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.

We aim 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 spend considerable time on due diligence to find the best ETFs for our models among several thousand available ones.

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 modest correlations. Using multiple models also reduces model estimation errors and uncertainties.

Broad-based Proprietary Models

These use multiple dual momentum modules to hold a variety of U.S. and non-U.S. stocks, bonds, commodities, managed futures, or gold. 

Enhanced Global Equities Momentum (E-GBM)

E-GBM is our oldest and most diversified model. It uses a broad portfolio of potential assets and four modules that provide variations on dual momentum. 

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. A-GEM adds market structure and intermarket relationships to dual momentum for determining trends. A-GEM uses daily and weekly data instead of just monthly returns. A-GEM has had twice the return and half the maximum drawdown of our public GEM model.

Focused Proprietary Models

These use the same exceptional trend identification system. Each model has different filtering that makes them more diverse. Each model uses daily data and holds the same assets as A-GEM when not invested in its underlying asset. Combining these models creates all-weather portfolios responsive to different market conditions.

NASDAQ Broad Advanced Trend (QBAT)

QBAT applies trend and mean reversion to the ProShares Ultra QQQ ETF (QLD) when all conditions are favorable. 

Treasury Bond Algorithmic Trend (TBAT)

DMFI uses only short to intermediate-term bonds. TBAT uses long-term U.S. Treasury bonds.  It lets us participate in interest rate changes reflective of economic activity.

Gold Long Trend (GLTR)

GLTR apples trend to the GLD ETF. Gold is often mean reverting and not easy to trade. Our trend strategy handles gold well.

Blockchain Algorithmic Strategic Trend (BLAST)

BLAST applies the trend model to the BLOK ETF. This represents blockchain and digital technology. It can serve as a gentle proxy for Bitcoin. Blockchain also has a bright future on its own.

Performance

Here is the performance of our Enhanced Global Equities Momentum (E-GBM) model compared to our public GEM model, the S&P 500 index, and a balanced 60/40 portfolio.

E-GBM Model Performance January 1970 through December 2023 
 
     E-GBM
        GEM
    S&P 500
        60/40
CAGR
         17.3
          15.8
        10.7
            9.4
Standard Deviation
          9.7
         13.2
        15.4
         10.0
Sharpe Ratio
       1.27
         0.88
         0.47
         0.54
UPI
         8.0
         2.55
          0.94
         1.59
Worst Drawdown
       -9.1
        -26.2
        -51.0
       -32.5
Avg Drawdown
      -1.2
          -3.3
          -7.5
         -3.3
% Up Months
         74
            70
            63
           65

Results are not a guarantee of future success and do not represent returns that any investor attained. We have subtracted estimated transaction fees, slippage, and fund management fees. Performance represents total returns and includes reinvestment of interest and dividends. CAGR is the compound annual growth rate. 60/40% is 60% S&P 500 Index and 40% ICE U.S. Treasury 7-10 Year Bond Index. The worst 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 the Disclaimer at the end of this document for additional information.

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.ca

DMFI Model Performance January 1970 through December 2023 

      DMFI     AGG  3-10 YR  S&P 500   Balanced
CAGR     10.4        6.8       6.5     10.7           9.6
Standard Deviation       5.7
       5.4      5.4     15.4         10.2
Sharpe Ratio

     0.96

    0.39    0.35     0.44         0.50
UPI     6.63    2.26    2.25     0.94         1.71
Worst Drawdown     -5.7  -17.2  -15.0   -51.0       -29.7
Avg Drawdown     -0.9    -1.3    -1.4     -7.5         -3.2
% Up Months       78       67      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. 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.

