HEDGEFUNDIE's excellent adventure Part II: The next journey

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

Post by LittleBitMore » Thu Apr 16, 2020 8:22 pm

lexor wrote:
Thu Apr 16, 2020 3:21 pm
How could I compare effective interest rates of UPRO vs E-Trade line of credit? E-Trade is running a .5% promotion discount which could bring rates for me down to 2.750%-3.125% and I believe it is a non callable loan (with collateral).

Also I might just bet long equities if I did this because I mostly use TMF to fight volatility decay of UPRO.
What are you going to do with the $$ because "* Proceeds may not be used to purchase securities, pay down margin loans, or be deposited into any brokerage account."?

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

Post by ChrisBenn » Thu Apr 16, 2020 9:03 pm

LittleBitMore wrote:
Thu Apr 16, 2020 8:22 pm
lexor wrote:
Thu Apr 16, 2020 3:21 pm
How could I compare effective interest rates of UPRO vs E-Trade line of credit? E-Trade is running a .5% promotion discount which could bring rates for me down to 2.750%-3.125% and I believe it is a non callable loan (with collateral).

Also I might just bet long equities if I did this because I mostly use TMF to fight volatility decay of UPRO.
What are you going to do with the $$ because "* Proceeds may not be used to purchase securities, pay down margin loans, or be deposited into any brokerage account."?
This restriction seemed weird to me - so googled a bit; learned all about the regs around "purpose" and "non-purpose" loans!

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

Post by kmft » Thu Apr 16, 2020 9:43 pm

lexor wrote:
Thu Apr 16, 2020 3:21 pm
How could I compare effective interest rates of UPRO vs E-Trade line of credit? E-Trade is running a .5% promotion discount which could bring rates for me down to 2.750%-3.125% and I believe it is a non callable loan (with collateral).

Also I might just bet long equities if I did this because I mostly use TMF to fight volatility decay of UPRO.
Looks like E-Trade’s promotion brings their rates in line with Schwab’s PAL now. But you’re going to need to use IBKR margin if you want to buy equities. Good news is IBKR margin is dirt cheap, bad news is it’s callable.

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

Post by stormcrow » Fri Apr 17, 2020 8:12 am

HEDGEFUNDIE wrote:
Thu Apr 16, 2020 12:57 pm
KSActuary wrote:
Thu Apr 16, 2020 12:15 pm
Might as well as that draw down isn't going away.
I am of a mind to keep that drawdown prominently posted forever so no one gets the wrong idea that I am cheerleading this strategy for unsuited newcomers.
This is probably a good idea. This strategy is getting a fair amount of attention across the wider investing internet. Might be good to have a bit of reality greeting them at the door.

euphoric85
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by euphoric85 » Fri Apr 17, 2020 1:05 pm

Waba wrote:
Sat Feb 22, 2020 2:50 pm
I was about to use PV for volatility targetting but then they went subscription based and I also wanted to have a little bit more control over the allocation weights so I made a small website to help me implement my own version of this adventure using volatility adjusted allocation weights.

You can find it at https://wantelbos.github.io/ no subscription required ;-)

The target allocation weights are derived from 3 mo VIX average and following table:
Image
I'm intrigued by the idea of using VIX as a signal to deleverage. Would you by chance be able to share your calculations with the class? :D If I stared at your chart long enough I'm sure I could figure it out but asking is a lot easier

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

Post by KSActuary » Fri Apr 17, 2020 1:17 pm

A basic explanation would be interesting to discuss. I assume the very mesmerizing chart was produced through back testing? Also, are you rebalancing quarterly? Monthly may have helped you lower the drawdown this year.

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

Post by Lee_WSP » Fri Apr 17, 2020 2:17 pm

Is the VIX even reliable as a forward indicator? Or does it only spike after stuff hits the fan? It is supposed to be an annualized forward looking estimate of the next 30 day's volatility, but staring at the VIX charts for a few hours does not instill me with much confidence in it's predictive capabilities.

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

Post by kmft » Fri Apr 17, 2020 2:36 pm

Dovahkiin wrote:
Sun Mar 08, 2020 3:17 am
Final tax drag results are in for different lot methods.

Assumptions: Not counting wash sales. Not applying realized capital loss carryovers to the next year. The "Lowest Taxes" assumes flat fixed marginal tax rates of 15% for long term capital gains, and 30% for short term capital gains. I'm not selling off the portfolio to pay for taxes and assuming you make up for the tax hit some other way. I'll leave it to the reader if they want to add up the taxes and subtract it from the equity or do their own simulations.

