02  August 2018

WELCOME TO THE SATURN V SITE!

If you are looking for the best investment alternative that combines security, high profitability and long-term consistency, read this text and read our articles. Whether you are a beginner or a veteran, here you will find differentiated and enriching content that will help you to evaluate with efficient criteria which are the best investments. You will also have the opportunity to learn a little more about the technical aspects of our product.

 

Saturno V is an artificial intelligence system that operates in the Financial Market entirely automatically. It was created by world record holder Hindemburg Melão Jr.  The basis of the strategy used began to be developed in 2005 and began to be automated in 2006. Since then, Saturno has received numerous improvements from investigations into the results of millions of backtests and thousands of optimizations. In August 2010, Saturno started to be used in real accounts and has been accumulating profits that place it among the best investments in the world, with an annual dollarized average of 43.03% (33.79% when discounting the value of licenses to use ). Since April 2016, the Saturno V has been used by a European fund and has won several (20  to date) international awards on fund platforms (Barclay Hedge, IASG, Preqin), positioning itself ahead of thousands of funds from various countries. In 2018, a team made up of champion programmers from the International Mathematics, Physics and Computer Science Olympiads started working on the development of our proprietary platform for optimizations and backtests, which aims to be the most complete and advanced in this segment. There are a total of 6 programmers awarded with  22 medals. With this platform, it is expected that the optimization steps will become much faster and more efficient, accelerating advances in new versions.

 

TO GET STARTED, IT'S IMPORTANT TO DEBURN SOME MYTHS:

 

When a person starts in the Capital Market, he arrives full of illusions, with expectations of quick and easy enrichment. But as soon as he starts to invest, he takes some reality checks, gradually gets frustrated and puts his feet on the ground. He discovers that no course and no book provides the knowledge necessary to outperform the index, he discovers that the vast majority of funds and managers perform below the simple Buy & Hold of the index. Gradually, you will realize that it is much easier to lose money in the market than to win.

This harsh reality is well known to anyone with more than 10 years of experience in the Capital Markets. After the initial phase of the illusion of easy gains is over, some people end up resigning themselves to practicing the pure and simple Buy & Hold, with an average performance of 1.46% per year. This is the average of the DJI (Dow Jones Index) between 1776 and 2006, after discounting for US inflation. High rates of inflation smear profits, making them look bigger than they really are. In Brazil, there are no historical records as long as those of the DJI, but the results of the IBOV, after discounting inflation, are similar. Other people end up choosing to invest in savings, with a real return of 0.42% pa since the changes introduced by the government in 2012 (MP 567/12). Others prefer direct treasury, LCIs, LCAs or some investment that offers tax benefits. In short, they are satisfied with something between 0.5% and 3% a year above inflation.

 

sources:

Savings profitability

Inflation (IPC FGV)

 

IS BUY & HOLD SUSTAINABLE? FOR HOW LONG?

 

The graph below shows the evolution of the Dow Jones Index since 1776, adjusted for inflation. When looking at this graph, one notices many facts that are often unknown or overlooked. For example: how long did it take for the New York Stock Exchange to recover from the 1929 crash and return to a higher level than it was before that crisis? When inflation is not taken into account, one gets the impression that in 1951 the stock market had already recovered, but when one considers inflation, one realizes that the effects of the crisis were much more lasting and only in 1994, almost 65 years later, the stock market is back where it was before the crash. This means that a Buy & Hold practitioner who had started trading at the height of the 1929 bubble, composing a portfolio equivalent to the index, would have been negative for 65 years and would only return to point 0 in 1994. Worse still was for those who entered 1881, and was negative until 1973, or more likely died before becoming positive again.

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Advocates of value investing and Buy & Hold don't pay much attention to these details; they prefer to believe that they can achieve stable and secure long-term gains. The risk of going negative doing B&H over a 100 year period is really low, but the risk of going negative in 20 or 30 years is much higher than most people realize. Just look at the chart and see that there are many moments after which it is more than 30 years negative, 40 years negative, 50 years negative... Despite this, value investing is still much better than Technical Analysis, which produces more losses. fast and no recovery. In the case of B&H, it is only a matter of time before it becomes positive again (although that could take 92 years). In the case of AT, it is lost and never recovered. Another illusion one has with value investing is that by selecting stocks that are believed to be good, the result will be better than with random buys and sells. In fact, for almost all value investing practitioners, the long-term results are equivalent to random purchases. This will be discussed in a little more detail later on.

