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

[Hydromod]

What is the consensus on M1 Finance's slippage? By definition, everything is essentially a market order. When we rebalance, how good (really) are the prices? I see people in this thread considering very frequent rebalancing, and am curious if there's a slippage risk that hasn't been considered with doing that.

I second the question. And would like to know how to model it...

I think a reasonable enough start would be to take the average bid-ask spread for both holdings and assume you lose that for the full amount bought & sold.

Here's where I'm lost. Where do you get this information? M1 doesn't provide it.

Also, m1 trades in one window a day, starting at 9 a.m. Central until all trades are completed. How would that factor in?

[Lee_WSP]

What is the consensus on M1 Finance's slippage? By definition, everything is essentially a market order. When we rebalance, how good (really) are the prices? I see people in this thread considering very frequent rebalancing, and am curious if there's a slippage risk that hasn't been considered with doing that.

I second the question. And would like to know how to model it...

I think a reasonable enough start would be to take the average bid-ask spread for both holdings and assume you lose that for the full amount bought & sold.

Here's where I'm lost. Where do you get this information? M1 doesn't provide it.

Also, m1 trades in one window a day, starting at 9 a.m. Central until all trades are completed. How would that factor in?

A limit order is not an option?

[Hydromod]

A limit order is not an option?

The M1 documentation claims it's a platform for long-term investing, which is their explanation for the single trading window per day. That keeps their costs down, which is one reason trading is free.

I don't see any option for limit orders; as far as I can tell all you can do is push a button for rebalance or another one for sell.

Which is generally fine, but I suppose you really don't have much control within a day.

[HEDGEFUNDIE]

I rebalanced on 8/1 with M1.

UPRO opened at 56.31, rose to an intra-day high of 58.15, then closed at 54.75
My purchase was executed at 57.67

TMF opened at 25.38, then kept rising until it closed at 26.45
My sale was executed at 25.83

So it does not appear that they are executing trades at the open or at the close.

[Freefun]

M1 app help says the trading window starts at 9am CT.

[MotoTrojan]

What is the consensus on M1 Finance's slippage? By definition, everything is essentially a market order. When we rebalance, how good (really) are the prices? I see people in this thread considering very frequent rebalancing, and am curious if there's a slippage risk that hasn't been considered with doing that.

I second the question. And would like to know how to model it...

I think a reasonable enough start would be to take the average bid-ask spread for both holdings and assume you lose that for the full amount bought & sold.

Here's where I'm lost. Where do you get this information? M1 doesn't provide it.

Also, m1 trades in one window a day, starting at 9 a.m. Central until all trades are completed. How would that factor in?

https://www.etf.com/UPRO#tradability seems to show UPRO has a very low 0.02% average spread.

[elderwise]

My m1 finance is showing 0 balance I had 1k in it and also did a large deposit $$$, below daily limit max but close.

Do they just do this? To review audit or js this a general outage issue?

[MotoTrojan]

Market surge today is parring some of the vol. target losses on my split-off portfolio. Hit an all-time high today, up 24% since 3/1/19.

[elderwise]

Btw I called them and their support seems non existant ? Right now is business hours CST est and how are they saying please call back during regular work hours? Weird

Anyone else face issues calling and talking to them?

[rascott]

Btw I called them and their support seems non existant ? Right now is business hours CST est and how are they saying please call back during regular work hours? Weird

Anyone else face issues calling and talking to them?

Good luck....their "support" is fairly lacking. Blast something on reddit if you don't hear back....they monitor their M1 sub pretty closely there.

Have you tried logging into your Apex account? It's the clearinghouse system they use and your account details can be found there

[caklim00]

If you are just using UPRO and TMF then I wouldn't worry about bid/ask spread. Maybe if you wwre trading every single day the .01 spread on both ETFs would add up but I doubt anyone here is doing that.

When I sold ISCF in my Roth IRA to free up space for this I wanted to buy a corresponding amount of ISCF in another account. I put in a sell order and a buy order right smack in the middle of the bid/ask spread (clicking the sell a split second before the buy). It actually worked. I sold myself $30K of ISCF lol. Now that is scary, and I wouldn't want any part of something like that in M1.

[LocusCoeruleus]

UPRO - anyone know why the quarterly dividends are not in line with the quarterly dividends of a plain (non-leveraged) S&P 500 fund?

