IEF Forum Topics
- All Comments on IEF
- General Discussion on IEF
- Tracking Mean Reversion After Bad Months [view article]
- Treasury Bonds: The Short of the Century [view article]
- Time to Short Both Long-Term Bonds and Crude [view article]
- How the Fed's Decision Impacts You [view article]
- Inflation Fears Are Overblown [view article]
- The Great Fed Rate Cutting Myth: Look Out Below [view article]
- REITs Are Getting Expensive Again [view article]
- Global Returns: Stocks Down, Bonds Down [view article]
- Bond Expert: Wednesday Outlook [view article]
- Today's Market Performance [view article]
- Bond ETFs: Are Treasury Bonds Entering a Downtrend? [view article]
- Global Interest Rates [view article]
loading ...Recent IEF Articles
- Thursday Outlook: Running of the Bears
- Wednesday Outlook: Holding Support
- Tracking Mean Reversion After Bad Months
- Tuesday Outlook: Oversold Conditions Remain
- Time to Short Both Long-Term Bonds and Crude
- Friday Outlook: End of the Bull
- How the Fed's Decision Impacts You
- Inflation Fears Are Overblown
- Thursday Outlook: Post-Fed Wipeout
- Wednesday Outlook: Bears in Command
- Full List of Articles »
Tracking Mean Reversion After Bad Months [view article]
worldbeta.blogspot.com... ReplyTracking Mean Reversion After Bad Months [view article]
Thanks Smart ETF - your comments are some of the few that are worthwhile and intelligent.I agree with you for the most part, and I examined a similar vol clustering in an old post on World Beta. Shoot me an email when you get the chance.
Reply
Tracking Mean Reversion After Bad Months [view article]
Our research concludes that you are on the right track but your focus is too linear. Mean reversion over the long-term is an academic boon for getting a Nobel Laureate designation but it does not translate into a workable application in the real world. For example, MVO demonstrates domestic equities have returned 10% over 80 years. Therefore, you should get a 10% return on average. In the real world, the domestic equity market is down over the past 1, 3, and 10 years; yes 10 years. Granted it worked in the 80’s & 90’s, but not the 60’s & 70’s, and definitely not this era. It’s like a broken clock that is right twice a day; it is devoid of market cycles.Short-term MVO is very interesting and much more meaningful. The question is, and will always be, what time frame is best for analyzing the time series of data (aka, time parameter estimation). I think you are off track when you try to curve fit your data by selecting a particular number of months. Markets don’t move in a linear pattern like monthly. You will have much greater success by rebalancing when markets move by a defined level of volatility or price (or both). Take volatility as an example, last February the market hit an extreme level of volatility (and price drop); buying at the level would have been very profitable. It is these extreme moves (up & down) that create the fat-tails of distributions and are reflected in the extreme technical patterns like Relative Strength. A more scientific approach is to go with a Noble winning approach from 2002 (in effect tossing the MPT model from 1959) and incorporate Generalized Auto-Regressive Conditional Heteroskedasticity (GARCH) which examines the clustering of data; basically, a scientific approach to short-term mean-variance. The analogy is MVO works like the Farmer’s Almanac for predicting weather; whereas GARCH acts like the Doppler Radar. Alternatively, you can use price and volatility movement to create a poor man’s GARCH model to track short term mean-variance. Cheers -
Reply
Tracking Mean Reversion After Bad Months [view article]
Interesting. Have you tried the inverse? In other words, take the best performing asset classes for a given month, waited a month and gone long? What tools did you use to test this theory? ReplyTreasury Bonds: The Short of the Century [view article]
Interesting take. I believe that investors are just truly confused and uninformed. How could you possibly predict how to short treasury bonds when investors actions are not corresponding with market signals. When the Fed makes statements that they will be tougher on inflation, yields shoot up. When the opposite happens, yields go down. this is exactly the opposite of what should be happening.Check out this article for a more in depth analysis of what investors are doing and how they are getting screwed by the treasury bonds, which off a lower return than current inflation levels.
www.greenfaucet.com/bo... Reply
Time to Short Both Long-Term Bonds and Crude [view article]
Interesting take. I believe that investors are just truly confused and uninformed. When the Fed makes statements that they will be tougher on inflation, yields shoot up. When the opposite happens, yields go down. this is exactly the opposite of what should be happening.Check out this article for a more in depth analysis of what investors are doing and how they are getting screwed by the treasury bonds, which off a lower return than current inflation levels.
