Search found 757 matches

by gw
Tue Jul 30, 2019 3:07 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 3353
Views: 263390

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

HEDGEFUNDIE wrote:
Mon Jul 29, 2019 4:56 pm
Cochese wrote:
Mon Jul 29, 2019 4:49 pm
Apologies if I missed this somewhere along the line, but why would PSLDX be treated as 100% equity? I feel like I’m missing some subtlety here.
PSLDX’s risk profile (std dev, max drawdown) is comparable to the S&P 500.
This comment is highly characteristic of this thread.
by gw
Tue Jun 18, 2019 10:52 am
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 3353
Views: 263390

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

The institutional PIMCO "Plus" funds are available to anyone with a Vanguard Brokerage account for $25k minimum. I've held them in my Roth for the last 10 years with good results. In my opinion they have expected Sharp ratios higher than the strategy advocated in this thread, primarily due to the e...
by gw
Wed Jun 12, 2019 7:19 am
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 3353
Views: 263390

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

5. I was just interested if you had analyzed these scenarios (flat or rising rates). Mathematically, or with Monte Carlos, or whatever else.I think that was gw's point too. Based on the fact that you replied with a backtest of falling rates and are offering to run data I provide, would it be fair t...
by gw
Tue Jun 11, 2019 9:34 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 3353
Views: 263390

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

From the beginning, I have framed this strategy as an alternative to a 100% equity portfolio. That is the benchmark by which we should judge this strategy: In your longest available backtest, it has twice the std dev of 100% equities, a 1.5x worse max drawdown (75%), and essentially the same return...
by gw
Tue Jun 11, 2019 6:42 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 3353
Views: 263390

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Rising interest rates are good for the bond portion of the strategy in the long run and bad for the bond portion of the strategy in the short run. ... where I guess "short run" includes steadily losing half your portfolio over a 14-year period while stocks go up, as in the historical examples above...
by gw
Tue Jun 11, 2019 5:05 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 3353
Views: 263390

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

What is the ex-ante reason we should accept sharply rising rates as a serious risk to my strategy? I agree we should base our decisions on ex-ante reasoning, not just backtesting. I've given you my reasoning, give me yours. To the extent that we can form an ex-ante position on interest rates, it's ...
by gw
Tue Jun 11, 2019 3:41 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 3353
Views: 263390

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

You're missing or evading the basic point, which is that effectively all you've done is to identify that bonds were a great investment over the last thirty years. ... Thank you for one of the most insightful posts in this thread. Of course you will get insane performance by picking the two best per...
by gw
Sun Mar 10, 2019 10:11 am
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 3353
Views: 263390

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Why would this have died on page 1? Ignoring everything else, the 1955-Present backtest shows similar long term return vs. the S&P 500, while delivering double its CAGR over the past 37 years and counting... That is worth 500 posts, at least! You're missing or evading the basic point, which is that...
by gw
Sat Mar 09, 2019 9:27 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 3353
Views: 263390

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

To reiterate, from about 1000 posts ago.... Doesn't this strategy rely on a bond bull market? No.... This is essentially BS. Whether you know it or not, the main reason you like this strategy is that long bonds have been an awesome investment over the last 30 years, which covers your backtesting hor...
by gw
Tue Mar 05, 2019 5:23 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 3353
Views: 263390

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

This is the monthly LTT data from '53-'18 that was posted way upthread by AlohaJoe. This is of course the unleveraged returns. I don't recall it being posted in graph form, so I thought I would present this to you for your viewing pleasure, and for those of you who would like something pre-1986 to ...
by gw
Mon Feb 25, 2019 1:19 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 3353
Views: 263390

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

I think the most likely explanation that is supported by the data is this: The correlation between LTT and stocks is zero, EXCEPT when stocks are going down, LTT usually goes up due to the "flight to safety" effect and the "Fed will cut rates due to impending recession" effect. Okay, but that's suc...
by gw
Mon Feb 25, 2019 11:29 am
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 3353
Views: 263390

