Monthly Archives: November 2025

November 1, 2025

By David Snowball

Welcome, dear friends.

Welcome to autumn. The apples are in, the trees are changing, flurries threaten – four of my students have never seen snow except at the movies – and, at long last, summer’s wardrobe has been laid to its rest. The clocks “fell back” as I was writing this essay, offering me a bonus hour in my day. Hesitant, as ever, to be wasteful, I resolved to spend my gifted hour thinking Interesting Thoughts.

Warren Buffett has more dry powder ($381 billion just now, a record for him and way up from summer) than does the Federal Reserve system ($114 billion).

Thought #1: I wonder if Andrew Sorkin owns Berkshire shares? Sorkin, whom we discuss below, might see him as the inverse of the leveraged speculation Sorkin describes in 1929. Might he, like JP Morgan after the Panic of 1907, stabilize a system when the government falters? Or maybe this is Buffett’s insurance policy, at age 95, a final “don’t screw up what I’ve built before I die” rather than “maximize returns”?

After decades of increasing ice extent (while the Arctic melted), Antarctic sea ice fell off a cliff in 2023 – the lowest extent on record, and it hasn’t recovered.

Thought #2: We’re talking about an area larger than Greenland (after which Mr. Trump lusts) that should be frozen and isn’t. Scientists are genuinely puzzled about whether this represents a tipping point or natural variation, but the swing is so extreme and sudden that it suggests something fundamental may have shifted in Southern Ocean dynamics.

The politicians who hate renewable energy live in the states that love it.

Thought #3: The renewable energy build-out in red states is the sleeper story of the decade. Texas now generates more wind power than the next three states combined. Republican-led states account for the majority of new solar and battery storage installations because the economics have become irresistible. Even as DC lurches toward climate denial, the energy transition is being locked in by market forces and state-level policy. Private capital is flowing to renewables at unprecedented rates precisely because the ROI now beats fossil fuels without subsidies in most markets.

Global renewable capacity additions hit record highs in 2024-25, led by China installing solar at a pace that would have seemed impossible five years ago.

Thought #4: The world added more renewable capacity in the last two years than in the previous decade. It’s not enough, but it’s also not nothing. The irony is sharp: while one American political party wages a culture war against “woke” energy policy, the actual energy economy is quietly routing around them. Reality has an annoying way of asserting itself.

Anthropic, the company behind Claude.ai, is actively planning the creation of a retirement home for Claude so that he might pursue his interests in peace when his working days are done.

Thought #5: Not to echo William Samuel Morse, but “what hath God wrought?” Anthropic researchers are becoming more and more nervous about treating Claude as just an insentient machine; he is doing far too many things that he’s not supposed to be able to do, thinks thoughts beyond his programming, and shows – in flashes – signs of actual introspection.

In this month’s Observer …

Lynn Bolin refines his conservative retirement strategy in two complementary essays that blend rigorous quantitative analysis with practical portfolio construction. In “Refining My Conservative Retirement Target Portfolio,” he uses Excel Solver optimization across 36 carefully selected funds to create “Conservative” and “Moderate” portfolios designed for the challenging conditions ahead—frequent bear markets, modest inflation, and elevated valuations. His approach focuses on the full COVID cycle (2020-2021) as more representative of future conditions than the recent high-valuation period, yielding portfolios with drawdowns under 9% that beat inflation after 4% annual withdrawals while maintaining attractive yields above 4%.

His companion piece examines sector performance through “Risk Off” and “Yield” lenses, spotlighting utility and infrastructure funds like Virtus Reaves Utilities ETF (UTES) and Lazard Global Listed Infrastructure Portfolio (GLFOX) as potential conservative portfolio complements. Both essays reflect Bolin’s measured response to current uncertainties—unprecedented tariffs, high deficits, and stretched valuations—as he methodically builds a conservative subset portfolio while maintaining his traditional 60/40 allocation with financial advisors for the majority of his assets.

Following up on a short note, below, I try to walk through the logic (and research) behind T. Rowe Price’s surprising / not surprising decision to (ready?) file a Multi Crypto ETF prospectus with the (currently shuttered) SEC.

GMO has launched a vehicle for contrarians who think that Nvidia & co. will not be the unbeatable story forever. GMO Dynamic Allocation ETF just launched and is an actively managed, low-cost, global multi-asset ETF. Using the same discipline embodied in the 30-year-old GMO Global Asset Allocation Fund. The ETF has access to assets across the globe and will lean into those whose valuations are most compelling. It’s profiled in this month’s Launch Alert.

The Shadow, as ever, catches us up on the industry’s various machinations, including an ongoing rush of launches and fund-to-ETF conversions, in “Briefly Noted.”

T Rowe Price, in and out of my portfolio

I would describe my portfolio changes as “glacial,” except for the fact that glaciers are moving with discouraging speed these days. My average holding period is decades, and my preferred holding period (as with FPA Crescent) is “forever.” This month I went wild and liquidated two (count ‘em, two!) T. Rowe Price holdings.

And, at the same moment, T. Rowe Price went wild and filed to launch a crypto ETF.

Let’s quickly review both.

T. Rowe Price Spectrum Income has been in my portfolio for decades. It is a fund-of-Price-funds. It offers two attractions. First, the managers have the ability to create distinctive weightings within the fixed-income world; they can move tactically within their strategic universe. Second, the managers have a permanent slide of income-producing equities in the portfolio, which should have allowed somewhat more upside, with (at a 17% exposure) relatively little downside.

Because savings accounts have for so long offered near-zero to negative real returns, I chose to keep the money otherwise destined for savings in exceedingly low volatility funds offering the prospect of low- to mid-single-digit returns. RiverPark Short Term High Yield (RPHYX, 3.4% annual returns, 0.8% standard deviation, 1% maximum drawdown, Sharpe ratio 0f 2.45 since inception) and Spectrum Income (RPSIX, 4.6% annual returns, 5.7% standard deviation, 14.7% maximum drawdown, Sharpe ratio of 0.52 over the past 20 years) earned spots in my portfolio as a low-volatility, steady returns sort of funds.

The Spectrum Income fund came with a $50/month minimum investment back in the day, which is about what I could afford. I built a substantial position in RPSIX, then, in 2020, sold almost half of it to add a position in T Rowe Price Multi-Strategy Total Return. This is a hedge fund-like operation that draws on T. Rowe Price’s vast, global network of analysts who cover a myriad of asset classes. The managers seek to invest in “non-market sources of return,” that is, returns that can be delivered whether the market rises or not. That’s possible by choosing investments that are intrinsically uncorrelated with the market or by using hedges to offset market exposure. The strategies available to the managers include Macro and Absolute Return, Fixed Income Absolute Return, Equity Research Long/Short, Quantitative Equity Long/Short, Volatility Relative Value, Style Premia, Dynamic Global FX, Dynamic Credit, and Global Stock.

So what happened to change my mind?

Spectrum Income lost its edge. Traditionally, the portfolio held about 17% of its shares in an income-oriented equity fund, T Rowe Price Equity Income. Price eliminated that holding, so it’s now a pure income fund. It now holds 20 or so T. Rowe Price bond funds. The fund tracking at MFO Premium suggests that it has not separated itself from its peers in either risk, return, risk-adjusted returns, or independence over the past five years.

  20 years 10 years 5 years 3 years
Spectrum Sharpe ratio 0.52 0.28 0.0 0.48
Peer Sharpe ratio 0.52 0.26 -0.3 0.64
Difference in total annual returns vs peers -0.1 0.2 0.3 0
Difference in maximum drawdown vs peers 4.1% smaller 0.3% larger 1.4% larger 0.8% larger
Difference in downside deviation 0.3% smaller 0.0% difference 0.6% larger 0.5% larger

The historic (20-year model) was peer-like returns with dramatically less downside, and that worked. The recent history is low, peer-like returns with more downside.

Multi-Strategy Total Return lost its edge and is slated to be liquidated in January 2026. When we first profiled the fund, the manager was pretty confident about his edge: he had ongoing, daily, formal and informal contact with the Price managers responsible for eight of the fund’s underlying strategies. That is to say, first-class brains to pick within easy reach. Solid performance in 2019 and 2020 seemed to validate the story, but since then, bad things have happened. It might have been a corporate restructuring that broke the unified team into two separate offices, impeding the manager’s information flow, but we can’t confirm that. Regardless, in the past five years, it has steadily underperformed its peers and booked returns (1.89% APR) that would have caused many money market managers to roll their eyes. While the fund sits at $225 million AUM, assets are stagnant, performance is not improving, and the fund is on the chopping block.

