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I now offer a third strategy using leverage to boost those returns. If you have a "sure thing" winning strategy, then why not always bet twice as much as you have? Genius!
Here are the new rules.
1. If the S&P 500 was up yesterday then it will be up today too. Go double long!
2. If the S&P 500 was down yesterday then it will be down today too. Go double short!
3. If the S&P 500 was unchanged, do nothing.
Let's check the results.
Click to enlarge.
$1 turns into $638 million! Woohoo!
For those keeping track at home, that's a 60% average annual return from 1957 to the peak! Behold the power of leverage!
Oh sure. The exponential trend failure was a bit brutal. Let's not dwell on that though. The strategy clearly worked. (Until it didn't.)
Brace for the sarcasm. It's a doozy.
I really hope our country's investment banks are doing similar things with our money. It's a shame not to take advantage of advanced trading algorithms combined with excessive debt! Can't lose! And even if it does lose, that's what the taxpayers are for!
See Also:
The Epic Momentum Bubble
The Epic Momentum Bubble v.2
Source Data:
St. Louis Fed: S&P 500
6 comments:
Hey Mark!
Does this mean invest the $1 near at close for the next day and so on?
Yes. I have an actual example of it in action within this post.
Behold the power of daily compounding.
Just keep in mind the system doesn't work at all now (thanks to high frequency trading algorithms no doubt).
Put another way, you can neither make money nor lose money with this system now it would seem. It has flatlined over the past few years and I expect it to continue to do so over the long-term.
What a ride it was for people who spotted it early and had the means to take advantage of it though. Wow.
Doubtful I'd have known to flip it round about 2000, and after some 45 years of phenomenal gains, I'm doubtful anyone else would have either, but it seems to me, flipping the algo in 2000 would have made one safely richer than Buffet by 2009. No?
Of course, trying to get filled on a $638 market order at the close might be problematic.
AllanF,
Oh my. Flipping the algo at the peak. I'll have to try that. Outstanding!
Of course, trying to get filled on a $638 market order at the close might be problematic.
Yeah, people might tend to get a bit suspicious, lol. ;)
It reminds me very much of my horse racing days. I bet on the long shots. I had little ability to scale it. The more I bet, the more my longshots would have become favorites. Sigh.
AllanF,
Doubtful I'd have known to flip it round about 2000, and after some 45 years of phenomenal gains, I'm doubtful anyone else would have either, but it seems to me, flipping the algo in 2000 would have made one safely richer than Buffet by 2009. No?
I tried it to see what would happen.
Had you miraculously known to toggle strategies at the very peak, you could have made it to $86 billion. Go figure.
Once again, this assumes that multi-billion dollar market orders at the close would be easy to fill. That's a somewhat questionable assumption of course, lol. ;)
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