The Papa Bear is based on the book Muscular Portfolios (BenBella Books, 2018) by Brian Livingston. The strategy is a clone of a 2013 whitepaper by Mebane Faber. It is an extension of his book The Ivy Portfolio, which has been tracked with real money since 2006.
The Papa Bear is designed to (1) keep losses small during bear markets, (2) underperform the S&P 500 with less volatility during bull markets, and (3) wind up with superior performance over each complete bear-bull market cycle.
The investing menu consists of low-cost exchange-traded funds (ETFs) that track 13 asset classes. Your portfolio allocates roughly equal dollar amounts to the three ETFs with the strongest momentum, as determined by the strategy rules.
The table below updates a couple of hours after the close every market day. But don't trade every day! Check and tune up your portfolio only once a month, on the same day of your choosing. The best gain is achieved by reallocating on or around the last trading day of the month (see Newsletter #28).
| Asset class | Average of 3, 6, 12- mo. gain | ETF symbol | Price | Buy |
|---|---|---|---|---|
| Gold | +23.57% | IAU | 60.86 | 34% |
| Developed-market large-cap stocks | +6.99% | VEA | 52.65 | 33% |
| US Treasury notes, 10-yr | +4.93% | VGIT | 59.54 | 33% |
| Non-US sovereign & corporate bonds | +3.13% | BNDX | 49.34 | — |
| Emerging-market stocks | +2.84% | VWO | 45.23 | — |
| US real-estate investment trusts | +2.25% | VNQ | 88.62 | — |
| US large-cap growth stocks | +1.40% | VUG | 383.84 | — |
| US high-quality corporate bonds | +0.78% | VCLT | 73.78 | — |
| US Treasury bonds, 30-yr. | -0.68% | EDV | 67.73 | — |
| US large-cap value stocks | -0.85% | VTV | 166.08 | — |
| Commodities | -5.98% | PDBC | 12.48 | — |
| US small-cap growth stocks | -8.99% | VIOG | 105.01 | — |
| US small-cap value stocks | -11.65% | VIOV | 79.14 | — |
Strategy rules:
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Execution Rule: Buy or sell an ETF only if its bid-ask spread is less than 1.0%. (If greater than 1.0%, a "flash crash" might be occurring. Check an hour later to see whether an orderly market has been restored.) Popular ETFs typically have spreads below 0.2%, but some bond and commodity ETFs have legitimately higher spreads due to trading differences.
KEY TO STATS
Average of 3, 6, 12-mo. gain is equal to an ETF’s nominal total gain (including dividends) over the average of the past 63, 126, and 252 trading days.
Prices and returns are recalculated approximately 2 hours after market close.
A flash crash is a temporary situation lasting a few minutes, during which prices and spreads suddenly move far from their typical values.
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