Appropriately Skeptical, Genuinely Curious

The ReturnStacked ETFs crew sat for a podcast that covered a lot of ground and I pulled out a couple of nuggets to write about.

They talked a little bit about carry as an investment strategy and they have two funds coming out soon that include carry. One fund will be 100% stocks and 100% carry and the other will be 100% bonds and 100% carry. So like their other funds they will be leveraged. Carry is kind of a nebulous term because there are several different exposures that are referred to as carry. One is a long short strategy of commodity futures that goes long futures in backwardation (rolling to the next month is done at a credit) and short futures that are in contango (rolling to the next month is done at a debit). The other more common one is going long currencies with high yields like the USD or Aussie dollar and short low yielding currencies like the yen or Swiss franc. 

While they were talking about carry, I looked to see whether there was an ETF doing the commodity version and I found the iShares Commodity Curve Carry Strategy ETF (CCRV). It appears to be a long only fund though that tracks closely to the Invesco DB Commodity Tracker (DB) which is one of the oldest broad commodity funds. CCRV might be a fine hold but it is a commodity proxy and I was curious to see how just the carry aspect does. If you know of such a fund, please leave a comment. 

My interest in carry would if it ends up being an uncorrelated return stream and then from there, whether blending it with equities or fixed income into one fund gives any sort of useful result. I don't know when the ReturnStacked funds with carry will list but I'd need to see them trade for quite a while to draw any sort of conclusion. 

One thing that was abundantly clear is they are all in on their belief about using leverage in the manner that the ReturnStacked ETFs do. That conviction is important of course but it is also important for anyone studying their funds, or other products built on unyielding faith, to be able to sift through information objectively and be appropriately skeptical. 

Their first two ETFs are struggling for reasons I've spelled out before but that does not invalidate the concept. We've coopted their use of leverage to talk about leveraging down but they very quickly mentioned another way to incorporate leverage into a portfolio. A big part of their strategy is keeping the stock/fixed income allocation the same and then using leverage to added something on top. For them, something means alternatives and that is what their first two funds do with managed futures and what their next two scheduled funds with carry. 

One of them quickly mentioned just adding a fund from AQR or another similar fund provider, PIMCO has some funds that do this too, to access what is hopefully prudent leverage. Putting 5-10% into a complex alternative that uses leverage is closer to what I do but it does run counter to the ReturnStacked premise of stacking on top. That's ok of course, take bits of process from various places to create your own process although I think I've been doing longer than they've been around. 

They mentioned the model portfolios they maintain. You need to be an advisor or other investment professional to access them so I am not going to share the holdings. They used to have a version of what is now the Return Stacked 60/40 on a different website that was not behind any sort of wall if you want to look for it. Return Stacked 60/40 like its predecessor is a complex list of funds that are themselves very complex (most of them). 

I built in Portfoliovisualizer with a couple of tweaks that I think are true to the portfolio in order to test it a little further back.

In 2022, the replication went down 7.27%, 60/40 was down 16.87 and Portfolio 3 which I'd say is simplicity hedged with some complexity was down 8.12%. You can decide for yourself which one is the most interesting but Portfolios 1 and 3 are pretty close with one being very simple.

A final point from the podcast, they talked about conversations they have with advisors who are just now learning about these sorts of portfolio construction concepts. The ReturnStacked guys made it sound like these advisors haven't had access to this sort of information or education which I can believe but I think the onus falls on the advisor to be curious enough to seek out new (to them) concepts as opposed to waiting for someone at their firm to get around to it years after the fact. It seems like everyone was talking about managed futures in 2022. It was curiosity that helped me find the strategy right after the Rydex, now Invesco, Managed Futures Fund started trading at the onset of the financial crisis. 

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.

ETF Democratization Continues

A whole bunch of fund stuff today.

First from the FT, it looks like there will be a parade of ETFs from hedge fund managers, packaging their respective strategies into ETFs. The article focused on the Tremblant Global ETF which will have the epic symbol of TOGA. The FT also said that Man Group, Gotham Asset Management, Ionic Capital Management and others were going the same route. Part of the drive is for more AUM but of course the fee structure will have to come way, way down for the ETFs to have a shot of being marketable. 

Kind of related, blogger Nomadic Samuel highlighted four funds that have decently long term track records of outperforming the S&P 500. Outperforming the broad market is also the objective of TOGA and I'm guessing the others that might come behind it. When a fund or strategy does have a long term track record of outperformance, it is natural to wonder if it should be bought. 

The first fund he mentioned was Boston Partners Long/Short Equity (BPLSX).

Based on those numbers alone which go back to 1999, yeah, I want to learn more. Here's the year by year though.

Over 25 years, it has only outperformed the S&P 500 11 times. That is not a bad result but might be less than you'd think when looking at the CAGR numbers. I outlined the four years that account for just about all of the long term outperformance. In 2000, BPLSX outperformed by 69%, in 2001 it outperformed by 37%, 22% in 2002 and 46% in 2009. For the last ten years, BPLSX's CAGR is a little more than half of the S&P 500. The fund could absolutely have another monster year in the next bear market but based on the fund's history, the outperformance is not a little bit every year, it comes from the occasional huge year. 

One of the other funds he mentioned was the Fidelity Contra Fund (FCNTX) which Portfoliovisualizer can take back to 1985, 40 years including a partial for 2024. It has outperformed 23 out of the 40 years. In most years FCNTX was close to the S&P 500 either way.

There were a few big years of outperformance for FCNTX in the early 90's but much closer in most years since. It has continued to outperform for the last ten years, but it is worth noting that in 2022 Contra Fund was 1000 basis points worse than the S&P 500. The point is not that either fund is good or bad but more about understanding how a fund works and to gain some insight on what drives returns. 

The other day, an email came in pitching a tax lien fund. It's for accredited investors, there's a huge minimum investment, I believe the fund is gated and I'm sure quite expensive. Without digging in to see if they mark to market (a huge issue with private funds), the returns look great and uncorrelated. The market for weather related derivatives on the CME has grown substantially and that offers the potential for uncorrelated returns too. We've looked at the CBOE S&P 500 Dispersion Index in previous posts as potential investment products offering uncorrelated returns. Stone Ridge has a mutual fund that owns an art portfolio which, again, potentially offers uncorrelated returns.

