Specific Changes to the Publications - February 1, 2022

All of these changes that affect Diamond publication.

If you use the Sapphire publication, the ones most relevant to you are 3,4,5, and 6.

#1 - New Numbers for the Model Portfolios

The portfolios in Diamond now use a new numbering scheme. All of the Diamond portfolios now have sg (sleeve group) numbers between 200 and 299. This series of numbers - in the 200s - indicate that these portfolios use 2x leveraged stock ETFs, which magnify daily returns by two.

The second two numbers in the portfolio number (e.g., “35” in “sg235”) indicate the maximum allocation to the leveraged stock ETFs. For example, “Diamond|Onyx 35|65 (MAIN) sg235” is a Diamond portfolio and has a maximum of 35% in the 2x DJIA-linked ETF (i.e., DDM).

If you have been using…

• sg218 as your long-term portfolio, its new number is sg235
• sg118 as your long-term, its new number is sg250
• sg131, use sg265, it is the most similar
• sg147, you can see the weight for DDM on Part III, p1, in the box on the right

The numbers in the decimal place will help me keep things organized when we add tactical sleeves, discussed below. Without a tactical sleeve, the decimal is “.1”.

#2 - All Portfolios Have the Same ETFs

Every portfolio is now a mix of the DJIA-linked and Onyx sleeves. Because of this change all model portfolios have the same ETFs and it will be easier for you to use the target weights of a different model portfolio to adjust the aggressiveness of your account, which is the third change.

#3 - Another Tool to Manage the Aggressiveness of Your Account 

From time to time, I will recommend that you temporarily use the target weights of a portfolio other than the one you have selected to use long term. This will allow us to shift the risk profile without increasing cash levels as much as we have in 2021.

I will give guidance for how many steps to shift away and in which direction from your long-term portfolio. For example, if there is a “-1” in the field marked “Box #3 Portfolio Shift” in the middle of page 1, use the target weights of the model portfolio one step to the left of (i.e., less aggressive than) your long-term portfolio in the chart on page 1. On the other hand, if there is a “1” in that field on page 1, use the target weights of the model portfolio one step to the right of (i.e., more aggressive than) your long-term portfolio.

I will continue to give guidance on the additional level of Box #2 Cash to hold. Going forward, however, we will use this tool for adjusting aggressiveness less frequently. Note that as of this week, we are using BOTH “Additional Box #2 Cash” and a leftward [less aggressive] “Box #3 Portfolio Shift.”

#4 - Box #2 Cash and Box #3 Shift Will Be Guidance for Virtually Everyone

In the past, I have said my suggestion to increase Box #2 Cash is for those with short time horizons (less than, say, 7 years) and/or who are sensitive to losses. I have been aggressive in increasing cash levels for those people.

Going forward, the guidance regarding Box #2 Cash and Box #3 Shift are for everyone except those with very long-time horizons AND who want the simplest trading possible.

#5 – Tactical Sleeves (replacing theme portfolios and add-ins)

In the past, we have used different techniques to add theme-related ETFs. The first was making available an add-in sleeve in April 2020 that included a NASDAQ-linked ETF. The timing of this was good; the NASDAQ ETFs have performed well from then through the end of 2021. We also introduced model portfolios for separate accounts that included a commodity-linked ETF, which was also well timed for the markets over the last roughly two years. Unfortunately, those techniques were cumbersome for users.

Going forward, I will add the most important theme related ETFs directly into the main portfolios. When that happens, I will also update the Shares-to-Trade worksheet. These steps will make it easier for you to take advantage of the themes.

The ETFs most likely to be added are NASDAQ-, commodity-, and gold-linked ETFs. I have added to the weekly publication "sleeve profiles" that show the historical performance of the computer models and algorithms related to holding these ETFs.

The charts illustrate the performance for:

• The sleeve that actively rotates among the ETFs listed
• A comparative mix, which is either the
• The most aggressive ETF held over the entire period, labeled buy-and-hold (B&H)
• A “neutral mix” of all the ETFs (NM). The comparative mix for Onyx is an equal-weighted mix of all four of its ETFs.

The profiles also show the Macro MRI for these ETFs, which will help you see when we are likely to add or remove these ETFs. These profile pages can be found after the detail pages for the model portfolios.

I am monitoring other ETFs for inclusion as tactical sleeves. These include global stock markets, Bitcoin, and other low-variability stock sectors.

#6 – Easy Access to Shares-to-Trade Current Worksheet

You will find a link to a current Shares-to-Trade worksheet in the middle of page 1 of the weekly publication. This worksheet, like the older worksheet, incorporates the Box #2 cash feature. In addition, it facilitates use of the Box #3 Shift feature. I will update the worksheet when tactical sleeves are added.

#7 - Upcoming Change: Performance of Actual Accounts

With the changes mentioned above, it will be difficult for the current performance system to track performance for these different variables.  I’ll provide more information at a later date. 

Example

Here is an example of what I will do this week in my Diamond account to adapt to these changes.

https://marketresilience.blogspot.com/2022/02/example-new-diamond-portfolios-and.html