HEDGEFUNDIE's excellent adventure Part II: The next journey

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

Post by cos »

jolmscheid wrote: Tue Jun 23, 2020 9:34 pm So, UPRO/TMF re-leverage daily. With the circuit breaker rules in place, the market can drop by a Max of 20% in a trading day. This would equate to a 60% drop for the 3x leveraged fund(s), if this were to happen...so, with re-leveraging daily, there is virtually no way for the 3x leveraged funds to go to zero.

Not saying that we want this to happen, but for this to go "bust" the market and long term Treasuries would both have to drop over 15% in one day. Is this correct? So, when looking at PV, and the S&P shows a Max drawdown for example of -50% let's say, this strategy would still be "alive" due to the daily re-leveraging?
Even if both the S&P 500 and long-term US treasuries drop 15% in one day, you won't necessarily go bust. They'd both have to drop 34%, and as you said, that's impossible for UPRO given the existence of circuit breakers monitoring the S&P 500 and unlikely for TMF given the stability of TLT (its largest recorded 1-day loss in over 18 years was -6.43%). It's also unlikely that they'd both drop so steeply simultaneously given their fairly large degree of anticorrelation.

The drawdowns reported by Portfolio Visualizer happen over the course of multiple months or even years, not single days, so yes, this strategy would live thanks to both its daily releveraging and its quarterly rebalancing. For example, during the subprime mortgage crisis, the S&P 500 suffered a -50.97% drawdown while this strategy suffered somewhere in the ballpark of a -67% drawdown.

You should take another look at the data in the first post of the original thread. A lot of your questions can be answered by exploring it yourself, and you'll probably learn something interesting in the process! It's really cool stuff.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by jolmscheid »

cos wrote: Tue Jun 23, 2020 11:33 pm
jolmscheid wrote: Tue Jun 23, 2020 9:34 pm So, UPRO/TMF re-leverage daily. With the circuit breaker rules in place, the market can drop by a Max of 20% in a trading day. This would equate to a 60% drop for the 3x leveraged fund(s), if this were to happen...so, with re-leveraging daily, there is virtually no way for the 3x leveraged funds to go to zero.

Not saying that we want this to happen, but for this to go "bust" the market and long term Treasuries would both have to drop over 15% in one day. Is this correct? So, when looking at PV, and the S&P shows a Max drawdown for example of -50% let's say, this strategy would still be "alive" due to the daily re-leveraging?
Even if both the S&P 500 and long-term US treasuries drop 15% in one day, you won't necessarily go bust. They'd both have to drop 34%, and as you said, that's impossible for UPRO given the existence of circuit breakers monitoring the S&P 500 and unlikely for TMF given the stability of TLT (its largest recorded 1-day loss in over 18 years was -6.43%). It's also unlikely that they'd both drop so steeply simultaneously given their fairly large degree of anticorrelation.

The drawdowns reported by Portfolio Visualizer happen over the course of multiple months or even years, not single days, so yes, this strategy would live thanks to both its daily releveraging and its quarterly rebalancing. For example, during the subprime mortgage crisis, the S&P 500 suffered a -50.97% drawdown while this strategy suffered somewhere in the ballpark of a -67% drawdown.

You should take another look at the data in the first post of the original thread. A lot of your questions can be answered by exploring it yourself, and you'll probably learn something interesting in the process! It's really cool stuff.
Thank you!
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by jolmscheid »

Lee_WSP wrote: Tue Jun 23, 2020 11:06 pm
jolmscheid wrote: Mon Jun 22, 2020 6:24 pm
RayKeynes wrote: Mon Jun 22, 2020 9:47 am @ HedgeFundie or @ all: What is the historically best split-up between TMF and UPRO? I think its around 40/60 (TMF/UPRO), or am I wrong?

I was thinking of going a little bit more "agressive" with a UPRO/TMF approach of 80/20 above SMA235 abd with 45 / 55 below SMA235. What do you guys think?
I like the idea of utilizing a moving average of some sort in an attempt to cut down on the more drastic drawdowns.
You would've been whipsawed in '18 & '20.
Good point on the whipsaws...I would think having a buffer band in place of say 1-2% above/below may help with this.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by keith6014 »

Anyone know if Hedgefundie updated performance?
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by TNWoods »

keith6014 wrote: Wed Jun 24, 2020 7:03 am Anyone know if Hedgefundie updated performance?
It is my understanding that due to harassment from certain zealots in another thread that he has left the bogleheads website.

