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Tactical Asset Allocation + HBPP an intriguing combo
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Re: Tactical Asset Allocation + HBPP an intriguing combo
If tactical models go risk-on with a v-shaped recovery in stonks, I'm going to repeat what I did in 2019... express the risk preference by buying exactly what the Fed said they're going to buy... high yield bonds, iShares HYG, and gradually trade in the HYG for equities if the "V" sticks and we don't get whipped by a monumental bull trap. 2019 was a good year for me. My low equity allocation didn't bother my, because I had risky bonds. Over the year, I traded them for equities, got to ~50% equities when the hammer hit in 2020, then pulled the ripcord 2/28.
Where we are with valuations? It's not 1932 or 1982, let's put in that way.
A Bogglyhead would say about yesterday, "Oh, you panic sold and now you're missing the rally". Hell you say - my bonds and gold and Newmont Goldcorp caught a huge bid yesterday. Portfolio up by four figures with very few stonks. Still only 2% off of ATH, and that's because I spent a lot of money on the house recently. Landscaping, new AC unit.
Where we are with valuations? It's not 1932 or 1982, let's put in that way.
A Bogglyhead would say about yesterday, "Oh, you panic sold and now you're missing the rally". Hell you say - my bonds and gold and Newmont Goldcorp caught a huge bid yesterday. Portfolio up by four figures with very few stonks. Still only 2% off of ATH, and that's because I spent a lot of money on the house recently. Landscaping, new AC unit.
Re: Tactical Asset Allocation + HBPP an intriguing combo
Ocho,ochotona wrote: ↑Fri Apr 10, 2020 11:28 amIf tactical models go risk-on with a v-shaped recovery in stonks, I'm going to repeat what I did in 2019... express the risk preference by buying exactly what the Fed said they're going to buy... high yield bonds, iShares HYG, and gradually trade in the HYG for equities if the "V" sticks and we don't get whipped by a monumental bull trap. 2019 was a good year for me. My low equity allocation didn't bother my, because I had risky bonds. Over the year, I traded them for equities, got to ~50% equities when the hammer hit in 2020, then pulled the ripcord 2/28.
Where we are with valuations? It's not 1932 or 1982, let's put in that way.
...
As usual, quality stuff. There is a number of ETFs that Fed will be buying this time.
https://www.zerohedge.com/markets/here- ... to+zero%29
Any particular reason why HYG, as opposed to everything else?
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Re: Tactical Asset Allocation + HBPP an intriguing combo
LOL, I didn't see this before. A triple!
Sam Bankman-Fried sentenced to 25 years
Re: Tactical Asset Allocation + HBPP an intriguing combo
Let me think about it...HappyMan wrote: ↑Sat Apr 11, 2020 2:43 amOcho,ochotona wrote: ↑Fri Apr 10, 2020 11:28 amIf tactical models go risk-on with a v-shaped recovery in stonks, I'm going to repeat what I did in 2019... express the risk preference by buying exactly what the Fed said they're going to buy... high yield bonds, iShares HYG, and gradually trade in the HYG for equities if the "V" sticks and we don't get whipped by a monumental bull trap. 2019 was a good year for me. My low equity allocation didn't bother my, because I had risky bonds. Over the year, I traded them for equities, got to ~50% equities when the hammer hit in 2020, then pulled the ripcord 2/28.
Where we are with valuations? It's not 1932 or 1982, let's put in that way.
...
As usual, quality stuff. There is a number of ETFs that Fed will be buying this time.
https://www.zerohedge.com/markets/here- ... to+zero%29
Any particular reason why HYG, as opposed to everything else?
Re: Tactical Asset Allocation + HBPP an intriguing combo
Junk ETFs to be bought by the Fed:
ANGL did badly in the last drawdown, significantly worse than the others on the list. HYLS has a 1.23% expense ratio. Strike those.
The short junk ETFs drew down less. Not surprising.
iShares USHY has the best distribution yield 6.70% and expense ratio 0.15%. That's a sweet spot. It's 87.5% US, and the rest ex-US which is actually interesting.. a bit diversified.
