HEDGEFUNDIE's excellent adventure Part II: The next journey

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

Post by OohLaLa »

ChinchillaWhiplash wrote: Thu Jun 16, 2022 12:31 pm
LeverageWBeverage wrote: Thu Jun 16, 2022 8:25 am Personally, I've learned a lot from this historical scenario but definitely not going to be abandoning this strategy. Here is how I will adjust going forward.

1. Next time rates are at zero.. may be 10 years from now who knows.. I'll be in 40% cash and zero TMF. Rates can only go up from there and TMF down.
2. As things normalize I'll be 20% TMF and 20% cash because as this period shows us....who knows.
3. When stock markets are at all time highs and been there for a while I'll be back at 40-45% TMF for the negative correlation for a normal correction..(unlike this one where rates were already at zero when stock market collapsed.)

I'm still not too worried and think I can make up some of this current pain in the future. If we do get into a recession in 23 or 24 and the stock market does hit that -40% mark I'm completely comfy going 100% UPRO to make up some ground as long as inflation in under control. At that point hopefully its just the normal doom and gloom of unemployment and bad earnings.
Instead of cash, you could always use TMV in place of TMF. Would only work with rising rates but that is somewhat predictable although not 100% knowable.
You can also check out PFIX, that someone mentioned. An interesting fund that reacts to interest rate changes. I haven't done a full dive into the doc but it could be a good, additional hedge.

People just have to keep in mind that everything is obvious when you already know the result. PFIX is sexy now because, YTD, it would have been great to hold it, but you can't predict when it will turn against you. If you would add it in now, will you gain much from it (unexpected rate increases incoming, still?) If we have another event where interest rates are near 0, will it work its charm again or might the US see negative interest rates in that future instance?

There is just no perfect solution to everything. :(
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hiddenpower
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by hiddenpower »

TheTimeLord wrote: Thu Jun 16, 2022 12:25 pm
HEDGEFUNDIE wrote: Sun Aug 11, 2019 9:41 pm [This thread is a continuation of HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs] --admin LadyGeek]

(continued from last post of Part 1)

Therefore, at these rates today, and with the three comparable historical periods I backtested above, I am hereby making the following change to the OG strategy:

55% UPRO / 45% TMF

_______________________________________________________________

Latest tracker (Updated Mar 18, 2020)

Image
Anyone have an update on how this have done since the last update?
Image

This should be close. Extending where PV ended from last month. After today I guess it's down to ~$116k
VTI
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by VTI »

market timer wrote: Thu Jun 16, 2022 9:40 am
hiddenpower wrote: Wed Jun 15, 2022 5:35 pm I’m waiting on MarketTimer to roll in and say I told you so
Luckily, UPRO and TMF reset their leverage every day, so it is unlikely anyone is going to get totally wiped out by this strategy. In fact, I think people who hang in there and keep committing new capital to this strategy through DCA are likely to do well going forward.
He speaks. This might be our sign to go all-in.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Hydromod »

hiddenpower wrote: Thu Jun 16, 2022 2:01 pm
TheTimeLord wrote: Thu Jun 16, 2022 12:25 pm Anyone have an update on how this have done since the last update?
This should be close. Extending where PV ended from last month. After today I guess it's down to ~$116k
I had a similar update here a few days ago with several different rebalancing strategies as well.
jarjarM
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by jarjarM »

Hydromod wrote: Thu Jun 16, 2022 3:08 pm
hiddenpower wrote: Thu Jun 16, 2022 2:01 pm
TheTimeLord wrote: Thu Jun 16, 2022 12:25 pm Anyone have an update on how this have done since the last update?
This should be close. Extending where PV ended from last month. After today I guess it's down to ~$116k
I had a similar update here a few days ago with several different rebalancing strategies as well.
Any chance to update those numbers when you have free time? We went through some big days in the last week or so, interested in seeing what it is now.
er999
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by er999 »

Interesting that voo is down 23.6% year to date but upro is down only 58.8%, but 3x 23.6% would would be 70.8% decline. Similarly TMF is down by 55% but vanguard long term treasuries VGLT 21.7%, and 3x would have been down 65%. It shows the difference between 3x daily resetting leverage vs over longer term. I’m sure someone better at math could explain better but at least over this time period the decline hasn’t been 3x the underlying non leveraged funds. If straight 55/45 should be down 68% instead of actually being down closer to 57%.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by km91 »

er999 wrote: Thu Jun 16, 2022 4:34 pm Interesting that voo is down 23.6% year to date but upro is down only 58.8%, but 3x 23.6% would would be 70.8% decline. Similarly TMF is down by 55% but vanguard long term treasuries VGLT 21.7%, and 3x would have been down 65%. It shows the difference between 3x daily resetting leverage vs over longer term. I’m sure someone better at math could explain better but at least over this time period the decline hasn’t been 3x the underlying non leveraged funds. If straight 55/45 should be down 68% instead of actually being down closer to 57%.
When leverage is not reset daily your leverage ratio increases as the underlying price moves down. If you have $100 gross exposure and $33 equity for a 3x leverage ratio, if the underlying moves down 5%, you now have $95 gross exposure and $28 of equity, or a leverage ratio of 3.4x. The opposite is true when price is increasing, you are deleveraging as price moves up
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by bgf »

I think people generally underestimate the path dependency of this strategy. It matters. A LOT.

