Seeking Alpha

Cliff Smith

 
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  • Benefits Of Short Selling Inverse Leveraged ETFs
    Yesterday, 9:28 AM SDS, SPXL, SPXS 39 Comments

    Summary

    • Comparisons are made between holding long positions of leveraged ETFs and shorting inverse leveraged ETFs of the same family.
    • The following cases are presented: 1) long SSO and short SDS versus SPY, 2) long SPXL and short SPXS versus SPY, and 3) long TMF and short TMV versus TLT.
    • Shorting an inverse leveraged ETF with periodic rebalancing significantly increases growth in bull markets compared to buying and holding a leveraged ETF or an unleveraged version of the ETF.
    • When combined with simple tactical methods such as moving averages or momentum, drawdown can be significantly reduced in short inverse leveraged ETFs, while maintaining high growth.
  • Simple Tactical Methods Incorporated Into An Equity-Treasury Hedge Strategy
    Mon, Aug. 18 SDS, SHY, SPY 40 Comments

    Summary

    • This article is a sequel to a previous SA article on simple equity-treasury hedge strategies that rely on the negative correlation between treasuries and equities in general.
    • In this article, simple tactical modifications have been made to the original strategy to protect it against bear treasury and bear equity markets when they occur at the same time.
    • The bond part of the strategy (TMF) and the equity part of the strategy (SPY or SSO) switch to cash (SHY) in bear markets.
    • For the TMF/SPY strategy, the optimum split is 25%/75%. Backtesting to 2009 shows a CAGR of 18.0% and a maximum drawdown of 8.4%.
    • For the TMF/SSO strategy, the optimum split is 35%/65%. Backtesting shows a CAGR of 26.7% and a maximum drawdown of 12.7%.
  • Quarterly Tactical Strategy Backtested To 2003: CAGR Over 28% And Consistent Positive Returns
    Fri, Aug. 15 SPY, TLT, VB 41 Comments

    Summary

    • A quarterly Tactical Asset Allocation Strategy has been developed for a basket of eight mutual funds plus a cash mutual fund.
    • Backtested results (2003-present) are: CAGR=28.7%, maximum drawdown=19.1%, positive returns every year, and beat the S&P 500 every year except 2013 (25.6% vs. 32.3%).
    • The same strategy is tested with ETF replacements, all having very high correlation with their corresponding mutual fund.
    • Backtested results (2010-present) with the ETFs accurately duplicate the results with the mutual funds, giving confidence in the ETF representation of the strategy.
  • Simple Hedging Strategies Employing A Short TMV Position
    Wed, Aug. 13 SDS, SH, SPXL 29 Comments

    Summary

    • Simple buy-and-hold hedge strategies (with rebalancing) are discussed that employ a short position of TMV.
    • The four strategies consist of a short position in TMV combined with 1) a long SPY, 2) a short SH, 3) a short SDS, and 4) a short SPXS.
    • The strategies are backtested to April, 2009, and show CAGRs of 21.1%, 22.7%, 39.7%, and 54.5% respectively.
    • Maximum drawdowns are 9.0%, 8.7%, 14.4%, and 20.1% respectively.
    • Arguments are presented that show that large drawdowns seen in the bear markets of 2002-03 and 2008 can be avoided with these hedge strategies.
  • Conventional Hedging May Not Work In A Rising Rate Environment
    Wed, Aug. 6 SHY, SPY, TBF 24 Comments

    Summary

    • A new hedging strategy has been developed that should work in both decreasing and increasing rate environments.
    • The new strategy employs a tactical methodology that chooses the best treasury ETF in any given semi-monthly period.
    • ETFreplay results are shown for three cases backtested from 2010-present: 1) SPY alone, 2) SPY with conventional hedging, and 3) SPY with the new hedging strategy.
    • The results show that in 2013, a year marked with rising rates and poor treasury performance, the new strategy shows significant improvement over conventional hedging.
  • 2 Tactical Municipal Bond Strategies For Non-Qualified Retirement Portfolios
    Sun, Jul. 6 AGG, BABS, BIL 39 Comments