 

IS IT RECOMMENDED TO CHOOSE AN INVESTMENT BASED ON A HISTORY OF JUST 36 MONTHS?

 

One of the great difficulties in finding good investments is because the largest banks only present to clients the history of the last 24 months or 36 months of their funds, but the minimum interval necessary for a good analysis of the quality of an investment. would be 50 to 100 years. With 10 to 20 years you can eliminate most bad investments, but there is still not enough data to identify, among the good ones, which are the best. The InfoMoney ranking, for example, only presents history for the last 24 months or less. Large banks, founded more than 70 years ago, such as Bradesco and Itaú, do not have funds with at least 50 years of history to present to their clients, not even funds that are 30 years old... of 10 years. This is because it is extremely difficult to consistently get positive results, so few people in the world do.

As banks do not offer a fair remuneration to the few really talented managers, these managers  end up being forced to open independent funds, so the best funds are not linked to big banks. More than 99% of the retail funds that big banks offer their customers are losers and need to be recycled periodically. The cycle basically works like this: the bank opens a new fund, makes strong publicity, managers need to achieve goals by “selling” this fund to clients, attract investors, who enter the fund, pay fees for a while, the bank receives the fees, the fund starts losing money from the client, the fund fails, the bank creates another fund, with another name, and the cycle repeats itself, attracting more clients like cattle to the slaughterhouse. Each bank creates hundreds or even thousands of funds each year. Among thousands of funds, some of them end up, luckily, going positive. So banks use the history of these positives to advertise, receive billions in investments, charging fees of up to 2.5% on the amount invested. When the stock market is going up, funds last longer before breaking, attracting even greater volumes of investment. But funds that last more than 10 years without breaking are very rare. As of January 2016, only 4 out of 300+ InfoMoney funds were positive (above inflation) in the last 2 years. If the period considered were longer, something like 5 years, none would be positive.

 

In a study carried out by FGV (Fundação Getúlio Vargas), one of the most renowned institutions of higher education in the areas of Economics and Finance, they published a list that aims to include the best funds in Brazil:

https://exame.abril.com.br/revista-exame/os-melhores-fundos-do-pais/

In this list of 1,000 selected funds, when considering earnings above inflation, it appears that there is only 1 fund with an average performance above 10% per year in the last 5 years and only 18 funds with more than 5% per year in the last 5 years. 5 years. That is, less than 2% of the funds delivered to their clients a real profit above 5% per year.

It is also important to clarify that this fund above 10% per year had 93.26% of its profit concentrated in the last 3 years, while only 6.74% of the profit was generated in the first 2 years. This anomaly in the distribution of profits is usually an indication that the above-normal gains must have been the result of luck in a period of bullishness, unlike what would be expected from an efficient strategy, which should produce more homogeneous results and should be more regardless of whether the stock market is rising or falling.

Furthermore, it is important to understand that among those funds that were above 5% pa in 5 years, probably none of them will remain positive in the next 5 years. The half-life of an investment fund is about 1 year, on average, and can drop to 3 months in long periods of market decline and can increase to 4 years in long periods of highs. This means that, on average, after 1 year about half of the funds that were positive (above inflation) will be negative (below inflation). After 2 years, about half of the half, or 1/4 will remain above inflation. After 3 years, 1/8 will remain above inflation. After 4 years, 1/16 will remain above inflation. After 5 years, 1/32 will remain above inflation and so on. That is, after 5 years, about 3% of the funds that were initially positive should remain positive. After 10 years, only 3% of these 3%, that is, 0.09%, will remain positive. This happens for funds that are profiting by “lucky”, that is, almost all of them. When a fund is profiting by luck, the probability that it will continue to be profitable next year is about 50%. In the next 2 years it is about 25%. In the next 3 years it's about 12.5%... In the next 10 years it's about 0.1%. If the stock market is falling, the situation gets much worse, depending on the intensity of the fall and the duration of this fall.

