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Thread: F Fund's inverse relationship to C Fund

  1. #13

    Question Re: F Fund's inverse relationship to C Fund

    Quote Originally Posted by jth View Post
    i looked at the last 200 days of trading and even broke it down to the last 50, 100, 150, and 200 trading days.

    It was interesting how the number of f & c inverse days were the exact same on the last 50, 51-100, and 101-150 days.

    Overall there were 140 inverse trading days 70%
    28 days traded down together 14%
    32 days traded up together 16%

    of the 28 days when both funds are down, 46% of the time both funds traded down the next day.

    Of the 32 days when both funds are up, 56.25% f was up the next day and 43.75% c was up the next day.

    I found it interesting there were 5 times when both funds traded up 2 days in a row, yet not once did they trade down together more then one day in a row.

    If the trend holds true, then both funds will not be down tomorrow...
    flip a coin my friend. Unless i'm reading the
    percentages wrong; its a 50/50 chance all
    the way around. Since they both traded to
    the negative two days in a row, isn't it still
    a 50/50 call?

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  3. #14

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    Default Re: F Fund's inverse relationship to C Fund

    In short, the ride is unpredictable now. Not as twitchy as equities, but still nervous. The last year or so has run rings around the usual Equities/Bond relationship. Before then, bonds were considered the "safe haven"; the low returns in balance with the safety factor. With the fall of the $, and the usual buyers fleeing the bond market (finding it too uncertain to justify the low returns), bonds aren't the sure thing they used to be. These days, U.S. bonds sometimes follow the U.S. equities market - looks safer when the U.S. economy looks ok, but look awful when it doesn't. So the "rule" of inverse relationship, isn't working.
    "All the prophets of Doom, Can always find room, In a world full of worry and fear..." - Protest Song, Monty Python

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  5. #15

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    Default Re: F Fund's inverse relationship to C Fund

    Quote Originally Posted by Silverbird View Post
    With the fall of the $, and the usual buyers fleeing the bond market ... bonds aren't the sure thing they used to be. These days, U.S. bonds sometimes follow the U.S. equities market - looks safer when the U.S. economy looks ok, but look awful when it doesn't. So the "rule" of inverse relationship, isn't working.
    Good comment, Silverbird. I don't think that C,S, and especially I are safe for more than a couple of days, and I can't jump in and out because I only have those two '&%*#' IFTs. So that would usually put me into F. But F Fund is having the same problem about only being productive in short spurts because of the recent bond fund reverses.

    That's exactly why this Chicklett is still huddled up in the safe haven of G Fund waiting for clearer weather to break through!

    Lady

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  7. #16

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    Default Re: F Fund's inverse relationship to C Fund

    Quote Originally Posted by squalebear View Post
    flip a coin my friend.
    That's about the way I see it. No matter how many times you flip a coin and get heads, the odds are the same each time. Oh well, that was an hour oh my life I'll never get back.

    But at least it did show that 70% of the time the two funds run inverse to each other. That was a pretty solid number thoughout the last 200 days.
    When I get some time, I may run the same number with F & S.

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  9. #17

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    Default Re: F Fund's inverse relationship to C Fund

    Lookee here. Continuing to turn Treasuries into junk bonds.


    Fed lays on extra liquidity support
    By Krishna Guha in Washington
    Published: July 30 2008 15:19 | Last updated: July 30 2008 21:34

    The Federal Reserve ramped up its liquidity support operations again on Wednesday in an effort to reduce money market strains and pre-empt the possibility of funding crises at the year-end or at other stress points.
    The US central bank said it would offer three-month cash loans to banks and create a new options auction facility. It also said it would give investment banks and other primary dealers extended access to emergency cash and loans of Treasury securities until January 30.
    The Fed said it was extending its support to primary dealers “in light of continued fragile circumstances in financial markets”.
    Funding needs

