Ask the Adviser: Risk-Managed Investing
If you have money in the financial system (stocks, bonds, retirement funds, etc.) and you share the same skepticism most of our readers have about the markets' future stability, how should you invest those funds?
Most of the folks who inquire about our endorsed financial advisers are far more interested in preserving the purchasing power of their wealth vs. aggressively trying to beat the market average each year. But how exactly does one do that?
In this week's podcast, Chris sits down again with Mike Preston and John Llodra to discuss risk-managed investing. In a nutshell, this is an approach that seeks to deliver decent (though rarely spectacular) gains when markets are up, but loses much less on a relative basis when markets move to the downside. Chris asks the team to expound on the strategy they pursue, as well as the vehicles investors interested in this approach can use.
Managing investment risk is the single most important value that we bring to our clients’ lives. You really have to distinguish between volatility and risk.
People generally think that volatility is risk, but that is not necessarily true. There are lots of instances in the market that we could point out where volatility is very low – for instance, like in late 2007 – but risk, by the ways that we measure risk, would be very high. There are other times where volatility would be very high, but risk would be a lot lower – for instance, March 2009 would be a better example, with VIX trading up around 50 or higher and the market swing 500 Dow points or more. But as we look back now, we understand that risk was lower in the longer term over that period.
Right now is another good example, I think. As we sit here in January of 2013, the volatility in the market, or risk, is really low. But while risk is also sometimes measured by standard deviation, where there is not a lot of day-to-day change in volatility, risk, we think, is very high right now.
And so we have to be pre-emptive and decide when risk is high, even if volatility is low, and make certain types of adjustments to our portfolio. Those types of adjustments generally would include using special tools to hedge against that risk and could include (and usually include) raising cash in portfolios so that we can deploy the cash at better valuation levels. Really, the name of the game is being patient enough to sit on cash or cash equivalents when appropriate and when risk is high so that we can deploy them when risk is likely to be better rewarded.
If after listening to this podcast, you find yourself interested in connecting with Bill, Mike, John, and the rest of their team to learn more about their advisory services, please use the form here to do so.
Transparency note: As a result of our public endorsement, Peak Prosperity has a commercial relationship with this firm. The details of this relationship are clearly presented in writing during the referral process — but the punchline is, our relationship does NOT result in any increased fees to those who become clients.
It should go without saying: this discussion should not be construed as individual financial advice by those listening to it. The content should be taken as informational and educational in nature only. Investment advice must be tailored to your specific personal situation (which Chris and his guests are obviously unaware of) and should be obtained directly from a financial adviser you trust. Before acting on any of the statements made in this podcast, we advise you do just that.
Click the play button below to listen to Chris' interview with New Harbor Financial (45m:54s):
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Ask the Adviser: Risk-Managed Investing
The following is a transcript of recorded content. Please note, these transcripts are not always perfect and may contain typos. If you notice any major mistakes, please feel free to report them by opening a Technical Support ticket under the Help menu at the top of the screen.
Chris Martenson: Welcome to another Peak Prosperity podcast. I am your host, Chris Martenson. Today we are going to talk about financial risk and about how it can and should be managed. To set the macro stage, we are living through the riskiest and most dangerous moments in the financial and economic history, in my estimation. And I say this with some certainty because today the prices of assets in financial markets are being elevated by the incredibly distortive participation of central banks. With the Federal Reserve pouring hundreds of billions into bonds, the prices of bonds are no longer reflective solely of investor’s perceptions of risk, especially inflation risk.
The yields on fixed-income security have declined markedly, and in many cases they are the lowest they have ever been in our nation’s history. Forced to chase yield elsewhere, the prices of equities are bid up by return hungry investors, elevating the risk of disappointing, if not punishing, future returns. Even worse is the idea that central banks are now providing a permanent backstop to all financial markets, utterly distorting, if not destroying, the concept of financial prudence. After all, if the Fed is going to prevent losses, then more and greater risks can be taken.
So how should we be thinking about risks in a world where the entire concept has been so utterly distorted? What does the past have to teach us, and what new things do we need to consider? More specifically, what can and should the individual investor do to optimize their chances of keeping, maybe even growing their wealth, while prudently navigating the growing and in some cases, brand new financial risks?
