HEDGEFUNDIE's excellent adventure Part II: The next journey

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

Post by Lee_WSP » Mon Mar 23, 2020 2:49 pm

willthrill81 wrote:
Mon Mar 23, 2020 2:29 pm
Lee_WSP wrote:
Mon Mar 23, 2020 1:49 pm
If your plan allows for market timing, well, so be it. However, market timing involves even more risk than rebalancing on a set schedule. You'll open yourself up to whipsaw losses.
I wouldn't necessarily say 'more' risk, just 'different' risk. Timing might reduce the problem of volatility decay, especially in highly volatile markets (e.g. now).
I do not consider rules based investing as market timing.

Different or additional risk is a different topic and a case by case basis. Obviously moving out of a leveraged fund reduces risk, so in that sense the risky part is to put money in leverage in the first place.

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willthrill81
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by willthrill81 » Mon Mar 23, 2020 3:06 pm

Lee_WSP wrote:
Mon Mar 23, 2020 2:49 pm
willthrill81 wrote:
Mon Mar 23, 2020 2:29 pm
Lee_WSP wrote:
Mon Mar 23, 2020 1:49 pm
If your plan allows for market timing, well, so be it. However, market timing involves even more risk than rebalancing on a set schedule. You'll open yourself up to whipsaw losses.
I wouldn't necessarily say 'more' risk, just 'different' risk. Timing might reduce the problem of volatility decay, especially in highly volatile markets (e.g. now).
I do not consider rules based investing as market timing.
Gotcha.
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Nicolas Perrault
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Nicolas Perrault » Mon Mar 23, 2020 3:56 pm

NUGT and DUST (Direxion Daily Gold Miners Bull and Bear 3X [soon to be 2X]) have ~$400 million and $176 million under management respectively. TMF has $169 million and UPRO has $654 million. So NUGT has ~60% as much assets as UPRO and more than twice as much as TMF, whereas DUST has more than TMF.

Since 1 year ago, NUGT and DUST have gone down by 72 and 71% respectively. Just wondering, who is buying NUGT and DUST? What are they doing?

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

Post by nolegs » Mon Mar 23, 2020 4:17 pm

Just learned about this strategy and message and it seemed to be going great until coronavirus which nobody could have predicted.

I'm curious whether the adherents here think there's anything that can/should be tweaked moving forward. I plan on putting $100k into this strategy once things settle down a bit.

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

Post by nisiprius » Mon Mar 23, 2020 4:22 pm

Nicolas Perrault wrote:
Mon Mar 23, 2020 3:56 pm
NUGT and DUST (Direxion Daily Gold Miners Bull and Bear 3X [soon to be 2X]) have ~$400 million and $176 million under management respectively. TMF has $169 million and UPRO has $654 million. So NUGT has ~60% as much assets as UPRO and more than twice as much as TMF, whereas DUST has more than TMF.

Since 1 year ago, NUGT and DUST have gone down by 72 and 71% respectively.
Thanks for a splendiferous illustration of the "heads you lose, tails you lose" nature of leveraged and inverse ETFs. That's stunning. And the cool thing is you can see that they really are moving in opposite direction, all the way down, on a short-term scale. PortfolioVisualizer is showing a -0.92 correlation between the two.

Image
Just wondering, who is buying NUGT and DUST? What are they doing?
Hopefully, people who are using them as billed, "for a single day," not buying them and holding them because they didn't read the summary web page, or didn't believe what they read.

Also, don't let the semilog axis fool you... those funds have provided "opportunities" to do things like multiply your money eightfold in seven months (NUGT in 2017) and plenty of chances to double or triple your money in a few months... or, in the case of DUST, apparently, almost triple it in three days, just lately.

NUGT to ashes, DUST to dust,
If the bull doesn't get you, the bear fund must.
Last edited by nisiprius on Tue Mar 24, 2020 5:58 am, edited 1 time in total.
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RomeoMustDie
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by RomeoMustDie » Mon Mar 23, 2020 4:35 pm

nolegs wrote:
Mon Mar 23, 2020 4:17 pm
Just learned about this strategy and message and it seemed to be going great until coronavirus which nobody could have predicted.

I'm curious whether the adherents here think there's anything that can/should be tweaked moving forward. I plan on putting $100k into this strategy once things settle down a bit.
I'm wondering how a simple moving average approach can help this portfolio avoid the huge downturns.

I'm also wondering what alternatives there are to Long-Term bonds since they introduce interest rate risk.

Overall, I'm curious whether the portfolio as a whole will survive this downtown and how long it will trail the s&p if at all since UPRO is getting hit so hard.

That being said, I'm staying the course through the downturn and not trying to call the bottom. Just continuing to invest as usual.

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

Post by Walkure » Mon Mar 23, 2020 4:58 pm

RomeoMustDie wrote:
Mon Mar 23, 2020 4:35 pm
nolegs wrote:
Mon Mar 23, 2020 4:17 pm
Just learned about this strategy and message and it seemed to be going great until coronavirus which nobody could have predicted.

I'm curious whether the adherents here think there's anything that can/should be tweaked moving forward. I plan on putting $100k into this strategy once things settle down a bit.
I'm wondering how a simple moving average approach can help this portfolio avoid the huge downturns.

I'm also wondering what alternatives there are to Long-Term bonds since they introduce interest rate risk.

Overall, I'm curious whether the portfolio as a whole will survive this downtown and how long it will trail the s&p if at all since UPRO is getting hit so hard.

That being said, I'm staying the course through the downturn and not trying to call the bottom. Just continuing to invest as usual.
The funny thing is, you don't really need to avoid the huge downturns - that's what the non-correlation is for. What you need to avoid is the convictionless volatility. I'm seriously considering shorting the inverse funds - a 2% borrow cost is easily worth the negative volatility decay in this environment.

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

Post by RomeoMustDie » Mon Mar 23, 2020 6:23 pm

Walkure wrote:
Mon Mar 23, 2020 4:58 pm
RomeoMustDie wrote:
Mon Mar 23, 2020 4:35 pm
nolegs wrote:
Mon Mar 23, 2020 4:17 pm
Just learned about this strategy and message and it seemed to be going great until coronavirus which nobody could have predicted.

I'm curious whether the adherents here think there's anything that can/should be tweaked moving forward. I plan on putting $100k into this strategy once things settle down a bit.
I'm wondering how a simple moving average approach can help this portfolio avoid the huge downturns.

I'm also wondering what alternatives there are to Long-Term bonds since they introduce interest rate risk.