According to the fund distribution page (https://www.proshares.com/funds/upro_distributions.html), the fund has only distributed dividends which at least for 2018 was 100% qualified dividends without LT or ST cap gains. Oddly in 2017 there were no dividends paid.

Anyone else think this fund is more tax efficient (from holding, not counting rebalancing cap gains/loss) than it's non-leveraged brethren?

[HEDGEFUNDIE]

UPRO - anyone know why the quarterly dividends are not in line with the quarterly dividends of a plain (non-leveraged) S&P 500 fund?

According to the fund distribution page (https://www.proshares.com/funds/upro_distributions.html), the fund has only distributed dividends which at least for 2018 was 100% qualified dividends without LT or ST cap gains. Oddly in 2017 there were no dividends paid.

Anyone else think this fund is more tax efficient (from holding, not counting rebalancing cap gains/loss) than it's non-leveraged brethren?

UPRO returns 300% the daily total return of the S&p 500.

Only some of that 300% is held in the form of actual stock, and dividends from those stocks are paid out as dividends of UPRO. But the majority of the 300% exposure is in the form of total return swaps and futures, which have the dividends baked into the price action.

[NMBob]

also, morningstar 3 year tax cost ratio

tmf is .32
vusux - vgd long treasury is 1.37

[MotoTrojan]

also, morningstar 3 year tax cost ratio

tmf is .32
vusux - vgd long treasury is 1.37

The new 3-fund portfolio; Total US, Total International, TMF.

[Lee_WSP]

A limit order is not an option?

The M1 documentation claims it's a platform for long-term investing, which is their explanation for the single trading window per day. That keeps their costs down, which is one reason trading is free.

I don't see any option for limit orders; as far as I can tell all you can do is push a button for rebalance or another one for sell.

Which is generally fine, but I suppose you really don't have much control within a day.

When the intra day volatility of these ETF's is so extreme that a whole 10% can easily be made or lost in a single day, I think I'd rather just go ahead and pay the $5 per trade....

[LocusCoeruleus]

So if TMF & UPRO are tax efficient from a holding perspective, instead of manual quarterly rebalance one just adds to whichever is off kilter from OP's allocation on a quarterly basis. Thus no st cap gain/loss. Then why is TMF & UPRO not suitable in taxable space?

The above assumes one has the ability to add sufficient funds to meet the OP's allocation on a quarterly basis without needing to sell / buy one fund for the other.

[rascott]

Going to hold off on loading up the PSLDX for now....if their borrowing rate is 3 month LIBOR (higher than a 30yr bond), long duration bonds is going to be a loser from the start (absent further bond rally). This LTT run-up has happened now 4 times since 2012.....and PSLDX has trailed SP500 for a decent period after each of these moves. Who knows if this time will be the same, but the risk/reward for establishing a big position doesn't seem ideal right now.

I think we'd need to go back to zero-ish short term rates for it to make much sense to me over just holding 100% equities. Or LTTs retreat back to where they were in the spring.

Will continue with just the OP strategy for now in Roth, as that's already going. But will wait for hopefully better entry point for a larger allocation to PSLDX. Been buying a bit of MTUM this week.

[caklim00]

also, morningstar 3 year tax cost ratio

tmf is .32
vusux - vgd long treasury is 1.37

The new 3-fund portfolio; Total US, Total International, TMF.

Ha!

I'm betting the following 3 fund would be super tax efficient assuming not selling:
UPRO, DZK, TMF

Might give Taylor a heart attack.

[caklim00]

Anyone else notice the biggest leveraged bond ETFs

Code: Select all

TBT	UltraShort Barclays 20+ Year Treasury	$760,553.48	-25.84%	2,722,095.0	$25.84	-0.12%	
TMF	Direxion Daily 20-Year Treasury Bull 3X	$191,743.21	52.03%	627,069.0	$29.27	0.27%	
TMV	Direxion Daily 20-Year Treasury Bear 3X	$135,095.61	-37.06%	658,595.0	$11.39	-0.44%	

A lot more people are shorting 20+

[MotoTrojan]

Going to hold off on loading up the PSLDX for now....if their borrowing rate is 3 month LIBOR (higher than a 30yr bond), long duration bonds is going to be a loser from the start (absent further bond rally). This LTT run-up has happened now 4 times since 2012.....and PSLDX has trailed SP500 for a decent period after each of these moves. Who knows if this time will be the same, but the risk/reward for establishing a big position doesn't seem ideal right now.