I am pleased to be speaking again with the team at New Harbor Financial. Today we have Mike Preston and John Llodra with us, who will help us answer these questions and address these concerns. Before we get started, I will make it clear that Peak Prosperity has a commercial relationship with New Harbor Financial, one in which fees are shared on referred accounts. It is important to note that this arrangement does not result in any increased fees charged to the end customer; you are charged the same as if you walked in through the front door. All the details in this arrangement are provided clearly in writing during the referral process. Okay, Mike, John, welcome to the show.
John Llodra: Good morning, Chris. Thank you for having us.
Mike Preston: Thank you, Chris. Hello.
Chris Martenson: Oh, it is a real pleasure. Okay, let us begin with New Harbor Financial Group’s philosophy towards risks and risk management.
John Llodra: I will kick this off here – this is John talking; thanks, folks for listening – so we are Investment Managers and we are Financial Planners. All the principles of the firm here, myself, Mike, and our third principle Bill Cole, are all Certified Financial Planners. But cutting through the typical titles that one might call folks like ourselves, we really view our primary job as that of being a Financial Risk Manager for clients. Quite simply, we want to protect our clients from the inevitable and sometimes swift large drawdowns that happen in financial markets, and of course, we want to help them capture gains when gains are being handed out.
You know, it is quite a common theme in our industry to just accept market risk and deal with it by staying in the market until things rebound. That is not quite good enough for us. We do think that risk can be observed and measured, and that defensive actions can be taken to protect clients from undue risks and potential large downsides. I cannot recall how many conferences I have been to with peers in my industry where I have heard something to the effect of someone saying, Yes, the market is down 25%, but our clients are only down 22%, as if they were taking a victory lap. That, to us, is just unconscionable. Relative outperformance like that does not cut the mustard to us, and it should not cut the mustard to our clients. We certainly expect more from ourselves, and our clients should. It is not an easy task to avoid risk altogether, and we do not project that we can, but we do think that large drawdowns can and should be protected against. You know, our primary day-to-day focus is on what we call investment or portfolio risk, and that really comes into play as we are hands-on investment managers.
But we also recognize there are other risks in our clients’ financial life that go beyond their financial portfolios. And this involves a risk to their health, their livelihood, and any non-financial assets they might have. And that is where things like insurance can come into play. We are licensed to help clients secure insurance – for example life insurance, disability insurance – and where and when it is appropriate, we do so. But by and large the biggest risk that folks sometimes unwittingly and unknowingly take is with respect to their financial assets, and that is really our primary reason for being here.
Chris Martenson: Well excellent, so let us focus on this first type of risk that you mentioned, investment risk. How is New Harbor Financial Group’s philosophies or approach to investment risk unique here?
Mike Preston: Let me take that one, Chris. This is Mike here. Let us talk about investment risk and how our approach to managing investment risk is unique. We really think that managing investment risk is the single most important value that we bring to our clients’ lives. You really have to distinguish between volatility and risk. People generally think that volatility is risk, but that is not necessarily true. There are lots of instances in the market that we could point out where volatility is very low – for instance, like in late 2007 – but risk, by the ways that we measure risk, would be very high. There are other times where volatility would be very high, but risk would be a lot lower – for instance, March 2009 would be a better example, with VIX trading up around 50 or higher and the market swing 500 Dow points or more. But as we look back now, we understand that risk was lower in the longer term over that period.
Right now is another good example, I think. As we sit here in January of 2013, the volatility in the market, or risk, is really low. But while risk is also sometimes measured by standard deviation, where there is not a lot of day-to-day change in volatility, risk, we think, is very high right now. And so we have to be pre-emptive and decide when risk is high, even if volatility is low, and make certain types of adjustments to our portfolio. Those types of adjustments generally would include using special tools to hedge against that risk and could include (and usually include) raising cash in portfolios so that we can deploy the cash at better valuation levels. Really, the name of the game is being patient enough to sit on cash or cash equivalents when appropriate and when risk is high so that we can deploy them when risk is likely to be better rewarded.
Chris Martenson: Mike, what I just heard you say is that New Harbor thinks about volatility and risk as potentially slightly overlapping circles, but not exactly the same thing. And that a lot of financial firms may be thinking – I know personally, when I open up the paper and I read about market risk, it is almost always just talked about in terms of just volatility. And yet, when we look through financial returns over time, there are many other descriptors that need to be thought about that actually add to this total thing we talk about as risk. And so New Harbor is actively looking at and attempting to manage around a larger concept of risk, and, as you mentioned, sitting on cash when that is appropriate. So there is an element of knowing when risks are stacked in your favor and being long or seeking gains in those moments, and having another sense of when risks are stacked against you and moving to the sidelines waiting for better returns. Is that fair?
