SPX 11,000?

The S&P 500 will double from here. Think about it. If you believe in American capitalism you know it will happen. Knowing that it will happen makes engaging in markets much easier on the nerves.

I'm being kind of snarky. Oh, it will double, that's going to happen but we cannot know how long it will take and we cannot know what the path to 11000 will be. From the high in 1968, it took 18 years to double which is a very long time of course. In the decade of the 90's it went up 4x which is very short for that sort of gain. From the high in 2000 it took until 2019 to double. Or you could look at the 2007 high which was within a few points of the 2000 high and say it took 12 years to double. The most recent doubling took just four years from the week of April 5th, 2020 to where we are now which again is very short.

If things go fantastically well, maybe it will only be a few years and maybe the path to 11000 won't be by way of 3000 first. 

There's no prediction being made here. Assuming the world doesn't end, markets will continue to function and generally work higher at some unknowable rate. Since we cannot know the path, this really spotlights a couple of important portfolio management concepts. The first is to build a portfolio that you have a reasonable basis to believe can get you to where you need to be can stick with emotionally and maintain an asset allocation that allows you to manage sequence of return risks. That doesn't have to mean cash. Diversifying a small portion into strategies that should go up when the broad market goes down is a good way to go if you don't want to be a forced seller of assets after a large decline.

Back in March, we to a quick look a the Miller Value Partners Leveraged ETF (MVPL). It had just started trading. The big idea is that it will either be 100% invested in ProShares Ultra S&P 500 (SSO) which is a 2x fund or the SPDR S&P 500 (SPY) which is simple plain vanilla exposure. It owns SSO when their proprietary signals are bullish and SPY when they are bearish. 

Fund manager Bill Miller IV was on ETF IQ today and wouldn't give up anything about how its systematic process works. Back in March I said it was some sort of fast signal which appears to be correct. Despite looking like SSO all year, Miller said it was in SPY last Monday when the S&P 500 fell 3%.

It don't see it on the chart but the historical data tab on Yahoo Finance shows it dropping 3% not 6% like you'd expect SSO to be down that day. Maybe it changed the week before, not sure, but it is back to owning SSO as of 8/12. The idea is interesting in the context of portfolio theory, the AUM is small at just under $6 million with the fee disclosed as follows;

That might be a little expensive for strategy that is likely to hold SSO most of the time. I am basing that generalization on the fact that the S&P 500 goes up far more often than not and the chart creates the opinion that it has held SSO most of the time. If nothing else, it will make for some fun portfolio theory blogging when the track record is a little longer. 

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