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Cliff Smith
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I am currently a retired Aerospace Engineer. I am married with three children and seven grandchildren. I was born in San Francisco, CA in 1949 and moved to Newport News, VA in 1951 where I lived until I went to college. By God's grace, I received a B.S. degree from Virginia Tech (1972), a M.S.... More
  • Tactical ETF Updates For June 16, 2014 16 comments
    Jun 14, 2014 6:09 PM | about stocks: PBE, IYR, RWX, EMB, HYLD, CVY, HGI, HYMB, PCY

    Please realize you use these recommendations at your own risk. I am not a registered financial advisor. If for any unforeseen reason I do not post the recommendations for the next period, please sell the ETFs and go to cash.

    Shown below are the June 16, 2014 ETF updates for the tactical strategies I have discussed in my Seeking Alpha articles. June 16th is the day to make your trades on these strategies. The figures shown below are taken from ETFreplay calculations, and the entire 2014 selections and results are presented. I have been tracking most of these strategies in real time since the beginning of 2014.

    Here are the strategies that are presented below:

    Equity Strategies:

    SSSEquity4 Strategy

    AllAssetsExceptBonds Strategy

    Bond Strategies:

    Bond-Only Strategy

    Low Volatility Bond Strategy, LVB

    Rising Rates Bond Strategy, RRBS3

    Simple Bond Strategy on HYLD/SHY

    Combined Strategies:

    Schwab Commission-Free Strategy -60% Equity/40% Bonds

    Unified Tactical Strategy, UTS - 60% Equity/40% Bonds

    Unified Bond Strategy, UBS - 100% Bonds

    I have added the tracking of UTS and UBS since some people have requested them. Some people have also requested that I switch the AllAssetsExceptBonds Strategy back to two ETF selections each period instead of three. So I have made that change in the AllAssetsExceptBonds Strategy.

    SSSEquity4 Strategy

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    AllAssetsExceptBonds Strategy

    I have decided to reduce the number of selections to two instead of three. I'm still using the reduced ETF universe (10 ETFs) and not the original ETF universe (14 ETFs). Most investors seem to want only two ETFs each period with this strategy. I'm sorry to keep tweaking this strategy.

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    Bond-Only Strategy

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    Low Volatility Bond Strategy, LVB

    This is the modified LVB with HYMB added to universe (no other changes).

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    RisingRatesBondStrategy, RRBS3

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    Simple Bond Strategy on HYLD/SHY

    Trade on Day of 3 Day & 25 Day Moving Average Ratio Crossover

    Please note: If you are interested in this strategy, I can send you an alert the day it occurs. Please send me a Seeking Alpha message asking to be included on the HYLD/SHY alert list. Please include your email address (no one can see it but me).

    Buy: Jan. 2, 2014 Sell: Open Trade

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    Schwab Commission-Free Strategy

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    Unified Tactical Strategy

    This strategy combines SSSEquity4 (30%), AllAssetsExceptBonds (30%), and LVB (40%).

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    United Bond Strategy

    This strategy combines Bond-Only Strategy (25%), LVB Strategy (25%), and RisingRatesBondStrategy, RRBS3 (50%).

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    These strategies have been backtested over a limited timeframe and shown to produce good growth with minimum risk, but future results may be dependent on factors not considered. Use these recommendations at your own risk.

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Comments (16)
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  • dbernatm
    , contributor
    Comments (5) | Send Message
     
    Dear Cliff

     

    Thanks very much for the information, I am currently following your United Bond Strategy.
    I have a question about HYLD ETF. I see that is ETF one of the strong points is that they pay a very high monthly dividend.

     

    So if we check the PF every 15 days and we go in and out of this ETF, maybe we are no able to get the dividend.

     

    What do you think about this?
    16 Jun 2014, 01:44 AM Reply Like
  • Cliff Smith
    , contributor
    Comments (586) | Send Message
     
    Author’s reply » I'm sorry, but I'm not exactly sure what you are asking. The strategies, including the HYLD/SHY strategy, track total return and not just the price of the ETF. So you don't have to worry about whether or not you get or do not get the dividend because the strategy is based on total return, i.e. the actual value of the ETF at any point in time. That means there is no drop in value of the ETF on the ex-div date, as indeed there isn't.

     

    I hope that answers your question.

     

    Thanks,
    Cliff
    16 Jun 2014, 06:28 AM Reply Like
  • dbernatm
    , contributor
    Comments (5) | Send Message
     
    Dear Cliff

     

    Thanks very much for your answer. Let me clarify if I understood it well.

     

    HYLD pays dividend monthly, but the price of the ETF is not affected by the payment of the dividend. Why? Isn't it a cash payment to shareholders?

     

    Sorry, I am quite new on this, I am little lost, thanks very much for your patience

     

    David
    17 Jun 2014, 12:34 AM Reply Like
  • Cliff Smith
    , contributor
    Comments (586) | Send Message
     
    Author’s reply » Hi David,

     

    The price of HYLD is affected by the dividend, but the total return is not. When a dividend is given out, the price drops by that amount, but the total return stays constant. The price drops by the amount of the dividend, but you still have the dividend (it just hasn't been added to your account). Even if you sell HYLD after the ex-div date, you still have the dividend. It will be credited to your account at a later date.

     

    That's why the strategy tracks total return of HYLD and not price of HYLD.

