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Frank Grossmann  

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  • SPY-TLT Universal Investment Strategy 20 Year Backtest [View article]
    If both SPY-TLT would go down for a longer period, then our strategy would reduce the total allocation up to 0% = cash. There may be quite periods where TLT shows positive correlation to SPY. However if there is a bigger market correction, then TLT normally quickly gets back to its safe haven role with negative correlation.
    The correlation in normal market periods is less important.
    Apr 14, 2015. 09:45 AM | 2 Likes Like |Link to Comment
  • SPY-TLT Universal Investment Strategy 20 Year Backtest [View article]
    Yes, here I meant to hedge the stock market ETF SPY with an inverse Treasury or in this case a short TLT put option.
    Apr 14, 2015. 03:42 AM | Likes Like |Link to Comment
  • Why You Can't Assume Mirror Price Results By Leveraged Long And Short ETFs [View article]
    There are two important facts to add. If your investment is flat, then you are right, leveraged ETFs are slightly worse than the normal ETFs, however if you rebalance or your investment goes only a little bit in the normal long term up direction, then most of the time a 3x leveraged ETF is the better way to go.

    Here an example:
    you buy 100'000$ TLT and 33'333$ of the 3x leveraged TMF (=3xTLT) on January 1. 2014. Both positions are substantially the same.
    April 13. 2015 your two positions have the following value:
    TLT = 131433$ = 31433$ profit = 30166$ profit after tax*
    TMF = 70390$ = 37057$ profit

    *In the TLT profit, there are 4224$ dividends of which you have to pay 30% witholding tax (=1267$). Leveraged ETFs normally do not pay dividends.

    Another important consideration is, that you only have to invest 1/3rd in the leveraged ETF. This means also that as a worst case scenario you can only lose 1/3rd of your money.

    So the 3x leveraged TMF is the better investment than TLT.
    Apr 13, 2015. 11:27 AM | 1 Like Like |Link to Comment
  • SPY-TLT Universal Investment Strategy 20 Year Backtest [View article]
    No, I sold SPY and TLT puts as a replacement of Spy and TLT. Selling puts is similar to a long position of the ETFs when they have a long expiry.
    Apr 13, 2015. 09:32 AM | Likes Like |Link to Comment
  • 'Hell On Fire' - The 3x Leveraged Universal Investment Strategy (Part I) [View article]
    As this is only an US strategy, it is well possible that we have a correction of both, US stocks and treasuries.
    Then you probably need to change to a strategy with more international exposure.
    Apr 10, 2015. 10:48 AM | Likes Like |Link to Comment
  • 'Hell On Fire' - The 3x Leveraged Universal Investment Strategy (Part I) [View article]
    You are right. The strategy profits a lot from that negative correlation. I don't know how long this will go on like this. Maybee some more years, but one day you will probably need to change to another strategy, however until then you should profit.
    Strategies are not made forever. Its the same like for the underlying ETFs. From time to time you have to change to another strategy which works better.
    Apr 10, 2015. 10:45 AM | Likes Like |Link to Comment
  • 'Hell On Fire' - The 3x Leveraged Universal Investment Strategy (Part I) [View article]
    If you rebalance these strategies, then you normally sell one ETF and buy the other some minutes later. So if the EOM effect has a positive effect on the ETF you sell, it will have a negative effect on the other ETF you buy. Over time I would say this way the total EOM effect is about zero.
    Apr 7, 2015. 08:50 AM | Likes Like |Link to Comment
  • 'Hell On Fire' - The 3x Leveraged Universal Investment Strategy (Part I) [View article]
    I always thought that you need to have a strategy if you invest your money. Cliffs strategies are simple and can be used by any serious investor. Btw, the strategy is not all, the selection of ETFs is also very important and cliff does a very good job to find out which ETFs play well together in a portfolio.
    Apr 6, 2015. 04:53 AM | Likes Like |Link to Comment
  • 'Hell On Fire' - The 3x Leveraged Universal Investment Strategy (Part I) [View article]
    A leveraged strategy like this one is not more risky than any other strategy if you don't invest too much. You control the risk. Instead of investing 100'000$ in the non leveraged strategy you may invest 33'000$ in the leveraged strategy and keep 77'000 as cash. Your return is about the same, but your maximum loss is limited to 1/3rd of your capital.
    Apr 6, 2015. 04:40 AM | 3 Likes Like |Link to Comment
  • 'Hell On Fire' - The 3x Leveraged Universal Investment Strategy (Part I) [View article]
    Btw, with such backtests we can not prove that such a strategy works in the future, but at least we can show that it worked in the past. If you can prove it worked in the past, then the chance is pretty high it will continue to work for some more years. If it stops working, then stop using it and use another backtested strategy.
    Most investors take investment decisions whout any strategy behind and without checking if it would have worked in the past. The chance is nearly 100% that those investors will fail in the next bigger market correction.
    Apr 6, 2015. 04:20 AM | Likes Like |Link to Comment
  • SPY-TLT Universal Investment Strategy 20 Year Backtest [View article]
    Yes, i already hedged by selling otm put options on TLT with a long expiry (6-12 month)
    TLT seems to have the most liquid options. The futures (30 year or Ultra bond) are not as liquid as TLT for options.
    Apr 4, 2015. 12:39 PM | 1 Like Like |Link to Comment
  • The End Of EOM? Strategy And Re-Balancing [View instapost]
    The problem is that the shorter the holding time of your ETFs is, the bigger is the influence of random "noise" market movements. Also the up-tick buy down-tick sell allows to equalize the spread.
    This was the setup which allowed to generate a good performance now for 20 years.
    Apr 1, 2015. 09:09 AM | Likes Like |Link to Comment
  • The End Of EOM? Strategy And Re-Balancing [View instapost]
    We made a lot of different backtests to check how to rebalance our strategies. You do not need to do any market timing. just sell your old position somewhere during the first two days of the month and buy immediately the new position. If you try to time the market, many times you can not buy the new position to the expected low price and after some time you just need to buy it anyway at a much higher price.
    Apr 1, 2015. 08:55 AM | Likes Like |Link to Comment
  • The End Of EOM? Strategy And Re-Balancing [View instapost]
    I think it is a good thing. It shows that it makes not a big difference anymore when you rotate your ETFs.
    Mar 31, 2015. 08:52 AM | Likes Like |Link to Comment
  • Logical Invest Strategy Performance For 2014 [View instapost]
    We did some walk forward backtesting, if it is that what you mean.
    You can easily check the performance of all strategies directly in the charts on our web-site http://bit.ly/15IIHte.
    We try to eliminate confirmation bias by selecting for example all world market ETFs rather than selecting only the ETFs which did well in the past.
    But some strategies like UIS only work if the environment stays about the same as for the last 20 years. It is well possible that a strategy does not work well anymore in the future. Best thing to do is then to select always the strategies which do well, similar to selecting ETFs which do well inside a strategy.
    Mar 31, 2015. 08:49 AM | Likes Like |Link to Comment
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