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 » Sun Nov 26, 2017 9:20 am

HappyMan wrote:BTW, why add TLT, GLD, and cash to the mix? For example, some analytics say that GLD will go down for a good while.
The idea behind this post and my portfolio is I'm adding to the robustness of the HBPP structure by adding trend-following global equities. This allows me to increase the equity slice without making the whole portfolio more risky that a regular HBPP.

Currently,
10% gold / platinum / agricultural commodities
10% cash
30% bonds (but medium duration, not long)
50% equities

As far as gold... the only function of gold is to embarrass people who try to guess what the price will be, as far as any of us here can tell. I don't think it's a worthwhile activity, beyond the amusement factor.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by Kbg » Sun Nov 26, 2017 11:32 am

Summoning the inner HB Yoda for HappyMan: Do, or do not. There is no predict.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Sun Nov 26, 2017 11:47 am

Kbg wrote:Summoning the inner HB Yoda for HappyMan: Do, or do not. There is no predict.
And Dual Momentum GEM also does not predict... it just follows the price action. No one has to forecast anything.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by Kbg » Sun Nov 26, 2017 11:54 am

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

Post by ochotona » Thu Nov 30, 2017 5:29 pm

No change to the GEM portfolio for December 2017. Still in 81% SWISX + 19% SCHE, or 100% in VEU.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by InsuranceGuy » Fri Dec 01, 2017 4:50 am

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

Post by HappyMan » Fri Dec 01, 2017 11:16 am

ochotona wrote:No change to the GEM portfolio for December 2017. Still in 81% SWISX + 19% SCHE, or 100% in VEU.
Curious, what was November return in percentage?
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Fri Dec 01, 2017 12:38 pm

0.6% in November
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by Mr Vacuum » Fri Dec 01, 2017 8:52 pm

InsuranceGuy wrote:I was backtesting what you are proposing and got some strange results as the optimal allocation based on the backtest was to not use the HBPP at all and just to use the GEM allocation strategy for 100% of your money. I thought about it more and convinced myself that the GEM system generated enough excess returns with little enough added volatility for that to make sense. I took it a step further and I was able to use some of the other successful modifications I have made to the HBPP to enhance the GEM strategy returns further but ultimately I prefer using a REIT as my 5th asset as opposed to International Stocks.

Anyways, the thing that bothered me is that I when I compared my GEM results using the asset class returns I have previously mined to those published on the optimum momentum site and there are some significant discrepancies in recent history and even more the further you go back. As a word of caution I do think the GEM momentum system is a good system, but I am apprehensive about the returns shown on Antonacci's site.

IG
Hmm, that would be troubling. My tests mostly matched Antonacci’s month for month since 1988, but I see differences before that, which I chalk up to evidently backfilling different data for the S&P 500 total returns with my numbers rolled from Shiller. I also don’t have aggregate bonds data and use 5 year Treasuries instead, which affects all the risk off months. And I don’t trust my synthetic Tbills all that much, which affects whether it’s in stocks or not any given month. All in all I didn’t expect an exact match and I didn’t get it :) But it was enough to test the concepts and see how it works.

Are you seeing discrepancies not explained by any of the above?

I found it surprising and disappointing when Antonacci removed the page that listed what asset GEM was in each month historically. That was there when I built my spreadsheet and it helped a lot to check my logic.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by HappyMan » Fri Dec 01, 2017 9:22 pm

ochotona wrote:0.6% in November
Oddly, SCHF and DBAW resulted in negative 0.69%.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by InsuranceGuy » Sat Dec 02, 2017 6:16 am

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

Post by Mr Vacuum » Sat Dec 02, 2017 6:52 am

Gotta wonder what Antonacci used pre-1988.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by Kbg » Sat Dec 02, 2017 7:57 am

Everyone is using total return data sets, yes?
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Sat Dec 02, 2017 10:27 am

ochotona wrote:0.6% in November
VEU was +0.6%

SWISX + SCHE combo was flat

Over short periods of time, these funds don't track perfectly
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CAPE-tilted GEM

Post by ochotona » Sat Dec 02, 2017 10:44 am

I realized this is what I have actually been doing. After pondering it, I realize I don't regard HBPP + GEM as a truly static allocation, well, except I think 10% gold is static, but what I've really been doing is a CAPE-tilted GEM.

At portfoliovisualizer.com you find a CAPE method for market timing, and it's simple and pretty darn good, and it hardly ever trades!

Shiller PE Ratio (PE10) market valuation based timing model uses shifts the allocation between stocks and bonds as follows:
PE10 >= 22 - 40% stocks, 60% bonds
14 <= PE10 < 22 - 60% stocks, 40% bonds
PE10 < 14 - 80% stocks, 20% bonds

During high CAPE years, it turns down equity exposure by 50%. That's the net effect.