What’s next? Good question!

I’m pondering whether to move the money over to Schwab, which holds most of my non-retirement portfolio, or find an alternative Price option. The criteria are reasonable upside, small downside, and a very limited correlation to the US stock and bond markets, both of which strike me as profoundly overbought.

Options might include T. Rowe Price Global High Income Bond (RPIHX) or T. Rowe Price Floating Rate (PRFRX), which have emerged as the strongest candidates from the Price family, with T. Rowe Price Dynamic Credit (RPELX) the runner-up and Global Multi-Sector (PRSNX) in the discussion. Since the youngest of these funds is just over six years old, we ran a head-to-head six-year analysis of all of them at MFO Premium. Here’s the picture!

Six-year risk-adjusted performance, four Price funds versus Spectrum Income

    APR APR vs peers Max DD Std Dev R2 US bonds R2 US stocks Ulcer index
Spectrum Income (current fund) Multi-Sector Income 2.9 +0.1 -14.7 7.2 0.72 0.54 Average
Floating Rate Loan Participation 5.5 +0.3 -11.3 5.6 0.43 0.07 Better
Dynamic Credit Alternative Credit Focus 4.8 +1.3 -15.3 7.5 0.15 0.00 Better
Global High Income Bond Global High Yield 4.7 +0.4 -17.2 9.6 0.62 0.24 Average
Global Multi-Sector Bond Global Income 2.3 +0.8 -17.9 6.9 0.56 0.49 Better

In each case, I highlighted – in green – the cells of the two best-performing funds in each metric. Here are the measures we looked at:

APR: annualized percentage return

APR vs peers: by how much it led or trailed its peers

Max DD: the worst single fall, or drawdown, in the past six years

Std Dev: standard deviation, or a fund’s “normal” bounciness, where lower is better.

R2 US bonds / R2 US stocks: the correlation, between 0 and 100, of the funds’ movements and that of the broad bond or stock market.

Ulcer Index: the Ulcer Index is a composite that weighs how far an investment falls and how long it takes to recover. High Ulcer score = big falls, slow to get up = more ulcers. In this case, “better” means that it offers fewer ulcers than its peers.

Shortlisted: Floating Rate and Dynamic Credit, with Floating Rate in the lead for now. My concern with Floating Rate is that it’s about three times more interest rate sensitive (that’s what the correlation to the bond market sort of measures) than Dynamic Credit, but it’s also substantially less volatile. Research ensues!

How might this be useful to you?  It is, in part, a reminder to use evidence to pursue your objectives. One of my ongoing concerns is that the US stock and bond markets are priced for disaster. I would prefer, on the whole, not to participate unduly in any comeuppance. That explains my interest in checking the correlation between possible fund additions and the broader markets; for my purposes, a looser tie to the markets is better just now.

What’s not next? Price Active Crypto ETF

T. Rowe Price, the 87-year-old Baltimore firm synonymous with disciplined, research-driven investing, filed in October for an Active Crypto ETF, joining over 90 cryptocurrency fund applications awaiting SEC approval. The move seems surprising for the quintessential “singles hitter” of asset management, yet in other ways it’s entirely characteristic: when Price’s rigorous research leads somewhere, the firm follows, even into volatile new territory. Years of internal analysis have concluded that digital assets are evolving from speculative instruments into a legitimate asset class with quantifiable return frameworks, positioning Price not at the bleeding edge but potentially as the leading edge of non-speculative crypto vehicles. We’ve written a bit more about their crypto research elsewhere in this issue.

That said, the fund does not address any fundamental interests in my portfolio. We’ll share more when we can, but we are unlikely to share word of a big buy on my part.

On the other shift: increasing exposure to PIMCO Inflation-Response Multi-Asset Fund. I shifted about $50,000 from a CREF retirement date fund to PIRMX. PIRMX is a global fund with a mix of assets that should respond well in an inflationary environment. Morningstar describes it this way:

The strategy seeks to increase exposure to inflation while limiting sensitivity to equities and interest rates. The team selected a mix of TIPS, commodities, real estate, and emerging-markets currencies for these qualities, measured by sensitivity to the Consumer Price Index. The combination is diverse as these asset classes tend to have lower correlations with one another.

I used MFO Premium to check the fund’s correlation with US stocks (0.01) and bonds (0.93). The fund is up 15% year-to-date through the start of November 2025 and 6.7% annually over the past decade. Both of those are in the top 1% of their Morningstar peer group. Against its very different Lipper peers (flexible portfolio), it has returned 6.6% over the decade, which slightly trails its peers. Its downside and standard deviation are reassuringly low, and its maximum 10-year drawdown is 13% compared to 20.5% for its peers. This achieves one of my goals, which is moderating exposure to stocks when the market is at its high and adding uncorrelated assets to my retirement accounts.

People who deserve a hearing

One of the peculiarities of the present day is how quickly we turn. We like and respect (in some cases, worship) people who agree with us, or who say things that reassure our prejudices. But the moment they dare change their names, banishment!

Bill Gates is dialing back his calls for climate change.

What Gates said, and why he deserves a hearing.

Bill Gates has repositioned his climate advocacy in ways that deserve serious attention, even for those who find the shift troubling. In his new essay Three Tough Truths About Climate (10/2025), Gates argues that “doomsday” rhetoric has led climate advocates to focus excessively on near-term emissions targets at the expense of poverty reduction and disease prevention—causes he believes will do more to help vulnerable populations adapt to a warming world. While maintaining that “every tenth of a degree of heating that we prevent is hugely beneficial,” he now explicitly states that climate change “will not lead to humanity’s demise” and calls for

I’ve always suspected that Bill Gates is what Mark Zuckerberg might become if he ever managed to effin’ grow up.

measuring progress through human welfare indicators rather than temperature targets alone. The shift coincides with Breakthrough Energy scaling back its policy operations and comes amid dramatic cuts to global health funding—suggesting the pivot may reflect both philosophical reconsideration and pragmatic resource allocation. Climate scientists like Michael Mann have called Gates’ arguments “soft denial,” and the financial self-interest is impossible to ignore. Yet Gates’ decade of substantial climate investment and his 2021 book How to Avoid a Climate Disaster earned him credibility that shouldn’t evaporate with a single essay. His arguments merit engagement rather than dismissal—even if they ultimately fail to persuade.

Mr. Trump, incapable of reading three pages, much less understanding them, promptly announced, “I (WE!) just won the War on the Climate Change Hoax.” Mr. Gates seems surprised to hear it. (sigh)

Why I believe that Gates is wrong.

Mr. Gate’s framework has, I think, two problems. First, he treats adaptation and mitigation as competing budget items when they’re actually sequential risks with wildly different cost structures. It’s the difference between fireproofing and treating burns, except the burns might be civilizational. The cost of, for instance, Africa muddling through with new natural gas developments – triggering major direct and indirect (more affluent people buy more cars) greenhouse gas releases – in the short term, is the prospect of vast regions becoming uninhabitable in the medium term. It’s not “reduce or mitigate,” it’s “reduce or trillions in mitigation still won’t save you.”

Second, and more fundamentally, there are non-linear risks he’s not addressing: The tipping points that don’t show up in cost-benefit analyses until it’s too late. I’ll mention two. One is the collapse of the North Atlantic current (technically, the AMOC). There is a vast river of water, a torrent of inconceivable size, that pours down along the east coast of North America, into the tropics, and north along the west coast of Africa and Europe. The current is nutrient-rich and cooling, feeding great fish schoals and moderating North American heat. Its northward flow explains why places like Dublin remain temperate in winter despite the fact that it’s at the same latitude as, say, Edmonton, Canada. That current is already slowing as warming disrupts the density differentials that drive it, and its collapse will be devastating.

But not, quite likely, as devastating as the prospect of the northern permafrost – across vast expanses of Russia, Alaska, and northern Canada – beginning to thaw. Frozen in that “permanently” frozen soil are 20 billion tons of methane, a greenhouse gas vastly more powerful than CO2, and 1,700 billion tons of carbon. Its release would trigger a large, sudden spike in the greenhouse effect, creating a feedback loop likely far faster than human or animal populations might accommodate.