Stocks are the thing that goes up the most, most of the time. That point is the anchor, for me anyway, in thinking about how to build and maintain a portfolio. Everything else we talk about is about trying to add some sort of effect to the return/volatility profile of the anchor asset of equities. Having small exposures to negatively correlated assets can be very beneficial to managing portfolio volatility but too much allocated to negative correlation becomes a hindrance instead of a helper. 

We talk about volatility in a similar manner, adding assets with very low volatility can also be very beneficial but again, too much and it becomes a hinderance over the course of an entire stock market cycle. 

So in addition to a portfolio sleeve for negatively correlated assets and another sleeve to low volatility, I believe a sleeve to truly uncorrelated assets also makes sense. I have a couple of funds in my ownership universe that I believe are truly uncorrelated. I don't expect them to outperform equities over the long term, the attribute of doing their own thing can be beneficial to the overall portfolio.

I have no interest in the tax lien fund that was emailed to me, and I can't see buying an art mutual fund but the Dispersion Index is interesting on its face, weather derivatives seem interesting too and there are others to spend time learning about. I'd take in information about any of these, including ones that are less interesting on their face, like tax liens and art. 

This post all ties into a point I've been making since I started blogging about ETFs and mutual funds evolving to offer access to more sophisticated strategies and exposures. democratizing what retail sized investors can invest in. The hedge funds I mentioned at the top are the simplest expression of that. Actual hedge funds in an ETF wrapper? That is democratization. That doesn't mean you or anyone should want that particular exposure, that up to each of us to do the work to figure that out but having the choice is unambiguously positive. 

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.

Early And Successful Example Of Capital Efficiency

For a few years in the 2010's, I had a side gig working for ETF provider AdvisorShares. One of my regular tasks was a quick, monthly call with each fund manager reviewing what happened and maybe getting some sort of forward look from them. One of the funds, Morgan Creek Global Tactical ETF with symbol GTAA, was managed by Mark Yusko who runs Morgan Creek Capital. I quote him every so often, he likes to say that risk happens fast which is a great line. 

It just clicked in my head that he employed capital efficiency in the running of GTAA. That term never came up with me but that is what he did. He used 3X levered ETFs which made room for a few other things including gold which I specifically remember. VettaFi still has a sheet up with the holdings from when it closed if you want to see the details.

You probably know at least something about the risks of using 3x levered funds. The objective is 3x on a daily basis so they reset daily. The way they compound could end up lagging in a catastrophic fashion, be way ahead or be pretty true to the underlying. There's no way to know and there have been instances where the compounding did hurt and other periods where it helped. If I recall correctly. GTAA always had some positioning in 3x funds, they obviously understood the risk and took it anyway with no problematic consequence. 

When I put together that they were running a capitally efficient portfolio I decided I wanted to play around with the 3x funds little bit here. We've done some work with 2x funds but very little with 3x.

None of the portfolios are leveraged up. Portfolio 1 is plain vanilla, Portfolio 2 uses 3x funds such that 15% in SPXL is intended to replicate 45% into SPY in Portfolio 1 and so on, leaving 67% left over to go into T-bills. Portfolio 3 takes a page from the ReturnStacked playbook by putting 15% into managed futures and 10% into client/personal holding BTAL which are both tools to manage portfolio volatility. 

Portfolios 2 and 3 lagged badly in 2020 but that corrected in 2022. Interestingly the unleveraged Portfolio 1 was down much more than the portfolios using the 3x funds.

Even if Portfolios 2 and 3 hadn't outperformed in 2022, the benefit to them is that with so much in T-bills, the portfolios are pretty bullet-proof against an adverse sequence of returns. They were built with the intention of trying to be market equaling but with fewer dollars exposed to risk assets. We've referred to this objective before as leveraging down. 

For fun, I plugged GTAA's holdings as reported by VettaFi into Portfoliovisualizer to compare to VBAIX which is a proxy for a 60/40 portfolio. GTAA does not appear to have been leveraging down, I'd say they leveraged up . Factoring in the notional exposure of the 3x funds, GTAA looks like it had 125% in equities including a huge overweight to tech. There was also a little global macro in there with a couple of currency ETFs and a couple of idiosyncratic bets too with gold as maybe a hedge. 

One way to implement a capitally efficient portfolio is to use the cash leftover after implementing the core exposures, which in this case are 3x SPY, 3x QQQ and 3x TLT, is to seek out alpha opportunities which is what GTAA appeared to do. Assuming no changes in the holdings, GTAA absolutely destroyed VBAIX. GTAA was of course managed actively, the static assumption is just for this blog post.

The volatility was much higher of course and in 2022 it went down 33% but it's hard to quibble with the long term result. 

If I am right about weaving in global macro into GTAA, that is pretty complicated versus plain vanilla stock versus bond allocation decisions. If you want that element in your portfolio, it probably makes more sense to outsource it to a mutual fund of some sort. It is also important to really understand the tradeoff that goes with alpha seeking which is (probably) more volatility which at times will be uncomfortable. 

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.

Solve Your RMD Problem Before It Happens

Barron's wrote about the mess of required minimum distributions (RMDs) from IRAs. The age that we have to start is slowly going higher which is a good thing but criticisms of RMDs being unnecessarily complicated are more than fair. 

The comments were useful as is often the case. One sentiment that popped up a few times was the threat of RMDs kicking people into higher tax brackets. Barron's audience certainly skews wealthier but this threat is worth digging into in order to better frame what the real risk is.

Tax brackets from Nerd Wallet. While I am not sure which tax bracket their readers view as being problematic, I am guessing they are not worried about the jump from 12% to 22%, I have to believe hey collectively make much more than that. As a quick reminder, if you move into a higher bracket, that higher rate only applies to dollars above the threshold. If taxable income married filing joint is $402,901, you're only paying 32% on the $19,000 that is above $383,901, dollars below $383,901 are taxed at the lower rates.

