HEDGEFUNDIE's excellent adventure Part II: The next journey

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

Post by Abalyon »

The more the market declines, the more I want to implement this in part of my portfolio. UPRO is down over 50% and TMF... wow lol. I guess the caveat I need to keep in mind is that something that has fallen 50% can fall another 50%. Just ask ARKK bagholders! If the S&P 500 falls another 15-20%, UPRO could fall however more depending on its daily sequence performance. But, at the very least, we are not at the top. That seems to be the thing that screws LEFT holders no matter what, buying at the top.

I'm 25 and the ideal number for me to start with personally would be $10,000. It's a little more than the 10% recommended, but I'd say I have a higher risk tolerance than most. Only thing that gives me significant pause is the fact this is the first major drop in a long time the FED has not been on our side. I might put in the $10,000 on a particularly bad day. Today was bad, but nothing blew up like a hedge fund getting margin called, a large company declaring announcing bankruptcy, a very bad string of earnings, bond liquidity fears, whatever. Not that I expect this bear market to be like 2008, I'm just waiting for something to break to bring max capitulation. After that, I'll DCA so much every month until the end of time. Yeah, it's market timing, yeah, it's gambling, whatever, but I would never do it for my regular index funds. This is a bit of an exception.

I still need to think about it and see how things unfold the next few weeks. If this turns out to be the bottom and we sharply rally resulting in me missing my opportunity, oh well. I'll put that money in index funds and forget about this thought. If UPRO gets to say $22, I buy it, and it declines to $15, that's still a pretty great cost basis for future appreciation in the future.
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David Jay
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by David Jay »

rawmelodyman wrote: Mon Jun 13, 2022 1:30 amHi all, I'm new to board and have just been pointed at HFEA...
By whom?

This is not a Boglehead strategy.
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JBTX
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by JBTX »

Hydromod wrote: Sun Jun 12, 2022 10:23 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?
I followed the approach proposed here, using composer.trade. I used $99007.44 starting March 18, 2020, trading quarterly.

I get better returns for the same period that was presented (1/3/2022: I have 221.16% gain, the figure has 201.08% gain). Starting 3/20/2020 instead results in an increase of 202.14%. I don't know what the difference in results is from, although the interface now has more options regarding slippage and fees that aren't shown in the earlier results. Fees include SEC and FINRA regulatory charges. Default slippage is set at 5 bps.

According to the recent calculation, as of 6/10/2022, the portfolio value would be $155,164.98. That includes fees and slippage of $192.82.

Composer.trade shows HFEA dropping below SPY on 5/6/2022, bouncing above and below a bit since. SPY currently shows a 67.07% return vs. 56.80% return from the start (the HFEA return apparently doesn't include the fees and slippage).

Alternative rebalancing:
  • With daily rebalancing, the calculated HFEA portfolio would be at $161,256.24 after fees and slippage ($1276.40) over the same period.
  • With weekly rebalancing, the calculated HFEA portfolio would be at $160,758.45 after fees and slippage ($565.63) over the same period.
  • With monthly rebalancing, the calculated HFEA portfolio would be at $151,302.66 after fees and slippage ($288.70) over the same period.
Using the inverse volatility model, 2-month lookback, 3 UPRO to 1 TMF:
  • With daily rebalancing, the calculated HFEA portfolio would be at $195,782.12 after fees and slippage ($1338.97) over the same period.
  • With weekly rebalancing, the calculated HFEA portfolio would be at $193,190.61 after fees and slippage ($583.43) over the same period.
  • With monthly rebalancing, the calculated HFEA portfolio would be at $186,698.12 after fees and slippage ($370.85) over the same period.
  • With quarterly rebalancing, the calculated HFEA portfolio would be at $199,189.96 after fees and slippage ($174.27) over the same period.
The 3 UPRO/1 TMF is a crude risk budget approach to tilt risk towards equities. Allocations would have varied roughly between 60 and 80% UPRO over the period. Just plain inverse volatility would have similar results as the HFEA approach.

Weekly trades are on the first day of the week. Monthly trades are on the first day of the month.

Edit: note that slippage is NOT proportional to the number of trades. Each trade is smaller, so in trending markets the effect is similar. Of course, the portion of costs attributed to a fixed fee for trading would be proportional to number of trades.