Overall, I'm curious whether the portfolio as a whole will survive this downtown and how long it will trail the s&p if at all since UPRO is getting hit so hard.

That being said, I'm staying the course through the downturn and not trying to call the bottom. Just continuing to invest as usual.
The funny thing is, you don't really need to avoid the huge downturns - that's what the non-correlation is for. What you need to avoid is the convictionless volatility. I'm seriously considering shorting the inverse funds - a 2% borrow cost is easily worth the negative volatility decay in this environment.
Would be interesting to see how this portfolio could be hedged with long straddles or ETF's that trade volatility.

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

Post by leverage101 » Mon Mar 23, 2020 7:03 pm

For a buy-hold portfolio and, in times of high volatility, I want to be owning assets outright/be un-levered as much as possible, not be the counter-party to a bunch of derivatives that are supposed to be negatively-correlated.

Is anyone concerned that a retirement portfolio of UPRO/TMF is essentially a bunch of derivative swap contracts?

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

Post by steadyeddy » Mon Mar 23, 2020 9:22 pm

I’m glad to see this downturn shaking out the weak, and even more glad to see HEDGEFUNDIE staying the course and keeping spectators such as myself updated. Now if he does make ten figures off this strategy, he will have earned it.

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

Post by LittleBitMore » Mon Mar 23, 2020 9:48 pm

leverage101 wrote:
Mon Mar 23, 2020 7:03 pm
For a buy-hold portfolio and, in times of high volatility, I want to be owning assets outright/be un-levered as much as possible, not be the counter-party to a bunch of derivatives that are supposed to be negatively-correlated.

Is anyone concerned that a retirement portfolio of UPRO/TMF is essentially a bunch of derivative swap contracts?
Not any more than I'm worried owning stocks/bonds is essentially a bet on a government bailout

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

Post by firebirdparts » Mon Mar 23, 2020 10:33 pm

leverage101 wrote:
Mon Mar 23, 2020 7:03 pm
Is anyone concerned that a retirement portfolio of UPRO/TMF is essentially a bunch of derivative swap contracts?
Well, it is a 79 page thread. I mean, Part 2 is 79 pages.
A fool and your money are soon partners

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

Post by Kbg » Mon Mar 23, 2020 10:56 pm

I'm down around 10-11% depending on the account...it's fine.

If one studies the good and bad of this and actually applies the lessons learned I believe they are as follows:

Stocks and long bonds, not diversified enough

You need a big wad of cash to replenish the occasional complete wipe out of an asset

3x daily ETFs with a lot of volatility eat your lunch; these same ETFs when coming out of the bottom with low volatility will more than replenish what you lost

Don't be over eager to rebalance unless your market timing is exquisite (I did this once in the current storm, now I'm waiting and not in a hurry)

In a warped, not fun way, at some point in a really nasty draw down further losses are mitigated vs. their 1x counterpart (Not much written about, but there in the data)

Take the lessons of ALL the data, not just the ones that are appealing

Most important lessons, big wad of cash, more diversification.

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

Post by LittleBitMore » Mon Mar 23, 2020 11:03 pm

Kbg wrote:
Mon Mar 23, 2020 10:56 pm
I'm down around 10-11% depending on the account...it's fine.

If one studies the good and bad of this and actually applies the lessons learned I believe they are as follows:

Stocks and long bonds, not diversified enough

You need a big wad of cash to replenish the occasional complete wipe out of an asset

3x daily ETFs with a lot of volatility eat your lunch; these same ETFs when coming out of the bottom with low volatility will more than replenish what you lost

Don't be over eager to rebalance unless your market timing is exquisite (I did this once in the current storm, now I'm waiting and not in a hurry)

In a warped, not fun way, at some point in a really nasty draw down further losses are mitigated vs. their 1x counterpart (Not much written about, but there in the data)

Take the lessons of ALL the data, not just the ones that are appealing

Most important lessons, big wad of cash, more diversification.
I don't see how the cash is objectively correct. Sure, after this drop having cash would have been an obvious win but what if this adventure had started in 2015? Would 70% 55/45 + 30% cash have outperformed 100% 55/45? As 2019 showed, 55/45 has the ability to double a balance in a year, that's a high cost of cash to wait for a crisis. Not to mention you make money over time so I actually have more cash now than I did in 2015 despite being fully invested

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

Post by HawkeyePierce » Mon Mar 23, 2020 11:11 pm

With the breakeven rate on TIPS at all-time lows, I'm giving serious thought to moving part of my EDV allocation in the Adventure over to LTPZ.

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

Post by Kbg » Mon Mar 23, 2020 11:28 pm

LittleBitMore wrote:
Mon Mar 23, 2020 11:03 pm
Kbg wrote:
Mon Mar 23, 2020 10:56 pm
I'm down around 10-11% depending on the account...it's fine.

If one studies the good and bad of this and actually applies the lessons learned I believe they are as follows:

Stocks and long bonds, not diversified enough

You need a big wad of cash to replenish the occasional complete wipe out of an asset

3x daily ETFs with a lot of volatility eat your lunch; these same ETFs when coming out of the bottom with low volatility will more than replenish what you lost

Don't be over eager to rebalance unless your market timing is exquisite (I did this once in the current storm, now I'm waiting and not in a hurry)

In a warped, not fun way, at some point in a really nasty draw down further losses are mitigated vs. their 1x counterpart (Not much written about, but there in the data)

Take the lessons of ALL the data, not just the ones that are appealing

Most important lessons, big wad of cash, more diversification.
I don't see how the cash is objectively correct. Sure, after this drop having cash would have been an obvious win but what if this adventure had started in 2015? Would 70% 55/45 + 30% cash have outperformed 100% 55/45? As 2019 showed, 55/45 has the ability to double a balance in a year, that's a high cost of cash to wait for a crisis. Not to mention you make money over time so I actually have more cash now than I did in 2015 despite being fully invested
The data is all here in two gigantic threads...it depends on what your objectives are. Personally I'm more interested in something I think can do better than a 100% stock only portfolio over the longer haul than see how large a CAGR I can achieve in any 1-5 year period. Personally, I don't think there is a single person invested in this thread with money that would have kept this portfolio from it's earliest data date until interest rates turned down.

If anything the past month should teach someone is that almost anything is possible.

Now if we are talking someone has 5-10% in this as advertised, sure why not roll the bones and why would anyone be freaking out changing the strategy. If one has substantially more, then I'd suggest they really look at all the data and understand 3xETF behavior really well.

