Search found 2669 matches
- Wed Mar 13, 2024 7:24 pm
- Forum: Investing - Theory, News & General
- Topic: International (Non-US) versus US Equities (The "Arguments")
- Replies: 5216
- Views: 833431
Re: International (Non-US) versus US Equities (The "Arguments")
Not to shift the convo from taxes, but can we talk about fundamentals? For me this about P/E and P/book. Looking at VTI, US index the P/E is 23 and P/B is 4. Compare to VEA - FTSE developed. P/E of 13.7 and P/B of 1.6. I do believe in structural advantages of US business climate and growth of US companies outpacing non-US in the mid-long term. But are those differences fairly priced by these fundamental differences? Even if we want to say that there will always be a P/E and P/B in US > non-US, I don't think the gap should be this wide. Market is pricing in higher risk for exUS markets and a higher expected return due to a higher discount rate I'm confused by your language. Is "higher expected return" only in the scenario that the...
- Wed Mar 13, 2024 7:09 pm
- Forum: Investing - Theory, News & General
- Topic: Margin Accounts - Avoiding 'Payment In Lieu Of Dividends'
- Replies: 34
- Views: 3183
Re: Margin Accounts - Avoiding 'Payment In Lieu Of Dividends'
"I'm wondering if the broker would have any need or desire" - The broker always has the "desire" to make money off you. "need" - define "need" (as in "I need to eat", "I need money") (lol). Interactive Brokers' desire is the biggest; they lent very aggressively. I hold mutual funds in an Interactive Brokers account and have held a margin balance and/or short box spreads consistently for 3 years. I have yet to receive PIL. Perhaps, like alex_686 stated, the odds are lower when holding mutual funds and borrowing via box spreads instead of margin. Correct. My understanding is mutual funds are normally not lent. IB lends stocks and ETFs aggressively. It's their biggest hidden fee, and...
- Wed Mar 13, 2024 6:38 am
- Forum: Investing - Theory, News & General
- Topic: Margin Accounts - Avoiding 'Payment In Lieu Of Dividends'
- Replies: 34
- Views: 3183
Re: Margin Accounts - Avoiding 'Payment In Lieu Of Dividends'
For #4, a description of SPX box spreads can be found here . Yes, these are options. The money that I'm "borrowing" is actually proceeds from the sale of the box spread, which will need to be paid back at the expiration date. Since I'm getting proceeds from the buyer of the box spread, it would seem that the broker does not need to come up with any money. In this case, I'm wondering if the broker would have any need or desire to hypothecate my holdings. You are pretty much on track here. The broker doesn't need to borrow money to fund your cash withdraw - the cash is coming from your sales proceeds. This is a liability. The broker needs to handle the risk of this liability in case you can't repay. However that is something differ...
- Mon Mar 11, 2024 7:41 pm
- Forum: Investing - Theory, News & General
- Topic: International (Non-US) versus US Equities (The "Arguments")
- Replies: 5216
- Views: 833431
Re: International (Non-US) versus US Equities (The "Arguments")
My only point was that since 2010, a large component of US returns has come from Valuation expansion. And that's true. It was over 4% of the annualized return. It's ALL cherry-picking You say Starting CAPE in 2010: 20.5 Jan 2020 CAPE: 31 But it is ALSO true that Starting CAPE in 2007 was 28 Oct 2022 CAPE was ALSO 28 SP500 was 1500 in 2007, and 3900 in Oct 2022 So there's 15 years, which is an even longer period than your 10 year period, and therefore MORE valid, right? And that shows valuations have had nothing to do with the 160% gain over 15 years (closer to 200% with dividends) (No, not really, because it's ALSO cherry-picked). We can prove anything we want by choosing the dates. You need to stop posting certain dates as "proof&quo...
- Mon Mar 11, 2024 3:54 pm
- Forum: Investing - Theory, News & General
- Topic: International (Non-US) versus US Equities (The "Arguments")
- Replies: 5216
- Views: 833431
Re: International (Non-US) versus US Equities (The "Arguments")
How deceptive cherry-picking dates can be!
The PV chart started in ca. 1989, at the peak of the Japan bubble.
104 pages into this thread, I am going to distribute my assets across global markets, to diversify the risk factors that generate my returns.
- Sat Mar 09, 2024 5:32 pm
- Forum: Non-US Investing
- Topic: TransferWise vs Schwab for EUR to USD recurring transfers
- Replies: 72
- Views: 9987
Re: TransferWise vs Schwab for EUR to USD recurring transfers
The more we advance in software development and AI, we will see more annoying customer service and red flags in accounts. Humans can only do so much at these concentrated apps that have millions of accounts. In my experience: Interactive Brokers: use it for what it's meant for... investing, either long term or short term but don't use it for FX, paying bills, moving money. Even keeping cash in there without it being in an investment product has some risk of account issues. Schwab: great, but mostly useless for Europeans unless you are doing individual stocks and some US situs risk. They withhold tax on cash balance interest for some odd reason which they never explained. Interest has no withholding tax in the US. Revolut: cheapest for FX, ...
