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ZIV/MYRS – how to go on after the crash

I have been asked in several emails on how to go on with existing ZIV positions, so here is a short note for our subscribers which still hold MYRS/ZIV positions. As you know underlying to ZIV are short positions of the VIX Futures month 4-7. So ZIV moves are about the same as the moves of the medium price of these Futures. As you can see in the above VIX term-structure chart, the medium price for this Futures is about 19.50$. On February 1st, this medium price was about 14.70$, so its up about 4.80$ which should translate in a 30% drop of ZIV. Today's price of 19.5$ however is still quite low, and this price can well go to the region of 25$. If the correction continues or markets go sideways with high volatility, then ZIV can further go down quite a lot. This said I would not recommend to invest in ZIV at the moment. We also already said this in our last monthly strategy post. However if you are not afraid and still want to profit from the volatility spike and if you can trade VIX Futures, then the much safer way is to buy VIX calendar spreads. For this you would for example sell the VIX May Future and buy the September VIX Future. The price for such a spread is - 1.30$. This way you only invest in the price difference of the Futures and if these go up to 25$ you will probability not notice much as the September Future will make up the losses of the May Future. This VIX Future spread price of -1.30$ is a very rare occasion. Normally the curve is in contango which means that the further out a VIX future is, the more expensive it is. We only [...]

2018-02-06T09:02:14+00:00 By |18 Comments

The Logical-Invest monthly newsletter for February 2018

Logical Invest Investment Outlook February 2018 Our top 2018 investment strategies, year-to-date : The Leveraged Universal strategy with +8.93% return.   The NASDAQ 100 strategy with +8.59% return.  The U.S. sector strategy with +4.39% return. SPY, the S&P500 ETF, returned +5.64%. News: QuantTrader Light is available to all subscribers, even to single strategy ones. Just download a copy and login with your LI username/password. Depending on your subscription level you will be able to access the corresponding strategies. This gives you the opportunity to update your portfolio during the last day of the month. Major strategy update: Leveraging on our multi-strategy framework, Frank created a new Hedge strategy that includes Gold. The new Hedge is included in most of our strategies and helps decrease Treasury exposure. Read more in our detailed article. QuantTrader version 510S has a new backtester build into the consolidation tool. You can now check how a portfolio of strategies would have performed in the past. 4 new videos will guide you on how to use the portfolio builder and the QuantTrader consolidation tool to issue signals as well as use the Interactive Brokers portfolio rebalancing tool. We hope to publish more videos in the coming months. Feel free to tell us your preferences. Market comment: This month's newsletter comes with a word for caution. The S&P 500 has risen in a parabolic fashion this past month. Sentiment has turned highly positive and most market players are sitting on profits. This is all good but we think we need to prepare for a new, slightly inflationary environment that may prove challenging to navigate through. Rising inflation is already reflected in the 10-year Treasury yield reaching 2.7% . The question is how will higher borrowing costs affect small to medium businesses, some of which rely on cheap credit. Loss of profitability for these companies could trigger a correction [...]

2018-02-01T10:42:15+00:00 By |3 Comments

The Logical-Invest monthly newsletter for January 2018

Logical Invest Investment Outlook January 2018 Our top 2017 investment strategies: The Maximum Yield strategy with 64.84% return. The Leveraged Universal strategy with 49.13% return.   The NASDAQ 100 strategy with 28.30% return. SPY, the S&P500 ETF, returned 21.70%. News: All-Strategy subscribers will be able to use QuantTrader 'Light' at no additional charge. Market comment: As we mentioned in our year-end review, the past year was characterized by large returns in U.S. and foreign markets and sustained low volatility despite an increase in geopolitical risk. The S&P 500 (ETF: SPY) returned 21%, Europe (ETF: FEZ) 24% and emerging markets (ETF: EEM) 37%, It is also the year where the U.S. Federal reserve stopped it’s 10-year balance sheet and increased short-term interest rates. Long term treasuries (ETF: TLT) as well as emerging bonds (ETF: PCY) managed a +9% while U.S. corporate bonds (ETF: AGG) barely touched 4%. Despite the announced tightening, the U.S. dollar lost ground: -13% against the Euro and -12% against gold. The most exciting financial event of the year is the attempt to include cryptocurrencies as a new asset class into the mainstream financial system. Looking at our strategies, our top performers were our riskier strategies: MYRS, UIS 3X and the Nasdaq 100. This is in line with the market being almost ‘perfect’ for 2017 and having very few corrections which benefits pure risk taking. This may or may not continue in 2018 as there are signs of caution: Central banks are slowing down or reversing stimulus programs and real world costs of goods, especially outside the U.S., are rising. 2017 was characterized by the astounding rise of cryptocurrencies, which we have been tracking since May. Bitcoin futures are now available to mainstream traders through Interactive Brokers (via CBOE and CME). Interestingly you need a whopping $50,000 margin to short 1 Bitcoin. For longs, the margin is [...]

