Gold Ready to Move

Peter Brandt had another nice gold and silver update today. I tend to agree with his analysis, that we are at a critical technical juncture with gold.  The weekly chart for GLD (SPDR Gold Trust ETF) looks almost identical to last week’s chart; in other words, nothing much has changed:

A potential head and shoulders pattern is setting up, which could mean we challenge the highs from 2011. However, we could just as easily see a big move to $135 – $140 if the $156-$157 level does not hold.

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Disclaimer: Stock Loon LLC, Scott's Investments and its author is not a financial adviser. Stock Loon LLC, Scott's Investments and its author does not offer recommendations or personal investment advice to any specific person for any particular purpose. Please consult your own investment adviser and do your own due diligence before making any investment decisions. Please read the full disclaimer at the bottom of www.scottsinvestments.com

ETF Replay Portfolio for March

This month’s ETFReplay.com Relative Strength ETF Portfolio has been updated at Scott’s Investments and includes turnover in two positions.

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I previously detailed here and here how an investor can use ETFReplay.com to screen for best performing ETFs based on momentum and volatility.  I originally created a portfolio of 22 ETFs and then expanded it to 25 ETFs which I believe represent a diverse basket of ETFs.  Readers often get confused by this point – I select only the top ETFs out of this static basket of 25 ETFs.

The buy/sell strategy for the portfolio is simple: purchase the top  ETFs based on a combination of their 6 month returns, 3 month returns, and 3 month volatility (lower volatility receives a higher ranking) and the average of  the 3 month return, 20 day return, and 20 day volatility.  I refer to these two different sets as “6/3/3″ and “3/20/20″.  The top 2 ETFs in the 6/3/3 ranking and top 2 in the 3/20/20 ranking are purchased each month.  When there are duplicates in the top 2, I look to the third ranked ETF in the 3/20/20 and, if necessary, the third ranked ETF in the 6/3/3.  The strategy always holds 4 ETFs.

I track this strategy as a public portfolio on Scott’s Investments.  As of the close February 29th the hypothetical portfolio was up 11.09% since inception on January 1st 2011. Returns include dividends but exclude commissions and taxes and all trades are hypothetical so real results will differ.  For some backtests on these strategies please see a post from mid-September.

For February 29th the strategy sold its positions in IEF (iShares Barclays 7-10 Yr Treasury) and TIP (iShares Barclays TIPS). The proceeds were used to purchase SPY (S&P 500 SPDR) and SCZ (iShares MSCI EAFE Small Cap Index). The portfolio also continues to hold PFF (iShares S&P US Preferred Stock Index ) and VBR (Vanguard MSCI U.S. Small Cap Value).

Minor fluctuations in rankings may not always justify selling positions each month. For example, if one ETF drops from the second highest rated to the third or fourth highest rated, it may not warrant selling the position. An investor could only sell a position when it drops out of the top 4 or 5 at the end of the month. This type of modification could be used when someone is looking to limit turnover; however, I think it is important to have whatever rule you prefer to use in place prior to making the investment decision in order to avoid discretionary or emotional decision making.

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In January I made some changes in the online portfolio tracking.  There will be less transaction history posted due to the limitations of Google Docs, the clutter created with too many details on the spreadsheets, and the amount of time required to manually track dividends and performance. Instead, I will be using a third-party software platform for performance calculations and post the results monthly.  Below is a performance graph of the portfolio (green) versus SPY (SPDR S&P 500 ETF) in purple from the portfolio’s inception until February 29th, 2012:

Below are the full rankings of both the 6/3/3 and 3/20/20 strategies, in order from top to bottom ranked, Interestingly, Gold (GLD) is the bottom ranked ETF in both categories:

 