I think we'd need to go back to zero-ish short term rates for it to make much sense to me over just holding 100% equities. Or LTTs retreat back to where they were in the spring.

Will continue with just the OP strategy for now in Roth, as that's already going. But will wait for hopefully better entry point for a larger allocation to PSLDX. Been buying a bit of MTUM this week.

How is the OP strategy any different? What do you think the borrowing rate of TMF is?

PSLDX also has a lot of corporate bond exposure and I would wager can even short some bonds, so it isn't such a given that the yield is below 3 month LIBOR (in fact I'd wager it will never, ever be below 3 month LIBOR, and will only lose out to 100% S&P500 if rates rise).

[rascott]

Going to hold off on loading up the PSLDX for now....if their borrowing rate is 3 month LIBOR (higher than a 30yr bond), long duration bonds is going to be a loser from the start (absent further bond rally). This LTT run-up has happened now 4 times since 2012.....and PSLDX has trailed SP500 for a decent period after each of these moves. Who knows if this time will be the same, but the risk/reward for establishing a big position doesn't seem ideal right now.

I think we'd need to go back to zero-ish short term rates for it to make much sense to me over just holding 100% equities. Or LTTs retreat back to where they were in the spring.

Will continue with just the OP strategy for now in Roth, as that's already going. But will wait for hopefully better entry point for a larger allocation to PSLDX. Been buying a bit of MTUM this week.

How is the OP strategy any different? What do you think the borrowing rate of TMF is?

PSLDX also has a lot of corporate bond exposure and I would wager can even short some bonds, so it isn't such a given that the yield is below 3 month LIBOR (in fact I'd wager it will never, ever be below 3 month LIBOR, and will only lose out to 100% S&P500 if rates rise).

It's not different... but just feel I've seen this movie before with these quick run-ups in bonds, and it's never held. Maybe this time will be different and I'll be dumb for waiting. Just looking for a better entry point than an all-time low LT bond yield, and an inverted curve. I'm sure over long-run it won't matter much if I pull trigger now or wait. Doubt there will be much a difference between this and VOO in near-term....once leverage costs and mgmt fees are taken out.

OP also levers equity to 120% (or more)...so feel like there is a legit need for the TMF.

[MotoTrojan]

Going to hold off on loading up the PSLDX for now....if their borrowing rate is 3 month LIBOR (higher than a 30yr bond), long duration bonds is going to be a loser from the start (absent further bond rally). This LTT run-up has happened now 4 times since 2012.....and PSLDX has trailed SP500 for a decent period after each of these moves. Who knows if this time will be the same, but the risk/reward for establishing a big position doesn't seem ideal right now.

I think we'd need to go back to zero-ish short term rates for it to make much sense to me over just holding 100% equities. Or LTTs retreat back to where they were in the spring.

Will continue with just the OP strategy for now in Roth, as that's already going. But will wait for hopefully better entry point for a larger allocation to PSLDX. Been buying a bit of MTUM this week.

How is the OP strategy any different? What do you think the borrowing rate of TMF is?

PSLDX also has a lot of corporate bond exposure and I would wager can even short some bonds, so it isn't such a given that the yield is below 3 month LIBOR (in fact I'd wager it will never, ever be below 3 month LIBOR, and will only lose out to 100% S&P500 if rates rise).

It's not different... but just feel I've seen this movie before with these quick run-ups in bonds, and it's never held. Maybe this time will be different and I'll be dumb for waiting. Just looking for a better entry point than an all-time low LT bond yield, and an inverted curve. I'm sure over long-run it won't matter much. Doubt there will be much a difference between this and VOO in near-term....once leverage costs and mgmt fees are taken out.

OP also levers equity to 120% (or more)...so feel like there is a legit need for the TMF.

Maybe PSPTX is a nice middle-ground to consider then, with -3 to +8 years of duration.

[HEDGEFUNDIE]

So if TMF & UPRO are tax efficient from a holding perspective, instead of manual quarterly rebalance one just adds to whichever is off kilter from OP's allocation on a quarterly basis. Thus no st cap gain/loss. Then why is TMF & UPRO not suitable in taxable space?