2018-01-02T04:16:16+00:00 By |0 Comments

The Logical-Invest Year End Review – 2017

Logical Invest 2017 Year In Review Overview: 2017 was another excellent year for our strategies with double digit returns and very low volatility. Although world economic data are positive, central bank tightening and possible rate increases may warrant more conservative approaches. We provide a basket of strategies to accommodate. Here are some of the best for this year: The Maximum Yield Investment strategy (+64%) The maximum yield was our very first quantitative strategy. It was first traded using VIX futures in order to collect mid-term volatility premium. It was then adapted to use ETFs. In the chart below you can see the theoretical backtested results before 2013 (left of the first line) and the live results to the right of the first line. The strategy was again improved in 2014 adding a variable Treasury component. It has performed in line with expectations. 2017 was an exceptional year with +64% return. MYRS History to 2108 The Universal Investment Strategy (+14.34%, Leveraged version: +49.13%) The strategy is an intelligent and dymamic version of the 60/40 equity/bond strategy. It was built with the 2008 crisis in mind where a  shift into bonds would have limited any catastrophic portfolio losses. As you can see from the graph, the live performance (after 2014) is in line with the backtested results. In 2015, where most investors lost money, it remained flat. It has yet to be tested in an extreme bear market. In 2017 we improved the strategy so as to dynamic allocate to TIPs (inflation protected Treasuries) in case interest rates start rising (causing Treasuries to underperform). 2017 performance was 14.34%. The  leveraged version of this strategy using 3x ETFs returned 49.13%. Logical Invest The Universal Investment Strategy 2017 Bond Substitution Strategies Many investors prefer the security and safety of [...]

2018-01-01T05:31:53+00:00 By |4 Comments

The Logical-Invest monthly newsletter for December 2017

Logical Invest Investment Outlook December 2017 Our top 2017 investment strategies, year-to-date: The Maximum Yield strategy with 51.57% return. The Leveraged Universal strategy with 43.37% return.   The NASDAQ 100 strategy with 29.84% return. SPY, the S&P500 ETF, returned 20.25%. News: Our strategy development software QuantTrader has been updated and can once again fetch intraday prices. Market comment: November was another positive month for the S&P 500 with the index gaining +3.06 %. More risk-sensitive indicators such as the Russell 2000, emerging markets indexes as well as high yield and foreign bonds showed increased volatility and signs of weakness. This may be due to expectations of coming inflation and interest rates hikes rather than economic factors. U.S. Treasuries gained 0.74% but still remain weak. Gold remains flat adding +0.36% for the month. Our strategies experienced some volatility mid-month but eventually recovered. Our best performer was the leveraged Universal Strategy (UIS 3x) with 6.70% as both SPY and TLT returned gains. Our worst performer was the World Top 4 (WT4) strategy shedding -2.39% mostly due to the Chilean ETF dropping -12.1%. Our enhanced permanent portfolio strategy (the "BUG") added a 0.7%, the Global Rotation Strategy added 1.63% and our Nasdaq 100 strategy managed 0.39% for the month despite some larger moves in it's individual allocations (LRCX -7.79%, ISRG +6.51) . Our Maximum Yield strategy reminded us that it can experience large corrections as volatility turned up mid-month only to recover later and end up with a slight (-0.62%) loss. MYRS remains above the 50% for the year. Christmas and New year's have always been kind to investors. This year, with the S&P500 already at +20% year-to-date we are curious if the market will once again reward risk takers. Either way we follow our models and keep a diversified and balanced exposure to the markets. We end this newsletter with a look at crypto-currencies. When we first [...]

