HEDGEFUNDIE's excellent adventure Part II: The next journey

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

Post by Kbg »

nisiprius wrote: Thu May 12, 2022 8:15 pm He started it in 2/2019 with an allocation of 40/60 UPRO/TMF, and then changed it in 10/2019 to 55/45. In other words, it's an actively managed strategy, but the manager isn't providing further guidance on whether or how he thinks the strategy should be adjusted.
Since 2011 until today with daily data, using IB's sliding scale commission table.

40/60
Rebal Ann Rtn/mdd
Ann 22.68/58.56
Qtr 27.85/59.34
Mo 24.41/58.62
Wk 18.64/58.69

55/45
Rebal Ann Rtn/mdd
Ann 27.69/60.17
Qtr 33.79/60.82
Mo 29.33/59.75
Wk 22.12/59.71

I assume everyone already knows they are living through the worst dd by far since these etfs were in existence
000
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by 000 »

True, but IIRC, one was not necessarily meant to stay the course with this thing through rising rates. I thought that was regarded by the OP as, firstly, extremely unlikely due to a "new era" and, secondly, something that might kill the strategy.

So far, these LETFs have actually held up pretty well, delivering about as much downside as one would anticipate from 3X.
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hiddenpower
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by hiddenpower »

Kbg wrote: Fri May 13, 2022 10:16 pm
nisiprius wrote: Thu May 12, 2022 8:15 pm He started it in 2/2019 with an allocation of 40/60 UPRO/TMF, and then changed it in 10/2019 to 55/45. In other words, it's an actively managed strategy, but the manager isn't providing further guidance on whether or how he thinks the strategy should be adjusted.
Since 2011 until today with daily data, using IB's sliding scale commission table.

40/60
Rebal Ann Rtn/mdd
Ann 22.68/58.56
Qtr 27.85/59.34
Mo 24.41/58.62
Wk 18.64/58.69

55/45
Rebal Ann Rtn/mdd
Ann 27.69/60.17
Qtr 33.79/60.82
Mo 29.33/59.75
Wk 22.12/59.71

I assume everyone already knows they are living through the worst dd by far since these etfs were in existence
I thought the drawdown was more like 40% at this point for 55/45.

I bought my first chunk last week and will be ready to dip my toes in more over the coming months. Good luck everyone.
Tellurius
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Tellurius »

Has the risk for this strategy showed up?
If yes, was it a known unknown or an unknown unknown?
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Marseille07
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

Tellurius wrote: Tue May 17, 2022 7:30 am Has the risk for this strategy showed up?
If yes, was it a known unknown or an unknown unknown?
It was a known known. Assuming away inflation doesn't make it an unknown.
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majasan
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by majasan »

Inflation. FFR spike/increase. Stagflation. Of these risks discussed so far, which ones are we expecting to visit us next ?
Inflation is already in -but expected to be tamed.
FFR increases are not going to be spikes but probably in a slow and uniform cadence.
Stagflation ?- If, as Bernanke indicated recently, this goes for two or three years, what is our plan of action.
For Lumpsummer and for DCAer ?
er999
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by er999 »

majasan wrote: Tue May 17, 2022 8:30 am Inflation. FFR spike/increase. Stagflation. Of these risks discussed so far, which ones are we expecting to visit us next ?
Inflation is already in -but expected to be tamed.
FFR increases are not going to be spikes but probably in a slow and uniform cadence.
Stagflation ?- If, as Bernanke indicated recently, this goes for two or three years, what is our plan of action.
For Lumpsummer and for DCAer ?
Lunpsummer can’t do anything (I don’t think it makes sense to switch the hedge to cash now from tmf when you’ve already lost 50%) but dollar cost averaging are somewhat protected. If someone was newly started the strategy now I’d consider dollar cost averaging in over a few years as there could be (although not guaranteed) further falls and DCA is somewhat of a hedge by itself if the DCA amount is significant compared to the total portfolio.
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OohLaLa
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by OohLaLa »

Another sad day for HFEA and its deformed clones. The silver lining is that ITT, LTT and VIX are doing their job. :beer
Ramjet
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Ramjet »