UPRO moved 10% today. One day!!! And that’s not even that unusual. What day you rebalance. What HOUR you rebalance. How often you rebalance. Whether you DCA or not. All of these have substantial effects on annual performance, let alone long term performance.

It’s to the point where I think people really need to focus less on modeling and more on risk tolerance. I know math is fun and charts are beautiful and there are a lot of mathletes here, but in reality, all that matters is whether your risk is properly sized. If it’s not, this strategy is going to eat you up and your charts were a waste of time.

Size properly. Stick to your strategy. That’s pretty much the whole deal.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"
jarjarM
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by jarjarM »

bgf wrote: Thu Jun 16, 2022 7:54 pm I think people generally underestimate the path dependency of this strategy. It matters. A LOT.

UPRO moved 10% today. One day!!! And that’s not even that unusual. What day you rebalance. What HOUR you rebalance. How often you rebalance. Whether you DCA or not. All of these have substantial effects on annual performance, let alone long term performance.

It’s to the point where I think people really need to focus less on modeling and more on risk tolerance. I know math is fun and charts are beautiful and there are a lot of mathletes here, but in reality, all that matters is whether your risk is properly sized. If it’s not, this strategy is going to eat you up and your charts were a waste of time.

Size properly. Stick to your strategy. That’s pretty much the whole deal.
:thumbsup Yeah, I went through the phase of modeling as well but after 2020, at some point I got to the same conclusion that the volatility is so high for the individual components that rebalance at EST am vs. pm could be a 10% difference and the deltas gets bigger as the rebalance period and other factors changes. At the end, either you accept that this will have high volatility or abandon it. :beer
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market timer
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by market timer »

HomerJ wrote: Thu Jun 16, 2022 12:12 pm
market timer wrote: Thu Jun 16, 2022 9:40 am
hiddenpower wrote: Wed Jun 15, 2022 5:35 pm I’m waiting on MarketTimer to roll in and say I told you so
Luckily, UPRO and TMF reset their leverage every day, so it is unlikely anyone is going to get totally wiped out by this strategy. In fact, I think people who hang in there and keep committing new capital to this strategy through DCA are likely to do well going forward.
You're probably right, market timer...

Can I ask why you aren't investing a chunk of your money in this strategy?
Leverage is for young people. I've already won the game.
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randyharris
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by randyharris »

Tellurius wrote: Sun Jun 12, 2022 8:49 am If the HEDGEFUNDIE chart in the first post of this thread were to be updated now, what total would it show?
Here you go, prices updated through June 17, 2022.

https://dualmomentumsystems.com/resourc ... 220618.pdf

Profit Farmer is working hard to have the highest drawdowns of the bunch, I seriously never imagined it would string so many losing months in a row.
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Afrofreak
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Afrofreak »

To put this drawdown into context, if today marked the end of the year, 2022 would have seen:

1. The 6th worst year in history on the S&P500 (-23.39%), only to be outdone by 1930 (-25.12%), 1974 (-25.90%), 1937 (-35.34%), 2008 (-36.55%) and 1931 (-43.84%).

2. Only the 3rd year in history where the S&P500 is down double digits (-23.39%) and the return on the 10-YR Treasury is negative (-13.22%), the other two being 1931 (-43.84%; -2.56%) and 1941 (-12.77%; -2.02%). There are probably only a handful of people on earth who were invested the last time that this occurred on an annual basis.

3. The single worst year in history of 10-YR Treasuries at -13.22%, period. Yes, you read that right, ITTs have never performed this poorly on an annual basis, ever. We are now two percentage points clear of the runner up, 2009 (-11.12%) and another two p.p. clear of third place, 2013 (-9.10%). In both of those years, the S&P500 was up well over 20%.

4. The longest drawdown in history of 10-YR US Treasuries (22 months and counting), and possibly the worst drawdown of Treasuries in history overall (haven't been able to verify but likely true).

We are quite literally approaching levels of drawdown we have not seen before and will make history if we remain at these levels for another 6.5 months. The magnitude of negative returns are nearly unprecedented. There's two ways I interpret this data:

The first is that yes, although we knew that inflation was a risk that would kill both equities and fixed income, we have been hit particularly hard. Not even the 70s/early 80s yielded results this bad annually. To have started on this adventure anytime in the last year would have been astronomically unlucky and I think that those who have endured till now can take solace in that fact. On the flip side, congratulations, you get a front-row seat to see (potential) investing history in the making.

