HEDGEFUNDIE's excellent adventure Part II: The next journey

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

Post by lexor »

pleonasm wrote: Wed Mar 18, 2020 5:02 pm
inquirering wrote: Wed Mar 18, 2020 4:51 pm So, what would be better than TMF as the "hedge" portion in the future?
Sovereign debt of the mightiest military, gold assets that you will never actually physically own, cryptocurrency that is a commit away from being dead/gone, speculative common shares of a company in the hopes that they return future excess capital back to you.

In the future, which would be least correlated with each other? or negatively correlated? Do you want to bet on the past with LTT/Gold/Shares? Or do you think the future holds a different view?

LTT would have been fine if we didn't have so many risk parity funds who liquidated. The fact that the normal person owns both is actually making them more correlated than usual in these flash crashes. In normal bull markets, or in gradual bear markets, they should continue being uncorrelated.
Which risk parity funds liquidated and why?
“The miracle of compounding returns is overwhelmed by the tyranny of compounding costs.” -Mr. John C. Bogle
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HEDGEFUNDIE
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by HEDGEFUNDIE »

I have updated the OP to show my current portfolio, lest anyone get the wrong idea about my transparency and commitment.
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ltdshred
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by ltdshred »

HEDGEFUNDIE wrote: Wed Mar 18, 2020 5:11 pm After today’s action I am officially below where I started the Excellent Adventure 13 months ago. $99k at 50/50.

I have my hand firmly on the ship’s wheel, staring down into the abyss. Whatever may come, I shall stay the course!
Same, although all of us aren't going to go through this time period without some sadness
MoneyMarathon
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MoneyMarathon »

inquirering wrote: Wed Mar 18, 2020 4:51 pm So, what would be better than TMF as the "hedge" portion in the future?
Looking at some recent returns:

SWAN (70% S&P delta via LEAP calls, 90% treasuries), -0.29% (today 3/18), -6.92% (previous one month to 3/17)
NTSX (90% S&P shares, 60% treasuries), -5.35% (today), -20.89% (previous one month)
GLDM (gold), -2.17% (today), -4.69% (previous one month)
EDV (extended duration treasuries), -5.27% (today), +7.41% (previous one month)
SPY (S&P), -5.06% (today), -24.92% (previous one month)
TMF (3x long duration treasuries), -18.14% (today), +11.39% (previous one month)
PPLC (1.35x S&P), -5.05% (today), -32.98% (previous one month)
PSLDX (1x S&P + 1.5x bonds), -9.56% (today), -29.4% (previous one month)
SSO (2x S&P), -10.26% (today), -46.62% (previous one month)
UPRO (3x S&P), -15.33% (today), -64.76% (previous one month)

SWAN, GLDM, and EDV held up well over both a 1-day look back (<6% drop) and a 30-day prior lookback (<10% drop or a gain). If somebody is looking for a place to put a portion of the money to actually hold value during a highly volatile bear market, any of them would be fine. For SWAN, even though the LEAP options lost value on the price change, they gained value on the increased implied volatility of options over the last few weeks.

Looking at 1-year returns (as of 3/17):

SWAN, 12.18%
NTSX, -1.27%
GLDM, 17.09%
EDV, 40.07%
SPY, -8.81%
TMF, 83.66%
PPLC, -13.87%
SSO, -24.69%
UPRO, -42.56%

EDV captured half the gain of TMF (40.07% to 83.66% up to 3/17), with a third of the downside today (-5.27% vs -18.14% on 3/18). PPLC had 1.57x the loss as SPY (-13.87% compared to -8.81%) compared to 4.83x for UPRO (-42.56% compared to -8.81%) if not rebalanced. The theme here is that, in a decline, something that gets less leverage (PPLC) or that both gets less leverage and avoids daily resetting leverage (EDV) will do better if the underlying goes up and down (at least, unless it's being rebalanced enough and at the right time).

SWAN, NTSX, and PSLDX perform rebalancing between stocks and bonds internally, automatically, and regularly, making it unnecessary to be good about the timing of rebalancing. This makes them good candidates for the core of a leveraged portfolio, although PSLDX is very inefficient in taxable, while NTSX is the most efficient in taxable. PSLDX is also unique here in having non-treasury bonds, credit risk that is correlated to equity risk, so it can be expected to go down faster than the S&P 500 if the treasuries are not gaining value to make up for the losses in more risky bonds (and up faster in a bull market, with a source of return that isn't perfectly correlated with the S&P or with treasuries).

