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Triple SPY looking pretty good right 'bout meow

Seems Ohai knows his stuff.

more than 180% in 5 years time. I’m kind of upset I don’t just follow this strategy.

¯\_(ツ)_/¯ It be like that sometimes.

3x is a suboptimal strategy 

5x or hacksaw

SUNE BROS!

#FreeCVM #FreeTurd #2007-2017

2x is optimal leverage. 3x will lose too much in downturn - but you can hold 50% bonds or something and rebalance in market dips. 

“Visit the Water Cooler forum on Analyst Forum. It is the best forum.”
- Everyone

Black Swan wrote:

5x or hacksaw

SUNE BROS!

wait a second. You’re telling me there’s a 5 times fund and I don’t know about it?

¯\_(ツ)_/¯ It be like that sometimes.

“Mmmmmm, something…” - H. Simpson

Some company was trying to launch a 4x leveraged ETF, but the SEC did not approve them. Therefore, 3x is the highest leverage you can achieve through unmargined ETFs. However, you can get 5x leverage or higher through futures if you want to. 

“Visit the Water Cooler forum on Analyst Forum. It is the best forum.”
- Everyone

if you cant play in the big leagues go with QLD

"You want a quote? Haven’t I written enough already???"

RIP

igor555 wrote:

if you cant play in the big leagues go with QLD

if you’re talking about me. The answer is, I can’t afford it.

¯\_(ツ)_/¯ It be like that sometimes.

ohai wrote:

2x is optimal leverage. 3x will lose too much in downturn - but you can hold 50% bonds or something and rebalance in market dips. 

Would you happen to have the research report handy (if public) that explains this? I tried to float this idea - drunkely - with a friend of mine. He wasn’t having it though, and while I may be able to handle the rejection of myself just fine, him rebuffing YOU is something I’m willing to make a complete ass out of myself to defend. 

¯\_(ツ)_/¯ It be like that sometimes.

It’s never too late; only 10yrs into the bull market. Have at it kid! 

I’m mulling over flipping half my spy’s (sitting in an IRA, so no tax) to 2x if the market drops say 25% from peak (almost happened in December) and the other half if the market drops 50%. Unwind when prior high achieved. Thoughts?

We’re gonna win so much, you may even get tired of winning. And you’ll say, 'Please, please. It’s too much winning. We can’t take it anymore. Mr. President, it’s too much.' And I’ll say, 'No, it isn’t!' We have to keep winning!

hpracing007 wrote:

I’m mulling over flipping half my spy’s (sitting in an IRA, so no tax) to 2x if the market drops say 25% from peak (almost happened in December) and the other half if the market drops 50%. Unwind when prior high achieved. Thoughts?

Works unless not v-shaped recovery. Also buy CSI300 to hedge!

hpracing007 wrote:

I’m mulling over flipping half my spy’s (sitting in an IRA, so no tax) to 2x if the market drops say 25% from peak (almost happened in December) and the other half if the market drops 50%. Unwind when prior high achieved. Thoughts?

No point in trying to time the market.   Just do it now

Hell nah haha

I could make it valuation based, when P/E hits X, really wouldn’t make a difference.

Looking back, I should have done it before the election. I was nearly all in before because I knew Trump would win and the markets would improve, but I didn’t use any leveraged instruments, oh well.

We’re gonna win so much, you may even get tired of winning. And you’ll say, 'Please, please. It’s too much winning. We can’t take it anymore. Mr. President, it’s too much.' And I’ll say, 'No, it isn’t!' We have to keep winning!

And Then I Was Right wrote:

kid! 

¯\_(ツ)_/¯ It be like that sometimes.

you cant afford what?

"You want a quote? Haven’t I written enough already???"

RIP

hpracing007 wrote:

Hell nah haha

I could make it valuation based, when P/E hits X, really wouldn’t make a difference.

Looking back, I should have done it before the election. I was nearly all in before because I knew Trump would win and the markets would improve, but I didn’t use any leveraged instruments, oh well.