The second is that I view this as an opportunity to make a fortune, particularly on the bonds side. Not necessarily because what goes down must come up, but because the Fed has now signaled that they are willing to take the Fed funds rate into restrictive territory but will not remain there once inflation cools down to 2%. All those posts about how we can't expect as good returns on TMF as we had in the past 40 years because we have come down from a Fed rate of momentarily over 20%... Well, the Fed is now targeting a terminal rate of 4%, a rate we haven't seen since briefly in 2007 and the 1990s before that. This is it! This is our chance to wind back the clock 2 decades, and TLT sure has performed quite well during that time. Certainly for those of us who were not invested in 2008, this will be the most critical period in our investing careers so far and potentially the opportunity of our lifetimes.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by privatefarmer »

randyharris wrote: Sat Jun 18, 2022 11:52 am
Tellurius wrote: Sun Jun 12, 2022 8:49 am If the HEDGEFUNDIE chart in the first post of this thread were to be updated now, what total would it show?
Here you go, prices updated through June 17, 2022.

https://dualmomentumsystems.com/resourc ... 220618.pdf

Profit Farmer is working hard to have the highest drawdowns of the bunch, I seriously never imagined it would string so many losing months in a row.

Wait what?? We are in a drawdown? I hadn’t noticed ;)

Yeah it’s been brutal. Down well over 60%. On the flip side, I now have over $500k in realized losses that will be used for probably years to come to offset gains. I actually transferred about $200k of Roth contributions to my brokerage account so that (hopefully) I’ll be able to actually make use of those losses and have extra liquidity at same time. It’s been unreal no doubt. To top it off, I started managing my parents portfolio with an unleveraged version of “profit farmer” late last year. They’re down about 20% so not too bad but still painful.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by 000 »

This is not what capitulation looks like. More pain may be incoming. :shock:
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

000 wrote: Sat Jun 18, 2022 5:24 pm This is not what capitulation looks like. More pain may be incoming. :shock:
Yeah, I don't understand their optimism on long-term treasuries here. Just because people are still massively buying LTTs (the Ten is still low), doesn't mean they're making a good move.
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000
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by 000 »

Marseille07 wrote: Sat Jun 18, 2022 5:27 pm Yeah, I don't understand their optimism on long-term treasuries here. Just because people are still massively buying LTTs (the Ten is still low), doesn't mean they're making a good move.
I like LTTs here. Higher rates have probably already begun the process of an economic slowdown. The question is if stocks see one euphoric rally before the real pain, perhaps due to a Fed pivot.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by er999 »

Afrofreak wrote: Sat Jun 18, 2022 2:32 pm .

The second is that I view this as an opportunity to make a fortune, particularly on the bonds side. Not necessarily because what goes down must come up, but because the Fed has now signaled that they are willing to take the Fed funds rate into restrictive territory but will not remain there once inflation cools down to 2%. All those posts about how we can't expect as good returns on TMF as we had in the past 40 years because we have come down from a Fed rate of momentarily over 20%... Well, the Fed is now targeting a terminal rate of 4%, a rate we haven't seen since briefly in 2007 and the 1990s before that. This is it! This is our chance to wind back the clock 2 decades, and TLT sure has performed quite well during that time. Certainly for those of us who were not invested in 2008, this will be the most critical period in our investing careers so far and potentially the opportunity of our lifetimes.
Are you doing anything differently? I can’t remember but think you were close to 100% invested in this strategy.
gips
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by gips »

sorry if this is a faq, is there is a published link to hedgefundie's portfolio performance since inception?
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by drzzzzz »

privatefarmer wrote: Sat Jun 18, 2022 4:06 pm
randyharris wrote: Sat Jun 18, 2022 11:52 am
Tellurius wrote: Sun Jun 12, 2022 8:49 am If the HEDGEFUNDIE chart in the first post of this thread were to be updated now, what total would it show?
Here you go, prices updated through June 17, 2022.

https://dualmomentumsystems.com/resourc ... 220618.pdf

Profit Farmer is working hard to have the highest drawdowns of the bunch, I seriously never imagined it would string so many losing months in a row.

Wait what?? We are in a drawdown? I hadn’t noticed ;)

Yeah it’s been brutal. Down well over 60%. On the flip side, I now have over $500k in realized losses that will be used for probably years to come to offset gains. I actually transferred about $200k of Roth contributions to my brokerage account so that (hopefully) I’ll be able to actually make use of those losses and have extra liquidity at same time. It’s been unreal no doubt. To top it off, I started managing my parents portfolio with an unleveraged version of “profit farmer” late last year. They’re down about 20% so not too bad but still painful.
Can you explain transferring losses from the Roth account to a brokerage account? Did you transfer in kind as a withdrawal (no taxes) and did the firm keep the cost basis allowing the loss to be noted when you sell or if you sold?
thanks
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Afrofreak
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Afrofreak »

er999 wrote: Sat Jun 18, 2022 7:20 pm
Afrofreak wrote: Sat Jun 18, 2022 2:32 pm .