A CAPE-tilted GEM would therefore now be 50% in equities. That's what I'm doing. That's a nice sleep at night portfolio for me. But when CAPE goes back below 14, then the suggestion is be all-in equities.

CAPE is 32 now.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by InsuranceGuy » Sat Dec 02, 2017 10:04 pm

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

Post by HappyMan » Sat Dec 02, 2017 10:24 pm

ochotona wrote:
ochotona wrote:0.6% in November
VEU was +0.6%

SWISX + SCHE combo was flat

Over short periods of time, these funds don't track perfectly
What an unfair disadvantage for Schwab. Is Vanguard better at composing their ETFs? Or, is it just this one incident?
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by Mr Vacuum » Sun Dec 03, 2017 8:21 am

InsuranceGuy wrote:
Kbg wrote:Everyone is using total return data sets, yes?
I use total return for all of my data.
I'm curious what you use for S&P 500 total returns prior to 1988. I used http://www.econ.yale.edu/~shiller/data.htm, which states, "Stock price data are monthly averages of daily closing prices." I assume Antonacci has monthly closing prices, so direct comparison is impossible.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Sun Dec 03, 2017 9:08 am

Mr Vacuum wrote:
InsuranceGuy wrote:
Kbg wrote:Everyone is using total return data sets, yes?
I use total return for all of my data.
I'm curious what you use for S&P 500 total returns prior to 1988. I used http://www.econ.yale.edu/~shiller/data.htm, which states, "Stock price data are monthly averages of daily closing prices." I assume Antonacci has monthly closing prices, so direct comparison is impossible.
I get total return data off of Morningstar. I really don't worry about month-to-moth return fluctuations. Since 2011, a Schwab 17% SCHF and 83% SCHE mix has gotten exactly the same CAGR as VEU (I goal-seeked the weights to make them match just as an example). But any given month? They hold the same companies and countries but in different weights, so it's going to be different. But over the long haul, it evens out.

If one is worried about the "purity" of the GEM signal, you can always use VOO VEU for the signal, but trade other things if you can trade them for free. Free has a big appeal for me. I keep my accounts very tidy and accurately balanced, so avoiding fees is important to me.

There's a big psychological component to GEM, and it's not unlike HBPP. And that is, let it loose, and over time worry less about it. I can feel it happening to me, now that I've been trend-following for 28 months. I have to let go of 29 prior years of a certain mindset and behavior.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by InsuranceGuy » Sun Dec 03, 2017 12:41 pm

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

Post by Mr Vacuum » Sun Dec 03, 2017 6:57 pm

I updated my back test with monthly GSPC prices from yahoo (and continued to add Shiller dividends). Much better to use that than Shiller’s daily average for this model. It now matches Anonacci’s returns much more closely back to 1970. I am satisfied that the remaining differences are accounted by cash and AGG vs 5yr Treasuries.

InsuranceGuy, would you care to call out a particular month or two in which you see unresolved differences?
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Tue Dec 12, 2017 4:34 pm

MangoMan wrote:Ocho, Using a site like stockcharts.com, what signal would you use for momentum?
You use the PerfChart at stockcharts.com, use the 1-year option (it defaults to 200 days). The momentum signal is a BUY if the 1-year return is > the risk free rate. I get risk free rate from the US Treasury Yield Curve rates, today it is 1.34%.

https://www.treasury.gov/resource-cente ... data=yield

I'm sizing my momentum stake this way... I ask, if it all went to he!!, and next month I was thrown out of the markets, but let's say Fate was semi-kind to me and it only just barely threw me out, what would that drawdown look like?

Since S&P500 is up 20.46% over the last year, and the risk free rate is 1.34%, that means I could be looking at a 19% hit, and I want a PP-hit at most, so I'm only 50% in my momentum strategy now. Honestly, I could go back up to 60%. Maybe I'll do some dip-buying.

Only climb as high as you're willing to fall.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by Mr Vacuum » Tue Dec 12, 2017 5:05 pm

Stockcharts.com is majorly ratcheting up the ads lately. I wish fidelity’s charts had a perfchart total return option. It looks like the etf comparison page Market 1yr total return would suffice.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Tue Dec 12, 2017 5:44 pm

Mr Vacuum wrote:Stockcharts.com is majorly ratcheting up the ads lately. I wish fidelity’s charts had a perfchart total return option. It looks like the etf comparison page Market 1yr total return would suffice.
Morningstar works too
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by HappyMan » Wed Dec 27, 2017 11:06 am

The time of cash and gold is coming?

"It's Time To Hold Physical Cash", Fidelity Manager Warns Ahead Of "Systemic Event"

http://www.zerohedge.com/news/2015-06-2 ... emic-event
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