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

Post by Lee_WSP » Mon Mar 23, 2020 11:32 pm

HawkeyePierce wrote:
Mon Mar 23, 2020 11:11 pm
With the breakeven rate on TIPS at all-time lows, I'm giving serious thought to moving part of my EDV allocation in the Adventure over to LTPZ.
Certainly seems to track well with TLT and comes with inflation protection.

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

Post by Dovahkiin » Tue Mar 24, 2020 2:08 am

caklim00 wrote:
Mon Mar 23, 2020 2:31 pm
Are you sure there is no margin interest?
I'm talking about maintenance and initial margin IE buying power, NOT margin interest. At TD Ameritrade in a Reg-T account if you buy $100k of SPY + TLT then your buying power goes down by $100k. At IBKR, on the paper account, it goes down by $50k. So you can buy up to 4x leverage at IBKR, making the 3x leverage strategy possible. At TD Ameritrade you can only buy up to 2x leverage. However, after some time you go to maintenance margin at TD Ameritrade, so slowly, over time, you can eventually buy up to 4x leverage at TD Ameritrade.

Interactive brokers does charge margin interest:
https://www1.interactivebrokers.com/en/index.php?f=1595

1.65% (BM + 1.5%) for under $100k, 1.15% (BM + 1%) for 100k - 1m, 0.75% (BM + 0.5%)1 for 1m+ margin loans.

I've seen them go up as high as 3%.

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

Post by halfisglassfull » Tue Mar 24, 2020 8:52 am

nolegs wrote:
Mon Mar 23, 2020 4:17 pm
Just learned about this strategy and message and it seemed to be going great until coronavirus which nobody could have predicted.

I'm curious whether the adherents here think there's anything that can/should be tweaked moving forward. I plan on putting $100k into this strategy once things settle down a bit.
Arguably this strategy is still doing great. I entered in April 2019, quarterly rebalancing, 55/45. At the close yesterday I was up 26%. The lowest I've gone was -6%. My UPRO allocation is now around 15%, so it seems likely when I rebalance that I will eventually make a killing on the rebound.

Obviously nothing is guaranteed going forward, but so far the strategy is working as intended. That said, please don't misconstrue this response as encouraging you to jump in if you're not 100% comfortable with the risks.

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

Post by Meaty » Tue Mar 24, 2020 9:02 am

halfisglassfull wrote:
Tue Mar 24, 2020 8:52 am
nolegs wrote:
Mon Mar 23, 2020 4:17 pm
Just learned about this strategy and message and it seemed to be going great until coronavirus which nobody could have predicted.

I'm curious whether the adherents here think there's anything that can/should be tweaked moving forward. I plan on putting $100k into this strategy once things settle down a bit.
Arguably this strategy is still doing great. I entered in April 2019, quarterly rebalancing, 55/45. At the close yesterday I was up 26%. The lowest I've gone was -6%. My UPRO allocation is now around 15%, so it seems likely when I rebalance that I will eventually make a killing on the rebound.

Obviously nothing is guaranteed going forward, but so far the strategy is working as intended. That said, please don't misconstrue this response as encouraging you to jump in if you're not 100% comfortable with the risks.
Another perspective - I entered the strategy in August and am down about 18%. That’s better than the S&P but you have to be ready/willing to take losses. If you don’t mentally chalk this up to lost money from day 1 you might not be ready for the massive ups and downs.
"Discipline equals Freedom" - Jocko Willink

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

Post by caklim00 » Tue Mar 24, 2020 9:55 am

Dovahkiin wrote:
Tue Mar 24, 2020 2:08 am
caklim00 wrote:
Mon Mar 23, 2020 2:31 pm
Are you sure there is no margin interest?
I'm talking about maintenance and initial margin IE buying power, NOT margin interest. At TD Ameritrade in a Reg-T account if you buy $100k of SPY + TLT then your buying power goes down by $100k. At IBKR, on the paper account, it goes down by $50k. So you can buy up to 4x leverage at IBKR, making the 3x leverage strategy possible. At TD Ameritrade you can only buy up to 2x leverage. However, after some time you go to maintenance margin at TD Ameritrade, so slowly, over time, you can eventually buy up to 4x leverage at TD Ameritrade.

Interactive brokers does charge margin interest:
https://www1.interactivebrokers.com/en/index.php?f=1595

1.65% (BM + 1.5%) for under $100k, 1.15% (BM + 1%) for 100k - 1m, 0.75% (BM + 0.5%)1 for 1m+ margin loans.

I've seen them go up as high as 3%.
Ok, so you would be paying interest then. Why not just use e-mini/micro e-mini for S&P 500 and ZB for treasury bond futures instead?

Please don't read this as a recomendation that anyone does this, but just wondering why pay interest buying ETFs on margin when one can just use futures instead?

By the way, mainenance margin on my Treasury Futures Ladder I simulated is now $32,033. Crazy that maintenance has gone up almost 4x this month. viewtopic.php?t=304904

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

Post by rascott » Tue Mar 24, 2020 9:57 am

Seems to me to be a great entry point for PSLDX.....LTTs have backed up a bit.... short term rates are 0%. Stocks down 30+%.

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

Post by amp » Tue Mar 24, 2020 10:51 am

LittleBitMore wrote:
Mon Mar 23, 2020 9:48 pm
leverage101 wrote:
Mon Mar 23, 2020 7:03 pm
For a buy-hold portfolio and, in times of high volatility, I want to be owning assets outright/be un-levered as much as possible, not be the counter-party to a bunch of derivatives that are supposed to be negatively-correlated.

Is anyone concerned that a retirement portfolio of UPRO/TMF is essentially a bunch of derivative swap contracts?
Not any more than I'm worried owning stocks/bonds is essentially a bet on a government bailout
But this strategy also has the same risk, no? If the bailout fails to materialize I don't see it performing particularly well. The risk of derivatives is on top of any risk to the underlying instruments.

I do have a question. I was reading through the UPRO prospectus and I came across the following.
Moreover, with respect to the use of swap agreements, if the Index has a dramatic intraday move that causes a material decline in the Fund’s net assets, the terms of a swap agreement between the Fund and its counterparty may permit the counterparty to immediately close out the transaction with the Fund. In that event, the Fund may be unable to enter into another swap agreement or invest in other derivatives to achieve the desired exposure consistent with the Fund’s investment objective.
Is this risk of closing out the position just a standard part of a swap agreement? In another lifetime, I worked a bit with swaps and I don't recall language like this in the master agreements. However, that was 20+ years so I'm not sure if swap contracts have evolved since then or if these are not plain vanilla agreements. Also, any idea what kind of "dramatic intraday move" would trigger a close out?