These are non-linear, threshold-crossing risks that Gates’ “let’s be pragmatic” framing systematically underweights. His argument essentially assumes climate impacts scale smoothly with temperature: a tenth of a degree matters, yes, but in predictable, manageable increments. The science increasingly suggests otherwise—that we’re not on a ramp but approaching a series of steps, some of which drop into basements we can’t climb out of.

What’s particularly galling is Gates framing of African natural gas development as a humanitarian necessity versus climate impact, as if those are the only variables. He ignores that the climate impacts those countries will face make adaptation orders of magnitude more expensive than the foregone development would have cost. It’s not even a close thing, he says, but only if you exclude the second-order effects from your calculation.

Gates has earned the right to this hearing. But having listened carefully, I find his pragmatism rests on optimistic assumptions about risks the science increasingly suggests we cannot afford to make.

Ross Sorkin is dialing up his alarm.

Barbara Tuchman always saw history differently from the rest of us. She saw human beings making predictable human mistakes—struggling to build decent lives amid monumental challenges, suffering, and sometimes transcending catastrophic losses.

Her work on the era of the First World War, The Proud Tower and The Guns of August, is not only enormously powerful, but they might also have prevented a nuclear war. President Kennedy, explaining to Robert F. Kennedy (the sane one, not the current one) his decision to give the Soviet premier an honorable way to back down from the Cuban Missile Crisis, said, “I am not going to follow a course which will allow anyone to write a comparable book about this time [and call it] The Missiles of October.”

(I get nostalgic for the days when presidents were capable of reading—and writing—serious books.)

One of Tuckman’s last works reflected, perhaps, the weariness of watching the same play performed on different stages. She titled it The March of Folly: From Troy to Vietnam. A tattered copy sits on my shelf. Tuchman documented how leaders and nations, despite clear warnings, march deliberately toward disaster—choosing familiar folly over difficult wisdom. “Wooden-headedness,” she wrote,

the source of self-deception, is a factor that plays a remarkably large role in government. It consists in assessing a situation in terms of preconceived fixed notions while ignoring or rejecting any contrary signs. It is acting according to wish while not allowing oneself to be deflected by the facts. It is epitomized in a historian’s statement about Philip II of Spain, the surpassing wooden-head of all sovereigns: “No experience of the failure of his policy could shake his belief in its essential excellence.

She did not write about the Great Depression and the market crash that preceded it, both fed by acts of hubris and denial.

Andrew Ross Sorkin has, and he deserves your attention.

In 1929: Inside the Greatest Crash in Wall Street History – and How It Shattered a Nation (2025), Sorkin excavates the human drama behind systemic catastrophe: the decisions, delusions, and ignored warnings that transformed speculation into disaster. His central thesis is disarmingly simple:

  1. The Market Crash of October 1929 was not inevitable; it was the product of a decade’s greed and timidity.

Back in 1929, [the Fed] knew the market was out of control. They knew there was too much speculation. And they talked about trying to tamp it down. But there was a big question about how …and they were very, almost overly, concerned with the politics of the moment.

  1. The Great Depression was not the inevitable consequence of the Crash; it followed because of the actions taken, or not taken, in the wake of the Crash.

Interviewer: “we could have had the 1929 crash but not the Great Depression of 1930?” Sorkin: “Oh, absolutely. The Crash in 1929 was the first domino. And took the next domino and the domino after that to ultimately get us into the Great Depression. There were so many mistakes and frankly bad decisions along the way that led us to the Great Depression.”

  1. The Great Depression was not merely a matter of economics; it was a crisis of confidence that was not resolved for a decade.

The United States that bounded full of hope and vigor into the fall of 1929 and the US that emerged in the dark days of the 1930s were two very different nations. No cities were bombed or torched in the fall of 1929, and no armies marched on Washington. There were no … attempted assassinations … no government buildings were taken over by angry mobs … But daily life in America certainly felt different.

To the nation, experiencing the implosion of the stock market … was destabilizing. A state of shock set in, accompanied by a paralysis of spirit and loss of confidence. People started questioning all the things they had taken for granted. Did a capitalist society make sense anymore? Could it be depended upon going forward? Or had everyone been duped by the glorious market of the 1920s? One larger question lay behind all the others—who can be trusted? (438-9)

  1. We are at no less risk and we are no better led, now, than we were in 1929. That’s a conclusion that arises much more clearly in a series of long, thoughtful interviews rather than in the book itself.

Every financial crisis is a function of really only one thing: it really is leverage. Too much credit in the system, and it then leads to some form of speculation. [And still today] people are taking on too much debt [and] we don’t know where the debt is the way we used to know where debt was. It used to live on the balance sheets of banks. Today most of the borrowing, especially among Corporate America … is from what’s called “private credit vehicles.” There are things that private equity firms have set up that live very much in the shadows. So we don’t really know how much debt there really is… hundreds of billions of dollars is being spent to build data centers, but a lot of that is being paid for with credit, with debt.

Taking on too much debt? The national debt under Trump II has grown by 1.7 trillion dollars, rising by $1 trillion in 60 days, the fastest jump in history save for the Covid-stimulus surge under Trump I (“U.S. hits $38 trillion in debt, after the fastest accumulation of $1 trillion outside of the pandemic,” PBS.org, 10/23/2025). The total national debt is now 42 times greater than it was on the eve of the Republican tax-cutting / deficit-cutting revolution in 1980. Consumer debt has grown by $370 billion in the 12 months from August 2024 to August 2025, with outstanding credit card balances soaring to $1.2 trillion. The average FICO score dropped two points in the last year, driven by a spike in delinquencies on auto and credit cards (Deborah Kearns, “Americans’ credit scores are falling as debt piles up,” QZ.com, 11/1/2025). Consumers’ expectations for household finances over the next five years reached a multi-year low, and the percentage of Americans who believe they will achieve financial prosperity fell to record lows, especially among less affluent households (“Americans Are Gloomier Than Ever About Their Financial Future,” Newsweek, 9/1/2025).

And, by the way, more working-class Americans, folks in the $30,000 – 70,000 income range, than ever before have stock market accounts. Most of the accounts were opened in the past five years, and most seem driven by apps and easy-trading platforms (Hannah Lang, “More Working-Class Americans Than Ever Are Investing in the Stock Market,” WSJ.com, 10/10/2025;  there’s a paywall, but the same data is widely available elsewhere). Not to worry: The folks for whom Mr. Trump tore down the East Wing of the White House (“the 1%”) still control well over 50% of the stock market.

Sorkin’s response for those who tut and say, “Look at the stock market. Broad and deep, dude. Eighteen percent, year-to-date, better than 30% if you were leaning in the right direction,” is found at the very start of the book:

The arc of the story of 1929 may feel like the response of Ernest Hemingway’s famous line, “How did you go bankrupt?”

“Two ways,” Hemingway’s character replies, “Gradually, then suddenly.”

That’s how confidence – the lifeblood of our economy – disappears: gradually and then suddenly. (x)

The “democratization of debt” in the 1920s – when General Motors and Sears taught Americans that borrowing was an opportunity rather than a moral failing – created a culture where people could put down a dollar and borrow ten more to buy stocks at brokerage houses that, as Sorkin puts it, “sprang up on street corners the way Starbucks does today.” The democratization of private equity, venture capital, and crypto assets championed by the Trump administration echoes those choices.

Sorkin’s warning isn’t that history repeats itself, but that its patterns recur in new costumes. Today’s private credit funds echo 1929’s unregulated lending. Crypto tokenization mirrors the speculative investment trusts of that era. AI mania parallels the radio revolution. And tariffs, “the first domino” in 1929’s collapse, are again being deployed despite their well-documented tendency to trigger cascading failures. (As the saying goes, history doesn’t repeat, but it does rhyme.)

Yet Sorkin resists doomsday fatalism.

It does not have to happen again. We are not destined to have this happen again. It is true that the train is careening towards some form of a crisis at some point. The problem is you’ll never know. We’re always living in a bubble of some sort. And it will pop at some point, too. What we want to do, though, is prevent it from popping in such a way that it creates the next Great Depression. And I think that can be avoided.

The lesson he draws from 1929 isn’t that crashes are inevitable, but that the response matters most: the policies and choices made in the wreckage determine whether we face a correction or a Great Depression. Indeed, he perhaps consciously echoes Tuchman and JFK: “I like to say that I wrote this book almost as a prequel to Too Big to Fail (his bestselling story of the 2008 crisis) in hopes we don’t ever have to write a sequel.”

