Combining GB with spread trend

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pmward
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Combining GB with spread trend

Post by pmward » Sun Mar 22, 2020 1:13 pm

Ok, so this last couple weeks has been interesting. In some ways I've grown a greater respect for the PP/GB. In other ways, my skills in technical analysis could have allowed me to do better if I had some flexibility built into my rules. The damage is now done, but coming out of a bear market there will be some new trends emerge that I can take advantage of... and I do not want to miss the boat this time. I've spent most of the weekend researching charts and trying to figure out how I can make a total PP/VP portfolio that is the best of both worlds. I do not have the stomach for large drawdowns, and at the same time I'm young, have a high savings rate, and have technical analysis skills so why not chase a little alpha? So here I am going to kind of document my adventures. First, what are my needs/wants in this portfolio?
  1. GB like safety on the whole. I can handle a 20-30% drawdown max, with 2-3 year recovery.
  2. Flexibility built in to allow me to follow long term trends within the framework.
    1. Trend following must be long term, I do not want to churn short term term trend swings.
    2. I'm not a fan of the momentum trend styles like GEM, that use blind percentages based on an arbitrary date.
    3. I'm skilled with reading charts, and I generally have a good feel for trends in the market, so I would like to use these skills.
  3. Rules built in to cater to my personal strengths/weaknesses as a trader
How to address these things:
  1. PP variation for core holdings with minimum asset thresholds.
    1. Stocks, Gold, Bonds - 15-20% minimum each (target is 20%, 15% means rebalance needed)
    2. Cash - 3-6 months expenses minimum
    3. All the above ratios always have to be held at all times. This essentially leaves 60-65% in a PP and 35-40% in a VP.
  2. Flexibility:
    1. Long term trend using charts - Use *weekly* spread charts. Only make a trade on the breakdown of a current long term trend.
      1. Track trend changes using 20, 50, and 200 week moving averages, long term trend lines, and weekly RSI.
      2. Changing from one asset to another should be done in multiple trades over time, not an all at once deal.
    2. All assets in both the PP and the VP can be swapped out with trend.
    3. Stocks - hold 1-3 of: large cap (S&P or QQQ), small cap, emerging markets, international, growth, value, momentum, and all combos.
    4. Bonds - 1-2 of Long, Intermediate, Short treasuries, or Corporate (short or intermediate)
    5. Commodities - 1-2 of gold, silver, REIT
    6. Cash - 90 day treasuries, 1 year treasuries, treasury money market, I-Bonds
  3. Rules to address personal strengths and weaknesses
    1. I'm very strong on picking buy points in long term trends. Allow some discretion here to follow my gut.
    2. I'm not as good at picking sell points. So changing to one asset to another must be done over time in DCA manner, not all at once.
    3. I'm much better at picking changes in the big long term trends than picking changes in short term trends. Stick to weekly charts only.

Currently where am I? I am currently in a run of the mill GB with 5% cash traded for 5% REIT. I also have a big expense next year, so I need to keep cash more overweight than I normally would.

What do I see in the charts that is catching my eye?

SPY/TLT: RSI is the most oversold on this spread since Oct 2008. Pretty much every spread I look at looks very similar to Oct 2008. So in general, I'm using this time period as my template. I'm expecting a bounce in stocks in the coming weeks/months. I'm expecting another down leg at some point though. Ideally somewhere around the 1900-1950 range on S&P will be the ultimate bottom. Because of this, I am looking to dabble in trading some bonds for stocks in the coming weeks.

Small-cap/Large-cap: Record over sold level here on RSI. I am expecting small to mean revert and out perform large on a relative basis in the short term. So I am going to keep my small caps since I already have them, this would be a poor time to swap. But I am keeping a close eye when we get back near the trend line. The large cap up-trend is strong, and when we retest the trend line next if it holds I'll start moving some small to large.

Value/Growth: Same as small/large. Record oversold level is being registered this week. I am expecting a mean reversion. Growth's uptrend vs value goes all the way back to 2002 without violating the trend line a single time. This is an extremely strong trend and should be taken very seriously. I'm looking to swap from value/blend funds to growth funds on the next trend line test (looking at QQQ or SLYG depending on how small/large resolves) assuming that the trend will stay in place as it has for the last 18 years and counting.

