Find Your Passion, Find Your Healthspan

Over the last couple of days I participated in the annual Basin Ops Drill, a firefighting thing. The drill is a unique interagency, interdepartmental wildland fire drill that involves putting live fire on the ground to give training to participants on how to assess, devise tactics and then actually put out the fire. For a volunteer department like ours, there will be some years where the drill is our only live fire hours so it is very important. I've been part of the planning committee for this drill since 2010, maybe 2009 and a participant since 2003. 

The focus of this post is a walk the walk about healthspan to hopefully help anyone who could use the nudge to make improvements to their fitness and health routines. People who read this blog know I have strong opinions on this front so I believe it is important to hold myself accountable to what I write.

First is I still cannot tell you how fun it is for me to work on a wildfire. The two days of the drill are two of the funnest days of the year for me. I get to take a lot of pictures of fire trucks and action shots which is one way I contribute to the planning group and fight a fire or two that doesn't reasonably threaten any values at risk (that term is jargon for houses and the like). 

I've mentioned this in the past but the cooperation that we have here between all the agencies like Prescott National Forest, Arizona State Dept of Forestry and the local departments is very unique across the country, it makes us a national model of how to do things which makes the Prescott area an epicenter of sorts and I, by virtue of being willing to do it for free, get a literal seat at the table. Take that as a quick plug for very actively volunteering with an organization you feel very passionate about. 

We've talked countless times about the annual physical requirement to work on a wildfire which is a three mile hike on a track wearing a 45 pound vest in 45 minutes or less. In terms of healthspan as defined as being able to do what you want to do for as long as you want to do it, being able to do the hike is crucial for doing what I enjoy. At now 57, I believe I am well past the age where I could not meet the hiking requirement without exercising vigorously all year. Some my age might be able to but many cannot. Note, I am saying it is doable for people in their 50's who stay in shape, very doable I believe. We've always had guys in their 60's able to pass and this year, one firefighter is 70 and passed. We've also had guys in their 20's unable to do it though. We all lose the ability to do physical tasks without being fit at some age and that age varies. 

If I want to still be able to fight fire then I must be able to do that hike in 45 minutes or less, it's that simple. There will come some year where I will no longer be able to do it but that eventual failure won't be because I was not fit. This is very high on my priority list. 

When I go to these drills, I try to spend most of my time on the crew fighting the actual fire. Where this is a training opportunity, someone will have the chance to be the incident commander (IC) of the fire and then depending on the complexity there may be other positions like just digging fire line on the hand crew, engine operator if water is being used and some others. I've been the IC on more small fires in Walker than I can remember so being able to simply function on a hand crew allows me to easily maintain my FF2 status which is important and I can also help any new firefighters on what might be their first fire as was the case both days this year. Then, depending on the circumstance of the drill, maybe I can do another job as was the case on day two of this year. 

Day one, I was on the hand crew and got my FF2 squared away for the year. Day two I was a division supervisor. I had 10 people reporting to me. We pulled up on scene, tied in with the IC and started digging line on the left flank of the fire known as Division Alpha. We turned a corner and started to work our way up a hill when the IC asked if I could have someone grab a bladder bag and get out in front on the chainsaw leading the line work moving toward the head of the fire. 

A bladder bag is a five gallon back pack that can be very effective for using a little water to go a long way. Five gallons so it weighs about 43 pounds in addition to your regular fire pack which weighs 20 pounds at the low end. Given the circumstance and greenness of my crew I decided to be the one to grab the bladder bag. So I went down to the truck, filled it up, slung it on, hiked back up the hill, out in front of the saw and the fire sort of took off right toward me. It was grass with some shrubs to it would move fast with a change in the wind which is what happened. There were a bunch of facilitators from the Forest Service near by. The fire moved so fast they had to scramble to get their UTV out of there. I was not alone out front but I became the only water source. I knocked a lot of it down as the Forest Service guys jumped to also help with digging line. So between my division coming up from the left, my squirting water at the head of this finger that was starting to get away and the FS guys coming from the right flank we all pinched it off. 

The other day I talked about doing some work on the Crooks Fire a year ago that wasn't dangerous at all. What I described above wasn't that dangerous because we could have backed off to the side and let it run if our safety was in doubt but it was not riskless, there was a lot of smoke blowing at me and the experienced people here, the Forest Service crew and me, were moving with more purpose than anyone needed to on Day 1 of the drill.

It was very hard work, I was carrying a lot of weight, it could have gotten away so the stakes were real and I was having a blast! That right there is healthspan. I hope everyone has something they love doing as much as I love wildland fires. Not going out all summer like I was a 22 and working for a Forest Service crew, makes what I am talking about pretty much a hobby for as few days/yr that I fight fire. Doing that 100 days/yr, well I probably would not enjoy that but where a busy year might be 6-8 days of fighting fire, that's something I can enjoy now and hope to do for many years. 