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

Post by ribeyesteaks » Tue Mar 24, 2020 11:00 am

drk wrote:
Sat Mar 21, 2020 2:35 pm
ribeyesteaks wrote:
Sat Mar 21, 2020 1:43 pm
Lee_WSP wrote:
Sat Mar 21, 2020 1:09 pm
LittleBitMore wrote:
Sat Mar 21, 2020 12:56 pm
With rates dropping, are those in the PSLDX camp getting worried the bonds won't offset the "fixed" expense ratio? S&P 500 exposure costs .03% so the trade-off is a 1.07% fee for PIMCO's active management of the bonds. If bonds only yield 3-5%, then PIMCO is taking a lot of the upside for no risk -- and if rates rise then you're paying for them to lower your net return.
In a rising rate environment, you do not lever bonds.
Exactly. In fact, I don't think you do bonds at all. The growing consensus right now is that in the next decade, inflation will make a come back. You don't want to own Treasuries in a growing inflationary environment. Maybe TIPS and GLD.
[citation needed]

Anybody predicting inflation right now, let alone "growing" inflation, needs to show their work because (a) they've likely been saying the same thing for the last decade and (b) they need to explain away the risk of deflation amidst a demand shock with stable supply.
There's been a lot of people who are saying now that inflation is coming. Of course it's not showing up in the #'s right now or in the near future, but looking at all the money printing and deficits going on, I'm thinking 10 years from now, we'll have a stagflationary environment.

I'm not a fan of Greenspan, and he's been quoted in the past saying that he thinks the Feds are overestimating inflation (which is absolutely ludicrous to most people), but he also thinks inflation is coming:

https://www.cnbc.com/2019/12/17/alan-gr ... llion.html

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

Post by ChrisBenn » Tue Mar 24, 2020 11:06 am

amp wrote:
Tue Mar 24, 2020 10:51 am
Moreover, with respect to the use of swap agreements, if the Index has a dramatic intraday move that causes a material decline in the Fund’s net assets, the terms of a swap agreement between the Fund and its counterparty may permit the counterparty to immediately close out the transaction with the Fund. In that event, the Fund may be unable to enter into another swap agreement or invest in other derivatives to achieve the desired exposure consistent with the Fund’s investment objective.
Is this risk of closing out the position just a standard part of a swap agreement? In another lifetime, I worked a bit with swaps and I don't recall language like this in the master agreements. However, that was 20+ years so I'm not sure if swap contracts have evolved since then or if these are not plain vanilla agreements. Also, any idea what kind of "dramatic intraday move" would trigger a close out?
I would think if anything that would be more likely a problem on the inverse fund - since drops happen much more rapidly typically than rises; if the counterparty didn't close it out in the huge rally we had the previously that seems pretty safe. Since a big drop is beneficial to them (in the regular fund) they obviously wouldn't be closing out there.

TMF through interest rate movement would be more likely to see a large spike up - but there it would typically be one large movement, probably not a sustained rally - so closing out would be of little value to them there either.

So that doesn't seem to me to be much extra risk of liquidation (or in this case slightly better maybe in non exposure; don't know if the etf is required to liquidate at that portion or not). Extra is the key, as there obviously is more than normal already - but I think that's part of the extra risk for extra return bargain.

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

Post by amp » Tue Mar 24, 2020 11:42 am

ChrisBenn wrote:
Tue Mar 24, 2020 11:06 am
Since a big drop is beneficial to them (in the regular fund) they obviously wouldn't be closing out there.
The text in the prospectus refers to "a material decline in the Fund’s net assets" as the event which causes the swap to be closed out, so I think they are in fact talking about a big market drop. I imagine this is to protect the other side of the transaction from being exposed to a possible default of the fund. Maybe these kinds of swaps aren't collateralized, hence the need for an exit mechanism?

I'm not saying that it's a likely scenario, just that it stuck out to me when reading through the prospectus.
Last edited by amp on Tue Mar 24, 2020 11:46 am, edited 1 time in total.

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

Post by halfisglassfull » Tue Mar 24, 2020 11:45 am

Meaty wrote:
Tue Mar 24, 2020 9:02 am
halfisglassfull wrote:
Tue Mar 24, 2020 8:52 am
nolegs wrote:
Mon Mar 23, 2020 4:17 pm
Just learned about this strategy and message and it seemed to be going great until coronavirus which nobody could have predicted.

I'm curious whether the adherents here think there's anything that can/should be tweaked moving forward. I plan on putting $100k into this strategy once things settle down a bit.
Arguably this strategy is still doing great. I entered in April 2019, quarterly rebalancing, 55/45. At the close yesterday I was up 26%. The lowest I've gone was -6%. My UPRO allocation is now around 15%, so it seems likely when I rebalance that I will eventually make a killing on the rebound.

Obviously nothing is guaranteed going forward, but so far the strategy is working as intended. That said, please don't misconstrue this response as encouraging you to jump in if you're not 100% comfortable with the risks.
Another perspective - I entered the strategy in August and am down about 18%. That’s better than the S&P but you have to be ready/willing to take losses. If you don’t mentally chalk this up to lost money from day 1 you might not be ready for the massive ups and downs.
Obviously looking at losses sucks, but I actually think we're saying the same thing. So far over the lifetime of the strategy, largely regardless of entry point, it has had better returns than 100% S&P 500. No guarantees that it continues.

It is definitely a riskier portfolio than 100% equities and so one should expect to be compensated for that risk, and also one should not be surprised if and when the risk shows up as poor performance. (It is also worth acknowledging that there are systemic risks that will not be compensated). If one doesn't have the need and willingness to take on such risk, it's not the right portfolio for them regardless of how well or poorly it performs. If one would not be comfortable investing in 100% equities in the first place, it is not the right portfolio for them (unless they are able to mentally bucket it as a side bet).

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

Post by Mr.Wu » Tue Mar 24, 2020 11:59 am

How do you fit this portfolio in your asset allocation? Is it your complete portfolio, an replacement of equity portion, or your play money?

core4portfolio
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by core4portfolio » Tue Mar 24, 2020 12:05 pm

Mr.Wu wrote:
Tue Mar 24, 2020 11:59 am
How do you fit this portfolio in your asset allocation? Is it your complete portfolio, an replacement of equity portion, or your play money?
8% of my portfolio
Allocation : 80/20 (80% TSM, 20% TBM) | Need to learn fishing sooner

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

Post by nolegs » Tue Mar 24, 2020 12:15 pm

If I'm going to allocate some $ to this strategy, thoughts on when and how to get in? DCA in? I was planning on waiting till there's more stability at some sort of bottom in a few weeks, but UPRO at 18 was tempting yesterday. UPRO up 25% so far today. In looking at the historicals for the past month, there have been a few 15-20% up days for UPRO, so is this just another false bull day?
halfisglassfull wrote:
Tue Mar 24, 2020 11:45 am
Meaty wrote:
Tue Mar 24, 2020 9:02 am
halfisglassfull wrote:
Tue Mar 24, 2020 8:52 am
nolegs wrote:
Mon Mar 23, 2020 4:17 pm
Just learned about this strategy and message and it seemed to be going great until coronavirus which nobody could have predicted.