6mo/3mo/3mo
Symbols Name
SPY SPDR S&P 500 Index
VBR Vanguard MSCI U.S. SmallCap Value
HYG iShares iBoxx High-Yield Corp Bond (4-5yr)
LQD iShares iBoxx Invest Grade Bond (7-8yr)
VNQ Vanguard MSCI U.S. REIT
PFF iShares S&P US Preferred Stock Index
XLE U.S. Energy Sector SPDR
EEM iShares MSCI Emerging Markets
DBV PowerSh DB G10 Currency Harvest
TIP iShares Barclays TIPS (4-8yr)
SCZ iShares MSCI EAFE Small Cap Index
PCY PowerShares Emerging Mkts Bond (7-9yr)
TLT iShares Barclays Long-Term Trsry (15-17yr)
XLU U.S. Utilities Sector SPDR
EFA iShares MSCI EAFE Index
SHY Barclays Low Duration Treasury (2-yr)
IEF iShares Barclays 7-10 Yr Treasury (7-8yr)
WIP SPDR Int’l Govt Infl-Protect Bond (9-10yr)
RWX SPDR DJ International Real Estate
BWX SPDR Barcap Global Ex-U.S. Bond (6-7yr)
DBC PowerShares DB Commodity Index
DBA PowerShares DB Agricultural Commodities
DBB PowerShares DB Base Metals
LSC Elements S&P C.T.I.
GLD SPDR Gold Shares



3mo/20day/20day
Symbols Name
SCZ iShares MSCI EAFE Small Cap Index
PFF iShares S&P US Preferred Stock Index
SPY SPDR S&P 500 Index
XLE U.S. Energy Sector SPDR
EEM iShares MSCI Emerging Markets
HYG iShares iBoxx High-Yield Corp Bond (4-5yr)
DBV PowerSh DB G10 Currency Harvest
RWX SPDR DJ International Real Estate
PCY PowerShares Emerging Mkts Bond (7-9yr)
DBC PowerShares DB Commodity Index
EFA iShares MSCI EAFE Index
VBR Vanguard MSCI U.S. SmallCap Value
LQD iShares iBoxx Invest Grade Bond (7-8yr)
WIP SPDR Int’l Govt Infl-Protect Bond (9-10yr)
VNQ Vanguard MSCI U.S. REIT
BWX SPDR Barcap Global Ex-U.S. Bond (6-7yr)
SHY Barclays Low Duration Treasury (2-yr)
XLU U.S. Utilities Sector SPDR
DBB PowerShares DB Base Metals
DBA PowerShares DB Agricultural Commodities
TIP iShares Barclays TIPS (4-8yr)
IEF iShares Barclays 7-10 Yr Treasury (7-8yr)
LSC Elements S&P C.T.I.
TLT iShares Barclays Long-Term Trsry (15-17yr)
GLD SPDR Gold Shares
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Disclaimer: Stock Loon LLC, Scott's Investments and its author is not a financial adviser. Stock Loon LLC, Scott's Investments and its author does not offer recommendations or personal investment advice to any specific person for any particular purpose. Please consult your own investment adviser and do your own due diligence before making any investment decisions. Please read the full disclaimer at the bottom of www.scottsinvestments.com

Investment Articles

Below are some investment related articles I am reading this week. The primary reason I originally started this site was to organize bookmarks and interesting articles related to investing and economics.  I try to keep this tradition alive every week by sharing articles I am reading. Here is today’s list:

Understanding the Basic Language of Option Trading – JW Jones

 What Has Worked in Investing (pdf) – Tweedy, Browne Company

Media Headlines Will Lead You to Ruin – Lance Roberts

Ben Graham’s Curse on Gold (pdf) – John Mauldin

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U.S. long bonds: Buyer Beware! Prieur du Plessis

 Macro Tides: In the Garden of Europe – The Big Picture

There has never been a better time to be an individual investors – Abnormal Returns

What’s Greek for ‘No End in Sight’? Satyajit Das

S&P 500 Cheapest to Bonds on Zero Fed Rates – Bloomberg

 Unusual Drawdown Risk – John Hussman

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Disclaimer: Stock Loon LLC, Scott's Investments and its author is not a financial adviser. Stock Loon LLC, Scott's Investments and its author does not offer recommendations or personal investment advice to any specific person for any particular purpose. Please consult your own investment adviser and do your own due diligence before making any investment decisions. Please read the full disclaimer at the bottom of www.scottsinvestments.com

New Features Added to Ivy Portfolios

I have added a new feature to the Ivy Portfolio spreadsheet provided on the top and right hand side of Scott’s Investments.  The percentage each ETF within the Ivy 10 and Ivy 5 Portfolio is above or below the current 10 month simple moving average is now provided.