GLD/SLV: We also have a record overbought level here, highest read since Oct 2008. Could silver start to come to life? The gold uptrend is strong, so it won't resolve quickly, but dabbling in some silver might be something to consider when metals start their next up leg. The gold $1350 breakout last year was the start of a new bull market. I do not expect to see prices ever get below $1350 ever again at this point. I would be very surprised if this happened. $1350-1400 range looks like a really good buying opportunity in metals, if we should get so lucky.

US/International - I have no international and the uptrend is intact. We are currently in the middle of the range. Staying fully U.S. until trend tells me otherwise.

Emerging/Developed - Emerging is surprisingly looking lively vs developed. I would have thought the virus would hit emerging harder, especially with the USD skyrocketing. There was a trend line break out for emerging 4 weeks ago that so far has held. Is this a prairie dog or is it for real? However, Emerging/SPY is still in a downtrend, though right at the very top of the range. Right now I'm simply observing, but I do expect sometime in the coming years for emerging to come back to life and I want to be a part of that trend when it does happen.

long bonds/intermediate bonds - Long bonds broke above the trend line that has been in place since 2011 a few weeks ago. It fell back below it this week for a bit, but closed back above. RSI is showing overbought, but it's signaled overbought a few times since 2011 and long has continued to out perform. Tracking this, but nothing actionable currently.

So based on the above, really the only near term actionable trend that I'm looking to make a change on is moving some TLT to S&P. Waiting for the right moment. I'm also watching small/large and value/growth very closely. I'm going to continue to ride my large/SCV barbell for the moment as I expect some mean reversion for both small and value in the short term. I wouldn't be surprised to see a trend change here, as bear markets tend to signal rotation of leadership. Could this finally be the time for SCV to come back to life? Everyone has forgotten it exists, so it certainly would a be a good time to catch everyone off guard. So I'm hoping I can hold my SCV for awhile longer, hopefully into a new multi-year trend. I'm using long term weekly charts here so it will likely be weeks before there is any resolution either way on any of these. I'm also eyeing with curiosity emerging markets to see if their relative strength is a fake out or a break out, as well as long/intermediate bonds. These two are more for curiosity at this point, but something actionable may come in the next few weeks to months. This is not going to be a fast paced system, sticking to weekly charts means most trends I trade will be in the timeframe of months to years. I'm basically hoping to take advantage of those long term, decade or higher trends that always seem to emerge. Things like, tilting to growth from 2002 -2020, or tilting from gold to silver from 2009-2011, and back to gold from 2011-2020. The indicators and spreads I am tracking going back as far as I can would have worked and added a ton of alpha to the portfolio, as well as further reduced drawdowns. It also keeps ~60% of my funds in a PP (modified to allow for tilts to similar trending assets) where they are safe. I'll try to update this with any new updates, moves, etc I make for anyone that is curious.
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Re: Combining GB with spread trend

Post by shekels » Sun Mar 22, 2020 1:55 pm

pmward wrote:
Sun Mar 22, 2020 1:13 pm
Ok, so this last couple weeks has been interesting. In some ways I've grown a greater respect for the PP/GB. In other ways, my skills in technical analysis could have allowed me to do better if I had some flexibility built into my rules. The damage is now done, but coming out of a bear market there will be some new trends emerge that I can take advantage of... and I do not want to miss the boat this time. I've spent most of the weekend researching charts and trying to figure out how I can make a total PP/VP portfolio that is the best of both worlds. I do not have the stomach for large drawdowns, and at the same time I'm young, have a high savings rate, and have technical analysis skills so why not chase a little alpha? So here I am going to kind of document my adventures. First, what are my needs/wants in this portfolio?
  1. GB like safety on the whole. I can handle a 20-30% drawdown max, with 2-3 year recovery.
  2. Flexibility built in to allow me to follow long term trends within the framework.
    1. Trend following must be long term, I do not want to churn short term term trend swings.
    2. I'm not a fan of the momentum trend styles like GEM, that use blind percentages based on an arbitrary date.
    3. I'm skilled with reading charts, and I generally have a good feel for trends in the market, so I would like to use these skills.
  3. Rules built in to cater to my personal strengths/weaknesses as a trader
How to address these things:
  1. PP variation for core holdings with minimum asset thresholds.
    1. Stocks, Gold, Bonds - 15-20% minimum each (target is 20%, 15% means rebalance needed)
    2. Cash - 3-6 months expenses minimum
    3. All the above ratios always have to be held at all times. This essentially leaves 60-65% in a PP and 35-40% in a VP.
  2. Flexibility:
    1. Long term trend using charts - Use *weekly* spread charts. Only make a trade on the breakdown of a current long term trend.
      1. Track trend changes using 20, 50, and 200 week moving averages, long term trend lines, and weekly RSI.
      2. Changing from one asset to another should be done in multiple trades over time, not an all at once deal.
    2. All assets in both the PP and the VP can be swapped out with trend.
    3. Stocks - hold 1-3 of: large cap (S&P or QQQ), small cap, emerging markets, international, growth, value, momentum, and all combos.
    4. Bonds - 1-2 of Long, Intermediate, Short treasuries, or Corporate (short or intermediate)
    5. Commodities - 1-2 of gold, silver, REIT
    6. Cash - 90 day treasuries, 1 year treasuries, treasury money market, I-Bonds
  3. Rules to address personal strengths and weaknesses
    1. I'm very strong on picking buy points in long term trends. Allow some discretion here to follow my gut.
    2. I'm not as good at picking sell points. So changing to one asset to another must be done over time in DCA manner, not all at once.
    3. I'm much better at picking changes in the big long term trends than picking changes in short term trends. Stick to weekly charts only.

