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Will he do it?  CAN he do it?  

HE WILL DO IT!
HE WILL FAIL MIGHTILY!
HE'S A DICK, AND I HOPE HE FUCKS IT UP.
I WISH I HAD A PLAN!

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Author Topic: The Plan Thread  (Read 58776 times)

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blackie

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Re: The Plan Thread
« Reply #195 on: August 26, 2009, 05:00:28 PM »

I would like to quit my job.

I'm gunna buy some Mega Millions tickets. $325 million could tide me over for a while.
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Bill Brasky

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Re: The Plan Thread
« Reply #196 on: August 26, 2009, 08:57:34 PM »

I would like to quit my job.

I'm gunna buy some Mega Millions tickets. $325 million could tide me over for a while.

I buy a few here and there.  The day before my last day, I hit four out of five numbers on the Cash5.  $122.  The extra digit I missed was worth about $900,000





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anarchir

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Re: The Plan Thread
« Reply #197 on: September 05, 2009, 12:58:44 AM »

The Plan:
Live in own place (w/ gf) for a year.
Attend the Midwest Liberty Fest next month.
Move, to my gf's college town.
Make it to the next Porcfest.
Get my finances in order.
Read some books I am in the middle of reading.
Finnish my Anarchism essay.
Finish the book I am writing (with anarcho-capitalists as the desired audience).
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Lindsey

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Re: The Plan Thread
« Reply #198 on: September 05, 2009, 07:50:22 AM »

The Plan:
Live in own place (w/ gf) for a year.
Attend the Midwest Liberty Fest next month.
Move, to my gf's college town.
Make it to the next Porcfest.
Get my finances in order.
Read some books I am in the middle of reading.
Finnish my Anarchism essay.
Finish the book I am writing (with anarcho-capitalists as the desired audience).

Does is strike you as odd that you spelled "finish" in this post twice - and that one was correct, and the other incorrect?   :P

Also, two weeks from today I should arrive in Illinois.   :D
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Our enemies are innovative and resourceful, and so are we. They never stop thinking about new ways to harm our country and our people, and neither do we.
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Bill Brasky

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Re: The Plan Thread
« Reply #199 on: September 05, 2009, 09:33:08 AM »


Also, two weeks from today I should arrive in Illinois.   :D

Avoiding Indiana, I hope.   

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anarchir

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Re: The Plan Thread
« Reply #200 on: September 05, 2009, 02:00:00 PM »

The Plan:
Live in own place (w/ gf) for a year.
Attend the Midwest Liberty Fest next month.
Move, to my gf's college town.
Make it to the next Porcfest.
Get my finances in order.
Read some books I am in the middle of reading.
Finish my Anarchism essay.
Finnish the book I am writing (with anarcho-capitalists as the desired audience) (for those from Finland).

Does is strike you as odd that you spelled "finish" in this post twice - and that one was correct, and the other incorrect?   :P

Also, two weeks from today I should arrive in Illinois.   :D

Attending the festival later?
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Lindsey

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Re: The Plan Thread
« Reply #201 on: September 05, 2009, 09:02:13 PM »


Also, two weeks from today I should arrive in Illinois.   :D

Avoiding Indiana, I hope.   



Well, I did kind of want to visit my cousin Carrie.  The downside to that is my granny lives there, and I can't stand her. 
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Our enemies are innovative and resourceful, and so are we. They never stop thinking about new ways to harm our country and our people, and neither do we.
         -George W. Bush

Russell Griswold

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Re: The Plan Thread
« Reply #202 on: September 05, 2009, 09:54:18 PM »

I met her granny. She seemed so nice. :lol:
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Lindsey

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Re: The Plan Thread
« Reply #203 on: September 05, 2009, 10:06:10 PM »

I met her granny. She seemed so nice. :lol:

That's because you're not related to her. 
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sillyperson

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Re: The Plan Thread
« Reply #204 on: September 05, 2009, 10:16:03 PM »

Indiana is 2 states:
Northen Indiana aka 'Gary zone' aka "America's Armpit
vs
Southern Indiana aka 'Kentuckyana' aka "A damn nice place to live"

Lindsey

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Re: The Plan Thread
« Reply #205 on: September 05, 2009, 10:33:17 PM »

We're from Indianapolis.  Near Speedway, where the race track is. 
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Our enemies are innovative and resourceful, and so are we. They never stop thinking about new ways to harm our country and our people, and neither do we.
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freeAgent

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Re: The Plan Thread
« Reply #206 on: September 05, 2009, 11:17:44 PM »

Congrats on the house Denis.  I'm happy for you.

As far as leveraged decay goes, 2-5 years is kinda long.  They re-set over night, and mirror daily percentage returns x2.  I'm a math fail, so its kinda hard for me to describe with technical accuracy, but here goes...

If a stock is worth $100, and loses 1%, it is now worth $99, right? 

When the daily gain on that $99 is 1%, you only recover 99c.  Thus, your gain must be 1.01% to recover a 1% loss.  As they go up and down in daily activity over a long period of time, that really starts to play on the numbers.  Thats decay.  And in a 2x, its more pronounced. 