Search for the last posts by him if you're interested in seeing how to rid the boards of any interesting, thoughtful and helpful posters who don't agree with your particular viewpoint 100%.

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

Post by 7th_Diagram »

TNWoods wrote: Wed Jun 24, 2020 8:00 am
keith6014 wrote: Wed Jun 24, 2020 7:03 am Anyone know if Hedgefundie updated performance?
It is my understanding that due to harassment from certain zealots in another thread that he has left the bogleheads website.

Search for the last posts by him if you're interested in seeing how to rid the boards of any interesting, thoughtful and helpful posters who don't agree with your particular viewpoint 100%.

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

Post by mroe800 »

TNWoods wrote: Wed Jun 24, 2020 8:00 am
keith6014 wrote: Wed Jun 24, 2020 7:03 am Anyone know if Hedgefundie updated performance?
It is my understanding that due to harassment from certain zealots in another thread that he has left the bogleheads website.

Search for the last posts by him if you're interested in seeing how to rid the boards of any interesting, thoughtful and helpful posters who don't agree with your particular viewpoint 100%.

TNWoods
Wow, what a shame.
CDub
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by CDub »

mroe800 wrote: Wed Jun 24, 2020 10:01 am
TNWoods wrote: Wed Jun 24, 2020 8:00 am
keith6014 wrote: Wed Jun 24, 2020 7:03 am Anyone know if Hedgefundie updated performance?
It is my understanding that due to harassment from certain zealots in another thread that he has left the bogleheads website.

Search for the last posts by him if you're interested in seeing how to rid the boards of any interesting, thoughtful and helpful posters who don't agree with your particular viewpoint 100%.

TNWoods
Wow, what a shame.
I hope he reconsiders.
mroe800
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by mroe800 »

CDub wrote: Wed Jun 24, 2020 10:02 am I hope he reconsiders.
Tough to be contributing to a site where you’re constantly derided for an alternate opinion.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by TNWoods »

mroe800 wrote: Wed Jun 24, 2020 10:04 am
CDub wrote: Wed Jun 24, 2020 10:02 am I hope he reconsiders.
Tough to be contributing to a site where you’re constantly derided for an alternate opinion.
And it wasn't even the alternate opinion from THIS thread, it was very good advice concerning necessary tax considerations from a very specific situation another poster had asked about.

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

Post by Texanbybirth »

mroe800 wrote: Wed Jun 24, 2020 10:04 am
CDub wrote: Wed Jun 24, 2020 10:02 am I hope he reconsiders.
Tough to be contributing to a site where you’re constantly derided for an alternate opinion.
I hope he develops some tougher skin. I always enjoyed reading his opinions/thoughts and I'll miss his contributions.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by occambogle »

It would be terribly sad if Hedgefundie dropped off this thread (and others)... I'm a relative newcomer but I've learned so much by reading through all the posts here. I sincerely hope they return....
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by LadyGeek »

The discussion is getting derailed with concern of HEDGEFUNDIE's whereabouts. Concerns about members can be posted in the US Chapters forum (Bogleheads community).

Please stay on-topic.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by dspencer »

LadyGeek wrote: Wed Jun 24, 2020 10:32 am The discussion is getting derailed with concern of HEDGEFUNDIE's whereabouts. Concerns about members can be posted in the US Chapters forum (Bogleheads community).