Currently where am I? I am currently in a run of the mill GB with 5% cash traded for 5% REIT. I also have a big expense next year, so I need to keep cash more overweight than I normally would.

What do I see in the charts that is catching my eye?

SPY/TLT: RSI is the most oversold on this spread since Oct 2008. Pretty much every spread I look at looks very similar to Oct 2008. So in general, I'm using this time period as my template. I'm expecting a bounce in stocks in the coming weeks/months. I'm expecting another down leg at some point though. Ideally somewhere around the 1900-1950 range on S&P will be the ultimate bottom. Because of this, I am looking to dabble in trading some bonds for stocks in the coming weeks.

Small-cap/Large-cap: Record over sold level here on RSI. I am expecting small to mean revert and out perform large on a relative basis in the short term. So I am going to keep my small caps since I already have them, this would be a poor time to swap. But I am keeping a close eye when we get back near the trend line. The large cap up-trend is strong, and when we retest the trend line next if it holds I'll start moving some small to large.

Value/Growth: Same as small/large. Record oversold level is being registered this week. I am expecting a mean reversion. Growth's uptrend vs value goes all the way back to 2002 without violating the trend line a single time. This is an extremely strong trend and should be taken very seriously. I'm looking to swap from value/blend funds to growth funds on the next trend line test (looking at QQQ or SLYG depending on how small/large resolves) assuming that the trend will stay in place as it has for the last 18 years and counting.

GLD/SLV: We also have a record overbought level here, highest read since Oct 2008. Could silver start to come to life? The gold uptrend is strong, so it won't resolve quickly, but dabbling in some silver might be something to consider when metals start their next up leg. The gold $1350 breakout last year was the start of a new bull market. I do not expect to see prices ever get below $1350 ever again at this point. I would be very surprised if this happened. $1350-1400 range looks like a really good buying opportunity in metals, if we should get so lucky.

US/International - I have no international and the uptrend is intact. We are currently in the middle of the range. Staying fully U.S. until trend tells me otherwise.

Emerging/Developed - Emerging is surprisingly looking lively vs developed. I would have thought the virus would hit emerging harder, especially with the USD skyrocketing. There was a trend line break out for emerging 4 weeks ago that so far has held. Is this a prairie dog or is it for real? However, Emerging/SPY is still in a downtrend, though right at the very top of the range. Right now I'm simply observing, but I do expect sometime in the coming years for emerging to come back to life and I want to be a part of that trend when it does happen.

long bonds/intermediate bonds - Long bonds broke above the trend line that has been in place since 2011 a few weeks ago. It fell back below it this week for a bit, but closed back above. RSI is showing overbought, but it's signaled overbought a few times since 2011 and long has continued to out perform. Tracking this, but nothing actionable currently.