Here is the average tax drag percentage over the 10 years for each lot method:

Monthly Re-balancing of $100k lump sum, no added cash, from 1/1/2010 to 1/30/2010:
  • FIFO: 1.72%
  • LIFO: 1.38%
  • Tax Efficient Loss Harvester: 1.28%
  • Nearest Cost (Manual Spec-ID): 1.26%
  • Lowest Taxes (Manual Spec-ID): 1.17%
  • Highest Cost: 1.12% - Winner for this data set
Raw Data: https://pastebin.com/raw/X5K3UUfz

Monthly Re-balancing of $100k lump sum, $8,333.33 monthly contributions ($100k annual), from 1/1/2010 to 1/30/2010, using cash to efficiently rebalance first:
  • FIFO: 1.27%
  • LIFO: 1.01%
  • Highest Cost: 0.88%
  • Nearest Cost: 0.84%
  • Tax Efficient Loss Harvester: 0.78%
  • Lowest Taxes (Manual Spec-ID): 0.73% - Winner for this data set
Raw Data: https://pastebin.com/raw/CZnzGXYq

Intraday 1% band re-balancing $100k lump sum, from 1/1/2010 to 1/30/2010:
  • FIFO: 3.84%
  • LIFO: 1.58%
  • Tax Efficient Loss Harvester: 1.73%
  • Nearest Cost: 1.64%
  • Highest Cost: 1.51%
  • Lowest Taxes (Manual Spec-ID): 1.31% - Winner for this data set
Raw Data: https://pastebin.com/raw/QAyHCpKp

Intraday 1% band re-balancing of $100k lump sum, $8,333.33 monthly contributions ($100k annual), from 1/1/2010 to 1/30/2010, using cash to efficiently rebalance first:
  • FIFO: 3.57%
  • LIFO: 1.41%
  • Nearest Cost: 1.24%
  • Tax Efficient Loss Harvester: 1.32%
  • Highest Cost: 1.18%
  • Lowest Taxes (Manual Spec-ID): 0.96% - Winner for this data set
Raw Data: https://pastebin.com/raw/Btw0SVk7

Intraday/Daily rebalancing is dead in the water. It's not worth the extra tax drag and commissions.

It's a really tough decision for the Tax Efficient Loss Harvester and "Lowest Tax" Method. Currently "lowest tax" is not supported by any brokerage and will require matching tax lots manually. It provides the best tax drag and it has the largest unrealized gains:
UPRO lump-sum: $630,582.63 vs $226,711.06 in LT Unrealized Gains, $97,805.87 vs $258,456.26 in ST Unrealized Gains
UPRO monthly contribution: $2,503,094.49 vs $930,203.70 in LT Unrealized Gains, $430,268.14 vs $1,052,562.94 in ST Unrealized Gains

On visual inspection of each year's specific tax drag it appears less volatile too. Tax Loss Harvester can be really lumpy, especially when it realizes large priced LT gains.

I'll be sending this data to TD Ameritrade (my broker) and I hope they'll consider adding it either with fixed 15% LT/30% ST rates or letting you customize your marginal rates in your profile.

Normally, I'd recommend Tax Efficient Loss Harvester, but anyone running this portfolio in taxable should strongly consider manual specific identification.
Going back through this post from last month, you mention "lowest tax" is not supported by any brokerage. Fidelity has the following settings for cost basis;

Image

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

Post by Dovahkiin » Fri Apr 17, 2020 4:32 pm

kmft wrote:
Fri Apr 17, 2020 2:36 pm
Going back through this post from last month, you mention "lowest tax" is not supported by any brokerage. Fidelity has the following settings for cost basis;
That's really awesome!!! Fidelity is an excellent choice with their fractional shares/dollar investment options and moves to the top of the list after you pointed that out. Thank you!

euphoric85
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by euphoric85 » Fri Apr 17, 2020 7:23 pm

Lee_WSP wrote:
Fri Apr 17, 2020 2:17 pm
Is the VIX even reliable as a forward indicator? Or does it only spike after stuff hits the fan? It is supposed to be an annualized forward looking estimate of the next 30 day's volatility, but staring at the VIX charts for a few hours does not instill me with much confidence in it's predictive capabilities.
I don’t think his intent is to use it as a forward indicator, rather an objective measure of current volatility. There are arguments in other threads that VIX may be better for that than measuring the volatility of UPRO/TMF themselves.

On the topic of forward indicators though, I don’t think I’ve seen discussed in here using the XLY:XLP ratio as such. Any thoughts?