Please stay on-topic.
The topic is literally the evolution of one member's personal investment strategy, so it seems relevant to know if they've left the site forever and won't update their strategy or performance ever again.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by ltdshred »

Does anyone have simulated backtested EDV data 30+ years? Thinking about deleveraging when I meet my short term aggressive goals
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

ltdshred wrote: Wed Jun 24, 2020 3:52 pm Does anyone have simulated backtested EDV data 30+ years? Thinking about deleveraging when I meet my short term aggressive goals
See Simba's leveraged spreadsheet.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by nigel_ht »

Texanbybirth wrote: Wed Jun 24, 2020 10:14 am
mroe800 wrote: Wed Jun 24, 2020 10:04 am
CDub wrote: Wed Jun 24, 2020 10:02 am I hope he reconsiders.
Tough to be contributing to a site where you’re constantly derided for an alternate opinion.
I hope he develops some tougher skin. I always enjoyed reading his opinions/thoughts and I'll miss his contributions.
I hope some bogleheads develop an open mind.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by keith6014 »

nigel_ht wrote: Wed Jun 24, 2020 10:12 pm
Texanbybirth wrote: Wed Jun 24, 2020 10:14 am
mroe800 wrote: Wed Jun 24, 2020 10:04 am
CDub wrote: Wed Jun 24, 2020 10:02 am I hope he reconsiders.
Tough to be contributing to a site where you’re constantly derided for an alternate opinion.
I hope he develops some tougher skin. I always enjoyed reading his opinions/thoughts and I'll miss his contributions.
I hope some bogleheads develop an open mind.
Exactly.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by ltdshred »

Lee_WSP wrote: Wed Jun 24, 2020 9:23 pm
ltdshred wrote: Wed Jun 24, 2020 3:52 pm Does anyone have simulated backtested EDV data 30+ years? Thinking about deleveraging when I meet my short term aggressive goals
See Simba's leveraged spreadsheet.
I've seen it, and it's monthly data. Is it just long term treasuries with the exact target duration of EDV? Does it replicate zero-coupon strips? Or is it a vanilla long duration treasury fund?
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

ltdshred wrote: Thu Jun 25, 2020 7:47 pm
Lee_WSP wrote: Wed Jun 24, 2020 9:23 pm
ltdshred wrote: Wed Jun 24, 2020 3:52 pm Does anyone have simulated backtested EDV data 30+ years? Thinking about deleveraging when I meet my short term aggressive goals
See Simba's leveraged spreadsheet.
I've seen it, and it's monthly data. Is it just long term treasuries with the exact target duration of EDV? Does it replicate zero-coupon strips? Or is it a vanilla long duration treasury fund?
I'm not sure what is confusing about the line item "Long Term Treasury STRIPS EDV"
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Bosro »

Wonder if HEDGEFUNDIE found another home on a different forum?

Would follow him there.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Blobfeesh »

Bosro wrote: Fri Jun 26, 2020 11:20 am Wonder if HEDGEFUNDIE found another home on a different forum?

Would follow him there.
I hope so. It would be sad to walk away from this experiment which has spurred such an engaging discussion.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by pathogenic »

Made an account just to say thanks. Very insightful information. In order to stay on topic I will ask that if you are running 55% UPRO and 45% TMF with >5% of your portfolio, hypothetically, would you shift the investment once it exceeds 5% of your total portfolio from growth? Lock in some of the gains. Or would you let it ride?
Rad Dad
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Rad Dad »

pathogenic wrote: Fri Jun 26, 2020 5:40 pm Made an account just to say thanks. Very insightful information. In order to stay on topic I will ask that if you are running 55% UPRO and 45% TMF with >5% of your portfolio, hypothetically, would you shift the investment once it exceeds 5% of your total portfolio from growth? Lock in some of the gains. Or would you let it ride?
The initial idea was to let it ride. However, there were several pages where people were discussing various exit strategies.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Mickelous »

pathogenic wrote: Fri Jun 26, 2020 5:40 pm Made an account just to say thanks. Very insightful information. In order to stay on topic I will ask that if you are running 55% UPRO and 45% TMF with >5% of your portfolio, hypothetically, would you shift the investment once it exceeds 5% of your total portfolio from growth? Lock in some of the gains. Or would you let it ride?
One thing I noticed about people using 5% of their portfolio, what do you expect from this if it does work?

