Mostly Voices [0:00]

A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines. If a man does not keep pace with his companions, perhaps it is because he hears a different drummer. A different drummer.

Mostly Mary [0:18]

And now, coming to you from dead center on your dial, welcome to Risk Parity Radio, where we explore alternatives and asset allocations for the do-it-yourself investor. Broadcasting to you now from the comfort of his easy chair, here is your host, Frank Vasquez.

Mostly Uncle Frank [0:36]

Thank you, Mary, and welcome to Risk Parity Radio. If you are new here and wonder what we are talking about, you may wish to go back and listen to some of the first episodes where we did our introductions of the various topics. And those episodes are episode one, three, five, seven and nine. And so if you go back and listen to those, it will get you up to speed. But now let us proceed with episode 135. Today on Risk Parity Radio, we are going to finish off the emails for November.

Mostly Voices [1:17]

And so without further Ado, here I go once again with the email and first off,

Mostly Uncle Frank [1:22]

First off, we have an email from Steven of Superb Diamond Range.

Mostly Mary [1:34]

And Steven writes, hi Frank, listening to you answer my query on your podcast was so much better than an email reply as it's something I can keep and re-listen. I'm so honored to be mentioned on your amazing podcast and love your take. Thank you so much, you are a true legend. Thanks again, Steven. A legend, you say?

Mostly Uncle Frank [1:49]

You're a legend in your own mind. Well, I think Mary would probably agree with that sentiment. Man's got to know his limitations. Just for reference, Steven is referring to episode 130 where I answered a question that he had. I am glad you are enjoying the podcast and thank you very much for this very nice email.

Mostly Mary [2:24]

Hey, Steve! Second off, we have an email from Alan, and Alan writes, hi Frank, you have shone light on my understanding of bonds for which I'm grateful. However, may I ask that you tone down or remove the sound effects from your podcast? I find them quite distracting and it makes it hard to concentrate on your message. They are fun, however, I have stopped listening as I can't understand what you're saying. Keep up the good work, Alan.

Mostly Uncle Frank [2:43]

Well, Alan, I realize the sound effects are of some controversy and consternation amongst some of my listeners, but I do have to say that you are probably outvoted by the majority of the listeners. At least those are the sorts of messages I get. They want this. I could have used a little more cowbell.

Mostly Voices [3:06]

I gotta have more cowbell. I gotta have more cowbell.

Mostly Uncle Frank [3:13]

But more importantly as to what I'm trying to accomplish here, you have to realize that the primary goal of this podcast is to get my children to listen to it. And they listen to it primarily for the sound clips.

Mostly Voices [3:25]

Yes!

Mostly Uncle Frank [3:29]

So after my most recent episode, our eldest sent me a text message that says, the SpongeBob clips in your most recent podcast were Hysterical, with laughing emoji until you cry your eyes out. Now I'm just wondering where he learned about those sentence enhancers.

Mostly Voices [3:48]

That's one of those sentence enhancers! Sentence enhancers! you! use them when you want to talk fancy. You just sprinkle it over anything you say and a level! you! got yourself a spicy sentence sandwich! Oh, I get it. Let me try. Ahem. Hello, Patrick. Lovely day we're having, isn't it?

Mostly Uncle Frank [4:12]

So I am afraid that the beatings will probably continue until morale improves. But if you want to avoid the worst of it, I would not listen to the rant episodes, because that's where I unleash the full fury of my strange sense of humor. Bow to your sensei. Bow to your sensei. But thank you for that email. It is a legitimate criticism.

Mostly Voices [4:41]

You are correct, sir, yes.

Mostly Uncle Frank [4:48]

Next off, we have an email from Christopher, and Christopher writes.

