Red Panda – China (not the sharpest image.)
McClintock is one of several Dual Momentum™ portfolios tracked here at ITA Wealth Management. Momentum is one of the five factors included in the Fama-French Five-Factor Model. It is not fully understood why momentum is such an important market anomaly and why it works. But it does and that is why I highly recommend a Dual Momentum portfolio be one of several investment models to include when managing the family portfolio. The McClintock is one of the better performing DM portfolios tracked here at ITA.
McClintock Main Menu
I normally do not include the Main Menu when reviewing portfolios, but I will this morning in case a new user of the Kipling is trying to emulate or mirror the McClintock. Note the Linear Regression periods as I am using a longer look-back combination than what is considered the “default” setting.
McClintock Dual Momentum Recommendation
With the investing Model/System set to DM, the current recommendation is to purchase shares of BND. I thought the market decline this morning would recommend cash or TIPs, but the recommendation is to open up a position in BND. I have several limit orders set to buy shares of BND and to raise more cash, I have TSLOs set to sell shares of ESGV.
McClintock Performance Data
The following data runs from 11/20/2020 through this morning, 7/14/2022. With an Internal Rate of Return of 10.6% (annualized) over this period, the McClintock is crushing the AOR benchmark as well as Vanguard’s Total World Stock Fund.
McClintock Risk Ratios
While the IRR separation between portfolio and benchmark is significant, I’m always curious to know what is going on when risk is factored into the calculations. For this information we move to the following table. The Sortino ratio is not as high as it was last year and that comes as no surprise. We are still in a bear market. However, the Jensen is much improved, despite the increasing rate in a short-term risk-free treasury. Of the five metrics, Jensen’s Alpha or the Jensen Performance Index is the most useful.
Pay attention to the Information Ratio as this measurement tells us if we are improving or lagging the benchmark. The Omega measure essentially the same thing as the Sortino.
Looking Ahead To The Second Half of 2022
The McClintock will now go into neglect mode for another 33 calendar days.
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Paul,
Just in case you are not able to read the Forum replies, I am copying my reply over here in a Comment section. You should receive a notification of this comment.
As portfolios are updated I’ll attempt to go into more detail, at least for a few, how I make decisions and how I use the Kipling. The easiest to understand are the Dual Momentum portfolios. There are only three or four asset classes and the model is set to DM for Dual Momentum.
The Copernicus and Schrodinger are buy and hold accounts so the Kipling is not needed. The Schrodinger is located with Schwab and is called an Intelligent Portfolio. I think of it as a Robo Account or managed by computer algorithms. Some may call it Artificial Intelligence.
What I don’t go into is how I use the Risk Ratios worksheets as that is much more complicated. That material is very specialized and requires quite a bit of manual labor.
Lowell
A reader of ITA asks this question.
“How can I use the Kipling workbook for the Dual Momentum model ?”
If you want to follow Gary Antonacci’s model closely, the first thing is to set the look-back period to 252 trading days or one year. I can go through this later if not clear. Then use only three ETFs. I recommend VTI, VEU and a bond ETF. I would likely go with AGG, but BND will also work.
When you have these settings in place, then in the Tranche worksheet (second screenshot above) be sure to select DM in the drop-down menu when asked for the Model/System? That option is located near the upper right-hand corner of the worksheet.
Then select only one asset at a time as the Dual Momentum recommendation is to be in only one asset class at a time. You are either in U.S. Equities (VTI), International Equities (VEU) or Bonds (AGG).
That should do it.
Lowell