Search found 775 matches
- Wed Apr 22, 2020 4:05 pm
- Forum: Personal Investments
- Topic: Active trading strategy using SPY
- Replies: 21
- Views: 1159
Re: Active trading strategy using SPY
This is like announcing you've discovered a cure for cancer, and you're going to give it to 20% of your pet cats, so people should know that going to the doctor isn't always the best thing to do if you're sick.
- Thu Mar 12, 2020 1:51 pm
- Forum: Investing - Theory, News & General
- Topic: HEDGEFUNDIE's excellent adventure Part II: The next journey
- Replies: 14356
- Views: 1988632
Re: HEDGEFUNDIE's excellent adventure Part II: The next journey
Counterpoint: you could 8x-leverage the excellent adventure, backstopped by bankruptcy and disability income.Lee_WSP wrote: ↑Thu Mar 12, 2020 1:17 pm To all the detractors,
Just stop. It's obviously a very risky play, and if one can't even accept 100% equities, they have no business being in the strategy in the first place. But if one is looking for more risk & more return than 100% equities, this is it. There is no better alternative other than accepting lower risk & lower return.
Sir, your "safer" portfolio just caused a $276k margin call.
*This* is how you gamble, kids.
- Thu Mar 12, 2020 1:17 pm
- Forum: Personal Investments
- Topic: Would trying to time this downturn be a mistake?
- Replies: 45
- Views: 3168
Re: Would trying to time this downturn be a mistake?
Depends on whether or not your forecast is correct.MakingBacon wrote: ↑Thu Mar 12, 2020 12:02 pm I don't want to panic sell, but we're getting hammered by so many others doing it as well as algorithmic trading which I believe is responsible for a lot of the damage right now. I'm contemplating pulling out for just for a few weeks with the idea of buying everything back at a discount.
So... terrible idea or what?
- Mon Mar 09, 2020 9:45 am
- Forum: Investing - Theory, News & General
- Topic: HEDGEFUNDIE's excellent adventure Part II: The next journey
- Replies: 14356
- Views: 1988632
Re: HEDGEFUNDIE's excellent adventure Part II: The next journey
Wha-huh? Did you misread the numbers? Clearly 15% bands are optimal. Can I get a 3x-levered 15%-bands minus monthly rebalance somewhere please?physixfan wrote: ↑Sun Mar 08, 2020 11:33 pmIt seems no conclusion for rebalancing frequency vs return can be made. Therefore, I choose to rebalance more frequently during highly volatile period just to make me feel better.HEDGEFUNDIE wrote: ↑Sun Mar 08, 2020 11:24 pm I just ran some backtests on the impact of rebalancing frequency during a downturn. I used SSO and VEDTX from 12/2007 to 12/2009. Assuming a starting balance of $100k and 55/45 AA:
(End Value / Max Drawdown)
Monthly rebalancing: $71k, -52%
Quarterly rebalancing: $77k, -48%
10% Absolute Bands (rebalance when SSO hits 45%): $75k, -50%
15% Absolute Bands: $83k, -46%
- Tue Mar 03, 2020 3:21 pm
- Forum: Investing - Theory, News & General
- Topic: HEDGEFUNDIE's excellent adventure Part II: The next journey
- Replies: 14356
- Views: 1988632
Re: HEDGEFUNDIE's excellent adventure Part II: The next journey
You're looking for the Berra strategy:lock.that.stock wrote: ↑Tue Mar 03, 2020 1:22 pm One thing I haven't seen discussed in this thread has been your question specifically - can this strategy be modified when the interest rates begin to rise?
Buy some bonds.
- If rates fall, sell 'em
- If rates rise, don't buy 'em.
- Sat Feb 29, 2020 10:57 am
- Forum: Investing - Theory, News & General
- Topic: Anybody want to guess the bottom of this "dip"?
- Replies: 573
- Views: 47328
- Wed Feb 26, 2020 4:27 pm
- Forum: Investing - Theory, News & General
- Topic: Novice high income invester- leveraged ETFs
- Replies: 56
- Views: 5271
Re: Novice high income invester- leveraged ETFs
Here's the best advice I've ever heard for young people, particularly for high income: “Good afternoon, Mr. Buffett and Mr. Munger…” my voice boomed out through the sound system with a half-second delay, making it almost impossible to remember my lines, memorized word-for-word. I continued: “If you were 30 years old and had no dependents but a full-time job that precluded full-time investing, how would you invest your first million dollars, assuming that you can cover 18 months of expenses with other savings? Thank you in advance for being as specific as possible with asset classes and allocation percentage.” Buffett let out a small laugh and began. “I’d put it all in a low-cost index fund that tracks the S&P 500 and get back to work… ...