Mostly Mary [4:56]

Dear Frank, no question today, but I came across something you may find interesting. Recently, in episode 131, you mentioned that interactive brokers had partnered with Paxos to offer cryptocurrencies on their platform. Paxos offers a stable coin, Pax Gold, ticker PAXG, that is backed by physical gold. As near as I can tell, PAXG functions almost identically to a gold ETF like GLDM. The main upside appears to be that PAXG does not have an annual expense ratio. To pay for storage fees and to pay Paxos for issuing the token, PAXG uses a smart contract that charges a 0.02% fee each time it is bought or sold. This significantly benefits buy and hold investors. The main downside is that while PAXG is regulated by the New York Department of Financial Services, It is not eligible for SIPC insurance. For those of us who already have accounts over the SIPC limits, this does not appear to be a significant drawback. While the 0. 18% yearly savings is probably enough to justify incurring capital gains, I thought it might be an interesting option for someone just starting to accumulate a position in gold. Full disclosure, I currently own no PAXG, no cryptocurrency, nor any gold. I just enjoy learning new things about finance. Hope you find this interesting. Thanks, Chris.

Mostly Uncle Frank [6:28]

Well, thank you for this. I am aware of PAXG and kind of wondered about it myself. Oddly enough, you cannot buy it through the Interactive Brokers interface with Paxos. However, I do own a little bit of it through BlockFi. For entertainment purposes, I got a BlockFi Visa card, which pays me cash back in Bitcoin and also bought a couple of things there on their platform just to see how they work. And one of them is Paxg. They also pay a interest rate of about three and a quarter percent on your Paxg holdings there. So I am fiddling around with that. I'm not sure that that is ultimately the better way to hold gold than ETFs. But it's an interesting idea, and I wonder whether it will be translated into other kinds of things that somebody might hold, and whether crypto currencies could ever be a competitor to ETFs for some of these sorts of commodities like holdings. So it is very interesting, and I wonder how it's all going to play out in the future. I wouldn't bet the farm on it, but putting a little into it just to see how it works. is almost never a bad idea. And besides, I love gold. But now moving to our next email.

Mostly Mary [8:04]

Our next email comes from Neil, and Neil writes, hello, Frank. Thank you for doing your show. I've listened to many of your episodes, and I know your common advice for those early in their accumulation phase is to allocate 100% to equities as they have a large portion of future cash as upcoming contributions. What are your thoughts on applying leverage in the accumulation phase to boost returns and reduce future cash drag? What about a leveraged all stock portfolio versus a leveraged risk parity portfolio for accumulation? I personally am in my accumulation phase approximately 10 to 15 years from financial independence, given my current savings, expected contributions, and something like 5% real returns, and comfortable with some leverage with leveraged ETFs or futures, more so if there are negatively correlated long-term treasury bonds in the mix. I like the idea of leveraging a low-risk portfolio and getting more return with a stock like standard deviation and drawdowns. What are your thoughts? Thank you. Well, this is another interesting email, and I have a few thoughts about this.

Mostly Uncle Frank [9:12]

First off, what you were talking about is the original idea that hedge funds had as to how to use risk parity, that they would create a risk parity portfolio and then add some leverage to it and thereby increase its returns. Because the original risk parity style portfolios looked kind of like that all seasons portfolio that we have as a sample. And so the returns are naturally pretty low, but obviously if you introduce leverage into a portfolio like that, you can up the returns to a better level that is more competitive with ordinary, mostly stock portfolios. My second thought is that it is always dangerous to add leverage to anything. Danger, Will Robinson, danger. And especially to a portfolio that was 100% equities. because you could easily lose all your money in a big downturn with something like that. Real wrath of God type stuff. In addition, a number of these leveraged funds such as UPRO have not been around that long, only about 12 years and haven't been through a big drawdown, an extended drawdown other than what happened in March 2020. So the jury is out as to how they could perform or will perform long term. That's why we only include such things in our experimental portfolios for the most part. But in theory, you could up your returns significantly with putting leverage into something like that. I did have one email or listener who did say that they had been mostly in UPRO since about 2011 and were approaching financial independence due to that choice that they made back then. You have a gambling problem. I think that's probably too much risk for most people. But if you are talking about smaller amounts of money earlier in your investing career, it may be reasonable to take that kind of risk knowing that you're going to have a lot more to invest in the future.

