PP Inspired Leveraged Portfolios

A place to talk about speculative investing ideas for the optional Variable Portfolio

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clacy
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Re: PP Inspired Leveraged Portfolios

Post by clacy » Mon Mar 11, 2019 7:31 pm

CME to launch Micro E-mini equity futures. This makes a futures based portfolio easier to swing due to matching notional values of contracts.

https://activetrader.cmegroup.com/micro ... relaunch_1
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Mar 29, 2019 7:53 pm

2012-2018
UST/TQQQ/VGSH 70/20/10 (The Desertish Risk Parity bullet): 11.62/-14.33
VGSH/TQQQ/TMF/UGLD 50/25/12.5/12.5 (The PPish all-weather barbell): CAGR 11.92/-18.33

2019 Performance
Close on 12/31/18 through the close on 3/29/19

Bullet: 14.73%
Barbell: 15.49%
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Re: PP Inspired Leveraged Portfolios

Post by clacy » Thu Apr 25, 2019 11:33 am

On May 6th, the CME will be launching Micro E-mini futures contracts for S&P, Dow, Nasdaq and Russell 2000.

I think these will make holding a futures based PP (any type of portfolio really) much easier. They will be 1/10th the size of their standard Emini contracts.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Apr 26, 2019 6:24 pm

I think I will be moving to them for my leveraged QQQ component. I'm not in a hurry and plan on watching their volume to see if they catch on. My take is you have the following +/-s.

+ Cheaper
+ Less capital required that you can put into STTs for a bit of interest

- Hassle factor of having to roll four times a year

+/- Tax consequences depending on your situation and account type
+ For taxable accounts I absolutely LOVE LOVE LOVE Section 1256 tax reporting. So much easier than stocks at tax time.

+/- Volatility decay...who knows. There will be far less of it, but one also has to realize they will not get the gains of a daily reset leveraged ETF in a good market, in fact they could get far less returns. Given that all of this is totally path dependent I think I would concentrate making a decision whether to replace leveraged ETFs with micro futures on the knowable aspects vs. the unknowable.

Good reminder...I need to bust out the pencil and get to figuring out what I will do.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Mon May 20, 2019 10:27 pm

2012-2018
UST/TQQQ/VGSH 70/20/10 (The Desertish Risk Parity bullet): 11.62/-14.33
VGSH/TQQQ/TMF/UGLD 50/25/12.5/12.5 (The PPish all-weather barbell): CAGR 11.92/-18.33

2019 Performance
Close on 12/31/18 through the close on 5/20/19

Bullet: 14.66%
Barbell: 14.64%
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Tue Jun 04, 2019 8:18 pm

TQQQ - POP! Holy Cow 9.6% today
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Thu Jun 13, 2019 1:16 pm

A joyous day! UGLD first time ever in the green.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Sat Jun 22, 2019 11:05 am

6/20/19

Bullet: 23.40%

Barbell: 26.50%

Seems like a good day for performance cherry picking. :-)
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Aug 09, 2019 11:10 am

8/8/19

Bullet: 25.09%

Barbell: 29.19%

Personal: 30.55%
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Wed Aug 28, 2019 8:48 am

*pinching self* just shy of +35% this year.
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Re: PP Inspired Leveraged Portfolios

Post by modeljc » Thu Aug 29, 2019 5:28 pm

Kbg wrote:
Wed Aug 28, 2019 8:48 am
*pinching self* just shy of +35% this year.
This a long post. Can you bring us up to date on your current allocations and %'s after XIV when off the board. What produced the +35%. Feels real good now. The old cat bird seat!!
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Thu Aug 29, 2019 7:22 pm

52% STT, 16% TQQQ/TMF/UGLD

My ideal would be 25/12.5/12.5. However, with the market being both long in the tooth and very expensive no need to be greedy.
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Re: PP Inspired Leveraged Portfolios

Post by modeljc » Fri Aug 30, 2019 11:05 am

Kbg wrote:
Thu Aug 29, 2019 7:22 pm
52% STT, 16% TQQQ/TMF/UGLD

My ideal would be 25/12.5/12.5. However, with the market being both long in the tooth and very expensive no need to be greedy.
Thanks. Do have have your rebalance bands set in your mind? When and how do you bank some of this gain. When you backtested this what does the down side feel like? Can it go off 35%?
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Aug 30, 2019 12:04 pm

It's hard to say and there are quite a few data issues so let's try some different backtests and I will assume 1.5x leverage of the primary assets and exclude cash.

