Tactical Asset Allocation + HBPP an intriguing combo

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ochotona
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by ochotona » Sun May 10, 2020 7:56 pm

pmward wrote:
Sat May 09, 2020 9:16 am
But yeah, GEM has no appeal to me personally.
If this still highly valued market goes risk-on again, I'm not going to use a binary all-in, all-out monthly strategy like GEM or even the SPY-COMP family any longer. I'm not going to post the GEM signals any longer. If we go risk-on again before we have a good cleansing bear market, I'm going to go back in with Paul Novell's version of Generalized Protective Momentum (GPM). The original GPM is described here, with free signals at the bottom of the post. Paul's isn't much different. It just spends more time in risk assets through the use of SPY-COMP for risk control as an overlay to the original GPM.

GPM still trades once a month but with important differences from all-in, all-out approaches:

1. the investible universe includes equities, bonds, gold, commodities, so when it's "risk on" it could still be allocating to safe havens
2. the momentum lookbacks are 1, 3, 6, and 12 month. The 1 month contribution makes it more fast-acting than GEM
3. The GPM maximum drawdown is -7.3%, the CAGR is 10.7%, Sharpe ratio is 0.96 for me that's nice. Fits my risk profile
4. the risk-on comes in steps, not all-in, all-out. As conditions get better or worse, the allocation steps the risk up or down

It does trade a lot, like 36 trades a year. The position sizes change each month as the risk size changes. So it's a pain to manage across several accounts. I built the spreadsheets needed to do this over the weekend.

Reason for doing this? Not wanting to miss out on a possible melt-up bubble due to stimulus, still want to trade monthly, but want a strategy with low drawdown and "good enough" returns, and it will tie itself off "fast enough" in stages to stop the bleeding when risk comes back with that 1 month lookback contribution.

But if we have that significant bear market, and valuations are back to historical norms, then I think it's OK to go back to what I was doing. As much intervention as the Fed is applying? Who knows when that might be, if ever.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by pmward » Mon May 11, 2020 11:08 am

ochotona wrote:
Sun May 10, 2020 7:56 pm
pmward wrote:
Sat May 09, 2020 9:16 am
But yeah, GEM has no appeal to me personally.
If this still highly valued market goes risk-on again, I'm not going to use a binary all-in, all-out monthly strategy like GEM or even the SPY-COMP family any longer. I'm not going to post the GEM signals any longer. If we go risk-on again before we have a good cleansing bear market, I'm going to go back in with Paul Novell's version of Generalized Protective Momentum (GPM). The original GPM is described here, with free signals at the bottom of the post. Paul's isn't much different. It just spends more time in risk assets through the use of SPY-COMP for risk control as an overlay to the original GPM.

GPM still trades once a month but with important differences from all-in, all-out approaches:

1. the investible universe includes equities, bonds, gold, commodities, so when it's "risk on" it could still be allocating to safe havens
2. the momentum lookbacks are 1, 3, 6, and 12 month. The 1 month contribution makes it more fast-acting than GEM
3. The GPM maximum drawdown is -7.3%, the CAGR is 10.7%, Sharpe ratio is 0.96 for me that's nice. Fits my risk profile
4. the risk-on comes in steps, not all-in, all-out. As conditions get better or worse, the allocation steps the risk up or down

It does trade a lot, like 36 trades a year. The position sizes change each month as the risk size changes. So it's a pain to manage across several accounts. I built the spreadsheets needed to do this over the weekend.

Reason for doing this? Not wanting to miss out on a possible melt-up bubble due to stimulus, still want to trade monthly, but want a strategy with low drawdown and "good enough" returns, and it will tie itself off "fast enough" in stages to stop the bleeding when risk comes back with that 1 month lookback contribution.

But if we have that significant bear market, and valuations are back to historical norms, then I think it's OK to go back to what I was doing. As much intervention as the Fed is applying? Who knows when that might be, if ever.
Sounds like a good plan to me. I think your last point there is important as well. There are economic climates that favor one system vs another. I don't think it's wrong to look at the climate you're in and use the system that best fits the conditions. So using a more diversified system now when things are really difficult to read is not a bad thing. Swapping to a more aggressive system when we eventually get back to one of those 2017 like sunshine and rainbows climates makes sense.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by ochotona » Mon May 11, 2020 11:15 am

pmward wrote:
Mon May 11, 2020 11:08 am
Swapping to a more aggressive system when we eventually get back to one of those 2017 like sunshine and rainbows climates makes sense.

When my family and friends are begging me not to buy stocks will be the time to buy stocks. When SPX 666 - 1150 again. When CAPE 10-15. We will know if those days ever come. Could be 2 or 3 years out.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by pmward » Mon May 11, 2020 11:29 am

ochotona wrote:
Mon May 11, 2020 11:15 am
pmward wrote:
Mon May 11, 2020 11:08 am
Swapping to a more aggressive system when we eventually get back to one of those 2017 like sunshine and rainbows climates makes sense.

When my family and friends are begging me not to buy stocks will be the time to buy stocks. When SPX 666 - 1150 again. When CAPE 10-15. We will know if those days ever come. Could be 2 or 3 years out.
I think those target numbers are too low. I don't think we will ever get below ~1500-1550 ever again. That was the top both in 2000 and 2007. This level is going to be extremely strong support. If we ever get below 1500 the world would basically be ending and we would all have worse things to worry about than our investments. I also think CAPE is too long of a metric and as such it is a very poor metric to use for timing. CAPE really only matters to those that are buy and pray investors. People like us that are going to sit out of any major decline don't need to even pay attention to CAPE.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by ochotona » Mon May 11, 2020 2:23 pm

I'm happy with SPX 1700
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by pmward » Mon May 11, 2020 2:33 pm

ochotona wrote:
Mon May 11, 2020 2:23 pm
I'm happy with SPX 1700
If we were at SPX 1700 today I would also be very happy to buy. That would be a very low risk/high reward spot.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by ochotona » Fri May 29, 2020 5:25 pm

Generalized Protective Momentum is 100% in IEF for June 2020, according what we see at TrendXplorer
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by ochotona » Tue Jun 30, 2020 3:59 pm

Generalized Protective Momentum for July 2020

Crash Protection IEF 33.33%
QQQ 22.22%
TLT 22.22%
GLD 22.22%


Data copied from TrendXplorer. I have adopted their Disclaimer as my own.
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