PP Inspired Leveraged Portfolios

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var
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Re: PP Inspired Leveraged Portfolios

Post by var » Wed Aug 19, 2020 12:02 pm

Ubt imploded yesterday. -47 pct
C6EAFCB5-368A-459D-8E52-C70051354C4E.png
C6EAFCB5-368A-459D-8E52-C70051354C4E.png (551.96 KiB) Viewed 1950 times

Any news why?

Proshares usually good with other products.

One needs to be careful
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Re: PP Inspired Leveraged Portfolios

Post by ozzy » Wed Aug 19, 2020 6:52 pm

Var - do your own UBT? Can you confirm it imploded? I don't see any evidence. According to Morningstar, as of 8/18/20, its up 41% YTD: https://www.morningstar.com/etfs/arcx/ubt/performance
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Re: PP Inspired Leveraged Portfolios

Post by var » Thu Aug 20, 2020 10:40 pm

Maybe charting was off that day.

No I don’t own it. It’s trading volume way to low.

I been watching it does have a lot of tracking errors.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Aug 21, 2020 10:05 am

I tried to swap UGL for DGP, but my company retirement plan has a restriction on it...go figure.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Mon Aug 31, 2020 11:50 pm

The "official" mix is changing.

VGSH 35%, UST 30%, TQQQ 25%, DGP 5%, VIXY 5%

Decided to add some pure negative correlation to the mix and I could see no redeeming quality to holding TMF anymore when VIXY is guaranteed to be negatively correlated.

Overall up this year ranging from 36-42% with actual money.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Thu Sep 24, 2020 11:50 pm

It has been a while since an official update...so let's do one.

My personal mix has changed this year:

Start: 60% VGSH, 20 TQQQ, 10 TMF, 10 UGLD

Then: 55% VGSH, 20 TQQQ, 10 TMF, 15 DGP (adjustment for the demise of UGLD)

Now: VGSH 35%, UST 30%, TQQQ 25%, DGP 5%, VIXY 5%

I will ignore the "Start" mix as it really isn't tradable anymore for performance.

Through the close on 9/24/20:

Then Portfolio: 23.40%, MDD - 18.33%

Now Portfolio: 21.75%, MDD - 13.64%

Live Portfolio: 25.71%. MDD ??

As noted previously the live portfolio includes some timing on my part...strictly done however within the overall construct of the portfolio. What I'm doing is timing rebalances which with leveraged ETFs is worth doing more contrary to the standard advice for unleveraged assets where less is often better. Risk control is key when using leverage and if you have an ok timing system then it can add value which (I think) I've demo'ed for most years I've posted.

I bailed on the futures version of this which I experimented with in an IB IRA. Keeping track of margin and required cash balances was just too much pain in the butt and there are settlement/trading restrictions which, strangely enough, is not the case with leveraged ETFs. This was even worse I thought. So went back to ETFs which is a bit of a bummer cost wise.

The board has discussed LTTs quite a bit lately and the "Then" and "Now" allocation mixes reflect my decision. I would not be the least bit surprised to see me bail sometime down the road on UST to further shorten duration. To compensate for pulling out some diversification you can see I've added VIXY (actually VXX) which provides pretty much guaranteed negative correlation when one needs it. And the recent performance stats are beautiful for illustrating the pros/cons of using VIXY. Rounding off (using above performance #s) 1.75% less return for 4.75% less max drawdown. However, let's break it down a little bit more to illustrate what happens under the hood. The numbers just below are the two respective portfolios time segmented by market type.

2/19 - 3/23 Then -8.51% Now +.94% (big down market)
3/23 - 9/2 Then +89.91% Now +99.89% (big up market)
9/2 - 9/24 Then -8.57% Now - 9.26% (down market - size TBD)

Big down market...actually eked out a small profit. VIXY up ~654% (1K = 5.95K), TQQQ down 73% (5K = 1.36K)..If this stuff is of interest to you, this math is well worth pondering. However lest I oversell this thing I said you should consider carefully, our hedge that did so wonderful in Feb-March lost 7% in this latest decline which is typical. In the bull market it lost 40%ish of it's value. Just ain't no such thing as a free lunch folks. (OBTW...both allocations had way better performance and way less risk than a 100% QQQ portfolio.)