I'm curious whether the adherents here think there's anything that can/should be tweaked moving forward. I plan on putting $100k into this strategy once things settle down a bit.
Arguably this strategy is still doing great. I entered in April 2019, quarterly rebalancing, 55/45. At the close yesterday I was up 26%. The lowest I've gone was -6%. My UPRO allocation is now around 15%, so it seems likely when I rebalance that I will eventually make a killing on the rebound.

Obviously nothing is guaranteed going forward, but so far the strategy is working as intended. That said, please don't misconstrue this response as encouraging you to jump in if you're not 100% comfortable with the risks.
Another perspective - I entered the strategy in August and am down about 18%. That’s better than the S&P but you have to be ready/willing to take losses. If you don’t mentally chalk this up to lost money from day 1 you might not be ready for the massive ups and downs.
Obviously looking at losses sucks, but I actually think we're saying the same thing. So far over the lifetime of the strategy, largely regardless of entry point, it has had better returns than 100% S&P 500. No guarantees that it continues.

It is definitely a riskier portfolio than 100% equities and so one should expect to be compensated for that risk, and also one should not be surprised if and when the risk shows up as poor performance. (It is also worth acknowledging that there are systemic risks that will not be compensated). If one doesn't have the need and willingness to take on such risk, it's not the right portfolio for them regardless of how well or poorly it performs. If one would not be comfortable investing in 100% equities in the first place, it is not the right portfolio for them (unless they are able to mentally bucket it as a side bet).

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

Post by drk » Tue Mar 24, 2020 12:44 pm

ribeyesteaks wrote:
Tue Mar 24, 2020 11:00 am
There's been a lot of people who are saying now that inflation is coming. Of course it's not showing up in the #'s right now or in the near future, but looking at all the money printing and deficits going on, I'm thinking 10 years from now, we'll have a stagflationary environment.

I'm not a fan of Greenspan, and he's been quoted in the past saying that he thinks the Feds are overestimating inflation (which is absolutely ludicrous to most people), but he also thinks inflation is coming:

https://www.cnbc.com/2019/12/17/alan-gr ... llion.html
Again, people have been making that claim since 2009. Some have come around to acknowledge that they were wrong, while others reject the evidence and insist that their prediction was just too early. Once any of them make a single accurate prediction about macro, we should consider giving them credence. Until then, nah.

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

Post by Mr.Wu » Tue Mar 24, 2020 1:06 pm

core4portfolio wrote:
Tue Mar 24, 2020 12:05 pm
8% of my portfolio
Thanks! Sounds closer to a play money spectrum.

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

Post by privatefarmer » Tue Mar 24, 2020 1:38 pm

Inflation very well may be coming. Bond yields certainly haven’t priced that in however. If anything they’re predicting deflation. What’s the opposite of inflation? A strong dollar. How strong is the USD today compared to foreign currencies? In many cases it’s at historic levels. Inflation in the US is relative. You have to compare it to inflation globally. We may be “printing money” but are we doing so at a lower rate than Europe or Japan? If so, then our dollar should remain strong. Everything is relative. I however do own gold (3x gold, of course) to make more of a true risk
Parity portfolio. But IMO it’s silly to try and predict inflation bc there are so many moving parts. What other countries are doing with their currencies, technological advances that make it cheaper to produce oil or other goods, the overall growth of the economy driven by population growth and technology.... IMO it cannot be predicted.

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

Post by danielfp » Tue Mar 24, 2020 2:05 pm

privatefarmer wrote:
Tue Mar 24, 2020 1:38 pm
Inflation very well may be coming. Bond yields certainly haven’t priced that in however. If anything they’re predicting deflation. What’s the opposite of inflation? A strong dollar. How strong is the USD today compared to foreign currencies? In many cases it’s at historic levels. Inflation in the US is relative. You have to compare it to inflation globally. We may be “printing money” but are we doing so at a lower rate than Europe or Japan? If so, then our dollar should remain strong. Everything is relative. I however do own gold (3x gold, of course) to make more of a true risk
Parity portfolio. But IMO it’s silly to try and predict inflation bc there are so many moving parts. What other countries are doing with their currencies, technological advances that make it cheaper to produce oil or other goods, the overall growth of the economy driven by population growth and technology.... IMO it cannot be predicted.
A very interesting factor that should be considered is that the US holds the world reserve currency, nobody else does. The nation that does can print way more because its currency gets more value in times of crisis. You can basically print money, devalue your currency to where it was before and do so without inflation, because the inflow of assets from abroad is deflationary.

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

Post by ribeyesteaks » Tue Mar 24, 2020 2:34 pm

Roubini summarizes the inflation hypothesis really well here:

https://finance.yahoo.com/news/why-trum ... 29407.html

Just watch the video until Roubini comes in. Part of the thesis is a move away from globalization, which was already beginning with Trump and China. If you believe like I do that inflation has been mostly exported away, then if we start heading inwards with our supply chains and manufacturing, then inflation should return. Not only that, but deficits in a supply shock economy generally don't bode well for prices.

Anyways, in 10 years time, we'll see. That's when I'm projecting 70's style stagflation to start creeping back. I wonder, by the way, how this UPRO/TMF would do in a stagflationary environment like in the 70's. I suspect eventually we'll see something like that that will reset yields much higher.

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

Post by Ramjet » Tue Mar 24, 2020 2:49 pm

ribeyesteaks wrote:
Tue Mar 24, 2020 2:34 pm
I wonder, by the way, how this UPRO/TMF would do in a stagflationary environment like in the 70's
Worst case scenario for the strategy I would think

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

Post by privatefarmer » Tue Mar 24, 2020 3:15 pm

People honestly believe globalization is going to decrease? Serious? Trump may hate foreigners but the world doesn’t revolve around trump. Globalization is a one way street. It will only become more Prominent as technology and the world progresses. More and more countries will become “developed” etc try as he might trump will not be able to cut us off from the rest of the world. And he will be gone in January anyhow.