- Sat Mar 09, 2024 5:19 pm
- Forum: Non-US Investing
- Topic: TransferWise vs Schwab for EUR to USD recurring transfers
- Replies: 72
- Views: 9987
Re: TransferWise vs Schwab for EUR to USD recurring transfers
Are you saying that Schwab enforces EU rules preventing EU citizens from buying U.S. mutual funds and ETFs? I'm asking because unlike IB, Schwab is a U.S. broker and does not actively do business in Europe as far as I know.
If true, then do you happen to know if Schwab accepts "professional investor status" per MiFID (requirement of certain amount of assets or trades per year) to be able to buy U.S. funds? (IB accepts professional investor status.)
- Sat Mar 09, 2024 4:39 pm
- Forum: Investing - Theory, News & General
- Topic: International (Non-US) versus US Equities (The "Arguments")
- Replies: 5216
- Views: 833431
Re: International (Non-US) versus US Equities (The "Arguments")
I even bought an Ex China Asia ETF that has no Chinese investments. I thought of this too; but the problem is, Chinese and Hong Kong valuations are currently among the lowest if not the lowest, while that of currently more prospering countries like India are similar to U.S. valuations if not higher. For example, I own shares of a Hong Kong listed conglomerate with subsidiaries in a relatively diversified set of industries that does much of its business via subsidiaries in Europe and elsewhere, but currently trades at a look-through P/E of 5 and has a dividend yield of more than 7%. That seems insanely cheap, and arguably prices in a lot of hostile government asset seizure or corruption scenarios. If I switch now to EM ex China funds, it mi...
- Sat Mar 09, 2024 4:20 pm
- Forum: Investing - Theory, News & General
- Topic: International (Non-US) versus US Equities (The "Arguments")
- Replies: 5216
- Views: 833431
Re: International (Non-US) versus US Equities (The "Arguments")
If it were possible to borrow in one country and lend in another at “identical” risk (e.g. Credit, inflation, FX) but different yields, arbitragers would quickly close the spread. You can both borrow and invest in either currency via derivatives at near zero cost and at or near risk-free money market rates. The confusion roots back to differing opinions of how to accurately quantify the risk. And yes, the same mechanism exists for maintaining equivalent risk-adjusted valuations for US vs International equities (eventually)… But as illustrated by this thread, there is significant difference of opinion in how to quantify the respective risk-reward trade off. And some believe that the task is so difficult that even if you are the one who corr...
- Sat Mar 09, 2024 2:54 am
- Forum: Non-US Investing
- Topic: TransferWise vs Schwab for EUR to USD recurring transfers
- Replies: 72
- Views: 9987
Re: TransferWise vs Schwab for EUR to USD recurring transfers
I still maintain residency and domicile in the US - drivers license, etc and use a mail forwarding service like full time RV folks. The issue with the account closing is for people who try to live out of their IB account and pay bills from it etc. I only have one transaction every few months. Been doing this for six years now. Perhaps I should not worry then and transfer my 100K Euros to USD with Interactive Brokers and be done. I have already my European bank account linked to my IB account, before I became aware of potential risks. It's hard to tell apart truth from fiction with some of the anecdotal account closure horror stories in some other threads in this forum and on Reddit. I don't want to lose my IB account under any circumstance.
- Sat Mar 09, 2024 2:46 am
- Forum: Investing - Theory, News & General
- Topic: Box Spreads as Loans - Interactive Brokers IBKR - 2021 [and later]
- Replies: 1250
- Views: 170811
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021 [and later]
My apologies if this is old news in this thread, I have not stayed up to date and read all posts. Today, I believe I experienced the mythical "bad mark" on my box spread. I have sold a number of boxes over the last 4-5 years. I don't recall this ever happening BUT it seems quite likely it has happened and I just wasn't aware of it. At close of market today, somehow the call spread side of things were marked somewhat odd, at least in my experience of options trading, in which my long call was marked low, and short call was marked high, at the same time the long put lost a lot while short leg went up, meanwhile SPX was down -0.65% at close, VIX did gain today but as I said, there seems to be an unusually large asymmetry between wha...
- Fri Mar 08, 2024 5:21 pm
- Forum: Investing - Theory, News & General
- Topic: International (Non-US) versus US Equities (The "Arguments")
- Replies: 5216
- Views: 833431
Re: International (Non-US) versus US Equities (The "Arguments")
I don't mean to switch topics from equities to fixed income; but I think this is also related to equities markets and possibly to the discussion at hand. An assumption is often made in this thread that from an efficient markets perspective, expected risk-adjusted returns must theoretically be equal across countries. Looking at fixed income real yields, that does not seem to be the case. USD long-term real yields are more than 2%; EUR long-term real yields are up to ca. 1%. Nominal yields at 20y are ca. 1.8% higher in USD than in EUR. Long-term inflation expectations seem to be similar in both currencies. Why would anybody invest in EUR when they can invest in USD for higher real risk-free yields. (Reportedly, real risk-free yields are also ...
