HEDGEFUNDIE's excellent adventure Part II: The next journey

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
DaveG75
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Joined: Thu Oct 10, 2019 4:57 pm

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

Post by DaveG75 » Fri Mar 13, 2020 5:32 pm

marky2kk wrote:
Wed Mar 11, 2020 7:48 pm
HEDGEFUNDIE wrote:
Wed Mar 11, 2020 7:06 pm
AHTFY wrote:
Wed Mar 11, 2020 6:31 pm
DaveG75 wrote:
Wed Mar 11, 2020 6:25 pm
shoehead wrote:
Wed Mar 11, 2020 11:54 am


Why would a stimulus package increase rates? Not debating, just trying to learn. Can anyone give a concise answer as to why treasuries are falling?
In general terms, the more one borrows, the higher the interest rate you must pay. A large stimulus package is paid for by borrowing more (running a larger deficit). Of course, that is ignoring all sorts of other forces, such as petrodollar flows, flight-to-safety, the money like quality of U.S. debt, liquidity, leverage, etc. etc. etc. No one can give a concise answer as to why treasuries are doing anything at any point in time. However, it is generally true that movements of U.S. equities and U.S. long term treasuries are negatively correlated.
Actually, the correlation of US equities and US long-term Treasuries is about zero. But since the early 1980s, the correlation has been negative and that's what people seem to remember.
Yeah it's almost like something fundamental changed in the early 80s...
Like the way the Fed conducted monetary policy after Volcker...

With inflation expectations so low and the Philipps curve dead, there is perhaps room for another structural shock to how monetary policy is conducted. I see no cost for the Fed to lower interest rates into deep negative territory (except for costs that will only be known with hindsight, like a 30-year flat stock market as in Japan).

Speaking of Japan, I never really understood Japan. Some people said it was demographics, etc., but it doesn't seems that's the reason because it happened in Europe, it appear to be happening in the U.S. as well. Is there any way you could test the strategy on the Japanese market for the last 30 years? Would be curious to see how the strategy would have done with a flat market and litte variation in long-term yields.
I think Hedgefundie is referring to the fact that bonds were callable until about 1985. A callable note is a very different instrument.

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

Post by HEDGEFUNDIE » Fri Mar 13, 2020 5:36 pm

Apropos of nothing, just wanted to point out that UPRO is down 55% in the past month while VOO is down 20%. Over the course of what is likely the most volatile month ever for the stock market.

Where are the volatility decay haters?

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

Post by Lee_WSP » Fri Mar 13, 2020 5:39 pm

HEDGEFUNDIE wrote:
Fri Mar 13, 2020 5:36 pm
Apropos of nothing, just wanted to point out that UPRO is down 55% in the past month while VOO is down 20%. Over the course of what is likely the most volatile month ever for the stock market.

Where are the volatility decay haters?
Vol decay is some sort of a weird boogeyman that doesn't show up in the historical record for stocks.

It does affect TMF, but the gains are still better than unlevered. They're just much lower than you'd expect for 3x flat leverage.

Keep on keeping on. :beer

The Adventure will continue to be one of my favorite topics here.

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

Post by RandomWord » Fri Mar 13, 2020 5:48 pm

HEDGEFUNDIE wrote:
Fri Mar 13, 2020 5:36 pm
Apropos of nothing, just wanted to point out that UPRO is down 55% in the past month while VOO is down 20%. Over the course of what is likely the most volatile month ever for the stock market.

Where are the volatility decay haters?
Isn't that because it's selling off as VOO goes down, so the effective stock position is less each day? The volatility decay will show up if/when VOO goes back to even, and UPRO is somewhere below even.

Topic Author
HEDGEFUNDIE
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by HEDGEFUNDIE » Fri Mar 13, 2020 5:49 pm

RandomWord wrote:
Fri Mar 13, 2020 5:48 pm
HEDGEFUNDIE wrote:
Fri Mar 13, 2020 5:36 pm
Apropos of nothing, just wanted to point out that UPRO is down 55% in the past month while VOO is down 20%. Over the course of what is likely the most volatile month ever for the stock market.

Where are the volatility decay haters?
Isn't that because it's selling off as VOO goes down, so the effective stock position is less each day? The volatility decay will show up if/when VOO goes back to even, and UPRO is somewhere below even.
I wasn't aware that volatility decay can decide to "show up" or not. Or so the haters would have you believe...

Lee_WSP
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Location: Arizona

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

Post by Lee_WSP » Fri Mar 13, 2020 5:53 pm

HEDGEFUNDIE wrote:
Fri Mar 13, 2020 5:49 pm
RandomWord wrote:
Fri Mar 13, 2020 5:48 pm
HEDGEFUNDIE wrote:
Fri Mar 13, 2020 5:36 pm
Apropos of nothing, just wanted to point out that UPRO is down 55% in the past month while VOO is down 20%. Over the course of what is likely the most volatile month ever for the stock market.

Where are the volatility decay haters?
Isn't that because it's selling off as VOO goes down, so the effective stock position is less each day? The volatility decay will show up if/when VOO goes back to even, and UPRO is somewhere below even.
I wasn't aware that volatility decay can decide to "show up" or not. Or so the haters would have you believe...
Why do we always have to rehash the volatility decay issue?

It only happens if it goes up and down for a prolonged period of time, ending at the starting point. Stocks generally don't do that, so vol decay for stocks is hardly ever going to happen. But it may have shown up in the 60's & 70's.

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

Post by MoneyMarathon » Fri Mar 13, 2020 5:56 pm

HEDGEFUNDIE wrote:
Fri Mar 13, 2020 5:49 pm
RandomWord wrote:
Fri Mar 13, 2020 5:48 pm
Isn't that because it's selling off as VOO goes down, so the effective stock position is less each day? The volatility decay will show up if/when VOO goes back to even, and UPRO is somewhere below even.
I wasn't aware that volatility decay can decide to "show up" or not. Or so the haters would have you believe...
Pretty sure we've sussed out the nuances of "volatility decay" previously and the fact that it's actually a benefit over strings of down days or strings of up days. It might be prudent to measure the effect from one price level of SPY to the same price level later, since it becomes detrimental if and only if the movement is zig-zag. To the extant that the long term trend is gently or steadfastly upwards, and to the extent that the downtrends look like the last two weeks, yes, "volatility decay" can be mostly a non-issue and sometimes beneficial. (Even more so if you time the rebalance well.)

