A Daily Interval

On Wednesday of this week, Alphabet (GOOG) reported earnings that were not well received by the street. A couple of the metrics missed, raising questions about whether the company is spending too much money on capex for AI, too much relative to what they can make back. Earlier on Wednesday I saw an ad for the T-Rex 2X GOOG ETF which has symbol GOOX. 

We've looked at leveraged products from several different angles including the idea that the more volatile the underlying, the more the 2X fund will deviate from it's reference security when looked at over longer periods. Looking at GOOX, it's been pretty close to 2X most of the time, not all of the time but most of it. 

Here are the month by month results.

Of course it is not perfect but many of the individual months are pretty close. Many of the stats are 2X too....except growth rate which is 50% more than the reference security. 

Figuring out the capital efficiency is interesting. There is clearly no assurance that GOOX will capture 2X GOOG for more than a day despite many months where it has come close. Stocks that are a little less volatile have less volatility drag and have the opportunity to come closer to 2X over a longer period. 

Sandisk (SNDK) is far more volatile than GOOG and so SNXX has been more like 1.1X over the shorter period that it has been trading. I would also throw in that since the start of 2026, GOOX is down far more than 2X GOOG. I think it is useful to revisit these every so often even if the likelihood of using them is very low. 

Related to leverage, the 2026 ReturnStacked Symposium was held in Chicago this week. During the event they Tweeted out photos with quotes attributed to the speakers like the following. Last year, after the event they shared a lot of the content so we'll see if they do that again this year. The content and the theory of course fasciate me.

We haven't been able to make it work best by stacking them all. The following is a variation of what we've looked at several times before. 

Both portfolios have the same 40% to equities, the same 20% to managed futures replication, the same two fixed income funds and then in the portfolio leveraged with RSST, we added APHPX which is like a global macro fund. The premise from ReturnStacked is not about leveraging up, it is about adding diversifiers without having to give up equity or fixed income exposure. 

I also ran it with 40% in JAAA as opposed to an additional alternative and that also lagged by a similar amount. The lag is slight and it is only a touch more volatile so it's not bad, it's less volatile than AOR which is 60/40 and had a higher Sharpe Ratio than AOR too. That's good but the leverage isn't adding anything versus not being leveraged. 

The problem is highlighted. I think RSST versus SPY/DBMF is a reasonable comparison, one we've used before and RSST seems to always lag. I've said this before, I'm not sure this is actually solving a problem. 

Last one is about the tokenization of funds. Here's another angle on this related to interval funds,  evergreen funds or any other fund that does not have daily liquidity. We are not yet at the point I am going to describe. The big idea is that it will soon be possible (probably) to buy a tokenized version of something like Ark Venture Fund (ARKVX) or the KPC Litigation Finance Fund and be able to sell it on chain without the limits or gating. ARKVX was profiled in this context in that link I dropped and KPC is a fund I've written about once or twice before, it doesn't have a symbol.

You can think of the tokenized version of a fund as being a different share class of a fund like mutual funds have. That's a little too simplistic but it paints a good picture. Whatever limits there are to buying the funds through the actual company like being accredited or needing an advisor would still be in place. It is not clear to be whether those restrictions would still be in place for someone buying a fund on chain. 

One big issue though could be the pricing when you try to trade on chain. Maybe it will be close to NAV but maybe not which is a risk but there is a price that you'd be able to get out if you had to. 

This concept will make its way to brokerage accounts which will make every aspect easier. Again, it's very early, we're not there yet, this is simply a concept that I think could be useful. A small slice into something like litigation finance interests me but there is no scenario where I am giving up daily liquidity. Maybe as described it's more of a step toward daily liquidity. 

The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.

A Clear Path To Catastrophe

The new VanEck Wealth Builder ETF (WBMO) looks interesting. It sort of comes from a model portfolio of ETFs that VanEck has been running for a little over two years. It's not a precise description but it appears to be similar. 

• 44.8% Domestic equity
• 7.7% Foreign equity
• 38.2% Fixed income 
• 8.6% Alternatives; gold, bitcoin, inflation, infrastructure, energy

I was able to tease out a backtest from Grok but fair warning, the numbers from Gemini were different. 