- Fri Mar 08, 2024 4:46 pm
- Forum: Investing - Theory, News & General
- Topic: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
- Replies: 307
- Views: 43566
Re: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
your commentary is very much focused on what is going on inside the fund. That is what most of the commentary out there on social media is focusing on. And the practical points you make regarding that are compelling. Having said that, the somewhat novel issue presented by this fund - what’s your risk assessment does not account for - is the question of whether section 1258 applies to the interest in the fund held by the investor. This strikes me as a much more difficult argument for the IRS to make. While the share price of the ETF is intended to track Treasury rates, the very reason it's not throwing off distributions annually is that it is a more complex instrument than just a box spread transaction—it also is engaging in a different tra...
- Fri Mar 08, 2024 8:23 am
- Forum: Non-US Investing
- Topic: TransferWise vs Schwab for EUR to USD recurring transfers
- Replies: 72
- Views: 9987
Re: TransferWise vs Schwab for EUR to USD recurring transfers
If you are living in Europe, then the fees really matter as everything you are spending is subject to those fees. I find IBKR is the best for doing the conversion. You do the conversion via a trade like buying a stock. Larger amounts go to the better currency market makers. You get the best rates at the lowest commission. Pay attention to the rates you are getting. Some banks say they charge no commission but get their fee from the big spread on the rates. The big difference with IB is you can hold multiple currencies in the same account so you have a USD balance and a EUR balance as well as your other stock and bond positions. Also its US based so no issue with FBAR etc. Once you have the EUR you wire transfer to a european bank of your c...
- Thu Mar 07, 2024 4:05 pm
- Forum: Non-US Investing
- Topic: TransferWise vs Schwab for EUR to USD recurring transfers
- Replies: 72
- Views: 9987
Re: TransferWise vs Schwab for EUR to USD recurring transfers
Revolut claims no spread/fees, but has a bid/ask spread for EUR/USD of ca. 0.1% (much higher than IB or interbank rates) when I verified with my actual conversions last year, and they have a limit of $20k USD for deposits to some U.S. checking accounts (this limit is not published, very bizarre). Wise is much higher spread, right? Schwab charges 0.5%. IB is near zero cost, but I don't want to risk closure of my investment account. Is there currently any other service with low cost for EUR to USD conversion? I need to convert 100k EUR soon. Revolut is a royal pain but was the best when I checked last year. Revolut was far and away the lowest cost option I found other than IB. I’ve shared in another thread my story about an incident in which...
- Thu Mar 07, 2024 3:43 pm
- Forum: Investing - Theory, News & General
- Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
- Replies: 2993
- Views: 500286
Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Are t-bills as good as cash in an IRA in IBKR for collateral purposes? I've found mixed answers on this. If I were to use all the cash in my IRA to buy t-bills, would I still be able to buy futures? The mechanism how T-bills can serve as futures collateral in IRAs was discussed up in this thread. Yes I think you can convert all your cash to T-bills; but IB sent an email recently that they are going to strictly enforce positive cash, which means if your futures lose money and your cash balance becomes negative, they will liquidate positions. But theoretically could I just set it to liquidate the t-bills first? They have no obligation to honor your liquidate first preference, so there is some risk; although the risk is really not big if you ...
- Thu Mar 07, 2024 3:33 pm
- Forum: Investing - Theory, News & General
- Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
- Replies: 2993
- Views: 500286
Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Are t-bills as good as cash in an IRA in IBKR for collateral purposes? I've found mixed answers on this. If I were to use all the cash in my IRA to buy t-bills, would I still be able to buy futures? The mechanism how T-bills can serve as futures collateral in IRAs was discussed up in this thread. Yes I think you can convert all your cash to T-bills; but IB sent an email recently that they are going to strictly enforce positive cash, which means if your futures lose money and your cash balance becomes negative, they will liquidate positions. So I would leave some cash buffer for that. After memorial day this year, securities will have T+1 settlement instead of T+2, which makes cash management a bit easier because securities settlement will ...
- Thu Mar 07, 2024 1:59 pm
- Forum: Non-US Investing
- Topic: TransferWise vs Schwab for EUR to USD recurring transfers
- Replies: 72
- Views: 9987
Re: TransferWise vs Schwab for EUR to USD recurring transfers
Revolut claims no spread/fees, but has a bid/ask spread for EUR/USD of ca. 0.1% (much higher than IB or interbank rates) when I verified with my actual conversions last year, and they have a limit of $20k USD for deposits to some U.S. checking accounts (this limit is not published, very bizarre). Wise is much higher spread, right? Schwab charges 0.5%. IB is near zero cost, but I don't want to risk closure of my investment account. Is there currently any other service with low cost for EUR to USD conversion? I need to convert 100k EUR soon. Revolut is a royal pain but was the best when I checked last year.
