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Pastimes : Clown-Free Zone... sorry, no clowns allowed

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To: Knighty Tin who wrote (254973)	8/11/2003 11:44:34 AM
From: Tommaso	Read Replies (2) of 436258

Maybe someone has mentioned James Grant's good analysis of Juno in a recent Forbes. He pointed out that with the expense of paying the coupon on shorted bonds, minus the income from the short position, plus the fund expenses, one has to pay something over 4% to hold that position. That's less than many standard front-end loads for mutual funds, but it does mean that there is steady erosion in a long term Juno position, although it might be that if shorter term rates rise enough, the income from the cash realized on the shorts would overtake the loss on the coupon payments. Grant did not mention this last possibility. In that case, a large short position on 30-year bonds paying about 5% coupon, might start to realize a positive return, in addition to the capital gain on the shorted bond. In effect, owning Juno would be borrowing long and lending short. Jeez, this may be a better thing than I realized. If only the stock market would tank a la 1987, I could switch my BEARX for Juno. Have a lot of Juno already, but talking my way through it in this message makes me see why you said it might be golden for a long time.

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