The 10 - 20 Strategy

I had a unique commodity futures client who had a system for trading that would buy only 10 year lows or even 20 year lows.  He no longer trades commodities. The thought was that 10 year lows were LOW. 

Aside from the obvious scarcity of 10 year lows (it was definately a long-term generational strategy) we have to consider the mechanics of this trade. Starting, for convenience, in 1991, the inception date of the Bloomberg Commodity Index, commods have had roughly 5 long-term bull runs. In the same period there were maybe four bear runs. Here's the long-term chart:

BBG CI=Bloomberg Commodity Excess Return Index since 1/2/1991 inception. 

If nothing else,  for the 30 year history of the index, there are very few chances to buy at 10 year lows. The 10 year low is not available to a buyer until 2015. And then, it was a loser until 2020! Likewise, selling 10 year highs, with one major exception (2008), have been losing trades. Today's market is at the lower end of the today's 10 year range.

The 20 year range offers even fewer opportunity, which may be expected from an index with a 30 year lifetime. Until 2020 there was maybe one opportunity to buy a 20 year low. 

BBG CI=Bloomberg Commodity Excess Return Index since 1/2/1991 inception. 

The Bloomberg Energy Index shows much the same.

Energy=Bloomberg Energy Excess Return Index since 1/2/1991 inception.

There are limited opportunities to sell the 10 year high, and many, since 2009, chances to buy the 10 year lows-albiet unprofitable.  

The ag markets appear more balanced, with very limited sell opportunities. Except for recent Covid trade history, 10 year buys were limited too.

Agriculture=Bloomberg Agriculture Excess Return Index since 1/2/1991 inception.

Precious Metals, despite the more rounded charts, have actually even fewer trading opportunities at 10 year extremes.

Agriculture=Bloomberg Agriculture Excess Return Index since 1/2/1991 inception.

The 10-20 year trade is a bust. It may be an occasional wealth builder but the entries and exits are so few and far between, they are hardly worth waiting for. In hindsight, Covid has presented a rare opportunity indeed. 

Disclaimer: Posts are for education only, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors. Send request to gdrahal@gmail.com to follow this blog and for additional information. 

© 2021 George Rahal.

Commodities YTD Up 30%-50%

 While the major commodity indexes are YTD up 30%-50%,

the sector returns reveal more about this year's price behavior. 

The steady march of oil prices from extraordinary lows plus covid scarcity has underpinned the 180% rise in energy. Remember, roughly one year ago the crude oil price was BELOW ZERO! The 20% rise in agriculture markets is actually reflective of the "almost-post" Covid demand shock. Gold has been flat to down, to spite the inflation hedge talkers.  And bitcoin, for good measure, is giving us the price and value of vapor - right in line with today's GOP politics. 

As the economy normalizes, as fewer hold out against vaccinations, as rationality returns to American political discourse, markets WILL moderate. Or not. It's a bet on future conditions, especially the future of rationality, science and democracy. 

Disclaimer: Posts are for education only, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors. Send request to gdrahal@gmail.com to follow this blog and for additional information. 

© 2021 George Rahal.

Selling Option Premium

Had an interesting conversation with an old classmate who, in his apparent retirement, has taken a liking to selling options. I love TD Ameritrade and admire TDA's educational work-far better than almost ALL investment research online. BUT, we have to be honest here, option income a siren song.

If option writing was such a good strategy, option income funds would be such good funds*. Well, what do you think? First, lets try and find any option income fund (they were popular in the 1980s and not so much, today). 

Eaton Vance**, a venerable old-money fund manager, runs a handful of option writing funds. Let's look at them over the long-term:

SPY = SPDR S&P 500 ETF Trust (SPY)

ETV = Eaton Vance Tax-Managed Buy-Write Opportunities Fund (ETV)

ETB = Eaton Vance Tax-Managed Buy-Write Income Fund (ETB)

ETW = Eaton Vance Tax-Managed Global Buy-Write Opportunities Fund (ETW)

EXD = Eaton Vance Tax-Advantaged Bond and Option Strategies Fund (EXD)

Source: Yahoo Finance

With the S&P up 500%, the option funds, up 300-400% all lag, 

Almost sixteen years seems like a good period to review the option writing strategy. Was this cherry-picked? Well, it so happens that 4/27/2005 was the first Yahoo price date for the earliest fund, the flagship ETB fund. The others started trading after that date. This is a misleading yet truthful picture of these funds. Of course, the SPY has been trading long before that date and is used, as always, for the comparison benchmark.