- Thu Mar 07, 2024 1:52 pm
- Forum: Non-US Investing
- Topic: TransferWise vs Schwab for EUR to USD recurring transfers
- Replies: 72
- Views: 9987
Re: TransferWise vs Schwab for EUR to USD recurring transfers
Understood. I thought the other poster's point was that you transfer to a US bank and thence to a brokerage so the brokerage does not know it is an international transfer. What is the problem in the US bank knowing it is an international transfer? Nothing, if you can afford account closure in case the U.S. bank or their "algo" decides to get rid of customers with potential for money laundering compliance issues. I think the consensus is to use "trash accounts" that you can afford to lose, for the initial transfer to/from transfer services. Since SDFCU, for example, supports expats and recommends Wise to their customers, I think this is very unlikely. There are other banks and CU who do the same. Maybe. I think mostly br...
- Thu Mar 07, 2024 1:44 pm
- Forum: Non-US Investing
- Topic: TransferWise vs Schwab for EUR to USD recurring transfers
- Replies: 72
- Views: 9987
Re: TransferWise vs Schwab for EUR to USD recurring transfers
I don't understand your point that "I think that does not mean that the recipient bank cannot detect that it's from a currency conversation / international transfer service."? The other bank or brokerage that you use to deposit to or withdraw from Wise knows that it's a Wise routing number, and that Wise is typically used for international transfers and money conversions. Understood. I thought the other poster's point was that you transfer to a US bank and thence to a brokerage so the brokerage does not know it is an international transfer. What is the problem in the US bank knowing it is an international transfer? Nothing, if you can afford account closure in case the U.S. bank or their "algo" decides to get rid of cus...
- Thu Mar 07, 2024 1:29 pm
- Forum: Non-US Investing
- Topic: TransferWise vs Schwab for EUR to USD recurring transfers
- Replies: 72
- Views: 9987
Re: TransferWise vs Schwab for EUR to USD recurring transfers
Wise USD account has routing number and account number. One can ACH push to Wise USD account from any account that supports ACH transfers. As far as I know most if not all currency conversion and transfer use ACH or wire transfer for the final part of depositing into a U.S. bank account, and some transfer service accounts have ACH routing numbers. I think that does not mean that the recipient bank cannot detect that it's from a currency conversation / international transfer service. I personally transfer from transfer services into my Citibank checking account, because Citi is the least valuable to me. Let's call it my trash account. [Unnecessary comment removed by moderator oldcomputerguy] I don't understand your point that "I think ...
- Thu Mar 07, 2024 1:02 pm
- Forum: Investing - Theory, News & General
- Topic: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
- Replies: 307
- Views: 43566
Re: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
Thank you all for the input. [Thread merged into here --admin LadyGeek] Hello! I was considering using BOXX ETF to park my emergency cash at fidelity but came across the following article- https://www.taxpolicycenter.org/taxvox/tax-gimmick-boxx Given this, should I proceed with using BOXX and if I did and something bad happened, what is the worst case scenario. Alternatively, if I borrow money using a Box spread using my investments as collateral to make a non-investment related purchase, I understand the loss because of borrowing money is also a time value transaction- should I be concerned about capital losses accrued this way? Thank you. See the recent posts in this thread. There's disagreement between posters here about what it means. ...
- Thu Mar 07, 2024 12:56 pm
- Forum: Non-US Investing
- Topic: TransferWise vs Schwab for EUR to USD recurring transfers
- Replies: 72
- Views: 9987
Re: TransferWise vs Schwab for EUR to USD recurring transfers
I know this is an older post. Which US banks are the easiest or best to work with for USD to EUR transfers? I don't know about the superlative, but state department federal credit union is partnered with Wise for international transfers, SDFCU is partnered with Wise to give you a fast and inexpensive way to send money overseas. I log onto my Wise account and pull from my SDFCU account. There's some cruft the first time about passwords and authentication, but after that I've found the transfer to be easy and straightforward. Once in the Wise account, you can convert to EUR and transfer to a Europe bank. I doubt that Wise partners only with SDFCU; you might be able to find a list of partner US banks on their website. One would hope that part...
- Thu Mar 07, 2024 1:31 am
- Forum: Non-US Investing
- Topic: TransferWise vs Schwab for EUR to USD recurring transfers
- Replies: 72
- Views: 9987
Re: TransferWise vs Schwab for EUR to USD recurring transfers
A bit tangential to your original question, but I have seen several posters cautious about using a transfer service (TW or Revolut) to make a direct transfer into a Schwab investment account. Schwab has informed all clients that any EU-based investors (regardless of whether you are temporary or not) are not allowed to invest in US ETFs because US ETFs do not meet EU regulations (no Key Investment Information Documents - KIIDs). Vanguard is even more stringent in not permitting investments from overseas (from the EU or otherwise). So while an EU-based person might use a VPN to connect to the Schwab or Vanguard website, another way the brokerage might know the person is not US-based is by seeing regular transfers from a money transfer servic...