Not exactly a random starting point. Starting when the market was over 30% down, and ending at about 20% down, off of a newer high, and leveraged, not shockingly has a positive result.
rawmelodyman
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by rawmelodyman »


TMF at a decade long low is irrelevant information. What matters is where the Ten (or whatever duration-matching yield you want to look at) goes.
Sorry, why is TMF irrelevant? Is't that the fund used to hedge any losses on the UPRO side of the strategy? At the moment BOTH funds are in bear territory and the hedging hasn't happened.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

rawmelodyman wrote: Mon Jun 13, 2022 8:40 pm Sorry, why is TMF irrelevant? Is't that the fund used to hedge any losses on the UPRO side of the strategy? At the moment BOTH funds are in bear territory and the hedging hasn't happened.
TMF is relevant, I was saying "TMF being at a decade long low" is irrelevant information because it can keep going down a lot further. It is a mistake to think that a rare event would somehow signal the bottom. That's not quite how bonds work.
Last edited by Marseille07 on Mon Jun 13, 2022 9:43 pm, edited 1 time in total.
finite_difference
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by finite_difference »

finite_difference wrote: Sun Jun 12, 2022 10:32 am
hiddenpower wrote: Wed Jun 08, 2022 6:15 am I was missing the inclusion LIBOR costs. By using this, everything aligned more. I tried out DCA-ing and that caused the underperformance to be less bad, but it is still susceptible to sequence of return risk. If the bad times happen 15 years in, DCA will have less impact relative to account size
Definitely need to include borrowing costs.

But isn’t LIBOR rigged, and that’s why it’s being replaced by SOFR?
Not a single person has a comment on LIBOR vs SOFR?

Has anyone studied whether the LIBOR rates y’all are using for back testing are actually reasonable and not systematically underestimating true borrowing costs?
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OohLaLa
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by OohLaLa »

finite_difference wrote: Mon Jun 13, 2022 9:36 pm
finite_difference wrote: Sun Jun 12, 2022 10:32 am
hiddenpower wrote: Wed Jun 08, 2022 6:15 am I was missing the inclusion LIBOR costs. By using this, everything aligned more. I tried out DCA-ing and that caused the underperformance to be less bad, but it is still susceptible to sequence of return risk. If the bad times happen 15 years in, DCA will have less impact relative to account size
Definitely need to include borrowing costs.

But isn’t LIBOR rigged, and that’s why it’s being replaced by SOFR?
Not a single person has a comment on LIBOR vs SOFR?

Has anyone studied whether the LIBOR rates y’all are using for back testing are actually reasonable and not systematically underestimating true borrowing costs?
Why would such backtests, for funds that employ LIBOR-based swaps, underestimate true borrowing costs? It doesn't make much sense. If LIBOR was inefficient then that inefficiency was passed on to the swap contracts the institutions used for the last 14 or so years.

I gander that you aren't getting many replies because this is not near the top of the list of concerns with HFEA right now. There's a much bigger, pink elephant in the room. :mrgreen:
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firebirdparts
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by firebirdparts »

In truth, backtest accuracy, whatever it is, was plenty good enough to tell us that rising interest rates would hurt like the devil.
This time is the same
Ramjet
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Ramjet »

Abalyon wrote: Mon Jun 13, 2022 7:57 pm The more the market declines, the more I want to implement this in part of my portfolio. UPRO is down over 50% and TMF... wow lol. I guess the caveat I need to keep in mind is that something that has fallen 50% can fall another 50%. Just ask ARKK bagholders! If the S&P 500 falls another 15-20%, UPRO could fall however more depending on its daily sequence performance. But, at the very least, we are not at the top. That seems to be the thing that screws LEFT holders no matter what, buying at the top.

I'm 25 and the ideal number for me to start with personally would be $10,000. It's a little more than the 10% recommended, but I'd say I have a higher risk tolerance than most. Only thing that gives me significant pause is the fact this is the first major drop in a long time the FED has not been on our side. I might put in the $10,000 on a particularly bad day. Today was bad, but nothing blew up like a hedge fund getting margin called, a large company declaring announcing bankruptcy, a very bad string of earnings, bond liquidity fears, whatever. Not that I expect this bear market to be like 2008, I'm just waiting for something to break to bring max capitulation. After that, I'll DCA so much every month until the end of time. Yeah, it's market timing, yeah, it's gambling, whatever, but I would never do it for my regular index funds. This is a bit of an exception.

