Monday, October 07, 2013 11:27:14 AM
LS7550
My avatar/username reflected my reading of Alfred Winslow Jones at the time of registering with IH. Proclaimed to be the founder of the modern day hedge fund, he'd typically be long 75% stocks that he perceived to be good value, and short 50% stocks he perceived to be poor value. Long/Short 75/50 -> LS7550 became my choice of IH userid.
In today's world, I guess to reflect such a asset allocation you could hold perhaps something like 25% in SDS (double short SPY) and 75% in small cap value.
If you apply AIM-HI to the 75% stocks, generally that might broadly track 100% stock exposure, but do so with some cash (less risk).
For the Short side AIM, a whopping 90% cash reserve, 20% Min Trade Size, 0% Buy Safe, 20% sell Safe (buy resistance) and 90% Buy Vealie applied to SDS appears to have worked quite well over recent years. With TIP (TIPS ETF fund) for 'cash', since July 2006 that short stock AIM yielded a 2.5% annualised gain, compared to -21.7% annualised decline in SDS (buy and hold).
Instead of a drawdown chart, the image below presents a 'riseup' chart, that reflects the maximum subsequent gain for each day/period up to the present date. i.e. for each day, the maximum subsequent value compared to that days price (monthly granularity).
The indications are that for that short AIM, up (down) to the 2008/9 crisis lows, the short AIM gained around +35%. Which is a nice inverse correlation to how some stocks/funds declined -50% over that period. With 75% exposure to funds (long stock AIM) losing perhaps -50%, but 25% exposure to fund (short stock AIM) gaining +35% combined such a portfolio might have been down around -29% from prior peak to 2008/9 crisis lows. That's less than 60% of the all stock loss, whilst still capturing 75%+ of all stock gains (as AIM SDS provided a +2.5% annualised gain over the total period tested).
What swayed me to currently look at a AIM short stock was that I've just been comparing several benchmarks and one stood out in particular for having done exceptionally well during the 2008/9 crisis period, and upon delving deeper it appears that they did so due to holding a relatively small amount in Options - which appear to have performed very well during the 2008/9 period. I've posted the above observation here as it may be of general interest to others.
Nice and sunny here in London today. Off now for a bit of cycling exercise.
Clive.
My avatar/username reflected my reading of Alfred Winslow Jones at the time of registering with IH. Proclaimed to be the founder of the modern day hedge fund, he'd typically be long 75% stocks that he perceived to be good value, and short 50% stocks he perceived to be poor value. Long/Short 75/50 -> LS7550 became my choice of IH userid.
In today's world, I guess to reflect such a asset allocation you could hold perhaps something like 25% in SDS (double short SPY) and 75% in small cap value.
If you apply AIM-HI to the 75% stocks, generally that might broadly track 100% stock exposure, but do so with some cash (less risk).
For the Short side AIM, a whopping 90% cash reserve, 20% Min Trade Size, 0% Buy Safe, 20% sell Safe (buy resistance) and 90% Buy Vealie applied to SDS appears to have worked quite well over recent years. With TIP (TIPS ETF fund) for 'cash', since July 2006 that short stock AIM yielded a 2.5% annualised gain, compared to -21.7% annualised decline in SDS (buy and hold).
Instead of a drawdown chart, the image below presents a 'riseup' chart, that reflects the maximum subsequent gain for each day/period up to the present date. i.e. for each day, the maximum subsequent value compared to that days price (monthly granularity).
The indications are that for that short AIM, up (down) to the 2008/9 crisis lows, the short AIM gained around +35%. Which is a nice inverse correlation to how some stocks/funds declined -50% over that period. With 75% exposure to funds (long stock AIM) losing perhaps -50%, but 25% exposure to fund (short stock AIM) gaining +35% combined such a portfolio might have been down around -29% from prior peak to 2008/9 crisis lows. That's less than 60% of the all stock loss, whilst still capturing 75%+ of all stock gains (as AIM SDS provided a +2.5% annualised gain over the total period tested).
What swayed me to currently look at a AIM short stock was that I've just been comparing several benchmarks and one stood out in particular for having done exceptionally well during the 2008/9 crisis period, and upon delving deeper it appears that they did so due to holding a relatively small amount in Options - which appear to have performed very well during the 2008/9 period. I've posted the above observation here as it may be of general interest to others.
Nice and sunny here in London today. Off now for a bit of cycling exercise.
Clive.
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