Red Lion

I'm not an expert on the utility industry in general, although I follow the PG&E situation very closely as my business has a big interest in the direction of the PG&E stock. My understanding is that most utilities have a regulated ROE they are allowed to earn, so if they have to roll debt at higher interest rates they could then use this in their rate case to get higher rates to achieve their allowed ROE even with rising interest rates. Do I misunderstand how this works? Or am I just extrapolating the PG&E framework to other utilities?

But you can lock in about 2% real rate by buying a 20 year TIPS, obviously those will fluctuate in value, but they sure look a lot more attractive with a 2% real rate rather than a negative real rate last year.

GOOGL puts were assigned @ 90.

I appreciate the back and forth, because at this point the alternative asset managers are my biggest position in my equity portfolio, and I find myself trying to talk myself off the ledge of being a true believer, and making sure that I have a solid understanding of the business here. I should say, I do agree, massively negative real interest rates are probably the utmost ideal business climate for the alternative asset managers. This helps tremendously with raising fee paying AUM which is the key driver of fundamental value in these names I believe. Also it is no doubt beneficial to to do deals with cheap credit and loose terms. In my opinion, I think these companies can do just fine with low asset values, high yield spreads, etc. because they are all able to invest into special situations including credit or simply less leveraged and lower valued buyouts. Credit seems like a huge opportunity here though, even in the buyout/PE funds, because they can and will and have bought out distressed credit and either taken quit profits or taken companies private through bankruptcy, etc. e.g. BREIT is talking about making credit investments where they can earn solid returns with much lower risk. The bigger question is whether they can continue to increase fee paying AUM and keep the relatively high management fees associated with their private funds. My guess is they probably can, especially with the shift towards high net worth private funds. I should also mention that all of these businesses, at least all of the ones I invest in, e.g. BAM, KKR, APO, BX, and ARES are all managing insurance capital, with an emphasis on pension risk transfer and annuity businesses, so all of these businesses tend to have a tailwind from rising interest rates as well and have historically earned higher returns on equity and had higher inflows of AUM in times of higher interest rates. It's easier to sell a 4% annuity than a 2% annuity regardless of what inflation or other investment opportunities are, and yet these companies are earning higher spreads with higher interest rates. With everything said, if you wanted to pick BRK and FFH over BAM for the next 5 years based on a theory of rising interest rates, I would completely understand. I still have my money on BAM when it comes to a 10 year horizon, and BX, APO, and KKR in my humble opinion as well, I personally hold them in a basket as large % of my equities portfolio. I also own BRK and FFH, and agree that they look attractive, especially FFH, in a rising interest rate environment. I don't think we are entering into a 10-20 year period of HIGH interest rates. I believe we are headed to 5 or 6% on the federal funds rate for a few years, recession, and then reduced rates. I could certainly be wrong, but that's where a good deal of my money is. About 50% of my equity portfolio is in BAM,APO,KKR, BX,ARES in that order. Most of my net worth is in a closely held business and T-bills, so it's not like I'm all in on stocks or anything, but I'm certainly a true believer in these companies for the long term even with higher interest rates.

I sure moved too slow on building this one up. I've been following the name for years, but just starting to see the great value setup in 2022. I did open a nice starter position in the mid $450s, and will be looking to add if I didn't miss my chance.

I'm short $90 GOOGL puts expiring today, and I'm going to just let them get assigned because I've been trying to add at or below $90. Managed to get a couple options premiums out of it. I also had more $90 GOOGL puts expiring on January 2023 I rolled those out to January 2024 down to a $78 strike for a $0.30 net credit. This position is not going to be anything special as far as IRR, but at least I can leave money in T-bills paying 4.5% while I wait to see if I can get these shares at a lower price. I'm trying to be disciplined while building positions on the downturn and am trying to add after 5-10% market price drops while I'm still building my position.

Bought a big chunk of 912796YW3, T-bill maturing 5/4/2023 for $978 for 4.5% YTM.

Sold out a set of QQQ puts spreads I had on expiring 11/4 - 11/7. I figured after the market reaction to FED results today I might as well close out and preserve some of my capital. Now watch QQQ drop 5% in the next week. Sold 11/04 puts on GOOGL @90 and NKE @92

You're telling me! I kept up with the trades the first few days of the vacation and decided I just needed to focus on living up my beach time. Better lucky than good they say. I think I may have lost money one the SPY position but very minimal, and actually made money on APO. I think I will probably try something like this again, but I really don't like having to roll options on a daily or weekly basis.