Say you do get 20% year over year returns with 5 percent of your portfolio, about double the S&P index. That's only 1/20th of your portfolio getting double the gains. So If you are 100% in equities even in your other 95% earning on average 10% year over year, getting 20% year over year in your 5% bucket, it's a .5% difference year over year. If you invest 1000 in a 10% year over year fund, you make $100 year 1, 5% of that in HF adventure gives you $105.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by firebirdparts »

pathogenic wrote: Fri Jun 26, 2020 5:40 pm Made an account just to say thanks. Very insightful information. In order to stay on topic I will ask that if you are running 55% UPRO and 45% TMF with >5% of your portfolio, hypothetically, would you shift the investment once it exceeds 5% of your total portfolio from growth? Lock in some of the gains. Or would you let it ride?
It was going to be a lottery situation. You can’t stop till you get rich. I think if you have a reason to take profits I would just skim off any amount over some number you set.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by RomeoMustDie »

I had to bail out of my excellent adventure from the rational/irrational risk (depending on your perspective) of stagflation in the next years.

Now seeking to create a leveraged portfolio with lower overall returns that hedges better against a high inflation, low growth environment.

Thinking of something like this:
TMF - 40
TYD - 15
UPRO - 30
UTSL - 7.5
CURE - 7.5

Sector ETF's are meant to hedge against stagflation in the absence of a 3x commodity or gold etf (UGLD is shutting down)

Another option is to use M1 borrow or IBKR margin loans to fill in 3x exposure to GLD and commodity index.

More research is currently going into this as far as the correct risk parity weightings and target volatility, but this is my mindset so far.

From a market timing perspective, things are looking a bit gray for this portfolio in the short term because interest rates have nowhere to go but up, stocks could be overvalued relative to macroeconomic conditions, and inflation may result from the current fiscal policy in the next several years. I am less concerned about the short term and more concerned with a portfolio that stabilizes through all market conditions and is well-diversified between multiple non-correlated assets.

Let me know your thoughts. ✌
Mickelous
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Mickelous »

RomeoMustDie wrote: Fri Jun 26, 2020 8:14 pm I had to bail out of my excellent adventure from the rational/irrational risk (depending on your perspective) of stagflation in the next years.

Now seeking to create a leveraged portfolio with lower overall returns that hedges better against a high inflation, low growth environment.

Thinking of something like this:
TMF - 40
TYD - 15
UPRO - 30
UTSL - 7.5
CURE - 7.5

Sector ETF's are meant to hedge against stagflation in the absence of a 3x commodity or gold etf (UGLD is shutting down)

Another option is to use M1 borrow or IBKR margin loans to fill in 3x exposure to GLD and commodity index.

More research is currently going into this as far as the correct risk parity weightings and target volatility, but this is my mindset so far.

From a market timing perspective, things are looking a bit gray for this portfolio in the short term because interest rates have nowhere to go but up, stocks could be overvalued relative to macroeconomic conditions, and inflation may result from the current fiscal policy in the next several years. I am less concerned about the short term and more concerned with a portfolio that stabilizes through all market conditions and is well-diversified between multiple non-correlated assets.

Let me know your thoughts. ✌
Reading what other members have posted here that long term treasuries still have a good bit of upside to go before they even reach 0%. Since much of the world is already negative I would imagine that LTT would eventually do so as well, in which case there will be a long way to go.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by guyinlaw »

Hope all of you know that HEDGEFUNDIE said he was holding PSLDX in ~50% of his portfolio. So people who are interested in UPRO/TMF should consider PSLDX is IRA account.
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isubrama
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by isubrama »

guyinlaw wrote: Fri Jun 26, 2020 9:32 pm Hope all of you know that HEDGEFUNDIE said he was holding PSLDX in ~50% of his portfolio. So people who are interested in UPRO/TMF should consider PSLDX is IRA account.
I believe he mentioned, PSLDX is his core holding on tax advantaged accounts.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by keith6014 »

Blobfeesh wrote: Fri Jun 26, 2020 2:01 pm
Bosro wrote: Fri Jun 26, 2020 11:20 am Wonder if HEDGEFUNDIE found another home on a different forum?

Would follow him there.
I hope so. It would be sad to walk away from this experiment which has spurred such an engaging discussion.
same. would follow her!
lemerou
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by lemerou »

Bosro wrote: Fri Jun 26, 2020 11:20 am Wonder if HEDGEFUNDIE found another home on a different forum?

Would follow him there.
Curious to this as well.