Let's look at a true comparison, using the first date in common for all five funds. 6/25/2010 is the first date in Yahoo for the youngest EXD blended tax advantaged bond and option fund:

The roughly ten-year period didn't change much. The S&P still beat option funds by 150% or more. So, did we cherry-pick again? Here's the five year period:

The S&P still beats by roughly 100%. Let's look at the 2020-Present time period. Here, the results narrow.

With EXD up 33% and SPY up 44%. the lead narrows to less than 10 points. Finally, lets look at what these funds did for us lately-the year-to-date 12/31/2020 to 10/15/2021 numbers:

NOW you can accuse me of cherry-picking! The SPY is smack dab in the middle of the Eaton Vance option fund returns! Ranging from 26% to 15%, the EV funds comp well with the SPY 20% ytd gain. 

As one can see, you have to work hard to get option writing to beat the S&P.

*The idea here being that if the smartest, richest traders in the world, public fund managers, can't do it. Nobody can!  The reason why so many fund manager's do worse than internet chatroom traders is because fund manager results are audited!

**While it may seem so, I am NOT picking on Eaton Vance. Option income is a tough strategy, especially, in bull markets. You keep giving up gains for pittance. Also, EV is one of the oldest managers out there with old money clients who primarily want to keep their money. These are wonderful gains, where many other managers have given up on option income funds. 

Disclaimer: Posts are for education only, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors. Send request to gdrahal@gmail.com to follow this blog and for additional information. 

© 2021 George Rahal.

Covid Deaths and Cases Per 100,000 Population

As Covid new reported cases fall, it may be time to review the totality of the pandemic. Below are the "rankings" of per capita Covid cases and Covid deaths by state as of 10/13/2021. Read and weep:

Of the four most populous states, red Texas and Florida cases are significantly worse than blue California and New York.

Source: Johns Hopkins University

In per capita deaths, New York ranks lower (46th at 287 per 100K) than Florida (41st at 267) and Texas (32nd at 235) and California's surprising high ranking (16th at 178).

Disclaimer: Posts are for education only, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors. Contact gdrahal@outlook.com for additional information.. 
© 2021 George Rahal.

Third Quarter 2021 Commodity Index Review

In the last days of September 2021, the Blomberg Commodity Index finally rose ABOVE its initial value of 100 set in 1991!

3 Months In The Life - Nasdaq 100 Futures

 Here we go:

Source: TDAmeritrade.com ThinkorSwim charts

Sell in May and go away

Doesn't really work today!

Disclaimer: Posts are for education only, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors. Send request to gdrahal@gmail.com to follow this blog and for additional information. 

© 2021 George Rahal.

The March to 100

 The chart for December WTI Crude Oil is shown below:

Source: thinkorswim on tdameritrade.com

It takes 10 years to show where crude oil WAS and where its GOING. The march to 100 may be mostly due to supply destruction on the heels of years of financial and demand destruction in the energy sector. 

Source: ARC Energy Research

Even if demand does not completely return to pre-Covid levels, the supply imbalance, the time it will take to restore production and clear markets, is likely to press prices back above $100.  

My contract of choice is the NYMEX December 2021 WTI Crude Oil futures which is trading at $70.71 as I write.

Disclaimer: Posts are for education only, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors. Request to gdrahal@gmail.com to follow this blog and additional information.. 
© 2021 George Rahal.

Crime Rate per 100,000 Population by State

While alarming headlines on rising crime become prominent amidst autocratic politics, a look at the most recent actual FBI data may help sort out the claims and any confusion. 