Below is a screenshot:

I have also decided to add additional price signals based on unadjusted dividend/split data from Yahoo.  The difference is that the 10 month simple moving average for the data below is calculated using unadjusted historical price data.  Thus, you may see different signals from time to time and small differences in percentages above/below a moving average depending on whether an ETF has paid a dividend in the past 10 months.

I often get questions from people who are looking at a moving average on a charting system which does not exactly align with the signals listed on this site. In most cases the charting system is basing moving averages on unadjusted data.  Therefore, I have decided  to add these unadjusted signals in order to help users see any potential differences in signals based on the nature of the historical price data.

The data is provided on an as-is basis. It is up to users to determine how to use it and to always do your own research. However, regardless of whether you invest in your own “Ivy Portfolio” it is important to remain consistent in your approach.

Below is a screenshot:

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Disclaimer: Stock Loon LLC, Scott's Investments and its author is not a financial adviser. Stock Loon LLC, Scott's Investments and its author does not offer recommendations or personal investment advice to any specific person for any particular purpose. Please consult your own investment adviser and do your own due diligence before making any investment decisions. Please read the full disclaimer at the bottom of www.scottsinvestments.com

The Short and Long-term Picture for Gold

Periodically on Scott’s Investments I analyze the technical picture for Gold and its corresponding ETF, GLD (SPDR Gold Shares ETF). Before I get to the technical picture, let’s look briefly at money supply and Gold’s long-term fundamentals.

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Gold can act as a hedge against quantitative easing  and currency debasement because it is viewed as an alternative to fiat currencies.  Looking at the chart below, courtesy of Chris Vermeulen via the St Louis Fed, we see the long-term expansion of M2 money supply is in a long-term uptrend:

A decline in a velocity of M2 money stock as shown below tells us in simple terms that the M2 money supply is not turning over as quickly as it was at its peak in the mid 90s:

Vermeulen argues regarding gold and silver (SLV) “the intermediate to longer term it is unlikely that we have seen the highs of this bull market for either metal. As long as central banks around the world continue to print money and expand their balance sheets gold and silver will remain in a long-term bull market.”

I would tend to agree with the intermediate to long-term picture. Nothing goes up forever and it is important to remain flexible and open-minded as conditions change and new evidence presents itself. However I do not think the bull market in gold has run its course, especially with the Federal Reserve stating it will keep rates at low levels for the foreseeable future.

In the short-term we can use technical analysis to guide us. Gold and GLD struggled mightily in December  but rebounded in January.  With the strong sell-off in December Gold’s long-term uptrend looked to be in trouble, however the January rebound, albeit on lighter volume, staved off a complete breakdown.  This trend has continued in February, with GLD up 12.52% year-to-date.

I continue to monitor the upward channel in GLD that began in 2008. Of note is the brief breakout of the channel in 2011, which resulted in a strong sell-off the subsequent month, bringing GLD back within the channel. In December 2011 there was a serious threat of a breakout below the channel, but GLD regained its footing in January and has gravitated closer to the top of the channel this month:

Since 2009 the 10 month simple moving average (in blue) has closely aligned itself with the bottom of the channel.  GLD currently resides above the 10 month moving average, although the break below the 10 month SMA in December was the first significant break below the average since 2008.

