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That subreddit reminds me I've been meaning to follow up on https://www.bogleheads.org/forum/viewtopic.php?t=288192 https://www.bogleheads.org/forum/viewtopic.p

That subreddit reminds me I've been meaning to follow up on https://www.bogleheads.org/forum/viewtopic.php?t=288192 https://www.bogleheads.org/forum/viewtopic.php?t=288192 (outperforming the market by holding UPRO/TMF). Wish that person were still disclosing their returns over time.

smabie 5y ago
Not sure if they outperform on a risk adjusted basis but both UPRO and TMF are 3x levered (55%/45% weight) A more fair comparison would be like 33% UPRO and 66% TMF. This would get you a portfolio that is similar to SPY, but with some leveraged treasuries on top. Regardless, bonds have done really well due to the drop in interest rates over the last 10 years and I doubt they can go any lower. Bonds will probably perform a lot worse in the future, unless the fed wants to try out negative rates (unlikely). Also you don't need them to disclose their returns, you can construct your own version: https://www.portfoliovisualizer.com/backtest-portfolio https://www.portfoliovisualizer.com/backtest-portfolio Edit: constructing the portfolio, it does seem to outperform SPY on a risk adjusted basis, with a Sharpe of 1.25 from 2010-2021. However, my caveat about bonds still stands.
- quickthrowman 5y ago
  Agreed, long Treasurys has a low reward, high risk setup. Particularly if you believe the inflation narrative.
  - reducesuffering 5y ago
    The risk/reward in isolation isn’t useful, because the market has priced in and bid them up so to their favorable inverse correlation with equities the past 40 years. Assets are priced due to their usefulness in the risk/reward for a portfolio as a whole.
  - cudgy 5y ago
    Who buys long treasuries other than the Fed?
    - imtringued 5y ago
      Pretty much every nation that has a trade surplus with the USA, worse it's also possible that a trade surplus between two non USA countries can result in the purchase of treasuries if they transact in USD. I say "worse", because this money can only enter the US economy by making the government run a deficit, if it does not do this then unavoidable unemployment is the consequence.
reducesuffering 5y ago
They’re projecting future returns and correlations based on past 50 years (the ones we have easily available financial data) on constantly lowering interest rates. If asset inflation already pumped up both long term treasuries and stock assets (which pumped up 3x levered UPRO and TMF), then a follow on interest rate increase will equivalently destroy a stock asset and long term treasury portfolio, triply so for those. They think they’ve found an edge in the market (lol like major financial players don’t know about long term treasury and stock asset inverse correlation the past 40 years), but in reality they’ve just ignored the potential for substantial interest rate increases, because it’s not in their data, and they’re pocketing the extra on top until it blows up (they don’t realize it will).

smabie 5y ago

Not sure if they outperform on a risk adjusted basis but both UPRO and TMF are 3x levered (55%/45% weight) A more fair comparison would be like 33% UPRO and 66% TMF. This would get you a portfolio that is similar to SPY, but with some leveraged treasuries on top. Regardless, bonds have done really well due to the drop in interest rates over the last 10 years and I doubt they can go any lower. Bonds will probably perform a lot worse in the future, unless the fed wants to try out negative rates (unlikely). Also you don't need them to disclose their returns, you can construct your own version: https://www.portfoliovisualizer.com/backtest-portfolio https://www.portfoliovisualizer.com/backtest-portfolio Edit: constructing the portfolio, it does seem to outperform SPY on a risk adjusted basis, with a Sharpe of 1.25 from 2010-2021. However, my caveat about bonds still stands.

quickthrowman 5y ago
Agreed, long Treasurys has a low reward, high risk setup. Particularly if you believe the inflation narrative.
- reducesuffering 5y ago
  The risk/reward in isolation isn’t useful, because the market has priced in and bid them up so to their favorable inverse correlation with equities the past 40 years. Assets are priced due to their usefulness in the risk/reward for a portfolio as a whole.
- cudgy 5y ago
  Who buys long treasuries other than the Fed?
  - imtringued 5y ago
    Pretty much every nation that has a trade surplus with the USA, worse it's also possible that a trade surplus between two non USA countries can result in the purchase of treasuries if they transact in USD. I say "worse", because this money can only enter the US economy by making the government run a deficit, if it does not do this then unavoidable unemployment is the consequence.

reducesuffering 5y ago

They’re projecting future returns and correlations based on past 50 years (the ones we have easily available financial data) on constantly lowering interest rates. If asset inflation already pumped up both long term treasuries and stock assets (which pumped up 3x levered UPRO and TMF), then a follow on interest rate increase will equivalently destroy a stock asset and long term treasury portfolio, triply so for those. They think they’ve found an edge in the market (lol like major financial players don’t know about long term treasury and stock asset inverse correlation the past 40 years), but in reality they’ve just ignored the potential for substantial interest rate increases, because it’s not in their data, and they’re pocketing the extra on top until it blows up (they don’t realize it will).