CAGR: 15.21%

Annualized volatility: 11.81%

Sharpe ratio: 0.91 (using ~4.5% risk-free rate) / 1.29 (rf = 0)

Total return: +45.71%

Max drawdown: –12.39%

The hypothetical backtest goes back to January 11, 2024 which is not a huge sample size but in that time frame we can make a comparison to SPY, VBAIX, PRPFX and AQRIX.

AQRIX is a multi asset fund and I think that it speaks well for WBMO that it was close to AQRIX. The fund is not a static allocation so the back test of just taking a snapshot today and going back a couple of years isn't that tight but I do tend to think that stats related to volatility can stand up even if the growth rate is off by a little. So that's the positive. The....maybe not negative but to me questionable is some of the largest holdings. 

• SPYM 17.52%
• QQQM 11.72%
• SMH 3.08%

There are some holdings with larger weightings between QQQM and SMH but SPYM and QQQM are the two largest and SMH is also in the top ten. There's a lot of overlap there. I think having the S&P 500 and NASDAQ 100 in the same portfolio is questionable. I asked Gemini about SPYM and QQQM and its initial response was to rationalize it by talking about making an active decision on cyclicality and mega cap tech and that SPYM/QQQM was a cheaper alternative than the only other choice of buying an actively managed fund instead.

Buying a more expensive actively managed fund is not the only alternative, not even close. Gemini backed off of that assertion. I asked if SPYM/QQQM might be an attempt at capital efficiency to increase the equity exposure with volatility and beta and Gemini said yes to that. My last question on this point was with all of that, does the 3% to semiconductors via SMH support the idea of capital efficiency or does it support my skepticism about overlap and questionable portfolio construction?

The 3.01% weight to the VanEck Semiconductor ETF (SMH) is the ultimate piece of evidence supporting your skepticism of overlapping index exposure.

It completely undermines the "clean tracking" or "capital efficiency" narrative and serves as a classic example of unnecessary duplication in portfolio design.

Ok, skepticism doesn't have to mean it's a bad fund but there are ways to get the same beta and volatility, if they are operating at that level, without overlapping like this. I do take a dim view of this sort of portfolio construction but you can check out Meb Faber's thoughts on his Twitter feed, I think he's said even harsher things. 

Now autocallables. One of the Innovator ETF guys was interviewed by ETF.com at Future Proof and part of the conversation was about autocallable ETFs. Innovator has two of them (at least two anyway), ACEI and ACII. The dispersion between the two is a great example to learn from without needing to dig all the way into the complexity of these funds.

ACII targets a 9% distribution and owns a series of autocallables on broad index ETFs. ACEI targets a payout of 13% or so and owns autocallables on individual stocks. 

A useful building block of understanding that we've been working with is that everything else being equal, the higher the yield of an autocallable fund, the more volatility it should have. ACEI and CAIE have very similar yield targets and the volatility is similar but ACEI appears to have really struggled. 

ACEI owns autocallables on individual stocks and CAIE owns autocallables on a more volatile variation of the S&P 500. Because of this, ACEI is more exposed to single stock volatility, it's more sensitive to equity volatility, versus index volatility for ACII and CAIE. 

This is another example where it's easy to get taken in by a mid-teens distribution but a 9% payout with less volatility is a very solid outcome and likely to be far less difficult to hold onto. If you want to step in, just keep the sizing right. A 60/40 portfolio with 40% in a bunch of different lower yielding autocallable funds seems like a clear path to catastrophe. 

The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.

Good, Not Riskless

Abnormal Returns included this link about managed futures in its post today. It doesn't offer anything new but I thought of a way to look at them versus what we've done before. I mentioned once before that Testfol.io can go back to 1987 with simulated KMLM.

The chart does a good job of explaining the potential benefit of managed futures. You need to look closely in some instances but KMLMsim diverges from the S&P 500 and 60/40 at almost every negative turn. 

Since then, it's been less reliable. 

