ppnewbie wrote: ↑Sat Mar 28, 2020 2:45 am
What are people’s thoughts about LTT’s in an environment of unprecedented money printing. The long end of the yield curve may have to go up dramatically in order for parties to purchase LTT’s in a highly inflationary environment.
One successful portfolio cooked up by Paul Novell is a 6 month look back momentum contest between eight very different bond ETFs. You invest in the top 3 of 8. If returns for any of the top 4 are negative you go to cash (it's in the public domain). Name is TAA Bond 3.
Maybe one could compare SHY, IEF, and TLT. And take the top 1 of 3. A momentum contest across the yield curve. In a worst case rising rate environment the bond portfolio would simply go to cash. That's actually why Paul built it.
So an example of a Paul Novell style trendfollowing Quasi PP could be 40% SPY-UI equities (public domain also, Google it), 45% trendfollowing Treasuries and 15% gold buy and hold. No cash because the bonds could go to cash.
I'm a bigger fan of looking at the spreads on a chart. I find arbitrary look back dates to be too flaky, and I also find using only 1 signal to have too many false positives. You can sign up for a TradingView account for free and look at spreads by using the '/' character. For instance, this is the weekly spread between TLT/IEF going back to 2011. You can see we are in a clear as day uptrend for TLT relative to IEF. Not only that, but we've actually broken above the channel line recently. A similar pattern exists in TLT/IEI. TLT has so much momentum behind it's back right now. And given that this trend has held for 9 years now, it is very strong. And not only can I track trend, I can also track relative strength, moving averages, momentum, etc to give further confirmation. If this trend breaks down I personally would move away from TLT into IEF or IEI, but at the moment the wind is at our backs with TLT, I see no reason to voluntarily trade the wind at my back for the wind in my face. I mean, there is not a single bearish signal on this chart...
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