Trying to piece this together, how much will your Social Security be? In today's dollars, my max benefit (spousal plus mine) would be close to $72,000. If all we got was SS, our taxable income wouldn't be anywhere near $72,000 but let's not even worry about that. How big is your non-Roth IRA likely to be? Have you looked at how RMDs are calculated?  Someone who is today 78 years old with a $5.2 million IRA will have an RMD this year of $236,364 according to Nerd Wallet. Are you likely to have a $5 million IRA? As of 2021, ProPublica said there were 28,000 IRAs that were that big or bigger. With an RMD of more than $200,000, yes you might very well get pushed up into a higher tax bracket. 

What about a $2.5 million IRA? How likely are you to get to that level? The RMD this year for a 78 year old for that sized IRA would be $113,636. Getting to $2.5 million won't be accessible for most people of course but someone who is 50 or 60 with a pretty decent 401k balance still putting in $20-$30k/yr and planning to work a while longer going through at least one more full cycle could easily see their balance get close to doubling from here. What would your balance likely be if the stock market doubled over the next 10 years, don't forget to factor in contributions? 

Mentally account that Social Security is your first income source, it is most likely taxed at 12% (the effective rate would be far less but let's not even worry about that). A $100,000 RMD, which would be huge for early retirement, plus Social Security is not even $200,000. The combination of SS and RMDs will be it in terms of income sources for many people, maybe even the majority. 

There are other types of income streams like rental income, royalties, long term capital gains and even dividends and interest from taxable accounts but those don't count toward your earned income and so while they are taxable they can't push you up into a higher bracket but double check with your accountant. Someone getting Social Security, with a large RMD and who gets a lot of active income could get pushed up into a higher bracket. If you do take a job, or stay in your old job, how much are you likely to make? It is hard to see someone making $150,000 all of sudden jumping up to $500,000-$600,000. If that does turn out to be your situation, then yes you will get bumped into a higher bracket but in that scenario you are making the decision to take that job with that income. I'd say it would be the rational decision but still a choice you'd be making.

In looking at your situation, how likely is your earned income to increase? If it is likely to go up, how much will it go up? If you're making $100,000 now and somehow you end up bringing in $150,000 after you "retire," that's a great outcome and you'd owe more taxes. 

Back the $2.5 million IRA. At age 90, the RMD this year would be $204,918. Someone who only takes out the minimum from their IRAs faces the real possibility that their balance doesn't go down and very well could see their balance go up. The Vanguard Balanced Income Fund (VBAIX) which tracks a 60/40 portfolio has compounded at 7.33% over the last 20 years. Taking out 4% per year, the compounding was still positive at 3.09% increasing the balance by 79% over the 20 years. Whatever the odds that someone is gainfully employed, making a lot of money at 80 (low?), those odds for a 90 year old are reasonably much less. A $200,000 RMD at age 90 plus SS gets you into the 24% bracket.

There are a couple of simple planning ideas that could help address the problem that Barron's readers talk about. One that will have the most impact at younger ages is to get money into Roth accounts. You can contribute to Roth accounts all along the way of course, subject to income limits, but there is more bang for the buck at younger ages. Because of how money compounds, the money we sock away between 25 and 35 or 40 will likely compound to be a large portion of our balances when we retire. At those ages we are likely to be earning less which further adds to the attractiveness of Roths. Then at older ages we might be making more and traditional IRA/401ks would probably make more sense. I'm sure you could yeah but me on this point but in general terms this point is salient.

Once you are taking RMDs, if you are making too much, it would be worth learning about qualified charitable distributions (QCDs) which reduce the tax owed on RMDs because the distribution goes to some sort of charity or the like. It looks like the limit for 2024 is $105,000. Making a couple of assumptions, cutting your RMD in half, or more, would go a long way to reducing the threat of RMDs pushing you into a higher bracket. 

I don't think this is a problem that affects too many people but this seems like a corner that is kind of easy to look around in terms of assessing whether it might be an issue for you and then trying to figure out whether it makes sense to change something in your equation and then how to actually do it. For what it's worth, my small sample size of clients, this has not been a common issue. 

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.

Rebuilding A Struggling ETF From Scratch

A few different things for this post.

First is a fascinating blog post from Finomial about factor investing. Finomial looked at the excess return generated long only factors like momentum, quality, various valuation metrics and I would add covered call fund to this discussion too. They also looked at long only multi-factor ETFs like the Goldman Sachs Active Beta US Large Cap Equity (GSLC). The short version is that for quite a few years the group has not had excess returns versus market cap weighting. 

We've looked at a lot of factor blends in pursuit of better risk adjusted portfolio construction without much luck. If most factors have been in a chronic dead spot for several years, not doing what they'd done previously then it makes sense that finding a compelling blend has been hard to do. Finomial expanded the definition of factor funds to include long/short in addition to long only and it used the AQR Market Neutral Fund (QMNIX) which we use frequently in blog posts as the star of the group. QMNIX is long/short equities based on, you guessed it, a bunch of different factors. Finomial laid out how long/short factor investing has worked out better in the last few years than long only factor investing. 

First thing I would say is that if factor investing hasn't delivered excess return lately, that's an argument for investing in it now. That is not a comfortable thing to do and more of a academic observation. Part of me wonders if long only factor investing hasn't "worked" because of the huge amounts of AUM going into ETFs created in the last 10-15 years.

We may have stumbled into one factor blend via Cliff Asness. You can read more about it here but basically it combines momentum, trend (managed futures) and carry although we used market neutral as a proxy for carry.

The results are compelling and the period studied is decently long. This was interesting stuff and I will try to explore it further. 

We've talked a few times about the YieldMax ETFs. These are covered call funds that for the most part track single stocks with a covered call overlay. A little more correctly, the funds are synthetically long the stock by buying a call and selling a put and then selling a call against the synthetic long position. YieldMax also has a few products that repeat the above with several individual names not just one. The issue they have is that the payouts for most of them are so huge that the market price erodes, their fund tracking Tesla has already done a reverse split. if you have to own any of them, I'd suggest reinvesting the dividend but to be clear I don't own any of them.

The reason to bring up YieldMax in this post is that they are launching a covered put fund on Tesla that will have symbol CRSH. If you've never heard of covered puts, basically it is the trade of selling short a stock and selling a put against the short sale. If the put is assigned, the stock put to the option seller offsets the short sale to close it out. 

