HEDGEFUNDIE's excellent adventure Part II: The next journey

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
gw
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by gw »

seersucker wrote: Mon Feb 24, 2020 8:48 pm
klaus14 wrote: Mon Feb 24, 2020 8:24 pm 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 will get crushed in any rising rate environment (like it did if you extend backtests to the 60s/70s). You're selling highly leveraged insurance against that risk, and in the backtests, it's worked out, for obvious reasons. The author of this thread tends to give glib and disingenuous replies to substantive critiques (It's a new normal! Look at the backtests!), while otherwise persistently cheerleading this "strategy."

About ten years ago, in a famous thread here, MarketTimer similarly rationalized making leveraged investments after a long run-up in the markets, garnering substantial interest from some, while others warned of impending disaster. He got *un*lucky, and everyone else got lucky, to learn a valuable lesson from his pain. So far, this has been the opposite.
TwoIdenticalIndexes
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by TwoIdenticalIndexes »

Market Timer was unlucky, but right

Decrying points of view as "not insightful" is the backtracking of someone who knows they are wrong. IR risk has been recognized and, by those partaking, evaluated to be worthwhile. If you have access to any investment vehicles with positive E[V] and 0 variance, I will happily lever that instead.
LittleBitMore
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by LittleBitMore »

gw wrote: Tue Feb 25, 2020 10:07 am
seersucker wrote: Mon Feb 24, 2020 8:48 pm
klaus14 wrote: Mon Feb 24, 2020 8:24 pm 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 will get crushed in any rising rate environment (like it did if you extend backtests to the 60s/70s). You're selling highly leveraged insurance against that risk, and in the backtests, it's worked out, for obvious reasons. The author of this thread tends to give glib and disingenuous replies to substantive critiques (It's a new normal! Look at the backtests!), while otherwise persistently cheerleading this "strategy."

About ten years ago, in a famous thread here, MarketTimer similarly rationalized making leveraged investments after a long run-up in the markets, garnering substantial interest from some, while others warned of impending disaster. He got *un*lucky, and everyone else got lucky, to learn a valuable lesson from his pain. So far, this has been the opposite.
The irony of claiming HF's replies are disingenuous while also siting the MarketTimer thread in which MT wildly deviated from his strategy at the single worse possible time in recent history as well was overleveraging himself well beyond his means as a comparison....and yet that story ended with him a millionaire living the life he wanted.

Amazing how no one here believes you can beat "the market" but everyone believe their specific portfolio is best ("the market" seems to take many forms)
Lee_WSP
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

LittleBitMore wrote: Tue Feb 25, 2020 10:33 am ....and yet that story ended with him a millionaire living the life he wanted.
That is the irony with anyone who ever cites the market timer thread. He ends up doing what he wanted anyway. He doesn't say how, but the story does not end in financial ruin, it ends with him rising from the ashes and accomplishing what he set out to do anyway.

And yes, if he just stayed solvent, he possibly would've come out a deca millionaire.
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Forester
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Forester »

gw wrote: Tue Feb 25, 2020 10:07 am
seersucker wrote: Mon Feb 24, 2020 8:48 pm
klaus14 wrote: Mon Feb 24, 2020 8:24 pm 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 will get crushed in any rising rate environment (like it did if you extend backtests to the 60s/70s). You're selling highly leveraged insurance against that risk, and in the backtests, it's worked out, for obvious reasons. The author of this thread tends to give glib and disingenuous replies to substantive critiques (It's a new normal! Look at the backtests!), while otherwise persistently cheerleading this "strategy."

About ten years ago, in a famous thread here, MarketTimer similarly rationalized making leveraged investments after a long run-up in the markets, garnering substantial interest from some, while others warned of impending disaster. He got *un*lucky, and everyone else got lucky, to learn a valuable lesson from his pain. So far, this has been the opposite.
July 22nd 2008

Forum member; "I hope you are diversified enough to whether a further drop in the market..."

His response; "Well diversified except for a disproportionate share of financials."

:shock: he deserves credit for sticking around I'm not judging, but ouch!
Texanbybirth
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Texanbybirth »

I wouldn't characterize the OP's responses as "disingenuous". He does have real, though not substantial in his overall portfolio, money in this strategy. I do wish he would simply update the first post in this thread with quarterly results, as he originally mentioned he would do. (ETA: I stand corrected by poster ramjet. Thank you!)

I think anyone who wants to implement this strategy should read all 100+ pages of posts between the two threads. (A discerning reader can quickly navigate the detours and off-topic arguments.) There is a logic to the strategy, but that doesn't mean you can't disagree with the premises and thus disagree with the strategy. However, since it is such a supercharged strategy (3x leverage) I wouldn't just trust any random poster's "summary" if I were considering joining the "adventure".
lock.that.stock wrote: Mon Feb 24, 2020 7:26 pm
Nicolas Perrault wrote: Mon Feb 24, 2020 6:07 pm
HEDGEFUNDIE wrote: Sun Feb 23, 2020 3:19 pm If being taken seriously means charging 3 and 30 for my ideas so be it.
Although sad, this is the funniest thing I've ever read on this forum.
Is 3 and 30 now the new 2 and 20?
Part of me thinks the OP was being tongue-in-cheek, given this is a 3x leverage strategy.
Last edited by Texanbybirth on Tue Feb 25, 2020 10:51 am, edited 1 time in total.
“The strong cannot be brave. Only the weak can be brave; and yet again, in practice, only those who can be brave can be trusted, in time of doubt, to be strong.“ - GK Chesterton
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Ramjet
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Ramjet »