It's really a shame he left.
Mickelous
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Mickelous »

lemerou wrote: Fri Jun 26, 2020 11:38 pm
Bosro wrote: Fri Jun 26, 2020 11:20 am Wonder if HEDGEFUNDIE found another home on a different forum?

Would follow him there.
Curious to this as well.

It's really a shame he left.
I am certainly glad HF posted this adventure, he may have created financial independence for many people willing to take the plunge, and in the future may be looked at as a pioneer such as the early adopters of the index fund strategy. Leveraged ETF Risk Parity could be the norm in 10 years. I am seeing more and more ETFs and funds emerge that are using leverage.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by taojaxx »

RomeoMustDie wrote: Fri Jun 26, 2020 8:14 pm I had to bail out of my excellent adventure from the rational/irrational risk (depending on your perspective) of stagflation in the next years.

Now seeking to create a leveraged portfolio with lower overall returns that hedges better against a high inflation, low growth environment.

Thinking of something like this:
TMF - 40
TYD - 15
UPRO - 30
UTSL - 7.5
CURE - 7.5

Sector ETF's are meant to hedge against stagflation in the absence of a 3x commodity or gold etf (UGLD is shutting down)

Another option is to use M1 borrow or IBKR margin loans to fill in 3x exposure to GLD and commodity index.

More research is currently going into this as far as the correct risk parity weightings and target volatility, but this is my mindset so far.

From a market timing perspective, things are looking a bit gray for this portfolio in the short term because interest rates have nowhere to go but up, stocks could be overvalued relative to macroeconomic conditions, and inflation may result from the current fiscal policy in the next several years. I am less concerned about the short term and more concerned with a portfolio that stabilizes through all market conditions and is well-diversified between multiple non-correlated assets.

Let me know your thoughts. ✌
I did 55% UPRO, 22% TMF, 67% LTPZ (LT TIPS from PIMCO) and -44% Cash. Works so far. Main issue will be maintaining the 44% margin leverage during stormy weather. I'm hoping LT TIPS would cross that bad weather unaffected so IB would keep the funding open.
But that's just "hope"...
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by RomeoMustDie »

taojaxx wrote: Sat Jun 27, 2020 5:24 pm
RomeoMustDie wrote: Fri Jun 26, 2020 8:14 pm I had to bail out of my excellent adventure from the rational/irrational risk (depending on your perspective) of stagflation in the next years.

Now seeking to create a leveraged portfolio with lower overall returns that hedges better against a high inflation, low growth environment.

Thinking of something like this:
TMF - 40
TYD - 15
UPRO - 30
UTSL - 7.5
CURE - 7.5

Sector ETF's are meant to hedge against stagflation in the absence of a 3x commodity or gold etf (UGLD is shutting down)

Another option is to use M1 borrow or IBKR margin loans to fill in 3x exposure to GLD and commodity index.

More research is currently going into this as far as the correct risk parity weightings and target volatility, but this is my mindset so far.

From a market timing perspective, things are looking a bit gray for this portfolio in the short term because interest rates have nowhere to go but up, stocks could be overvalued relative to macroeconomic conditions, and inflation may result from the current fiscal policy in the next several years. I am less concerned about the short term and more concerned with a portfolio that stabilizes through all market conditions and is well-diversified between multiple non-correlated assets.

Let me know your thoughts. ✌
I did 55% UPRO, 22% TMF, 67% LTPZ (LT TIPS from PIMCO) and -44% Cash. Works so far. Main issue will be maintaining the 44% margin leverage during stormy weather. I'm hoping LT TIPS would cross that bad weather unaffected so IB would keep the funding open.
But that's just "hope"...
I like the thinking behind your setup. I'll look more into leveraged TIPS.
perfectuncertainty
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by perfectuncertainty »

RomeoMustDie wrote: Sun Jun 28, 2020 3:22 am
taojaxx wrote: Sat Jun 27, 2020 5:24 pm
RomeoMustDie wrote: Fri Jun 26, 2020 8:14 pm I had to bail out of my excellent adventure from the rational/irrational risk (depending on your perspective) of stagflation in the next years.

