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Lowell Herr  

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  • Momentum Model Recommends Investors Move To Cash [View article]
    Larry,

    "How many do you personally use and invest in, and how many of them also
    "predicted" the action Thursday and Friday as this one seemingly did?"

    I just checked to see when the Momentum Model (using the Kipling 8.0 spreadsheet) recommended going 100% to cash or SHY and it was back on 8/11/2015. If MTUM is not one of the ETFs used to populate the portfolio the 100% cash recommendation goes back even further.

    Lowell
    http://itawealth.com
    Aug 24, 2015. 03:21 PM | Likes Like |Link to Comment
  • Momentum Model Recommends Investors Move To Cash [View article]
    The second and third paragraphs of this link may be helpful.

    http://bit.ly/1KI6Cr6

    Caution: When you see back-tests that provide only one set of data, beware. The market does not work so neatly. Also, in many investment books the results are presented to the hundredth decimal place. Again, take that information with a grain of salt. Markets are not that precise.

    The above model is designed to give an investor an edge, without undue data mining. The real test comes by observing portfolio performance going forward.

    Lowell
    Aug 24, 2015. 02:25 PM | Likes Like |Link to Comment
  • Momentum Model Recommends Investors Move To Cash [View article]
    Z Sailor,

    I track and publish 14 portfolios on ITA Wealth Management. All are real portfolio. Three are passively managed so they are fully invested at all time. The remaining 11 are actively managed using a momentum style. The momentum spreadsheet (Kipling 8.0) recommended investors be in cash or SHY for several days. I would need to go back and check to see when the recommendation kicked into action.

    My Platinum membership link is currently broken so don't try to register. I should have it fixed by tomorrow.

    It will take more space to explain the Monte Carlo method, but basically it means one needs to run many variations to come up with meaningful results.

    Lowell
    Aug 24, 2015. 11:01 AM | Likes Like |Link to Comment
  • Momentum Model Recommends Investors Move To Cash [View article]
    tp2,

    I generally check both volatility settings to see if there is any difference. Generally the top ranked ETFs are not impacted. I think the back-testing favors a 13 or 14 calendar day setting for mean-variance. That is pushing the curve fitting or data mining process.

    Lowell
    Aug 23, 2015. 02:32 AM | Likes Like |Link to Comment
  • Momentum Model Recommends Investors Move To Cash [View article]
    tp2,

    The above portfolio is very similar to the Rutherford except for the addition of three ETFs. They are VOE, VBR, and BIV. I've added VOE and VBR to take advantage of any anomaly that might be attributed to value. BIV is added as an intermediate bond option as there are no bond ETFs in the Rutherford portfolio.

    These three additions are likely not needed as VOE and VBR are highly correlated with VTI and BIV is highly correlated with TLT and TIP.

    Lowell
    Aug 22, 2015. 08:26 PM | Likes Like |Link to Comment
  • Momentum Model Recommends Investors Move To Cash [View article]
    I too use commission free ETFs. There are one or two exceptions, but the vast majority are commission free.

    Lowell
    Aug 21, 2015. 07:08 PM | Likes Like |Link to Comment
  • Momentum Model Recommends Investors Move To Cash [View article]
    Based on the last few market days, the momentum model calling for a move into cash was timely. The next test is to watch for the ETFs that will emerge from this market decline by moving above SHY in the rankings.

    Lowell
    http://itawealth.com
    Aug 21, 2015. 04:49 PM | Likes Like |Link to Comment
  • Momentum Model Recommends Investors Move To Cash [View article]
    The third metric is a standard deviation over a specific number of calendar days. Generally 13 or 14 days work well. In the Kipling 8.0 spreadsheet users have the option to use a semi-variance metric. Then a 20% weight is assigned to that metric.

    Lowell
    http://itawealth.com
    Aug 20, 2015. 03:14 PM | Likes Like |Link to Comment
  • Momentum Model Recommends Investors Move To Cash [View article]
    DBC is the commodities ETF and as you can see from the above table, it ranks last among the list. It is too early to consider commodities, at least if one is using ETFs,

    Lowell
    http://itawealth.com
    Aug 19, 2015. 05:43 PM | Likes Like |Link to Comment
  • Momentum Model Recommends Investors Move To Cash [View article]
    Charles,

    Yes, if you are using a reversion-to-the-mean approach. Momentum models operate on the other side of that equation and momentum is the one where I have lots of back-testing data.

