No. of Recommendations: 9
Sorry, I haven't done a numerical follow up in a few years.
I'd love to revisit it, but I've got stuff on my plate at the moment.
But in general, I think it's fair to say that none of the timing signals mentioned in the post has covered itself with glory since then.
Timing is hard.
I have become particularly skeptical of higher frequency timing signals, though the longer cycle bull/bear detectors have had some discriminating power.
To add insult to injury, we have come off a period that SPY has done quite a lot better than RSP, so using RSP as the basis has been the safer option, but not the higher return one.
This is historically the minority of the time, but it certainly happens, sometimes for a few years at a time.
On the lighter side, the strategy as defined doesn't wipe you out when the timing is bad, mainly you just don't get a return during those periods.
One flaw of the system as described, which I don't think was mentioned in the thread: some of the time you're both long and short, and the returns of the two generally cancel out. Cool.
Picture an interval that the index is going up but you're hedged--that happens. The mark to market returns will be flattish. Still cool.
Since you are long stock and short futures, the long side produces unrealized profits while the short side sucks up cold hard cash immediately.
Where does that cash come from? If it were all of your portfolio, you'd have to liquidate bit of stock on the way up. And, to keep the hedge ratio correct, you'd have to close bits of the hedge as well.
It's not a night and day issue, but horrible bookkeeping and hard to decide the precise liquidation/rebalancing/reinstating system you'd use.
If you're the sort of person who generally keeps a big pile of cash around at all times, it's not an issue.
Jim