     

    Hope that helps,
    Cliff
    17 Jun 2014, 08:36 AM Reply Like
  • ronako
    , contributor
    Comments (9) | Send Message
     
    For the allassetsexceptsbonds strategy, I'm calculating the top 2 as RWX and EFA. Am I missing something as to why IYR was chosen?
    16 Jun 2014, 06:51 PM Reply Like
  • Cliff Smith
    , contributor
    Comments (586) | Send Message
     
    Author’s reply » My calculation (using ETFreplay) says RWO and RWX if I use the old 14 ETF universe (not RWX and EFA). If I use the newer 10 ETF universe, ETFreplay says IYR and RWX.

     

    I don't know why your calculation says RWX and EFA.

     

    Cliff
    16 Jun 2014, 07:32 PM Reply Like
  • ronako
    , contributor
    Comments (9) | Send Message
     
    When using the 10 ETF universe:

     

    4 month return
    EFA 4%
    IYR 6.01%

     

    4 month volatility
    EFA 6.5%
    IYR 9.1%

     

    With the 65%/35% weighting, EFA would actually ahead. So if I rank the the top 3, it would be RWX, EFA, EEM. IYR is actually number 4.

     

    I don't think that my calculations are incorrect as my results have matched yours the last couple months.
    17 Jun 2014, 01:16 AM Reply Like
  • Cliff Smith
    , contributor
    Comments (586) | Send Message
     
    Author’s reply » Here is the screening at the end of June 13th:

     

    4-mon. return 4-mon. volatility Rank

     

    RWX 8.7% 9.3% 1
    IYR 8.0% 8.8% 2
    EEM 11.4% 14.1% 3
    MDY 5.7% 11.5% 4
    EFA 5.6% 10.5% 5
    CSD 5.5% 14.7% 6
    IJR 4.8% 15.2% 7
    PJP 5.3% 18.6% 8
    GLD -1.2% 12.6% 9
    FPX 2.7% 15.6% 10

     

    It seems your numbers for 4-month return and volatility are different than ETFreplay. So there must be a difference in the way you and ETFreplay calculate them. For 4-month growth in mid-month, I think ETFreplay takes the difference between the end-of-the-month number three months ago and the current (mid-month) number. So it is not really four months growth; rather it is 3.5 month growth.

     

    At the end of the month, the 4-month growth number is actually four months.

     

    I think that is the way ETFreplay does it.

     

    Cliff
    17 Jun 2014, 08:26 AM Reply Like
  • ronako
    , contributor
    Comments (9) | Send Message
     
    For volatility, I went to http://bit.ly/MOQA0f and put a range of 4 months. Maybe I'm using that tool incorrectly to get the volatility because I'm not sure what that dropdown just above the graph is for.
    17 Jun 2014, 12:49 PM Reply Like
  • sraphael
    , contributor
    Comments (132) | Send Message
     
    CLiff: Love your work. Added to all the literature on TAA over the last five to ten years. Especially that related to Goldman Sachs which has been thoroughly covered by Seeking Alpha. I'm concerned, however, that by publishing your findings for all to EASILY see, your program will lose its edge. When too many people start using it, the outcomes will "become the market" and the edge will be lost. From a behavioral standpoint the reason that a trading program with an edge will continue to be relevant is only if you make people work at it and stick to it. The vast majority of people will not. Therefore, the edge will continue.

     

    Don't publish the results. Just tell us the specific details as to how to do it. The few of us who understand the true value of these trading platforms will continue to benefit and your theories will remain relevant.
    26 Jun 2014, 08:26 AM Reply Like
  • Cliff Smith
    , contributor
    Comments (586) | Send Message
     
    Author’s reply » There is certainly a scalability issue if too many people use my recommendations. But I think there are relatively few people who are using the strategies, except for the simple HYLD/SHY strategy. I am concerned how the HYLD/SHY strategy will play out when I give a "sell" alert.

     

    But I'm doing this just to help some people with their retirement savings. If the strategies start influencing the market, then I will have to back down and maybe stop giving out the recommendations. But I think we are a long way from that happening (except maybe the HYLD/SHY strategy).

     

    Thanks for your comments,
    Cliff
    26 Jun 2014, 10:10 AM Reply Like
  • sraphael
    , contributor
    Comments (132) | Send Message
     
    Thanks, Cliff. I continue to believe it will be when, not if. However, I respect your values and need to adhere to them.

     

    The only request I would make would be for you to give a concise summary, at some point, as to procedure and content, for the portfolios you continue to work with. The information is there but it is scattered amongst the various articles and correspondence. This would really be helpful.

     

    Again, greatly respect your efforts and obvious ability. I appreciate your altruism.
    26 Jun 2014, 10:34 AM Reply Like
  • mirko78
    , contributor
    Comments (13) | Send Message
     
    an question, in SSSEquity4 Strategy when do you use shy ?

     

    thank you
    22 Jul 2014, 02:38 AM Reply Like
  • Cliff Smith
    , contributor
    Comments (586) | Send Message
     
    Author’s reply » When the top-ranked ETF for a given period is below its 4-month moving average.

     

    Thanks,
    Cliff
    22 Jul 2014, 06:28 AM Reply Like
  • mirko78
    , contributor
    Comments (13) | Send Message
     
    but you don t use IEF as filter ?
    22 Jul 2014, 06:36 AM Reply Like
  • Cliff Smith
    , contributor
    Comments (586) | Send Message
     
    Author’s reply » Better results are obtained when you use IEF as the cash filter rather than SHY. But when I combine multiple sub-strategies (like UTS), there is only one cash filter in ETFreplay so I typically use SHY. In reality, SSSEquity4 can use SHY or IEF for a cash filter, or you can use the Bond-Only Strategy as a cash filter if you desire.

     

    Thanks,
    Cliff
    22 Jul 2014, 10:02 AM Reply Like
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