I still need to think about it and see how things unfold the next few weeks. If this turns out to be the bottom and we sharply rally resulting in me missing my opportunity, oh well. I'll put that money in index funds and forget about this thought. If UPRO gets to say $22, I buy it, and it declines to $15, that's still a pretty great cost basis for future appreciation in the future.
Maybe not. Hedgefundie used 15% of his portfolio as a one-time bet, not 10%
Marseille07
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

firebirdparts wrote: Tue Jun 14, 2022 6:59 am In truth, backtest accuracy, whatever it is, was plenty good enough to tell us that rising interest rates would hurt like the devil.
Well, no one disputed that I don't think, the question was if the long-term yields would rise. We knew the FF rate would rise, but some posters argued the long-term yields won't rise that much. I even argue that 3.3% on the Ten is still very low.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by bigblue1ca »

firebirdparts wrote: Tue Jun 14, 2022 6:59 am In truth, backtest accuracy, whatever it is, was plenty good enough to tell us that rising interest rates would hurt like the devil.
Truth.

Although, not that it mattered. Last year, suggesting here that TMF should be approached with caution, because it could really take a hard hit this year if inflation continued to rise, was effectively shouted down as blasphemy.

"Inflation is transitory, rates won't go that high, Fed will backdown (which they still might, but just not how people last year would have envisioned it), Don't you understand, TMF will be a counter-balance if there is a crash."
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by BayStater »

I don't recall it being discussed on here before. Direxion launched a 2x TIPS (intermediate-term TIPs) fund back in April. Ticker is TIPL

The investment objective of the fund is to track the 2x daily performance of the Solactive TIPS ETF Index (which is simply composed of iShares' TIP ETF).

Since it's based on intermediate-term bonds, it may be more relevant to mHFEA than HFEA.
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OohLaLa
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by OohLaLa »

BayStater wrote: Tue Jun 14, 2022 10:42 am I don't recall it being discussed on here before. Direxion launched a 2x TIPS (intermediate-term TIPs) fund back in April. Ticker is TIPL

The investment objective of the fund is to track the 2x daily performance of the Solactive TIPS ETF Index (which is simply composed of iShares' TIP ETF).

Since it's based on intermediate-term bonds, it may be more relevant to mHFEA than HFEA.
I thought that was great news, especially for folks running lower leverage portfolios. For 3x, this ETF will take up more space for the same exposure so it might have limited use.

Still need to give it some time, to see how it tracks. Direxion and Proshares have been generally very solid when it comes to that. There were some anomalies with International funds, though, if I remember correctly.

If this whole thing doesn't come crashing down and access to these ETFs is not closed (think politicians, FINRA, SEC etc.), then there is a very good chance I will employ TIPL when I come down to 2x. :beer
vel
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by vel »

Been riding the snake since July '19.

The risk I am most worried about is UPRO and/or TMF becoming unavailable one day. In such a case, if this hasn't been documented yet, could we flesh out a consensus contingency plan. This would help me and I believe many others. There has been some discussion about using futures, perhaps options, but I don't recall the approach being laid out in stepwise detail for the less experienced among us in those areas.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by privatefarmer »

vel wrote: Tue Jun 14, 2022 2:27 pm Been riding the snake since July '19.

The risk I am most worried about is UPRO and/or TMF becoming unavailable one day. In such a case, if this hasn't been documented yet, could we flesh out a consensus contingency plan. This would help me and I believe many others. There has been some discussion about using futures, perhaps options, but I don't recall the approach being laid out in stepwise detail for the less experienced among us in those areas.
+1

Specifically, what tickers does one use when buying futures? Where do you find this information? I understand the ticker would change as the contract expiration changes, where does one look this up? How do you calculate how much leverage each contract has? I am very much a beginner in this area (futures). Can they be employed in a Roth IRA?
000
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by 000 »

Yeah just start copy trading derivatives you don't fully understand after the LETF adventure blows up. What could possibly go wrong? :mrgreen:
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OohLaLa
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by OohLaLa »

