Monthly Archives: June 2025

June 1, 2025

By David Snowball

Welcome to the June issue of the Mutual Fund Observer!

It’s a grand month, whose start was marked by the 165th commencement ceremony celebrating Augustana’s graduates. The college was born in 1860, an expression of longing and ambition. Swedish immigrants in the Midwest – and there were a lot of them – wanted to provide their children with a better life, which, to them, meant a good education. At the same time, they didn’t want their children to forget their homeland and its proud traditions.

So, they made a college. Modeled after the great universities in northern Europe, Augustana became an expression of faith: in the welcome that America gave its new citizens, in the country’s endless promise, in the power of education, and in the wonder of their children. This year, 555 souls representing 68 majors, 26 states, and 23 countries joined the storied roster of Augie grads.

Much has changed at the College, so very much. But those smiles, those expressions of incandescent pride and joy, that expression of family and faith and hope, never have.

It’s a grand month, whose close will be marked by Chip and me arriving in Augustana’s ancestral homeland for the first time. From June 20 – July 3, she and I will be traveling via planes, buses, ferries, and trains – from Stockholm to Uppsala, thence to Oslo, Flam, and Bergen. That has two implications. First, we’ll have a July issue finished at mid-month, with the faithful Raychelle launching on July 1st for us (and you). Second, if you’ve got cool and out-of-the-way spots for us to peer into – cool cafes? Neat markets? Iconic shipwrecks – let us know! We’ll share pictures and credit. 

In this month’s issue …

Don Glickstein makes his debut with “Stories over Stats,” advocating for a narrative-driven approach to investing that prioritizes manager communication and downside protection over complex analytics. Like me, Don is a UMass grad. Unlike me, he’s also a former journalist and award-winning author of After Yorktown: The Final Struggle for American Independence (2015).

Drawing an analogy to baseball’s preference for “unicorn” players with compelling stories, Glickstein systematically rebuilt his portfolio around four key questions: Does the fund maintain cash reserves? How did it handle inflation? What’s its downside protection? Do managers communicate effectively with shareholders? His rebalancing led him from fully invested funds to managers like Marshfield Concentrated Opportunity (28% cash) and FPA Queens Road Small Cap Value, emphasizing the importance of direct manager communication and defensive positioning.

Lynn Bolin continues his practical guidance with two complementary pieces addressing current market uncertainties. In “Investing Internationally for the Timid Investor,” he recommends Vanguard Global Wellesley Income Fund (VGWIX) for conservative investors seeking international exposure without the volatility of pure equity funds. For less timid investors, he suggests WisdomTree Dynamic Currency Hedged International Equity Fund (DDWM), noting that international equities are currently outperforming expensive US markets.

His second essay, “Best Laid Plans of Mice and Men,” provides a sobering assessment of the current economic environment, citing Federal Reserve Chairman Powell’s warnings about “more volatile inflation” and “more frequent supply shocks.” Bolin reduces his stock allocation from 57% to 50%, emphasizing shorter-duration bonds and inflation-protected securities as tariff policies and rising deficits create unprecedented uncertainty.

All three pieces reflect a shared philosophy of defensive positioning in uncertain times. Both authors prioritize downside protection, favor managers who maintain cash reserves, and emphasize the importance of clear communication from fund managers. Bolin’s international diversification recommendations align with Glickstein’s search for funds with defensive characteristics, while both writers advocate for simpler, story-driven approaches over complex analytics during periods of heightened market volatility.

The collective message is one of prudent caution: reduce risk, diversify globally, seek defensive managers, and focus on preservation of capital in an environment where “this time is incredibly different.”

This caution is especially warranted when “Something wicked this way comes,” our analysis of two potentially disastrous changes in the financial markets. The US Department of Labor has denounced decisions made during the Biden administration to restrict the use of cryptocurrencies in retirement accounts. On May 28, 2025, that restriction effectively ended. The second development is largely driven by industry greed: single-stock ETFs, leveraged or reverse leveraged, were a tiny and unnecessary niche product. As we looked at May’s SEC filings, it became clear that something like a hundred new single-stock offerings are surging toward you. Collectively, the government and the industry have embraced a vision of the market as a casino, and of speculation as investing. We walk through the risks with you.

Often, I think my writing is “purely okay.” I’m actually half-proud of the writing in this one. I hope you like it.

Finally, The Shadow shares “Briefly Noted” word of the torrent of fund-to-ETF conversions that’s rushing over the industry (RiverNorth Core? That one surprised me), along with other developments, including new CEOs at two major independent fund firms.

A peace built on quicksand, a rally built on TACOs

One of the most famous unattributed descriptions in the 20th century described the events following the Treaty of Versailles (1919) as “a peace built on quicksand.” At base, the Treaty was incredibly, fundamentally flawed. A vindictive document written by bitter old men. Marshal Ferdinand Foch, a key French military leader during World War One, famously said of the Treaty of Versailles: “This is not a peace. It is an armistice for twenty years.”

The generations that followed paid the price for their idiocy. The rise of the Nazi movement and the fall of a series of democratic governments, the German turn toward cults of personality and vengeance, were largely product of those failed negotiations. Twenty years later, World War Two erupted in Europe. Historians ultimately judged it, with its 75 million deaths, to be “the final battle of World War One.”

As we write this issue, the S&P500 sits with a gain of 1% for the year (through 5/30/2025), a ferocious rebound from its low point in the year: a loss of 19%. The question is, does this rally suggest that the coast is clear?

We suspect not. It is, to coin a phrase, a rally built on TACOs. TACO is the latest meme in the investing world, and it stands for Trump Always Chickens Out. Since inauguration day, the stock market has lurched downward every time Mr. Trump announces, sometimes on the spur of the moment, a new, tightened, or extended tariff. And the stock market has lurched upward every time Mr. Trump … well, chickens out, and removes, loosens, or pauses a tariff. Mr. Trump has made over 50 separate trade and tariff announcements in just over four months (“What is TACO trade and how ‘Trump chickening out’ helps investors,” Business Standard, 5/29/2025). The New York Times summarizes it this way: “The tongue-in-cheek term adopted by some analysts and commentators describes how markets tumble on President Trump’s tariff threats, only to rebound when he relents” (5/27/2025).

The term was coined by Robert Armstrong of The Financial Times (5/2/2025), and it reportedly infuriates Mr. Trump. It is also a balm to investors looking for a reason to trade.

Two things you need to know:

  1. Trump has always chickened out. His reputation as a master negotiator was created by a book he didn’t write, Trump: The Art of the Deal. The book was written by Tony Schwartz who regrets participating in the myth-making, but also notes that Mr. Trump operated with “a stunning level of superficial knowledge and plain ignorance,” which is attributed to an extremely short attention span and the inability to focus on anything beyond self-aggrandizement for more than a few minutes (Jane Mayer, “Donald Trump’s ghostwriter tell all,” The New Yorker, 7/18/2016). Others who have actually engaged Mr. Trump in negotiations conclude “he’s not a good negotiator.” A striking example is The Art of the Deal itself: Mr. Schwartz was given 50% of the $500,000 advance and almost 50% of the royalties, and he got his name on the cover in the same line and same font as Trump.

    Most ghostwriters for books like Trump’s are paid a flat fee in the $30,000–$100,000 range, rarely receive royalties, and almost never get their name on the cover. How hard was that to achieve? “He basically just agreed,” according to Mr. Schwartz (Michael Kruse, “He Pretty Much Gave In to Whatever They Asked For,” Politico, 6/1/2018). Mr. Kruse’s article documents a long and stable pattern: Mr. Trump chickens out.

  2. But you can’t count on it.

    While stock investors hum a merry tune and consumer confidence measures perk, many of the people responsible for the underlying economy are hunkering down. The Leuthold Group reports (5/7/2025) that the stocks of economically sensitive companies (think “trucking”) are withering:

    Out of necessity, bear market rallies and the first leg of a new advance look nearly identical; if they didn’t, the game would be too easy. However, the action (or lack of it) within the most economically sensitive groups would seem to support our bearish take.

