In this episode we answer emails from Jeff, Jenzo and Sam. We discuss spending money on relationships, a 72(t) situation, what to do with an unused Coverdell, GDE (again), a nice risk parity write-up and some random musings about the history of free speech and communications technologies.
And THEN we our go through our weekly portfolio reviews of the eight sample portfolios you can find at Portfolios | Risk Parity Radio.
Additional links:
Jenzo's GDE Backtest: testfol.io/?s=0SLNjC7As4b
Sam's Most Excellent Risk Parity Explication Blog Post: 15 Uncorrelated Assets | SSiS
Sam's Most Excellent Bill Of Rights Blog Post: Boxed In | SSiS
Breathless Unedited AI-Bot Summary:
When markets tumble and headlines scream doom, properly diversified portfolios reveal their quiet strength. This episode showcases exactly that phenomenon - while small cap value has plummeted 15.58% and the S&P 500 has shed 5.74% year-to-date, gold has soared a remarkable 25.87%, creating a balancing effect that keeps risk parity portfolios remarkably stable.
We dive into listener Jeff's retirement strategy, examining his use of 72T distributions and exploring whether his recent RV purchase makes financial sense. The answer turns out to be more about relationships than raw numbers. Research shows expenditures that facilitate meaningful connections tend to yield the greatest happiness returns - a powerful framework for evaluating major purchases in retirement.
The emerging world of composite leveraged ETFs takes center stage as we examine GDE, which combines S&P 500 exposure with gold allocation at 1.8x leverage. While innovative funds like these package risk parity principles into convenient solutions, they represent a tradeoff between simplicity and control. We explore whether these instruments belong in a sophisticated asset allocation strategy or if traditional single-asset funds still offer superior flexibility.
For investors fascinated by portfolio design theory, we tackle the question of just how many truly uncorrelated assets one needs. While hedge funds and endowments might pursue 15+ distinct asset classes, diminishing returns suggest a more practical approach for individual investors. The mathematical reality shows the incremental benefit of adding that 11th or 12th asset pales in comparison to the impact of moving from one or two assets to five diverse investments.
Our weekly portfolio review reveals the practical power of these principles. Despite market turmoil, most of our sample portfolios remain nearly flat or slightly positive for the year - precisely the stability risk parity promises. Whether you're just beginning your investment journey or fine-tuning an established strategy, this episode offers both theoretical frameworks and practical evidence for building resilient portfolios in uncertain times.
Ready to hear more? Subscribe, leave a review, and send your questions to frank@riskparityradio.com.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Voices (00:01):
A foolish consistency, is the hobgoblin of little minds
, adored by little statesmen andphilosophers and divines.
If a man does not keep pacewith his companions, perhaps it
is because he hears a differentdrummer, a different drummer.
Mostly Mary (00:19):
And now, coming to you from dead center on your
dial, welcome to Risk ParityRadio, where we explore
alternatives and assetallocations for the
do-it-yourself investorBroadcasting to you now from the
comfort of his easy chair.
Here is your host, frankVasquez.
Mostly Uncle Frank (00:37):
Thank you, Mary, and welcome to Risk Parity
Radio.
If you have just stumbled inhere, you will find that this
podcast is kind of like a divebar of personal finance and
do-it-yourself investing.
Voices (00:52):
Expect the unexpected.
Mostly Uncle Frank (00:55):
It's a relatively small place.
It's just me and Mary in hereand we only have a few
mismatched bar stools and someeasy chairs.
We have no sponsors, we have noguests and we have no expansion
plans.
Voices (01:11):
I don't think I'd like another job.
Mostly Uncle Frank (01:13):
What we do have is a little free library of
updated and unconflictedinformation for do-it-yourself
investors.
Voices (01:23):
Now who's up for a trip to the library?
Mostly Uncle Frank (01:26):
tomorrow.
So please enjoy our mostly coldbeer served in cans and our
coffee served in old, chippedand cracked mugs, along with
what our little free library hasto offer.
Welcome but now onward, episode418 today on risk parity radio
(01:57):
it's time for the grandunveiling of money which means
we'll be doing our weeklyportfolio reviews of the eight
sample portfolios you can findat wwwriskparryradiocom on the
portfolios page.
And the stock market went upfor once.
Enjoy it while it lasts.
Voices (02:18):
I think I've improved on your methods a bit too.
But before we get to that, I'mintrigued by this, how you say
emails and First off.
Mostly Uncle Frank (02:32):
First off, we have an email from Jeff and
the subject is it's a nutty kindof email.
Voices (02:39):
I used to be able to name every nut that there was,
and it used to drive my mothercrazy because she used to say,
harlan pepper, if you don't stopnaming nuts.
And the joke was, of course,that we lived in pine nut and I
think that's what put it in myhead at that at that point.
So I'd go to see she'd hear mein the other room and she would
(03:00):
just start yelling.
I'd say peanut, hazelnut,cashew nut and Jeff writes Hello
Frank and Mary.
Mostly Mary (03:13):
I've been considering writing in for a
while, but after and during thelong AI episode, I thought I'd
go ahead and do it.
That was brutal, by the way.
Mostly Uncle Frank (03:21):
This is pretty much the worst video ever
made.
Mostly Mary (03:24):
Anyway, we made the decision to slow down the dog
training business.
Voices (03:29):
A bloodhound not only has a great nose, but he also
they can talk.
And so when he's doing that,he's talking, he's saying what
you doing, he's saying what youdoing, what you doing, what you
doing, what you doing, and he'ssaying I'm ready.
That's when you know he's readyfor a show, because he says I'm
ready, I'm ready, I'm ready,see that.
And I know he's ready.
What's your point?
Mostly Mary (03:53):
He says I'm ready, I've walked and I'm ready have a
good night's sleep and thenwe'll get going and it'll be
showtime for you, right?
Of course, we didn't realize wewere doing so in an environment
that was going to cause aslowdown in the industry.
So we're dealing with having tosupplement the business with
retirement funds, at least for awhile, to keep our one employee
paid and somewhat productive.
I suspect later this yearthings will turn around and the
(04:15):
business will once again beself-sufficient.
We started a 72T last August,equating to about 1.3% of our
invested portfolio.
It looks like we're going toneed to start another for
approximately the same amount inApril or May.
At that point we'd be at about2.6% of our invested portfolio.
For reference, the portfolio isin a modified golden ratio
(04:38):
portfolio 25% total stock, 25%small cap value, 25 percent
long-term treasuries, 15 percentgold, 5 percent commodities
managed futures and 5 percentmoney market.
I'm totally comfortable withthe portfolio.
Thanks to you and your tutoring, I've been able to analyze
until my heart is content, sothat I am comfortable moving
(05:00):
forward.
We're looking to do some RVtraveling when our junior in
high school graduates and webought a brand new travel
trailer in January for about1.5% of our invested portfolio.
Sweet, with that withdrawalI'll be up to 4.1% withdrawn in
2025, which I wasn't sure I'dever feel comfortable with.
(05:21):
I want to thank you forproviding me with the knowledge
and tools to become comfortablewith enjoying the fruits of our
labor at 53 and 50.
Voices (05:30):
We had the tools, we had the talent.
Mostly Mary (05:33):
I do have a question Is there any advantage
to starting the second 72T onone of my wife's IRAs rather
than on another one of mine?
The obvious disadvantage isthat we have to go three years
longer with equal payments toget to 59 and a half.
But as we're planning tocontinue to live off of these
going forward, I can't imaginethat it's that big of a deal.
(05:55):
I'd love to hear your input,however.
Another question I have isregarding my kids' Coverdell
college savings accounts.
The freshman in college hasabout $80,000, and the junior in
high school has about $70,000in their Coverdells.
It would appear, throughacademic scholarships,
work-study programs and athleticscholarships, they won't have
(06:16):
to use this money at all.
Right now it's in an AmericanCentury Aggressive Mutual Fund.
I never moved it to Fidelitywhen I moved all my retirement
accounts.
What would you suggest doingwith this money, as I hope they
can eventually use the money toget started with their lives?
I know that the funds Iinitially invested after tax can
be withdrawn without penalty ortax, while the earnings will be
(06:38):
taxed and assessed a 10%penalty if not used for
educational expenses.
Again, I say thank you.
Thank you for sharing yourknowledge and being so free with
helping us feel comfortablewith our retirement investments.
I look forward to listening toeach and every new podcast, Jeff
.
Voices (06:56):
The dog ain't gonna talk , but his mind is like a
telepathy.
Think what he says I want thebest one here.
I want the best one you've everseen.
And then the judge in his mind,because he can pick up on the
lepers.
They will sometimes give himblue ribbon.
(07:19):
That's not a bad idea.
Maybe I just should do that.
Practice that right.