2017-12-27T14:44:33+00:00 By |5 Comments

The Logical-Invest monthly newsletter for November 2017

Logical Invest Investment Outlook November 2017 Our top 2017 investment strategies, year-to-date: The Maximum Yield strategy with 52.51% return. The Leveraged Universal strategy with 34.36% return.   The NASDAQ 100 strategy with 29.34% return. SPY, the S&P500 ETF, returned 16.68%. Market comment: Just like September, October was positive for the S&P 500. The index gained +2.36% continuing its multi-month rise to new highs. U.S. Treasuries did not manage to recover after last month's losses, staying almost flat at -0.04%. Gold showed weakness returning -0.75%. Our strategies recovered quite well as they shifted weights into equity and decreased or replaced treasury positions with inflation protected notes (TIP) and convertible bonds (CWB). Our Nasdaq 100 strategy returned +7.81% for the month, while the Maximum Yield strategy added 5.94% passing the 50% return mark for 2017. Our leveraged Universal Strategy (UIS 3x) added 4.68%. Our Global Market Rotation (GMRS) and World Top 4 (WT4) strategies added 2% each. As our subscribers may remember, we recently updated the hedging mechanism of our strategies. In an article posted on December 2016, Frank explained why we are moving into a more dynamic hedging of the equity component by allowing strategies to choose from inflation protected Treasuries (TIP) as well as other types of bonds. This was done in anticipation of possible under-performance of Treasuries due to the Fed's normalization policy. These strategy "upgrades" are now working and paying off as our Universal Investment strategy has already shifted to TIPs and our other two strategies to convertible bonds. We are entering the traditionally best performing months of the year. Seasonally, equity markets exhibit some type of correction during the summer, followed by a volatile and often bearish September and October. Typically they end the year with strong November-December performances. This year we only had a minor correction back in August but no corrections since then. The index [...]

2017-11-01T06:35:46+00:00 By |0 Comments

The Logical-Invest monthly newsletter for October 2017

Logical Invest Investment Outlook October 2017 Our top 2017 investment strategies, year-to-date: The Maximum Yield strategy with 43.96% return. The Leveraged Universal strategy with 28.36% return.   The NASDAQ 100 strategy with 19.97% return. SPY, the S&P500 ETF, returned 13.99%. Market comment: The S&P 500 has reached new heights, gaining +2% for the month, influenced by a more optimistic tax reform outlook. On the other hand, president Trump's proposed tax cuts and the possibility of a growing U.S. deficit caused U.S. Treasuries to sell off, pushing the benchmark 10-year yield to 2.26% and the TLT price down by -2.32%. Most of our strategies had a pullback partly due to our strategies using the TLT etf (or TMF) as a hedge. Strategy losses ranged from -3.76% for the Nasdaq 100 to -0.11% for the non-leveraged BUG strategy. Winner for the month was the U.S. Sector strategy (+1.28%).  The Bond rotation strategy managed to stay positive at +0.21% despite the widespread bond sell-off. Our Gold-USD strategy lost -0.12% managing to hedge the gold correction (GLD: -3.37%) for the month. Seasonally, October is a volatile month but often leads to a favorable pre-Christmas equity environment. We wish you a healthy and prosperous 2017. Logical Invest, October 1, 2017 Strategy performance overview: Logical Invest Performance October 2017 Visit our site for daily updated performance tables. Symbols: BRS - Bond Rotation Strategy BUGST - A conservative Permanent Portfolio Strategy BUGLEV - A leveraged Permanent Portfolio Strategy GMRS - Global Market Rotation Strategy GMRSE - Global Market Rotation Strategy Enhanced GSRLV - Global Sector Rotation low volatility NASDAQ100 - Nasdaq 100 strategy WORLD-TOP4 - The Top 4 World Country Strategy UIS - Universal Investment Strategy UIS-SPXL-TMF - 3x leveraged Universal Investment Strategy AGG - iShares Core Total US Bond (4-5yr) SPY - SPDR S&P 500 Index TLT - iShares Barclays Long-Term Trsry (15-18yr) Follow my blog with Bloglovin

2017-10-05T00:01:43+00:00 By |2 Comments

The Logical-Invest monthly newsletter for September 2017

Logical Invest Investment Outlook September 2017 Our top 2017 investment strategies, year-to-date: The Maximum Yield strategy with 47.47% return. The Leveraged Universal strategy with 31.15% return.   The NASDAQ 100 strategy with 24.65% return. SPY, the S&P500 ETF, returned 11.74%. Market comment: After more than three months of extremely low levels of volatility, VIX spiked on August 10th peaking at the 16.04 level. The index has now dropped around the 10 - 11 level awaiting further possible market disruptions. The move has triggered an upward reaction to traditional safe heavens assets with TLT  (Treasury ETF) returning 3.41% and GLD (Gold ETF) 4.2%, for the month. This has benefited our strategies since a majority of them use these assets as a hedge. For September, the upcoming U.S. Congress needs to agree on a budget for fiscal year 2018 and raise, once again, the so-called debt ceiling, The Federal Reserve may start a large winding down of its crisis-era balance sheet while the European Central Bank is considering scaling back its asset purchases. Tensions between N. Korea and the U.S. may escalate. All these factors could cause VIX to spike. As mentioned in the previous newsletters, the dollar index continues to show weakness, benefiting foreign (non-U.S.) equity and emerging market bonds. The Euro continues to show some strength. Gold has been showing strength in 2017 after reaching a low on December 2016. Our best strategy performers for August are: The Nasdaq 100 strategy, recovered from last month's correction adding +4.56 %. The Bug Leveraged strategy added +3.54% to reach a very respectable 11.10% year-to-date. Our 3x Universal Investment strategy returned 3.17% for the month. The Gold-USD strategy made a 2.32% profit and finally turned positive for 2017. The performance of the Bug Leveraged strategy was due to holding full (leveraged) positions in 'safer' assets: GLD (+4.2%),  TLT (+3.4%) and PCY (2.18%). Our flagship [...]

