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 » Sat Dec 02, 2017 7:57 am

Everyone is using total return data sets, yes?
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ochotona
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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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InsuranceGuy
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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

Kbg wrote:Everyone is using total return data sets, yes?
I use total return for all of my data.
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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

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.
All of my data is at the daily level so that I can compute the max daily drawdown. I use the daily ^GSPC series and then load the dividend return from schiller as a percentage onto the daily data.

If he were using the end of month price change instead of the average price change that would match my results very closely as that is what I am doing at a monthly level with the dividend earnings added again as a percentage on top of that.

Sadly, the results still don't match that closely...
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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

pugchief 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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