Kaegi2011

Just got around to reading this. Super interesting to think about. A few interesting tidbits that I picked up: 1 - 36x return in Feb, 41x return YTD, but against a 96.66%/3.33% SPX/tail hedge portfolio, March performance was 0.4% vs. SPX March performance of -12.4%. This would imply that only .44% of the tail hedge portfolio was actually "at work" at the beginning of March vs. the 3.33% allocation (or 13.1% of the total 3.33% allocation, not exactly 1/12, but maybe due to the big drawdown in Feb carried over?). 2 - In the public articles he talks about tail hedge being able to return 9-10x in a big drawdown event (defined as >-15%), and over backtesting period even assuming 0% return it does aid the portfolio in a fairly dramatic way. 3 - While the articles do not explicitly state this, I have to assume the tail hedge costs are expected to be expensed on an annual basis. I quite like the elegance of the theory. We know emotionally we are our own worst enemies, so to be able to stay calm and invested during times of turmoil is extremely valuable. Furthermore, not only does it provide a hedge, it also allows one to be tax efficient (assuming crash levels are still above cost bases), and add to exposure during the most opportune time. My questions related to the strategy are as follows: A - What instruments are being used for this strategy? It has to be a derivative of some kind. Likely not a straight out of the money put but something far more exotic (binary options? barrier options? I looked up "exotic options" and saw a few I've never even heard of like Rainbow and Timer options - fascinating stuff...). B - Given the instruments, what is the execution strategy? Based on #1 above it seems like the hedge costs are not being spent all at once, but rather sparingly throughout the full year. So this implies some type of rolling exposure, but how? C - Lastly, but likely most pertinent to us, is there a similar replication strategy we can implement with instruments more accessible to the common investors (e.g., puts?)? On the last question, based on *today's prices* it seems that one would have to go with a put spread strategy to get close to a 10-15x max return (and that's going long 15% OTM put and short 20% OTM put a month out). Using instruments longer term (e.g., 6 months), it would produce closer to 5x max return. Using a more "normalized" vol and an options calculator, the returns above can 2x. But remember that's the max return, and also at expiry, so it's possible that MTM return is far less. As a thought experiment, I used the options calculator here - https://www.optionseducation.org/toolsoptionquotes/optionscalculator - to see what SPY puts for June 30 would have been priced at the beginning of the year (324 underlying, 275 strike, and 250 strike, 20% vol) - the 275 strike would have been $3.24, and the 250 strike would have been $0.70. Ignoring bid/ask for a second, assuming the spread cost is as such (3.24 - 0.70 = 2.54), then max payoff was close to 10x (25/2.54). However, if one held it until now, the return is close to 2.14x as the 275 strike is 10.09 mid and 4.66 mid, for a total value of $5.43. Not interesting (but we're also looking at prices after a new bull market so...). So what are some ways to make the simple instrument hedging strategy more interesting? a - Shorten the duration of the puts. Of course this comes with its own issues such as time decay, so instead of one month out, maybe do a rolling 2 month hedge (e.g., ride it from day 60 to day 30, then go buy new 60 day hedges again)? I need to have historical options data to see how this would work out. b - During big drawdowns, sell off the long put and keep the short put. That way, one could realize the explosion in vol on the long side, and ride it back down on the short side. Obviously if the timing is incorrect, and the market goes down a lot more, the hedging strategy starts to accelerate the decline of the entire book. Kinda dangerous... I'm out of ideas at this point. Any thoughts on this? Does anyone have data access on historical options pricing?

Don't mean to gloat, but damn if I've ever made a call with this rate of IRR... Now if I only listened to myself in size!

This is true. However, the initial commentary seemed more political than anything else, and while we would all like to think tha tthe general public is thoughtful and discerning it's just not reality. I think that the last election is more than enough to prove that point. Amongst my friend group (mid 30s) this is starting to bubble up as a topic whenever conversation turns to deficits and medicare, etc. Young people are just future old people. The boomers were the free spirit revolutionaries in their times with the summer of love and the anti-war movement and all the drugs and rock and roll experimentation with the long hair and bell bottoms and all that. Now they're decried as the old ossified establishment. The wheels keep turning. People are people ¯\_(ツ)_/¯ The boomers had more fun than the Millennials will ever have. If the Millennials want to change the world, they need to stop voting for grandpas to begin with. Couldn't agree with this more. If people want representation and a different path they have to vote. I think this is part of the reason why Mayor Pete was interesting this time around.