The second is that I view this as an opportunity to make a fortune, particularly on the bonds side. Not necessarily because what goes down must come up, but because the Fed has now signaled that they are willing to take the Fed funds rate into restrictive territory but will not remain there once inflation cools down to 2%. All those posts about how we can't expect as good returns on TMF as we had in the past 40 years because we have come down from a Fed rate of momentarily over 20%... Well, the Fed is now targeting a terminal rate of 4%, a rate we haven't seen since briefly in 2007 and the 1990s before that. This is it! This is our chance to wind back the clock 2 decades, and TLT sure has performed quite well during that time. Certainly for those of us who were not invested in 2008, this will be the most critical period in our investing careers so far and potentially the opportunity of our lifetimes.
Are you doing anything differently? I can’t remember but think you were close to 100% invested in this strategy.
I'm actually more than 100% invested already unfortunately. I had a $45K HELOC invested in HFEA on top of my savings that I've now begun paying down as a result of the increase in interest rates hitting me quite hard. My personal rule of thumb is to borrow to invest in non-leverage assets up to 2.5% and leveraged assets (like HFEA) up to 4%. After the last hike by the Bank of Canada I'm sitting at a 3.1% HELOC rate with -$42K remaining. In preparation for crossing over that threshold I'm aggressively paying off debt to the tune of roughly $2K a month, so I'm looking at 21 more months until I will restart contributions at the latest or earlier should the HELOC rate drop back below 4%. I don't think thats likely anytime soon and my forecasted HELOC rate should top out at 6-7%. Manageable, but nowhere near low enough to make investing with borrowed funds viable. I am the quintessential rate slave. Borrows when rates are low and pays them back when rates are high :D

If things become absolutely dire, and I mean like, really dire, I may max out my HELOC once again even if the rate is above my threshold. If TMF starts rebounding hard, I'd be willing to sell it and be momentarily completely exposed to TQQQ only if it meant I could pay off the HELOC in full. For that to happen though, TMF would need to more than double from these levels. Would not sell before that.

Still, I have no regrets except not being more open to the possibility that rates could rise this quickly and forecasted to rise this high. There I was wrong. The performance of the strategy itself though? That was just unlucky. As always, I think the negative correlation thesis is strong -- with the exception of a high inflationary environment -- and there is no better hedge than Treasuries.
er999
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by er999 »

Afrofreak wrote: Sat Jun 18, 2022 8:28 pm
er999 wrote: Sat Jun 18, 2022 7:20 pm
Afrofreak wrote: Sat Jun 18, 2022 2:32 pm .

The second is that I view this as an opportunity to make a fortune, particularly on the bonds side. Not necessarily because what goes down must come up, but because the Fed has now signaled that they are willing to take the Fed funds rate into restrictive territory but will not remain there once inflation cools down to 2%. All those posts about how we can't expect as good returns on TMF as we had in the past 40 years because we have come down from a Fed rate of momentarily over 20%... Well, the Fed is now targeting a terminal rate of 4%, a rate we haven't seen since briefly in 2007 and the 1990s before that. This is it! This is our chance to wind back the clock 2 decades, and TLT sure has performed quite well during that time. Certainly for those of us who were not invested in 2008, this will be the most critical period in our investing careers so far and potentially the opportunity of our lifetimes.
Are you doing anything differently? I can’t remember but think you were close to 100% invested in this strategy.

Still, I have no regrets except not being more open to the possibility that rates could rise this quickly and forecasted to rise this high. There I was wrong. The performance of the strategy itself though? That was just unlucky. As always, I think the negative correlation thesis is strong -- with the exception of a high inflationary environment -- and there is no better hedge than Treasuries.
Sorry to hear. I’m hoping you’ll become like Markettimer, coming back 14 years later in 2036 to post that you’re rich enough that you gave up leverage.
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Afrofreak
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Afrofreak »

er999 wrote: Sat Jun 18, 2022 9:21 pm Sorry to hear. I’m hoping you’ll become like Markettimer, coming back 14 years later in 2036 to post that you’re rich enough that you gave up leverage.
Haha, a man can dream. Will the next few years be uncomfortable? Yes. Will I survive? Also yes. At the end of the day, my job is basically guaranteed as a federal government employee and so is my pension after 35 years... I just don't want to wait 35 years to secure my retirement.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by TheDoctor91 »

Afrofreak wrote: Sat Jun 18, 2022 8:28 pm
er999 wrote: Sat Jun 18, 2022 7:20 pm
Afrofreak wrote: Sat Jun 18, 2022 2:32 pm .

The second is that I view this as an opportunity to make a fortune, particularly on the bonds side. Not necessarily because what goes down must come up, but because the Fed has now signaled that they are willing to take the Fed funds rate into restrictive territory but will not remain there once inflation cools down to 2%. All those posts about how we can't expect as good returns on TMF as we had in the past 40 years because we have come down from a Fed rate of momentarily over 20%... Well, the Fed is now targeting a terminal rate of 4%, a rate we haven't seen since briefly in 2007 and the 1990s before that. This is it! This is our chance to wind back the clock 2 decades, and TLT sure has performed quite well during that time. Certainly for those of us who were not invested in 2008, this will be the most critical period in our investing careers so far and potentially the opportunity of our lifetimes.
Are you doing anything differently? I can’t remember but think you were close to 100% invested in this strategy.
I'm actually more than 100% invested already unfortunately. I had a $45K HELOC invested in HFEA on top of my savings that I've now begun paying down as a result of the increase in interest rates hitting me quite hard. My personal rule of thumb is to borrow to invest in non-leverage assets up to 2.5% and leveraged assets (like HFEA) up to 4%. After the last hike by the Bank of Canada I'm sitting at a 3.1% HELOC rate with -$42K remaining. In preparation for crossing over that threshold I'm aggressively paying off debt to the tune of roughly $2K a month, so I'm looking at 21 more months until I will restart contributions at the latest or earlier should the HELOC rate drop back below 4%. I don't think thats likely anytime soon and my forecasted HELOC rate should top out at 6-7%. Manageable, but nowhere near low enough to make investing with borrowed funds viable. I am the quintessential rate slave. Borrows when rates are low and pays them back when rates are high :D