In the short-term today’s move in GLD was noteworthy and we could be near a short-term breakout depending on Wednesday’s action. February’s high is $171.23 and GLD is touching the trendline (yellow line) that includes February’s high. We actually closed just above this line today (Tuesday), so tomorrow we could be set for a higher move this week if resistance at $171.23 is broken. The next price target would be the resistance level (red line) around $175. Price support (green) in the daily chart is in the $166.50 – $166.60 range:

No current position in GLD

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Disclaimer: Stock Loon LLC, Scott's Investments and its author is not a financial adviser. Stock Loon LLC, Scott's Investments and its author does not offer recommendations or personal investment advice to any specific person for any particular purpose. Please consult your own investment adviser and do your own due diligence before making any investment decisions. Please read the full disclaimer at the bottom of www.scottsinvestments.com

Testing the Harry Browne Permanent Portfolio with Emerging Markets

In response to my Harry Browne Permanent ETF Portfolio article from last week, David Jackson of Seeking Alpha wondered if the portfolio had been tested with Emerging Markets ETFs as opposed to US equities. His theory is the Emerging Markets have added beta over US stocks and may perform better in the future due to higher expected GDP growth.

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I created a second Harry Browne Permanent ETF Portfolio in ETF Replay and then used their platform to test the results.  The portfolio consists of a 25% equal allocation to EEM (MSCI Emerging Markets Index Fund), TLT (iShares Barclays 20+ Year Treasury), SHY (iShares Barclays 1-3 Year Treasury Bond Fund), and GLD (SPDR Gold Trust).   This allocation is identical to the portfolio in my “original” Harry Browne portfolio with one exception: EEM has been substituted for SPY (SPDR S&P 500 ETF).

If an investor bought the Emerging Markets Permanent Portfolio on January 3rd, 2005 and held until February 17th, 2012, the total return was 128.4% (12.3% CAGR) and 12.7% volatility (all returns discussed exclude commissions, taxes, and slippage). The original Harry Browne Portfolio (SPY/SHY/TLT/GLD) would have returned 105.6% (10.7% CAGR) at 9.3% volatility:

The max drawdown on the Emerging Market Permanent portfolio was 26.15% versus 16.17% for the original version.  The increased volatility and drawdown of the Emerging Market version is not surprising since emerging market equities have traditionally had higher volatility than large cap US equities.

In my original article I also tested the 10 month moving average system popularized in recent years by Mebane Faber in The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets. When an ETF in the portfolio was below its 10 month moving average at month-end, the position was sold and held in “cash” (SHY was used as a substitute for cash). When it closed the month above its 10 month moving average, the ETF was purchased at the stated allocation.

To properly test the moving average system I had to begin the test at the beginning of 2006 since GLD did not have adequate trading history to generate a 10 month moving average in 2005.  In order to properly compare strategies (moving average vs. buy and hold) we first need to show the results for buying and holding the portfolios over the same time period of 2006-present (portfolio A is the Emerging Markets version, Portfolio B is the original):

We see that the Emerging Markets version had a total return of 90.5% (11.1% CAGR). .63 sharpe ration, and 12% volatility. The original version had a total return of 81.1% (10.2% CAGR), .73 sharpe ratio, and 9.2% volatility.

For the first 10 month moving average test we will revisit the original Harry Browne ETF Portfolio (SPY/SHY/TLT/GLD). When we test the 10 month moving average system we see is that the moving average system decreased volatility and returns while increasing the sharpe ratio:

Below are the annual performance statistics which include no down years (2012 is down year to date):

When we apply the 10 month moving average system to the Emerging Markets version(EEM/SHY/TLT/GLD), we see the same impact, a decrease in returns and volatility and an increase in the portfolios sharpe ratio:

The annual statistics include no losing years (2012 is down year to date):

The table below summarizes the returns of each strategy for comparison purposes:

 