Mike Preston: Yes, Chris; I think that is a good encapsulation of how we try to be different about risk management here at New Harbor.
Chris Martenson: So this is what I am interested in finding out: I would like you to walk me through how New Harbor’s investment risk management philosophy actually plays out in practice –say, when you begin working with a new client or circumstances change and you want to review an existing clients portfolio. You have the sense that obviously we have to look at many more things besides just volatility if we want to measure risks. There is more than the beta of a stock against the market; there are a variety of other factors that you are looking at. So how does that actually work in practice?
John Llodra: Put quite simply, many times we will meet a new prospective client, we will take a look at their financial assets and the makeup of their real estate assets and their debt profile, and that type of thing. And we will advise them to obtain some physical precious metals if they do not already have them. We will advise them, often times, to pay down debt, perhaps pay off a mortgage, and sometimes there is really nothing left over to invest in the financial markets after all of that happens.
But that is great for everybody. That does not necessarily mean we get a new client, but we certainly get a new friend. And we are helping that person out in the way that they should be, properly. You are right; we should not just be thinking about traditional financial assets when we think about investments. We should be thinking about putting solar in your house, for instance, or a rain collection system. Or developing the skills needed to garden, or you could even think about buying farmland or things like that, so those are the types of discussions that we have.
To give a picture of how we are different is to first start by describing what most firms will do. Now basically, most firms will have a new client come in and complete a questionnaire of sorts. That questionnaire will usually have kind of boilerplate information about the client’s financial picture, a summary of their assets and their liabilities. But then it will also get into softer questions such as what their goals are, what their timeline is for needing the funds that are to be invested. And the key section of these questionnaires typically has to do with some type of self-assessment by the client as to their risk tolerance. And the result of this kind of questionnaire, regardless of what firm’s logo is on the questionnaire, is they all have the same basic effect. The result of this kind of questionnaire is typically translated into this “optimal pie-chart investment allocation” that is deemed to be ideal for the client based upon their responses.
Now underlying that, the science if you will, and arriving at that optimal pie chart is a body of academic investment theory called modern portfolio theory. And it has been around for several decades; folks like Merton and a whole other cast of characters were seminal in building this body of academic research. And basically what that approach does is it looks at volatilities, as we described in the preamble here, of different asset classes – you know, stocks, bonds, commodities, and so on and so forth. And looks at how those things, historically speaking, have behaved relative to one another in a long-term sense, and then optimizes for what makes them the best asset classes that will achieve the greatest expected return for any given level of portfolio volatility, trying to get the most level of return for an assumed volatility based upon long term historical averages. This is what is sometimes called the “efficient frontier” in academia.
The problem we have found with that are several faults. First off, basically modern portfolio theory assumed those historical averages as being given. What we have seen is that the market often will and does cause those assumptions to be utterly flawed. The fact that stocks and bonds enjoyed some historical correlation in the past (or non-correlation as the case might have been) at periods of extreme market environment, those correlations get thrown out of the window and have no relevance, because everything becomes ultra-correlated typically at major turning points. So the basic academic underlying assumptions of these models ended up being flawed. Therefore the optimality of the pie chart becomes flawed.
Other shortcomings to this approach are that clients themselves are not really good at being an honest assessor of their own risk tolerance. What we have found across the board, whether clients call themselves conservative or aggressive, we say it somewhat tongue in cheek, but it is kind of the truth, is this: Every client hates losing and all clients love gains. So what we have seen is the most aggressive investors, or self-described aggressive investors, had the behaviors of the most conservative investors when markets are collapsing and vice versa.
The other thing is, clients assume they have longer time frames than is actually the case. Even a 25-year-old younger client, who in theory has a 40-plus-year time horizon before they retire, will inevitably say their timeline is much shorter. They have got the down payment for the house and then a little beyond that they have college tuition payments due, so the long term, the time horizon assumption that goes into the typical asset allocation approach is usually flawed because life does not have those long time frames typically for even our younger clients.