From Jan 1 2008 to now, KMLMsim has compounded at 3.42% versus 11.30% for SPY and 8.43% for 60/40. A long time ago at other URLs for my blog I theorized that T-bill rates at zero or close to it hurts managed futures. Managed futures funds hold a lot of T-bills so for much of the period in the bar chart when rates were very low, there was 300-400 basis points of T-bill interest those funds weren't getting. When I was side-gigging with AdvisorShares I had opportunities to ask people about my theory and was routinely told it wasn't a factor. It was a factor. 

T-bills now have yield. Of course T-bills had yield in 2023, 2024 and 2025. Obviously yield is not the only factor driving returns, if it was, there'd be no argument to own managed futures. Holding managed futures in that recent three year period meant riding out a combo of whipsaws and choppiness which are both obstacles for the strategy. If that's too many excuses then you probably aren't interest in managed futures. 

The other thing today is that I wanted to dig in a little on the Innovator Equity Managed Floor ETF (SFLR). It's in the neighborhood of being a buffer fund but it's also the opposite of a buffer fund. Instead of protecting against the first 9% maybe or 15% down, exposing holders the the decline beyond that first 9%, 15% or whatever the objective is, SFLR offers no protection against the first 10% down, the floor so to speak, but then offers protection against for the rest of the way down after the first 10%. 

Except when it doesn't. 

The fund puts on an option combo. This is from the most recent fact sheet. Obviously it is stale but you can see that it sells calls to pay for a ladder of puts.

SFLR has a beta of 0.61 and is unlikely to keep up with SPY. That's not a negative, it is important to understand going in. If the market is up a little, then yeah, it will probably be pretty close but up a lot and the calls will cap the upside. 

The fund is at risk of "not working" in a long drawn out decline like 2000-2002. Gemini worked through an example where it thought SFLR would have been down 30-35% versus 50% for the S&P 500. The reason has to do with how the market kept going down and the new puts that were purchased along the way were at lower strike prices giving more room to the downside. The 10% floor would have kept getting set lower. 

The other type of scenario flagged was a very fast decline and snapback. Depending on when that happens in relation to when the calls expired, the fund could miss out on the snapback. None of that has happened so far though.

Once you realize that this will not keep up with the S&P 500 when the S&P 500 is up a lot, it becomes easier to accept SFLR has had a very good result.

Generally speaking, including a fund that could have decent upside, not full but decent, while helping to bring down the portfolio's volatility is a valid approach stressing having the correct expectations. It will not have full upcapture.

Going full floor or full buffer is probably a bad idea. In the 2000-2002 scenario, it would be easy to think the fund wasn't working correctly and give up at the bottom. Having the correct expectations includes understanding these funds relying on options combos to deliver some sort of managed result are not infallible. SFLR might be a good fund but it's not a riskless fund. 

The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.

A Clear Source Of Volatility

We've taken a couple of looks at the Northern Trust 2055 Inflation Linked Distributing Ladder ETF (TIPD). The example we came up with for a use case was to cover property tax for most or all of retirement. Our property tax in Walker is about $2000 so $60,000 in TIPD should cover it. The inflation rate for things like Medicare or homeowners insurance typically exceeds the inflation rate used to adjust TIPS.

The chart compares TIPD with UTHY which tracks 30 year treasury bonds. TIPD bottomed out with a 12.5% drawdown on a price basis and is currently down 9.5%. It has a holding maturing in December which will be the big payout for the year. The duration of the fund will slowly go down as we move closer to 2055 but it will be sensitive to interest rates for many more years. For a little context, TIPA which is the Northern Trust fund maturing in 2030 is down a little less than 2%.

Everything is working as it should but when we work on some of these ideas (theories), they are always interesting but it is important to check in on what actually owning, in this case TIPD to cover 30 years of property tax is really like. 

If someone can devote $60,000 or maybe a higher amount for a more expensive county to such a narrow purpose then maybe it makes sense but it will be volatile. I would not devote 10% of my nest egg for long term property tax coverage but 5% might be reasonable.

Clearly TIPD would be a source of volatility, repeated for emphasis.

The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.

