The Global Adaptive Strategy Explained

Number One

Identify Market Conditions

The Market Conditions Model measures equity and fixed income market conditions in a probabilistic way. For example, it may signal Favorable conditions if there is a high probability of a market rise with low risk. However, a signal of Favorable conditions is not a guarantee of a Bull Market nor does a signal of Hostile conditions presage, with certainty, a Bear Market. However, the three conditions, when coupled with the appropriate fund baskets, work incredibly well in lowering risk and improving returns across full market cycles

Tactical Asset Allocation Strategies Market Conditions Model

Number Two

Select Fund Basket

The Tactical Model selects one of three fund baskets based on Market Condition Favorable, Balanced, or Hostile. Each fund basket consists of 8-14 low-cost Exchange Traded Funds which have been carefully selected and validated for a specific market condition.


A strongly trending market with little risk of major decline. Unexpected declines are likely to be temporary and relatively short-lived.

The fund basket emphasizes domestic and international equities supplemented with real estate, commodities and fixed income.


Risks of market decline and opportunity for advance are roughly equal; however conditions are supportive of increased volatility and uncertainty.

The fund basket includes a mix of larger domestic and international equity funds together with a complement of high quality fixed income.


High risk of extended market Correction (10%+) and Bear Market (20%+) declines and large equity drawdowns.

The fund basket emphasizes a broad spectrum of government fixed income together with a limited selection of large cap equity funds and commodities.

Number Three

Rank, Select, and Allocate

The Tactical Model then ranks, selects and allocates the best performing funds from the selected basket. Should there not be sufficient "best performing funds", the allocation is assigned to cash.


Four years of research and development went into Adaptive Dynamic Momentum, our ranking algorithm.

While most tactical ranking is performed using fixed length periods; Adaptive Dynamic Momentum identifies the optimum ranking criteria for each fund, each week.

The much improved trend identification results in higher returns and lower drawdowns.


Fund ranking is just the beginning of the process for selecting funds for the next rebalance.

We are just as interested in how well a fund is likely to continue performing in the future as how well it has performed in the past.

Adaptive Dynamic Momentum assigns a confidence level to each fund's trend ranking. We use the combined ranking and confidence level to make the final selections.


Once the funds eligible for the next rebalance are selected, portfolio weights are assigned to each fund.

We employ volatility weighting algorithms which allocates larger percentages to funds with low volatility and smaller percentages to funds with high volatility.

The small decrease in return is offset with a larger decrease in portfolio volatility.

It requires just a few minutes each month to rebalance the portfolio using the monthly Rebalance Notice.


The chart shows back tested results for the Full Market Cycle beginning with the Bear Market in September 2007 and continuing through the most recent month. Dividends are included. The table, also produced by the Tactical Model, shows month by month and annual returns together with summary statistics.


(included with each subscription)

There are at least two good reasons to consider a tactical fixed income strategy to supplement a broad market tactical strategy:

  • Eating distributions - some investors would prefer to withdraw distribution income for living expenses than “eat the seed corn”.
  • Tactical diversification - it is exceedingly unwise to put all your eggs in one basket, even when that basket looks far better than all the other baskets on display.

The TAAS Adaptive Income Strategy provides subscribers with a Fixed Income strategy which delivers outstanding results coupled with low drawdowns.

The chart shows back tested results for the Full Market Cycle beginning with the Bear Market in September 2007 and continuing through the most recent month. Dividends are included. The table, also produced by the Tactical Model, shows month by month and annual returns together with summary statistics.

What makes our strategies well worth the annual subscription price?

Low Volatility

I have tested many thousands of tactical strategies and, in every case, my first focus has been on drawdowns, then returns.

The strategies which have resulted from this discipline are strategies in which I have confidence sharing with our family and subscribers.

Market Conditions

One strategy does not fit all markets.

The integration of our Market Conditions Model, condition-specific fund baskets, and Tactical Model yields a strategy combination which is designed to navigate the full spectrum of market conditions.

Selection & Allocation

Our algorithms for selection and allocation of funds to each rebalancing are unique.

Adaptive Dynamic Momentum, which increases the accuracy and timeliness of trend identification, is coupled with confidence based selection algorithms and volatility weighting.

This combination provides the unique building blocks for the TAAS Global Adaptive and Adaptive Income strategies which lowers your risk and improves your returns ... well beyond the capabilities of traditional Asset Allocation methods.

A Caveat

A 35+ year secular bull market in both equities and bonds began in 1982. The last cyclical bull market in equities (and to a lesser extent, bonds) began 10 years ago. Returns during these periods have been historically exceptional. Market returns for the next 10 years are highly unlikely to approach those of the past 10. In fact, there is at least some evidence that market returns have a high probability of being significantly lower and that bonds and equities (which have risen together) may actually begin working at cross purposes.

Investors should not use the statistics shown for our strategies to establish expectations of specific levels of returns or drawdowns. Investors should, however, appreciate that we believe the principles which underlie the Global Adaptive and Adaptive Income Strategies are enduring enough to significantly outperform the market in the future, both in lowering risk and in improving returns.

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