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#21
10-16-2007, 12:28 PM
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Re: 50% returns on small amounts?
[ QUOTE ]
yes. desk quants/desk analytics books of people i've spoken with have done this. one guy is the FI desk analytics guy at lehman and the other is the structured products desk quant. the FI guy has generated nothing impressive in terms of excess returns: 13%, but very impressive at only 5% vol (IR of 2.6) for 2 years now. that is pretty sick. [/ QUOTE ] if it can't be leveraged, i'm not impressed :P [ QUOTE ] there is no theoreticall basis for high returns to necessarily have lower ratios beyond capitalism. [/ QUOTE ] beyond capitalism? what does that mean? 
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#22
10-16-2007, 01:21 PM
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Re: 50% returns on small amounts?
[ QUOTE ]
[ QUOTE ] there is no theoreticall basis for high returns to necessarily have lower ratios beyond capitalism. [/ QUOTE ] beyond capitalism? what does that mean? [/ QUOTE ] according to capitalism, higher risk means higher returns. you have to take more risk to incur larger returns. what i meant to say was that there is no theoretical reason why higher returns must have a necessarily lower ratio beyond cost of leverage etc. (i.e. usually in order to gain more exposure, it costs some small amount so higher returns that have proportionally higher risk lose a little in their ratio in terms of the costs of taking the more risky positions... i.e. you can't costlessly scale up high IRs). that is what i meant by capitalism though i was a bit glib. Barron
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#23
10-16-2007, 01:53 PM
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Re: 50% returns on small amounts?
[ QUOTE ]
I really really dont think 50% returns are sustainable. Its like the 10pt/bb winrate. Sure some guys can run there for 40 to even 70k hands but put it over any decent sample and its basically impossible expect for honestly 5-6 guys in the world. The stock market cannot allow you to see the long run so this argument is pretty pointless. Its very possible DCs gains during the years were due to positive variance and his real EV was 25% gains. Im not saying it eas or wasnt, im just saying if poker has taught me anything its to not be so results oriented if the decision was an intelligent one. [/ QUOTE ] I was definitely running hot, plus the bursting of the internet bubble was very good for my style of investing, the first couple years of my streak. Now maybe I'm running a little cool, or I'm lazy, but I'm still doing over 20%. But in Buffetts case, I believe the reason he said he could guarantee results was arb deals. Not just merger arb, but clever high return opportunities from recapitalizations and such, including bankruptcies and high yield debt. For an example google the coffee bean arbitrage he did when he first started working for Ben Graham. It paid him a very high risk free return. The reason Buffett has an edge finding these deals is that he's reading annual reports every day, he probably reads thousands a year so he can find these very rare opportunities. I can't bring myself to do that much work.
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#24
10-16-2007, 03:39 PM
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Re: 50% returns on small amounts?
Cocoa beans, not Coffee beans.
[ QUOTE ] Some offbeat opportunities occasionally arise in the arbitrage field. I participated in one of these when I was 24 and working in New York for Graham-Newman Corp. Rockwood & Co., a Brooklyn based chocolate products company of limited profitability, had adopted LIFO inventory valuation in 1941 when cocoa was selling for 50 cents per pound. In 1954 a temporary shortage of cocoa caused the price to soar to over 60 cents. Consequently Rockwood wished to unload its valuable inventory - quickly, before the price dropped. But if the cocoa had simply been sold off, the company would have owed close to a 50% tax on the proceeds. The 1954 Tax Code came to the rescue. It contained an arcane provision that eliminated the tax otherwise due on LIFO profits if inventory was distributed to shareholders as part of a plan reducing the scope of a corporation’s business. Rockwood decided to terminate one of its businesses, the sale of cocoa butter, and said 13 million pounds of its cocoa bean inventory was attributable to that activity. Accordingly, the company offered to repurchase its stock in exchange for the cocoa beans it no longer needed, paying 80 pounds of beans for each share. For several weeks I busily bought shares, sold beans, and made periodic stops at Schroeder Trust to exchange stock certificates for warehouse receipts. The profits were good and my only expense was subway tokens. The architect of Rockwood’s restructuring was an unknown, but brilliant Chicagoan, Jay Pritzker, then 32. If you’re familiar with Jay’s subsequent record, you won’t be surprised to hear the action worked out rather well for Rockwood’s continuing shareholders also. From shortly before the tender until shortly after it, Rockwood stock appreciated from 15 to 100, even though the company was experiencing large operating losses. Sometimes there is more to stock valuation than price-earnings ratios. [/ QUOTE ]
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#27
10-16-2007, 09:27 PM
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Re: 50% returns on small amounts?
Well i can't brag about huge returns. I made a nice % on a couple refineries that I mentioned on this board. One thing I see few people mention is the fact that we have been in a bull run for some time now and picking winners has been much easier IMO. If we are in an economic downturn, then the next 5+ years will show to be much more accurate in identifying profitable traders.
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#29
10-16-2007, 11:32 PM
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Re: 50% returns on small amounts?
[ QUOTE ]
[ QUOTE ] i'm most impressed with any kind of returns on a 1.5 or higher ratio. in that case, you can use leverage in many ways to increase your returns and really have a lot of room in terms of costs to do so. [/ QUOTE ] does anyone have a record of achieving ratios that high over long periods of time? if i could do 50% with a 30% standard deviation (which should be about right with that information ratio), i'd retire right now [img]/images/graemlins/laugh.gif[/img] [/ QUOTE ] You would just about have to if you want those returns. You can't spend 10 minutes reading Barron's, throw an order onto ETrade, and wake up a year later and expect to make 50%. You have to put in the work, including watching the market most of the trading day.
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#30
10-16-2007, 11:34 PM
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Re: 50% returns on small amounts?
[ QUOTE ]
[ QUOTE ] [ QUOTE ] i'm most impressed with any kind of returns on a 1.5 or higher ratio. in that case, you can use leverage in many ways to increase your returns and really have a lot of room in terms of costs to do so. [/ QUOTE ] does anyone have a record of achieving ratios that high over long periods of time? if i could do 50% with a 30% standard deviation (which should be about right with that information ratio), i'd retire right now [img]/images/graemlins/laugh.gif[/img] [/ QUOTE ] You would just about have to if you want those returns. You can't spend 10 minutes reading Barron's, throw an order onto ETrade, and wake up a year later and expect to make 50%. You have to put in the work, including watching the market most of the trading day. [/ QUOTE ] duhh i'd get someone else to do it for me :P
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