000 wrote: Wed Jun 15, 2022 12:19 am Yeah just start copy trading derivatives you don't fully understand after the LETF adventure blows up. What could possibly go wrong? :mrgreen:
Our benevolent overlords regulating the bejeezus out of ETFs =/= HFEA blowing up.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by LTCM »

Abalyon wrote: Mon Jun 13, 2022 7:57 pm I'm 25 and the ideal number for me to start with personally would be $10,000. It's a little more than the 10% recommended, but I'd say I have a higher risk tolerance than most.
If you do 10% then you're leveraged to 120% not 300%. You have to consider the portfolio as a whole.
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Elysium
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Elysium »

This strategy is failing in the current environment, is it not?

The original post laid out a lot of well thought out analysis, charts, and data, and it looked great on paper. It did talk about the one risk that could happen when both S&P 500 and LTT crash together, it then observed that over a 60 year period since 1955 the chance of this happening was non-existent. In fact there hasn't been a single period in the scattergrams that showed S&P 500 and LTT both down -20% or more. Yet here we are in 2022 when both are down over -20%.

Whoa, a well thought out strategy just got hit by an outlier event that it thought had extremely low probably of happening, within less than 3 years of starting it. What are the chances :shock: where else have we seen this before :?:

Guess the strategy will survive, if, either of these assets can recover fairly short time period, say next year or so. But if both of these assets continue for another 2 or 3 years on this path, then I guess the strategy will blow up, or not?
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

Elysium wrote: Wed Jun 15, 2022 10:33 am This strategy is failing in the current environment, is it not?

The original post laid out a lot of well thought out analysis, charts, and data, and it looked great on paper. It did talk about the one risk that could happen when both S&P 500 and LTT crash together, it then observed that over a 60 year period since 1955 the chance of this happening was non-existent. In fact there hasn't been a single period in the scattergrams that showed S&P 500 and LTT both down -20% or more. Yet here we are in 2022 when both are down over -20%.

Whoa, a well thought out strategy just got hit by an outlier event that it thought had extremely low probably of happening, within less than 3 years of starting it. What are the chances :shock: where else have we seen this before :?:

Guess the strategy will survive, if, either of these assets can recover fairly short time period, say next year or so. But if both of these assets continue for another 2 or 3 years on this path, then I guess the strategy will blow up, or not?
This strategy is not failing. Drawdowns hitting -75% was known. Currently at what, -45%~-50%?

If the drawdown *renews* backtested DD then that's when we can say it's failing.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by bgf »

Elysium wrote: Wed Jun 15, 2022 10:33 am This strategy is failing in the current environment, is it not?

The original post laid out a lot of well thought out analysis, charts, and data, and it looked great on paper. It did talk about the one risk that could happen when both S&P 500 and LTT crash together, it then observed that over a 60 year period since 1955 the chance of this happening was non-existent. In fact there hasn't been a single period in the scattergrams that showed S&P 500 and LTT both down -20% or more. Yet here we are in 2022 when both are down over -20%.

Whoa, a well thought out strategy just got hit by an outlier event that it thought had extremely low probably of happening, within less than 3 years of starting it. What are the chances :shock: where else have we seen this before :?:

Guess the strategy will survive, if, either of these assets can recover fairly short time period, say next year or so. But if both of these assets continue for another 2 or 3 years on this path, then I guess the strategy will blow up, or not?
The 30 year rate has doubled in the last like 7 months. If it were to double again in that time span, then it would be at 7% by spring 2023.

I think that the option to lock in 7% on US govt debt for 30 years might gather some interest here and there.

I mean, think about what the rate would be at if this trend continued for 2 years? It’s basically inconceivable.
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jarjarM
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by jarjarM »

Elysium wrote: Wed Jun 15, 2022 10:33 am This strategy is failing in the current environment, is it not?

The original post laid out a lot of well thought out analysis, charts, and data, and it looked great on paper. It did talk about the one risk that could happen when both S&P 500 and LTT crash together, it then observed that over a 60 year period since 1955 the chance of this happening was non-existent. In fact there hasn't been a single period in the scattergrams that showed S&P 500 and LTT both down -20% or more. Yet here we are in 2022 when both are down over -20%.

