MachineGhost's Research Resort

[MachineGhost]

Here's the rebalancing bands optimal for each asset rather than all as a single group:

Stocks 12.02%
Bonds 16.54%
Gold 14.15%
Cash 4.37%

This adds 1.31% CAGR with about a 1.17% decrease in MaxDD over vanilla since 1969. Checked on a yearly basis.

The cash band seems a little odd but as that is 1-year T-Bills, I imagine they rarely move much.

[MachineGhost]

[Kbg]

Hmmm...a 2x PP is looking totally awesome to me. GTAA AGG is the only one close to a 2x's performance. Oh yeah, and zero timing required.

[MachineGhost]

Hmmm...a 2x PP is looking totally awesome to me. GTAA AGG is the only one close to a 2x's performance. Oh yeah, and zero timing required.

But the "zero timing" price comes with stupendous drawdowns. How brassy are your balls for surviving a -50% MaxDD?

Put simply, current market conditions are associated with small potential returns and enormous latent risks across nearly every asset class. The combination of extreme valuations, weak prospective returns, and emerging risk-aversion suggests that market losses could unfold abruptly, creating an interconnected Rube Goldberg chain of consequences because of the steep leverage that investors and corporations have taken on in recent years. The image that comes to mind is that of speculators scrounging around on their hands and knees to pull a few pennies from the catch of a mousetrap whose hammer is tied to the lid of a box of angry bees and a switch that drops an anvil. Even if there are rewards in the short-run, the situation isn’t likely to end well.

http://hussmanfunds.com/wmc/wmc161010.htm

[Reub]

Hmmm...a 2x PP is looking totally awesome to me. GTAA AGG is the only one close to a 2x's performance. Oh yeah, and zero timing required.

But the "zero timing" price comes with stupendous drawdowns. How brassy are your balls for surviving a -50% MaxDD?

Put simply, current market conditions are associated with small potential returns and enormous latent risks across nearly every asset class. The combination of extreme valuations, weak prospective returns, and emerging risk-aversion suggests that market losses could unfold abruptly, creating an interconnected Rube Goldberg chain of consequences because of the steep leverage that investors and corporations have taken on in recent years. The image that comes to mind is that of speculators scrounging around on their hands and knees to pull a few pennies from the catch of a mousetrap whose hammer is tied to the lid of a box of angry bees and a switch that drops an anvil. Even if there are rewards in the short-run, the situation isn’t likely to end well.

http://hussmanfunds.com/wmc/wmc161010.htm

Hussman's been saying this for seven years now. And why did he have to mention Rube Goldberg anyway??

[InsuranceGuy]

[deleted]

[MachineGhost]

Hussman's been saying this for seven years now. And why did he have to mention Rube Goldberg anyway??

QEternity made a fool of everyone, that's for sure.

[Kbg]

How many times do we have to replay this...care to post the max DD not including the one after the 400% increase in gold?

No, I thought not. It ruins the narrative.

And besides...I'm simply using YOUR posted data for the assessment for the time frame of the observations. So on a pure apples to apples basis, there is no doubt a 2x PP hits the top 2 of your list.

[InsuranceGuy]

[deleted]

[MachineGhost]

How many times do we have to replay this...care to post the max DD not including the one after the 400% increase in gold?

No, I thought not. It ruins the narrative.

And besides...I'm simply using YOUR posted data for the assessment for the time frame of the observations. So on a pure apples to apples basis, there is no doubt a 2x PP hits the top 2 of your list.

No, I'm not going to cherry pick or selectively show a MaxDD that doesn't include the worst case to support your cognitive bias and your narrative. If that's how you're fauxly brassing up your balls, good luck with the delusion.

P.S. That MaxDD event had nothing to do with gold and everything to do with the Fed.

P.P.S. So how about we exclude the forthcoming MaxDD event after the nearly 3,000% increase in T-Bonds? And so on and so on.

[MachineGhost]

Okay, buddy, since 1969 a 2x PP would have returned 17.66% CAGR and -38.04% MaxDD. This assumes exactly 2x returns is possible and 10% rebalancing bands are used and checked on a yearly basis in January so you're avoiding the worst of the MaxDD event.

So not quite a doubling since MaxDD growth isn't typically linear. Are your balls still brassy?

P.S. The above may not be entirely accurate as you can't double the 1yr T-Bill returns AFAIK. Without the cash, 15.56% CAGR and -39.22% MaxDD.

[MachineGhost]

[Kbg]

Okay, buddy, since 1969 a 2x PP would have returned 17.66% CAGR and -38.04% MaxDD. This assumes exactly 2x returns is possible and 10% rebalancing bands are used and checked on a yearly basis in January so you're avoiding the worst of the MaxDD event.

So not quite a doubling since MaxDD growth isn't typically linear. Are your balls still brassy?

P.S. The above may not be entirely accurate as you can't double the 1yr T-Bill returns AFAIK. Without the cash, 15.56% CAGR and -39.22% MaxDD.

For a CTA, those figures would be world class for such a long period of time...not to mention it completely clocked 100% equities. Look, this is definitely not grandma's retirement portfolio. Never claimed it was.

[MachineGhost]

[MachineGhost]

Poo on the leveraged PP!

[MachineGhost]

[jay]

Okay, buddy, since 1969 a 2x PP would have returned 17.66% CAGR and -38.04% MaxDD. This assumes exactly 2x returns is possible and 10% rebalancing bands are used and checked on a yearly basis in January so you're avoiding the worst of the MaxDD event.

So not quite a doubling since MaxDD growth isn't typically linear. Are your balls still brassy?

P.S. The above may not be entirely accurate as you can't double the 1yr T-Bill returns AFAIK. Without the cash, 15.56% CAGR and -39.22% MaxDD.

MG, great research. Thanks for sharing your work.

I am doing a bit of back-testing myself and wondering where one can find 2X stocks/bonds/gold data that does back to 1969. Did you synthesize it yourself?

[MachineGhost]

I am doing a bit of back-testing myself and wondering where one can find 2X stocks/bonds/gold data that does back to 1969. Did you synthesize it yourself?

No, all I did was doubled the CAGR and MaxDD since it was the same whether or not you used 2:1 margin or no margin and doubled. Futures would have been similar in $ returns but not %.

[MachineGhost]

[MachineGhost]

Thanks to dutchtraffic for indirectly referencing these new study results.

[MachineGhost]

Here's a PutWrite fund: https://www.wisdomtree.com/etfs/alternative/putw