The above assumes one has the ability to add sufficient funds to meet the OP's allocation on a quarterly basis without needing to sell / buy one fund for the other.

Huge assumption.

What if the portfolio crashes 50% or skyrockets 80%? Will you really have enough dry powder to fully rebalance?

[HEDGEFUNDIE]

Anyone else notice the biggest leveraged bond ETFs

Code: Select all

TBT	UltraShort Barclays 20+ Year Treasury	$760,553.48	-25.84%	2,722,095.0	$25.84	-0.12%	
TMF	Direxion Daily 20-Year Treasury Bull 3X	$191,743.21	52.03%	627,069.0	$29.27	0.27%	
TMV	Direxion Daily 20-Year Treasury Bear 3X	$135,095.61	-37.06%	658,595.0	$11.39	-0.44%	

A lot more people are shorting 20+

And they've been killed YTD.

[rascott]

Going to hold off on loading up the PSLDX for now....if their borrowing rate is 3 month LIBOR (higher than a 30yr bond), long duration bonds is going to be a loser from the start (absent further bond rally). This LTT run-up has happened now 4 times since 2012.....and PSLDX has trailed SP500 for a decent period after each of these moves. Who knows if this time will be the same, but the risk/reward for establishing a big position doesn't seem ideal right now.

I think we'd need to go back to zero-ish short term rates for it to make much sense to me over just holding 100% equities. Or LTTs retreat back to where they were in the spring.

Will continue with just the OP strategy for now in Roth, as that's already going. But will wait for hopefully better entry point for a larger allocation to PSLDX. Been buying a bit of MTUM this week.

How is the OP strategy any different? What do you think the borrowing rate of TMF is?

PSLDX also has a lot of corporate bond exposure and I would wager can even short some bonds, so it isn't such a given that the yield is below 3 month LIBOR (in fact I'd wager it will never, ever be below 3 month LIBOR, and will only lose out to 100% S&P500 if rates rise).

It's not different... but just feel I've seen this movie before with these quick run-ups in bonds, and it's never held. Maybe this time will be different and I'll be dumb for waiting. Just looking for a better entry point than an all-time low LT bond yield, and an inverted curve. I'm sure over long-run it won't matter much. Doubt there will be much a difference between this and VOO in near-term....once leverage costs and mgmt fees are taken out.

OP also levers equity to 120% (or more)...so feel like there is a legit need for the TMF.

Maybe PSPTX is a nice middle-ground to consider then, with -3 to +8 years of duration.

Yeah I like that....think I'll move over some VTI to this tomorrow. Give me a chance to see if Ally actually will let it go through for a $9.95 trade.

[MotoTrojan]

Anybody disagree that 100% S&P500, -100% CASHX, 100% 20 year treasuries is a bad proxy for PSLDX? Expense ratio of course...

Interesting comparison of 1987-2019:

OP strategy - 17.01% CAGR 0.65 Sharpe

Above approximation of PSLDX - 15.07% CAGR 0.72 Sharpe

S&P500 - 10.15% CAGR 0.52 Sharpe

Even after adjusting for the ER you'd have done pretty well, and only a 43% drawdown (lowest of the bunch).

>1.5% CAGR improvement over S&P500 from 1955-1982 as well.

[butricksaid]

If this is meant to be a lottery ticket after 30+ years, what is short version of why this strategy should not hold as much as 80/20 UPRO/TMF?

40/60 UPRO/TMF seems like it is meant to keep you from panic selling due to significant drawdown rather than to have enough bonds to rebalance over during a downturn, there would still be plenty with 20% or so TMF.

[perplexed]

Is there any alternative to PSLDX? Apparently my fido retirement account complains it is an advisor fund

[rascott]

Going to hold off on loading up the PSLDX for now....if their borrowing rate is 3 month LIBOR (higher than a 30yr bond), long duration bonds is going to be a loser from the start (absent further bond rally). This LTT run-up has happened now 4 times since 2012.....and PSLDX has trailed SP500 for a decent period after each of these moves. Who knows if this time will be the same, but the risk/reward for establishing a big position doesn't seem ideal right now.

I think we'd need to go back to zero-ish short term rates for it to make much sense to me over just holding 100% equities. Or LTTs retreat back to where they were in the spring.

