Tactical Asset Allocation + HBPP an intriguing combo

A place to talk about speculative investing ideas for the optional Variable Portfolio

Moderator: Global Moderator

thisisallen
Senior Member
Senior Member
Posts: 126
Joined: Sat Sep 24, 2016 5:39 pm
Location: NJ and India

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

Post by thisisallen » Fri Jan 04, 2019 10:24 pm

From Allocate Smartly:
(The site analyzes tactical asset allocation strategies)

“TAA’s performance to start the new year is likely to be extreme (either extremely good or extremely mediocre). As we show in the data dump below, TAA is now postured very defensively. The average allocation to defensive asset classes stands at 88%. Those are levels not seen since the 2008-09 Global Financial Crisis. If we see a strong market recovery to start the year, TAA is going to be left underperforming on the sidelines. But if recent market weakness continues, TAA is going to be riding high and dry. This remains a “hero or zero” moment for TAA.”
User avatar
ochotona
Executive Member
Executive Member
Posts: 3353
Joined: Fri Jan 30, 2015 5:54 am

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

Post by ochotona » Sat Jan 05, 2019 2:54 am

thisisallen wrote:
Fri Jan 04, 2019 10:24 pm
From Allocate Smartly:
(The site analyzes tactical asset allocation strategies)

“TAA’s performance to start the new year is likely to be extreme (either extremely good or extremely mediocre). As we show in the data dump below, TAA is now postured very defensively. The average allocation to defensive asset classes stands at 88%. Those are levels not seen since the 2008-09 Global Financial Crisis. If we see a strong market recovery to start the year, TAA is going to be left underperforming on the sidelines. But if recent market weakness continues, TAA is going to be riding high and dry. This remains a “hero or zero” moment for TAA.”
It's not a hero or zero moment for me. I'm going to judge it on where I stand in 2026, retirement day.
User avatar
TrickPony
Junior Member
Junior Member
Posts: 8
Joined: Tue Jan 12, 2016 11:28 am

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

Post by TrickPony » Wed Jan 09, 2019 12:05 pm

Looks like I sold low and will be buying back in high. Good recipe to end up in the poor house.
Kurt
User avatar
ochotona
Executive Member
Executive Member
Posts: 3353
Joined: Fri Jan 30, 2015 5:54 am

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

Post by ochotona » Wed Jan 09, 2019 2:00 pm

TrickPony wrote:
Wed Jan 09, 2019 12:05 pm
Looks like I sold low and will be buying back in high. Good recipe to end up in the poor house.
The month is not over! Maybe we get whipsawed back... but maybe not. Who can predict the stock market over the next 30, 60, 90 days? No one!

You most assuredly don't know that you'll end up in the poor house over the full duration of your portfolio life. Decades of data suggests otherwise, and you can verify it independently.

GEM lags in bull markets, but hugely leads in bear markets. Everyone should know this. There are lots of trades that don't work out, but the ones that do hit big. It's the same thing for the HBPP, or any disciplined investment strategy for that matter. If you're not prepared for a bad trade, don't be in the financial markets. Buy a CD.
HappyMan
Senior Member
Senior Member
Posts: 132
Joined: Thu Nov 09, 2017 7:01 am

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

Post by HappyMan » Wed Jan 09, 2019 9:28 pm

ochotona wrote:
Wed Jan 09, 2019 2:00 pm

GEM lags in bull markets, but hugely leads in bear markets. Everyone should know this. There are lots of trades that don't work out, but the ones that do hit big. It's the same thing for the HBPP, or any disciplined investment strategy for that matter. If you're not prepared for a bad trade, don't be in the financial markets. Buy a CD.
This is a valuable piece of information. Thanks for sharing.
User avatar
buddtholomew
Executive Member
Executive Member
Posts: 2464
Joined: Fri May 21, 2010 4:16 pm

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

Post by buddtholomew » Thu Jan 10, 2019 6:56 am

ochotona wrote:
Wed Jan 09, 2019 2:00 pm
TrickPony wrote:
Wed Jan 09, 2019 12:05 pm
Looks like I sold low and will be buying back in high. Good recipe to end up in the poor house.
The month is not over! Maybe we get whipsawed back... but maybe not. Who can predict the stock market over the next 30, 60, 90 days? No one!

You most assuredly don't know that you'll end up in the poor house over the full duration of your portfolio life. Decades of data suggests otherwise, and you can verify it independently.