Whoa, a well thought out strategy just got hit by an outlier event that it thought had extremely low probably of happening, within less than 3 years of starting it. What are the chances :shock: where else have we seen this before :?:

Guess the strategy will survive, if, either of these assets can recover fairly short time period, say next year or so. But if both of these assets continue for another 2 or 3 years on this path, then I guess the strategy will blow up, or not?
It was shown multiple times in the original thread that 1960s/1970s stagflation period was detrimental to the thread. OP original argument is that Fed will do its job well and prevent runaway inflation without significantly raising interest rate. Of course, that bit of assumption/belief is being tested right now but the jury is still out. In the meanwhile, for those who embark early on in this journey, we are either slightly ahead or on par with S&P500 since Mar 2019 but of course risk adjusted return is much worse due to leverage. OP did put in a warning on the first post regarding the assumption and danger of this and many of us never suggest anyone put their entire portfolio into this and understand the risk first.

IF both assets continue this path, I think many of the 60/40 traditional BH folks will freak out too, just look at how many threads are discussion abandoning bond funds recently.

Now, the overlord who plan on preventing us from harming ourselves, that's another story...
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by hiddenpower »

I’m waiting on MarketTimer to roll in and say I told you so
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

jarjarM wrote: Wed Jun 15, 2022 5:22 pm IF both assets continue this path, I think many of the 60/40 traditional BH folks will freak out too, just look at how many threads are discussion abandoning bond funds recently.
I think the freakout on 60/40 is orderly because the drawdown is only -15~20% not -45%~-50%.

You're correct that they're actually in trouble, but it's hard to see the magnitude because the hole isn't as deep as HFEA. When they realize their bond funds aren't recovering for 5~7 years, that's when they realize the hole they're in.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by hiddenpower »

Marseille07 wrote: Wed Jun 15, 2022 5:39 pm
jarjarM wrote: Wed Jun 15, 2022 5:22 pm IF both assets continue this path, I think many of the 60/40 traditional BH folks will freak out too, just look at how many threads are discussion abandoning bond funds recently.
I think the freakout on 60/40 is orderly because the drawdown is only -15~20% not -45%~-50%.

You're correct that they're actually in trouble, but it's hard to see the magnitude because the hole isn't as deep as HFEA. When they realize their bond funds aren't recovering for 5~7 years, that's when they realize the hole they're in.
The max DD on 60/40 was only 15-20% historically? Wow
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

hiddenpower wrote: Wed Jun 15, 2022 5:40 pm The max DD on 60/40 was only 15-20% historically? Wow
I didn't say historical MaxDD, I was referring to 2022's drawdown for 60/40.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by jarjarM »

Marseille07 wrote: Wed Jun 15, 2022 5:39 pm
jarjarM wrote: Wed Jun 15, 2022 5:22 pm IF both assets continue this path, I think many of the 60/40 traditional BH folks will freak out too, just look at how many threads are discussion abandoning bond funds recently.
I think the freakout on 60/40 is orderly because the drawdown is only -15~20% not -45%~-50%.

You're correct that they're actually in trouble, but it's hard to see the magnitude because the hole isn't as deep as HFEA. When they realize their bond funds aren't recovering for 5~7 years, that's when they realize the hole they're in.
True, but those who runs 60/40 or 50/50 have significantly lower risk tolerance than those who went with HFEA so I assume the sleepless nights are even worse for the traditional folks.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

jarjarM wrote: Wed Jun 15, 2022 5:45 pm True, but those who runs 60/40 or 50/50 have significantly lower risk tolerance than those who went with HFEA so I assume the sleepless nights are even worse for the traditional folks.
I suppose so, though if they bash cash and refuse to hold cash and lose sleep because bonds are losing value...they have a lot to learn.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by jarjarM »

