Huge Learning Opportunity Today

Today was a rough day for markets as we talked about this morning and then it got worse throughout the day. As I write this around 6pm AZ time, futures are down another 48 basis points. The learning opportunity from the title of this post relates to how various holdings do during events like this. I wouldn't necessarily draw a specific conclusion, more like accumulating data points.

It's one thing to look at a backtest but it's another thing to take an inventory in real time during an event like the one we are going through now. If we were just going by backtests, we'd be heavy-heavy into managed futures but as Jose Ordonez pointed out, enduring through with managed futures can be very difficult. Maybe things will turn around for managed futures but if you use alternatives and you use managed futures, it is runs like this one that are why I pound the table on diversifying your diversifiers. It's incorrect to say they aren't working, but right now, managed futures isn't helping. 

The symbols are all funds we've talked about here before. The only one to disclose is FIRS, I own a few shares, it's a quadrant style, multi-asset fund but it has more beta than something like Risk Parity RPAR and what I think Bridgewater All Weather (ALLW) will have. Based on the bid at the close, FIRS was down more like 2% not 1.58%. TRTY is also all-weatherish. Good that TRTY was down less but its growth rate is less than half that of Vanguard Balanced Index (VBAIX). 

The Permanent Portfolio Fund (PRPFX) did a little better than VBAIX which was down 1.45%. 

YSPY is a new put selling fund we've been looking it. It has had rough luck with regard to it's timing, launching into a nasty decline. FWIW, the WidsomTree PutWrite Strategy ETF (PUTW) was down 2.4%. 

I included Alpha Architect Tail Risk ETF (CAOS). Like we just mentioned the other day, it avoids the bleed of tail risk strategies but doesn't seem that sensitive to declines in the S&P 500. If I owned CAOS, I think I'd be hoping for a bigger lift than that. I have a macro fund in my ownership universe that was up more than CAOS today and since this decline started it is up about 3% versus a few basis points for CAOS. Macro shouldn't be expected to have a negative correlation, I would hope it is uncorrelated which could result in a nice run like it has had but it could have gone the other way. The Cambria Tail Risk Fund (TAIL) was up 3.54% on Monday.

RSST had a rough day but interestingly, RSSY which is stocks and carry was up over 2%. 

Putting it all in.....whatever broad based vehicle like VBAIX or PRPFX and maybe TRTY if you can live with a low CAGR is valid or putting it all into a broad market equity fund but there will be market events that will cause you to have some regret, hopefully just temporarily. But if you're reading a blog like this one you are probably more engaged than that, maybe you would call yourself a student of the market, I certainly think of myself that way. 

These types of events are guaranteed to come along every so often and if you think you might be a student of the market then I would encourage you to treat this as a learning opportunity and use it to become a more knowledgeable investor. 

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.