Hybrid Vigor: Vol 2 Issue 7 "Here Comes The Sun"

Dear Friends,

Greetings from the friendly skies. My wife and I are off to Las Vegas for a few days of mid-winter break, with the kids at their grandparents.  You have my word that no matter how much money I lose, Hybrid Vigor’s subscription rates won’t go up.

In addition to our regular features, I’ve provided some thoughts on the best ways to incorporate our Hillside Overall Convertible Score (HOCS) into your daily work. HOCS, as you probably know by now, was intended to help bridge the gap between what models say and what people—especially outright people—actually do. We’ve seen times where the rating system has hit blackjack in predicting new issue performance and times where it’s crapped out. We advise you to use it as an additional tool to go along with models you already have, in addition to your most valuable tool, your own judgment.

Elsewhere in today’s issue, Curt Peters digs in a bit deeper to show how Hillside Adjusted Risk Points, (HARP), the warning signal that’s also a component of HOCS, tries to balance the risks of premium contraction and absolute decline against each other, in the context of the most recent week’s performance.  And strong performance it was, with many new highs being made.  Not so much for the HOCS 20, which outperformed the previous week but struggled under the weight of two big laggards most recently.

Speaking of Vegas, it’s more than 10 years now since the fund I co-managed took a brutal hit on the cash takeover of Mandalay Bay by MGM.  Every time I’ve visited Vegas since then, I have threatened to trash one of Mandalay Bay’s rooms, rock-star style, in retribution. Could this be the year?  Nah, who am I kidding. It’s so much more fun to trash overvalued convertibles.

Bill

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