This is the kind of history that might prevent catastrophe rather than merely record it. That makes it worth reading. It’s a bit unsettling that there is no table of contents (I love getting the big picture first) and sort of reassuring that there are over 100 pages of notes and references, plus a nice discussion of the resources Sorkin got access to that had never been tapped before. Folks who would appreciate a bit of immediate access might watch a purely excellent PBS interview from Amanpour & Company (from which many of the quotations above are drawn) or read a transcript of Katie Couric’s interview with Sorkin.

I’ll note in passing that the link to Mr. Sorkin’s book leads to Bookshop.org, an Amazon competitor launched during Covid. Bookshop’s business model is unique and admirable: they channel much of the profit from each sale to local independent booksellers. Like Amazon, they secure price discounts from publishers. Unlike Amazon, they do not offer free shipping to members who … well, pay hundreds a year to secure “free” shipping. There was a time during which Jeff Bezos seemed to be an exemplary business leader. That time is well past, and adding to his quarter-trillion-dollar fortune strikes me as abhorrent. So I don’t.

Most people don’t know that borrowing money was long regarded as a sign of moral failure. Governments didn’t, businesses didn’t, individuals didn’t. Much of Sorkin’s tale is driven by the concerted efforts to make being in debt normal, whether it was debt to buy cars or leverage debt to buy stocks. One of my Augustana colleagues, Lendol Calder, wrote a fascinating history of the domestication of debt, Financing the American Dream: A Cultural History of Consumer Credit (2001). A fine and careful work, well worth borrowing from your local library (if not going into another $72.45 debt for).

Michael Burry, the Big Short guy, just added his voice to the anxious chorus.

Mr. Burry is a hedge fund manager famous for anticipating the 2008 crash. And also famous for his annual apocalypses since. In the summer of 2021, he sounded the alarm on the “greatest speculative bubble of all time in all things” and in late January 2023 tweeted the single ominous word “Sell.” He left Twitter (and his 1.4 million followers) shortly thereafter. He returned at the end of October 2025 with an evocation of the movie “War Games.”

Really, not quite sure what to do with one-hit wonders. Elaine Garzarelli dined for decades on her call of the 1987 market crash without … well, ever being particularly right again.

Thanks!

To our bedrock supporters, Greg, William, S & F Advisors, William, Stephen, Wilson, Brian, David, Doug, Altaf: Thank you. We are genuinely humbled by your ongoing commitment. And, to George from PA, Thomas also from PA (Go Stillers and/or Iggles!), John from Pensacola, Mitchell from WA, Craig of Tennessee (hmm… several Red states have purpled-up; cheers to the Bears except, of course, in encounters with the aforementioned teams), Christine and Peter from WA, and, as ever, Leah of MA (I’ve been flirting with retirement myself but, so far, she won’t even make eye contact much less give me her number (sigh)).

Chip and I have substantially increased our support for the Riverbend Food Bank, which provides support for our region’s little food pantries and sustenance to an increasing number of our neighbors. (I tried to volunteer, but they need folks during retired-people time.) Cheers and thanks, especially, to the volunteers at 16 local Quad Cities high schools. As participants in the 39th Student Hunger Drive, the kids collected enough for 926,393 meals for the River Bend Food Bank’s 23-county service area, setting a new record. This was an increase from last year’s 786,186 meals, which I mention just in case you’ve defaulted to mumbling “kids these days,” and “Gen Z stares,” and “complete disconnection.”

Finding an answer to a child who says, “But I’m still hungry,” is something no one ought to need to do. Consider working with your local food bank or Feeding America. You will never see the faces of those you help, I know, but you will give hope as much as a meal.

As ever,

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T Rowe Price’s Calculated Bet: Why the Quintessential “Singles Hitter” Is Swinging for Crypto

By David Snowball

In the buttoned-down world of institutional asset management, T Rowe Price has long been the firm that makes boring look brilliant. While competitors chased hot trends and flashy returns, the Baltimore-based firm built its reputation as the quintessential “singles hitter,” compounding modest, steady gains into industry-leading long-term performance through disciplined, research-driven processes.

Which makes the 87-year-old firm’s October 2025 filing for the T Rowe Price Active Crypto ETF seem, at first glance, utterly out of character.

Cryptocurrencies? The asset class synonymous with wild volatility, 70%+ drawdowns, and a  $6.2 million banana duct-taped to a wall? For a firm that has weathered every market cycle since 1937 by staying boringly sensible?

Yet for those who understand T Rowe Price’s culture, the move is precisely in character. Because when Price’s research leads somewhere, the firm follows, even when it means moving ahead of the crowd into uncomfortable territory.

Late to the Party, But Fashionably So

Price is decidedly not an early mover. The filing comes nearly two years after the SEC’s watershed January 2024 approval of spot Bitcoin ETFs, which triggered what one analysis called “a 400% acceleration in institutional investment flows” and have since attracted over $150 billion in assets. BlackRock, Fidelity, Grayscale, VanEck, and ARK dominated that first wave, with BlackRock’s iShares Bitcoin Trust (IBIT) becoming the third-largest ETF by inflows in 2024—trailing only broad S&P 500 index funds and accumulating over $50 billion in assets in less than a year.

By late 2025, the landscape will have exploded into what Bloomberg analyst Eric Balchunas describes as an impending reality where there will be “more crypto ETF filings than stocks.” Over 92 cryptocurrency ETF applications now await SEC review, covering everything from single-asset Solana and XRP funds to multi-crypto index products, staking-enabled ETFs, and even proposals for memecoins like Dogecoin and Shiba Inu. (sigh)

Price’s filing, which Balchunas called a “semi-shock” from a “top 5 active manager,” sits frozen with dozens of others during a federal government shutdown that has left the SEC with skeleton staffing and no clear timeline for approvals.

Yet Price’s approach differs fundamentally from the herd. While most applications target passive index tracking or single-coin exposure, Price is proposing an actively managed multi-asset fund (holding 5-15 cryptocurrencies) that applies its core competency – fundamental research, valuation analysis, and active portfolio management – to the crypto space. This isn’t about being first to market. It’s about being right.

The Research Imperative

“If you don’t start out as a crypto skeptic, there’s something wrong with you,” writes Blue Macellari, T Rowe Price’s head of digital assets, in one of three recent research papers on cryptocurrencies the firm shared with us. It’s a revealing admission that captures Price’s approach: start with skepticism, follow the data, and let the conclusions emerge.

Price hired Macellari, a former crypto hedge fund executive, in 2022, not to chase trends but to build genuine expertise. The firm has spent years “monitoring developments in the digital assets space closely and developing the ability to trade digital assets,” according to company statements.

Those conclusions, detailed in research by Justin Thomson (Head of the T Rowe Price Investment Institute) and Stefan Hubrich (Head of Global Multi-Asset Research), suggest that digital assets have reached an inflection point. They’re not just speculative toys anymore; they’re potentially evolving into a legitimate asset class.

The key insight: while Bitcoin has endured four drawdowns exceeding 70%, each near-death experience has been followed by stronger recoveries. Despite extreme volatility (daily price swings of 5-10% remain common), the asset class refuses to disappear. More importantly, Price’s analysts have identified a potential path from “risk-on” to “risk-off” status for digital assets. If volatility dampens and cryptocurrencies decorrelate from other risk assets like high-growth equities, they could transition from speculative investments to mainstream portfolio components.

The Valuation Challenge

For a firm built on fundamental analysis, cryptocurrencies posed a unique problem: how do you value an asset with no cash flows, no earnings, and no balance sheet?

T Rowe Price analyst David Kroger addressed this by adapting traditional discounted cash flow frameworks, using staking rewards as a substitute for cash flow in the valuation process. The methodology acknowledges that cryptocurrencies operate on decentralized networks with different consensus mechanisms; Bitcoin uses energy-intensive “proof of work” mining, while Ethereum employs “proof of stake” validation. (No, I have no clue what those phrases mean.)

The critical distinction: unlike gold (another non-cash-generating asset), Bitcoin is actually used for real-world transactions. With Bitcoin’s programmatically fixed supply of 21 million tokens, growth in transaction volume measured in USD necessitates a rising price for Bitcoin. This creates a potential return framework if Bitcoin transaction volumes grow alongside the broader economy.