    Hedge fund manager Doug Kass, who has a suspiciously good record at forecasting short-term market movements, just announced that “I view less than 5% upside compared to 10%-15% downside. This is an increasingly unattractive ratio of nearly three to one” (5/31/2025). His reasoning:

    Political and geopolitical polarization and competition will probably translate into less centrism and, in turn, a reduced concern for deficits. This will create structural uncertainties, fiscal sloppiness, and worldwide imprudence. It will also create the possibility that bond markets ‘disanchor’ … l see valuations and consensus expectations for economic and corporate profit growth inflated, so look for the soft data to weaken into the hard data as the housing market slows and the vulnerability of the middle class is revealed.

    And in the background, a largely supine cohort of congressional Republicans happily pushing along a tax cut that will add trillions to the deficit. All of the major credit rating agencies have now stripped the US of its top-tier rating, and increasing numbers of international (aka “foreign”) investors are losing interest in part-ownership of America.

    But you knew all that already. For our purpose, the message remains the same: risk-conscious, multi-asset, broad diversification away from just the largest US stocks and Treasury bonds.

If you’re so rich, why aren’t you smart?

We wrote last month about the peculiar, and peculiarly American, fantasy that equates being filthy rich with being smart. The original essay is posted on LinkedIn and has been read by a fair number of folks (and, I hope, by a number of fair folks).

Almost immediately after our publication, a desperate new story began circulating:

Elon Musk wandered into a random Harvard University math classroom, was challenged by the (certainly liberal) professor … and then Elon CRUSHED the Crimson. Here’s the lede to one such post:

A Harvard Professor Mocked Elon Musk as ‘Rich But Dumb’—Then Musk Solved an ‘Unsolveable’ Math Problem in 2 MINUTES! 😱 The Crowd Went SILENT!

Ummm … the crowd went SILENT! Because there was no crowd. No classroom. No Musk at Harvard. No Musk ownin’ the libs. There were pictures – check out the 1960s vintage chalkboard above, apparently that’s all that Harvard can afford these days – generated by AI.

Which, I suppose, might have been able to solve the math problem (Laerke Christensen, “No proof Musk solved ‘unsolvable’ math problem at Harvard,” Snopes.com, 5/30/2025). Christensen’s article did have a nice poke at DOGE, with which Musk estimated he could easily trim a couple of trillions from the US budget. That appears not to have occurred (CBS News, 4/28/2025).

Our essay’s original argument remains: getting to be ultra-rich generally requires two vast blind spots, which facilitate the risk-taking and ruthlessness needed to get that rich, but those same blind spots create tragic misjudgments.

Changes in Snowball’s portfolio

Just FYI. I very, very rarely second-guess myself. For most of my funds, my holding period is measured in decades (see, for example, FPA Crescent, which I first acquired around the turn of the century). In May, however, I made two moves.

Move one: I added PIMCO Inflation-Response Multi-Asset to my retirement account, selling down CREF Social Choice to fund it. At base, the fund invests in assets that rise with inflation. Those include inflation-linked bonds, commodities, currencies, REITs, and precious metals. PIMCO’s pitch:

Unlike conventional stocks and bonds, inflation-related assets tend to have a positive correlation, or tendency to move in lockstep, with inflation. Including them in a portfolio may therefore enhance diversification while helping to hedge inflation risk.

Morningstar praises the management team for a deep bench and sharp execution. It’s a fairly small position but represents an attempt to hedge as I enter the … umm, second half of my career. The fund has returned about 8.1% annually over the past five years, and risk-return measures (Sharpe, Sortino, Martin, Ulcer Index) are well ahead of its “flexible portfolio” peers. We’ll look into it more in our July issue.

Move two: looking to eliminate T Rowe Price Spectrum Income. Spectrum Income is a fund-of-Price-funds that I’ve owned forever. I have never liked savings accounts, and so my “cash” tends to be split between ultra-short funds and Spectrum Income. Spectrum holds shares of 20 other fixed-income funds. What it doesn’t hold is exposure to dividend-paying equities, which was a long-time distinction of the fund. Price announced in April the elimination of the equity fund that was designed to add a bit of capital appreciation to a fund that otherwise lacked distinction.

The problem is that my embedded capital gains in the fund, owing to its decent performance (4.1% over 15 years with both a little more upside and a little more downside than its peers) and my decades-long holding, are substantial. I still need to work that through before acting.

Thanks, as ever …

To the faithful few who keep the lights on and our spirits up: the good folks at S&F Investment Advisors, Wilson, Greg, William, William, Stephen, Brian, David, Doug, and Altaf.

Special thanks this month to five friends. Sharon both made a generous contribution and arranged a matching grant from her employer, Debbie made an equally generous contribution in honor of her late husband, and my long-time best friend Nick Burnett, Jeroen of Anchorage (thank you, sir, we try hard and we’re glad it helps!), Thomas from Idaho (which I haven’t visited) and Stephen of Albuquerque (which I have visited and thought was amazing in both people and place.

You mean so much to us!

 

We’ll wave from the Nordic nations.

david's signature

 

Investing Internationally for the Timid Investor

By Charles Lynn Bolin

I like Will Rogers’ quote, “Don’t gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don’t go up, don’t buy it.” A good friend of mine once said that a balanced portfolio will usually have funds that are losing money. Then there are the unusual years like 2022 when few categories other than money market funds, short-term bonds, and commodities had positive returns. This article looks at how Vanguard Global Wellesley Income Fund (VGWIX) may fit into the portfolio of a timid investor, or how WisdomTree Dynamic Currency Hedged International Equity Fund (DDWM) might fit into the portfolio of a somewhat less timid investor.

With all of this market turmoil and uncertainty, we can reduce anxiety by getting out and doing the things we enjoy. Smell the roses. This baby Gold Finch was enjoying the sunshine in our yard and the bird seed that we set out. Turn off the news and go for a walk.

On the investing side, we can develop long-term plans and stick to them. A well-balanced portfolio within our risk tolerance can help reduce anxiety.

I am searching for sustainable simplicity.

As I review investments of family and friends, I am asked why do I (we) own this fund if it’s losing? In the past, someone told me that they sold all equities before the Great Financial Crisis, but they never got back in, and I showed how much more they would have had if they had just stayed in. Investors should increase their financial literacy and understand their risk tolerance.

The psychology of investing is that the fear of losing is often greater than the satisfaction of gaining. Inflation is a stealthy thief. People see their ultra-conservative investments gaining, but don’t see the loss of purchasing power. I take this into account when assisting family and friends with investments. They sometimes want to make more money, but sell the dips and miss the upswings. I recommend using financial advisors to develop a long-term plan and stick with it.

International equities are outperforming domestic stocks lately, partly because valuations are very high in the US. Some analysts cite tariffs as disproportionately impacting the US. When I explain this to timid investors, they ask if they should buy international stocks. My answer is no, because they don’t like to see the value of their accounts or funds go down.

For the less timid investor who can handle that some holdings will go down while others are up, I like the WisdomTree Dynamic Currency Hedged International Equity Fund (DDWM). It is classified by MFO as a Great Owl Fund for consistently being in the top quintile of International Multi-Cap Value funds for risk-adjusted returns. I selected it from all international equity funds for its high risk-adjusted performance.

For the ultra-conservative, timid investor who does not like to see big losses among their funds, I suggest mixed asset funds with global exposure. I have assisted some of them in the past to own the Vanguard Wellesley Income Fund (VWINX/VWIAX), and it is often one of their favorites. VWINX has 13% exposure to international investments.

My advice for some timid investors to get more exposure to international equities is to consider switching to the Vanguard Global Wellesley Income Fund (VGWIX), which has a 52% exposure to international investments. The Global Wellesley fund has outperformed its counterpart for the past five years with slightly less risk. Both have about 37% allocated to stocks. I also like VGWIX, in part, because its valuation is much lower than VWINX. Both of these funds are classified as Mixed-Asset Target Allocation Conservative.

Table #1: High Performing International Equity and Global Mixed Asset Funds – 7 Years

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

Figure #1 shows that the performance of the Vanguard Global Wellesley Income Fund (VGWIX) has been very close to that of Vanguard Wellesley Income Fund (VWINX) for the past seven years. The return of WisdomTree Dynamic Currency Hedged International Equity Fund (DDWM) has been slightly higher than Dimensional International Value ETF (DFIV), but with less downside risk.

