This page has been archived and commenting is disabled.
What's The "Best" Way To Make A 10% Return?
Aside from the "sure thing" of buying the Alibaba IPO, achieving a 10% yield return in the new normal world requires leverage and excess risk-taking. To compare the risk/reward of various assets, Citi accounts for haircuts and leverage costs of the typical investor and finds an investors needs a 1.9x leverage in the S&P 500, 8.1x leverage in Treasuries, and 2.3x leverage in high-yield to achieve (based on historical norms) the required return. However, after accounting for downside risks, high-yield cash and leveraged loans both top the S&P 500 as the best way to meet a 10% bogey yield.
To achieve a 10% yield bogey, you need leverage...
Which means risk... (worst case)
Which leaves us with the best way to achieve a 10% bogey (based on risk/reward)...
* * *
For Citi, corporate high yield is compelling, stocks not so much, and Treasuries abhorrent...
Source: Citi
»
- 13366 reads
- Printer-friendly version
- Send to friend
- advertisements -
Become a politician. Or better yet, a banker who bribes politicians. By which I mean fundraising, of course.
The phrase, "...a banker who bribes politicians", is a redundancy.
the sex trade works for me.
jacking up banks and comes to mind...
Horseshit.
I just need to disintermediate and employ the capital directly to earn 10%.
The problem is scale. Earning 10% organically on $10,000 is a hell of a lot easier than earning 10% on $10,000,000.
To achieve a 10% yield bogey, Citi, you need leverage. Not me.
For example, almost any slob can search Craig's List and find a deal on a used car for $10,000. In a year's time, they almost certainly can sell the car to some sucker for $11,050 to cover expenses and earn 10%. No leverage required. Do this same transaction 10 times per year instead of once, and the return goes way up, 100% instead of 10%, but the risk doesn't increase.
@hedgeless,
Great response. I know a guy that buys and sells Appaloosa horses using a bank note to finance the buy side and he indeed turns over his inventory several times a year - sells to high end customers whose kids need a horse for equestrian school etc. Maybe not 100% p/a but way above anything to be gotten in normal financial markets - without undue risk exposure.
Many instances exist in the USA economy where all one needs is a little creativity and enough capital to show a bank that one has collateral - and voila, excellent ROI with minimal risk exposure.
Walter White and Pinkman figured it out. Occupational hazard though.
Become a bankster.
Yeah, pretty much. "Become the Bank President." That's at least a 1000% return right there. "Buy off politicians, start wars, declaim responsibility, demand your cronies get a piece of the action."
Just generally destroy the very idea of representative democracy and don't even bother with the news conference "cuz you own those phuckers too."
Pen nice articles in the Chrisitan Science monitor...talk about "faith healing" with Oprah. She'll understand. "Being a billionaire is HARD!"
I mean seriously...how much oil you pulling out of the ground in Lower Manhattan Citi?
I DIDNT THINK SO!
(Morgan Stanley sends you their regards for gifting your securities business to them. TOODLES!)
Lots of investment models have something called "risk free rate of return" at their core. It used to be 3%, maybe 4%. Now it's zero (after inflation, but don't get me started on this subject). Have fun kids. Mind the broken glass and stray razor blades.
You want zero risk, you get zero return. Everything above that is going to cost you. How much you wanna pay?
Risk...... Lol, just BTFD. Old Yeller's got your back.
Old models die hard, Doc. I'm talking "risk" in the classical sense of the word- volatility. Not REAL risk- permanent and irrecoverable loss of capital.
And I believe a banker like Yellen's got my back like I believe my dog wouldn't eat my dead carcass when he got hungry enough. Would Yellen sacrifice all our 401k money for some "greater (governmental or banking) good"? Fuck yeah, she would.
Yeah I know you are. It cracks me up when I talk with the guys in the office and they are struggling with models in this environment. Nothing works like it used to.
No, it sure doesn't. But the time period we have to judge what is "normal" is only a few decades. Ask them to explain why anyone who takes no risk should expect any (real) return by way of a simple fund investment (as opposed to doing anything to actually earn it) and you can often begin a reality-based conversation.
It's the core of how I look at the post-crash, new-normal, financial repression world. A spin-off from Modern Portfolio Theory, applied with a little common sense.
I'll be proven horribly wrong in my ham-fisted misguided attempts to explain the world, of course, but it's worked pretty good for the last 6 years. So, what the fuck, you take your wins where you find them, right?
I've been struggling with a model myself of late. I think she's just too hard on herself...always staring in the mirror. I'm like "God invented sex for a reason woman!" Still...she just.....
OK, we're going to take this REAL slow.....
Is the "model" in the mirror you? If so, I'd recommend seeking professional counseling. Can can do nothing for you.
If the model in the mirror is your woman, kick her to the curb. If she comes back, she's broken (how you deal with the situation from that point forward is at your discretion).
There's a shocker. A bank pushing leverage. Next thing you know car sales people will try pushing autos.
From my experience, car sales people push loans. The car is just the bait.
These days most every industry is a loan pusher. Margins are too thin to actually sell stuff for cash.
I got a lap dance and a happy ending for 36 months interest free. She gave me a toaster afterwards to boot!!
Your wife is very generous dancing for you that way. Just one question.... You do know she took that toaster off the kitchen counter right?
Depends. Walk in with cash and it's a WHOLE different conversation. Ask me how I know.
If they can't get you to "lease". Leasing just makes sense, right? Right?
Sweat equity works for me. When you smell like the rats ass, your client can't say no!
Hell, she'ld probably throw in a bar of soap! :-)
Off topic - but did anyone else see the story of the San Diego School District getting a MRAP, because you know there are a lot of land mines around public schools in America.
The question was asked, what if there is a school shooter? The district needs to be prepared.
Acquired for $5000. Begs the question, if a school district can purchase a MRAP, can you?
http://www.autoblog.com/2014/09/16/san-diego-school-district-acquires-mrap/
Nope. On the wrong side. We are the target of the MRAP crowd.
I make a10% return on apartment buildings, the fuck is so complicated about that. I could be doing better if I'd had more cash in 2011 but I didn't.
I've been wilding in Lithium of late. That thing goes up ten percent in a day!
Who needs yield when you have stocks that trade for a dime!
1 bedbug and you're history
I have yet to find a better way to make 10% than take $1000 wager on broncos and $1000 on Seahawks. Someone will be paying $1100 before you hand over $1000.
Buy manipulated synthetic gold. It's backed by nothing!
Try investing in Novo Nordisk ...
never let an accountant invest your $$ just shows citi is totally clueless
I nominate this for post of the day!
Another great example of 'talking one's book.' Nice to see the ZH rank and file taking the bait...
Also indicative of the shit-ass quality of sell side research and what happens when you let your brandy-new analysts fresh out of training run with the ball. Some mighty fine rank() they did there...