compoundinglife
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Posts posted by compoundinglife
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Been playing around on Quantconnect.com writing some strategy back tests. Coming out of the bottom of 2009 (early march), 100 small caps with top dollar volume (Morning star only, must be in their smallcap core, smallcap growth or smallcap value styles), equal weighted did ~75% annualized until March 2011.
Here is the chart: https://www.quantconnect.com/terminal/processCache/?request=embedded_backtest_074ac30d3fd623b6acd82166a163195f.html
Trade report csv attached (zipped).
Similar to what was seen with the Wilshire 4500 equal weight.
Obviously this is time period cherry picking, but interesting.
But you have to know when the bottom is in :)
Yep. That is why I called out that I was cherry picking the timing.
Easier said than done. On different time frames the SPY is the better pick.
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Been playing around on Quantconnect.com writing some strategy back tests. Coming out of the bottom of 2009 (early march), 100 small caps with top dollar volume (Morning star only, must be in their smallcap core, smallcap growth or smallcap value styles), equal weighted did ~75% annualized until March 2011.
Here is the chart: https://www.quantconnect.com/terminal/processCache/?request=embedded_backtest_074ac30d3fd623b6acd82166a163195f.html
Trade report csv attached (zipped).
Similar to what was seen with the Wilshire 4500 equal weight.
Obviously this is time period cherry picking, but interesting.
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I would like to discuss how the most money was made from the depths of the last crisis.
The lesson from 2003 (after the 2000-02 deflationary bust) and 2009 (after the 2008 GFC) is -- buy the trashiest micro-caps you can and buy a bunch. Their share prices go up the highest.
I'm going to use the Wilshire Equal-Weight 4500 (ie, excludes the top 500 stocks in market cap and thus is the equivalent of throwing darts at all the small-cap names). Here's some data.
2003:
S&P 500 Tot. Return: +28.7%
4500 Equal-Weight: +97.5%
2009:
S&P 500 Tot. Return: +26.5%
4500 Equal-Weight: +88.0%
I had a study from the 2003 market that further stratified the returns. IIRC, it stratified the 4500 small caps by debt to equity ratio. No surprise, the bottom decile in terms of debt/equity (ie - highest debt to equity) did the best (well over 150% on average). In fact, there was almost a perfect negative correlation -- ie low debt equity did less well (vs the overall average of 88%) and each decile of greater debt-to-equity did better.
FWIW,
wabuffo
I can't seem to find an equal weighted Wilshire 4500 or extended market (ex-SP500) etf. Do you know if one exists in ETF or Mutual fund form? The results of SP500, SP600 and RAFI equal weights don't look as good.
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Now 6% SV, 6% EM, 12% Stable Value.
Is SV small cap value?
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Agreed. I think a pref + warrant deal is more likely with the airlines. On the flip side, there must be some advantages to owning NetJets and major airline. For example a loyalty program that spanned both. Efficiency improvements? Speculating, I don't know enough about the businesses to know if it impact returns.
Hmm, is NetJets a success currently? I remember it was not doing great at some point. I think it's too small to be mentioned anymore, so probably we can't know how it is doing.
Your right. It’s just a blip. Internet estimates put it around 300M top line in 2019.
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He explicitly said he won't buy an airline.
He said it was unlikely and cited the reasons why its complicate for BRK to buy one. I left with the impression that he might consider it in extraordinary circumstances.
"It'd be very unlikely we would do that," Buffett said. "I'm not saying it's impossible, but, it's complicated. There's a lot of complications because it's a regulated industry. Anytime you get into a regulated industry, you have more complications in transactions."
Yeah, he's too smart to not leave himself an out.
I'll bet that he won't.
See him buy airline tomorrow. 8)
Agreed. I think a pref + warrant deal is more likely with the airlines. On the flip side, there must be some advantages to owning NetJets and major airline. For example a loyalty program that spanned both. Efficiency improvements? Speculating, I don't know enough about the businesses to know if it impact returns.
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I think this will ultimately be an effort that succeeds or fails because of action(or inaction) at the local levels. Trump literally has nothing to do with this. He is not capable of really impacting anything any more than he does when he whines about the Fed. He s just a mouthpiece who behaves in a predictable way.
Most states immediately declared state of emergency, Trump has yet to do so. People I think are conflating Trumps actions with the responses. Sprinkle in a little media narrative and social media effect, and its easy to see how people think this is Italy. But on a local level, I think the work has been solid. And I again say this giving credit to politicians like Murphy and De Blasio, guys I generally think are shleps.
Some stuff is just preposterously priced right now. Other stuff, not so much. But thats almost always the case.
Action or inaction at the local level is impacted the Federal government as we have seen already. It has taken things to get to pressure cooker levels for local governments to ignore the feds.
Conflicting messages between federal and local officials has caused chaos and IMO slowed down reaction. Seattle's pro-active reaction to this was instigated by independent thinkers who had enough will and concern to ignore the CDC. Not every local government has the luxury of teams of scientist in their back yards studying this situation in depth. Additionally I think WA/Seattle would have done much more much sooner if they had more co-operation from the CDC on data collection.