- Wed Feb 26, 2020 1:36 pm
- Forum: Investing - Theory, News & General
- Topic: Novice high income invester- leveraged ETFs
- Replies: 56
- Views: 5271
Re: Novice high income invester- leveraged ETFs
Here's the best advice I've ever heard for young people, particularly for high income: “Good afternoon, Mr. Buffett and Mr. Munger…” my voice boomed out through the sound system with a half-second delay, making it almost impossible to remember my lines, memorized word-for-word. I continued: “If you were 30 years old and had no dependents but a full-time job that precluded full-time investing, how would you invest your first million dollars, assuming that you can cover 18 months of expenses with other savings? Thank you in advance for being as specific as possible with asset classes and allocation percentage.” Buffett let out a small laugh and began. “I’d put it all in a low-cost index fund that tracks the S&P 500 and get back to work… ”...
- Tue Feb 25, 2020 9:07 am
- Forum: Investing - Theory, News & General
- Topic: HEDGEFUNDIE's excellent adventure Part II: The next journey
- Replies: 14356
- Views: 1988632
Re: HEDGEFUNDIE's excellent adventure Part II: The next journey
This thread is now 57 pages. Can someone summarize the main arguments and counter arguments? And most liked vehicles to implement some of these ideas? That’s nuthin’. The first thread is 68 pages. Seriously, start reading Hedgefundie’s first post in the first thread. Most of what you need to know is there. For: In backtests, long term bonds have equity-like risk/returns, and are anti-correlated with equities (especially during the 2009 crisis), so a levered equity/bond portfolio like some mix of upro/tmf shows excellent returns with tolerable risk. Against: There's nothing insightful to this. It's basically just a bet on perpetually falling interest rates, which is essentially all that has happened within the backtest window. The portfolio...
- Mon Feb 24, 2020 1:20 pm
- Forum: Investing - Theory, News & General
- Topic: HEDGEFUNDIE's excellent adventure Part II: The next journey
- Replies: 14356
- Views: 1988632
Re: HEDGEFUNDIE's excellent adventure Part II: The next journey
Did I miss a 1 year update from Hedgefundie? Or is he gonna update end of this month since its 3 months since his last update? One year update is I’m up 85%, and considering starting my own hedge fund. Any other questions? I would like you to imagine a national coin-flipping contest. Let’s assume we get 225 million Americans up tomorrow morning and we ask them all to wager a dollar. They go out in the morning at sunrise, and they all call the flip of a coin. If they call correctly, they win a dollar from those who called wrong. Each day the losers drop out, and on the subsequent day the stakes build as all previous winnings are put on the line. After ten flips on ten mornings, there will be approximately 220,000 people in the United States...
- Sun Jan 19, 2020 2:19 pm
- Forum: Personal Finance (Not Investing)
- Topic: Is our spending crazy?
- Replies: 136
- Views: 14608
Re: Is our spending crazy?
- Sun Jan 19, 2020 1:26 pm
- Forum: Personal Finance (Not Investing)
- Topic: Is our spending crazy?
- Replies: 136
- Views: 14608
- Sun Jan 19, 2020 11:32 am
- Forum: Personal Finance (Not Investing)
- Topic: Is our spending crazy?
- Replies: 136
- Views: 14608
Re: Is our spending crazy?
To concur, the problem is that saving even $150K/year isn't obviously enough to enable continuation of current spending in retirement (let alone other goals/priorities).
- Sun Jan 19, 2020 9:50 am
- Forum: Personal Finance (Not Investing)
- Topic: Is our spending crazy?
- Replies: 136
- Views: 14608
Re: Is our spending crazy?
I feel nauseous when I see our spending. We are spending an average of $14,500 a month.... My wife spends almost the entirety. However, when I look at the things she buys it is hard to get upset. Nothing seems extravagant. .... I feel like for the amount we spend we should be living in luxury. In addition, my wife has her hands full with a toddler right now. Is trying to bring our expenses down a battle worth waging? Oh boy can I relate. ... Hard to understand if you haven't been there, but it's *very* easy to spend that much without obvious extravagance, depending on circumstances (e.g. high cost of living area, long hours, spouse at home with kids). Yeah, at some level "shopping for entertainment" is probably a culprit, but &qu...