Time Period 2006-present
Portfolio Strategy Total Return CAGR Volatility Sharpe Max draw down
“Original” Permanent Portfolio (SPY/SHY/TLT/GLD) Buy & Hold 81.10% 10.20% 9.20% 0.73 -15.85%
“Emerging Mkt” Permanent Portfolio (EEM/SHY/TLT/GLD) Buy & Hold 90.50% 11.10% 12.00% 0.63 -23.12%
“Original” Permanent Portfolio 10 month SMA 69.30% 9.00% 7.10% 0.79 -7.10%
“Emerging Mkt” Permanent Portfolio 10 month SMA 83.30% 10.40% 9.10% 0.75 -11.80%
SPY Buy & Hold 23.90% 3.60% 24.40% 0.12 -55.20%
SPY 10 month SMA 60.30% 8.00% 13.20% 0.38 -18.70%

There are some important caveats in these tests. The time period covered is relatively short by historical standards so it is difficult to draw significant conclusions.  The period tested includes 2008, a particularly volatile period for equities and fixed income securities. Commissions, taxes, and slippage (the price you would actually get filled at when placing a real order versus the historical data used for the tests) will impact results.

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Disclaimer: Stock Loon LLC, Scott's Investments and its author is not a financial adviser. Stock Loon LLC, Scott's Investments and its author does not offer recommendations or personal investment advice to any specific person for any particular purpose. Please consult your own investment adviser and do your own due diligence before making any investment decisions. Please read the full disclaimer at the bottom of www.scottsinvestments.com

MarketClub Timing Portfolio Trade

The MarketClub ETF Portfolio I track on the site signaled a “buy” position on USO today at $38.96. I have updated the portfolio accordingly.  Thus, the two long positions currently are SPY and USO.

Gold (GLD) and the Euro (FXE) remain neutral and in cash.

For more details on this strategy click here.  Keep in mind this strategy and the spreadsheet is purely hypothetical and my posts on any portfolio updates are not real-time; signals are generated intra-day making it impossible for me to provide instant updates.

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Disclaimer: Stock Loon LLC, Scott's Investments and its author is not a financial adviser. Stock Loon LLC, Scott's Investments and its author does not offer recommendations or personal investment advice to any specific person for any particular purpose. Please consult your own investment adviser and do your own due diligence before making any investment decisions. Please read the full disclaimer at the bottom of www.scottsinvestments.com

Testing a Harry Browne Permanent ETF Portfolio

Last week I detailed an ETF portfolio (part 1 and part 2) intended to mimic PRPFX, the Permanent Portfolio mutual fund.  Coincidentally, Global X launched a Permanent ETF (PERM) last week; the fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive Permanent Index.  The Solactive Permanent Index allocates 25% each to four asset class categories: Stocks, U.S. Treasury Bonds (Long-Term), U.S. Treasury Bonds (Short-Term), and Gold and Silver.

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The stated allocation of PERM corresponds to Harry Browne’s proposed allocation in his 1998 Fail-Safe Investing: Lifelong Financial Security in 30 Minutes.  Browne proposed an equal-weight portfolio of stocks, long-term bonds, cash, and gold. An investor could create this portfolio using as little as four ETFs: SPY (SPDR S&P 500 ETF), TLT (iShares Barclays 20+ Year Treasury), SHY (iShares Barclays 1-3 Year Treasury Bond Fund), and GLD (SPDR Gold Trust).  These are not the only ETFs which could be used to replicate Browne’s Permanent Portfolio. For example, VTI (Vanguard Total Stock Market ETF) is a viable substitute for SPY and offers exposure to stocks in the small and medium market cap space.

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How has Browne’s portfolio performed historically? There are several sources which track the strategy, with some minor variations between the different indexes or trading vehicles used to track performance. Crawling Road has tracked the annual performance from 1972 through 2011.

I created an ETF portfolio of SPY, TLT, SHY, and GLD. Using ETF Replay I then tested the portfolio as a buy and hold portfolio from January 3, 2005 until February 13, 2012. GLD did not begin trading until November 2004, which restricts our test using ETFs. The results of the test are below:

The portfolio had a total return including dividends of 105.7% (10.7% compound annual growth rate) with volatility of 9.3%. The max drawdown was 16.71% and the sharpe ratio .80.