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

Post by ThereAreNoGurus » Fri Mar 13, 2020 6:03 pm

Lee_WSP wrote:
Fri Mar 13, 2020 5:39 pm
HEDGEFUNDIE wrote:
Fri Mar 13, 2020 5:36 pm
Apropos of nothing, just wanted to point out that UPRO is down 55% in the past month while VOO is down 20%. Over the course of what is likely the most volatile month ever for the stock market.

Where are the volatility decay haters?
Vol decay is some sort of a weird boogeyman that doesn't show up in the historical record for stocks.

It does affect TMF, but the gains are still better than unlevered. They're just much lower than you'd expect for 3x flat leverage.

Keep on keeping on. :beer

The Adventure will continue to be one of my favorite topics here.
Same here (and my favorite holding :D ).
Trade the news and you will lose.

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

Post by RandomWord » Fri Mar 13, 2020 6:10 pm

HEDGEFUNDIE wrote:
Fri Mar 13, 2020 5:49 pm
RandomWord wrote:
Fri Mar 13, 2020 5:48 pm
HEDGEFUNDIE wrote:
Fri Mar 13, 2020 5:36 pm
Apropos of nothing, just wanted to point out that UPRO is down 55% in the past month while VOO is down 20%. Over the course of what is likely the most volatile month ever for the stock market.

Where are the volatility decay haters?
Isn't that because it's selling off as VOO goes down, so the effective stock position is less each day? The volatility decay will show up if/when VOO goes back to even, and UPRO is somewhere below even.
I wasn't aware that volatility decay can decide to "show up" or not. Or so the haters would have you believe...
I think you're becoming too emotionally invested in this. I wasn't criticizing you or your strategy, just trying to explain the price movements. If you've got a better explanation, let me know. No need for sarcasm.

Lee_WSP
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Location: Arizona

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

Post by Lee_WSP » Fri Mar 13, 2020 6:19 pm

RandomWord wrote:
Fri Mar 13, 2020 6:10 pm
HEDGEFUNDIE wrote:
Fri Mar 13, 2020 5:49 pm
RandomWord wrote:
Fri Mar 13, 2020 5:48 pm
HEDGEFUNDIE wrote:
Fri Mar 13, 2020 5:36 pm
Apropos of nothing, just wanted to point out that UPRO is down 55% in the past month while VOO is down 20%. Over the course of what is likely the most volatile month ever for the stock market.

Where are the volatility decay haters?
Isn't that because it's selling off as VOO goes down, so the effective stock position is less each day? The volatility decay will show up if/when VOO goes back to even, and UPRO is somewhere below even.
I wasn't aware that volatility decay can decide to "show up" or not. Or so the haters would have you believe...
I think you're becoming too emotionally invested in this. I wasn't criticizing you or your strategy, just trying to explain the price movements. If you've got a better explanation, let me know. No need for sarcasm.
Peak to trough and back again, UPRO only lost 3% to volatility decay the last go around in 2018.

https://www.portfoliovisualizer.com/bac ... ion2_2=100

Compared to a 3x margin account, the "decay" is really not that bad.

https://www.portfoliovisualizer.com/bac ... ion2_2=100

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

Post by dave_k » Fri Mar 13, 2020 6:53 pm

Lee_WSP wrote:
Fri Mar 13, 2020 6:19 pm
RandomWord wrote:
Fri Mar 13, 2020 6:10 pm
HEDGEFUNDIE wrote:
Fri Mar 13, 2020 5:49 pm
RandomWord wrote:
Fri Mar 13, 2020 5:48 pm
HEDGEFUNDIE wrote:
Fri Mar 13, 2020 5:36 pm
Apropos of nothing, just wanted to point out that UPRO is down 55% in the past month while VOO is down 20%. Over the course of what is likely the most volatile month ever for the stock market.

Where are the volatility decay haters?
Isn't that because it's selling off as VOO goes down, so the effective stock position is less each day? The volatility decay will show up if/when VOO goes back to even, and UPRO is somewhere below even.
I wasn't aware that volatility decay can decide to "show up" or not. Or so the haters would have you believe...
I think you're becoming too emotionally invested in this. I wasn't criticizing you or your strategy, just trying to explain the price movements. If you've got a better explanation, let me know. No need for sarcasm.
Peak to trough and back again, UPRO only lost 3% to volatility decay the last go around in 2018.

https://www.portfoliovisualizer.com/bac ... ion2_2=100

Compared to a 3x margin account, the "decay" is really not that bad.

https://www.portfoliovisualizer.com/bac ... ion2_2=100
Just in the last two days, UPRO is lagging 3x the two day move in the S&P 500 by about 6% due to volatility decay. S&P 500 down 1.11% from Wednesday's close, 3x would be 3.33%, but UPRO is down 9.3%, and would be down even more if it had tracked more closely (it dropped only 2.87x on Thursday, and gained 2.99x today). That's absolutely brutal, and TMF has had swings back & forth nearly as large recently. Let's not kid ourselves about how bad volatility decay is on this portfolio in times like this.

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

Post by langlands » Fri Mar 13, 2020 7:05 pm

RandomWord wrote:
Fri Mar 13, 2020 6:10 pm
HEDGEFUNDIE wrote:
Fri Mar 13, 2020 5:49 pm
RandomWord wrote:
Fri Mar 13, 2020 5:48 pm
HEDGEFUNDIE wrote:
Fri Mar 13, 2020 5:36 pm
Apropos of nothing, just wanted to point out that UPRO is down 55% in the past month while VOO is down 20%. Over the course of what is likely the most volatile month ever for the stock market.

