The Precious Metals High Yield Bull Fund aims to offer a high-yield, portfolio volatility-reducing strategy, by opportunistically benefiting from the ongoing sales of 1-3 month PM ETF and PM equity index options. Further, on an intermediate term basis, time premiums (implied volatility) are low today and set to grow.
While the market is searching for yield as inflation accelerates, therefore, the Strategy is expected to provide increasing yields due to the growth in underwritten time premiums that, in a PM Bull market, rally along with their underlying securities. This scenario represents a highly favorable double whammy
Specifically, by exploiting the high yield sales of options of 1 - 3 months in duration, the Fund seeks to provide ongoing income, as well as leveraged insurance against a potential bear market in the broad equity indices by taking advantage of the historically asymmetric performance of the PMs versus the major stock groups. It is in these two classes’ historically asymmetric performance that we find the leverage in the strategy, option writing for yield, notwithstanding
When common stocks advance, their yields decline unless dividends increase; this represents a distinct advantage for the Fund versus other financial instruments.
Assuming inflation-adjusted negative yields of ~4.00%, competition is poor against the PMs, while the Strategy aims to also provide the high yielding product that investors seek.
The Manager believes that global equities are at major highs, viewing 2000 as having marked the summit of equities’ “real” inflation-adjusted peaks, in both financial and economic terms; this view is coupled with the outlook that a secular bull market in the PMs began in 2001-2002, while still being in their nescient stages today. Meanwhile, the stock market faces several formidable tailwinds, not the least of which being stock valuations
The manipulation of global asset prices via currency printing and interest rate suppression has created unsustainable, artificially inflated equity valuations that are expected to cause much higher PM prices, all while investors seek value, diversification, and protection in an ever-worsening long term inflationary environment
August 15, 2021