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

Post by Lee_WSP » Fri Apr 17, 2020 7:29 pm

euphoric85 wrote:
Fri Apr 17, 2020 7:23 pm
Lee_WSP wrote:
Fri Apr 17, 2020 2:17 pm
Is the VIX even reliable as a forward indicator? Or does it only spike after stuff hits the fan? It is supposed to be an annualized forward looking estimate of the next 30 day's volatility, but staring at the VIX charts for a few hours does not instill me with much confidence in it's predictive capabilities.
I don’t think his intent is to use it as a forward indicator, rather an objective measure of current volatility. There are arguments in other threads that VIX may be better for that than measuring the volatility of UPRO/TMF themselves.

On the topic of forward indicators though, I don’t think I’ve seen discussed in here using the XLY:XLP ratio as such. Any thoughts?
But if the volatility isn't realized, it's not a good signal to change strategy.

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

Post by mrspock » Fri Apr 17, 2020 7:37 pm

.... annnnnd back to an all-time high for me on this, +76% for standard 50% UPRO /50% TMF w/ quarterly rebalancing, Feb 2018 start date. No tinkering, no timing...just vanilla.

The Schwab "Risk vs. Reward" chart is comical.

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

Post by HawkeyePierce » Fri Apr 17, 2020 7:41 pm

mrspock wrote:
Fri Apr 17, 2020 7:37 pm
.... annnnnd back to an all-time high for me on this, +76% for standard 50% UPRO /50% TMF w/ quarterly rebalancing, Feb 2018 start date. No tinkering, no timing...just vanilla.

The Schwab "Risk vs. Reward" chart is comical.
I'm juuuuuust shy of an all-time high on my EDV variant. +21% since starting in August 2019.

The rest of my portfolio is up 1.5% over the same time frame.

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

Post by dave_k » Fri Apr 17, 2020 8:36 pm

Not near my all time high of +102%, but doing well at +80%. Was doing 40/60 UPRO/TMF from March 2019, switched to 35/65 UPRO/EDV a few weeks ago.

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

Post by Lee_WSP » Fri Apr 17, 2020 11:31 pm

The rebalance points make a huge difference.

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

Post by HawkeyePierce » Fri Apr 17, 2020 11:46 pm

Lee_WSP wrote:
Fri Apr 17, 2020 11:31 pm
The rebalance points make a huge difference.
My quarterly rebalance was 4/1. Not quite the low point of 3/23 but close enough.

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

Post by zdzdbets » Sat Apr 18, 2020 11:01 am

How would one replicate TMF in the EU where you can't trade this etf? There are alternatives for UPRO.

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

Post by BolekLolek » Sat Apr 18, 2020 3:16 pm

PSLDX has a bigger drawdown from 2/20 peak but has rebounded nicely and is up 3% over VTSAX.

Anybody agree that the Fed buying corporates is a good plus for this fund?

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

Post by SVT » Sat Apr 18, 2020 3:39 pm

mrspock wrote:
Fri Apr 17, 2020 7:37 pm
.... annnnnd back to an all-time high for me on this, +76% for standard 50% UPRO /50% TMF w/ quarterly rebalancing, Feb 2018 start date. No tinkering, no timing...just vanilla.

The Schwab "Risk vs. Reward" chart is comical.
Yeah, you and I have been close to the same. I'm also 50/50 now, but was still doing the OG 40/60 until a month or so ago. I'm up 83% total, started Feb 22 2018 I believe and am now right at the previous all time high.

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

Post by mrspock » Sat Apr 18, 2020 8:39 pm

SVT wrote:
Sat Apr 18, 2020 3:39 pm
mrspock wrote:
Fri Apr 17, 2020 7:37 pm
.... annnnnd back to an all-time high for me on this, +76% for standard 50% UPRO /50% TMF w/ quarterly rebalancing, Feb 2018 start date. No tinkering, no timing...just vanilla.

The Schwab "Risk vs. Reward" chart is comical.
Yeah, you and I have been close to the same. I'm also 50/50 now, but was still doing the OG 40/60 until a month or so ago. I'm up 83% total, started Feb 22 2018 I believe and am now right at the previous all time high.
Happy to hear this is working out for you as well! I must say I am contemplating bumping this to a solid 5% of my portfolio (from <3%). Entirely possible this runs out of steam due to bond bull market as many have indicated... but that could be years away.

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

Post by SVT » Sat Apr 18, 2020 11:35 pm

mrspock wrote:
Sat Apr 18, 2020 8:39 pm
SVT wrote:
Sat Apr 18, 2020 3:39 pm
mrspock wrote:
Fri Apr 17, 2020 7:37 pm
.... annnnnd back to an all-time high for me on this, +76% for standard 50% UPRO /50% TMF w/ quarterly rebalancing, Feb 2018 start date. No tinkering, no timing...just vanilla.