1,795 bonds held. And none of the top 100-ish are energy issues. They are there, at the back in tiny slices. The is not a Shale Sh** Show ETF.
USHY has proportionally more B and fewer BB than HYG. Therefore, it drew-down more than HYG recently. And it has more pop-up potential, I suppose.
USHY. Instead of Stonks. Thanks for asking! {but both HYG or USHY would be fine - this is hair-splitting}
ANGL did badly in the last drawdown, significantly worse than the others on the list. HYLS has a 1.23% expense ratio. Strike those.
The short junk ETFs drew down less. Not surprising.
iShares USHY has the best distribution yield 6.70% and expense ratio 0.15%. That's a sweet spot. It's 87.5% US, and the rest ex-US which is actually interesting.. a bit diversified.
1,795 bonds held. And none of the top 100-ish are energy issues. They are there, at the back in tiny slices. The is not a Shale Sh** Show ETF.
USHY has proportionally more B and fewer BB than HYG. Therefore, it drew-down more than HYG recently. And it has more pop-up potential, I suppose.
USHY. Instead of Stonks. Thanks for asking! {but both HYG or USHY would be fine - this is hair-splitting}
Re: Tactical Asset Allocation + HBPP an intriguing combo
I always come back to this:tomfoolery wrote: ↑Tue Apr 14, 2020 3:03 amI believe the stock market will drop another 20% to 30% over the next 6 months. I want to speculate on this in my variable portfolio.
It feels silly to be long total stock market index in my PP and go short the same holding in my VP which are both held in the same brokerage account and only exist separately by virtue of me saying they are separate on my financial spreadsheet. If I die and the spreadsheet gets deleted, there's no indication to the outside world that I "intend" the two portfolios to exist separately within the same brokerage.
So, I have an idea. What if I short my PP holdings, pretending the PP and VP are two separate entities, which they are supposed to be anyway?
For example, suppose I had $500k and $400k was my PP and $100k was my VP. I'd be holding $100k total stock market index or SP500 index in my PP. Suppose I want to go short $50k in my VP.
I could "lend" $50k of my total stock index from the PP to the VP and provide an IOU for those exact number of shares lent. I then sell the $50k of stocks from the PP. In my VP, I can do whatever I want with the $50k cash, let it sit in cash, buy gold, whatever. But, if the stock market rises, I risk a "margin call" from the VP to the PP because the PP is money I can't afford to lose and am not allowed to rebalance from the VP.
In other words, two scenario examples:
Sell $50k of stock index. Sit on $50k cash instead. My PP is essentially $350k with a current value $50k IOU from the VP and my VP is $150k with a debt owed to the PP. Suppose the stock market doubles. The IOU isn't for $50k, it's for X shares of stock index. Since that doubled in value, the IOU is worth $100k. Assuming my VP only has $100k of actual assets in it, I am forced to liquidate my entire VP and use the money to buy back the stock index shares. Thus, my PP remained equivalent as if I never did this, but I wiped out my VP completely.
Or, I sell $50k of stock index and it loses 50%. Then whenever I decide to stop shorting it, my VP will buy back the now $25k worth of stock index funds and "transfer" back to the PP. My VP gained $25k and my PP lost $25k however my PP was going to lose that $25k regardless of whether I "shorted" stocks in my VP or not.
I find myself wanting to short the market as a whole and it seems silly to maintain $100k of stock index while simultaneously shorting $50k of stock index. This type of positioning adds counterparty risk and transfer fee/inefficiencies (buy/sell spreads).
The biggest risk seems to be of self-control, will I really limit my losses to the VP and not recoup money from the PP?
Arnold Schwarzenegger, Kindergarten Cop - "There is no bathroom"
There is no PP and VP. There is only what you own, your Portfolio. PP and VP are just dotted lines. And there's nothing wrong with that.
BUT, when dotted line cause someone to do costly things, like incur the significant carry costs involved in shorting the exact same stock they own, you gotta wonder... where is the sense in that?