GLDM (gold) is a wild card. My experience is that people like it or they don't. It didn't do any better than EDV in this time period, which could argue for its exclusion. However, it could do much better if there is either a weak US dollar or rising treasury yields, and it certainly didn't hurt even now.

Some argue against leveraged stocks because they're already very volatile and are leveraged internally by the company balance sheets. The extra risks of daily resetting leverage add to this concern. However, if you're prepared for it to crater, having up to 20% in UPRO has a maximum downside of a little less than 20% to the portfolio per rebalancing period. Just 20% in UPRO already provides 60% exposure.

You can already try to "beat the market" with SWAN, NTSX, GLDM, EDV, and/or PPLC, all without having much of the volatility risk we've seen lately. You could add a limited amount of TMF or UPRO (suggesting up to 20% of each) to taste. The resulting portfolio is definitely still risky enough for most people.

This thread has seen a lot of people join up and then drop out of 3x TMF and UPRO of various ratios. Seems to be fear of missing out and a failure to gauge risk tolerance correctly, since relatively few of them considered any of the less leveraged options that they might have been able to stick with during a downturn. Most of my posts last year were exploring less leveraged ideas. Most people were hesitant to use less leverage; it would take longer to become a multi-millionaire.

That said, I do applaud those who are sticking with it, with a small fraction of their assets, through what is an inevitable rough patch for a long term strategy.
lexor
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by lexor »

HEDGEFUNDIE wrote: Wed Mar 18, 2020 5:53 pm I have updated the OP to show my current portfolio, lest anyone get the wrong idea about my transparency and commitment.
Thanks for updating. What would happen if UPRO went negative? Would it be liquidated?

Would you as an individual be responsible for the debt?
“The miracle of compounding returns is overwhelmed by the tyranny of compounding costs.” -Mr. John C. Bogle
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by drk »

lexor wrote: Wed Mar 18, 2020 7:13 pm Thanks for updating. What would happen if UPRO went negative? Would it be liquidated?

Would you as an individual be responsible for the debt?
Is that possible? The S&P 500 stops trading for the day if it hits -20%, which limits downside risk to about -60%, and the fund resets its exposure daily. So you would just keep losing 60% of a smaller and smaller sum, right?
Thesaints
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Thesaints »

How not to quote from the first page of this thread ?
samsdad wrote: Sun Aug 11, 2019 9:43 pm
rascott wrote: Sun Aug 11, 2019 9:25 pm <snip>
In the 4.5 years since Jan 2015, this strategy has mainly trailed the SP500. After the run-up this year it's back to about even with it....all while being much more volatile.
Meh. Notwithstanding interest rates and their implications, in the many hours I’ve looked at this and other variations of this strategy, one of the things that stick out for me is that oftentimes this strategy would’ve lagged or zigged and zagged under or over the performance of the 500 for the first x number of years (pick a start date) before taking off and leaving the 500 in the dust.

Even the OP dataset shows this from the very beginning. You would’ve zigged and zagged the 500 had you started in 1987 and wouldn't have left its orbit till 1995.
The highlighted part in red should have given an inkling that also the opposite might have been possible...
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by schooner »

HEDGEFUNDIE wrote: Wed Mar 18, 2020 5:53 pm I have updated the OP to show my current portfolio, lest anyone get the wrong idea about my transparency and commitment.
Quick question - what would you do if either fund closes? Seems like that’s a real possibility after a huge drop like this.

Wouldn’t the nightmare scenario be one or both funds plummet, liquidates, and you can’t reinvest quickly enough to get the upside?

Your backtests assumes you can run the strategy continuously for an indefinite period of time. I think that is your real error.
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HEDGEFUNDIE
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by HEDGEFUNDIE »

schooner wrote: Wed Mar 18, 2020 7:38 pm
HEDGEFUNDIE wrote: Wed Mar 18, 2020 5:53 pm I have updated the OP to show my current portfolio, lest anyone get the wrong idea about my transparency and commitment.
Quick question - what would you do if either fund closes? Seems like that’s a real possibility after a huge drop like this.