Where are the volatility decay haters?
Isn't that because it's selling off as VOO goes down, so the effective stock position is less each day? The volatility decay will show up if/when VOO goes back to even, and UPRO is somewhere below even.
I wasn't aware that volatility decay can decide to "show up" or not. Or so the haters would have you believe...
I think you're becoming too emotionally invested in this. I wasn't criticizing you or your strategy, just trying to explain the price movements. If you've got a better explanation, let me know. No need for sarcasm.
Just want to chime in with my two cents and say RandomWord is 100% correct. Fortunately, understanding volatility decay is a matter of simple arithmetic and requires neither knowledge of finance nor economics.

Consider two down days of 10% followed by two up days of 10% for VOO. For simplicity, say initial price of VOO and UPRO are both 100.

On the way down after two days, price of VOO is 100*0.9*0.9 = 81 so VOO is down 19%.
On the way down after two days, price of UPRO is 100*0.7*0.7 = 49 so UPRO is down 51%.
51% < 3*19%, so volatility "decay" is actually a bonus as expected when all the moves are in the same direction.

After another two up days, price of VOO is 81*1.1*1.1 = 98.01 so VOO is down about 2%.
After another two up days, price of UPRO is 49*1.3*1.3 = 82.81 so UPRO is down about 17%.
17% > 3*2%, so after going through the whole round trip, UPRO suffers a substantial volatility drag.

Interestingly, notice that volatility drag is not specific to 3x leverage. You can see its manifestation here even with VOO. It's just that 3x greatly magnifies the effect.

A little surprised by your post HEDGEFUNDIE since I seem to recall seeing a post early on in the Adventure thread in which you lay out pretty much exactly this arithmetic.

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

Post by MoneyMarathon » Fri Mar 13, 2020 7:36 pm

langlands wrote:
Fri Mar 13, 2020 7:05 pm
On the way down after two days, price of VOO is 100*0.9*0.9 = 81 so VOO is down 19%.
langlands wrote:
Fri Mar 13, 2020 7:05 pm
After another two up days, price of VOO is 81*1.1*1.1 = 98.01 so VOO is down about 2%.
langlands wrote:
Fri Mar 13, 2020 7:05 pm
Interestingly, notice that volatility drag is not specific to 3x leverage. You can see its manifestation here even with VOO.
There is a sense in which "volatility drag" applies to any investment (when comparing arithmetic to geometric returns). This is an example of it because you can see that the arithmetic average daily return was 0 (an average of -0.1, -0.1, 0.1, 0.1) and the geometric return was negative.

In the sense that VOO is the underlying, though, a roundtrip up would be multiplying by 1/0.9 = 1.11... and VOO would be whole. Meanwhile, a 3x version would be 0.7 * 0.7 * 1.33 * 1.33, and it would still be down (at 87.11% ... down about 13%).

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

Post by privatefarmer » Sat Mar 14, 2020 1:51 am

Something I’m not understanding maybe someone can clear up :

- why is the potential price accumulation for TMF not infinite? Because of bond convexity. If yields are 1.5% today and they fall in half to 0.75% overnight, the price of the bond should double correct? A 30yr bond paying 1.5% should now be worth twice as much if other 30yr bonds are selling for 0.75%, correct? Therefore, even if yields are 0.01%, if they then fell in half to 0.005%, the bonds should again double... so as yields approach zero the price appreciation should shoot towards infinity if I’m not mistaken. But I’m sure someone can correct me here, I’m no economist.

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market timer
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by market timer » Sat Mar 14, 2020 1:56 am

privatefarmer wrote:
Sat Mar 14, 2020 1:51 am
Something I’m not understanding maybe someone can clear up :

- why is the potential price accumulation for TMF not infinite? Because of bond convexity. If yields are 1.5% today and they fall in half to 0.75% overnight, the price of the bond should double correct? A 30yr bond paying 1.5% should now be worth twice as much if other 30yr bonds are selling for 0.75%, correct? Therefore, even if yields are 0.01%, if they then fell in half to 0.005%, the bonds should again double... so as yields approach zero the price appreciation should shoot towards infinity if I’m not mistaken. But I’m sure someone can correct me here, I’m no economist.
Your math works for a perpetual bond, but not a 30-year. The effect of an interest rate change on price is the bond's duration. The maximum duration of a 30-year bond is capped at 30 years (when the bond has no coupon). So a drop in yield from 0.01% to 0.005% results in a price increase of approximately 30 x 0.005%, or 0.15%.

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Nicolas Perrault
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Nicolas Perrault » Sat Mar 14, 2020 3:14 am

market timer wrote:
Sat Mar 14, 2020 1:56 am
Your math works for a perpetual bond, but not a 30-year. The effect of an interest rate change on price is the bond's duration. The maximum duration of a 30-year bond is capped at 30 years (when the bond has no coupon). So a drop in yield from 0.01% to 0.005% results in a price increase of approximately 30 x 0.005%, or 0.15%.
We need High Quality Noncallable Perpetuals 3X. One can always dream

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Steve Reading
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Steve Reading » Sat Mar 14, 2020 7:07 am

HEDGEFUNDIE wrote:
Fri Mar 13, 2020 5:49 pm
RandomWord wrote:
Fri Mar 13, 2020 5:48 pm
HEDGEFUNDIE wrote:
Fri Mar 13, 2020 5:36 pm
Apropos of nothing, just wanted to point out that UPRO is down 55% in the past month while VOO is down 20%. Over the course of what is likely the most volatile month ever for the stock market.

Where are the volatility decay haters?
Isn't that because it's selling off as VOO goes down, so the effective stock position is less each day? The volatility decay will show up if/when VOO goes back to even, and UPRO is somewhere below even.
I wasn't aware that volatility decay can decide to "show up" or not. Or so the haters would have you believe...
Oh volatility decay has been with us all along. VOO needs a cumulative +25% return to get back to even. UPRO needs 122%. And the longer the market choppiness continues, the worse that’s gonna get.

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

Post by NMBob » Sat Mar 14, 2020 10:48 am

well, yes, nobody wants to buy in on the day before the crash. i started in april 2019. it looks like vti has a price only return about -8.6 (loss) from that date. my 3x portfolio of 7-8 etfs has of today lost around 14 percent of the total money invested. so, hasn't been a disaster from my perspective.

