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.

Cracking The Cockroach Again! Maybe!

A couple of years ago I proclaimed that I Cracked The Cockroach! Maybe! Finominal took a run at dissecting the Cockroach Portfolio this week. It came via email, I don't have a link. As a quick reminder, the Cockroach comes from Jason Buck and Mutiny Funds and is allocated as follows.

Here's how Finominal replicated it versus my post from November, 2024.

Finominal's version is obviously much simpler but I think my version is truer to the complete allocation as laid out in the circular chart. The way Finominal modeled it, they have most of the outperformance being attributed to massive outperformance in 2022 and that it was pretty close to 40% ACWI/60% LQD that they used to benchmark against the rest of the time. They didn't actually specify LQD, they described the fixed income sleeve as US Investment Grade Bonds.

There's been some differentiation along the way but you can see that the outperformance in 2022 is a big part of the story. That's not a knock. Looking like a benchmark except when the benchmark tanks is a pretty good outcome. 

The backtest goes back to when testfol.io first has data for EBSIX which is a fund we used to use more frequently for blogging purposes. I included the 40/60 benchmark but I also threw in a more typical 60/40 too. My thought on benchmarking might be a little unusual but in this context, the exercise is about trying to get close to the return of 60/40 where 60% is in equities but with less volatility, hopefully a lot less or maybe smaller drawdowns or some measure of all-weather/crisis alpha.

This next table cuts off to when I wrote the blog post on 11/27/2024. The volatility numbers stand up about the same which makes sense and you see the CAGR pretty close to the 60/40 we're working with today.

My version probably violates the idea of a lot of simplicity hedged with a lot of complexity. There's probably a lot of complexity there. 

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.

Build Your Own Glidepath

I had a crazy idea about creating your own glidepath. I'm not the first person to come up with this per an interaction with Gemini but it's an interesting idea that might come in handy.

The idea ties in somewhat with the bridging concept we have been working with lately. As a quick reminder, the bridge we've been talking about is taking a smaller piece of money to live on for several years until the next financial milestone like taking Social Security or taking RMDs. The idea would be that this piece of money wouldn't need to last for more than ten years, that it would be expected to deplete or maybe get to the end of intended bridge duration with a small emergency fund amount left over. 

More correctly this could be a path to a different type of bridge versus the very yield concept we have been working with. So the example we'll work with starts putting $200,000 into a high yielding derivative income fund, SPXX for this post because it has a long track record. It's high yielding alright but not an NAV incinerator. It's ten year price only CAGR has been 3.29% so the yield has averaged out to 7.59% but in real life it has been lumpier than that. 

Starting out with 100% of a bridge account in equities might be difficult but we can mitigate that quickly. The idea is to take all of the yield from SPXX and put that into Stone Ridge Reinsurance (SHRIX) which is a catastrophe bond fund and reinvest SHRIX's distributions to buy more shares. Each year that goes by, again we are working with a ten year window, the equity percentage goes down as we move closer to retirement. 

Testfol.io says that $200,000 in SPXX ten years ago would now be worth $276,444 (price only gain). Gemini says that the total value of the account, SPXX price only plus the purchases/reinvestment of SHRIX would now be worth $516,000 which is slightly ahead of putting the $200,000 into VBAIX ten years ago instead. Starting with just SPXX would have been far more volatile than VBAIX but the volatility would have steadily decreased as the SHRIX position grew relative to the account. What started as 100% SPXX would now be 53% SPXX and 47% SHRIX. Missing the carnage caused by higher interest rates was a big contributing factor to the long term outperformance. 

I chose SPXX and SHRIX so we could get a decently long time to look back although SHRIX doesn't quite go back ten years but the reality is that with these two funds, this is very inefficient/unfriendly from a tax perspective. The world has evolved plenty since 2016. SPYI pays returns of capital not ordinary income for example. ROC distributions defer the tax, there's no tax owed on the distributions until ROC takes the cost basis below zero then the distributions are taxable at the long term gains rate. Testfol.io has SPYI yielding almost 13% so if that rate persists it would take seven and half years for the cost basis to hit zero. Reiterating, the cost basis would be going down with each distribution. 

There are also funds that could replace SHRIX in that sleeve that are more tax efficient. A mix of some yieldy holdings and some alts like managed futures, some of the macro funds we look at and also long/short strategies could have a similar total return outcome as SHRIX but with far less tax owed. 

Moving from all equity exposure to less and less equity exposure is what glidepaths do. By definition this reduces the threat from an adverse sequence of market returns. Someone who started this in 1998, planning to retire on December 31, 2007 would have had half of this piece of money out of equities when things started to rollover into the financial crisis. 

Even you think this idea stinks, one thing it has going for it is that the process to manage sequence of return risk is systematic. There's nothing close to guessing or predicting anything. It harvests the volatility from the derivative income sleeve to start and then build up a defensive sleeve as someone moves closer to needing their money. Obviously doing something like this in an IRA account of some sort would mean being able to avoid the tax gymnastics. 

