Tactical Asset Allocation + HBPP an intriguing combo

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

Post by Kbg » Mon Jan 14, 2019 8:12 pm

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

Post by ochotona » Tue Jan 15, 2019 5:25 am

Kbg wrote:
Mon Jan 14, 2019 8:12 pm
https://blog.thinknewfound.com/2019/01/ ... entum-gem/
A must read.
The Economic Pulse portfolios are either much less fragile due to the use of economic data, or they are curve-fit to the hilt. Their drawdowns are much less than GEM. -15% vs -25%. They have an EM portfolio, which I think is important.

Even so, GEM is still better than buy and hodl.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by InsuranceGuy » Tue Jan 15, 2019 9:33 am

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

Post by ochotona » Tue Jan 15, 2019 11:04 am

It will be interesting in 30 more years to see how it all played out!
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by Kbg » Tue Jan 15, 2019 1:15 pm

InsuranceGuy wrote:
Tue Jan 15, 2019 9:33 am
ochotona wrote:
Tue Jan 15, 2019 5:25 am
Kbg wrote:
Mon Jan 14, 2019 8:12 pm
https://blog.thinknewfound.com/2019/01/ ... entum-gem/
A must read.
The Economic Pulse portfolios are either much less fragile due to the use of economic data, or they are curve-fit to the hilt. Their drawdowns are much less than GEM. -15% vs -25%. They have an EM portfolio, which I think is important.

Even so, GEM is still better than buy and hodl.
Could be my bias, but I'd lean towards overfit. See Figure 3 here: https://investingforaliving.us/economic ... ewsletter/, the title is 6 Factor COMP Probit Model.

Funny enough they use 6 factors to predict the 7 economic downturns since 1973, though I'm guessing there are more parameters in their model in order to get the signal to show up within 1 month of the start of each downturn.
With regard to the COMP model, what we know is they have zero basis to conclude anything nor will they likely in our lifetimes. Not saying having a macro model isn't a good thing. I have one, but it's main purpose is to hopefully ID how "bad" a bear could be vs. timing. If macro tubes then I expect a worse drawdown and act accordingly. However, if you look at associated performance data a HUGE component of outperformance is not when you get out but equally as much as when you get back in. Bull markets after major bears are large and fast moving and it really hurts to miss some of that (or any of it)

While what they have is proprietary so it's hard to tell, it appears to me they do not use a single lookback in their momentum models. I was pleasantly surprised/pleased that the thinknewfound guys validated something that I had come to a conclusion on a couple of years back. Just wish they would have went shorter than 6 months in their analysis. In any event, for what they point out I do not use a single lookback per the by the book DM rules.

Ocho...IIRC correctly you were using this service, you left and now you are back again?
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Tue Jan 15, 2019 4:22 pm

I was with Gary Antonacci's proprietary model, got tired of paying the fees and the black box, then yanked my money back. Economic Pulse is new for me. It's low cost but I still get their signals, I get to manage the trades and customize around the edges, my assets stay put. This is a good fit. If I don't like it I just go back to GEM.

But I really want a plan for Emerging Markets. GMO, Research Affiliates, others ID EM as the probably best performing market in the next decade. Public GEM model doesn't explicitly treat EM.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by Kbg » Tue Jan 15, 2019 5:21 pm

GEM with QQQ/EEM does quite nicely.

1. Backtest is way short - bad

2. Still have the dollar effect

3. Normally when the US market leads it's tech driven, normally when Emerging leads it's commodities driven - good

If one was to do this...probably need to study up on how China is handled. Obviously this is aggressive.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Tue Jan 15, 2019 8:41 pm

Kbg wrote:
Tue Jan 15, 2019 5:21 pm
GEM with QQQ/EEM does quite nicely.

1. Backtest is way short - bad

2. Still have the dollar effect

3. Normally when the US market leads it's tech driven, normally when Emerging leads it's commodities driven - good

If one was to do this...probably need to study up on how China is handled. Obviously this is aggressive.
veiex is an older EM mutual fund. There must be a NASDAQ mutual...
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by D1984 » Wed Jan 16, 2019 1:52 am

ochotona wrote:
Tue Jan 15, 2019 8:41 pm
Kbg wrote:
Tue Jan 15, 2019 5:21 pm
GEM with QQQ/EEM does quite nicely.

1. Backtest is way short - bad

2. Still have the dollar effect

3. Normally when the US market leads it's tech driven, normally when Emerging leads it's commodities driven - good

If one was to do this...probably need to study up on how China is handled. Obviously this is aggressive.
veiex is an older EM mutual fund. There must be a NASDAQ mutual...
RYOCX (a NASDAQ-100 index fund) goes back to early 1994; there are no EM index funds that far back that I know of but MADCX (Blackrock's actively managed emerging market fund) goes back to the late 1980s. The MSCI EM index goes back to 1988 (daily TR) and the S&P IFC EM index Tr (monthly) goes back to 1976; before that you'd need to go to GFD which has an Emerging Markets index that goes back monthly to 1925....but GFD costs around $23K a year if you are not affiliated with a college or university.

