Scott's Investments

Backtesting a Sector ETF Momentum Strategy

Hi, Thanks - none include tax considerations and most do not include any trade commission assumptions unless otherwise noted. However, this particular test was done by CXOAG and included the following:

"Trading friction is 0.25% of the balance whenever we switch ETFs."

Zen Lessons in Investing

I should have clarified in the article that he is not a Zen Buddhist. I am not Buddhist but do have an undergraduate in Religion so I should have caught that. The title was pulled from Hussman's article, more or less a review of his article with some inputs from myself.

An Interesting Alternative to Gold

Hi Everyone - SA monitors my blog/website and chooses which articles to publish on a daily basis. I do not submit articles to them directly, they have discretion over which articles to publish. I agree with the comments, this one should not have been published by them!

Smarter Way to Pick High Yield Stocks?

Stay tuned for part 2 in the next couple of days, which will address payout ratio...

Smarter Way to Pick High Yield Stocks?

To the first 2 comments: 1) An analysis of yielding stocks from 1990-2006 was done by Credit Suisse papers.ssrn.com/sol3/p... which finds similar results that the highest yielding stocks are not the top performers, however, 2) a momentum affect exists among stocks and has been well-documented. I would suggest starting here for some research on the topic: www.cxoadvisory.com

GlobalTreker- 'data-crunching too marred by Schwab's non-rigorous methods.' Please elaborate - do you know something about this particular study we're not aware of? Have you read it? There are quite a few assumptions in the comment that I suspect is not based on actually reading the study.

What Lies Ahead for the S&P 500?

A moving average is nothing more then an indicator - a 50 day can be used to indicate the intermediate trend (so could a 60 day, 49 day, etc.). A break below it can simply be used as a general 'indication' of where the market is trading. It does not guarantee price projections and there is no 'magic' MA number. I think the more relevant indicator in the article is the top of the Lehman gap, and the fib retracement which more or less aligned and proved to be a resistance point. Identifying support and resistance levels can help in making entries and exits, setting stops, etc. However, the only 'magic' number is price, because price pays.

One Basic Portfolio, 5 ETFs

I would tend to agree that hedge fund returns are shrouded in ambiguity, but I think you need to look at Alphaclone's historical returns - they are calculating returns based on actual stock holding performance (not hedge fund performance). The stocks are determined by representation in various hedge funds.

One Basic Portfolio, 5 ETFs

Kinabalu - I think you may be confusing holding individual stocks vs. tracking some type of hedge fund index. Alphaclone uses the reported stock holdings of hedge funds to compose stock portfolios. Thus, you are not tracking an index but holding actual stocks using quarterly filings of various hedge funds. There are limitations with this system but the historical performances w/ lower volatility speak for themselves. Of course, with anything, past performance won't guarantee future success. I would, however, suggest checking out their site if you are interested in understanding the product and strategy more thoroughly.

One Basic Portfolio, 5 ETFs

Geoffrey - Those are valid points. This type of portfolio is geared towards smaller account which may not either have access to certain types of products only available to institutions or which do not have the capital to justify holding more positions. A couple of points:

1 - During a crisis, all correlations gravitate towards 1, which is what we have seen over the past year +; however, employing a moving average system *may* allow an investor to avoid significant drawdowns.

2 - A momentum based system, as explained, will offer different returns then just buying and holding all 5.

3 - I'll try to put together a portfolio of 5 liquid ETFs or mutual funds that offer lower correlation then the 5 mentioned (again, we're picking 5 here to keep it realistic for smaller retail accounts). Sounds like a fun challenge!

One Basic Portfolio, 5 ETFs

Hi - If you combine the allocations with a moving average system (Faber used the 10 month), the portfolio has not had a losing year since 1974, which includes 2008. Thus, the subtitle of the book may be a little misleading since you're not exactly investing like the endowments, but are taking some allocation ideas from them. I would suggest checking out the book if you have not done so to gain a deeper perspective. Thanks for the comment -

International Bond ETFs' Correlation to Equities

Hi, Good suggestion, I published an article similiar to the one you suggested: "Dollar Correlation to Global Bonds"

Backtesting a Moving Average System on SPY

Good suggestions Baboon - additional tests are coming on my blog. I would suggest reading Faber's book for more comprehensive results over a longer time period. In addition, SPY has been in a secular bear market since 2000, so there is some variety within the security's performance.

Backtesting a Moving Average System on SPY

I attempted to add the following for clarification but the article had already been published: "When SPY closes a month below the 10 month SMA, the long position is exited on the next months opening price."

Fundadvice Model ETF Portfolio: September Update

I would suggest looking at Fundadvice.com's website, they have the returns listed in an article.

A Basic ETF Portfolio for September

If the market sees that as a potential, it will be reflected in the price action and a sell would be triggered at the 200 day MA.