It is far more likely that this is not yet over despite how many times it might be asked today on the network.
On an unrelated note it looks like iPath will soon be launching a couple of ETNs tied to the VIX index--more specifically futures contracts on VIX.It would be great if a product tracking VIX could be used to help hedge a portfolio and maybe these can but the VIX and all things tracking it are very complex.
Whatever you think you know about VIX, you probably need to learn a whole lot more before using the new ETNs. It's not like I am casting a stone, I have a lot more to learn before using these.
Hopefully you will heed me on this--the VIX is more complex than you know (applies to more than 99% of market participants including me). If you want to learn more you should start reading Bill Luby or Adam Warner if you don't already.
19 comments:
I saw the news about the VIX ETNs. All I can say is 'ouch'. VIX futures are a complicated product even for the 'experts' to understand. I'm all for everyone having the opportunity to trade whatever they want, but I hope to see a focus on education. I fear that I'm going to see more of what I do with the commodity ETF/Ns. The articles about how it's easy to hedge your price at the pump, just buy an ETF and buy and holed.
Now for something completely off the wall (humor attempt). Apparently hop prices over the last few years have gone up 1000%. I have hop plants in my backyard and would love to hedge my crop against aphids and lock in some sky high prices. Any ETF/Ns for that yet?
i can short you some Aphid Begone Spray. I would suggest a ratio of 10 Hops plants to 0.5 cans.
These are the kinds of esoteric investment products I WANT to hear more about!!!
It is not impossible that I write more about the esoteric than just about anyone. To whit Norwegian fisheries, farmland stocks, airport stocks, tollroad stocks, hydro funds and probably some others. There is a lot more to talk about than those things and I do warn about having a portfolio of diversifiers hedged with a few equities as not be ideal.
I enjoy your site! But I'm wondering how much you actually use these types of products for your clients in proportion to the amount of time you spend talking about them. I've been forewarned by other investment professionals to steer clear of ETNs - any logic in that?
How are the Aphid Begone shorts working?!
I have been very consistent and very transparent on this. Learn about all of them, invest in a couple of them. I said is much up above, about not owning a portfolio diversifiers. Please check the archives.
I would steer clear of ETN's as well, they are only as strong as the institution that is backing them. Look at the situation with Barclay's, investors in their ETN's are not being compensated for the additional risk they are taking on.
That's a very interesting problem. The drumbeat about deadbeat banks (hey let's use Krugman's term: zombie banks) is getting louder and louder. contrast that with more ETNs coming out. Wacky.
Thanks for the nod, Roger.
At some point I would be interested in hearing your current thoughts on ETNs and issuer risk.
Cheers,
-Bill
I'm curious about hops prices/availability this year; corn/soybeans prices are heading down now that ethanol fervor has been dampened. In theory some land that was taken out of hops production should go back in.
I'm sure this has nothing to do with my beer consumption. It's simply an academic curiousity.
Right Stephen, right. I grow hops strictly because I'm an extremely focused horticulturist. wink, wink.
They put these things in beer you say?
Hops is for beer, right. I worked with a fella who grew his own hops but that was because he would graft it to marijuana root stock (hops and boo are related); he might have made beer with the product at some point afterward I suppose.
Think I'll give him a call in case he did - might help me understand VIX, nothing else has (knew I could segue back to topic with a little effort).
Yikes!
"At the beginning of last year I projected 2008 earnings on the S&P 500 of $50 dollars, when most analysts were calling for $70 to $80, now the verdict is in and probably looks to be $48 dollars when the final tally arrives.
That line has now sliced below the mega phone formation and IS NOT going to turn up anytime soon. Now my expectations for the S&P 500 is $30 and if you include unfunded pension obligations it falls to $22dollars, and at 10 times earnings that translates into 220 on the S&P 500, an approximate 70% decline from here."
http://www.financialsense.com/fsu/editorials/andros/2009/0122.html
MSFT
I usually stick to mutual funds and preferably ETFs but I think MSFT future is bleak.
Vista got bad press and a lot of customers do not like it. IMO they changed many things for the sake of change as opposed to improving things the way the autos use to change tail lights and tail fins frequently so customers would have a new must have product. This is not long term thinking.
More significantly, I recently got the recent version of open office. It is free and the new version finally has most of what I want. I think it will be much more difficult for many businesses to justify buying MS Office. MS Office has been a cash cow and I think they will have to drop the price a lot in the future.
MS Office also has the new ribbon thing as opposed to standard menu. What idiot thinks I want to learn a new system?
On the plus side as money gets tighter spending more for a Mac will be questioned by many IMO. So I do not see Mac taking off due to price.
But a lot of these silly net books are coming with linux. There is the possibility even if small that linux gets more acceptance through the back door of net books. Not positive about this, but Windows has 90+% of the desktop now and if it increases a little it is no big deal, but if it decreases it could be a very big deal. One day I think this might happen and it will be devastating to the stock.
I do not work in software or computers my engineering field is else where and I do not currently own any of the related stocks.
I guess I am saying I think MSFT problems are even worse than our current economy. I really would not look to any competitors making a big profit from their loss though as I see price competition prevailing in the future.
Apparently Mish is agreeing with me about MSFT
His analysis of MSFT is flawed in several ways.
Instead of looking at the S&P 500 and making guesses that are based on guesses of earnings, I'm wondering what might happen to it if, say, the equity of several banks like Citigroup and BankAmerica went to zero.
Roger, I am a fund manager from Australia. I notice you have an Australain bank in your portfolio..and this has led me to contact you for the first time...though i have read you blog for a while and find it relevant to my daily battle with client you want to blow themselves up!
you may wish to comment on 2 issues.
1.Many technicians and commentators call for "snap-back" rallies within the bear market..correcting oversold conditions. Comments suggesting the best rallies occur in bear markets..etc..Without shortsellers operating in the market does lessen the impact of such rallies?
2. Australian financials - they have suffered as much or more than other financials despite no gov't bailout, little subprime and reasonable capital ratios. Nevertheless, the constant cry from foreign investors operating in our market...is...."well we are in a mess in our home markets, i would expect Australia is next...so GMO! add to this sentiment the fact that our regulator has just extended the ban on short selling for another month and the path of least resistance remqains down!
Hooray, I appear to be wrong on my gut feel on the VIX articles. At least for now ...
Beware, New VIX Products
remog, thanks for the comment, while not quite small hometown banks in the middle of town, the Aussie banks seem to have fewer moving parts than the US and UK banks. down as much but maybe not as jsutified?
BillB the big difference between my post and don's post, is he understands the VIX in a way i never will.
knowing that i don't know is big--you also seem to get it as well. very important stuff.
Post a Comment