GEM lags in bull markets, but hugely leads in bear markets. Everyone should know this. There are lots of trades that don't work out, but the ones that do hit big. It's the same thing for the HBPP, or any disciplined investment strategy for that matter. If you're not prepared for a bad trade, don't be in the financial markets. Buy a CD.
Ocho, you’re playing poker with your financial future (all-in, all-out) and rationalizing the outcome to a PP investor that incurs a loss from time to time.
User avatar
ochotona
Executive Member
Executive Member
Posts: 3353
Joined: Fri Jan 30, 2015 5:54 am

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

Post by ochotona » Fri Jan 11, 2019 10:06 am

buddtholomew wrote:
Thu Jan 10, 2019 6:56 am
Ocho, you’re playing poker with your financial future (all-in, all-out) and rationalizing the outcome to a PP investor that incurs a loss from time to time.
The data does not support that assertion.
User avatar
buddtholomew
Executive Member
Executive Member
Posts: 2464
Joined: Fri May 21, 2010 4:16 pm

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

Post by buddtholomew » Fri Jan 11, 2019 12:20 pm

ochotona wrote:
Fri Jan 11, 2019 10:06 am
buddtholomew wrote:
Thu Jan 10, 2019 6:56 am
Ocho, you’re playing poker with your financial future (all-in, all-out) and rationalizing the outcome to a PP investor that incurs a loss from time to time.
The data does not support that assertion.
Just curious, can you answer these questions?
What were your stocks down YTD when the sell signal was triggered? How much more have you lost since the sell signal through yesterday? I suspect the answer is 15-20%. Compare that figure to a buy and hold investment over the same period. Is it worth it?
User avatar
ochotona
Executive Member
Executive Member
Posts: 3353
Joined: Fri Jan 30, 2015 5:54 am

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

Post by ochotona » Sat Jan 12, 2019 11:31 am

The sell signal was Dec 31. Judging one's strategy on a handful of days will never work no matter what the strategy. Think full market cycle.

Though if we get into a choppy whipsaw market, the thought of going to a buy and hold PP to wait out the vol storm seems appealing. PP has always been a great bear market allocation.
User avatar
TrickPony
Junior Member
Junior Member
Posts: 8
Joined: Tue Jan 12, 2016 11:28 am

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

Post by TrickPony » Sun Jan 13, 2019 11:23 am

I was thinking of keeping 50% of my portfolio in a pure HB PP & 50% in the GEM model. Under "risk of times" you would be 75% in stocks and in bad times only 25% equity. With this setup you always have a little skin in the game.
User avatar
ochotona
Executive Member
Executive Member
Posts: 3353
Joined: Fri Jan 30, 2015 5:54 am

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

Post by ochotona » Sun Jan 13, 2019 11:55 am

TrickPony wrote:
Sun Jan 13, 2019 11:23 am
I was thinking of keeping 50% of my portfolio in a pure HB PP & 50% in the GEM model. Under "risk of times" you would be 75% in stocks and in bad times only 25% equity. With this setup you always have a little skin in the game.
Exactly. Easy to live with. Follow the two models. Live your life.
User avatar
ochotona
Executive Member
Executive Member
Posts: 3353
Joined: Fri Jan 30, 2015 5:54 am

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

Post by ochotona » Sun Jan 13, 2019 5:41 pm

I am migrating to the portfolio models in the Economic Pulse Newsletter, available by subscription only from Investingforaliving.us

These models are very similar to the Antonacci GEM models. But, I can't discuss them, because the content is copyrighted. I won't update the GEM signals any longer. Don't worry, you can always get a fresh signal for the GEM by clicking on this link.
Kbg
Executive Member
Executive Member
Posts: 2815
Joined: Fri May 23, 2014 4:18 pm

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

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

User avatar
ochotona
Executive Member
Executive Member
Posts: 3353
Joined: Fri Jan 30, 2015 5:54 am

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.
User avatar
InsuranceGuy
Executive Member
Executive Member
Posts: 425
Joined: Sun Mar 29, 2015 1:44 pm

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

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

[deleted]
Last edited by InsuranceGuy on Mon Mar 08, 2021 8:00 pm, edited 1 time in total.
User avatar
ochotona
Executive Member
Executive Member
Posts: 3353
Joined: Fri Jan 30, 2015 5:54 am

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!
Kbg
Executive Member
Executive Member
Posts: 2815
Joined: Fri May 23, 2014 4:18 pm

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?
User avatar
ochotona
Executive Member
Executive Member
Posts: 3353
Joined: Fri Jan 30, 2015 5:54 am

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.
Kbg
Executive Member
Executive Member
Posts: 2815
Joined: Fri May 23, 2014 4:18 pm

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.
User avatar
ochotona
Executive Member
Executive Member
Posts: 3353
Joined: Fri Jan 30, 2015 5:54 am

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...
D1984
Executive Member
Executive Member
Posts: 730
Joined: Tue Aug 16, 2011 7:23 pm

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.
User avatar
ochotona
Executive Member
Executive Member
Posts: 3353
Joined: Fri Jan 30, 2015 5:54 am

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
thisisallen
Senior Member
Senior Member
Posts: 126
Joined: Sat Sep 24, 2016 5:39 pm
Location: NJ and India

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
Kbg
Executive Member
Executive Member
Posts: 2815
Joined: Fri May 23, 2014 4:18 pm

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.
User avatar
ochotona
Executive Member
Executive Member
Posts: 3353
Joined: Fri Jan 30, 2015 5:54 am

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.
Post Reply