    Lowell
    Aug 19, 2015. 05:40 PM | Likes Like |Link to Comment
  • Momentum Model Recommends Investors Move To Cash [View article]
    "Lowell... can you give us some performance data for your strategy over the past 18 months or so? In particular the behavior over the past few months in this sideways market would be interesting to everyone."

    Bitfool,

    You make many good points and you will not pick any strong arguments to the contrary with me. I am tracking 14 portfolios and three are passive with almost no turnover other than to rebalance when necessary. I've held ETF for 15 years in one of these portfolios. Six portfolios are managed using a Momentum Model and the rest are managed using a Tranche Model. This is explained on my blog. Keep in mind that all the back-testing is not complete for the Tranche Model.

    What I am testing, as it relates to a momentum model, is to compare the Internal Rate of Return (IRR) of each portfolio vs. a customized benchmark for each portfolio. In addition, I compare results with the VTSMX index fund. Currently, no portfolio is beating the VTSMX index on a head to head comparison. Keep in mind that I have not been using momentum for much more than a year so what I am testing is how well the momentum managed portfolios are trending with respect to the benchmarks. Are the portfolios gaining or loosing ground with respect to the customized benchmark and the VTSMX benchmark.

    Last week, eleven (11) of the fourteen portfolios recorded either the same or showed a positive trend with respect to the VTSMX benchmark. Performance trend is a comparison to the performance six weeks ago.

    The test is whether or not positive trends continue or wane. My gut feeling is that a momentum model, as described above, will have a difficult time in a flat market. It should shine in a bear market and I am one that pays as much attention to risk (portfolio volatility and draw-downs) as I do to returns.

    I hope this answers, at least in part, your question.

    Lowell
    http://itawealth.com
    Aug 19, 2015. 12:08 PM | Likes Like |Link to Comment
  • Momentum Model Recommends Investors Move To Cash [View article]
    Dataman2,

    "How do your results compare to dual momentum results?"

    I don't have a good way to make comparisons with dual momentum as I don't follow DM, nor does my portfolio tracking spreadsheet permit me to pull out specific periods for Internal Rate of Return results. I do post results every Saturday on my blog.

    The spreadsheet I use for portfolio tracking contains a customized benchmark for each portfolio and that is the benchmark I try to exceed.

    Lowell
    Aug 19, 2015. 11:50 AM | Likes Like |Link to Comment
  • Momentum Model Recommends Investors Move To Cash [View article]
    wmj,

    The absolute acceleration percentage shows the normalized (growth per trading day) rate of growth for ROC1 vs. ROC2. If the value is greater than zero, it means the security is growing faster per day over the shorter time period vs. growth per day over the longer time period.

    Some back-testing was applied to buying ETFs with higher absolute acceleration percentages, but it provided little advantage over the basic momentum model.

    Lowell
    Aug 18, 2015. 06:16 PM | Likes Like |Link to Comment
  • Momentum Model Recommends Investors Move To Cash [View article]
    2sd,

    You picked up on an important point and I call it the "luck of the review date." Is the review date of significance over the long run? I use limit orders almost exclusively so a order may not be filled for a day or two. There are times when the market moves away from the limit order price and the order never is filled.

    Under investigation right now is something called the Tranche Model where we look at ETFs that not only are highly rated on the day of the review, but what if the review happened 2, 4, 6 days before or the same interval after the review date? Results are not in as to whether "tranching" a portfolio makes sense.

    Lowell
    http://itawealth.com
    Aug 18, 2015. 04:08 PM | Likes Like |Link to Comment
  • No Contest: In High Yield, Active Funds Beat ETFs [View article]
    I'm looking for tickers of an actively managed bond funds so I can run comparisons. One major problem is finding those active managers before I am aware they were going to turn out great returns.

    Lowell
    http://itawealth.com
    Aug 18, 2015. 03:48 PM | Likes Like |Link to Comment
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