    Summary

    • This article presents two tactical strategies employing tax-free (income), municipal bond ETFs, and is best suited for non-qualified (taxable) retirement accounts.
    • The first strategy selects (semi-monthly) the top-ranked ETF based on relative growth and volatility.
    • Limited backtesting (2009-2014) shows this strategy could produce 13% annual growth (no taxes on income) with a maximum drawdown of only 5.5%.
    • A second tactical strategy is presented that uses the tax-free municipal bond ETF HYMB.
    • This strategy uses short duration moving averages, and has the potential of giving annual returns of 13% with a maximum drawdown of only 2.0%.
  • Tactical Unified Bond Strategy With High Sharpe Ratio
    Wed, May. 7 AGG, BIL, BKLN 14 Comments

    Summary

    • A tactical Unified Bond Strategy (UBS) has been developed that has the potential of providing good annual growth (>14%) with a maximum drawdown of 4%.
    • The UBS is composed of three different bond sub-strategies previously published that employ different tactical parameters and ETF universes.
    • The sub-strategies utilize different asset classes of bond ETFs in order to produce good performance in varying market conditions including rising interest rates.
    • The UBS (with proxies) has a backtested annual growth of 16.6% and a Sharpe Ratio of 2.4 from 2008-present.
    • The UBS (using actual ETFs) has a backtested annual growth of 14.4% and a Sharpe Ratio of 3.4 from 2012-present.
  • Tactical Strategy Recommendations For March 17, 2014
    Sun, Mar. 16 BWX, CSD, CVY 17 Comments

    Summary

    • In this article, I am posting the March 17th ETF recommendations for 12 tactical strategies I have developed and presented in Seeking Alpha articles.
    • These strategies are based on relative growth, relative volatility, and moving average tactical methods, and have been backtested using ETFreplay software.
    • I have been tracking these strategies since January 2014, and the results for 2014 including total return and volatility are presented for each strategy.
  • Improvements To Tactical Bond Strategy For Rising U.S. Interest Rates
    Tue, Mar. 11 HYLD, HYS, IEF 13 Comments

    Summary

    • This article presents an improved tactical bond strategy based on a previously-developed strategy.
    • This new strategy should be profitable for retirement portfolios in a rising U.S. interest rate environment.
    • The strategy features low volatility, annual growth of 15-17% based on backtested results, and built-in risk mitigation methods.
  • Tactical Bond Strategy For Rising Treasury Rates
    Thu, Mar. 6 AGG, HYLD, HYS 27 Comments

    Summary

    • This article presents a tactical bond strategy that is appropriate for conservative retirement portfolios.
    • The strategy features low volatility, annual growth of about 12% and built-in risk mitigation methods.
    • I will also discuss ETFs suited for the current rising rate market environment.
  • Unified Tactical Strategy: Annual Growth>20%; Drawdown<9%; Sharpe=1.85
    Thu, Feb. 27 BKLN, CSD, FPX 30 Comments
  • Conservative Bond Strategy Returning 12% Annually And 3.5% Maximum Drawdown
    Wed, Feb. 5 BKLN, BSJG, HYS 110 Comments
  • Tactical Strategy Using Fast-Growing Equity ETFs
    Mon, Feb. 3 CSD, GURU, BLV 5 Comments
  • Going More Defensive: ETF Recommendations For February 3, 2014
    Sat, Feb. 1 BKLN, BLV, CSD 7 Comments
  • Tactical Asset Allocation Strategy Using Schwab-Free ETFs
    Wed, Jan. 29 CVY, FEU, FRN 6 Comments
  • Super Simple Savings Strategy For Retirement Portfolios
    Tue, Jan. 14 AGG, BKLN, CSD 28 Comments
  • Unique Application Of Moving Day Average To High Yield Bond ETFs
    Fri, Jan. 10 HYG, JNK, HYS 31 Comments
  • Tactical Asset Allocation Strategy For Conservative Investors
    Thu, Jan. 9 BLV, BWX, EMB 29 Comments
  • Tactical Asset Allocation Strategy For More Aggressive Investors
    Mon, Jan. 6 TLT, CSD, SHY 46 Comments
  • New Tactical Asset Allocation Strategy To Grow Retirement Savings At Reduced Risk
    Mon, Jan. 6 73 Comments