OohLaLa wrote: Wed May 18, 2022 11:35 am Another sad day for HFEA and its deformed clones. The silver lining is that ITT, LTT and VIX are doing their job. :beer
At this point it doesn't even hurt anymore. Whatever happens, happens.
VT & HFEA
TXGator
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by TXGator »

OohLaLa wrote: Wed May 18, 2022 11:35 am Another sad day for HFEA and its deformed clones. The silver lining is that ITT, LTT and VIX are doing their job. :beer
Could be worse - could be 100% in Target today!
TXGator
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by TXGator »

Ramjet wrote: Wed May 18, 2022 12:01 pm
OohLaLa wrote: Wed May 18, 2022 11:35 am Another sad day for HFEA and its deformed clones. The silver lining is that ITT, LTT and VIX are doing their job. :beer
At this point it doesn't even hurt anymore. Whatever happens, happens.
It does hurt less since that portion of my NW is becoming a smaller portion :shock:
Jags4186
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Jags4186 »

OohLaLa wrote: Wed May 18, 2022 11:35 am Another sad day for HFEA and its deformed clones. The silver lining is that ITT, LTT and VIX are doing their job. :beer
HFEA is performing pretty much identically to the SP500 today.
skierincolorado
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by skierincolorado »

TXGator wrote: Wed May 18, 2022 12:10 pm
It does hurt less since that portion of my NW is becoming a smaller portion :shock:
Having one unleveraged portfolio and one highly leveraged portfolio is mathematically guaranteed to underperform a single portfolio with very slight leverage.
comeinvest
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by comeinvest »

skierincolorado wrote: Wed May 18, 2022 1:38 pm
TXGator wrote: Wed May 18, 2022 12:10 pm
It does hurt less since that portion of my NW is becoming a smaller portion :shock:
Having one unleveraged portfolio and one highly leveraged portfolio is mathematically guaranteed to underperform a single portfolio with very slight leverage.
:happy thanks for always fact-checking, skier! Your contributions to this and the mHFEA thread are invaluable.
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Crushtheturtle
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Crushtheturtle »

skierincolorado wrote: Wed May 18, 2022 1:38 pm
TXGator wrote: Wed May 18, 2022 12:10 pm
It does hurt less since that portion of my NW is becoming a smaller portion :shock:
Having one unleveraged portfolio and one highly leveraged portfolio is mathematically guaranteed to underperform a single portfolio with very slight leverage.
Is this true?

I always assumed such a mix resulted in a simple average. For example:

50% Unleveraged
30% Leveraged
20% Cash

(50%) x 1.0 + (30%) x 3.0 = 1.40 Leverage
If you're not having fun, you'll just have to pretend.
skierincolorado
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by skierincolorado »

Crushtheturtle wrote: Wed May 18, 2022 6:18 pm
skierincolorado wrote: Wed May 18, 2022 1:38 pm
TXGator wrote: Wed May 18, 2022 12:10 pm
It does hurt less since that portion of my NW is becoming a smaller portion :shock:
Having one unleveraged portfolio and one highly leveraged portfolio is mathematically guaranteed to underperform a single portfolio with very slight leverage.
Is this true?

I always assumed such a mix resulted in a simple average. For example:

50% Unleveraged
30% Leveraged
20% Cash

(50%) x 1.0 + (30%) x 3.0 = 1.40 Leverage
If you do not maintain those exact percentages it will underperform because you will get more volatility decay. For example, if the market goes down 10% in one day, the 3x will lose 30%. You will now have lower leverage. 1.256x to be exact. You could easily fall below 1x leverage. Having low leverage when the market is down makes volatility decay much worse.

If you maintained constant 1.4x leverage you would still have volatility decay but it would be much less.

If you rebalance to the percentages in your example often you should be able to stay close to 1.4x. Some people don't rebalance between their hfea and non hfea at all, which is guaranteed to underperform significantly.