Fair. Perhaps professionally managed buildings are different. In my experience in lower income housing growing up, the landlord isn't without leverage. That's why I even brought up the point around negotiating a bit. Anyway, we've gotten off track on topic. Apologies for the detour.

This is true. However, the initial commentary seemed more political than anything else, and while we would all like to think tha tthe general public is thoughtful and discerning it's just not reality. I think that the last election is more than enough to prove that point. Amongst my friend group (mid 30s) this is starting to bubble up as a topic whenever conversation turns to deficits and medicare, etc.

In many homes, internet goes beyond just browsing (think alarm systems, Alexa, etc.). In many locales tenants sign up and pay for utilities and cutting that off can be challenging (have to validate identify) and all. Long way of saying, landlords should stick to courts. So perhaps I could have clarified that my comments are for the securities listed in the title of this thread. If it's a single family it's a different story. However, if it's a high rise in NY it's very likely that tenants do not have a choice on their internet provider. It's either bundled in rent, or it runs through the central infrastructure of the building (with one provider and zero choice unless cellular). Having listed in 6 different buildings in NY that has consistently been the case (4 bundle with cable, 2 individually billed, but zero choice on provider).

HOurs cut in half - ok, so based on the information you submitted during time of lease, that's a $xxx reduction in income. I assume some of your other expenses are down as well, so can you pay 50% and we'll put the balance to be due later, and have another conversation next month? Aunt sick - really sorry to hear, hope she feels better. Listen I know it's tough time for everyone, but I also have people I need to pay to run the building, people who are in equally tough situation as you, and I'm trying to not cut them back. Also I have to pay the bank, etc. How long do you think you're in a place to start paying? If it's 6 months from now I will not have any choice but to start an eviction process. I like the credit score point. And I'm not trying to paint this as a black and white picture - I realize that it's state by state and said that extrapolating is probably not a good idea previously. I just think there are ways in which different situatiosn can be worked through vs. not doing anything on non-paying tenants.

Let's play this out. Me - Hi Matt, I haven't seen a payment for this month, are you having financial difficulties? Matt - Yes, reasons XYZ Me - Understood. Sorry to hear about your financial difficulties. I want to work with you through this crisis. Can you show me something that shows you've been fired or furloughed or some bank statement showing a decline in income? Let's see what we can work out. Matt - No, you have no right to any financial information of mine. Me - Well you may be right, but I'm trying to work with you. You submitted your financial information along with your credit history at time of rental, and so you don't have to provide it, but it'll make it easier for us to work through this together. Is that unreasonable?

You have a valid point, but if it really gets to that level is there really nothing that can be done as a land lord? Especially in this high rise buildings, are there no options (cutting internet, for example) to at least force a conversation around ability to pay? It's one thing to not be able to pay, it's another thing to choose to not pay. So if one wants electricity or cable or internet, assuming they could be cut off unit by unit, why is a landlord obligated to provide that if the renter isn't paying rent? I'm almost sure turning off electricity would open up massive legal liabilities that landlords would lose in court. I know it is illegal in canada to turn off electricity or the heating source to delinquent renters. I imagine it is the same in the US, nevermind during this crisis. As for cable/internet...not sure how it works in US, but again in Canada, most renters even in apartment buildings have individual agreements with their telcos. yes, technically the buildings allow the telcos to run their hardware through common areas, but the rent is separate. landlords would have no legal right to turn off a third party service. Is it generally different in the US? Is the internet explicitly bundled with rent? Making unit uninhabitable by landlord is called constructive eviction and opens up landlord to civil lawsuit/liabilities. Depending on the state these could very stiff. Got it. Having said that, if courts are packed for a while, isn't this also going to take a long time? What will they do in the interim? Are tenants better off just coming to an agreement with the landlord based on ability to pay?

