The Blaise Practical Strategy

Risk disclosure: this appendix is a supplement to the editor “Blaise’s” personal practical strategy; it is not a required core lesson of the CLEC system, and suits advanced investors who are already familiar with the 433 allocation and who pursue higher capital efficiency. If you do not understand the 433 allocation, please first return to the CLEC Investment and Personal Finance Channel to understand the basics before reading the content below. The content of this appendix is a demonstration of a personal strategy and does not constitute individual investment advice; conclusions from historical backtests do not represent any future guarantee.

The Accelerator That Uses Volatility to Magnify Assets

Teacher James’s core CLEC system stresses controlling overall Beta risk through the cash ratio, keeping the system stable over the long term. On this foundation, Blaise further developed a personal practical version, “the Blaise Strategy v3.2,” whose core goal is “to keep operating even in the worst scenario” — the point is not to earn the most, but to design an antifragile system that can pass through the cycle even after a crash, and can even become more advantageous amid chaos.

1. The Dual-Core Architecture (Giving Assets a “Duty”)

The overall assets are broken into two engines with completely different logics; this strategy’s public default is the 433 allocation (40% underlying + 30% leverage + 30% short bonds), and users can adjust it to lower-Beta variants such as 613 or 424 according to their risk tolerance.

• The pledge system (defense, 00662): responsible for survival, stability, and the bottom line in the worst scenario. Buy only, never sell, and do not participate in the leverage system’s dynamic adjustment during periods of market volatility; at annual rebalancing, if the market has hit a new high and the ratio is insufficient, buy 00662 to return to the preset underlying ratio. A practical stress test: using only 10% of total assets for pledging, assuming NT$10 million of collateral and NT$1 million of borrowing, even if the year-2000 dot-com bubble were to recur (an 83% drop), the maintenance ratio would still be about 170%, and in theory would not yet break below the 130% margin-call line — but 170% is already a high-pressure zone, not exactly far off, and it still must be paired with a cash line of defense, interest-payment capacity, and the broker’s rules; only when the market falls more than 87% would this fortress be directly breached.
• The leverage-balancing system (offense, 00670L + 00865B): responsible for absorbing volatility, converting risk, and magnifying the future slope. In up years, sell stock to buy bonds and lower Beta; in a large decline, sell bonds to swap into stock and wait for an accelerated rebound, purely using rules to eat volatility.

2. The Hard Overarching Principle (a 30% Short-Bond Floor)

The starting allocation’s short-bond position (cash-like) must not fall below 30%, and so this strategy does not adopt 442 as the starting allocation. This is a personal risk-control limit of the Blaise Strategy v3.2 (it needs 30% short bonds as arithmetic-progression add-on fuel), and does not mean the CLEC main line rejects 442; investors who adopt the CLEC-standard 442 should return to the original 40 / 40 / 20 rule and not apply this appendix’s high-intensity add-on mode. In a full -50% drop, the three modes respectively burn through 10% / 20% / 30% of short bonds (conservative / sprint / aggressive); therefore the cumulative add-on of the chosen mode must not exceed the short-bond position you hold. If the initial short bonds are below 30%, there is not enough fuel to run the aggressive mode, and you must step down one tier — with only 20% short bonds switch to sprint, with only 10% switch to conservative.

3. The Arithmetic-Progression Add-On Method (Using Discipline to Take Over Human Nature)

Using 00670L / QLD’s “all-time high (ATH)” as the calculation basis (not personal cost), build an arithmetic-progression add-on path with every 5% drawdown as the base unit (-5%, -10%, -15%… up to a -50% cap). At each node, transfer short bonds (00865B) into the 2× (00670L) according to the preset mode. Execution rule: each drawdown node triggers only once, and the entire node table is not reset until 00670L / QLD sets a new all-time high; and it is always judged by the daily or weekly close, not triggered by an intraday price, to avoid false breakdowns causing excessive trading. The three modes are designed as follows:

Blaise’s personal practical choice is the aggressive mode (+3% per tier), meaning that when 00670L retraces 50% from its all-time high, the 30% short-bond fuel will all be converted into the 2×, as a precise slope replacement at the moment of valuation correction. But let it be said plainly: in aggressive mode the in-system short bonds hit zero after -50%, and this path only works when both “a stable salary cash flow” and “routinely pledging 00662 to continuously produce a 10%–20% cash-cushion layer” are in place at the same time, ensuring the supply is never cut off; otherwise the public default should adopt the conservative or sprint mode, keeping at least a 10%–20% short-bond line of defense.

