed-income, one can look broadly at a mix of m-mkt funds, T-Bills, short-term CDs, ultra ST bond funds. It isn't a good idea to rely entirely on any one of these, or to claim that one would never have x or y or z.
BTW, institutions are stuck with m-mkt funds and T-Bills (ask Warren Buffett) because what will do with limited FDIC insurance, now restricted to 5x per account per bank with all sort of tricks.
IRS Waiver of Annual RMD for Inherited Retirement Accounts
IRS Waiver of Annual RMD for Inherited Retirement Accounts There was indeed confusion in early-2021 and there were revised versions of IRS Publication 590-B [
As you wrote in the cited link, "So, this new 590-B dated 3/25/21 makes things clear."
Hence the original two year transition waiver through the
end of 2022.
If the rules have been clear since 3/25/21, then ISTM that by providing additional waivers for 2023 and then 2024, all the IRS is doing is rewarding people who didn't read rules that were clear for two
years or more at the time they were required to take RMDs (2023 and later).
IRS Waiver of Annual RMD for Inherited Retirement Accounts To be clear here (somewhat ironic choice of words), the IRS is rewarding failure to read the rules by waiving a rule for another year.
Some individuals who are owners of inherited IRAs ... [misunderstood] the new 10-year rule. ... Specifically, [they] expected that the [new] 10-year rule would operate like the [old] 5-year rule. [They though that] there would not be any RMD due for a calendar year until the last year of the 5- or 10-year period following the ... death of the eligible ... beneficiary. ...
[B]eneficiaries of individuals who died in 2020 explained that they did not take an RMD in 2021 and were unsure of whether they would be required to take an RMD in 2022. [They] asserted that ... the Treasury Department and the IRS should provide transition relief for failure to take distributions that are RMDs due in 2021 or 2022
https://www.irs.gov/pub/irs-drop/n-24-35.pdfFair enough. To avoid penalizing beneficiaries due to initial confusion about the new rule, the IRS provided a two year period where penalties were waived.
Apparently two
years weren't enough for some taxpayers. The IRS extended the waiver for 2023, and now again for 2024. As near as I can see, there was no additional rationale given beyond that used for the initial transition waiver.
Note that the same rules apply to inherited employer-sponsored plans (401(k)s, 403(b)s).