Figure #1: High Performing International Equity and Global Mixed Asset Funds – 7 Years

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

Figure #2 shows that the performance of the Vanguard Global Wellesley Income and Vanguard Wellesley Income has been almost identical for the past three years. Likewise, the performance of WisdomTree Dynamic Currency Hedged International Equity ETF and Dimensional International Value ETF is also similar.

Figure #2: High Performing International Equity and Global Mixed Asset Funds – 3 Years

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

Year to date as of April, Dimensional International Value ETF (DFIV) is outperforming WisdomTree Dynamic Currency Hedged International Equity Fund (DDWM). The Vanguard Global Wellesley Income is outperforming Vanguard Wellesley Income.

Figure #3: High Performing International Equity and Global Mixed Asset Funds – YTD

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

Closing

I extracted all mixed asset funds with 40% or less allocated to stocks, above average risk-adjusted performance, and average or better annual percent returns. I narrowed the list to those with at least 20% invested internationally. Vanguard Global Wellesley Income Fund (VGWIX) is about the only fund to make the list of sixteen funds besides Mixed-Asset Target Funds with a target date of 2025 or earlier, and Mixed-Asset Target Today funds. So, the timid investor who wants to get international exposure should look at Vanguard Global Wellesley Income Fund (VGWIX).

Stories over stats: A simple approach to chaos-resistant investing

By Don Glickstein

I love baseball and personal finance, but I barely understand baseball’s sabermetrics and finance analytics. I want a good story.

The stat guys despise the Tampa Bay Rays’ Chandler Simpson because he only has a single tool: speed. The one home run he’s hit in his entire career was inside the park. This is a guy who can barely hit a ball out of the infield. I love him because he’s a unicorn. He has a story to tell: 112 stolen bases last year in the minors. For those of you who don’t know baseball, that’s a good number.

Likewise, my eyes spin around in my head when I look at Ulcer Indices, Martin ratios, EBITDA, and Bollinger Bands. I don’t have a clue why anyone would want to look at a logarithmic scale when they can view a linear scale with true proportions. Anyone who thinks they can predict the future by looking at past performance using charts strikes me as one step below alchemists.

So when crunch time comes for whatever reason, I want to hear what David Snowball says, or Warren Buffett, or Morningstar human analysts (its AI analyses are useless), or any of my mutual fund managers.

Crunch time came last year on the wings of inflation, and this year on the barge across the River Styx to the Tariff Hades. I wanted to evaluate my funds to see which had cash in reserve and how they had performed as inflation grew.

I didn’t want to change my allocation from the traditional (and arbitrary) 60 percent stocks and 40 percent bonds. I don’t panic easily, and keeping 60–40 makes it easier to buy low and sell high when I rebalance my portfolio.

Rather than drowning in incomprehensible metrics, I decided to focus on four simple questions that any investor can understand and evaluate.

  • Does the fund keep cash reserves for defense and opportunities?
  • How did it handle the recent inflationary period?
  • What’s its downside protection when markets tumble?
  • And perhaps most importantly—do the managers tell a rational story about their strategy and actually talk to shareholders like human beings?

These four criteria guided me through a systematic review of my entire portfolio, from large-cap growth to small-cap value to bond funds.

I started my analysis with Parnassus Core Equity (PRBLX, PRILX), a wonderful, large-cap fund that I’ve owned since 2002.  It also screens companies for social responsibility. (Needless to say, it avoided Enron, among others.) Its lead manager, Todd Ahlsten, writes informative reports; talks with the media frequently; has occasional shareholder conference calls; and answers questions personally, despite the fund being relatively large (due in no small part to its good performance over the years). Its downside capture over the past five years is 73, and Morningstar gives it a Gold rating.

Still, I was concerned that it’s a fund that always stays fully invested, and its top holdings were (as of March 2025), Microsoft, Amazon, NVIDIA, and Alphabet. With 32 percent of its portfolio in tech, I had concerns.

I can’t imagine ever selling my entire position in the fund, but it was time to do some rebalancing into a large-company fund that counterweighted Parnassus.

MFO gave me a lead: Marshfield Concentrated Opportunity (MRFOX). It was sitting on 28 percent cash in March, with no holdings in tech. One of three managers had a unicorn background: a Yale Law School degree, and she worked for a now-senator whom I respect from my home state of Massachusetts, Ed Markey. Another manager went the Warren Buffett route: an MBA from Columbia. Of course, resumes do not a fund manager make. I was impressed with Marshfield’s investing philosophy, the managers’ commentaries, and yes, its downside capture was just 51. Over three and five years, Morningstar rates it as low risk, high return. In fact, it’s never had a losing calendar year.

So I now own both Parnassus and Marshfield as my large-cap funds.

But what about a small-company fund? I had owned Neuberger Berman Genesis (NBGNX) for almost as long as I owned Parnassus. It had served me well because its managers didn’t gamble: They invest in smaller companies that actually have real products and real profits. It never made as much money in bull markets, but it lost a lot less in bear markets.

It was always fully invested in equities. As inflation and tariff chaos came on, I wondered if there was a small-cap fund that might lose even less and keep a cash reserve. I found the fund in a boutique family where I already owned two funds: FPA Crescent (FPACX), which is an MFO favorite, and FPA Flexible Income (FPFIX), which attracted me because of its relatively short duration (to simplify: a measure of when bonds come due) and its goal to beat inflation over rolling three-year periods.

The new small-cap fund was FPA Queens Road Small Cap Value (QRSVX). However, before I convinced myself to sell out of Neuberger, I had questions. While its performance was equivalent to Neuberger, and its downside capture was less, unlike other FPA funds, Queens Road appeared to have just one manager, and, of equal concern, that manager worked for a subadvisor. In other words, it’s a contractual arrangement.

That raised alarms because a former FPA fund, International Value, was purchased by a third-party company, and within a year, the fund divorced its new owner and closed. (MFO’s article about it here)

So I wanted to hear from the horse’s mouth about the arrangement that Queens Road has with FPA, and what happens if the manager can’t continue? I sent an email to both FPA and the subadvisor asking that whoever opened it forward it to Steven Scruggs, the manager. It took a couple of weeks to get a response, but yes, Steve replied, answered my questions, and offered to talk with me on the phone. (And yes, he now has a co-manager, and relations with FPA are great.)

I sold Neuberger and made Queens Road my core small-cap fund, which also has a 10 percent cash position.

Finally, in addition to the FPA Flexible Income bond fund, I had a position in what I called my super-conservative junk-bond fund, BrandywineGlobal Corporate Credit (BCAAX). It began its life as Diamond Hill Corporate Credit, owned by a smallish company based in Ohio. In 2021, it sold the fund to the behemoth multinational Franklin Templeton fund-devouring monster. While the managers continued to run the fund well, their shareholder communications became thinner and thinner.

I moved that money to the even more conservative junk-bond fund, CrossingBridge Low Duration High Income (CBLVX, CBLVX). To be fair, the manager doesn’t consider his fund to be junk, and Morningstar classifies it as a multisector bond. However, in March, 60 percent of its portfolio was below investment grade or unrated. Of greater importance to me was the duration: far shorter than Brandywine, so it would have greater flexibility to deal with the chaos economy.

Again, I had some questions about how the manager, David Sherman, works with his team, and I emailed CrossingBridge. He replied quickly. Soon after my investment, I connected to his quarterly video conference call. He managed to speak to my low level while giving more details to those who are much smarter than I am.

Bottom Line: Since making these portfolio tweaks, the market has climbed higher rather than crashed (as of mid-May, as I write). My new funds haven’t necessarily outperformed my old ones on the upside—and that’s the point. I’m not trying to hit home runs anymore; I’m playing for consistent base hits and stolen bases, just like Chandler Simpson. I can’t predict whether we’ll face layoff chain reactions, persistent inflation, crushing consumer debt, or economic retaliation from former allies seeking independence. But I know my fund managers have cash to deploy, proven downside protection, and the communication skills to explain what they’re doing when the chaos arrives.

