Summary My inflation sensitive Model Portfolio outperformed the S&P 500 in January 2026, driven by strong returns in Precious Metals, Quality Stocks and Speculative Investments. Allocations among asset categories shifted modestly, with profits from outperforming categories funneled into the new All Weather ETFs bucket, enhancing portfolio flexibility. Key holdings like FEORX, GLD, SIVR, and IBOT delivered robust gains, while Bitcoin and CGGR lagged during the monthly period. The monetary inflation thesis on which the Model Portfolio was created remains intact, and the addition of HECA is expected to help navigate disinflationary mini-cycles and provide additional diversification. Model Allocation Update (February 2026) This article provides ongoing analysis of my Asset Allocation Model (the " Model Allocation " or " Model "). Specifically, this article (1) analyzes the performance of certain investment ideas generated for the Model Allocation's portfolio for 2026 (the " Portfolio "), and (2) briefly discusses the macro framework supporting the Model. Below are the current asset allocations of the Model compared to where they stood back in December 2025. Current Model Allocations As of February 1, 2026, the updated allocations for the eight (8) asset allocation buckets (increased from seven categories in 2025 ) constituting the current Model Portfolio are as follows. Asset Class Target Allocation % % As of December 24, 2025 % As of February 1, 2026 Inflation Beneficiary Equities ("IBE") 15-20 20 20 BTC & Blockchain Equities 1-5 5 2 Growth Stocks 15-20 16 14 Quality Stocks 20-25 25 25 Speculative Investments 5-10 5 5 Precious Metals 5-10 10 10 All Weather ETFs 5-10 -- 7 Cash/Cash Equivalents 5-20 19 17 With exceptions, the asset allocations over the past month stayed largely the same. Declines in the BTC & Blockchain Equities (" BTC&BE " ) and Growth Stocks buckets were primarily due to underperformance in those categories and, in the case of BTC&BE, dilution as a result of a lower allocation target to allow for an allocation to the new (for 2026) All Weather ETFs bucket. Such dilution in the BTC&BE bucket for 2026, which thus far has proved auspicious and timely as Bitcoin ( BTC-USD ) has entered a bear market. The Portfolio's allocation to Cash/Cash Equivalents was also diluted to make way for the new All Weather ETF category. Precious Metals, Quality Stocks, Speculative Investments and the Inflation Beneficiary Equities asset categories performed very well in January and profits taken have generally been funneled into the All Weather ETFs category. Performance Below I show the performance of the key core investments in the Model Allocation Portfolio against the 1.47% gain for the SPDR® S&P 500® ETF ( SPY ) (the " Benchmark ") for the January 1, 2026, to January 31, 2026, period (the " Period "). The Portfolio materially outperformed in January, which is shown below. Security Asset Class Portfolio % Performance for the Period First Eagle Overseas Fund ( FEORX ) Quality Stocks 20.5 6.52% SPDR® Gold Shares ETF ( GLD ) Precious Metals 7.5 12.27% Hedgeye Capital Allocation ETF ( HECA ) All-Weather ETFs 7 5.42% Capital Group Growth ETF ( CGGR ) Growth Stocks 7 (0.02%) Astoria Real Asset ETF ( PPI ) Inflation Beneficiary Equities 7 6.56% VanEck Robotics ETF ( IBOT ) Growth Stocks 5 8.28% abrdn Physical Silver Shares ETF ( SIVR ) Precious Metals 2.5 17.09% VanEck Real Assets ETF ( RAAX ) Inflation Beneficiary Equities 2 10.36% Horizon Kinetics Inflation Beneficiaries ETF ( INFL ) Inflation Beneficiary Equities 2 10.08% Bitcoin ( BTC-USD ) BTC/Blockchain Equities 1 (3.84%) VanEck Onchain Economy BTC/Blockchain Equities 1 8.94% SPY BENCHMARK -- 1.47% February has introduced more volatility into markets so we will see if those gains can withstand the current whipsaw. Performance of Core Speculative Investments The performance of the core Speculative Investments in the Portfolio was as follows for the Period: Security Portfolio % Performance for Period Orla Mining Ltd. ( ORLA ) 1.25% 12.03% PureCycle Technologies Inc. ( PCT ) 1.50% 11.29% Palladium ( PALL ) 0.75% 5.83% Strive Asset Management, LLC ( ASST ) 0.25% 11.26% Bitmine Immersion Technologies, Inc. ( BMNR ) 0.75% (7.55%) Solid overall performance, but I am taking my lumps thus far in February, especially with respect to the ASST and