If things become absolutely dire, and I mean like, really dire, I may max out my HELOC once again even if the rate is above my threshold. If TMF starts rebounding hard, I'd be willing to sell it and be momentarily completely exposed to TQQQ only if it meant I could pay off the HELOC in full. For that to happen though, TMF would need to more than double from these levels. Would not sell before that.

Still, I have no regrets except not being more open to the possibility that rates could rise this quickly and forecasted to rise this high. There I was wrong. The performance of the strategy itself though? That was just unlucky. As always, I think the negative correlation thesis is strong -- with the exception of a high inflationary environment -- and there is no better hedge than Treasuries.
In a similar situation as a Canadian with a HELOC borrowing on top (not investing that money in to HFEA however).

All I can say is that it's a gift that this is happening while young. I hope this bear market is treacherous and lasts at least 5 years.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by 000 »

privatefarmer wrote: Sat Jun 18, 2022 4:06 pm I actually transferred about $200k of Roth contributions to my brokerage account so that (hopefully) I’ll be able to actually make use of those losses and have extra liquidity at same time.
If the money was already in Roth, you were never going to have to pay taxes on the gains in Roth anyway.
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privatefarmer
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by privatefarmer »

drzzzzz wrote: Sat Jun 18, 2022 7:29 pm
privatefarmer wrote: Sat Jun 18, 2022 4:06 pm
randyharris wrote: Sat Jun 18, 2022 11:52 am
Tellurius wrote: Sun Jun 12, 2022 8:49 am If the HEDGEFUNDIE chart in the first post of this thread were to be updated now, what total would it show?
Here you go, prices updated through June 17, 2022.

https://dualmomentumsystems.com/resourc ... 220618.pdf

Profit Farmer is working hard to have the highest drawdowns of the bunch, I seriously never imagined it would string so many losing months in a row.

Wait what?? We are in a drawdown? I hadn’t noticed ;)

Yeah it’s been brutal. Down well over 60%. On the flip side, I now have over $500k in realized losses that will be used for probably years to come to offset gains. I actually transferred about $200k of Roth contributions to my brokerage account so that (hopefully) I’ll be able to actually make use of those losses and have extra liquidity at same time. It’s been unreal no doubt. To top it off, I started managing my parents portfolio with an unleveraged version of “profit farmer” late last year. They’re down about 20% so not too bad but still painful.
Can you explain transferring losses from the Roth account to a brokerage account? Did you transfer in kind as a withdrawal (no taxes) and did the firm keep the cost basis allowing the loss to be noted when you sell or if you sold?
thanks
No you just have to sell investments in roth, transfer out as cash, and then deposit into brokerage account. There are no taxes because I’ve made sufficient contributions overtime that it all comes out tax and penalty free. If I touched the earnings in the roth then it’d be a different story. Ive had Roth IRAs for 20+ years and roth 401ks so I’ve made 200+k in contributions that can be withdrawn anytime
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by NewEnglandVolley »

Afrofreak wrote: Sat Jun 18, 2022 8:28 pm
I'm actually more than 100% invested already unfortunately.

Still, I have no regrets except not being more open to the possibility that rates could rise this quickly and forecasted to rise this high. There I was wrong. The performance of the strategy itself though? That was just unlucky. As always, I think the negative correlation thesis is strong -- with the exception of a high inflationary environment -- and there is no better hedge than Treasuries.
I had considered taking a huge risk and dumping more than half of my IRA into HFEA, but I ended up only putting in roughly 10%, per one of the initial warnings from HF. I'm glad I ended up not doing so, but I'll have to consider if I want to throw cash at HFEA via an after-tax brokerage account going forward or sell off things like VGT or VUG (which are down closer to 30%+ this year) at a loss for the sake of dumping more into HFEA once inflation seems to have cooled down.
bigblue1ca
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by bigblue1ca »

000 wrote: Sat Jun 18, 2022 5:24 pm This is not what capitulation looks like. More pain may be incoming. :shock:
I agree. In the short term the market's going to do what the market's going to do. But, I don't see any real conviction coming until there are meaningful signs inflation is going to be coming down significantly and that the Fed is satisfied and is going to pause hikes. By then, maybe we will have a better idea if we are going to jump from the frying pan (inflation) into the fire (recession), or burn in a grease fire in the frying pan (stagflation). 😉
majasan
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by majasan »

Afrofreak wrote: Sat Jun 18, 2022 2:32 pm To put this drawdown into context, if today marked the end of the year, 2022 would have seen:

1. The 6th worst year in history on the S&P500 (-23.39%), only to be outdone by 1930 (-25.12%), 1974 (-25.90%), 1937 (-35.34%), 2008 (-36.55%) and 1931 (-43.84%).

