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Imagine: You are holding all cash. The market resets to 2009 valuation levels. Jim's bottom detector fires. You can buy only 5 holdings, which you intend to hold for most of the next secular run. What do you buy?

I know Jim is going to load up on BRK. Many will want to own RSP. Maybe VT goes in there? What else?
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Imagine: You are holding all cash. The market resets to 2009 valuation levels. Jim's bottom detector fires. You can buy only 5 holdings, which you intend to hold for most of the next secular run. What do you buy?

I know Jim is going to load up on BRK. Many will want to own RSP. Maybe VT goes in there? What else?


10% BNS, 60% in BRK.*, 10% GWR, 10% in PHYS, 10% VZ
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10% BNS, 60% in BRK.*, 10% GWR, 10% in PHYS, 10% VZ

For clarity:
BNS is Bank of Nova Scotia?
GWR I get Genesee & Wyoming?
PHYS is Physical Gold
VZ Verizon

No rules about not holding ETF's here...
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For clarity:

BNS is Bank of Nova Scotia? -- YES.
GWR I get Genesee & Wyoming? -- YES.
PHYS is Physical Gold -- Yes; they hold the gold, not the end-user.
But unlike GLD, they really have all the
gold their shares claim, registered in the
the fund and held by the Royal Mint in
Toronto, Canada. Most similar funds may hold
physical gold, gold contracts, gold mining stocks
and other gold derivatives, but when the excrement
hits the ventilator, you might get stiffed.
VZ Verizon

No rules about not holding ETF's here...
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1) UPRO

2) UPRO

3) UPRO

4) UPRO

5) UPRO

(Not the first one to say it- I think it was a DrBob idea)

DoesMIWork
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UPRO

You're kidding, right?

"UPRO provides 3x leveraged daily exposure to a market-cap-weighted index...
...
As a leveraged product, UPRO is not a buy-and-hold ETF; it’s a short-term tactical instrument. Like many leveraged funds, it delivers its 3x exposure only over a one-day holding period. Over longer periods, returns can vary significantly from its headline 3x exposure to the S&P 500."
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UPRO

You're kidding, right?

"UPRO provides 3x leveraged daily exposure to a market-cap-weighted index...
...
As a leveraged product, UPRO is not a buy-and-hold ETF; it’s a short-term tactical instrument. Like many leveraged funds, it delivers its 3x exposure only over a one-day holding period. Over longer periods, returns can vary significantly from its headline 3x exposure to the S&P 500."





Might be worth a if in an extended bull from a 2009 valuation level.

Just giving it an eyeball on StockCharts, looks like it opened around 2.5 in Jun 2009 and now it is 38.8
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Over longer periods, returns can vary significantly from its headline 3x exposure to the S&P 500."

Ain't that the truth.

UPRO 38.80/2.36 = 16.4x

SPY 260.00/92.34 = 2.8x

Leverage: 5.8

DB2
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UPRO 38.80/2.36 = 16.4x
SPY 260.00/92.34 = 2.8x
Leverage: 5.8


Interesting, though actually reaching 2009 valuation levels will come with much fear that might make this choice difficult to execute on. That said, it's down only 3x SPY from the peak (http://schrts.co/b6pKKm) and I guess one could limit max DD by investing only 1/3 in UPRO and 2/3 in cash.

So no more conventional portfolios out there like SPY, VTI, VXUS, RSP?
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.3333 UPRO/.6667 SHY vs. straight SPY

$10000 turns into $25157 and $26867 respectively

Annual rebalance, yahoo annual total return data
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Forgot the fun one...100% UPRO $84237
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.3333 UPRO/.6667 SHY vs. straight SPY
$10000 turns into $25157 and $26867 respectively


How are you calculating that? Using the numbers above, which appear correct:
UPRO 38.80/2.36 = 16.4x
SPY 260.00/92.34 = 2.8x



$3,333 x 16.4 = 54,661 UPRO
$6,667 x 1.08 = 7,200 SHY
61,861

vs.

$10,000 x 2.8 = 28,000


Looks as if one could cap MDD at around 13% (UPRO goes to zero) and still match SPY.
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Annual rebalance, yahoo annual total return data

Just read annual rebalance, which here I guess could make that much difference.

And I also need to restate: MDD in my example would also be much higher. It would be 13% of original capital at risk.
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"You're kidding, right?"

I was not. When the market tanks so badly, no one but God know which ones are done and which ones will rebound, which ones died in the forest fire and which ones will live and grow stronger than before.

I looked at a lot of these kinds of things and asked myself, "What should I have done, had I known what I know now? I concluded that there's no fool proof way of knowing in advance which ones will survive and what the new leaders will be. It's almost impossible to beat UPRO in a bull market, even with FANTASTIC picks.

Just buy the index and then leverage.

DoesMIWork
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Just buy the index and then leverage.

I don't disagree with that, just don't think that these daily-reset 2x or 3x things is the best way to go. They *specifically* state that they should be used only for daily periods.

I'd be thinking more along the lines of something mungo suggested--leverage by buying a deep ITM call. XSP is 260.71, the March 180 call has 3X leverage and is almost all intrinsic value, only 1.49 time value. The Jun is similar.

Looks like somebody has that same idea.
The only Jun open interest (except for a couple of onsy-twosy) is on the 190, at 517 contracts.
Ditto for Match 190, at 568 contracts.

Other than that, not much ITM open interest until December.
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I looked at a lot of these kinds of things and asked myself, "What should I have done, had I known what I know now? I concluded that there's no fool proof way of knowing in advance which ones will survive and what the new leaders will be. It's almost impossible to beat UPRO in a bull market, even with FANTASTIC picks.

You nailed my intention. The idea is that there times to row, when there is no tailwind, and times to set sail and let the market carry you. 2009 valuations levels would certainly be one of those times to set sail, though would not necessarily a catastrophic forest fire IMO. The way I'm counting value we'd be just a little below the 100-year average at those levels: http://tinyurl.com/y7hlbjpt
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