Friday, February 16, 2007
Quite a while back a reader left a comment about what I thought sounded like an interesting fixed income product; SLM CPI Linked Note (OSM).
While I can't be certain that comparing OSM to iShares TIP Fund (TIP) is the best possible comparison I want one inflation product for clients and I would pick one over the other, I chose TIP. Structured products, which this sort of seems to be, have a lot of moving parts and are very difficult to fully understand. I am not sure why OSM is lagging and I am not sure if I could figure out why on my own and you probably don't need to spend time figuring out.
The important thing is that I heard about it, I watched it for many months and concluded it is not for me. It matures in ten years and probably matures at its $25 par value but if you want to own it for that you need to make sure about the price at maturity and you need to be willing to hold it as I suspect it could still go down.
Yesterday a reader asked what the term overbought means. Well as I think of it there are two meanings. Whether something truly is overbought comes from looking at oscillators, not something I do. With a tip of the hat to Helene Meisler at RealMoney the term is used a little more often that is really applicable. Most folks, me included, will say that a stock or a market or whatever is overbought after it goes up for what seems like longer than normal.
The reader asks how can something overbought because for every buyer there is a seller. Well not exactly. Part of being a specialist or market maker is the expectation that you will need to commit capital to facilitate trades every now and then, maybe more often than that phrase implies. Maintaining fair and orderly markets means stepping in on either side of the market at any time. Further if a stock starts moving up (to keep the context all the same) a lot during the day there are more buyers as buyers are willing to pay a higher price thus clearing out the sellers for the time being.
Yesterday's Land of the Lost Post certainly drew more attention than I would have expected. Thank goodness for bad television, eh? For the last couple of months I have been TiVo-ing Kung Fu every Sunday on channel 255 on Directv; talk about bad television! All things considered Kwai Chang Cane never should have snatched the pebble from Master Khan.