And the main shortcoming approach is that the underlying premise of the modern portfolio theory is that markets are efficient. And at any given point in time, the market is properly offering an appropriate risk premium to folks who are willing to invest in stocks or other risky assets, which just is not the case in practice. As we can see in 2007, folks were investing in stocks at a time where there was very little in hindsight, very little upside and lots of downside. And the modern portfolio theory just does not recognize that as being a possibility. So at major turning points, these asset allocation models end up being very flawed.
On the other hand – and I will let Mike explain a little bit more about this – we do not prescribe to a fixed pie chart where the idea of active management is just mechanically rebalancing to this model-driven allocation. We take a much more dynamic approach to asset allocation, and I will let Mike talk about that.
Chris Martenson: Well, John, before we move on there – so the idea here – I of course, had to learn modern portfolio theory in my MBA course, and I had disagreements with it even then because it was very theoretical. And when we get into the real world it is completely obvious that there are whole periods of time when your theories can just get chucked out the window. And this may be one of those times. So we have people like Bill Gross saying recently that bonds could get burned to a crisp. And there is this idea that part of the reason that you have falling bond yields will lead to a rising stock market is because people are chasing the yield and going over that direction. But the reverse could be true, so that these assets that are supposed to be uncorrelated, we are going to give you 60/40 stocks, bonds, something like that, because one will do well when the other is doing poorly. But there is an idea here that both could do poorly at the same time, potentially. And that could be a complete disaster, so are you saying that what you are trying to do is understand what the theories are, look at what history has to teach us, and you have got one eye firmly on the idea that these are absolutely extraordinary times?
John Llodra: Oh, absolutely. We have observed our Fed and central banks across the world basically turn on the money printing presses without restraint. And basically, at a macro level, what that has done is it is caused money to chase yields in virtually every asset class to the point where – if you think about, here is where we do think market theory does work – eventually equilibrium is achieved. So essentially what we think has happened is across all asset classes – whether you are talking stocks, bonds, even to some degree commodities and you might even say in the short term, precious metals – the money has flown so aggressively into all different asset classes that the market has achieved equilibrium in the sense that the near-term perspective returns for all asset classes, we think, are very poor. That is by definition what equilibrium is, when the perspective returns for all types of assets have achieved equivalency. And in this case, sadly, we think that equivalency is very disappointing potential returns in the near term.
Chris Martenson: And there is certainly a growing body of evidence that – well, how long has it been since the stock market has really given a great return? We have got that, and we have got people like Jeremy Grantham recently talking about that maybe low growth is now the new normal and we have an entire financial system that is tuned for a very different level of growth. And so trying to think about what the long term is, is interesting. And I am intrigued, before you mentioned that the long term is not 40-plus years anymore, even for some of your younger clients, it is the next big financial event in your horizon which ofttimes is maybe only 10 years away. So I am intrigued by that, so now that I understand how other firms are approaching this in – if I can say this – maybe somewhat of a cookie cutter, somewhat theoretical sort of a way. How does New Harbor really approach risk management and portfolio building for someone?
Mike Preston: Chris, really what I think makes New Harbor’s approach different is that we measure the risk in the environment, as we talked about earlier. We really do not use a cookie cutter, as you said, pie-chart type allocation for our clients’ portfolios. In fact, we do not use what most money managers would use, [which] is an age-based model. We have a portfolio that is based upon the risks in the market as we measure them. So whether somebody is 80 years old or 25 years old, their accounts are going to look pretty similar. Because we think we should only take risks in the market when risks are likely to be rewarded. You know, the 25 year old does not want to be aggressive and lose money just because they are 25 years old and have more years until retirement. And the 80 year old – frankly, if the market conditions dictate and valuations are good, that 80 year old still has a long time frame in their lifetime, and they should be taking risks when risks are appropriate. So we do not prescribe to the typical take 100 minus your age and put that much into the stock market or risk assets.
So often times like now, when volatility is low and risk is high, we have got a very low allocation to risk assets like equities and a very high allocation to assets like cash or cash equivalents. Most or many of our colleagues in this business do not hold on to the cash equivalents, but we really think it is an investment decision to hold cash or cash equivalents. Because how else are you going to have the money to buy assets when they achieve favorable valuation through a market correction or reset, if you are not sitting on cash in the first place?
