Tactical Asset Allocation + HBPP an intriguing combo

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InsuranceGuy
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by InsuranceGuy » Tue Dec 31, 2019 6:35 pm

rocketdog wrote:
Tue Dec 31, 2019 1:46 pm
People obsess over max drawdowns WAY too much. Unless you're in retirement (or close to it) you should ignore drawdowns entirely. In fact, you should greedily view them as ideal buying opportunities.

The market only took 3 years to completely recover from the Great Recession, and that was after a drawdown of 40%! So if you were a buyer of stocks during that period (rather than selling in a panic), then you made out like a bandit.

"Be greedy when others are fearful, and fearful when others are greedy." - some smart investor guy :)
OR... you can take a portfolio with low drawdowns and leverage it and get much better returns over the long haul while still keeping a managable risk profile. Additionally, many investors sell during drawdowns which ultimately costs them dearly on returns.

In the end, drawdowns could be ignored but rarely are and lower average investor returns significantly.
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rocketdog
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by rocketdog » Tue Dec 31, 2019 10:53 pm

Hence my point: "if you were a buyer of stocks during that period (rather than selling in a panic), then you made out like a bandit."

Ignore drawdowns to your benefit, or ignore them at your perile. After all, it's your money.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Wed Jan 01, 2020 10:23 am

rocketdog wrote:
Tue Dec 31, 2019 10:11 am
It's fun to look at old posts like this to see what people were doing with their portfolios and checking to see if it was the right decision or not. In this case... not. From 5/31/2017 (the date of the GEM signal) to 12/31/2019, here are the performance differences of the funds mentioned:

SPY: +40%
CWI: +16%
VEU: +16%

So if you had switched from SPY to either CWI or VEU on 5/31/2017 and held until now, you would have forfeited 24% of your potential profits within a mere 2-1/2 years, for an annualized under-performance of nearly 10%.

So much for momentum signals... :o
If you have time to make fun of people's investment strategies, you're making poor use of your limited time on earth. Yes, I am as Old As Dirt, and I want to retire soon, so I tailor my portfolio mix to have a probably worst case -10% Max Drawdown so I don't end up stealing cat food from my orange cat.

Most strategies have underperformed relative to buy and hold S&P 500 since 2009. I assure you, as someone who has been investing since 1985, it will not be like this forever. When S&P 500 buy and hold investors are singing the blues for years, we won't hear from them. Everyone measures against the S&P 500, but the S&P 500 knows nothing about your personal financial goals, time horizons, risk tolerance, or anything like that. It's just stupidity. Go ahead, be like a teenager on Instagram and compare yourself to the S&P 500. Your day is coming in the fullness of the complete bull/bear market cycle.

AND US Large Caps were underwater for 4 years 10 months after the Great Recession, not three years. Your facts are wrong.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by Kbg » Wed Jan 01, 2020 11:34 am

Och,

If you have not done so I highly recommend a segmented DM lookback approach vs 12mo lookback. I’m pretty convinced it’s a better method.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by ochotona » Wed Jan 01, 2020 7:34 pm

Kbg wrote:
Wed Jan 01, 2020 11:34 am
Och,

If you have not done so I highly recommend a segmented DM lookback approach vs 12mo lookback. I’m pretty convinced it’s a better method.
I'm using a 3, 6 and 12 month averaged lookback now... but still only one trading signal, on or off. Not using tranches. It's part of the Economic Pulse service. The 12 month lookback GEM reporting is just for the benefit of those readers who may be interested.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by Kbg » Wed Jan 01, 2020 8:14 pm

ochotona wrote:
Wed Jan 01, 2020 7:34 pm
Kbg wrote:
Wed Jan 01, 2020 11:34 am
Och,

If you have not done so I highly recommend a segmented DM lookback approach vs 12mo lookback. I’m pretty convinced it’s a better method.
I'm using a 3, 6 and 12 month averaged lookback now... but still only one trading signal, on or off. Not using tranches. It's part of the Economic Pulse service. The 12 month lookback GEM reporting is just for the benefit of those readers who may be interested.
Mine it as follows:

Lookback starting at 63 market days and incrementing 21 market days up to 252 market days (3-12 mo LB) for a total of 10 independent lookbacks with each getting 10% of the DM portfolio. I like it MUCH better as it isn't so binary. Of interest it has actually had a small allocation to intl which is a first.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by ochotona » Fri Jan 03, 2020 8:15 am

Kbg wrote:
Wed Jan 01, 2020 8:14 pm
Mine is as follows:

Lookback starting at 63 market days and incrementing 21 market days up to 252 market days (3-12 mo LB) for a total of 10 independent lookbacks with each getting 10% of the DM portfolio. I like it MUCH better as it isn't so binary. Of interest it has actually had a small allocation to intl which is a first.

