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  • Boosting Portfolio Returns With Tactical Asset Allocation To Best-Performing Sectors [View article]
    Your intuition is contradicted by the research performed by Mebane Faber over a long term period starting in 1970. I would recommend his paper on relative strength: http://bit.ly/s1EI16
    Nov 20 07:38 PM | Likes Like |Link to Comment
  • Boosting Portfolio Returns With Tactical Asset Allocation To Best-Performing Sectors [View article]
    Your suggestion is very sensible and would certainly further limit the volatility and drawdown of this simple strategy.

    I would add two remarks:
    1/ Even with low interest rate, and even with TLT below its 6-month moving average, the odds that the inverse correlation between stocks and long term bonds still hold in the future remains quite high in my view.

    2/ More broadly, the possibility that in the aftermath of the 2007/2008 crisis, the U.S. end up experiencing a Japanese-type behavior cannot be ruled out. In such case, we could be stuck for a long time with very low interest rate. As of Friday, the yield on 10-y Japanese bonds was 0.95%, i.e. more than half that of 10-y U.S. Treasuries (2.01%)
    Nov 20 02:02 PM | Likes Like |Link to Comment
  • Achieving Positive Returns in This Market [View article]

    Quick update: as of Thursday August 19th’ close, the conservative portfolio has returned + 4.8% with a 14.2% volatility. In the meantime, the SPY has lost a staggering 12.8% with a 50%+ volatility!
    Aug 19 09:55 PM | Likes Like |Link to Comment
  • Achieving Positive Returns in This Market [View article]
    Sounds sensible indeed to take some off at this level, while being ready to reenter ini few days/weeks later in the current trends continue
    Aug 5 03:40 PM | Likes Like |Link to Comment
  • Achieving Positive Returns in This Market [View article]
    Yes, and investing in the Top 1 of our universe has returned over 43% annually since 2003. But is it a portfolio strategy? Who would seriously put 100% of his hard won money in one single position at all times? You certainly would not, and your remark is therefore not relevant in the context what's disscussed in the article
    Aug 5 03:39 PM | 1 Like Like |Link to Comment
  • How to Achieve the True Diversification of Top Endowments [View article]
    "The Ivy Portfolio" is a great piece by Mebane Faber, which has done a lot of research whose spirit is close to what we are doing. In particular, he wrote papers on relative strength that are very valuable.

    What is exposed in the book and here are two different things though:
    - in the book, the author shows how to replicate the overall results of the endowments, not their strategy. He does so by selling positions when their monthly close is below a reference MA.
    - what we do here is show how our strategy can replicate the "hedge fund" exposure of the endowments, within the policy portfolio allocation. Our strategies are comprehensive enough to be used alone, but the article highlights another way to use them within more "classic" approaches to investing and allocating assets.
    Jun 23 05:37 PM | Likes Like |Link to Comment
  • Indonesia ETFs Soar Amidst Global Uncertainty [View article]
    Mr. Norton is again totally right. Thanks again for the article
    Jun 23 05:30 PM | Likes Like |Link to Comment
  • Indonesia ETFs Soar Amidst Global Uncertainty [View article]
    Our aggressive model portfolio indeed holds a position in IDX, as our relative strength ranked it first among emerging markets.
    Jun 20 08:29 PM | 1 Like Like |Link to Comment
  • How to Achieve the True Diversification of Top Endowments [View article]
    There is no SLV in these portfolios. But even if there were: I would invite you to read again the article: the point here is to compare the performance of a portfolio with and without synthetic hedge fund exposure. Whether you have 5%, or 0% or 30% of GLD or of any other ETF will not change the relative performance of the portfolio with HF exposure compared to the portfolio without such exposure.
    Jun 19 02:18 PM | Likes Like |Link to Comment
  • A Primer for Emerging Market Exposure With ETFs [View article]
    Very thoughtful questions indeed. Find below a few insights

    1) Some of our portfolios are constructed this way. You may have seen that our conservative portfolio, detailed in other articles, aways keeps 50% in bonds or cash. So only one half is invested in the top ETFs in this case.

    2) If one of the Top ETFs is a bond ETF, it automatically increases the share of fixed-income. Furthermore, we only invest in an ETF when it is above a reference moving average and has performed better than cash. Otherwise, we stay in cash.

    3) What you propose is indeed a possible alternative, which would have similar effects on reducing volatility and drawdowns. However, the risk-adjusted returns will be higher when hedging, because of the possibility to make money on "two-sides" of the trade. This will for example be the case when our top ETFs rise whil EEM is falling.

    4) You are totally right. Indeed we prefer to short the long ETF, for the reason we mention. But some other may be more comfortable only "buying". This is why we mention the inverse ETF as a way to do that.

    5) We believe it strikes a right balance between limiting trading fees and being flexible enough to adapt to market developments. Furthermore, it is consistent with the lengths we use to asses momentum and the trends we try to capture.
    Jun 12 01:14 PM | Likes Like |Link to Comment
  • Building a 'Permanent Portfolio' Using ETFs [View article]
    Thanks for the analysis. It is interesting to see that the current allocation of our conservative portfolio (updated every month) is quite close to your ETF equivalent of the Permanent portfolio. I guess it tells a lot about where we're headed...
    Jun 10 10:33 AM | Likes Like |Link to Comment
  • A Primer for Emerging Market Exposure With ETFs [View article]
    Good question. Indeed we have not, as fees and taxes can vary significantly between investors.
    This being said, the outperformance of the strategies below is so important compared to the buy and hold strategy that even after taxes, you're still way ahead (and you haven't experienced big drawdowns.
    My father used to say that "there are two categories of people: the ones worried about money and the ones worried about taxes. As along as you are in the latter, you're just fine"
    Jun 10 10:19 AM | Likes Like |Link to Comment
  • Why an Emerging Market Bubble May Be on the Horizon [View article]
    Very interesting article. Above all, it underscores how uncertain future developments are. This call for having a sound an flexible approach to investing in emerging markets. I believe long short strategies (buying the strongest country ETFs while shorting the index are particularly well suited at the current juncture. Good post
    Jun 9 09:53 PM | Likes Like |Link to Comment
  • The Mechanics of Our Conservative ETF Portfolio Strategy [View article]
    After the serious May 2006 correction, the model moved to 100% cash in June before gradually jumping back on the strongest ETFs
    Jun 8 09:49 AM | Likes Like |Link to Comment
  • The Mechanics of Our Conservative ETF Portfolio Strategy [View article]
    Relative strength can be powerful but should be implemented carefully.
    I would be interested in the volatility and drawdowns of such strategy, as well as the way you define your stocks universe (minimum volume? OTC stocks?).
    CAGR per se is a small part of the equation: buying and holding EEM (emerging market index) between 2003 and Dec-2010 returned the same CAGR (22.6%) with a 36% volatility and a -66.5% max drawdown!!
    All in all, I believe your strategy might be of interest for a small part of a much broader portfolio but can hardly be a comprehensive investment strategy
    Jun 7 09:19 PM | Likes Like |Link to Comment
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