This new type of ETF will again be synthetically exposed to the stock through buying a put and selling a call and then selling a put against that combo. I will be curious to see how this trades in the market.

Finally, Yahoo had an alert that the Simplify Macro Strategy ETF (FIG) hit a 52 week low as it fell 8% as of late day Thursday. Looking at the ETFs that FIG owns, it is not clear why it is getting hit like that. We tracked Simplify's Tail Risk fund as it was imploding and I could at least come up with a theory related to that fund's VIX exposure. Cocoa is getting crushed again and while it is not crushing the Simply Managed Futures ETF (CTA), I  wonder if FIG has direct exposure to cocoa, coffee it getting hit to a lesser extent.

Reading FIG's fact sheet makes the fund out to be Permanent Portfolio inspired, maybe all-weatherish noting the likelihood of challenging times, as of 2022 when the fund launched, for "classic balanced portfolios" which was a good call. It allocates to equities, managed futures, hedged fixed income and it seeks out "idiosyncratic macro dislocations." The fund owns a lot of other Simplify ETFs, a gold fund and futures contracts. Most of the funds held by FIG are very complex making FIG itself even more complex. I would also note that the fact sheet benchmarks the fund to a 60/40 portfolio and that comparison has gone poorly for FIG despite plain vanilla fixed income struggling. 

I build a sort of FIG replication using the same broad exposures weighted as close to FIG's weightings as I could figure.

MBXIX is a proxy for FIG's macro sleeve. In the comparison below, Portfolio 1 is Fig and Portfolio 3 is VBAIX which is a 60/40 mutual fund.

The time period is short obviously but the asset allocation appears to work. The performance of Portfolio 2 is very close to 60/40 with a much lower standard deviation. The light equity exposure caused Portfolio 2 to lag 60/40 by quite a bit in 2023 but that was balanced out by missing that drop from the end of July, 2022 into the October low. I wouldn't expect the FIG replication to keep up with 60/40 very often but I do think it could maintain that lower standard deviation and I would call it a success if it captured 75% of 60/40's upside over a longer period. 

FIG might be an example of being too clever by half. The complexity is off the chart, kudos to Simplify for having the stones to try these things but they don't always work as CYA showed us. 

As an aside, I'd never heard of AGRH but in its short life so far it appears to be hedging out everything I think is wrong with AGG.

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.

Annuitization, Maybe, Annuities In The Traditional Sense, Not So Much

Over the last few months we've taken a couple of looks at the Stone Ridge Life Cycle suite of mutual funds. The quick and dirty on them is that they annuitize fund assets when holders turn 80 years old. They are issued for each year so if you were born in 1959, you buy the fund for that birth year and then at 80, you're locked in. The funds pay out like an annuity and then at age 100, the remaining assets are split among fundholders who are still alive. 

The expense is nothing like regular annuities, I've described these funds as merely not cheap. Allan Roth thinks the product details are well worth the expense if you want to read his take. There's a growing sentiment that part of the solution for our lack of preparedness for retirement is to annuitize more asset to harness the benefit of longevity pooling and the opportunity for a payout that it noticeably larger than 4%. Of course the families of people who die young lose out on that aspect. Please note that annuitizing assets is not the same as buying annuities. The Stone Ridge funds are an evolutionary step in figuring this out. I've said before they are intriguing but I don't know if they are a final solution. I'm glad that companies are trying to innovate in this space. 

Annuitization, maybe. Annuities in the traditional sense, not so much. Hopefully, I'm clear on this point. 

The Wall Street Journal reported on a product that is in this same neighborhood from Blackrock which is a client holding. Between the article and Blackrock's webpage for what it is calling LifePath Paycheck target date strategies, there are some details not easily found so take this as a first investigation on what the product is. 

At a very high level, picture a target date fund with an allocation to equities, fixed income and some sort of annuity product. If it was a target date fund of funds and one of the funds was one something like Stone Ridge's Life Cycle then I'd probably think this was a good, incremental step forward to whatever the workable solution will end up being. 

Keeping in mind that the vast majority of 401k participants do not engage anywhere near the level that you, reading an investment blog does. While I believe target date funds to be woefully inferior, they can get the job done. So from that context, annuitizing part of a 401k with something structured like one of the Stone Ridge funds doesn't seem that bad to me. 

That's not what Blackrock appears to be doing. As best as I can tell, Blackrock customers have access to buy an annuity through their LifePath fund. Buy an annuity might be cringe, but maybe not, it does say "no commissions, loads, distribution fees or surrender charges." I don't know if this is a good deal or not but we all know to be skeptical and yes I am skeptical. It is still early innings in the evolution of products that annuitize retirement assets (reminder I am making a distinction between annuitize and annuities). 

I will continue to say to let this niche evolve and keep tabs on what happens. If I understand the Blackrock product, big if, then I'd say the end user implementing the corresponding Stone Ridge in with their other asset classes for themselves would be better than having it lumped in for you by a financial services company.

That Blackrock is making an effort in this space, aside from thinking it can be lucrative, validates that something needs to happen with annuitizing retirement assets in a manner that differs from annuities as most people know them. If Vanguard and Schwab try to jump in then that would be more validation and might bring in Fidelity which tends to be good at this sort of thing even if their track record for being first to market is spotty. 

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.

April: Bad Month For Stocks, Good Month For Alts

Corey Hoffstein from Newfound and ReturnStacked ETFs had a Twitter thread that recapped a webinar they put on about how to use their funds but it seemed to have an edge to it like it was defensively justifying the idea. 

Take that Tweet combined with the two older funds ReturnStacked Stocks & Trend (RSST) and Return Stacked Bonds & Trend (RSBT) which appear to be lagging as per the following. 

Six months in the case of RSST is a very short period but that is a big difference.

A year where RSBT is concerned is not a long time but it's not nothing and that is a big gap.

I agree with the idea of not tunnel visioning on performance alone but that depends on what we're talking about. I say all the time if gold is the best performer in your portfolio, then chances are things aren't going very well. That is even more the case with client/personal holding BTAL. We've modeled countless portfolios over the last year and half or so with BTAL and it has shown to consistently lower volatility and help with performance. 