Texanbybirth wrote: Tue Feb 25, 2020 10:45 am I do wish he would simply update the first post in this thread with quarterly results, as he originally mentioned he would do
He is isn't he? What I remember is him saying he will update every qtr. based on when he started. Last update was end of November so that means we're due for another at the end of February
Texanbybirth
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Texanbybirth »

Ramjet wrote: Tue Feb 25, 2020 10:49 am
Texanbybirth wrote: Tue Feb 25, 2020 10:45 am I do wish he would simply update the first post in this thread with quarterly results, as he originally mentioned he would do
He is isn't he? What I remember is him saying he will update every qtr. based on when he started. Last update was end of November so that means we're due for another at the end of February
Duh, you're exactly right. Fixed my post.

Thank you! :beer
“The strong cannot be brave. Only the weak can be brave; and yet again, in practice, only those who can be brave can be trusted, in time of doubt, to be strong.“ - GK Chesterton
MoneyMarathon
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MoneyMarathon »

TwoIdenticalIndexes wrote: Tue Feb 25, 2020 10:16 am Market Timer was unlucky, but right
Market Timer wiped out all his assets and went to a deep negative net worth. To attribute that to luck is to say that the original strategy depended on luck for its success, where success is defined merely as "not taking a bath and having to claw your way back with earned income or bankruptcy to cover investment losses." The investment strategy was deeply flawed in at least one respect.

Implementation matters. Being acutely aware of what can go very wrong - and avoiding it, not by "luck" - is extremely important, unless you're happy with losing all your money and owing some on top of that. I don't think you are.
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lock.that.stock
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by lock.that.stock »

Can someone summarize what market timer did in a few lines and what the end result was or point to the thread being discussed? Curious to know more.
TwoIdenticalIndexes
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by TwoIdenticalIndexes »

LittleBitMore wrote: Tue Feb 25, 2020 10:33 am The irony of claiming HF's replies are disingenuous while also siting the MarketTimer thread in which MT wildly deviated from his strategy at the single worse possible time in recent history as well was overleveraging himself well beyond his means as a comparison....and yet that story ended with him a millionaire living the life he wanted.

Amazing how no one here believes you can beat "the market" but everyone believe their specific portfolio is best ("the market" seems to take many forms)
Do you have the link for this / approximate page number? The thread is very long.
TwoIdenticalIndexes
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by TwoIdenticalIndexes »

lock.that.stock wrote: Tue Feb 25, 2020 11:21 am Can someone summarize what market timer did in a few lines and what the end result was or point to the thread being discussed? Curious to know more.
Heavily levered himself based on lifecycle investing strategies just before the 08 recession. Ended up 200k in debt, but worked his way out of it.
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firebirdparts
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by firebirdparts »

Years from now we'll be saying "well, it was a long thread, but most of the posts were people asking how to avoid reading it"
A fool and your money are soon partners
TwoIdenticalIndexes
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by TwoIdenticalIndexes »

MoneyMarathon wrote: Tue Feb 25, 2020 10:59 am
TwoIdenticalIndexes wrote: Tue Feb 25, 2020 10:16 am Market Timer was unlucky, but right
Market Timer wiped out all his assets and went to a deep negative net worth. To attribute that to luck is to say that the original strategy depended on luck for its success, where success is defined merely as "not taking a bath and having to claw your way back with earned income or bankruptcy to cover investment losses." The investment strategy was deeply flawed in at least one respect.

Implementation matters. Being acutely aware of what can go very wrong - and avoiding it, not by "luck" - is extremely important, unless you're happy with losing all your money and owing some on top of that. I don't think you are.
Owning assets with Variance > 0 is relying on luck according to your definition.
guyinlaw
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by guyinlaw »

AllWeatherPro wrote: Tue Feb 25, 2020 3:53 am I am just playing with PV and found that TQQQ/TMF 60/40 has the highest return per risk with timing model. DId anyone knows whats the timing model performance during the bad time during 2008 or 2000 ? not sure if the timing model works well only on the bull run or its doing good during bad time as well.
If you are timing UPRO/TMF or EDV with target volatility of 25% (for UPRO).

At end of Jan - allocation for UPRO was 81%
Today the allocation for UPRO is down to 47%.

https://docs.google.com/spreadsheets/d/ ... edit#gid=0

https://www.portfoliovisualizer.com/tes ... ion1_1=100
Time is your friend; impulse is your enemy. - John C. Bogle
Lee_WSP
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

TwoIdenticalIndexes wrote: Tue Feb 25, 2020 11:31 am
lock.that.stock wrote: Tue Feb 25, 2020 11:21 am Can someone summarize what market timer did in a few lines and what the end result was or point to the thread being discussed? Curious to know more.
Heavily levered himself based on lifecycle investing strategies just before the 08 recession. Ended up 200k in debt, but worked his way out of it.
Using maximum margin; and I don't believe he diversified with any levered bonds either. So, yeah, even at the time it was kind of clear that any significant drop would wipe out his position easily and possibly put him into debt.

