Pension funds use a fixed income allocation to enforce rebalancing discipline. When equities fall, the fixed income portion grows relatively, forcing a sale of fixed income to buy cheaper equities. This systematically forces investors to buy at the bottom and sell at the top.
Actively write short-term covered calls on individual stocks that have appreciated near your valuation targets. This reframes the options strategy from simple income generation to a sophisticated tool for forcing disciplined profit-taking and rotating capital out of fully valued positions.
While debt covenants are weakening, investing in large public companies reduces this risk. Their need to maintain good credit for shareholders, board members, and business counterparties serves as a strong, implicit covenant, discouraging risky cash extraction common in private equity-owned firms.
Public discourse is constrained by the "Overton Window," which selects for easily transmitted messages, not just politically acceptable ones. This favors low-resolution slogans (60% accurate, highly repeatable) over high-resolution, nuanced arguments (95% accurate, hard to share), explaining why simple messages dominate.
While a common stock yielding near 10% often signals a "yield trap," a preferred stock yielding 7-9% is not a sign of distress. Its senior position in the capital structure (paid before common) justifies the higher, more debt-like yield that is typical for the asset class.
To generate extra income without sacrificing significant upside, write very short-term (1-3 week) covered calls on only a part of a portfolio. This contrasts with strategies that write longer-dated calls on an entire portfolio, which often cap returns in rising markets.
The Fed's rate policy is driven by flawed data. The BLS's shelter inflation component has a built-in six-month delay and uses outdated collection methods. Real-time data shows inflation is already at target, meaning current high rates are unnecessarily damaging the economy.
Passive, cap-weighted fixed income funds behave like momentum traders, buying more of a bond as its price rises. This is a flawed strategy for fixed income because many bonds are callable, meaning their upside is capped and rising prices increase call risk. Active management can exploit this inefficiency.