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HOW TO KNOW IF AN INVESTMENT IS GENERATING PROFIT BY LUCK?

 

This half-life effect happens because the “strategies” used in almost all funds offer no real advantage compared to trading randomly. There are several studies on this, comparing the operations of professional managers with chimpanzees, octopuses, pigs, dogs and other animals. One of the most famous studies was carried out by the Wall Street Journal, comparing 100 professional managers with a chimpanzee, and it was found that the chimpanzee's performance, in terms of risk-adjusted profit, was superior to the managers' average. As the Market can only move in 2 directions, up or down, it becomes very easy to win by luck during short periods, especially while the stock market is going up, but it is very difficult to keep winning for longer and longer periods, because this increasingly requires an efficient strategy to be used.

This article from  Forbes  and this one from  Wall Street Journal  are quite alarming about the investment products offered by the big retail banks  and even by the big investment banks.

When a fund is profiting from using a truly winning strategy, then it doesn't matter if the market is going up or down, it should remain profitable. Also, his survival probability is not affected by this half-life rule, and he will remain profitable as long as he continues to use the winning strategy.

 

In Brazil there are very few funds with a history of more than 10 years; the vast majority break before that. When a fund exceeds 5 years, it proudly displays its results. Interestingly, good funds rarely come to the attention of most investors, in part because there are so many bad products made up to look like  good, in part because most investors don't cultivate  the habit  to research and learn.

 

GET TO KNOW SOME OF THE BEST INVESTMENT FUNDS IN BRAZIL

Few investors delve into and research the best funds, but  these few investors end up finding really promising alternatives, such as Dynamo Coughar, Tempo Capital, Sparta, which are among the very few really profitable funds in Brazil, with a track record of more than 10 years and consistent results, some above 5% per year, as discounting inflation, according to a study published in  Economic Terrace.

 

When analyzing the history of these funds before 2008 and after 2008, it is clear that even the best among the best did very poorly between 2008 and 2015, because in that period the Bovespa was falling, and along with it even the best funds were unable to generate profits for their clients, denouncing that the results they obtained before 2008 are not due to the merits of an excellent strategy to operate in all scenarios, but to the fact that a good part of the success achieved occurred in a long period of high of the Stock Exchange, from 2000 to 2008.

 

When the stock market began to fall, the fragility of its strategies became evident and only one of these funds remained consistently profitable: Hedging-Griffo Verde (HGV), which is currently simply called “Verde”. Between 1997 and 2015, the HGV generated an accumulated nominal profit of 11,284.49%, and even after discounting for inflation, the average real profit was 19.08% per year. When considering the period of decline of Bovespa, from 2008 to 2015, the HGV still maintained an average performance of 9.94% pa above inflation, while Dynamo Coughar had an average performance of 6.27% per year and Tempo Capital -4 .01% per year. After 2015, the stock market resumed its growth and the less efficient funds also started to grow again, but the most important range of comparison is when the stock market was falling, and even then the best funds remained firm.  

Verde is by far the best Brazilian fund, with more than 20 years of history, managed by the best human manager in Brazil, Luis Stuhlberger. Anyone who doesn't know Stuhlberger needs to read more about him and watch some of his videos on YouTube. Its record of results since 1997 (considering risk-adjusted profitability) is the best, in addition, even in the darkest period, from 2008 to 2015, Stuhlberger remained profitable, with almost 1/3 of the performance of the Saturn V, which is absolutely extraordinary for a human.

The Saturno V is the best investment alternative available. The only investment better than the Saturn V is James Simons' Medallion fund, which has been operating since 1982 with an average return to its clients of 35% per annum, net of fees. However, the Medallion fund does not accept new investors. It is still possible to invest in other funds from the Renaissance Techologies manager, also owned by James Simons, but the performance of these funds is much more modest, around 10% per year.  