- Tue Dec 17, 2019 9:54 am
- Forum: Personal Investments
- Topic: Fidelity Zero
- Replies: 54
- Views: 9378
Re: Fidelity Zero
Taxable investors are better off using ETFs in taxable accounts at Fidelity, Schwab, TD, and any other brokerage firm. The reason is taxes. ETFs are more tax-efficient because they do not pay capital gain distributions at year-end. Is Vanguard different? I use mutual funds in my Vanguard taxable brokerage account. Should I be using ETFs? I haven't seen capital gain distributions from my Total Stock and FTSE all world ex-U.S. index funds. Vanguard is different. ETFs are a share class of the fund, hence the tax treatment is the same for both. The unique and patented structure allows all share classes to be tax-efficient.... Rick Ferri This is true, but Vanguard's patents are expiring over the next 2-5 years, and presumably everyone will copy...
- Mon Oct 07, 2019 9:12 pm
- Forum: Personal Investments
- Topic: Desperately In Need Of Advice
- Replies: 24
- Views: 4991
Re: Desperately In Need Of Advice
I personally wouldn't hassle with a CD. Just put it in a money market fund like VMMFX. It'll earn about the same amount of interest and remain easily accessible for when you need it.
Or if you don't mind a small amount of risk, could consider sticking it in a short-term bond fund like VFISX, or even an intermediate-term fund like VBMFX.
You're looking at earning $2-3K per year on that money. Not life-changing, but certainly better than giving it away to the bank through your checking account for no reason.
I would skip the financial advisor for now. You don't need any complicated advice.
Good luck!
Or if you don't mind a small amount of risk, could consider sticking it in a short-term bond fund like VFISX, or even an intermediate-term fund like VBMFX.
You're looking at earning $2-3K per year on that money. Not life-changing, but certainly better than giving it away to the bank through your checking account for no reason.
I would skip the financial advisor for now. You don't need any complicated advice.
Good luck!
- Sun Sep 22, 2019 8:15 am
- Forum: Investing - Theory, News & General
- Topic: Vanguard said to offer Digital Advisory Service [Robo-Advisor]
- Replies: 111
- Views: 12547
Re: Vanguard said to offer Digital Advisory Service [Robo-Advisor]
Thanks, that's pretty impressive.ksJoe wrote: ↑Sat Sep 21, 2019 8:46 pmIts worth a lot. I've seen harvesting as little as $6
Wealthfront slices and dices to an asset allocation, based on how you answer their questions. Its more than 3 categories of funds, but similar idea.
This is what Wealthfront has accomplished for me:
I opened the account July 3, 2018 with $5000 deposit
July 20th 2018 I started a weekly $1000 deposit
Total invested: $66,000
Current balance: $69,500
Total harvested loses to date: $2197
Total fee paid to Wealthfront: $80
Has anyone worked out like how many bps it's worth in expectation?
- Sat Sep 21, 2019 8:27 pm
- Forum: Investing - Theory, News & General
- Topic: Vanguard said to offer Digital Advisory Service [Robo-Advisor]
- Replies: 111
- Views: 12547
Re: Vanguard said to offer Digital Advisory Service [Robo-Advisor]
What is auto-TLH worth for some tlh-optimized version of the three fund portfolio?
I saw that VPAS offered some kind of TLH, and I see the comment saying it wasn't very good, and I see that it's mentioned in the filing for the new thing. Also see that fees can get as low as 10 bps for larger accounts.
Is 10 bps for Auto-TLH on 3-fund a good trade?
I saw that VPAS offered some kind of TLH, and I see the comment saying it wasn't very good, and I see that it's mentioned in the filing for the new thing. Also see that fees can get as low as 10 bps for larger accounts.
Is 10 bps for Auto-TLH on 3-fund a good trade?
- 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: 888631
Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
This comment is highly characteristic of this thread.HEDGEFUNDIE wrote: ↑Mon Jul 29, 2019 4:56 pmPSLDX’s risk profile (std dev, max drawdown) is comparable to the S&P 500.