BMNR, two digital asset treasury companies. *** Overall, the Portfolio did very well in January, following a strong 2025. It is probably a good time to remind readers (and myself) of the genesis of the Model Allocation on which the Portfolio is based. In December of 2024, in An Asset Allocation for 2025 and Beyond , I wrote: My thinking about the next decade is deeply influenced by two books: (1) The Dying of Money: Lessons of the Great German and American Inflations by Jens O. Parsson (available via PDF here ) and (2) When Money Dies: The Nightmare of Deficit Spending, Devaluation and Hyperinflation in Weimar Germany by Adam Fergusson (available via PDF here ). Cutting to the chase, for me, these books are evidence that human nature is static; it does not change . To accrue power, fight wars and buy votes, inflation caused by government money printing is a cyclical tale as old as time.... Heading into 2025, I am thus sympathetic to the continuation of the U.S. inflation story and have used it as my base case to think about portfolio allocation for 2025 and beyond. However, I do not underestimate the power of human agency. Recent events have shown that an intelligent, determined and charismatic leader like Argentina's Javier Milei can do what it takes to reduce inflation and generate a budget surplus . Similarly, the turnaround in El Salvador led by Nayib Bukele has been impressive not only by its success , but by the speed of its success. In this regard, it does not go unnoticed that Milei has the ear of the Trump Administration, including Elon . If there was ever an opportunity for the U.S. to escape the "inflation trap" it likely finds itself mired in, now is the time. While I am hopeful the ship can be righted, I am skeptical for a number of reasons. For one... the situation in Ukraine, [the] opening up the border to illegal migrants... , and... federal worker deals , is only going to make the Trump Administration's operations more difficult and expensive to execute. Second, and more importantly, the U.S. Government is the largest and most powerful institution in history and, as such, the permanent bureaucracy that runs the federal government will make it exceedingly difficult for reforms to be effective. In this regard, in the post-World War Two era, the American bureaucracy is, as far as I can tell, undefeated. Third, President Trump's agenda, including tariffs and extensions of expiring tax cuts, may also add to the inflationary pressure. Moreover, President Trump is fond of seeing the S&P 500 rise as a marker of his own economic performance, which leads me to believe he will ultimately choose asset inflation (i.e., increasing liquidity) when push comes to shove." Fifteen months ago, I was skeptical but open to the possibility that the Trump Administration could cut government spending and right Team USA's fiscal house. There are no longer any illusions for me; the Administration's plan is to grow its way out of debt and invest heavily in US military, strengthening my (humble) conviction that we will undergo above-trend, secular inflation, even if there are short periods of cyclical disinflation (as we are currently experiencing in early 2026). As such, the Portfolio should continue to shine in this environment, while providing guard rails and discipline. For me, writing about the performance of the Portfolio provides further discipline and, if others gain from this process, all the better. With the Portfolio's performance having been particularly good over the last 13 months, it is probably worth reiterating a couple of points. First, we will have periods of disinflation, as we are having now, and the inflation will not go up in a straight line. Second, we should expect a lot of volatility going forward due to monetary disorder (see Ray Dalio ), geopolitical risks , and government debt problems (see, e.g., Japan ). Third, given the volatility, it is necessary to rebalance portfolios and take profits along the way, particularly in volatile commodity related assets. Concluding Thoughts The monetary inflation thesis on which the Model is predicated remains intact, even if it will not play out in a straight line . Performance for the Model Portfolio in January was excellent and, notwithstanding the volatility, performance for the first week of February has also outperformed SPY.
