Self-help guru Tony Robbins is out with a new book which offers a slew of financial advice including an “All Weather Portfolio” (AWP). Without delving into too much detail (others have already done this favor for us….), the crux of Robbins’ All Weather Portfolio is a recommendation to allocate 55% of ones portfolio into US Treasury Notes & Bonds:

“Then you need long-term government bonds. 15% in intermediate term (7- to 10-year Treasuries) and 40% in long-term bonds [20- to 25-year Treasuries].”

The concept here isn’t rocket science; bonds help to reduce overall portfolio volatility which would otherwise be quite high if a portfolio consisted only of equities:


An example of a portfolio’s best, worst, and average returns given the percentage stock/bond allocation

Mr. Robbins (primarily with the help of hedge fund legend Ray Dalio) is also advising his followers to rebalance their portfolios at least annually which will mean that assets which have appreciated will be trimmed and investors will accumulate more of those assets which have underperformed.

The combination of recommending that novice/intermediate investors plow 55% of their portfolios into US Treasuries at record low yields AND also encouraging them to ‘rebalance’ regularly (which basically means adding to losing positions and selling winning positions) strikes me as an especially reckless and potentially toxic formula. The reason that the AWP backtests so well is that we have just experienced an epic 30-year bull market in bonds:

Click to enlarge


 Long-term US Treasury Bond yields have never been lower 

Many ‘gurus’ have been calling for a top in the US Treasury market for quite some time, thus far they have all been badly wrong. However, they probably won’t be wrong forever and the level of complacency currently being exhibited by bond market participants should prompt investors to raise an eyebrow or two.

Meanwhile a couple of key ingredients that seem to have been missing from forming a lasting top in Treasuries (a bottom in yields) is unanimous acceptance among investors that yields are going to stay low for a long time to come and heavy retail investor participation in the bond market. During the past several months we have begun to see both of these begin to play out with investors chasing yield through high-yield corporate bonds and leveraged loans while a widespread ‘deflation’ meme has been circulating throughout I-Bank research reports and the assorted financial media punditry. Is the Tony Robbins All Weather Portfolio the final ingredient necessary for a long-term top in bonds to be put in place?

Read also:

Bloomberg: SEC’s Gallagher Sees Bond Bubble Hurting Retail Investors

FT: Investors in junk bond funds face a Matrix moment

DealBook: A Recent Surge of Leveraged Loans Rattles Regulators

Pragmatic Capitalism: Assessing the Ray Dalio/Tony Robbins Portfolio