Here are the ten worst states for crime per 100,000 population:

Lets not nitpick. Looking at the most populous states, here's how they rank:

Source:https://ucr.fbi.gov/crime-in-the-u.s/2019/crime-in-the-u.s.-2019/topic-pages/tables/table-5

Conclusions:

Today's crime knows no politics. Who knew Alaska and New Mexico had the worst crime rates in the nation? The South, with 7 out of 10 of the worst, has its full share of bad crime. 

The most populous states have higher crime rates than the national average EXCEPT FOR NY, PA, OH and GA. Beware politician claims to the contrary!

Why this matters?  While a markets blog, good government and accurate PERCEPTIONS, are essential to proper functioning of the markets. With the rise of autocratic politicians (read Florida and Texas) we all can use a good dose of factual understanding. 

Disclaimer: Posts are for education only, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors. Note my excel data spreadsheets are available upon request. Send request to gdrahal@gmail.com to follow this blog and additional information.. 
© 2021 George Rahal.

Commodities Rise in May

Commodities continued rising in May with both major indexes up almost 3% for the month yet still below April's highs.

Year to date, the Bloomberg Commodity Index and the S&P Dow GSCI are up 17% and 23%, respectively. The gains were broad based. Click here to see detailed returns.

Fortunately the dismal outlook may have changed. Virus accelerated demand destruction, supply dislocations, price wars and geopolitics have given way to recovery, increased demand and supply scarcity-raising prices.

Disclaimer: Posts are for education only, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors. Note my excel data spreadsheets are available upon request. Send request to gdrahal@gmail.com to follow this blog and additional information.. 
© 2021 George Rahal.

Vaccinations by State

With vaccines readily available, social, economic and political attention is focused on the safe return to normal which can be directly measured by the percent of population fully vaccinated!  Below is the latest, as of 5/22/2021, from Johns Hopkins University:

The two other views of the same data are presented below. 

Barchart

The bar chart makes state success rates perfectly clear. Longer bars are better! Go Maine!

Note Florida and Texas are in the lower half of the United States. Needless to say, California, New York and, especially, New Jersey?!, rank in the upper to near highest in the percent of population vaccinated. The numerical table, as of 5/22/2021, is presented below.

Numerical Table

Conclusion

The national average today is 39%! Not nearly enough to give us the mythical herd immunity that will protect us all. But, sadly, vaccination rates are falling.

In JHU's latest data, TX ranks 40th in the nation while FL is 34th and both are below the national average. CA at 19th, NY 11th and NJ 6th (???!) are way above the national average. 

Government by the people has a responsibility to care for the people. One can wonder how perception and reality can vary so much. 

Disclaimer: Posts are for education only, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors. Note my excel data spreadsheets are available upon request. Send request to gdrahal@gmail.com for data and/or to follow this blog. 
© 2021 George Rahal.

 

Covid Revisited

Below are the latest total number of per capita confirmed cases of Covid by state as of 5/15/2021 from Johns Hopkins University. 

California (ranked 19th) and New York (35th) governors are under fire. Texas (24th) and Florida (34th) governors are taking victory laps. But, where is the victory?

Shorter bars are better.

Here's the same data in table form:

Disclaimer: Posts are for education only, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors. Send request to gdrahal@gmail.com to follow this blog. 
© 2021 George Rahal.

Colonial Pipeline and the Indexes

As an indexer I hardly ever say trading is fun but today may be an exception. Rarely are markets faced with a very likely short-lived binary contained emergency.  Below are four exciting thinkorswim year-to-date chart screenshots for the micro Dow 30, S&P 500, Nasdaq 100, and Russell 2000 futures contracts. 

The Indexes

Symbol MYMM21, Micro Dow Jones 30 Industrial Average June 2021 futures down* 25% from its intraday all-time high three days ago.

Symbol MESM21, Micro S&P 500 June 2021 Index futures contract is down* about 25% from its all-time high three days ago.

Symbol MNQM21, Micro Nasdaq 100 Index June 2021 futures contract is down* about 60% from its all-time high ten days ago.

