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 » Fri Jun 28, 2019 4:58 pm

The GEM portfolio is in US Equities for July 2019 (SPY, IVV, VOO, SCHX).

Having said that, I am doubting the ability of the 12-month lookback to perform accurately past the end of September, due to the extreme volatility of Q4 2019. This is a bad feature of this particular simple way to calculate momentum. It could very well post a "BUY" signal for late 2019 / early 2020 simply due to the trough in the stock market in late 2018 / early 2019.

I find that an 18 month simple moving average has similar results to the 12-month lookback, so I'll be reporting that from now on.

I'll still be comparing S&P 500 stocks vs. ACWI ex-US (I'll use the CWI ETF, it outperforms VEU) using the 12-month lookback to find out which to invest in, I just won't use the 12-month lookback to go risk-on / risk-off.

{FYI - I'm not using the above. I'm following the Economic Pulse model, which I can't disclose, but I don't want to leave readers in the lurch}
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by ochotona » Mon Jul 01, 2019 5:19 pm

Paul Novell was on Meb Faber's podcast recently.

https://mebfaber.com/2019/07/01/the-bes ... dels-fail/
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by ochotona » Wed Jul 31, 2019 5:07 pm

The GEM portfolio is in US Equities for August 2019 (SPY, IVV, VOO, SCHX)
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by HappyMan » Wed Jul 31, 2019 7:30 pm

ochotona wrote:
Wed Jul 31, 2019 5:07 pm
The GEM portfolio is in US Equities for August 2019 (SPY, IVV, VOO, SCHX)
Thanks for the information. Do you still consider USMV?
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by ochotona » Wed Jul 31, 2019 7:44 pm

I am concerned USMV is too crowded a trade. Still using SP500 cap weighted ETFs.

That said, for my wife's purely buy-and-hold portfolio, I am using ACWV, iShares MSCI Min Vol Global ETF. I think over a period of time it will be more suitable for her than VT, which she was in before.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by ochotona » Fri Aug 30, 2019 8:24 pm

The GEM portfolio is in US Equities for September 2019 (SPY, IVV, VOO, SCHX).
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by ochotona » Fri Sep 06, 2019 3:30 pm

I'm in a 401(k) which I detest. The two best funds I have access to are Invesco S&P500 Equal Weight (VADAX), and American Funds New World Fund® Class R-3 (RNWCX). The later is a global fund, actively managed and costly, and heavily EM weighted, almost 1/2 EM. I get assailed by ridiculous fees. You know what it is. Thankfully, when I turn 59.5 I can do an in-service transfer and rip the accumulated funds out.

Being half EM sounds like a recipe for failure, but I have noticed that as on Aug 30, RNWCX beats VADAX on a 12-mo momentum basis, so I switched over to it. I'm trying to run something like a GEM in my 401(k) and hope I don't hit any frequent trading limits. I should be OK.

Interesting observation I thought others would like to hear. The US vs International, the passive vs active worms may be turning.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by pmward » Sat Sep 07, 2019 2:32 pm

ochotona wrote:
Fri Sep 06, 2019 3:30 pm
Interesting observation I thought others would like to hear. The US vs International, the passive vs active worms may be turning.
Honestly, I wouldn't be surprised at all to see active start working again when we do get the next "paradigm shift". Especially since active fees have dropped considerably in the last few years. I mean, there are some solid active funds now under 1% ER (like the highly regarded Contrafund).
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by ochotona » Fri Sep 27, 2019 12:45 pm

How much does Interactive Brokers save you in trading friction? Are their order executions that much better than Schwab, Fidelity, etc for trading ETFs? That might be a consideration for a momentum investor.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by ochotona » Mon Sep 30, 2019 6:28 pm

IBKR charges USD 0.005 per share to trade. It sounds like Schwab charge MORE than that to their customers, but we don't know it because the charges are not line-items. I am trying to get my hands on more information. They sell their order flow to 3rd party trading desks and earn commissions form it. Every years they earn $100s of millions in this manner.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by Kbg » Mon Sep 30, 2019 8:48 pm

I don’t have Schwab so I can’t compare, but pure commission wise if you are swinging a really big bat fixed commission is cheaper than IB.

IB provides a ton of methods to control your trade. Of note, as of Friday IB now offers a commission free trading account for US stocks and ETFs.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by ochotona » Tue Oct 01, 2019 7:39 pm

The GEM portfolio is in US Equities for October 2019 (SPY, IVV, VOO, SCHX)
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by ochotona » Wed Oct 30, 2019 9:38 pm

The GEM portfolio is in US Equities for November 2019 (SPY, IVV, VOO, SCHX). It's early to call it, but a change is highly unlikely.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by HappyMan » Wed Nov 06, 2019 3:00 am

Here is a Canadian version of GEM, Hot Potato Portfolio,

https://www.moneysense.ca/save/investin ... portfolio/
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PODCASTS

Post by ochotona » Sat Nov 23, 2019 7:28 am

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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by TrickPony » Sat Nov 23, 2019 3:21 pm

Thanks for the info.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by ochotona » Fri Nov 29, 2019 2:16 pm

The GEM portfolio is in US Equities for December 2019 (SPY, IVV, VOO, SCHX).
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by ochotona » Tue Dec 31, 2019 9:45 am

The GEM portfolio is in US Equities for January 2020 (SPY, IVV, VOO, SCHX).
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by rocketdog » Tue Dec 31, 2019 10:11 am

ochotona wrote:
Thu Jun 01, 2017 2:06 pm
I have almost entirely exited US equities. I bought CWI ETF of global stocks excluding US. VEU is another choice. This was the May 31 Dual Momentum signal.

It feels strange. Now the financial news is oddly not relevant. I'm dependent on Mario Draghi, PBoC, BOJ more than Yellen.
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
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by Kbg » Tue Dec 31, 2019 11:24 am

rocketdog wrote:
Tue Dec 31, 2019 10:11 am
ochotona wrote:
Thu Jun 01, 2017 2:06 pm
I have almost entirely exited US equities. I bought CWI ETF of global stocks excluding US. VEU is another choice. This was the May 31 Dual Momentum signal.

It feels strange. Now the financial news is oddly not relevant. I'm dependent on Mario Draghi, PBoC, BOJ more than Yellen.
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
Well, how about let's just say you don't actually understand the profit/loss profile of a momentum system and this one in particular.

Correct on underperformance. I do not run the classic GEM so my performance stats are different but the version I run since the date cited has the following stats.

5.06 CAGR vs.
13.74 for a buy and hold of the S&P 500 equivalent asset
5.46 for a buy and hold of the ex US equivalent asset
3.70 for a buy and hold of the US bond asset

But that is only half of the story...if we throw in MaxDDs we find the following:
-19.36 MaxDD for S&P 500
-21.51 MaxDD for ex-US
-3.57 MaxDD for Bonds

System MaxDD -9.11

NOT a newsflash to anyone who has studied the system - in a strong US bull stock market the system underperforms

So please post this exact same post when one of three things happens and I promise to run the numbers and post them

1. Intl outpeform US
2. Bonds outpeform anything
3. a bear market
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by rocketdog » 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 :)
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Re: Tactical Asset Allocation + HBPP an intriguing combo

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

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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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