How has a simple 10 month moving average system performed within this portfolio? The 10 month simple moving average system has been popularized in recent years by Mebane Faber in The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets. When an ETF in the portfolio was below its 10 month moving average at month-end, the position was sold and held in “cash” (SHY was used as a substitute for cash). When it closed the month above its 10 month moving average, the ETF was purchased at the stated allocation.

The performance for the 10 month moving average system within the 4 ETF permanent portfolio is below. The results are from 2006-February 13th, 2012. GLD did not have adequate trading history at the start of 2005 to generate a 10 month moving average, therefore we started in 2006:

The total returns were 69.2% (9% CAGR) with volatility of 7.1%. The max drawdown was 7.1% and the sharpe ratio .79. Keep in mind these statistics include the 2008 period, when global equity markets suffered extreme volatility.

Since the first buy and hold test started in 2005, it is fair to compare the 10 month moving average returns to buying and holding the same portfolio from 2006-February 13th, 2012:

From 2006 to present, buying and holding total returns were 81.1% (10.2% CAGR) with volatility of 9.2%. The max drawdown was 15.85% and the sharpe ratio .73.

In either case, the portfolio has had relatively low drawdown and volatility with recent returns outpacing equity markets. The 10 month moving average system lowered the volatility of the portfolio to 7.1% and drawdown to 7.1% but had slightly lower overall returns than simply buying and holding the portfolio.

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Disclaimer: Stock Loon LLC, Scott's Investments and its author is not a financial adviser. Stock Loon LLC, Scott's Investments and its author does not offer recommendations or personal investment advice to any specific person for any particular purpose. Please consult your own investment adviser and do your own due diligence before making any investment decisions. Please read the full disclaimer at the bottom of www.scottsinvestments.com

Building a Permanent ETF Portfolio, Part 2

Earlier this week I proposed a 14 ETF portfolio intended to replicate the popular Permanent Portfolio mutual fund, PRPFX.  My original 14 ETF portfolio was intended to replicate PRPFX as closely as possible using liquid ETFs. The 14 positions could realistically be reduced to 8 while still maintaining a high correlation to the original 14 ETF portfolio.

The original 14 ETFs are listed below:

Ticker Name Allocation
FXF Swiss Franc CurrencyShares 10.00%
GLD SPDR Gold Shares 20.00%
HYG iShares iBoxx High-Yield Corp Bond (4-5yr) 5.00%
IEF iShares Barclays 7-10 Yr Treasury (7-8yr) 5.00%
IGE iShares S&P N. Amer Nat. Resources 5.00%
VUG Vanguard MSCI U.S. LargeCap Growth 7.50%
IWO iShares Russell 2000 Growth 7.50%
LQD iShares iBoxx Invest Grade Bond (7-8yr) 5.00%
RWX SPDR DJ International Real Estate 5.00%
SHY Barclays Low Duration Treasury (2-yr) 5.00%
SLV iShares Silver Trust 5.00%
TIP iShares Barclays TIPS (4-8yr) 10.00%
TLT iShares Barclays Long-Term Trsry (15-17yr) 5.00%
VNQ Vanguard MSCI U.S. REIT 5.00%

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If we consolidate the stock and bond holdings, we are left with an 8 ETF portfolio that still closely maintains the stated portfolio structure and asset allocation  of PRPFX and, as we will see below, has been highly correlated to the 14 ETF portfolio:

AGG iShares Barclays Aggregate Bond (4-5yr) 35%
FXF Swiss Franc CurrencyShares 10%
GLD SPDR Gold Shares 20%
IGE iShares S&P N. Amer Nat. Resources 5%
RWX SPDR DJ International Real Estate 5%
SLV iShares Silver Trust 5%
VNQ Vanguard MSCI U.S. REIT 5%
VUG Vanguard MSCI U.S. LargeCap Growth 15%