The Schwab "Risk vs. Reward" chart is comical.
Yeah, you and I have been close to the same. I'm also 50/50 now, but was still doing the OG 40/60 until a month or so ago. I'm up 83% total, started Feb 22 2018 I believe and am now right at the previous all time high.
Happy to hear this is working out for you as well! I must say I am contemplating bumping this to a solid 5% of my portfolio (from <3%). Entirely possible this runs out of steam due to bond bull market as many have indicated... but that could be years away.
Currently 22.5% of net worth for me. I increased my allocation a month or so ago.

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

Post by Meaty » Sun Apr 19, 2020 12:03 pm

mrspock wrote:
Sat Apr 18, 2020 8:39 pm
SVT wrote:
Sat Apr 18, 2020 3:39 pm
mrspock wrote:
Fri Apr 17, 2020 7:37 pm
.... annnnnd back to an all-time high for me on this, +76% for standard 50% UPRO /50% TMF w/ quarterly rebalancing, Feb 2018 start date. No tinkering, no timing...just vanilla.

The Schwab "Risk vs. Reward" chart is comical.
Yeah, you and I have been close to the same. I'm also 50/50 now, but was still doing the OG 40/60 until a month or so ago. I'm up 83% total, started Feb 22 2018 I believe and am now right at the previous all time high.
Happy to hear this is working out for you as well! I must say I am contemplating bumping this to a solid 5% of my portfolio (from <3%). Entirely possible this runs out of steam due to bond bull market as many have indicated... but that could be years away.
The bond bull seems like it juiced returns but the strategy still holds as long as we don’t get rapidly rising rates, right? It seems as long as UPRO/S&P trends upward over time and TMF/treasuries remain the asset of choice when their is a flight to safety we should be good to go.
"Discipline equals Freedom" - Jocko Willink

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

Post by Lee_WSP » Sun Apr 19, 2020 12:33 pm

Meaty wrote:
Sun Apr 19, 2020 12:03 pm

The bond bull seems like it juiced returns but the strategy still holds as long as we don’t get rapidly rising rates, right? It seems as long as UPRO/S&P trends upward over time and TMF/treasuries remain the asset of choice when their is a flight to safety we should be good to go.
Assuming zero (non negative) nominal returns from TMF, the strategy would have -0.7% CAGR difference from 1955 to 2018 vs a 100% S&P strategy.

Assuming TMF keeps up with inflation (zero real returns) the strategy would have a +1% CAGR difference from 1955 to 2018 vs a 100% S&P strategy.

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

Post by Meaty » Sun Apr 19, 2020 3:14 pm

Lee_WSP wrote:
Sun Apr 19, 2020 12:33 pm
Meaty wrote:
Sun Apr 19, 2020 12:03 pm

The bond bull seems like it juiced returns but the strategy still holds as long as we don’t get rapidly rising rates, right? It seems as long as UPRO/S&P trends upward over time and TMF/treasuries remain the asset of choice when their is a flight to safety we should be good to go.
Assuming zero (non negative) nominal returns from TMF, the strategy would have -0.7% CAGR difference from 1955 to 2018 vs a 100% S&P strategy.

Assuming TMF keeps up with inflation (zero real returns) the strategy would have a +1% CAGR difference from 1955 to 2018 vs a 100% S&P strategy.
Thanks for sharing. That’s not too stellar given current interest rates.
"Discipline equals Freedom" - Jocko Willink

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

Post by Lee_WSP » Sun Apr 19, 2020 3:35 pm

Meaty wrote:
Sun Apr 19, 2020 3:14 pm
Thanks for sharing. That’s not too stellar given current interest rates.
No. That's why this strategy is a lot riskier than first appears.

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

Post by tbfanman » Sun Apr 19, 2020 3:38 pm

Hi guys, new poster. This is a very fascinating thread through what I've read so far.

Just wanted throw out a question I had about the long-term strategy with TMF. Given the convexity of bond returns, will the volatility of LTT actually increase as bond yields continue to drop? Namely, as our yields drop to 0.6% and lower, is TMF becoming a higher risk asset? If so, does a risk parity strategy decrease the allocation to TMF as bond yields drop and approach negative yield territory?

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

Post by RomeoMustDie » Sun Apr 19, 2020 3:52 pm

Lee_WSP wrote:
Fri Apr 17, 2020 2:17 pm
Is the VIX even reliable as a forward indicator? Or does it only spike after stuff hits the fan? It is supposed to be an annualized forward looking estimate of the next 30 day's volatility, but staring at the VIX charts for a few hours does not instill me with much confidence in it's predictive capabilities.
I agree with your statement. It seems to be a trailing indicator.

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

Post by MoneyMarathon » Sun Apr 19, 2020 10:02 pm

get_g0ing wrote:
Wed Apr 15, 2020 11:03 am
MoneyMarathon wrote:
Tue Apr 14, 2020 6:28 pm
get_g0ing wrote:
Tue Apr 14, 2020 8:53 am
With the current reduction in interest rates, is the OG 55/45 strategy still viable for the long-term?
Possibly.
How so?