This strategy can only wipe out what you bet and only if the S&P itself goes to zero or loses 1/3 in one day (virtually not possible given the built in kill switch).
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lock.that.stock
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by lock.that.stock »

Lee_WSP wrote: Tue Feb 25, 2020 11:40 am
TwoIdenticalIndexes wrote: Tue Feb 25, 2020 11:31 am
lock.that.stock wrote: Tue Feb 25, 2020 11:21 am Can someone summarize what market timer did in a few lines and what the end result was or point to the thread being discussed? Curious to know more.
Heavily levered himself based on lifecycle investing strategies just before the 08 recession. Ended up 200k in debt, but worked his way out of it.
Using maximum margin; and I don't believe he diversified with any levered bonds either. So, yeah, even at the time it was kind of clear that any significant drop would wipe out his position easily and possibly put him into debt.

This strategy can only wipe out what you bet and only if the S&P itself goes to zero or loses 1/3 in one day (virtually not possible given the built in kill switch).
Thanks for the info. How did he get himself out from being 200k under?

FYI I believe there are a few here using margin for this strategy.
Lee_WSP
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

lock.that.stock wrote: Tue Feb 25, 2020 11:44 am
Lee_WSP wrote: Tue Feb 25, 2020 11:40 am
TwoIdenticalIndexes wrote: Tue Feb 25, 2020 11:31 am
lock.that.stock wrote: Tue Feb 25, 2020 11:21 am Can someone summarize what market timer did in a few lines and what the end result was or point to the thread being discussed? Curious to know more.
Heavily levered himself based on lifecycle investing strategies just before the 08 recession. Ended up 200k in debt, but worked his way out of it.
Using maximum margin; and I don't believe he diversified with any levered bonds either. So, yeah, even at the time it was kind of clear that any significant drop would wipe out his position easily and possibly put him into debt.

This strategy can only wipe out what you bet and only if the S&P itself goes to zero or loses 1/3 in one day (virtually not possible given the built in kill switch).
Thanks for the info. How did he get himself out from being 200k under?

FYI I believe there are a few here using margin for this strategy.
He has been less than forthcoming with that information other than saying he earned his way out of it. Presumably he was in the beginning of a very well paid career doing something in 2007/8; hence why he levered up so very heavily based on lifecycle investing theory (his future earnings would be so extreme that to equal them today he had to lever up 10x (I mean said that way, the end result was kind of obvious if even a minor pullback occurred).

That he is now a millionaire and semi retired without using leverage indicates that it was a very very well paid career.

Also left unsaid would have been any family support. Also, it is left unsaid whether he had any debt forgiven, but if he made 200k/yr it wasn't that big of a hole. And I suspect he made more than that (ie a surgeon's salary or something like that).
MoneyMarathon
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MoneyMarathon »

lock.that.stock wrote: Tue Feb 25, 2020 11:21 am Can someone summarize what market timer did in a few lines and what the end result was or point to the thread being discussed? Curious to know more.
viewtopic.php?t=5934
"Summary: Econ grad student applies Mortgage Your Retirement theory at the top of the last bull market, starting around 2x leverage, loses $210K of borrowed money, and is forced is to sell what's left of his portfolio at S&P 821 in November 2008."
"100% equities"
"2x S&P 500 funds use a constant rate of leverage. This implies that they will buy stocks as the market rises and sell them as the market falls. When the market is volatile without direction, the 2x funds lose money due to this unsuccessful momentum trading. The leverage I suggest is not constant. In fact, as the market rises, to maintain constant equity exposure, you are required to sell. As the market falls, you are required to buy more. LEAPS, as one method to obtain leverage, will act like an investment purchased on margin (without the risk of margin call). Therefore, your leverage increases as the market falls and decreases as the market rises for any particular LEAP."
"Yes, there is an optimal amount of constant leverage if one's goal is to maximize geometric mean returns for equity investments. I recall it's around 2x. My goal is not to maximize geometric mean returns because: 1. This isn't an infinitely repeated game. 2. I have future cash flows to consider."
"Down $28K today. Ridiculously leveraged right now, almost 10x."
"I'm scrambling to reduce leverage by raising capital and only selling if forced. I still have a little flexibility to sell equities and buy futures as a way to increase leverage. It is annoying and humiliating; for example, requesting an advance check from payroll. I wish there were a way for me to securitize, or otherwise somehow borrow against, human capital."
"There's nothing like waking up to forced liquidation.
Equity exposure: $370K
Net worth: -$105K
High score on Galaga: 225K"

Some lessons that could be learned if you don't want to get burned:

(1) Lifecycle is junk. Kelly is king. Go for maximum geometric returns, or fractional Kelly according to risk tolerance.

(2) Varying leverage like that is a Martingale betting strategy, and Martingale is for losers. Cap that multiplier nice and tight.

(3) Sharpe matters. Don't leverage any old inefficient portfolio. Again, lifecycle is junk. Go for higher risk-adjusted returns.

