Misc

Miscellaneous is often where the gems are.

Misc

Why is the VIX so low?

  • Latest BIS quarterly thinks it is not because of the rise of 0DTE options (those that expire the same day). This week these hit a new record volume share at 57%.
  • Rather the rise of yield-enhancing ETFs that sell options (in various forms) is the real culprit – see lhs of chart. JPM has some further analysis via FT.
  • While on the topic of 0DTE the rhs chart shows their truly lottery-like payoff structure.
  • “Investing in 0DTE options loses money on average, with annualised returns of -32,000%, but on rare occasions generates extremely high returns of up to 79,000%. These returns are much more volatile than the returns on one-month options, which have an average return of -550% annualised and a maximum of 2,500%.”
Misc

US Navy vs. PLAN

  • People’s Liberation Army Navy, when it comes to quantity, is on track to overtake the US.
  • Their shipbuilding capacity is wildly more dominant – controlling 40% of the world’s commercial shipbuilding market compared to just 0.5% for the US.
  • This article argues that the US Navy still has quality – but that might erode and “quantity eventually improves quality”.
Misc

1900 vs. 2024

  • Let this sink in – “Of the US firms listed in 1900, some 80% of their value was in industries that are small or extinct today; the UK figure is 65%“
  • Many of these industries have simply moved to lower-cost countries.
  • “Yet similarities between 1900 and 2024 are also apparent. The banking and insurance industries continue to be important. Similarly, such industries as food, beverages (including alcohol), tobacco, and utilities were present in 1900 and continue to be represented today. In the UK, quoted mining companies were important in 1900 just as they are in London today“
  • Source: UBS.
Misc

Regime Investing

  • “Inflation is probably the most predictable of the regime frameworks, in terms of the magnitude of returns and the persistence of direction. If you are only allowed to use one economic datapoint to guide your decisions, US headline CPI should be it.“
  • Equity bull markets are 80% of history. Don’t forget the simple lessons…
  • Man group’s team tries to study whether investment regimes exist and whether one can profit from them.
Misc

Secured High Yield

  • “Senior secured bonds have always been a constituent of the high yield market. However, over the past few years, their share of the overall index has increased dramatically and is now at a record level of the market. While the coupon structure is different, senior secured bonds are “secured” by the assets of the borrower, much like leveraged loans. This recent development — the growth of senior secured bonds as an overall percentage of the high yield market — blurs the lines between these markets and may lead to increasingly similar behavior between the markets.”
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