If you're going to make speculative moves, AS I DO (I'm not a PP-holder, though I have lots of US Treasuries, Cash and Gold now) then you need to have a strong, back-testable, rational basis for decision-making, not just hunches and news flow.
Your speculation really should be like the PP itself - driven by historical data and results, "lazy" in the sense that the system gives you an action to follow without guesswork, "parsimonious" in the sense of few trades (no more than 1 per month), and you sleep better at night.
Over in the VP forum there are a number of Tactical Asset Allocation threads: pmward, HappyMan, InsuranceGuy, and Ochotona all participate.
I truly believe PP and Tactical compliment each other at this point in history for those who are pre-retirement and want a faster accumulation rate but with strong risk management. Why?
- Because gold - and as Jim Rickards wisely said, you can't get physical gold suddenly when you think you need it. There is no other way than buy and hold. You can trade ETF, miners, but the supply chain for retail physical gold is busted now.
- Because Long US Treasuries - you could in theory trade TLT, but as anyone who has tried to do so can tell you, it's wickedly volatile and I think they are harder to trade than stocks
- Because cash - one step away from food and shelter - gives you optionality on all assets classes
Gold, cash, and US sovereign bonds together have the best crisis alpha of anything. And we are in a crisis.
But someday we won't be in a crisis... and when we are not, you have to have a methodology for going back in to risk assets. The classic HBPP is a smooth performer but leaves money on the table. There are other ways to mitigate risk than having only 25% in stocks all the time.
Re: Tactical Asset Allocation + HBPP an intriguing combo
How does this way to hold equities look to you? Simple 10 month moving average rule. It's risk-off now.tomfoolery wrote: ↑Tue Apr 14, 2020 3:03 amI believe the stock market will drop another 20% to 30% over the next 6 months. I want to speculate on this in my variable portfolio.
It's simple but not easy. Holding any portfolio different from the S&P 500 or Dow is not easy. You have to be different. That's impossible for most people.
The signals are here for free !!!!!
Re: Tactical Asset Allocation + HBPP an intriguing combo
Another thing to think about... a 60/40 with the 40 being PP, the 60 being stocks using a simple 12 week and 26 week EMA crossover to decide if in stocks or cash, and tilting stocks to the factor that had the most long term momentum (large cap growth, so using QQQ). Mind you, the ETF's limit the data to start at 2005, but still, that's not too shabby at all...
https://www.portfoliovisualizer.com/tes ... odWeight=0
https://www.portfoliovisualizer.com/tes ... odWeight=0
Last edited by pmward on Tue Apr 14, 2020 11:07 am, edited 2 times in total.
Re: Tactical Asset Allocation + HBPP an intriguing combo
And if you did no tilting and just went with SPY all around, still great. Less alpha, but still outperformed buy and hold stocks, only a 12% max drawdown which is lower than the PP alone, and a HIGHER Sharpe than the PP alone.
Re: Paul Novell's flagship strategy: SPY-COMP
Thanks for sharing!
Re: Paul Novell's flagship strategy: SPY-COMP
Is there a place that shows what the 6 signals he follows are and the exact rules behind the system? I would be curious to see how the sausage is made.
Re: Paul Novell's flagship strategy: SPY-COMP
He has some public blogs posts made before he paywalled the model.
https://investingforaliving.us/category ... ndicators/
Re: Paul Novell's flagship strategy: SPY-COMP
So from what I can gather piecemeal, is that it's basically using these 6 economic indicators: https://investingforaliving.us/top-6-ec ... ndicators/ochotona wrote: ↑Fri Apr 24, 2020 11:47 amHe has some public blogs posts made before he paywalled the model.
https://investingforaliving.us/category ... ndicators/
If one of those indicators flashes red, then it defers to the 200 day SMA. So to buy back, either stocks need to go above 200 day SMA or all 6 indicators need to go green?
