About 1 month ago a work colleague asked whether I thought DB was a good buy, and answered her with this post.

At the time I said that I liked financials in a rising rate environment but I would go with the market leader XLF instead of DB. What has played out since then?

Total return, 10/27 close to 11/23 close
DB: 14.49 to 15.79, +9.0%
XLF: 19.86 to 22.38, +12.7%

Drawdown
DB 10/28 high to 11/4 low, 14.74 to 13.32, -9.6%; if entered 10/27 close, then still -8.1% on capital invested. Yikes!

XLF 10/27 high to 11/4 low, 19.95 to 19.40, -2.8%; if measuring from 10/27 close, then -2.3%.

More gain with a lot less pain on XLF!

The smaller drop is hugely important psychologically speaking if you have a position that matters in size or leveraged ie hedge fund trading. For example, considering interest rates, one could make a justification to have financials be extreme overweight in a portfolio, even 50% in an individually managed IRA at this point. Why not? From 2011-15 all you really needed to own was biotech and tech. Thus far from the election, all you need is financials and USA small caps. But if you enter positions that drop -9% in a few days, it is extremely difficult to go big.

There are many ways to win in this game (and even more ways to lose), but the way I saw it happen at a fund that ran ~75MM and produced +100% return in one of two funds in 2013 was to go big on leaders and hold. This doesn't mean piling on after that fact - which is a recipe for disaster. It means catching the leaders in an early stage and playing that move as large as one can take. Then one can adjust the portfolio though rough patches in the futures market. If one has read my posts for a while, you will see this view underlying most of the strategy recommendations. Buy what is going up, instead of trying to buy what has been down the most or shorting tops. When the market is making a real long term trend change, like bonds and gold in January 2016, or Brazil EWZ in February 2016, pivots will make that very obvious.