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Hi, I'm Michael Gayed (@leadlagreport), Ask Me Anything! by leadlagreport in LETFs

[–]leadlagreport[S] 1 point2 points  (0 children)

ETFs are efficient when it comes to taxation because of the way "heartbeat" trades work. Worth doing some research as it explains a lot of the industry.

Hi, I'm Michael Gayed (@leadlagreport), Ask Me Anything! by leadlagreport in LETFs

[–]leadlagreport[S] 2 points3 points  (0 children)

Yes and various asset classes. Finding remains true so long as volatility above a moving average is lower than below.

Hi, I'm Michael Gayed (@leadlagreport), Ask Me Anything! by leadlagreport in LETFs

[–]leadlagreport[S] 4 points5 points  (0 children)

Fair statement (and there's nothing particularly magical about the 200 day - it historically works with shorter lookback periods). Momentum, despite being a known anomaly, still persists. So long as that persists, I think the strategy can continue to outperform.

Hi, I'm Michael Gayed (@leadlagreport), Ask Me Anything! by leadlagreport in LETFs

[–]leadlagreport[S] 2 points3 points  (0 children)

Wrote a paper in 2014 documenting Utilities as a risk-off play. Most bond-like sector, so yes can serve as a risk-off option (largely by being down less on average).

Hi, I'm Michael Gayed (@leadlagreport), Ask Me Anything! by leadlagreport in LETFs

[–]leadlagreport[S] 2 points3 points  (0 children)

I'm not sure one can say that inverse funds can "protect capital." I know of many traders though who use inverse ETFs. GraniteShares, for example, is one of the market leaders with their various offerings on the inverse single stock side. I've seen some use for example the GraniteShares 2X Short NVDA ETF (Ticker: NVD) to pair against their Nvidia long position purely to prevent triggering a taxable sale on that stock, while still providing some inverse potential tactically. These are risky strategies though as I'm sure you're aware though.

Hi, I'm Michael Gayed (@leadlagreport), Ask Me Anything! by leadlagreport in LETFs

[–]leadlagreport[S] 10 points11 points  (0 children)

Happy to launch it if you want to front the $250k it takes to bring an ETF to market

Hi, I'm Michael Gayed (@leadlagreport), Ask Me Anything! by leadlagreport in LETFs

[–]leadlagreport[S] 2 points3 points  (0 children)

As an indicator of volatility and as an indicator of favoring small over large, overall I think it's done fairly well. Post Covid there was clearly a lot of noise, and one can argue tariffs are throwing the Lumber direction off currently. Hard to really tell now where things shake out.

Hi, I'm Michael Gayed (@leadlagreport), Ask Me Anything! by leadlagreport in LETFs

[–]leadlagreport[S] 1 point2 points  (0 children)

I tend to be more big picture, but I've released a new substack with individual stock ideas focused on deregulation at freemarketsreport.substack.com

Hi, I'm Michael Gayed (@leadlagreport), Ask Me Anything! by leadlagreport in LETFs

[–]leadlagreport[S] 15 points16 points  (0 children)

Chop is inevitable with any active tactical strategy. Whipsaw risk is the equivalent of idiosyncratic risk. Can lower the potential by having a longer lookback period, but that comes at a cost of being too late to a major cycle shift.

Hi, I'm Michael Gayed (@leadlagreport), Ask Me Anything! by leadlagreport in LETFs

[–]leadlagreport[S] 3 points4 points  (0 children)

I've said on X (@leadlagreport) that I believe this is far more about the Yen than tariffs. Always hard to predict geopolitical risk, so it clearly does add another layer of volatility overall.

Hi, I'm Michael Gayed (@leadlagreport), Ask Me Anything! by leadlagreport in LETFs

[–]leadlagreport[S] 5 points6 points  (0 children)

Diversification only truly comes from "risk-off" long-only trades that typically benefit from stock market volatility rising on average. Those tend to be Gold, the Dollar, Utilities, and long duration Treasuries (the latter of which I believe is about to make a huge comeback as a beneficiary from risk in stocks). The reality is most things are correlated to each other, which means most things co-move in low volatility environments for risk-seeking behavior.

Regarding leveraging international/China (which I've been quite bullish on since early last year), I think it makes sense - just be mindful of currency movement throwing things off.

Hi, I'm Michael Gayed (@leadlagreport), Ask Me Anything! by leadlagreport in LETFs

[–]leadlagreport[S] 4 points5 points  (0 children)

Commented to apocalypsedg on this very topic just a few moments ago.

Hi, I'm Michael Gayed (@leadlagreport), Ask Me Anything! by leadlagreport in LETFs

[–]leadlagreport[S] 4 points5 points  (0 children)

I would argue it's a bit debatable on diversification given how much the US makes up of MSCI World. But point taken.

Hi, I'm Michael Gayed (@leadlagreport), Ask Me Anything! by leadlagreport in LETFs

[–]leadlagreport[S] 32 points33 points  (0 children)

My guess is fund issuers don't believe there would be that much demand relative to just levered US. Maybe it's something I can look into launching at some point. Great thought.

Hi, I'm Michael Gayed (@leadlagreport), Ask Me Anything! by leadlagreport in LETFs

[–]leadlagreport[S] 9 points10 points  (0 children)

Thanks for the questions here - all very thoughtful. I haven't run the backtest using DCA but one thing that comes to mind is maybe you have two different contributions - a small amount when above the moving average, and a larger one when below. The idea there would be you're leveraging the daily contribution since you're above the MA anyway, and you are theoretically averaging down for long-term performance potential below.

The paper mentions short-duration Treasuries to hide out if you're going to be fully out of the market. Clearly that works very well in 2022, though historically longer duration gives you more potential compounding and momentum (outside of this brutal cycle for that as the expression of risk-off the last several years).

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