Wouldn’t the nightmare scenario be one or both funds plummet, liquidates, and you can’t reinvest quickly enough to get the upside?

Your backtests assumes you can run the strategy continuously for an indefinite period of time. I think that is your real error.
If either fund closes I would just move to futures. More work involved but same general outcome - I get filthy rich.
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ltdshred
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by ltdshred »

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

Post by HawkeyePierce »

The EDV variant is doing fine. I'm down 12% since jumping in. -22% YTD. That doesn't bother me and I'm sticking with it. My allocation has now drifted to 20/80 UPRO/EDV.
bgf
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by bgf »

HEDGEFUNDIE wrote: Wed Mar 18, 2020 5:11 pm After today’s action I am officially below where I started the Excellent Adventure 13 months ago. $99k at 50/50.

I have my hand firmly on the ship’s wheel, staring down into the abyss. Whatever may come, I shall stay the course!
wow, so you are now in the same position as when you started, except that equities are substantially cheaper and bonds substantially more expensive.

does that change anything? or not because strategy is agnostic to value?
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"
lexor
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by lexor »

HEDGEFUNDIE wrote: Wed Mar 18, 2020 7:44 pm
schooner wrote: Wed Mar 18, 2020 7:38 pm
HEDGEFUNDIE wrote: Wed Mar 18, 2020 5:53 pm I have updated the OP to show my current portfolio, lest anyone get the wrong idea about my transparency and commitment.
Quick question - what would you do if either fund closes? Seems like that’s a real possibility after a huge drop like this.

Wouldn’t the nightmare scenario be one or both funds plummet, liquidates, and you can’t reinvest quickly enough to get the upside?

Your backtests assumes you can run the strategy continuously for an indefinite period of time. I think that is your real error.
If either fund closes I would just move to futures. More work involved but same general outcome - I get filthy rich.
Can futures be purchases in small quantities or are they limited to 100 share blocks like options?
“The miracle of compounding returns is overwhelmed by the tyranny of compounding costs.” -Mr. John C. Bogle
samsdad
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by samsdad »

Thesaints wrote: Wed Mar 18, 2020 7:33 pm How not to quote from the first page of this thread ?
samsdad wrote: Sun Aug 11, 2019 9:43 pm
rascott wrote: Sun Aug 11, 2019 9:25 pm <snip>
In the 4.5 years since Jan 2015, this strategy has mainly trailed the SP500. After the run-up this year it's back to about even with it....all while being much more volatile.
Meh. Notwithstanding interest rates and their implications, in the many hours I’ve looked at this and other variations of this strategy, one of the things that stick out for me is that oftentimes this strategy would’ve lagged or zigged and zagged under or over the performance of the 500 for the first x number of years (pick a start date) before taking off and leaving the 500 in the dust.

Even the OP dataset shows this from the very beginning. You would’ve zigged and zagged the 500 had you started in 1987 and wouldn't have left its orbit till 1995.
The highlighted part in red should have given an inkling that also the opposite might have been possible...
It certainly did to me. On the other hand, save for the period of 1968-1981ish, every drop was quickly made up for.

Confession: I dropped out of the adventure per se a few weeks ago and went to 100% TMF. After being cute about it and trying to time the market over the next week or so, I found myself basically where I was when I pulled the cord initially. The ostensible liquidity issues surrounding LTT spooked me when the equities and bonds both went down.

Having said this, let it be known that I also had about 80% of my liquid investing $$$ in this at the time. I realized that the current situation required that I have much less risk in the market (at all) since I’m a small-business owner and am selling something besides toilet paper or Lysol.

I further confess to taking about 10% of said monies to do a little unashamed market timing with SPXU and am strongly considering having a taste of TMV tomorrow.

Going forward, I’ll admit to being a little gun-shy about TMF due to the aforementioned liquidity issue in the underlying LTT market. From the top of February 20th, my 60% MIDU/40% TMF combo dropped about 5% before I bailed. Farting around for another week got me another 2%ish haircut, but I’m basically where I was at the end of last year or so—I’d have to go check to confirm.