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.

How Diversification Is Supposed To Work

Let's start with this.

If inflation continues to run at about 3.5% then that implies a real return of 3.5% versus 4.56% real return for Vanguard Balanced Index Fund (VBAIX) since inception or 5.97% real return for the last ten years. The real return coming down to 3.5% might be disappointing but it's not catastrophic. Getting an extra 50 basis points with alts would be helpful if the other assumptions turn out to be correct. 

Coincidentally, Finominal's Monday research looked at diversifying with gold, managed futures and bonds.

The first thing I wondered is why not run the same test with all three in one portfolio?

The first four portfolios allocate 60% to the S&P 500. Splitting the 40 between gold, managed futures and bonds does what it should. Volatility and the max drawdown both drop some and the CAGR is neither the best of the lot nor the worst. This is simply the building block of understanding that there's no reliable way to guess which diversifier will work the best and that by diversifying your diversifiers you should get exactly what we got with this exercise. 

On a related note, Matthew Bartolini from StateStreet was on ETF IQ and he had some interesting things to say about portfolio construction. Eric Balchunas said that bond funds like AGG are not providing the type of diversification that they used to. Bartolini had some stats to validate Eric's point but nonetheless, bonds don't do it anymore, so what does StateStreet suggest?

He talked about replacing AGG-like exposure with derivative income funds, high yield and bank loans. 

This last backtest only covers five years, going back to when bonds became unreliable. The yield didn't adequately compensate for the risk and volatility long before five years ago but five years ago is when it started to matter. 

Kudos to Bartolini for thinking outside the box. 

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.

The Alt Less Traveled

We talk all the time about alternative strategies. I've cited my awareness/interest in the idea back to an article about Jack Meyer who used to run the Harvard Management Company, the endowment for the school. I think this might be the article, it talks some about Meyer's interest and belief in timberland as a diversifier. He talks about the opportunity to get a 7.5%-8% real return from timberland, there is the implication of getting that return but with a low correlation to domestic equities. 

The prompt for today's post is an in depth look at timber investing by Meketa. The Meketa paper is thorough in terms of providing education but there wasn't too much in the way of how to access timberland. Many years ago, I owned Plum Creek Timber (PCL) for clients. It was a fine hold but I'm not sure it really captured the effect. A stock (or REIT in this case) that trades in the market will have a tougher time delivering a differentiated return stream. Weyerhaeuser took over PCL in 2016. I sold it long before then, I may have sold it to make room for RYMFX in late 2007 but I am not sure. For the last ten years, WY has compounded slightly negatively which isn't necessarily a catastrophe for a diversifier except that it was down more than the S&P 500 in 2022. 

Neither Grok nor Gemini could find a dedicated timberland interval fund. That wrapper would work for timberland, that would be something worth learning about but I can't see using an interval fund for clients but I do spend a little time studying the space. Gemini pointed to the Harrison Street Real Assets Fund (VCCRX) which is an interval fund, despite having a symbol, it is not a mutual fund. The allocation is interesting;

Included in VCRRX is Harrison's own infrastructure ETF. To Harrison's credit, the ETF is differentiated from the S&P 500 but looks very similar to some of the other infrastructure funds.

Here's a long term look at VCRRX, the parent fund so to speak.

It's a horizontal line that tilts upward. From the literature, the fund consistently lags behind its benchmark for growth rate but with a fraction of the volatility. The result is very similar to client holding Merger Fund (MERIX) so I am not opposed to that but I'm not sure it makes sense to to endure the limited liquidity and the 2.2% expense ratio for that result. The fund is intended to be absolute return so it is pretty much doing what they have in mind but 50% MERIX/50% BOXX would have the same result for 1/3 the cost and with the advantage of daily liquidity. 

A different path to MERIX' result interests me, we can revisit this if they ever put this into a vehicle with daily liquidity. 

Closing out with a chart from Barry Ritholtz.

We've looked at these several times in the past for blogging purposes. The way we framed it, I think these stocks do a great job of being proxies for investing in private equity and private debt without the expense or limited liquidity. We looked at them when times were good, they mostly go up more than the broad market with more volatility and now things are going poorly and they are down more than the broad market with more volatility. I realize the broad market isn't actually down in any sort of meaningful way currently. 

At some point these will bottom and I'm sure go back up again but based on the volatility, owning any of them seems like it would be very difficult. A quick editorial note is that I don't know anything about Hamilton Lane, really nothing, and from what I've read about Blue Owl, that one might be in a more serious situation than the others. BX is the one we've looked at the most for blogging purposes. It is currently at $109, down from $199 in late 2024. I imagine it will get to $199 again at some point but the path back to $199 might go through some much lower number first. 

Like I said, these are difficult to own.

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.