This is a test of the “Excess Earnings Yield Dynamic” valuation strategy based on the paper Man Doth Not Invest by Earnings Yield Alone by White and Haghani of Elm Wealth. The strategy dynamically splits the portfolio between stocks and TIPS based on “excess earnings yield”, which is the cyclically-adjusted earnings yield (1 / CAPE) […]
Various Miscellany
Maximum Ulcer Performance Index (UPI) Portfolios
We’ve added a new objective to the Portfolio Optimizer. Members can now find the combination of TAA strategies that would have maximized the Ulcer Performance Index (UPI), aka the “Martin Ratio”. Members: begin exploring the Max UPI portfolios now. UPI is a measure of return relative to drawdowns (i.e. losses). It captures both the length […]
Linear vs Logarithmic Charts: When Log Is Better, and When Neither Is Very Good
This is quick explainer on linear vs logarithmic charts. We hope that even experienced users who are familiar with the subject will find a nugget or two of useful wisdom in here. We provide all backtests in two flavors: linear and logarithmic (log). There’s a button below each chart where you can switch between them […]
New Performance Charts with Awesome New Features
We’ve radically redesigned the charts we use to show backtested performance throughout the member’s platform. At first glance, the new charts look familiar, but there are a ton of useful ways members can now manipulate them. Let’s look at four new features: Zoom by predefined periods, with rebasing to $10,000 Zoom by specific start and […]
New Feature: Alternative Benchmarks
Members can now compare both investment strategies and their own custom Model Portfolios to alternative benchmarks like the S&P 500 or Nasdaq 100. Previously, we only benchmarked to the 60/40 (60% US stocks, 40% US bonds), the de facto standard in US asset management. To try it now, go to Compare Strategies and select up […]
Portfolio Optimizer Version 3.0: Custom Optimized Model Portfolios
We just released version 3.0 of our Portfolio Optimizer for Pro members and it’s awesome. New here? We track Tactical Asset Allocation strategies. Members can combine those strategies together into what we call “Model Portfolios”. The Portfolio Optimizer shows the optimal mix of strategies to trade in your Model Portfolios based on objectives like maximizing […]
“Dynamic Bond” Variations of 10 Tactical Asset Allocation Strategies
Background (we’ve covered all of this before, but just to bring readers up to date): We track 70+ Tactical Asset Allocation strategies sourced from research papers, books, etc. A subset of those strategies have a significant flaw: when shifting to a defensive risk posture, they blindly dump the portfolio into bonds (mostly US Treasuries) regardless […]
Inflation and Stock/Treasury Correlation
There has been a surge in correlation between US stocks and Treasuries over the last couple of years. To illustrate, below we’ve shown the rolling 3-year correlation between US stocks and 10-year Treasuries since 1900 (based on monthly returns). Note the spike at the far right of the chart. What is correlation? In this context, […]
Super-Secret Proprietary Black Box Strategies
Note: This is a rare non-geeky, non-quantitative, stream of thought blog post. Because we’re so deep into this world of Tactical Asset Allocation (TAA), we’re sometimes asked for our thoughts on such-and-such black box TAA strategy. By “black box” we mean a strategy for which the trading rules are not disclosed to investors (nor to […]
New Feature: 10-Year Stock Market Return Forecast
We are often asked about stock market valuation models such as Shiller’s CAPE Ratio and the Buffet Indicator. These models predict long-term returns, usually forecasting the next 10 years. Our recent analysis of one such valuation model, the Aggregate Investor Allocation to Equities, motivated us to take our our own deep dive into the subject. […]