Tactical Asset Allocation + HBPP an intriguing combo

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

Post by HappyMan » Sat Jun 30, 2018 7:12 am

ochotona wrote:
Sat Jun 30, 2018 4:58 am
I follow Kathy Jones' advice. She is the bond strategist at Schwab. She advised a long time ago to go to 3-5 year durations. Now she's thinking about adding more duration. Follow her @kathyjones on Twitter.
Great! Thanks for the reference. When I talked to Schwab about treasuries and ask for an advice, they basically told me to come back when I have at least a half of a mil. How often does she tweet an actual advice?

Do you hold to expire or sell/buy every once in a while?
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by jhogue » Sat Jun 30, 2018 1:23 pm

Talk to someone else at Schwab.

I buy both LTTs and STTs through my Fidelity brokerage account. Fidelity's minimum bond purchase is $1,000. The Bond Desk will talk to you over the phone if you have questions. I think Vanguard has roughly the same deal. Even though Treasury bonds are liquid and can be sold at any time, I aim to hold them until maturity.

I also recommend that you read Gumby's tutorial on the Bond board before buying bonds online at Fidelity.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Sat Jun 30, 2018 9:08 pm

HappyMan wrote:
Sat Jun 30, 2018 7:12 am
Great! Thanks for the reference. When I talked to Schwab about treasuries and ask for an advice, they basically told me to come back when I have at least a half of a mil. How often does she tweet an actual advice?
Do you hold to expire or sell/buy every once in a while?
Here's the actual page where bond advice is posted: https://www.schwab.com/resource-center/ ... d-insights

Someone told you you have to have $500,000 in order to get help from the Schwab bond desk? That's not right. They'll talk to any customer as far as I know.

I used to own only ETFs, but now I'm buying individual bonds and holding them to maturity. Short-term Treasuries and high quality corporates. It has been a good experience.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by HappyMan » Sat Jun 30, 2018 10:13 pm

ochotona wrote:
Sat Jun 30, 2018 9:08 pm

Here's the actual page where bond advice is posted: https://www.schwab.com/resource-center/ ... d-insights

I used to own only ETFs, but now I'm buying individual bonds and holding them to maturity. Short-term Treasuries and high quality corporates. It has been a good experience.
Appreciate the link. You are very helpful!

That's the other thing. Should one invest in bonds (2-3%) or in related ETFs, like PFF, for example (3-4%)?
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ochotona
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Sun Jul 01, 2018 4:52 am

I stay away from high risk fixed income like PFF. Look what it did during 2097-2009. Very scary.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by HappyMan » Sun Jul 01, 2018 7:23 am

jhogue wrote:
Sat Jun 30, 2018 1:23 pm
Talk to someone else at Schwab.

I buy both LTTs and STTs through my Fidelity brokerage account. Fidelity's minimum bond purchase is $1,000. The Bond Desk will talk to you over the phone if you have questions. I think Vanguard has roughly the same deal. Even though Treasury bonds are liquid and can be sold at any time, I aim to hold them until maturity.

I also recommend that you read Gumby's tutorial on the Bond board before buying bonds online at Fidelity.
Thank you for recommending a tutorial. I guess it applies to bonds at Schwab as well.

Where can one find this guide? Googling has not brought satisfying results.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by jhogue » Sun Jul 01, 2018 7:40 pm

See "Treasury Bond Buying Tutorial," the first thread under "Bonds"

or:

viewtopic.php?f=3&t=1670
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by HappyMan » Sun Jul 01, 2018 10:00 pm

jhogue wrote:
Sun Jul 01, 2018 7:40 pm
See "Treasury Bond Buying Tutorial," the first thread under "Bonds"

or:

viewtopic.php?f=3&t=1670
Thank you. Will look at it.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by HappyMan » Mon Jul 02, 2018 12:52 am

jhogue wrote:
Sun Jul 01, 2018 7:40 pm
See "Treasury Bond Buying Tutorial," the first thread under "Bonds"

or:

viewtopic.php?f=3&t=1670
I've read that guide a couple of months ago along with the FAQ. After that I purchased my first bond with Schwab.

What would you recommend to read to someone after that? Just stick to a pro like that woman from Schwab? I'm interested in strategic buying of bonds. Would be good to familiarize myself with different strategies.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Tue Jul 03, 2018 5:57 pm

Marilyn Cohen, "The Little Bond e-Book"
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by HappyMan » Wed Jul 04, 2018 9:31 am

ochotona wrote:
Tue Jul 03, 2018 5:57 pm
Marilyn Cohen, "The Little Bond e-Book"
Nice! Currently free for Kindle.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by jhogue » Wed Jul 04, 2018 1:04 pm

Let the buyer beware! Marilyn Cohen is promoting the sale of municipal and corporate bonds in this book. These are not suitable for the HBPP.

1. Anyone tempted to buy munis because they are free of federal, state, and local taxes should read up on Puerto Rico and Chicago or ask pug chief for a tutorial on fiscal finance in the Land of Lincoln.

2. As for corporate bonds, about 20 years ago, I took Marilyn Cohen's advice (she writes a bond column for Forbes) and bought some really neat GMAC zero coupon bonds with a coupon of 7.65%. They tanked during the 2008-2009 recession, and while I eventually got out at a profit, it was a wild ride while GMAC was being bailed out by TARP and then converted into Ally Bank. Trust me, you don't want to go for that ride. Bonds should be boring, not exciting.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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ochotona
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Wed Jul 04, 2018 1:54 pm

jhogue wrote:
Wed Jul 04, 2018 1:04 pm
Let the buyer beware! Marilyn Cohen is promoting the sale of municipal and corporate bonds in this book. These are not suitable for the HBPP.