Everyone says this, and I can tell that you're an intelligent investor with more experience than me, so maybe you can answer this question... Every time I see someone say that Private Equity needs high prices and low rates to work, I wonder, how did all these companies start out in the 80s and 90s (Blackstone and Apollo) or the very late 70s (KKR) and just knock it out of the park? They had very high interest rates, lower asset prices, lower fund sizes. So why can't they do it again? I personally think that the good PE managers know how to play several playbooks. I think you're going to see more convertible debt investments, takeovers and restructuring in BK court, portfolio companies buying back debt at a huge discount. Keep in mind the big players, especially BX, BAM, and KKR have a TON of capital to deploy into these lower asset prices. Just those three alone have around 300-350 billion of uncalled fund commitments and they are all still increasing their AUM in the face of rapidly rising interest rates.

Bought a vertical put spread on QQQ $265/$260 expiring on Friday. This a very small position but could return 10X if QQQ drops 5% by Friday.

Bought back all of my BX and MPW puts today for a nice quick profit.

I started a small trading position last week in their P series fixed to floating preferred shares, I feel like the upside is probably similar and downside lower than the common, but I don't trust these mortgage REITs and even in a preferred I'm keeping this position size extra small.

I feel bad for letting this experiment die on the vine. I ended up closing these positions out on vacation in early September because I couldn't keep up with the frequent trading, then I planned to put them back on once I was finished so I could start posting again. But then the market fell into a free fall, and I should have started again because I suspect all this volatility would have been very interesting to see if the strategy worked. I will go back through and look at my trades to see if I can come up with final profit and loss on this strategy, I believe I cleared a very negligible profit, but that was probably user error.

Sold ITM GOOGL options expiring tomorrow, hoping to pickup some shares. Sold the $94 strike price for $1.75.

Rolled over maturing T-bills to November 15 22 maturity T-bills with a YTM over 3%, might extend my duration a bit once these mature depending on what the yield curve is looking like at that time.

$80 strike Meta puts expiring in January for $2.65.

Bought back puts that I just sold a few days ago on BABA and OWL. For BABA I paid $0.05 per contract, and I felt like it was worth leaving a nickel on the table than riding this out through Friday. For OWL my puts were expiring on January 20, I sold them on 10/21 for $0.40 and bought back today for $0.17. I felt like the risk:reward on this trade skewed quickly, and I don't feel like holding the position for the next 3 months just to potentially get 40% of the total profit.

$10 strike November 18 MPW puts for $0.60

Added starter positions in AGNC/P and RITM/C. Not much of an expert on preferred stock, all I know is that every time the market crashes I see preferred stock that looks attractive and then they usually seem to trade back near to par far quicker than equity markets recover. Maybe this time is different with interest rates, but these are fixed to floating preferred, so they still seem pretty attractive to me.

Nice entry price I think, especially with the upcoming spinoff which I should unlock a lot of value by having the market put a value on the asset manager, especially at this price.

I managed to snag 10 contracts of 6/16/23 $5 CLPR CALL options for $1.90 which is their intrinsic value, I don't understand why someone took the other side of that trade.

Sold $58 BABA puts expiring this Friday for $1.28. I'm not comfortable with a big position in this stock, but if these are exercised it's going to be a 100 basis point position.

What does your thesis practically look like? Commodity stocks? shorting stocks? shorting tlt and putting your money into short term t bills? The only thing working for me this year has been cash and a very large beneficial/derivative interest in PCG stock that I can’t control. Fortunately between the two that’s about 75% of my net worth. My investment accounts are otherwise down 24% this year and that includes about 800 basis points of hedging returns. Ouch.

Excellent info, thank you very much. I will definitely check out the Janus CLO fund, this is something I've read about, but never directly invested in myself because I don't know how. Sounds like an ETF might be worth the fees to park some of my short term holdings here. I'm holding most of this cash waiting for an opportunity in real estate, so the last thing I want to do is stretch for duration and have a big drawdown right when I'm trying to make an investment, I think there's certainly an argument to be adding some duration on the fixed income side at this point now that we are seeing likely OK real returns priced in and maybe some quick gains if you time the FED just right.