Marseille07 wrote: Wed Jun 15, 2022 5:47 pm
jarjarM wrote: Wed Jun 15, 2022 5:45 pm True, but those who runs 60/40 or 50/50 have significantly lower risk tolerance than those who went with HFEA so I assume the sleepless nights are even worse for the traditional folks.
I suppose so, though if they bash cash and refuse to hold cash and lose sleep because bonds are losing value...they have a lot to learn.
So the moral of the story is that every asset class have its chance to shine :wink:
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by hiddenpower »

jarjarM wrote: Wed Jun 15, 2022 5:50 pm
Marseille07 wrote: Wed Jun 15, 2022 5:47 pm
jarjarM wrote: Wed Jun 15, 2022 5:45 pm True, but those who runs 60/40 or 50/50 have significantly lower risk tolerance than those who went with HFEA so I assume the sleepless nights are even worse for the traditional folks.
I suppose so, though if they bash cash and refuse to hold cash and lose sleep because bonds are losing value...they have a lot to learn.
So the moral of the story is that every asset class have its chance to shine :wink:
TMV is shining bright
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by jarjarM »

hiddenpower wrote: Wed Jun 15, 2022 5:52 pm
jarjarM wrote: Wed Jun 15, 2022 5:50 pm
Marseille07 wrote: Wed Jun 15, 2022 5:47 pm
jarjarM wrote: Wed Jun 15, 2022 5:45 pm True, but those who runs 60/40 or 50/50 have significantly lower risk tolerance than those who went with HFEA so I assume the sleepless nights are even worse for the traditional folks.
I suppose so, though if they bash cash and refuse to hold cash and lose sleep because bonds are losing value...they have a lot to learn.
So the moral of the story is that every asset class have its chance to shine :wink:
TMV is shining bright
So is SQQQ :twisted: Now we just need to incorporate those 2 into the strategy and we're golden. I know hydromod is working on it right now :beer
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by 000 »

OohLaLa wrote: Wed Jun 15, 2022 1:43 am Our benevolent overlords regulating the bejeezus out of ETFs =/= HFEA blowing up.
That, and other weird LETF-specific things happening, was always a risk of the adventure.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by er999 »

Tmf up 5.5% and upro up 4.2% today on the 0.75 rate hike news. Let’s hope this is the start of both following each other up instead of only down.
taojaxx
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by taojaxx »

A cheerful post for a change: 2021, S&P went up 26.89%, UPRO went up 101.96%.
YTD, S&P is down 20.48%, UPRO down 55.48%.
So it's triple leveraged but it gave you almost 3.79 times the upside in 2021 and only 2.7 times the downside YTD.
What's not to like?
Key to a manageable sail through the waterfall was dumping TMF as it crossed down the 200 DMA. Shorting ES as SPY crossed down the 200 DMA allowed for an even less bad outcome: down 38% YTD in my case. I'm sure others did even better (or less bad) on the same 200 DMA strategy.
All this "Bonds safe haven when stocks crash" is an analytical framework. Life has a way of wrecking analytical frameworks. 200 DMA is just an empirical framework. Way sturdier. At least it was this time around lol
Better lucky than smart.
Marseille07
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

taojaxx wrote: Wed Jun 15, 2022 10:57 pm A cheerful post for a change: 2021, S&P went up 26.89%, UPRO went up 101.96%.
YTD, S&P is down 20.48%, UPRO down 55.48%.
So it's triple leveraged but it gave you almost 3.79 times the upside in 2021 and only 2.7 times the downside YTD.
What's not to like?
Key to a manageable sail through the waterfall was dumping TMF as it crossed down the 200 DMA. Shorting ES as SPY crossed down the 200 DMA allowed for an even less bad outcome: down 38% YTD in my case. I'm sure others did even better (or less bad) on the same 200 DMA strategy.
All this "Bonds safe haven when stocks crash" is an analytical framework. Life has a way of wrecking analytical frameworks. 200 DMA is just an empirical framework. Way sturdier. At least it was this time around lol
No offense but your math is way off.

If S&P did 26.89% followed by -20.48%, we have 1.2689 * 0.7952 = 1.009, basically flat.

UPRO going 101.96% then -55.48% means 2.0196 * 0.4452 = 0.899, or -10%.

Isolating upside vs downside doesn't do anything. According to the numbers you provided, S&P500 is winning since 2021.
CletusCaddy
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by CletusCaddy »

HFEA being down -55% YTD when the S&P is down -21% is…not shocking?

HFEA being down -55% when the S&P is up +21% would require an explanation from the adherents…
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by LadyGeek »

I removed a contentious interchange expressing an opposing point of view.