2. Only the 3rd year in history where the S&P500 is down double digits (-23.39%) and the return on the 10-YR Treasury is negative (-13.22%), the other two being 1931 (-43.84%; -2.56%) and 1941 (-12.77%; -2.02%). There are probably only a handful of people on earth who were invested the last time that this occurred on an annual basis.

3. The single worst year in history of 10-YR Treasuries at -13.22%, period. Yes, you read that right, ITTs have never performed this poorly on an annual basis, ever. We are now two percentage points clear of the runner up, 2009 (-11.12%) and another two p.p. clear of third place, 2013 (-9.10%). In both of those years, the S&P500 was up well over 20%.

4. The longest drawdown in history of 10-YR US Treasuries (22 months and counting), and possibly the worst drawdown of Treasuries in history overall (haven't been able to verify but likely true).

We are quite literally approaching levels of drawdown we have not seen before and will make history if we remain at these levels for another 6.5 months. The magnitude of negative returns are nearly unprecedented. There's two ways I interpret this data:

The first is that yes, although we knew that inflation was a risk that would kill both equities and fixed income, we have been hit particularly hard. Not even the 70s/early 80s yielded results this bad annually. To have started on this adventure anytime in the last year would have been astronomically unlucky and I think that those who have endured till now can take solace in that fact. On the flip side, congratulations, you get a front-row seat to see (potential) investing history in the making.

The second is that I view this as an opportunity to make a fortune, particularly on the bonds side. Not necessarily because what goes down must come up, but because the Fed has now signaled that they are willing to take the Fed funds rate into restrictive territory but will not remain there once inflation cools down to 2%. All those posts about how we can't expect as good returns on TMF as we had in the past 40 years because we have come down from a Fed rate of momentarily over 20%... Well, the Fed is now targeting a terminal rate of 4%, a rate we haven't seen since briefly in 2007 and the 1990s before that. This is it! This is our chance to wind back the clock 2 decades, and TLT sure has performed quite well during that time. Certainly for those of us who were not invested in 2008, this will be the most critical period in our investing careers so far and potentially the opportunity of our lifetimes.
Thanks a bunch for this write-up. I do think it's an opp of our lifetime. But to read the way you put it out there is very powerful. :sharebeer
Semantics
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Semantics »

Afrofreak wrote: Sat Jun 18, 2022 2:32 pmThe second is that I view this as an opportunity to make a fortune, particularly on the bonds side. Not necessarily because what goes down must come up, but because the Fed has now signaled that they are willing to take the Fed funds rate into restrictive territory but will not remain there once inflation cools down to 2%. All those posts about how we can't expect as good returns on TMF as we had in the past 40 years because we have come down from a Fed rate of momentarily over 20%... Well, the Fed is now targeting a terminal rate of 4%, a rate we haven't seen since briefly in 2007 and the 1990s before that. This is it! This is our chance to wind back the clock 2 decades, and TLT sure has performed quite well during that time. Certainly for those of us who were not invested in 2008, this will be the most critical period in our investing careers so far and potentially the opportunity of our lifetimes.
How, though? That kind of implies a free lunch. But if everyone knows the Fed is going to reverse course once inflation cools, won't the yield curve just invert with LTT staying closer to the expected long term trend and leveraging into an inverted curve being a money losing proposition?

I can see how AFTER the yield curve normalizes so that a proper term premium opens up again then maybe LTT will be a good option again, but will the premium be 4% like it was for most of the 2010s when the Fed rate was 0%, or much smaller thereby limiting the benefit of leverage?
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Afrofreak
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Afrofreak »

Semantics wrote: Tue Jun 21, 2022 8:08 pm
Afrofreak wrote: Sat Jun 18, 2022 2:32 pmThe second is that I view this as an opportunity to make a fortune, particularly on the bonds side. Not necessarily because what goes down must come up, but because the Fed has now signaled that they are willing to take the Fed funds rate into restrictive territory but will not remain there once inflation cools down to 2%. All those posts about how we can't expect as good returns on TMF as we had in the past 40 years because we have come down from a Fed rate of momentarily over 20%... Well, the Fed is now targeting a terminal rate of 4%, a rate we haven't seen since briefly in 2007 and the 1990s before that. This is it! This is our chance to wind back the clock 2 decades, and TLT sure has performed quite well during that time. Certainly for those of us who were not invested in 2008, this will be the most critical period in our investing careers so far and potentially the opportunity of our lifetimes.
How, though? That kind of implies a free lunch. But if everyone knows the Fed is going to reverse course once inflation cools, won't the yield curve just invert with LTT staying closer to the expected long term trend and leveraging into an inverted curve being a money losing proposition?
1. Because we don't know when inflation will start cooling or when the Fed is going to reverse course
2. Nor do we know whether inflation will continue to rise in the meantime
chrisdds98
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by chrisdds98 »

I wonder if now is a good time to do a roth conversion. hate to do it now and have another massive collapse!
bgf
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by bgf »

TMF up over 18% past 5 days… crazy. I’ve recovered 5% against my benchmark this week, still down by ~27% to the benchmark having started at almost the worst time possible.