YOu're all right - not a landlord, never been a landlord, never want to be a landlord (at least directly). Also never missed rent when I was renting, so total ignorance here for sure. Is internet access considered essential service? Is there nothing that is available to a landlord outside of the courts? BTW - renting was when I lived in TX, so maybe the laws / enforcement is different from rest of the country. I just remember even getting some basic stuff fixed was a real pain. Perhaps this is also because the apartments were very cheap, so you sort of get what you pay for, and I certainly had no money to go sue... Edit - to be clear, I'm not advocating just forcing someone out because they can't make payment. If I'm a landlord and I underwrote a tenant based on his/her financial situation, then I made that call and it's my responsibility to bear. However, if *having a conversation* is too much, then that's when I become unsympathetic. I'm merely trying to tease out ways in which to force a conversation. Perhaps that's not legal in any form, but if I'm being screwed over then I'm going to use whatever legal means I do have to hit back...

On some levels I agree. The generation has been given enormous opportunities in the post war period, and yet so many have not set themselves up for success. Just bailout after bailout. On the other hand, no one owns the assets forever. Wealth is passed down through the generations (as a society, not familial). However, with the inequalities created, as well as estate taxation, we're just getting more divided and access to opportunity is getting further apart. On top of that, our creditors are not us, but countries like China. This is unlikely to boil over this election, but the next two... I don't know.

You have a valid point, but if it really gets to that level is there really nothing that can be done as a land lord? Especially in this high rise buildings, are there no options (cutting internet, for example) to at least force a conversation around ability to pay? It's one thing to not be able to pay, it's another thing to choose to not pay. So if one wants electricity or cable or internet, assuming they could be cut off unit by unit, why is a landlord obligated to provide that if the renter isn't paying rent? I'm almost sure turning off electricity would open up massive legal liabilities that landlords would lose in court. I know it is illegal in canada to turn off electricity or the heating source to delinquent renters. I imagine it is the same in the US, nevermind during this crisis. As for cable/internet...not sure how it works in US, but again in Canada, most renters even in apartment buildings have individual agreements with their telcos. yes, technically the buildings allow the telcos to run their hardware through common areas, but the rent is separate. landlords would have no legal right to turn off a third party service. Is it generally different in the US? Is the internet explicitly bundled with rent? Obviously case by case basis here and we're generalizing, so it's prob not great to extrapolate. However, if the reason why renters aren't paying is b/c they think the courts will be stuck with too many cases, then it goes for landlords too. ANd in terms of liabilities - outside of physical harm (so heat being one of the "Essential" items), what could be claimed? No legal expert here but can someone really claim that they are entitled to free rent? Again, I'm not suggesting that this is just a legal issue. If I were a landlord and I have tenants who I know are employed, able to pay, and won't even have a conversation about rent and is telling me to go pound sand to take advantage of a pandemic, then I have no problem letting him or her know that electricity is not a "right." In terms of internet / cable - depends on the building. Many large buildings include it as a part of the rent / HOA. It's just easier to negotiate on behalf of 100 units and get economies of scale and service.

You have a valid point, but if it really gets to that level is there really nothing that can be done as a land lord? Especially in this high rise buildings, are there no options (cutting internet, for example) to at least force a conversation around ability to pay? It's one thing to not be able to pay, it's another thing to choose to not pay. So if one wants electricity or cable or internet, assuming they could be cut off unit by unit, why is a landlord obligated to provide that if the renter isn't paying rent?

Of course there is. I don't have a clue how much this plays out as much as the next guy. So yeah, there's risk. But in two years which of the names listed here is more likely to make it back to its original earnings power? I'm willing to bet on LIND vs. the others.

Let's assume, for argument sake, that "flu" is just as deadly / contagious / etc. with CV19 absent vaccine, but why is that a better logical comparison, since vaccine does exist?

Baby thrown out with the bathwater? Are you booking one for June? Why does the price matter whether you're going on a cruise / trip / vacation right now or not? You don't think there's a difference between someone who can pay $25k to go on a trip to Antartica with 20 people vs. thousands paying $1k to be trapped on a ginormous trip? You think people who can afford those passages are impacted sufficiently to stop spending that money, and there's no demand for it going forward? It's not the price that matters - it's the segment. But sure, if you think Ferrari is in the same boat as Ford then I guess you wouldn't take a look.

we dont now that. you may be right though. during flu season, many people obtain a vaccine predictive for the viral strains to be expected, and US still has 10,000-50,000 deaths attributed to flu each year. without any vaccine protection, we are not yet at 9,000 with corona in US. and I believe that number would have been MUCH lower if we had focused all of our resources on elderly etc as opposed to our precious selves. if I were to speculate, I would say that this virus has a higher rate of asympomatic infection than other flu viruses, perhaps because there is some basic commonality to other corona viruses we have all had. that will become apparent perhaps in the vaccine development project Key phrase is we don't know. You're comparing 9k death (which we know will go up, likely 10x based on current projections), in a very short period of time, with a practically locked down country, vs. a flu *season* where something like 30% of the people get a vaccine. Not apples to apples. So we can quibble about whether maybe there is a better way next time, simply stating that this is a gross over reaction does not make sense.