- Wed Mar 06, 2024 4:17 pm
- Forum: Investing - Theory, News & General
- Topic: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
- Replies: 307
- Views: 43566
Re: Box spreads to borrow and lend
[Thread merged into here --admin LadyGeek] Hello! I was considering using BOXX ETF to park my emergency cash at fidelity but came across the following article- https://www.taxpolicycenter.org/taxvox/tax-gimmick-boxx Given this, should I proceed with using BOXX and if I did and something bad happened, what is the worst case scenario. Alternatively, if I borrow money using a Box spread using my investments as collateral to make a non-investment related purchase, I understand the loss because of borrowing money is also a time value transaction- should I be concerned about capital losses accrued this way? Thank you. See the recent posts in this thread. There's disagreement between posters here about what it means. My guess is that the situatio...
- Tue Mar 05, 2024 9:32 pm
- Forum: Investing - Theory, News & General
- Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
- Replies: 2993
- Views: 500286
Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Okay I did the math! https://i.imgur.com/zAgtuak.png Spreadsheet link: https://docs.google.com/spreadsheets/d/1w-So78omMk9uXcX5rWRl0i5nz4QgxUVlKqP9cPqcpbw/edit?usp=sharing Skipped taxes for now, we can model that later if necessary. Just want to make sure this is kosher so far: 1. Sell the put 2. Invest premium in t-bill 3. Take the cost and scale to get the implied % 4. Scale the box implied % So it's similar but the put is a little cheaper. I think this is because with PM we're shifting the tail risk to the broker. Margin req is 50k ~1.5 mil exposure on 150k base. In the black swan scenario they might not be able to liquidate fast enough I'm not understanding your logic and calcs; but I don't think options pricing depends on a particular...
- Tue Mar 05, 2024 11:37 am
- Forum: Investing - Theory, News & General
- Topic: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
- Replies: 307
- Views: 43566
Re: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
Like we said in comments above, even if SPX options are exempt from conversion transactions, purchase and sale of BOXX might be a conversion transaction; ordinary income tax might be due on sale of BOXX shares (if not before; I don't have time to read the 1258 regulations), and the IRS might implement appropriate reporting rules categorizing certain exchange-traded funds as section 1258 transactions; and regardless of reporting or audits, you would have to correctly reflect the income or sales proceeds on your tax return as ordinary income. ok, so small risk of paying income tax rates when you sell. compared to holding t-bills where you definitely pay income tax rates every year, still good bet. State tax unless you are lucky like in Alask...
- Tue Mar 05, 2024 9:55 am
- Forum: Investing - Theory, News & General
- Topic: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
- Replies: 307
- Views: 43566
Re: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
So everyone doing box trades were reporting as 1258? if this was the case, why would AlphaArchitect even launch this fund? Box being 1258 is not a conventional reading. See https://twitter.com/AnthonyTuths/status/1742314848120152545 I didn't say that. If SPX options are never "applicable straddles", then so be it. I just opened section 1092(c) in my browser, and it's too complicated for me at the moment as I have a regular job to do. But section 1258 still says in another provision "For purposes of this section, the term conversion transaction means any transaction substantially all of the taxpayer’s expected return from which is attributable to the time value of the taxpayer’s net investment in such transaction, AND which i...
- Tue Mar 05, 2024 9:48 am
- Forum: Investing - Theory, News & General
- Topic: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
- Replies: 307
- Views: 43566
Re: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
So everyone doing box trades were reporting as 1258? if this was the case, why would AlphaArchitect even launch this fund? Box being 1258 is not a conventional reading. See https://twitter.com/AnthonyTuths/status/1742314848120152545 I didn't say that. If SPX options are never "applicable straddles", then so be it. I just opened section 1092(c) in my browser, and it's too complicated for me at the moment as I have a regular job to do. But section 1258 still says in another provision "For purposes of this section, the term conversion transaction means any transaction substantially all of the taxpayer’s expected return from which is attributable to the time value of the taxpayer’s net investment in such transaction, AND which i...
- Mon Mar 04, 2024 9:35 pm
- Forum: Investing - Theory, News & General
- Topic: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
- Replies: 307
- Views: 43566
Re: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
Nobody answered that last question on X between Feb 22 and now. I personally am going to exit my BOXX positions and not entering new ones until the questions are resolved. For me it is not worth the risk and hassle of revised tax returns and audits. There are many other good ways of avoiding taxable interest on cash. Unfortunately I guess the small gain from BOXX will show on my 1099. Imminently prudent. There are enough Wall Street tax practitioners who think the IRS has a clean shot at the investor-level under 1258, with the question being whether they'll take it only prospectively. If the conclusions in the last few comments are correct, then there would be no reporting on the fund level, neither now nor in the future; at least not unde...
