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 » Fri Jan 26, 2018 8:35 pm

AlphaArchitect will also run the GEM strategy for you, by the way. They license a proprietary version from Gary Antonacci. They can be reached at AlphaArchitect.com, of course. I had my money with them for a while, but I got bored I suppose, I had to pull it back to Schwab and run it myself. It did cost 0.90% per year too, it didn't seem worth it, since I knew basically what they were doing.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by modeljc » Sat Jan 27, 2018 9:08 am

ochotona wrote:AlphaArchitect will also run the GEM strategy for you, by the way. They license a proprietary version from Gary Antonacci. They can be reached at AlphaArchitect.com, of course. I had my money with them for a while, but I got bored I suppose, I had to pull it back to Schwab and run it myself. It did cost 0.90% per year too, it didn't seem worth it, since I knew basically what they were doing.
Thanks for all the work. I am a happy camper in the PP but fear the low level of Interest rates have ruined any remaining sanity in the various asset classes. I fear that the market at 32 CAPE will cause a long period of bad returns and possibly a large drawdown.

I will check out Alpa ARchitect. Thanks again!
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ochotona
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Sat Jan 27, 2018 10:14 am

Best wishes. I think there will be more and better trendfollowing products in coming years, especially after the next crash. Ironically, that will be the time when they are least needed. HBPP popularity will also be surging.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by modeljc » Sat Jan 27, 2018 6:15 pm

ochotona wrote:Best wishes. I think there will be more and better trendfollowing products in coming years, especially after the next crash. Ironically, that will be the time when they are least needed. HBPP popularity will also be surging.
I want to THANK you for the link of the Portfolio Visualize. I have been there before but never got to the dual monentum. The late signals look OK. The whipsaws look ok. If you are lucky like me, you have all your stocks in non-taxables.

NO downside in a Vanguard IRA Account:

Commissions: none

Taxes: none

False signal: out too soon and missed gain is no problem in the account

Late to get in: got all your cash

Over time: VEU or SPY will produce the missed gain.
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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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ochotona
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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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ochotona
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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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Cortopassi
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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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ochotona
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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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ochotona
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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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