www.greenfaucet.com/bo... Reply
Time to Short Both Long-Term Bonds and Crude [view article]
forward looking inflation concerns do not dictate bond yields. "old-school play book may say they do, but this is not the way it works now, bond traders are much smarter than that (supply-demand) , at least i hear Antal Fekete and Michael hudson talk about this often.Commodity's will soar as long as investment banks keep lapping up the profits in order to repair their balance sheets. Knowing this, The fed won't hike until housing prices stabalize (which in turn will stop the mortgage carnage on investment bank balance sheets) allowing them to be repaired. Upward wage pressure will not gain momentum (sans unions) plus globilization so the Consumer Price inflation and dollar devaluation *may* not be as long lived as the 70's, otherwise the standard of living could fall to levels not seen in anyone's lives (and unrest could reach levels which would justify being veri-chipped). Perhaps the fed copy's the BOJ and leaves rates low for a long time and investment banks reap the rewards until the pressure becomes too great and OPEC drop dollar peg (and war planes fly). Reply
Time to Short Both Long-Term Bonds and Crude [view article]
With all due rerspect to all that there vanalysis -I don't think I'll try to call the top in oil -
Or in anything else for that matter.
I'd rather patiently wait for unwanted , undervalued entities , and hold them until they are sky high.
Still holding my 1 buck SSRI , 4 buck PAAS , 5 buck GG , .35 BQI , etc.
Don't think I'll try to "catch" the oil top -
Just keep looking for things of value but out of favor
so that nobody else but me wants it , and hold it until everybody wants it - AND WANTS IT REAL BAD ! Reply
Tiedeman
Time to Short Both Long-Term Bonds and Crude [view article]
Nuts. Oil is going to 200. Shorting is a guess on a very short term pull back. Many men have lost it all shorting this oil bull run. ReplyTime to Short Both Long-Term Bonds and Crude [view article]
I think we should sell oil stocks and other commodity related stocks now. This is the greatest period to make profit by unloading your existing investment in commodities. We had more than 7 years of bull market for commodity. We are in the final stage of current commodity bull market.All hot commodity indexes including oil index will come down soon.
Very soon we will see collapse in the commodity market similar to property market. We are in the bubble stage now.
Oil prices will come down sooner than later.
This is the time to short all hot sectors such as oil and other hot commodities.
Reply
Time to Short Both Long-Term Bonds and Crude [view article]
That's the normal 4% spread the banks need to operate on and pay their CEO + options.Mike unfortunately time isn't on our side here.
The problem is Hugo doing what he's done makes Bush look like a whip and everyone else want a piece of the chump. Reply
Time to Short Both Long-Term Bonds and Crude [view article]
If the fed borrowing rate is 2%, why are mortgages in the 6% area? ReplyTime to Short Both Long-Term Bonds and Crude [view article]
junkyarddog: Yes. The fed wants to keep rates low to help the housing market. On the other hand, this may be out of its control, especially with ECB so hawkish, since the market in the end determines long rates. Furthermore, if the inflation genie was let out of bag respective to wages, you would think affordability would go up to support housing versus low rates.In reality, I'm thinking the short oil side will be likely what performs sooner, as the helium gets let out of the bubble. Massive economic slowdown (which the stock market is shouting) portends to deflation and commodity collapse with falling aggregrate demand. Reply
Time to Short Both Long-Term Bonds and Crude [view article]
Exactly... What a mess. My optimism is probably a decade too early, don't you think? ReplyTime to Short Both Long-Term Bonds and Crude [view article]
Mike K: I love your out-of-the-box thinking, and long term view. However, your assumption *MAY* be flawded because you may the taking political considerations out of the equation. Notice how many times I used the word MAY, as I really don't know it myself.Goldman Sachs, Lame-O Bros, JP Morgan and the rest of the gang lost their shirts in the mortgage meltdown crisis. Now they borrow cheap money from the Fed at 2% and invest in oil to recover their losses. And all of this is supported by the political leaders. My point: I don't think there's a willingness to change.
In the long run I think you're right, but at present the political will doesn't seem to be there. Great post! Reply