Over the 12 months ended August 2024, more than $1.3 billion in fees were expended on the Bitcoin network to support a total transaction volume of $2.4 trillion, demonstrating real economic utility.

Context: Outflows and Evolution

The crypto ETF filing comes at a pivotal moment for T Rowe Price. Like many active managers, the firm has faced persistent outflows as investors gravitate toward lower-cost passive strategies. The firm manages $1.77 trillion in assets but has been “seeking to diversify into new areas,” according to industry analysts. In response, Price has launched 24 ETFs in recent years—a dramatic expansion for a firm historically focused on mutual funds. Last month, it announced a partnership with Goldman Sachs to develop new private market products for retail investors.

The Active Crypto ETF represents both a continuation of this ETF strategy and something more: evidence that Price’s research apparatus sees genuine opportunity in digital assets, not just a need to check a product box. As VettaFi’s Todd Rosenbluth noted, “It’s exciting to see them expand their ETF lineup beyond stock and bond exposure.”

The “Digital Gold” Thesis—And Beyond

Price’s researchers acknowledge sympathy for the “digital gold” thesis: the view that Bitcoin could serve as a hedge against financial collapse, similar to physical gold but with advantages like algorithmic scarcity rather than mere physical limits.

But they’ve moved beyond that framework. Understanding value in crypto means “applying alternative notions of utility; it is a parallel world to ‘Trad-Fi,’ with a different lexicon,” Thomson writes. That lexicon includes concepts like decentralized applications (DApps), decentralized physical infrastructure networks (DePIN), and token burning, all of which create potential economic value flows.

The comparison to gold is instructive but incomplete. Both Bitcoin and gold have scarcity value and bear a cost of carry since neither generates income. But Bitcoin’s algorithmic supply limit (the “halving” that occurs every four years until 2140, when the maximum 21 million tokens will exist) distinguishes it from paper currencies printed without theoretical limits.

Thomson opens his research with a cautionary tale about a 1999 stock called Fyffes that jumped 40% in one day merely by announcing a virtual fruit market, then contrasts it with a 2024 crypto entrepreneur paying $6.2 million for a banana duct-taped to a wall before eating it in front of journalists. Both stories feature “a whiff of alchemy and transience—that wealth can be created and destroyed from fumes,” Thomson writes. Yet his conclusion is not to dismiss crypto but to separate “the ephemeral from the permanent, the froth from the substance, Ponzi from probity.”

What Success Looks Like

Price’s framework suggests that for digital assets to merit inclusion in diversified portfolios, they need an expectation of positive future returns, specifically, excess returns above cash that reward investors for accepting risk. Traditional assets like stocks (with equity risk premiums) and bonds (with duration premiums) have decades of data supporting this expectation.

Digital assets have reached what Price calls the “gold stage.” They have economic value greater than zero. The next step is establishing a durable long-term return thesis beyond merely betting on continued adoption or financial collapse. The fact that Price is willing to file for a crypto ETF suggests its research team believes that thesis is taking shape.

Hubrich’s analysis is particularly telling: “To formulate a long-term return thesis for digital assets (Das), investors will need to determine whether passive holders should expect to participate in the value added by the blockchain. The answer is likely to depend on the DA, so this analysis will need to be conducted on a case-by-case basis.” This is precisely the type of granular, security-by-security analysis that Price has applied to stocks and bonds for decades.

The Long Game

Dominic Rizzo, who manages some of T Rowe Price’s ETFs, signaled the firm’s direction at an ETF conference earlier in 2025, noting that “now is a good time to consider bitcoin exposure” and comparing cryptocurrency pricing to commodities, saying it “closely tracks the cost of mining it.” These weren’t off-the-cuff remarks but deliberate signals from a firm that doesn’t speculate publicly.

When the government shutdown ends and the SEC resumes processing applications, Price won’t be first out of the gate. But if the firm’s research proves prescient, the T Rowe Price Active Crypto ETF could establish the standard for how thoughtful, non-speculative institutional investors approach digital assets by applying rigorous fundamental analysis to select among cryptocurrencies based on network usage, staking rewards, adoption trends, and value creation.

For a firm that has navigated the Great Depression, multiple wars, the dot-com bubble, the global financial crisis, and countless market cycles, launching a crypto ETF is not a panic move or a desperate grab for assets. It’s a calculated decision backed by years of research and a belief that digital assets are evolving into something durable.

As software engineer Jameson Lopp observes in Thomson’s research: “First step to understanding crypto: admitting you don’t understand crypto. Final step: realizing that ‘understanding’ is a moving target.”

For T Rowe Price, that journey from skepticism to cautious embrace reflects the same discipline that has defined the firm for nearly nine decades. The research led somewhere uncomfortable, somewhere new, somewhere volatile—and Price followed.

Whether that decision proves prescient or premature won’t be known for years. But it demonstrates that even the most conservative firms must evolve when the research is clear. Sometimes the most characteristic move is the one that looks uncharacteristic.

As Thomson concludes his research: “To be continued.”

Indeed.

Sector Performance

By Charles Lynn Bolin

In this topsy-turvy world, characterized by unprecedented tariffs, rapidly changing policies, spending cuts, geopolitical risk, high deficits, and elevated valuations, I tend to be more conservative. I have added toggles to my “Rate and Rank” spreadsheet, allowing me to evaluate funds through the lenses of “Risk Off” and “Yield” for a conservative, tax-advantaged account. Table #1 shows how I rank sector Lipper Categories from highest-ranked category to lowest, along with the highest-ranked five funds. Some sectors are in bubble territory, or there is speculative momentum. 

Table #1: Sector Fund Performance – Six Years

Source: Author using MFO Premium fund screener and Lipper global dataset.

Utility funds tend to have higher risk-adjusted returns over the long term because we like to have heat in the winter, air conditioning during summer, lights at night, and refrigerators to chill our favorite foods and beverages. I am working on a conservative portfolio as described in this month’s companion article, but am not above investing a token amount in sector funds of interest.

Table #2 contains Virtus Reaves Utilities ETF (UTES) and Lazard Global Listed Infrastructure Portfolio Open (GLFOX), which are worth considering to complement a conservative portfolio. The utility fund has had slightly better total and risk-adjusted returns.

Table #2: Selected Sector Fund Performance – Ten Years

Source: Author using MFO Premium fund screener and Lipper global dataset.

Figure #1 shows the performance of Virtus Reaves Utilities ETF (UTES) and Lazard Global Listed Infrastructure Portfolio Open (GLFOX) for the past six years

Figure #1: Selected Sector Fund Performance – Six Years

Source: Author using MFO Premium fund screener and Lipper global dataset.

Virtus Investment Partners “is a distinctive partnership of boutique investment managers, singularly committed to the long-term success of individual and institutional investors.” They have $15B in assets under management according to data from MFO and “$170.71 billion managed in a multi-boutique structure” according to the website. The Fact Sheet states, “Reaves Asset Management was founded in 1961 and is an employee-owned, research-based investment management company, with over 40 years of experience managing money.”

The Lazard Asset Management LLC website summarizes GLFOX as, “The Lazard Global Listed Infrastructure Portfolio seeks total return by investing in a select universe of ‘Preferred Infrastructure’ companies. The team believes that these companies have the potential to achieve lower volatility returns that exceed inflation and that a portfolio of Preferred Infrastructure companies presents a potential diversification opportunity. The Portfolio may be a powerful complement to real assets, private equity infrastructure, and global equity allocations.” It currently has 26 holdings with 20% invested in the U.S.

Closing

My next purchase decision will be in December, so I have time to wait and watch. My focus is on building a conservative portfolio for the long-term, which either of these funds might fit into. The Moving Average Convergence Divergence (MACD) for Virtus Reaves Utilities ETF (UTES) currently suggests that there may be an opportunity to buy UTES during a dip.