The volatility of the components of this strategy is unlike anything I’ve experienced in investing.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"
corpgator
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by corpgator »

bgf wrote: Thu Jun 23, 2022 10:19 am TMF up over 18% past 5 days… crazy. I’ve recovered 5% against my benchmark this week, still down by ~27% to the benchmark having started at almost the worst time possible.

The volatility of the components of this strategy is unlike anything I’ve experienced in investing.
Yes, sooooo much fun!
bgf
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by bgf »

corpgator wrote: Thu Jun 23, 2022 2:17 pm
bgf wrote: Thu Jun 23, 2022 10:19 am TMF up over 18% past 5 days… crazy. I’ve recovered 5% against my benchmark this week, still down by ~27% to the benchmark having started at almost the worst time possible.

The volatility of the components of this strategy is unlike anything I’ve experienced in investing.
Yes, sooooo much fun!
:D definitely not fun! But not the end of the world either.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"
ToBeOrNot
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by ToBeOrNot »

When playing around with “Profit Farmer” variations of the strategy on portfolio visualizer, I found that draw downs and portfolio volatility were very reasonably contained without sacrificing too much CAGR when applying a 5% portfolio stop loss. This year has still been a series of losses but not quite as bloody.
er999
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by er999 »

Tmf is down 53.2% year to date and upro down 53.9%. Quarterly rebalancing is in 2 days but there may be no need to rebalance at all this quarter with near equal losses, we’ll see in 2 days on July 1.
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randyharris
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by randyharris »

ToBeOrNot wrote: Tue Jun 28, 2022 11:19 am When playing around with “Profit Farmer” variations of the strategy on portfolio visualizer, I found that draw downs and portfolio volatility were very reasonably contained without sacrificing too much CAGR when applying a 5% portfolio stop loss. This year has still been a series of losses but not quite as bloody.
How is that stop loss implemented, seems like many days are over 5% +/- with a strategy like this, is it stopped on on daily volatility or monthly, and what is the mechanism for getting back in once stopped out?
hilink73
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by hilink73 »

er999 wrote: Wed Jun 29, 2022 3:04 pm Tmf is down 53.2% year to date and upro down 53.9%. Quarterly rebalancing is in 2 days but there may be no need to rebalance at all this quarter with near equal losses, we’ll see in 2 days on July 1.
I'm at 54% UPRO / 46% TMF. Rebalancing amount would be around 5.4k. I think I pass this time. :-D
Portfolio is down to 87k (from 100k initially).
er999
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by er999 »

hilink73 wrote: Thu Jun 30, 2022 12:55 pm
er999 wrote: Wed Jun 29, 2022 3:04 pm Tmf is down 53.2% year to date and upro down 53.9%. Quarterly rebalancing is in 2 days but there may be no need to rebalance at all this quarter with near equal losses, we’ll see in 2 days on July 1.
I'm at 54% UPRO / 46% TMF. Rebalancing amount would be around 5.4k. I think I pass this time. :-D
Portfolio is down to 87k (from 100k initially).

That isn’t so bad. I had the misfortune of buying near market highs so my $100k is down to something like $50k. Still debating whether to add any new money but probably won’t and just let it ride. I have $50k in new annual contributions — $10k yearly going to my tqqq twice monthly buys but I don’t have that much confidence to divert any more money away from traditional index funds. At most I’d try another $10k / year into HFEA (at $800 monthly) but I figure with $50k already in there 20% new additions for a year or two won’t make much difference. Either it will come back or I’ll just lose the other $50k in a sideways market over the next few years.
hilink73
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by hilink73 »

er999 wrote: Thu Jun 30, 2022 1:23 pm
hilink73 wrote: Thu Jun 30, 2022 12:55 pm
er999 wrote: Wed Jun 29, 2022 3:04 pm Tmf is down 53.2% year to date and upro down 53.9%. Quarterly rebalancing is in 2 days but there may be no need to rebalance at all this quarter with near equal losses, we’ll see in 2 days on July 1.
I'm at 54% UPRO / 46% TMF. Rebalancing amount would be around 5.4k. I think I pass this time. :-D
Portfolio is down to 87k (from 100k initially).

That isn’t so bad. I had the misfortune of buying near market highs so my $100k is down to something like $50k. Still debating whether to add any new money but probably won’t and just let it ride. I have $50k in new annual contributions — $10k yearly going to my tqqq twice monthly buys but I don’t have that much confidence to divert any more money away from traditional index funds. At most I’d try another $10k / year into HFEA (at $800 monthly) but I figure with $50k already in there 20% new additions for a year or two won’t make much difference. Either it will come back or I’ll just lose the other $50k in a sideways market over the next few years.
Well... it's been at 180k earlier on, so there's that.
ToBeOrNot
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by ToBeOrNot »

randyharris wrote: Wed Jun 29, 2022 3:46 pm
ToBeOrNot wrote: Tue Jun 28, 2022 11:19 am When playing around with “Profit Farmer” variations of the strategy on portfolio visualizer, I found that draw downs and portfolio volatility were very reasonably contained without sacrificing too much CAGR when applying a 5% portfolio stop loss. This year has still been a series of losses but not quite as bloody.
How is that stop loss implemented, seems like many days are over 5% +/- with a strategy like this, is it stopped on on daily volatility or monthly, and what is the mechanism for getting back in once stopped out?
It looks like “sell at the close” for a trading day that has total portfolio value lower than 5%. Or you could sell at the next open. Then restart the strategy on the next rebalance day next month. Yes that means you could be stopped out on the first day of a month.