(4) Know what leverage is appropriate for your portfolio. There's an inflection point. Less is more.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by TwoIdenticalIndexes »

Lee_WSP wrote: Tue Feb 25, 2020 11:50 am
lock.that.stock wrote: Tue Feb 25, 2020 11:44 am
Lee_WSP wrote: Tue Feb 25, 2020 11:40 am
TwoIdenticalIndexes wrote: Tue Feb 25, 2020 11:31 am
lock.that.stock wrote: Tue Feb 25, 2020 11:21 am Can someone summarize what market timer did in a few lines and what the end result was or point to the thread being discussed? Curious to know more.
Heavily levered himself based on lifecycle investing strategies just before the 08 recession. Ended up 200k in debt, but worked his way out of it.
Using maximum margin; and I don't believe he diversified with any levered bonds either. So, yeah, even at the time it was kind of clear that any significant drop would wipe out his position easily and possibly put him into debt.

This strategy can only wipe out what you bet and only if the S&P itself goes to zero or loses 1/3 in one day (virtually not possible given the built in kill switch).
Thanks for the info. How did he get himself out from being 200k under?

FYI I believe there are a few here using margin for this strategy.
He has been less than forthcoming with that information other than saying he earned his way out of it. Presumably he was in the beginning of a very well paid career doing something in 2007/8; hence why he levered up so very heavily based on lifecycle investing theory (his future earnings would be so extreme that to equal them today he had to lever up 10x (I mean said that way, the end result was kind of obvious if even a minor pullback occurred).

That he is now a millionaire and semi retired without using leverage indicates that it was a very very well paid career.

Also left unsaid would have been any family support. Also, it is left unsaid whether he had any debt forgiven, but if he made 200k/yr it wasn't that big of a hole. And I suspect he made more than that (ie a surgeon's salary or something like that).
He was in grad school for economics, so likely some sort of finance / consulting / in-house role.
MoneyMarathon
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MoneyMarathon »

TwoIdenticalIndexes wrote: Tue Feb 25, 2020 11:33 am
MoneyMarathon wrote: Tue Feb 25, 2020 10:59 am
TwoIdenticalIndexes wrote: Tue Feb 25, 2020 10:16 am Market Timer was unlucky, but right
Market Timer wiped out all his assets and went to a deep negative net worth. To attribute that to luck is to say that the original strategy depended on luck for its success, where success is defined merely as "not taking a bath and having to claw your way back with earned income or bankruptcy to cover investment losses." The investment strategy was deeply flawed in at least one respect.

Implementation matters. Being acutely aware of what can go very wrong - and avoiding it, not by "luck" - is extremely important, unless you're happy with losing all your money and owing some on top of that. I don't think you are.
Owning assets with Variance > 0 is relying on luck according to your definition.
Returns do not actually follow a normal distribution.

There are plenty of portfolios with variance > 0 that never land you in debt.

Also, your defense is ridiculous on the facts of the case. A large stock market decline has happened dozens of times. A portfolio set up to land someone in debt because the stock market goes in half is a self-inflicted wound waiting to happen.
Texanbybirth
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Texanbybirth »

firebirdparts wrote: Tue Feb 25, 2020 11:33 am Years from now we'll be saying "well, it was a long thread, but most of the posts were people asking how to avoid reading it"
Lol, my thoughts exactly.
“The strong cannot be brave. Only the weak can be brave; and yet again, in practice, only those who can be brave can be trusted, in time of doubt, to be strong.“ - GK Chesterton
TwoIdenticalIndexes
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by TwoIdenticalIndexes »

MoneyMarathon wrote: Tue Feb 25, 2020 11:59 am
TwoIdenticalIndexes wrote: Tue Feb 25, 2020 11:33 am
MoneyMarathon wrote: Tue Feb 25, 2020 10:59 am
TwoIdenticalIndexes wrote: Tue Feb 25, 2020 10:16 am Market Timer was unlucky, but right
Market Timer wiped out all his assets and went to a deep negative net worth. To attribute that to luck is to say that the original strategy depended on luck for its success, where success is defined merely as "not taking a bath and having to claw your way back with earned income or bankruptcy to cover investment losses." The investment strategy was deeply flawed in at least one respect.

Implementation matters. Being acutely aware of what can go very wrong - and avoiding it, not by "luck" - is extremely important, unless you're happy with losing all your money and owing some on top of that. I don't think you are.
Owning assets with Variance > 0 is relying on luck according to your definition.
Returns do not actually follow a normal distribution.

There are plenty of portfolios with variance > 0 that never land you in debt.

Also, your defense is ridiculous on the facts of the case. A large stock market decline has happened dozens of times. A portfolio set up to land someone in debt because the stock market goes in half is a self-inflicted wound waiting to happen.
Eyeroll for innumeracy. Using variance doesn't imply normal distributions. It's merely deviation of the data (set of realized or realizable outcomes) from the mean (E[V]).

100% UPRO never lands you in debt, but it also does not satisfy reasonably investment goals. You're being purposefully obtuse.