I have no regrets pulling the plug, and will enter the octagon again once HEDGEFUNDIE calls the bottom of equities. Just kidding. I’ll have to wait to see what my business is doing sales-wise before plowing a bunch of money (to me) back in this. I’m strongly considering just going 100% UPRO with a smaller amount and bailing at the first hint of chop in the water. We’ll see.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

Stef wrote: Wed Mar 18, 2020 5:00 pm
inquirering wrote: Wed Mar 18, 2020 4:51 pm So, what would be better than TMF as the "hedge" portion in the future?
UPRO/SPXU :wink:
Why not UPRO/CASH or just less UPRO or SSO/TLT?
drk wrote: Wed Mar 18, 2020 7:30 pm
lexor wrote: Wed Mar 18, 2020 7:13 pm Thanks for updating. What would happen if UPRO went negative? Would it be liquidated?

Would you as an individual be responsible for the debt?
Is that possible? The S&P 500 stops trading for the day if it hits -20%, which limits downside risk to about -60%, and the fund resets its exposure daily. So you would just keep losing 60% of a smaller and smaller sum, right?
No, it is not possible with current circuit breakers. Although, it can theoretically be possible for it to drop by 33.4% before the breakers trip, but extremely unlikely to the point of being practically impossible.
RandomWord
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by RandomWord »

HEDGEFUNDIE wrote: Wed Mar 18, 2020 5:53 pm I have updated the OP to show my current portfolio, lest anyone get the wrong idea about my transparency and commitment.
Much respect to you for doing that. I hope you're not feeling too down right now. Like you said, there have been times in the past when this portfolio has crashed, only to shoot back up like a rocket.

For comparison, my own "adventure" using futures for risk parity is down about 40% from a month ago, and roughly even with a year ago. But it's been dropping so rapidly these last two weeks that I'm feeling scared.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by getjiggy »

HEDGEFUNDIE wrote: Wed Mar 18, 2020 5:11 pm After today’s action I am officially below where I started the Excellent Adventure 13 months ago. $99k at 50/50.

I have my hand firmly on the ship’s wheel, staring down into the abyss. Whatever may come, I shall stay the course!
Thanks for continuing to post here. Very much appreciate it. Currently at $66k (50/50) down -16% from orig allocation and first time dipping below orig alloc. High point was around $121k. Overall ‘traditional core’ portfolio down -23% from high point few weeks ago and SPY down -29% from high. So there is the perspective where this is still holding pretty good for me relatively speaking. Absolutely staying the course and will ride it out.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by shoehead »

HEDGEFUNDIE wrote: Wed Mar 18, 2020 5:11 pm After today’s action I am officially below where I started the Excellent Adventure 13 months ago. $99k at 50/50.

I have my hand firmly on the ship’s wheel, staring down into the abyss. Whatever may come, I shall stay the course!
Know who else kept their hands on the ship’s wheel and rode out the storm? Lieutenant Dan and Forrest Gump. And what happened to them? They came out on the other side RICH. This captain goes down with the ship.

Farewell and adieu you fair Spanish ladies.....
ribeyesteaks
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by ribeyesteaks »

More leveraged ETF's are close to liquidating in the mREIT space:

https://catalyst-insights.com/the-virus-infecting-mlps/

mREITs were an absolute blood bath today, some down almost 50%. The news is it was due to forced liquidations by a run on the leveraged ETF's above. It makes sense now the huge wide swings we've been seeing in the market since 2018. Partly it was due to low vol up to that point, and a lot of hedge funds betting long on the low vol trade by writing options -- which they absolutely got wiped with lately. But, I think mostly it has to due with the increased amount of leveraged ETF's since 2008 that are out there. I think it's these levered ETF's that are making the markets swing wildly, and in effect, causing the swings to amplify and hurt each other. It's really ironic when you think about it.

Anyways, you guys are playing with fire at this point. My thoughts now is that we'll be seeing more and more levered ETF's liquidate as the bear market carries on.
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market timer
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by market timer »

ribeyesteaks wrote: Thu Mar 19, 2020 12:16 am More leveraged ETF's are close to liquidating in the mREIT space:

https://catalyst-insights.com/the-virus-infecting-mlps/

mREITs were an absolute blood bath today, some down almost 50%. The news is it was due to forced liquidations by a run on the leveraged ETF's above. It makes sense now the huge wide swings we've been seeing in the market since 2018. Partly it was due to low vol up to that point, and a lot of hedge funds betting long on the low vol trade by writing options -- which they absolutely got wiped with lately. But, I think mostly it has to due with the increased amount of leveraged ETF's since 2008 that are out there. I think it's these levered ETF's that are making the markets swing wildly, and in effect, causing the swings to amplify and hurt each other. It's really ironic when you think about it.