Well, I think this was one of my better updates in awhile. Most of the key principles and examples of running a leveraged portfolio I wrote about extensively a couple of years ago. This one adds the element of long VIX futures and how they behave. Hope my long time readers enjoyed it.
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Re: PP Inspired Leveraged Portfolios

Post by Mark Leavy » Fri Sep 25, 2020 8:49 am

Kbg wrote:
Thu Sep 24, 2020 11:50 pm
Hope my long time readers enjoyed it.
Thanks Kbg! I'll sit down with this over the weekend and go over it with a fine toothed comb. I always learn a ton when I pick apart the machinery behind your allocations. I'm looking forward to it.

Mark
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Sep 25, 2020 10:12 am

Mark Leavy wrote:
Fri Sep 25, 2020 8:49 am
Kbg wrote:
Thu Sep 24, 2020 11:50 pm
Hope my long time readers enjoyed it.
Thanks Kbg! I'll sit down with this over the weekend and go over it with a fine toothed comb. I always learn a ton when I pick apart the machinery behind your allocations. I'm looking forward to it.

Mark
Tip...spend time looking at basically a ratio of VIXY/VXX to your leveraged stock component. Also, UVXY just has way too much contango to overcome. I was hoping to use less UVXY but it doesn’t seem to work out well. And as noted, UST is probably my biggest “should I use this” question about the allocation. Wish I could predict interest rates. :-)
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Re: PP Inspired Leveraged Portfolios

Post by Mark Leavy » Sun Sep 27, 2020 12:57 pm

Thanks again, Kbg. I spent all morning on this and I'm pretty comfortable with your reasoning. You really have a good mind.

Now, I just need another week or so of pondering and what/ifs to game how these variable would fit in with my life. I like about 40% of my assets in physical gold and about 5 years of living expenses in cash. The rest should be making me money - over the very long term.

I'm going to play around for a bit and run every scenario I can think of. Much like Vinny, (who I suspect has not yet taken the PP jump :) I'm a slow moving guy.

Whenever I read well thought out plans or strategies, I always wonder what the author really knows, and how much was elided for the purpose of public consumption.

Mark
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Re: PP Inspired Leveraged Portfolios

Post by vnatale » Sun Sep 27, 2020 1:09 pm

Mark Leavy wrote:
Sun Sep 27, 2020 12:57 pm
Thanks again, Kbg. I spent all morning on this and I'm pretty comfortable with your reasoning. You really have a good mind.

Now, I just need another week or so of pondering and what/ifs to game how these variable would fit in with my life. I like about 40% of my assets in physical gold and about 5 years of living expenses in cash. The rest should be making me money - over the very long term.

I'm going to play around for a bit and run every scenario I can think of. Much like Vinny, (who I suspect has not yet taken the PP jump :) I'm a slow moving guy.

Whenever I read well thought out plans or strategies, I always wonder what the author really knows, and how much was elided for the purpose of public consumption.

Mark
100% correct assumption on your part! Good memory!

Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats."
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Sun Sep 27, 2020 8:15 pm

There are somethings I make allusions to (my momentum system) and things that are fully disclosed/discussed. This is in the latter and the entire thread and previous similar one I hijacked have been A) research/observations real time and B) has a substantial piece of my retirement funds in.