Will continue with just the OP strategy for now in Roth, as that's already going. But will wait for hopefully better entry point for a larger allocation to PSLDX. Been buying a bit of MTUM this week.

How is the OP strategy any different? What do you think the borrowing rate of TMF is?

PSLDX also has a lot of corporate bond exposure and I would wager can even short some bonds, so it isn't such a given that the yield is below 3 month LIBOR (in fact I'd wager it will never, ever be below 3 month LIBOR, and will only lose out to 100% S&P500 if rates rise).

It's not different... but just feel I've seen this movie before with these quick run-ups in bonds, and it's never held. Maybe this time will be different and I'll be dumb for waiting. Just looking for a better entry point than an all-time low LT bond yield, and an inverted curve. I'm sure over long-run it won't matter much. Doubt there will be much a difference between this and VOO in near-term....once leverage costs and mgmt fees are taken out.

OP also levers equity to 120% (or more)...so feel like there is a legit need for the TMF.

Maybe PSPTX is a nice middle-ground to consider then, with -3 to +8 years of duration.

Has anyone looked at the Small Cap Stocks Plus fund (PSCSX). It's crushed the straight Russell index....why would their bond strategy do so much better than the SP500 index funds, like the original Stocks Plus?

[HEDGEFUNDIE]

Going to hold off on loading up the PSLDX for now....if their borrowing rate is 3 month LIBOR (higher than a 30yr bond), long duration bonds is going to be a loser from the start (absent further bond rally). This LTT run-up has happened now 4 times since 2012.....and PSLDX has trailed SP500 for a decent period after each of these moves. Who knows if this time will be the same, but the risk/reward for establishing a big position doesn't seem ideal right now.

I think we'd need to go back to zero-ish short term rates for it to make much sense to me over just holding 100% equities. Or LTTs retreat back to where they were in the spring.

Will continue with just the OP strategy for now in Roth, as that's already going. But will wait for hopefully better entry point for a larger allocation to PSLDX. Been buying a bit of MTUM this week.

How is the OP strategy any different? What do you think the borrowing rate of TMF is?

PSLDX also has a lot of corporate bond exposure and I would wager can even short some bonds, so it isn't such a given that the yield is below 3 month LIBOR (in fact I'd wager it will never, ever be below 3 month LIBOR, and will only lose out to 100% S&P500 if rates rise).

It's not different... but just feel I've seen this movie before with these quick run-ups in bonds, and it's never held. Maybe this time will be different and I'll be dumb for waiting. Just looking for a better entry point than an all-time low LT bond yield, and an inverted curve. I'm sure over long-run it won't matter much. Doubt there will be much a difference between this and VOO in near-term....once leverage costs and mgmt fees are taken out.

OP also levers equity to 120% (or more)...so feel like there is a legit need for the TMF.

Maybe PSPTX is a nice middle-ground to consider then, with -3 to +8 years of duration.

Has anyone looked at the Small Cap Stocks Plus fund (PSCSX). It's crushed the straight Russell index....why would their bond strategy do so much better than the SP500 index funds, like the original Stocks Plus?

PSCSX's outperformance was all in the early years. Since mid-2010 it has basically matched the unleveraged index.

https://www.portfoliovisualizer.com/fun ... F01%2F2011

[LocusCoeruleus]

So if TMF & UPRO are tax efficient from a holding perspective, instead of manual quarterly rebalance one just adds to whichever is off kilter from OP's allocation on a quarterly basis. Thus no st cap gain/loss. Then why is TMF & UPRO not suitable in taxable space?

The above assumes one has the ability to add sufficient funds to meet the OP's allocation on a quarterly basis without needing to sell / buy one fund for the other.

Huge assumption.

What if the portfolio crashes 50% or skyrockets 80%? Will you really have enough dry powder to fully rebalance?

I've seen this argument made previously on this thread. It doesn't have to be dry powder, assuming one's willingness and ability to cash flow the equalizer on a quarterly basis. If one is going to be investing in a regular basis in a taxable account - as noted by above why not make this the ultimate "two fund" portfolio.

Clearly, scale does matter. A $1mm portfolio would be much more challenging to cash flow the equalizer than something much smaller for the typical investor here. Though perhaps that is the point. When that $100k does hit $1mm then what do you do? To that point though, the flip side - the withdrawal stage could provide an opportunity to quarterly balance.