Anyways, you guys are playing with fire at this point. My thoughts now is that we'll be seeing more and more levered ETF's liquidate as the bear market carries on.
I backed up the truck on mREITs yesterday: AGNC, NLY, STWD, BXMT.

However, not sure that UPRO/TMF have the same issues with regard to liquidation. As I understand, UPRO and TMF are ETFs, not ETNs. The liquidated funds were ETNs with well-defined liquidation conditions.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by LittleBitMore »

ribeyesteaks wrote: Thu Mar 19, 2020 12:16 am More leveraged ETF's are close to liquidating in the mREIT space:

https://catalyst-insights.com/the-virus-infecting-mlps/

mREITs were an absolute blood bath today, some down almost 50%. The news is it was due to forced liquidations by a run on the leveraged ETF's above. It makes sense now the huge wide swings we've been seeing in the market since 2018. Partly it was due to low vol up to that point, and a lot of hedge funds betting long on the low vol trade by writing options -- which they absolutely got wiped with lately. But, I think mostly it has to due with the increased amount of leveraged ETF's since 2008 that are out there. I think it's these levered ETF's that are making the markets swing wildly, and in effect, causing the swings to amplify and hurt each other. It's really ironic when you think about it.

Anyways, you guys are playing with fire at this point. My thoughts now is that we'll be seeing more and more levered ETF's liquidate as the bear market carries on.
1. 0 LETFs have liquidated. Only the ETNs have liquidated (very different and that difference is why this adventure isn't invested in them)
2. You mention mREITs and linked to energy MLPs
3. A few billion of LETFs isn't swinging the multi-trillion dollar market
4. It was always playing with fire -- when the model shows a 50% drawdown everyone says "ok that's fine" then we have a 30% drawdown,everyone says "omg did you know that could happen?!?!". This is just part of the ride. Happy to get through it now so either a. we get another good run and I can sell with a big win or b. I have the experience to hold through next time.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Meaty »

LittleBitMore wrote: Thu Mar 19, 2020 8:55 am
ribeyesteaks wrote: Thu Mar 19, 2020 12:16 am More leveraged ETF's are close to liquidating in the mREIT space:

https://catalyst-insights.com/the-virus-infecting-mlps/

mREITs were an absolute blood bath today, some down almost 50%. The news is it was due to forced liquidations by a run on the leveraged ETF's above. It makes sense now the huge wide swings we've been seeing in the market since 2018. Partly it was due to low vol up to that point, and a lot of hedge funds betting long on the low vol trade by writing options -- which they absolutely got wiped with lately. But, I think mostly it has to due with the increased amount of leveraged ETF's since 2008 that are out there. I think it's these levered ETF's that are making the markets swing wildly, and in effect, causing the swings to amplify and hurt each other. It's really ironic when you think about it.

Anyways, you guys are playing with fire at this point. My thoughts now is that we'll be seeing more and more levered ETF's liquidate as the bear market carries on.
1. 0 LETFs have liquidated. Only the ETNs have liquidated (very different and that difference is why this adventure isn't invested in them)
2. You mention mREITs and linked to energy MLPs
3. A few billion of LETFs isn't swinging the multi-trillion dollar market
4. It was always playing with fire -- when the model shows a 50% drawdown everyone says "ok that's fine" then we have a 30% drawdown,everyone says "omg did you know that could happen?!?!". This is just part of the ride. Happy to get through it now so either a. we get another good run and I can sell with a big win or b. I have the experience to hold through next time.
+1. If you didn’t mentally chalk this up to lost money the moment you entered the adventure you set yourself up for heartbreak
"Discipline equals Freedom" - Jocko Willink
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by halfisglassfull »

LittleBitMore wrote: Thu Mar 19, 2020 8:55 am 4. It was always playing with fire -- when the model shows a 50% drawdown everyone says "ok that's fine" then we have a 30% drawdown,everyone says "omg did you know that could happen?!?!". This is just part of the ride. Happy to get through it now so either a. we get another good run and I can sell with a big win or b. I have the experience to hold through next time.
Well said. It's amazing how much goalpost-moving is going on, both by those invested in this adventure and by those rooting for it to fail. I guess that's what happens when emotions get involved - rationality goes out the window.
ribeyesteaks
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by ribeyesteaks »