Now seeking to create a leveraged portfolio with lower overall returns that hedges better against a high inflation, low growth environment.

Thinking of something like this:
TMF - 40
TYD - 15
UPRO - 30
UTSL - 7.5
CURE - 7.5

Sector ETF's are meant to hedge against stagflation in the absence of a 3x commodity or gold etf (UGLD is shutting down)

Another option is to use M1 borrow or IBKR margin loans to fill in 3x exposure to GLD and commodity index.

More research is currently going into this as far as the correct risk parity weightings and target volatility, but this is my mindset so far.

From a market timing perspective, things are looking a bit gray for this portfolio in the short term because interest rates have nowhere to go but up, stocks could be overvalued relative to macroeconomic conditions, and inflation may result from the current fiscal policy in the next several years. I am less concerned about the short term and more concerned with a portfolio that stabilizes through all market conditions and is well-diversified between multiple non-correlated assets.

Let me know your thoughts. ✌
I did 55% UPRO, 22% TMF, 67% LTPZ (LT TIPS from PIMCO) and -44% Cash. Works so far. Main issue will be maintaining the 44% margin leverage during stormy weather. I'm hoping LT TIPS would cross that bad weather unaffected so IB would keep the funding open.
But that's just "hope"...
I like the thinking behind your setup. I'll look more into leveraged TIPS.
The issue using margin is that you can't do it in an IRA so using margin for TIPS isn't an option. And using any of these strategies in a taxable account is going to have tax-induced drag as a result of quarterly rebalancing.
bl4ckjack
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by bl4ckjack »

Hello,

One thing I've been wondering about this strategy - bond prices should increase when rates go down, but with 0% interest rates, haven't bonds basically peaked? If the market tanks again, why would people shift even more funds to bonds given that bond upside is low. So what exactly are we "hedging" by including TMF/TLT?

I've seen a variation of this strategy which basically keeps money 100% in cash/treasury when SPY > 200 DMA, and 100% in UPRO/TQQQ when SPX > 200 DMA. Wouldn't that work better in a low interest rate environment?

Basically I'm wondering what exactly are bonds hedging going forward with low rates?
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by taojaxx »

"using any of these strategies in a taxable account is going to have tax-induced drag as a result of quarterly rebalancing."
Correct, but if you ease into the portfolio the first year, you just buy the low performing asset with fresh cash, adding to portfolio size. Thereafter, you just rebalance the regular way but it is LT capital gains at 15% (even 0% if your taxable income as MFJ is below $78k).
corp_sharecropper
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by corp_sharecropper »

Has this been compared with using futures? Due to the notional value of treasury futures you'd be forced to have a pretty large balance and you wouldn't have great granularity on your AA unless you had an enormous account but I'm wondering if that's not too big of a deal and that maybe some aspects of futures might make up for that. I could see the tax treatment going either way with futures vs LETFs but certainly you would save on ER drag compared to LETFs and you could customize your amount of leverage to as many decimals as you want. Seems like rolling futures every 3 months would be just as much work as rebalancing LETFs, I certainly wouldn't consider it to be burden. I think eminis would be the ideal equity side contracts though maybe micro eminis would be preferable for a smaller account.
Rad Dad
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Rad Dad »

bl4ckjack wrote: Sun Jun 28, 2020 11:57 am Hello,

One thing I've been wondering about this strategy - bond prices should increase when rates go down, but with 0% interest rates, haven't bonds basically peaked? If the market tanks again, why would people shift even more funds to bonds given that bond upside is low. So what exactly are we "hedging" by including TMF/TLT?

I've seen a variation of this strategy which basically keeps money 100% in cash/treasury when SPY > 200 DMA, and 100% in UPRO/TQQQ when SPX > 200 DMA. Wouldn't that work better in a low interest rate environment?

