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varan

varan
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  • The ABCs And XYZs Of Dividend Investing [View article]
    The first article on SA that discusses DG stocks within a rational framework. No hype, no extravagant claims, no mystical assertions, no conspiracy theory, no belittling of statistical concepts and MPT and pointy haired academics.

    Excellent. Waiting for the next one.
    Aug 21 06:27 PM | 2 Likes Like |Link to Comment
  • Is The Global Financial Asset Portfolio The Perfect Indexing Strategy? [View article]
    nice analysis that fills on SA a giant void on the importance of proper allocation.
    Aug 21 12:35 PM | Likes Like |Link to Comment
  • 3 Lessons From The Galena Scandal [View article]
    After reading the comments on GALE and Herbal Life on SA one would be not too wrong in concluding that even if someone writes about how bad an investment Enron was, the defenders will come out in full force to promote the company long dead.

    Good examples for readers to learn from - to be skeptical of all claims on financial sites, especially the extravagant ones that offer incredibly high rewards or very low risk such as almost guaranteed income for life that increases at a rate higher than inflation.
    Aug 21 11:33 AM | 2 Likes Like |Link to Comment
  • 3 Lessons From The Galena Scandal [View article]
    Not all GALE promoters on SA used false identities. Perhaps not all were paid for the promotion. Some may have been directly paid by gullible readers for the promoters' 'advice'.
    Aug 21 11:07 AM | 2 Likes Like |Link to Comment
  • Simple Tactical Methods Incorporated Into An Equity-Treasury Hedge Strategy [View article]
    My calculation is based on monthly returns. Perhaps you are looking at the daily returns. Even then, I think that VWINX drawdown can be used a some sort of benchmark for drawdowns.
    Aug 20 11:08 AM | Likes Like |Link to Comment
  • Simple Tactical Methods Incorporated Into An Equity-Treasury Hedge Strategy [View article]
    The return of SSO is supposed to be 2X return of SPY on a daily basis, not necessarily over any other period.
    Aug 20 12:35 AM | Likes Like |Link to Comment
  • The Journey To And Through Retirement [View article]
    Reminds me of the retirement calculators that came of vogue in the eighties after Reagan had begun the GOP project of decimating the defined pension plans (and boy was he successful).

    Most of the time these calculators used to tell me that in order to achieve my goals I would essentially have to cut all expenses except perhaps for food and housing. No way an ordinary person could have followed that. Just an illustration of the fact that projecting decades into the future is wrought with lots of uncertainties and is not very useful.
    Aug 19 09:16 PM | Likes Like |Link to Comment
  • Simple Tactical Methods Incorporated Into An Equity-Treasury Hedge Strategy [View article]
    This might be useful

    http://bit.ly/1oOcRUv

    Backtest results have to be adequately deflated.

    There are many strategies whose returns are mind-boggling in back tests for short time periods, sometimes even for the last ten years, especially if you optimize some parameters. For some, e.g. GMR, it is possible to perform back tests for a longer period using the almost equivalent mutual funds, and the results are always worse.

    The main reason is that the correlations (or more precisely the lack of correlations) change over time - e.g. correlation between VFINX and VUSTX during 1991-2014 vs. the correlation between SPY and TLT during 2003-2014.

    Which is not to say that the strategies that you have described will not be better than many alternatives. I just want to dampen the enthusiasm a bit in light of the other work in this area. The best example of the over-enthusiasm on the basis of back tests is the slow burn of the ETF GTAA which was launched with great fanfare but did not at all live up to its promise generated by the results of years of back tests.
    Aug 19 01:36 PM | 1 Like Like |Link to Comment
  • Simple Tactical Methods Incorporated Into An Equity-Treasury Hedge Strategy [View article]
    Thanks Algyros.

    I found this summary of the pitfalls of expecting to consistently get over 20% annual returns over a long period.

    http://bit.ly/1oXbtJt
    Aug 19 01:05 PM | Likes Like |Link to Comment
  • Simple Tactical Methods Incorporated Into An Equity-Treasury Hedge Strategy [View article]
    Any strategy that gives you growth > 20% (or even >18%) is bound to ultimately fail. Your sights are too high. Someone once did a calculation and published the results somewhere that 20% CAGR will lead you to own the whole stock market in a certain number of years.