- 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: 888631
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 effects of volatility drag and expenses from 3X ETFs. There is a good reason Vanguard doesn't allow trading in the leveraged ETFs while the PIMCO funds are generally well regarded by pension and 401k managers. If you backtest over the longest live period you can see the sharp ratio is higher for the same stock/bond risk exposures: https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=1985&firstMont...
- 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: 888631
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 to say that these have not been analyzed much? And you would be wrong. The original post includes two Monte Carlo analyses, one including the 1968-1981 rising rate period. If you search for privatefarmer there are numerous posts by him/her backtesting periods of rising/flat rates. Others as well. I notice your strategy looks pretty bad in the 1968-2018 Monte Carlo you cite, with worse median 20-year performance than the sp500 and something like 40...
- 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: 888631
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 returns (10% vs. 11%), so a pretty big fail. But worse than that, the strategy essentially *only* made money during the post-1981 period of steadily falling rates - it steadily *lost* money throughout the previous period, when rates were rising. https://i.imgur.com/9D8QjKf.png Your response is to simply discard the (long!) period where your strategy underperformed, while keeping all the returns from the period where it outperformed, under an argument t...
- 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: 888631
Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
... 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.HEDGEFUNDIE wrote: ↑Tue Jun 11, 2019 5:17 pm 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.
I just don't think you've really thought this through, and you've got a number of people following you with their retirements at stake.
- 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: 888631
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 probably that rates will continue to decline or stagnate, given demographic and technology trends. Are you disputing that rising rates are bad for the strategy? The only historical examples were pretty horrible. It seems unlikely to me that rates will continue to decline in the future as they have in the past (e.g. 10-year from 15% in the 80s to 2.5% now). Opinions may vary, but to me, 2.5% rates vs. a 2% inflation target seems pretty close to a ...
- 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: 888631
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 performing asset classes and specifications, that maintain some level of diversification and then leverage like crazy. Gw, what do you think about the idea of equal weight contribution (risk parity) in general? ERC of stocks, treasuries, bonds, commodities, property; leveraged to a target volatility. GW’s objection raises the question: what is it reasonable to expect ex-ante? I submit the following: 1. That the equity premium will persist. 2. That t...
- 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: 888631
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 effectively all you've done is to identify that bonds were a great investment over the last thirty years. Everybody already knew that, or they should have. Yeah, yeah, anti-correlation, or uncorrelation (I can't tell if you have a consistent view here), but it doesn't change the basic point. TANSTAAFL - If you believe bonds have insurance value, then you should discount their expected returns accordingly. Either way, you're relying on backte...
- Sat Mar 09, 2019 8:27 pm
- Forum: Investing - Theory, News & General
- Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
- Replies: 3353
- Views: 888631
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 horizon. ... TLDR - if you think the appeal of this strategy isn't driven by the outstanding performance of bonds over the past 30 years, which is highly unreliable going forward, then you're simply fooling yourself. And the rest of y'all need to stop reinvesting your retirement portfolios into 3x levered ETFs based on some anonymous internet dude's half-baked, week-old forum post. Jesus. You can rationalize, but this thread would have died on page ...
- Tue Mar 05, 2019 4:23 pm
- Forum: Investing - Theory, News & General
- Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
- Replies: 3353
- Views: 888631
Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
What does it look like if you just naively use this data to backtest the 40/60 3x portfolio, i.e. 120 vfinx analogue, 180 this data, -200 cashx, rebalanced quarterly? I don't think that's been posted yet?samsdad wrote: ↑Tue Mar 05, 2019 4:11 pm
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 chew on while waiting for that simulated leveraged data to develop.
- Mon Feb 25, 2019 12:19 pm
- Forum: Investing - Theory, News & General
- Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
- Replies: 3353
- Views: 888631
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 such obviously valuable insurance that you should be highly skeptical that it's so cheap you're paid to carry it (better long-term risk-adjusted returns than equities in your sample). Look, maybe I'm acting like the economist who won't pick up a hundred dollar bill lying on the sidewalk because there's no such thing, but I think you need to take a much more critical look at the assumptions underlying your strategy, and at the dat...
- Mon Feb 25, 2019 10:29 am
- Forum: Investing - Theory, News & General
- Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
- Replies: 3353
- Views: 888631
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 two very distinct-looking periods, which to my mind casts doubt on the validity of simply taking an average and projecting forward. If you were running these backtests in 1997, looking at the first half of the sample, you would have had no idea bonds would be so nicely anti-correlated with equities over the next 20 years (by something like -30%); conversely, if the periods were reversed, you might be pretty bummed, expecting -30% correlation, wh...