Postscript: Downside capture ratios and my funds

How do I measure downside protection? I look at a statistic so simple even I can understand it: Downside capture, which is a ratio of how much a fund loses in bad markets compared with its asset-category index (aka benchmark). If the market plummets by 50 percent, a fund with a downside capture of 100 also drops by 50 percent. But if the fund’s downside capture is zero, it hasn’t lost any money. This is important because the less money you lose, the easier it is to recover. If I lose half of my $100 investment, I have $50. To get back up to $100, my investment would need to increase by 100 percent. That’s tough, and even with good funds, it could take years to get back to even.

  Fund downside cap vs. the S&P 500 & rating US Bond downside cap & rating  
1.5 years Since launch 1.5 years Since launch MFO rating Fund Age (yrs)
FPA Crescent Flexible Portfolio 42 54 8 -23 5 32
Marshfield Concentrated Opportunity Multi-Cap Growth 70 67     5 9
Parnassus Core Equity Equity Income 107 74     5 33
Neuberger Berman Genesis Small-Cap Growth 202 87     5 37
FPA Queens Road Small Cap Value Small-Cap Core 138 87     5 23
FPA Flexible Fixed Income Multi-Sector Income     26 11 5 6
BrandywineGLOBAL – Corporate Credit High Yield     -14 37 3 23
CrossingBridge Low Duration High Income Multi-Sector Income     -30 -20 5 7

How do you read that table? Easy!

After each fund’s name, we identify its Lipper peer group and then share its downside capture for two different periods. Columns 3 and 4 are the downside capture relative to the stock market over the past 18 months, which I identify as a high-inflation period, and since the fund’s launch. Columns 5 and 6 report the same information relative to the bond market’s movements. The last column tells you how long it’s been around; obviously, a fund with 30+ years of history might carry a bit more weight in your mind than a fund with six or seven years. For numbers people, we include the actual downside capture (8 means a fund captured 8% of the market’s decline, -11 means a fund rose when the market declined). For the rest of us, we color-code the box: blue is best, green is good, yellow is average, orange is below average, and red (none on my chart!) is the basement.

We only identify the downside capture relative to the asset class in which a fund invests: stock funds versus the S&P 500, income funds against the bond aggregate, and FPA Crescent against both because it invests in both.

As a bonus, we included two other risk-return measures for you. If a fund’s name is in a blue box (FPA Crescent, for instance), that signals that MFO designates it as a “Great Owl” fund for having achieved top 20% risk-adjusted returns for the past 3-, 5- 10-, and 15-year periods. The MFO Rating ranks a fund’s performance based on risk-adjusted return, specifically Martin Ratio, relative to other funds in the same investment category over the same evaluation period. The same color-coding applies: blue is top 20%, green is good, and so on.

Best Laid Plans of Mice and Men

By Charles Lynn Bolin

I created my best laid plans of mice and men for retirement, or as Dwight D. Eisenhower said, “plans are worthless, but planning is indispensable”. I follow much of what Christine Benz recommends in How to Retire: 20 Lessons for a Happy, Successful, and Wealthy Retirement. I divide my intermediate investment bucket, consisting of Traditional IRAs, into conservative sub-portfolios of bonds that I manage and more aggressive sub-portfolios of stocks and bonds managed by Fidelity and Vanguard for growth and income. In this article, I look at managing withdrawals in a secular bear market with an elevated sequence of return risk.

This Time Is Different, Incredibly Different

Keynesian macroeconomic theory is to use government intervention to manage economic downturns and promote employment. The law of supply and demand means American consumers will spend less as tariffs are passed along in the form of price increases. Tariffs are a regressive tax on lower- and middle-income households. A broad measure of the dollar has declined by eight percent year-to-date, making imports even more expensive. Cutting Federal tax revenue more than spending adds to deficits and is financed with higher national debt. Businesses don’t like uncertainty, and those that don’t pass along the cost of tariffs will have lower profits, which pressures high valuations. This time is incredibly different!

I wrote Investing in 2025 and the Coming Decade for the Mutual Fund Observer December 2024 newsletter. Fidelity’s Asset Allocation Research Team (AART) described “a new environment of slower growth, increasing geopolitical risk, and declining globalization”. This was before tariffs were increased in April and before abrupt cuts to the Federal workforce and spending! I displayed Figure #1 below, which I created from Vanguard Perspective (October 22, 2024), to represent projected 10-year nominal returns and volatility. Investing in international equities and bonds helped investors with well-diversified portfolios sail through the 2025 correction with low volatility.

Figure #1: Vanguard VCMM 10-Year Return vs Volatility Projections

Uncertainty in retirement planning has greatly increased. Last month, while the stock market had recovered, I reduced my overall allocation of stocks to bonds from about 57% to around 50%. For a candid assessment of the risks, I refer you to “JPMorgan CEO Jamie Dimon Says Markets Are Too Complacent On Tariffs, Expects S&P 500 Earnings Growth To Collapse,” by Hugh Son at CNBC. To be clear, I favor a balanced budget in a well-thought-out manner over time. Uncertainty, whether strategic or not, will have lingering adverse effects.

Paolo Confino wrote, “As the Fed devises its new strategy, Powell sees an economy with ‘more volatile’ inflation,” for Fortune. Mr. Confino quotes Federal Reserve Chairman Jerome Powell as saying, “We may be entering a period of more frequent and potentially more persistent supply shocks, a difficult challenge for the economy and for central banks.” Mr. Powell continued, “Higher real rates may also reflect the possibility that inflation could be more volatile going forward than during the inter-crisis period of the 2010s.” Mr. Powell concludes, “Anchored expectations played a key role in facilitating these expansions. More recently, without that anchor, it would not have been possible to achieve a roughly five percentage point disinflation without a spike in unemployment.”

Lance Roberts at Real Investment Advice explains in “Earnings Revision Shows Sharp Decline” that earnings “estimates are exceedingly optimistic”. He suggested “rebalancing risk as necessary and adjusting portfolio holdings to provide some hedge against a sudden pickup in volatility”. Mr. Roberts points out that “as the economy slows, consumer demand falls”. One implication is that as the economy slows, tax revenues will slow, worsening the deficit and adding to the national debt.

Current Investment Environment

I watched “2025 Economy Watch,” by The Conference Board, and “Navigating Markets through a Shifting Sea of Policy” at Fidelity. They articulated my concerns for the economy very clearly. In Table #1, I compare the timely forecast from The Conference Board to the First Quarter 2025 Survey of Professional Forecasters by the Federal Reserve Bank of Philadelphia, which was made before the April 2nd announcement of tariffs. Economists at The Conference Board estimate that economic growth will probably slow to below 2% this year and next, and inflation will remain elevated near 3%.

Table #1: Forecasts of Real GDP and Inflation

Author Using Data from The Conference Board and Federal Reserve Bank of Philadelphia Survey of Professional Forecasters

The government bond sale this week was not met with enthusiastic investors, and the yield on 30-year Treasuries has risen from 4.4% following the April 2nd announcement of tariffs to over 5%. The 10-year Treasury has risen from 4.0% to nearly 4.6% during the same time as investors seek higher yields to compensate for inflation and uncertainty. The S&P 500 fell 1.6% that day.

Walmart recently announced that it would have to raise prices to offset tariffs. Walmart’s net operating profit margin is around 3%, and it depends on inventory turnover. They have little choice but to raise prices for consumers because of the cost of tariffs.

The recent GOP budget proposal is estimated to cost over $3T over ten years. “New Report: Rising National Debt Will Cause Significant Damage to the U.S. Economy” by the Peter G. Peterson Foundation, describes a study that estimates that the current path of growing national debt will, in the coming decades, reduce the size of the economy, the number of jobs, private investment, and wages. Moody’s became the last of the three major rating firms to lower the rating of US government debt, citing high deficits and rising interest costs.