There must be plenty of hobbies/volunteer endeavors that check off the boxes for successful aging but volunteer firefighting certainly can be one of them. It requires being in shape but <very harsh comment coming> I know from doing a lot of reading and learning about the fire service this is not always the case with volunteer departments. In places where there really isn't a wildland fire component there is no pack test as described above. I don't know the prevalence of some sort of fitness standard at those departments but certainly for folks so motivated, being a fit firefighter is hugely beneficial. Even out here, technically we don't have to be pack tested but then we would not be allowed to work on fires in our area once the Forest Service showed up plus I believe there is a huge liability there. 

Engaging in a fire department requires problem solving that usually differs from what you might need to do in other facets of your life, provides meaningful social engagement as opposed to meaningless chit chat at parties which isn't a lot of fun for me and the way our department is, we have some very young guys ranging up to the one firefighter I mentioned who is now 70. 

 

Interacting with people of all ages is important. I've had that yellow shirt longer than the other two firefighters have been alive. That is not an exaggeration.  

For many people, the only thing preventing them from doing today what they enjoyed doing when they were younger are just a couple of changes in habits related to diet and exercise. There are no absolutes but a lot of the maladies that inhibit middle aged people and younger seniors can be reversed much easier than you might think. Either way, there is no downside to getting in shape an eating less sugar. 

And we'll close with a fire truck picture. 

60/40 Is Dead! Long Live 60/40!

The Wall Street Journal had an article about the standard 60/40 portfolio, that is 60% allocated to stocks and 40% allocated to fixed income. Last year, 60/40 "tanked" but this year it is doing better. 

I've been bagging on straight 60/40 for a long time. It is valid, no doubt about it, it is a valid strategy, but it has been a long time since 40% to fixed income was optimal. The way I've been approaching this has been to build the 40% differently, to not pile the 40% or 35% or 45% depending on the client, all into fixed income. The presence of lower yields, that yes kept going lower, turned bonds, as opposed to bills and some notes, into equity beta. Some called the lowest yields "return free risk."

My experience is that the typical retired person/couple expects growth in exchange for some volatility from the equity portion of their portfolio, they don't want it from their fixed income sleeve. Fixed income holdings with equity beta stand to be far less effective at helping manage equity volatility with 2022 being a text book example that we'll study for the rest of our careers. 

The framing of this has always been simple. When bond yields were at all time lows that means prices were at all time highs. Buying a ten year Treasury note or ETF that tracks the ten year when the yield on the note was under 1.00% was taking equity risk. That's the very simple reality. Really under 2.00% it was taking equity risk. But when you buy an equity or equity proxy, there is no zero bound to prevent that equity from going up further. Yeah, you might pick the wrong stock or the wrong time for that stock but there's no "law of physics" to prevent higher prices. If the ten year had gone negative that would have been even a worse trade. The above is why I've taken to referring to bonds as sources of unreliable volatility.

It made no sense to buy down at that low yield to manage equity volatility and 2022 showed it increased portfolio volatility.  

Yields were kind of low in the mid 2000's before the financial crisis which was part of the story for why I started to use liquid alternatives (that term didn't exist yet), bond substitutes and bond proxies. This evolved for me into leveraging down and using more reliably negatively correlated holdings. Here's an interesting chart.

 

One of those lines is a 100% allocation to Vanguard Balanced Index Fund (VBAIX) which is a proxy for a 60/40 portfolio. The other line is 80% to a broad based equity index ETF and 20% to ProShares Short S&P 500 (SH). Over ten years studied, the CAGRs nine basis points apart and the standard deviations are more meaningful 0.54% apart. 

They're essentially the same portfolio but the one with SH took no interest rate risk last year and outperformed VBAIX by 491 basis points. I don't have that portfolio for anyone and never would but it is instructive to create understanding for how substitutes can be used to capture certain effects while avoiding the one year/event that was a catastrophe. 

If the math is not clear on the 80/20 looking like 60% equities, the allocation is 80% plain vanilla equity and then subtract the 20% in the inverse fund which gets to a 60% net equity exposure.

Here's something else that is interesting. 

 

Each portfolio is just one fund. Both funds are 100% equities. The blue line is the same broad equity index fund as above and was down 19.47% in 2022 while the red line was up 0.71%. Not much yield from the red line but in terms of volatility, I think this is what many people hope for from their bonds. If you've been reading the blog for a while you might be able to guess that the red line is the Merger Fund (MERFX) which is a client and personal holding. 

MERFX, any merger arbitrage fund probably, is 100% equity but it is long short, the type of long short that seeks an absolute type of return. I've described this and few others as horizontal lines that hopefully tilt upward. That's not really an equity attribute. MERFX is 100% equity (for the nitpickers, there is cash) but it is not an equity proxy.

I'm not sure how much fixed income that has equity beta should be in a portfolio but I don't think it's a high number.

I have used SH in client accounts in the past and while there is no near term visibility for using it, I imagine in some future cycle I will.