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

When you said the historical correlation would persist going forward, did you mean the large positive correlation from the 70s-90s, or the large negative correlation since then? I mean the full historical evidence which includes both periods. I was highlighting that the historical correlations show...
by gw
Mon Feb 25, 2019 11:10 am
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 3353
Views: 263390

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Aren't you also concerned about the upper right quadrant? Why should I be concerned about it? Both parts of the portfolio are making money for me there. These charts clearly show two phenomena: 1. Stocks and LTT are often negatively correlated, 2. And when they are positively correlated, they are u...
by gw
Mon Feb 25, 2019 8:41 am
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 3353
Views: 263390

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

https://i.imgur.com/KwuFjt6.png The bottom left quadrant is the concern. Aren't you also concerned about the upper right quadrant? Or is your model that LTT will have Large positive returns when equities have large positive returns, and Large positive returns when equities have negative returns. Yo...
by gw
Fri Feb 22, 2019 1:25 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 3353
Views: 263390

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

HEDGEFUNDIE wrote:
Fri Feb 22, 2019 1:04 pm
gw wrote:
Fri Feb 22, 2019 12:47 pm
For a rough sense of things, try just subtracting 60% of the returns from your backtest at the top of the thread - not so sexy anymore, is it?
If I subtract 60% of the returns from $20M, I still get $8M. So what's your point again?
Haha, no, you get $0.9M.
by gw
Fri Feb 22, 2019 12:47 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 3353
Views: 263390

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

This thread is a flashing-neon sell signal for bonds, like when your barber starts giving out stock tips. At least you've survived longer than MarketTimer. Doesn't this strategy rely on a bond bull market? No.... This is essentially BS. Whether you know it or not, the main reason you like this strat...
by gw
Wed Aug 26, 2015 1:08 am
Forum: Personal Investments
Topic: my retired mother's predicament
Replies: 55
Views: 8698

Re: my retired mother's predicament

It's misleading to think of this money in terms of "asset allocation." These aren't retirement assets. They don't provide any meaningful income. The long-term income available from $35K is something like $100/month, which is probably not very significant compared to what she gets from social securit...
by gw
Mon Aug 10, 2015 3:04 pm
Forum: Investing - Theory, News & General
Topic: Does the Three Fund Portfolio need a roboadviser?
Replies: 92
Views: 10773

Re: Does the Three Fund Portfolio need a roboadviser?

Vanguard should offer a roboadvisor.
by gw
Mon Jul 13, 2015 9:13 am
Forum: Investing - Theory, News & General
Topic: Why do we care about price movements? Aren't earnings all that matter?
Replies: 44
Views: 4937

Re: Why do we care about price movements? Aren't earnings all that matter?

If you commit to buy and never sell your equity investments, and just live off earnings, you will be guaranteed a positive return as long as earnings remain positive. That seems pretty low risk to me. It's an interesting angle. Let's call it "Eat Your Earnings." Backtesting against Shiller's histor...
by gw
Fri Oct 31, 2014 12:35 pm
Forum: Personal Investments
Topic: fleeced by an adviser, is there a recourse?
Replies: 104
Views: 12811

Re: fleeced by an adviser, is there a recourse?

This is a sad state of affairs. I disagree with those who say this is capitalism and do your due diligence; imagine if you had to check the chemical composition of every can of food you buy, or try to figure out the effects and efficacy of every medicine. This isn't the 19th century, nor is it Chin...
by gw
Thu Oct 30, 2014 4:57 pm
Forum: Personal Consumer Issues
Topic: A Little Common Core Math problem
Replies: 97
Views: 6317

Re: A Little Common Core Math problem

This problem doesn't seem confusing, and I'm not sure why everyone is upset about the concept of Everyday Math (which has been taught LONG before Common Core). x + 8x = 63 9x = 63 x = 7 The cat weighs 7 lbs and the dog weighs 56 lbs. This does not require a calculator nor a pen and paper. Why are s...
by gw
Mon Oct 20, 2014 10:21 am
Forum: Investing - Theory, News & General
Topic: 30 yr TIPs auction announced 16 oct: yield=1.10%?
Replies: 93
Views: 10055

Re: 30 yr TIPs auction announced 16 oct: yield=1.10%?