Mostly Uncle Frank (07:25):
Well, I'm glad you're making good use of
what we do here and that it'shelping you spend mo' money.
Voices (07:32):
Mo' money, mo' money, mo' money.
Mostly Uncle Frank (07:36):
Your RV purchase reminded me of part of
the presentation I gave at theEconomy Conference this year,
which was about what things giveyou greater well-being in life
if you spend money on them, andthe primary one is actually
relationships, and that comesfrom a lot of research by Daniel
Crosby and others.
(07:57):
And that's the interesting thingabout things like RVs, or
something that you are likely touse for going to have fun in,
or something that you are likelyto use for going to have fun in
, and the question in my mindalways becomes is this purchase
going to facilitate more fun orbetter relationships or not?
And the same thing could be ayes for one person and a no for
(08:18):
another person, depending onwhat those relationships are and
what the rest of their lifelooks like.
And in your case, it's clearlya big thumbs up, since you and
your wife want to do this.
You're at an age when it'sgoing to be the most fun in your
50s You're not 80 years old oreven 70.
And what's going to be the mostfun now is actually planning
(08:41):
some of these adventures,because the funny thing about
travel is, if you can plan itwell in advance, you actually
get a psychic benefit from justanticipating doing it and
talking about it with whomeveryou're going to go on the
adventure with.
But I think that's a goodquestion to ask whenever you're
considering some kind of largepurchase in retirement or
(09:02):
whether you should do somethingor not is what effect is this
going to have on first therelationships I care about, and
then would it facilitate medeveloping more relationships,
positive relationships, notnegative ones?
Voices (09:16):
So, Brian, we're even now right Ready to start a new
life in England.
I've got my money.
Your wounds have healed upnicely.
What do you say?
We let bygones be bygones.
Hmm, you shot me in both myknees then lit me on fire.
Mostly Uncle Frank (09:28):
And if you use that framing, then the only
question on the purchase is doesthis fit into some kind of
budget I've made out for myself?
And you stop thinking aboutthings like, well, maybe I can
cheap out on this in some way orsave some money and on this in
some way, when that's not thepoint.
The point is, is this going tobe relationship positive or not?
(09:51):
But enough on that, at leastfor one podcast.
Your questions your first one'sabout the second 72T and
whether you should do it in yourwife's IRAs or your IRAs,
because there's a three-yeardifference and she would have to
be on the plan a little bitlonger.
I don't think in this case itmatters one way or the other.
(10:13):
Forget about it.
So if that's more convenientfor you or just feels better, I
would go ahead and do that.
You're really not talking aboutmuch time and I'm sure this is
not going to be a large portionof your assets overall, and if
that's the case, I think you arecorrect to think that it's not
(10:34):
a big deal, because I don'tthink it is.
Voices (10:37):
You are correct, sir.
Mostly Uncle Frank (10:38):
yes, your next question, or your other
question, was about thisCoverdale college savings
accounts, and I looked into thisbriefly and I think what makes
the most sense for money you'renot going to be actually using
is to roll that into a 529 plan,which is allowed.
I think you can only do onerollover out of a Coverdell a
(11:02):
year, but once it's in a 529plan, then you get all of the
more favorable 529 rules,including things like being able
to change beneficiaries.
So if you're thinking aboutreally long-term planning, you
may have grandchildren somedayand you could leave this 529
(11:22):
you're creating in the name ofyour now children Well, I'm sure
they'll still be your childrenlater too With the idea that
you're going to transfer thatmoney to some other person for
education.
It has to be some otherrelative, but that person does
not need to have been born rightnow and that now does not need
to be used for just collegeeducation, but could be used for
(11:43):
some kind of primary educationor related schooling.
There is also a provision nowwith 529s and being able to
convert them in part to RothIRAs.
I don't know if that would applyin this circumstance, because I
think the 529 has to be openfor 15 years and I don't know
whether you'd get grandfatheredin for the amount of time the
(12:05):
Coverdell was open.
I just don't know what therules 15 years and I don't know
whether you'd get grandfatheredin for the amount of time the
Coverdell was open.
I just don't know what therules are on that and I couldn't
find anything quickly thatwould answer that question.
But I think the first stepwould be to roll those things
into 529s and then go from there.
And finally, I just want to sayI greatly appreciate your
listenership and yourcontribution to this podcast.
Voices (12:25):
That's gold, jerry gold.
Mostly Uncle Frank (12:28):
There are a number of different categories
of people that listen to thispodcast, and I feel you fall
into the category I like tothink of as my different
drummers named after the quotefor Thoreau.
Voices (12:40):
If a man does not keep pace with his companions,
perhaps it is because he hears adifferent drummer.
Let him step to the music hehears, however measured or far
away.
Mostly Uncle Frank (12:54):
Which are people who have forged their
lives through non-standardcareer paths or just ways of
approaching life that don'tfollow other people's
conventions.
Voices (13:03):
ways of approaching life that don't follow other
people's conventions.
It's 106 miles to Chicago.
We got a full tank of gas, halfa pack of cigarettes, it's dark
and we're wearing sunglassesHit it.
Mostly Uncle Frank (13:21):
And you are generally people that just don't
like other people telling themwhat to do, but really don't
want to fight about it either.
Voices (13:30):
You just want to go off and do what you want to do.
We few, we happy few.
Mostly Uncle Frank (13:43):
We band of brothers and I identify with
that, and so I'm very happy toBe able to facilitate that in
your lives.
Voices (13:49):
For he, today that sheds His blood with me, shall be my
brother.
Be he ne'er so vile.
This day shall gentle hiscondition.
And gentlemen in England Nowabed Shall think themselves
accursed they were not here andhold their manhoods cheap whilst
any speaks that thought with usupon St Presbyterian Day.
Mostly Uncle Frank (14:19):
So thank you very much for your listenership
and thank you for your email.
Voices (14:26):
Macadamia nut.
That was the one that was senther into a gone crazy.
She said you stop naming nutsand Hubert used to be able to
make the sound and he wasn'ttalking, but he used to go.
That sounded like macadamia nut, Iron nut, which is a nut, but
(14:47):
it's also the name of the town,Pistachio nut.
Red pistachio nut.
Natural, all natural whitepistachio nut.
Mostly Uncle Frank (15:00):
Second off.
Second off.
We have an email from Jenzo.
Voices (15:06):
It's showtime.
Mostly Mary (15:08):
I'll sacrifice your swordsman of Lansdor and I'll
summon Jenzo.
Mostly Uncle Frank (15:13):
And Jenzo writes.
Mostly Mary (15:29):
Second, a riddle what product has 1.8 times
exposure, a 0.2% expense ratio?
The underlying assets arecritical components of a risk
parity portfolio and has matchedthe performance of these
underlying assets with basicallyzero volatility drag since
inception.
Surprise, it's GDE.
(15:50):
Take a look at this backtest ofGDE.
Compared to a VOO slash, GLDMequivalent, it is pretty
remarkable.
Voices (15:58):
Inconceivable.
Mostly Mary (16:00):
The fund still only has $61 million in assets under
management as of mid-February,but what a run.
The only other leveragedproduct I have found that has
been able to keep up with theunderlying assets is RSSB 2X,
global Stocks and Treasuries,but nothing like GDE.
I think it's been a few yearssince you had examined it on the
(16:20):
podcast.
I hope you'll be able to get onthe bike soon as the thawing
continues.
Best Genzo.
Mostly Uncle Frank (16:27):
Well GDE.
Voices (16:29):
Genzo, strut your stuff.
Mostly Uncle Frank (16:32):
Yes, I hadn't talked about this for a
while, but it's come up a lotrecently.
I think it's become verypopular, since gold has been
outperforming these days.
Just so people know, gde is acomposite fund with leverage in
it that combines the S&P 500 andan allocation to gold.
Voices (16:52):
You're insane gold member.
Mostly Uncle Frank (16:55):
So it is kind of like holding a leveraged
form of VOO and GLDM together,as Genso has observed, and I
will put your link in the shownotes to the test folio analysis
.
We'll put your link in the shownotes to the test folio
analysis.
So we originally talked aboutthis back in episodes 167 and
(17:15):
170 when the fund was new, buthave more recently talked about
it in episodes 407 and 415,which I do not wish to repeat.
Everything I said there.
The thing is your email came inbefore those episodes went out,
since we have about a two-monthdelay on the emails here, so I
won't repeat all that.
I'll just say that thesecomposite funds can be used to
(17:37):
construct risk parity styleportfolios, particularly if
you're doing some kind ofleveraged or return-stacked kind
of setup where you havemultiple assets within the same
fund.
It's still my preference tohave each fund represent only
one asset, because I think itfacilitates rebalancing in a
(17:58):
better way and it's harder toset the whole thing up in terms
of macro allocations when youhave multiple assets in one fund
.