And, symbol M2KM21, Micro Russell 2000 June 2021 index futures contract is down* 50% from it all time high 43 days ago!

*Note: these are not absolute down moves, these are the drawdowns measured against the range of the yearly high minus the yearly low. In other words, these measure how much the market has given up its move for the year-to-date. 100% down would take the market back to its yearly low.

These four ARE the major "broad" indexes that all money managers have such a hard time trying to beat. The last three days, as do all large breaks, present a great opportunity for active managers to beat the indexes. But how significant IS this sharp market break?

While the Dow and S&P just take us back to the second week in April (that is how large the rally WAS) the much more volatile Nasdaq is now at levels seen as far back as the second week of January! Same with the Russell 2000 index. The January 2021 highs are about where these two indexes are trading as I write. Those who thought they missed the move, well, they didn't. 

Colonial Pipeline

What largely precipitated this break is the Colonial gasoline pipeline interruption. When I was an energy trader, we used to darkly opine that a three day blackout in electricity or gas supply would shut down a city or a state.  The headline pictures of today's gas lines throughout the east cost are tribute to that. But what is also true is that as quickly as this went sideways is how quickly this can go back up! 

The pipeline interruption may be very short lived. I mean HOW incompetent ARE the IT guys and managers at Colonial? Darkside itself made a conciliatory statement. The pipe can be back even before the weekend and, if so, my bet (and I'm not really a betting guy) is market breaks will be very short lived as well.

Disclaimer: Posts are for education only, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors. Please request to follow this blog by email to gdrahal@gmail.com.

© 2021 George Rahal.

Commodity Time Machine - April 2021

After April's 8% commodity rally, one may say commodities are bullish. It might be a good time to see exactly where we, and commodities, stand long-term. 

Bloomberg Commodity Index

GDP Recovery or 8MM Out of Work -- Which is it?

 Today's 9/30/2021 Wall Street Journal front page headline proudly declares 

WE'RE BAAACK! Implying all's well in the US economy and stimulus is not needed.

Sadly, buried in the 4/3/21 front page of the same paper and contradicting THAT headline is the fact that 8MM PEOPLE are STILL OUT OF WORK!

I don't know how to reconcile the two reports without being cynical or accusatory.

Disclaimer: Posts are for entertainment & education only, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors. To follow this blog email FOLLOW to VistaMktResearch@gmail.com.

© 2021 George Rahal.

Top Mutual Funds - Ranked for Persistence

At the turn of the quarter, its time again to review my fund positions but this time with a new perspective, courtesy of Vanguard! Vanguard offers on their website a fund list* of cumulative returns that anyone can find here. Below are the top Vanguard Funds ranked in order by 3 year returns.

Vanguard Fund 3 Year Rankings as of 3/31/2021

Why the 3 year baseline? It includes 2018's down year, 2019's up year and the wild ride of 2020 to present. 

Results

How interesting that one fund, the U. S. Growth Fund, comes in number ONE for the 3, 5 and 10 year periods. It may or may not be Vanguard's best equity fund but someone has to be number one! Note that the TOP RANK DID NOT PERSIST for the 1 year, 3 month nor 1 month period. In fact, This was the WORST fund, ranked 37 out of 37, for the 3 month period and the second worst fund for the month of March! 14 Funds had HIGHER average ranks than U. S. Growth. 

The fund with the HIGHEST average ranking, at 11.3, was Diversified Equity. This too was in the lower half of funds for the 2021 rankings. The top funds for the first quarter look very different:

All 3 mo. 2021 winners were highly ranked for the 1 year period (it may be the reason for the 1 yr. ranking) but all ranked in the lower half for prior periods. The best average ranking for all periods was the Extended Market Index, which likewise, ranked at the bottom for 1 month!

Conclusion

Its like you can't win trying to pick or guess which fund to buy. Let's look at my benchmark, as usual, the flagship Vanguard 500 Index Fund:

With a 14.2 batting average (in the top third or so) and a no worse than 26 ranking, it has more persistence than most and may be as good as any. 