BTAL, as an example, allows for a much greater allocation to equities leading to a much higher return than plain vanilla 60/40 with about the same volatility. And you can see how BTAL by itself just sort of limps along. 

RSBT and RSST are talked about in terms of capturing the beta of bonds and stocks respectively and then adding managed futures on top to add the opportunity for "excess return." The idea has merit and Corey's comment about making sure you're looking at the right things is valid but you need some basis to think that the strategy you're considering can work and I'm having trouble seeing that with the ReturnStacked ETFs at this point. There was a related fund that we've looked at a few times, the Newfound Risk Managed US Growth which is now closed, it had symbol NFDIX and as opposed to 100/100, it was 75/75. It too lagged badly. 

The concept of leverage as they employ it can work but it appears to me that with their funds, something has been off regardless of whether I can figure out what about it has been off. 

The WisdomTree US Efficient Core ETF (NTSX) is a capital efficient (synonymous with ReturnStacked) fund that leverages up in such a way that a 67% allocation to it just about equals 100% into a 60/40 strategy like the Vanguard Balanced Index Fund (VBAIX). 

Portfolio 3 takes a similar approach to how ReturnStacked suggests their funds are used by allocating 10% to managed futures on top of a "normal" stock/bonds mix. The lower volatility and higher performance of Portfolio 3 is merely incremental but we can take NTSX, plug in different types of alts intended to smooth out the ride and get back tests that also have incremental benefit.

Speaking of alts, April was obviously a rough month for equities. It looks like the S&P 500 was down 4.07% for the month. I wanted to take a look at how various types of alts that are intended to help smooth out the ride one way or another did as a microcosm. 

Just typical Yahoo Finance weirdness that not all them capture today's close. The names don't matter, they're all funds that we look at here regularly and/or are in my ownership universe. Client/personal holding BLNDX is not on the chart but it was down 2.3%. A month is obviously a very short period and while a couple of them were down (less than the market) I would say they collectively helped with avoiding the full brunt of the 4.07% decline. It wouldn't have been surprising if any of them disappointed for the month, it just turns out that wasn't the case on this go around. The potential for one or two to not work out is why you diversify your diversifiers. 

Interestingly, managed futures looks like it did well even though the cocoa trade blew up on Monday. I don't follow every single managed futures fund but of the 6 or 7 I do watch, only the Invesco Managed Futures Fund (RYMFX), which I believe to be the oldest in the group, was down for the month. 

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.

Effective Derisking?

ProShares emailed out a short paper in support of the ProShares S&P 500 High Income ETF (ISPY). ISPY is a covered call fund and it's point of differentiation is that instead of selling monthly calls it sells daily calls. The idea is that by selling dailies, fund holders can capture more of the S&P 500's upside versus selling monthlies. The idea makes intuitive sense and so far it seems mostly correct. 

Quick disclaimer that I am test driving ISPY in one of my accounts for possible use for clients. 

From the start of 2024 it was closer to the S&P 500 than XYLD which sells monthly calls but ISPY felt more of the market's downside move in early April than XYLD. I think ISPY had more downside because of the smaller premiums taken in from daily selling than monthly selling. To capture the ISPY dividends for a more accurate total return number, we'd need to add in about 2.5% to the 3.1%. How does 5.6% versus 7.0% (plus 35-40 basis points or so for the S&P 500's dividend) sit with you? Is that enough upcapture? For XYLD, we'd add back 3.2% for a total of 4.8% YTD return. Remembering that nothing can be infallible, ISPY is mostly doing what they said it would do so that is a positive but again, is the upcapture sufficient? That's what I'm trying to figure out and that will take time so this is sort of just a progress report. 

As a coincidence, Ben Carlson and Michael Batnick had Eric Metz from SpiderRock Advisors on one of their podcasts talking about options. SpiderRock is a pretty big firm specializing in providing outsourced option strategies to advisory firms.

Sidebar, I don't know where the name SpiderRock comes from but there is a Spider Rock formation in the middle of Canyon de Chelly.

Anywho, the podcast didn't have a lot of meat on the bone but there was one thought provoking point that I wanted to explore. Metz talked a little about using options to help derisk a portfolio as someone approaches or moves into retirement or the decumulation phase. 

The context was more about using options to manage the risk of large positions of company stock than using ETFs with some sort of options overlay in pursuit of less volatility. If you have a portfolio with 20-40 holdings without a disproportionate weighting in one stock (from your employer or anywhere else), I'm not sure using options to derisk each position makes sense. 

Funds that employ options strategies offer the promise of lower volatility, a form of derisking but as noted above they are not infallible, nothing is. As I mentioned, ISPY was down on lockstep with the S&P 500 for the first three weeks of April.

For all the different types of option strategies now accessible through funds, the attributes are different enough that they'll help smooth out the ride in different ways during different types of market events. I think solving the idea of how to derisk comes down to a couple of things, finding the more reliable derisking effect as well as maintaining the proper asset allocation for the investor in question. 

An investor who has enough money such that their plan will probably work needs something close to a normal exposure to equities. Someone who is very far ahead of the game can usually get away with having more allocated to lower volatility strategies whether that is options funds or something else. An investor who is very far behind might be better off with no equity exposure for fear that sequence of return risk would blow them up. There are countless examples, these were just some very basic ones. 

I believe the better way to derisk is by blending plain vanilla equity exposure with alts that combine to bring down portfolio volatility instead of owning funds that should have less volatility. As we've looked at many times, this approach does reduce volatility but with the opportunity for more upcapture. 

Ten years is a good sample size and to be clear, all of these lagged 100% exposure to the S&P 500 which in the same period had a CAGR of 12.73 but a standard deviation of 15.05%. You can see for yourself how that compares and decide for yourself what appeals to you. The examples I used for this point are over simplified versus real world portfolio construction. BTAL in Portfolio 1 is a client and personal holding. 

My hunch is that ISPY can have better upcapture than XYLD (four months is too short to conclude anything) but I would need to see it hug the market cap weighted index closer than it has so far to want to anchor around it. 

