This is not a signal service, and I do not provide investment advice.
Automatic 7 (A7) is a Tactical Asset Allocation trading system inspired by Mebane Faber’s and Eric Richardson’s Ivy Portfolio.
A7′s investable universe consists of the following 7 classes of ETFs:
IWM or VTI (US Stocks)
EFA(Foreign Developed Stocks)
VWO (Emerging Market Stocks)
VNQ (US Real Estate Investment Trusts “REITS”)
DBC (Commodities)
IEF (US 7-10 year Treasury Bonds)
GLD(Gold)
The following two versions of A7 were released on November 30, 2010:
The basic, absolute return seeking version of A7 (A7 Classic) holds 1 to 4 ETFs based on proprietary momentum rankings. It rotates its holdings at the close of the last trading session of each month if need be. A7 classic is used as a benchmark for other optimized A7 system flavors.
A7 Timid, aka “Mom and Pop”, is a somewhat more conservative version of the portfolio.
It is essentially attempting to maximize the portfolio’s Sortino ratio, which, to date, has meant that it allocates anywhere from 40-100% to bonds and/or cash in any given month.
Actual results will be posted once enough data has been collected to provide meaningful performance statistics.
2012 A7 system variations:
For 2012, I will be publishing seven flavors of A7.
In the name of having an accurate, replicable track record, I will make every attempt to publish the allocations of all A7 variations in real time; however, if time does not permit me to do so, then I will publish only the A7 Vanilla portfolio in real time with the others being posted shortly thereafter.
Optimized systems:
A7 Smooth– optimized for absolute return and smoothness of ride; no leverage
Goal: Beat A7 on a risk adjusted basis; does not attempt to beat A7 Classic on an absolute basis
A7 Plus– optimized for absolute return and smoothness of ride; sometimes uses leverage (primarily levers treasuries via the futures market);
Goal: Beat A7 Classic and A7 Vanilla on absolute and risk adjusted basis, and beat A7 Smooth on an absolute basis. A tall order! This is what I traded from August 2011 to December 2011, and I do believe if I ever ran a hedge fund or other money management firm, this would be the aggressive version available to the public.
A7 Timid (aka Mom and Pop) – optimized for smoothness of ride
Goal: Beat 50/50 benchmark on absolute and risk adjusted basis…and to use a cliché, “achieve stock-like returns with bond-like volatility”. Again, if I ran a hedge fund, this would be the conservative version available to the public.
A7 Full Tilt – optimized for smoothness of ride; utilizes 2x leverage at all times
Goal: Maximum return in a margin account.
A7 Composite — An equal weight blend of the recommendations from A7 Smooth, Plus, Timid and Full Tilt; no leverage.
Goal: Understand how a committee of experts approach compares to using a single A7 flavor.
I will also be posting my actual results from my taxable account.
Goal: Mimic A7 Full Tilt — actual results will show deviation from A7 Full Tilt because of commissions, slippage, use of futures and options instead of margined ETFs, and operator error.
Secondary goal: Beat A7 plus on an absolute basis and be volatile enough for my high risk tolerance.
Tertiary goal: Stick to the system!
Benchmarks:
A7 Vanilla – benchmark – simple parameters – not optimized
A7 Classic – benchmark – optimized for maximum absolute returns; no leverage
50/50 – benchmark — SPY/IEF – not optimized
VT — benchmark
GTAA — benchmark