Thanks market timer. I've just spent the last 10 to 20 minutes trying to find a calculator to do that math and decided I needed Excel but my Excel skills weren't up to the task. The number is quite a bit closer to the "standard" 4% risky portfolio than I would have imagined. But what happens if I l...
by gw
Tue Jul 22, 2014 2:55 pm
Forum: Investing - Theory, News & General
Topic: Delay Social Security to age 70 and Spend more money at 62
Replies: 203
Views: 47819

Re: Delay Social Security to age 70 and Spend more money at

You can choose to frame the problem any way you like. I chose to lay out a simpler example. I have seen other examples using annuities, but they are complex enough that a lot of people's eyes glaze over. I attempted to describe a new simpler way to look at the problem. One should strive to make thi...
by gw
Tue Jul 22, 2014 1:15 pm
Forum: Investing - Theory, News & General
Topic: Delay Social Security to age 70 and Spend more money at 62
Replies: 203
Views: 47819

Re: Delay Social Security to age 70 and Spend more money at

Now you're doing it right. :happy Well Now you understand it! --- It's what I said in the Original Post! Here's what I think is the right way to frame the issue, using your numbers and Ketawa's: Scenario 1: Take SS at 62 SS income is $19.5K, vs. $34.1K if you wait until age 70. So you have a $14.6K...
by gw
Mon Jul 21, 2014 11:43 pm
Forum: Investing - Theory, News & General
Topic: Delay Social Security to age 70 and Spend more money at 62
Replies: 203
Views: 47819

Re: Delay Social Security to age 70 and Spend more money at

This thread doesn't make sense. As Ketawa mentioned, you can't compare Social Security, which is an annuity, to a 4% (or any X%) "SWR," which is something else. You'll just get silly results. Apples and oranges and all that. The issue is that 4% is too conservative unless you're worried about leavin...
by gw
Tue Jul 15, 2014 1:08 pm
Forum: Personal Investments
Topic: Thoughts on 100% stock allocation for 33 year old
Replies: 85
Views: 14365

Re: Thoughts on 100% stock allocation for 33 year old

IMO, this is the best argument for 100% stocks when you're young:

http://www.whynot.net/main/mortgage_retirement.pdf

This is perhaps the best argument against it:

http://www.bogleheads.org/forum/viewtopic.php?t=5934
by gw
Tue Apr 08, 2014 3:03 pm
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 175
Views: 38114

Re: Help me understand Michael Lewis' "Flash Boys"

The gripe about young Ph.D.'s being wasted on HFT is misplaced, because the technology and skillset propagates both to other parts of the industry and beyond finance, with net benefits to society. Your other points are more reasonable, but I can't agree with this, having seen it in action. They wor...
by gw
Tue Apr 08, 2014 2:38 pm
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 175
Views: 38114

Re: Help me understand Michael Lewis' "Flash Boys"

3). Why do they cancel all those trades?? No information...... Then why the fake trades? It shouldn't be so confusing --- this is really straightforward to understand. First of all, we're talking about quotes, not "trades." In other words, the question is why it should be the case that the vast maj...
by gw
Tue Apr 08, 2014 1:25 pm
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 175
Views: 38114

Re: Help me understand Michael Lewis' "Flash Boys"

My gripe isn't about talent or money wasted on finance instead of other stuff. My gripe is why isn't this problem being solved the right way, instead of one that fits with Wall Street ideology? :? I didn't mean to attribute the gripe to you. What do you think is the "right way"? Churchill would pro...
by gw
Tue Apr 08, 2014 12:06 pm
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 175
Views: 38114

Re: Help me understand Michael Lewis' "Flash Boys"