You stand to make more than you lose, so its all good.  But you can really see a droop in very long charts.  Its worth it to reposition yourself if they are losing buckets in a several day slump.  I know you don't like to day trade, but if the talking heads talk about a significant factor thats causing a large market trend in the wrong direction, like oil falling through the floor, you may want to consider making a readjustment until a new low is bottomed. 

That's mostly right, but it's missing part 2 which explains why this occurs with leveraged ETFs and not unleveraged ETFs (aside from fees eating into principle in both scenarios).  Mathematically:

$100*.99=$99 (1% loss)

$99*1.01=$99.99 (1% gain)

To break even, you need: (current amount)/(1-loss%)

To turn that into a percent, just divide that whole thing by the current amount.  A more dramatic example would be a $1 loss on $5 principle.  That's a 20% loss.  However, to get back to $5 you need a 25% gain.

PART 2

This all matters to leveraged ETFs because they aim to double (or triple, etc.) the daily return (or loss) of...whatever.  So, if you take my $1 loss on $5 principle example, your double-levered ETF would give you a -40% return on the 20% drop.  You're down to $3.  The next day, the underlying asset returns to its previous value.  Great!  That means it went up 25% and you get a 50% bump!  Not so fast...  $3*1.5=$4.50.  You just lost 10%, my friend.  That is decay.  It sucks.
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freeAgent

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Re: The Plan Thread
« Reply #207 on: September 05, 2009, 11:30:26 PM »

I guess I should add my plan, since this is the plan thread.  Basically, my most immediate plan is to get furniture to populate the empty space that currently dominates my condo.  That will take accumulation of money, and that will take time...but hopefully before this time next year I'll be pretty much set.  We'll see.  Another plan I have is to work in my current job until I decide whether or not I want to go to business or law school, which I will do no sooner than 3 years from now.
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Bill Brasky

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Re: The Plan Thread
« Reply #208 on: September 06, 2009, 02:45:01 AM »

Congrats on the house Denis.  I'm happy for you.

As far as leveraged decay goes, 2-5 years is kinda long.  They re-set over night, and mirror daily percentage returns x2.  I'm a math fail, so its kinda hard for me to describe with technical accuracy, but here goes...

If a stock is worth $100, and loses 1%, it is now worth $99, right? 

When the daily gain on that $99 is 1%, you only recover 99c.  Thus, your gain must be 1.01% to recover a 1% loss.  As they go up and down in daily activity over a long period of time, that really starts to play on the numbers.  Thats decay.  And in a 2x, its more pronounced. 

You stand to make more than you lose, so its all good.  But you can really see a droop in very long charts.  Its worth it to reposition yourself if they are losing buckets in a several day slump.  I know you don't like to day trade, but if the talking heads talk about a significant factor thats causing a large market trend in the wrong direction, like oil falling through the floor, you may want to consider making a readjustment until a new low is bottomed. 

That's mostly right, but it's missing part 2 which explains why this occurs with leveraged ETFs and not unleveraged ETFs (aside from fees eating into principle in both scenarios).  Mathematically:

$100*.99=$99 (1% loss)

$99*1.01=$99.99 (1% gain)

To break even, you need: (current amount)/(1-loss%)

To turn that into a percent, just divide that whole thing by the current amount.  A more dramatic example would be a $1 loss on $5 principle.  That's a 20% loss.  However, to get back to $5 you need a 25% gain.

PART 2

This all matters to leveraged ETFs because they aim to double (or triple, etc.) the daily return (or loss) of...whatever.  So, if you take my $1 loss on $5 principle example, your double-levered ETF would give you a -40% return on the 20% drop.  You're down to $3.  The next day, the underlying asset returns to its previous value.  Great!  That means it went up 25% and you get a 50% bump!  Not so fast...  $3*1.5=$4.50.  You just lost 10%, my friend.  That is decay.  It sucks.

Daily percent returns on the underlying index or commodity.  Times the multiple, if any.  Daily. 

I get what you're saying, and its simpler if you forget the dollar value when talking percents.  It fuzzes the issue. 
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freeAgent

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Re: The Plan Thread
« Reply #209 on: September 06, 2009, 10:10:20 AM »

It's essential to understanding why decay affects leveraged funds, but not simple index funds.  The simple fact that you need >1% bounce to get back from a 1% loss is not enough.  If that was the case, decay would apply to all assets including straight stocks...it doesn't.  The point is that when the underlying asset/index/whatever goes down by some amount and then returns to that exact same amount, a leveraged fund will get you a net loss.  That's just how to explain it mathematically.

If you invest $x in a levered ETF which goes down by a% one day and returns to parity the next day, your loss in dollar terms is (where b is the leverage amount):

x*(1-(1+b*(1-(1-a))/(1-a))*(1-(1-(1-b*a))))

You can plug that straight into Excel if you create three fields with the names a, b, and x and watch what happens when you mess with the numbers.  It ain't too pretty.  In the original example of investing $100 in something that goes down 1% and then back up 1.01% (so the underlying asset is of equal value in the end), your double-levered ETF investment just lost you $0.02...and that's my $0.02 ;)
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