Thoughtful criticism/critiques new ideas/approach/tweaks within the basic framework of what this thread is about are heartily welcomed.
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Re: PP Inspired Leveraged Portfolios

Post by Mark Leavy » Sun Sep 27, 2020 8:47 pm

Kbg wrote:
Sun Sep 27, 2020 8:15 pm
Thoughtful criticism/critiques new ideas/approach/tweaks within the basic framework of what this thread is about are heartily welcomed.
Not criticism. Admiration.
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Re: PP Inspired Leveraged Portfolios

Post by mrbk2fi » Sat Oct 10, 2020 5:33 pm

Ozzy - how is this new allocation treating you recently?
ozzy wrote:
Mon Jun 22, 2020 8:01 pm
Houston, we have a problem. UGLD is being de-listed, see article here:

https://www.prnewswire.com/news-release ... 80971.html

This is a real bummer. I've owned UGLD since 2014 and made good money with it. I'm going to sell it and pay tax, then replace it with UGL (2x gold).

To bring ya'll up to speed, I've been running my own version of a leveraged PP, which consists of: 45% UPRO, 35% TMF, 20% UGLD, rebalanced yearly.

Now, I'm thinking my new version will be: 40% UPRO, 30% TMF, 30% UGL, rebalanced yearly. Its very similar performance, here's the comparison between the old and new versions:

https://www.portfoliovisualizer.com/bac ... tion6_2=30
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Re: PP Inspired Leveraged Portfolios

Post by ozzy » Sun Oct 11, 2020 3:21 am

mrbk2fi - You can track the allocation here:

https://www.portfoliovisualizer.com/bac ... tion3_1=30
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Re: PP Inspired Leveraged Portfolios

Post by modeljc » Thu Oct 15, 2020 12:30 pm

Kbg wrote:
Mon Aug 31, 2020 11:50 pm
The "official" mix is changing.

VGSH 35%, UST 30%, TQQQ 25%, DGP 5%, VIXY 5%

Decided to add some pure negative correlation to the mix and I could see no redeeming quality to holding TMF anymore when VIXY is guaranteed to be negatively correlated.

Overall up this year ranging from 36-42% with actual money.
I showing this to have a Max drawdown of 44%. Why so high when you have 115% outside of TQQQ with 75% in TQQQ? Does your rebalance take some of this out? What rebalance do you use?
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Sat Oct 17, 2020 8:25 pm

modeljc wrote:
Thu Oct 15, 2020 12:30 pm
Kbg wrote:
Mon Aug 31, 2020 11:50 pm
The "official" mix is changing.

VGSH 35%, UST 30%, TQQQ 25%, DGP 5%, VIXY 5%

Decided to add some pure negative correlation to the mix and I could see no redeeming quality to holding TMF anymore when VIXY is guaranteed to be negatively correlated.

Overall up this year ranging from 36-42% with actual money.
I showing this to have a Max drawdown of 44%. Why so high when you have 115% outside of TQQQ with 75% in TQQQ? Does your rebalance take some of this out? What rebalance do you use?
What data are you using for a 44% drawdown? Portfolio level or TQQQ?
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Re: PP Inspired Leveraged Portfolios

Post by modeljc » Sun Oct 18, 2020 10:12 am

Kbg wrote:
Sat Oct 17, 2020 8:25 pm
modeljc wrote:
Thu Oct 15, 2020 12:30 pm
Kbg wrote:
Mon Aug 31, 2020 11:50 pm
The "official" mix is changing.

VGSH 35%, UST 30%, TQQQ 25%, DGP 5%, VIXY 5%

Decided to add some pure negative correlation to the mix and I could see no redeeming quality to holding TMF anymore when VIXY is guaranteed to be negatively correlated.

Overall up this year ranging from 36-42% with actual money.
I showing this to have a Max drawdown of 44%. Why so high when you have 115% outside of TQQQ with 75% in TQQQ? Does your rebalance take some of this out? What rebalance do you use?
What data are you using for a 44% drawdown? Portfolio level or TQQQ?
Using Portfolio Visualizer I get 33.48% CAGR with -43.94 drawdown with no rebalancing! Seems high. With rebalance annually I only get a CAGR of 16.09% and drawdown of -12.3%. This seems low. Probably something wrong with the data. What rebalance system do you plan to use? Thanks for the help.
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Re: PP Inspired Leveraged Portfolios

Post by modeljc » Sun Oct 18, 2020 5:19 pm

modeljc wrote:
Sun Oct 18, 2020 10:12 am
Kbg wrote:
Sat Oct 17, 2020 8:25 pm
modeljc wrote:
Thu Oct 15, 2020 12:30 pm
Kbg wrote:
Mon Aug 31, 2020 11:50 pm
The "official" mix is changing.