As a reminder, opposing points of view are welcome. Please remove the emotion from your post and state your concerns in a civil, factual manner.

Update: Additional posts have been removed. Please restate the opposing point of view in a civil, factual manner.
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taojaxx
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by taojaxx »

Marseille07 wrote: Wed Jun 15, 2022 11:03 pm
taojaxx wrote: Wed Jun 15, 2022 10:57 pm A cheerful post for a change: 2021, S&P went up 26.89%, UPRO went up 101.96%.
YTD, S&P is down 20.48%, UPRO down 55.48%.
So it's triple leveraged but it gave you almost 3.79 times the upside in 2021 and only 2.7 times the downside YTD.
What's not to like?
Key to a manageable sail through the waterfall was dumping TMF as it crossed down the 200 DMA. Shorting ES as SPY crossed down the 200 DMA allowed for an even less bad outcome: down 38% YTD in my case. I'm sure others did even better (or less bad) on the same 200 DMA strategy.
All this "Bonds safe haven when stocks crash" is an analytical framework. Life has a way of wrecking analytical frameworks. 200 DMA is just an empirical framework. Way sturdier. At least it was this time around lol
No offense but your math is way off.

If S&P did 26.89% followed by -20.48%, we have 1.2689 * 0.7952 = 1.009, basically flat.

UPRO going 101.96% then -55.48% means 2.0196 * 0.4452 = 0.899, or -10%.

Isolating upside vs downside doesn't do anything. According to the numbers you provided, S&P500 is winning since 2021.
Nowhere did I say that UPRO beat S&P, nor did I do any math beside reporting the periods' changes. Depending on the chosen period and the sequence of return, one can always prove that one over/underperform the other.
I just drew attention to the fact that -over these two periods- triple leveraging brought more than 3 times upside on the way up and less than 3 times downside on the way down.
Better lucky than smart.
LeverageWBeverage
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by LeverageWBeverage »

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

Post by market timer »

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

Post by majasan »

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.
I dunno about others, but , you coming in and putting these words, was almost like the OP Hedgefundie came back to support us. :D :sharebeer
Marseille07
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

taojaxx wrote: Thu Jun 16, 2022 7:22 am Nowhere did I say that UPRO beat S&P, nor did I do any math beside reporting the periods' changes. Depending on the chosen period and the sequence of return, one can always prove that one over/underperform the other.
I just drew attention to the fact that -over these two periods- triple leveraging brought more than 3 times upside on the way up and less than 3 times downside on the way down.
Gotcha, although my point is that being more than 3 times to the upside and being less than 3 times to the downside isn't terribly significant.

A simple example is +25% -20% is 1.00, or back to square one. We can even reverse the order as -20% +25%, still the same thing. It is not a direct example of 3x vs 1x, but you get the idea.
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hiddenpower
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by hiddenpower »

majasan wrote: Thu Jun 16, 2022 10:35 am
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.
I dunno about others, but , you coming in and putting these words, was almost like the OP Hedgefundie came back to support us. :D :sharebeer
+1000.

What about as a lottery ticket in a roth though? Is the strategy only best performed in a situation where DCA is easy then? Hm. I haven't started my HFEA ticket yet
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drumboy256
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by drumboy256 »

My mHFEA will be getting a $6k Roth injection here shortly. :twisted: :sharebeer
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OohLaLa
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by OohLaLa »

Didn't want to spam too much with cheerleading posts each time I invested more, but I kept DCA with my tax return and I will be continuing with regularly-scheduled contributions to my famine-stricken portfolio. :beer

The irony with my HFEA is that the one fund that was expected to progressively decay (VIX mid-term fund) is actually one of the biggest gainers during my investment period. I know, I know, it's just "luck" but I sure as heck am happy to see some green. :mrgreen:
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HomerJ
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by HomerJ »

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

Post by perfectuncertainty »

Convexity is out the door.
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TheTimeLord
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by TheTimeLord »

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

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

Post by ChinchillaWhiplash »

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

Post by ChinchillaWhiplash »

I wonder if anyone did this in reverse? 55% SPXS 45% TMV. Would be doing pretty good if started at beginning of the year :twisted:
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