The entire premise of my strategy rests upon the idea that when one asset collapses, the other asset rises sharply. If you don’t believe this will happen reliably going forward, you should not undertake this strategy. I am comfortable on this point, both because of historical returns and the underlying risk story of why this occurs. Here is the historical evidence:Sola Scriptura wrote: ↑Thu Feb 07, 2019 11:32 amYou're right; my mistake. I overstated my case and didn't provide enough detail. What I meant is that being wiped out completely on his 40% would take a while to recover from if current low (relative to the past) treasury yields persist, even with a presumed rally (which could actually end up being more modest than you suppose). HEDGEFUNDIE has stated elsewhere that he doesn't have a long period to recover, so how much time are you assuming would be available for him to slowly move back into a leveraged ETF position?Jags4186 wrote: ↑Thu Feb 07, 2019 10:51 amIn a singlthe day 33.33% drop he wouldn’t be screwed. He’s be out 40% of this section of his portfolio, long term treasuries would likely rally, and he could rebalance back into a leveraged ETF.Sola Scriptura wrote: ↑Thu Feb 07, 2019 10:03 amHEDGEFUNDIE,
What I still don't understand, given your data and given everything that's been said, is that if this strategy is only 15% of your total portfolio, how do you not already have enough downside protection built in, thus enabling you to go 100% UPRO regardless of the potential for a 95% drawdown in a 2008-like scenario? In a single-day 33.33% drop, you'd be screwed anyway, so why not let 100% UPRO ride and take your chances on hitting that $10MM goal much sooner?
There is no “slowly moving back”. My rule is to rebalance into 40/60 every quarter, no exceptions.