VGSH 35%, UST 30%, TQQQ 25%, DGP 5%, VIXY 5%

Decided to add some pure negative correlation to the mix and I could see no redeeming quality to holding TMF anymore when VIXY is guaranteed to be negatively correlated.

Overall up this year ranging from 36-42% with actual money.
I showing this to have a Max drawdown of 44%. Why so high when you have 115% outside of TQQQ with 75% in TQQQ? Does your rebalance take some of this out? What rebalance do you use?
What data are you using for a 44% drawdown? Portfolio level or TQQQ?
Using Portfolio Visualizer I get 33.48% CAGR with -43.94 drawdown with no rebalancing! Seems high. With rebalance annually I only get a CAGR of 16.09% and drawdown of -12.3%. This seems low. Probably something wrong with the data. What rebalance system do you plan to use? Thanks for the help.
Would you be willing so share how much of your total assets you apply to this system? I remember WONK not trusting these new products and had 45 % gold physical and 25% in SHY. This gave him a 70% safety outside of the new leveraged products. Willing to see 15% to 30% get no bid. Your new allocation has 65% in the new products. How did your overcome this unknown risk with leveraged new products? I'm ok with decay and expenses. Again we appreciate your posts.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Sun Oct 18, 2020 5:56 pm

A lot

Of course one rebalances more frequently. One must do so when using 3x ETFs. My rebalancing method has been explained earlier but remember risk control is the primary reason for rebalancing. The rebalancing rules for a leveraged PP and a normal PP are not the same, nor should they be. The volatility of 3x ETFs must be respected and the rebalancing approach should be tailored to the volatility inherent in them. As a basic difference, one should rebalance more not less. A simple approach would be monthly or quarterly.

A good way to think about things is the effective non-leveraged size. So if I’m 25% TQQQ, I’m really 75% QQQ. If my allocation then grows to 30%, the effective is then 90%. It would take a very long time to have that kind of swing in a PP, but in a leveraged PP that can happen in a month. Do you really want a 90% allocation or are you more comfortable with 75%? If so, time to rebalance.

Never forget the best rebalancing strategy is path dependent, which is unknowable in advance. Therefore, risk and taxes should be your guide...and with 3xETFs, I suggest risk should be the primary driver.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Sun Oct 18, 2020 6:00 pm

On performance...those numbers are good. Basically holding TQQQ since inception would have made anyone wealthy. However, one should model 2000-2002 with a simulated TQQQ...my mix tries to be a mix for the long haul.
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Re: PP Inspired Leveraged Portfolios

Post by modeljc » Mon Oct 19, 2020 2:18 pm

Kbg wrote:
Sun Oct 18, 2020 6:00 pm
On performance...those numbers are good. Basically holding TQQQ since inception would have made anyone wealthy. However, one should model 2000-2002 with a simulated TQQQ...my mix tries to be a mix for the long haul.
I not sure TQQQ would have made it past 2000-2002. For me I not sure you can take the risk of TQQQ with other leveraged products. I think I would model how much can I see not get a bid. Maybe I say I'm young and I can make up a 25% loss so that is all I can affort to put in TQQQ. Then you accept less reward and maybe said 25% SHV or SHY, 25% IEF, 25% gold, and 25% TQQQ. That does 16.1% with 11% drawdown. I can pinch myself with 16% for sure. I just don't have the trust of Wall Street being on top of this and be able to manage the various instruments during a panic or meltdown. Please keep reporting as I have grandchildren that love the action.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Mon Oct 19, 2020 9:10 pm

I wouldn’t try to talk anyone into this portfolio. My personal expectation is to have the TQQQ position completely wiped out, probably a couple of times. It’s in the data. However, if the rest of the port does its job, not to worry. The most important thing is can one refill the tank?

