Proprietary Models

We designed our public dual momentum model, GEM, to be simple and easy to use by do-it-yourself investors. Our book featuring GEM introduced dual momentum to the world. GEM was designed to help protect smaller investors from horrendous drawdowns while giving them a chance to earn better than market returns over the long run.

Dual momentum works best when it is combined with other investment criteria. There is a synergistic effect from doing this that most investors are unaware of.

Our aim is to achieve high and consistent returns using all available investment tools. These models are the culmination of a lifetime of investment research and experience.

Our proprietary models are highly adaptive to market conditions and often serve as the basis for core portfolios. They have their foundation in academic research supported by out-of-sample and real-time validation.

Most investment approaches do not spend enough time on portfolio construction. Thoughtful portfolio structuring is an important part of optimal investing. We integrate that into all our proprietary models.

We license our proprietary model signals to substantial private investors and select investment advisors. Our models work best when they are used together due to their differences and modest correlations.

Here are our current proprietary models:

Dual Momentum Fixed Income (DMFI)

Dual momentum works as well with fixed income as it does with equities. DMFI is our simplest and oldest proprietary model. It applies dual momentum to the short and intermediate segments of the bond market. Since 1970, DMFI has had equity-like returns with the volatility of short-term bonds.

Besides its value as a stand-alone investment, DMFI is an attractive substitute for passive bonds in a stock-bond portfolio. Because of its low volatility and modest correlation to our more aggressive models, DMFI has considerable value as a portfolio diversifier.

Advanced Global Equities Momentum (A-GEM)

A-GEM focuses on various areas of the stock market but includes bonds and other assets when market conditions warrant it. A-GEM adds market structure and intermarket relationships to dual momentum in determining trends. A-GEM uses daily and weekly data instead of just monthly data.

NASDAQ Breadth and Trend (QBAT)

QBAT applies breadth, trend, and mean reversion to the ProShares Ultra QQQ ETF (QLD). When not invested in QLD, QBAT holds the same positions as A-GEM. QBAT uses only daily data. It is our most adaptive and most complete model.

Performance

Here is the performance of our Dual Momentum Fixed Income (DMFI) model compared to Aggregate Bonds, 3-10 Year Treasury Bonds, and the S&P 500 index.

DMFI Model Performance January 1970 through June 2023

	DMFI	AGG	3-10 YR	S&P 500	Balanced
CAGR	9.4	6.8	6.5	10.6	9.5
Standard Deviation	5.6	5.3	5.4	15.4	10.2
Sharpe Ratio	0.84	0.39	0.35	0.44	0.50
Ulcer Index	1.61	2.51	2.70	12.86	5.93
Worst Drawdown	-6.3	-17.2	-15.0	-51.0	-29.7
Avg Drawdown	-0.9	-1.2	-1.4	-7.6	-3.2
% Up Months	76	68	66	63	64

Results do not guarantee future success and do not represent returns that any investor attained. You cannot invest directly in our models. AGG is the Bloomberg Barclays U.S. Aggregate Bond Index from its starting date of July 1983 and the Ibbotson 5-Year U.S. Government Bond Index before that. 10 YR is the ICE U.S. Treasury 7-10-Year Bond Index. Balanced is 60% S&P 500 Index and 40% ICE U.S. Treasury 7-10-Year Bond Index. CAGR is the compound annual growth rate. Drawdowns are on a month-end basis. Please see the Disclaimer page for additional information.

Dual Momentum Fixed Income January 1970 – June 2023

Historical data and analysis should not be taken as an indication or guarantee of future performance. Performance does not represent actual fund or portfolio performance. Performance includes reinvestment of interest and dividends. CAGR is the compound annual growth rate. Balanced is 60% S&P 500 Index and 40% ICE U.S. Treasury 7-10 Year Bond Index. Worst drawdown is on a cumulative month-end basis. Please see the Disclaimer page for more information.

Here are the results of the current version of our A-GEM model compared to the S&P 500, a 70%/30% balanced stock/bond portfolio, our DMFI model, and our public Global Equities Momentum (GEM) model. We also show allocations of 50/50% and 70/30% to A-GEM and DMFI. Results begin in January 1999 due to limited daily data before then. We have extended ETF data with associated index data when necessary.

A-GEM Model Performance January 1999 through June 2023

	S&P 500	BALANCED	GEM	DMFI	A-GEM	50/50	70/30
CAGR	7.3	6.7	9.5	7.6	18.8	13.2	15.4
STD DEV	16.7	11.4	11.9	5.4	11.6	7.4	9.0
SHARPE	0.50	0.62	0.83	1.38	1.55	1.71	1.65
ULCER IDX	16.6	9.3	7.3	1.8	2.8	1.7	2.0
MAX DD	-52.9	-36.6	-19.6	-6.3	-9.9	-6.0	-7.6
AVG DD	-10.7	-5.3	-4.7	-1.1	-1.5	-0.8	-1.1
% UP MOS	62	64	67	71	70	73	70

Results are not a guarantee of future success and do not represent returns that any investor actually attained. Performance includes reinvestment of interest and dividends. CAGR is the compound annual growth rate. We have estimated transaction costs at 0.1% per trade. Maximum drawdown is on a cumulative month-end basis. Ulcer Index measures the depth and duration of drawdowns from earlier highs. Please see our Disclaimer page for more information.

We can combine QBAT with DMFI to create a “barbell approach” of non-correlated low and high-volatility strategies. Here are the back-tested results from July 2006 with 40%/60%, 50%/50%, 60%/40%, 70%/30%, and 80%/20% in DMFI and QBAT, respectively. Since QBAT is invested the same as A-GEM when it is not in QLD, these allocations are an amalgamation of three different models.

QBAT with DMFI Model Performance July 2006 through June 2023

	QQQ	DMFI	QBAT	40/60	50/50	60/40	70/30	80/20
CAGR	15.0	7.8	41.6	27.8	24.5	21.1	17.8	14.4
STD DEV	19.5	5.6	23.8	15.3	13.3	11.3	9.5	7.8
SHARPE	0.82	1.37	1.60	1.69	1.72	1.75	1.78	1.77
MAX DD	-50.2	-6.3	-19.6	-12.8	-11.1	-9.6	-8.1	-6.6
AVG DD	-7.2	-1.1	-2.3	-1.4	-1.2	-1.0	-0.9	-0.8
W% MOS	66	71	68	68	70	70	71	74

Results are not a guarantee of future success and do not represent returns that any investor actually attained. Performance includes reinvestment of interest and dividends. CAGR is the compound annual growth rate. Maximum drawdown is on a cumulative month-end basis. Leveraged ETFs have high risk and extreme volatility. Please see our Disclaimer page for more information.

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