Re: Paul Novell's flagship strategy: SPY-COMP
Yes, to go risk-on you need above the SMA or all 6 economic indicators green. He has an error % on top of the SMA, so it would be slightly more than the SMA.pmward wrote: ↑Fri Apr 24, 2020 12:11 pmSo from what I can gather piecemeal, is that it's basically using these 6 economic indicators: https://investingforaliving.us/top-6-ec ... ndicators/
If one of those indicators flashes red, then it defers to the 200 day SMA. So to buy back, either stocks need to go above 200 day SMA or all 6 indicators need to go green?
Re: Paul Novell's flagship strategy: SPY-COMP
Re: Tactical Asset Allocation + HBPP an intriguing combo
Ochotona, I was looking at Paul Novell's website after reading your posts and couldn't find some info.
The coronavirus decline began on Feb 19th and SPY dropped below 200MA on Feb 27th. So Paul's SPY-COMP would have signaled exiting the position, getting you out with minimal losses.
However, are his signals only at the end of the calendar month? What if the crash started on Feb 28th and bottomed out at the end of March? The portfolio would have taken a full 35% hit (much more than SPY-COMP's max drawdown till date). At least on the face of it, it seems like SPY-COMP has lucked out so far and may not be robust against drawdowns.
Does Paul address this concern and/or provide any way to mitigate that risk? And do you have any opinions on it?
Re: Tactical Asset Allocation + HBPP an intriguing combo
Yeah, I myself have a gripe with the strategies that wait until month end. The markets just move way too fast these days.decipede wrote: ↑Wed Apr 29, 2020 8:05 pmOchotona, I was looking at Paul Novell's website after reading your posts and couldn't find some info.
The coronavirus decline began on Feb 19th and SPY dropped below 200MA on Feb 27th. So Paul's SPY-COMP would have signaled exiting the position, getting you out with minimal losses.
However, are his signals only at the end of the calendar month? What if the crash started on Feb 28th and bottomed out at the end of March? The portfolio would have taken a full 35% hit (much more than SPY-COMP's max drawdown till date). At least on the face of it, it seems like SPY-COMP has lucked out so far and may not be robust against drawdowns.
Does Paul address this concern and/or provide any way to mitigate that risk? And do you have any opinions on it?
Re: Tactical Asset Allocation + HBPP an intriguing combo
Novell has end of week signals and also a daily volatility buy-sell signal. You are not limited to monthly trades. I agree markets move too fast these days.
Re: Tactical Asset Allocation + HBPP an intriguing combo
The GEM portfolio is in Bonds for May 2020 (AGG, BND, SCHZ)
Re: Tactical Asset Allocation + HBPP an intriguing combo
Moving discussion over here from another thread, as it better fits here:
Of course, his favorite economic indicator, the unemployment rate, is going to be destroyed for quite awhile to come from this redonculous jobless data we have right now.
Yeah Novell is basically using the economic data as a crap filter to help reduce unnecessary whipsaws. He likes to pair the economic data with his systems that use slower trend signals, as the tradeoff to slower signals is that they can be prone to some pretty big whipsaws when the market does a quick rip down and back up. In SPY-COMP when all economic data is good, then you ignore any technical sell signals from your trend following system. This means that you hold through the shallow quick corrections (like many that we had from 2010-2018) instead of risking the potential of selling the bottom and buying the top. This would have prevented people from selling and getting whipsawed in a lot of the quick shallow corrections. It really only sells if there is evidence of a real potential recession in the economic data. He does use some forward looking market based data too, like yield curve inversion, so it is pretty robust. If only one of the economic indicators is flagging danger, then you listen to your trend signals. It's only when they are *all* green that you ignore them.Vil wrote: ↑Fri May 08, 2020 3:03 pmThanks for the link, got the overall idea, but the point about the economic indicators I do not really understand. Actually, I share the common(?) belief that markets are somewhat following their own way of interpreting things going on; as Dalio currently stated "there is a real economy and there is a financial economy, which are intertwined but different. The real economy and the financial economy each has its own supply and demand dynamics".
Of course, his favorite economic indicator, the unemployment rate, is going to be destroyed for quite awhile to come from this redonculous jobless data we have right now.
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