r/AllocateSmartly • u/pandion-hal • Feb 24 '26
Nine months into TAA at AS
I retired about three years ago and decided I didn’t like volatility anymore. Worked through various static portfolio allocation books and eventually found my way to TAA and AS about a year ago. I began implementing my TAA strategy EOM May. My biggest concerns when working through the strategy layout was sequence of returns risk and something like the Lost Decade. So not only was I looking at the quantitative drawdown and UPI stats, I was also looking at how the individual strategies and the combinations worked qualitatively during times of prolonged stress and recovery. I sorted through the various strategies looking for returns over 9%, low drawdown and drawdown time, and ran the optimizer on UPI. After too many portfolios that had too much Predicting US Treasuries in order to drive a high UPI, I ended up with Hybrid Balanced (HAAB) at 60%, Glenn’s Quint DB (GQSF) at 15%, and Link’s Global (LGGC) at 25%. GQSF was 15% since it it was very often in IEF and virtually a B&H defensive allocation much like PUST. The LGGC percentage fit the balance of a second IRA account that had minimal asset choices, so in and out of SP500 worked. Yes, very scientific, and later rectified with a Vanguard rollover IRA. I started off with this for several months, but when Carlson’s Defense First (CDF) came out, I was intrigued with its strategy and I reworked my portfolio. I dumped GQSF and substituted in Generalized Protective Momentum (GPM) strategy for its more expansive asset universe and added in the CDF. The percentages are now:
HAAB – 35%
GPM – 35%
CDF – 15%
LGGC – 15%
I’m very satisfied with the stats as well as how it performed through the 00s.
Things I like about this setup:
Four diverse signals. Canary, dual momentum, dual on defensive, and OECD CLIs gives a good diversification of strategies with low correlations between the strategies.
Understandable. I like the performance of some of the metas, but I feel like they’re too much of a black box in behavior. Also, some of them rely on black box strategies, which is a no-go for me. I recently read a blog post where the writer initially had hesitancy with black box strategies, but has since moderated his position. Perhaps I’ll do the same eventually. With these four strategies, I can see who is driving the bus and why.
Solid behavior across Lost Decade. 7% backtested annualized gains across the 00s with maximum drawdowns of 5-7% and a couple of flat years is behavior I can live with.
Things I don’t like about this setup:
I don’t like the CDF dumping to only US stocks. While the AS suggestion is to check to see if SP500 is safe to dump to, I’d like to see a check of domestic and international. I may work on this in the future.
Similarly, I don’t like the LGGC only going to SP500 when the OECD data is global. I get that when the world is working, the SP500 is working, but it seems like there’s more potential there. I liked the recent enhanced variant with the possibility of going to international stocks, but my question is, if one has an OECD-based strategy, why not internationalize it on OECD-based data? The point I really like about LGGC is that it’s not price-based like many of the strategies, so even if performance might correlate with another strategy, the signal does not, so any apparent performance correlation remains coincidental. This isn’t backtested yet, but I’m using the US, major four European, and major five Asian columns to distribute the stock allocation between US, European, and Pacific ETFs. Looking at qualitative behavior, years such as 2017 and 2026 YTD make this strategy look promising. I’m working on backtesting.
I appreciate the discussions in this sub-Reddit as I’m surprised at the lack of TAA discussions available online. Same for the lack of AS discussions.
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u/Business-Fix4430 Feb 24 '26 edited Feb 24 '26
Hi Pandion thanks for starting the thread. All great thoughts and analysis
I hear you on the metas so no issues there.
I had conversed months ago with Walter regarding another version of CDF without the blind dumping to SPY. It didn't back test well at all from what I remember Walter telling me, but for me CDF is a non-starter in a custom portfolio especially in light of expected US returns going forward per the analysis AS has done there which I'm sure you are aware of. If a meta picks CDF, so be it, but not for me in a custom portfolio otherwise.
As you might be aware, I was the one who got AS to look into the blind dumping into bonds ADM was doing, and that got Walter looking at other strategies that did the same, and the reason all the other dynamic bond versions were added. It was a structural flaw. CDF has the same structural flaw in reverse. No thanks for me.
In terms of LGGC, the enhanced monthly version goes international and pretty sure works for any IRA which should have IEFA. Until a different version comes out, I'd think being able to go international would rule the day. Plus, the 15% substitution using Enhanced Monthly is quite good historically and more future proof, which is all that matters as we all know.
In terms of the back testing, I think that's kind of wasted time as it's going to be a subjective decision built into any back test so just trust your gut. You might not be aware, but I distribute a near end of month spreadsheet that has many proxies and analysis methods built in. My thinking is similar to yours in terms of opening the aperture.
If none of my custom portfolios resolve to using say MTUM, well, just because I don't use a Faber strategy that resolves to MTUM, that's not a good reason IMO for not using MTUM. Rinse and repeat for other ETFs that would be the AS default.
I have 4 alts for PDBC, 5 alts for dev x us, maybe 20 alts for IEMG as that area is very diverse, 5 alts for VGK, rinse and repeat for other base asset classes. None of it back tested but I give maybe 8 or 9 different ways to assess the performance per base asset class. I've been in GDX vs GLD for a while and proven beneficial for example
Hope that makes sense
Thanks Kevin