Pauling Portfolio Review: 24 August 2023

Christmas Valley – Central Oregon

From its early days as a Dual Momentum™ portfolio the Pauling struggled to perform as expected.  Without going into detailed analysis this may be one of those portfolios that was launched when the market declined and new money was added at high points.  Regardless, a change was needed and I made a switch in the investment quiver several months ago.  When such moves are made it is important to track the Jensen Performance Index (frequently referred to as the Jensen Alpha) to see if improvement is forthcoming.

Pauling Security Recommendations

The revised investment quiver focuses on equities, be they domestic or international.  As with Dual Momentum™ portfolios when equities are out-of-favor we look to bonds and short-term treasuries as havens for cash.

When using the Buy-Hold-Sell (BHS) investing model (see purple arrow), the “default” look-back combination (green arrow), and a maximum of three (3) assets (red arrow) the recommendation is to maintain (Hold) the current positions.

Pauling Manual Risk Adjustments

No changes are planned for ESGV, VOO, VTI, or SPY.  Several limit orders are in place to purchase more shares of BIL.  Another option is to leave the money in the money market as it is earning something close to the yield of BIL.

Pauling Performance Data

As mentioned in the introductory paragraph, the Pauling is lagging the SPY benchmark by a large delta.  This data goes back to 12/31/2021 so we are closing in on 19 months of information.

Pauling Risk Ratios

The trend of the Jensen since last December is up, with a few hiccups.  The Information Ratio also points out that the portfolio gained on the benchmark in August, despite a lack-luster market these past few weeks.  However, overall the Information Ratio has been weak.

There is no way to hide that the Pauling has been a disappointment since inception.

Huygens is the portfolio up for review tomorrow.