*Why Vanguard? Scale, fees and a business model aligned with the investor. 

This post reports Vanguard's universe of 53 equity funds' cumulative returns for 1 mo., 3mo., 1 yr., 3 yr., 5yr and 10 year periods. Only 37 funds have 10 year periods, so I limited ranking to those funds. Caveat's include the following: no actual returns are shown and the distribution of returns can make rankings misleading, especially if they are bunched, then, the rankings within the bunch have very little meaning. Also, Vanguard includes select funds in their list, there are many others in and out of Vanguard. Fund composition and styles can change while their names may not. This makes period to period comparisons difficult or invalid. Finally, most funds have overlapping positions, especially to the 500 Index fund, and their returns may not be distinct. 

Source: Vanguard.com

Disclaimer: Posts are for education only, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors. Please follow this blog by email.

© 2021 George Rahal.

 

*Why use Vanguard as a baseline for fund returns? Well they are, in my opinion one of the only managers with a business model made for investors. Their mission is aligned with investors not fund owners or fund managers, their size lets them hire the best people, their fees are the lowest in the space (don't be fooled by phony zero commision newcomers). 

Commodity Returns First Quarter 2021

Anyone worried about missing this years rally in commodities may want to look again. Outside of energy, the returns are decidedly mixed. The Bloomberg Commodity Index ended the first quarter up 6.6% yet down 2% in March and up only 3.1% from year-end 2019.

Covid Cases and Deaths

Victory laps by a few select states and their grandstanding governors offset by the dramatic fall of other governors deserve a current look at the state of Covid by state. Data collected by FactSet on the Covid death and case totals, as of this writing (3/20/2021), are presented below. 

Cases per 100,000

Factset total number of cases per 100,000 population by state.

Higher bars are worse.

The total number of cases, per 100,000 population, range from a remarkable low of 2,026 cases in isolated Hawaii to a disastrous maximum of 13,265 cases in wide open North Dakota! The U.S. statewide average is 8,774 cases per 100,000. Oddly enough, the two states declaring victory, Florida and Texas, in red, have HIGHER per capita cases than the major targets of California and New York, in blue.  The complete list of per capita cases can be seen here. 

Truth be told, the case numbers for the four highlighted states rank near the average. Texas is ranked 27th in the country for per capita number of cases, Florida is 25th, New York 24th and California, where the Governor is facing impeachment due to Covid, is the best of the four at 22nd in the United States.

Deaths per 100,000

Factset total number of Covid deaths per 100,000 population by state.

Higher bars are worse.

The number of per capita Covid deaths by states (51, including the District of Columbia) are not so sanguine. There is a wide disparity among states ranging from a remarkable low of 32 deaths per capita in West Virginia (followed closely by Arizona, Vermont and Ohio) to a high of 271 deaths per capita in New Jersey followed by Wyoming at 254.  Of the four highlighted states California ranks with the worst at 49, behind Wyoming, at 244 deaths per capita. Florida ranks closely behind at 44th in the nation with 234 deaths per capita. Florida's Governor is campaigning on his Covid results. To fill out this story, both New York at 16th in the nation and Texas at 19th, are among the lower ranks of Covid deaths per capita.

One caveat for all these results is there are many factors other than population, such as density, social factors, economics, urbanization and more which affect Covid results. Here we see just one indicative measure.  

Conclusion

Covid is a national medical emergency (hopefully today in retreat). Despite being a medical issue, politics has distorted not just the responses of individuals to medical directives but also the public perception of state by state Covid results. New York's low death rates and Florida's high death rates make little mark in the public eye.

Disclaimer: Posts are for education only, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors. Please follow this blog by email.

© 2021 George Rahal.

YPI vs CPI, Real Price Increases vs Inflation

CPI versus YPI

T.D. Ameritrade's Ticker Tape publication posted an interesting story about "Assessing Your Personal Inflation Rate"  which discusses prices of the CPI (Consumer Price Index) versus YPI (Your Personal Inflation). The difference between the two is one's individual spending basket versus the CPI basket. Below is an imperfect yet indicative comparison of the CPI basket and my own YPI:

In our household, we spend a little less on energy, food, meds, and shelter but more on purchases and transport-we live close to stores and we have grands. All in all, we match up pretty close to the government breakdown of personal expenses. Your mileage may vary. 

