Your Most Important Asset

It's time for the (almost) annual health post. I've done quite a few of these over the years usually coinciding with re-upping health insurance. It seems crazy that we all have to start over every year to sign up for health insurance. Healthcare was a mess and then the Affordable Care Act broke it to the point that it appears no one knows how to fix it. When ACA was in the process of being passed into law, skeptics were saying it was a Trojan horse on the way to socialized medicine. I'm not a fan of that outcome but the current system isn't working and they don't know what to do (repeated for emphasis) or maybe we're so politically dysfunctional that there will never be a way to agree about what to do. 

Ok, onto health insurance for 2023. For most of the last several years we've had what has amounted to catastrophic coverage and we're going that route again. The deductibles are sky high with these. I have a quote from Blue Cross of Arizona for $541/mo which would cover both my wife and me. That's actually down $4/mo compared to 2022 for Golden Rule. 

The coverage includes four free doctor visits so an annual physical for each of us and then maybe if there was a follow up needed or if something came up during the year. There's also information about prescription coverage, diagnostic tests if anything needs to be done beyond basic preventative care and so on. Kind of an interesting bit of information they provide as part of the quote is an estimate of all-in costs. The estimate is not defined like is it by age group, non-smokers, is it for everyone, not sure. They estimate that on top of the $6500 for annual premiums, I would need to spend $800 more annually on doctor visits, $4500 on lab tests and $800 for prescriptions for an all in around $12,000/yr, $1000/mo. 

If we went full-boat with an HSA eligible ACA plan, real insurance, we'd probably have to pay about $1500/mo and I don't know to what extent we'd be on the hook for extra doc visits, test and prescriptions on top of that. 

For years, I've tried to make the point here that staying healthy has direct cause and effect financial benefits. As was the case for 2022 we're saving about $1000/mo because we can get away with catastrophic coverage and by Blue Cross' estimate, another $500/mo on other medical expenses. We might spend $100/mo on supplements but that is in our grocery budget. Vitamin D and zinc are cheap, turmeric and magnesium glycinate are expensive. 

It's not lost on us that we've been mostly lucky so far with this stuff but we're also doing the work in terms of maintaining good habits, simple habits. I lift weights, eat very little sugar (carbs) and do a very easy version of intermittent fasting, my first meal of the day is a little before noon on most days.

Greatly reducing healthcare expenses and maintaining the ability to bend down and pick up heavy things contribute mightily to the type of optionality I write about so often. How much are you likely to need to spend per month for everything when you're retired? $5000/mo? $10,000? More? Not spending that extra $1500 per month on healthcare stuff will make a big impact at just about any non-one-percenter level. If it is looking like you might be pinched a little to make your retirement numbers work and you'll need some sort of part time, active income then you'll have more options by still being able bodied. 

To the title of this post, I would say health should be our top priority. Yes family should be the top priority but if you're sick, not able bodied, you can't meet the needs of your family anywhere near as well.

Obviously anything, health-wise, can happen to anyone at anytime. A part of life is that sometimes, you can do everything right and it still not work out the way we'd like. The way I am wired, I would not be able to forgive myself for not doing all that I could to stay healthy and fit.

Study Many, Use Few

This post will revisit our look at the Simplify Macro Strategy ETF (FIG) thanks to a prompt from blogger Nomadic Samuel. FIG is a multi-asset/multi-strategy fund that tries to modernize a balanced portfolio by leveraging up to gain most of its equity exposure and balance out the leverage up by using strategies like managed futures and risk parity to leverage down in such a way that they are trying to mitigate the downside. 

From that post a couple of months ago you can see that FIG allocates about 25% each to managed futures and  hedged high yield, 20% to a variation of inverse VIX, 10% to risk parity, a few smaller things and then options combos to build up the equity allocation. I observed back then, with only two months under it's belt, that it looked a lot like the Vanguard Balanced Index Fund (VBAIX) which is a proxy for a 60/40 portfolio. Two months later and...

...it still looks a lot like VBAIX.

Sam Tweeted about Simplify Managed Futures (CTA) saying that he owned via its 25% weighting in FIG. He owns FIG. I pulled up the above chart and said I don't think he's really getting much benefit from CTA that way. FIG looks a lot like VBAIX. It would make more sense to own VBAIX and some sort of managed futures fund, CTA or whatever else, separately. If FIG is trying to be a proxy for 60/40, which I doubt, then it is a more expensive proxy. If it should outperform 60/40 then I'm not sure it's making a compelling case it can do that.

I've been on the I don't like multi-strategy funds soapbox for ages. I don't think they work very well. Strategies can cancel each other out which might be going on with FIG. I also think the value of an individual strategy can be undercut when lumped in with several other strategies. Here's an article taking the other side that would be worth reading. FIG may do better in the future but it makes no sense to me to own a bunch of complex strategies in one fund that nets out to being a proxy for 60/40.

Client and personal holding Standpoint Multi Asset (BLNDX/REMIX) is an exception that proves the rule but it only blends two things together; equities and managed futures. I've written quite a few times about the Rational ReSolve Adaptive Asset Allocation Fund (RDMIX). It started out great this year and has given just about all of it back. What's going on? No idea. There are many strategies under the hood, several of which are extremely complex. There are two levels here, how the strategies are doing and how they are interacting with each other. Why did it work so well before? No idea. Why is it down so much from its high? No idea. I don't think a holder can really assess what's going on compared to managed futures. Managed futures is long energy, just an example, and oil and nat gas are both down a ton this week. Much simpler to dissect.

I've been writing for ages about what sort of expectation a fund is trying to set for holders. What should it look like? The expectation doesn't always correspond to the name of the fund. 

 

NOPE is the Noble Absolute Return Fund. It just started trading and is already down close to 20%. It "seeks capital appreciation across a full market cycle."  That sounds absolute return-ish. It's a long/short fund so that fits but down 20% in about 10 minutes. It came out of the blocks with some very large bets. It's short 78% in Tesla (TSLA) and short 36% in ARK Innovation ETF (ARKK) so even more short of TSLA. All other positions are mid-single digits or less other than a 9% weight to US dollar ETF which gets 9%. It's not obvious what this fund is trying to look like. I'd say the same thing if it was up 20% in 10 minutes. 

I can accept that the managers of the fund expect big swings from how it builds is long/short book but from where I sit, unpredictability is an extra risk on top of any other more typical risks in a fund.

The best shot for success with liquid alt funds is to spend time looking at a lot of them, choosing very few of them to actually use. I've learned quite a bit looking at RDMIX and the guys who run it. I just don't think there's anyway to know what the fund is doing in real time. Study many, use few.