Using ETFReplay.com, we see that both portfolios have shown a high correlation since 2008:

The 8 ETF portfolio had CAGR of 8.4% and a max drawdown of -25.25%. When we compare the 8 ETF portfolio to a 50/50 portfolio consisting of 50% SPY and 50% AGG, we see that the Permanent 8 portfolio significantly outpaced a 50/50 portfolio since 2008 with about the same volatility:

 

One of my favorite tools for potentially reducing portfolio volatility and drawdown is to use the 10 month simple moving average strategy, popularized in recent years by Mebane Faber in The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets.

For example, the Permanent Portfolio has a 20% allocation to Gold, which is in the midst of a bull market.  When and if Gold begins a bear cycle, it could be a significant drag on the portfolio. By using a long-term moving average signal, we could potentially reduce portfolio drawdown created when any one of the holdings enters a bear market.

The results for a 10 month moving average system on the 8 ETF Permanent portfolio are below (2008-present). When an ETF in the portfolio was below its 10 month moving average at month-end, the position was sold and held in “cash” (SHY was used as the cash position). When it closed the month above its 10 month moving average, the ETF was purchased and held until the close of the next month:

The results were not as dramatic as I expected. Portfolio drawdown was reduced to -16% versus -25.25% for buy and hold of the same portfolio. Volatility was reduced slightly to 11.5% and total return actually increased slightly to 41.4%. An improvement in all areas, yes, but not significant.

Finally, what if we simply purchased the 2 ETFs with the strongest momentum within the Permanent 8 ETF portfolio? This is a similar strategy used in my monthly ETF Replay Portfolio. Purchasing the 2 ETFs out of the 8 with the highest 6 month returns and rebalancing monthly yield the following results (2008-present):

If we purchased the top 2 ETFs as gauged by a combination of their 6 month return, 3 month return, and 3 month volatility, and rebalanced monthly, the results are below:

If we reduce the time frame to a 3 month return, 20 day return and 20 volatility, the historical results are better:

Holding only 2 ETFs increases portfolio volatility, which should be expected, but did not necessarily increase returns versus buy and hold or the 10 month simple moving average system.

The goal here is not to identify “the best” solution, since past results are no guarantee of future returns. It is to propose a relatively simple ETF portfolio to mimic PRPFX and to explore and test additional risk management and trading techniques within the ETF portfolio.

Note: All return calculations provided by ETF Replay. All returns are hypothetical and exclude commissions and taxes.

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Disclaimer: Stock Loon LLC, Scott's Investments and its author is not a financial adviser. Stock Loon LLC, Scott's Investments and its author does not offer recommendations or personal investment advice to any specific person for any particular purpose. Please consult your own investment adviser and do your own due diligence before making any investment decisions. Please read the full disclaimer at the bottom of www.scottsinvestments.com

Was Friday’s Price Action in Gold Signaling a Top in the S&P 500?

JW Jones and Chris Vermeulen give us their analysis on equities, gold, and macro events in this article. Below is an excerpt from their report:

I follow a variety of indicators to help me decipher more accurately when the market is getting overbought or oversold. For nearly two weeks the market has been extremely overbought, but now we are reaching truly astonishing levels…

 

At this point, I suspect a pullback will present a good buying opportunity for those that are patient. However, I think it is critical to point out that this move in gold on Friday could be a signal that the U.S. Dollar is going to find some short to intermediate term strength. If the Dollar does start to push higher, it will likely put downward pressure on risk assets like equities and oil

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Disclaimer: Stock Loon LLC, Scott's Investments and its author is not a financial adviser. Stock Loon LLC, Scott's Investments and its author does not offer recommendations or personal investment advice to any specific person for any particular purpose. Please consult your own investment adviser and do your own due diligence before making any investment decisions. Please read the full disclaimer at the bottom of www.scottsinvestments.com