But it's not insurmountable,it's just a function of algebra.
And you also mentioned the fundRSSB, which is one of the newer
return stack funds from CoreyHofstein, which has the same
(18:18):
kind of principles.
So all these are relatively newand I'm interested to see how
people are going to be usingthem, because there does seem to
be a good future here for thesesorts of things.
However, for us old fogies whojust want to stick with some
simple one asset funds, you know, at my age the mind starts
(18:41):
playing tricks.
So, ah, death, that's only thecat, oh it's probably not
something I'm going toincorporate in something I'm
doing, which doesn't mean thatit's not appropriate for you to
use in your own personalsituation.
It's also funny you mention thebike, because in February it
(19:02):
was difficult to get out on thebike here, but I've had a lot
more success recently.
I'm trying to ride at least 100miles a week.
I've only got 10 miles left forthis week, so we'll see if we
can keep that up if you don'tstart making more sense, we're
gonna have to put you in a home.
Voices (19:21):
You already put me in a home, then we'll put you in the
crooked homies.
Mostly Uncle Frank (19:25):
On 60 minutes I'll be good I don't
think there'll be any ridingtoday, Saturday, since it's
raining outside.
Voices (19:33):
Not going to do it Wouldn't be prudent at this
juncture.
Mostly Uncle Frank (19:36):
But probably tomorrow when this podcast
comes out.
Hopefully that helps Check outthose episodes if you haven't
yet 407 and 415.
And 170 and 167.
And thank you for your email.
Voices (19:51):
Not Jinzo, that's right pal.
Mostly Mary (19:54):
And I bet you know what that means.
It's time to say goodbye toevery trap card you have on the
field.
It's a trap, it's a trap, it'sa trap, it's a trap, it's a trap
.
Mostly Uncle Frank (20:09):
It's a trap, it's a trap.
It's a trap, it's a.
It's a trap.
It's a trap.
It's a trap.
It's a trap, it's a, it's atrap, last off.
Last off is an email from Sam.
Voices (20:21):
Yosemite Sam, it's Yosemite Sam.
Yosemite Sam, yosemite Sam,yeah, yosemite Sam.
No-transcript.
Yosemite Sam, yeah, yosemiteSam.
The roughest, toughest key man,stuffest hombre has ever
crossed the Rio Grande, and Iain't no man be pandy.
Mostly Mary (20:36):
And Sam writes Frank, thanks to your diligent
effort spreading the word onrisk parity investing with some
comedic clips interjected.
More Seinfeld, please.
Mostly Uncle Frank (20:47):
Yada, yada, yada, Yada, yada yada.
Mostly Mary (20:50):
Y.
No need to read this email onthe podcast, but it would be
great to hear your generalthoughts on finding 15 truly
uncorrelated assets in thepublic markets.
Not able to find anythingspecifically on this topic
online, here's a post where Itried to break down the
opportunities and challenges ofthis investing strategy,
(21:12):
leveraging the work of you andothers in the efficient and
diversified ETF space, of youand others in the efficient and
diversified ETF space.
Also, as a lawyer, feel free toreview this research piece on
the US Bill of Rights and howthese core tenets have changed
over the course of history,based on various legislative
actions, sometimes bubbling allthe way up to the Supreme Court.
Looking forward to hearing yournext podcast on a disjointed
(21:34):
cadence about random topics.
That's exactly what retirementprojects should be about.
Thanks, sam.
Voices (21:42):
I speak softly, but I carry a big stick.
Oh yeah, well, I speak loud andI carry a bigger stick and I
use it too.
Mostly Uncle Frank (21:59):
Well, thanks for writing in Sam.
Sam has linked to a couple ofposts on his blog, and the first
one is all about the riskparity ideas from Ray Dalio and
gives a history of the conceptsand there are some nice graphs
in there.
I do think if you're interestedin this, you should check this
(22:19):
post out, because it's a verynice summary of a lot of things
and there is a nice fourquadrant model or graph with,
like a target imposed over it,with assets on the graph showing
which ones perform well inincreasing inflation or
decreasing inflation, increasinggrowth or decreasing growth in
(22:41):
those four quadrants, and Ithink that's a nice way to
visualize the concepts thatwe're using here and the kind of
diversification we're lookingfor.
So I probably will be referringpeople to that when they ask me
if I've written up posts aboutsummaries of this material, and
the answer is, of course, not.
I'm a podcaster, not a writer.
Voices (23:02):
I don't think I'd like another job.
Mostly Uncle Frank (23:05):
Now, as your question about my general
thoughts on finding 15 trulyuncorrelated assets in the
public markets, I think thatwould be very difficult to do,
and that is what hedge funds tryto do and why they might invest
in, also private markets.
That is also what endowments dofamously David Swenson at Yale
(23:25):
and the people that havefollowed those ideas but on the
other hand, I don't think that'snecessary for what we're trying
to accomplish here, because inthose circumstances, they just
have a lot more resources.
They are planning on usingleverage in various ways and
also doing analyses to changethe composition of the
portfolios over time.
(23:46):
Fortunately, we don't need todo all that.
All we need to do is findsomething that has a high safe
withdrawal rate, because that'swhat we're actually using these
things for.
Voices (23:58):
You don't even know what a write-off is, do you?
No, I don't, but they do, andthey're the ones writing it off.
Mostly Uncle Frank (24:09):
And, as you can imagine, the incremental
value of adding another asset toa portfolio goes down with the
number of assets you alreadyhave.
So going from one or two tofive makes a big difference, but
going from 10 to 15 probablyisn't going to make much of a
difference, and that actuallydoes come through in the
(24:35):
mathematics of it.
I'll also link to that shortvideo from Ray Dalio where he
explains the Holy GrailPrinciple.
But that's why we have threeprinciples and not just one the
Holy Grail Principle, theMacroallocation Principle and
the Simplicity Principle.
You want to go back to episode7 to go through all three of
(24:56):
those, but we talk about themfrequently here.
I also did take a look at yourresearch piece on the US Bill of
Rights, and the First Amendmentin particular.
I have to confess I haven'tread the whole thing because
it's quite a tome.
Voices (25:12):
It's like you're unraveling a big cable knit
sweater that someone keepsknitting, knitting, knitting,
knitting, knitting, knitting,knitting.
Mostly Uncle Frank (25:26):
But, yes, that has been subject to many
applications and interpretationsover time, and it's really more
only in the 20th century thatwe have the kind of First
Amendment jurisprudence thatpeople were familiar with,
starting with Oliver WendellHolmes, I believe, and
discussions about whether youcould be prohibited from yelling
(25:47):
fire in a crowded theater Fire,fire.
Voices (25:50):
Fire, fire.
Mostly Uncle Frank (25:54):
And the answer is yes, but that's really
not the subject matter of thispodcast.
I did have one musing when Iwas reading it, or one
recollection that I'll sharewith you.
It's kind of a little bit offthe subject, but related.
Voices (26:08):
You are talking about the nonsensical ravings of a
lunatic mind.
Mostly Uncle Frank (26:14):
And that is how the injection of new
technologies in communicationsoften change the way people
actually communicate, what kindsof ideas are communicated, and
then leading to the Signal andthe Noise, which is a book that
Nate Silver wrote about 10 yearsago.
But he was just recounting how,when the printing press was
(26:59):
invented, people thought thatwell, this is going to lead to
an expansion of knowledge and agolden era of people sharing
things and knowing things.
And oftentimes thesetechnologies don't work out that
way, because what the printingpress led to was a lot of
conflicts and eventually wars,which ended with a 30 years war
in the 17th century.
Those were religious wars.
It also led to the popularityof witch hunting in the Middle
Ages and, in particular, thepublication of a book, a
(27:22):
notorious book called theMalleus Maleficarum, which was
all about witchcraft and how toidentify witches and how to
torture them properly to getconfessions and all kinds of
nefarious ideas.
Voices (27:36):
Tell me, what do you do with witches Burn?
And what do you burn, apart fromwitches, poor witches.
Wood.
So why do witches burn?
Because they're made of wood.
Good, so how do we tell whethershe is made of wood?
(28:02):
Build a bridge out of her?
Ah, but can you not also makebridges out of?
stone, oh yes.
Does wood sink in water?
No, no, it floats, it floats.
Throw her into the pool.
Throw her into the pool.
What also floats in water Bread.
(28:24):
Apples, very small rocks, cider,gravy, cherries, mud Churches.
Churches Lead, lead A duck,exactly, exactly.
So, logically, if she weighs thesame as a duck.
(28:45):
She's made of wood andtherefore away.
Mostly Uncle Frank (29:01):
And that stuff persisted for hundreds of
years.
