Comments on GTAA model

Well, the market took a huge dump today. If you are following my model you are 80% in cash/bonds, and by the end of the day tomorrow (unless commodities rip back up), you will be 100% in cash and bonds.

I asked readers who utilize the model for their comments the other week in my “Yawn” post, and I have heard from everyone from little retail accounts to billion dollar hedge funds that have implemented the strategy. (And yes, I am still waiting on any thank-you bottles of nice tequila…)

Here are some below (and if you haven’t left a comment, do so now):

“I’m following a 10-asset class, 130% GTAA model using leveraged funds based on Meb’s white paper. I use a 4-week cycle instead of a monthly cycle. I’m currently 100% in bonds and cash. Took profits on DJP on 8/11/08 and on GSP on 9/08. Portfolio is +2.3% YTD and +4.1% YoY with a maximum drawdown of 4.7% measured on a weekly basis from peak to trough. Compared to a 60% IWB / 40% AGG benchmark, GTAA rocks!”

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“My “Strategy 3” is a variation of your white paper idea – you can view weekly allocations here: http://www.regimenia.com/

My TAA model has been 100% cash the past 2 weeks. In actuality I’ve been net short.”

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“I’m in cash (and speakers). I talk about my strategies at kirznerfervor.blogspot.com (which you’ve seen). Most of this year, though, I was day trading energy and financial companies, but with more leverage than I felt comfortable with given the volatility. So I made a better trade, Senior Economist at an insurance company too conservative to blow up.”

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“My TAA Portfolio,
VTI (Total Stock Market)
VWO (Emerging Markets)
IEF (7-10 Year Treasury)
RWX (Intl Real Estate)
DBC (Commodity)

Right now, Long 20% IEF

I love this strategy.”

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“Long time reader, first time poster….

Count me in as a huge fan of the system.”

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“I had followed the 5 asset-class strategy for a while but in EUR (instead of USD). Actually, I lost money and stopped the experiment this summer.

I continue to monitor the strategy as it seems sound to me.

The reason for my losses was the cost of trading Euro ETFs (bid-ask spread mainly).

My experience tells that you should invest in ETF from the USA, in USD then hedge your currency (if you want to).”

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“Here is the strategic asset allocation for a 130% GTAA model, which is one of three models I publish:

Symbol Percent
ULPIX – 5.0%
UAPIX – 5.0%
UNPIX – 5.0%
UUPIX – 5.0%
URE – 10.0%
DJP – 10.0%
GSP – 10.0%
SHV – 12.5%
SHY – 12.5%
IEF – 12.5%
TIP – 12.5%

I use a 4-week period and a 40-week SMA for the timing signal. The last period ended on 9/05/08, when the model generated a sell signal for GSP. The model had previously generated a sell for signal for DJP on 8/08. The portfolio is currently 50% long bonds, 50% cash.”

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“
Thanks for the update, and yes my reading of the signals is a sell on commodities tomorrow. I wonder if we’ll see $60 oil? That’ll be a big plus for financial markets. I see a big potential for a cyclical bull move in a long, secular term bear for equities building.

Then as the last move, we go from the bull high in equities to a climax low for the secular move in several years while oil goes from $60-$200. That’ll be quite a ride.

Thanks for your work. It has made and saved me a lot. “

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“Make hay while the sun is shining, brother! It’s doing exactly what it’s supposed to do; muting volatility and delivering long-term (i.e. multi-year) returns that will slightly exceed that of stocks.

What will be interesting, will be when the GTAA is trailing the SPY over a 12-month period by a substantial margin. It’s happened in test and will happen again.

Like most mechanical systems, GTAA adds believers when it outperforms and will probably lose them when it underperforms. That’s not a fault with the system – far from it! I’m a fan! It’s more a fault with investor psychology.

… and a reason why mechanical systems will always work and never get their “edges” arbitraged away …”

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“I am an investment advisor who started using the TAA method back in April. I wanted to express a “BIG THANK YOU” from me and the clients I rep. This method is simple enough for my clients to understand, but sophisticated enough for me to appear valuable in its implementation and monitoring. For those who are looking for an incredible opportunity. Get securities licensed, show this method and obtain 100 $1,000,000 clients, charge 1% for the advice you offer, gross $1,000,000, make your clinets lots of money, get paid well for doing it. M you are the best.”