Instead of lower leverage when the market is down, you want either constant or even increased leverage in order to reduce volatility decay.
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Crushtheturtle
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Crushtheturtle »

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

Post by hiddenpower »

skierincolorado wrote: Wed May 18, 2022 6:29 pm
Crushtheturtle wrote: Wed May 18, 2022 6:18 pm
skierincolorado wrote: Wed May 18, 2022 1:38 pm
TXGator wrote: Wed May 18, 2022 12:10 pm
It does hurt less since that portion of my NW is becoming a smaller portion :shock:
Having one unleveraged portfolio and one highly leveraged portfolio is mathematically guaranteed to underperform a single portfolio with very slight leverage.
Is this true?

I always assumed such a mix resulted in a simple average. For example:

50% Unleveraged
30% Leveraged
20% Cash

(50%) x 1.0 + (30%) x 3.0 = 1.40 Leverage
If you do not maintain those exact percentages it will underperform because you will get more volatility decay. For example, if the market goes down 10% in one day, the 3x will lose 30%. You will now have lower leverage. 1.256x to be exact. You could easily fall below 1x leverage. Having low leverage when the market is down makes volatility decay much worse.

If you maintained constant 1.4x leverage you would still have volatility decay but it would be much less.

If you rebalance to the percentages in your example often you should be able to stay close to 1.4x. Some people don't rebalance between their hfea and non hfea at all, which is guaranteed to underperform significantly.

Instead of lower leverage when the market is down, you want either constant or even increased leverage in order to reduce volatility decay.
So long as you rebalance quarterly it's close enough from what I can tell on portfoliovisualizer though. And monthly is basically in line exactly (such as targeting 2x via 50% UPRO / 50% VOO)
skierincolorado
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by skierincolorado »

hiddenpower wrote: Wed May 18, 2022 9:14 pm
skierincolorado wrote: Wed May 18, 2022 6:29 pm
Crushtheturtle wrote: Wed May 18, 2022 6:18 pm
skierincolorado wrote: Wed May 18, 2022 1:38 pm
TXGator wrote: Wed May 18, 2022 12:10 pm
It does hurt less since that portion of my NW is becoming a smaller portion :shock:
Having one unleveraged portfolio and one highly leveraged portfolio is mathematically guaranteed to underperform a single portfolio with very slight leverage.
Is this true?

I always assumed such a mix resulted in a simple average. For example:

50% Unleveraged
30% Leveraged
20% Cash

(50%) x 1.0 + (30%) x 3.0 = 1.40 Leverage
If you do not maintain those exact percentages it will underperform because you will get more volatility decay. For example, if the market goes down 10% in one day, the 3x will lose 30%. You will now have lower leverage. 1.256x to be exact. You could easily fall below 1x leverage. Having low leverage when the market is down makes volatility decay much worse.

If you maintained constant 1.4x leverage you would still have volatility decay but it would be much less.

If you rebalance to the percentages in your example often you should be able to stay close to 1.4x. Some people don't rebalance between their hfea and non hfea at all, which is guaranteed to underperform significantly.

Instead of lower leverage when the market is down, you want either constant or even increased leverage in order to reduce volatility decay.
So long as you rebalance quarterly it's close enough from what I can tell on portfoliovisualizer though. And monthly is basically in line exactly (such as targeting 2x via 50% UPRO / 50% VOO)
2x is close enough to 3x you don't see a big difference.

But look what happens when targetting 1.5x using UPRO if you only rebalance annually. The volatility decay of UPRO kills you. 19.09% vs 16.88% CAGR. And some don't rebalance at all which makes it much worse. And this is in a bull market where volatility decay is much less.

https://www.portfoliovisualizer.com/bac ... ion3_2=150

There's no reason to accept the volatility decay of 3x leverage, if you are not 3x leverage overall.
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hiddenpower
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by hiddenpower »

skierincolorado wrote: Wed May 18, 2022 11:15 pm
hiddenpower wrote: Wed May 18, 2022 9:14 pm
skierincolorado wrote: Wed May 18, 2022 6:29 pm
Crushtheturtle wrote: Wed May 18, 2022 6:18 pm
skierincolorado wrote: Wed May 18, 2022 1:38 pm

Having one unleveraged portfolio and one highly leveraged portfolio is mathematically guaranteed to underperform a single portfolio with very slight leverage.
Is this true?