CPI Up 0.4% In February 2021

Below is the reported annual price change by general category. A more detailed breakdown can be found clicking here. 

Inflation versus Real Price Change

When prices rise or fall we need to consider the source or cause of the price change. While some call every price change inflationary only a certain class of changes are due to inflation.  Inflation is a general price increase. In essence, its a rising tide that lifts all ships and reduces the buying power of a given currency, in our case, the dollar. The price rises but the price of everything else rises too

A real price increase is when a certain good or service becomes scarce and that price rises as compared to other prices. The classic examples include an ounce of gold equals the cost of a man's suit or, classically, Ricardo's "barrel of wine" buys a "bolt of cloth" and vice versa!  When buying power rises, when you need two barrels to buy the same bolt, that's a real price increase. For example, a Midwest drought may cause the price of grain to double but nearly everything else, like oil or rent, stays the same. 

Not all price changes are inflation, not all price changes are "real". Today's 4% CPI feels like inflation since all of the economy is recovering from Covid but as in everything economic, only time will tell.

Disclaimer: Posts are for education only and not investment advice, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors. Please follow this blog by email.

© 2021 Vista Market Research.

Bonds versus Bonds

My earlier bond comparison "Bonds vs. The Stock Market" has led me to make a deeper look at major bond funds with varying maturities and varying credit quality ratings. Below are the results for the 10 largest bond funds in the world: 

Results first, analysis follows: 

Methodology

The method here is fairness to the small individual investor and NOT to the fund managers. Yes, there are hundreds of bond funds offered by dozens of companies but few will know these companies unless they are sold to you-a costly proposition. In the end bond funds differ only in expenses, credit quality and duration (a fancy name for time to maturity).  So I picked the TEN LARGEST funds I could find on Yahoo Finance and from searching.

All the numbers here can be found by typing the fund symbol in Yahoo finance, including daily prices since inception. If you do this, be sure to use the "Adjusted Close". This includes the interest payouts of the funds over time. 

Five of the ten are Vanguard funds. Vanguard manages over $800 Billion of the $1.2 Trillion held by the ten largest funds. PIMCO had the reputation as the largest bond fund manager in the world and today is far from it. 

Results

The ten largest bond funds had an average yield of 2.2% but with rates rising in 2021 are down 2% year-to-date (as of 3/3/2021). That is, they already lost all their income for the year plus another 2 points. Duration averages 5 years and is a measure of the gain or loss a fund is likely to have for every 1% change in interest rates (in this case 5% down in price for every 1% rise in interest rates). The average credit rating for these funds are a very good AA. 

Note, as expected, the short term funds with the shortest durations have the best year-to-date returns. PIMCO has excelled here but note the low BBB average credit quality combined with the shortest 1.9 year duration. 

Conclusion

Bond funds are NOT bonds. Bond prices fluctuate prior to their maturity and, if they don't go bankrupt, will eventually mature and return your capital regardless of interest rates. As a former bond trader I could never see the value of bond funds. 

Funds never mature. A bond fund always is buying new bonds to replace those it matures and a large portion of the bond portfolio will always be subject to interest rates.

 

For those who really want to preserve capital, the shortest term bond funds, will do best. Money market funds and CDs will do better. Bank CDs, which pay more than money markets, are usually non-negotiable, you cannot get your money early barring a penalty. Money markets have the lowest rates.

The trade offs are always the same, the safer and shorter the bond, the lower the yield. 

Disclaimer: Posts are for education only and not investment advice, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors. Please follow this blog by email.

© 2021 Vista Market Research.

Commodity Returns- February 2021

The Bloomberg Commodity Index rose 6.4% in February 2021. Commodities have finally recovered their 2020 losses, posting small gains from year-end 2019. 