Saturno V began operating in real accounts on 08/18/2010 and since then has generated an average performance of 43.03% per year, in dollars, or 58.14% per year in reais. Discounting the amount paid for the biennial licenses of use (L-IV), the net profit in dollars of the customers is still about 33.79% per year (up to 08/18/2018). It is important to remember that the Saturno V has achieved these performances in a period when the stock market has been falling. It is also important to emphasize that in addition to high performance, the results of the Saturno V stand out for their homogeneity, isotropy and ergodicity.

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The results obtained in real accounts corroborate the expectations based on the millions of backtests carried out since 2006, crowning the theoretical models on which the strategy is based with success.

HOW MANY CRISES SHOULD A STRATEGY SUPPORT?

In addition to 8 years of real account operations, the Saturn V has been tested since 1885 on the Dow Jones Index and since 1971 on Forex. Tests on the Dow Jones Index were extremely important to verify how the Saturn V would behave when going through major monetary crises, such as the 1929 New York Stock Exchange crash, in which many funds and banks failed, with a drop of more than 89 % it took 65 years for the economy to recover. The great crisis of 2008, which nearly bankrupted the United States; the 2000 crisis, which took the giant Microsoft to a loss of more than 60% and more than 15 years to recover, and the various other crises of 1907, 1937, 1966, 1973 and 1988.

What the tests demonstrated is that the Saturn V can be “trained” with historical data from 1885 to 1890 to “learn” the fundamental patterns that indicate optimal times to buy and sell. But we don't want to operate between 1885 and 1890. We want to operate in the future, and the effectiveness of a strategy must be measured based on the performances it is able to produce in the future, using the learning it has had in the past. Exclusively using the Saturn learning from 1885 to 1890 and putting it to work for the next 120 years, it continues to generate consistent profits, and robustly through all major crises, demonstrating its versatility and adaptability to different scenarios, including many scenarios. unpublished. Its average profit in this period is +36.34% per year and the maximum drawdown is -17.90%. While large funds suffered losses of more than 90% in the 1929 crisis, the Saturn V made profits during that crisis, and had its worst negative period in 1966, with a maximum loss of only 17.90%, which was recovered a few months later and resumed its growth rate. This rapid resilience is another extremely important property, because it often takes several years or even decades for exchanges to resume growth and surpass the previous high (watermark), while the Saturn V rarely goes more than 1 negative year in the history of several decades and only had three negative biennia in a history of more than 100 years.  

CAN BACKTESTS BE RELIABLE?

It's nice to have such a remarkable track record with over 100 years of backtesting! But how are the results in the real accounts? This is another important differentiator of the Saturno V: in addition to more than 120 years of results in backtests and 8 years in real accounts, several studies were carried out to measure the similarity between backtests and real accounts. The importance of these studies lies in verifying in what  the backtest results reflect what would have happened if the same strategy had been used in a real situation.

 

What we have found, adopting all appropriate security procedures and simulating all random variables that can affect the similarity between backtests and real accounts, is that the observed differences between a real account and a backtest is no less than the observed difference between two accounts. real compared to each other.  

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The chart above shows a comparison between backtest and real account from September to December 2010. The green line  shows the evolution of the balance on a real account. Then, the historical data from that same period were used to run a backtest, using the same version and same configuration of the Saturn that operated on the real account. The backtest result is represented by the blue line. It can be seen that they are practically the same, the moments of entry and exit, the quotations in the moments of purchase and sale, are almost identical.

 

Several studies were carried out with different versions of Saturn, different configurations and different periods, comparing backtests and real accounts, and all studies confirmed that the results in the backtests can be interpreted as highly reliable representations of what would have been achieved if the same strategy had been used. used in real accounts. This means that the Saturn V would have weathered the great crisis of 1929 and all other crises with the same serenity and efficiency with which it operates in any other scenario.

 

The overwhelming majority of funds do not even carry out studies on the isotropy and ergodicity of their performance records. Isotropy is one of the most fundamental properties, because it indicates the extent to which previous results can serve as a reference for estimating later results. Ergodicity indicates the extent to which the results obtained in a specific period tend to be reproduced in other, longer periods.

