GPM_Fuzzy - out

The GTR1 version of Generalized Protective Momentum also by Keuning and Keller modified
to switch between risk and safe more aggressively has been holding up well. 22% return for
each of 2020 and 2021, in cash and only down a little less than 1% year to date.
http://gtr1.net/2013/?~Protective%20Asset%20Allocation%20Fuz…

RAMc

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RAMc, I’m GTR1 illiterate. Can you elaborate on this?

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RAMc, I’m GTR1 illiterate. Can you elaborate on this?

In 2016 Keuning and Keller wrote a paper describing PAA an allocation system to reduce drawdowns.
Trend explorer combined PAA with generalized momentum and posted a nice article that explains it
Better than I can:
TrendXplorer: Deciphering Correlation Hedged Momentum (indexswingtrader.blogspot.com)
I initially backtested this in Python and Excel then RgearyIII did most of the effort to create a GTR1
Version. Backtesting this and scatter plotting the monthly gains vs their linear risk metric scaling from risk
to safe showed that the risk – safe decision worked better with a sharper fuzzy type switch.
The final mod was to replace the momentum with a rrs version instead of their 1/2/6/12m version.
Most of the time like right my fuzzy version tracks the original version.
K&K’s version is very seldom fully in a risky or safe mode, almost all the time near the middle.

The K&K’s risk/safe compared to the fuzzy version:

zi>0  K&K'sSafe  FuzSafe
  12      0.000    0.000
  11      0.167    0.000
  10      0.333    0.000
   9      0.500    0.000
   8      0.667    0.167
   7      0.833    0.333
   6      1.000    0.500
   5      1.000    0.667
   4      1.000    0.833
   3      1.000    1.000
   2      1.000    1.000
   1      1.000    1.000
   0      1.000    1.000

RAMc

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Hi RAMc,

When running the GTR1 as a “screener” I am trying to figure out which line you are reading to figure out the allocations:

**GTR1 ID  Index  Ticker Symbol  [Weight]**
8        8      GSG            0
7        7      GLD            0
9        9      VNQ            0
1        1      SPY            0
2        2      QQQ            0
3        3      IWM            0
10       10     HYG            0
5        5      VGK            0
4        4      EWJ            0
11       11     LQD            0
6        6      EEM            0
12       12     TLT            0
13       13     SHY            1
14       14     IEF            0

I assume that this means to go 100% SHY, and that it will change when conditions change. Also, how often do you re-run this (once per month)?

Thanks, Gabriel

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Correct. But this is one of those rare situations where the system didn’t consider a raising interest rate
environment. If there was a third alternative safe choice it would have chosen cash in place over SHY or
IEF. I’m currently using this for 26% my portfolio and I went to cash.
RAMc

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In the current environment, is there any reason to use either SHY or IEF instead of just substituting “cash” for either.

–G

In the current environment, is there any reason to use either SHY or IEF instead of just substituting “cash” for either.

I don’t think so. SHY’s duration is 1.9 years. With the FED apparently poised to increase interest rates you will see a capital loss.

I don’t see any decent alternatives right now. Short term things like FLOT & FLRN have such low yield that they aren’t much worth it. Might as well stick to cash-cash.

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I don’t see any decent alternatives right now. Short term things like FLOT & FLRN have such low yield that they aren’t much worth it. Might as well stick to cash-cash.

Neither do I. But there is a short-term etf(3mo T-Bills) that recently had less loss & shorter duration.

Name                        ISHARES SHORT TREASURY BOND ETF  ISHARES 1-3 YEAR TREASURY BOND ETF
 
**Symbol                                    SHV                                SHY**
 
ETP Type                    ETF                              ETF
Asset Class                 Fixed Income                     Fixed Income
 
Market Price                                        $110.14                              $82.83
                            5/3/2022 14:13                   5/3/2022 14:13
Price Performance (Today)                            -0.01%                              -0.02%
                            5/3/2022 14:13                   5/3/2022 14:13
Volume                      3.7M                             4.8M
                            5/3/2022 14:13                   5/3/2022 14:13
**Market Total Return (YTD)                            -0.15%                              -2.50%**
                            3/31/2022                        3/31/2022
Market Total Return (1 Yr)                           -0.24%                              -3.11%
                            3/31/2022                        3/31/2022
Market Total Return (3 Yr)                            0.75%                               0.70%
                            3/31/2022                        3/31/2022
Net Expense Ratio                                     0.15%                               0.15%
                            12/13/2021                       12/13/2021
Tracking Error                                         4.06                                2.87
Efficiency                                             0.11                                0.18

GD_

For cash, I use 1 to 6 month Treasury Bills bought at auction. The auctions are about every 2 weeks. Similar ETFs: SGOV or BIL.