Monthly = Bloomberg Commodity Index Excess Returns (BCOM)

Cumulative = Cumulative BCOM return since start of 2020

Source: Bloomberg.com

Year-to-date, energy, up almost 20%, overwhelmed the Bloomberg Commodity Index. Industrial metals, softs and grains all were reaching for 10%. Precious metals lagged, down almost 8% year-to-date. Bitcoin, up 27%, the new "gold", is added for good measure.

Stars may be aligning for hard assets. The combination of Covid waning, more huge stimulus and ample Fed accommodation can spike demand-the punchbowl may not be leaving for quite some time. With interest rates rising the long-term commodity bear cycle may give way to signs of inflation - the definition of bullish commodity markets!

Disclaimer: Posts are for education only and not investment advice, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors. Please follow this blog by email.

© 2021 Vista Market Research.

How to Read a Month-End Futures Statement

This post will go over the standardized month-end futures statement. This statement is generated every month-end by your commodity/futures broker.

While similar to the daily equity run (see prior post How to Read a Futures Statement), the month-end statement is different, it has no trade prices! Both the month-end and daily statements are needed to have a complete picture of one's futures account. 

The following is the actual redacted "Monthly statement" for my recently opened small account at T. D. Ameritrade. 

The statement starts with the standard header: broker name, your name, address, account number, etc. It then continues with two sections. The first, YOUR ACITVITY THIS MONTH, is a ledger of the cash debits and credits to your futures account. 

• Line 1 on 1/7/21 shows an opening trade for the purchase of one MNQH21 futures contract charging fees and  commissions totaling $2.47. NO TRADE PRICE IS SHOWN. 

The purchase and sales prices are NOT on monthly statements, they are only on your confirmations or daily statements. This can sometimes be confusing since you need BOTH the daily and monthly statements to understand the account. 

Opening trades initiate or "open" positions, either long or short. Closing trades "close" positions and create a profit or loss depending upon the opening and closing prices. Every trade is opening or closing except for when positions, as in deliverable commodities, are closed by deliveries. Longs deliver and shorts receive (i.e. buyers receive 5000 bushels of wheat or sellers deliver them).

• Line 2 is another opening trade and another fee and commission debit. 
• Line 3 shows the credit for a transfer from my TDA equity account to meet my initial margin call. 
• Lines 4 and 5 show more cash transfers from my equity to futures account.
• Line 6 on 1/13/21 shows a SWEEP or transfer OUT of my futures into my equity account. This is because my positions increased in value and created a surplus or margin excess. This broker automatically keeps futures accounts in balance with automatic sweeps. 
• Line 7 and 8 are more withdrawals from futures to equity.
• Line 9  on 1/28/21 shows a closed 'P&L', that is a profit or loss on a closed trade. Here 1 MNQH21 was closed out for a profit of $235, thus the credit. 
• Line 10 shows the fees and commissions on the 1/28 MNQ closing trade. 
• Line 11 shows the same for the closed MES position except this was a loss or debit of $422.50.
• Line 12 shows the MES fees and commissions debit.
• Line 12 shows the cash being swept out of the futures account.
• Line 13 shows an automatic transfer into my futures account. 

The second section is the summary of the account's cash activity. 

• Line 1 of this section shows my zero starting balance.
• Line 3 shows the zero ending balance (since there were no positions in the account at month end).
• The remaining lines sum up the month's P&Ls, commissions and fees. 

With any luck, my account will show gains as the year continues. 

Disclaimer: Posts are for education only and not investment advice, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors. Please follow this blog by email.

Bond Funds vs The Stock Market

A long time friend wants to be OUT of the stock market and needs to know where to put his money now. He has two bond funds VFIDX and PAGNX and wants to know how they will move if the market declines.  Here we go: 

VFINX = Vanguard 500 Index Fund Investor Shares

VFIDX = Vanguard Intermediate-Term Investment -Grade Fund Admiral Shares

PAGNX = PIMCO GNMA and Government Securities Fund Class A Net Asset Value

Source: Yahoo Finance