Well at 75 bucks now W is prob not the risk/reward vs. 50 bucks ago...

I do think LIND falls into a different camp. Looked at this over the past few days. Super high end tickets (some are $25k+!), national geographics branded excursions, really unique trips that aren't really substitutes for "normal cruises." Seems more like the baby thrown out with the bathwater situation.

Relatively new user here. Is there an "ignore user" feature on this forum? 95% of the people are trying to have a civilized conversation even if they disagree on the conclusion, just would like to cut out the 5%. Anyone?

I hope you're right Orthopa, and thanks for chiming back in this thread. In the spirit of trying to better understand the situation I have a few points / questions: 1) miles traveled is likely closely correlated to population density. If you live in Montana on a ranch, your miles traveled is irrelevant vs. miles traveled in Chicago. Not suggesting what you're saying could not be correct - for sure it could, especially in Southern / more rural regions, but I think it conflates a few factors. 2) I'm unclear how you're drawing the conclusion that the lockdown isn't doing anything. I mean, if it was effectively would you not expect it to reduce the infection rate (and the whole reason to lockdown)? This doesn't prove that the lockdown is as effective as everyone thinks, but it certainly does not prove it to be ineffective ("did nothing"). 3) Miami metro area seems to have ~50% of the cases. Does this not confirm density vs. weather may be more of a factor? 4) For herd immunity with R0 of 2-3 I've seen numbers between 50-70% in terms of percentage of the population that need to be immune / recovered. It seems like we're very far from that? I don't know that anyone really even knows the % of the population that may have had it at this point - do you have some data sources that have cited this? Lastly, how do you think we emerge from this? Youv'e cited end of the month being a demarcation line - why? Based on immunity, or that face masks are really effective and we can bring R0 down below 0 with them, or some other factor? Just trying to understand your line of reasoning.

That was definitive for him? I'm not sure I'd go as far as thowed, but it's more directional than most of his letters. Take a look at his letters for hte past three years. Seems more hedged vs. this one.

I bought some Synchrony preferreds on Monday that seemed like a great deal to me. My first ever purchase of preferred stock. This seems like a way under-researched area of the market. I'm not sure if that's because these things tend to take a dive during a downturn, or beacuse of the financials concentration most people don't go near it, or if it's just a weird space b/t FI and equity that nobody takes a look. If anyone has recommendation in terms of ways to get up to speed quickly i'd love to learn more. The CEFs on preferreds have gotten killed along with the rest of the CEFs and I'm sure there's something here...

Agree with this sentiment completely. I've been trading in and out of SPY $200 strike puts recently and had sold it yesterday. Today the options opened down at around $3 bucks and basically stayed there all day, despite SPY ramping by ~5% from open til close. Interesting to see this in real time.

What if I care about all people but I choose to favor lives that won't come back above jobs that eventually will? I'm sure you are a complete humanitarian and a generous person. I'm not questioning that. I don't understand the scorn reserved for the President at a time of crisis. Some things are not going to go correctly, yet this is being used as the time to bring him down. Continue to have at it. It will likely work where impeachment didn't. How is the opposition party absolved of ANY responsibility here with a 3 year clusterfuck where the #1 issue was get rid of Trump and NOT GOVERN? Totally wasting everyone's time for nothing and ignoring issues critical to the country. How is the opposition party absolved of using this crisis to stuff a critical bill full of crap that has nothing to do with solving a crisis? How is the opposition party absolved of the fight to recalibrate our relationship with China - which clearly needs to happen? Where were the governors that rooted on "open borders" and no immigration security and crapping on our streets? Do any of these politicians share any blame? Nope - not when you can blame it all on the President you hate. Continue to focus all your scorn on the President. You'll get you wish with wartime President Biden and associates Schiff, Pelosi and Nadler. Can't wait to see how they deal with this once they open the borders. Dude, how could you forget about Bengahzi and Hillary's emails??!?! And the prostitution ring in the pizza joint!!!