LittleBitMore wrote: Thu Mar 19, 2020 8:55 am
ribeyesteaks wrote: Thu Mar 19, 2020 12:16 am More leveraged ETF's are close to liquidating in the mREIT space:

https://catalyst-insights.com/the-virus-infecting-mlps/

mREITs were an absolute blood bath today, some down almost 50%. The news is it was due to forced liquidations by a run on the leveraged ETF's above. It makes sense now the huge wide swings we've been seeing in the market since 2018. Partly it was due to low vol up to that point, and a lot of hedge funds betting long on the low vol trade by writing options -- which they absolutely got wiped with lately. But, I think mostly it has to due with the increased amount of leveraged ETF's since 2008 that are out there. I think it's these levered ETF's that are making the markets swing wildly, and in effect, causing the swings to amplify and hurt each other. It's really ironic when you think about it.

Anyways, you guys are playing with fire at this point. My thoughts now is that we'll be seeing more and more levered ETF's liquidate as the bear market carries on.
1. 0 LETFs have liquidated. Only the ETNs have liquidated (very different and that difference is why this adventure isn't invested in them)
2. You mention mREITs and linked to energy MLPs
3. A few billion of LETFs isn't swinging the multi-trillion dollar market
4. It was always playing with fire -- when the model shows a 50% drawdown everyone says "ok that's fine" then we have a 30% drawdown,everyone says "omg did you know that could happen?!?!". This is just part of the ride. Happy to get through it now so either a. we get another good run and I can sell with a big win or b. I have the experience to hold through next time.
Yeah, my bad. I posted about the mREIT's earlier. I meant to say leveraged CEF etf's.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by ribeyesteaks »

As an aside, this is one of the best articles I've read on the leveraged ETF long term returns:

http://www.ddnum.com/articles/leveragedETFs.php

It's really good. I highly recommend anyone following this adventure to read up on it. Basically, holding 3x for the long term is likely worse than 1x especially after adjusting for fees. S&P from 1950 to 2009 seem to be the exception. But from 1885 to 2009 on the Dow, 2x+ leverage did no better than 1x after fees.
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Re: My forecast for the next year

Post by cos »

Thesaints wrote: Wed Mar 18, 2020 1:54 pm
cos wrote: Tue Mar 17, 2020 10:34 pmAs HEDGEFUNDIE pointed out, the fundamentals remain unchanged. Why should I jump ship?
Maybe the realization that fundamentals were misunderstood, up to now ?
What parts of the fundamentals backing this strategy have been misunderstood? So far, everything is behaving as expected.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by e5116 »

ribeyesteaks wrote: Thu Mar 19, 2020 1:19 pm As an aside, this is one of the best articles I've read on the leveraged ETF long term returns:

http://www.ddnum.com/articles/leveragedETFs.php

It's really good. I highly recommend anyone following this adventure to read up on it. Basically, holding 3x for the long term is likely worse than 1x especially after adjusting for fees. S&P from 1950 to 2009 seem to be the exception. But from 1885 to 2009 on the Dow, 2x+ leverage did no better than 1x after fees.
Thanks for linking. Most surprising thing in that for me is that historically, leverage of 2x has produced better results than 3x (with the exception of the S&P 500 1950-2009 which certainly is still a large sample). For whatever reason, it seems like 2x leverage is largely eschewed by investors/traders. As they say at the bottom though: "This article has not proved that the optimal leverage is about 2. It has just demonstrated that 2 has been good in the past. The future may be different."
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physixfan
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by physixfan »

I deleveraged today, switched from UPRO/TMF to UPRO/EDV. I believe the performance of UPRO can overcome the volatility drag, but I don't believe TMF can do so.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by mroe800 »

physixfan wrote: Thu Mar 19, 2020 1:38 pm I deleveraged today, switched from UPRO/TMF to UPRO/EDV. I believe the performance of UPRO can overcome the volatility drag, but I don't believe TMF can do so.
Considering this myself, but has anyone though about switching to TQQQ/EDV? Basically betting that tech will come faster and stronger than broad market.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Crushtheturtle »

Maybe it's just because I'm paying close attention, but I'm noticing that UPRO is doing a miserable job today delivering 3x the price movement of SPY.