I always assumed such a mix resulted in a simple average. For example:

50% Unleveraged
30% Leveraged
20% Cash

(50%) x 1.0 + (30%) x 3.0 = 1.40 Leverage
If you do not maintain those exact percentages it will underperform because you will get more volatility decay. For example, if the market goes down 10% in one day, the 3x will lose 30%. You will now have lower leverage. 1.256x to be exact. You could easily fall below 1x leverage. Having low leverage when the market is down makes volatility decay much worse.

If you maintained constant 1.4x leverage you would still have volatility decay but it would be much less.

If you rebalance to the percentages in your example often you should be able to stay close to 1.4x. Some people don't rebalance between their hfea and non hfea at all, which is guaranteed to underperform significantly.

Instead of lower leverage when the market is down, you want either constant or even increased leverage in order to reduce volatility decay.
So long as you rebalance quarterly it's close enough from what I can tell on portfoliovisualizer though. And monthly is basically in line exactly (such as targeting 2x via 50% UPRO / 50% VOO)
2x is close enough to 3x you don't see a big difference.

But look what happens when targetting 1.5x using UPRO if you only rebalance annually. The volatility decay of UPRO kills you. 19.09% vs 16.88% CAGR. And some don't rebalance at all which makes it much worse. And this is in a bull market where volatility decay is much less.

https://www.portfoliovisualizer.com/bac ... ion3_2=150

There's no reason to accept the volatility decay of 3x leverage, if you are not 3x leverage overall.
You cannot rebalance annually for doing leverage in this manner, you have to rebalance more often than that. So it's not the best for a taxable account but seems quite good for a retirement account if you want to keep constant leverage without any margin call risks (futures) or total loss (LEAPS) and is simpler to manage than both LEAPS and futures.
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hiddenpower
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by hiddenpower »

It seems cash + UPRO monthly still struggles a bit.

VFINX + Margin VS. CASH/UPRO VS. VFINX/UPRO reveals you can get much closer using a combination of VFINX/UPRO. It's not as good as 1.5X but seems close enough.

For my own education, is 150 VFINX and -50 CASHX fully simulating taking out 50% of VFINX on margin?
Last edited by hiddenpower on Thu May 19, 2022 11:48 am, edited 1 time in total.
Marseille07
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

hiddenpower wrote: Thu May 19, 2022 11:43 am It seems cash + UPRO monthly still struggles a bit.

VFINX + Margin VS. CASH/UPRO VS. VFINX/UPRO reveals you can get much closer using a combination of VFINX/UPRO. It's not as good as 1.5X but seems close enough.
You can't backtest UPRO on PV because it didn't exist in 2008. We know it would have gone -95% had it existed.
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Afrofreak
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Afrofreak »

Has anyone else noticed that both UPRO and TQQQ have started deviating quite significantly away from their objective, particularly to the downside? What is going on and is there anything we can do about it? On days where the S&P500 is down more than 3%, UPRO is down more than 1% more than expected. That's bad.

https://www.proshares.com/our-etfs/leve ... verse/upro
https://www.proshares.com/our-etfs/leve ... verse/tqqq
Marseille07
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

Beta slippage. Not much you can do about it.
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elderwise
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by elderwise »

Marseille07 wrote: Thu May 19, 2022 12:18 pm Beta slippage. Not much you can do about it.
Does this work both ways? So if Nasdaq is up 1% technically Tqqq should be up 3% but will it be up 3.5% due to this beta slippage? Or does it only work on the downside?
Marseille07
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

elderwise wrote: Thu May 19, 2022 12:20 pm
Marseille07 wrote: Thu May 19, 2022 12:18 pm Beta slippage. Not much you can do about it.
Does this work both ways? So if Nasdaq is up 1% technically Tqqq should be up 3% but will it be up 3.5% due to this beta slippage? Or does it only work on the downside?
Well it kind of always works both ways, but when we discuss beta slippage, we're often talking about up -> down -> up -> down.