I mean is TMF expected to continue playing its intended role in the strategy, going forward?

These was some discussion around TMF needing a falling interest rate environment to do it's job for the strategy (?)
Hoping for some comments on this please.

Several folks have looked at backtests extensively:
Does anyone know if today's interest environment occurred during the backtest, and how did the strategy fare?
You're asking good questions, but the danger is that you convince yourself that you know the answer. You will never know. Nobody knows. People start thinking they know the answer and talk about putting 100% into leveraged ETFs. Bad idea.

Yes, there are hundreds of posts on how being leveraged to the max on treasuries will sink a portfolio if yields rise. If the time frame is 20-30 years, nobody knows if inflation will rise or yields will rise. Nobody knows. So don't invest assuming you know.

There is a little bit of new information recently on how yields can be very unstable if the Fed acts suddenly, increasing the risk of volatility decay. People say that higher risk means higher reward. That's wrong. Higher risk is a chance of both higher rewards and higher losses. Increasing volatility through leverage skews loss-reward outcomes more heavily towards losses. That's just how leverage and volatility works, unfortunately. It's okay if you're right about the underlying investments, but you can't really just expect to be right.

There are two ways to handle not knowing:

(1) Have some fun money in the portfolio but limit it to a relatively small percentage of assets (maybe 5%).

(2) Don't hop on the FOMO train, look into more efficient and less leveraged approaches without the same tail risks.

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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 Apr 19, 2020 10:31 pm

MoneyMarathon wrote:
Sun Apr 19, 2020 10:02 pm
People say that higher risk means higher reward. That's wrong. Higher risk is a chance of both higher rewards and higher losses.
This is not said often enough.

get_g0ing
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by get_g0ing » Mon Apr 20, 2020 5:29 am

MoneyMarathon wrote:
Sun Apr 19, 2020 10:02 pm
get_g0ing wrote:
Wed Apr 15, 2020 11:03 am
MoneyMarathon wrote:
Tue Apr 14, 2020 6:28 pm
get_g0ing wrote:
Tue Apr 14, 2020 8:53 am
With the current reduction in interest rates, is the OG 55/45 strategy still viable for the long-term?
Possibly.
How so?

I mean is TMF expected to continue playing its intended role in the strategy, going forward?

These was some discussion around TMF needing a falling interest rate environment to do it's job for the strategy (?)
Hoping for some comments on this please.

Several folks have looked at backtests extensively:
Does anyone know if today's interest environment occurred during the backtest, and how did the strategy fare?
You're asking good questions, but the danger is that you convince yourself that you know the answer. You will never know. Nobody knows. People start thinking they know the answer and talk about putting 100% into leveraged ETFs. Bad idea.

Yes, there are hundreds of posts on how being leveraged to the max on treasuries will sink a portfolio if yields rise. If the time frame is 20-30 years, nobody knows if inflation will rise or yields will rise. Nobody knows. So don't invest assuming you know.

There is a little bit of new information recently on how yields can be very unstable if the Fed acts suddenly, increasing the risk of volatility decay. People say that higher risk means higher reward. That's wrong. Higher risk is a chance of both higher rewards and higher losses. Increasing volatility through leverage skews loss-reward outcomes more heavily towards losses. That's just how leverage and volatility works, unfortunately. It's okay if you're right about the underlying investments, but you can't really just expect to be right.

There are two ways to handle not knowing:

(1) Have some fun money in the portfolio but limit it to a relatively small percentage of assets (maybe 5%).

(2) Don't hop on the FOMO train, look into more efficient and less leveraged approaches without the same tail risks.
Well written post. Thanks for commenting, I found this very useful.
I've recently been reading a bit about risk, and your post is a good reminder of how to think about some of these things.

Even if we assume that we don't know and nobody really knows, I think we still invest in any strategy with some expectation. Like the SCV crowd, international, etc. There is this expectation (or hope perhaps) that this would pay off, eventually (for this or that reason). So I was asking from that perspective, whether the current environment (or the likely future environments) still keeps this strategy viable.

Regarding (1), it reminds of something I read from Howard Marks :happy
A conscious balance must be struck between striving for return and limiting risk. The choice ... defies an easy answer. For example, consider this conundrum: Many people seem unwilling to do enough of anything ... such that it could significantly harm their results if it doesn’t work. But in order for something to be able to materially help your return if it succeeds, you have to do enough so that it could materially hurt you if it fails.

In investing, almost everything is a two-edged sword. opting to take bigger risks, substituting concentration for diversification and using leverage to magnify gains. if it’ll help if it works, that means it’ll hurt if it doesn’t.

