NFA Two Times Pattern
OK I'm not sure if this is true, but it feels like it's true.
Sometimes the market gives you a back-up-the-truck low-risk high-return opportunity, and you should probably try going even riskier.
Two examples:
Example 1
In 2022, Series I Savings Bonds ("I Bonds") offered a 9.6% yield, backed by the full faith and credit of the US government. I backed up the truck and maxed out with every tax number my family had access to.
Instead, if I had invested in broad US equities, I could have made much more money, at more risk and subject to different tax treatment.
Example 2
STRC high yield junior preferred stock offers stable yield of ~11.5% on ~4% realized volatility (lower volatility than government bonds!). The money to pay for this yield is transparent, visible, audited etc. And there's no price hype valuation risk because this preferred stock price has not appreciated.
Instead, if you had invested in MSTR common equity1 instead of STRC, you'd have the chance to ride a quick mNAV expansion from 1.05 to approx 1.3 now, on ~70% realized vol. Most of this price risk was bitcoin price risk, not MSTR price hype valuation risk.
Sometimes, the deal looks too good to be true, and it is only that good because there's an even better deal on offer, that appears unpalatable due to the (temporary) perceived risk.
More concretely: if someone has gone to the effort of paying out a sustainable 10% yield, that's usually a good sign that they have access to even better opportunities
at the right time, though!↩