N/N/N = Large Cap/LC, LT (Long-term treasuries), G (gold) followed by CAGR and Max DD
Portfoliovisualizer from 1978 - July 2019 https://www.portfoliovisualizer.com
50/25/25 10.03/-20.49; 1.5 leveraged 15.04/30.74 (nominal)

Portfolio Charts (IIRC Tyler's data starts in 1970)
75/37.5/37.5 11.1/-24 (real average annual returns)

Portfoliovisualizer from 2005 - July 2019 QQQ/TLT/GLD https://www.portfoliovisualizer.com
50/25/25 10.97/-21.48; 1.5 leveraged 16.46/32.22 (nominal)

The above is fairly consistent so let's say 15% and -35% is a good estimate nominal

If we do 50/50/50 (classic PP with 1.5 leverage overall portfolio/2x leverage for active assets)

13.97/-31.14 from PortfolioViz
10.06/-26 from PortfolioCharts

Again, none of this is really accounting for leverage costs or gains from cash precisely. However, all of them thump a 100% stocks only portfolio.

With the advent of micro futures I believe, tactically, the best way to do something like this (now) is probably to leverage up the stock and gold components, buy LTTs with a low cost ETF. In theory you should keep the Max DD in cash, but with the right brokerage you can specify a sell off plan if it should come to that. However, I have not transitioned to this yet and am still using 3x ETFs. I have not transitioned because I haven't had the time to nail down account management details. Finally, I've spent a fair amount of time trying to figure out treasury futures vs. an ETF or the actual bonds and I just don't think I get them at a sufficient level of depth at this time.
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Re: PP Inspired Leveraged Portfolios

Post by modeljc » Fri Aug 30, 2019 3:38 pm

Kbg wrote:
Fri Aug 30, 2019 12:04 pm
It's hard to say and there are quite a few data issues so let's try some different backtests and I will assume 1.5x leverage of the primary assets and exclude cash.

N/N/N = Large Cap/LC, LT (Long-term treasuries), G (gold) followed by CAGR and Max DD
Portfoliovisualizer from 1978 - July 2019 https://www.portfoliovisualizer.com
50/25/25 10.03/-20.49; 1.5 leveraged 15.04/30.74 (nominal)

Portfolio Charts (IIRC Tyler's data starts in 1970)
75/37.5/37.5 11.1/-24 (real average annual returns)

Portfoliovisualizer from 2005 - July 2019 QQQ/TLT/GLD https://www.portfoliovisualizer.com
50/25/25 10.97/-21.48; 1.5 leveraged 16.46/32.22 (nominal)

The above is fairly consistent so let's say 15% and -35% is a good estimate nominal

If we do 50/50/50 (classic PP with 1.5 leverage overall portfolio/2x leverage for active assets)

13.97/-31.14 from PortfolioViz
10.06/-26 from PortfolioCharts

Again, none of this is really accounting for leverage costs or gains from cash precisely. However, all of them thump a 100% stocks only portfolio.

With the advent of micro futures I believe, tactically, the best way to do something like this (now) is probably to leverage up the stock and gold components, buy LTTs with a low cost ETF. In theory you should keep the Max DD in cash, but with the right brokerage you can specify a sell off plan if it should come to that. However, I have not transitioned to this yet and am still using 3x ETFs. I have not transitioned because I haven't had the time to nail down account management details. Finally, I've spent a fair amount of time trying to figure out treasury futures vs. an ETF or the actual bonds and I just don't think I get them at a sufficient level of depth at this time.
Any thoughts on re balance?
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Sat Aug 31, 2019 9:40 pm

No, not really. This stuff is pretty volatile, so I'd suggest whatever you can live with and keep to the strategy. If in taxable, not more than once per year. I admit to some market timing with this particular portfolio. I don't think it has helped or hurt much.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Nov 08, 2019 1:43 pm

UST/TQQQ/VGSH 70/20/10 (The Desertish Risk Parity bullet)
VGSH/TQQQ/TMF/UGLD 50/25/12.5/12.5 (The PPish all-weather barbell)

2019 Performance
Close on 12/31/18 through the close on 11/07/19

Bullet: 30.11%
Barbell: 35.29%

It has been an exceptional year.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Nov 29, 2019 9:06 am

Not sure if I will posts stats but I flipped a large amount of a retirement account to 70% SCHR (ITTs) 20% TQQQ 10% UGLD. Accordingly, portfolio leverage is 160%. After a fair amount of analysis between ITTs and a STT/LTT mix I opted for simplicity as it really does not matter it seems which you go with.