                                                      Dual Momentum Fixed Income January 1970 – December 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. The worst 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 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% to A-GEM and E-GBM and 70/30% to A-GEM and DMFI. 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 Model Performance January 1999 through December 2023

      S&P500  BALANCED  GEMDMFI AGEM 50/50 70/30
CAGR       7.4             6.0    9.2    9.0    19.0    16.3   16.0
STD DEV     16.7          11.5  11.7    5.7
    11.9     9.7     9.5
SHARPE    0.51          0.62  0.80  1.52    1.52   1.61   1.62
UPI

    0.55

         0.94  1.31  5.33   6.80   7.86   7.79
MAX DD  -52.9        -32.5-19.6  -5.4  -11.0   -7.6

   -8.3

AVG DD  -10.6          -4.5  -4.9  -1.0    -1.5   -1.2   -1.1
% UP MOS        61            64    65    73      69     70     71

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. 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.

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  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 December 2023

    QQQ  DMFI  QBAT  50/50   60/40     70/30   80/20
CAGR    15.3    11.3    40.4    24.9     21.8     18.7    15.7
STD DEV    19.5      5.8    24.3    13.9     11.9     10.0      8.3
SHARPE    0.83    1.60    1.53    1.68     1.72     1.77    1.80
UPI    1.29    5.83    7.24    8.08    8.35     8.65

    8.86

MAX DD  -50.2    -4.9   -19.5  -10.8    -9.0     -7.2     -5.5
AVG DD    -7.2    -1.0     -3.6    -1.8    -1.5     -1.2     -1.0
W%MOS       66       76        73       73      73       73       75

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. 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. Leveraged ETFs have high risk and extreme volatility. Please see our Disclaimer page for more information.

Four Model Performance July 2006 through December 2023

Here are the results since QLD started trading in August 2006. Sample portfolio allocations are of DMFI, QBAT, TBAT, and GLTR respectively. The use of multiple models can reduce estimation risk and model uncertainty.

 
S&P 500
   A-GEM
   DMFI
  GLTR
   QBAT
    TBAT
  25 ALL
CAGR
       9.9
     18.1
     11.3
    17.4
     39.1
       18.0
     21.9
STD DEV
    17.7
    12.4
      5.8
   15.1
    24.3
       13.9
     11.2
SHARPE
     0.62
    1.41
    1.60
   1.13
     1.49
       1.26
    1.85
UPI
     0.86
    6.01
    5.83
   4.85
     7.07
       4.30
  11.25
MAX DD
   -52.9
  -11.0
    -4.9
 -13.7
    -20.1
     -13.8
    -9.6
AVG DD
     -7.4
    -1.7
    -1.0
   -2.4
     -3.6
       -2.6 
    -1.1
W% MOS
       66
       69
      76
      64
        73
          62
      70
 25

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

BLAST Model Performance October 2014 – December 2023

Here is the performance of  DMFI, QBAT, TBAT, GLTR, and BLAST along with some possible allocations to these five proprietary models since BLAST began. Two models have high expected returns and high volatility. Two have lower expected returns and lower volatility. DMFI has the lowest expected return and the lowest volatility. Their combination creates a desirable “barbell effect”. 

 
 DMFI
 QBAT
  GLTR
  TBAT
  BLAST
    Q/B/D/G          25 ALL
   Q/B/T/G           25 ALL
 Q/B/D/T/G               20 ALL
CAGR
    6.7
   34.4
  11.5
    12.5
    42.6
       24.1
       25.8
       21.8
STD DEV
    5.5
   23.2
  12.6
   12.7
   25.0
      13.1
       13.9
      11.9
SHARPE
 1.22
   1.41
  0.93
   1.00
   1.56
      1.74
       1.75
      1.75
UPI
 3.70
   6.40
  3.46
  2.47
13.57
    10.04
       9.63
      9.31
MAX DD
 -4.9
 -20.1
  -9.5
 -13.8
 -13.1
     -10.1
     -12.3
    -10.3
AVG DD
 -1.2
   -3.6
  -2.5
   -3.7
   -1.8
       -1.3
       -1.5
      -1.2
W% MOS
    70
     73
    68
      63
      71
         73
          71
         72

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 fact sheets and additional information on our proprietary models.