Furthermore, if suitable TLH partners are (or become) available for upro & tmf, lt cap gains spec id could be strategically harvested and st losses similarly for these volatile instruments providing an intriguing tax benefit that /u/livesoft would be proud of

No doubt, one wouldn't have to deal with these issues every quarter in tax advantaged space, though I would imagine there may be folks reading this who have ability to enlarge taxable space much faster than the limited tax advantaged space available to them. And the above may represent an option for them particularly in light of the very low tax drag associated with the dividends of these products than their non-leveraged counterparts that these same folks may be holding in their taxable space.

[HEDGEFUNDIE]

So if TMF & UPRO are tax efficient from a holding perspective, instead of manual quarterly rebalance one just adds to whichever is off kilter from OP's allocation on a quarterly basis. Thus no st cap gain/loss. Then why is TMF & UPRO not suitable in taxable space?

The above assumes one has the ability to add sufficient funds to meet the OP's allocation on a quarterly basis without needing to sell / buy one fund for the other.

Huge assumption.

What if the portfolio crashes 50% or skyrockets 80%? Will you really have enough dry powder to fully rebalance?

I've seen this argument made previously on this thread. It doesn't have to be dry powder, assuming one's willingness and ability to cash flow the equalizer on a quarterly basis. If one is going to be investing in a regular basis in a taxable account - as noted by above why not make this the ultimate "two fund" portfolio.

Clearly, scale does matter. A $1mm portfolio would be much more challenging to cash flow the equalizer than something much smaller for the typical investor here. Though perhaps that is the point. When that $100k does hit $1mm then what do you do? To that point though, the flip side - the withdrawal stage could provide an opportunity to quarterly balance.

Furthermore, if suitable TLH partners are (or become) available for upro & tmf, lt cap gains spec id could be strategically harvested and st losses similarly for these volatile instruments providing an intriguing tax benefit that /u/livesoft would be proud of

No doubt, one wouldn't have to deal with these issues every quarter in tax advantaged space, though I would imagine there may be folks reading this who have ability to enlarge taxable space much faster than the limited tax advantaged space available to them. And the above may represent an option for them particularly in light of the very low tax drag associated with the dividends of these products than their non-leveraged counterparts that these same folks may be holding in their taxable space.

Let's just look at one year, 2011, when the OG strategy returned 77%.

If you started with $100k and rebalanced using new contributions, you would have needed to contribute $57k over the course of the year. If you did not contribute any new money, you would have generated the same amount ($57k) in STCG.

Neither is feasible. This is also why PSLDX is basically unusable in a taxable account, even at 2x leverage the tax cost for rebalancing is unbearable.

[rascott]

How is the OP strategy any different? What do you think the borrowing rate of TMF is?

PSLDX also has a lot of corporate bond exposure and I would wager can even short some bonds, so it isn't such a given that the yield is below 3 month LIBOR (in fact I'd wager it will never, ever be below 3 month LIBOR, and will only lose out to 100% S&P500 if rates rise).

It's not different... but just feel I've seen this movie before with these quick run-ups in bonds, and it's never held. Maybe this time will be different and I'll be dumb for waiting. Just looking for a better entry point than an all-time low LT bond yield, and an inverted curve. I'm sure over long-run it won't matter much. Doubt there will be much a difference between this and VOO in near-term....once leverage costs and mgmt fees are taken out.

OP also levers equity to 120% (or more)...so feel like there is a legit need for the TMF.

Maybe PSPTX is a nice middle-ground to consider then, with -3 to +8 years of duration.

Has anyone looked at the Small Cap Stocks Plus fund (PSCSX). It's crushed the straight Russell index....why would their bond strategy do so much better than the SP500 index funds, like the original Stocks Plus?

PSCSX's outperformance was all in the early years. Since mid-2010 it has basically matched the unleveraged index.

https://www.portfoliovisualizer.com/fun ... F01%2F2011

I was comparing it to the Russell...since that's what it tracks.

https://www.portfoliovisualizer.com/bac ... total3=100

[HEDGEFUNDIE]

It's not different... but just feel I've seen this movie before with these quick run-ups in bonds, and it's never held. Maybe this time will be different and I'll be dumb for waiting. Just looking for a better entry point than an all-time low LT bond yield, and an inverted curve. I'm sure over long-run it won't matter much. Doubt there will be much a difference between this and VOO in near-term....once leverage costs and mgmt fees are taken out.

