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Friday, August 13, 2021

MrRenev portfolio exposed

MrRenev portfolio exposed

Here is my current short term portfolio. This might give the reader an idea of how a moderately diversified short term portfolio might look. I use various tools (including turbos, options...) so it's hard to say how much I have in, but I know how much of original risk I got. Which is today €500. I added my little XRP bag from earlier this year to my crypto holdings to get to exactly 500.

It makes more sense to build a PF looking at risk rather than the size that doesn't mean anything by itself. Of course I have some winners and I have trailed my stop so this is why I precise "original" risk, that's the risk when I opened the position.

The whole thing is maybe €40,000 with €25,000-€30,000 in Forex which would make it around 70% but it is less volatile, in "risk" terms it's actually 30%. Entry stops are tight (for example 0.50% with FX, 2% with S&P , 1% with commodities depends). I am sure I have 25 to 30K in FX, it's the rest that is hard to evaluate.

Here is the detail:
30% - Forex: 2 longs on the Yen, 2 shorts on AUD, and short USDZAR .
25% - Commodities: Gold , Platinum, Natural Gas . All long.
23% - Indices: All in the S&P500 long, pyramided in since April.
12% - Crypto: Mostly Bitcoin . And a bit of XRP (it's less than 6 month old).
10% - Stocks: Pfizer & Moderna .

I also have a few stocks & cryptos that I hold long term and have not listed here. And cash in the bank. And physical goods in my house. I even have stamps and a few old coins. I don't check on it every day, or week, or month, or year, but I really don't care about the long term stuff, I am focussed on the long term. Looks like I have found a perfect trick to not worry.

I am not "ultra" diversified, but some billionaires have hinted that diversification may be for idiots. If you saw Ray Dalio present his "holy grail" you know that (roughly) you get a huge improvement in risk adjusted returns going from 1 to 5 (good) positions, a little more improvement going from 5 to 10, and it basically flatlines past 10 positions no matter how much you add. This is universally true, I'm sure it can be proven by a mathematician and the limit of growth will be Euler's number 2.718 (like maybe the stdev can only be improved 2.718X?), no matter how many uncorrelated positions are added. The reasons for having dozens of positions is either you're such a whale you have to, or you're trying to attract clients and plenty of positions makes you look pro and justifies the cost and also makes it look too complicated to do for a novice.


snapshot

My positions shown here are all short term, with:
FX and Commodities and Stocks (65%) all under 2 months
S&P500 and Crypto (35%) all under 6 months

I have been long US indices since September or October of 2020 but it was tech100 and I closed it all since then.

33% of my holdings are correlated to the US stock market but I am in the green on the S&P and have guaranteed stops, I have pyramided into my winner over time, so there is actually no major risks there. I am not a professional risk manager and I don't give advice but I don't think I have crazy risks.

No single instrument (a currency, an indice) ever has a leverage over 5 (when adding all pairs or all correlated indices). The max leverage I have been using on a position ever as far as I can recall is 2 (0.25% stop loss with a leverage of 2 = risk of 0.50% on the single position). Anyone who understands elementary school level maths should be able to understand the problem with too much volatility:
A 3% drawdown takes a 3.09% profit to get back to breakeven. This is 3% more (3.09% is 3% more than 3%).
A 10% drawdown takes an 11.11% profit to get back to breakeven. This is 11.11% more.
A 30% drawdown takes a 42.9% profit to get back to breakeven. This is 42.9% more.
A 70% drawdown takes a 233.33% profit to get back to breakeven. Good luck.
Simply since this is short term there will be much more volatility , so careful with leverage! (Indeed, if a long term portfolio had say 15% deviation happen every 100 years, the short term one could have this every 100 months or even 100 weeks).

And then there are the black swan events... They don't happen but when they do it stings. And in one's career they WILL happen.
Bill Hwang got destroyed by having 5 leverage on all his money, concentrated in a few stocks. The "Swiss Franc Tsunami" was a 15% drop. You'd have to be a complete mongrel to get wiped out, that would require over 6 leverage on a single currency. Legend james Cordier had next to 100 leverage divided between only half a dozen commodities , he was riding at least a 10X on NatGas alone. Even if you had 10 leverage on stocks but distributed in 10 a 20% gap down wouldn't wipe you out it's very unlikely they ALL gap down. Don't go 10X in stocks even if diversified, that was just for the example, in the EU it's not even possible anyway max is 5.


snapshot

I even posted ideas for some of those positions

With Bitcoin I think I post everything. Not sure.
After a long while... Bitcoin buy entry reached. TGT 200-250K

Almost 1 year ago, "buy area visited", hah I actually bought the very bottom. As I said this is nearly 1 year old but I moved to the S&P500 back in April to catch a new swing. 2 different trades within a long term bull bias. Buying pullbacks with tight stops you get stopped often but you also buy the very bottom often. I probably mentioned my transition to the S&P500 somewhere but without details and I don't write every single time I add or take profit or reduce my position.
So here we are. Buy area visited.

Might add a bit to crypto if it keeps going. Hopefully I get to short GME soon, should reduce my overall stock risk, maybe. It can always shoot up while the rest crashes down, I don't think this is likely it's a 1/100 thing, it does happen, and you want to make sure you'll survive it, but it doesn't happen that often so it's worth taking the risk.

Typicall I might have something like this:
10 positions
2 wins I'm trailing (> 5R)
3 little wins trying (2.5-4.5R)
5 positions around my entry (between -1R and 2.5R)

I rarely see red in my accounts, losers go quite fast. So mostly I look at positions in the green. It has the benefit of feeling good. Losers hold losers, that simple.
Individual positions are very volatile, I might see a currency pair have a drastic move against me and crush my soul, but then I log in my accounts and I see my overall profits have not moved much, while the 1 pair was crashing 3 other ones sligthly went up. So it makes it more of a slow and steady growth rather than some hysterical bipolar game.



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