But essentially, I mean this isa cautionary tale that the
technology that we have now theinvention of the internet and
then all of these different waysof popularizing or spreading
ideas is very helpful for manypeople.
But it's not all for the good,and it's kind of naive to think
that if anybody can say anythingat any time, anywhere, and all
(29:25):
these ideas are put out there,that the best ones are going to
rise to the top and the bad onesare going to go away, because
that's not how this actuallyworks, that's not how this
actually works.
Mostly Mary (29:35):
That's not how it works.
Mostly Uncle Frank (29:37):
That's not how any of this works what
happens is that the ideas thatare attached to the most
attractive stories, movements orideas tend to be the ones that
are preeminent, or becomepreeminent, at least for a while
, and some of those are goodthings and some of those are bad
things, because, as YuvalHarari observed in the book
(30:06):
Sapiens, humans are essentiallyanimals that tell stories, and
so it's the most attractivestories that tend to win the day
, not the best or most rationalarguments.
Win the day, not the best ormost rational arguments.
I find your arguments strewnwith gaping defects in logic.
Voices (30:23):
Maybe, but you can't evaluate a man by logic alone.
He has avoided two appointmentsthat I've made for his physical
exam without reason.
That's not at all surprising,doctor.
Mostly Uncle Frank (30:36):
He's probably terrified of your beads
and rattles.
Anyway, sorry to go off on thistangent, but that's what your
second post reminded me of mostwhen I was reading it.
You never know what you'regoing to get, so hopefully
you're enjoying my disjointedcadence about random topics.
Voices (31:02):
And thank you for your email.
I start off with curls.
That's good for the bicep.
I do ten reps, two sets.
That's fantastic.
You work out with weights?
No, I don't, you should.
Why have you decided?
Oh, get the swordfish, bestswordfish in the city.
(31:23):
The best, jerry, I'll have thesalmon and you.
Uh, you know what?
I think I'm just gonna havesoup.
Yeah, I'll save the meal foranother time.
Another time, what other?
time I had a hot dog earlier.
(31:44):
I'm not that hungry.
No, no, Ben, you know this isthe dinner.
The soup counts.
Mostly Uncle Frank (31:51):
Now we're going to do something extremely
fun, and the extremely fun thingwe get to do now is our weekly
portfolio reviews.
Of the eight sample portfoliosyou can find at
wwwriskparryradiocom on theportfolios page.
And this was actually arecovery week for most things,
including mostly the stockmarket, even though it's still
(32:14):
down a bunch for the year, asyou might expect these days,
since gold seems to be movingopposite the stock market most
of the time.
Gold was the only thing thatwas down this week, although not
down anything substantial.
It's still up ridiculousamounts for the year.
But, going through the markets,the S&P 500, represented by VOO
(32:34):
, is down 5.74% for the year sofar.
The NASDAQ 100, represented byQQQ, is down 7.43% for the year
so far.
Small cap value, represented bythe fund VIOV, is the big loser
this year.
So far it's down 15.58%.
It's looking like a rebalancingopportunity when we get there.
It's looking like a rebalancingopportunity when we get there
(32:58):
and that will be rebalanced,most likely out of gold.
The representative fund, gdlm,is up 25.87% for the year so far
.
Voices (33:08):
I love gold.
And that's after being up about25% last year.
Mostly Uncle Frank (33:31):
And that's the way.
Uh-huh, uh-huh, I like it.
Far.
Commodities, represented by thefund PDBC, are down 1% for the
year so far.
Preferred shares, representedby the fund PFFV, are down 0.04%
for the year so far and managedfutures, represented by the
fund DVMF, are down 2.03% forthe year so far.
(33:54):
Now moving to these sampleportfolios.
First one's an all-seasonsportfolio.
It is a reference portfoliothat's only 30% in stocks and a
total stock market fund, 55% inintermediate and long-term
treasury bonds and the remaining15% in commodities and gold.
This is also modeled in thatlast post I was referring to
(34:17):
From the last EU mailer.
It is down 0.91% month to date,but it's up 1.71% year to date
and up 10.41% since inception inJuly 2020.
Now, moving to the kind of breadand butter portfolios.
First one's Golden Butterfly.
This one's 40% in stocksdivided into a total stock
(34:39):
market fund and a small capvalue fund, 40% in treasury
bonds divided into long andshort, and the remaining 20% in
gold GLDM.
It is down 0.31% month to date.
It's up 1.85% year to date andup 36.4% since inception in July
(35:00):
2020.
Next one's the golden ratio.
This one is 42% in stocks in alarge-cap growth fund and a
small-cap value fund 26% inlong-term treasury bonds, 16% in
gold, 10% in a managed futuresfund and 6% in a money market in
cash.
It is down 0.12% month to date.
(35:23):
It's down 0.16% year to dateand up 29.75% since inception in
July 2020.
Next one's the risk parityultimate.
I won't go through all 14 ofthese funds.
It is down 1.1% month to date.
It's down 0.04% year to dateit's almost flat and up 20.57%
(35:47):
since inception in July 2020.
Now, moving to theseexperimental portfolios.
Voices (35:53):
Look away, I'm hitting you.
Mostly Uncle Frank (35:56):
They all involve leveraged funds.
Don't try this at home.
Voices (36:01):
Well, you have a gambling problem.
Mostly Uncle Frank (36:04):
First one's the Accelerated Permanent
Portfolio.
This one is 27.5% in a leveredbond fund TMF, 25% in a
leveraged stock fund UPRO, 25%in PFFV, a preferred shares fund
, and 22.5% in gold GLDM.
It is down 3.32% month-to-date.
(36:24):
It's up 0.53% year-to-date andup 1.57% since inception in July
2020.
Next one is our most leveredand least diversified of all
these portfolios and worstperformer as well.
It's called the aggressive50-50, half stocks and half
bonds.
Really, it is one-third in alevered stock fund, upro,
(36:48):
one-third in a levered bond fund, tmf and the remaining third in
ballast in a preferred sharesfund and an intermediate
treasury bond fund, shares fundand an intermediate treasury
bond fund.
It is down 5.96% month to date.
It's down 7.41% year to dateand down 18.45% since inception
in July 2020.
(37:08):
Next one's the levered goldenratio.
One has some of those compositelevered funds in it at least
one of them and that fund isNTSX.
It's 35% of this portfolio.
It's a S&P 500 and treasurybonds combined, levered up 1.5
to 1.
It's got 20% in gold GLDM, 15%in a international small cap
(37:30):
value fund, avdv, 10% in KMLM,which is a managed futures fund,
10% in a levered bond fund, tmf, and the remaining 10% divided
into a levered Dow fund and alevered utility fund, udao and
UTSL 5% each.
For those it is down 1.05%month-to-date but it's up 1.34%
(37:56):
year-to-date and down 3.14%since inception in July 2021.
It's a year younger than thefirst six and our last one is
the Optra portfolio oneportfolio to rule them all which
we just started last July as areturn stacked kind of portfolio
.
It has 16% in a levered stockfund, upro, 24% in a composite
(38:23):
worldwide value fund, avgv, 24%in a treasury strips fund, govz,
and the remaining 36% dividedinto gold and managed futures.
It is down 1.61% month to date.
It's down 0.6% year to date andup 2.29% since inception in
(38:45):
July 2024.
So it's funny, after all theturmoil in the markets this year
, so far these portfoliosactually haven't moved a whole
lot.
Boring.
Most of them are almost flatfor the month of April, which
has otherwise been a horriblemonth for the stock market in
particular, and most of them areflatter up slightly for the
(39:06):
year.
Boring, but that's the kind ofperformance you're hoping for
when things go poorly in thestock market that your
diversified assets will come inand ameliorate that.
Voices (39:18):
All we need to do is get your confidence back, so you
can make me more money.
Mostly Uncle Frank (39:24):
Which they have done quite well this year,
especially the holdings in gold.
Voices (39:28):
This is gold, Mr Bond.
I think you've made your point.
Goldfinger, Thank you for thedemonstration.
Do you expect me to talk?
No, mr Bond, you expect me totalk.
No, mr bond, I expect you todie now will this all continue.
Mostly Uncle Frank (39:43):
Well, we can go consult our crystal ball
again my name's sonja.
Mostly Mary (39:47):
I'm going to be showing you um the crystal ball
and how to use it, or how I useit but you know what our crystal
ball always says when we ask itabout what's going to happen
next we don't know.
Voices (40:02):
What do we know?
Mostly Uncle Frank (40:03):
you don't know, I don't know, nobody knows
the more things change, themore they remain the same I
could have told you that but nowI see our signal is beginning
to fade.
If you have comments orquestions for me, please send
them to frank atriskparityradiocom.
That email is frank atriskparityradiocom.
(40:23):
Or you can go to the website,wwwriskparityradiocom.