    The best balanced fund in terms of drawdown is VWINX, whose drawdown was around 18.9% in 2008-2009. Anything lower than that is good enough.
    Aug 19 11:33 AM | 1 Like Like |Link to Comment
  • Simple Tactical Methods Incorporated Into An Equity-Treasury Hedge Strategy [View article]
    My purpose was not to present VTI/TLT as something better (the apt comparison would be with the TLT/SPY in this article), but point to a simpler method that does not depend on moving averages etc.

    Anyway, here are the results for quarterly switching of VTI/TLT (there may differences from ETFReplay, as I switch on the first trading day of the quarter, and use the returns for the three prior calendar months):
    2003 15.47%
    2004 1.59%
    2005 5.89%
    2006 11.37%
    2007 19.11%
    2008 11.09%
    2009 32.99%
    2010 7.75%
    2011 38.40%
    2012 10.11%
    2013 29.01%
    2014 13.24%

    CAGR 16.37%

    Max drawdown 16.9%
    Sharpe 1.05

    The drawdown is quite high with respect to the author's SPY/TLT, but I think that the substantially higher CAGR (16.9% vs. 9.3%) more than compensates for it.

    If you are uncomfortable with going all in with one of VTI or TLT, you can use Naive Graham ( http://bit.ly/1jbcPEt and http://bit.ly/1oWOpuk ) . With VTI/TLT you get a CAGR of 13.1%, max DD of 14.3% and Sharpe of 1.14.

    With both paired-switching and Naive Graham, their are no annual losses during 2003-2014.
    Aug 19 09:58 AM | 1 Like Like |Link to Comment
  • Simple Tactical Methods Incorporated Into An Equity-Treasury Hedge Strategy [View article]
    The simplest strategy using TLT because of its negative correlation with the market is to switch between VTI and TLT (paired switching) on the first trading day of every quarter depending on which one did better during the prior quarter. You can do this every month as well, but use the prior quarter's return. This strategy would have done very well during 2003-todate, and would have completely avoided the 2008 melt down (11% annual return in 2008 with quarterly switching, and 17% annual return in 2008 with quarterly switching). YTD the quarterly strategy as returned over 13%. The strategy works with varying degree of out-performance if VTI is replaced by any other ETF/mutual fund which is nominally correlated with the market such as IJJ, IVE, RPV, etc. The simplicity of this approach is quite remarkable especially since the performance would have been so good during the last ten years.

    Correspondingly you can do the same with the MVV/UBT, SSO/UBT. QLD/UBT, DDM/TLT, and UWM/UBT pairs, but MVV yields the best results.

    Likewise the UMDD/TMF pair also yields very good results. Back tests based on simulated data for UMDD and TMF suggest that the best switching period for this pair may be one or two months (about 30% CAGR for 1997-2014 on the basis of simulated data).

    I am a bit wary of methods based on search for the optimal weights as that may lead to non-robust strategies that may at some point not perform as well as in the back tests.
    Aug 19 01:38 AM | 3 Likes Like |Link to Comment
  • Supply-Side Versus Keynesian Economics [View article]
    You take Kudlow and the hack from Heritage (everyone from Heritage is a hack) this seriously?
    Aug 18 11:50 PM | 3 Likes Like |Link to Comment
  • A Diversified, All Hedged ETF Portfolio [View article]
    Nice, but is there any way to evaluate the performance for a longer time period? Obviously, less than a year of history cannot be used to make any definitive judgment.
    Aug 18 01:17 PM | 1 Like Like |Link to Comment
  • Build A 'Whatever Happens' Portfolio... Now [View article]
    @JLS

    The portfolio of 50% even in these stocks and 50% TLT would have done reasonably well during 2003-todate (actually slightly better than SPY), with only about 5% loss in 2008.

    Proper allocation is something that is not given as much emphasis in this forum as necessary.
    Aug 17 05:22 PM | Likes Like |Link to Comment
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