This is a technical observation but in doing some housekeeping and looking at S&P 500 futures data going back to 2000, we are almost at the point where a roll adjusted continuous time series is the same as the non-roll adjusted time series. In other word since 2000 there have now been almost as many positive carry months as negative carry months for SP futures. The changing of the guard if memory serves was some time in 2008 when short term rates (cost to borrow) became lower than the dividend yield of the cash SP 500. At that time the term structure of futures went into backwardation and there it has remained.

Charles Pennington writes:

We should thank 'anonymous' who told us back then that backwardation would be good for stock investing.

anonymous clarifies: 

My supposition [was] based on comments by Philip Carret in his 1931 book The Art of Speculation.
Mr. Carret talked about periods when stocks "carried themselves"
because their dividends were sufficient to cover the cost of borrowing.
As of today, stocks are still carrying themselves, as Mr. Coker notes.





Speak your mind


Resources & Links