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Hello again (I am not getting any work done today! I won't tell if you
don't!),
Let me first apologize to those RTs who could care less about this
system--I am sorry for cluttering up your email.
The bond market model we use looks at the DJ 20 Bond Index, yield on the
30 yr T-Bond, yield on the 3-month T-Bill, DJ Utils, and the CRB index.
Like the stock market model, moving averages are used to determine each
indicator's position ( + or -). When a certain number of them are
positive, the model is positive. When a certain number of them are
negative, the model is negative.
Since 1966 (there's that year again), the DJ-20 Bond Index has returned
around 8% with a maximum drawdown of 21% (assuming a 30 yr. T Bond
yield). Our bond market model has returned 12% with a maximum drawdown
of 4%. Again, the returns are not huge, but the risk is controlled.
Asset allocation is the key.
WE BELIEVE THAT YOU SHOULD WORRY ABOUT HOW MUCH RISK YOU ARE GOING TO
TAKE BEFORE YOU WORRY ABOUT HOW MUCH MONEY YOU ARE GOING TO MAKE.
Another point I forgot to bring up about both this system and the stock
market system, is that it doesn't matter how the models do overall,
because we don't trade them all the time--what is important is the
performance while invested. What I mean is, we only trade bonds in zone
2, so what matters is how our bond model performs in zone 2 (20.75% CAR
while invested with a 3.6% max dd). The overall numbers for the bond
market model assume you are in a money market when not invested in the
bond market (zones 3 & 4).
My next post will be about our mutual fund switching model.
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