Proprietary Models

We designed our public dual momentum model, GEM, to be simple and easy to use by do-it-yourself investors. GEM exists to help protect smaller investors from horrendous drawdowns while allowing them to earn better than market returns over the long run.

But dual momentum works best when it incorporates multiple trend determinants. There is a synergistic effect from doing so. Most investors do not give enough importance to price trend.  Greyserman & Kaminsky show that simple trend following has outperformed buy-and-hold and reduced downside excursions back to the beginnings of every market. No other investment factor can say that. 

Using all available investment tools, we created proprietary models to achieve high and consistent returns. Our models are the culmination of a lifetime of investment research and experience. Three of our five proprietary models use a channel breakout approach that we validated on 100 years of data in this research study.

Our models are highly adaptive to market conditions and often serve as core portfolios. All are based on rigorous academic quality research and supported by out-of-sample and real-time validation. When trends weaken, we use layering of our models by switching to alternative assets or models still showing strong trends. 

Most investment approaches do not spend enough time on portfolio construction. Thoughtful portfolio structuring is an important part of optimal investing. We spend considerable time on due diligence to find the best ETFs for our models. We also look for combinations of models that will enhance returns while reducing downside exposure. 

Because of their modest correlations, our models work best when used together. We create optimal portfolios by using multiple models that complement each other. Multiple models also reduce model estimation errors and uncertainty.

We license our proprietary model signals to substantial private and institutional investors and selected investment advisors who understand and appreciate what we do. 

Broad-Based Proprietary Models

Advanced Global Equities Momentum (A-GEM)

A-GEM focuses on various stock market areas but includes bonds and other alternative assets when market conditions warrant. It adds market structure to dual momentum for determining trends. A-GEM uses daily and weekly data and usually holds three ETFs. With the advent of our more advanced models, A-GEM is now primarily used as the backup for our more focused models when they are risk-off.

Focused Proprietary Models

These models generally use an exceptional channel breakout-type trend system applied to daily data. Our latest research shows the efficacy of this approach on 100 years of industry data, giving us added confidence in our approach. Richard Dennis taught something similar to his “turtle traders.” Jack Dreyfus became a billionaire using channel breakouts of stocks making new highs. 

Most other models exit to a safe harbor asset when not in risk-on positions. Our models are unique in switching to other assets or models with positive trends before seeking a safe harbor. Model layering captures additional profit and helps reduce whipsaw losses.

Our models work well in many different markets. We chose which to use so that their combinations create balanced portfolios responsive to different market conditions. 

High Yield Bond System (HYBS)

HYBS holds selected high-yield bond ETFs when their trends are positive. HYBS can also hold intermediate and short-duration Treasury bond ETFs with positive trends.

Gold Long Trend (GLTR)

GLTR applies trend following to the SPDR Gold Shares ETF (GLD). Gold is often mean-reverting and difficult to trade, but our trend strategy handles it well. GLTR holds the A-GEM positions when it is not in gold.

Bitcoin and Digital Asset Synergistic System (BADASS)

BADASS applies our trend model to the BLOK ETF, representing blockchain technology, and to a spot Bitcoin ETF. This combination gives better risk-adjusted results than either ETF by itself. When not in these positions, BADASS holds the GLTR or HYBS positions.

Stock Market Upside Reversal Factor (SMURF)

SMURF is a stock and bond model that combines mean reversion with trend and seasonality. It buys the ProShares Ultra QQQ ETF (QLD) and the Schwab U.S. Large Cap Growth ETF (SCHG) when their trends are positive. SMURF exits when the trends are no longer positive or on abnormal strength. When not in QLD or SCHG, SMURF  can hold the HYBS bond positions or the iShares MSCI Emerging Markets ETF (EEM). 

Performance

Here are the results of the current version of our A-GEM and GLTR models compared to the S&P 500, QQQ, gold, a 70%/30% balanced stock/bond portfolio, and a 70%/30% A-GEM/GLTR portfolio. Results began in January 1999 due to limited daily data before then. We have extended ETF data with associated index data when necessary.

A-GEM and GLTR Model Performance  – January 1999 through December 2024

    S&P500   BALANCE

  QQQ

  GLD  AGEM  GLTR

   70/30

    CAGR          8.1          7.2    10.3     8.5     19.0    18.0    18.9
  STD DEV       16.5        11.7    25.3   16.7
     11.7    15.0    11.5
  SHARPE       0.55        0.64    0.51   0.57     1.55    1.18    1.57
      UPI

       0.59

        0.84    0.32   0.55     6.91    4.91    7.90
   MAX DD     -52.9      -38.1   -79.6  -42.3    -11.4  -12.9

  -10.3

   AVG DD     -10.2        -5.3   -31.3  -12.6      -1.5    -2.5    -1.3
 % UP MOS          62          64        60      53        71       61       69

 

Results do not guarantee future success nor represent returns that any investor attained. Performance includes reinvestment of interest and dividends. CAGR is the compound annual growth rate. We have estimated transaction costs to be 0.1% per trade. Balanced is 60% S&P 500 Index and 40% ICE U.S. Treasury 7-10-Year Bond Index. Maximum drawdown is on a cumulative month-end basis. UPI is the Ulcer Performance Index, which divides return by the Ulcer Index. The Ulcer Index measures the depth and duration of drawdowns from earlier highs. Please see our Disclaimer page for more information. 

