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The Lost Decade

The Lost Decade: 2000-2009

Without further adieu, I will be presenting over the course of the next couple of weeks a year-by-year review of our Lost Decade: 2000-2009

Explore someĀ  fun facts, figures, and charts, and watch as the most difficult investing environment in over 70 years unfolds in front of your eyes.


What Worked in 2000?

Surprisingly, one of the best strategies of 2000 was to buy the close and sell the next open. This strategy generated a return of 172.75% 42.09% on the QQQQ (not including commissions). The average trade was worth 0.45% 0.28% with the average winning trade generating profits of 2.81% 1.17% while the average loser lost -2.12% -0.77%. The strategy won 52.17% 53.79% of the time. (Sorry about the strikethroughs. I had a mistake in my code.)

This is significant and should serve as a reminder that during a volatile bear market, one is paid a handsome risk premium for holding overnight. In fact, the same strategy began working again as the market plunged in 2008.

What Didn’t Work in 2000?

Arguably, most everything. Some stand-out losers were E-Toys, Pets.com, and At Home Corporation.




The Theme of 2000…

Everything that goes up must come down. In other words, embrace mean reversion! Mean reversion begins to assert itself as the dominant regime. A simple RSI2 system with the rules below returned 56.86% with a 77% win rate.

  • Buy=RSI2<10
  • Sell=RSI2>80
  • Short=RSI2>90
  • Cover=RSI2<20

As we would expect, a similar system would have done very well in the volatile bear of 2008.

Thus begins the Lost Decade.

The year 2000 was the perfect harbinger of what was to come during the decade ahead, characterized by corruption, corporate and government malfeasance, bursting bubbles, volatility, and shattered paradigms.

Stay tuned for the year 2001, otherwise know as, “Tech’s a Wreck…Let’s Flip a House!”

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