If we get a series of green days (+1% +1% +1% +1%) then you're right that UPRO can keep rockin'.
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000
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by 000 »

I wonder if this is a good time to go back to the original allocation. I mean, how much worse can things get for bonds?
Marseille07
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

000 wrote: Thu May 19, 2022 3:39 pm I wonder if this is a good time to go back to the original allocation. I mean, how much worse can things get for bonds?
We don't know, but if the Fed keeps hiking until 8%, I'd think the Ten will be quite higher than 2.8%.
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000
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by 000 »

Marseille07 wrote: Thu May 19, 2022 3:40 pm
000 wrote: Thu May 19, 2022 3:39 pm I wonder if this is a good time to go back to the original allocation. I mean, how much worse can things get for bonds?
We don't know, but if the Fed keeps hiking until 8%, I'd think the Ten will be quite higher than 2.8%.
TMF (which I hold) does not hold "the Ten" though.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

000 wrote: Thu May 19, 2022 3:42 pm TMF (which I hold) does not hold "the Ten" though.
It doesn't, but the same concept applies.
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000
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by 000 »

Marseille07 wrote: Thu May 19, 2022 3:44 pm
000 wrote: Thu May 19, 2022 3:42 pm TMF (which I hold) does not hold "the Ten" though.
It doesn't, but the same concept applies.
So far your rates prediction does not seem to be holding up. Anything much above 3% appears to meet resistance.

The FFR at 8% would be quite likely to cause an economic slowdown; thus no need for longer term rates to rise.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

000 wrote: Thu May 19, 2022 3:52 pm So far your rates prediction does not seem to be holding up. Anything much above 3% appears to meet resistance.

The FFR at 8% would be quite likely to cause an economic slowdown; thus no need for longer term rates to rise.
:oops: I nailed 3% by the May FOMC (hit 3% 2 days before, then crashed but we saw 3.14% or w/e right after). You can't hit it better than that.

The other prediction is 4% by EOY, I don't want to hear "so far" in May.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by 000 »

Marseille07 wrote: Thu May 19, 2022 3:54 pm :oops: I nailed 3% by the May FOMC (hit 3% 2 days before, then crashed but we saw 3.14% or w/e right after). You can't hit it better than that.

The other prediction is 4% by EOY, I don't want to hear "so far" in May.
It hasn't held at 3% though.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Afrofreak »

Marseille07 wrote: Thu May 19, 2022 12:33 pm
elderwise wrote: Thu May 19, 2022 12:20 pm
Marseille07 wrote: Thu May 19, 2022 12:18 pm Beta slippage. Not much you can do about it.
Does this work both ways? So if Nasdaq is up 1% technically Tqqq should be up 3% but will it be up 3.5% due to this beta slippage? Or does it only work on the downside?
Well it kind of always works both ways, but when we discuss beta slippage, we're often talking about up -> down -> up -> down.

If we get a series of green days (+1% +1% +1% +1%) then you're right that UPRO can keep rockin'.
No, this is not what I'm talking about. TQQQ and UPRO are not performing to their desired daily objectives. Just today, QQQ finished down 0.54% while TQQQ was down 2.02%. Same thing for the S&P500 down 0.58% whereas UPRO ended down 2.05%.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by 000 »

Afrofreak wrote: Thu May 19, 2022 5:25 pm No, this is not what I'm talking about. TQQQ and UPRO are not performing to their desired daily objectives. Just today, QQQ finished down 0.54% while TQQQ was down 2.02%. Same thing for the S&P500 down 0.58% whereas UPRO ended down 2.05%.
Volatility affecting derivatives pricing??
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

Afrofreak wrote: Thu May 19, 2022 5:25 pm No, this is not what I'm talking about. TQQQ and UPRO are not performing to their desired daily objectives. Just today, QQQ finished down 0.54% while TQQQ was down 2.02%. Same thing for the S&P500 down 0.58% whereas UPRO ended down 2.05%.
OK, then I'm not sure what the cause is. Premium / discount seems OK so the prices are "correct" in the sense of tracking the NAV.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

000 wrote: Thu May 19, 2022 4:12 pm It hasn't held at 3% though.
Watch, it will pay! I may have been early but I'm not wrong.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by 000 »

