In Jul 2009 the 30 year Treasury was yielding 4.5%. Today it's yielding 3.0%.HomerJ wrote: ↑Tue Feb 05, 2019 11:41 pmYour return numbers from the backtest are high because of how well Long Treasuries did during that period. You will not get those same numbers starting from this point.HEDGEFUNDIE wrote: ↑Tue Feb 05, 2019 11:36 pmI have said this before, I'll say it again. The reason the Long Treasuries are there is NOT because of their expected return. It's because of their status as the ultimate global flight-to-safety asset, the asset that reliably surges when stocks crash. This dynamic, along with regular rebalancing, is the key to the strategy, and why it has held up over the past 30 years.HomerJ wrote: ↑Tue Feb 05, 2019 11:15 pmBacktest for 1987-2018.Jags4186 wrote: ↑Tue Feb 05, 2019 4:49 pm So what jumps at me whenever I see a great backtested strategy are the following:
1). What conditions occurred that allowed these great returns
2). Where are we today and how does it compare to the starting point at the beginning of the back test?
3). What would lead this strategy to fail miserably vs following a 40/60 unleveraged strategy.
Long Treasuries did AMAZING through most of that period, as interest rates dropped
Today's conditions for Long Treasuries are not the same.
The plan may indeed do very well, but you are highly unlikely to get your $10 million in the same amount of time, because you are NOT starting with 10% Treasuries with falling interest rates.
This strategy, as shown in my last post using the actual ETFs, delivered 26% CAGR over this period. Pretty much the same as over the previous 20 years when interest rates dropped from 10%, as you say.