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

Post by GodzillaBorland » Sat Mar 14, 2020 2:45 pm

I am reviewing the strategy https://wantelbos.github.io/, in the rebalancing page it talks about rebalancing with less UPRO and more TMF when VIX volatility is over 22. How about for a brand new portfolio. I have a youngster who I am suggesting this. If someone is starting out today with UPRO beaten up so much, wouldn't be better for them to load more UPRO, say 70% and less TMF?

Has anyone tried this TQQQ and TMF?

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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 » Sat Mar 14, 2020 2:50 pm

GodzillaBorland wrote:
Sat Mar 14, 2020 2:45 pm
I am reviewing the strategy https://wantelbos.github.io/, in the rebalancing page it talks about rebalancing with less UPRO and more TMF when VIX volatility is over 22. How about for a brand new portfolio. I have a youngster who I am suggesting this. If someone is starting out today with UPRO beaten up so much, wouldn't be better for them to load more UPRO, say 70% and less TMF?

Has anyone tried this TQQQ and TMF?
A few of us on this forum have tried TQQQ and TMF, myself included. Personally I wouldn't recommend 3X leverage for a youngster as that may quickly lose all their investments if both equities and bonds go negative (which they have recently). That will kick that person out of the market very quickly and potentially for an extended period.

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

Post by langlands » Sat Mar 14, 2020 3:41 pm

privatefarmer wrote:
Sat Mar 14, 2020 1:51 am
Something I’m not understanding maybe someone can clear up :

- why is the potential price accumulation for TMF not infinite? Because of bond convexity. If yields are 1.5% today and they fall in half to 0.75% overnight, the price of the bond should double correct? A 30yr bond paying 1.5% should now be worth twice as much if other 30yr bonds are selling for 0.75%, correct? Therefore, even if yields are 0.01%, if they then fell in half to 0.005%, the bonds should again double... so as yields approach zero the price appreciation should shoot towards infinity if I’m not mistaken. But I’m sure someone can correct me here, I’m no economist.
For someone who is as invested in this strategy as you are, I'm a little disturbed that you have this misconception. Especially since one of the main concerns is that yields are very low and the upside to TMF looks less rosy than it was in the previous decades. If one of the main factors in you going all into this strategy is that you think that TMF will be a perfect hedge for UPRO when the fed cuts rates to zero in a recession, perhaps you should consider rethinking your allocation.

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

Post by Waba » Sat Mar 14, 2020 3:46 pm

GodzillaBorland wrote:
Sat Mar 14, 2020 2:45 pm
I am reviewing the strategy https://wantelbos.github.io/, in the rebalancing page it talks about rebalancing with less UPRO and more TMF when VIX volatility is over 22. How about for a brand new portfolio. I have a youngster who I am suggesting this. If someone is starting out today with UPRO beaten up so much, wouldn't be better for them to load more UPRO, say 70% and less TMF?

Has anyone tried this TQQQ and TMF?
The backtesting that I did for that strategy (it's my website) showed that during periods of very high volatility (e.g. 2008-2009) the outcomes become very hard to predict and get quite sensitive to small parameter changes. This is why the strategy scales down overall leverage by switching into VFITX/IEF in such periods. My conclusion was that such strategy wil be good enough so that you will be abe to live through such period and when you come out at the other end you will be able to start making money again.

The performance of the strategy so far during the current market crash falls nicely within the expectations that I had based on the backtests ("less drawdown than 3x VBINX") During the current crash you can see that TMF had initially a great run up (negative correlation) to compensate for the crash in UPRO, but then during most of last week, this correlation disappeared.

Given that volatility is currently at a historical high, given the high uncertanty about current stock/bond correlations, and given my believe that the market will go down further before it starts a recovery I do not recommend anyone to start this strategy at all at this point in time.

I sold everything that I had in this strategy and everything that I was planning to put in this strategy (a MAPOX mutual fund) during the close on friday during the nice little pump&dump courtesy of the White House (Thank you Mr President) I plan to re-enter the strategy once volatility has come back to more reasonable levels and there is a bit of an uptrend again.

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

Post by RomeoMustDie » Sat Mar 14, 2020 6:16 pm

Waba wrote:
Sat Mar 14, 2020 3:46 pm
GodzillaBorland wrote:
Sat Mar 14, 2020 2:45 pm
I am reviewing the strategy https://wantelbos.github.io/, in the rebalancing page it talks about rebalancing with less UPRO and more TMF when VIX volatility is over 22. How about for a brand new portfolio. I have a youngster who I am suggesting this. If someone is starting out today with UPRO beaten up so much, wouldn't be better for them to load more UPRO, say 70% and less TMF?

Has anyone tried this TQQQ and TMF?

The backtesting that I did for that strategy (it's my website) showed that during periods of very high volatility (e.g. 2008-2009) the outcomes become very hard to predict and get quite sensitive to small parameter changes. This is why the strategy scales down overall leverage by switching into VFITX/IEF in such periods. My conclusion was that such strategy wil be good enough so that you will be abe to live through such period and when you come out at the other end you will be able to start making money again.

The performance of the strategy so far during the current market crash falls nicely within the expectations that I had based on the backtests ("less drawdown than 3x VBINX") During the current crash you can see that TMF had initially a great run up (negative correlation) to compensate for the crash in UPRO, but then during most of last week, this correlation disappeared.

Given that volatility is currently at a historical high, given the high uncertanty about current stock/bond correlations, and given my believe that the market will go down further before it starts a recovery I do not recommend anyone to start this strategy at all at this point in time.

I sold everything that I had in this strategy and everything that I was planning to put in this strategy (a MAPOX mutual fund) during the close on friday during the nice little pump&dump courtesy of the White House (Thank you Mr President) I plan to re-enter the strategy once volatility has come back to more reasonable levels and there is a bit of an uptrend again.
To HEDGEFUNDIE and other investors in this portfolio,

Does the disappearance of the correlation between UPRO and TMF in the last week alter your perception of this strategy.

One would think that the lower interest rate would enforce the correlation we are expecting between UPRO and TMF. However, the short term results have been different.

