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I remember Frank writing somewhere that during times of low volatility, one might consider reducing allocation in MYRS, whereas after a VIX spike to 22 or more, one might consider moving more funds from defensive strategies into MYRS/ZIV to capture the mean reversion.
My question is this. What should be given more emphasis in such a decision – the VIX term structure and percentage contango, or the actual spot price of the VIX?
For example at this moment the spot VIX is very low at ~12, however the term structure still shows significant contango. How do you recommend to use these observations to judge expected returns in the short term for MYRS/ZIV strategy?
Greetings! I am a new subscriber and this is my first post. I am curious to hear other opinions on strategy selection/mix going forward if we expect lower returns from US equities over the next few years and believe that the long bull market in bonds is coming to an end. Let me try to formalize the question as follows:
THESIS: The post-crisis rally in U.S. equities has run far and long, and we should expect lower returns for the next several years. In addition, it is difficult to imagine that bond yields will continue to decline during this period.
QUESTION: Which strategies might be expected to perform best in this type of expected market conditions?
I list below the strategies that I prefer given the thesis above, but am very interested to hear the opinions of others.
MYRS: In a sideways or slowly grinding market, the VIX futures should remain in a state of contango and we can still capitalize on the monthly roll yield.
Top 4 World: If the U.S. Stock market under-performs over the next few years, perhaps it will pass the baton to some other country or countries.
Global Market Rotation: Similar argument as Top 4 World strategy.
Global Sector Rotation: In any sideways market, one can usually find individual sectors that out-perform.
Any thoughts?