Basically I'm wondering what exactly are bonds hedging going forward with low rates?
LTT still have the potential to be a powerful counterbalance. This article was shared previously and is an excellent explanation:

https://portfoliocharts.com/2019/05/27/ ... convexity/

If you search the thread you’ll find lots of people with similar concerns. I’m considering adding some hedging with a VXTH type strategy as well.
NMBob
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by NMBob »

corp_sharecropper wrote: Sun Jun 28, 2020 12:48 pm Has this been compared with using futures? ...
there are probably many hundreds of posts talking about using treasury futures to execute the bond side of a leveraged portfolio, if that is what you are asking. some seem to be by posters actually doing it.

search.php?keywords=hedgefundie+futures ... mit=Search
taojaxx
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by taojaxx »

Three issues with futures:
1) Size. Large denominations make rebalancing cumbersome. Options can help adjust the exposure but then you lose the simplicity of HF's game.
2) Taxes. Futures create a taxable event anytime the position is rolled into the next calendar period. 40% STCG, 60% LTCG, 4 times a year, every year.
3) Overnight exposure to low liquidity environments. UPRO and TMF close at 4pm and you can go enjoy happy hour. ES, TN, ZB and others trade 23/6 all week, every week. Steep market moves Sydney time with zero liquidity can trigger margin calls and position liquidations. It happens, believe me
am
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by am »

Mickelous wrote: Sat Jun 27, 2020 2:27 pm
lemerou wrote: Fri Jun 26, 2020 11:38 pm
Bosro wrote: Fri Jun 26, 2020 11:20 am Wonder if HEDGEFUNDIE found another home on a different forum?

Would follow him there.
Curious to this as well.

It's really a shame he left.
I am certainly glad HF posted this adventure, he may have created financial independence for many people willing to take the plunge, and in the future may be looked at as a pioneer such as the early adopters of the index fund strategy. Leveraged ETF Risk Parity could be the norm in 10 years. I am seeing more and more ETFs and funds emerge that are using leverage.
There are scenarios where this strategy can deliver poor returns with all the same volatility, I think discussed earlier in this mega thread. I think a side bet is ok, but to gamble with a big % is too risky.
keith6014
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by keith6014 »

taojaxx wrote: Sun Jun 28, 2020 3:23 pm Three issues with futures:
1) Size. Large denominations make rebalancing cumbersome. Options can help adjust the exposure but then you lose the simplicity of HF's game.
2) Taxes. Futures create a taxable event anytime the position is rolled into the next calendar period. 40% STCG, 60% LTCG, 4 times a year, every year.
3) Overnight exposure to low liquidity environments. UPRO and TMF close at 4pm and you can go enjoy happy hour. ES, TN, ZB and others trade 23/6 all week, every week. Steep market moves Sydney time with zero liquidity can trigger margin calls and position liquidations. It happens, believe me
4) For smaller accounts (less than $35k), Emini Micro does a great job but will have a problem with Treasuries. There isn't a smaller face value instrument. They are all near ~100k notional.
bl4ckjack
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by bl4ckjack »

Rad Dad wrote: Sun Jun 28, 2020 1:52 pm
bl4ckjack wrote: Sun Jun 28, 2020 11:57 am Hello,

One thing I've been wondering about this strategy - bond prices should increase when rates go down, but with 0% interest rates, haven't bonds basically peaked? If the market tanks again, why would people shift even more funds to bonds given that bond upside is low. So what exactly are we "hedging" by including TMF/TLT?

I've seen a variation of this strategy which basically keeps money 100% in cash/treasury when SPY > 200 DMA, and 100% in UPRO/TQQQ when SPX > 200 DMA. Wouldn't that work better in a low interest rate environment?

Basically I'm wondering what exactly are bonds hedging going forward with low rates?
LTT still have the potential to be a powerful counterbalance. This article was shared previously and is an excellent explanation:

https://portfoliocharts.com/2019/05/27/ ... convexity/

If you search the thread you’ll find lots of people with similar concerns. I’m considering adding some hedging with a VXTH type strategy as well.
Thank you this was really informative. I didn't realize the impact of convexity and also the implications of mixing long + short expiry.

Tail Hedging is exactly what I was thinking of, but with put backspreads. With VXTH, I don't think 30 delta 1-month vix calls are the right hedge as that portfolio underperforms S&P for a long time until the black swan event. But then you have to actively manage those puts every month or every six weeks.
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cos
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by cos »

Just thought I'd check in since I just hit the big yellow rebalance button. I've been following the Adventure with a portion of my portfolio for quite awhile, but I didn't go all-in until the end of last year so note that my returns reflect that. Also note that I contribute regularly so all returns are money-weighted.