Does this change anything, and will there be impact to the performance of the portfolio during the recovery period because of the simultaneous drawdown?

Say for example, an impact similar to the volatility decay that was witnessed with 100% UPRO backtesting.

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

Post by JayReece » Sat Mar 14, 2020 6:55 pm

Waba wrote:
Sat Mar 14, 2020 3:46 pm
I sold everything that I had in this strategy and everything that I was planning to put in this strategy (a MAPOX mutual fund) during the close on friday during the nice little pump&dump courtesy of the White House (Thank you Mr President) I plan to re-enter the strategy once volatility has come back to more reasonable levels and there is a bit of an uptrend again.
@Waba if you don't mind sharing, what is your strategy in this volatile market? Or are you just sitting CASH until it settles and waiting for buying opportunities?

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

Post by Waba » Sat Mar 14, 2020 11:42 pm

JayReece wrote:
Sat Mar 14, 2020 6:55 pm
Waba wrote:
Sat Mar 14, 2020 3:46 pm
I sold everything that I had in this strategy and everything that I was planning to put in this strategy (a MAPOX mutual fund) during the close on friday during the nice little pump&dump courtesy of the White House (Thank you Mr President) I plan to re-enter the strategy once volatility has come back to more reasonable levels and there is a bit of an uptrend again.
@Waba if you don't mind sharing, what is your strategy in this volatile market? Or are you just sitting CASH until it settles and waiting for buying opportunities?
For this part of my portfolo, cash until Vix drops back below 30.

I'm also considering to go short but that's a bit more of a one-off bet, and as Uncorrelated would point out, it would be more rational to first sell the rest of my portfolio (~70/30 unleveraged B&H).

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

Post by JayReece » Sun Mar 15, 2020 3:15 am

Waba wrote:
Sat Mar 14, 2020 11:42 pm
For this part of my portfolo, cash until Vix drops back below 30.

I'm also considering to go short but that's a bit more of a one-off bet, and as Uncorrelated would point out, it would be more rational to first sell the rest of my portfolio (~70/30 unleveraged B&H).
Makes sense.

I was actually contemplating a move like 80% TMF / 20% UPRO until I just saw your post that they don't remain inversely correlated in times of high volatility :?

Thought I had found a less risky way to short the market without having to actually short or buy puts :oops:

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

Post by typical.investor » Sun Mar 15, 2020 4:05 am

langlands wrote:
Fri Mar 13, 2020 7:05 pm
RandomWord wrote:
Fri Mar 13, 2020 6:10 pm
HEDGEFUNDIE wrote:
Fri Mar 13, 2020 5:49 pm
RandomWord wrote:
Fri Mar 13, 2020 5:48 pm
HEDGEFUNDIE wrote:
Fri Mar 13, 2020 5:36 pm
Apropos of nothing, just wanted to point out that UPRO is down 55% in the past month while VOO is down 20%. Over the course of what is likely the most volatile month ever for the stock market.

Where are the volatility decay haters?
Isn't that because it's selling off as VOO goes down, so the effective stock position is less each day? The volatility decay will show up if/when VOO goes back to even, and UPRO is somewhere below even.
I wasn't aware that volatility decay can decide to "show up" or not. Or so the haters would have you believe...
I think you're becoming too emotionally invested in this. I wasn't criticizing you or your strategy, just trying to explain the price movements. If you've got a better explanation, let me know. No need for sarcasm.
Just want to chime in with my two cents and say RandomWord is 100% correct. Fortunately, understanding volatility decay is a matter of simple arithmetic and requires neither knowledge of finance nor economics.

Consider two down days of 10% followed by two up days of 10% for VOO. For simplicity, say initial price of VOO and UPRO are both 100.

On the way down after two days, price of VOO is 100*0.9*0.9 = 81 so VOO is down 19%.
On the way down after two days, price of UPRO is 100*0.7*0.7 = 49 so UPRO is down 51%.
51% < 3*19%, so volatility "decay" is actually a bonus as expected when all the moves are in the same direction.

After another two up days, price of VOO is 81*1.1*1.1 = 98.01 so VOO is down about 2%.
After another two up days, price of UPRO is 49*1.3*1.3 = 82.81 so UPRO is down about 17%.
17% > 3*2%, so after going through the whole round trip, UPRO suffers a substantial volatility drag.

Interestingly, notice that volatility drag is not specific to 3x leverage. You can see its manifestation here even with VOO. It's just that 3x greatly magnifies the effect.

A little surprised by your post HEDGEFUNDIE since I seem to recall seeing a post early on in the Adventure thread in which you lay out pretty much exactly this arithmetic.
To me this discussion is irrelevant (at least until TMF and UPRO have simultanous sustained movement downward).

UPRO was way down on 3.6 and TMF was way up. I rebalanced.
Same with 3.9 (rebalanced on 3.10)
Same with 3.11 (rebalance on 3.11)

Who is holding UPRO long term without taking money out when it's high and putting it back in when it's low?

Yeah, if you never rebalance you will see volatility decay. And if you rebalance daily you won't.

Ok, Ok volatility decay is real. I am not in denial. But if UPRO and TMF see the same change in the opposite direction, my balance will not be flat or down. It's because I reduced exposure to TMF when it was high, and increased exposure to UPRO when it was low.

Am I guaranteed to always be able to do that. No way, no how. That is the risk. And it is real risk. But I think the truth is that volatility decay is a risk that may or may not show up and is less likely if you rebalance. As you say, it's simple math. You need to adjust your exposure to avoid it.

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

Post by Nicolas Perrault » Sun Mar 15, 2020 4:40 am

A problem for anyone interested:

Rebalancing helps fight volatility decay. Rebalancing everyday would eliminate volatility decay, but would incur hefty bid/ask spread trading costs.

If rebalancing when the VIX index is above 30 involves costs of 0.1% on the shares that are sold and 0.1% on the shares that are bought, what is the optimal rebalancing frequency when the VIX is greater than 30?