Bonds For Conservative and Aggressive Buckets

I extracted performance data for the past five years of 723 bond and money market funds using MFO Premium fund screener and Lipper global dataset for all Fund Families loosely excluding those with performance ratings in the bottom quintile, those with less than $5B in assets under management, and those with fewer than five bond funds. The results are in Table #2. The data is color-coded with best as blue and worst as red. The worst-performing bond categories of the past four years became the best-performing of 2025 as of the time of this writing. I expect short-term interest rates to fall at the end of the year and long-term interest rates to rise, and tilt away from core bonds to those with shorter durations and inflation-protected bonds.

Table #2: Lipper Bond Category Performance by Year

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

Table #3 lists the Lipper Categories sorted by the highest returns to the lowest for 2021 to 2025, plus for the past four years. Funds in the Lipper Category below the dark red line had negative returns for the time period. The blue and gray shaded Categories were the most consistent high performers and suitable for a conservative fixed income portfolio. Those in the reddish and yellowish cells were less consistent and/or worse performers over the past four years. When inflation is high and long-term rates are rising, bonds with longer durations don’t perform well.

Table #3: Lipper Bond Category Performance by Year

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

Figure #2 shows the Annualized Percent Return (APR) for the past four years versus Downside Deviation. Those in the blue rectangle are the Lipper Categories that I would put in a conservative intermediate bucket sub-portfolio. Those in the orange shape are the more volatile Lipper Categories that may be suitable for a more aggressive intermediate bucket sub-portfolio.

Figure #2: Lipper Bond Category APR Versus Downside Deviation

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

Table #4 contains funds in the Lipper Categories for conservative bond portfolios as of mid-May. Yields for municipal bond funds are adjusted to the tax equivalent yield for an investor taxed at 22%. Bonds with shorter duration and inflation-protected bonds are trending higher.

Table #4: Author’s Ranking System of Conservative Bond Categories

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

Target Allocation (Stocks to Bonds)

Now that I have been in retirement for three years, I have a firm handle on expenses and guaranteed income, and updated my lifetime financial plan. My life expectancy is fifteen years plus or minus, well, fifteen years. At the short end of that range, I need to be concerned about “Sequence of Return” risk, and at the long end of the range, I need to be concerned about longevity risk.

To estimate the sensitivity of changing my target stock to bond allocation, I downloaded all of the mixed asset funds with a thirty-year history and created a regression trendline comparing allocation of equity to the annualized percent return (APR) and rolling minimum (worst) three-, five-, and ten-year returns. Table #5 represents performance versus allocation. Changing my stock to bond allocation target from 60% to 50% does not have a major impact on outcomes. The data also shows that over the worst ten-year period, returns may not beat inflation.

Table #5: Estimated Risk Sensitivity to Stock Allocation – Past Thirty Years

% Equity APR Rolling APR Minimum
3 Year 5 Year 10-Year
Core Bond 4.4 -5.6 -0.9 0.8
10 5.1 -2.8 0.0 2.6
20 5.6 -4.1 -0.6 2.3
30 6.1 -5.4 -1.1 1.9
40 6.6 -6.8 -1.7 1.6
50 7.1 -8.1 -2.2 1.3
60 7.6 -9.4 -2.8 1.0
70 8.1 -10.7 -3.4 0.7
80 8.6 -12.0 -3.9 0.3
Multi-Cap 9.1 -18.4 -7.9 -2.5

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

“A Lifetime Investment Approach in a Single Strategy,” by Fidelity, describes two important concepts about retirement planning, which are age at retirement and current age, which impact the time in retirement that one has to have income. For someone who is 70 and in retirement for several years, the chart estimates that a typical investor may want a stock-to-bond ratio between 40% and 50%. A financial plan and risk tolerance should be used to determine the target allocation to stocks and bonds.

Fidelity Market Sense provides a good summary of the highest and lowest returns for one- and five-year time periods over approximately one hundred years. My overall target allocation was set up for “Growth and Income,” which is a traditional 60% stock/40% bond portfolio. The average return is 8.56% with a minimum (worst) one-year return of -47% and a rolling minimum five-year return of -8.26%. I compared this to the “Balanced” target portfolio, which had an average long-term annualized return of 7.98% with a rolling minimum one-year return on -40.64%. My life expectancy is much less than one hundred years, so I build in a margin of safety.

I used the Fidelity Retirement planner to simulate end-of-plan assets and income for 25 years for different asset allocations. The Fidelity Retirement Planner recommended that I maintain my current allocation of close to 60% stocks. The opportunity cost of lowering my target allocation from 60% to 50% in below-average market conditions is that the end of plan assets will be about 6% lower. During average market conditions, the difference between the two portfolios is larger.

Withdrawal Strategy

Figure #3 is a comparison of an intermediate term investment bucket #2 consisting of Traditional IRAs with $1,00,000 in it and a $40,000 annual (4%) withdrawal from 1997 to 2025. The link to Portfolio Visualizer is provided here. The portfolio balance and withdrawals are adjusted for inflation. For this exercise, one-third of the stock allocation is in international stocks.

Notice that the 100% bond portfolio had low drawdowns but did not keep up with inflation. Performance worsened starting in 2012, largely because Quantitative Easing and easy monetary policy suppressed yields. Yields are likely to be higher in the coming decade in order to finance the rising national debt. The 50% stock/50% bond portfolio kept up with inflation; however, one has to have the tolerance for the high volatility. The 25% stock/75% bond is a compromise to minimize drawdown but with some growth. During 2022, both stocks and bonds did poorly. Flexible withdrawal strategies based on market conditions can improve outcomes, and in the case of Traditional IRAs with RMDs, withdrawals in excess of spending needs can be reinvested in after-tax accounts.

Figure #3: Portfolio Performance Including Withdrawals Adjusted For Inflation

Source: Author Using Portfolio Visualizer

My Strategy

We are overweight in Traditional IRAs. I switched as soon as ROTH 401ks became available and made ROTH conversions after retirement. We are accelerating withdrawals and reinvesting the excess over spending needs in tax-efficient after-tax accounts in order to reduce long-term taxes and leave an inheritance in a tax-efficient manner.

I want to make the conservative sub-portfolios that I manage last the rest of our lives. Over the past year, I converted the conservative sub-portfolios that I manage to 100% short-term bonds and bonds ladders and set up automatic withdrawals from an aggressive managed IRA sub-portfolio to an after-tax account for longer-term goals. I also lowered my overall target allocation for less downside risk. As interest rates rise, I will look for opportunities to extend the duration in bond ladders.

At Vanguard, withdrawals may be automated to withdraw from a fund. In managed accounts, Vanguard rebalances when the portfolio is out of its allocation tolerance ranges. At Fidelity, withdrawals can be automated for self-managed IRA accounts, and Fidelity sells eligible funds to cover the withdrawal.

I am considering setting up a Separately Managed Account in the future for short-duration bonds that Fidelity manages for a fee of 0.35%–0.40% with a minimum investment of $350,000. I’m taking one small step at a time.

Closing

We have been helping family and friends with hospice, moving to nursing homes, finding assisted/independent living facilities, updating wills and durable powers of attorney, and financial planning. I volunteer over twenty hours a week to repay society for the wonderful opportunities that I have experienced in my life and to help people in a variety of circumstances. As a cancer survivor, I am aware that best-laid plans of mice and men may not come to fruition and that plans are worthless, but planning is indispensable. I search for sustainable simplicity in this uncertain environment.

“Something wicked this way comes,” Ray Bradbury (1962)

By David Snowball

It was a great and horrifying story about two young boys and the arrival of the Cooger and Dark Carnival in Green Town, Illinois. If you entered the carnival grounds late at night, you might be drawn to its iconic ride, Cooger & Dark’s Pandemonium Shadow Show. It’s a story about the ways in which evil can be a powerful temptation to even the best of people. Some of the lines are maddeningly good.

A stranger is shot in the street, you hardly move to help. But if, half an hour before, you spent just ten minutes with the fellow and knew a little about him and his family, you might just jump in front of his killer and try to stop it. Really knowing is good. Not knowing, or refusing to know is bad, or amoral, at least. You can’t act if you don’t know.

Others half-haunt me.

Oh, what strange wonderful clocks women are. They nest in Time. They make the flesh that holds fast and binds eternity. They live inside the gift, know power, accept, and need not mention it. Why speak of time when you are Time, and shape the universal moments, as they pass, into warmth and action? How men envy and often hate these warm clocks, these wives, who know they will live forever.