 

In a simplified way, for a stochastic process to be considered ergodic, it is necessary that there is global stationarity (which can be spontaneous or produced by deflation/indexation) and there must also be local stationarity in any sufficiently extensive stretch, chosen at random. An example of what cannot happen: if a strategy produces very high profits in one period and very low profits in a different period, each of these periods being long enough for the sample of cases to be statistically significant, then the profit history is not Ergodic, and this is a strong indication that the strategy does not work, that is, it is not capable of producing consistent profits in the long term. It is important to emphasize that this only applies when the periods being compared are long enough for the sample of cases to be statistically significant.

As the Financial Market has major crises every 15 years or so and several smaller crises, then the minimum range to include enough variety of scenarios is about 10 to 20 years. This means that at much shorter intervals, you don't have enough information for the strategy to have the opportunity to turn out to be good or bad. A group of 5 to 10 intervals, with 10 to 20 years each interval, when compared, if they present similar results, is a very strong indication that the strategy is really efficient.

To better understand why the ergodicity measure needs each considered interval to be “long enough”, one can consider a series of tosses of an unbiased coin, with 50% probability heads and 50% tails. If the attempt to measure ergodicity is performed with 5 sets of 6 tosses in each set, it may happen that some sets of 6 tosses have 100% heads and others may have 0% heads, or there may be 83% heads (5 heads) and 17% heads (1 heads), which are very different results from each other. But if there were 10 series of 300 tosses each series, it would be extremely unlikely to have a series with 100% heads and another with 0% heads, or any other ratio very different from 50% heads and 50% tails. In series with many releases each, the probability that the percentages in the different series are similar to each other is much higher than if there were few releases in each series. Both in the series with few releases and in the series with many releases, we will observe some units more or less in some series, but this variation of some units is small percentage when the total number of releases is large, whereas if the total number of launches is small, this fluctuation of few units can compromise the result. For the same reason, when verifying ergodicity in the performance of an investment fund, periods of at least 50 to 100 years should be considered, divided into intervals of at least 5 to 10 years each.

A VIRTUE THAT EVERY GOOD INVESTMENT NEEDS TO SHOW

The graph below, on a logarithmic scale, shows the evolution curves of a portfolio that had been managed by the Saturn V between 1885 and 2014. The performances were segmented into 11 intervals of approximately 12 years, and each interval starts with $100,000, so so that you can see what the evolution of earnings starting in 1885 to 1896 would be like compared to the evolution of earnings starting in 1897 to 1908 and compared to all other intervals represented in the graph. The great similarity between the curves of the different intervals shows how the Saturno behaves at different times and different scenarios, evidencing the high level of ergodicity in the performances. When considering sufficiently long intervals to attenuate the noise caused by the luck factor, it appears that both in major crises and in quieter periods, Saturn's growth rate is approximately constant.

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No matter which slice of history you are considering, the results are very similar to each other. In addition, a smooth and consistent growth curve can be observed in any interval.

 

This is an essential characteristic for any investment that intends to declare itself safe and long-lasting, and for this study to be carried out, the performance history must have at least a few decades of track record, and preferably more than a century.

 

If the history is too short, less than 20 years, and you divide that history into 4-5 year intervals, these intervals will not include enough variety of scenarios for the ergodicity test to be performed properly, and the results obtained will not have statistical validity. For example: from 1997 to 2018, if you divide it into 4 stretches of 5 years each, then the interval that includes the 2008 crisis will be different from the others. Let's look at the Hedging Griffo Verde chart, for example:

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It can be observed that the curve has a smooth growth before 2008 and after that date, but in 2008 it suffers a brutal fall, because in that period there was a considerable crisis. This makes the interval that includes the last months of 2008 different from the other intervals and harms ergodicity. A less pronounced anomaly can also be observed at the end of 2013. This does not mean that the bottom is bad. It just means that the 20-year history is insufficient for a proper study of this property, as each interval would need to be between 10 and 20 years, and the total history would need to be at least 50 to 100 years old. That is why it is so important to carry out backtests over several decades, just as it is very important to measure the similarity between backtests and real accounts.