Short-term rates are expected to rise to about 3% by the end of the year. They increased about 0.5% in the last 3 months. Long rates increased about 1%. Longer duration bonds will lose value if interest rates increase.

          percent       percent                              Assets
        Total Return  Total Return             Credit   under management
Ticker    3 Month       12 Month    Duration  Quality      [$million]             Category                           Name
 USFR       0.36          0.37          0     NotRated        4,084           Ultrashort Bond       WisdomTree Floating Rate Treasury ETF
VMFXX       0.03          0.03          0     NotRated      208,077         Money Market-Taxable   Vanguard Federal Money Market Investor
 TFLO       0.29          0.34        0.01      AAA           931             Ultrashort Bond      iShares Treasury Floating Rate Bond ETF
 FLRN       -0.26         0.01        0.04        A           3,279           Ultrashort Bond          SPDR® Blmbg Inv Grd Flt Rt ETF
 FLOT       -0.15         0.11        0.06        A           9,569           Ultrashort Bond          iShares Floating Rate Bond ETF
  BIL       0.02          -0.05       0.07      AAA          16,274           Ultrashort Bond          SPDR® Blmbg 1-3 Mth T-Bill ETF
 **SGOV       0.06          0.08        0.1       AAA           2,546           Ultrashort Bond        iShares® 0-3 Month Treasury Bond ETF**
  SHV       -0.13         -0.28       0.36      AAA          17,675           Ultrashort Bond          iShares Short Treasury Bond ETF
  SHY       -2.34         -3.66       1.89      AAA          22,769           Short Government       iShares 1-3 Year Treasury Bond ETF
 SPTS       -2.36         -3.56       1.93      AAA           4,075           Short Government     SPDR® Portfolio Short Term Treasury ETF
 VGSH       -2.37         -3.64       1.93      AAA          14,238           Short Government         Vanguard Short-Term Treasury ETF
 SCHO       -2.35         -3.64       1.96      AAA           8,056           Short Government       Schwab Short-Term US Treasury ETF™
 VCSH       -4.16         -5.59       2.79        A          39,839           Short-Term Bond      Vanguard Short-Term Corporate Bond ETF
  IEI       -5.93          -8         4.68      AAA           9,759       Intermediate Government    iShares 3-7 Year Treasury Bond ETF
 VCIT       -9.83        -10.93       6.4       BBB          42,231           Corporate Bond           Vanguard Interm-Term Corp Bd ETF
  IEF       -9.14         -9.63       8.04      AAA          16,029           Long Government        iShares 7-10 Year Treasury Bond ETF
  IJR       -5.78         -8.04               NotRated       66,547             Small Blend            iShares Core S&P Small-Cap ETF
  SLY       -5.83         -7.85               NotRated        1,716             Small Blend              SPDR® S&P 600 Small Cap ETF
  Date    1 Mo  2 Mo  **3 Mo** 6 Mo  1 Yr  2 Yr  3 Yr  5 Yr  7 Yr  10 Yr  20 Yr  30 Yr
5/2/2022  0.41  0.71  **0.90** 1.49  2.10  2.73  2.93  3.01  3.04  2.99   3.26   3.07
2/2/2022  0.04  0.10  **0.19** 0.45  0.76  1.16  1.38  1.60  1.74  1.78   2.17   2.11
 change   0.37  0.61  **0.71** 1.04  1.34  1.57  1.55  1.41  1.30  1.21   1.09   0.96
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I run it once a week.

Hiphop Also, how often do you re-run this (once per month)?

Sorry, I didn’t answer this. I run it about once every 3 to 5 weeks, I’m not too concerned
about getting that last tenth of a percent. But it does look like there is a little advantage
to bi-weekly trading. Assuming 0.15% friction which seems reasonable for ETF’s:

                 1 wk   2 wks  4 wks  8 wks
CAGR:             10.4   10.3    9.7    8.9
SAWR(42; 0.95):    8.8    8.6    8.1    7.4
GSD(42):           9.3    9.1    9.0    9.3
LDDD3:             4.0    4.1    4.6    5.3
MDD:             -14.8  -15.0  -15.1  -15.8
UI(42):            2.2    2.3    2.7    3.6
Sharpe(42):        1.1    1.1    1.0    0.9
Beta(42):          0.1    0.1    0.1    0.1
AT:                4.0    3.6    3.2    2.6

RAMc

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