Bradbury declared it his most “delicious” story.

The title is also an homage to the witches of Macbeth (Act 4, Scene 1, following “boil and trouble”):

2nd Witch:

By the pricking of my thumbs,

Something wicked this way comes. [Knocking]

Open locks,

Whoever knocks!

[Enter Macbeth]

I admit to having been thinking of dark circuses and evil clowns rather a lot lately. They make it hard to pick up the newspaper most mornings. Chief Justice Warren got it, too: “I always turn to the sports section first. The sports section records man’s accomplishments; the front page has nothing but man’s failures” (Sports Illustrated, July 22, 1968).

For readers of the Mutual Fund Observer, two coming circuses will be particularly pressing.

The explosion of single-stock and leveraged single-stock ETFs.

Single-stock exchange-traded funds (ETFs) and leveraged single-stock ETFs are relatively new and complex investment products that have garnered significant attention from both investors and researchers. I was struck by the utter flood of new fund registrations in the first weeks of May, which might signal a July or August. Launch.

In the middle of 2024, there were about 100 such funds globally. The first in the US seems to have been AXS Tesla and AXS NVIDIA, both launched in 2022. Trading volume and AUM data are scant. Morningstar did report a doubling in the pool’s AUM in the first quarter of 2024.

What do they do? In general, they do not own the single stock in question. They own derivatives tied to the performance of the stock, but they are generally tied to one day’s performance: if Tesla drops 25% tomorrow, an inverse-leveraged TSLA ETF will drop by 25%, or 50%, or 75% in a day. The extent of the drop depends on the extent of the leverage provided. The same is true in the other direction.

Two ugly realities:

  1. Returns are sequence-dependent. TSLA might fall 25% then rise 25% in consecutive days. A TSLA ETF might show a two-day loss of 6.25% because the fall eroded the share’s value on day one, reducing the impact of day two’s rise. A 2x Bull TSLA would show a loss of 25% in the same two days. A 3X Bull TSLA would be down 56%. The phenomenon is called “compounding decay due to path dependency.”
  2. The cost of the derivatives and management fees create a huge drag. Per Morningstar, the average leveraged single-stock ETF charges 1.07%, about three times as much as the average ETF overall. Those expenses mean you never get the pure performance of the stock.

In general, these are toys for speculators. They are not investment products. Sadly, investors fall for marketing and overestimate their own abilities. They think they’ll track that 3X DraftKings ETF and move like a ballerina. Or, frankly, more likely, like Dumbo.

In general, academic and professional research reach the same conclusion. If you’re a professional with vast tracking resources and a holding period of one day or less, these are fine tools. If you aren’t a professional and don’t intend to monitor hour-by-hour for the rest of your adult life, run away.

Morningstar’s take:

Single-stock ETFs can meet the needs of a few. High-conviction traders with a single-day or shorter holding period may find them useful vehicles to express their views. After all, it’s hard for everyday investors to use leverage or construct their own covered calls.

But the fact is that these products are rarely sensible for everyday investors. They are flawed, costly, and liable to take more from investors than they give. (Ryan Jackson, “For Most Investors, Single-Stock ETFs Are Best Left Alone,” Morningstar.com, 4/9/2024)

Which, of course, means that we’re being flooded with them. Here’s a sampling of the 485A prospectus filings that MFO came across during just two weeks in May 2025:

GraniteShares 2x Long ABNB Daily ETF Airbnb, Inc.
GraniteShares 2x Long APP Daily ETF AppLovin Corporation
GraniteShares 2x Long BULL Daily ETF Webull Corporation
GraniteShares 2x Long CEG Daily ETF Constellation Energy Corporation
GraniteShares 2x Long COST Daily ETF Costco Wholesale Corporation
GraniteShares 2x Long CRWV Daily ETF CoreWeave, Inc.
GraniteShares 2x Long CVNA Daily ETF Carvana Co.
GraniteShares 2x Long ETOR Daily ETF eToro Group Ltd.
GraniteShares 2x Long FSLR Daily ETF First Solar, Inc.
GraniteShares 2x Long GLXY Daily ETF Galaxy Digital Inc.
GraniteShares 2x Long HIMS Daily ETF Hims & Hers Health, Inc.
GraniteShares 2x Long ISRG Daily ETF Intuitive Surgical, Inc.
GraniteShares 2x Long KO Daily ETF The Coca-Cola Company
GraniteShares 2x Long MCD Daily ETF McDonald’s Corporation
GraniteShares 2x Long MELI Daily ETF MercadoLibre, Inc.
GraniteShares 2x Long NBIS Daily ETF Nebius Group N.V.
GraniteShares 2x Long NKE Daily ETF NIKE, Inc.
GraniteShares 2x Long OKLO Daily ETF Oklo Inc.
GraniteShares 2x Long PM Daily ETF Philip Morris International Inc.
GraniteShares 2x Long RGTI Daily ETF Rigetti Computing, Inc.
GraniteShares 2x Long SBUX Daily ETF Starbucks Corporation
GraniteShares 2x Long SNAP Daily ETF Snap Inc.
GraniteShares 2x Long SPOT Daily ETF Spotify Technology S.A.
GraniteShares 2x Long UNH Daily ETF UnitedHealth Group Incorporated
GraniteShares 2x Long WMT Daily ETF Walmart Inc.
Leverage Shares 2X Long ABNB Daily ETF Airbnb, Inc.
Leverage Shares 2X Long AFRM Daily ETF Affirm Holdings, Inc.
Leverage Shares 2X Long BBAI Daily ETF BigBear.ai Holdings, Inc.
Leverage Shares 2X Long BYDDY Daily ETF BYD Company ADR
Leverage Shares 2X Long COST Daily ETF Costco Wholesale Corporation
Leverage Shares 2X Long FUTU Daily ETF Futu Holdings Limited
Leverage Shares 2X Long GOLD Daily ETF Gold
Leverage Shares 2X Long HIMS Daily ETF Hims & Hers Health, Inc.
Leverage Shares 2X Long JD Daily ETF JD.com, Inc.
Leverage Shares 2X Long NEM Daily ETF Newmont Corporation
Leverage Shares 2X Long OKLO Daily ETF Oklo Inc.
Leverage Shares 2X Long PDD Daily ETF PDD Holdings Inc.
Leverage Shares 2X Long RGTI Daily ETF Rigetti Computing, Inc.
Leverage Shares 2X Long RKLB Daily ETF Rocket Lab Corporation
Leverage Shares 2X Long SOUN Daily ETF SoundHound AI, Inc.
Leverage Shares 2X Long UNH Daily ETF UnitedHealth Group Incorporated
Leverage Shares 2X Long VST Daily ETF Vistra Corp.
Roundhill 2X Long VIX Futures Points ETF Volatility Index
Roundhill 2X Short VIX Futures Points ETF Volatility Index
Roundhill Long VIX Futures Points ETF Volatility Index
Roundhill Short VIX Futures Points ETF Volatility Index
Tradr 2X Long ASTS Daily ETF AST SpaceMobile, Inc.
Tradr 2X Long CEG Daily ETF Constellation Energy Corporation
Tradr 2X Long CEP Daily ETF Cantor Equity Partners, Inc.
Tradr 2X Long CRWV Daily ETF CoreWeave, Inc.
Tradr 2X Long DDOG Daily ETF Datadog, Inc.
Tradr 2X Long GEV Daily ETF GE Vernova Inc.
Tradr 2X Long ISRG Daily ETF Intuitive Surgical, Inc.
Tradr 2X Long LRCX Daily ETF Lam Research Corporation
Tradr 2X Long NET Daily ETF Cloudflare, Inc.
Tradr 2X Long SMR Daily ETF NuScale Power Corporation
T-REX 2X Long ACHR Daily Target ETF Archer Aviation Inc.
T-REX 2X Long AFRM Daily Target ETF Affirm Holdings, Inc.
T-REX 2X Long AUR Daily Target ETF Aurora Innovation, Inc.
T-REX 2X Long AVAV Daily Target ETF AeroVironment, Inc.
T-REX 2X Long AXON Daily Target ETF Axon Enterprise, Inc.
T-REX 2X Long BBAI Daily Target ETF BigBear.ai Holdings, Inc.
T-REX 2X Long BKNG Daily Target ETF Booking Holdings Inc.
T-REX 2X Long BULL Daily Target ETF Webull Corporation
T-REX 2X Long CEG Daily Target ETF Constellation Energy Corporation
T-REX 2X Long CRWV Daily Target ETF CoreWeave, Inc.
T-REX 2X Long CVNA Daily Target ETF Carvana Co.
T-REX 2X Long DDOG Daily Target ETF Datadog, Inc.
T-REX 2X Long DKNG Daily Target ETF DraftKings Inc.
T-REX 2X Long DNA Daily Target ETF Ginkgo Bioworks Holdings, Inc.
T-REX 2X Long DUOL Daily Target ETF Duolingo, Inc.
T-REX 2X Long GEV Daily Target ETF GE Vernova Inc.
T-REX 2X Long GLXY Daily Target ETF Galaxy Digital Inc.
T-REX 2X Long GOLD Daily Target ETF Gold
T-REX 2X Long HHH Daily Target ETF Howard Hughes Holdings Inc.
T-REX 2X Long KTOS Daily Target ETF Kratos Defense & Security Solutions, Inc.
T-REX 2X Long OKLO Daily Target ETF Oklo Inc.
T-REX 2X Long QUBT Daily Target ETF Quantum Computing Inc.
T-REX 2X Long RXRX Daily Target ETF Recursion Pharmaceuticals, Inc.
T-REX 2X Long SMLR Daily Target ETF Semler Scientific, Inc.
T-REX 2X Long SMR Daily Target ETF NuScale Power Corporation
T-REX 2X Long SOUN Daily Target ETF SoundHound AI, Inc.
T-REX 2X Long TEM Daily Target ETF Tempus AI, Inc.
T-REX 2X Long TTD Daily Target ETF The Trade Desk, Inc.
T-REX 2X Long UPST Daily Target ETF Upstart Holdings, Inc.
T-REX 2X Long UPXI Daily Target ETF Upexi, Inc.
T-REX 2X Long WGS Daily Target ETF GeneDx Holdings Corp.
T-REX 2X Long XXI Daily Target ETF Twenty One
Tradr 2X Long SMR Daily ETF NuScale Power Corporation