    On August 10 2007 – the day after the credit crisis broke – the Federal Reserve said that banks might “experience unusual funding needs because of dislocations in money and credit markets”, writes James Politi. It promised to “provide reserves as necessary” to maintain its desired overnight interest rate and reminded banks they could use the “discount window” to access emergency cash.
    The Fed has had to improvise to support market functioning – becoming more like the European Central Bank, which started the crisis with a wider range of liquidity tools. In the process the Fed extended its reach beyond commercial banks to investment banks.
    The options facility is similar to the strategy used by the Fed in 1999 to deal with the risk of a millennium Y2K liquidity crisis. The Fed will auction $50bn of options giving dealers the right but not the obligation to swap illiquid securities for Treasuries over periods of likely funding stress, such as the year-end.
    The European Central Bank and the Swiss National Bank will also offer three-month dollar loans through an offshore facility set up with the Fed. The Fed will increase the amount of dollars it provides to the ECB in exchange for euros by $5bn to $50bn.
    Goldman Sachs said the moves “should help to . . . alleviate market stresses, but are incremental rather than transformational”.
    Its initiatives follow the recent turmoil in financial sector stocks, which has created a risk that the credit squeeze in the real economy could intensify in the coming months.
    The US central bank does not believe it can solve what are in many cases capital problems by providing extra liquidity. But it does believe it can support the adjustment process by reducing the risk of a liquidity run on any individual institution or any forced firesales of illiquid assets.
    The Fed’s acknowledgement of the continuing stress in financial markets makes it improbable that it will raise interest rates soon. However, in the longer term, Fed policymakers believe that liquidity tools and rates could in principle diverge.
    The decision to offer $75bn in three-month loans (replacing $75bn of one-month loans) marks an important concession by the Fed, which had resisted pressure from banks to extend the term from the previous single month.
    The creation of the options facility, meanwhile, is intended to pre-empt stress “in advance of periods that are typically characterised by elevated stress in financial markets, such as quarter ends” and the year-end.
    The S&P 500 index rose 1.7 per cent to close at 1,284.27. The Dow Jones Industrial Average was up 1.6 per cent at 11,583.93. The S&P financials index was up 2 per cent but the homebuilders sector finished in negative territory, down 1.7 per cent.
    The yield on the two-year Treasury closed flat at 2.621 and the 10-year yield was up 1bp at 4.048.
    Additional reporting by Anuj Gangahar in New York

    Copyright The Financial Times Limited 2008.

  10.  
  11. #18

    Default Re: F Fund's inverse relationship to C Fund

    Quote Originally Posted by luv2read View Post
    Lookee here. Continuing to turn Treasuries into junk bonds.
    Excellent summary and explanation of what's happening! Appreciate your whit!


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  13. #19

    Default Re: F Fund's inverse relationship to C Fund

    Quote Originally Posted by luv2read View Post
    Lookee here. Continuing to turn Treasuries into junk bonds.
    Thanks so much, for the research L2R,
    Forgive me for being dense, and difficult to grasp all in the article fully, but as if I understand it correctly, bottomline,
    - its all suggesting to be wary/stay away from the F-Fund & T-Bonds, that they are headed to relecting the price of Junk Bonds!
    VR

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  15. #20

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    Default Re: F Fund's inverse relationship to C Fund

    What pinned the 1:00 pm tail on the F fund?
    "All the prophets of Doom, Can always find room, In a world full of worry and fear..." - Protest Song, Monty Python

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  17. #21

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    Default Re: F Fund's inverse relationship to C Fund

    Quote Originally Posted by Silverbird View Post
    What pinned the 1:00 pm tail on the F fund?

    Corresponds with sale of 30 yr. treasuries.
    10 year crashed from 4% to 3.95%
    Don’t ask me how it works, all I know is that if I want to follow the f fund. (Aside from the AGG) I track treasuries.
    Never let your friends determine who your friends are going to be!.

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  19. #22

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    Default Re: F Fund's inverse relationship to C Fund

    Quote Originally Posted by hessian View Post
    Thanks so much, for the research L2R,
    Forgive me for being dense, and difficult to grasp all in the article fully, but as if I understand it correctly, bottomline,
    - its all suggesting to be wary/stay away from the F-Fund & T-Bonds, that they are headed to relecting the price of Junk Bonds!
    VR
    Not necessarily Hessian. There are earlier articles posted on the MB. Our wise Fed has turned Tbonds into junk bonds with the BSC bailout, the auction windows (accepting junk that nobody wants as collateral), and Fannie/Freddy bailouts. When the activities first started AGG Treasuries and F fund took a nose dive, it was obvious that China and sovereign wealth funds were dumping. It's kind of evened out now, trading range of 11.96-12.25 or so. I've been quite pleased with moving in and out of F fund (instead of G) so far.

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