Put your message into thecontact form and I'll get it
that way.
If you haven't had a chance todo it, please go to your
favorite podcast provider andlike subscribe.
Give me some stars, a follow, areview.
That would be great.
Okay, Thank you once again fortuning in.
(40:44):
This is Frank Vasquez with RiskParity Radio signing off.
Voices (40:50):
ZOINKS, it's the witches .
Easy guys, it's just the HexGirls.
I'm gonna cast a spell on you.
You're gonna do what I want youto Mix it up here in my little
(41:14):
bowl, say a few words and you'lllose control.
I'm a hex girl and I'm gonnaput a spell on you.
I'm gonna put a spell on you.
I'm a hex girl and I'm gonnaput a spell on you.
Put a spell on you.
(41:35):
Earth, wind, fire and air.
We may look bad, but we don'tcare.
We ride the wind, we feel thefire.
To love the Earth is our onedesire.
To love the Earth is our onedesire.
Scooby-dooby-doo.
Mostly Mary (42:12):
The Risk Parody Radio Show is hosted by Frank
Vasquez.
The content provided is forentertainment and informational
purposes only and does notconstitute financial, investment
tax or legal advice.
Please consult with your ownadvisors before taking any
actions based on any informationyou have heard here, making
sure to take into account yourown personal circumstances.
A foolish consistency, is the hobgoblin of little minds
, adored by little statesmen andphilosophers and divines.
If a man does not keep pacewith his companions, perhaps it
is because he hears a differentdrummer, a different drummer.
Mostly Mary (00:19):
And now, coming to you from dead center on your
dial, welcome to Risk ParityRadio, where we explore
alternatives and assetallocations for the
do-it-yourself investorBroadcasting to you now from the
comfort of his easy chair.
Here is your host, frankVasquez.
Mostly Uncle Frank (00:37):
Thank you, Mary, and welcome to Risk Parity
Radio.
If you have just stumbled inhere, you will find that this
podcast is kind of like a divebar of personal finance and
do-it-yourself investing.
Voices (00:52):
Expect the unexpected.
Mostly Uncle Frank (00:55):
It's a relatively small place.
It's just me and Mary in hereand we only have a few
mismatched bar stools and someeasy chairs.
We have no sponsors, we have noguests and we have no expansion
plans.
Voices (01:11):
I don't think I'd like another job.
Mostly Uncle Frank (01:13):
What we do have is a little free library of
updated and unconflictedinformation for do-it-yourself
investors.
Voices (01:23):
Now who's up for a trip to the library?
Mostly Uncle Frank (01:26):
tomorrow.
So please enjoy our mostly coldbeer served in cans and our
coffee served in old, chippedand cracked mugs, along with
what our little free library hasto offer.
Welcome but now onward, episode418 today on risk parity radio
(01:57):
it's time for the grandunveiling of money which means
we'll be doing our weeklyportfolio reviews of the eight
sample portfolios you can findat wwwriskparryradiocom on the
portfolios page.
And the stock market went upfor once.
Enjoy it while it lasts.
Voices (02:18):
I think I've improved on your methods a bit too.
But before we get to that, I'mintrigued by this, how you say
emails and First off.
Mostly Uncle Frank (02:32):
First off, we have an email from Jeff and
the subject is it's a nutty kindof email.
Voices (02:39):
I used to be able to name every nut that there was,
and it used to drive my mothercrazy because she used to say,
harlan pepper, if you don't stopnaming nuts.
And the joke was, of course,that we lived in pine nut and I
think that's what put it in myhead at that at that point.
So I'd go to see she'd hear mein the other room and she would
(03:00):
just start yelling.
I'd say peanut, hazelnut,cashew nut and Jeff writes Hello
Frank and Mary.
Mostly Mary (03:13):
I've been considering writing in for a
while, but after and during thelong AI episode, I thought I'd
go ahead and do it.
That was brutal, by the way.
Mostly Uncle Frank (03:21):
This is pretty much the worst video ever
made.
Mostly Mary (03:24):
Anyway, we made the decision to slow down the dog
training business.
Voices (03:29):
A bloodhound not only has a great nose, but he also
they can talk.
And so when he's doing that,he's talking, he's saying what
you doing, he's saying what youdoing, what you doing, what you
doing, what you doing, and he'ssaying I'm ready.
That's when you know he's readyfor a show, because he says I'm
ready, I'm ready, I'm ready,see that.
And I know he's ready.
What's your point?
Mostly Mary (03:53):
He says I'm ready, I've walked and I'm ready have a
good night's sleep and thenwe'll get going and it'll be
showtime for you, right?
Of course, we didn't realize wewere doing so in an environment
that was going to cause aslowdown in the industry.
So we're dealing with having tosupplement the business with
retirement funds, at least for awhile, to keep our one employee
paid and somewhat productive.
I suspect later this yearthings will turn around and the
(04:15):
business will once again beself-sufficient.
We started a 72T last August,equating to about 1.3% of our
invested portfolio.
It looks like we're going toneed to start another for
approximately the same amount inApril or May.
At that point we'd be at about2.6% of our invested portfolio.
For reference, the portfolio isin a modified golden ratio
(04:38):
portfolio 25% total stock, 25%small cap value, 25 percent
long-term treasuries, 15 percentgold, 5 percent commodities
managed futures and 5 percentmoney market.
I'm totally comfortable withthe portfolio.
Thanks to you and your tutoring, I've been able to analyze
until my heart is content, sothat I am comfortable moving
(05:00):
forward.
We're looking to do some RVtraveling when our junior in
high school graduates and webought a brand new travel
trailer in January for about1.5% of our invested portfolio.
Sweet, with that withdrawalI'll be up to 4.1% withdrawn in
2025, which I wasn't sure I'dever feel comfortable with.
(05:21):
I want to thank you forproviding me with the knowledge
and tools to become comfortablewith enjoying the fruits of our
labor at 53 and 50.
Voices (05:30):
We had the tools, we had the talent.
Mostly Mary (05:33):
I do have a question Is there any advantage
to starting the second 72T onone of my wife's IRAs rather
than on another one of mine?
The obvious disadvantage isthat we have to go three years
longer with equal payments toget to 59 and a half.
But as we're planning tocontinue to live off of these
going forward, I can't imaginethat it's that big of a deal.
(05:55):
I'd love to hear your input,however.
Another question I have isregarding my kids' Coverdell
college savings accounts.
The freshman in college hasabout $80,000, and the junior in
high school has about $70,000in their Coverdells.
It would appear, throughacademic scholarships,
work-study programs and athleticscholarships, they won't have
(06:16):
to use this money at all.
Right now it's in an AmericanCentury Aggressive Mutual Fund.
I never moved it to Fidelitywhen I moved all my retirement
accounts.
What would you suggest doingwith this money, as I hope they
can eventually use the money toget started with their lives?
I know that the funds Iinitially invested after tax can
be withdrawn without penalty ortax, while the earnings will be
(06:38):
taxed and assessed a 10%penalty if not used for
educational expenses.
Again, I say thank you.
Thank you for sharing yourknowledge and being so free with
helping us feel comfortablewith our retirement investments.
I look forward to listening toeach and every new podcast, Jeff
.
Voices (06:56):
The dog ain't gonna talk , but his mind is like a
telepathy.
Think what he says I want thebest one here.
I want the best one you've everseen.
And then the judge in his mind,because he can pick up on the
lepers.
They will sometimes give himblue ribbon.
(07:19):
That's not a bad idea.
Maybe I just should do that.
Practice that right.
Mostly Uncle Frank (07:25):
Well, I'm glad you're making good use of
what we do here and that it'shelping you spend mo' money.
Voices (07:32):
Mo' money, mo' money, mo' money.
Mostly Uncle Frank (07:36):
Your RV purchase reminded me of part of
the presentation I gave at theEconomy Conference this year,
which was about what things giveyou greater well-being in life
if you spend money on them, andthe primary one is actually
relationships, and that comesfrom a lot of research by Daniel
Crosby and others.
(07:57):
And that's the interesting thingabout things like RVs, or
something that you are likely touse for going to have fun in,
or something that you are likelyto use for going to have fun in
, and the question in my mindalways becomes is this purchase
going to facilitate more fun orbetter relationships or not?
And the same thing could be ayes for one person and a no for
(08:18):
another person, depending onwhat those relationships are and
what the rest of their lifelooks like.
And in your case, it's clearlya big thumbs up, since you and
your wife want to do this.
You're at an age when it'sgoing to be the most fun in your
50s You're not 80 years old oreven 70.
And what's going to be the mostfun now is actually planning
(08:41):
some of these adventures,because the funny thing about
travel is, if you can plan itwell in advance, you actually
get a psychic benefit from justanticipating doing it and
talking about it with whomeveryou're going to go on the
adventure with.
