In this interview, Jason Hartman asks George Gammon to explain Chris Cole’s “Dragon Portfolio,” a re‑engineered version of the traditional risk‑parity mix. Gammon describes how Cole examined 90‑100 years of market history and found that a standard 60 % stocks/40 % bonds allocation performed well only from 1984‑2007, failing in earlier periods. To improve resilience, Cole added uncorrelated assets—long volatility, commodity trend‑following, and gold—creating a portfolio that can thrive in both boom (Serpent) and deleveraging (Hawk) cycles. Gammon outlines the Hawk/Serpent framework: the Serpent cycle is a growth‑driven boom that ends in excess debt and policy distortion; the Hawk cycle follows, marked by deleveraging through deflation or inflation (e.g., 1930s deflationary Hawk, 1970s‑early‑80s inflationary Hawk). He argues we are currently in a Hawk cycle that began in 2008 and may last 20‑30 years. For investors, the “mini‑Dragon” allocation is roughly 20 % bonds, 20 % stocks, 20 % gold, plus commodity trend‑following and a long‑volatility position. Retail investors face hurdles: long‑volatility funds have negative carry, and commodity trend‑following requires expertise. Gammon suggests real‑estate rental properties as a practical way for non‑accredited investors to capture long‑volatility‑like cash‑flow benefits. The conversation also critiques why many financial advisors ignore income‑property investing, noting fee‑based incentives. Gammon recommends reading Cole’s 20‑page “Allegory of the Hawk and Serpent” paper for deeper insight.
Chapters
The Dragon portfolio. What is that, George?
Well, it was designed by a gentleman by the name of Chris Cole with Artemis Capital. They're out of Austin, Texas. I love listening to the guy. He's often on Macro Voices, the podcast, or Real Vision. He's just a real, real sharp thinker. And he went back, looked at the last 90 years to 100 years, and saw how the typical portfolio called a risk parity portfolio, and that's your 60% stocks, 40% bonds, and then you kind of adjust it based on your age. So he looked at how that portfolio did over the last hundred years through these different cycles. They performed extremely well from 1984 to 2007, but when you look before that, they didn't do well at all. So then he combined all these different elements that really don't have anything to do with bonds. They're not really correlated to bonds or stocks, such as volatility. And this is what his fund does. It's a long volatility fund. And one of his main funds, he tested that, and he saw that it did extremely well, regardless of. Of whether we are in a boom cycle or we are in a bust cycle. So he came up with this paper, this report that's called Allegory of the Hawk and Serpent. And it kind of just tells a story while at the same time going through all of this research, all the charts, and then comparing this Dragon portfolio is what he calls it, to a normal risk parity portfolio that your average financial planner would suggest.
Mm, okay. And so he talks about the Hawk and the Serpent. Can you go into that a little bit? And how do we. How do we use this?
Sure. So that he starts with the first Hawk cycle, and that was in the 1930s. That was what we consider the Great Depression. So let me back up a little bit further. So the Serpent cycle is a cycle where we go into a boom. So it starts off with great free market capitalism. Everything we think about, usually it has a tailwind, such as demographics or a new type of technology, and the economy expands. But when you get toward the end of the cycle, it gets corrupted by politicians, by deficit spending, by money printing, all these things that you talk about so well on your show that really cripple an economy. And then what happens that issues in a Hawk cycle? Hawk cycle is a deleveraging, and the deleveraging can come as a result of deflation or inflation. So we first talked about the Hawk cycle in the 1930s. That was a deflationary deleveraging. But in the 1970s, from about 65 to 1983, we had an inflationary Hawk cycle. And really that Hawk cycle comes in and just wipes the slate clean. It takes care of all it eradicates the mal investment, the misallocation of resources that happened as a result of the latter stages of the serpent cycle.
Okay, so are we in one of those two cycles now?
Yeah, now we're in a Hawk cycle, but it started in 2008. But these cycles last usually 20 to 30 years. So we're maybe just the first third of it so far.
Okay, so it lasts a while, this Hawk cycle. And why does it last so long? How do we know it lasts that long? What tells us that? Just history or.
Yeah, through his research, he's got these cycles defined. He goes back about 100 years and that's generally how long they've lasted. Now can it last longer? Can it be shorter? Absolutely. But it generally lasts that long because it takes a long time for, for all of the mal investment to really get cleaned out of the system. Ray Dalio calls this a beautiful deleveraging. If some of your viewers have watched his YouTube videos, he has when he talks about economic cycles and debt cycles, long term, short term. But I think Chris is just taking it a step further.