The very obvious premise of lifecycle investing is that risking being in debt is OK if it reduces your lifetime earnings variance. If you don't understand what variance is, and want to avoid any "luck" getting near your portfolio, I would point you to gold commodities, but even they are subject to supply shocks from new reserve discoveries. You'd better not save at all!
MoneyMarathon
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MoneyMarathon »

TwoIdenticalIndexes wrote: Tue Feb 25, 2020 12:20 pm Eyeroll for innumeracy. Using variance doesn't imply normal distributions.
I already know that. Precisely why I mentioned variance in the context of a distribution that is not normal.
TwoIdenticalIndexes wrote: Tue Feb 25, 2020 12:20 pmThe very obvious premise of lifecycle investing is that risking being in debt is OK if it reduces your lifetime earnings variance.
Indeed. And, for most people, losing their entire nest egg is not okay.

Even if it's year 1 and "just" being liquidated by the broker and losing $200k.
TwoIdenticalIndexes wrote: Tue Feb 25, 2020 12:20 pmIf you don't understand what variance is
You're both wrong and arrogant with these insults.

Again, your defense is ridiculous on the facts of the case. A large stock market decline has happened dozens of times. A portfolio set up to land someone in debt because the stock market goes in half is a self-inflicted wound waiting to happen. End of story.

I'm sure you'll come back with more to feel better about ignoring the obvious & not even being good at nitpicking at the same time.
TwoIdenticalIndexes
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by TwoIdenticalIndexes »

MoneyMarathon wrote: Tue Feb 25, 2020 12:34 pm
TwoIdenticalIndexes wrote: Tue Feb 25, 2020 12:20 pm Eyeroll for innumeracy. Using variance doesn't imply normal distributions.
I already know that. Precisely why I mentioned variance in the context of a distribution that is not normal.
TwoIdenticalIndexes wrote: Tue Feb 25, 2020 12:20 pmThe very obvious premise of lifecycle investing is that risking being in debt is OK if it reduces your lifetime earnings variance.
Indeed. And, for most people, losing their entire nest egg is not okay.

Even if it's year 1 and "just" being liquidated by the broker and losing $200k.
TwoIdenticalIndexes wrote: Tue Feb 25, 2020 12:20 pmIf you don't understand what variance is
You're both wrong and arrogant with these insults.

Again, your defense is ridiculous on the facts of the case. A large stock market decline has happened dozens of times. A portfolio set up to land someone in debt because the stock market goes in half is a self-inflicted wound waiting to happen. End of story.

I'm sure you'll come back with more to feel better ignoring the obvious & not even being good at nitpicking at the same time.

It's funny that I'm the arrogant one because I told you something you claim that you knew when you felt the need to bold something even more obvious to me a comment prior. Waving your arms over "insults" is also funny with all the accusations of being "ridiculous" and "arrogant" you sent my way initially.

You admit that life-cycle investing does achieve its goal of earnings variance reduction. This is sufficient to prove that Market Timer was, at the core, correct. The only counter-assertion you offered was that losing an undefined amount of money was "not ok" for "most people." This is a pretty clearly irrational utility curve. A rational utility curve is concerned with lifetime consumption (or earnings) distribution and only pays attention to debt to the extent that it limits or enables lifetime consumption. Even if most people have it an irrational utility curve, Market Timer didn't. He didn't try to force anyone else to use his strategy, just implemented a correct strategy and got the low end of the possible outcomes.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by shoehead »

guyinlaw wrote: Tue Feb 25, 2020 11:36 am
AllWeatherPro wrote: Tue Feb 25, 2020 3:53 am I am just playing with PV and found that TQQQ/TMF 60/40 has the highest return per risk with timing model. DId anyone knows whats the timing model performance during the bad time during 2008 or 2000 ? not sure if the timing model works well only on the bull run or its doing good during bad time as well.
If you are timing UPRO/TMF or EDV with target volatility of 25% (for UPRO).

At end of Jan - allocation for UPRO was 81%
Today the allocation for UPRO is down to 47%.

https://docs.google.com/spreadsheets/d/ ... edit#gid=0

https://www.portfoliovisualizer.com/tes ... ion1_1=100
Yeah this was a bad month for the timing model...stupid beer virus
guyinlaw
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by guyinlaw »

shoehead wrote: Tue Feb 25, 2020 1:01 pm
guyinlaw wrote: Tue Feb 25, 2020 11:36 am
AllWeatherPro wrote: Tue Feb 25, 2020 3:53 am I am just playing with PV and found that TQQQ/TMF 60/40 has the highest return per risk with timing model. DId anyone knows whats the timing model performance during the bad time during 2008 or 2000 ? not sure if the timing model works well only on the bull run or its doing good during bad time as well.
If you are timing UPRO/TMF or EDV with target volatility of 25% (for UPRO).

At end of Jan - allocation for UPRO was 81%
Today the allocation for UPRO is down to 47%.

https://docs.google.com/spreadsheets/d/ ... edit#gid=0

https://www.portfoliovisualizer.com/tes ... ion1_1=100
Yeah this was a bad month for the timing model...stupid beer virus
Actually timing model with target volatility has done better..