So based on the above, really the only near term actionable trend that I'm looking to make a change on is moving some TLT to S&P. Waiting for the right moment. I'm also watching small/large and value/growth very closely. I'm going to continue to ride my large/SCV barbell for the moment as I expect some mean reversion for both small and value in the short term. I wouldn't be surprised to see a trend change here, as bear markets tend to signal rotation of leadership. Could this finally be the time for SCV to come back to life? Everyone has forgotten it exists, so it certainly would a be a good time to catch everyone off guard. So I'm hoping I can hold my SCV for awhile longer, hopefully into a new multi-year trend. I'm using long term weekly charts here so it will likely be weeks before there is any resolution either way on any of these. I'm also eyeing with curiosity emerging markets to see if their relative strength is a fake out or a break out, as well as long/intermediate bonds. These two are more for curiosity at this point, but something actionable may come in the next few weeks to months. This is not going to be a fast paced system, sticking to weekly charts means most trends I trade will be in the timeframe of months to years. I'm basically hoping to take advantage of those long term, decade or higher trends that always seem to emerge. Things like, tilting to growth from 2002 -2020, or tilting from gold to silver from 2009-2011, and back to gold from 2011-2020. The indicators and spreads I am tracking going back as far as I can would have worked and added a ton of alpha to the portfolio, as well as further reduced drawdowns. It also keeps ~60% of my funds in a PP (modified to allow for tilts to similar trending assets) where they are safe. I'll try to update this with any new updates, moves, etc I make for anyone that is curious.
I just try to follow the KISS method.
It is enough for me, just to not overthink things.
Good Luck , Keep us posted.
¯\_(ツ)_/¯
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Re: Combining GB with spread trend

Post by shekels » Sun Mar 22, 2020 2:23 pm

This might be of interest to you for your stock allocation .
On the Tactical Asset Allocation + HBPP thread is an idea ochotona was following from Paul Novell's newsletter.
Taking the 200 SMA for the SPY.
I looked at the website and it seems interesting.
Just not to many indicators to form fit what you think will happen.
¯\_(ツ)_/¯
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Re: Combining GB with spread trend

Post by pmward » Sun Mar 22, 2020 4:40 pm

shekels wrote:
Sun Mar 22, 2020 2:23 pm
This might be of interest to you for your stock allocation .
On the Tactical Asset Allocation + HBPP thread is an idea ochotona was following from Paul Novell's newsletter.
Taking the 200 SMA for the SPY.
I looked at the website and it seems interesting.
Just not to many indicators to form fit what you think will happen.
I use 200 SMA as one indicator. I never trust any single indicator though. There is no magic single signal out there. All signals work and fail at different times. I look at multiple indicators and angles. So I wouldn't just look at SPY, I would look at the spread of SPY vs IWM, SPY vs VXUS, SPY vs TLT, SPY vs GLD, SPY vs QQQ, etc. I would look at multiple moving averages, trend and channel lines, relative strength indicator, etc for each of those charts. By doing this I see more of the story and sometimes find some trends that are hiding in plain sight. I also trust my intuition, so I always use discretion in any trade. I never just blindly trade because an indicator tells me to. I'm very good at forming big picture macro-thesis as you probably notice if you pay attention to my posts around here, so if something is not fitting into my macro thesis I'm going to sit and watch it for awhile and make it earn my trust (just like the emerging markets breakout that I mentioned in my original post, this is very interesting and very peculiar given the circumstances... so I'm hesitant to act on it, but if the chart proves to me it's really starting a new trend of outperformance in EM, I'll gladly ride along).

Also, it's really not much work. I mean, I look at these charts regularly anyways. I'm also only trading off the weekly chart, so it eliminates all the noise of daily charts, and it would take weeks to months for a trend to form and be confirmed before I would act on it. So I really wouldn't even have to check these things but once a month or so, though in reality I'll probably check every weekend. I sidestepped the 2018 Q4 meltdown almost entirely by selling out in early Nov and getting back in on Dec 26 (day after bottom). In this system I wouldn't fully have went to cash in Feb (that's just too stressful, trying to find the way back in from full cash, not something I want to do again) but I did see the blowoff top forming, and if I would have allowed discretion at the time I would have sold some stocks before the plummet. I really didn't act on it this time mainly because I was trying to practice the GB buy and hold philosophy... but I think I'm just one of those people that needs a bit more flexibility. I love the GB (or PP/VP) as a framework, and think I can tap into my creative talents to improve upon it. Basically, my benchmark is the GB, and I'm looking to beat it in performance while maintaining equal safety. I believe I can add 1-2% per year alpha to the GB, and that really adds up over time, especially for someone in hyper-accumulations mode like me. When I get close to retirement and the game is won I'll start shifting more defensive. For now, I really have no reason not to try to chase a little alpha.
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Re: Combining GB with spread trend

