Growth or More Certainty?

From 2011 through 2021, the earnings yield on the S&P 500 and the yield-to-worst of high yield fixed income had been at equivalent levels.  Today, high yield bond yields exceed S&P 500 earnings yields by 3.5%.  Higher interest rates are prompting consideration for substitution of equity exposure with high yield or other credit and direct-lending […]

Dot Plots and Fed Funds Futures

There are two primary sources for advanced predictions on the future path of short-term interest rates, the Fed Funds Futures market and the FOMC dot plot projections.  On December 13th, the FOMC updated its policy rate projection, lowering its year-end 2024 expected Fed Funds rate to 4.6% (three 25 basis point rate cuts) from the […]

Options Income Strategies

The promise of extra income is one of the most persuasive arguments to compel investors to consider a different investment.  Demand for income, along with tighter options spreads, lower commissions, and the introduction of zero-days-till-expiration options, have propelled explosive growth in options trading.  In 2019, there were 5.8 billion equity options contracts traded in North […]

Keeping More of High Yield’s Yield

The declining costs of investing is a boon for investors.  Even individual investors can own efficient cap-weighted portfolios of stocks and bonds for less than 5 basis points (bps).  Beyond major market exposures, competition between index providers is driving down investing costs in another market, high yield bonds.  Ten years ago, the average actively managed […]


There is an interesting debate about a contract between Chicago Bears rookie defensive lineman Gervon Dexter and an entity called Big League Advance Fund II (BLA). While a student at the University of Florida, Dexter signed a contract with BLA. In the contract, BLA agreed to pay Dexter $436,485 upfront, and Dexter agreed to pay […]


The past two years were challenging for bond investors, but there are reasons to believe that most of the pain from the rout is in the past. The bond market’s valuation, fundamentals, and capacity to handle negative events have all improved. When thinking about bond valuations, real yields, or expected yields in excess of inflation, […]


This most recent Fed Beige Book credits Taylor Swift’s Eras tour with boosting the economy. The Philadelphia Federal Reserve wrote, “May was the strongest month for hotel revenue in Philadelphia since the onset of the pandemic, in large part due to an influx of guests for the Taylor Swift concerts in the city.” The Eras […]

Is the S&P 500 More Like the NBA or MLB

There are a couple of different philosophies about salary construction in sports.  One side believes in the star model, having a small number of highly compensated star players mixed with less expensive players.  The other option is a balanced roster of more evenly paid players. examined payrolls of MLB and NBA teams and compared […]

One-Day Options

In late April, the CBOE started a new index, the CBOE 1-Day Volatility Index (VIX1D), that tracks the implied volatility of one-day S&P 500 options.  Like the VIX index, which has been tracking the 30-day implied S&P 500 options volatility since 2003, the 1-day VIX provides a picture of the equity market’s perceptions of risk, […]

Safest Asset in the World

In most fields, there are fundamentals upon which the discipline relies, for example, the four fundamental forces in physics.  In investing and finance, the risk-free rate (i.e., the interest rate on three-month Treasury Bills) is one such fundamental.  The risk-free rate represents the rate of return an investor can expect to earn if they take […]

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