Who are the idiots buying bonds for 1% interest?

Big D - you are describing apples to oranges and not a 'downside' from a purely correct technical standpoint. YM to CL is a good, solid statistical correlator, and I have no doubt that you do indeed successfully trade one based upon the relative value price action of the other (the spread). I have clients who hire me just to uncover those kinds of exploitable relationships for directional plays. (there are better intra-market correlators for each of those, by the way)

There have been times in the past when the Yen and the third-month Eurodollar were golden, as was the CD vs. CL and the MX vs. CL.

But from a statistical fitness standpoint the cointegration traits for that particular combination (the beta plot study on your Bloomberg) suck - no way I'd trade spread trade that combo with simultaneous execution of both legs both ways. There are much better spread combinations (some not so obvious) to risk capital on from a pure spread trading standpoint (simultaneous execution of all legs).

So, there is a tangible difference between correlation trading and pure spread trading.
 
Quote from bone:

Big D - you are describing apples to oranges and not a 'downside' from a purely correct technical standpoint. YM to CL is a good, solid statistical correlator, and I have no doubt that you do indeed successfully trade one based upon the relative value price action of the other (the spread). I have clients who hire me just to uncover those kinds of exploitable relationships for directional plays. (there are better intra-market correlators for each of those, by the way)
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You seem to be implying that good correlation is a desirable property from a trading perspective. This seems obviously false - trading the spread of perfectly correlated instruments is worthless.

The reason I trade them is precisely because they are NOT all that well correlated.
 
Quote from The Big D:
I think I can agree with that.

However, I would seriously question whether IBM bonds and T-bonds have that close a relationship. I think in the context of what we were discussing my comment is completely valid. There's a big question of "what's in fashion" that plays into corporate vs. government spreads that has little to do with the probability of default on the corporate bonds.
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Well, the relationship is exists, simply because both are fixed coupon debt instruments. So, whatever other aspects go into the pricing of these, the sensitivity to interest rates is a common thread. But I agree that there are other aspects, such as the one you mention. Hence the fun, the challenge and the pain in relative value trading.
 
Hubris gives way to closed minds and over-reaching statements. We are giving you gems, golden nuggets, diamonds and you rebuff the generosity of thought and insult the providers.

1. No two instruments are identical, but trading the most closely related and correlated instruments is defined as arbitrage. Last time I checked, arbitrage is stupidly profitable - too bad they don't last. I would guesstimate that half the guys I now in this business with real FU money did it with an arbitrage that they rode like a whore with the fleet in town. Until they got clipped. Then they sold their seats and opened restaurants, got creative with the waitstaff, and suffered through very expensive divorce settlements. But you get the point.

2. Over the past two years, comparing closing marks, YM and CL have a 91.9% correlation. And that, ladies and gentlemen, is a very well correlated market. Facts are stubborn things, Big D. You are making money on a correlation, and a very good one at that!

3. I do not claim that that my strategy is better than yours, but your YM vs. CL play relies far more upon relative value trading correlations than you care to admit. Chillax. Now go cover your short two year position.
 
Simple....people are slowly coming to a panic.

They do not see Savings accounts or the Stock Market as safe. They are being told and guided to Bonds as a safe place to "PRESERVE CAPITAL".

Those who do not have much capial do not understand. Those with Captial are trying to PRESERVE IT.

Anything on a Schedual E is now taxed 3.9% thanks to OBAMA CARE. So, the intrest you earn in a saving, cd, etc will have 3.9% of that interest taken away for the "Healthcare" funding. THIS WENT INTO EFFECT as soon as the bill passed.

For those of you who have accountants...you should know this!

So, the final flight to safty is the BOND MARKET. IMHO, S&P will break 1010 soon and the INDU will have a bumpy ride, but head towards the lows of 6500 and break it. As this happens, more and more people will flee to safety....BONDS.

Will the US go broke...we already are but the World will not allow us to "Admit" it. So, Bonds may only yeild 1%...but it will be far better than being at RISK in Banks, Markets, Oil, Etc...if your looking to try and stop your networth from falling fast.
 
I don't see sovereign debt as 'flight-to-quality' anymore, everybody is choking on supply and more is coming down the pike.

Physical commodities like metals, energy, grains, etc. is the darling place to park cash these days.

They don't reach into the bond offer book like they used to, but they sure will empty out the LME and Comex precious metals offer book.
 
Quote from bone:

Hubris gives way to closed minds and over-reaching statements. We are giving you gems, golden nuggets, diamonds and you rebuff the generosity of thought and insult the providers.
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You think overly highly of yourself.

Personally, I'm sort of wondering why a guy who claims 18 consecutive profitable years of trading is offering training for 4 or 5 figures. Then again, you could re-state that and say that I'm sort of not wondering :D
 
My clients love me, and successful clients provide wonderful references. Be nice - there's no downside in it. Open your mind, switch on the 'signal receive' mode.
 
Quote from The Big D:

You think overly highly of yourself.

Personally, I'm sort of wondering why a guy who claims 18 consecutive profitable years of trading is offering training for 4 or 5 figures. Then again, you could re-state that and say that I'm sort of not wondering :D
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Yes, I always wonder about this too. 18 consecutive years of profitability in active trading might be something like a 1 in 500K(maybe thats conservative) shot, compared to the probability of finding an snake oil salesman and its safe to say its not likely the man is not entirely honest. I understand he will take offense to this but if he knows any basic math he should actually agree with this
 
So, the intelligent conversation gets personal. Proven incorrect, and you get nasty on a personal level. Not mature. Not smart.

I've had clients speak with the management at TransMarket Group, RCG, Advantage Futures, Man Financial, DE Trading, and check all of my references inside and out. Some have even contacted former principals at prop firms. No issues, no second-guessing, they want to contract with me immediately. My performance record and background has never been an issue for a serious prospect engaged in serious due diligence.

There are about 30 ET members who are clients, and if I was some sham you certainly would have heard about it by now.
 
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