Let’s do some basic math.

$1000 in TQQQ, and ndx goes down 33%....$0 in TQQQ

However, I can refill to $1000 and it goes up 33%....$2000 in TQQQ.

The 65% in short term and intermediate term treasuries is no mistake. It’s spare gas for refilling the tank. There is a thread on Bogle heads called hedgefundie’s big adventure which is REALLY long but has some excellent research in it and is worth the time if interested in this approach. However, I think what they ended up with is completely nuts and will not stand the test of time. Hopefully, the folks over there with real money in their suggestion keeps it to a small percentage of their assets. If inflation ever kicks in and interest rates begin to go up what they have come up with is not going to end well.

Anyone contemplating this portfolio should spend a lot of time running scenarios and understanding the math behind 3X ETFs. I would also spend some time going through the extensive writing I have done on this topic and several associated tangents. One can find information in this thread as well as the other leveraged PP thread.
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Re: PP Inspired Leveraged Portfolios

Post by modeljc » Mon Oct 19, 2020 9:45 pm

Kbg wrote:
Mon Oct 19, 2020 9:10 pm
I wouldn’t try to talk anyone into this portfolio. My personal expectation is to have the TQQQ position completely wiped out, probably a couple of times. It’s in the data. However, if the rest of the port does its job, not to worry. The most important thing is can one refill the tank?

Let’s do some basic math.

$1000 in TQQQ, and ndx goes down 33%....$0 in TQQQ

However, I can refill to $1000 and it goes up 33%....$2000 in TQQQ.

The 65% in short term and intermediate term treasuries is no mistake. It’s spare gas for refilling the tank. There is a thread on Bogle heads called hedgefundie’s big adventure which is REALLY long but has some excellent research in it and is worth the time if interested in this approach. However, I think what they ended up with is completely nuts and will not stand the test of time. Hopefully, the folks over there with real money in their suggestion keeps it to a small percentage of their assets. If inflation ever kicks in and interest rates begin to go up what they have come up with is not going to end well.

Anyone contemplating this portfolio should spend a lot of time running scenarios and understanding the math behind 3X ETFs. I would also spend some time going through the extensive writing I have done on this topic and several associated tangents. One can find information in this thread as well as the other leveraged PP thread.
Thanks for the Math. I just don't trust other leveraged products to be there when you need them. Maybe you do 70% IEF and 30% TQQQ for 19.4% with 18% drawdown. That sounds a little safer than 30% UST, 5% DGP, 5% VIXY and 25% TQQQ. Not much gas for the tank if 65% get messed up or partly impared. I do appreciate the lesson as I can see several of these poducts getting messed up with counter party risk or whatever. Rebalance also helps the math.
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Re: PP Inspired Leveraged Portfolios

Post by modeljc » Tue Oct 20, 2020 5:19 pm

modeljc wrote:
Mon Oct 19, 2020 9:45 pm
Kbg wrote:
Mon Oct 19, 2020 9:10 pm
I wouldn’t try to talk anyone into this portfolio. My personal expectation is to have the TQQQ position completely wiped out, probably a couple of times. It’s in the data. However, if the rest of the port does its job, not to worry. The most important thing is can one refill the tank?

Let’s do some basic math.

$1000 in TQQQ, and ndx goes down 33%....$0 in TQQQ

However, I can refill to $1000 and it goes up 33%....$2000 in TQQQ.

