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A couple of quick hits from this weekend's Barron's. 

There was a write-up about how well equity momentum funds are doing this year. At one point during the April carnage, momentum funds were reportedly doing poorly, but have turned it around? JP Morgan has a momentum ETF with the symbol JMOM. I hadn't heard of it, but it has been trading since 2017. 

One line is JMOM, the other is Vanguard S&P 500.

If you're interested in broad-based factor investing, it must be because you are interested in capturing some sort of differentiated trait; otherwise, why do it? JMOM is from JP Morgan, so the AUM is huge, but it's probably been enough time for the fund to set an expectation of how much or how little differentiation it can offer. It appears to me, not much. The stock weightings and the sector weighting do differ from VOO currently, but it's hard to find meaningful differentiation. To be fair, this year JMOM is 400 bp ahead of VOO after a slightly larger drawdown at the April low.

The other article was titled Bonds Have Underperformed. Why You Should Own Them Now. The title was a little misleading; it was more of a rundown of funds to use to access various income market niches like MBS, REITs, and so on.

Lisa Shalett from Morgan Stanley is quoted "now is not the time to abandon fixed income." She might be right, I have no idea, but am grateful that I don't have to think about that with regard to duration. Anyone who's had duration as part of their portfolio is probably very underwater, so from that standpoint, locking in a 20-30% loss takes some number crunching. 

A portfolio with a bunch of different issues maturing in 10-15 years, down 20% and yielding 2% from what they paid seven years ago, might be better off trading one or two of those positions out for a catastrophe bond fund (not mentioned), yielding low double digits. As long as things don't go terribly for the cat bond fund (so not saying no triggering events in the fund, just not a lot of them all at once), the recovery wouldn't take that long, but keep that kind of sizing small. Cat bonds are not riskless. 

Maybe, there are one or two other specialized income niches that have similar yields to cat bonds but that are vulnerable to completely different risk factors that can be swapped in a similar fashion. All of a sudden, maybe the damage from taking on duration at the wrong time can be recovered five years earlier than hoped for. 

Again, this idea is risky but has a reasonable probability of working out. 

I did not take the article as being worried about duration, but please leave a comment if you read it differently. Duration equals volatility, and there was no mention of trying to offset volatility along the lines of the RISR/MBB combo we've looked at a few times over the last month or so. 

MBB's volatility is pretty much completely offset by RISR. It's not quite as straight of a line as client holding BOXX, but it is close and has churned out a growth rate that drifts into low-vol equity territory with less than half the volatility. 

The reason I threw MBB and RISR individually onto the back test is that the blue line can't be owned. However volatile MBB and RISR look to you, remember they are each fixed-income niches, that's what MBB/RISR owners would have to live with. Building this sort of trade requires the ability to ignore live item risk. This is probably an example of working against this trade's ergodicity and rebalancing based on some sort of threshold. 

Finding this sort of simple offset to other income segments with duration is not easy. I've tried over the years, but where there's one, there must be others. 

A lot of fire department stuff lately. On the weekends during fire season, we offer paid station manning shifts. There's been a lot of interest this year. Some guys take pay and some do not. As a matter of circumstance, I was at the station house when they were starting today, and we had a quick briefing/BS session about a few things. 

One of the guys is exactly my age, 59, and joined late last year. He's retired from is career job and has jumped in with both feet into the fire department. The other firefighter is one of the couple of guys who is younger than the yellow shirt I've been fighting fire in since 2003.

So, more than 35 years difference between the two, and they had to figure it out to get some stuff done and hopefully have fun. It's easy after retiring to become disconnected from younger people, but it is important to maintain these connections to stay current with the world, which is a big deal. For the younger firefighter, it was a chance to figure out how to relate to someone much older, which can be difficult beyond your parents. A kid in his 20's is probably going to need to know how to get along well with much older bosses at some point, so maybe this helps him a little. 

I'm not worried that anything negative happened on their shift, but I am hopeful it was a very positive experience for both of them. 

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