- Mon Feb 25, 2019 10:10 am
- Forum: Investing - Theory, News & General
- Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
- Replies: 3353
- Views: 888631
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 usually going up together, not down together. Both are great for my strategy. There are two possible explanations for those graphs: Bonds systematically have large, positive, better-than-equities returns, and they're systematically anti-correlated with equities, except when you don't want them to be. Historical performance of bonds over this period turned out to be much better than one can reasonably expect going forward. You're betting pretty hea...
- Mon Feb 25, 2019 7:41 am
- Forum: Investing - Theory, News & General
- Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
- Replies: 3353
- Views: 888631
Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
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.
- Fri Feb 22, 2019 12:25 pm
- Forum: Investing - Theory, News & General
- Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
- Replies: 3353
- Views: 888631
Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Haha, no, you get $0.9M.HEDGEFUNDIE wrote: ↑Fri Feb 22, 2019 12:04 pmIf I subtract 60% of the returns from $20M, I still get $8M. So what's your point again?
- Fri Feb 22, 2019 11:47 am
- Forum: Investing - Theory, News & General
- Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
- Replies: 3353
- Views: 888631
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 strategy is that long bonds have been an awesome investment over the last 30 years, which covers your backtesting horizon. In particular, over the last 30 years, bonds were better than stocks (they had risk-adjusted returns equal or better than those of equities, depending on your risk measure, and they performed much better during the 2001/2008 crashes). Try just plotting +150% VUSTX/-50%CASHX (50% leverage to match stdev of equity returns) alongside...
- Wed Aug 26, 2015 1:08 am
- Forum: Personal Investments
- Topic: my retired mother's predicament
- Replies: 55
- Views: 9431
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 security. This money is more like an emergency fund. Or just think of it as savings. As for how to hold the money, in principle it doesn't matter. You can put it in equities if you don't care about potential 50% losses, or you can put it in bonds if you don't want to lose much (giving up maybe $50/month extra earnings in equities on average). In practice, I get that it hurts to lose $5K-$7K of the $35K, but it's important to realize that's wat...
- Mon Aug 10, 2015 3:04 pm
- Forum: Investing - Theory, News & General
- Topic: Does the Three Fund Portfolio need a roboadviser?
- Replies: 92
- Views: 11899
Re: Does the Three Fund Portfolio need a roboadviser?
Vanguard should offer a roboadvisor.
- 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: 5566
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 historical data would probably be informative: http://www.econ.yale.edu/~shiller/data/ie_data.xls Some issues: Payout ratio. Earnings generally exceed dividends, by some significant multiple, so you'll be doing a lot of selling, which means you're actually quite sensitive to price. Business cycle. Earnings are likely much more volatile than your preferred consumption patterns. Will you do some kind of smoothing, like in PE10? Inflation. You'l...
- Fri Oct 31, 2014 12:35 pm
- Forum: Personal Investments
- Topic: fleeced by an adviser, is there a recourse?
- Replies: 104
- Views: 13838
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 China (where, mind you, enough complaining will still result in someone going to prison). This industry is one of the very few that gets away with openly ripping off their customers. What ogd said. The lack of adequate consumer protection in this space is really a huge problem, especially as funding for retirement continues to shift away from pensions and into the hands of individuals. Part of the issue, though not ultimately a good excuse, is that c...
- Thu Oct 30, 2014 4:57 pm
- Forum: Personal Consumer Issues
- Topic: A Little Common Core Math problem
- Replies: 97
- Views: 7626
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 so many people (including the OP) using two variables? It isn't "common core" making this difficult.... Does anyone know how Common Core actually wants students to solve the problem? As I understand it, the whole point of the Common Core stuff is to rescue children from math-as-rote-algorithms, like "solve a simultaneous set of equations." No offense to the engineers in the room, but that's really horrible.
- 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: 10882
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 live for 31 years with a MLP portfolio? :P I've been going on the assumption that if you had say a ten year TIPS ladder that you didn't roll unless you hit that equity bear early in retirement that you could increase the 4% SWR substantially. But I am absolutely sure that I can't do that calculation. Guys, remember you can easily do this math in your head (especially with today's rates). The annuity pays back 1/30th of your principal eac...
- 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: 75002
Re: Delay Social Security to age 70 and Spend more money at
One should strive to make things as simple as possible, and no simpler.Cut-Throat wrote: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.