Post by pmward » Wed Mar 25, 2020 1:06 pm

I sold a bit of stock in my taxable account today to raise some cash (and harvest more losses). With Trump talking about opening up the country on Easter, I really think the numbers are going to get ugly and I'll get a better spot to load up on stocks. We also are testing the trend line that started back in 2009, and I think it likely will reject (very common in a bear market to retest the last bull markets trend line before a plummet, this happened in both 01 and 08). This locks in a nice little quick 15% gain on the rebalance I did last week, though I did actually take a bit more off the table than I put in on the rebalance, so I'm now underweight stocks (though still well over my 20% minimum). I'm going to just let what I have for stocks ride at this point. I'll also continue to let my 401k do it's DCA every 2 weeks because there's no reason not to, but none of my taxable contributions will be going into stocks until I start deploying my cash. Looking for an opportune time to start deploying my cash pile into stocks. Also, still keeping a close on on small/large and growth/value spreads when I do re-deploy that cash. Now the for the hard part... patience.

EDIT: and at the close it did reject the trend line and closed below it. So for today at least, my bet is working out. Now we wait to see if we get a confirmation move down.
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Re: Combining GB with spread trend

Post by pmward » Thu Mar 26, 2020 10:16 am

I took on a 5% position in silver this morning. Seeing the SVR:GLD spread's relative strength be the most oversold it's been since 2008 has really tempted me. We also had a break back above a major support line a couple days back, as well as a break above the prior downtrend line that it had fallen through in the pullback. It's held above both levels for 3 days now, so that gives me enough confirmation to feel comfortable. I'm keeping this one on a tight leash, if we fall back down I'll cut my losses. Fundamentally though, I'm about as bullish as can be for metals.

After selling stock yesterday and buying silver today my current approximate allocation give or take a couple % is 20% S&P, 15% SCV, 20% gold, 35% bonds (either barbell or intermediates in 401k), 5% silver, 5% REIT. I'm surprised fundamentally to see the stock market so strong today after a record unemployment claims number. I still think this is a bull trap though, I don't think this is the launching pad for the next bull market. I would love to buy more stocks, but not right now. Also, both small caps and value are catching a bid relative to large and growth this week, as I figured would happen.
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Re: Combining GB with spread trend

Post by pmward » Sat Mar 28, 2020 12:10 pm

We had some changes in the trends I was viewing last weekend. I'm using this thread to help me document, sort through, and notate my thoughts as I navigate this crazy time of change.

As mentioned yesterday, silver is bouncing from historic oversold conditions relative to gold. As I mentioned I initiated a 5% position in SVR.

Small caps did start to get a slight boost that I was was looking for relative to large, and on the weekly chart we also have 2 bottoming candles in back to back weeks. I expect to see this mean reversion to take place over the coming weeks for small caps relative to large. I'm doubtful of a change in trend though, but I'm open to it, depending on how the trends resolve.

Value vs growth I'm getting conflicting measures. In the large cap space value got a bid relative to growth this week, and we printed a topping candle this week. Also QQQ underperformed SPY by a good measure. However, in small caps growth is still breaking out vs value, and hit the very top of the trend channel line going all the way back to 2002. I'm biased similar to large/small with leaning more towards value getting a mean reversion vs growth in the short to medium term, but looking for the strong growth trends going back to 2002 to continue.

Emerging markets I stated last week were breaking out vs developed markets and I was doubtful of the breakout. Well it did the prairie dog as expected this week and sold down back into the downtrend. So EM's are still staying in timeout, though I do think the time for EM is approaching at some point in the next couple years.