Hasn't come close at all.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Hydromod »

Crushtheturtle wrote: Thu Mar 19, 2020 2:15 pm Maybe it's just because I'm paying close attention, but I'm noticing that UPRO is doing a miserable job today delivering 3x the price movement of SPY.

Hasn't come close at all.
Might this be because it is tracking daily movements, not hourly?
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by danielfp »

Hydromod wrote: Thu Mar 19, 2020 2:18 pm
Crushtheturtle wrote: Thu Mar 19, 2020 2:15 pm Maybe it's just because I'm paying close attention, but I'm noticing that UPRO is doing a miserable job today delivering 3x the price movement of SPY.

Hasn't come close at all.
Might this be because it is tracking daily movements, not hourly?
Yeah, there's no promise of ever tracking the intra-day movement 3x.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Crushtheturtle »

Makes sense.

But I just want it to go up so badly.

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

Post by Crushtheturtle »

For today, 3/19/20:

S&P 500 close: + 0.47%
UPRO close: - 0.63%

What gives?
If you're not having fun, you'll just have to pretend.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

mroe800 wrote: Thu Mar 19, 2020 1:45 pm
physixfan wrote: Thu Mar 19, 2020 1:38 pm I deleveraged today, switched from UPRO/TMF to UPRO/EDV. I believe the performance of UPRO can overcome the volatility drag, but I don't believe TMF can do so.
Considering this myself, but has anyone though about switching to TQQQ/EDV? Basically betting that tech will come faster and stronger than broad market.
Prior to the crash I would have cautioned against a repeat of 2000 and mildy cautioned against a repeat of 2008. However, all bets are now off.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by pduan87 »

End result of this strategy highly leveraged in the current market environment: https://www.reddit.com/r/wallstreetbets ... al_damage/
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by langlands »

Crushtheturtle wrote: Thu Mar 19, 2020 3:57 pm For today, 3/19/20:

S&P 500 close: + 0.47%
UPRO close: - 0.63%

What gives?
Were yesterday's numbers correct? Check this: https://www.proshares.com/funds/upro.html. Notice that NAV yesterday was below market price closing. This means UPRO had to correct downward today towards NAV. That's my guess anyway. In general, I think very volatile days (like yesterday) are likely to dislocate market price from NAV and the following day's price action has to correct for this dislocation.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Mr.Wu »

I am thinking to move money from Vanguard to other brokerages for this strategy. I am thinking of TD Ameritrade or Chase Youinvest. Anyone has experiences?
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MoneyMarathon »

Mr.Wu wrote: Thu Mar 19, 2020 4:40 pm I am thinking to move money from Vanguard to other brokerages for this strategy. I am thinking of TD Ameritrade or Chase Youinvest. Anyone has experiences?
I've heard nothing good about Chase Youinvest, seems a bit half baked to me.

TD Ameritrade or Fidelity would be fine. Fidelity has fractional shares like M1 but lets you pick your own time to rebalance.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Mr.Wu »

MoneyMarathon wrote: Thu Mar 19, 2020 4:42 pm
Mr.Wu wrote: Thu Mar 19, 2020 4:40 pm I am thinking to move money from Vanguard to other brokerages for this strategy. I am thinking of TD Ameritrade or Chase Youinvest. Anyone has experiences?
I've heard nothing good about Chase Youinvest, seems a bit half baked to me.

TD Ameritrade or Fidelity would be fine. Fidelity has fractional shares like M1 but lets you pick your own time to rebalance.
Thanks!
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by ribeyesteaks »

Crushtheturtle wrote: Thu Mar 19, 2020 3:57 pm For today, 3/19/20:

S&P 500 close: + 0.47%
UPRO close: - 0.63%

What gives?
This is likely tracking error or volatility drift. Read that article I just posted. Also, read more here:

https://seekingalpha.com/article/432111 ... -dashboard
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

ribeyesteaks wrote: Thu Mar 19, 2020 5:05 pm
Crushtheturtle wrote: Thu Mar 19, 2020 3:57 pm For today, 3/19/20:

S&P 500 close: + 0.47%
UPRO close: - 0.63%

What gives?
This is likely tracking error or volatility drift. Read that article I just posted. Also, read more here:

https://seekingalpha.com/article/432111 ... -dashboard
Or a difference between bid/ask spreads. It's an ETF, it does not trade at NAV.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by AHTFY »