But I think that's a goodquestion to ask whenever you're
considering some kind of largepurchase in retirement or
(09:02):
whether you should do somethingor not is what effect is this
going to have on first therelationships I care about, and
then would it facilitate medeveloping more relationships,
positive relationships, notnegative ones?
Voices (09:16):
So, Brian, we're even now right Ready to start a new
life in England.
I've got my money.
Your wounds have healed upnicely.
What do you say?
We let bygones be bygones.
Hmm, you shot me in both myknees then lit me on fire.
Mostly Uncle Frank (09:28):
And if you use that framing, then the only
question on the purchase is doesthis fit into some kind of
budget I've made out for myself?
And you stop thinking aboutthings like, well, maybe I can
cheap out on this in some way orsave some money and on this in
some way, when that's not thepoint.
The point is, is this going tobe relationship positive or not?
(09:51):
But enough on that, at leastfor one podcast.
Your questions your first one'sabout the second 72T and
whether you should do it in yourwife's IRAs or your IRAs,
because there's a three-yeardifference and she would have to
be on the plan a little bitlonger.
I don't think in this case itmatters one way or the other.
(10:13):
Forget about it.
So if that's more convenientfor you or just feels better, I
would go ahead and do that.
You're really not talking aboutmuch time and I'm sure this is
not going to be a large portionof your assets overall, and if
that's the case, I think you arecorrect to think that it's not
(10:34):
a big deal, because I don'tthink it is.
Voices (10:37):
You are correct, sir.
Mostly Uncle Frank (10:38):
yes, your next question, or your other
question, was about thisCoverdale college savings
accounts, and I looked into thisbriefly and I think what makes
the most sense for money you'renot going to be actually using
is to roll that into a 529 plan,which is allowed.
I think you can only do onerollover out of a Coverdell a
(11:02):
year, but once it's in a 529plan, then you get all of the
more favorable 529 rules,including things like being able
to change beneficiaries.
So if you're thinking aboutreally long-term planning, you
may have grandchildren somedayand you could leave this 529
(11:22):
you're creating in the name ofyour now children Well, I'm sure
they'll still be your childrenlater too With the idea that
you're going to transfer thatmoney to some other person for
education.
It has to be some otherrelative, but that person does
not need to have been born rightnow and that now does not need
to be used for just collegeeducation, but could be used for
(11:43):
some kind of primary educationor related schooling.
There is also a provision nowwith 529s and being able to
convert them in part to RothIRAs.
I don't know if that would applyin this circumstance, because I
think the 529 has to be openfor 15 years and I don't know
whether you'd get grandfatheredin for the amount of time the
(12:05):
Coverdell was open.
I just don't know what therules 15 years and I don't know
whether you'd get grandfatheredin for the amount of time the
Coverdell was open.
I just don't know what therules are on that and I couldn't
find anything quickly thatwould answer that question.
But I think the first stepwould be to roll those things
into 529s and then go from there.
And finally, I just want to sayI greatly appreciate your
listenership and yourcontribution to this podcast.
Voices (12:25):
That's gold, jerry gold.
Mostly Uncle Frank (12:28):
There are a number of different categories
of people that listen to thispodcast, and I feel you fall
into the category I like tothink of as my different
drummers named after the quotefor Thoreau.
Voices (12:40):
If a man does not keep pace with his companions,
perhaps it is because he hears adifferent drummer.
Let him step to the music hehears, however measured or far
away.
Mostly Uncle Frank (12:54):
Which are people who have forged their
lives through non-standardcareer paths or just ways of
approaching life that don'tfollow other people's
conventions.
Voices (13:03):
ways of approaching life that don't follow other
people's conventions.
It's 106 miles to Chicago.
We got a full tank of gas, halfa pack of cigarettes, it's dark
and we're wearing sunglassesHit it.
Mostly Uncle Frank (13:21):
And you are generally people that just don't
like other people telling themwhat to do, but really don't
want to fight about it either.
Voices (13:30):
You just want to go off and do what you want to do.
We few, we happy few.
Mostly Uncle Frank (13:43):
We band of brothers and I identify with
that, and so I'm very happy toBe able to facilitate that in
your lives.
Voices (13:49):
For he, today that sheds His blood with me, shall be my
brother.
Be he ne'er so vile.
This day shall gentle hiscondition.
And gentlemen in England Nowabed Shall think themselves
accursed they were not here andhold their manhoods cheap whilst
any speaks that thought with usupon St Presbyterian Day.
Mostly Uncle Frank (14:19):
So thank you very much for your listenership
and thank you for your email.
Voices (14:26):
Macadamia nut.
That was the one that was senther into a gone crazy.
She said you stop naming nutsand Hubert used to be able to
make the sound and he wasn'ttalking, but he used to go.
That sounded like macadamia nut, Iron nut, which is a nut, but
(14:47):
it's also the name of the town,Pistachio nut.
Red pistachio nut.
Natural, all natural whitepistachio nut.
Mostly Uncle Frank (15:00):
Second off.
Second off.
We have an email from Jenzo.
Voices (15:06):
It's showtime.
Mostly Mary (15:08):
I'll sacrifice your swordsman of Lansdor and I'll
summon Jenzo.
Mostly Uncle Frank (15:13):
And Jenzo writes.
Mostly Mary (15:29):
Second, a riddle what product has 1.8 times
exposure, a 0.2% expense ratio?
The underlying assets arecritical components of a risk
parity portfolio and has matchedthe performance of these
underlying assets with basicallyzero volatility drag since
inception.
Surprise, it's GDE.
(15:50):
Take a look at this backtest ofGDE.
Compared to a VOO slash, GLDMequivalent, it is pretty
remarkable.
Voices (15:58):
Inconceivable.
Mostly Mary (16:00):
The fund still only has $61 million in assets under
management as of mid-February,but what a run.
The only other leveragedproduct I have found that has
been able to keep up with theunderlying assets is RSSB 2X,
global Stocks and Treasuries,but nothing like GDE.
I think it's been a few yearssince you had examined it on the
(16:20):
podcast.
I hope you'll be able to get onthe bike soon as the thawing
continues.
Best Genzo.
Mostly Uncle Frank (16:27):
Well GDE.
Voices (16:29):
Genzo, strut your stuff.
Mostly Uncle Frank (16:32):
Yes, I hadn't talked about this for a
while, but it's come up a lotrecently.
I think it's become verypopular, since gold has been
outperforming these days.
Just so people know, gde is acomposite fund with leverage in
it that combines the S&P 500 andan allocation to gold.
Voices (16:52):
You're insane gold member.
Mostly Uncle Frank (16:55):
So it is kind of like holding a leveraged
form of VOO and GLDM together,as Genso has observed, and I
will put your link in the shownotes to the test folio analysis
.
We'll put your link in the shownotes to the test folio
analysis.
So we originally talked aboutthis back in episodes 167 and
(17:15):
170 when the fund was new, buthave more recently talked about
it in episodes 407 and 415,which I do not wish to repeat.
Everything I said there.
The thing is your email came inbefore those episodes went out,
since we have about a two-monthdelay on the emails here, so I
won't repeat all that.
I'll just say that thesecomposite funds can be used to
(17:37):
construct risk parity styleportfolios, particularly if
you're doing some kind ofleveraged or return-stacked kind
of setup where you havemultiple assets within the same
fund.
It's still my preference tohave each fund represent only
one asset, because I think itfacilitates rebalancing in a
(17:58):
better way and it's harder toset the whole thing up in terms
of macro allocations when youhave multiple assets in one fund
.
But it's not insurmountable,it's just a function of algebra.
And you also mentioned the fundRSSB, which is one of the newer
return stack funds from CoreyHofstein, which has the same
(18:18):
kind of principles.
So all these are relatively newand I'm interested to see how
people are going to be usingthem, because there does seem to
be a good future here for thesesorts of things.
However, for us old fogies whojust want to stick with some
simple one asset funds, you know, at my age the mind starts
(18:41):
playing tricks.
So, ah, death, that's only thecat, oh it's probably not
something I'm going toincorporate in something I'm
doing, which doesn't mean thatit's not appropriate for you to
use in your own personalsituation.
It's also funny you mention thebike, because in February it
(19:02):
was difficult to get out on thebike here, but I've had a lot
more success recently.
I'm trying to ride at least 100miles a week.
I've only got 10 miles left forthis week, so we'll see if we
can keep that up if you don'tstart making more sense, we're
gonna have to put you in a home.
Voices (19:21):
You already put me in a home, then we'll put you in the
crooked homies.
Mostly Uncle Frank (19:25):
On 60 minutes I'll be good I don't
think there'll be any ridingtoday, Saturday, since it's
raining outside.
Voices (19:33):
Not going to do it Wouldn't be prudent at this
juncture.