2017-10-05T00:01:56+00:00 By |2 Comments

The Logical-Invest monthly newsletter for August 2017

Logical Invest Investment Outlook August 2017 Our top 2017 investment strategies, year-to-date: The Maximum Yield strategy with 46.05% return. The Leveraged Universal strategy with 27.11% return.   The NASDAQ 100 strategy with 19.29% return. SPY, the S&P500 ETF, returned 11.42%. News: Our professional portfolio software QuantTrader has reached version 5.0 with improvements including being able to load your custom set of strategies and a new consolidated signals screen. You can now allocate your funds in multiple strategies and have QuantTrader calculate the number of shares of each stock/ETF you need to buy.   QuantTrader Consolidated Signals   Market comment: Just as we mentioned in our last June newsletter, we continue to observe low volatility and a weakening dollar. The VIX index hit a record low on July 26th, falling temporarily to 8.84, a level last seen back in 1993. Moreover the index stayed under the 10 level for 10 consecutive days showing persistence.  The U.S. dollar fell to a 13-month low against a basket of currencies. The Euro has broken to the upside, reaching 1.18 against the dollar, a level last seen before December 2014. The Euro is 11% up year-to-date. Certain commodities that have had terrible returns for the past years are this month's top performers: Sugar, Gasoline, U.S. diesel Heating oil, Nickel, Coffee and U.S. oil (USO) ETFs all gave more than 10% returns for the month. Of course if you look at a graph you will see this is just a tiny reaction to multi-year bear markets. Taking advantage of the extended low volatility environment, out top strategy, the Maximum Yield strategy, added another +5.93% to reach +46.79% return for the year.  The Universal Investment 3x strategy added 2.54% for a +27.11% YTD return. All our other strategies were positive in July. The exception was the Nasdaq 100 strategy that corrected -3.1% causing this month's allocations to change significantly. As [...]

2017-10-05T00:02:10+00:00 By |2 Comments

The Logical-Invest monthly newsletter for July 2017

Logical Invest Investment Outlook July 2017 Our top 2017 investment strategies, year-to-date: The Maximum Yield strategy with 38.54% return. The Leveraged Universal strategy with 23.91% return.   The NASDAQ 100 strategy with 23.07% return. SPY, the S&P500 ETF, returned 9.17%. News: Our professional portfolio software QuantTrader continues to evolve and can now download data from 3 different providers: Tiingo, Yahoo and Google. Tiingo is an inexpensive solution for DYI investors that need good quality dividend-adjusted end of day data. Market comment: The U.S. Federal Reserve raised its benchmark federal-funds rate on June 15th by a quarter percentage point and hinted to further hikes. Individual investors remain skeptical of the bull market as the AAII survey shows 43.4% being neutral (historical average is at 38%). Mainstream market analysts keep a positive outlook quoting decreased risks and equity strength in Europe, global strength in developed and emerging markets, low unemployment in the U.S. and a sense that the Fed's tightening is predictable. We continue to see a low volatility environment and a weakness in U.S. dollar for 2017 which benefits non-U.S. stocks, bonds as well as gold. The European market returned 17% YTD while India and China achieved 20%+ returns for the year. UUP ETF (U.S. Dollar Index)   Out top strategy, the Maximum Yield strategy, added another +6.85% to reach +38.5% return for the year.  The Universal Investment 3x strategy had a correction in the last few days of July but came out positive adding +1.66% for a +23.9% YTD return. Both the Nasdaq 100 and the U.S. Sector strategies had corrections: -1.98% and -2.47% to achieve +23% and +5% YTD  respectively. All other strategies remained flat with gains/losses below 1%. A final note: We do keep a watchful eye on recent developments in the crypto-currency markets as Bitcoin and Ethereum are attempting to make their way into the mainstream. It may be [...]

2017-10-05T00:02:29+00:00 By |6 Comments