Mostly Voices [11:21]

Well, you have a gambling problem.

Mostly Uncle Frank [11:24]

I agree that you do mitigate a lot of that risk if you take a position in, say, a long-term Treasury bond ETF, leveraged ETF like TMF in addition to taking the leverage position in the stock side. And that's what our experimental portfolios are attempting to do, the Accelerated Permanent Portfolio and the Aggressive 5050. In theory, those will yield higher returns than the stock market over time. with about the same or slightly less volatility in them. But we're going to have to see how that plays out because those funds in particular were not designed for long-term holdings. They work that way or they have worked satisfactorily, but they weren't designed that way. There are more funds coming online that are designed for long-term holdings that are leveraged, including the fund NTSX that we've used. in the levered golden ratio sample portfolio. But again, those have only been around for a few years themselves. So we can't say that this ultimately will be successful. We just can say that it'll be successful in theory. You can't handle the gambling problem. I will link to another one of these leveraged type portfolios that you can have a look at. that I did for the Choose FI M1 Pies page. And that may be of some interest to you because it's better structured than either the Accelerated Permanent Portfolio or the Aggressive 5050, which were just designed as primitive models of those kinds of portfolios. So I do view these things as something you might take some risk with. But you wouldn't want to bet the farm on at this point. And I think we are likely to see more uses of these leveraged ETFs in the future. So we will observe them and take interest. And thank you for that email. Last off. Last off we have an email from Essek. And Essek writes. Frank, the YouTube tutorials for both the Portfolio

Mostly Mary [13:38]

Charts and Portfolio Visualizer were amazing. I have a much better understanding of how they work and now I can't wait to build on your tutorials. Thank you for spending the time to help us all better understand these complexities by making it look simple. These are both very useful tools only made better with your explanations. I look forward to all your work and podcasts. Thank you.

Mostly Uncle Frank [14:05]

Well, Essek, I'm glad you enjoy those tutorials and I was Encouraged by your email to go make another one.

Mostly Voices [14:13]

I do what I'm told.

Mostly Uncle Frank [14:18]

Which I have put up on the YouTube channel in the last couple days here. It is about another one of the portfolio visualizer calculators. And while they are of not the highest quality, I think they are sufficiently good quality to be useful to many people. I think I've improved on your methods a bit too. I do plan on trying to make at least one a month and we have many, many calculators to go through from just portfolio charts and portfolio visualizer that will help you decide what kind of portfolios you want to have and be able to see how they have performed in the past and may perform in the future with Monte Carlo simulations. You're gonna want that cowbell. So thank you for that email. It's very inspiring. But now I see our signal is beginning to fade. We will be picking up again this weekend, once again with our weekly reviews of the seven sample portfolios that you can find at www.riskparadioradio.com on the portfolios page. I noticed today there's something wrong with the podcast page on my website. But hopefully I'll get that repaired today or shortly thereafter. If you have comments or questions for me, please send them to frank@riskparityradio.com that email is frank@riskparityradio.com or you can go to the website www.riskparityradio.com and fill out the contact form and I should get your message that way. If you haven't had a chance to do it, please go to your podcast provider, and like the podcast, subscribe, give it some stars and a review. Oh, that would be greatly appreciated. That would be great.

Mostly Voices [16:02]

Okay. Thank you once again for tuning in.

Mostly Uncle Frank [16:06]

This is Frank Vasquez with Risk Parity Radio. Signing off.

Mostly Voices [16:14]

Babies, before we're done here, y'all be wearing gold-plated diapers. What does that mean? Ooh, you're right, Patrick. My lips are tingling from the the spice of this conversation. The Risk Parity Radio Show is hosted by Frank Vasquez.

Mostly Mary [16:39]

The content provided is for entertainment and informational purposes only and does not constitute financial, investment, tax, or legal advice. Please consult with your own advisors before taking any actions based on any information you have heard here, making sure to take into account your own personal circumstances.