Since its creation in 2005, YouTube has grown into a social media powerhouse. The social media platform isn’t just used to watch music videos or funny skits anymore. But, instead, generations like Millennials and Gen-Z are accessing YouTube to learn how to do things, like, makeup tutorials, playing new games, and discovering new investment opportunities.
We now live in the age of the “Social Media Influencer.” Influencers are people who have large audiences of followers on their social accounts and leverage this to influence or persuade their followings to utilize certain products or services.
We may be a bit old school, but we tend to “influence” our audience by publishing blogs and podcasts that focus on education and providing necessary ammunition for investors — you know, logic, numbers, evidence, and even those disclaimer things to make sure you understand everything that’s being shown.
But like anything, there are pros and cons. Some influencers may not have all the facts or are just interested in boosting their views and likes.
Here’s where YouTube “influencer” Graham Stephan, enters the story — who’s primary goal is not just to educate and entertain, but make a bit of a nice living off doing so. Here’s Forbes with a 2020 article on Graham:
His total revenue from his direct YouTube channel for 2019 was $1,141,231.43, up 568% from the previous year. He also earned $170,428.75 for the year on the Graham Stephan Show channel. There was an additional $500,000 in program sales and $90,000 and sponsorships and affiliate marketing. His total YouTube income for 2019: $1,904,273.73.
Why does this matter? Well, we covered this topic in our post around the $GME pop back at the start of the year, but what piqued our interest this time was Graham recently putting out a video to his three million-plus subscribers talking about the Cockroach Fund, co-managed by RCM subsidiary www.attainfunds.com and our friends at Mutiny Funds. Here it is:
Wow – Alts making the millennial mainstream! Way to expand your knowledge base Graham! There’s just a few things that need a bit of clarifying/fact-checking:
- The Cockroach approach and portfolio design is wholly and firmly the work of Jason Buck and Taylor Pearson of MutinyFunds. Graham gives a very brief mention of mutinyfund.com, but there’s no semblance of listing a ‘source’ or providing a link to the original material. To download the full Cockroach Investment Strategy ‘Manifesto’, please visit here.
- He mentions in the video that the returns are likely primarily due to the portfolio including Bitcoin in the past, which has gone up exponentially. A more careful reading of the ‘source material’ actually explains that the Cockroach handicapped the performance by NOT including Bitcoin’s past performance, believing it would make the portfolio’s past performance a bit unrealistic.
- He’s saying you can do this on your own. Sort of…the recent work done by ReSolve Asset Management and Newfound Research on Return Stacking is a good start. But there are three complex pieces to replicate on one’s own: 1. Long volatility 2. Commodity trend 3. Leverage.
- But in the end, we’re worried Graham sort of misses the point. The video correctly realizes that the Cockroach strategy is about diversification, but seems to incorrectly understand that it is even more about – diversifying into DEFENSIVE assets. Without the defense part, the diversification won’t nuclear winterize your portfolio, it will just help with the air conditioning in the summer months. Graham lists his “portfolio weightings”.
That looks sort of diversified there on YouTube, but here’s what that looks like the inside of the cockroach framework (alongside the actual framework).
This is the whole point of Cockroach. People think they are diversified. They think they are covering these different economic regimes – but they are really just doubling or tripling up on their exposure to the growth quadrant of economic environments. Graham personifies this in real time on the video – both getting the need for diversification and then messing it up at the same time. Make sure you get the real meaning of the approach, that you need defense and offense, not just lots of different players running different offensive plays.
- Many disclaimers are needed here. The short version, the Cockroach Fund Graham alludes to, is only available to accredited investors through a properly delivered private placement memorandum. This video was not sanctioned nor approved by Mutiny Funds nor Attain Portfolio Advisors. And the results and performance listed are hypothetical.
The long version =
The results shown in the video are from a hypothetical backtest calculated by rebalancing each of the four asset classes monthly to their target weights of 50% Stocks, 50% Income 50% Trend, 50% VOL, and 25% Gold, then subtracting a management fee of 1/12 of 0.50% and a 10% incentive fee calculated off new net profits above the previous high watermark. The data used is:
STOCKS = US (SPY total return), Foreign (EFA), Emerging (EEM) ’03 onwards, underlying indices 1990 to 2003
INCOME = US (AGG,TLT) Foreign (IGOV) ’09 onwards, US Aggregate Bond Index’ 99-09, BBERG Treasury Index’ 90-’99
60/40 = 60% Stocks / 40% Income – as calculated above
TREND = Hypothetical Multi-Manager Portfolio ’10 onwards, DJCS CTA Index’ 99-’09, hypothetical replication of trend following model’ 90-’99
GOLD = GLD ’05 onwards, Gold Price Index’ 90-’05
VOL = Mutiny Fund Long Vol Fund 5/20 onwards, Mutiny Funds Long Vol Fund Hypothetical Performance ’15 to 4/20, Eurekhedge Long Vol index’ 04-’15,
hypothetical replication of Put Buying performance’ 90-’04
HYPOTHETICAL PERFORMANCE DISCLAIMER
THE TABLES AND GRAPHS HEREIN WERE CREATED USING VARIOUS TYPES OF PAST DATA, INCLUDING ACTUAL REPORTED RETURNS, PROPRIETARY PERFORMANCE, AND BACK TESTED PERFORMANCE OF THE SUB ADVISORS. THE RETURNS AND STATISTICS REPRESENT HYPOTHETICAL COMPOSITE PERFORMANCE.
THIS COMPOSITE PERFORMANCE RECORD IS HYPOTHETICAL AND THESE TRADING ADVISORS HAVE NOT TRADED TOGETHER IN THE MANNER SHOWN IN THE COMPOSITE. HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY MULTI-ADVISOR MANAGED ACCOUNT OR POOL WILL OR IS LIKELY TO ACHIEVE A COMPOSITE PERFORMANCE RECORD SIMILAR TO THAT SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN A HYPOTHETICAL COMPOSITE PERFORMANCE RECORD AND THE ACTUAL RECORD SUBSEQUENTLY ACHIEVED.
ONE OF THE LIMITATIONS OF A HYPOTHETICAL COMPOSITE PERFORMANCE RECORD IS THAT DECISIONS RELATING TO THE SELECTION OF TRADING ADVISORS AND THE ALLOCATION OF ASSETS AMONG THOSE TRADING ADVISORS WERE MADE WITH THE BENEFIT OF HINDSIGHT BASED UPON THE HISTORICAL RATES OF RETURN OF THE SELECTED TRADING ADVISORS. THEREFORE, COMPOSITE PERFORMANCE RECORDS INVARIABLY SHOW POSITIVE RATES OF RETURN. ANOTHER INHERENT LIMITATION ON THESE RESULTS IS THAT THE ALLOCATION DECISIONS REFLECTED IN THE PERFORMANCE RECORD WERE NOT MADE UNDER ACTUAL MARKET CONDITIONS AND, THEREFORE, CANNOT COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FURTHERMORE, THE COMPOSITE PERFORMANCE RECORD MAY BE DISTORTED BECAUSE THE ALLOCATION OF ASSETS CHANGES FROM TIME TO TIME AND THESE ADJUSTMENTS ARE NOT REFLECTED IN THE COMPOSITE.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN; IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK OF ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.