SHARPE INCOME … Avoided the “Battle of the Bond Rout”

Posted on Nov 21 2016 - 1:19pm by Dan

The original Sharpe Income post that explains this project can be found here.

The Sharpe Income category be found by clicking on that red ‘Sharpe Income’ tag next to this post title, or by clicking here.

We continue the discussion from the last entry.


We began this project with only $500. All in an effort to help out the small retail investor who doesn’t have a lot of money, understand the importance of growing an income account, as opposed to a trading account. The following numbers are taken from our PDF that is attached below.  Remember that the numbers are computed off of Friday’s close …

Total Sharpe Income Balance: $3,043.67
Total Sharpe Income YTD Return: + 5.04 %
Sharpe Income YTD Paid Yield on Cost: + 2.45 %
Total Sharpe Income YTD Maximum Draw-down: – 6.84 %
iShares Barclay’s IEF Return: + 1.50 %
S&P 500 Index YTD Return: + 6.75 %
S&P 500 Index YTD Maximum Draw-down: – 11.24 %


So first of all, let’s cover our basic house-keeping.  We have placed this weeks ‘capital deposit’ in the category reserved as “dry powder”.  Cash that we simply have ‘on hand’ and can move about as we wish.  

Of that cash, 85% of the capital deposit was placed as reserved for a future deposit towards the ‘capital gains’ strategy.  15% of the capital deposit is placed towards reservations for the purchase of more income assets.

For many years, Fixed Income managers were faced with a decision.  One could either continue to attempt to squeeze blood from a turnip (extract yield from bond instruments).  Or instead, switch to over to equity (stock) instruments to extract yield from and settle for a more standard 300 BPS of yield.  And many felt that eventually, a day would arrive in which bonds would have to ‘face the music’, adjust yields higher, and bond prices would have to sink.

As you no doubt have been able to determine, we made the decision to go with Equities.  And in light of recent events?  

We are glad we did.  We avoided the entire battle ongoing with bond prices.  Equities have caught yet another bid, and so we were able to extract that yield and produce good risk-adjusted results …

(Video Included. If you’re seeing this entry elsewhere and cannot play the video?  Click this link to go to the exact video entry …)

The link to the Google Drive Spreadsheet that you can view, that we will edit, build upon and refer to over time can be found at this link.

We continue the Sharpe Income project with this next entry.

The Sharpe Income PDF breakdown for Week 104 can be found here (numbers computed off of Friday’s close) …

4 Comments so far. Feel free to join this conversation.

  1. mappy November 21, 2016 at 3:30 pm - Reply

    take a look at BUD when you can.

  2. Anonymous November 21, 2016 at 3:33 pm - Reply

    Dan,

    I was expected a longer video entry. Your PDF issue is number 104, which corresponds to exactly 2 years for the Sharpe Income project.

    Did you not sell of TLT and SHY recently? These are still indicated on spreadsheet as not being sold,

    • Dan November 21, 2016 at 8:06 pm - Reply

      Thanks for the heads up on that. This is Dan and I am at the in- laws at the moment. I’ll get that corrected when I get back to the office because you’re right. No TLT and SHY

    • Dan November 21, 2016 at 9:56 pm - Reply

      Ah, the spreadsheet. I thought it meant the PDF. The PDF shows just PCY and cash.

      Yeah, if you look at the formula on the spreadsheet to formulate the gain/loss? You’ll notice that I hard-coded the sale number of TLT and SHY. So that shouldn’t vary at all, because in the calculation of the “value”, I just hardcoded what I sold it for, plus the dividends.

      Hope that helps.

      Regards,
      Dan

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