Marseille07 wrote: Thu May 19, 2022 6:52 pm Watch, it will pay! I may have been early but I'm not wrong.
How do you see stocks / UPRO doing given your rates / FFR call? High borrowing costs are not exactly conducive to stock bull runs in economies built on debt.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

000 wrote: Thu May 19, 2022 7:01 pm How do you see stocks / UPRO doing given your rates / FFR call? High borrowing costs are not exactly conducive to stock bull runs in economies built on debt.
I don't see S&P ATH until the Fed is done hiking, personally speaking. But this is an opportunity for the accumulators to load up.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by comeinvest »

Marseille07 wrote: Thu May 19, 2022 7:17 pm
000 wrote: Thu May 19, 2022 7:01 pm How do you see stocks / UPRO doing given your rates / FFR call? High borrowing costs are not exactly conducive to stock bull runs in economies built on debt.
I don't see S&P ATH until the Fed is done hiking, personally speaking. But this is an opportunity for the accumulators to load up.
I think you want to compare the real borrowing rate to the P/E ratio of stocks or similar valuations. With nominal borrowing rate at 2.x% and medium-term expected inflation at 2.x%, the real borrowing rate would be close to zero. Very low in historical comparison.
Of course I guess the time since the 2008 financial crisis to now was a dream for leveraged investors, with short-term borrowing rates often significantly below inflation.
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hiddenpower
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by hiddenpower »

Marseille07 wrote: Thu May 19, 2022 7:17 pm
000 wrote: Thu May 19, 2022 7:01 pm How do you see stocks / UPRO doing given your rates / FFR call? High borrowing costs are not exactly conducive to stock bull runs in economies built on debt.
I don't see S&P ATH until the Fed is done hiking, personally speaking. But this is an opportunity for the accumulators to load up.
How many years will that be? :D
Marseille07
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

hiddenpower wrote: Fri May 20, 2022 11:54 am How many years will that be? :D
Lengthy downturns can and do happen. S&P's 2007 price didn't recover until 2013.
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elderwise
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by elderwise »

I think this is the perfect time to start this strategy but maybe not lumpsum, just DCA good chunks.

Maybe just go 3x upro or tqqq, when they RIP they RIP.
Marseille07
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

elderwise wrote: Fri May 20, 2022 12:18 pm I think this is the perfect time to start this strategy but maybe not lumpsum, just DCA good chunks.

Maybe just go 3x upro or tqqq, when they RIP they RIP.
What's the appeal? Why not just 1x SPY?
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hiddenpower
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by hiddenpower »

Marseille07 wrote: Thu May 19, 2022 11:46 am
hiddenpower wrote: Thu May 19, 2022 11:43 am It seems cash + UPRO monthly still struggles a bit.

VFINX + Margin VS. CASH/UPRO VS. VFINX/UPRO reveals you can get much closer using a combination of VFINX/UPRO. It's not as good as 1.5X but seems close enough.
You can't backtest UPRO on PV because it didn't exist in 2008. We know it would have gone -95% had it existed.

1.5x with poor start time
2x with poor start time
1.5x when times are good
2x when times are good

With the above, it doesn't seem LETF concoctions for constant target leverage are all that bad. Sure I suppose using margin wins (if I'm understanding CASHX correctly), but using 50% margin or 100% if targeting 2x seems like more potential behavioral risk to me. With the latter being impossible unless you use futures or LEAPS (each with their own downsides)
Marseille07
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

hiddenpower wrote: Fri May 20, 2022 12:37 pm 1.5x with poor start time
2x with poor start time
1.5x when times are good
2x when times are good

With the above, it doesn't seem LETF concoctions for constant target leverage are all that bad. Sure I suppose using margin wins (if I'm understanding CASHX correctly), but using 50% margin or 100% if targeting 2x seems like more potential behavioral risk to me. With the latter being impossible unless you use futures or LEAPS (each with their own downsides)
A 70% drawdown is terrible. You see folks on this thread throwing in the towel around 40%; and I don't blame them. Best to avoid strats that you *know* they would have gone -70% in 2008.