I have no idea where inflation will go. This particular strategy did poorly in stagflation however this is why I own gold. And I have a house. That is a substantial percentage of my net worth that is in “real assets”

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

Post by Dovahkiin » Tue Mar 24, 2020 5:12 pm

caklim00 wrote:
Tue Mar 24, 2020 9:55 am
Ok, so you would be paying interest then. Why not just use e-mini/micro e-mini for S&P 500 and ZB for treasury bond futures instead?

Please don't read this as a recomendation that anyone does this, but just wondering why pay interest buying ETFs on margin when one can just use futures instead?
Because in back tests, $3.2 million algorithm @ 3% margin interest rates > $2.5m SPY/TLT 3x levered quarterly re-balanced > $1.5m UPRO/TMF?

IBKR is really competitive with their margin giving libor + 0.50%. For 0.50% basis points it's absolutely worth doing spy/tlt on margin:

Because I've shown SPY/TLT is very tax efficient having a negative tax drag on capital gains and a minor tax drag of 1.27% from dividends. Futures are marked to market at 60% LTCG/40% STCG. Futures are very tax inefficient for buy and hold like this.

Futures are very tax risky. Imagine being marked to market paying 60/40% on capital gains of say $300k in the peak 2007 year, then having 2008 come and now your position is $89k? You pay tax on your futures market value on December 31st of each year.. Your capital losses will offset new gains of course, but in reality there's going to be huge tax withdrawals from the account to pay for that insane tax drag.

SPY+TLT on margin means every tax lot is long term capital gains, re-balancing is done efficiently with the extra cash from margin: you drift to 2.9x margin, re-balance assets & leverage to 3x, you've bought most of your new shares on margin to re-balance with instead of selling old shares.

Is all of this worth 50 basis points for the markup IBKR has over Libor? Good god yes. No one should be considering futures for this portfolio in a taxable account. Maybe for a IRA at TD Ameritrade as they only mark up margins by 125%.


I've not even got into the algo trading side of futures:
QuantConnect does support trading futures but they have no data going back to 2003 for futures. Their implementation sucks. If I drop off the 3% margin interest simulation rate down to say 1.5% or 0.75%, it only affects the ending value to something like $3.5million. Need to make sure no bugs in trading futures.

If there's a bug in trading stocks in my algorithm, say it's spamming orders constantly or buys too much, that's a lot less dollar risk. Let's say I have a live bug that is spamming buy orders because there is lag on order fills (this is an actual bug I had early on in my algo trading hobby.) With equity it's an annoyance. With futures contracts it could be a bankruptcy.

Flash crashes in the futures are a real possibility still. The /ES futures went as little as 50-100 contracts showing at the bid/ask when usually it's been 10k contracts. SPY and TLT has remained liquid throughout the most recent volatility. Too much risk of bad fills in volatility using futures. I'd need to write a lot of extra code to price check the /ES and /ZB futures.

The bond futures are a different asset class than TLT. They are a fixed set of securities specified by the exchange. They have different convexity than TLT. TLT has bonds in the fund that would never be delivered in a futures contract. This needs to absolutely be back tested to make sure it doesn't blow up in 2008. TLT's convexity is really interesting as it's very favorable in bullish bond markets and less risk in bear bond markets. The bond futures convexity acts more how one individual bond would trade instead, and so there may be more risk there.

That's why I'm not trading futures. I think it's a stupid idea in taxable for anyone who wants to shoot for over a $1m adventure or doesn't need to realize gains for 20+ years.

In tax advantaged, sure? Knock yourself out. It's either futures or UPRO/TMF, so futures will probably win out. With how margins are you'd probably need a 200k+ IRA to use the futures version and you'd need to watch it like a hawk to manage your leverage. At $177 for /ZB one contract has a notional value of $177,000. After hours /ES is 2442x50 - 122,100 notional. Micro futures are $5/tick so $12,220 notional.

So we can get our S&P leverage fine from micros, I won't bother with the math here. The bond future is the biggest problem. With 3x leverage the minimum account size for 45% bonds levered to 3x is: 177000/3/.45 = $131k. There's going to be a crap ton of variance in leverage. Say your portfolio goes down 20% to 104.8k, and stays there for the next quarterly rebalance. Now your bond allocation is .45 * 104.8k = 47.16k Now, with that one futures contract, your bond leverage is 3.75x. (math: 177/47.16). Assuming you have perfect 3x leverage on the S&P 500 your new portfolio leverage is: 3.3375x (3.75*.45 + 3*.55). So now you're taking on more risk then you signed up for and probably need to get out of the future completely.

You wouldn't be able to use 2 full contracts until you're at 262k, 4 contracts at 524k, 8 contracts at 1 million, etc. You'd have some position of cash + bond fund + futures that's changing constantly due to the leverage. Honestly, I take back my 200k account recommendation. You won't get a smooth leverage curve until you're 1 million+ and have enough numerical fluidity to adjust contract sizes to leverage. $1 million at IBKR would be a $2m margin loan on SPY/TLT at perfect 3x leverage, and definitely qualify for benchmark + 50 basis point rates.

Thinking about future math with such large fixed contract sizes really hurts my brain. I wouldn't recommend replicating this strategy with futures until there is a micro for /ZB.

I think on I'll probably just do UPRO/TMF in my tax advantaged accounts as it'd still be beating 100% stocks to the ground, or just leave them alone in a more conservative portfolio (bucketing.) Honestly - do UPRO/TMF in tax advantaged until $1m or micro /ZB comes out, then finding someone like TDA who will let you have 125% futures margin in an IRA.

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

Post by Dovahkiin » Tue Mar 24, 2020 5:42 pm

Mr.Wu wrote:
Tue Mar 24, 2020 11:59 am
How do you fit this portfolio in your asset allocation? Is it your complete portfolio, an replacement of equity portion, or your play money?
I was 100% stocks before the COVID crash. Still remain 100% stocks after. I only discovered Hedgefundie's posts earlier this year. So right now I threw a $70k windfall I got into it on 3/19 and I'll be letting it ride. Right now it's 25% of my entire portfolio. My philosophy is "bucketing" it for a certain amount of time. Pretend it's a closed end mutual fund with no redemptions allowed until X (say 10) years from now. I don't rebalance into or out of it, as it'd defeat the purpose otherwise.

If it does well through COVID, through helicopter money, etc., then once recovery is clear I may decide to invest 100% of my net worth and future income into it like a select few in this thread are doing. I don't know at this point though as others are right - there are systemic risks like we've seen recently where both stocks and bonds go down in value. Stagflation and deflation both can do that. I don't want to be another market timer story either.

