Replies to post #31299 on A.I.M. Users Bulletin Board (AIMUSERS)

[ls7550]

Hi LC.

I remember having a look at your spreadsheet but I think I was distracted onto something else at the time and subsequently forgot to revisit.

Thanks for reminding me, I'll have a dig around to see if I've still got the HiLowdemo spreadsheet.

Best. Clive.

[ls7550]

Your idea of using the Permanent portfolio in place of cash is interesting.

The same concept might equally be applied using alternatives LC.

Take for example Mebane's Quantitative model. Over the mid to longer term Mebane's timing method appears to pace buy-and-hold. There are however periods of one leading the other and then that reverses



Equally the same concept generally holds true for other blends when using styles/methods that yield the same mid to longer term benefit, but do so with different volatilities along the way. For example take stocks, emerging markets, gold, long dated bonds, REIT, energy, agriculture commodities and run them as a equal weighted monthly rebalanced set and you get something like the left hand chart.



Individually time them using 10m sma and monthly rebalance that set and you get something like the right hand chart.

If both sets have similar average gains at the end, then periodically rebalancing between the sets using any form of constant value type style will likely yield a higher reward than not rebalancing (similarly rebalancing within the actual sets at the individual stock level might also add some rebalance benefits).

Ideally one half should have cash like risk (low drawdowns) as that can then become the 'cash' side. The normal stock can be held as the 'stock' part. With both 'stock' and 'cash' earning the same average reward, then rebalance gains become value-add benefit overall.