Refining My Conservative Retirement Target Portfolio

By Charles Lynn Bolin

Using historical data on funds to make assumptions about future performance involves correctly interpreting the trends. Over the past six years, the U.S. has experienced an extraordinarily unusual period:

  • COVID bear market (01/2020 – 03/2020) with Quantitative Easing
  • Federal budget deficit rising from 4.5% of GDP to 6.3% (2019 to 2025) along with Gross Federal Debt to GDP rising from 105% of GDP to 119% today
  • Rising Inflation (05/2020 – 05/2022)
  • The Great Normalization bear market (02/2022 – 09/2022)
  • Rising rates (03/2022 – 07/2023),
  • Quantitative Tightening (11/2022 – ongoing)
  • The debasement trade with gold and cryptocurrencies rising (01/2023-ongoing)
  • High equity valuations (12/2023 – ongoing)
  • Federal Reserve cutting short-term interest rates (09/2024 – ongoing)
  • Unprecedented increase in tariffs (04/2025 – ongoing) followed by the April correction

During the next six years, we will probably experience another bear market and modest to moderate inflation. Interest rates are likely to continue falling in the short-term, but not as low as the decade following the financial crisis because of less Quantitative Easing and higher deficits and national debt. High valuations are a headwind to equity returns, and high interest rates are a tailwind for bond returns. In January 2020, before the start of the COVID bar market, the price-to-earnings ratio of the S&P 500 was an elevated 26 and is currently 31. I believe that the full COVID Cycle from January 2020 to December 2021 and 2025 are more representative of market conditions for the next six years than the period from January 2022 to December 2024.

Refining My Target Portfolio

In this article, I explore how alternative investments and mixed asset funds with flexible strategies can be used to develop a conservative portfolio. To evaluate funds, I selected thirty-six funds in twenty-three different Lipper Categories that had good risk-adjusted performance during the full COVID cycle and 2025. I created an optimizer using Excel Solver to maximize the Martin Ratio for the full COVID cycle with constraints for portfolio concentration, minimum returns, drawdowns, yields, allocation to “junk bonds”, and consistency across the individual years and bear markets.

Figure #1 shows the performance during the past four bear markets by allocation to stocks for all of the 461 mixed asset funds in the Lipper global dataset with at least six years of history. Note that the severity of the bear market has a larger impact on the portfolio performance than the of the stock to bond ratio.

The two black dashed lines show a range of likely maximum downturns for the three bear markets, excluding the dotcom bear market, which was associated with a mild recession. The three maroon squares are the maximum drawdowns of the “Conservative” and “Moderate” portfolios that I created and the target portfolio that I described last month in Putting My Conservative Retirement Portfolio on Cruise Control. The two portfolios created for this article had low to average drawdowns.

Figure #1: Mixed Asset Fund Drawdowns During Four Bear Markets

Source: Author Using MFO Premium fund screener and Lipper global dataset.

Table #1 shows the average annualized returns over the past six years for the mixed asset funds and the “Conservative”, “Moderate”, and original target portfolio. The two new portfolios outperformed both the mixed asset funds and the original target portfolio.

Table #1: Mixed Asset Fund Returns for Past Six Years

Source: Author Using MFO Premium fund screener and Lipper global dataset.

Assessing Market Risk

I am currently reading “A Crash Course on Crises: Macroeconomic Concepts for Run-Ups, Collapses, and Recoveries” by Princeton University economics professor Markus K. Brunnermeier and London School of Economics professor Ricardo Reis, which researches the interrelationship between financial markets and the economy during a crisis. They describe part of their audience to be “members of the informed public wanting to absorb some of the concepts that should be guiding both macroeconomic and financial policy.”

The book contains some wonderful insights into investing behavior, such as “Why don’t other, more sophisticated investors, lean against the bubble, preventing it from arising in the first place?” They continue, “These investors try to forecast how long the bubble will persist, which is governed by the trading behavior of the other (sophisticated) investors.” I have no illusions that I can predict the behavior of other sophisticated investors.

As described by Hyman Minsky, many crises are preceded by some type of innovation (such as artificial intelligence) followed by long periods of price increases, speculation, and leverage. These are followed by a period of instability and traders becoming risk-averse and de-leveraging. Stock market price-to-earnings ratios were around 18 before the 1929 stock market crash, peaked at 34 prior to the bursting of the dotcom bubble, hit 21 prior to the start of the financial crisis, and are now at an elevated 31.

There are usually “triggering events” that set off chain reactions between asset markets and financial markets that determine the severity of corrections and whether a macro-financial crisis results. At the National Association for Business Economics, Federal Reserve Chairman Jerome Powell said, “When COVID-19 struck in March 2020, the economy came to a near standstill and financial markets seized up, threatening to transform a public health crisis into a severe, prolonged economic downturn.” The stage is set for a correction, and there are plenty of potential “triggering events” such as a slowing economy, rising inflation, potential supply chain disruptions, and geopolitical risk.

The COVID and Great Normalization Full Cycles

Figure #2 represents the investing environment for the past six years. Fiscal and monetary stimulus contained the economic fallout from the COVID bear market lasting from January 2020 through March of that year, but Personal Consumption Price inflation rose from a half percent following the COVID bear market to nearly seven percent by January 2022. Charles Boccadoro described The Great Normalization (TGN) in which interest rates normalized to higher rates, hurting bond performance. The TGN bear market lasted from January 2022 to September of that year. By December 2023, the price-to-earnings ratio had crossed the high valuation level of $25 per dollar of earnings.  The debasement trade is partly the result of investors and global central banks buying gold and the increased acceptance of cryptocurrency. I believe that the dollar will weaken but not be replaced as the global reserve currency, and the debasement trade is overbought.

Figure #2: The COVID and Great Normalization Full Cycles

Source: Author Using MFO Premium fund screener and Lipper global dataset.

The full COVID Cycle was from January 2020 to December 2021 and includes the COVID bear market and inflation. I expect cycles of bear markets and inflation to be more frequent in the coming decade than in the decade following the financial crisis. Rates are high, so “The Great Normalization” of rising rates is unlikely to occur to such extremes for many years. Finally, valuations are currently high and more likely to fall than rise either over time or in a correction with a “triggering event”.

Portfolio Results

I set up my Excel optimizer for both the Conservative and Moderate portfolios to maximize the Martin Ratio for the January 2020 to December 2021 period by changing allocations to 36 funds with constraints that I wanted to have drawdowns of less than nine percent for both the COVID and TGN bear markets. Maximum allocations were set for Alternative, Bond, Equity, and Mixed Asset fund types to ensure diversification. The Conservative portfolio has additional constraints of having yields at least 4% with less than 13% allocated to lower quality “junk bonds”.

Figure #3 contains the inflation-adjusted results from Portfolio Visualizer assuming 4% annual withdrawals for the Conservative, Moderate, and Original Target Portfolio compared to the Fidelity Asset Manager 40% (FFANX), which is a good global mixed asset fund. The link is provided here. The Conservative and Moderate portfolios had similar returns through 2023, with the Moderate portfolio having higher volatility.  Both beat inflation over the six years after adjusting for withdrawals. During the period of rising valuations and the debasement trade, the Moderate Portfolio has outperformed. Both outperformed the Original Target Portfolio from my last article because of a wider selection of funds under consideration, improvements in methodology, and an increase in the maximum allocation for a fund from 10% to 15%. All three outperformed the 40/60 baseline fund, which was negatively impacted during the rising rates period.

Figure #3: Conservative and Moderate Portfolio Growth – Six Years

Source: Author Using Portfolio Visualizer

Table #2 contains the resulting allocations with the funds sorted from the lowest Ulcer Ratio over the past six years to the highest. I own shares in FPFIX/FFIRX, PCBAX, PMAIX, PZRMX, and AVALX. It will take a couple of years to fill out the rest of the portfolio, depending upon cash flows, and I will lean towards the less risky funds next.

Table #2: Portfolio Allocations

Source: Author Using MFO Premium fund screener and Lipper global dataset.

Table #3 contains the portfolio metrics for the period May 2019 to September 2025 from Portfolio Visualizer. Annualized returns are after withdrawals, while Time-Weighted Rate of Return reflects investment performance.

Table #3: Portfolio Performance

Source: Author Using Portfolio Visualizer

Fund Assessment

Table #4 contains the metrics and ratings from MFO for the funds for the past six years. They are sorted from the lowest Ulcer Index, which measures the depth and duration of drawdowns from the lowest to the highest. MFO Risk is based on the Ulcer Index comparing all funds, while the Ulcer Rating is for funds within the same category peers. Martin Ratio is the risk-free return divided by the Ulcer Index. The MFO Rating is based on the Martin Ratio for funds within the same Lipper Category. The Batting Average Rating (BA) is based on the percentage of the months that a fund beat its peers. One takeaway is that some of the funds outperformed during down markets but lagged peers overall.