My Experience With Amazon One Medical

A recurring theme here is the extent to which everything about the healthcare system is broken. We generally have long wait times, insurance is absurdly expensive and we are collectively very unhealthy. Most people take a lot of medication, not only for whatever issue they have but also medication to manage the side effects of the medication they take to treat whatever issue they have. 

Neal Templin's latest article for Barron's looks at how he uses AI to help with health stuff. One example he gave was about whether to use creatine or not. One way he would not use it was to get an opinion about getting a heart ablation. He said he saw his doctor and then got a second opinion from another doctor. AI could have played a role in his ablation though. In that instance, AI could have helped him come up with better questions to ask his doctor and his second opinion visit. Better questions, not conclusions. 

A couple of weeks ago I said that I had signed up for Amazon One Medical (AOM). I hadn't had a physical in a while and needed a new doctor. I tried going the conventional route with Banner in Tucson and they couldn't get me in until March. 

On October 7th I enrolled in AOM, had a video consult with a doctor on October 9, got blood drawn on October 16th and had the follow up to go over the bloodwork on October 23 (all good!). AOM is a few things. It can match you up with a doctor which is what I did and it takes my admittedly crappy health insurance which is another form of optionality, cheaper insurance. Through the AOM system, the doctor sent orders through to Sonora Quest which didn't go too smoothly. I went to the one in Prescott Valley and they didn't know what to do. I called in to AOM customer service and they are very good, the rep sent me the orders through the portal which I printed and took in with me to a Sonora Quest in Tucson. 

In addition to matching me with a doctor and the customer service number, there is a concierge type of service for simple medical things, like refilling prescriptions or getting a new prescription for something like a urinary tract infection (their examples). That sort of consult is pretty much available immediately. Concierge is my word, if you think there is a better or more accurate description, please leave a comment. 

There was a little bit of a learning curve for me and I probably still don't have it all dialed in. I couldn't figure out how to find the orders for my bloodwork. It wasn't an issue for AOM to send it as I described but still. I also had trouble figuring out how to circle back to the same doctor for a follow up. On a different call to AOM customer service the rep said to think of it more as a clinic which made sense but I was able to find the same doc and follow up with him.

A fair point here is to wonder, well is the doctor any good. I have no real basis to know. I found him on LinkedIn and he's been practicing since 2002. He seemed to know things and he was personable. 

If you've been reading my blog for a while you might know that I am a health enthusiast, I get teased in the fire department about being a health nut which is fair. When I had the follow up with the doctor he said something to the effect of "you weren't kidding about exercising," he could see that in my numbers. I also got a couple of "wow...for your age" comments which I take as supporting the idea that a couple of simple habits (lift weights, low carb diet) can slow down the aging process on cellular and metabolic levels.  

Good health and fitness is optionality, I've made that comment 100 times. If you're skeptical about AOM or any other telehealth and think the quality of care might not be great, you might be correct for someone who needs more care and more interventions. The optionality in this context is being able to get away with substandard care for now because I just need bloodwork every so often, if something pops up, hopefully I'd be catching early. 

I am acutely aware how fortunate I am to not need any clever doctoring or need to manage any sort of chronic malady. I believe lifting weights and greatly reducing carbohydrate consumption is how to avoid chronic conditions that require medication and then more medication to treat the side effects of the first medication. I realize I said that above. 

Amazon One Medical solves a problem for me which is why I am sharing this, maybe it solves a problem or two for other people too. 

Options, Options, Options!

We'll start with a Barron's article that took quick looks at several categories of options oriented ETFs, mostly buffer funds and covered call funds. There wasn't anything new but there were some good points to reiterate. The space is growing dramatically of course and there are bound to be gaps between expectations and reality. 

Keeping it high level, buffer funds typically don't protect against losses beyond a certain point. Nine percent and 15% are common points where there is no further protection. They also cap the upside. The S&P 500 is up 23% in some random year? Great! That's not what you're getting with your buffer fund. Not even close. Getting 9% when the S&P 500 is up 23% isn't automatically terrible. Building a portfolio that can get a long term real return of 4, 5 or 6% irrespective of broad market outcomes with less volatility solves problems for a lot of people. Or building a portfolio where part of it has the opportunity to capture the full market gain, while another portion gets an adequate real return with less volatility also solves problems for people. 