The 65% in short term and intermediate term treasuries is no mistake. It’s spare gas for refilling the tank. There is a thread on Bogle heads called hedgefundie’s big adventure which is REALLY long but has some excellent research in it and is worth the time if interested in this approach. However, I think what they ended up with is completely nuts and will not stand the test of time. Hopefully, the folks over there with real money in their suggestion keeps it to a small percentage of their assets. If inflation ever kicks in and interest rates begin to go up what they have come up with is not going to end well.

Anyone contemplating this portfolio should spend a lot of time running scenarios and understanding the math behind 3X ETFs. I would also spend some time going through the extensive writing I have done on this topic and several associated tangents. One can find information in this thread as well as the other leveraged PP thread.
Thanks for the Math. I just don't trust other leveraged products to be there when you need them. Maybe you do 70% IEF and 30% TQQQ for 19.4% with 18% drawdown. That sounds a little safer than 30% UST, 5% DGP, 5% VIXY and 25% TQQQ. Not much gas for the tank if 65% get messed up or partly impared. I do appreciate the lesson as I can see several of these poducts getting messed up with counter party risk or whatever. Rebalance also helps the math.
You probably have this covered in your thinking or approach. A Tweak for me would never try to catch a falling TQQQ. You may use 50% of the gas tank. Maybe you only rebalance when it is above 50 week moving average or whatever. Never below it. Of course the first fill up is NOT going to make you feel like you will do a second if you have a LOT in this. By the way it's the numbers that are talking several of us in it. So please don't feel you are to blame.
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Re: PP Inspired Leveraged Portfolios

Post by modeljc » Thu Oct 22, 2020 12:05 pm

modeljc wrote:
Tue Oct 20, 2020 5:19 pm
modeljc wrote:
Mon Oct 19, 2020 9:45 pm
Kbg wrote:
Mon Oct 19, 2020 9:10 pm
I wouldn’t try to talk anyone into this portfolio. My personal expectation is to have the TQQQ position completely wiped out, probably a couple of times. It’s in the data. However, if the rest of the port does its job, not to worry. The most important thing is can one refill the tank?

Let’s do some basic math.

$1000 in TQQQ, and ndx goes down 33%....$0 in TQQQ

However, I can refill to $1000 and it goes up 33%....$2000 in TQQQ.

The 65% in short term and intermediate term treasuries is no mistake. It’s spare gas for refilling the tank. There is a thread on Bogle heads called hedgefundie’s big adventure which is REALLY long but has some excellent research in it and is worth the time if interested in this approach. However, I think what they ended up with is completely nuts and will not stand the test of time. Hopefully, the folks over there with real money in their suggestion keeps it to a small percentage of their assets. If inflation ever kicks in and interest rates begin to go up what they have come up with is not going to end well.

Anyone contemplating this portfolio should spend a lot of time running scenarios and understanding the math behind 3X ETFs. I would also spend some time going through the extensive writing I have done on this topic and several associated tangents. One can find information in this thread as well as the other leveraged PP thread.
Thanks for the Math. I just don't trust other leveraged products to be there when you need them. Maybe you do 70% IEF and 30% TQQQ for 19.4% with 18% drawdown. That sounds a little safer than 30% UST, 5% DGP, 5% VIXY and 25% TQQQ. Not much gas for the tank if 65% get messed up or partly impared. I do appreciate the lesson as I can see several of these poducts getting messed up with counter party risk or whatever. Rebalance also helps the math.
You probably have this covered in your thinking or approach. A Tweak for me would never try to catch a falling TQQQ. You may use 50% of the gas tank. Maybe you only rebalance when it is above 50 week moving average or whatever. Never below it. Of course the first fill up is NOT going to make you feel like you will do a second if you have a LOT in this. By the way it's the numbers that are talking several of us in it. So please don't feel you are to blame.
Another mystery to try to unravel is Credit Suisse. It operates world wide and has .9 trillion of assets. Is it a swiss bank or U S Bank. If some of it is U S how much? Is the U S part to BIG to fail? I don't think so. Some days they have 44% of TQQQ Nasdaq 100 index swaps! That one is hard to model.
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