Okay. Okay, good. So is there a certain way we as investors are supposed to act during this cycle versus the next cycle?
Yes. So if we're in a Hawk cycle right now, if you read his paper and I'll send you the link, if you want to put a link in your show notes, it's a very readable PDF, about 20 pages or so. But if you say, okay, this makes a lot of sense to me, then you've got to figure out how to set up your own portfolio to take advantage of this Hawk cycle. So you've got to set up your own little mini dragon portfolio, let's call it. Most people can do this pretty easy because it's about 18, 20% bonds, 20% stocks, you got about 20% gold. But where it gets a little more difficult is you have to go into commodity trend following, which is doable. There's some books out there, how to do it. Or if you're an accredited investor, you can check out Chris's fund. But not everyone's an accredited investor. So for the average Joe and Jane, the complex part of the portfolio is trying to figure out how to go long. Volatility, because there are volatility funds out there, but they typically have a negative carry. So if you hold them over 10 years, you're almost guaranteed to lose money. And I won't go into why, but it's just not a good long term investment. So one of the things I did in yesterday's video is I tried to think through, kind of get outside of the box and ask myself, what could the average Joe and Jane do? And to go long, volatility. And of course, one of these things was real estate. Because if you look back at things that have done well either in a deflationary period like the 1930s or the 1970s, not all real estate, of course. Like you say, there is no monolith called real estate. You've got to get granular. But when you look at the type of rental properties that you and I like in linear markets with great cash flow, typically if you look at the 1970s, they haven't knocked the ball out of the park from an appreciation standpoint when you look at it in terms of inflation adjusted, but from a cash flow, and if you're using good, solid, smart debt at a low fixed interest rate, they do well. Then going back to the 1930s, you've got some good cash flow. They might have lost a little money as far as the equity, but you lose a lot less than all these other options. And like you always say, you gotta have to ask yourself, compared to what.
Yeah, yeah, that's, that's interesting. You know what drives me crazy about these, these guys, all of these financial guys, George, they always talk in terms of like this fund or that fund or that stock or, you know, it's like they just never really talk about real estate enough. You know, they, they sort of don't consider it investing. Whenever I hear one of these or hear or see one of these commercials for a financial services firm, right. They talk about investors and it's like there's this elephant in the room called income property. Just ignore it.
Like.
Yeah, well, if you like real estate, you should be in a REIT or, you know, or something like that. And you know, what about just buying some houses? You know, it's.
Yeah, well, I think it takes them out of the equation.
Yeah, right.
So they don't like why they don't like it because if you're in of your own investments, whether it's just physical gold in your back pocket or you own a real estate or you own a rental property, you don't need a manager. There's no way for them to collect fees. And I think that's most likely why they don't like it too much.
Sadly, yes, that is the definite answer. Well, is there anything Else you want to tell us about the Dragon portfolio?
I would suggest reading the paper. Absolutely fascinating. It makes a lot of sense, but it also teaches.
Is that the one you sent me the other day?
It is, yeah, yeah.
Oh, that's long, by the way. That's deep. Yes. There's a lot to it.
Yeah, yeah. But it also teaches people to see things more clearly. And what I mean by that is, if you look at some of the charts he has in there for the 1970s as an example, he uses that as a period of this inflationary deleveraging. Most people look at inflation and deflation as though it's binary. So we have one or the other. But what you see in the paper and what I found through my research in the last couple months is there is no binary. We don't have either deflation or inflation. We have a combination of both all the time, and they're like two different cross currents. So you have to ask yourself, well, inflation or deflation compared to what? So when you're looking at some of his charts as an example, you see that from 1974. 1972, I believe. From 1974, the stock market went down by like 60%. Most people don't know 60%. While at the same time, if you look at the cpi, the inflation rate, as you have many times, you see that the inflation rates like 6 or 7%. So we had 6 or 7% inflation in consumer prices, while at the same time, the stock market went down by 60%. Not all at once, just gradually. A big bear market. So where, if you say, like, let's say the average person on the street or even the average investor, you said, okay, we're going to get inflation over the next 10 years. They'd say, okay, well, then the stock market has to go up. Well, not necessarily. We could see the price of food increase by 50%. We could see the price of rent go up by 50%, while we could see the stock market or the bond market go down by 20 or 30%. Or we could see the dollar get stronger against the euro. You really got to get granular there if you want to figure this stuff out.
