What recommendations emerged from the Kipling 3.1 spreadsheet during the Great Recession? To answer this question I will look at the recommendations at the end of each quarter progressing from 12/31/2007 through 6/30/2009. The following seven screenshots illustrate the power of the Kipling spreadsheet.
The Robust Portfolio is built around asset classes that cover the globe and mirror the Rutherford 10 portfolio.
Projections on 12/31/2007: At the end of 2007 we were at the edge of the financial abyss, ready to take the plunge. The following “robust” portfolio recommends moving to Commodities, Gold, and Emerging Market Sovereign Debt. This is a conservative move. Note that the spreadsheet is not quite ready to short the market with SH.
Projections on 3/31/2008: In the early stage of the Great Recession the following recommendation is to move to bonds (AGG) and Long-Term Treasury (TLT). Stay away from all equities. Note the Sell recommendation for Emerging Markets (EEM).
Projections on 6/30/2008: Looking back, we are near the middle of the Great Recession and the Kipling is recommending we move to Commodities (DBC). When only one ETF is recommended, we move on to the Position Sizing worksheet to see how many shares of DBC are recommended. This is not a time to overload into only one asset class. I’ll omit this Position Sizing diversion as it is outside the scope or focus of this blog. Again, we stay away from both domestic and international equities.
Projections on 9/30/2008: While the market has not hit bottom, it is getting there. The Kipling recommends we move over to SH or short the market. This move to SH actually came earlier and would have shown up during the 33-Day review rotation. Most of the major asset classes are positioned to Sell.
Projections on 12/31/2008: Still in the depths of the Great Recession, the Kipling is recommending we sell SH and move into Gold (GLD), Bonds (AGG), and Treasuries (TLT). These are all conservative positions or securities designed to protect capital. Since we have not held equities such as VFINX or EFA for over a year, the Hold recommendations do not apply.
Projections on 3/31/2009: Wow! Look how quickly the change. The Kipling is recommending we move into equities, REITs, and Commodities in a big way. It did not take the model long to snap into action and buy equities.
Projections on 6/30/2009: Assuming we purchased VFINX, EFA, EEM, RWX, and DBC last quarter, we continue to hold as recommended in the following worksheet.
These seven screenshots illustrate the “robust” recommendations from the Kipling spreadsheet during a volatile period. Does the model work as well during less volatile periods. That will be presented in later blog posts.