OP also levers equity to 120% (or more)...so feel like there is a legit need for the TMF.

Maybe PSPTX is a nice middle-ground to consider then, with -3 to +8 years of duration.

Has anyone looked at the Small Cap Stocks Plus fund (PSCSX). It's crushed the straight Russell index....why would their bond strategy do so much better than the SP500 index funds, like the original Stocks Plus?

PSCSX's outperformance was all in the early years. Since mid-2010 it has basically matched the unleveraged index.

https://www.portfoliovisualizer.com/fun ... F01%2F2011

I was comparing it to the Russell...since that's what it tracks.

https://www.portfoliovisualizer.com/bac ... total3=100

It's a shame PIMCO chose the obviously inferior small cap index, I guess they are a bond shop after all.

[rascott]

Maybe PSPTX is a nice middle-ground to consider then, with -3 to +8 years of duration.

Has anyone looked at the Small Cap Stocks Plus fund (PSCSX). It's crushed the straight Russell index....why would their bond strategy do so much better than the SP500 index funds, like the original Stocks Plus?

PSCSX's outperformance was all in the early years. Since mid-2010 it has basically matched the unleveraged index.

https://www.portfoliovisualizer.com/fun ... F01%2F2011

I was comparing it to the Russell...since that's what it tracks.

https://www.portfoliovisualizer.com/bac ... total3=100

It's a shame PIMCO chose the obviously inferior small cap index, I guess they are a bond shop after all.

Agreed....but don't think they have an option.... believe you can only buy futures on the Russell. So blame CME for not giving us a better product

Just found it odd that the bonds bosted returns so much over the index of that fund....but not the original Stocks Plus fund. Would assume they used the same bond strategy with both, guess not.

[rascott]

I'm going to return to a general question about the PIMCO funds.

With an inverted yield curve.... and 3 month LIBOR rate = 30 year Treasury rate....is it feasible to expect these funds to beat their underlying indexes at today's prices? Once you account for mgmt fees? Seems extremely difficult compared with a more "normal" curve environment.

[HEDGEFUNDIE]

I'm going to return to a general question about the PIMCO funds.

With an inverted yield curve.... and 3 month LIBOR rate = 30 year Treasury rate....is it feasible to expect these funds to beat their underlying indexes at today's prices? Once you account for mgmt fees? Seems extremely difficult compared with a more "normal" curve environment.

Do you expect the yield curve to be inverted forever?

Seems like the perfect time to buy low.

[MoneyMarathon]

Anybody disagree that 100% S&P500, -100% CASHX, 100% 20 year treasuries is a bad proxy for PSLDX? Expense ratio of course...

Above approximation of PSLDX - 15.07% CAGR 0.72 Sharpe

Bad proxy. Too much treasuries, not enough junk, corporate, and international.

Probably the same-ish total return (but not Sharpe) in the time period of used to run the numbers, just saying.

[rascott]

I'm going to return to a general question about the PIMCO funds.

With an inverted yield curve.... and 3 month LIBOR rate = 30 year Treasury rate....is it feasible to expect these funds to beat their underlying indexes at today's prices? Once you account for mgmt fees? Seems extremely difficult compared with a more "normal" curve environment.

Do you expect the yield curve to be inverted forever?

Seems like the perfect time to buy low.

Well of course not.... but I only see two ways out of it..... Yields go back up in which case I'd be buying high. Or we have a bunch of rate cuts which would mean we are recession (or zero growth) bound.

I could be thinking entirely wrong.

[MoneyMarathon]

With an inverted yield curve.... and 3 month LIBOR rate = 30 year Treasury rate....is it feasible to expect these funds to beat their underlying indexes at today's prices? Once you account for mgmt fees? Seems extremely difficult compared with a more "normal" curve environment.

PSLDX gets a lot of its return from credit risk, not just market + term. So it should underperform if rates rise fast enough, but its degree of outperformance (in any other situation: sideways / slow rising rates / falling) is less dependent on rates going down than it would be with a portfolio with only term risk in bonds (only treasuries in bonds).