Anyway, just trying to help; sorry if it came across otherwise.
A little more food for thought --- if you assume a "safe withdrawal rate" that's more attractive than the appropriate annuity rate, then it's probably not "safe."
- 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: 75002
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 shortfall to make up from age 62 until death. Modulo survivorship issues, this is equivalent to an inflation-indexed annuity bought at age 62. Ketawa says such SPIAs pay at a rate of something like 3-5% now, so the $14.6K/year has a value of $292K - $365K. Scenario 2: Take SS at 70 Here SS income is going to be $34.1K in today's dollars, but you don't get it until age 70, so you need to make up 8 years of inflation-indexed $34.1K payments. For e...
- Tue Jul 22, 2014 11:28 am
- Forum: Investing - Theory, News & General
- Topic: Delay Social Security to age 70 and Spend more money at 62
- Replies: 203
- Views: 75002
Re: Delay Social Security to age 70 and Spend more money at
Now you're doing it right.
- 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: 75002
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 leaving an estate. In fact you can afford to withdraw something like 6-8%, by annuitizing. That's the proper comparison to SS.
If you do the math correctly, you might get a different answer. (Hint: don't use FireCalc.)
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 leaving an estate. In fact you can afford to withdraw something like 6-8%, by annuitizing. That's the proper comparison to SS.
If you do the math correctly, you might get a different answer. (Hint: don't use FireCalc.)
- Tue Jul 15, 2014 1:08 pm
- Forum: Personal Investments
- Topic: Thoughts on 100% stock allocation for 33 year old
- Replies: 85
- Views: 17180
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
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
- Tue Apr 08, 2014 3:03 pm
- Forum: Investing - Theory, News & General
- Topic: Help me understand Michael Lewis' "Flash Boys"
- Replies: 175
- Views: 40725
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 work in secrecy, burn out, lose self respect, the complete opposite of what should happen with people among the best in their fields. It's a big, sad waste, for society that is -- they do get paid very well. I don't claim a universal view, but I'm sure personal experiences vary depending on many factors. It does seem a shame that finance doesn't have the same social/professional structures as law and medicine, or academia, but perhaps the money help...
- Tue Apr 08, 2014 2:38 pm
- Forum: Investing - Theory, News & General
- Topic: Help me understand Michael Lewis' "Flash Boys"
- Replies: 175
- Views: 40725
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 majority of quotes that are posted in the market are canceled before they're traded against. The answer is very simple: market makers naturally want to update their quotes more or less continuously as their concept of the fair price changes, but as a matter of implementation detail, that requires canceling an old quote and posting a new one at a different price. So this is a perfectly natural and beneficial activity. In practice, the rate ...
- Tue Apr 08, 2014 1:25 pm
- Forum: Investing - Theory, News & General
- Topic: Help me understand Michael Lewis' "Flash Boys"
- Replies: 175
- Views: 40725
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 probably say that HFT is the worst possible form of market-making, except for every other option. First, the money spent on all this technology is nothing --- it' s cheap, cheap, cheap... Now amortize that over at least a few years lifetime, or likely indefinitely longer since you can't do too much better... If there is one thing we know about technology, it is you can always do "better." So better get the metric for what is &quo...
- Tue Apr 08, 2014 12:06 pm
- Forum: Investing - Theory, News & General
- Topic: Help me understand Michael Lewis' "Flash Boys"
- Replies: 175
- Views: 40725
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 make any difference to you? Same thing here. The spread going down is only indicative of the fastest HFT players being able to make their market risks smaller and smaller because they are effectively providing liquidity for a shorter and shorter amount of time, knowing they can back away (and in some cases remove existing liquidity) faster than anyone else. That's wrong, bid-ask spreads are definitely an indicator of trading costs. If nothing els...
- Tue Apr 08, 2014 11:57 am
- Forum: Investing - Theory, News & General
- Topic: Help me understand Michael Lewis' "Flash Boys"
- Replies: 175
- Views: 40725
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 profits by 25%. Every year, capital outlays continued, and manufacturing costs fell as predicted, yet profits stayed flat. Why? Because every other manufacturer made the same investment. Where did the investments go? Straight into their customers pockets, and the industry innovated itself to death. It's the same with HFTs, and more broadly, with market making in general over a longer history. All these tech investments end up benefiting everyone...