I think your point is accurate, the battle will won or loss on the micro not macro level. But the battle in the hard hit areas would be farther along IMO if the administration had acted differently.
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He explicitly said he won't buy an airline.
He said it was unlikely and cited the reasons why its complicate for BRK to buy one. I left with the impression that he might consider it in extraordinary circumstances.
"It'd be very unlikely we would do that," Buffett said. "I'm not saying it's impossible, but, it's complicated. There's a lot of complications because it's a regulated industry. Anytime you get into a regulated industry, you have more complications in transactions."
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Anecdotal observation about the ranges of concern among the population.
Being in the Seattle area my family has been acutely aware of the situation as it has been unfolding. WA nursing homes are finally turning away visitors and Seattle Public Schools shut down after saying for weeks they would not. Friend who is a teacher reported that their principal tested positive and the school turned into a hazmat zone, he thought they were going to leave through a tube (E.T. reference).
On the other side of the coin, east coast family (at risk age group) who had been planning to visit someone in an LTC center in Oregon finally acknowledged our message about requesting they do not come up to visit us. But is still planning to fly cross country to the nursing home in Oregon because as of today the home is still allowing visitors.
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I enjoyed this interesting blog post from early February comparing two different methods of estimating CFR. Key take away for me is that "naive CFR" (cases / deaths) under estimates up front and rises to converge with actual CFR eventually. Where as the "resolved CFR" (deaths / (deaths + recoveries)) tracks the observed CFR with more accuracy than the naive CFR. Author's prediction/estimate is 1.6% CFR when estimating under reported cases.
https://blog.zorinaq.com/case-fatality-ratio-ncov/
Author is not an expert, take it with a grain of salt. But I learned a few things from reading this.
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I have 25% of assets in an account with limited options and strict rebalancing limits. It was 50% stocks (SP500 and International), 25% Total Bond and 25% Stable value. I shifted it this week to 60% stocks and 20% each of bonds and stable value. If prices are this level or lower when I can rebalance again (30 days) I will probably shift to 70%-75%equities. Rinse and repeat if it allows until I am at 100% equities. All my other accounts are 100% stocks except for some small cash positions and incoming dividends. So I figure I will slow boat this account to have some dry powder for buying the market if things get really bad.
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Yesterday bought some DAL, and a small token amount of OTM 2022 SAVE Leaps.
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GM?
I don't see it. GM is a value trade for Berkshire IMO. Do we know if its a Ted/Todd or Warren pick? At 2B it could be either? Additionally there might be some conflict of interest issues with the fact that they own dealerships.
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Cassius - when Carrefour was selling its 10% (?) stake in Costco back in the 1990s, Berkshire had the opportunity and passed due to Buffett's aversion to retail, despite Charlie's support for it.
File that in the errors of omission stack.
LOL 10% of Costo's market cap is just shy of Carrefour's market cap.
File that under boneheaded moves.
Just peak to trough from the financial crisis to date, COST is almost 20% annualized not including dividends. Sigh....
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Sorry to hear. Hope things work out fine for you and your family.
Thanks. We are doing great and not losing any sleep. Just staying informed exercising reasonable caution.
+1
Yeah, I'd +1 that too.
I don't want to diminish what's going on. This thing is definitely a nasty bug. But the reaction to it is definitely weird.
I lived in Toronto during SARS (I actually worked on the subway during the crisis) and I lived in London during H1N1 (England was one of the harder hit places). But I don't remember anything like what is going on right now. There was a general level of concern (I started to cough in my elbow) but life pretty much went on as usual. I don't remember being any shortage of masks in the heath care sector. People definitely didn't stockpile masks. The markets certainly didn't care because we were all fucked at that point anyway.
I just don't get why things are so much different this time.
Social media
This
Yes, if you frequent a site like reddit it is easy to see how social media has informed the response vs previous situations. There are tons of people asking if they should be worried about their fevers, coughs etc... And plenty of people responding saying "it sounds like you have it!", "you need to get tested!". Where as in the past you might just call your doctor and they would say, call us if it gets bad, your fine.
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Sorry to hear. Hope things work out fine for you and your family.
Thanks. We are doing great and not losing any sleep. Just staying informed exercising reasonable caution.
+1
Yeah, I'd +1 that too.
I don't want to diminish what's going on. This thing is definitely a nasty bug. But the reaction to it is definitely weird.
I lived in Toronto during SARS (I actually worked on the subway during the crisis) and I lived in London during H1N1 (England was one of the harder hit places). But I don't remember anything like what is going on right now. There was a general level of concern (I started to cough in my elbow) but life pretty much went on as usual. I don't remember being any shortage of masks in the heath care sector. People definitely didn't stockpile masks. The markets certainly didn't care because we were all fucked at that point anyway.
I just don't get why things are so much different this time.