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

Post by Uncorrelated » Sun Mar 15, 2020 5:34 am

Nicolas Perrault wrote:
Sun Mar 15, 2020 4:40 am
A problem for anyone interested:

Rebalancing helps fight volatility decay. Rebalancing everyday would eliminate volatility decay, but would incur hefty bid/ask spread trading costs.
This assumption is false. Rebalancing every day still incurs a volatility decay. The only way to truly avoid volatility decay relative to an index is to invest in the index without leverage.

For a solution to the problem, google "merton's portfolio model with proportional transaction costs". The optimal approach is to create a boundary around your target asset allocation. If you are inside the boundary, don't trade. If you are outside the boundary, make the minimum amount of trades that put you inside the boundary.
Last edited by Uncorrelated on Sun Mar 15, 2020 5:47 am, edited 2 times in total.

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

Post by typical.investor » Sun Mar 15, 2020 5:39 am

Nicolas Perrault wrote:
Sun Mar 15, 2020 4:40 am
A problem for anyone interested:

Rebalancing helps fight volatility decay. Rebalancing everyday would eliminate volatility decay, but would incur hefty bid/ask spread trading costs.

If rebalancing when the VIX index is above 30 involves costs of 0.1% on the shares that are sold and 0.1% on the shares that are bought, what is the optimal rebalancing frequency when the VIX is greater than 30?
My math isn't good enough to figure that out.

All I can say is that I likely paid more that 0.1%, more likely probably 5%-15% to sell TMF. I didn't look at NAV, but other ETFs were suffering liquidity cost. Even so, it was more than worth it. TMF was way up and UPRO was way down.

Is 0.1%(x2) the same as when TMF is up 30% and UPRO is down 30% as it is if TMF is up 5% and UPRO down 5%? Even if you are 50-50, I say not really no. TMF is most likely going to drop when the economy looks clear and we are out of the flight to safety/panic, and TMF will bounce back when the economy stabilizes. So the larger the discrepancy in price movement, the more you will likely make.

Thus, I don't see an answer. I don't know the magnitude of the price change. With greater price change, I think the frequency to rebalance increases. What am I missing?

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

Post by typical.investor » Sun Mar 15, 2020 6:00 am

Uncorrelated wrote:
Sun Mar 15, 2020 5:34 am
Nicolas Perrault wrote:
Sun Mar 15, 2020 4:40 am
A problem for anyone interested:

Rebalancing helps fight volatility decay. Rebalancing everyday would eliminate volatility decay, but would incur hefty bid/ask spread trading costs.
This assumption is false. Rebalancing every day still incurs a volatility decay.
I disagree. Flows (or rebalancing by investors) into leveraged funds can reduce and even eliminate the need for the fund to rebalance.
What the researchers are saying is that money tends to move out of leveraged funds on the days the funds move up significantly—mostly due to profit-taking—and money flows in after down days. Such movement helps keep the asset base steady, thus reducing the fund’s need to rebalance its leveraged exposure in the direction of the market, which is what can contribute to volatility.
In fact here is a fed paper stating "We also show theoretically that flows can completely eliminate ETF rebalancing in the limit."

https://www.federalreserve.gov/econresd ... cle_inline

So the fact is, that if flows were perfect, there would be no rebalancing and no volatility decay.
Uncorrelated wrote:
Sun Mar 15, 2020 5:34 am
The only way to truly avoid volatility decay relative to an index is to invest in the index without leverage.
I believe that to be an incorrect statement. It's not the only way. Perfect flows would result in the same thing.

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

Post by Uncorrelated » Sun Mar 15, 2020 6:55 am

typical.investor wrote:
Sun Mar 15, 2020 6:00 am
Uncorrelated wrote:
Sun Mar 15, 2020 5:34 am
Nicolas Perrault wrote:
Sun Mar 15, 2020 4:40 am
A problem for anyone interested:

Rebalancing helps fight volatility decay. Rebalancing everyday would eliminate volatility decay, but would incur hefty bid/ask spread trading costs.
This assumption is false. Rebalancing every day still incurs a volatility decay.
I disagree. Flows (or rebalancing by investors) into leveraged funds can reduce and even eliminate the need for the fund to rebalance.
Fund in/outflows are completely irrelevant for volatility decay. If all investors except you would have left UPRO last week, you would still see exactly the same sequence of returns

Volatility decay is a function of leverage (or exposure) and volatility, not a function of rebalancing.

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

Post by typical.investor » Sun Mar 15, 2020 7:48 am

Uncorrelated wrote:
Sun Mar 15, 2020 6:55 am
typical.investor wrote:
Sun Mar 15, 2020 6:00 am
Uncorrelated wrote:
Sun Mar 15, 2020 5:34 am
Nicolas Perrault wrote:
Sun Mar 15, 2020 4:40 am
A problem for anyone interested:

Rebalancing helps fight volatility decay. Rebalancing everyday would eliminate volatility decay, but would incur hefty bid/ask spread trading costs.
This assumption is false. Rebalancing every day still incurs a volatility decay.
I disagree. Flows (or rebalancing by investors) into leveraged funds can reduce and even eliminate the need for the fund to rebalance.
Fund in/outflows are completely irrelevant for volatility decay. If all investors except you would have left UPRO last week, you would still see exactly the same sequence of returns

Volatility decay is a function of leverage (or exposure) and volatility, not a function of rebalancing.
Say what you will, but it's been empirically shown that rebalancing by investors can eliminate the need for the fund to rebalance in order to reset its exposure.

Let me ask you, if a leveraged fund has zero need ever to reset its exposure, will that fund see volatility decay? I say no.

From an investors' stand point if a fund loses 10% and then gains 10%, you have a 1% loss. For a leveraged fund down 30%, to then gain 30%, you are down 9%. We agree on that I think. All I am saying is that if you increase your exposure in a leveraged fund after then loss, you can come out to the exact 1% loss. Just add $4.62 for each $100 you had in the 3X fund and you will have the multiple of the index return or a 3% loss.

And if investors as whole do that every day, the leveraged fund itself will have the same returns as a multiple of the index.

Now if I change my exposure in the 3X fund everyday, and other investors don't, I will still have the same returns as a multiple of the index.

The point here is that the strategy is resetting our exposure when we rebalance. I am not doing it everyday, but I tell you what, I am definitely over-rebalancing when I do due to the strong movements of my leveraged bond fund.

