Tactical Asset Allocation + HBPP an intriguing combo

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ochotona
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Wed Jan 31, 2018 7:29 pm

No change to the GEM portfolio for February 2018. Still in 81% SCHF + 19% SCHE, or 100% in VEU. I am using SCHF ETF instead of SWISX Mutual Fund because I got an excessive trading warning letter from Schwab. It's not a big deal.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Sun Feb 04, 2018 9:17 am

Wes Gray just mentioned these competing products in his podcast... looks better than his own offerings for people who want to trend-follow large cap US stocks for use an an otherwise-HBPP structure:

Pacer ETFs
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Thu Feb 08, 2018 10:19 am

Non US stocks back at lows from that panic Monday. This crap isn't over. Another waterfall may be ahead.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by Cortopassi » Thu Feb 08, 2018 10:39 am

No where to hide right now.

But I do feel a bit better with physical gold that can't go poof.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by tim47 » Thu Feb 08, 2018 8:01 pm

Why not use thes Pacer ETFs writhin a typical PP strategy. Are there downsides here???
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Thu Feb 08, 2018 9:16 pm

I won't use a trendfollowing ETF that hasn't been battle tested. I look forward to the day when I can.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Mon Feb 19, 2018 7:39 am

D1984 wrote:As a general rule, buying and holding junk debt via an index fund that owns the whole junk bond index is a losing trade but there are at least two instances where owning junk makes some sense.

1. The first is market timing; pick some of the junkiest of the junk bond funds (FAGIX comes to mind; they tend to own a lot of CCC-rated and unrated junk bonds) and put it into PortfolioVizualizer using a 10-month or 8-month or 12-month moving average. Beats the S&P 500 or total stock market with much lower drawdown. This seems to be because junk bonds sell off hard (far more than is justified by default rates vs recovery rates) during market falls but then lead the way during recoveries (see 1991-92, 2003, and 2009) when they go up in value at a far faster rate than stocks typically do; timing the market means you miss most of the downturn but capture much of the upturn. Timing the market with junk bond funds can have a Sortino above 2.
The things you learn on this forum... are simply amazing...

So I tested an old T.Rowe Price high yield bond mutual fund in PortfolioVisualizer.com, PRHYX, in Dual Momentum mode, 1 asset, risk-off asset was VFITX (US Treasury intermediate), 12-month lookback period.

From 1999-2018,

CAGR 7.82%, max drawdown 11%, Sortino ratio 1.86

It tests out about like a 60% GEM, 40% fixed income portfolio, but better in the Sortino ratio... it has a greater preponderence of upside variability (which people like)

CAGR 7.78, max drawdown 9%, Sortino ratio 1.48

And high-yield trend-following DOES snap back faster after a downturn... it got back into the market 90 days faster than GEM. I guess because companies want to get back to paying their bondholders back first after they get up from being walloped.

This is really food for thought, it could be a great thing for a tax-deferred account. High-yield would suck for a taxable account, though.

I spent the morning doing trend-following on the old PRHYX fund, and ETFs HYG and ANGL. ANGL is really interesting, but has a short history. HYG performs better than JNK, so I'm not considering JNK. PHB trades free at Schwab, but it's not a good performer.

The 200 day moving average or the 6-month Absolute Momentum seem to work about the same over a long period of time with PRHYX. The 6-month momentum thingy was also observed by Paul Novell in his Tactical Bond Portfolio.

It's worth noting that HYG and ANGL are BOTH BELOW the 200 day MA at this time! This is in line with the old trading adage that junk bonds sniff out risk in the market better than stacks; they are the coal mine canaries often.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by Mr Vacuum » Tue Feb 20, 2018 11:54 am

Huh. In fact in Antonacci's absolute momentum paper high yield bonds with absolute momentum show the highest Sharpe ratio and best improvement in volatility, a fact which I glossed over previously. PRHYX also does very well with SPY in dual momentum.

I see the data goes back to 1992. Are you using 1999 to torture the data and avoid a positive head start prior to the dotcom bust?
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Wed Feb 21, 2018 4:47 am

I was looking all the way back to 1992. But this isn't something I'm going to rush into. Maybe on the other side of the future valley, and after interest rates have been going up a while, or in retirement.

Guggenheim BulletShares has highly diversified target date junk offerings. If after the next recession I see yields get above 7% for my retirement target date, I think that would be a place to invest a big chunk in. 7% CAGR is my portfolio stretch goal. If I get 7% CAGR I'd be thrilled.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by HappyMan » Mon Feb 26, 2018 2:45 am

"This Week's ETF Launches: Vanguard (Yes, Vanguard) Launches Suite of Active-Factor ETFs"

They are:

The five individual factor ETFs – the Vanguard U.S. Minimum Volatility ETF (VFMV n/a), the Vanguard U.S. Liquidity Factor ETF (VFLQ n/a), the Vanguard U.S. Momentum Factor ETF (VFMO n/a), the Vanguard U.S. Quality Factor ETF (VFQY n/a) and the Vanguard U.S. Value Factor ETF (VFVA n/a)

One of them is momentum-related. Would be cool, if someone could mix momentum and value.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by Kbg » Mon Feb 26, 2018 3:36 pm

There are funds for that...
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Mon Feb 26, 2018 8:17 pm

On a related note, my employer's 401(k) is moving from rip-off insurance company custody to Vanguard!
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by Mr Vacuum » Wed Feb 28, 2018 5:46 pm

ochotona wrote:On a related note, my employer's 401(k) is moving from rip-off insurance company custody to Vanguard!
Another one bites the dust. Nice!