If you want you can (IIRC) input NASDAQ-100 index daily index into the system as a benchmark or portfolio if you want to go back farther than 1995 (you would need to create an Excel or CSV or text file of it and add the expense ratio back in, though); Yahoo Finance has it back to 1985 and there are other sources of it (GTR1) for a backtested created version back to 1972.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Wed Jan 16, 2019 2:16 am

Details on Economic Pulse COMP models

https://drive.google.com/file/d/1sqb1c7 ... p=drivesdk
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by thisisallen » Thu Jan 17, 2019 6:03 pm

This is Gary Anonacci’ rebuttal to the GEM analysis kink posted by Kbg previously in this thread
(https://blog.thinknewfound.com/2019/01/ ... entum-gem/)


https://www.dualmomentum.net/2019/01/wh ... m-gem.html
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by Kbg » Thu Jan 17, 2019 6:49 pm

Most interesting point...does use multiple in his proprietary models.

For me an important point...taxes. Performance going forward is unknown year to year. Taxes are not.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Fri Jan 18, 2019 5:18 am

thisisallen wrote:
Thu Jan 17, 2019 6:03 pm
This is Gary Anonacci’ rebuttal to the GEM analysis kink posted by Kbg previously in this thread
(https://blog.thinknewfound.com/2019/01/ ... entum-gem/)

https://www.dualmomentum.net/2019/01/wh ... m-gem.html
Gary makes a compelling defense. I just learned that Novell's model is already just about ready to go back to equities based on a weekly close above the 13 week EMA. That's way too quick for me. That's short-termism, whipsaw city. 200 day MA, ok... 13 week EMA? Huh?

I like his compilation if economic data. But I wonder if I could just use the Ned Davis recession indicator (free for Schwab customers), or get the data myself for free, in combination with GEM, in order to trade GEM even less. We shall see, as a recession inevitably approaches someday.

Ned Davis and Novell are not signaling recession risk. Kind of makes the end of December equity exit look unnecessary. I could have used Ned Davis to sell down to 40% (their recent equity allocation) then just wait for a recession signal to confirm the momentum signal. At 40% equity you can tough out a correction. That's Golden Butterfly style.

Fewer good trades, not more. That's my goal.

But I like Novell's EM model. Reason enough to get Economic Pulse. Investors must have a way to play EM without getting crushed. Gary has EM in his proprietary model, but I'm not going to send my portfolio away out of my control and pay 1% to do so. I hate paying thousands I fees every quarter. It makes me ill.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Fri Jan 18, 2019 5:30 am

It's not a burden to be 12% gold, 13% cash, 70% T-Bills, 5% stocks right now. It's like a vacation.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by buddtholomew » Fri Jan 18, 2019 7:47 am

ochotona wrote:
Fri Jan 18, 2019 5:30 am
It's not a burden to be 12% gold, 13% cash, 70% T-Bills, 5% stocks right now. It's like a vacation.
Ouch...missed a huge rally...
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by thisisallen » Fri Jan 18, 2019 8:10 am

https://www.dualmomentum.net/2019/01/wh ... m-gem.html
[/quote]

Gary makes a compelling defense. I just learned that Novell's model is already just about ready to go back to equities based on a weekly close above the 13 week EMA. That's way too quick for me. That's short-termism, whipsaw city. 200 day MA, ok... 13 week EMA? Huh?

I like his compilation if economic data. But I wonder if I could just use the Ned Davis recession indicator (free for Schwab customers), or get the data myself for free, in combination with GEM, in order to trade GEM even less. We shall see, as a recession inevitably approaches someday.

Ned Davis and Novell are not signaling recession risk. Kind of makes the end of December equity exit look unnecessary. I could have used Ned Davis to sell down to 40% (their recent equity allocation) then just wait for a recession signal to confirm the momentum signal. At 40% equity you can tough out a correction. That's Golden Butterfly style.

Fewer good trades, not more. That's my goal.

But I like Novell's EM model. Reason enough to get Economic Pulse. Investors must have a way to play EM without getting crushed. Gary has EM in his proprietary model, but I'm not going to send my portfolio away out of my control and pay 1% to do so. I hate paying thousands I fees every quarter. It makes me ill.
[/quote]

Does NEd Davis Research have a good track record of accurate predictions?
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Fri Jan 18, 2019 11:07 am

buddtholomew wrote:
Fri Jan 18, 2019 7:47 am
ochotona wrote:
Fri Jan 18, 2019 5:30 am
It's not a burden to be 12% gold, 13% cash, 70% T-Bills, 5% stocks right now. It's like a vacation.
Ouch...missed a huge rally...
Not if it's a bear market rally! They are often rippin'