The above about buffer numbers and how they work are basic building blocks, there's been a lot of innovation and product development in the last couple of years. 

We've spent a lot of time on covered call funds. JEPI's great success early on might have been the catalyst for setting off the huge renaissance in these funds. Twenty years ago there were a lot of closed end funds that sold calls and now there are a couple hundred ETFs from various providers. We've looked at how to use them effectively because they also should be expected to cap the upside. Again, not a problem for people who realize this going. Having the correct expectation for something and having it meet that expectation is a great outcome. We have fun playing around with funds that are NAV incinerators but in real life, I would say they should be avoided. 

The last category from Barron's was autocallable funds. There was no real attempt made to get into how complex these funds really are. Most of them are not NAV incinerators so there's that. Part of the appeal of covered calls funds is that they have the opportunity to be less volatile than the index but I wouldn't expect that from too many autocallable funds. Not every covered call fund will fit that bill either but JEPI does for example and with autocallables, CAIE is one of the biggest and it's volatility has been very close to the S&P 500. We've highlighted JELM from Janus as likely to be the least volatile but the trade off is that it is very low yielding compared to other autocallable funds. ACSP from ProShares has a very high targeted yield at 18-19% and it's day to day volatility is very high. It is unlikely that autocallable funds will malfunction or otherwise break but if it happens, it won't be easy to understand why. 

Today I learned from Upworthy that there are Bitcoin buffer funds. iShares will be listing one soon with symbol PBT but there are a couple of others including QBF from Innovator and FirstTrust has a series of them too. For this post will look at BFAP from FirstTrust. 

Uh oh, what's up with QBF? Gemini thinks that the quarterly reset is a mismatch with Bitcoin's volatility and reports that the fund will be liquidating in January. BFAP appears to be working. It's an annual reset (actually 53 weeks?). It will provide up to 26% upside and will protect any downside beyond 15%. If Bitcoin falls 10%, no protection. If Bitcoin falls 30% then BFAP should only fall 15% of course there is no guarantee from First Trust on that. A crucial point of understanding though is that the protection against the downside is intended to come from holding the fund to the reset date. If Bitcoin cut in half between June and October, BFAP would drop a lot in price too. Probably not that full 50% but either way the protection is designed around the reset date. 

You're going to laugh at me but that one is very easy for me to follow. 

Here's an interview from ETF.com with JD Gardner from Aptus ETFs. They have several options oriented ETFs. He talked about building a portfolio that is 75% equities and 25% options oriented ETFs to get a result that is similar to 60/40 but without bonds, he is not a fan of bonds. He says done the right way, 75/25 allows for more equity exposure  without larger drawdowns. 

The best Aptus funds to test the theory are too new to draw any conclusions. Gemini says their buffer fund of funds with symbol ABUF would be their best fund to use so we'll use BUFR from FirstTrust instead because it has a much longer track record.

Using BUFR, the theory stands up. The drawdowns were not bigger, the worst one was the same but BUFR doesn't go back far enough to take in the Covid Crash of 2020. If we swap BJUL in for BUFR which may not be apples to apples, we can capture the Covid Crash and 75% SPY/25% BJUL was down 30% versus 20% for VBAIX. I don't take that as a Karl Popper situation, more like there are some market events where there are very few places to hide and the Covid Crash was one of them. BTAL worked because it is essentially an inverse fund and although managed futures worked during that event, I attribute that more to luck than anything else. 

Speaking of options, Matthew Tuttle was interviewed at TheStreet.com. Here's a snippet where he talks about the breakdown of his updated permanent portfolio idea that we looked at a few weeks ago. Here's the breakdown which includes option strategies. 