Mostly Uncle Frank (19:36):
But probably tomorrow when this podcast
comes out.
Hopefully that helps Check outthose episodes if you haven't
yet 407 and 415.
And 170 and 167.
And thank you for your email.
Voices (19:51):
Not Jinzo, that's right pal.
Mostly Mary (19:54):
And I bet you know what that means.
It's time to say goodbye toevery trap card you have on the
field.
It's a trap, it's a trap, it'sa trap, it's a trap, it's a trap
.
Mostly Uncle Frank (20:09):
It's a trap, it's a trap.
It's a trap, it's a.
It's a trap.
It's a trap.
It's a trap.
It's a trap, it's a, it's atrap, last off.
Last off is an email from Sam.
Voices (20:21):
Yosemite Sam, it's Yosemite Sam.
Yosemite Sam, yosemite Sam,yeah, yosemite Sam.
No-transcript.
Yosemite Sam, yeah, yosemiteSam.
The roughest, toughest key man,stuffest hombre has ever
crossed the Rio Grande, and Iain't no man be pandy.
Mostly Mary (20:36):
And Sam writes Frank, thanks to your diligent
effort spreading the word onrisk parity investing with some
comedic clips interjected.
More Seinfeld, please.
Mostly Uncle Frank (20:47):
Yada, yada, yada, Yada, yada yada.
Mostly Mary (20:50):
Y.
No need to read this email onthe podcast, but it would be
great to hear your generalthoughts on finding 15 truly
uncorrelated assets in thepublic markets.
Not able to find anythingspecifically on this topic
online, here's a post where Itried to break down the
opportunities and challenges ofthis investing strategy,
(21:12):
leveraging the work of you andothers in the efficient and
diversified ETF space, of youand others in the efficient and
diversified ETF space.
Also, as a lawyer, feel free toreview this research piece on
the US Bill of Rights and howthese core tenets have changed
over the course of history,based on various legislative
actions, sometimes bubbling allthe way up to the Supreme Court.
Looking forward to hearing yournext podcast on a disjointed
(21:34):
cadence about random topics.
That's exactly what retirementprojects should be about.
Thanks, sam.
Voices (21:42):
I speak softly, but I carry a big stick.
Oh yeah, well, I speak loud andI carry a bigger stick and I
use it too.
Mostly Uncle Frank (21:59):
Well, thanks for writing in Sam.
Sam has linked to a couple ofposts on his blog, and the first
one is all about the riskparity ideas from Ray Dalio and
gives a history of the conceptsand there are some nice graphs
in there.
I do think if you're interestedin this, you should check this
(22:19):
post out, because it's a verynice summary of a lot of things
and there is a nice fourquadrant model or graph with,
like a target imposed over it,with assets on the graph showing
which ones perform well inincreasing inflation or
decreasing inflation, increasinggrowth or decreasing growth in
(22:41):
those four quadrants, and Ithink that's a nice way to
visualize the concepts thatwe're using here and the kind of
diversification we're lookingfor.
So I probably will be referringpeople to that when they ask me
if I've written up posts aboutsummaries of this material, and
the answer is, of course, not.
I'm a podcaster, not a writer.
Voices (23:02):
I don't think I'd like another job.
Mostly Uncle Frank (23:05):
Now, as your question about my general
thoughts on finding 15 trulyuncorrelated assets in the
public markets, I think thatwould be very difficult to do,
and that is what hedge funds tryto do and why they might invest
in, also private markets.
That is also what endowments dofamously David Swenson at Yale
(23:25):
and the people that havefollowed those ideas but on the
other hand, I don't think that'snecessary for what we're trying
to accomplish here, because inthose circumstances, they just
have a lot more resources.
They are planning on usingleverage in various ways and
also doing analyses to changethe composition of the
portfolios over time.
(23:46):
Fortunately, we don't need todo all that.
All we need to do is findsomething that has a high safe
withdrawal rate, because that'swhat we're actually using these
things for.
Voices (23:58):
You don't even know what a write-off is, do you?
No, I don't, but they do, andthey're the ones writing it off.
Mostly Uncle Frank (24:09):
And, as you can imagine, the incremental
value of adding another asset toa portfolio goes down with the
number of assets you alreadyhave.
So going from one or two tofive makes a big difference, but
going from 10 to 15 probablyisn't going to make much of a
difference, and that actuallydoes come through in the
(24:35):
mathematics of it.
I'll also link to that shortvideo from Ray Dalio where he
explains the Holy GrailPrinciple.
But that's why we have threeprinciples and not just one the
Holy Grail Principle, theMacroallocation Principle and
the Simplicity Principle.
You want to go back to episode7 to go through all three of
(24:56):
those, but we talk about themfrequently here.
I also did take a look at yourresearch piece on the US Bill of
Rights, and the First Amendmentin particular.
I have to confess I haven'tread the whole thing because
it's quite a tome.
Voices (25:12):
It's like you're unraveling a big cable knit
sweater that someone keepsknitting, knitting, knitting,
knitting, knitting, knitting,knitting.
Mostly Uncle Frank (25:26):
But, yes, that has been subject to many
applications and interpretationsover time, and it's really more
only in the 20th century thatwe have the kind of First
Amendment jurisprudence thatpeople were familiar with,
starting with Oliver WendellHolmes, I believe, and
discussions about whether youcould be prohibited from yelling
(25:47):
fire in a crowded theater Fire,fire.
Voices (25:50):
Fire, fire.
Mostly Uncle Frank (25:54):
And the answer is yes, but that's really
not the subject matter of thispodcast.
I did have one musing when Iwas reading it, or one
recollection that I'll sharewith you.
It's kind of a little bit offthe subject, but related.
Voices (26:08):
You are talking about the nonsensical ravings of a
lunatic mind.
Mostly Uncle Frank (26:14):
And that is how the injection of new
technologies in communicationsoften change the way people
actually communicate, what kindsof ideas are communicated, and
then leading to the Signal andthe Noise, which is a book that
Nate Silver wrote about 10 yearsago.
But he was just recounting how,when the printing press was
(26:59):
invented, people thought thatwell, this is going to lead to
an expansion of knowledge and agolden era of people sharing
things and knowing things.
And oftentimes thesetechnologies don't work out that
way, because what the printingpress led to was a lot of
conflicts and eventually wars,which ended with a 30 years war
in the 17th century.
Those were religious wars.
It also led to the popularityof witch hunting in the Middle
Ages and, in particular, thepublication of a book, a
(27:22):
notorious book called theMalleus Maleficarum, which was
all about witchcraft and how toidentify witches and how to
torture them properly to getconfessions and all kinds of
nefarious ideas.
Voices (27:36):
Tell me, what do you do with witches Burn?
And what do you burn, apart fromwitches, poor witches.
Wood.
So why do witches burn?
Because they're made of wood.
Good, so how do we tell whethershe is made of wood?
(28:02):
Build a bridge out of her?
Ah, but can you not also makebridges out of?
stone, oh yes.
Does wood sink in water?
No, no, it floats, it floats.
Throw her into the pool.
Throw her into the pool.
What also floats in water Bread.
(28:24):
Apples, very small rocks, cider,gravy, cherries, mud Churches.
Churches Lead, lead A duck,exactly, exactly.
So, logically, if she weighs thesame as a duck.
(28:45):
She's made of wood andtherefore away.
Mostly Uncle Frank (29:01):
And that stuff persisted for hundreds of
years.
But essentially, I mean this isa cautionary tale that the
technology that we have now theinvention of the internet and
then all of these different waysof popularizing or spreading
ideas is very helpful for manypeople.
But it's not all for the good,and it's kind of naive to think
that if anybody can say anythingat any time, anywhere, and all
(29:25):
these ideas are put out there,that the best ones are going to
rise to the top and the bad onesare going to go away, because
that's not how this actuallyworks, that's not how this
actually works.
Mostly Mary (29:35):
That's not how it works.
Mostly Uncle Frank (29:37):
That's not how any of this works what
happens is that the ideas thatare attached to the most
attractive stories, movements orideas tend to be the ones that
are preeminent, or becomepreeminent, at least for a while
, and some of those are goodthings and some of those are bad
things, because, as YuvalHarari observed in the book
(30:06):
Sapiens, humans are essentiallyanimals that tell stories, and
so it's the most attractivestories that tend to win the day
, not the best or most rationalarguments.
Win the day, not the best ormost rational arguments.
I find your arguments strewnwith gaping defects in logic.
Voices (30:23):
Maybe, but you can't evaluate a man by logic alone.
He has avoided two appointmentsthat I've made for his physical
exam without reason.
That's not at all surprising,doctor.
Mostly Uncle Frank (30:36):
He's probably terrified of your beads
and rattles.