Since Jan 2010
UPRO/TMF - CAGR - Sharpe
55/45 - 29.42% - 1.37
100/0 - 32.40% - 0.92
Timing - 37.00% - 1.43

See PV Link above.. Timing has the lowest drawdowns..

viewtopic.php?t=281691
Time is your friend; impulse is your enemy. - John C. Bogle
Busdrvr
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Busdrvr »

Texanbybirth wrote: Tue Feb 25, 2020 10:52 am
Ramjet wrote: Tue Feb 25, 2020 10:49 am
Texanbybirth wrote: Tue Feb 25, 2020 10:45 am I do wish he would simply update the first post in this thread with quarterly results, as he originally mentioned he would do
He is isn't he? What I remember is him saying he will update every qtr. based on when he started. Last update was end of November so that means we're due for another at the end of February
Duh, you're exactly right. Fixed my post.

Thank you! :beer

On 1/1/20 HF said EOY was plus 60%
hilink73
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by hilink73 »

shoehead wrote: Tue Feb 25, 2020 1:01 pm
guyinlaw wrote: Tue Feb 25, 2020 11:36 am
AllWeatherPro wrote: Tue Feb 25, 2020 3:53 am I am just playing with PV and found that TQQQ/TMF 60/40 has the highest return per risk with timing model. DId anyone knows whats the timing model performance during the bad time during 2008 or 2000 ? not sure if the timing model works well only on the bull run or its doing good during bad time as well.
If you are timing UPRO/TMF or EDV with target volatility of 25% (for UPRO).

At end of Jan - allocation for UPRO was 81%
Today the allocation for UPRO is down to 47%.

https://docs.google.com/spreadsheets/d/ ... edit#gid=0

https://www.portfoliovisualizer.com/tes ... ion1_1=100
Yeah this was a bad month for the timing model...stupid beer virus
Yes, that went down the drain quite fast... hehe
Thesaints
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Thesaints »

LittleBitMore wrote: Tue Feb 25, 2020 10:33 am Amazing how no one here believes you can beat "the market" ...
All the opposite. Whoever has a solid grasp of the theory is firmly convinced that one can beat the market. The issue is that they are not likely to do so and, once we consider carefully, their chances of beating the market are lower than the chances of underperforming it.

gw's post is spot on. Backtesting, and above all blind backtesting without understanding the forces in play, has very little practical value.
hilink73
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by hilink73 »

guyinlaw wrote: Tue Feb 25, 2020 11:36 am
AllWeatherPro wrote: Tue Feb 25, 2020 3:53 am I am just playing with PV and found that TQQQ/TMF 60/40 has the highest return per risk with timing model. DId anyone knows whats the timing model performance during the bad time during 2008 or 2000 ? not sure if the timing model works well only on the bull run or its doing good during bad time as well.
If you are timing UPRO/TMF or EDV with target volatility of 25% (for UPRO).

At end of Jan - allocation for UPRO was 81%
Today the allocation for UPRO is down to 47%.

https://docs.google.com/spreadsheets/d/ ... edit#gid=0

https://www.portfoliovisualizer.com/tes ... ion1_1=100
How do you get the spreadsheet show you the newest data (February).
Mine is stuck with the data for January.

(Asked that in the target vol. threat, too. Sorry for cross-posting).


Thanks
guyinlaw
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by guyinlaw »

hilink73 wrote: Tue Feb 25, 2020 3:42 pm
guyinlaw wrote: Tue Feb 25, 2020 11:36 am
AllWeatherPro wrote: Tue Feb 25, 2020 3:53 am I am just playing with PV and found that TQQQ/TMF 60/40 has the highest return per risk with timing model. DId anyone knows whats the timing model performance during the bad time during 2008 or 2000 ? not sure if the timing model works well only on the bull run or its doing good during bad time as well.
If you are timing UPRO/TMF or EDV with target volatility of 25% (for UPRO).

At end of Jan - allocation for UPRO was 81%
Today the allocation for UPRO is down to 47%.

https://docs.google.com/spreadsheets/d/ ... edit#gid=0

https://www.portfoliovisualizer.com/tes ... ion1_1=100
How do you get the spreadsheet show you the newest data (February).
Mine is stuck with the data for January.

(Asked that in the target vol. threat, too. Sorry for cross-posting).


Thanks
I made a copy of the spreadsheet and edited the sheet to change the formula that draws the January data, to get data for last 30 days... If you want to follow this rigorously, you might want to buy the portfolio visualizer subscription..

Code: Select all

=GOOGLEFINANCE(I$2, "price", DATE($C$3,$C$4,1)-1,MIN(DATE($C$3,$C$4+1,1)-1,TODAY()),"DAILY")
to
=GOOGLEFINANCE(I$2, "price", DATE($C$3,$C$4,27)-1,MIN(DATE($C$3,$C$4+1,26)-1,TODAY()),"DAILY")
IMO timing is the better way to hold UPRO.. the data below shows it.. I will let the experts chime in..

Since Jan 2010 - comparing timing with target volatility of 25%..
UPRO/TMF - CAGR - Sharpe
55/45 - 29.42% - 1.37
100/0 - 32.40% - 0.92
Timing - 37.00% - 1.43
Time is your friend; impulse is your enemy. - John C. Bogle
Lee_WSP
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

guyinlaw wrote: Tue Feb 25, 2020 4:23 pm
IMO timing is the better way to hold UPRO.. the data below shows it.. I will let the experts chime in..