To the extent an options strategy fund could be thought of as a factor, I continue to believe there is a way to blend in a covered call fund with another factor or two to find something that is a proxy for market cap weighted exposure but that does a little better. I haven't found that yet but I think it is worth pursuing.

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.

You Need To Work Longer But Will Be Forced To Retire Earlier

Writing for Bloomberg, Allison Schrager suggests that in order to enjoy retirement, we should work a little longer. Ann Tergesen at the Wall Street Journal reports that while most people expect to retire at 65, 62 ends up being more like it. So what the hell are we supposed to do? 

Summing up Schrager. most people are not financially ready to retire at 65 or even 67, combined with longer lifespans she says, we'd be better off working into our 70's. Fortunately for her scenario, there are some demographic trends that indicate that a labor shortage is in the offing. 

The sorts of things that inhibit our ability to work longer are all things you've heard before including ageism which can include a lot of different things, some sort of medical or physical issue or some sort of burnout. 

There were over 800 comments on the WSJ article. I always say read the comments and while I did not read all of them, I looked at quite a few and of course there was just about every possible reaction. There were sad stories, people who started their own business and still wildly successful in their 70's, comments blaming both major political parties, people talking about conspiracies to manipulate us toward a couple of very different outcomes, on and on. 

People having their hand forced earlier than they were planning, this happens to plenty of people in their 50's, is a real thing that can coexist with the financial need for many to work longer. Sitting idly by and hoping nothing like this happens or being in denial about the possibility are probably very common behaviors but the idea of not being proactive is not something that I personally could live with. Like with anything, the more you put in, the more you get out including how you develop resilience and optionality. 

We have this conversation regularly. At 50 or so, you probably need to have a decent understanding of where you stand. Are you generally on track, way behind or far ahead? From there, I think you need to understand what things you're relying on like working until a certain age or maybe an inheritance or downsizing your house to get cash out or anything else. I would also start to Plan B some ideas if the thing(s) you're relying on doesn't pan out. 

As we pointed out above, all sort of things can get in the way of a plan that relies on working until some "older" age. Top down numbers on inheritances are all over the place but if you are planning on some sort of inheritance and assuming no Mr. Marbles gets the summer house plot twist like the pet food commercial, some sort of longer than normal assisted living situation could seriously reduce an inheritance. Downsizing a house has at the very least become more difficult to do as house prices and interest rates have skyrocketed. I'll add another one, focusing for years on moving to a specific country and then that plan unraveling like what has gone on in Ecuador lately. I read something today that talked about Ukraine having been an expat destination. I haven't even mentioned coming up short in retirement savings. Not something catastrophic like having nothing but like coming up 20-25% short which is more of a problem than a catastrophe.

There really are a lot of variables and things can take a negative and unexpected turn. It is up to us to mitigate that for ourselves. 

Resilience becomes easier, the earlier you start. There are huge payoffs in your 50's and 60's from having lived below your means. You probably have a little in the bank and at that age, it would be reasonable to be mortgage free at that point. Maybe, there are no car payments so all you have pay for are various insurances, taxes, utilities, food and unbudgetable one-off expenses. Hopefully there's a little left over for fun too. 

If you do end up out of work and you have no income, odds are very good that health insurance will be almost free. If somehow part of a severance package includes free or cheap insurance, that'd be nice but explore insurance through healthcare.gov. Also, if you get to the end of a calendar year with no earned income, that might be a path to a small, up to the amount of the standard deduction, tax-free Roth conversion. Ask your tax preparer about that. 

Optionality needs to be cultivated and there are quite a few ways to do that. Keep up with how your industry is developing by staying curious and keeping up skill-wise. Stay curious to learn about entirely different things that could grow into some sort of opportunity. I always talk about actively volunteering as a path to a job opportunity. Work on creating some sort of passive income stream. Passive is really a misnomer as these things usually require a lot of work. And of course start early to see if any of your hobbies can be monetized. 

In a scenario of having your hand forced at 55 or 60 or whatever but most of the way there with your retirement account balance but not all the way there, mortgage free and able to create some sort of income stream, that income stream can hopefully cover the various insurances, taxes, utilities, food and unbudgetable one-off expenses. If your retirement account balance is close then maybe you don't have to add to it in this Plan B type of situation but one more full stock market cycle and maybe the total balance can grow enough so that you hit the amount you think you need which is not a heroic assumption. 

I've said before, I've seen plenty of people where I live, without a lot of money, figure this out because they had to. I believe in that but would prefer to have as little stress as possible in case I ever need to figure it out because I have to. 

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.

Is There A Secret To Beating The Market?

Blending together assets/strategies with different attributes, correlations and expected behaviors plays a huge role in how I construct portfolios. This is something I've been doing and writing about for ages. The blending, when done effectively, can help smooth out the ride for clients which is a high priority for me.

Forget that though. What if all someone cared about was beating the market, regardless of the volatility, regardless of the occasional, painful drawdown? How could someone go about that? Sidebar: this post is not going where you think it's going. If beating the market was the only thing that mattered to someone, chances are they would not go heavy into utilities and consumer staples. These sectors tend to have lower volatility than the broad market, higher yields and are kinda sorta counter cyclical in terms of (hopefully) having defensive attributes to help soften the blow as was the case in 2022. 

It would make sense to look for alpha opportunities in only certain sectors including technology and consumer discretionary. Yes, there are stocks in every sector that outperform the broad market but what this is about is adding beta. Tech and discretionary have higher betas and as sectors, have the tendency to go up more when the market is going up and down more in declines.

You can decide for yourself if there's enough there to be a tendency or not but in the time studied, the SPX compounded at 14.37% versus 16.60% for discretionary and 20.34% for tech. With all that in mind, I wondered what a portfolio that was 50/50 tech/discretionary would look like versus the S&P 500. That mix should outperform with a lot more volatility. 

It certainly did outperform. Is that a lot more volatility? It is noticeably more volatility but a little less than I expected. The 50/50 mix was down 32% in 2022 versus 18% for the S&P 500 which is a dramatic difference. In the period studied it outperformed in 13 out of the 16 years sampled. 