 

It is very difficult to have real accounts operating for so long, so the measure of similarity between backtests and real accounts solves an important problem that is the validation of long histories of backtests, making possible studies on ergodicity and others that would not be possible in longer histories. short, this being another important difference of the Saturn V.

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The following chart compares the returns of Saturno V in real account from August 2010 to July 2018 with the Fundo Verde in the same period:

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Comparing them, one can notice some important differences:

 

1. The profitability of the Saturn V is much higher. The risk-adjusted return by the Sharpe ratio is also higher (1.29 for Verde and 2.24 for Saturn V). Using more sophisticated metrics to measure risk-adjusted profitability gives Saturn an even greater (and more realistic) edge.  

 

2. The homoscedasticity of the Saturn curve is greater, that is, the volatility in any given interval is more similar to the volatility of any other interval. In Green, there are some abrupt fluctuations in volatility in 2008 and 2014. This behavior of Green shows that despite  of low volatility most of the time, it can succumb in a few months when going through a very hostile scenario, while the behavior of Saturn does not change in different scenarios, remaining profitable even in the most severe crises.  This is because Saturn's strategy adapts to any scenario. What these facts indicate is that in a very prolonged and intense crisis, Green is in danger of ruin, while Saturn simply goes on as if it were a normal scenario.  

 

3. While Green remains profitable, it is getting less and less profitable over time. Between January 1997 and January 2008, the average annual return discounting inflation was 29.53%. But between January 2008 and July 2018 the average annual return was 8.56%, a substantial reduction in the level of profits. In contrast to this, the Saturn V versions are constantly being improved and produce ever greater performances, with less and less risk. The annual average of versions used between August 2010 and July 2018 was 41.62%, in dollars. The newest version of the Saturn, operating with half the lots, generates a profit of 66.81% in the same period. The tendency is that the gains with the Saturn will be bigger and bigger.

 

4. On the other hand, it is important to consider that Verde has R$33 billion under management, while Saturno V has only R$24 million. The volume in Green is  1400 times greater, so the liquidity difficulties faced by Verde are greater. It is more difficult to trade with billions, because trades cannot be executed all at once. In addition to determining the entry and exit points  in each operation, it is necessary to divide each operation into parts compatible with the available liquidity.  

 

Pondering the main points, Verde has already confirmed its efficiency through a  history with more than 20 years, managing volumes of tens of billions, with performances that continue to be among the best, in addition to high stability and robustness when going through crises,  while the Saturn V stands out  for unsurpassed performance,  for greater homogeneity and stability, and has been accumulating a track record, which exceeds 8 years. In terms of volume, Saturno is still relatively small when compared to funds with similar or slightly lower performance,  but as more qualified investors become aware of the differentiators the Saturn offers, the tendency is for the Saturn to also top the list in terms of volume.  

 

The main problem that affects the overwhelming majority of good investment funds, and that differentiates the good ones from the exceptional ones, is precisely this: good funds appear to be stable for several years, until a severe crisis occurs and their weaknesses become evident, with tragic losses that are up to 10 times greater than the losses typically seen in “normal” periods. While Saturn has a much smaller negative amplitude in the most dramatic periods, keeping practically the same performance as in the “normal” periods. This is because in addition to the Saturn being an adaptive system, the strategy used is much more versatile and comprehensive.

Although the history considered in the charts above is too short to be able to make a conclusive study on ergodicity, it is already possible to observe some differences between the Saturn V and some of the best investment alternatives that exist. In addition to much higher performance, the Saturn is also distinguished by having lower long-term risk, greater long-term stability, vastly greater (virtually unlimited) longevity expectation, and much stronger evidence of efficiency, supported by a wide variety of studies. .

  

If this text piqued your interest to learn more about the Saturn V, read our others  articles , read the  depositions  of those who already use Saturno, find out about how to analyze and compare the different investment alternatives, and make the best choice! Your reward will be the happiness of seeing your money grow safely and steadily, at a rate you've never imagined before!