Since Jan 2010 - comparing timing with target volatility of 25%..
UPRO/TMF - CAGR - Sharpe
55/45 - 29.42% - 1.37
100/0 - 32.40% - 0.92
Timing - 37.00% - 1.43
Timing using what metric?
guyinlaw
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by guyinlaw »

Lee_WSP wrote: Tue Feb 25, 2020 4:28 pm
guyinlaw wrote: Tue Feb 25, 2020 4:23 pm
IMO timing is the better way to hold UPRO.. the data below shows it.. I will let the experts chime in..

Since Jan 2010 - comparing timing with target volatility of 25%..
UPRO/TMF - CAGR - Sharpe
55/45 - 29.42% - 1.37
100/0 - 32.40% - 0.92
Timing - 37.00% - 1.43
Timing using what metric?
target volatility of UPRO at 25%

viewtopic.php?t=281691

https://www.portfoliovisualizer.com/tes ... ion1_1=100

https://docs.google.com/spreadsheets/d/ ... edit#gid=0
Time is your friend; impulse is your enemy. - John C. Bogle
hilink73
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by hilink73 »

guyinlaw wrote: Tue Feb 25, 2020 4:23 pm
hilink73 wrote: Tue Feb 25, 2020 3:42 pm
guyinlaw wrote: Tue Feb 25, 2020 11:36 am
AllWeatherPro wrote: Tue Feb 25, 2020 3:53 am I am just playing with PV and found that TQQQ/TMF 60/40 has the highest return per risk with timing model. DId anyone knows whats the timing model performance during the bad time during 2008 or 2000 ? not sure if the timing model works well only on the bull run or its doing good during bad time as well.
If you are timing UPRO/TMF or EDV with target volatility of 25% (for UPRO).

At end of Jan - allocation for UPRO was 81%
Today the allocation for UPRO is down to 47%.

https://docs.google.com/spreadsheets/d/ ... edit#gid=0

https://www.portfoliovisualizer.com/tes ... ion1_1=100
How do you get the spreadsheet show you the newest data (February).
Mine is stuck with the data for January.

(Asked that in the target vol. threat, too. Sorry for cross-posting).


Thanks
I made a copy of the spreadsheet and edited the sheet to change the formula that draws the January data, to get data for last 30 days... If you want to follow this rigorously, you might want to buy the portfolio visualizer subscription..

Code: Select all

=GOOGLEFINANCE(I$2, "price", DATE($C$3,$C$4,1)-1,MIN(DATE($C$3,$C$4+1,1)-1,TODAY()),"DAILY")
to
=GOOGLEFINANCE(I$2, "price", DATE($C$3,$C$4,27)-1,MIN(DATE($C$3,$C$4+1,26)-1,TODAY()),"DAILY")
IMO timing is the better way to hold UPRO.. the data below shows it.. I will let the experts chime in..

Since Jan 2010 - comparing timing with target volatility of 25%..
UPRO/TMF - CAGR - Sharpe
55/45 - 29.42% - 1.37
100/0 - 32.40% - 0.92
Timing - 37.00% - 1.43
Great, thanks. I guess I'd need a Googel account for that.
I've managed to save as LibreOffice Calc file and put in the data manually.
Which gets me
41.90% UPRO
58.10% TMF
for 25% target volatility.


Already down a few grand. :moneybag Still in it, though. :beer

My next rebalancing date would be end of February, trading 1st of March.
Lee_WSP
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

guyinlaw wrote: Tue Feb 25, 2020 4:36 pm
Lee_WSP wrote: Tue Feb 25, 2020 4:28 pm
guyinlaw wrote: Tue Feb 25, 2020 4:23 pm
IMO timing is the better way to hold UPRO.. the data below shows it.. I will let the experts chime in..

Since Jan 2010 - comparing timing with target volatility of 25%..
UPRO/TMF - CAGR - Sharpe
55/45 - 29.42% - 1.37
100/0 - 32.40% - 0.92
Timing - 37.00% - 1.43
Timing using what metric?
target volatility of UPRO at 25%

viewtopic.php?t=281691

https://www.portfoliovisualizer.com/tes ... ion1_1=100

https://docs.google.com/spreadsheets/d/ ... edit#gid=0
Gotcha.

Well, changing a single variable in that timing model changes the result to no difference.

https://www.portfoliovisualizer.com/tes ... ion1_1=100

As such, I cannot say that the evidence for consistently better returns than B&H is compelling.
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Crushtheturtle
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Crushtheturtle »

What has two thumbs and bought more UPRO today?
If you're not having fun, you'll just have to pretend.
effigy98
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by effigy98 »

Getting wrecked. Make the pain stop! TMF and Gold, why are you not saving me today?
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by LadyGeek »

Opposing points of view are welcome, but an an extended interchange got contentious and derailed the thread (sowing dissension). Those posts have been removed. As a reminder, see: General Etiquette
We expect this forum to be a place where people can feel comfortable asking questions and where debates and discussions are conducted in civil tones.

