1939 Graham coupe or “Sharknose” coupe.
McClintock is a Dual Momentum™ portfolio where a longer look-back period is used. As you recall, the Franklin recommendation was to move out of VTI and into a lower volatile security. The Franklin uses a shorter look-back combination so it is quicker to react to market movements. Not so with the McClintock as you will see in the first screenshot.
McClintock Dual Momentum Recommendation
Due to using a 100- and 252-trading days look-back combination, the recommendation is to stick with U.S. Equities (VTI). This comes as a bit of a surprise as I figured the recent draw-downs would trigger a move to either SCHP, BND, or VGLT.
The red arrow points to the look-back periods and the weight given to each. The Pauling uses even a longer look-back combination.
McClintock Performance Data
Over the past 14 months the Internal Rate of Return (IRR) of the McClintock is 15.2% while the AOR benchmark is 6.8%. This data comes from QuoteMedia or the source used by the Investment Account Manager (IAM) software.
Keep in mind that the return for AOR is really a Time-Weighted Return, not an IRR. These two measurements are very close unless there is significant cash moving in and out of the account.
McClintock Risk Ratio Data
Based on the Sortino Ratio we see the McClintock lost money this past month. Not surprising considering the lousy January market. The good news is that the Jensen Alpha (8.28) is still positive as is the Jensen slope. (2.9). I fully expected these high values to eventually reverse-to-the-mean.
If the market continues to decline, I’ll check in on all Dual Momentum portfolio regularly to see what recommendations are forthcoming.
Hi Lowell, I am surprised as well to see that it has not triggered to move to cash! Is there a way to compute when the indicator will show a move to cash, when the drawdown % needs to go down to meet the conditions for trigger? Thanks, Jay R
Jay,
To my knowledge, there is no easy way to do this. I could manually enter data and try to force the issue, but I might run the risk of fouling up underlying equations.
My best recommendation is to check the recommendations each day the market declines. If the market ticks up, this will delay the day when the McClintock calls for a transition out of U.S. Equities.
Lowell
Jay,
The DM model (as defined by Gary Antonacci) does not include an option to move to Cash – only to the asset ranking highest in RELATIVE strength. If one wanted to apply a positive absolute momentum filter one could just add the “Filter” asset (in this case SCHP) to the asset quiver and check the slope (LRS1 and/or LRS2) to check for a positive value – if negative, move to Cash.
Here’s an example https://www.dropbox.com/s/dhbmszje9y6p6gp/2022-01-29_10-32-47.png?dl=0 where I’ve added SCHP to the Tversky DM portfolio – checking LRS1 and LRS2 we see that LRS1 is negative – therefore you might choose to move to Cash.
David
Lowell,
Why would you expect BND and VGLT to have BUY signals? The 50-day SMAs of both are on the decline. The same is true of SCHP. That’s a technical comment.
Why would you expect either to go up, thus triggering a BUY, as long as interest rates are rising? Seems to me like we ought to be avoiding these securities. What am I missing?
~jim
Jim,
Perhaps this reason is faulty, but here goes. Since the Dual Momentum model is looking for one security and that single security is the best performer, I figured the model would move out of VTI and into one of the three.
I’m trying to recall a situation where all ETFs in the DM model show a Sell and not a single Buy signal. That may have occurred in 2008 or before the Kipling was developed. SCHP has been nearly flat over the past year so it seems like a likely candidate should a change show up.
Just four days ago the Franklin called for a move from VTI into BND. This event was likely in my mind.
Lowell
Jim, Lowell,
Remember that the DM model is based on RELATIVE Strength – therefore it will recommend the strongest or, presently, the “least bad” asset – even if this is in a negative trend.
David