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What I really love is the simplicity of it. Just 2 stocks split 50/50 that rebalances twice monthly. Very some to execute vs those with three or more stocks.
Yes, I’m aware if the drawdown impacts, but I’m a long-term investor that can handle it knowing the potential future rewards are well worth the risks.
Looking ahead into next month, appears the allocations for gold will roar back into the mix. The shocker is what Quant is forecasting for stock allocations. I will be anxiously awaiting the actual allocation forecast later this week.
Call me crazy, but I think interest rates will never rise again and will only go lower perhaps forever. It wouldn’t surprise me if the 30 year yield is minus 2 percent by the end of 2022 and minus 5% by the end of the decade. It’s just numbers.
I believe that the stock market has become entrapped in almost everyone’s lives now than it was as late as the mid 90’s. The shift to 401ks is the reason and we can’t let those balances collapse.
If rates rise, the stock market will fall. We can’t have that happen. Only stocks are allowed to rise forever. Thus rates must fall forever. The FED is in too deep.
If rates fell to 0%, I think TLT would rise another 30% or so from today’s levels. TMF almost 80%.
This is just my opinion. Would be very interested to hear LI take on it.
Frank,
Thank you so much for helping me see this strategy.
Mark,
From what I can see, it has had excellent results with quarterly rebalancing. Thanks for sharing.
I tried creating an ini file but I must be doing something wrong because quanttrader won’t recognize it. Oh well. I was really wanting to see this strategy in action.
All leveraged ETFs have the risk to go to zero if the tracking index falls more than 30% in one day for 3x funds or 45% for 2x funds.
So, if you ever think the underlying fund can drop that much in one day, then avoid them.
For instance, TQQQ is a 3x leverage fund over QQQ (the NASDAQ 100). If QQQ were to drop 30% in one day, then TQQQ would drop 90% and basically be obliterated. The only day in the past few decades that might have occurred was Black Monday in October, 1987, when the DOW Jones fell 25% in one trading day.
Honestly, I feel that will never happen again because of all the circuit breakers in place now. However, imagine a 15% daily decline over the course of a few days. That wouldn’t kill the 3x leverage, but it would do some major damage.
The key with 3x funds is to never buy and hold them forever. They are best for rotation strategies and one should never ever be emotionally attached to were one never wants to sell. They are dangerous but very rewarding plays when you follow the rules and sell when appropriate.
A few years ago XIV fell to near 0. Google that fund and you will get details how many people suffered great losses on a fund that seem to always go higher, until it didn’t.
Mark,
Can you put your leveraged strategies in an .ini file? I have no idea how to see your strategy using QT.
Thanks.
I’m already a big fan of this new 2x Market Strategy. I’ve been a loyal follower of the 3x version since 2015 and have had a wonderful run with it. The 2x version seems to come with even less risk and barring my 10 day cash hoard back in March, I have been 100% invested since 2015. Yeah, I’ve been a rebel and the gains have crushed the market. The reason I’m 100% all in is because I’m playing with house money and I chop gains monthly into a cash account thats building beautifully.
But, for those with less risk tolerance, I think 40 to 50% allocation would be the way to go with 2x version.
As always, with any investment strategy comes risk, so invest wisely and to your tolerance level which LI has many to choose from.
I noticed a new ticker for UGLD as UGLDF. It appears to do exactly what UGLD used to do. Does anyone know if it can be trusted to trade as 3x leveraged gold like UGLD was?
And I’ve used TQQQ since 2015. The only notable difference is that TQQQ can have more dramatic drops during market volatility vs SPXL, but that is countered by its outperformance during normal market recovery.
I sold both today. I bought UGL with my UGLD holdings and put my ZIV balance into TQQQ (SPXL).
I think this is a sign that the market will continue to delist more leveraged ETNs and ETFs this year. They dont want the average retail investor outperforming the big money robbing financial firms anymore.
The March crash made instant millionaires out of some lucky TVIX holders too. The big guys hate that.
I dont believe there will ever be a next leg down. The market is rigged to only go higher. I suspect Trump called Powell and told him to do whatever it takes to make sure the market doesn’t fall while he’s president, especially since there is an election on the horizon.
If an event like this can’t bring the market down, what can?
It basically all boils down to this, the market can only crash if the FED doesn’t intervene. Since they have always intervened, they can never undo what they have already done because doing so would cause the market to collapse.
So, if they undo anything they’ve done before, the market will collapse. Since they don’t want that to happen, the market won’t collapse.
The stock market, in my opinion, is now rigged and manipulated by the FED in a way that it will never crash again for a long downward duration.
All previous economic rules we’ve grown to understood over the past decades are no longer in effect. The rules have changed and will always change to ensure a market collapse will never occur.
Everybody wins.
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.
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.
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.
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.
TMF has collapsed this week and UGLD didnt help out much either. It all started about an hour before the market closed on Monday.
I went all cash today because the whole market seems broken right now and I can live to fight another day once everything gets back to normal.
No way should the rates be rising when the market is on free fall.
If it is margin selling pressure and everyone is selling everything, then cash is king right now. This bond market has been something else these past few days.
The only thing making money is VXX and TVIX and short ETFs. Frank or anyone at LI, if you see this message, is there anyway these could work as a better hedge than gold and treasuries? I think VXX is up more than 100% this month which is a much better hedge than TMF because of the fear and panic in this market condition. TVIX, which is always an excellent product to short, has risen from $40 to more than $400 over the past two weeks.
Any insight would be most helpful. I wouldn’t be surprised if they shut the markets down for a period of time to stop the bleeding. This environment is absolutely crazy right now and it appears to just be getting started.
The allocations seem solid so far for March. Up 17% MTD!!! Interest rates continue to plummet and now people think they could go negative. If they do, TMF will continue to soar higher.
This strategy continues to deliver solid returns and is, by far, the best performer LI has produced overtaking the MYRS as #1.
In a perfect world, having one million dollars invested in this stategy would seem plausible, but reality is real. So I personally wouldn’t want that amount invested so aggressively and I’m sure others would agree. So I found comfort in using a base amount each month that theoretically produces an amount most comfortable for me based on CAGR and putting the monthly gains into a cash account that draws 2% APY when the rebalance is positive, which has been quite frequent lately. No complaints here.
Thank you guys for keeping this strategy alive and well. It’s perfect for me and anyone with a true taste of aggressive investing.