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

Post by Ramjet » Mon Apr 20, 2020 6:06 am

BolekLolek wrote:
Sat Apr 18, 2020 3:16 pm
PSLDX has a bigger drawdown from 2/20 peak but has rebounded nicely and is up 3% over VTSAX.

Anybody agree that the Fed buying corporates is a good plus for this fund?
That's the impression I got as well

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

Post by Crushtheturtle » Mon Apr 20, 2020 9:52 am

get_g0ing wrote:
Mon Apr 20, 2020 5:29 am
Howard Marks wrote: A conscious balance must be struck between striving for return and limiting risk. The choice ... defies an easy answer. For example, consider this conundrum: Many people seem unwilling to do enough of anything ... such that it could significantly harm their results if it doesn’t work. But in order for something to be able to materially help your return if it succeeds, you have to do enough so that it could materially hurt you if it fails.

In investing, almost everything is a two-edged sword. opting to take bigger risks, substituting concentration for diversification and using leverage to magnify gains. if it’ll help if it works, that means it’ll hurt if it doesn’t.
That's a great quote, thank you for sharing. I agree.

Risk and Reward are linked. Can't have one without the other.
“The mass of men lead lives of quiet desperation.” - Henry David Thoreau

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

Post by fatcoffeedrinker » Mon Apr 20, 2020 10:04 am

mrspock wrote:
Fri Apr 17, 2020 7:37 pm
.... annnnnd back to an all-time high for me on this, +76% for standard 50% UPRO /50% TMF w/ quarterly rebalancing, Feb 2018 start date. No tinkering, no timing...just vanilla.

The Schwab "Risk vs. Reward" chart is comical.
Very close for me. ATH was $183k, now at $176k. Invested $100k around 2/19/19. Started off at 40/60 and then went to 55/45 when this new thread started.

hilink73
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by hilink73 » Mon Apr 20, 2020 1:49 pm

Hi guys

Better late than never. Just some stats regarding my target volatility 25% strategy
Here's an update on the end of March rebalancing according to PV:
Feb UPRO 42% / TMF 58%
March UPRO 9% / TMF 91%

I'm still not sure if I understand target volatility correctly as I have the feeling of buying high and selling low.
Maybe to original strategy would suit me better, who knows.
Also, I'm not sure if I care about volatility at all after this turmoil.

Since mid of march, both UPRO and TMF seem to go up, so does this allocation.

At the moment, PV would have me at UPRO 16% / TMF 84%.

jaj2276
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by jaj2276 » Mon Apr 20, 2020 2:33 pm

hilink73 wrote:
Mon Apr 20, 2020 1:49 pm
Hi guys

Better late than never. Just some stats regarding my target volatility 25% strategy
Here's an update on the end of March rebalancing according to PV:
Feb UPRO 42% / TMF 58%
March UPRO 9% / TMF 91%

I'm still not sure if I understand target volatility correctly as I have the feeling of buying high and selling low.
Maybe to original strategy would suit me better, who knows.
Also, I'm not sure if I care about volatility at all after this turmoil.

Since mid of march, both UPRO and TMF seem to go up, so does this allocation.

At the moment, PV would have me at UPRO 16% / TMF 84%.
In its simplest form it says " how much of these assets would I need to own to get a vol of 25." In this strategy the market asset is UPRO. Since UPRO was quite volatile it only needed 9% UPRO for March to get to 25% vol. The rest (100% - 9%) would be your "out of market" asset, TMF. Clearly TMF has vol but that's not considered in determining the weightings.

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

Post by Lordosis » Mon Apr 20, 2020 2:43 pm

I am happy to say that as of this morning my finds finally arrived and I am officially on the adventure!

Looks like I am having a bad first day but who cares, I am in this for the long haul!

Thanks everyone!

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

Post by Kbg » Mon Apr 20, 2020 2:49 pm

hilink73 wrote:
Mon Apr 20, 2020 1:49 pm
I'm still not sure if I understand target volatility correctly as I have the feeling of buying high and selling low.
This is exactly what happens...accordingly, I would suggest caution when using short term measures for volatility weighting and 3xETFs together.

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

Post by occambogle » Tue Apr 21, 2020 6:28 am

Lordosis wrote:
Mon Apr 20, 2020 2:43 pm
I am happy to say that as of this morning my finds finally arrived and I am officially on the adventure!

Looks like I am having a bad first day but who cares, I am in this for the long haul!