The idea of tech and discretionary outperforming has merit (disclaimer it's not infallible and not the point of the post). Back to the idea of the power of blending, I wanted to mix in an alternative strategy to see if I could equal the volatility of the S&P 500 but outperform it with these two same sectors.

The standard deviations are almost identical but Portfolio 3's CAGR is 201 basis points higher than the S&P 500. The max drawdown though was much larger. 

The point of today's post is to offer a simplistic example of how I think portfolio volatility can be managed. I have no secret for outperforming the stock market. Over a long period of time, an investor who is at least ordinary will have years that they lag and years that they lead. I think it is far more constructive to manage to a smoother ride which I think is more realistic than "beating" the market. 

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.

Risk Parity Funds Still Don't Work

It's been a while since we bagged on risk parity but Bloomberg gave us a good prompt to revisit the strategy. Apparently a few state pensions and similar pools of capital have been pulling money from risk parity funds managed by the likes of Bridgewater, Man and others. 

The simplistic definition is that risk parity equal weights asset classes by their volatility. Where bonds, generically are less volatile than equities, a risk parity fund would have more exposure to bonds to get the volatility contribution of both to be equal. This often involves using leverage to get the bond allocation large enough for its volatility contribution to equal that of equities. There can be other things in there too like commodities and there can also be management of the weightings to account for changes the volatility profiles of the various asset classes. The RPAR Risk Parity ETF (RPAR) is indexed, the Fidelity Risk Parity Fund (FAPSX) is actively managed as two examples. 

I always say the same thing about risk parity, it is intellectually appealing and I want it to work which I concede is silly, but it just doesn't, at least not in retail accessible funds and based on the Bloomberg article, maybe not in hedge funds either. Or maybe they are doing it wrong. 

At times in the Bloomberg article they seemed to use risk parity and All-Weather interchangeably, attributing both to Ray Dalio. The following compares All-Weather. a home made risk parity replication that copies the target allocation, which is leveraged, of the Risk Parity ETF (RPAR) and plain vanilla 60/40.

RPAR has only been around since 2019 but the replication allows us to go back to 2008. It isn't necessarily a bad thing that risk parity lagged but it did so with a higher standard deviation. 

The year by year for risk parity replication shows quite a few things. It was down a little less in 2008 and 2022. There were a couple great years, a couple good years and maybe a half a dozen years where it lagged by a lot. 

Both All-Weather and risk parity don't keep up with simpler broad market proxies and risk parity doesn't lower the volatility, All-Weather does have a a lower standard deviation though. It is possible that they are both too clever by half. We've looked at countless ways to build around a normal weighting to very simple core exposures, equities, with small slices to complex strategies to try to reduce overall volatility in what I think is a similar way to what All-Weather and risk parity have in mind. 

An update on something I mentioned in passing a few months ago, the CBOE S&P 500 Dispersion which has symbol DSPX. Google Finance recognizes the symbol and you can do some things like chart comparisons. Yahoo recognizes it but the charting doesn't work. You can also do some things on the CBOE site too.

When I wrote about it before I thought it captured some sort of put/call skew but that was incorrect. Basically it tracks when stocks are more likely to deviate away from the performance of the S&P 500 or less likely to deviate away from the performance S&P 500. By their work, the dispersion tends to increase going into earnings season and then come down some after earnings season. The process to derive the Dispersion Index is kind of similar as the process to derive VIX but the information is much different. 

The plan is to create a futures contract based on DSPX in Q1 2025 which could then be a path to some sort of exchange traded product. CBOE, a client holding, among others things has about 19% of ETF listings. 

On Google, it only goes back to last fall but I compared to a bunch of liquid alternative funds and it doesn't look like anything. I think it is uncorrelated to everything but we'll see how that proves out. If so then it becomes a way to harness volatility as an asset class and uncorrelated return stream which makes for good diversification when sized correctly. 

Per the above backtest, DSPX went up during market declines including a massive spike during the 2020 Pandemic Crash. It briefly went to zero in 2018 and then came right back. They would need to address what the index going to zero would mean for a fund. If there was some number of shares and the index went to zero but shares still existed then when the index came back, the shares would have value again. Maybe it would be that simple? I listened to a webinar about it and the way I understood it, it can touch zero but it cannot stay at zero. Based on that understanding, if it touched zero after a fund launch, it should probably be bought hand over fist but I'd still have some learning to do to be comfortable with that idea. 

DSPX is interesting on first and second glance and I am getting an early start learning about it. 

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.

What The Hell Is This Fund Trying To Do?

We look at a lot of alternative funds here. Basically, I'm willing to dig into just about anything that does something that might be a little different or have its own take on a strategy that interests me. A high level answer I am looking for is what should the fund look like, what expectation should investors have and is the fund meeting those expectations. 

For example client/personal holding Merger Fund (MERIX) should have very little volatility and go up a small amount most of the time. Client/personal holding BTAL should have a negative correlation to equities most of the time and go up more often than not when stocks go down. You can decide for yourself whether either of them live up to those expectations but defining them is pretty simple. Some other alternatives do their own thing in such a way that they complement equity exposure to reduce volatility and drawdowns without lowering the long term growth of the portfolio. 

If you're going to buy any type of alternative strategy, I believe beyond understanding what the fund does it is important to understand the expectations and whether the fund is meeting them.

This brings us to the ABR 75/25 Volatility Fund (VOLSX). ABR has a couple of other funds too but we'll just focus on this one for today. I mentioned this fund once before. The objective is "long term capital appreciation" and there's this further description, "Seeks to generate favorable long-term risk-adjusted returns, in part, by profiting from price changes involving instruments that track volatility levels. Relies principally on models to determine allocations among (i) long exposure to CBOE Volatility Index (“VIX Index”) futures and VIX Index exchange-traded products (“ETPs”); (ii) short exposure to VIX Index futures and VIX Index ETPs; (iii) long exposure to S&P 500 Index futures and S&P 500 Index ETPs; (iv) long exposure to long-term U.S. Treasury securities, and (v) cash." In terms of trying to set an expectation, it says to "use for liquid alternative investment; long and short investment." 

It offers this pie chart to show its current asset allocation.

