200,000+ daily Covid infection rate continues in India. Investment implications? 1. It is likely that COVID-19 pandemic will be brought into control with vaccination along with other mitigation practices, but it will take time and resources. Federal reserves across the globe have pledged to support this effort. As long term investors it would prudent to DCA into international funds over several months instead one lump sum, since this pandemic may take a year or longer before it stabilizes.
2. Right now countries such as New Zealand, South Korea, and Taiwan who have gotten their COVID infection under control early and are doing well economically. US is playing catch-up with rapid deployment of vaccines (FEMA) and lots of resources. Delivering 200 million vaccines within 100 days is remarkable. However, there is a sizable population who do not want the vaccines and this will prevent US to reach the herd immunity this year. It is the rapid mutation of the coronavirus that is most concerning. The worst scenario would be the new variants would greatly reduce the efficacy of COVID vaccines, and render them much less effective. So far these variants are found to be more contagious but not necessary more lethal.
3. The FANNG stocks along with those that enable remote working have advanced more than the rest of the S&P
500. The market have broadened out the economically sensitive value stocks in fall 2020. Recent interview with Leann Sonder (Schwab) posted by
@Derf also discussed the recent change of stock leadership and the direction moving toward “quality” stocks.
Peter Lynch: Outperform the Market By This Simple Strategy A cute 10 minute clip. Lynch always was telegenic - hasn’t skipped a beat since leaving Magellan when it was at the crest of the wave. Is it as simple as “Buy what you know”? More appropriately what he means is : “Learn / Research / Study” before you buy. Maybe study 5-10 prospects and weed out the weakest ones before buying that “gem”. That’s hard work. If it was easy, we’d all be rich or famous like Lynch. I agree with the thought - right on the money. But I find it a lot easier (lazier) to buy mutual funds instead of stocks. Let the manager do the hard work.
10-Year Closing in on 1.5% (OP) - Blows Right Past - Near 5% (30 months later) - Whee! Again closing in on 1.5% :)
After peaking at 1.778% March 30, the 10-year Treasury bond has steadily declined, dipping below 1.
54% this evening. The rapid reversal has baffled many observers - especially in light of generally “hot” economic indicators (retail sales, commodity prices, employment numbers) and a roaring stock market.
Theories as to what, if anything, the reversal portends abound. I’ve seen suggestions some big players (like hedge funds) are bracing for a stock market sell-off later in the year, The WSJ speculates today that the rate reversal portends a strengthening European economy relative to the U.S. in coming months.
CHART
SEC, FBI, Prosecutors Investigate “Mysterious Demise of $1.7 Billion Mutual Fund” - WSJ “A U.S. mutual fund that suffered nearly $500 million of losses appears to have misvalued its large derivatives portfolio, according to an analysis of the fund’s disclosures by The Wall Street Journal, academics and traders.
The Infinity Q Diversified Alpha Fund disclosed in filings with the Securities and Exchange Commission valuations of investments that in at least three instances were incorrect or inconsistent with market conditions, said traders and academics. One valuation was mathematically impossible, said a former Morgan Stanley managing director who reviewed the disclosures. In one instance, the disclosures show, Infinity entered two nearly identical swaps contracts referencing the same index over the same period, yet booked a gain on one that was more than three times as large as the other—an outcome analysts said defied logic.
The SEC informed Infinity of evidence that the firm’s chief investment officer, James Velissaris, was adjusting parameters of third-party pricing models used to value its derivatives, leaving Infinity unable to accurately value its holdings, the firm has said. ... The Federal Bureau of Investigation and prosecutors at the Manhattan U.S. attorney’s office are also investigating, the people familiar with the matter said ...
The mutual fund, which launched in 2014 and is a part of Infinity Q Capital Management LLC, sought to generate returns that weren’t as tied to the returns of other assets like stocks and bonds, its disclosures showed ... It appeared to pay off, particularly during the brunt of last year’s selloff. In March 2020, the mutual fund posted a return of about 7%, while the S&P 500 fell 12.4%, its worst month since 2008. That month, the fund drew its highest inflows ever, according to Morningstar Direct data.” Excerpted / (Edited for Brevity) from
The Wall Street Journal, April 21, 2021
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How much dry powder to hold in reserve ? I haven’t read everything above but I say cash is form of bonds. When I started investing in 1982 cash reserve funds were the high flyers. Of course conditions then were much different than they are now but still, cash reserves are ultra short bonds. Johnathan Clements discussed his thoughts on cash in a
recent article in his Humble Dollar blog At this point, half my bonds are termed “cash”. Another 2
5% are in a Stable value fund - neither true bonds or cash. Maybe I should advocate that we call all these bond like instruments “fixed income”.