Thanks everyone!
I also just started, with $3k out of a $6k Roth IRA. Bought at UPRO = 36, TMF = 44 on Friday. Planning to do the remaining $3k soon.
I figured I'd go with the default 55/45 allocation because it's been more heavily evaluated by those wiser than me. I have to say though, TQQQ just seems to have performed so much better than UPRO this year, and previous years. Apart from the circuit-breaker aspect, I still have some curiosity about it as part of a mix....

euphoric85
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by euphoric85 » Tue Apr 21, 2020 7:27 am

occambogle wrote:
Tue Apr 21, 2020 6:28 am
Lordosis wrote:
Mon Apr 20, 2020 2:43 pm
I am happy to say that as of this morning my finds finally arrived and I am officially on the adventure!

Looks like I am having a bad first day but who cares, I am in this for the long haul!

Thanks everyone!
I also just started, with $3k out of a $6k Roth IRA. Bought at UPRO = 36, TMF = 44 on Friday. Planning to do the remaining $3k soon.
I figured I'd go with the default 55/45 allocation because it's been more heavily evaluated by those wiser than me. I have to say though, TQQQ just seems to have performed so much better than UPRO this year, and previous years. Apart from the circuit-breaker aspect, I still have some curiosity about it as part of a mix....
I’m probably not one of those wiser than you but I just recently started TQQQ/TMF myself. While I agree with the consensus that QQQ is not diversified enough, I also believe the companies it’s heavily weighted with will weather this storm very well. No oil. I believe only one airline. MS, Google and Amazon I suspect will profit as companies greater leverage their cloud offerings to support everyone working from home. If we are in another tech bubble I don’t see it popping soon, so I’m in.

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

Post by occambogle » Tue Apr 21, 2020 7:53 am

euphoric85 wrote:
Tue Apr 21, 2020 7:27 am
I’m probably not one of those wiser than you but I just recently started TQQQ/TMF myself. While I agree with the consensus that QQQ is not diversified enough, I also believe the companies it’s heavily weighted with will weather this storm very well. No oil. I believe only one airline. MS, Google and Amazon I suspect will profit as companies greater leverage their cloud offerings to support everyone working from home. If we are in another tech bubble I don’t see it popping soon, so I’m in.
That's somewhat my thinking too... Tech just feels like it will weather this storm better. But who knows. Can I ask what ratios you are using?

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

Post by Lordosis » Tue Apr 21, 2020 8:34 am

TQQQ has done great this past decade. The problem I have is that I have a tremendous amount of faith in the US economy going up long term (S&P500) I do not have nearly as much faith that tech will always outpace the rest of the market. I would not know how long to tolerate under performance. I would not know when to cash in. I would not trust myself to stay the course after years of poor returns.

Just like in my boring 3 fund investing I do not go after any sectors.

euphoric85
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by euphoric85 » Tue Apr 21, 2020 10:04 am

occambogle wrote:
Tue Apr 21, 2020 7:53 am
euphoric85 wrote:
Tue Apr 21, 2020 7:27 am
I’m probably not one of those wiser than you but I just recently started TQQQ/TMF myself. While I agree with the consensus that QQQ is not diversified enough, I also believe the companies it’s heavily weighted with will weather this storm very well. No oil. I believe only one airline. MS, Google and Amazon I suspect will profit as companies greater leverage their cloud offerings to support everyone working from home. If we are in another tech bubble I don’t see it popping soon, so I’m in.
That's somewhat my thinking too... Tech just feels like it will weather this storm better. But who knows. Can I ask what ratios you are using?
55/45 TQQQ/TMF in a Roth with 5% rebalance bands and M1’s dynamic allocation of my biweekly contributions. I just started recently so I’ve yet to need to do a rebalance.

Adamtc4
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Adamtc4 » Tue Apr 21, 2020 9:30 pm

So can someone tell me if I am missing something? I know the prospectuses on these investments say that high volatility is bad but I went back through months with high volatility spikes (09-present) and can only find one or two instances when the market beat a 50/50 UPRO/TMF. It seems even during times with high volatility this mix still beats the SP500 handedly. Even Feb and March of this year where volatility was almost to 2008 levels. This is my only hesitation at the moment so I have been reducing my position since VIX is still high but after doing this look back it is starting to seem like it might be a non issue.

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

Post by Lee_WSP » Tue Apr 21, 2020 11:48 pm

Adamtc4 wrote:
Tue Apr 21, 2020 9:30 pm
So can someone tell me if I am missing something? I know the prospectuses on these investments say that high volatility is bad but I went back through months with high volatility spikes (09-present) and can only find one or two instances when the market beat a 50/50 UPRO/TMF. It seems even during times with high volatility this mix still beats the SP500 handedly. Even Feb and March of this year where volatility was almost to 2008 levels. This is my only hesitation at the moment so I have been reducing my position since VIX is still high but after doing this look back it is starting to seem like it might be a non issue.
You are not looking at enough data to draw any conclusions. The actual funds themselves have only been around post 2008 recovery. You'd have to look at simulated data to see the true drawdown risk.