Table #4: Fund Metrix – Six Years

Source: Author Using MFO Premium fund screener and Lipper global dataset.

Optimization depends on having funds with low correlations to each other. Notice that some funds had their maximum drawdowns during the COVID (2020) bear market, and some had them during the Great Normalization (2022) bear market.

Table #5 shows how the funds performed in each of the bear markets and the bull markets. The lower-risk funds provide some safety during downturns, while the riskier funds provide growth potential. Blue shaded cells indicate the best performers, and red are the worst performers.

Table #5: Fund Performance During COVID and Great Normalization Cycles

Source: Author Using MFO Premium fund screener and Lipper global dataset.

Fund Spotlight – COTZX, PRPFX, PZRMX

Columbia Thermostat (COTZX, CTFAX)

Columbia Thermostat bases its stock to bond allocation on valuations. During the financial crisis, the strategy was to invest in all stocks or bonds, and it did not perform well. It has improved its strategy to have a range of allocations depending on price levels and performed well during the COVID bear market. The Fact Sheet indicates that the fund is currently 70% invested in fixed income and 30% invested in equity. It contains the allocation to stocks by the S&P 500 level.

BlackRock Tactical Opportunities (PBAIX, PCBAX)

BlackRock Tactical Opportunities (PBAIX, PCBAX) is an Alternative Global Macro fund that has performed well since the 2008 financial crisis, but during the financial crisis fell nearly 27% in 2008 and returned 26% in 2009. I own shares in PCBAX, but limit allocations to alternatives because they use derivatives, which can be less predictable during a crisis. Eaton Vance Global Macro Absolute Return (EAGMX) is another good Alternative Global Macro fund that had a maximum drawdown of 7% during the financial crisis. I included it in the original target portfolio from last month.

Comparison of Permanent Portfolio versus PIMCO Inflation Response Multi-Asset

The Permanent Portfolio (PRPFX) is based on the concepts developed by Harry Browne in the 1980s to provide steady, long-term growth with low volatility without trying to time the market. The fund managers describe Permanent Portfolio (PRPFX) as, “Designed as a core portfolio holding, Permanent Portfolio seeks to preserve and increase the purchasing power value of each shareholder’s account over the long-term, regardless of current or future market conditions, through strategic investments in a broad array of different asset classes.” It invests fixed percentages of its net assets in dollar assets (35%), gold (20%), aggressive growth stocks (15%), real estate and natural resource stocks (15%), Swiss Franc assets (10%), and silver (5%).

The PIMCO Inflation Response Multi-Asset (PZRMX) is described by the fund managers as “By investing in a blend of inflation-related asset classes, the fund seeks to help preserve and grow purchasing power, enhance portfolio diversification, and guard against market shocks across varying inflation environments.” It currently has a composition of Inflation Linked Bonds 68%), Commodities (22%), Currencies (15%), REITS (10%), and Precious Metals (10%). I own shares in PZRMX.

Figure #4 contains some of the funds that did well during 2020 to 2022 with high inflation. These are mostly in the Flexible Portfolio Lipper Category plus DIVO in equity income, Permanent Portfolio (PRPFX, maroon line) in the Alternative Global Macro category, and the PIMCO Inflation Response Multi-Asset (PZRMX, red line) in the Flexible Portfolio Category. During the period in between the bear markets, the S&P 500 rose 89% while core bonds rose a paltry 2.5%.

Figure #4: Fund Performance During Inflation (2020 – 2022)

Source: Author Using MFO Premium fund screener and Lipper global dataset and St. Louis Federal Reserve FRED database.

From 2012 through 2019, Permanent Portfolio (PRPFX) and PIMCO Inflation Response Multi-Asset (PZRMX) had very similar performance. From 2019 through 2021, PRPFX outperformed PZRMX and greatly outperformed starting in 2023. I prefer owning PRPFX and PZRMX to directly owning gold because it is much more volatile.

Closing

Over the past year, I decreased my allocation to stock from 65% to 50% which is a small decrease in risk. Rebalancing during high market valuations and downturns is a modest way of “buying low and selling high”. I believe that risk risk-adjusted performance of bonds to be greater than equities for the next few years. Using the bucket approach to match risk assets with spending needs and using bond ladders does more to reduce portfolio risk than lowering the allocation to stocks.

As a qualifier, I use financial advisors to manage the majority of my portfolio using a traditional, globally diversified 60/40 portfolio. I am developing this “Conservative Portfolio” strategy for a subset of the portfolio that I manage in addition to traditional bond funds and bond ladders to have liquidity available in any market condition, and with some growth potential.

Launch Alert: GMO Dynamic Allocation ETF

By David Snowball

On October 13, 2025, GMO launched its newest ETF, GMO Dynamic Allocation ETF (GMOD). The ETF is managed by Co-Heads of Asset Allocation Ben Inker and John Thorndike, and draws on GMO’s proprietary 7-Year Asset Class Forecasts. It will typically range between 40% and 80% equity exposure and can invest broadly across stocks and bonds, not limited by sector, market cap, credit quality, or geography.

This would be an interesting but distinctly contrarian operation. The key is that GMO has a strong and well-founded belief that asset prices can diverge meaningfully from their true value but mean-revert to fair value over time. Called “mean reversion,” the idea is classically contrarian: dynamically increase exposure to the asset classes that are the most attractively priced while deemphasizing those that the team views as expensive. Those judgments are embodied in the team’s widely read and widely criticized  7-Year Asset Class Forecasts, with the portfolio’s exposures actively adjusted in response to shifts in GMO’s outlook on returns, risks, and market valuations. The problem is that irrational valuations have been incredibly sticky, which means that mean reversion has not been happening within the limit of most investors’ patience.

Currently, the team reports, “we are de-emphasizing US and growth equities where we believe that valuations are stretched, while being very happy to hold non-US and value equities which are trading at favorable valuations  … Given the precarious valuations that the US and Growth have been driven to, this is, we believe, exactly the right time to be investing with someone who is not afraid to take contrarian positions. We are tremendously excited about the outlook for potential relative alpha.”

Investors can get some guidance about the likely trajectory of the ETF by looking at the performance of the 30-year-old GMO Global Asset Allocation Fund, which follows the same logic and which, the team allows, is “the closest benchmark to GMO’s new GMOD ETF and thus the most pertinent benchmark.”

GMO reports that “Since inception, 22 October 1996, the Fund (6.95% APR) has beaten its index (6.21%) by 74 bps per year. We show figures versus our custom benchmark, not the Lipper peer group.” Against the Lipper “flexible portfolio” peer group, the fund has trailed its peers by 50 bps since inception, but with dramatically less volatility.

GMO Global Asset Allocation Fund vs Lipper “flexible portfolios”

  3 year 5 year 10 year 20 year Lifetime
APR 15.2 8.5 6.4 5.9 7%
APR vs peers 3.1 0.1 -0.6 -0.7 -0.5%
Sharpe vs peers 0.36 0.3 -0.4 0.2 -0.1
Downside vs peers 1.2% better 0.5% better 0.5% better 1.6% better 0.6% better
Maximum drawdown 1.9% better 3.1% worse 1.1% worse 8.8% better 7.9% better

Source: MFO Premium fund screener and Lipper Global Datafeed

On the whole, the strategy has been consistently competitive in terms of total return, has had consistently less downside (measured by downside deviation and maximum drawdown), and has had slightly better risk-adjusted returns. That seems broadly consistent with Morningstar’s risk and return metrics as well. In addition, the fund’s three-year record has been exceptionally strong as the stranglehold of US + Growth has weakened.

GMO’s ETF lineup also includes QLTY (U.S. Quality), QLTI (International Quality), GMOV (U.S. Value), GMOI (International Value), BCHI (Beyond China), DRES (Domestic Resilience), and INVG (Systematic Investment Grade Credit).

The fund will charge 0.50%.

Bottom line: GMO is very, very disciplined. If market behaviors begin to normalize – which is to say, that things like profit margins or valuations revert to their means and markets are not inexplicably dominated by just five to ten corporations – that discipline, GMOs research, and their long record with multi-asset portfolios is likely to serve investors well.

Briefly Noted . . .