TLT rallied in vain today, slipping to negative 12mo total return lookback vs. SHV for the first time in a few months. It looks to remain choppy the next couple months, but I guess that’s normal for bonds.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Wed Feb 28, 2018 7:14 pm

Back to the GEM portfolio: no change to the portfolio for March 2018. Still in 81% SCHF + 19% SCHE, or 100% in VEU.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by modeljc » Thu Mar 01, 2018 8:06 am

ochotona wrote:Back to the GEM portfolio: no change to the portfolio for March 2018. Still in 81% SCHF + 19% SCHE, or 100% in VEU.

Thanks for the update!
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Fri Mar 30, 2018 5:31 am

No change to the portfolio for April 2018. Still in 81% SCHF + 19% SCHE, or 100% in VEU.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Mon Apr 02, 2018 2:20 pm

bedraggled wrote:Dow 30, Dow transports and the S & P 500 are each below Dow theory sell signal. Must wait for the close. This is for a VP, I guess.
Yup, the cheese is getting ripe.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by HappyMan » Thu Apr 05, 2018 10:45 pm

Just curious, any other component in your portfolio is currently bringing profit?
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by HappyMan » Sun Apr 15, 2018 3:41 am

Can someone advise how to measure GEM using Portfolio Visualizer? I am trying to compare it with three other portfolios. Link to the three,

https://www.portfoliovisualizer.com/bac ... tion4_3=35

Wondering how to add GEM portfolio in the mix. Counting with a calculator brings meager $26,173 if invested $10,000 since 2007. Granted the span is short, it makes one think.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Sun Apr 15, 2018 9:22 am

HappyMan wrote:Can someone advise how to measure GEM using Portfolio Visualizer? I am trying to compare it with three other portfolios. Link to the three,... Wondering how to add GEM portfolio in the mix. Counting with a calculator brings meager $26,173 if invested $10,000 since 2007. Granted the span is short, it makes one think.
There are a couple of things you could do.

You simulate the GEM using the Market Timing Tools, Dual Momentum option. Then, you save the results AS BENCHMARK. Then they are always available for you to compare to any other three static portfolios, which is what I think you want to do.

CORE-SATELLITE will let you blend a static (core) with a actively-traded (SATELLITE) portfolio, and one of the satellite options is Dual Momentum. Again, you can save the results are benchmark for future comparisons.

I've said it before, I'll say it again... I think roughly 50% GEM and the rest in cash, bonds, and gold is just about a magical combination. It grows much better than native HBPP, but it has the similar drawdown (pucker factor) and risk-adjusted return. I think it's close to ideal.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by HappyMan » Mon Apr 16, 2018 3:12 am

ochotona wrote: You simulate the GEM using the Market Timing Tools, Dual Momentum option. Then, you save the results AS BENCHMARK. Then they are always available for you to compare to any other three static portfolios, which is what I think you want to do.
I think I've got it:
https://www.portfoliovisualizer.com/tes ... odWeight=0
ochotona wrote: I've said it before, I'll say it again... I think roughly 50% GEM and the rest in cash, bonds, and gold is just about a magical combination. It grows much better than native HBPP, but it has the similar drawdown (pucker factor) and risk-adjusted return. I think it's close to ideal.
Do you have by any chance a saved link to this combination?

Honestly, I thought DM was best long-term investment strategy based on previous earnings, and then I found out about the other three portfolios, which are 50% better.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Mon Apr 16, 2018 5:23 am

I didn't notice you could save the URLs for each test! That's handy. I don't have saved tests, I just recorded the results in my notes...
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by HappyMan » Mon Apr 16, 2018 8:09 am

ochotona wrote:I didn't notice you could save the URLs for each test! That's handy. I don't have saved tests, I just recorded the results in my notes...
It is quite handy. In your notes, is there Final Balance, CAGR, Best Year, Worst Year, Max. Drawdown, Sharpe Ratio, Sortino Ratio, US Mkt Correlation?

So far, the best I have for $10K invested since March 2006:

Final Balance, CAGR, Best Year, Worst Year, Max. Drawdown, Sharpe Ratio, Sortino Ratio, US Mkt Correlation
$38,586 12.75% 34.02% -20.47% -29.93% 1.04 1.71 0.85
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Mon Apr 30, 2018 6:08 pm

No change to the portfolio for May 2018. Still in 81% SCHF + 19% SCHE, or 100% in VEU.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by HappyMan » Mon Apr 30, 2018 11:25 pm

ochotona wrote:No change to the portfolio for May 2018. Still in 81% SCHF + 19% SCHE, or 100% in VEU.
When you get a chance, can you please look up CAGR and other statistics of your mix of GEM+HBPP. Thanks!
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