At all times we must conduct ourselves in a respectful manner to other posters. Attacks on individuals, insults, name calling, trolling, baiting or other attempts to sow dissension are not acceptable.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by langlands »

effigy98 wrote: Tue Feb 25, 2020 8:34 pm Getting wrecked. Make the pain stop! TMF and Gold, why are you not saving me today?
Well, TMF did what it was supposed to to an extent. Hard to explain the gold though (not like you can on a daily basis anyway, it's all just statistical correlations).
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by firebirdparts »

I decided to rebalance. We'll see if I was right.
A fool and your money are soon partners
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

effigy98 wrote: Tue Feb 25, 2020 8:34 pm Getting wrecked. Make the pain stop! TMF and Gold, why are you not saving me today?
TMF didn't help during Black Monday; in fact it made it worse. Why would you think it couldn't happen again?
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by getjiggy »

firebirdparts wrote: Tue Feb 25, 2020 10:49 pm I decided to rebalance. We'll see if I was right.
Does the OP strategy prescribes ONLY quarterly rebalance or is there an exception in-between if band threshold breaches? For example, my TMF is now 54% and UPRO is 45% and my next quarterly rebalance is not due until 5/13.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

getjiggy wrote: Tue Feb 25, 2020 10:59 pm
firebirdparts wrote: Tue Feb 25, 2020 10:49 pm I decided to rebalance. We'll see if I was right.
Does the OP strategy prescribes ONLY quarterly rebalance or is there an exception in-between if band threshold breaches? For example, my TMF is now 54% and UPRO is 45% and my next quarterly rebalance is not due until 5/13.
No. But whatever you choose, stick with the plan.
GodzillaBorland
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by GodzillaBorland »

firebirdparts wrote: Tue Feb 25, 2020 10:49 pm I decided to rebalance. We'll see if I was right.
Given the 2 day massacre I was curious how HEDGEFUNDIE's strategy worked. This is probably a test as any given it is the worst 2 day drop in history. From the portfolio results page, https://wantelbos.github.io/, I see the value is ~170K, is this correct?
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Momus »

guyinlaw wrote: Tue Feb 25, 2020 11:36 am
AllWeatherPro wrote: Tue Feb 25, 2020 3:53 am I am just playing with PV and found that TQQQ/TMF 60/40 has the highest return per risk with timing model. DId anyone knows whats the timing model performance during the bad time during 2008 or 2000 ? not sure if the timing model works well only on the bull run or its doing good during bad time as well.
If you are timing UPRO/TMF or EDV with target volatility of 25% (for UPRO).

At end of Jan - allocation for UPRO was 81%
Today the allocation for UPRO is down to 47%.

https://docs.google.com/spreadsheets/d/ ... edit#gid=0

https://www.portfoliovisualizer.com/tes ... ion1_1=100
How are you timing it? Can you explain?
Momus
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Momus »

lock.that.stock wrote: Tue Feb 25, 2020 11:44 am
Lee_WSP wrote: Tue Feb 25, 2020 11:40 am
TwoIdenticalIndexes wrote: Tue Feb 25, 2020 11:31 am
lock.that.stock wrote: Tue Feb 25, 2020 11:21 am Can someone summarize what market timer did in a few lines and what the end result was or point to the thread being discussed? Curious to know more.
Heavily levered himself based on lifecycle investing strategies just before the 08 recession. Ended up 200k in debt, but worked his way out of it.
Using maximum margin; and I don't believe he diversified with any levered bonds either. So, yeah, even at the time it was kind of clear that any significant drop would wipe out his position easily and possibly put him into debt.

This strategy can only wipe out what you bet and only if the S&P itself goes to zero or loses 1/3 in one day (virtually not possible given the built in kill switch).
Thanks for the info. How did he get himself out from being 200k under?

FYI I believe there are a few here using margin for this strategy.
I think MT is making 300k+/yr with his main job nowadays. Easy to wipe out 200k debt.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by mrspock »

GodzillaBorland wrote: Wed Feb 26, 2020 12:34 am
firebirdparts wrote: Tue Feb 25, 2020 10:49 pm I decided to rebalance. We'll see if I was right.
Given the 2 day massacre I was curious how HEDGEFUNDIE's strategy worked. This is probably a test as any given it is the worst 2 day drop in history. From the portfolio results page, https://wantelbos.github.io/, I see the value is ~170K, is this correct?
I'm doing the 50/50 version of this, I'm down a whopping 4.5% over the last 2 days (still up an embarrassingly large amount). *yawn* Honestly I'm surprised at the astonishing lack of resolve those in the accumulation phase (angst from retired folks is a bit more understandable) have had over the last 2 days.

It's not as if the thousands of investing books haven't indicated exactly this sort of thing would happen. Black swans, systemic risk, crashes, corrections etc. They even tell you what to do: stand here and do nothing, it's just not that hard. As Buffet might say: lots of naked swimmers out there I guess...
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privatefarmer
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by privatefarmer »

Was up to $1.1mil two days ago.

Now down to $950k. Yeehaw!!!

Will be increasing my margin loan in the AM to make up for the selling my LETFs have done over the last two days.
sweetnpsycho
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by sweetnpsycho »

Let's say you stick with this and grow your investments immensely.

How big could your trades be before you significantly affect the market.

For example, if you're doing target volatility rebalancing every month with total asset of $10 million and could switch from 100% of one asset to another.

Or if Hedgefundie achieves his goal of $10 million and wants to liquidate.
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