You don't have to lever it up 3x either. You can lever it up 2x with 2x etfs, or plain old SPY/TLT on margin. 2x doesn't get talked about enough here - it's risk profile is roughly equivalent to 75% stocks 25% bonds.

I'm autistic in real life and so I have no emotional feeling over my account balance. They're just numbers to me. Others may not be able to withstand the volatility that I have gone through with 100% stocks. If I feel confident enough in the portfolio over the next year my plan is to throw 100% of future income into it until it hits double my FIRE target, take half to live off on a safe portfolio, and let the rest ride.

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

Post by dspencer » Tue Mar 24, 2020 6:39 pm

Dovahkiin wrote:
Tue Mar 24, 2020 5:42 pm
I'm autistic in real life and so I have no emotional feeling over my account balance. They're just numbers to me. Others may not be able to withstand the volatility that I have gone through with 100% stocks. If I feel confident enough in the portfolio over the next year my plan is to throw 100% of future income into it until it hits double my FIRE target, take half to live off on a safe portfolio, and let the rest ride.
I don't claim to know anything about how autists handle stock losses, but I don't consider staying the course to be solely a matter of controlling (or lacking) emotions. I know that for me part of the issue is wondering whether all the conditions that led to a decision still hold true. There can be purely rational reasons to second guess a particular strategy.

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

Post by ChrisBenn » Tue Mar 24, 2020 6:49 pm

Dovahkiin wrote:
Tue Mar 24, 2020 5:42 pm
You don't have to lever it up 3x either. You can lever it up 2x with 2x etfs, or plain old SPY/TLT on margin. 2x doesn't get talked about enough here - it's risk profile is roughly equivalent to 75% stocks 25% bonds.
If you wanted 2x a 50/50 mix of the 3x and underlying would probably be more efficient than the 2x fund (average expense would be less at a minimum). The difference is probably pretty minimal though.

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

Post by typical.investor » Tue Mar 24, 2020 7:31 pm

halfisglassfull wrote:
Tue Mar 24, 2020 8:52 am
nolegs wrote:
Mon Mar 23, 2020 4:17 pm
Just learned about this strategy and message and it seemed to be going great until coronavirus which nobody could have predicted.

I'm curious whether the adherents here think there's anything that can/should be tweaked moving forward. I plan on putting $100k into this strategy once things settle down a bit.
Arguably this strategy is still doing great. I entered in April 2019, quarterly rebalancing, 55/45. At the close yesterday I was up 26%. The lowest I've gone was -6%. My UPRO allocation is now around 15%, so it seems likely when I rebalance that I will eventually make a killing on the rebound.

Obviously nothing is guaranteed going forward, but so far the strategy is working as intended. That said, please don't misconstrue this response as encouraging you to jump in if you're not 100% comfortable with the risks.
+1 This strategy has been Golden. Far better than anything Swedroe, who disses leveraged ETFs in the press, has recommended.

Started 4.10.2020 and am now up about 3%. The market is down 23% in that time.

I have rebalanced out of Treasuries as TMF has jumped. I bought TMF at $20.70 and rebalanced out at $47.88, $49.88, $37.45, and $40.73.

So my original 519 shares of UPRO are now 1351 and are 60% of the strategy.

This has worked very well since I haven't rebalanced in my other holdings. Thus even with UPRO's percent rising, I am still under my equity total as a whole and I won't rebalance into TMF until my portfolio as a whole needs balancing. My fixed income outside the strategy is leveraged Muni funds or long term CDs. Both of which have nice yields but no liquidity.

My holdings outside this strategy are heavily value weighted which I believe will do better with inflation (as future expected income isn't as much in growth and won't be discounted from inflation to the same degree).

So this strategy has really given me a good way to better maintain my overall stock exposure, and I think is poised well to perform as economic expectations recover.

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

Post by mrspock » Tue Mar 24, 2020 8:09 pm

Still up 30% vs. -28% for the S&P 500. Rebalance due next week.... right on time for the stimulus package, and infection rates to taper off. Buckle up boys and girls... UPRO is about to blast off!

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

Post by Dovahkiin » Tue Mar 24, 2020 8:28 pm

dspencer wrote:
Tue Mar 24, 2020 6:39 pm
I know that for me part of the issue is wondering whether all the conditions that led to a decision still hold true. There can be purely rational reasons to second guess a particular strategy.
Of course, fair point. That's why I'm bailing on UPRO/TMF for SPY/TLT at 3x on margin when I can. I don't trust the swaps, counter parties, closure agreements, and volatility drag.

If we start getting hit super hard on bonds a ton of people are going to panic/be upset. Quite frankly, I think we will have plenty of warning if we return to a 1970s stagflation era and yields start shooting through the roof. Ultimately all of us are making calculated risks by being in stocks and bonds themselves, even unlevered, over FDIC insured stuff/real estate/etc. At least with TLT I'll be getting the excess yield, and I hope that is more than the margin loan rate. You won't be getting yield from TMF, only the capital gains/losses from interest rates changing.

I'm also setting definite de-risk points. I'm confident this strategy will likely work for the next 5-10 years. I'm comfortable with the risk during my earning years. I wouldn't run this portfolio in retirement at all.

Then I found out at 3:50 pm EST on real accounts IBKR will liquidate anyone on Reg-T that was at 25% initial to 50% initial. It turns out the 25% initial is just for day trading only. :( Since they compute margin in real time they don't do "Day trading buying power" like other Reg-T brokerages do.

So, I've considered all the conditions and for my personal portfolio it's this: UPRO/TMF to $300k after taxes, then algorithm at IBKR on portfolio margin in SPY/TLT. If I decide to do tax-advantage money in my roth ira/401k/etc it'll be UPRO/TMF.

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

Post by LittleBitMore » Tue Mar 24, 2020 9:12 pm

mrspock wrote:
Tue Mar 24, 2020 8:09 pm
Still up 30% vs. -28% for the S&P 500. Rebalance due next week.... right on time for the stimulus package, and infection rates to taper off. Buckle up boys and girls... UPRO is about to blast off!
Virus grows at an exponential rate and has continued to do so through the "lockdowns", now Trump is sending people back to work. Infection rate is going to double, not tamper off. Stimulus package will do all of nothing -- in 2008 the stimulus package was following by a further 40% decline (https://imgur.com/s7EkeQM). Today and tomorrow are the first bull traps, unemployment #s will crater the market despite stimulus deal (which will be announced same day).