One other thing I would like to tie in, Chris, is the economics of loss. We understand fully the mathematics behind the economics of loss, so we really embrace that as one of our core principles here at this firm. The economics of loss or the mathematics of loss are very unforgiving. If you lose 10%, you have got to make 11% to break even. If you lose 20%, you have got to make 25% to break even. By the time you lose half of your money – and that is not hard to do, the S&P 500 was down over 50% back in the drawdown of 2008 – if you lose 50%, you have got to double your money to get even. And commonly investors will panic out at the wrong time. So it is much, much better to not lose very much on a downside so that you can have most of your cash available to buy when everyone else is selling. So that is a core tenant of our philosophy.
John Llodra: Chris, if I might elaborate, just kind of thinking back to the real-world test of the efficacy of the modern portfolio approach. Look, for example, at late 2007, when we know now with hindsight that the market peaked, and compare that with early 2009 when we know, at least in hindsight, that we had a relative trough. Basically, a given client would have been roughly the same age, a little over a years’ worth of difference in age, but essentially the same age. So two hypothetical clients that came to a traditional firm, one in October of 2007 and one in March 2009, would have been prescribed exactly the same investment portfolio.
Now anybody that is sitting at home can realize that there was over a 60% drop in the markets between those points of time. So it just does not pass the sniff test that at those two extremes, a perspective client would have been told to invest exactly the same way, under the traditional modern portfolio theory model. So that is just kind of the ultimate real-world test as to the appropriateness or efficacy of that kind of approach.
Chris Martenson: Richard Russell is fond of saying that the primary purpose of a bear market is to take the most money from the most people. And so what you are talking about is that the drawdowns are very painful. Mike, you were mentioning that that first take no losses, sort of a financial Hippocratic oath as it were, and John, you were mentioning now that dynamic asset allocation, understanding and responding to market conditions as they are, it is an important cornerstone of your philosophy, can you elaborate on that a little more?
John Llodra: Yeah, I would be happy to. So, more so than a client’s age or what they self-classify as their risk tolerance, we are going to have an asset allocation across different asset classes that is mindful of our measurement of the risk reward environment. Quite simply, our pie chart is going to look like one that traditionally an 80-year-old would pursue when risks are high and one that a younger person would typically pursue when risks are lower. So, for example, where a client that might go through a traditional asset allocation firm might be prescribed a pie chart that is something like 60% stocks/30% bonds, maybe a token 3% allocation to commodities, and then a small amount of cash, our typical clients would look much different.
Well first off, our clients are typically going to find a much more heavy emphasis on things like precious metals, way more than what a traditional modern portfolio theory model would ever allow for. We are also going to have allocation to assets that really are mindful of the three-E thematic that your Peak Prosperity listeners and readers are so mindful of. Things that recognize that we are in the midst of very dramatic turning points and trends as related to energy, the environment, and the economy.
But more than that, our clients are going to see a much more dramatic range of allocation to things like stocks. So, for example, rather than holding a static 60% in stocks for clients through all environments, our clients have come to expect, based upon changing environments in the markets, just looking over the last seven years – a typical client of ours might have seen equity allocations as low as 15% or 20% and as high as 65% or 75%. Not because their age changed or their self-prescribed risk tolerance changed, but the market dynamics changed. There were times where it made sense to be more invested in stocks, like in early 2009. And then times to be much less invested, like in late 2007. And frankly, we would say right now, here in January 2013, we think there is great reason to be much less allocated in things like stocks than one ordinarily might consider appropriate for themselves.
Chris Martenson: Well, actually, we are talking about risk-adjusted returns then and wanting to hedge your bets, such as they are, because when you have a good sense of what the risks are, of course you can create a relatively well-balanced approach to that. And sometimes the risks are unknown, particularly – let us be honest; you mentioned this before – we’re in a world where central banks are dumping literally trillions of dollars into markets. And exactly how that is going to play out, we will only really know in hindsight, because we do not have any guidebooks to go with, here.
So Mike, you had mentioned before that there is more to risk than volatility, and I would like to go a little deeper into that if we could. How does the New Harbor team go about gauging whether risks are high or low? Is this an exact science?
Mike Preston: No, Chris, certainly it is not an exact science; it is really a mixture of science and art and experience. Markets are irrational, and they can remain irrational for a lot longer than you can stay solvent. And that is the well-known axiom of Wall Street.
Chris Martenson: Yes.
