Some More Revisions to the Weekend Retirement Portfolio

As the US government continues to burn under Republican’s deranged arson, we’ve made the Weekend Retirement Portfolio a tad more defensive.

The Sitch

We’ve previously discussed our ‘neutral’ portfolio that we prefer in ordinary times ^[1], as well as some more recent defensive changes made recently in reaction to Trump revenant ^[2].

Our neutral portfolio, to which we long to return, is an index fund portfolio of:

• 60/40 stock/bond allocation,
• 60/40 US/International in stocks and REITs,
• 60/40 total market stock index funds/small or small-value tilt funds to capture some of the Fama-French small and value factors, and
• 75/25 US Treasuries & TIPS/international bonds (currency hedged).

The particular iteration shown here has a short-term Treasury component (VSBSX), which was a holdover from the financial crisis (2007-2008) and the COVID-19 decline, defending against interest rate rises. (Failing to stick with intermediate Treasuries was a mistake, but a minor one that helped me sleep well at night.)

The last time we revised this portfolio is shown here; it is more defensive with:

• 50/50 stock/bond allocation,
• 50/50 US/international in stocks and REITs,
• 60/40 total market stock index funds/small or small-value tilt funds to capture some of the Fama-French small and value factors, and
• 67/33 US Treasuries & TIPS/international bonds (currency hedged).

So it’s more defensive in allocation across asset classes (basically less stock), and a bit less US-centric in stock (just a hair less than the global market allocation, which is about 55/45 US/international.)

However, it still has 67% of the bond sector in US Treasuries. That’s… getting to be a sore point.

What We Did This Time

A US Treasury default would be a world-wide economic disaster, from which nothing would be safe. Nothing. Just an inescapable world depression.

That’s unlikely, but… Trump specializes in doing the horribly unlikely. His economic plan would push the deficit and its time integral, the debt, to heights of bizarrely self-inflicted financial injury. While default is unlikely, he might try to:

• “Reschedule” the debt (forcibly, and illegally, reducing coupon rates and extending terms to 50-100 years so bond holders are stuck with very different kinds of bonds than they bought).
  
• “Monetize” the debt by printing money, with all the inflation that would cause. It’s beyond my ken whether this means the inflation protection of TIPS would be honored, or whether he would just game the CPI to lie about it. DOGE has apparently made a lot of government databases now wildly inaccurate ^[3] (and we’ve even documented some of that on this Crummy Little Blog That Nobody Reads (CLBTNR) ^[4], so it’s not a stretch to think that Trump might direct them to lie about inflation. (It’s time to resurrect the MIT Billion Prices Project ^[5], which provided an independent check on the US government CPI data from 2007 - 2015. The US CPI was more or less accurate.)

So we decided to lighten up on Treasuries & TIPS a little bit. The alternatives are quite limited:

• We don’t want corporate bonds, since we’ve previously done regression analyses those look like Treasuries plus a little stock. ^[6] You can’t diversify away from stock risk by adding more stock!
• Junk bonds are even more so, and quite risky even in ordinary recessions, let alone what’s about to happen.
• Dividend stocks? C’mon, say it with me: _you can’t diversify away from stock risk by adding more stock!
• Alts like commodities, gold, futures, crypto? Oh, please. Those are not investments. Those are tools to fleece naïve investors. I’m naïve, but not that much.

So… more international bonds. As you can see here, we’ve gone with 50/50 Treasuries & TIPS/international bonds. That makes us 50/50 in stock/bond ratio, 50/50 in US/international stocks, 50/50 in US/international REITs, and now 50/50 in US/international bonds. (See the bond sector in the red rectangle, shown here.)

There are, I think, 2 possible outcomes here:

• If I’m regrettably right, I’ll probably wish this had been even more conservative, like a 40/60 stock/bond allocation. But I’ll be glad for this much protection compared to our neutral portfolio.
• If I’m wrong and the world does not melt down (and nobody will be more relieved than me to see that), then this will have been a tick more defensive than needed. But it will not have cost too much return.

I can live with both of those.

The Weekend Conclusion

We can only repeat the conclusions from the last time we reallocated the portfolio:

As always, this is not investment advice; it’s just a summary of what we’re doing here at Château Weekend.

The world is terrible. But as all the existentialists have said, “Nevertheless, here we are.” We have to cope with what is in front of us. Any other policy is self-delusion. Coping with what is in front of us means:

• For investments, becoming somewhat more defensive.
• Politically & practically, becoming as difficult as possible, throwing sand in all the gears of Republican fascism.

At my age, I can do the former, but will have to choose carefully about the latter.

As must we all.

(Ceterum censeo, Trump incarcerandam esse.)

Addendum 2025-Jun-11, later in the day: VTABX Composition

Somebody on Mastodon complained (mildly and politely) about my choice of VTABX, or its ETF share class BNDX. The complaint was along the lines of “it’s mostly corporate”, when we want mostly government bonds of developed nations.

So I did some checking. Have a look on Morningstar at their portfolio as of 2025-Apr-30 (the last reporting date as of 2025-Jun-11), shown here:

• The table at top left shows the breakdown by bond type (government, corporate, …). Importantly, the last line shows 30% derivatives. These are the currency forwards used to hedge the various bond currencies back to the dollar. It’s probably not quite right to include them in the asset breakdown, but at least you can see what’s what.
• The table at top right shows the breakdown by credit rating. At least 75% of the portfolio is AAA, AA, or A quality, which is all very good.
• The bar chart at the bottom shows the credit quality breakdown (colors) by type of bond. This, of course, does not include the currency hedges.

Looking at the bottom bar chart, which includes only the bonds and not the hedges, we see that the portfolio breaks down as:

• a hair under 80% government bonds,
• a hair over 5% secured bonds, i.e., something sort of like mortgages where an asset backs the bond against default, and
• just a hair over 15% corporates for the rest.

Conclusion: VTABX/BNDX is mostly government or securitized bonds, with only about 15% or so in corporates. Not perfect, but good enough for now.

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Notes & References

1: Weekend Editor, “The Weekend Retirement Portfolio”, Some Weekend Reading blog, 2021-Jun-19. ↩

2: Weekend Editor, “A Weekend Retirement Portfolio for the Trump-Revenant Era”, Some Weekend Reading blog, 2025-Feb-10. ↩

3: A Wallace, “DOGE layoffs may have compromised the accuracy of government data”, CNN, 2025-Jun-05. ↩

4: Weekend Editor, “Bad Doggies!”, Some Weekend Reading blog, 2025-Apr-15. ↩

5: A Cavallo & R Rigobon, “The Billion Prices Project”, Billion Prices Project web site, downloaded 2025-Jun-11. ↩

6: Weekend Editor, “Stock Diversifiers: Treasury vs Corporate Bonds?”, Some Weekend Reading blog, 2021-Jun-11. ↩