BTW, this is a portfolio stop. Not a security stop. The “Private Farmer” strategy is a min variance adaptive strategy with monthly rebalances. A single security could be down more than 5%, but the other allocated securities be up or flat. Or the down one could have such a small allocation for the month that it doesn’t affect total portfolio balance.

I’ve had thoughts on restarting at the 1/2 month interval if the stop happens in the first two weeks of the month and rebalance again on the normal month period, but portfolio visualizer doesn’t allow for that kind of trading rule. So I haven’t tested that.
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randyharris
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by randyharris »

results through June 2022 for HFEA [and Profit Farmer, and MAX PAIN]

https://dualmomentumsystems.com/resourc ... 220630.pdf
jarjarM
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by jarjarM »

randyharris wrote: Thu Jun 30, 2022 7:43 pm results through June 2022 for HFEA [and Profit Farmer, and MAX PAIN]

https://dualmomentumsystems.com/resourc ... 220630.pdf
Looks like the first 6 moths of this year is the 2nd worse drawdown of this strategy since 1980. Both bond and stock suffered and down ~50% or so. Hoping for a better 2nd half but expect some additional pain. :oops:
Marseille07
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

jarjarM wrote: Thu Jun 30, 2022 8:53 pm
randyharris wrote: Thu Jun 30, 2022 7:43 pm results through June 2022 for HFEA [and Profit Farmer, and MAX PAIN]

https://dualmomentumsystems.com/resourc ... 220630.pdf
Looks like the first 6 moths of this year is the 2nd worse drawdown of this strategy since 1980. Both bond and stock suffered and down ~50% or so. Hoping for a better 2nd half but expect some additional pain. :oops:
1x SPX did bad too, I hear this is the worst half of the year since 1970 (52 years ago).
US & FM (5% seed) | 300K Cash
jarjarM
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by jarjarM »

Marseille07 wrote: Thu Jun 30, 2022 9:37 pm
jarjarM wrote: Thu Jun 30, 2022 8:53 pm
randyharris wrote: Thu Jun 30, 2022 7:43 pm results through June 2022 for HFEA [and Profit Farmer, and MAX PAIN]

https://dualmomentumsystems.com/resourc ... 220630.pdf
Looks like the first 6 moths of this year is the 2nd worse drawdown of this strategy since 1980. Both bond and stock suffered and down ~50% or so. Hoping for a better 2nd half but expect some additional pain. :oops:
1x SPX did bad too, I hear this is the worst half of the year since 1970 (52 years ago).
Yeah, saw that bit of the news too. It's being painful all around I remember someone has a portfolio that heavily invest in thou-shall-not-name coin and ARKK, that must've really hurt.
bigblue1ca
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by bigblue1ca »

jarjarM wrote: Thu Jun 30, 2022 9:40 pm Yeah, saw that bit of the news too. It's being painful all around I remember someone has a portfolio that heavily invest in thou-shall-not-name coin and ARKK, that must've really hurt.
Yup. 225 million shares of ARKK traded in the first 6 weeks of 2021 and some of those for sure will still be holding 70-75% paper losses. Ouch. Apparently, they failed to read the studies about chasing hot fund manager performance being a losing game.
corpgator
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by corpgator »

Just another absolutely brutal month. Hopefully July is better, but I doubt it will be even if earnings are solid - inflation fears will keep crushing HFEA for the foreseeable future.
realseabass
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by realseabass »

randyharris wrote: Thu Jun 30, 2022 7:43 pm results through June 2022 for HFEA [and Profit Farmer, and MAX PAIN]

https://dualmomentumsystems.com/resourc ... 220630.pdf
Wondering where I can find more detailed explanations on the Profit Farmer and Max Pain strategies?
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cos
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by cos »

randyharris wrote: Thu Jun 30, 2022 7:43 pm results through June 2022 for HFEA [and Profit Farmer, and MAX PAIN]

https://dualmomentumsystems.com/resourc ... 220630.pdf
Just a heads-up, there's a grammatical error on page 3, the Hedgefundie page, under the "Characteristics" section.
HedgeFundie has is always leveraged with 3X ETF's
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privatefarmer
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by privatefarmer »

realseabass wrote: Fri Jul 01, 2022 7:30 am
randyharris wrote: Thu Jun 30, 2022 7:43 pm results through June 2022 for HFEA [and Profit Farmer, and MAX PAIN]

https://dualmomentumsystems.com/resourc ... 220630.pdf
Wondering where I can find more detailed explanations on the Profit Farmer and Max Pain strategies?
Well this is my version of “profit farmer”

https://www.portfoliovisualizer.com/tes ... odWeight=0
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