The catalyst for this post comes from a short writeup by James Picerno about real yields. The idea of manufacturing a high yield while still getting decent growth ahead of inflation is fun thing to toy around with.
Today's attempt as follows;
There's a little bit of leverage with TECL on the way to a 50% equity allocation and 65% to yield although WTPI does have some equity beta too. By having so much in FLOT, the portfolio doesn't completely whore out for yield. If the entire 65% were in things that yielded low double digits, there would be more erosion in the results.
In looking at this, we don't necessarily care about what the benchmark is doing, we are trying to take yield out and have the remainder grow at a rate that exceeds price inflation.
The Yield Engine portfolio went down less in 2022 but that is mostly attributable to avoiding duration, SPMO and SCHD helped some too. It did not offer any protection or crisis alpha in the Tariff Panic of 2025 or the Iran War decline this year. I'm not sure I would count on the Yield Engine portfolio to reliably go down less in a slow decline but maybe?
The way to protect against the Yield Engine feeling every bit of the next bear market would be to have some number of months of expected expenses set aside in cash in case withdrawing from the portfolio felt uncomfortable.
SPMO, SPHQ, SCHD, BKLN and FLOT are all in my ownership universe.
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.
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