Mike Preston: But you do not have to be exact to make very good risk adjustor returns over time. Frankly, we do not think you have to be that exact to beat most investors over time. You simply have to ascertain when risks are high and when risks are low and take appropriate action. You do not have to be precise in identifying major turning points. You only need to be in the right neighborhood, Chris. So let me give you a couple of examples. Stock market peaks in October 2007, but you had almost another full year to reduce your exposure to risk assets. It was not until September of 2008 that the stock market really started to plummet. And there were a lot of things going on early in ’07 – we had the Bear Stearns collapse and so forth, and there was plenty of time to adjust; there was a lot of complacency, volatility was pretty low. A lot of our other indicators that probably are beyond the scope of this podcast were basically telling us to batten down the hatches and raise cash, and we did.
On the flip side of that, you really did not have to get in right at the bottom, the most recent bottom being March 2009. The market rocketed higher, after March 2009, but there were plenty of indicators that were turning from red to green at that point. It was like a picture – you can kind of picture a puzzle coming together and the pieces fitting in one by one. We started to see, for instance, in March 2009, bearishness really going off of the charts. Negativity was at a crescendo, fever pitch. Our own clients were relaying to us how they felt, and it was a very negative feeling. We saw things like the Shiller price earnings ratio get much more favorable. So again, pieces of the puzzle started fitting together; we started taking on more risk in a stepwise fashion. And again we do not have to be exact at either the top or the bottom; we just simply have to be in the right vicinity. Right now, as we said several times in January 2013, risks are very high, but we have frankly thought that risks have been high for well over a year.
So we are quite early in the game this go round and being relatively conservative. We are still producing decent returns; of course, it is not always possible to match the S&P in any given year because we are never really 100% invested, nor would our clients want us to take that risk. But we have found that this strategy of identifying risk, retreating to cash and out of risk assets to some extent when risk is high, gives us the ability to avoid the majority of drawdowns and have ammunitions if you will to deploy, when things get looking like they are at the other extremes – like they did in March 2009, and also March 2003 was another time. I can recall the statue coming down in Baghdad; it was another time when everyone wanted to be out of stocks. That was a good time to get in the market and enjoy a little bit of a bull run.
So for our clients, we think we have to be willing to do the opposite of what they feel like doing. We have to do the opposite of what most people want to do. That could make it very difficult, and as we said, timing is always very hard to get exactly right. But we view ourselves as disciplined risk managers that deploy assets in the proper way and maintain an emotional discipline that many of our clients cannot or do not want to do on their own and they ask us to do it for them.
John Llodra: Chris, if I could just add on to that in case the listeners here get this vision of us licking our finger and holding it up to kind of get a sense for which way the wind is blowing, we actually have a kind of a systematic tool chest, if you will, to help us objectively measure the risk environment. So we rely on both what we generally call technical analysis as well as fundamental research to enable us to objectively really measure and get a sense. Just like forecasting the weather, it is not a perfect science, but you can have a model or a system that is very good at getting reasonable accurate reads on the environment. So as I mentioned, we use a number of technical indicators that are not so much centered on asking the question why something is happening or behaving the way it is in the market, but really measuring what actually is happening, what are people doing with their feet insofar as how they are moving markets with their actual investment decisions.
But we also focus very intensively on independent fundamental research. Your research and contributors to your site are great input into our macro thinking. There are countless other folks that we read and digest their independent research, the likes of folks like John Huffman of the Huffman Fund, Ed Easterling of Crestmont Research. These are just a couple of independent fundamental research analysts who have a great body of research in identifying the sets of conditions that time and time again, if you look historically, have been reliable indicators of when are acceptable times to take risks and when are not. John Huffman refers to these kinds of sets of conditions as “syndromes,” which we think is quite an appropriate way to describe it. What are the syndromes that are typically present in terms of actual measurable data that has historically speaking been in the environments where it turned out to be a bad time to take risk? Those are the kinds of things that we rely on objectively to get a sense of what the risk environment is – not our own egos, not our own intellect, but really objective measurements of fundamental and technical data points.
Chris Martenson: All right, so we have a dynamic approach to asset allocation that relies on experience, a systematic tool kit for assessing risk. You have a variety of voices that you listen to, many of whom are sharing your penchant for looking at things as objectively, as measurably, as dispassionately, if I can use that word. And you have an emphasis on precious metals, some other 3E themed investments. Are there any other additional tools that you use here?
Mike Preston: Yes, Chris, there are definitely some other tools that I would like to explain in broad, conceptual terms. We do use tools known as “options” in our accounts to smooth out risk
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