• 25% Equities (he talked about higher volatility equity exposures)
• 25% "Beyond bonds" which he defines as property and casualty insurers and pre-merger SPACs
• 25% Hard money like gold, Bitcoin and digital credit like the Strategy preferreds
• 25% Tail risk which includes managed futures, options and T-bills

His theory about P&C insurers is lost on me. In terms of helping with equity market volatility the way bonds used to, the track record is mixed using the KWBP ETF as a proxy.

He said pre-merger SPACs mostly own T-bills and pay T-bill-like interest. So why own it if it is like T-bills?

He's onto something here. There is opportunity for mergers to increase the price of holdings in the fund and there is essentially a put option at $10 per share with SPACS, $10 is the price they get issued at. To the extent companies post SPAC merger might be crappy, the latest the fund sells is when the deal closes, sometimes it sells on the announcement but it does not stick around to find out whether it's a good company post merger or a piece of crap. Also, it would be reasonable to think that if SPAQ had existed in 2022, it would not have gone down anywhere near as much as the popular bond ETFs with duration. SPAQ mostly owns T-bills.

Let's take another run at replicating Tuttle Permanent Portfolio Update

You see zero allocated to STRC because the track record is too short but that is what he means by digital credit. We looked at SATA recently which is from a different company as another example. NOVIX is fund we have never mentioned, the Glenmede Global Secured Options Fund. It owns a mix of ETFs and option combos seeking capital appreciation while tamping down the volatility and declines. The track record on the second objective has been spotty but it has done well enough in its category to be a 5 star fund by Morningstar. 

I didn't add more T-bills. SPAQ is in there for the theory that it is a better proxy for T-bills and managed futures is mostly T-bills under the hood. 

Tuttle's idea certainly worked in the period available to study in terms of growth rate. We need to go to Portfoliovisualizer for the drawdown chart. There's some sort of distortion with NOVIX that I don't think changes the CAGR but does skew the drawdown.

Updated Tuttle has a decent record for going down less but it's not infallible. The volatility of Updated Tuttle is not much lower which makes sense, NOVIX and Bitcoin are pretty volatile. 

This was a long post but productive and covering pre-merger SPACS is new for us. 

The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.

High Commodity=High Volatility

ETF Hearsay Tweeted out about an ETF filing from Grant Park. They are probably most known for their Grant Park Multi Alternative Strategy Fund (GPAIX). It's a four star fund and has been around quite a while. We've looked at it a couple of times for blogging purposes but not too often. The new fund will be an income fund but the description reads like it will be similar to GPAIX.

There's another fund, the Grant Park Dynamic Allocation Fund (GPKIX). It's coming up on two years of trading so it is still new. The literature compares it to the S&P 500.

The fund has done well. It's been pretty close to the S&P 500 with somewhat lower volatility and a much lower beta. I threw VBAIX in there because based on the asset allocation, it seems like it is more of total portfolio solution than an equity fund.

Here's the current allocation.

It is an actively managed fund but from what I can find, this mix shouldn't change much, it hasn't changed much so far. If you know different about that, please leave a comment. The fund owns a combination of ETFs and futures contracts to run its strategy. The fund is leveraged and while the amount of leverage is not fixed, Gemini pegged a range of 200-350% of notional exposure. That doesn't mean it is leveraged up, the leverage includes selling short. 

I took a stab at replicating it as you can see. PDBC is held in the fund but I don't believe any of the others are. 

The replication might be selling the fund short a little bit in terms of what they might have done over a longer period but the replication looks far more like VBAIX, and PRPFX too but not really much like the S&P 500. The volatility of the replication is also similar to the vol of the actual fund. I wouldn't expect a fund with a thirty something percent weighting to commodities to have a reduced volatility compared to VBAIX but obviously has a lower vol than SPY. Lower vol is a the wrong expectation. 

The bar chart shows quite a bit of year by year differentiation and reiterating a point we make frequently, being different is not always easy to endure. If we think about it as an alt, pairing it with VBAIX, the result is mixed. Better growth rate and Sharpe Ratio but no place to hide in the couple of drawdowns since it started.

As new as the fund is, it's too early to draw any conclusions but I do think Grant Park knows what they're doing and the fund is interesting so I'll keep tabs and we can revisit in the future.

The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.