Zerohedge, Charlie McElligott
What this means, somewhat ironically, is that while everyone was blaming the algos for the December meltdown, even though nobody has "accused" the algos of creating the ongoing meltup, investors and traders know very well that the move higher is not organic, but is purely the result of systematic, algo and various other quant traders forcibly buying as a result of key technical market levels being hit. Unfortunately for the few humans left trading stocks, this is not a buying signal, which likely means that just like in January of 2018 when retail investors finally capitulation and rushed into stocks just ahead of the February 2018 correction, so this time too it is likely that the algos will keep buying until everyone else jumps into the pool... at which point the market will once again take the elevator down.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by buddtholomew » Fri Jan 18, 2019 1:28 pm

ochotona wrote:
Fri Jan 18, 2019 11:07 am
buddtholomew wrote:
Fri Jan 18, 2019 7:47 am
ochotona wrote:
Fri Jan 18, 2019 5:30 am
It's not a burden to be 12% gold, 13% cash, 70% T-Bills, 5% stocks right now. It's like a vacation.
Ouch...missed a huge rally...
Not if it's a bear market rally! They are often rippin'

Zerohedge, Charlie McElligott
What this means, somewhat ironically, is that while everyone was blaming the algos for the December meltdown, even though nobody has "accused" the algos of creating the ongoing meltup, investors and traders know very well that the move higher is not organic, but is purely the result of systematic, algo and various other quant traders forcibly buying as a result of key technical market levels being hit. Unfortunately for the few humans left trading stocks, this is not a buying signal, which likely means that just like in January of 2018 when retail investors finally capitulation and rushed into stocks just ahead of the February 2018 correction, so this time too it is likely that the algos will keep buying until everyone else jumps into the pool... at which point the market will once again take the elevator down.
Sorry to laugh but how can you possibly put your financial future at risk listening to commentary on Zerohedge. Ocho, I like you a lot but please don’t follow this nonsense as if it were gospel. Trying to avoid the next decline is hopeless; I prefer buying into the decline when it occurs rather than running from it. I implore you to check % for lost opportunity rather than repeat the mistake of all in/all out again.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Fri Jan 18, 2019 1:42 pm

You don't understand, Budd.

McElligott is with Nomura Securities.. not ZH. He had an hour long podcast on macrovoices.com this week. I heard it yesterday. He called the Feb 18 sell off event, he says more is to come. I just cut and pasted from ZH because they had conveniently transcripted his audio.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by buddtholomew » Fri Jan 18, 2019 2:07 pm

ochotona wrote:
Fri Jan 18, 2019 1:42 pm
You don't understand, Budd.

McElligott is with Nomura Securities.. not ZH. He had an hour long podcast on macrovoices.com this week. I heard it yesterday. He called the Feb 18 sell off event, he says more is to come. I just cut and pasted from ZH because they had conveniently transcripted his audio.
Got it. Good luck to you.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Fri Jan 18, 2019 10:48 pm

GEM history since 1992:

April 1994 - November 1994: a cluster of whipsaws, GEM was down -0.6%, and buy & hold was up +3.6%. Oh damn, I'm an idiot!

GEM avoided most of two back to back bear markets... Tech Bubble 2000-2003, and Great Financial Crisis 2008-2009, each down -50%

October 2015 - March 2016: whipsaws, GEM was down -5.8%, buy &hold was up +8.3%. Oh, damn, I'm an idiot.

Every few years you have the pay the "Oh Damn, I'm an idiot" tax, but it's for your own good.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by InsuranceGuy » Fri Jan 18, 2019 10:58 pm

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

Post by ochotona » Sat Jan 19, 2019 6:29 am

Paul Novell tells me he has back tested his models to 1948 and on Great Depression data. That's a good dataset.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by Kbg » Sat Jan 19, 2019 5:16 pm

I think it very prudent to diversify look back periods, and particularly so in tax sheltered accounts. If you do, they should be distinctly different.

My shorter length is still in bonds.
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not so fast

Post by ochotona » Sat Jan 19, 2019 5:55 pm

I paid my $35 for Economic Pulse, and found from studying past issues that the models are twitchier. They trade more often. For example, their Developed Markets DM-COMP model traded five times in 2018, and got whipsawed four of those five times in the course of a month... GEM traded once. They did about the same returns for 2018.

You have to understand your temperament as an investor. I hate to trade, buyers or sellers remorse builds up in my soul after a trade, inevitably. In a few months, I forget about it. But it deteriorates my life for a while.

Someday I will be 100% in a lazy portfolio, maybe with a trend-following ETF like PTLC, where I don't have to trade. Why I don't do it now... it's not an internationally diversified security. It's costly, for me hundreds per month. GEM is free. Economic Pulse is $35 per month. I'm waiting for iShares to offer the same thing for less money. Then I'm gone.

2019 is key for me. I will keep subscribed to Economic Pulse, but I will watch how it reacts to what could be working out to be a gigantic bull trap... the sucker rally or rallies that pull in the retail investor before the drain is pulled out of the bathtub. We are going to have a recession someday, that is 100% certain. I'm confident both models would react properly to a true recessionary bear market, I just don't want to go through extra torture to get there.

If Economic Pulse gets whipped by a sucker rally, and if it whips a great deal in 2019, I won't use it.

Plus I am comparing the economic data with what I can harvest from elsewhere, namely Ned Davis Research Market Digest (free to me because I'm at Schwab). If they line up throughout 2019... I'll go with the free source of information.

So I'll keep posting GEM signals here, as long as I keep using them.
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