Yeah, I don't take any of the discussion here as diminishing whats going on. I think its a healthy discussion. I just figured it would be useful to provide context about what it is like to be here. I don't know what it is like elsewhere but it has been very interesting to observe locally and in my social media bubbles.
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Sorry to hear. Hope things work out fine for you and your family.
Thanks. We are doing great and not losing any sleep. Just staying informed exercising reasonable caution.
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The question now is at what point does Washington State start to quarantine the hardest hit areas? This seems to be the play book in other regions in the world that lost control of the virus. The economic cost right now is too large for any public official to make the call. As everyone starts to understand the gravity of the situation (i.e. the confirmed cases skyrocket higher) they eventually will have no choice. At some point the fear of the health carnage will become greater than the current fear of the economic carnage.
My guess is the quarantine will likely happen in stages. Right now they are telling anyone who can work from home to do so. High risk people should stay at home. Soon all schools will be closed. And then finally we will get to a full on quarantine for a couple of weeks.
Again, i am basing the comments above on how other parts of the world where a cluster broke out handled the crisis. China, Northern Italy, South Korea and Iran. We will soon be adding Kirkland Washington to this list.
And there is a chance that the US has discovered a new way to manage this crisis in Washington State where a quarantine is not required. One possibility is for the US to decide to let the virus spread from Washington State into all states to speed up the process of infecting their populations and getting through this crisis quickly. Yes, the death toll will be much higher with this approach but it is only a flu after all; mother nature at work :-) And as the President said last night the death rate is not 3.4% but closer to 1% (his hunch). Americans now feel much better. I would expect flights to China, Northern Italy, Korea and Iran to start up again any day.
Yeah I think is a long con in terms of the quarantine. WA, Seattle and King County officials know where this is going but they are trying to ease into it to reduce disruption. If people fight on Black Friday for 60" TVs at Walmart, imagine what happens over the last box of TP at Costco if everyone is freaked the eff out because they have been told they should not be out. It could be total chaos. At least right now the TP buyers are just the bandwagon preppers. Officials are concerned about mass hysteria IMO.
For context, I am about 16 miles from the long term care center in Kirkland where the first deaths originated. Lots of people are confused and frustrated because they are getting conflicting information. For example teachers are frustrated because people are being told to work from home and avoid mass gatherings but they need to keep going to school which is arguably the worst place in terms of spreading (although you could argue having all those kids running around is worse). A local Toyota dealership had an employee suspected (later confirmed) and tried to hide it, not telling anyone. There are reports on social media of many people falling ill but the confirmed numbers seem really low. Downtown Seattle is a ghost town, the small business owners I know are freaked out they are going to lose their shirts which looks very possible right now.
Good times :D
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Interesting blog post from a researcher here in Seattle at the Fred Hutch Cancer Research Center. They are doing genomic epidemiology research. Using samples they had from the Seattle flu project ( https://seattleflu.org/ ) they were able to identify the second patient in Washington from a previous flu test sample and come up with a potential transmission chain linking it the first patient.
Cryptic transmission of novel coronavirus revealed by genomic epidemiology
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Selling off VTEB I have in taxable accounts for dry powder.
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More leverage, and tech heavy poo poo stuff should lead the way. If I was looking to hold overnight or longer term I'd find a different vehicle(duh).
I think they are both 3x. Yeah, Tech leading the way seems reasonable if there is a bounce back.
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TQQQ with a stop at $80. Just a short term trade in the event we bounce
Why TQQQ (nasdaq) over UPRO (SP500), just curious.
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I'm curious if the researchers realized that this wasn't risk-neutral because of opportunity costs, or if the writer just wanted to make things "simple". If you're in a company with a high ROE, then a 25% chance of a 300% return after 3 years (or 75% of nothing after one year) isn't even close to a break even proposition.
I think you'd be surprised at how little VPs of companies understand even their own incentive compensation structure. Like an option is basically a black box to them in terms of how it works. So you're right logically, but I think the point that there's risk aversion generally within corporate America very much rings true.
Yes. I worked at a company where you could get your stock comp in your desired mix of RSUs and options. The options provided a multiplier with regards to share exposure. Almost everyone I spoke to who had chosen some percentage of options had never actually calculated or knew how to calculate what the underlying had to do to outperform the RSUs. Granted it was not a financial firm. In my experience, if you walk around a large cap company and start asking non-C suite leaders what the companies key metrics are (Revenue, Revenue mix, margins, ROE etc..), you will be shocked (at least I was). Again not a financial firm, I would expect more in one, but don't know.
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Some yesterday and some today. VDE as a spec. MSG, MSGN, DD, IBKR. Also rebalancing a UPRO/TMF paired position idea I am playing with, found the idea on boggleheads.
How to make money from this crash - Lessons from 2008
in General Discussion
Posted
That performance included quant connects default brokerage model which models in some fees. I have not dug in to see how realistic they are. They have an Interactive Brokers model that I believe I can also use in back test mode. I have mostly been playing around with their platform as a learning experience and don’t expect I would actually use it to implement automated trading strategies so I haven’t dug to deep on frictional costs.