Systematic investor/trader, Kevin C Maki, PhD QV/MT investing = quality, value/momentum, trend Research scientist/educator, long-time investor/trader
SW Florida
Joined July 2023
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Systematic Investment Research & Education retweeted
“Cut your losses and stay with your winners. That is my credo for building wealth and achieving goals of all kinds.” - Larry Hite audible.com/pd/Principles-of…
Nice discussion about combining value and momentum, which are weakly correlated. Putting these factors together smooths the equity path.
podcasts.apple.com/us/podcas…
Systematic Investment Research & Education retweeted
My new book Crash Test Dummy: How to Survive the Coming Market Crash (and Thrive in the Next Boom) is now available via
link.amazon/B04hl5L95
The rule-of-thumb is that last decade’s winner will not be the winner the following decade. However, some assets do outperform their historical averages for long stretches, such as gold from 2000 forward and stocks since 2009.
Systematic Investment Research & Education retweeted
Each of the last several decades had a clear winner, an asset that rose so far and so persistently that it came to seem like the obvious place for money.
Each went on to disappoint in the decade that followed.
The pattern is consistent across very different assets:
* Gold rose more than thirteen-fold in the inflationary 1970s, then lost ground through the 1980s as inflation fell.
* Japanese stocks rose nearly six-fold in the 1980s, then lost half their value in the 1990s, beginning a slump that lasted decades.
* The Nasdaq rose roughly nine-fold in the 1990s, then fell 44 percent in the 2000s.
* Emerging market stocks nearly tripled in the 2000s, then barely moved in the 2010s.
In each case, the decade’s winner ended it with the widest following, the most confident forecasts, and the highest prices relative to its fundamentals.
Systematic Investment Research & Education retweeted
Take ideas from other traders, but don't try to copy what they do. - Simon Russo @simonrusso__ 133/n lnk.to/marketwizardsnextgene…
My view is test everything. I am regularly surprised when testing produces results that were unexpected.
This is fascinating. I knew Warren and Charlie designed compensation systems to align interests, but did not know the specifics.
on incentive comp
BUFFETT: But [Ted and Todd] are perfect, and we pay them each a salary of a million dollars a year, and we give them 10 percent of the amount by which their portfolios beat the S&P. So that if they beat the S&P by 10 points, they get one point, for example, and we get nine points. But we do it on a three-year rolling basis so you don’t get the seesaw effect. And each one gets paid 80 percent based on their own efforts and 20 percent based on the other person’s, so that they have every incentive to operate in a collaborative way rather than sit there jealously guarding their own ideas and hoping the other guy doesn’t do very well.
--
WARREN BUFFETT: Well, we’ve always been more concerned about how our record is achieved than the precise record itself. And with both Todd and Ted, Charlie and I were struck by, not only a good record, but intellectual integrity and qualities of character, a real commitment to Berkshire, a lifelong-type commitment. And we’ve seen hundreds and hundreds of good records in our lifetimes; we haven’t seen very many people we want to have join Berkshire.
But these two are perfect, and we pay them each a salary of a million dollars a year, and we give them 10 percent of the amount by which their portfolios beat the S&P. So that if they beat the S&P by 10 points, they get one point, for example, and we get nine points. But we do it on a three-year rolling basis so you don’t get the seesaw effect. And each one gets paid 80 percent based on their own efforts and 20 percent based on the other person’s, so that they have every incentive to operate in a collaborative way rather than sit there jealously guarding their own ideas and hoping the other guy doesn’t do very well.
So it’s a — I don’t think we could have a better — it’s the same structure on pay, basically, that we had with Lou Simpson for 20-some years, except he did not have a partner. To the extent that they employ people underneath them, that comes out of their performance record, and it’s worked far better than either Charlie and I had hoped, and we had pretty high hopes. We had 1 3/4 billion with each of them at year end, but we’ve added another billion each on March 31, so they’re running 2 3/4 billion apiece.
More useful analysis. Thanks!
I often hear people say that if a trade doesn’t work right away it should be exited. My own studies suggest that setting stops too tight worsens results. Most trades need room to fluctuate a bit. Some time below break even is to be expected.
Systematic Investment Research & Education retweeted
The biggest winners doesn't reveal themselves on day one..
My weekend study is complete.
I wanted to know how quickly we could identify the biggest winners..
He's said it on stream: "some of the best setups go right away.. but sometimes they don't."
Turns out most don't.
Measured by R, the top 10% of Qullamaggies trades it looks like this:
Day 1: 5/83 in the top 10%
Day 3: 26/83 in the top 10%
Day 5: 50/83 in the top 10%
Day 10: 77/83 in the top 10%
Last one needed 15 days..
‼️WEEKEND STUDY SESSION: how many days until we know we have a winner?
WHY
"Some of the best setups either go right away, they go straight up.. but sometimes they don't. Sometimes they come down and are very close to stop you out. And sometimes they stop you out and then go."
299 of his 828 breakout entries hit the stop on entry day. 440 on the second day.
The 245 that were still open after day 5 add up to +1,555R on the 10-day exit. Everything that closed before adds up to -562R.
So the losers are cut fast, and the profits are in the rest.
What we don't have is the win-rate post ante, day by day. I know our overall winrate, but I've never checked the winrate on day 2, 3, 4 or 5.
THE WORK (2 to 3 hours)
1. Open 30 breakout entries in date order.
2. On each chart, look at the entry candle only. Write down two things: did his stop hold through the day, and where it closed against his entry, in R
3. Move to the close of day 3. Same two things. Then day 5.
4. Then find the exit.
5. Count. Of the trades still open after day 1, how many ended green? Same for day 3 and day 5. Then the second count: on day 1, could the ones that ended big be told from the rest by where they closed?
WHAT I'M AFTER
Four win rates: one at the buy, after day 1, after day 3, after day 5. I have the first one. If the other three move the way I think they do, it changes how I sit through day 2.
I have borrowed stil concept from someone who trades intraday with great success, who doubled his avg. gain in a setup because he cut his losers faster.
Systematic Investment Research & Education retweeted
Updated year to date returns across major markets.
Systematic Investment Research & Education retweeted
Good morning, market participants 🤑
The homie Benjamin Franklin once said, "An investment in knowledge pays the best interest." What are you learning today?
Systematic Investment Research & Education retweeted
I'm thrilled to share the latest episode of the #RicherWiserHappier podcast: my conversation with Matt Ludmer, founder & CEO of Aligned Wealth Management & author of a new book, "The Right Mountain: Practical Wisdom for Achieving True Wealth."
Listen: tinyurl.com/yz6zzv93
Watch: youtu.be/1cjGwxNEvFo
I like a bit more vol than average for managed futures funds. I wish more ETFs would run at higher vol, although not necessarily as high as Mulvaney.
COM is a managed futures ETF that focuses on commodities using a long/flat approach. DBMF attempts to replicate the before fees performance of the SG CTA index that tracks the 20 largest CTA managers. Most of the managers are trend followers but there is a mix of strategies among the individual managers.
Systematic Investment Research & Education retweeted
From the Trend Following replicator:
"Whoever coined the term trend following honestly owes a huge apology to everybody in this business." [laughter] @andrewdbeer1
Trend following is one of the most accurate descriptions of an investment strategy ever coined.
youtu.be/-IvPOjyFFBk?si=bmO6…