Bid-ask spread isn't a measure of trading cost. It's a measure of cost for trading on the time scale of HFT players. Any slower and the market moves because HFT players react. If your system takes a day to make a trade on an ETF from the time you see the quote, would the bid-ask spread in that ETF ...
by gw
Tue Apr 08, 2014 11:57 am
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 175
Views: 38114

Re: Help me understand Michael Lewis' "Flash Boys"

Have you ever heard (or read) Warren Buffett talking about what a disastrous purchase Berkshire Hathaway was? It was a terrible business (clothing manufacturer) --- every year, the managers came to him and said they had to buy the newest loom, which was going to cut manufacturing costs and increase...
by gw
Tue Apr 08, 2014 8:51 am
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 175
Views: 38114

Re: Help me understand Michael Lewis' "Flash Boys"

http://www.cnbc.com/id/49333454 Cancelled orders are routine, and done purposefully. A significant amount of hft orders are made then cancelled. This provides them with information. The above is just one algo, just one example. http://www.zerohedge.com If you want to read, and SEE what happens, the...
by gw
Tue Apr 08, 2014 1:45 am
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 175
Views: 38114

Re: Help me understand Michael Lewis' "Flash Boys"

If HFT people captured all this for free, then fine. But they don't. That fiber optic cable, that microwave tower, that high speed data feed, those smartest and brightest hired to bash their brains on economically meaningless microsecond market data and write economically useless quote stuffing cod...
by gw
Tue Apr 08, 2014 12:54 am
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 175
Views: 38114

Re: Help me understand Michael Lewis' "Flash Boys"

I think you're correct in asking about the "cost to synchronize," rather than the "cost" of high-speed trading (though in fairness you do both). It goes back to the presumption that multiple venues should function transparently as a single "system," in a particular way, so that it should be "free" ...
by gw
Mon Apr 07, 2014 5:00 pm
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 175
Views: 38114

Re: Help me understand Michael Lewis' "Flash Boys"

The most interesting thing about this discussion is the presumption that the markets should function as a single system . That's not obviously a good goal, or even a feasible one... The other extreme would be ... to drop RegNMS, and let each exchange operate independently. ... The only real consequ...
by gw
Mon Apr 07, 2014 2:31 pm
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 175
Views: 38114

Re: Help me understand Michael Lewis' "Flash Boys"

The most important factor in either design method, synchronous or asynchronous, is that A + B = B + A. In other words you get the same result regardless of which input path you use. That is not currently the case for the exchanges. Trades do not just depend on the information input from each trader...
by gw
Sat Apr 05, 2014 1:51 pm
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 175
Views: 38114

Re: Help me understand Michael Lewis' "Flash Boys"

Do you think that the smallest several exchanges on this list are adding or extracting value? Brokers basically have to connect and pay their membership and connection fees under Reg NMS. http://batstrading.com/market_summary/ To be fair, with the smaller exchanges, they normally don't have liquidi...
by gw
Fri Apr 04, 2014 11:55 pm
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 175
Views: 38114

Re: Help me understand Michael Lewis' "Flash Boys"

Do you think that the smallest several exchanges on this list are adding or extracting value? Brokers basically have to connect and pay their membership and connection fees under Reg NMS. http://batstrading.com/market_summary/ To be fair, with the smaller exchanges, they normally don't have liquidi...
by gw
Fri Apr 04, 2014 5:05 pm
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 175
Views: 38114

Re: Help me understand Michael Lewis' "Flash Boys"

I really am not trying to be Cpt. HFT, but I guess I will be for sake of discussion! Jack's house analogy has some issues. The situation would be more like this, there are 2 houses for sale, both for $100. You walk over to one house and buy it for $100. Your neighbor sees you do that, figures you m...
by gw
Fri Apr 04, 2014 4:59 pm
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 175
Views: 38114

Re: Help me understand Michael Lewis' "Flash Boys"