We waited too long and bought ourselves a U recovery, not V

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

Post by typical.investor » Tue Mar 24, 2020 9:50 pm

LittleBitMore wrote:
Tue Mar 24, 2020 9:12 pm
mrspock wrote:
Tue Mar 24, 2020 8:09 pm
Still up 30% vs. -28% for the S&P 500. Rebalance due next week.... right on time for the stimulus package, and infection rates to taper off. Buckle up boys and girls... UPRO is about to blast off!
Virus grows at an exponential rate and has continued to do so through the "lockdowns", now Trump is sending people back to work. Infection rate is going to double, not tamper off. Stimulus package will do all of nothing -- in 2008 the stimulus package was following by a further 40% decline (https://imgur.com/s7EkeQM). Today and tomorrow are the first bull traps, unemployment #s will crater the market despite stimulus deal (which will be announced same day).

We waited too long and bought ourselves a U recovery, not V
So let me ask you this, why haven't hospitalizations and deaths in Japan taken off? They aren't on lockdown. Restaurants are busy.

I suspect the main avenue of transmission is in the droplets from when people sneeze/cough. WHO testing shows it's not aerosolized particles.

The only thing different about Japan is that people wear allergy masks regularly as a precaution and to be polite (I mean let's face it, it's a little rude to cough or sneeze in a public place). And I think you'll find a high rate of usage in most crowded countries where the infection rate hasn't become shockingly alarming.

I bet America could do it with bandanas if y'all could wash them. Of course maybe people would use it as a cover to rob banks - I mean judging by how people reacted to the crisis in Katrina.

I could be wrong, but the only real thing I see different about Japan is the individual responsibility of taking a simple measure to prevent the spread of your own droplets. Other than their practice of not shaking hands, not much explains their fortunate situation. Of course the WHO insists their crisis simply must be around the corner, but we shall see. Perhaps it's as simple as containing the flight of droplets.

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

Post by potatopancake » Tue Mar 24, 2020 10:13 pm

typical.investor wrote:
Tue Mar 24, 2020 9:50 pm
LittleBitMore wrote:
Tue Mar 24, 2020 9:12 pm
mrspock wrote:
Tue Mar 24, 2020 8:09 pm
Still up 30% vs. -28% for the S&P 500. Rebalance due next week.... right on time for the stimulus package, and infection rates to taper off. Buckle up boys and girls... UPRO is about to blast off!
Virus grows at an exponential rate and has continued to do so through the "lockdowns", now Trump is sending people back to work. Infection rate is going to double, not tamper off. Stimulus package will do all of nothing -- in 2008 the stimulus package was following by a further 40% decline (https://imgur.com/s7EkeQM). Today and tomorrow are the first bull traps, unemployment #s will crater the market despite stimulus deal (which will be announced same day).

We waited too long and bought ourselves a U recovery, not V
So let me ask you this, why haven't hospitalizations and deaths in Japan taken off? They aren't on lockdown. Restaurants are busy.

I suspect the main avenue of transmission is in the droplets from when people sneeze/cough. WHO testing shows it's not aerosolized particles.

The only thing different about Japan is that people wear allergy masks regularly as a precaution and to be polite (I mean let's face it, it's a little rude to cough or sneeze in a public place). And I think you'll find a high rate of usage in most crowded countries where the infection rate hasn't become shockingly alarming.

I bet America could do it with bandanas if y'all could wash them. Of course maybe people would use it as a cover to rob banks - I mean judging by how people reacted to the crisis in Katrina.

I could be wrong, but the only real thing I see different about Japan is the individual responsibility of taking a simple measure to prevent the spread of your own droplets. Other than their practice of not shaking hands, not much explains their fortunate situation. Of course the WHO insists their crisis simply must be around the corner, but we shall see. Perhaps it's as simple as containing the flight of droplets.
Japan is only beginning to develop cases. They stand at 1,100 total. 154 new on 3/23. Japan has lagged behind most other countries, possibly for the reasons you mentioned.

The US cases / day and deaths / day is increasing at a faster rate than Italy (minus 12 days, lag time). With over 200 dead today in the USA, I don't see this slowing down soon. Unemployment figures are coming out soon and they will be bad. NY, CA, WA have been hit badly and there are 47 other states which are only now beginning to see more significant numbers of cases. There are more tests being run each day. I don't see any evidence to prove that the USA is anywhere close to beating this thing nor lifting shelter-in-place orders. Stocks will be volatile in downward direction for a while yet.

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

Post by Kbg » Tue Mar 24, 2020 11:17 pm

Ramjet wrote:
Tue Mar 24, 2020 2:49 pm
ribeyesteaks wrote:
Tue Mar 24, 2020 2:34 pm
I wonder, by the way, how this UPRO/TMF would do in a stagflationary environment like in the 70's
Worst case scenario for the strategy I would think
Is

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mrspock
Posts: 971
Joined: Tue Feb 13, 2018 2:49 am
Location: Vulcan

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

Post by mrspock » Tue Mar 24, 2020 11:27 pm

LittleBitMore wrote:
Tue Mar 24, 2020 9:12 pm
mrspock wrote:
Tue Mar 24, 2020 8:09 pm
Still up 30% vs. -28% for the S&P 500. Rebalance due next week.... right on time for the stimulus package, and infection rates to taper off. Buckle up boys and girls... UPRO is about to blast off!
Virus grows at an exponential rate and has continued to do so through the "lockdowns", now Trump is sending people back to work. Infection rate is going to double, not tamper off. Stimulus package will do all of nothing -- in 2008 the stimulus package was following by a further 40% decline (https://imgur.com/s7EkeQM). Today and tomorrow are the first bull traps, unemployment #s will crater the market despite stimulus deal (which will be announced same day).

We waited too long and bought ourselves a U recovery, not V
You know how Mr. Market was completely devoid of data when it took the plunge down? (and continues to) Exactly what makes you think it's going to wake up tomorrow and start a career as a Data Scientist? As soon as it gets a whiff that the infection rate is declining and shelter in-place orders are going to be rescinded, it's back up we go -- at least half the losses will be wiped out in short order. It's as simple as that. If you are sitting around and waiting for GDP growth, unemployment numbers, and Q3/Q4 earnings ... good luck with that.

HawkeyePierce
Posts: 1243
Joined: Tue Mar 05, 2019 10:29 pm
Location: Colorado

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

Post by HawkeyePierce » Tue Mar 24, 2020 11:54 pm

Currently down 2.4% since getting in, down 14% YTD. My YTD loss is less than my core portfolio. Staying the course, next rebalance is 4/1.

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