Mr.Wu wrote: Thu Mar 19, 2020 4:40 pm I am thinking to move money from Vanguard to other brokerages for this strategy. I am thinking of TD Ameritrade or Chase Youinvest. Anyone has experiences?
I recently moved money from Vanguard to Schwab. I really like Schwab for trading, at least more than Vanguard or TD Ameritrade.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Mr.Wu »

AHTFY wrote: Thu Mar 19, 2020 8:31 pm
Mr.Wu wrote: Thu Mar 19, 2020 4:40 pm I am thinking to move money from Vanguard to other brokerages for this strategy. I am thinking of TD Ameritrade or Chase Youinvest. Anyone has experiences?
I recently moved money from Vanguard to Schwab. I really like Schwab for trading, at least more than Vanguard or TD Ameritrade.
Thanks!
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by fallingeggs »

schooner wrote: Wed Mar 18, 2020 7:38 pm
HEDGEFUNDIE wrote: Wed Mar 18, 2020 5:53 pm I have updated the OP to show my current portfolio, lest anyone get the wrong idea about my transparency and commitment.
Quick question - what would you do if either fund closes? Seems like that’s a real possibility after a huge drop like this.

Wouldn’t the nightmare scenario be one or both funds plummet, liquidates, and you can’t reinvest quickly enough to get the upside?

Your backtests assumes you can run the strategy continuously for an indefinite period of time. I think that is your real error.
If the funds aren't breaking down with 12% daily swings, what in the world could cause them to break? And check the inverse leveraged ETFs... up until now they have consistently lost money yet they stay open. The ETF sponsors are still printing money from running this business, so they won't voluntarily close (or go bankrupt). I think the only risk is that the SEC regulates them out of existence at some point, but I think Treasury/SEC has bigger fish to fry at this moment. But yes, have a future trading strategy as a back up (and know how to execute it; futures are a different beast).
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by guyinlaw »

As TMF is rising, I am selling some as it gets to $40 and above.. I don't think there is much upside in the near term above $50..

Eyeballing the charts TMF@ $44.49 corresponds to 30Y rate @1.322%.

https://www.marketwatch.com/investing/bond/tmubmusd30y

Anyone replacing TMF with Gold (UGLD?) or temporarily with cash?
Time is your friend; impulse is your enemy. - John C. Bogle
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by mrspock »

Still in it to win it. Still up around +16% vs -30% for S&P 500.

“Vanilla” 50/50 version with quarterly rebalance. Sitting at 20/80 (UPRO/TMF) currently. Liking my TMF position right now...
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by physixfan »

guyinlaw wrote: Fri Mar 20, 2020 12:34 pm As TMF is rising, I am selling some as it gets to $40 and above.. I don't think there is much upside in the near term above $50..

Eyeballing the charts TMF@ $44.49 corresponds to 30Y rate @1.322%.

https://www.marketwatch.com/investing/bond/tmubmusd30y

Anyone replacing TMF with Gold (UGLD?) or temporarily with cash?
I've replaced TMF with EDV to deleverage.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Jags4186 »

I've been watching a lot of CNBC lately (i know i know...) but one thing mentioned today that got me wondering was about the strength of the dollar.

Comments were made about how because of the flight to cash and treasuries the dollar continues to strengthen against foreign currencies and there may at some point need to be an agreement reached to devalue the dollar. If this were to happen what would happen to treasuries and TMF? I have no idea what the mechanics of this are or why the US would agree to this or if this is just fantasy CNBC talk.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by lexor »

Jags4186 wrote: Fri Mar 20, 2020 2:59 pm I've been watching a lot of CNBC lately (i know i know...) but one thing mentioned today that got me wondering was about the strength of the dollar.

Comments were made about how because of the flight to cash and treasuries the dollar continues to strengthen against foreign currencies and there may at some point need to be an agreement reached to devalue the dollar. If this were to happen what would happen to treasuries and TMF? I have no idea what the mechanics of this are or why the US would agree to this or if this is just fantasy CNBC talk.
Not sure how it would impact treasuries but my understanding is that devaluing your currency can help increase your exports because it's cheaper for other countries to buy from you.
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