The necessary conditions for activating the high-intensity modes (sprint / aggressive) (all must be met simultaneously, none can be missing): activating the sprint-to-aggressive mode means that in an extreme bear market you will convert a full (20%–30%) position of short bonds into high-volatility 2× assets, and therefore you must have the bottom line of “off-book supply never cut off” — first, a stable salary cash flow to support living costs and existing principal and interest; second, routinely pledging 00662 to continuously produce at least a 10%–20% cash-cushion layer, as a defensive substitute after the short bonds hit zero. Only when both are in place at the same time, ensuring the system’s supply is never cut off, do you qualify to activate it; if either is missing, step back down to the conservative or sprint mode and keep a short-bond line of defense.

4. The Three-Dimensional Rebalancing Mechanism

To handle the complexity of the real market, this strategy breaks the rebalancing mechanism into three dimensions to execute:

• Monthly contribution rebalancing (the everyday norm): when the monthly salary is injected or an extra bonus arrives, adopt a “buy only, never sell” strategy — without disturbing existing assets, precisely put the new funds into whichever tickers are currently below the preset allocation in actual ratio, dynamically maintaining balance. Distinguish the nature of the funds: your own funds such as salary and bonuses can be put into any ticker according to the allocation gap; but borrowed funds such as newly approved personal loans / mortgages must not be put directly into leveraged tickers such as 00670L / QLD — if used for investment they should be limited to the 00662 underlying or to replenishing the short-bond line of defense, and the monthly principal and interest must be borne by a stable salary or predictable cash flow, not repaid with market returns, distributions, or by selling stock
• Drawdown-event rebalancing (a sudden negative): when 00670L’s drawdown from ATH, confirmed by the daily or weekly close, crosses a node such as -5% / -10%, on the next fixed trading day execute “sell 00865B, buy 00670L” according to the arithmetic-progression add-on ladder, harvesting the par-value volatility brought by the black swan into a position, rather than chasing the price on an intraday sharp rebound
• Annual rebalancing (the cyclical settlement): execute on one fixed day each year (late December or early January is recommended), operating by category according to that year’s price state — in an up year, if the leverage position is severely overweight, sell the excess 00670L, buy 00865B, calibrate Beta back to 1 and refill the fuel tank; in a down year, strictly judge whether to add on according to the drawdown nodes, do no routine rebalancing, and wait quietly for the next year’s new high before a major rebalancing

5. The Pledge Top-Up Mechanism (a Hidden Cash Layer)

This strategy’s most core design — however much you pledge and borrow, top up the same amount to the short bonds (00865B). This brings a dual effect: when you continuously “sell bonds and buy the 2×” in a bear market, you still possess a layer of “hidden liquidity” that comes from pledge borrowing. The system’s original 30% short bonds plus the pledge-supplemented portion can raise the whole account’s “total liquidity” to about 40%–50% (it is recommended to pledge and borrow at most 20%). But recognize this: this layer is “liquidity corresponding to a liability,” not a net-asset line of defense — it carries interest cost, maintenance-ratio risk, and a repayment obligation, and when calculating safety you should look together at total assets, total liabilities, net assets, the pledge ratio, and the maintenance ratio, and not assume you are safer just because the short-bond ratio rose.

6. The Philosophy of Cash Flow and Pledging

The living reserve is set at 3 to 12 months of total expenses, with the first layer in a high-interest demand account (short-term cash) and the second layer in short-bond-like cash (medium-term, withdrawable at any time). In extreme volatility, you can lower the priority of “early repayment of principal” and keep the cash and short bonds as defense; but the minimum payment, the amortization of principal and interest, and the pledge interest on all debts must still be paid on time, the pledge credit line can serve only as short-term liquidity backup, and covering living costs is also the second layer — it cannot replace the basic repayment responsibility.