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

Post by Nicolas Perrault » Wed Apr 22, 2020 8:56 am

Crushtheturtle wrote:
Mon Apr 20, 2020 9:52 am
Risk and Reward are linked. Can't have one without the other.
Sure you can. Put a six-shooter with only five chambers empty to your head and pull the trigger. Tons of risk, no reward.

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

Post by RomeoMustDie » Wed Apr 22, 2020 9:10 am

euphoric85 wrote:
Tue Apr 21, 2020 7:27 am
occambogle wrote:
Tue Apr 21, 2020 6:28 am
Lordosis wrote:
Mon Apr 20, 2020 2:43 pm
I am happy to say that as of this morning my finds finally arrived and I am officially on the adventure!

Looks like I am having a bad first day but who cares, I am in this for the long haul!

Thanks everyone!
I also just started, with $3k out of a $6k Roth IRA. Bought at UPRO = 36, TMF = 44 on Friday. Planning to do the remaining $3k soon.
I figured I'd go with the default 55/45 allocation because it's been more heavily evaluated by those wiser than me. I have to say though, TQQQ just seems to have performed so much better than UPRO this year, and previous years. Apart from the circuit-breaker aspect, I still have some curiosity about it as part of a mix....
I’m probably not one of those wiser than you but I just recently started TQQQ/TMF myself. While I agree with the consensus that QQQ is not diversified enough, I also believe the companies it’s heavily weighted with will weather this storm very well. No oil. I believe only one airline. MS, Google and Amazon I suspect will profit as companies greater leverage their cloud offerings to support everyone working from home. If we are in another tech bubble I don’t see it popping soon, so I’m in.
Tech sector ETF's have been fairly volatile. It's also possible that the market turns against software as a service and platform as a service soon since they carry high operational licensing costs and often are not core revenue generating functions in the business.

Cloud companies had negative P/E ratios before the crash. Not sure how long they could hold up with their balance sheets in the red.

Interesting, but UPRO seems more diversified.

caklim00
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by caklim00 » Wed Apr 22, 2020 9:32 am

I'm currently up a little over 40K on the Treasury Futures ladder I created about 2 months ago: viewtopic.php?t=304904 This is very close to the bond future portion of NTSX.

I do have some serious reservations about the long term viability of this approach though given the current interest rates moving forward.

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

Post by Crushtheturtle » Wed Apr 22, 2020 10:24 am

Nicolas Perrault wrote:
Wed Apr 22, 2020 8:56 am
Crushtheturtle wrote:
Mon Apr 20, 2020 9:52 am
Risk and Reward are linked. Can't have one without the other.
Sure you can. Put a six-shooter with only five chambers empty to your head and pull the trigger. Tons of risk, no reward.
Presumably, I would only be doing so to win a monetary wager, escape from the Russian mob, or obtain an adrenaline rush (assuming a mental disorder). All "rewards," albeit with poor Sharpe ratios.

But your point is taken. :wink:
“The mass of men lead lives of quiet desperation.” - Henry David Thoreau

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

Post by Mickelous » Wed Apr 22, 2020 12:03 pm

So after reading this whole two part series and assessing my risk at age 30, I've decided to invest in this strategy in a couple different accounts. Called Fidelity to ask them a question about how the cash reserves work and I heard a snicker or a muffled laugh after the rep reviewed my account.

We'll see who's laughing in 10 years. Maybe her but if it's not her I will hopefully be close to retirement. I figure if I wait it out long enough I'll hit a good enough bull run between retiring early and on time and will be no worse than an index fund over a 10-20 year run.

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

Post by ltdshred » Wed Apr 22, 2020 2:59 pm

occambogle wrote:
Tue Apr 21, 2020 7:53 am
euphoric85 wrote:
Tue Apr 21, 2020 7:27 am
I’m probably not one of those wiser than you but I just recently started TQQQ/TMF myself. While I agree with the consensus that QQQ is not diversified enough, I also believe the companies it’s heavily weighted with will weather this storm very well. No oil. I believe only one airline. MS, Google and Amazon I suspect will profit as companies greater leverage their cloud offerings to support everyone working from home. If we are in another tech bubble I don’t see it popping soon, so I’m in.
That's somewhat my thinking too... Tech just feels like it will weather this storm better. But who knows. Can I ask what ratios you are using?
QQQ performed better during the 08 crisis than the SP and it appears to be the case here. The tail risk for another dot com is extremely low, and QQQ doesn't have value stocks.

I became TQQQ-TMF at the start of this year and even in the crash, it's done well for me

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