Originally Posted by Pascal
This is disappointing on more than one level, Pascal. At the beginning of my first post in this thread I asked if using ETFs with a long-term edge would be worth considering for the robot. Your post above would have answered that question, sparing me the time and energy that I put into my later posts.
This must be how Lyndon Johnson felt during the Vietnam war when he kept sending in more soldiers with the hope that those who had died did not die in vain. (Alas, they did.) I won't belabor things, but at least let me see if I can gain a better understanding of this outcome. Perhaps others can pipe up to relieve you as the sole respondent.
Regarding the potential benefits of my idea, let's use your nine sectors as a proxy. The potential (or best possible) benefit would be seen when the best-performing model sectors and the best-performing sectors are the same. Looking at your 2010-11 numbers, the model's average two-year return for all nine sectors is 48.3%, whereas the average of the model's top-three returns is 72.1%. That's a difference of 23.8 percentage points, or a 49.3% greater return (24.6% annualized). Factor in the effects of compounding, and your conclusion makes no sense to me unless you understated the impracticality of implementing the idea (meaning that it's virtually impossible). Honestly, Pascal, I have a feeling -- from all of your replies -- that you gave little or no thought to possible ways that my idea might work, but only to the reasons why it wouldn't. For example:
If the limitations that you cited above do not apply to your nine sector ETFs -- the ones that you have been able to evaluate in detail and are considering for trading -- then my idea might be applied to them in a limited way. Although none of those ETFs are in sectors that are current SweetSpot picks, some of them have been in the past and any of them could be in the future. If and when they are, they might be worth considering for robot trading. Or even better, maybe someone knows of a proven method -- SweetSpot aside -- for ranking the nine sectors at any given time in terms of their long-term prospects. How could it not be worthwhile to explore such a potentially powerful overlay?
Respectfully,
Neil
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