So will I end up with a 3X return of the index. Who knows? It depends on what the bond fund does too. What I know is that I will not have the same volatility decay that the leveraged fund has due to my rebalancing.

This is not difficult to understand, and I probably won't post further thinking that not understanding this is just willful.

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

Post by Nicolas Perrault » Sun Mar 15, 2020 8:36 am

If my math is correct, it does seem as if there is volatility drag even with daily rebalancing, to the contrary of what I wrote in my previous post, although the drag is greatly diminished over an unrebalanced fund. Imagine the following sequence of SP500 returns.

Day 0 value: SP500 @ $100. UPRO @ $100.
Day 1: SP500 -5% ($95). UPRO -15% ($85).
Day 2: SP500 -5% ($90.25). UPRO -15% ($72.25)
Day 3: SP500 +5.265% (95.00$). UPRO +15.795% ($83.66)
Day 4: SP500 +5.265% (100.00$). UPRO + 15.795% ($96.87).

If you rebalanced every day between 50% Cash and 50% UPRO, you would have the following number of shares every day. Assume a share of cash is worth $100.

End of day 0: 1 share of UPRO and 1 share of CASH.
End of day 1: 1.08823 shares of UPRO and 0.925 share of CASH.
End of day 2: 1.18425 shares of UPRO and 0.8556 share of CASH
End of day 3: 1.10345 shares of UPRO and 0.92315 share of CASH
End of day 4: 1.02821 shares of UPRO and 0.996025 share of CASH

Value of daily rebalanced 50/50 UPRO/CASH portfolio at the end of day 4:
1.02821 UPRO @ $96.87 = $99.59
0.996025 CASH @ $100 = $99.6025
-------
$199.19 (volatility drag: 0.4%).

Value of unrebalanced 50/50 UPRO/CASH portfolio: $196.87 (volatility drag: 1.565%)
Value of 100% SP500 or 100% CASH portfolio: $200 (no drag, by construction).

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Nicolas Perrault
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Nicolas Perrault » Sun Mar 15, 2020 8:55 am

Uncorrelated wrote:
Sun Mar 15, 2020 5:34 am
Nicolas Perrault wrote:
Sun Mar 15, 2020 4:40 am
A problem for anyone interested:

Rebalancing helps fight volatility decay. Rebalancing everyday would eliminate volatility decay, but would incur hefty bid/ask spread trading costs.
This assumption is false. Rebalancing every day still incurs a volatility decay. The only way to truly avoid volatility decay relative to an index is to invest in the index without leverage.

For a solution to the problem, google "merton's portfolio model with proportional transaction costs". The optimal approach is to create a boundary around your target asset allocation. If you are inside the boundary, don't trade. If you are outside the boundary, make the minimum amount of trades that put you inside the boundary.
Interesting, I'll check out what you recommend. And I assume that the narrower your rebalancing bands, the less volatility drag. What's the difference in efficiency between say 5%, 10%, 15% bands and no rebalancing?

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

Post by Uncorrelated » Sun Mar 15, 2020 9:28 am

typical.investor wrote:
Sun Mar 15, 2020 7:48 am
Uncorrelated wrote:
Sun Mar 15, 2020 6:55 am
typical.investor wrote:
Sun Mar 15, 2020 6:00 am
Uncorrelated wrote:
Sun Mar 15, 2020 5:34 am
Nicolas Perrault wrote:
Sun Mar 15, 2020 4:40 am
A problem for anyone interested:

Rebalancing helps fight volatility decay. Rebalancing everyday would eliminate volatility decay, but would incur hefty bid/ask spread trading costs.
This assumption is false. Rebalancing every day still incurs a volatility decay.
I disagree. Flows (or rebalancing by investors) into leveraged funds can reduce and even eliminate the need for the fund to rebalance.
Fund in/outflows are completely irrelevant for volatility decay. If all investors except you would have left UPRO last week, you would still see exactly the same sequence of returns

Volatility decay is a function of leverage (or exposure) and volatility, not a function of rebalancing.
Say what you will, but it's been empirically shown that rebalancing by investors can eliminate the need for the fund to rebalance in order to reset its exposure.
You're barking at the wrong tree. Volatility decay depends on your daily net equity exposure, not on fund in/outflows. You don't care if the fund achieves it's exposure target by rebalancing or by lucky fund in/outflows.


The only way to avoid volatility decay is to use long term options contracts and no rebalancing. Your strategy appears to be an active strategy that replicates the behavior or long term options. On top of my head there are four downsides to that strategy. First, that strategy is suboptimal to a daily leveraged ETF (with constant leverage) from a mean variance standpoint, unless you have an increasing relative risk aversion. This form of risk aversion is widely considered to be irrational. Second, this strategy puts you at high risk of defaults unless you use a long call-only strategy which is super expensive. Third, your active strategy is very expensive from a transaction fee standpoint. Fourth, the strategy depends on an arbitrary starting price which is a form of market timing, if you ever change your starting price you've let volatility decay back in.

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

Post by Uncorrelated » Sun Mar 15, 2020 12:28 pm

Nicolas Perrault wrote:
Sun Mar 15, 2020 8:55 am
Uncorrelated wrote:
Sun Mar 15, 2020 5:34 am
Nicolas Perrault wrote:
Sun Mar 15, 2020 4:40 am
A problem for anyone interested:

Rebalancing helps fight volatility decay. Rebalancing everyday would eliminate volatility decay, but would incur hefty bid/ask spread trading costs.
This assumption is false. Rebalancing every day still incurs a volatility decay. The only way to truly avoid volatility decay relative to an index is to invest in the index without leverage.

For a solution to the problem, google "merton's portfolio model with proportional transaction costs". The optimal approach is to create a boundary around your target asset allocation. If you are inside the boundary, don't trade. If you are outside the boundary, make the minimum amount of trades that put you inside the boundary.
Interesting, I'll check out what you recommend. And I assume that the narrower your rebalancing bands, the less volatility drag. What's the difference in efficiency between say 5%, 10%, 15% bands and no rebalancing?
I'm not sure. I never tested that, it would also be difficult to test because of tax considerations. I tested earlier that if your target asset allocation is 3x, a 3x leveraged ETF is better than regularly rebalanced options even if options have substantially lower expense ratio. But that conclusion does not translate to a lower target leverage.