So what does this mean for my portfolio assets:

Stocks: As mentioned earlier this week I sold stocks into the bounce this week. That is looking like a good call, as I locked in a nice 15% gain from the rebalance I did the week prior, and so far we closed the week pretty much right at the levels I sold at, and rejected the Q1 2018 resistance level. I'm looking for a continued downtrend in stocks... but I do think the bottom is near in the next 30-60 days. This is playing out like Oct 2008, but at a faster rate, so I expect a faster bottom following the VIX spike than the 6 months we saw after the Oct 2008 VIX spike. I'm watching stocks very closely, looking to not only redeploy my cash that I raised this week... but also to go overweight stocks. Currently, since we have record momentum in large growth, yet a strong oversold condition on small value, I think the best way to play this is a 50/50 hedge on both. My mind could change if the charts change, but for the moment I'm looking at 50% QQQ and 50% SCV for any fresh cash deployed, and when trends resolve more clearly I'll look to tweak accordingly.

Commodities: I'm potentially looking to add more to SVR if this trade goes my way. I'm also keeping a decently tight stop on this trade in case my thesis doesn't play out as expected. My current 5% REIT position I don't have much opinion on technically speaking at the moment, but I do think fundamentally that these will take off once we get out of the fear stage of the crisis. 0% interest rates are not only a boon for REIT companies, that use leverage to acquire assets, but also makes that current 30 day SEC yield of over 5% all the more tantalizing, likely driving inflows into the sector.

Bonds: Long bonds I'm ok with at the moment. They've got a lot of momentum. I'm way overweight on cash though, and really looking to deploy this into either stocks and/or silver depending on how they trade going forward.
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Re: Combining GB with spread trend

Post by pmward » Wed Apr 01, 2020 11:19 am

Well it's official, I have capitulated on small cap value. The trend is weak and getting weaker. I don't mind doing some moonshot countertrend mean reversion bets, but not with that large of a chunk of my portfolio. I eliminated small cap value, traded some of my overweight cash for long bonds, and added a position in large cap growth (through QQQ in IRA and taxable and Fidelity Contrafund in my 401k). I hate capitulating like this, but I kept having the thought go through my head that if I had 100% cash today I would not choose to buy small cap value. Therefore, if I wouldn't buy it today, why am I holding it? I was holding it simply because I had rode the loss down, and was hoping beyond hope for some mean reversion to get out. Holding and praying for mean reversion to exit a position makes no sense. So I now have the portfolio I want. I'll keep an eye on trends in case SCV does start to shift into favor, but in the meantime, good riddance. I never should have bought SCV to begin with, I really only bought it against my better judgment because for a period of time I wanted to try to stick to buy and hold on a GB so that I could have a portfolio that I didn't have to actively monitor and put time and effort into. Lesson learned, that is not for me. Now that I've unwound my past buy and hold mistakes I can now move forward fully with my GB+Trend approach.

Current target allocation:

S&P 500: 15%
Large cap growth: 15%
LTT: 20%
Cash: 20%
Gold: 20%
Silver: 5%
REIT: 5%

Still looking to get aggressively back into stocks, but waiting for the right opportunity to start scaling back into stocks.
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Re: Combining GB with spread trend

Post by vnatale » Wed Apr 01, 2020 11:31 am

pmward wrote:
Wed Apr 01, 2020 11:19 am
Well it's official, I have capitulated on small cap value. The trend is weak and getting weaker. I don't mind doing some moonshot countertrend mean reversion bets, but not with that large of a chunk of my portfolio. I eliminated small cap value, traded some of my overweight cash for long bonds, and added a position in large cap growth (through QQQ in IRA and taxable and Fidelity Contrafund in my 401k). I hate capitulating like this, but I kept having the thought go through my head that if I had 100% cash today I would not choose to buy small cap value. Therefore, if I wouldn't buy it today, why am I holding it? I was holding it simply because I had rode the loss down, and was hoping beyond hope for some mean reversion to get out. Holding and praying for mean reversion to exit a position makes no sense. So I now have the portfolio I want. I'll keep an eye on trends in case SCV does start to shift into favor, but in the meantime, good riddance. I never should have bought SCV to begin with, I really only bought it against my better judgment because for a period of time I wanted to try to stick to buy and hold on a GB so that I could have a portfolio that I didn't have to actively monitor and put time and effort into. Lesson learned, that is not for me. Now that I've unwound my past buy and hold mistakes I can now move forward fully with my GB+Trend approach.

Current target allocation:

S&P 500: 15%
Large cap growth: 15%
LTT: 20%
Cash: 20%
Gold: 20%
Silver: 5%
REIT: 5%

Still looking to get aggressively back into stocks, but waiting for the right opportunity to start scaling back into stocks.
Mathjak would approve in that he and I both share the belief that even when you don't sell or buy anything, every day, implicitly, you are deciding to sell all and buy exactly what you sold.

