Thank you LI and Frank

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    Mark Vincent

    Thank you Frank and LI. I liquidated 2 days ago. Broke even year YTD. VIX over 50 did it for me that was the final decision. Will get back in when VIX is under 20 I think. As far is making money right now it’s a guess. You could short and make a killing or lose everything. I will remain on the sidelines.

    Mark V.


    Same here.

    Mark Vincent

    Risk Parity and Tactical Asset allocation is not going to work in this envirnment as the big guys need to unwind. Cash is king.


    I don’t like to go against the strategy signals but the way TMF and UGLD preformed this week as the markets tumbled didn’t make any sense at all.

    They worked well at the start of the month but something doesn’t seem right last few days. Rates are rising suddenly as stocks tank. TMF took big drops the final hour of trading too that didn’t seem logical with the actual interest rate changes.

    So cash it is until this gets resolved.


    Normally I always would stay the curse no matter what’s happening and wich Investment strategy i follow, but in this case I’m on the sidelines with expectation of my long term holdings.Most things reaction really abnormal in this exceptional circumstances.Let’s hope the best that things will go to normal.


    It may be wrong at the moment to liquidate the hedge (GLD or TLT) as for example TLT was trading last Wednesday 5% below the value of it’s assets. GLD is most probably also trading below its assets. This at least should recover once liquidity comes back to the markets.


    They probably fixed themselves right after I sold. I noticed they weren’t moving as much and interest rates were still moving higher fast but the ETFs stopped dropping. Pisses me off.


    “I don’t like to go against the strategy signals but the way TMF and UGLD preformed this week as the markets tumbled didn’t make any sense at all.”

    That’s why I liquidate as well. This kind of 3 sigma event will make everything move in the same direction and the usual hedging logic no longer work.


    I’d also like to give a vote of thanks to Frank and the LI team during this period.

    Thanks also for the interesting observation about looking at the Net Assets of the hedge tickers and seeing that they are below NAV. Certainly appears to be an opportunity…


    A few days after I went to cash, bonds righted the ship and rebounded fast. Stocks recovered. Gold jumped quickly. Of course they did. So frustrating. Had I just simply stayed put, I would have made back the losses I sustained by selling.

    I’m back now. Good or bad, I’m never doubting the signals again. I don’t care what happens going forward.

    If the markets can survive this black swan event, then I can’t think of one that could ever be worse.

    Good luck to all.


    Hi Deshan

    In one of Frank’s other posts, he suggests remaining out of the markets until the VIX has fallen to around 25.

    I think that the reason for this is that all LI systems are optimised on maximising Sharpe over a certain lookback period. This then gives the recommended ETFs for the following calendar month. My observation is that the systems are optimised to work best with a low(er) volatility environment.

    My sense is that the risk with VIX being as high as it now (52 today) is that the chosen ETFs can swing wildly high then low over multiple days during the following month. Given that each system, at the start of a month, chooses a greater or lesser exposure to the equity ETF and the hedge ETF, it might be down to luck as to whether the system chooses an allocation which is profitable during that following month (i.e. the daily results will be highly volatile and the monthly result not necessarily profitable despite ‘paying’ the price of high volatility).

    Sometimes, leveraged systems can give a windfall (for example, a greater than 10% daily profit) on an individual ETF position. One could take that profit (i.e. close the individual ETF position) and watch the remaining positions (i.e. checking that they do not fall into loss) until the end of the month and then rebalance. This, however, is more an ‘active management’ style.

    One could also say that investing is to a great degree about ‘not losing money’, which could be translated as not exposing one’s portfolio to excessive risk of loss (as we know that markets fall much more quickly than they rise and that drawdowns are emotionally hard to recover from and require ever greater percentage profits to cover the previous losses). Now is probably a time of excessive risk (without a sufficiently high probability of reward). Having said that, the VIX is coming down, and investing a small percentage of your portolfio (‘toe dipping’) might be a sound policy.

    Side note: I suspect that the lookback period also should be viewed in conjunction with the holding period. Thus, having an optimised lookback period of less than 20 days (i.e. the number of trading days in an average month) may give unexpected results when used with a monthly rebalancing system. A shorter lookback than 20 days might suggest a weekly rebalancing system. Perhaps the LI team can provide their observations on whether this makes sense.


    I understand the risks associated with leveraged funds, that’s why I hit the sell button when all three asset classes began falling in tandem very rapidly.

    I’m also aware of the VIX threshold that Frank has mentioned. The initial panic is over now even with the index near 50.

    I felt very comfortable going into this market correction with 70% hedge in March. But what I’ve learned is that simply staying the course is better because the Fed and the US Govt will always find a way to fix whatever is breaking.

    I’m back in this month and being 80% hedged feels great in this environment.

    One concern going into late next week is the 30 year treasury auction. There is speculation that the auction could fail and bonds could fall or crash if interest rates begin to rise rapidly.

    Other than that, the environment still favors bonds and gold. If they fail going forward, then so be it.

    I can’t let short term fluctuations affect my emotions anymore. The 3x leverage strategy has done me quite well over the past few years.

    Long term results are impressive.

    Over the last 12 months, Up 31% compared to SP500 (-14%).

    Past 2 years, 46% vs (-6%)

    Past 3 years, 116% vs 4%.

    And since I started the strategy in 2015, 255% vs only 21% for SP500.

    When you put those results in perspective, staying the course is best for me.

    Good luck to all.

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