More specialized new games include:

  1. Bitwise Bitcoin Option Income Strategy ETF
  2. Bitwise BITQ Option Income Strategy ETF
  3. Bitwise Ethereum Option Income Strategy ETF
  4. Defiance Enhanced Long Vol ETF
  5. Defiance Enhanced Short Vol ETF
  6. Defiance Vol Carry Hedged ETF
  7. Tuttle Capital 1x Inverse Volatility ETF
  8. Tuttle Capital 2x Inverse Volatility ETF

The arrival of cryptocurrency in retirement plan portfolios

On May 28, 2025, Mr. Trump’s Department of Labor rescinded a 2022 policy urging “extreme caution” about including cryptocurrency in retirement plans. The official announcement read:

The U.S. Department of Labor’s Employee Benefits Security Administration has rescinded a 2022 compliance release that previously discouraged fiduciaries from including cryptocurrency options in 401(k) retirement plans.

The 2022 guidance directed plan fiduciaries to exercise “extreme care” before adding cryptocurrency to investment menus. This language deviated from the requirements of the Employee Retirement Income Security Act and marked a departure from the department’s historically neutral, principled-based approach to fiduciary investment decisions. 

“The Biden administration’s department of labor made a choice to put their thumb on the scale,” said U.S. Secretary of Labor Lori Chavez-DeRemer. “We’re rolling back this overreach and making it clear that investment decisions should be made by fiduciaries, not D.C. bureaucrats.”

One might pause at the breathtaking hypocrisy disguised as policy guidance. If we’re talking about crypto, beloved by Elon & co., the rule is “investment decisions should be made by fiduciaries, not D.C. bureaucrats.” If we’re talking about the option of socially-responsible investments in the same accounts, the rule reverses, and the government must surely make financial decisions rather than trusting fiduciaries.

It’s a policy that marries the mendacious with the disastrous, a rare accomplishment.

The proposed inclusion of cryptocurrencies in employer retirement plan options raises significant concerns about investor protection, particularly given the extreme volatility and risk characteristics these digital assets exhibit.

The cryptocurrency market has experienced substantial growth in trading activity, with the top exchanges processing trillions in volume annually. According to current market data, there are literally millions of cryptocurrencies in circulation (really, you could make your own this afternoon since there are no regulations and no barriers to entry). The total cryptocurrency market capitalization fell 18.6% in Q1 2025 to close at $2.8 trillion, after briefly touching $3.8 trillion in January. This dramatic swing within a single quarter exemplifies the type of volatility that could devastate retirement portfolios, particularly for investors nearing or in retirement who have limited time to recover from significant losses. Consider, for example, the drawdown periods for the oldest and most liquid coin, Bitcoin.

Source: LazyPortfolioETF, using Highcharts graphing.

Remember, this is just the downside. There are lunatic price spikes the rest of the time. The point here is to help you get a big picture of how deep the knife plunges (the red drawdowns) and how long the wound lasts (the gray “ramps” shows months to recovery).

Below are the five-year risk-return metrics for the two largest cryptocurrencies, which we assume are the two most likely to infiltrate a retirement plan.

  Annual Return Maximum Drawdown Standard Deviation Best Year Return Worst Year Return Ulcer Index
Bitcoin (BTC) 51% -73% 65.6% +303% (2020) -64% (2022) 36.2
Ethereum (ETH) 61% -79% 91.2% +420 (2020) -68% (2022) ~40

Sources: Lazy Portfolio ETF (for Bitcoin), Portfolio Labs ETH-USD, and S&P Ethereum Index

The data reveals several alarming characteristics that underscore the inappropriateness of these investments for retirement accounts. Bitcoin, despite being the most established cryptocurrency, has experienced maximum drawdowns exceeding 70%, meaning investors could lose more than 70% of their investment. The recovery period for Bitcoin’s maximum drawdown required 19 months, during which retirement investors would face sustained and severe portfolio losses.

Ethereum presents even more extreme risk characteristics, with a maximum five-year drawdown of nearly 79% (and a near-complete meltdown in 2018) The current Ethereum drawdown stands at 45.29%, that is, at the end of May 2025, an Ether is worth 45% less than it was at its November 2021 peak. For retirement investors, such sustained periods of substantial losses could prove financially catastrophic, particularly for those requiring portfolio withdrawals during retirement.

The smaller cryptocurrencies are worse.

Retirement investors require stable, predictable growth that preserves capital while generating reasonable returns over long time horizons. The documented maximum drawdowns approaching 95-96% for major cryptocurrencies represent existential threats to the retirement security of elderly investors. The extreme volatility documented in this analysis represents not an investment opportunity but rather a fundamental threat to retirement system stability and individual financial security.

Bottom Line

These decisions, government and corporate, continue to move the markets in the direction of a casino. Investors’ conviction that “patience is for losers” just makes them losers. Buy quality stocks from experienced managers. Diversify away from assets that depend on Washington acting like adults. Find managers who manage volatility thoughtfully. We list them!

What’s an investor to do?  Learn from the experience of others. When you suspect something wicked is around, do not go alone into the basement with a flickering light. When you suspect something wicked this way comes, do not wander off on your own – away from the security of friends – “to see what made that noise.”

“Acting without knowing takes you right off the cliff.” ― Ray Bradbury, Something Wicked This Way Comes (1962)

An MFO Bonus Feature: What Investors Can Learn from Teen Slasher Flicks!

