Case Threshing Machine
Pauling, a Dual Momentum™ style portfolio, is the account up for review this morning. Either the model is deficient or I’ve not managed it well. The end result is that the Pauling is one of the worst performers tracked here at ITA. I will work with the model for a few more months or even untill the end of the year. If there is not performance improvement I will switch investment models to one that is performing much better.
The second DM portfolio is the McClintock and it is performing much better than the Pauling so the fault likely lies with my handling of the Pauling rather than the investment model.
Pauling Dual Momentum Recommendation
I’m using the one-year or 252 trading days as recommended by the developer of the Dual Momentum™ model. The current recommendation is to place 100% of the portfolio in Developed International Equities (VEU). A wide array of limit orders are set to pick up more shares of VEU. As we move into the weakest time of the year for equities (historically) this seems a good time to pick up shares of VEU at lower prices.
Once the cash has been invested I will sell shares of SHV and SHY in order to purchase more shares of VEU, assuming it is still the recommended asset class.
Pauling Performance Data
Over the past 16 months the Pauling has fallen behind the S&P 500 (SPY) as well as benchmarks such as AOA and AOR. Assuming I sell shares of SHV and SHY this morning and pick up shares of VEU, the following pie chart will change dramatically.
Pauling Risk Ratios
Checking the Jensen Performance Index, the Pauling has fallen significantly since November of 2022. Over the past 13 months the Pauling has outperformed its benchmark only twice. Using the Information Ratio as a guide, those months were April of 2022 and October of 2022.
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