HYBS Model Performances – Jan 2008 through December 2024

Here are the results of HYBS with SPY, JNK, and IEI as benchmarks from January 2008, when HYBS began. HYBS has had a higher return than the S&P 500, with only a fraction of its volatility.

 
HYBS
SPY
JNK
IEI
              CAGR
11.4
10.6
4.7
 2.3
           STD DEV
6.9
15.4
8.0
 4.0
            SHARPE
1.42
0.92
0.57
0.30
                 UPI
6.03
1.35
0.67
0.29
              MAX DD
-8.8
-49.0
-34.9
-13.7
              AVG DD
-0.9
-6.0
-3.5
 -2.5
W% MOS
69
            69
            63
             56

 

Results do not guarantee future success nor represent returns that any investor attained. Performance includes reinvestment of interest. Positions are rebalanced monthly. CAGR is the compound annual growth rate. Maximum drawdown is on a cumulative month-end basis. UPI is the Ulcer Performance Index. This divides the average return by the Ulcer Index, which measures the depth and duration of drawdowns from earlier highs. See the Disclaimer at the end of this document for more information. 

 SMURF Performance  – Jan 2008 through December 2024

SMURF combines mean reversion with trend and has the highest reward-to-risk ratio of all our models. With strategic asset allocation, a permanent bond position drags down long-term portfolio performance. Instead of always holding stocks and bonds, SMURF holds the QLD, SCHG, and EEM stock ETFs when they have the highest probability of success. Otherwise, it is invested in the HYBS bond positions. SMURF spends nearly half its time in these bonds. 

 

       HYBS

      SPY

      QLD

      SCHG

      SMURF

        CAGR

        11.4

      10.6

       23.4

         13.4

        33.7

     STD DEV

          6.9

      15.4

       36.2

         16.8

        15.9

      SHARPE

        1.42

      0.92

       0.93

         1.02

        1.92

           UPI

        6.03

      1.35

       1.63

         1.60

      11.29

      MAX DD

         -8.8

    -49.0

     -75.7

       -43.9

       -13.5

      AVG DD

         -0.9

      -6.0

     -14.4

         -6.4

         -1.6

    W% MOS

           69

        68

          66

           70

           74

Results do not guarantee future success nor represent returns that any investor attained. You cannot invest directly in our models. CAGR is the compound annual growth rate. Drawdowns are on a month-end basis. UPI is the Ulcer Performance Index, which divides return by the Ulcer Index. The Ulcer Index measures the depth and duration of drawdowns from earlier highs. 

 

Optimal Portfolios  –  January 2018 – December 2024

Here are the BADASS results and some attractive SMURF, BADASS, and GLTR allocations in that order. Because of our models’ risk controls, we can use digital assets more aggressively than buy-and-hold investors. We also reduce portfolio risk by combining models with modest correlations. Combining models with low and high volatility and return, along with modest correlations, creates the desirable “barbell effect.” 

 
BADASS
SMURF
GLTR
 S&P500
45/35/20
50/30/20
45/30/25
40/30/30
    CAGR
     62.1
    41.9
 18.5
    12.7
      45.5
     44.4
      43.1
      41.9
 STD DEV
     38.6
    18.1
 14.4
    18.1
     19.4
     18.4
     18.2
      18.1
 SHARPE
     1.44
    2.05
 1.25
    0.75
     2.05
     2.11
     2.08
      2.05
      UPI
  10.53
  13.73
 6.15
    1.85
   21.45
  21.57
   21.35
   20.95
 MAX DD
  -20.3
  -13.5
 -8.1
  -23.8
     -9.0
      -8.7
      -8.5
      -8.4
 AVG DD
    -4.4
    -1.5
 -2.1
    -4.9
     -1.1
      -1.1
      -1.0
      -1.0
 W%MOS
      68
      75
   69
       63
       71
        74
        75
         71

Results do not guarantee future success and do not represent returns that any investor attained. You cannot invest directly in our models. CAGR is the compound annual growth rate. Drawdowns are on a month-end basis. UPI is the Ulcer Performance Index which divides return by the Ulcer Index. The Ulcer Index measures the depth and duration of drawdowns from earlier highs. Please see the Disclaimer page for additional information.

Please contact us for more information and fact sheets on our proprietary models.