Technically, even 1x SPY can go -88% (1929-1931 or w/e).
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hiddenpower
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by hiddenpower »

Marseille07 wrote: Sat May 21, 2022 12:47 am
hiddenpower wrote: Fri May 20, 2022 12:37 pm 1.5x with poor start time
2x with poor start time
1.5x when times are good
2x when times are good

With the above, it doesn't seem LETF concoctions for constant target leverage are all that bad. Sure I suppose using margin wins (if I'm understanding CASHX correctly), but using 50% margin or 100% if targeting 2x seems like more potential behavioral risk to me. With the latter being impossible unless you use futures or LEAPS (each with their own downsides)
A 70% drawdown is terrible. You see folks on this thread throwing in the towel around 40%; and I don't blame them. Best to avoid strats that you *know* they would have gone -70% in 2008.

Technically, even 1x SPY can go -88% (1929-1931 or w/e).
Okay but we knew that HFEA had a drawdown of 70% in the 70s with simulated data. Instead I think it's best to frame it differently, and accept that leverage works both ways and there is no free lunch.

This is on maximizing return, not about sharpe. I think it makes sense to run a 2x equity portfolio and another account as HFEA (when things look brighter for bonds) just for diversification ;).

Market timer probably would have preferred a 70% drawdown with fixed leverage and defined risk. Certainly my biggest takeaway from reading that thread.
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privatefarmer
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by privatefarmer »

I don’t know, maybe I’m just weird, but my drawdown hit north of 60% this month and although it sucks I can honestly say that I have had no second thoughts or plans to change strategy. In fact, I see these strategies as now being in prime position to have some really great returns going forward. If one is going to be an aggressive investor in their young adult years, as they probably should be, they should fully anticipate a 50-70% drawdown at some point, maybe more than once. HFEA and it’s variants are a little more aggressive than just being 100% equities but either way one should anticipate really bad drawdowns. I guess what I’m getting at is if it’s the 70% historical drawdown that’s keeping you out of HFEA then you probably shouldn’t be 100% equities either but just realize that the odds of you having significant growth over decades of investing is severely limited If you can’t stomach an aggressive portfolio.
er999
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by er999 »

privatefarmer wrote: Sat May 21, 2022 8:39 am I don’t know, maybe I’m just weird, but my drawdown hit north of 60% this month and although it sucks I can honestly say that I have had no second thoughts or plans to change strategy. In fact, I see these strategies as now being in prime position to have some really great returns going forward. If one is going to be an aggressive investor in their young adult years, as they probably should be, they should fully anticipate a 50-70% drawdown at some point, maybe more than once. HFEA and it’s variants are a little more aggressive than just being 100% equities but either way one should anticipate really bad drawdowns. I guess what I’m getting at is if it’s the 70% historical drawdown that’s keeping you out of HFEA then you probably shouldn’t be 100% equities either but just realize that the odds of you having significant growth over decades of investing is severely limited If you can’t stomach an aggressive portfolio.
Agreed I’m starting a DCA into tqqq — I was thinking about starting a new thread regarding this if there is any interest but also didn’t want to bother the more mainstream part of the board.
drzzzzz
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by drzzzzz »

er999 wrote: Sat May 21, 2022 10:11 am
privatefarmer wrote: Sat May 21, 2022 8:39 am I don’t know, maybe I’m just weird, but my drawdown hit north of 60% this month and although it sucks I can honestly say that I have had no second thoughts or plans to change strategy. In fact, I see these strategies as now being in prime position to have some really great returns going forward. If one is going to be an aggressive investor in their young adult years, as they probably should be, they should fully anticipate a 50-70% drawdown at some point, maybe more than once. HFEA and it’s variants are a little more aggressive than just being 100% equities but either way one should anticipate really bad drawdowns. I guess what I’m getting at is if it’s the 70% historical drawdown that’s keeping you out of HFEA then you probably shouldn’t be 100% equities either but just realize that the odds of you having significant growth over decades of investing is severely limited If you can’t stomach an aggressive portfolio.
Agreed I’m starting a DCA into tqqq — I was thinking about starting a new thread regarding this if there is any interest but also didn’t want to bother the more mainstream part of the board.
I'd be interested in comments on TQQQ in a new thread - have been writing options against my small position and doing some naked put writing (which has been challenging in a down environment).
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