Why would you time your 2x exposure and not your 3x?  Sounds like a behavioral bias to me

And 3x is sometimes optimal, just not frequently as so as 2x.

I guess trying to remove supposed behavior bias and making the investment thesis more robust, I could calc the normalized p/e of the S&P 500. Say it’s 18x. If the multiple hits 9x, use double levered to buy into the market at an equiv of 18x w/ more vol of course. If market falls by 2/3, use 3x. If it falls beyond, buy calls with any spare cash, if I’m still employed. Hope the market normalized towards the avg at some point and unwind. 

We’re gonna win so much, you may even get tired of winning. And you’ll say, 'Please, please. It’s too much winning. We can’t take it anymore. Mr. President, it’s too much.' And I’ll say, 'No, it isn’t!' We have to keep winning!

hpr its an excellent way to go about it. but unlike ohai, i dont think you can be permanently invested in these products. there isnt that much data on them, the largest ones were only recently created between around 2006 to 2008. anyways during the last market downturn S&P fell 55%, while the 2x levered product fell 85%.  a similar crash right now would make you regret ever purchasing a levered etf.  but then again an over 50% downturn is pretty rare. of  150 years of data there was only maybe 17 bear markets. of that 17 there was only 2 or 3 major downturns that had a 50% downside.

some market stats from peter lynch:

The markets had a 10 or 11 percent return, compounded over the last 40 or 50 years, let’s say. But the returns are quite volatile, inter-year. For example, there have been 95 years so far this century. Fifty times, the market has had a decline of 10 percent or more. This does not mean 50 “down” years – the market might have been up 26 percent at one point in the year, finished up 4 percent for the year, and had a correction in the middle. So in 50 declines in 95 years means that about once every 2 years, the market has a 10 percent correction…That’s going to get your attention, and it’s probably going to scare a lot of people.

Of the 50 declines of 10 percent or more this century, 15 have been a decline of 25 percent or more. Fifteen declines in 95 years is about once every 6 years…That certainly will get your attention. I haven’t seen much in human nature that’s changed in the last 400 years, so there will be these corrections every 2 to 6 years. And what are you going to do when that happens! If you’re prepared for it, you don’t panic.

I love my cheese. I got to have my cheddar.

CEO10K-DAY wrote:

And Then I Was Right wrote:

kid! 

Aren’t you early/mid 20’s?

#FreeCVM #FreeTurd #2007-2017

Nerdyblop wrote:

hpr its an excellent way to go about it. but unlike ohai, i dont think you can be permanently invested in these products. there isnt that much data on them, the largest ones were only recently created between around 2006 to 2008. anyways during the last market downturn S&P fell 55%, while the 2x levered product fell 85%.  a similar crash right now would make you regret ever purchasing a levered etf.  but then again an over 50% downturn is pretty rare. of  150 years of data there was only maybe 17 bear markets. of that 17 there was only 2 or 3 major downturns that had a 50% downside.

some market stats from peter lynch:

The markets had a 10 or 11 percent return, compounded over the last 40 or 50 years, let’s say. But the returns are quite volatile, inter-year. For example, there have been 95 years so far this century. Fifty times, the market has had a decline of 10 percent or more. This does not mean 50 “down” years – the market might have been up 26 percent at one point in the year, finished up 4 percent for the year, and had a correction in the middle. So in 50 declines in 95 years means that about once every 2 years, the market has a 10 percent correction…That’s going to get your attention, and it’s probably going to scare a lot of people.

Of the 50 declines of 10 percent or more this century, 15 have been a decline of 25 percent or more. Fifteen declines in 95 years is about once every 6 years…That certainly will get your attention. I haven’t seen much in human nature that’s changed in the last 400 years, so there will be these corrections every 2 to 6 years. And what are you going to do when that happens! If you’re prepared for it, you don’t panic.