• Pledging as a second layer of liquidity backup (not replacing the cash reserve): traditional thinking, keeping a large sum of idle cash as a reserve, gets skinned by inflation over the long run, so this strategy lowers the idle-cash ratio and puts funds into the system as much as possible (4:3:3) to maintain the compounding slope; but the pledge credit line can only be a second-layer backup, and cannot replace the first layer’s 3–12 months of bank cash / short bonds — the broker can adjust the collateral ratio, and in a large drop the credit line available can instead shrink, so the moment you most need liquidity is often exactly when pledge risk is highest. Using a quality asset’s high liquidity as an auxiliary safety cushion is fine; using it as the sole reserve is not
• Controlling repayment flexibility: pledge borrowing is not for consumption upgrades but for trading time for space. When the market is high, repay faster to actively deleverage and lock in gains; when the market is low, repay slowly to keep cash as fuel for the balancing system
• Living expenses are themselves automatic risk control: when you draw funds from the system to support living, you are in essence executing a kind of “dynamic deleveraging” — funds flowing out means the absolute exposure amount drops; this breaks the traditional investing mindset of “scrimp and save to gamble,” and turns living expenses into the system’s pressure-relief valve
• Strictly forbidden: funds borrowed through pledging are strictly forbidden from being reinvested into stock tickers; this red line is fully consistent with the CLEC main line in CH16

This discipline of “be a tortoise in a bull market, charge in a bear market” can turn volatility decay into an asset accelerator. But this method demands extremely high execution discipline and psychological quality; those whose initial short bonds do not reach 30% must forcibly step down to the sprint mode (+2% per tier) or return to the CLEC-standard 433 allocation.

The Public Spreadsheet (Apply It Yourself)

The arithmetic-progression add-on ladder, three-dimensional rebalancing, and pledge top-up described above can all be directly applied and calculated in the “Blaise Strategy v3.2 public spreadsheet” (updated 2026-05-18). After copying it to your own Google account and modifying the parameters, you can project the add-on nodes and short-bond consumption under different multiplier modes and drawdown scenarios, turning abstract rules into visible numbers.

“Blaise Strategy v3.2 Public Spreadsheet”:

https://docs.google.com/spreadsheets/d/1fUfMAVPcrLO736a03Wq_VzfPN8PVLeLVIgu32jmH_CI/edit?usp=sharing

Before using it, first “make a copy” to your own Google account so you can edit it; the original link is read-only. The projection results are for concept verification and scenario simulation only; the numbers do not represent guaranteed future returns.

Backtest of Drawdown and Recovery: 433 vs. 442 vs. Full QQQ

Blaise once used the 2022 decline to quantify what “keeping an extra 10% cash” actually buys. Take that year’s pullback: full QQQ had a maximum drawdown of about -32.58% and took about 12 months to recover; the more aggressive 442 (only 20% cash) drew down deeper, about -36.96%, and likewise took about 12 months to recover; while the conservative 433 (30% cash) not only held the maximum drawdown to about -30.77% but also shortened the recovery time to about 7 months. That extra 10% cash is the ammunition that lets you rebalance smartly in a bear market, accelerate refilling the leveraged position, and cut the “painful lock-up period” nearly in half — this is exactly why the Blaise strategy insists on the 30% short-bond floor. (This is Blaise’s personal backtest over the 2022 window, not official performance; actual results vary by window and instrument.)

The Path Dependence of Leverage — Why Full 2× Is Forbidden

A long-horizon projection makes the risk that “full leverage may never recover” clearest. Suppose over the next 30 years QQQ compounds at 14% and QLD, amplified by leverage, at about 28%: in a smooth “normal scenario,” QQQ grows to about 51× and QLD to about 1,645× — the explosive power of leverage is real. But just switch the “opening” to a nightmare — the first 3 years fall about -70% before annual growth resumes — and the outcome is worlds apart: QLD ends at only about 21×, its deep opening pit having eaten most of the compounding; while full QQQ, though it recovers, is only about 0.93× after 30 years, not even back to principal. Same long-run annualized return, different opening order, and the outcome can be a chasm between 1,645× and 21×. This is precisely why the Blaise strategy always builds on a base of prototype and short bonds and never goes full 2× — no one can foresee whether they are on the “deep bear at the opening” path. (This is a projection under long-horizon assumptions, not actual performance; the figures depend heavily on the annualized-return assumptions and the timing of declines.)