PP Inspired Leveraged Portfolios

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

Moderator: Global Moderator

modeljc
Executive Member
Executive Member
Posts: 220
Joined: Sat Feb 04, 2012 11:52 am

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.
User avatar
Kbg
Executive Member
Executive Member
Posts: 1807
Joined: Fri May 23, 2014 4:18 pm

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.
modeljc
Executive Member
Executive Member
Posts: 220
Joined: Sat Feb 04, 2012 11:52 am

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.
modeljc
Executive Member
Executive Member
Posts: 220
Joined: Sat Feb 04, 2012 11:52 am

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.
modeljc
Executive Member
Executive Member
Posts: 220
Joined: Sat Feb 04, 2012 11:52 am

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.
User avatar
StrategyDriven
Junior Member
Junior Member
Posts: 7
Joined: Thu Jul 09, 2020 5:58 pm

Re: PP Inspired Leveraged Portfolios

Post by StrategyDriven » Fri Nov 06, 2020 4:29 pm

I use to leveraged version of the Permanent Portfolio, one is 200% leveraged, the other 269%. For a no-fuss strategy, I like it.

Perm+
https://www.portfoliovisualizer.com/bac ... tion7_1=25

Perm+ Max
https://www.portfoliovisualizer.com/bac ... ion11_2=12


Image

Image
User avatar
Kbg
Executive Member
Executive Member
Posts: 1807
Joined: Fri May 23, 2014 4:18 pm

Re: PP Inspired Leveraged Portfolios

Post by Kbg » Sat Nov 07, 2020 5:58 am

Your data doesn’t extend back far enough and using monthly data and assuming it will be a good estimate for a DAILY reset 3xETF is extremely risky.

Just trust me on this one...269% leverage is not a good plan/idea (unless you you are good with blowing up your account)

Lesson 1 with backtesting. You are highly likely to see worse than is in the data.

Lesson 2. Never do anything that doesn’t survive in the data because it has actually happened.

269% leveraged doesn’t adhere to lesson 2.
User avatar
StrategyDriven
Junior Member
Junior Member
Posts: 7
Joined: Thu Jul 09, 2020 5:58 pm

Re: PP Inspired Leveraged Portfolios

Post by StrategyDriven » Sat Nov 07, 2020 1:40 pm

Kbg wrote:
Sat Nov 07, 2020 5:58 am
Your data doesn’t extend back far enough and using monthly data and assuming it will be a good estimate for a DAILY reset 3xETF is extremely risky.

Just trust me on this one...269% leverage is not a good plan/idea (unless you you are good with blowing up your account)

Lesson 1 with backtesting. You are highly likely to see worse than is in the data.

Lesson 2. Never do anything that doesn’t survive in the data because it has actually happened.

269% leveraged doesn’t adhere to lesson 2.
It has been back tested 40 years with similar funds and I’m quite comfortable with how it back test and how it’s performed since I’ve been using it. I appreciate your thoughtfulness.
User avatar
Kbg
Executive Member
Executive Member
Posts: 1807
Joined: Fri May 23, 2014 4:18 pm

Re: PP Inspired Leveraged Portfolios

Post by Kbg » Sat Nov 07, 2020 3:55 pm

Oh good, so you are using daily data properly adjusted for 3xETFs. Rock on if you are good for those results during the 1970s.
User avatar
Mark Leavy
Executive Member
Executive Member
Posts: 1142
Joined: Thu Mar 01, 2012 10:20 pm
Location: US Citizen, Permanent Traveler

Re: PP Inspired Leveraged Portfolios

Post by Mark Leavy » Sat Nov 07, 2020 7:42 pm

Hey Kbg,
Just another thank you for your thoughtful perspective. I think I’ve got the dynamite in my portfolio properly firewalled, but now you have me running more ‘what ifs’.

Paranoia is a good thing.
Mark
User avatar
Kbg
Executive Member
Executive Member
Posts: 1807
Joined: Fri May 23, 2014 4:18 pm

Re: PP Inspired Leveraged Portfolios

Post by Kbg » Sun Nov 08, 2020 5:54 am

Of course these things are a personal risk preference but for me 1.8x is as much as I will do. 2x is ok, north of 2.5 I think is nuts. The guys over on Boogleheads Hedgefundie’s Big Adventure thread mixes...completely nuts in my view. One can only assume they are younger and haven’t had their heads handed to them yet with enough money that it hurts.
User avatar
ozzy
Executive Member
Executive Member
Posts: 162
Joined: Sat Dec 17, 2011 9:34 pm
Location: Tampa, Florida
Contact:

Re: PP Inspired Leveraged Portfolios

Post by ozzy » Sun Nov 08, 2020 7:20 am

I swapped out my TMF for UBT to reduce bond leverage. Now my leveraged PP is: 40% UPRO, 30% UBT, 30% UGL. This puts me at approximately 2.3x leverage overall.
Post Reply