- Mon Mar 04, 2024 8:10 pm
- Forum: Investing - Theory, News & General
- Topic: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
- Replies: 307
- Views: 43566
Re: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
Nobody answered that last question on X between Feb 22 and now. I personally am going to exit my BOXX positions and not entering new ones until the questions are resolved. For me it is not worth the risk and hassle of revised tax returns and audits. There are many other good ways of avoiding taxable interest on cash. Unfortunately I guess the small gain from BOXX will show on my 1099. Imminently prudent. There are enough Wall Street tax practitioners who think the IRS has a clean shot at the investor-level under 1258, with the question being whether they'll take it only prospectively. If the conclusions in the last few comments are correct, then there would be no reporting on the fund level, neither now nor in the future; at least not unde...
- Mon Mar 04, 2024 6:46 pm
- Forum: Investing - Theory, News & General
- Topic: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
- Replies: 307
- Views: 43566
Re: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
Nobody answered that last question on X between Feb 22 and now. I personally am going to exit my BOXX positions and not entering new ones until the questions are resolved. For me it is not worth the risk and hassle of revised tax returns and audits. There are many other good ways of avoiding taxable interest on cash. Unfortunately I guess the small gain from BOXX will show on my 1099.
- Mon Mar 04, 2024 6:24 pm
- Forum: Investing - Theory, News & General
- Topic: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
- Replies: 307
- Views: 43566
Re: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
i think irs changing the character of the ETF gains backwards is highly unlikely. worst case they will say moving forward ETF should distribute income and/or capital gains. i think this is also unlikely because both box trick and etf tricks have been in use for decades. AlphaArchitect now have sufficient AUM that they would challange any irs action in court. it probably takes congress passing a new law to change things.. But section (or paragraph) 1258 has existed for decades, and is well known; or should be well known to somebody trying to craft creative tax avoidance transactions. It was even mentioned earlier in this forum. Advisors to high net worth individuals probably didn't do 1258 transactions on a large scale, due to risk of audit...
- Mon Mar 04, 2024 5:05 pm
- Forum: Investing - Theory, News & General
- Topic: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
- Replies: 307
- Views: 43566
Re: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
i think irs changing the character of the ETF gains backwards is highly unlikely. worst case they will say moving forward ETF should distribute income and/or capital gains. i think this is also unlikely because both box trick and etf tricks have been in use for decades. AlphaArchitect now have sufficient AUM that they would challange any irs action in court. it probably takes congress passing a new law to change things.. But section (or paragraph) 1258 has existed for decades, and is well known; or should be well known to somebody trying to craft creative tax avoidance transactions. It was even mentioned earlier in this forum. Advisors to high net worth individuals probably didn't do 1258 transactions on a large scale, due to risk of audit...
- Mon Mar 04, 2024 1:15 pm
- Forum: Investing - Theory, News & General
- Topic: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
- Replies: 307
- Views: 43566
Re: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
Brokers must report whether 1256 applies in its reporting to investors of box spread transactions. But they do not have to report whether 1258 applies. Sounds strange, but that's the law. The more interesting question here is whether the interest in the ETF can be considered a 1258 conversion transaction. If it is, the investor in the ETF will not succeed in getting LTCG treatment. There is a growing trend of thinking that there is a substantial risk that 1258 indeed applies in this case. That's probably because the brokers are not law firms. They would need to assign a legal team to each customer with options, and interpret each customer's options strategies. But in the case of 1258 within an ETF, don't the brokers just pass along whateve...
- Mon Mar 04, 2024 11:37 am
- Forum: Investing - Theory, News & General
- Topic: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
- Replies: 307
- Views: 43566
Re: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
Brokers must report whether 1256 applies in its reporting to investors of box spread transactions. But they do not have to report whether 1258 applies. Sounds strange, but that's the law. The more interesting question here is whether the interest in the ETF can be considered a 1258 conversion transaction. If it is, the investor in the ETF will not succeed in getting LTCG treatment. There is a growing trend of thinking that there is a substantial risk that 1258 indeed applies in this case. That's probably because the brokers are not law firms. They would need to assign a legal team to each customer with options, and interpret each customer's options strategies. But in the case of 1258 within an ETF, don't the brokers just pass along whateve...
- Mon Mar 04, 2024 1:53 am
- Forum: Investing - Theory, News & General
- Topic: TD Ameritrade to Schwab
- Replies: 161
- Views: 13605
Re: TD Ameritrade to Schwab transition - how was it for you?
I think Schwab doesn't show cost basis for stocks that are "non-covered", i.e. for which cost basis is not reported to the IRS because they were bought before Jan 1st 2011. I have stocks at Schwab that I purchased in 1994. The cost basis is shown. When sold, the 1099 shows box E "cost basis not reported to IRS." That is my experience too. Stocks and Funds that my Dad bought in the 1990's showed their lots and basis (Avg) cost. Schwab doesn't show the cost basis of non-covered securities that I transferred from Interactive Brokers. IB showed the cost basis, but not all of them correctly. I think for the ones that I originally transferred from somewhere else, IB shows the price as of end of 2010. I don't care at this point.