The issue I have, which is separate but unrelated to this is the long term performance drift of those funds where the CAGR doesn’t tie out with the underlying over time.  It bleeds off significant value over time and if you aren’t in an unprecedented period of Fed driven asset inflation could be really bad.  Going 2x vs 3x does go a long way toward mitigating this as the data is much worse on the 3x funds, but not enough for me to consider this a great strategy long term.  I may be wrong, Ohai seems smart, but that’s just the way I look at it.

#FreeCVM #FreeTurd #2007-2017

I’ve been thinking about that too… likely not the right instrument if I want to hold a few years if I need to. I made that mistake back a few years ago with uso. Maybe it would be better if I could take out margin and lever up only slightly instead.

We’re gonna win so much, you may even get tired of winning. And you’ll say, 'Please, please. It’s too much winning. We can’t take it anymore. Mr. President, it’s too much.' And I’ll say, 'No, it isn’t!' We have to keep winning!

fully agree with what you said. but i wouldnt midn the bleed after a 50% decline. the risk reward after a 25% decline is very different from the risk reward of a market peak. 

anyways interesting comment on margin. i actually dont know whats worse.

leveraging your own assets.

or having a levered product. 

you have protection when you use a levered product although there are fees. margining ur own assets is cheaper but you run the risk of a margin call. you might end up selling during the best time to buy!

I love my cheese. I got to have my cheddar.

Black Swan wrote:

CEO10K-DAY wrote:

And Then I Was Right wrote:

kid! 

Aren’t you early/mid 20’s?

Yeah, but have some ‘spect would ya? I don’t walk around here calling you grandpa all day do I?

¯\_(ツ)_/¯ It be like that sometimes.

CEO10K-DAY wrote:

Black Swan wrote:

CEO10K-DAY wrote:

And Then I Was Right wrote:

kid! 

<Gif>

Aren’t you early/mid 20’s?

Yeah, but have some ‘spect would ya? I don’t walk around here calling you grandpa all day do I?

Meh, kid fits.

#FreeCVM #FreeTurd #2007-2017

The way I view it.  The issue is that in your early to mid 20’s you’re really 1-5 years into real life in terms of adult issues having an actual grown up job, expenses, experience, responsibilities, investments, social life, etc.  So in those terms, you’re basically a toddler screaming randomly.  By early 30’s you’re now breaking into real world teen years and basically the young teenager of the adult world, you sort of can grasp what’s going on but probably have a sense of confidence out of sync with reality.  And so on, so forth.  So basically college graduation = T(0).

#FreeCVM #FreeTurd #2007-2017

i thought that old people dont really have a social life.

I love my cheese. I got to have my cheddar.

Nerdyblop wrote:

i thought that old people dont really have a social life.

It varies, a lot of active older people but sort of depends on how burned out or poor you are.  In a lot of instances it slows down at first but once the kids get old enough that you can use them to source low interest liar loans its models and bottles again.

#FreeCVM #FreeTurd #2007-2017

Nerdy doing the classic risk aversion analysis. You look at draw downs absent of the recovery? Cmon man no one forces you to liquidate at any point. If you will need liquidity this isn’t where you’d store it

The 2x does make assumptions about the market to avoid the problem of drift. But it works in a lot of environments. While a lot of America’s history works better at 3x than 2x, the strategy seems too sensitive at that level IMO 

at markets peaks is precisely when you want to look at max drawdowns. 

and even if you do not liquidate your position in a levered fund, that levered fund will still be forced to liquidate positions when it goes against them.

as for recovery cycles, levered etfs have had only 1 economic cycle, and its a 10 year trendy cycle that arguably is still ongoing.

in addition trends and volatility play a key role in your performance. timing will also play an issue. the more leverage you take, the more it will matter because they are using derivatives to achieve your desired return.

anyways my bottom line is i am not against using it, but i am against holding it to perpetuity. there just isnt sufficient data to conclude that the next recovery after a bear market will be as generous nor as trendy. 

I love my cheese. I got to have my cheddar.