I'm up ~25% all-time, since March 29th, 2019 (on average, ~50% of my portfolio has been allocated to the adventure during this time, the rest tracked unleveraged total world stock pretty closely).

I'm up ~26% in the past quarter, since March 30th, 2020 (100% of my portfolio has been allocated to the vanilla 55/45 adventure during this time).

I wish I could get money-weighted returns from a specified date out of the M1 app, but my options are limited to past day, past week, past month, past quarter, past year, and all-time.
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queso
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by queso »

I can't speak for hedgefundie, but I started last september and am up 30% (original 55/45 with only one rebalance that wasn't adding additional funds).
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Meaty
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Meaty »

queso wrote: Mon Jun 29, 2020 3:06 pm I can't speak for hedgefundie, but I started last september and am up 30% (original 55/45 with only one rebalance that wasn't adding additional funds).
Started last august and up 20%.
"Discipline equals Freedom" - Jocko Willink
jolmscheid
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by jolmscheid »

Meaty wrote: Mon Jun 29, 2020 3:37 pm
queso wrote: Mon Jun 29, 2020 3:06 pm I can't speak for hedgefundie, but I started last september and am up 30% (original 55/45 with only one rebalance that wasn't adding additional funds).
Started last august and up 20%.
cos wrote: Mon Jun 29, 2020 11:37 am Just thought I'd check in since I just hit the big yellow rebalance button. I've been following the Adventure with a portion of my portfolio for quite awhile, but I didn't go all-in until the end of last year so note that my returns reflect that. Also note that I contribute regularly so all returns are money-weighted.

I'm up ~25% all-time, since March 29th, 2019 (on average, ~50% of my portfolio has been allocated to the adventure during this time, the rest tracked unleveraged total world stock pretty closely).

I'm up ~26% in the past quarter, since March 30th, 2020 (100% of my portfolio has been allocated to the vanilla 55/45 adventure during this time).

I wish I could get money-weighted returns from a specified date out of the M1 app, but my options are limited to past day, past week, past month, past quarter, past year, and all-time.

Is this using the UPRO/TMF allocation, or is there any TQQQ in there (as some are doing)? Also, these "up" percentages are current (includes the corona drop-off in March/April)?
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queso
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by queso »

jolmscheid wrote: Mon Jun 29, 2020 4:29 pm
Meaty wrote: Mon Jun 29, 2020 3:37 pm
queso wrote: Mon Jun 29, 2020 3:06 pm I can't speak for hedgefundie, but I started last september and am up 30% (original 55/45 with only one rebalance that wasn't adding additional funds).
Started last august and up 20%.
cos wrote: Mon Jun 29, 2020 11:37 am Just thought I'd check in since I just hit the big yellow rebalance button. I've been following the Adventure with a portion of my portfolio for quite awhile, but I didn't go all-in until the end of last year so note that my returns reflect that. Also note that I contribute regularly so all returns are money-weighted.

I'm up ~25% all-time, since March 29th, 2019 (on average, ~50% of my portfolio has been allocated to the adventure during this time, the rest tracked unleveraged total world stock pretty closely).

I'm up ~26% in the past quarter, since March 30th, 2020 (100% of my portfolio has been allocated to the vanilla 55/45 adventure during this time).

I wish I could get money-weighted returns from a specified date out of the M1 app, but my options are limited to past day, past week, past month, past quarter, past year, and all-time.

Is this using the UPRO/TMF allocation, or is there any TQQQ in there (as some are doing)? Also, these "up" percentages are current (includes the corona drop-off in March/April)?
Again, I can't speak for anybody else, but mine is a relatively unmonitored (read as - only rebalanced manually once and new money thrown in now and then randomly without any planning) and is 55/45 UPRO/TMF with nothing else (right now sitting at 51/49 and up 32% after today's close). This has all been since September so includes all covid effects with no effort to do anything to mitigate covid induced market swings, etc.

EDIT - this is M1's "money weighted returns" so take that for what it is worth. When I compute it myself just using the delta between total investments and total account balance right now I get 18%.
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