[rascott]

Anybody disagree that 100% S&P500, -100% CASHX, 100% 20 year treasuries is a bad proxy for PSLDX? Expense ratio of course...

Above approximation of PSLDX - 15.07% CAGR 0.72 Sharpe

Bad proxy. Too much treasuries, not enough junk, corporate, and international.

Probably the same-ish total return (but not Sharpe) in the time period of used to run the numbers, just saying.

Yeah I decided it's worthless to try to make a proxy for it....they move around their bond allocations quite a bit. Even in PSLDX they seem to have gone as short duration as they can while still being a "long duration" fund.

[butricksaid]

If this is a lottery ticket, why not any of the following (or even more granular to 5% or 1%)? You would still have enough to rebalance into the losing asset.

UPRO/TMF

• 50/50
• 60/40
• 70/30
• 80/20
• 90/10 - maybe you won't have enough to rebalance on this one

[HEDGEFUNDIE]

If this is a lottery ticket, why not any of the following (or even more granular to 5% or 1%)? You would still have enough to rebalance into the losing asset.

UPRO/TMF

• 50/50
• 60/40
• 70/30
• 80/20
• 90/10 - maybe you won't have enough to rebalance on this one

You are assuming that only UPRO generates the returns.

Which would have been a bad assumption for the past 30 years, as well as the past year.

[rascott]

If this is a lottery ticket, why not any of the following (or even more granular to 5% or 1%)? You would still have enough to rebalance into the losing asset.

UPRO/TMF

• 50/50
• 60/40
• 70/30
• 80/20
• 90/10 - maybe you won't have enough to rebalance on this one

You'd risk digging such a hole in a bad bear market it would take years (decades) to recover

[MotoTrojan]

If this is meant to be a lottery ticket after 30+ years, what is short version of why this strategy should not hold as much as 80/20 UPRO/TMF?

40/60 UPRO/TMF seems like it is meant to keep you from panic selling due to significant drawdown rather than to have enough bonds to rebalance over during a downturn, there would still be plenty with 20% or so TMF.

Have you run an 80/20 backtest? And not just since fund inception.

[Lee_WSP]

If this is meant to be a lottery ticket after 30+ years, what is short version of why this strategy should not hold as much as 80/20 UPRO/TMF?

40/60 UPRO/TMF seems like it is meant to keep you from panic selling due to significant drawdown rather than to have enough bonds to rebalance over during a downturn, there would still be plenty with 20% or so TMF.

Have you run an 80/20 backtest? And not just since fund inception.

Hint: 1987 nearly wipes you out.

[butricksaid]

Since I'm already asking dumb questions... how do I get PortfolioVisualizer to allow me to backtest on UPRO given that it did not exist before Jul 2009? I tried to enter in UPROSIM and some other entries but it did not register.

https://www.portfoliovisualizer.com/bac ... total3=100

Note: The time period was constrained by the available data for ProShares UltraPro S&P500 (UPRO) [Jul 2009 - Jul 2019].

[Lee_WSP]

Since I'm already asking dumb questions... how do I get PortfolioVisualizer to allow me to backtest on UPRO given that it did not exist before Jul 2009? I tried to enter in UPROSIM and some other entries but it did not register.

https://www.portfoliovisualizer.com/bac ... total3=100

Note: The time period was constrained by the available data for ProShares UltraPro S&P500 (UPRO) [Jul 2009 - Jul 2019].

How confident are you that your simulated backtest actually tracks the real UPRO and TMF?
UPRO tracks extremely well. TMF has some issues, but siamond's analysis indicates that since 2013 it has also "fallen in line" with the formula. I have uploaded the data here, if you would like to play with it yourself.

Guess the link doesn't work. It's in the op.

[NMBob]

If this is a lottery ticket, why not any of the following (or even more granular to 5% or 1%)? You would still have enough to rebalance into the losing asset.

UPRO/TMF

• 50/50
• 60/40
• 70/30
• 80/20
• 90/10 - maybe you won't have enough to rebalance on this one

lets say you are 80/20 and you have stocks drop 40 percent and at same time long bonds up 30%. so 3x roughly is 120 loss upro, 90% tmf gain. You would have close to 0 upro/38tmf when it is over, which totals a 62 percent loss. If you had been at 40upro/60 tmf to start, that same stock decline would result 0 upro/114 tmf so a 14 percent gain in total.