Anyway, sorry to go off on thistangent, but that's what your
second post reminded me of mostwhen I was reading it.
You never know what you'regoing to get, so hopefully
you're enjoying my disjointedcadence about random topics.
Voices (31:02):
And thank you for your email.
I start off with curls.
That's good for the bicep.
I do ten reps, two sets.
That's fantastic.
You work out with weights?
No, I don't, you should.
Why have you decided?
Oh, get the swordfish, bestswordfish in the city.
(31:23):
The best, jerry, I'll have thesalmon and you.
Uh, you know what?
I think I'm just gonna havesoup.
Yeah, I'll save the meal foranother time.
Another time, what other?
time I had a hot dog earlier.
(31:44):
I'm not that hungry.
No, no, Ben, you know this isthe dinner.
The soup counts.
Mostly Uncle Frank (31:51):
Now we're going to do something extremely
fun, and the extremely fun thingwe get to do now is our weekly
portfolio reviews.
Of the eight sample portfoliosyou can find at
wwwriskparryradiocom on theportfolios page.
And this was actually arecovery week for most things,
including mostly the stockmarket, even though it's still
(32:14):
down a bunch for the year, asyou might expect these days,
since gold seems to be movingopposite the stock market most
of the time.
Gold was the only thing thatwas down this week, although not
down anything substantial.
It's still up ridiculousamounts for the year.
But, going through the markets,the S&P 500, represented by VOO
(32:34):
, is down 5.74% for the year sofar.
The NASDAQ 100, represented byQQQ, is down 7.43% for the year
so far.
Small cap value, represented bythe fund VIOV, is the big loser
this year.
So far it's down 15.58%.
It's looking like a rebalancingopportunity when we get there.
It's looking like a rebalancingopportunity when we get there
(32:58):
and that will be rebalanced,most likely out of gold.
The representative fund, gdlm,is up 25.87% for the year so far
.
Voices (33:08):
I love gold.
And that's after being up about25% last year.
Mostly Uncle Frank (33:31):
And that's the way.
Uh-huh, uh-huh, I like it.
Far.
Commodities, represented by thefund PDBC, are down 1% for the
year so far.
Preferred shares, representedby the fund PFFV, are down 0.04%
for the year so far and managedfutures, represented by the
fund DVMF, are down 2.03% forthe year so far.
(33:54):
Now moving to these sampleportfolios.
First one's an all-seasonsportfolio.
It is a reference portfoliothat's only 30% in stocks and a
total stock market fund, 55% inintermediate and long-term
treasury bonds and the remaining15% in commodities and gold.
This is also modeled in thatlast post I was referring to
(34:17):
From the last EU mailer.
It is down 0.91% month to date,but it's up 1.71% year to date
and up 10.41% since inception inJuly 2020.
Now, moving to the kind of breadand butter portfolios.
First one's Golden Butterfly.
This one's 40% in stocksdivided into a total stock
(34:39):
market fund and a small capvalue fund, 40% in treasury
bonds divided into long andshort, and the remaining 20% in
gold GLDM.
It is down 0.31% month to date.
It's up 1.85% year to date andup 36.4% since inception in July
(35:00):
2020.
Next one's the golden ratio.
This one is 42% in stocks in alarge-cap growth fund and a
small-cap value fund 26% inlong-term treasury bonds, 16% in
gold, 10% in a managed futuresfund and 6% in a money market in
cash.
It is down 0.12% month to date.
(35:23):
It's down 0.16% year to dateand up 29.75% since inception in
July 2020.
Next one's the risk parityultimate.
I won't go through all 14 ofthese funds.
It is down 1.1% month to date.
It's down 0.04% year to dateit's almost flat and up 20.57%
(35:47):
since inception in July 2020.
Now, moving to theseexperimental portfolios.
Voices (35:53):
Look away, I'm hitting you.
Mostly Uncle Frank (35:56):
They all involve leveraged funds.
Don't try this at home.
Voices (36:01):
Well, you have a gambling problem.
Mostly Uncle Frank (36:04):
First one's the Accelerated Permanent
Portfolio.
This one is 27.5% in a leveredbond fund TMF, 25% in a
leveraged stock fund UPRO, 25%in PFFV, a preferred shares fund
, and 22.5% in gold GLDM.
It is down 3.32% month-to-date.
(36:24):
It's up 0.53% year-to-date andup 1.57% since inception in July
2020.
Next one is our most leveredand least diversified of all
these portfolios and worstperformer as well.
It's called the aggressive50-50, half stocks and half
bonds.
Really, it is one-third in alevered stock fund, upro,
(36:48):
one-third in a levered bond fund, tmf and the remaining third in
ballast in a preferred sharesfund and an intermediate
treasury bond fund, shares fundand an intermediate treasury
bond fund.
It is down 5.96% month to date.
It's down 7.41% year to dateand down 18.45% since inception
in July 2020.
(37:08):
Next one's the levered goldenratio.
One has some of those compositelevered funds in it at least
one of them and that fund isNTSX.
It's 35% of this portfolio.
It's a S&P 500 and treasurybonds combined, levered up 1.5
to 1.
It's got 20% in gold GLDM, 15%in a international small cap
(37:30):
value fund, avdv, 10% in KMLM,which is a managed futures fund,
10% in a levered bond fund, tmf, and the remaining 10% divided
into a levered Dow fund and alevered utility fund, udao and
UTSL 5% each.
For those it is down 1.05%month-to-date but it's up 1.34%
(37:56):
year-to-date and down 3.14%since inception in July 2021.
It's a year younger than thefirst six and our last one is
the Optra portfolio oneportfolio to rule them all which
we just started last July as areturn stacked kind of portfolio
.
It has 16% in a levered stockfund, upro, 24% in a composite
(38:23):
worldwide value fund, avgv, 24%in a treasury strips fund, govz,
and the remaining 36% dividedinto gold and managed futures.
It is down 1.61% month to date.
It's down 0.6% year to date andup 2.29% since inception in
(38:45):
July 2024.
So it's funny, after all theturmoil in the markets this year
, so far these portfoliosactually haven't moved a whole
lot.
Boring.
Most of them are almost flatfor the month of April, which
has otherwise been a horriblemonth for the stock market in
particular, and most of them areflatter up slightly for the
(39:06):
year.
Boring, but that's the kind ofperformance you're hoping for
when things go poorly in thestock market that your
diversified assets will come inand ameliorate that.
Voices (39:18):
All we need to do is get your confidence back, so you
can make me more money.
Mostly Uncle Frank (39:24):
Which they have done quite well this year,
especially the holdings in gold.
Voices (39:28):
This is gold, Mr Bond.
I think you've made your point.
Goldfinger, Thank you for thedemonstration.
Do you expect me to talk?
No, mr Bond, you expect me totalk.
No, mr bond, I expect you todie now will this all continue.
Mostly Uncle Frank (39:43):
Well, we can go consult our crystal ball
again my name's sonja.
Mostly Mary (39:47):
I'm going to be showing you um the crystal ball
and how to use it, or how I useit but you know what our crystal
ball always says when we ask itabout what's going to happen
next we don't know.
Voices (40:02):
What do we know?
Mostly Uncle Frank (40:03):
you don't know, I don't know, nobody knows
the more things change, themore they remain the same I
could have told you that but nowI see our signal is beginning
to fade.
If you have comments orquestions for me, please send
them to frank atriskparityradiocom.
That email is frank atriskparityradiocom.
(40:23):
Or you can go to the website,wwwriskparityradiocom.
Put your message into thecontact form and I'll get it
that way.
If you haven't had a chance todo it, please go to your
favorite podcast provider andlike subscribe.
Give me some stars, a follow, areview.
That would be great.
Okay, Thank you once again fortuning in.
(40:44):
This is Frank Vasquez with RiskParity Radio signing off.
Voices (40:50):
ZOINKS, it's the witches .
Easy guys, it's just the HexGirls.
I'm gonna cast a spell on you.
You're gonna do what I want youto Mix it up here in my little
(41:14):
bowl, say a few words and you'lllose control.
I'm a hex girl and I'm gonnaput a spell on you.
I'm gonna put a spell on you.
I'm a hex girl and I'm gonnaput a spell on you.
Put a spell on you.
(41:35):
Earth, wind, fire and air.
We may look bad, but we don'tcare.
We ride the wind, we feel thefire.
To love the Earth is our onedesire.
To love the Earth is our onedesire.
Scooby-dooby-doo.
Mostly Mary (42:12):
The Risk Parody Radio Show is hosted by Frank
Vasquez.
The content provided is forentertainment and informational
purposes only and does notconstitute financial, investment
tax or legal advice.
Please consult with your ownadvisors before taking any
actions based on any informationyou have heard here, making
sure to take into account yourown personal circumstances.
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