Super Long Term Direction?

[FetteredChinos]

Guys and Gals.

A question for you, and i'd like to hear your thoughts on this one.

I have come up with a few strategies that mainly trade to the long side..and drastically outperform buy and hold on a single contract basis etc..


however, we have been in a large bull run since the early 1980's, which may be distorting results..


The question i am posing, is,

Will the Long Term Equities Bull Run (75 years and counting) proceed indefinitely? (presumably driven by largely inescapable inflation amongst other things)

ie, is it feasible that we could have a 30+ year bear market? What would trigger such an event?

I know the Japanese Market has been wilting for 15 years now, but is now showing signs of recovery..

I would like to hear people's opinions on these matters, and whether trading to the long side is therefore more likely to be profitable in the long run?

FC

 

[FetteredChinos]

edit, i should also add, that survivorship bias should also ensure that the markets general move is up..

ie, poor performing companies usually get ejected from the headline indices...

 

[TWI]

How long before you die? Do you want to trade a system that has a time horizon beyond a few years?
Maybe you could include a super long term moderator in your system that will change it from a long only to a short only system to protect your grandchildren. I do feel a fallout shelter may be more use to them however as this is likely to be necessary should we enter a protacted bear market period.

 

[FetteredChinos]

so you mean my Anderson shelter is no good?

 

[Tuffty]

i should also add, that survivorship bias should also ensure that the markets general move is up

Don't forget about suvivorship bias in the indecies themselves i.e. stock markets being taken over by govts & revolutions etc. Most people just look at the surviving indecies (UK US etc).

On your general question I did some work on this several years ago. My conclusion was to have a market neutral strategy so it didn't matter what market we were in. This also gets rid of any curve fitting issues about long only strategies.

 

[FetteredChinos]

i agree somewhat..

and indeed, one of the main strats i am now looking at is long for approx 280 days a year, and short for approx 85 a year on average..

from 1997 to 2004 on futures data, it returns approx 16,000 points...

the index moved only 1,000 points in that time, yet still moved up..

im just concerned as to what a lengthy bear market may do to it...bearing in mind its slightly long persuasion..

thanks for your input though..

fc

 

[bracke]

Hello Seymour

I see you are at it again - posing esoteric questions.

Are you looking for another 75 year bull run before deciding to invest your ill-gotten gains or to have some asbestos suitcases made so that you can take it with you.

I fully appreciate your caution but I suspect that you are taking the long term view a little too seriously.

Regards

bracke

 

[bracke]

and indeed, one of the main strats i am now looking at is long for approx 280 days a year, and short for approx 85 a year on average..

Now if you could just inform me when the long days occur and when the short days occur it would be much appreciated.

Regards

bracke

 

[dc2000]

Hi Fc
did it work well Sept 2000 to Sept 2002?

 

[FetteredChinos]

yes DC...

here is the equity curve...showing open and closed equity at the end of each trading day

2000-2002 runs from 570-1320 on the x-axis..

as you can see, it performs well in the mini bear market we had.. and indeed in the sideways period of the 1970s (not shown here)..

but i'm uncertain of what would happen in a japanese style scenario....

then again, arent we all? lol

FC

 

[garethb]

Have you thought of testing it on the Nikkei 225?

 

[FetteredChinos]

indeed, i have...

and i'll attach the equity graph...and you will see what i mean.. although it is still heading upwards, its a pretty rough ride...!

Pink line is equity, blue line is Nikkei Cash Price..nikkei rise 6,000 points since 1990, equity rises 50,000 points....

i suppose the only way around this is by diversification accross a host of indices..

FC