After bemoaning the lack of sources of credit market data for individual investors in yesterday's RM column, it is time for me to stop complaining and to start helping people. I have referred to the opportunities in the corporate bond and preferred space as "generational buying opportunities," but finding the information on those securities is so difficult for regular folks that it is possible to miss out on profitable trades for want of facts. I get that. For my trading firm, I have a small portion in options positions -- exclusively short on underlying equities -- and that has helped ExCap thrive in February and March. The "meat" of the portfolio is long, though, and that's where bets become investments. "It's yielding 12%" is NOT enough reason to buy any security. Ever. Context is needed, and here are a few sources I use to generate that context.
The term structure of interest rates. As with any financial instrument, the slope of the yield curve is more important than the actual yields themselves. The flat yield curve was screaming contraction at the U.S markets for all of 2019 and, unfortunately, it took the grand human tragedy of Covid-19 to drive that home. The best place to monitor those rates is Bloomberg.com, and this is a good homepage on that site. It's the first source I check every morning.
The future's so bright...Timbuk 3's 80s hit is a theme for these times, since, as another character of the 1980s, Wall Street's Gordon Gekko, said, money never sleeps. There has been much discussion of late about the liquidity and thus the ultimate validity of the futures markets as after-hours predictors of the next day's U.S. market activity, but ignore the noise. The creation of E-mini S&P 500 futures contracts has given all investors access to trading outside regular 9:30 am - 4:00 pm ET U.S. trading hours. I am not advocating that you trade futures, just that you pay attention to them. For real-time quotes I use Investing.com's futures page. Remember that equity index futures trade as monthly contracts, so futures contract prices include a time component. If you want to see what the futures price equates to in real-time DJIA/S&P/Nasdaq index points, CNBC has a handy "implied open" calculator based on futures prices here.
Black gold. The equity markets are moving based on the whims of the global oil markets this week, and that brings the oddities of the crude markets to the fore. Oil trades on two benchmarks, Brent (an oilfield located in Scotland) which is considered the "world" price and WTI (West Texas Intermediate) which is considered the "U.S." price. My first stop for U.S. oil price data is the CME's page, and Brent is mainly traded on the Intercontinental Exchange, with quotes here.
Corporate bonds/preferreds. As mentioned in yesterday's RM column, there is no single source for accurate information across these broad, liquid markets. I am working on a solution that will save all the legwork required to check individual fixed-income security prices.
So, the next time someone asks you "how is the market doing?" you now have extra data sources to give an informed answer. I always smile when I hear someone in a position of power in finance say the "Dow is...." I was taught as a summer intern never to call the DJIA the Dow (Dow is publicly-traded company, there should be no confusion) and that as an equal-weighted, price weighted index, the DJIA is basically useless as indicator of the valuation of U.S. equity markets, anyway. I am sorry if that is too nerdy.
Nobody cares what the nerds think until the markets go haywire. Well, they are haywire now. Use the data sources I listed above and be a little nerdy about your portfolio, and you will reap the benefits.
