@generativist this is a variant of St Petersburg paradox, better handled by @ole_b_peters than Taleb IMHO arxiv.org/abs/1011.4404
@generativist I do believe young people should be holding some TQQQ
@generativist Everyone saying “he’s right” needs to look up “volatility drag.”
@generativist @MorlockP I remember when I first learned about leverage.
@generativist Theoretically would work if you had a lot of margin to waste. In practice the fees are exorbitant and you get liquidated after 5 days.
@generativist Given that we've eliminated debtor's prison, it is not an unreasonable strategy. It is essentially an option payoff. Huge upside and limited downside (if you have limited assets, i.e., you're young).
@generativist leveraged returns are only guaranteed over a certain time period (sometimes a day). So this is basically asking whether 5% moves are better than 1% moves. when you factor in the drops, simple math says it's not worth it: (1.05)(.95) < (1.01)(.99)
@generativist Definitely not the worst thing you could do, but there is just so much leakage/drag from volatility in the levered ETFs.
@generativist The decay effect becomes too strong when you go beyond 3x. The sweet spot for the S&P is 2x.
@generativist I don’t understand why this wouldn’t work, I’m not the most informed on this topic but I’d love an explanation