Was the whole magic of THOR that they equalized time of arrival? As far as I can tell, Thor offers two value-adds. They could act as your router, and hit all the other exchanges simultaneously (they patented this). Additionally, they slow down incoming orders until they have the correct NBBO. This ...
by gw
Fri Apr 04, 2014 2:49 pm
Forum: Investing - Theory, News & General
Topic: [High-frequency trading hurts regular customers]
Replies: 108
Views: 10150

Re: [High-frequency trading hurts regular customers]

At 2:32 PM ... a large fundamental trader (a mutual fund complex) initiated a sell program.... [executing the largest net trade of the year] extremely rapidly in just 20 minutes. In other words, it was essentially a fat-finger trade by an institution with a broken algorithm. The report continues by...
by gw
Fri Apr 04, 2014 12:46 pm
Forum: Investing - Theory, News & General
Topic: [High-frequency trading hurts regular customers]
Replies: 108
Views: 10150

Re: [High-frequency trading hurts regular customers]

Sure, but the flash crash was caused by the HFTs, not the market makers. That's false. See the SEC/CFTC report, for example. If you mean this report: http://www.sec.gov/spotlight/sec-cftcjointcommittee/021811-report.pdf Then I'd say they agree with me. I'm not sure what you're referring to. Surely ...
by gw
Fri Apr 04, 2014 11:45 am
Forum: Investing - Theory, News & General
Topic: [High-frequency trading hurts regular customers]
Replies: 108
Views: 10150

Re: [High-frequency trading hurts regular customers]

The simplest change would probably be to introduce a 1% churn tax for any stock not held for at least one day. A slightly more complicated solution would be to enforce one second trading queues so that all transactions are held till the end of the second and then batch processed. Either of those wo...
by gw
Fri Apr 04, 2014 11:40 am
Forum: Investing - Theory, News & General
Topic: [High-frequency trading hurts regular customers]
Replies: 108
Views: 10150

Re: [High-frequency trading hurts regular customers]

Why do you think market participants can't get access to the relevant technology? I mean, yeah, I don't own a car factory, but that doesn't mean I have to ride a horse to work. [Translation: get a decent broker.] Not all market participants can get access to the "relevant technology" because the te...
by gw
Fri Apr 04, 2014 11:36 am
Forum: Investing - Theory, News & General
Topic: [High-frequency trading hurts regular customers]
Replies: 108
Views: 10150

Re: [High-frequency trading hurts regular customers]

Clearly_Irrational wrote: Sure, but the flash crash was caused by the HFTs, not the market makers.
That's false. See the SEC/CFTC report, for example.
by gw
Fri Apr 04, 2014 11:26 am
Forum: Investing - Theory, News & General
Topic: [High-frequency trading hurts regular customers]
Replies: 108
Views: 10150

Re: [High-frequency trading hurts regular customers]

I admit, playing with OPM is fun, but you've kept hammering this 'ineptitude'. I'm curious if you have some thoughts behind it? What is the cost of market impact? How would you measure it? In my world, I don't care about the .005 per share impact - if I own 140 average days volume on a small cap st...
by gw
Thu Apr 03, 2014 3:08 pm
Forum: Investing - Theory, News & General
Topic: [High-frequency trading hurts regular customers]
Replies: 108
Views: 10150

Re: [High-frequency trading hurts regular customers]

Proponents (typically HFT insiders, usually biased, but also usually the only ones who understand what they're talking about) tout the inherent value of HFT as a market-making service, Except that they're not real market makers as they have no obligation to provide liquidity, which is why we see fl...
by gw
Thu Apr 03, 2014 9:17 am
Forum: Investing - Theory, News & General
Topic: [High-frequency trading hurts regular customers]
Replies: 108
Views: 10150

Re: [High-frequency trading hurts regular customers]

...it seems to me that the defenders of HFT are talking mostly about the market-making aspects of it, and the attackers of HFT are talking mostly about the manipulative aspects of it. This statement seems to presume that HFT is somehow inherently manipulative, which is false. It's otherwise pretty ...