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Totally get your first point but I’m afraid I can’t agree with your second. [https://www.google.com/search?q=is+there+more+gold+in+the+ground+or+that+has+already+been+mined&rlz=1CDGOYI_enUS590US590&oq=is+there+more+gold+in+the+ground+or+that+has+already+been+mined&gs_lcrp=EgZjaHJvbWUyBggAEEUYOdIBCDExOTZqMGo3qAIZsAIB4gMEGAEgX_EFO4yzFbHlXdXxBTuMsxWx5V3V&hl=en-US&sourceid=chrome-mobile&ie=UTF-8&zx=1775603308794](https://www.google.com/search?q=is+there+more+gold+in+the+ground+or+that+has+already+been+mined&rlz=1CDGOYI_enUS590US590&oq=is+there+more+gold+in+the+ground+or+that+has+already+been+mined&gs_lcrp=EgZjaHJvbWUyBggAEEUYOdIBCDExOTZqMGo3qAIZsAIB4gMEGAEgX_EFO4yzFbHlXdXxBTuMsxWx5V3V&hl=en-US&sourceid=chrome-mobile&ie=UTF-8&zx=1775603308794)
As Fidelity's caveats tell us, these are dangerous instruments where you can lose all your money. So, be cautious. Read the book "Black Swan". We cannot forecast the extreme events that can wipe out our wealth, which is a critical concern in retirement. But in small doses, leverage funds can provide some boost. I use UPRO, EFO and EET.
Why not 50% UPRO, 20% EFO, and 30% ZROZ and chill?
I use Matlab and code it up myself, so there's always possibility of some error. As a quick test, I ran a momentum-adjusted risk budget case with UPRO, TMF, EFO, SPY, and TLT, starting in 1998 with weekly rebalances, with leverage always close to 2x. I did tax rate of 33% for both ST and LT gains to mimic your situation. Allocations fluctuated quite a bit; for example, EFO varied between 0 and 50% or so. Final CAGR of 17% less equivalent ER from tax of about 1.5%, volatility of 18%. It looks like 8 of 23 full years had a net positive tax. The three worst years had tax of about 7% of portfolio value, one year with 4% of portfolio value, and 4 years between 0 and <2% of portfolio value. Without momentum, everything stayed allocated with smaller allocation swings. Final CAGR of 17.4% less equivalent ER from tax of about 0.9%, volatility of 18.5%, 12 years with a net positive tax. Total sales with gains were usually less than 10% of the year-end portfolio value, maximum of 30%. I don't calculate final basis (it didn't occur to me until just now). I suspect that the second case would have some fraction (maybe a quarter or so) with much higher final basis. With just 55/45 UPRO/TMF fixed allocation with 30-trading-day rebalancing from 1986 on gives 2+% ER, with most years having tax. With 5-day rebalancing, \~4% ER (10% of total gains). Seems like generally in the ballpark of 10% of final gains to taxes with your rates.
[Ben Carlson on Twitter](https://twitter.com/awealthofcs/status/1580551745176236032?s=20&t=EFO2XFtMBV8dwN1tjCGwCA): 40 years of declining negotiating power of workers and stagnating wages for a large part of the population Economists: Nothing we can do about this 18 months where workers finally have the upper hand Economists: We must put an end to this immediately! I'm not saying high inflation is good (it's not) But let's not pretend like low inflation is going to fix everything for the average American worker either
Regards are 70-79 https://www.ebi.ac.uk/ols/ontologies/efo/terms?short_form=EFO_0003847
> I have read that the interest costs are not included in the ER as they are very variable and hard to predict. I forgot about the swaps though, good point there. Nope! If you want to dive into the details I recommend searching on /r/LETFs and/or asking questions there. There is a lot of cool information about them. >EFO has very low trading volume, which I believe will not be an issue though as the underlying assets are very liquid, correct? It can be an issue, identical to how a low liquidity at the strike you're looking at with options can be an issue. If the liquidity is low my advice is the same with options, use a limit order and be patient to get the best fill. There is a thread or two on /r/LETFs which synthetically makes VT, so I know it's possible. Though I don't believe VT has much or any emerging markets in it. Taking a step back, if you want to a bit of due diligence when it comes to the emerging world, I recommend watching some of Peter Zeihan's youtube videos or reading some of his books. He specializes in predicting what different emerging markets will do in the coming decades. This would be only applicable for investing as it's long term, not so much short term. You can use the information he shares to identify what countries might be worth investing in and what countries might be worth avoiding.
The interest rate is covered by the expense ratio? But aren't interest rates much higher than the ER ratio? I forgot about the swaps though, good point there. I'm look at US LETFS, particularly the EFO (Long 2X Ex-US Developed) and EET (Long 2X Emerging Markets). EFO has very low trading volume, which I believe will not be an issue though as the underlying assets are very liquid, correct? I'm basically trying to construct a 2X Ex-US equity portfolio buy combining EFO and EET together. Haven't seen an LEFT that is World Ex-Us yet.
https://stockcharts.com/freecharts/perf.php?SPY,ULPIX&p=6 https://stockcharts.com/freecharts/perf.php?GDXJ,JNUG&p=6 https://stockcharts.com/freecharts/perf.php?IWM,TNA&p=6 https://stockcharts.com/freecharts/perf.php?EFA,EFO&p=6
Some contrarian thoughts are that if you DCA into ULPIX since the inception of the fund (1998) you only really start beating the sp500 in 2017, a full 19 years later. Also if you look at 2x funds for other countries/regions (EET - emerging markets, XPP - china, EFO - EAFE index, UPV - Europe, and EZJ - Japan) they either don't beat or barely beat the underlying indices. Probably because of more volatility in those markets compared to the US. It seems like you need 7-8% returns before leverage starts taking off and relatively low volatility. Will the US continue to have relatively low volatility and prosperity? Hard to say but that's what you're banking on with leverage.
The beginning of Skynet https://youtu.be/lM9EFO3h-UI