VIX And More

When the first version of this week’s graph of the week first appeared on your blog in Chart of the Week: Change of Trend in Cash Holdings? January 2009, it produced a astonishing amount of controversy. A follow-up post in March 2009, Cash on the Sidelines Headed to Shares Back?

In the graph below, remember that money market mutual fund assets started declining sharply in the second week in March 2009 (after topping in January 2009,) as stocks and shares were bottoming and needs to catch a bid just. In the twenty months because the bottom in stocks, net changes to money market mutual funds have been a solid coincident and sometimes leading indicator of demand for stocks. I am resurrecting this chart for a number of reasons again, not the least of which would be that the drop in money market shared funds has lessened significantly because the end of April, when stocks hit their 2010 highs.

25 billion in money market shared funds was the biggest since July 2009 and the second largest since January 2009. While this might not mean anything, I like to be provocative with these types of charts. Readers should at least most probably to the probability that most of the cash on the sidelines that will ultimately be committed to stocks in a bull market was already committed. Perhaps it will take a significant downturn in connection prices for another large pool of money to be transferred into equities.

This is not just a buy and hold investment. On the other hand, TVIX does a decent job of complementing the short-term percentage moves of the VIX. The graph below shows historical correlations with the linear best-fit approximation showing TVIX’s moves to be about 93% of the VIX’s. October 3 The info from before TVIX’s inception on, 2011, originates from my simulation of TVIX based on the fundamental VIX futures. A lot of people buy TVIX as a contrarian investment, expecting it to go up when the equities market goes down.

It does a good job of the with the median TVIX’s percentage move being -4.8 times the S&P 500’s percentage move. However 18% of the time TVIX has transferred in the same path as the S&P 500. So please don’t say that TVIX is damaged when it doesn’t happen to move the way you expect. With erratic S&P 500 monitoring and heavy price erosion over time, owning TVIX is generally a poor investment.

In reality, even the provider’s marketers who you’d be prepared to figure out an optimistic spin, state that “The long-term expected value of your ETNs is zero.” Unless your timing is particularly good you will lose money. How do Credit Suisse and VelocityShares make money on TVIX? Credit Suisse, TVIX’s issuer, collects an everyday investor fee on TVIX’s assets-on an annualized basis it’s 1.65% per calendar year. 7.5 million per calendar year.

  • An amount received as a lump sum is counted as income only in the month receive
  • 3 Summary Methodology
  • 20 percent of these previously lived using their parents, relatives, or friends
  • Physical Bullion
  • For the production or assortment of income
  • The cash account in the business’s ledger is a(n)
  • My position in bonds remains small and got smaller with two bonds maturing this month

That should be enough to protect TVIX costs and be profitable, however, I suspect their business model includes revenue from more than the investor charge just. VelocityShares (now owned by Janis Capital Group) – gets a portion of the investor charge for its marketing and branding efforts. Unlike an ETF, TVIX’s Exchange Traded Note structure does not require Credit Suisse to designate what they are doing with the cash it receives for creating stocks.

The take note is carried as senior debt on their balance sheet but they don’t pay out any interest on this personal debt. Instead, they promise to redeem shares that the APs go back to them based on the value of its index-an index that’s going for zero. To totally hedge their liabilities Credit Suisse could contain the appropriate variety of VIX futures contracts, but they almost certainly don’t because there are cheaper ways (e.g., swaps) to reduce their dangers. Given TVIX’s inexorable journey towards zero, it would be appealing to believe some risk rather than hedge their TVIX position completely, but I question Credit Suisse has a corporate and business culture that could support that.