- Sun Mar 03, 2024 10:59 pm
- Forum: Investing - Theory, News & General
- Topic: At what tax rate do Munis make sense?
- Replies: 66
- Views: 11503
Re: At what tax rate do Munis make sense?
At what tax rate do Munis make sense? Munis and treasuries are two different animals. . . . Treasuries, on the other hand, are considered to have no credit risk. I agree you need to compare like to like. The problem is that with total bond, munis (AAA/AA) and treasuries are difficult to compare. Clearly, treasuries are safer. I'd be really curious to hear everyone's thoughts on the following: Only for the highest tax bracket, if you're comfortable with the additional risk. That's because . . . Municipal bonds (munis) don’t offer their tax benefit without any downsides; that tax benefit has a downside. Munis may have more risk than higher-quality bonds. We saw this during the 2020 coronacrash, for example - with various muni funds (VWAHX, V...
- Sun Mar 03, 2024 8:59 pm
- Forum: Investing - Theory, News & General
- Topic: TD Ameritrade to Schwab
- Replies: 161
- Views: 13605
Re: TD Ameritrade to Schwab transition - how was it for you?
For the most part, the transition was smooth for both of my accounts (a personal brokerage account and a Roth IRA). The only issue I've faced is that I discovered that my cost basis was missing for a few stocks I purchased well over a decade ago. I started both brokerage and Roth IRA accounts with Datek, which was acquired by Ameritrade, which became TD Ameritrade, which became Schwab. Somewhere along this chain, someone lost my cost basis, and none of them ever notified me of this or showed it in the user interface. So, while it's annoying to have to fix, I'm sort of glad that Schwab's user interface shows that there's an issue with my cost basis. Schwab's response to my inquiry about cost basis was also fast. At first, I thought they had...
- Sun Mar 03, 2024 8:50 pm
- Forum: Investing - Theory, News & General
- Topic: TD Ameritrade to Schwab
- Replies: 161
- Views: 13605
Re: TD Ameritrade to Schwab transition - how was it for you?
My experience in a low asset brokerage account (<$200000) was mostly mixed and I give Schwab a C- grade. Here's why: (1) a few pending dividends on US Stocks ended up getting processed as cash to the bank (2) ongoing dividends of US and foreign stocks ended up all being processed as cash - several calls to note this never were processed by their brokers and I had to keep calling to find out that I could reset these dividends as REINVEST by clicking the box on the Positions page (3) Schwab will not allow reinvested distributions for foreign stocks and the checkbox cannot be changed from NO to YES (4) Call hold times slightly longer - Schwab calls get answered slightly faster but having to wait on hold for registered brokers takes far longer...
- Sun Mar 03, 2024 8:24 pm
- Forum: Investing - Theory, News & General
- Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
- Replies: 2993
- Views: 500286
Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Folks PLEASE sanity check me on this: I think we can get cheaper financing than box spreads - Sell deep ITM leaps (puts) This assumes portfolio margin, so the leveraged portion just dips into buying power instead of paying margin fees. For example DEC2024 600P is basically all intrinsic: Cash from short put goes into STT. This seems like near free leverage? Full exposure to the index, slight risk if we close above 600 but we can just roll up. We're selling on SPX so minimal fees and 60/40 tax treatment. Thoughts? You are showing SPY options which are American exercise style options, and not SPX options. It may not matter for your argument. Writing cash-secured puts is a well known strategy, with better risk-adjusted returns than the index ...
- Sun Mar 03, 2024 2:58 pm
- Forum: Investing - Theory, News & General
- Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
- Replies: 2993
- Views: 500286
Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Folks PLEASE sanity check me on this: I think we can get cheaper financing than box spreads - Sell deep ITM leaps (puts) This assumes portfolio margin, so the leveraged portion just dips into buying power instead of paying margin fees. For example DEC2024 600P is basically all intrinsic: Cash from short put goes into STT. This seems like near free leverage? Full exposure to the index, slight risk if we close above 600 but we can just roll up. We're selling on SPX so minimal fees and 60/40 tax treatment. Thoughts? You are showing SPY options which are American exercise style options, and not SPX options. It may not matter for your argument. Writing cash-secured puts is a well known strategy, with better risk-adjusted returns than the index ...
- Sat Mar 02, 2024 12:38 am
- Forum: Investing - Theory, News & General
- Topic: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
- Replies: 307
- Views: 43566
Re: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
I would argue that the underlying box spread holdings are not conversion transactions per the definition of the rule that the article author is citing. Return from box spreads is not "time value" return, it's something else, a Section 1256 contract . It's basically hedging your bets so that each leg is either a gain, loss, or neutral, and summing them all up. In order to invalidate BOXX, they would also have to invalidate box spreads, which have been taxed for many years as Section 1256 contracts. It may "look on the surface like" and "can be calculated like" an interest rate, but that does not make it interest. The definition doesn't fit, IMO, unless they're going to nix the whole box spread game, which if th...