Lots of little moves... very well thought out. Congratulations. I ran into a trading problem at Schwab yesterday because of my order size, I wonder if tranching is in my future.

Order too large - a really, really, really good problem to have. Definitely first-world Asian / Causasoid problem.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by pugchief » Fri Jan 03, 2020 12:34 pm

ochotona wrote:
Fri Jan 03, 2020 8:15 am
Kbg wrote:
Wed Jan 01, 2020 8:14 pm
Mine is as follows:

Lookback starting at 63 market days and incrementing 21 market days up to 252 market days (3-12 mo LB) for a total of 10 independent lookbacks with each getting 10% of the DM portfolio. I like it MUCH better as it isn't so binary. Of interest it has actually had a small allocation to intl which is a first.

Lots of little moves... very well thought out. Congratulations. I ran into a trading problem at Schwab yesterday because of my order size, I wonder if tranching is in my future.

Order too large - a really, really, really good problem to have. Definitely first-world Asian / Causasoid problem.
I am deeply offended by your racist implication that POC could not have portfolios large enough to experience this problem. [/sarcasm] :P
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by Kbg » Fri Jan 03, 2020 1:53 pm

ochotona wrote:
Fri Jan 03, 2020 8:15 am
Kbg wrote:
Wed Jan 01, 2020 8:14 pm
Mine is as follows:

Lookback starting at 63 market days and incrementing 21 market days up to 252 market days (3-12 mo LB) for a total of 10 independent lookbacks with each getting 10% of the DM portfolio. I like it MUCH better as it isn't so binary. Of interest it has actually had a small allocation to intl which is a first.

Lots of little moves... very well thought out. Congratulations. I ran into a trading problem at Schwab yesterday because of my order size, I wonder if tranching is in my future.

Order too large - a really, really, really good problem to have. Definitely first-world Asian / Causasoid problem.
That IS a good problem to have...and if I were you I would be thinking about changing brokers to something like Interactive Brokers. In any event, I would be paying a huge amount of attention to execution issues which is hands down your biggest problem now if you are rolling bones that large. IIRC they (Schwab) also has a number to call for trading large orders...really, you can get creamed/screwed royally in costs that you are unaware of when trading large size. In all likelihood you are losing far more money in execution than even a pretty hefty commission. Order sophistication is a worthwhile topic to get up to speed on if you are not already.

On the incrementing...would love to say it was my idea, but I got it from Newfound who did a research report on it using GEM specifically...it definitely caught Antonacci's attention as I think he was pretty much compelled to respond which he did on his blog.

Also...incrementing isn't tranching. Subtle but key difference. Tranching is using the same system parameters traded on different dates. Incrementing is not being beholden to a specific lookback time period. The net effect of incrementing is that you get the mid point of a range of different lookbacks and greatly reduce your end result's association to pure timing luck.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by ochotona » Fri Jan 03, 2020 2:08 pm

I took a look at Interactive Brokers but it was a bit confusing ... will look at it again.

5 min later... IBKR has a flat rate plan of $0.005 per share. Well, using Schwab and MOC orders, I got exactly the closing price of the ETF, though I had to pay $25 for 6000 shares, or $0.00416 per share. Eh... it's all the same.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by Kbg » Fri Jan 03, 2020 3:23 pm

If you are doing MOC, you are likely OK. At least you get an actual market price vs. computer algos dueling it out.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by ochotona » Thu Jan 30, 2020 8:29 pm

The GEM portfolio is in US Equities for February 2020 (SPY, IVV, VOO, SCHX). I don't think anything will happen tomorrow that could change that in the next 18.5 hours.
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