Bank loan or floating rates bonds are unique among bond types in that the rate is not fixed, but is free to move in relation to an underlying base rate such as the LIBOR (London Interbank Offered Rate). As with any investment there are risks and bank loans are no exception. With the prospect of rising interest rates looming over our economy, everything from bonds to houses will be impacted so I’m constantly looking for ways to benefit from that environment.
Virtus Investment Partners published a white paper in May of this year discussing floating rate funds and their characteristics.
Read it here: Virtus White Paper-BreakFromTradition
Author and speaker James Howard Kunstler is perhaps the most outspoken critic of suburban sprawl and alternative energy as a replacement for cheap oil. In a pair of TED talks in 2004 and 2010 he shares his perspective and explains how our we lost our “places.” (a word of caution: Kunstler uses colorful language at times)
For a deeper dive into how we got to where we are and some thoughts on where we might be going Kunstler also wrote a few books worth reading:
The Geography of Nowhere
The Long Emergency
Too Much Magic
Luis von Ahnm created Captcha to suppress spam on the internet and launched reCaptcha when he realized the potential of massive online collaboration to help digitize books. Now he’s doing the same for language learning and translation with DuoLingo.
I’m relearning spanish right now, if you want to join me check out my profile here: Joe’s DuoLingo Profile
If I’ve learned anything about the markets in the last decade, it’s that they are anything but rational. Investments that appear to be expensive are traded higher while those with reasonable valuations languish. Although I’m an advocate of fundamental analysis, I’ve been searching for an opportunity to take advantage of this irrational behavior.
Enter Managed Futures.
The benefit of Managed Futures comes from the material improvement in the downside deviation.
–Longboard Asset Management: The Case for Managed Futures
Managed Futures are a form of trend following that allows for profiting from the direction of the ‘herd,’ but what makes it most interesting is that it is direction agnostic; up or down it’s possible to benefit. I’ve used sparingly used Managed Futures in the past, but was never quite satisfied with the performance. Because short hold periods are susceptible to volatility, even when the trend direction was correctly identified, the price movements rendered positions unprofitable. Some companies are avoiding this tendency by holding for much longer time periods than what is typical for the managed future strategy (12-16 months vs weeks), unfortunately, this is usually reserved for those who play in the hedge fund world.
Another interesting aspect to managed futures is the way the contracts are collateralized. Treasury Bills and other high quality short term investments are used to secure the portfolio of futures which, in a period of rising interest rates (a trend), would contribute additional income to the portfolio while also profiting (hopefully) from the decline in bond prices (as a result of the rising interest rates).
Fortunately, I recently met with a company with a fund that is doing exactly what I’ve described (I won’t mention names for compliance disclosure reasons) and will be integrating them into portfolios in the coming weeks (See disclosure in the below).
If you are not already a client (because if you are I’m familiar with your plan) , I’d like to hear your strategy for combating a declining market/ and or a rising interest rate environment.
Not sure what to do? Send me a message or ask a question in the comments below.
Want to learn something or maybe you’d just like to improve your memory ? Now you can with the website (and recently launched smartphone app) from Memrise. By utilizing the human brains enhanced capacity to recall images (especially “unique” ones) memory masters have accomplished what appear to be “super human” feats of memorization.
Memrise.com was created by memory champ, author, and mentor Ed Cooke to help people learn the methods of the world’s Grandmasters of memory. I first leaned of the system and of Ed in Josh Foer‘s 2011 book “Moonwalking With Einstein,” then later when he partnered with Tim Ferriss for a $10,000 memory challenge. Rather than memorize cards I’ve been using it to relearn Spanish and some technology related things.
Try it out and let me know what you think. If you decide to use it, look me up: Joe on Memrise.