1. Anyone tempted to buy munis because they are free of federal, state, and local taxes should read up on Puerto Rico and Chicago or ask pug chief for a tutorial on fiscal finance in the Land of Lincoln.

2. As for corporate bonds, about 20 years ago, I took Marilyn Cohen's advice (she writes a bond column for Forbes) and bought some really neat GMAC zero coupon bonds with a coupon of 7.65%. They tanked during the 2008-2009 recession, and while I eventually got out at a profit, it was a wild ride while GMAC was being bailed out by TARP and then converted into Ally Bank. Trust me, you don't want to go for that ride. Bonds should be boring, not exciting.
This is a VP discussion.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by jhogue » Wed Jul 04, 2018 2:19 pm

Yeah, I know.

My caveat emptor about munis and corporate bonds applies to holders of VPs as well as more orthodox holders of the HBPP.

Are you recommending investors buy munis and corporate bonds?
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Wed Jul 04, 2018 3:12 pm

jhogue wrote:
Wed Jul 04, 2018 2:19 pm
Yeah, I know.

My caveat emptor about munis and corporate bonds applies to holders of VPs as well as more orthodox holders of the HBPP.

Are you recommending investors buy munis and corporate bonds?
I don't make any recommendations to anyone.
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ochotona
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Sun Jul 08, 2018 7:57 am

A reminder about why this thread exists:

2005-Today performance (because GLD doesn't go back further)

HBPP
CAGR 6.74%
MaxDD -12.59%
Sharpe 0.84
US Mkt correlation 0.39

GEM
CAGR 8.73%
MaxDD -17.72%
Sharpe 0.72
US Mkt correlation 0.66

50% HBPP + 50% GEM
CAGR 7.80%
MaxDD -11.12%
Sharpe 0.92
US Mkt correlation 0.66

The blend has lower drawdown, higher Sharpe ratio, 1% higher return, and it's still relatively lazy (look once a month; trade a few times per year). What's not to like? (But I don't recommend it to anyone. Make your own decisions).

GEM uses SWPPX, SWISX, and VFITX is the risk-off asset
HBPP uses SWPPX, GLD, TLT, and Cash
Last edited by ochotona on Sun Jul 08, 2018 12:59 pm, edited 1 time in total.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by HappyMan » Sun Jul 08, 2018 8:51 am

Nice summary, Ochotona! Thanks for your work!
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ochotona
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Sat Jul 28, 2018 7:24 pm

FYI, this is where I am now:

10% cash (90 day T-Bills, Ally Bank)
10% gold
10% TIPS (I put I-Bonds in the TIPS bucket)
25% core bonds with 4 year duration (Treasuries, Total Bond Market, Short Term High Quality Corporates - no junk, no EM, no preferreds)
45% GEM

This is sleep well at night portfolio for sure. :)
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by HappyMan » Sat Jul 28, 2018 10:34 pm

ochotona wrote:
Sat Jul 28, 2018 7:24 pm
FYI, this is where I am now:

10% cash (90 day T-Bills, Ally Bank)
10% gold
10% TIPS (I put I-Bonds in the TIPS bucket)
25% core bonds with 4 year duration (Treasuries, Total Bond Market, Short Term High Quality Corporates - no junk, no EM, no preferreds)
45% GEM

This is sleep well at night portfolio for sure. :)
Nice allocation! Keep thinking why did you chose 3-4 year bonds over, for example, 1 year or 10 year ones?
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Sun Jul 29, 2018 5:45 am

HappyMan wrote:
Sat Jul 28, 2018 10:34 pm
Nice allocation! Keep thinking why did you chose 3-4 year bonds over, for example, 1 year or 10 year ones?
My criterion was: how much can I tolerate losing, emotionally, if interest rates were to rise? That's why I chose that duration. It's my pain threshold. Through the long bond fluctuations I have not had much discomfort, and on a point-forward basis, 4 year bonds are in the meaty, juicy part of the yield curve.

When GEM goes out of stocks, I may lengthen, however, anticipating more QE.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by Kbg » Sun Jul 29, 2018 10:19 am

A rotational strategy using momentum and various types of bonds funds/ETFs works very well. To execute it you need a source of dividend adjusted prices...which will generally require a subscription and specialized software. Someone who may be interested and cheap might dig into Stockcharts.com to see if their prices are div adjusted.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Sun Jul 29, 2018 2:33 pm

Morningstar.com and Stockcharts( Perfcharts) both report total return for free.
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by HappyMan » Sun Jul 29, 2018 10:10 pm

ochotona wrote:
Sun Jul 29, 2018 5:45 am

My criterion was: how much can I tolerate losing, emotionally, if interest rates were to rise? That's why I chose that duration. It's my pain threshold. Through the long bond fluctuations I have not had much discomfort, and on a point-forward basis, 4 year bonds are in the meaty, juicy part of the yield curve.

When GEM goes out of stocks, I may lengthen, however, anticipating more QE.
Thank you for sharing your wisdom with us!
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Tue Jul 31, 2018 5:15 pm

Very important content from Gary and others. A must-read. This suggests dual momentum portfolios outperform in retirement.

https://www.dualmomentum.net/2018/07/mo ... t.html?m=1
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Re: Dual Momentum GEM + HBPP a great combo, easy to test

Post by ochotona » Wed Aug 01, 2018 5:28 am

No change to the GEM for August 2018. Still 100% in US stock ETFs like SCHX, IVV, VOO, etc.
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