- Fri Mar 01, 2024 9:02 pm
- Forum: Investing - Theory, News & General
- Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
- Replies: 2993
- Views: 500286
Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
Update: Inspecting stock/bond correlation on various scales
- Fri Mar 01, 2024 8:40 pm
- Forum: Investing - Theory, News & General
- Topic: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
- Replies: 307
- Views: 43566
Re: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
I would argue that the underlying box spread holdings are not conversion transactions per the definition of the rule that the article author is citing. Return from box spreads is not "time value" return, it's something else, a Section 1256 contract . It's basically hedging your bets so that each leg is either a gain, loss, or neutral, and summing them all up. In order to invalidate BOXX, they would also have to invalidate box spreads, which have been taxed for many years as Section 1256 contracts. It may "look on the surface like" and "can be calculated like" an interest rate, but that does not make it interest. The definition doesn't fit, IMO, unless they're going to nix the whole box spread game, which if th...
- Fri Mar 01, 2024 5:38 pm
- Forum: Investing - Theory, News & General
- Topic: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
- Replies: 307
- Views: 43566
Re: AlphaArchitect launches BOXX: 1-3 Month Box Spread ETF
There have been several articles recently talking about whether BOXX should be treated as a section 1258 "conversion transaction". "Congress draft Code section 1258, the Tax Code’s anti-conversion statute. (“Conversion” refers to the converting of higher-taxed “ordinary” income into lower-taxed capital gains.)" Tax Gimmick in a BOXX https://www.taxpolicycenter.org/taxvox/tax-gimmick-boxx Good article. I don't know much about the anti-conversion statute, but on its face this seems to present a nontrivial risk of using BOXX. But how long will it take the IRS to rule on this? And what would be the worst-case of this risk? Would they immediately make you pay the taxes on all years gains previous to the ruling, or would they...
- Thu Feb 29, 2024 8:08 pm
- Forum: Investing - Theory, News & General
- Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
- Replies: 2993
- Views: 500286
Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
For whatever reason, the ZB and UB "March first day" and the UB "June last day" CTDs switched to the far end of the maturity range. Big differences between first day vs. last day DV01 numbers for March, even for the ZN (10y) contract. I'm wondering what that means for the "actual" DV01 exposure.
- Wed Feb 28, 2024 11:14 pm
- Forum: Investing - Theory, News & General
- Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
- Replies: 2993
- Views: 500286
Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
This time I looked at the treasury futures roll again. I think theoretically the curves of the near expiration 3-month SOFR futures and the treasury futures rolls should have an inverse appearance, because higher 3-month financing cost should raise the futures roll price and vice versa, all other things being equal. I can see that for the most part when I look at the Feb 22 vs Feb 26 level. But the 3-week movements don't make sense to me at all, especially the movement between Feb 12 and Feb 13 that was rather consistent across all treasury futures roll prices. I would expect the roll prices to jump upward not downward, when the SOFR futures price jumped down (i.e. the expected overnight SOFR for the next 3 months, and by implication the im...
- Wed Feb 28, 2024 12:28 pm
- Forum: Investing - Theory, News & General
- Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
- Replies: 2993
- Views: 500286
Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
For starters, I'm not quite following your calculations. The way I think about it, is if I have a $1M portfolio and want to target 1.75x allocation to bonds at 5-year duration with, for example, equal duration adjusted allocation among ZT/ZF/ZN (33% each) then I want $583k (1.75 * $1M / 3) duration equivalent. In terms of contracts, that would be: ZT: $203,632 * 1.8983 / 5 = $77,095 per contract at 5-years; $583k / $77k = 7.5 ZT contracts Using the same math, would get you 6.9 ZF and 4.5 ZN contracts (and obviously round to whole number of contracts). That is one correct way of doing the math. Or you could just calculate the desired/required DV01 in each bucket per your asset allocation (in your case by dividing your total desired portfoli...
- Wed Feb 28, 2024 12:02 pm
- Forum: Investing - Theory, News & General
- Topic: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
- Replies: 2993
- Views: 500286
Re: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory
- CME numbers: I use sellenium in Python to pull the numbers directly from the CME Analytics site, so they were accurate at the time I took the screenshot :) I'm using the "Modified Duration" and "Futures DV01" from the Deliverables; I'm not sure if those need to be modified at all or can be used as is. I think the "futures DV01" are generally the relevant numbers for the duration exposure when holding a futures contract, although how exactly they are calculated is not 100% clear. There was a discussion a bit earlier in this thread between physicist and myself, where we tried to replicate the modified duration and DV01 numbers on the CME analytics site. I can't remember if the "modified duration" is ...