How to Die in a Teen Slasher Flick How to Lose All Your Money
Split Up – “Let’s cover more ground!” (Spoiler: you just covered your grave.) Go All-In – “Let’s 3X leverage this!” (Spoiler: you just leveraged your bankruptcy.)
Ignore the Weird Local – “He’s just being dramatic.” (He’s also always right.) Ignore the Boring Expert – “They don’t understand innovation!” (They do. You just don’t like what they say.)
Investigate That Noise – “Is someone there?” (Yes. With a machete.) Chase the Hype – “Everyone’s talking about this token!” (Just before it vanishes.)
Drop the Weapon – “Oh, thank god, it’s just you!” (It’s not.) Sell the Winner, Hold the Loser – “It’ll come back eventually.” (It won’t. Ever.)
Say You’ll Be Right Back – (You won’t. Ever.) Say You’ve Got a Gut Feeling – (Your gut also told you Taco Bell was a good idea.)
Trust the Cop – He’s either dead, possessed, or useless. Possibly all three. Trust the Finfluencer – She’s not your friend. She’s your exit liquidity.
Go Into the Basement – No exit, no lights, no hope. YOLO Into Retirement Crypto – No floor, no plan, no future.

 

Briefly Noted

By TheShadow

Updates

Jason Gottlieb becomes Artisan’s new CEO on June 4, 2025. He’s not a new import. Mr. Gottlieb has been the president of Artisan Partners since 2021. He joined the firm first in October 2016, prior to which he led Goldman Sachs’ Alternative Investment and Manager Selection Groups and was a portfolio manager on Goldman Sachs Multi-Manager Alternatives Fund. Artisan’s superpower has been its ability to identify and attract superstar management teams from elsewhere; the term they once used was “category killers.” Over the past five years, it’s reported that Mr. Gottlieb has had 1600 conversations with managers who might aspire to be Artisan Partners. While not all new partners manage mutual funds for the firm, you get a sense of their selectivity when you look at the ratio of conversations to fund launches over the past five years. 1600 conversations, five launches.

Eric Colson, Mr. Gottlieb’s predecessor, will become chair of Artisan’s Board of Governors.

Paul Headley is returning as CEO of Matthews Asia. Mr. Headley was one of the Matthews Asia co-founders, along with Paul Matthews, in 1991. The firm was, for decades, distinguished as the most successful, risk-conscious adviser in Asian equities. Its funds were legendary for steadiness and for a willingness to close tight and early in order to protect the interests of their shareholders. In 2022, Matthews appointed Cooper Abbott as their CEO. Mr. Abbott had been president and chair of Carillon Tower Advisors, a firm which had absorbed the Scout Funds and Reams Asset Management, for the preceding 18 years. It was not a fruitful partnership. William Samuel Rocco highlighted the challenges facing Mr. Headley:

Matthews International Capital Management’s Parent rating drops to Below Average from Average, owing to yet more personnel changes, a deep slide in assets under management, and other issues.

The firm has suffered from extreme personnel turnover throughout the 2020s, and it has lost 15 members of its investment team during the past two years, including a former CIO/portfolio manager and other key individuals. … Most of the firm’s strategies have posted mixed, or worse, returns in recent years, and investors have pulled assets away. And with just USD 6 billion of AUM in April 2025, the firm is only around half the size it was in mid-2023 and one fifth the size it was at its peak in the late 2010s. (05/27/2025)

The firm’s assets and the size of its investment staff have fallen in tandem: Matthews has less than half the talent and less than half the assets they had prior to Mr. Cooper’s ascendance.

We’ve been working with the folks at Matthews to find time to talk with Mr. Headley sometime in the first week or so of June, and we’ll surely share what we learn.

Briefly Noted . . .

Small Wins for Investors

Wisconsin Capital Funds is converting its Class A shares to investor shares for its Plumb Balanced and Plumb Equity Funds. The conversions are expected to occur after the close of business on June 27, 2025. The expense amounts will be the same for the investor class as the A share class counterparts, minus the front-end load. The initial minimum investment will be $2,500.00 for the investor share class compared to $250.00 for the A share class.

Launches and Conversions

The Emerald Insights and Emerald Financial and Banking Innovation funds are being reorganized into an ETF and another open-ended fund, respectively. The Emerald Insights fund will be reorganized into the F/m Emerald Special Situations ETF; the Emerald Financial and Banking Innovation fund will be reorganized into the Emerald Banking & Finance Evolution Fund. A shareholder meeting will be held on July 29. If approved, the reorganizations will occur on or about August 1.

Franklin Multisector Income ETF is in registration. The fund will invest in a diversified portfolio of U.S. and foreign debt securities across multiple fixed income sectors. The portfolio managers will be Albert Chan, CFA, Benjamin Cryer, CFA, Patrick Klein, Ph.D., Thomas Runkel, CFA, Michael V. Salm, and Matthew J. Walkup. Total annual fund operating expenses are projected to be 0.39%.

Franklin Templeton has approved the conversion of the following Putnam funds into ETFs:

  • Putnam California Tax Exempt Income fund
  • Putnam Massachusetts Tax Exempt Income fund
  • Putnam Minnesota Tax Exempt Income fund
  • Putnam New Jersey Tax Exempt Income fund
  • Putnam New York Tax Exempt Income fund
  • Putnam Ohio Tax Exempt Income fund
  • Putnam Pennsylvania Tax Exempt Income fund
  • Putnam Short-Term Municipal Income fund
  • Putnam Tax-Exempt Income fund and Putnam Tax Free High Yield fund

Franklin Advisers believes that the reorganization will provide multiple benefits for shareholders of the mutual funds, including lower net expenses, additional trading flexibility with respect to fund shares, and increased portfolio holdings transparency.

Invesco has begun offering three new active exchange-traded funds (ETFs). The Invesco QQQ Hedged Advantage ETF (QQHG), the Invesco Comstock Contrarian Equity ETF (CSTK), and the Invesco Managed Futures Strategy ETF (IMF) will each feature veteran Invesco PM teams.

  • Invesco QQQ Hedged Advantage (QQHG) is led by Peter Hubbard, John Burrello, Chris Devine, and Scott Hixon. It will have a 0.45% expense ratio. QQHG attempts to replicate the performance of the Nasdaq-100 Index while also employing an ‘option overlay strategy’ to hedge against volatility and downside risk. 
  • Invesco Comstock Contrarian (CSTK) is led by Devin Armstrong, CFA, and Kevin Holt, CFA; it will have an expense ratio of 0.35%. CSTK aims for the total return through capital growth and income, with our portfolio managers focusing on discrepancies between stock prices and company values.
  • Invesco Managed Futures (IMF0 is managed by John Burrello, Chris Devine, and Scott Hixon and will have a 0.65% expense ratio. IMF employs a futures strategy that takes both long and short positions across a variety of global markets and asset classes, seeking long-term capital appreciation with low correlation to traditional markets. 

JPMorgan Unconstrained Debt Fund is being reorganized into the JPMorgan Flexible Debt ETF on or about September 26, 2025. The ETF will be managed in a substantially similar manner to the fund. 

Lazard US Systematic Small Cap Equity Portfolio will be converted into an ETF on or about September 12, 2025.

RiverNorth Core Opportunity Fund is being reorganized into an exchange-traded fund. The reorganization is subject to shareholder approval. If approved, the reorganization will occur early in the third quarter of 2025.

Old Wine, New Bottles

TETON Westwood SmallCap Equity Fund will change its name to Keely Small Cap Fund effective June 27, 2025.

Off to the Dustbin of History

Baillie Gifford International Smaller Companies fund will be liquidated on or about July 21, 2025.

Franklin FTSE Hong Kong ETF will be liquidated on or about July 8, 2025.

Hartford Schroders Commodity Strategy ETF, Hartford Longevity Economy ETF, Hartford Multifactor Diversified International ETF, and Hartford Multifactor International Small Company ETF are expected to liquidate on or about June 30, 2025.

JPMorgan Total Return Fund will be liquidated on or about July 29, 2025.

Oakhurst Short Duration Bond and Short Duration High Yield Credit funds will be liquidated on or about July 30, 2025.

Putnam Intermediate-Term Municipal Income fund will be liquidated on or about July 18, 2025.

Victory Pioneer Global Value Fund will be liquidated on or about July 25, 2025.

Western Asset Short Duration Income and Total Return ETFs will be liquidated on or about August 29, 2025.

Victory THB US Small Opportunities Fund was liquidated on April 29, 2025.