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  • A Simple Way To Outperform The S&P 500 [View article]
    This article properly demonstrates the outperformance of Smallcaps, as originally explained by Fama and French.
    Jan 5, 2014. 07:20 AM | Likes Like |Link to Comment
  • A Simple Way To Outperform The S&P 500 [View article]
    I must point out the irony of repeatedly stating "in the long run", while using only 4-7 years of history in the charts.
    Jan 5, 2014. 04:53 AM | 1 Like Like |Link to Comment
  • The Case For Long-Short VIX Portfolios [View article]
    Hello Michael,

    I appreciate your interesting article. I've recently taken a VIX position which may or may not fit your definition of hedged, and I'd appreciate any comment you have:

    Sell 1 VXX 13 Call
    Buy 3 VXX 16 Calls
    2-3 months out, and I will roll (or close out) by the time it is 30 days from expiration.

    Here the short position was made to lower the overall cost of the trade, rather than to reduce roll costs. But will it have that effect, and will the roll costs of the near-the-money 13 strike be greater or less than those for the deeper OTM 16 strike?

    May 15, 2013. 01:19 AM | Likes Like |Link to Comment
  • ETFReplay Portfolio For May [View article]

    I have done quite a bit of momentum strategy design and back testing on ETFreplay (with very little success) and on ETFscreen (with much better success).

    Sector rotation momentum strategies have not worked well for me at all. I attribute this to the high correlation between sectors, especially during times of declining markets. The big outperformance of momentum strategies comes from getting out of an asset class when it starts turning down. US equity sectors are simply too correlated to make money by rotating between them, in my opinion.

    A broader strategy of asset class rotation based on momentum is much more effective, and achieves substantial outperformance of the S&P500, at reduced drawdown and SD. There has been a lot of recent research on this published by Varadi, Antonacci, and others.

    May 3, 2013. 03:21 AM | Likes Like |Link to Comment
  • ETFReplay Portfolio For May [View article]
    Etfscreen has 5y benchmarking for free. With a premium account it has benchmarking going back to 2003, but that is of limited value as most of the ETFs weren't around back then, so I have found the pre-2008 back testing to be of less than expected value. More valuable in the premium subscription is the ability to step back through the backrest and see the trades and positions at each point in time.
    May 3, 2013. 03:10 AM | Likes Like |Link to Comment
  • ETFReplay Portfolio For May [View article]
    It's odd to me that gets so much publicity, and use, when it provides such a very basic functionality. It only supports 5 variables:
    - Define an ETF list
    - X period return
    - Y period return
    - Z period volatility
    - Weights between these 3 factors provides a far more robust strategy capability, including MA crossovers, MACD, custom functions, user-defined variables, etc. It can handle far more advanced screens, and I've been able to make very effective momentum screens with it (CAGR > 20% with SD and max drawdowns < 15 %).
    I'm in no way affiliated with etfscreen, but have substantial real money following a strategy I've developed using their tools.

    It's worth a look.
    May 1, 2013. 07:32 PM | Likes Like |Link to Comment
  • An Annually Updated And A Permanent Portfolio Of Dividend Growth Stocks [View instapost]
    I think if you have to pay anywhere near 8% to borrow funds, you definitely should not do so for investing purposes. I'm paying 1.66% right now at Interactive Brokers and using it relatively conservatively, to hold a 2x leveraged position in Jeffrey Gundlach's Doubleline Total Return (DBLTX). I think that's a good use of cheap funds currently.
    Mar 7, 2013. 04:38 PM | 1 Like Like |Link to Comment
  • Making Buffett's Alpha Your Own [View article]
    If the theory is that low-beta equities will outperform the S&P500, then to capture that most purely you would buy $100 of SPLV and sell short $73 of SPY (as SPLV has a beta of 0.73). Or do the same with LEAPs.

    Have you looked at whether this is a profitable trade?
    (It's not just that I'm lazy, but I'm traveling and can't check it myself now).

    Jan 21, 2013. 06:25 AM | Likes Like |Link to Comment
  • Doubling The Return Of The S&P 500 Over 20 Years [View article]
    I would like to see a low volatility product that controlled for sector exposure, which I think would create better diversification while still being true to the concept.

    I believe you're looking for USMV. It maintains the sector weighting of the S&P500, while holding the lowest-volatility stocks in each sector.
    Jan 21, 2013. 06:23 AM | 1 Like Like |Link to Comment
  • Hedging For Disaster: 5 Plays That Make 500% If The Market Falls [View article]
    Too late at night for me to catch the subtlety, I guess. Cheers.
    Oct 25, 2012. 06:15 PM | Likes Like |Link to Comment
  • Hedging For Disaster: 5 Plays That Make 500% If The Market Falls [View article]
    So, your definition of hedging is buying more of a stock as its price falls?

    I don't think that the author's definition of hedging. Or most anyone else's. Perhaps you are confusing hedging with "averaging down your cost basis" - which is something quite different.
    Oct 23, 2012. 09:46 AM | Likes Like |Link to Comment
  • Are Low-Volatility ETFs Robust Or Just A Fad? [View article]
    As galicianova mentions below, iShares USMV aims to do exactly that - keep the sector weightings roughly the same as the S&P500, but pick the least volatile equities within each sector. I much prefer this strategy, and have moved my domestic index holdings over to USMV. There are also international, EM, and Canada versions by iShares.
    Sep 4, 2012. 09:53 AM | 1 Like Like |Link to Comment
  • Apple: Selling Puts Ahead Of Earnings [View article]
    So, here we are a day later. Apple's missed earnings estimates by a wide margin. It's received a downgrade and lowered Q4 estimates by analysts. The stock is off 5%.

    Too bad for the guy who made this trade!

    Except for the small matter that... It's up. The position could be closed right now for $2.13, a 0.30 gain, or 0.5% gain on the margin requirement. Not bad for a bet in the wrong direction and a 1-day holding period. Alternatively, the trade could be held longer, with the trader increasingly confident that the market has already priced in the bad news. But I would sell; ther trade went against me, and I'd be done with it after capturing the benefit of the drop in option prices due to reduced implied volatility after the announcement.

    A well-planned low-risk trade.
    Jul 25, 2012. 10:21 AM | 2 Likes Like |Link to Comment
  • MLPA Is The Cheapest MLP ETF [View article]
    Thanks, Ron. I hadn't seen that.
    I think the right path for me is clear - I'm sticking with AMJ for my MLP exposure.

    May 15, 2012. 07:40 PM | Likes Like |Link to Comment
  • MLPA Is The Cheapest MLP ETF [View article]
    I just came across this just-launched MLP mutual fund, which mentions simplified reporting through a 1099. Any idea whether this will suffer from the double-taxation of MLPA and the other C-corps?
    May 14, 2012. 11:10 PM | Likes Like |Link to Comment