Rogers stock on news that Verizon is coming to Canada

An Unconventional All-Season Hedge for Your ETF Portfolio

I am exploring the concept that shorting natural gas futures contracts should have a permanent place in your portfolio in order to improve risk adjusted returns. 

Basic concept test: A long term short on Natural Gas futures. S&P500 in blue for comparison. Green strategy holds 90% cash and 10% short on UNG (a long natural gas ETF). Weekly rebalance. I see it as similar to shorting VIX futures. You get paid to store a rapidly declining asset, but you don't actually store it (which means you're on the hook for whatever the market price is on delivery. Long run storage premium should be much higher than inflation in natural gas prices)

There are several ways to get downside exposure to Natural Gas through ETFs:
1) if possible, borrow and short UNG (roles long position in natural gas futures)
2) buy KOLD (-2x daily inverse natural gas from ProShares)

Since KOLD was just started in 2012, I simulated shorting UNG for the backtest. However, for actually implementing a position I would use KOLD (Use leveraged ETFs at your own risk. Please do your research and understand how they work before using them). 

Has it worked recently?

Yes. KOLD has been a terrific hedge just as other hedge ETFs have sold off. In almost 2 months GLD (gold), EDV (treasuries), and LTPZ (TIPS) have had significant corrections. 

SPY (S&P500) is up just 1% in this period.

Results are encouraging for the use of KOLD as an all-season hedge

Should a Canadian Invest in Bitcoin?

In 2013, the value of a Bitcoin has soared from $12.95 to $108 as of Tuesday’s close. That’s a 733% move (2023% at it’s $275 high!). This is from an asset that could benefit from weakness in traditional currencies and act as a potential equity hedge. I had to take closer look. Unfortunately, Bitcoin did not stack up.

Value of Bitcoin in CAD (Last 30 Days)

With no gold standard today, why does money have value? There will always be demand for traditional currency because governments can dictate that it must be used for all transactions within their boarders. The government can then stabilize the currency for its citizens through interest rate adjustments and the rate of money creation. Conversely, Bitcoin has no jurisdiction, it pays no interest because it has no citizens to tax, and has no central authority to match money supply with demand. 

Instead of printing money like a government would, ‘miners’ (virtual not literal) are awarded Bitcoins in exchange for solving complex problems using their computing power. Solving these 'problems' provides no economic value but is just a way to decide who gets the new coins! Difficulty is adjusted to ensure coins are awarded at a predetermined rate. New interest from the media in the virtual currency has attracted a flood of new investors which mining activity cannot keep up with. What is scary is a change in regulations, loss of confidence in its security or just fading interest could trigger a sell off with no government to stabilize its value. 

Bitcoins are generally only accepted at online black markets and I don’t see them being used at Amazon any time soon. Since you can’t convert it into goods and services, you are at the mercy of online currency exchanges to convert your virtual wallet into something tangible. The opposite would be something like TTC tokens. They have zero secondary market but can always be redeemed for a ride!

Long term demand is another question mark. The value of all the Bitcoins in the world is only about $500 million USD. A single large investor entering or exiting the market can significantly move the price. If you're holding this stuff, you could be depending on the Winklevoss Twins to support the currency (rumored to be the largest holders of Bitcoin). 

My feeling is Bitcoin has no place in an investor’s portfolio. There are far better conventional sources of currency diversification using ETFs.

My Grandma's Simple Hedge Fund

The search for alpha usually leads to complicated strategies.

But how many hedge funds do you see with 10 year track records?

Few stand the test of time.

My grandma would go to her local TD Bank branch and spend the afternoon tormenting the manager for more interest on her bonds.

Drinking the Google Kool Aid

Did you know Google is directly selling phone and tablets exclusively from their webstore. They do not want people to have to buy long term agreements just to get their phone, so they keep it away from the cell companies.  

DIY Stand Up Desk

I hate sitting in an office all day. The lighting, the recycled air, the white noise, and just sitting all day is more fatiguing to me than my old summer jobs as a landscaper. Obviously, man was not designed for this.

How popular was portfolio theory during the great depression?

Investing is tough. Billion dollar hedge funds and super fast computers keep markets efficient. Trying to pick the right stock to own or guess the S&P500's next move is a gamble. Bonds barely pay interest and have big downside if/when rates rise. Hedge funds have been useless in bear markets. Inflation eats your cash. Where do investors turn? No, Bitcoin is not the answer.

Managed Volatility March Month End

email me for a description of the strategy

Managed Volatility February Month End

SOC news: Disney teams with Sensio

Disney teams with Sensio for On-Demand distribution of 3D films
LA Times, March 4, 2103

Encouraging news for SOC holding, Sensio SIO...

Disney is partnering with Sensio to sell 3D versions of Disney movies directly through peoples 'smart' TVs.

The mention 2 manufacturers are expected to add the Sensio technology to their devices by the end of the year. This is encouraging that 3D isn't totally dead. From what I understand Sensio produces by far the best 3D versions of movies, but since there's no content yet, manufacturers have opted for the inferior open source encoding to save paying Sensio's licence fee.

DM

Shane Battier: the NBA's first 'quant'

Guarding Kobe

Sports Illustrated May 2009

This story could be renamed "Why the Heat Will Repeat as Champs".  Its not cause of LeBron or Dwyane. It's because of former NCAA star Shane Battier.

Shane is possibly the most underrated player in the NBA. He goes full out "Moneyball" with how he plays defense, he studies that statistics for hours so he can force offensive players into their least favourite shooting positions.

Unfortunately for Battier, there is no stat for forcing a missed shot so he rarely gets the credit.

dmorton.To@gmail.com

Managed Volatility Strategy Outline

available on request

dmortonto@gmail.com

Good read on a Quant Basketball Handicapper

Meet the world's top NBA gambler

from ESPN, Feb 21, 2013

A good read on one of the first guys to utilize computing power to run Monte Carlo simulations on sporting events.

Theory for a potential quant single stock strategy

A Quant Strategy to trade single stocks

A colleague proposed an interesting strategy:

In this example I used a fixed basket of 15 stocks for my universe to choose from.

I tried to pick a basket that I felt I could stick with over a long period without having to refresh the universe.

I tried to pick all the giant leaders of tech, plus where I see growth in the technology space (3D printing and cloud computing in my opinion)

I didn’t go as deep as chip manufactures/part suppliers etc.

Stream of Consciousness:

Stream of Consciousness (SOC) (formally known as The Ducati Fund) is an active stock picking and timing strategy with group involvement.

Stocks from Maggy will not be considered. Maggy is rotational momentum strategy that is restricted to Microsoft, Apple, and Google.

Stocks are picked with specific profit or loss price targets to exit the trade entirely.

Trades must have a time limit.

Managed Volatility Week Ended Feb 22, 2013

Managed Volatility Backtest + Live 2012

Historical statistical analysis of MV 2007 through 2012

Managed Volatility Live Performance

Managed Volatility Week Ended Feb 15