The fact sheet does not define what 75/25 means but the prospectus says it allocates 75% to long volatility and 25% to short volatility. I found a fact sheet from Q2 2021 that had about the same equity exposure but a much greater 13.5% to short volatility. Getting information from the website is not easy. It is not clear if something changed to account for the reduction in short volatility or if it is an active decision to reduce that exposure because VIX has been so low. Either way, it is not apparent to me how the fund had 25% allocated to short volatility in either instance. The prospectus seems to be saying that it includes equity proxies as part of the long volatility exposure. I am not saying it is doing anything wrong, if I am looking at this correctly, I'm sure prospectus gives them the wiggle room where it says "the adviser may implement adjustments to the 75/25 blend under various market conditions..."

Based on the pie chart, it looks more like a multi-asset fund than a volatility-centric alternative strategy. Below, we compare VOLSX to a home made version of their exact, most recent allocation and VBAIX a proxy for a 60/40 portfolio.

The time frame is so short because VOLSX only goes back to 2020. VOLSX outperformed in 2021 and 2023 but fell twice as much as the others in 2022. Clearly the portfolio weightings are a valid combo but the fund is capable of lagging by a lot. To be clear, just because it is valid doesn't mean it is optimal or even usable. 

What about the big picture premise of VOLSX' strategy which is a long/short combo of volatility weighted 75/25. That can be replicated several ways, I am doing it below with VIXM and SVXY and comparing it to 60/40. Maybe the Volatility Blend does something interesting?

The Volatility Blend seems to track the same uptrend, it is far more volatile than 60/40, it had three very bad years along the way but in 2022 it only fell 3%. While I'm not going to implement this as a portfolio, it reiterates an important concept, it blends together to very volatile, negative correlated assets to deliver a result that in terms of CAGR is not that far from VBAIX. Blending disparate strategies is a powerful return driver.

Let try one more idea with the 75/25 concept, not VOLSX. The following builds a return stacking sort of idea around the WisdomTree US Efficient Core ETF (NTSX) which is levered in such a way that a 67% allocation to the fund equals 100% allocated to VBAIX leaving 33% left over to either leverage up with alpha seeking or alternatives to manage volatility or even just cash to add a few basis points to the total return while managing sequence of return risk. 

Well this looks promising at first glance, higher returns and lower standard deviation. The longer term outperformance seems to have happened all at once during the 2020 Pandemic Crash. In 2022, Portfolio 1 actually lagged VBAIX by a few basis points. 

The actual VOLSX fund is a hard pass, I'm not sure what expectation the fund is trying to set so there is no way to know if it is meeting the expectation the managers have in mind. The 75/25 idea is interesting though and there might be a way to stumble into a better use of the idea than with VIX products. I will follow up on this post if I come up with something that turns out to be a better implementation.

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.

Join The Bond Market Resistance!

Jason Zweig wrote an article titled How Not to Invest in the Bond Market. The title of course piqued my interest. This blog has pretty much evolved into 100 ways to build a portfolio without bonds. I've been like a broken record for years on the need to avoid bonds that have any sort of duration or at least be extremely underweight duration versus the typical benchmarks. 

The article devoted a good amount of space to bond market math, focusing on the pain of owning the iShares 20+ Year Treasury ETF (TLT) and bond funds in general. Bond funds have no par value to return to which might make them worse than individual bonds. An individual 20 year treasury bond bought when yields were at their lowest will return 100 cents on the dollar when it matures in 2040. There is nothing that says TLT must get back to the $171 dollars it traded at in 2020. The dividend that TLT pays will help but the capital put in to TLT in 2020 might be permanently impaired.

I'm not sure how long Jason has felt this way or if maybe he is new to the resistance but there were a couple of points in the article I want touch on. 

This quote from Jason surprised me. "It’s impossible to say for sure why so many people barged into long-term bond funds last year." Ok, well just about every pundit on TV and news print was saying to add duration. All these various talking heads from brokerage firms and the like were given their regular media platform and were regularly doing this and I have to believe that the clients they advise, directly and indirectly, did end up buying long term bonds funds last year. One of the articles in this week's Barron's quoted someone as saying something like bonds are more attractive than they've been in 20 years. Maybe they are that attractive, maybe not but I'm not sure how anyone could be confused by the amount of buying in 2023. 

After making the case that even the Fed doesn't know what interest rates will do, he said "...financial advisers are kidding you if they say they are 'positioning' your portfolio for a specific interest-rate scenario. If the Fed itself can’t forecast rates, why would your financial advisers think they can?"

This is an important point. For however long I've been a broken record on this, I've avoided trying predict anything since probably 2010, I learned a lesson at some point back then about how silly it is to try to predict interest rates. Just for fun, I Googled "Nusbaum bond still stink" because I think I've written a lot posts with that title. I found an interview I did with Seeking Alpha in late 2010 that made its way to NASDAQ.com. Here's the relevant excerpt.

Not much has changed in terms of my approach to bonds, but the manner in which alts have evolved has led me to more use of alts also, lately, pricing for individual issues over treasuries hasn't been great. I think you can see in that snippet that the focus was more on what we know and can be easily observed. That is certainly the case now. Longer term debt yields less than shorter term debt, volatility of longer term debt was extremely high, it is less so now but still high in my opinion, there was a consensus calling for lower rates on the front end and as we've all seen many times and as Zweig points out, being right about this sort of thing is very hard to do. 

Observing there is elevated risk and volatility is not the same thing as trying to make a prediction. It's about making an active decision about what to avoid. The risk that I've been concerned about since, apparently, at least 2010 may have never had a consequence beyond a couple of blips along the way. It turned out it did matter starting in late 2021. 

It turns out there might have been something to these observations I've been relying on. Alfonse Peccatielo, @macroalf on Twitter, posted the following.

With higher inflation, like we've had for a while, bonds don't offer the same kind of diversification benefit. The way I have been describing this has been to say that bonds have become less effective diversifiers than what they use to be due to volatility that has become unreliable.

The volatility that I perceive as unreliable leaves me unwilling to commit to intermediate and longer term bonds while they have a four handle. I guess I'm at the point of trying to assess what sort of yield it would take to be willing to extend duration which is not much different than the interview excerpt from 2010.

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.