Vinny
"I only regret that I have but one lap to give to my cats."
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Re: Combining GB with spread trend

Post by pmward » Wed Apr 01, 2020 11:41 am

vnatale wrote:
Wed Apr 01, 2020 11:31 am
pmward wrote:
Wed Apr 01, 2020 11:19 am
Well it's official, I have capitulated on small cap value. The trend is weak and getting weaker. I don't mind doing some moonshot countertrend mean reversion bets, but not with that large of a chunk of my portfolio. I eliminated small cap value, traded some of my overweight cash for long bonds, and added a position in large cap growth (through QQQ in IRA and taxable and Fidelity Contrafund in my 401k). I hate capitulating like this, but I kept having the thought go through my head that if I had 100% cash today I would not choose to buy small cap value. Therefore, if I wouldn't buy it today, why am I holding it? I was holding it simply because I had rode the loss down, and was hoping beyond hope for some mean reversion to get out. Holding and praying for mean reversion to exit a position makes no sense. So I now have the portfolio I want. I'll keep an eye on trends in case SCV does start to shift into favor, but in the meantime, good riddance. I never should have bought SCV to begin with, I really only bought it against my better judgment because for a period of time I wanted to try to stick to buy and hold on a GB so that I could have a portfolio that I didn't have to actively monitor and put time and effort into. Lesson learned, that is not for me. Now that I've unwound my past buy and hold mistakes I can now move forward fully with my GB+Trend approach.

Current target allocation:

S&P 500: 15%
Large cap growth: 15%
LTT: 20%
Cash: 20%
Gold: 20%
Silver: 5%
REIT: 5%

Still looking to get aggressively back into stocks, but waiting for the right opportunity to start scaling back into stocks.
Mathjak would approve in that he and I both share the belief that even when you don't sell or buy anything, every day, implicitly, you are deciding to sell all and buy exactly what you sold.

Vinny
Yeah. I really wanted to try to have a no effort required portfolio. But it's just not a good fit for me. I'm a trend follower at heart, so it just goes against my nature to want to hold something that is in a 20 year downtrend. I wish I would have went with my current strategy before the crash, I would have done much better (and had reduced stock exposure much earlier on; I'm still holding a bit more stock that I would like to simply because I've already suffered the loss and want to hedge in case my technical thesis is wrong and we bottom sooner than I'm targeting). But oh well, no use crying over spilled milk. I learned my lesson, and I'm moving to fix it now. I think my strategy of having minimums I have to hold in all asset classes, and tilting those assets to what is out performing on a relative basis, and allowing myself 40% of my portfolio effectively to be a VP, just seems like a much better way to go. I mean, I'm sitting here watching the markets do exactly what I thought they would do, getting my thesis proven right, yet holding a large chunk of my portfolio in some assets that go against my thesis. I just could no longer justify holding the moonshot that I did not fully believe in that was also going against me more and more by the day. And at the end of the day yesterday, according to Personal Capitol's performance tab, I'm only down 10% from the top. So even though I took a big beating in the SCV side of things, I've still managed to do pretty well on the whole. Now I'm at least more comfortable with where I am at in the short term and can start looking to start my strategy to play the recovery when the time is right.
ppnewbie
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Re: Combining GB with spread trend

Post by ppnewbie » Thu Apr 02, 2020 11:01 am

How do you feel about REITs midterm? Personally, REITs feel like they are in a precarious position.
pmward
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Re: Combining GB with spread trend

Post by pmward » Thu Apr 02, 2020 11:55 am

ppnewbie wrote:
Thu Apr 02, 2020 11:01 am
How do you feel about REITs midterm? Personally, REITs feel like they are in a precarious position.
Technically, yes they are in a precarious position. I do think fundamentally they are in a position to really benefit on the rebound and out perform the regular stock market. Having a 5-6% yield in a time when bonds are 0% is bound to attract a lot of buying interest once people feel safe again after the crisis. Not to mention that REIT companies use leverage to buy properties... and the cost of that leverage is plummeting.

Also, while we are in a deflation now, I do think that coming out of this we will finally see a pick up in inflation. I obviously have both gold and silver as well, this is also kind of another form of diversified bet on inflation returning.
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