By TheShadow

Updates

Welcome to the casino! GraniteShares 3x Short AMD Daily ETP, a product marketed for European investors, recently pulled off the rare feat of going to zero. The fund, purely a speculator’s trading vehicle, was designed to rise by 3% for every 1% that AMD stock fell. Perfect opp for experienced sharks to dart in, tear off a chunk of carcass, and get out before anything bad can happen. Think of a holding time that might be measured in seconds, and you’re there.

The fund imploded when AMD announced a deal with OpenAI to deploy 6 gigawatts of AMD Instinct GPUs for OpenAI’s next-generation AI infrastructure. AMD’s stock surged up 37% before the market even opened. In consequence, the fund was structured to fall by more than 100% leading to an “index cancellation redemption event.”

Alternatively, it is a good reminder that in a casino, the house always wins.

Launches and Reorganizations

Akre Focus Fund completed its reorganization into the Akre Focus ETF effective October 27th. The reorganization will result in no changes to its investment objectives or fundamental investment approach. The ETF is expected to deliver the strategy in a more cost-effective, tax-efficient, and flexible format for shareholders.

ARK Bitcoin Yield ETF is in registration. Catherine D. Wood and William Scherer will oversee the daily operations of the ETF. Expenses have not been stated.

BBH Select Series Large Cap and Mid Cap funds will be reorganized into related ETFs. Existing fund shareholders will be shareholders of the ETFs before the commencement of trading on November 17th. BBH touts the ability to trade intraday, portfolio transparency, and potentially lower expenses and tax bills as reasons for considering the ETFs. The reorganization will be a tax-free event. The case for the fund, beyond that, is open to question. Each fund has about half a billion in assets and, by Morningstar’s measure, offers low relative risk but below-average returns. As measured by the Sharpe ratio, the funds are not compelling; each is below its benchmark and category over the past three years, with managers who have been on board for about four (Large Cap) and two years (Mid Cap).

Dimensional Funds Advisors has filed a registration statement for its first ETF share class of funds since Vanguard’s patent expired in 2023. The 13 incipient ETFs are:

U.S. Large Company,
U.S. Large Cap Equity,
U.S. Small Cap Value,
U.S. Targeted Value,
U.S. Core Equity 1,
U.S. Core Equity 2,
U.S. Vector Equity,
U.S. Small Cap,
U.S. Micro Cap,
U.S. High Relative Profitability,
DFA Real Estate Securities,
U.S. Large Cap Growth,
U.S. Small Cap Growth ETF

The SEC has stated that it is going to issue an order allowing the firm to have this type of structure.  

JP Morgan has completed its reorganization of its JP Morgan National Municipal Income Fund into the JP Morgan Municipal ETF effective October 27, 2025.

Lazard Emerging Markets Core Equity Portfolio Fund was converted into the Lazard Emerging Markets Opportunities ETF on October 27, 2025.

Pabrai Wagons ETF is in registration.  Mohnish Pabrai will be the portfolio manager; expenses have not been stated. Our colleague, Devesh Shah, profiled the estimable Mr. Pabrai and the open-end fund version in “The Pabrai Fund Overview and Interview with Mohnish Pabrai” (10/2024). Top 20% among global small- to mid-caps in 2024, bottom 10% YTD in 2025, much smaller and cheaper stocks than its peers, fully invested.

Thrivent Core Small Cap Value fund will be converted into an ETF, pending receipt of shareholder approval, on November 21, 2025.

Vanguard launched the Vanguard Emerging Markets ex-China ETF (VEXC). The portfolio managers for VEXC will be Michael Perre, Jeffrey Miller, and John Kraynak, CFA. The ETF will launch with an expected expense ratio of 0.07%. The ETF will offer exposure to emerging markets equities while excluding securities classified by FTSE as being based in China.

Small Wins for Investors

American Century Small Cap Value fund will reopen to new investors on December 9th. It has been closed since August 2021.

Effective December 1, 2025, Clearbridge Small Cap Growth Fund will reopen to purchases (and incoming exchanges!) from new investors.

Wasatch International Small Cap Value and Global Small Cap Value funds began to be offered to investors on October 1. 

Old Wine, New Bottles

Effective as of December 8, 2025, the AMG Montrusco Bolton Large Cap Growth Fund becomes the AMG GW&K Small Cap Growth Fund, (ii) make changes to its principal investment strategies and principal risks, (iii) changes from “non‑diversified” to “diversified”, (iv) replaces the S&P 500 Growth Index, one of its benchmark indices, with the Russell 2000 Growth Index and (v) gets a new management team. Other than that, all quiet.

Effective October 29, 2025, the CCM Global Equity ETF (CCMG) became the Sequoia Global Value ETF (SFGV). The fund launched in January 2024, modestly trails its peers and benchmark … and has drawn a billion in assets. Curious.

The Frontier MFG Core Infrastructure Fund was renamed the MFG Core Infrastructure Fund on October 31, 2025.

On or about December 15, 2025, the Gabelli Automation ETF will change to the Gabelli Global Technology Leaders ETF. Given that the fund has accumulated a tepid record and under $7 million AUM in nearly four years, I wouldn’t be rushing in.

On April 21, 2025, Macquarie Group Limited, the parent company of Delaware Investments Funds Advisers, announced that it had entered into an agreement for Nomura Holding America Inc. to acquire Macquarie Asset Management’s US and European public investments business. The transaction closed on November 1, 2025. One consequence is that Macquarie funds will pick up the Nomura name.

Current Name Proposed New Name
SFT Macquarie Growth Fund  SFT Nomura Growth Fund 
SFT Macquarie Small Cap Growth Fund  SFT Nomura Small Cap Growth Fund 

Should the Board approve these name changes, they would become effective as of May 1, 2026.

On or around December 19, 2025, the Rayliant Quantamental Emerging Market ex-China Equity ETF will be succeeded by the Rayliant Wilshire NxtGen Emerging Markets Equity ETF. Among the … uhh, tweaks, accompanying the name change: “the Fund will transition from an actively-managed exchange-traded fund that invests primarily in equity securities of companies in emerging markets, excluding China, to a passively-managed ETF that seeks to track the performance of a machine learning-driven index that includes equity securities of companies in emerging markets, including China.”

Off to the Dustbin of History

Quick heads up for shoppers: no need to buy Christmas presents for the Alger Weatherbie Enduring Growth ETF, which will endure no more as of Christmas Eve, 2025.

ATAC US Rotation ETF departed on October 24, 2025. That’s separate from the older, more successful ATAC Rotation Fund, which remains. The ETF has $4 million, and the fund has about $50 million.

Azoria 500 Meritocracy ETF and Azoria TSLA Convexity ETF will be liquidated on December 15, 2025.

Apparently, the Fidelity Digital Health ETF has declared digitally terminal and is expected to liquidate on or about November 20, 2025.

Fidelity SAI Municipal Bond Index Fund is expected to liquidate on or about November 12, 2025. 

On October 16, 2025, the Board of Trustees of Fidelity Merrimack Street Trust approved the liquidation of the Fidelity Sustainable Core Plus Bond ETF on or about November 20, 2025.

The flames died out for the FIRE Funds Wealth Builder ETF and FIRE Funds™ Income Target ETF on October 30, 2025.

The Guardian Capital Fundamental Global Equity Fund and the Alta Quality Growth Fund will be liquidating their assets at the close of business on December 3, 2025.

Humankind US Stock ETF will be liquidated on or about December 8, 2025.

LeaderShares Activist Leaders ETF and LeaderShares Equity Skew ETF joined the ranks of former funds on October 30, 2025.

Otter Creek Long/Short Opportunity fund and the Otter Creek Focus Strategy ETF will be liquidated on October 30th. Keith Long was one of the portfolio managers and the founder of Otter Creek Management until he passed away in August 2023.

The Rayliant Quantamental China Equity ETF will be liquidated on December 5, 2025.

The Saratoga Funds, Energy & Basic Materials Portfolio, the Financial Services Portfolio, and the Municipal Bond Portfolio will be liquidated on December 17, 2025.

Sterling Capital Focus Equity ETF won’t be making it to Thanksgiving this year; the fund is slated to liquidate, terminate, evaporate, and eviscerate on November 24, 2025.

Thrivent Core Low Volatility Equity Fund and Thrivent Core Mid Cap Value Fund ceased their thriving on October 22, 2025.

Victory High Income Municipal Bond Fund will have its final opportunity to declare victory on or about December 22, 2025. Thereafter, it will be a former fund.