Update (adding short backtest since 2012, no trading costs)

The above: 12.29 CAGR, -14.21 Max DD
1xETF PP: 4.96, - 8.07
1.6xETF PP: 6.82, -15.19 (using 2x ETFs and then scaled down for 1.6x leverage)
1.6xETF PP: 6.96, -15.74 (using 3x ETFs and then scaled down for 1.6x leverage)
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Wed Jan 01, 2020 11:51 am

UST/TQQQ/VGSH 70/20/10 (The Desertish Risk Parity bullet)
VGSH/TQQQ/TMF/UGLD 50/25/12.5/12.5 (The PPish all-weather barbell)

2019 Performance
Close on 12/31/18 through the close on 12/31/19

Bullet: 33.04%
Barbell: 46.50%
Personal/real: 39.07%

It was an exceptional year.

For 2020 my allocation will be 60% ITTs or US AGG bonds/20% TQQQ/10% TMF/10% UGLD
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Re: PP Inspired Leveraged Portfolios

Post by ozzy » Fri Jan 03, 2020 8:28 am

Hi all,

My 2019 leveraged PP results are in. I implemented this 5 years ago and have gotten a 14.93% CAGR. I rebalance yearly. Last year was spectacular, a whopping 67.71%! Here's a 5 year screenshot: http://www.tightwadweb.com/3x2019.jpg

Take care.
-Ozzy
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Re: PP Inspired Leveraged Portfolios

Post by var » Sun Jan 05, 2020 8:14 pm

ozzy wrote:
Fri Jan 03, 2020 8:28 am
Hi all,

My 2019 leveraged PP results are in. I implemented this 5 years ago and have gotten a 14.93% CAGR. I rebalance yearly. Last year was spectacular, a whopping 67.71%! Here's a 5 year screenshot: http://www.tightwadweb.com/3x2019.jpg

Take care.
-Ozzy
ozzy,

just to clarify you keep the same allocation? and rebalance once a year?

great result.
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Re: PP Inspired Leveraged Portfolios

Post by ozzy » Mon Jan 06, 2020 6:37 am

Var - correct. I prefer the simple hands-off approach. Same allocation (45% UPRO, 35% TMF, 20% UGLD), rebalance yearly. The less I tinker the better. Its a roller coaster ride, but I only keep a portion of my net worth in the Leveraged PP.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Mon Jan 06, 2020 3:13 pm

ozzy wrote:
Mon Jan 06, 2020 6:37 am
Var - correct. I prefer the simple hands-off approach. Same allocation (45% UPRO, 35% TMF, 20% UGLD), rebalance yearly. The less I tinker the better. Its a roller coaster ride, but I only keep a portion of my net worth in the Leveraged PP.
I ended up liking this so much I've kinda gone all in. Something around a 50/50 split between stocks and "other stuff" works quite well which is the allocation I report on. The astute reader will note that I'm essentially 60% Stocks 30% gold and 90% bonds. This is a mix that has done well over pretty much any time period. Part of my rationale as well is that I know, stomach wise, I could see any of the 3x ETFs get wiped out and step back in and retop...which I fully expect given historical performance for the three volatile components.

For those interested in this type of investing, there are some very good threads over on the bogleheads site that are closely related. I do have to smile as we've been at it much longer here.

Of note, NTSX is an ETF that I think should receive strong consideration if you are doing a UPRO/TMF mix. The cost is ~80% less than the 3x ETFs. If one equalizes for notional value held due to leverage, NTSX still comes out ~60% cheaper.

If the Nasdaq 100 wasn't my index of choice, I would be in NTSX
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Mon Feb 03, 2020 7:17 am

Thus far 2020 is off to a great start...I’m ranging +6.5 to 9.2%
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Feb 28, 2020 12:03 am

Still up 6%, that is all.
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