That said, don't focus on minimizing volatility decay. Volatility decay does not magically result in lower gains, it simply changes the output probability distribution. Pick a portfolio, rebalance regularly, and stick with it

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

Post by LittleBitMore » Sun Mar 15, 2020 4:28 pm

FED cuts rates to 0%-.25% (https://www.reuters.com/article/us-heal ... SKBN21219K)

If we blow all of the tool we have in the first month of crisis, what do we do when testing truly kicks off an tens of thousands are infected? TMF to the moon on Monday but does UPRO jump too? Not sure I want to own stocks at 3000 during a pandemic

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

Post by danielfp » Sun Mar 15, 2020 4:36 pm

LittleBitMore wrote:
Sun Mar 15, 2020 4:28 pm
FED cuts rates to 0%-.25% (https://www.reuters.com/article/us-heal ... SKBN21219K)

If we blow all of the tool we have in the first month of crisis, what do we do when testing truly kicks off an tens of thousands are infected? TMF to the moon on Monday but does UPRO jump too? Not sure I want to own stocks at 3000 during a pandemic
Well QE has no limit plus there are stills tools to use, like a commercial paper facility or the fed outright purchasing stocks/commodities. The real consequences of their use are a different thing. Macroeconomic history being written before our very eyes.

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

Post by Huygens » Sun Mar 15, 2020 4:46 pm

LittleBitMore wrote:
Sun Mar 15, 2020 4:28 pm
FED cuts rates to 0%-.25% (https://www.reuters.com/article/us-heal ... SKBN21219K)

If we blow all of the tool we have in the first month of crisis, what do we do when testing truly kicks off an tens of thousands are infected? TMF to the moon on Monday but does UPRO jump too? Not sure I want to own stocks at 3000 during a pandemic
This was a short-term move to keep financial markets functioning. Long-term effects around increasing consumption and total dollar spending remains to be seen.

I expect rates to dip below zero. Many theories about the performance of long-term Treasuries in zero- and negative-yielding environments will be tested.

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

Post by privatefarmer » Sun Mar 15, 2020 4:51 pm

So when the fed “buys treasuries”, like they supposedly are doing tomorrow with $500 billion, does this in effect boost the price of long term treasuries? Does it essentially have the same effect as lowering interest rates?

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

Post by danielfp » Sun Mar 15, 2020 5:00 pm

privatefarmer wrote:
Sun Mar 15, 2020 4:51 pm
So when the fed “buys treasuries”, like they supposedly are doing tomorrow with $500 billion, does this in effect boost the price of long term treasuries? Does it essentially have the same effect as lowering interest rates?
Long story short, yes. You can prop up treasuries by just buying them without going into explicit negative fed fund rates, this should however cause inflation as the end result is no different than outright monetizing debt. So in the end people buying bonds at zero are losing value on the paper as if rates were negative, but through a different mechanism.

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

Post by danielfp » Sun Mar 15, 2020 5:06 pm

I am interested to see if interest rate futures cross 100 for the first time ever!

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

Post by physixfan » Sun Mar 15, 2020 5:33 pm

In my understanding, QE is basically FED purchasing long term treasuries. So does this mean TMF will rise?

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

Post by SVT » Sun Mar 15, 2020 5:47 pm

physixfan wrote:
Sun Mar 15, 2020 5:33 pm
In my understanding, QE is basically FED purchasing long term treasuries. So does this mean TMF will rise?
We'll all find out soon enough.

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

Post by AHTFY » Sun Mar 15, 2020 6:00 pm

physixfan wrote:
Sun Mar 15, 2020 5:33 pm
In my understanding, QE is basically FED purchasing long term treasuries. So does this mean TMF will rise?
T-bond futures currently up 2.2%. But how often have we seen long bonds start the day higher and drift down from there?

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

Post by jaj2276 » Sun Mar 15, 2020 7:27 pm

My adventure is down 79 bps on the year. My current slices are:

OG: 40/60 (50%). Rebalanced end of December, has drifted to 20/80.
Tgt 16: 22/78. Rebalanced and targets updated end of Feb. Currently at 18/82.
21-day RP: 33/67. Rebalanced targets updated end of Feb. Currently at 28/82.

I'm going to rebalance end of March on all my slices and update the targets for Tgt 16 and 21-day RP. I calculated what the values would be right now and the Tgt 16 would go 8/92 and the 21-day RP would go 34/66. With OG going back to 40/60, that would give me a 31/69 split for March. Obviously we still have half the month to go so who knows what the 2 slices will really end up being.

My portfolio topped out at $120k (intraday) on March 9 and it's back to $84k. Not for the faint of heart.

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

Post by Lee_WSP » Sun Mar 15, 2020 7:37 pm

AHTFY wrote:
Sun Mar 15, 2020 6:00 pm
physixfan wrote:
Sun Mar 15, 2020 5:33 pm
In my understanding, QE is basically FED purchasing long term treasuries. So does this mean TMF will rise?
T-bond futures currently up 2.2%. But how often have we seen long bonds start the day higher and drift down from there?
The whole darned week.

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

Post by getjiggy » Sun Mar 15, 2020 8:57 pm

Interesting thread / theory on risk parity hedge funds who were about to be nuked but saved by bailout🤔🤔🤔

https://threadreaderapp.com/thread/1238 ... 08480.html

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

Post by Huygens » Sun Mar 15, 2020 9:28 pm

getjiggy wrote:
Sun Mar 15, 2020 8:57 pm
Interesting thread / theory on risk parity hedge funds who were about to be nuked but saved by bailout🤔🤔🤔

https://threadreaderapp.com/thread/1238 ... 08480.html
It's an interesting thread, but it doesn't explain the one thing I've been wondering about all week: What caused volatility in Treasuries themselves? Liquidating hedge funds who were margin called should be a side effect not root cause, right?

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