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 [0:19]

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 1-3, five, seven and nine. And so if you go back and listen to those, it will get you up to speed. But now onward to episode 151. Today on Risk Parity Radio, it is time for our weekly portfolio reviews of the seven sample portfolios you can find at www.riskparityradio.com on the portfolios page. And just a little preview of that.

Mostly Voices [1:23]

I love gold.

Mostly Uncle Frank [1:27]

But before we get to that, we'll do what we do best here.

Mostly Voices [1:31]

I'm intrigued by this, how you say, emails.

Mostly Uncle Frank [1:39]

And our first three emails come from people that have gone to the front of the list because they have donated to our sponsored charity on this podcast. We don't have any commercial sponsors. We only have a charity. It is the Father McKenna Center. Yes! And so our first two emails come from people who are patrons on Patreon and donate that way. And then our third email comes from somebody who donated directly. We few, we happy few, we band of brothers. And if you do that, you have my eternal gratitude. And your email goes to the front of the list. We have enough patrons on Patreon that I can't keep track of all of them now. So if you are one and you send it an email, please note that in your email so that I can make sure your email goes to the front of the line. That would be great. Okay. If you want to know more about the Father McKenna Center and opportunities to donate through this podcast or otherwise, please go to the support page at www.riskparityradio.com. We still have some NFTs for sale there if you can figure out exactly how to buy them. And I think they've gone down in price given the fall in the price of Ethereum recently. But enough about that. Let's get to these emails. First off. First off, we have an email from Julie T.

Mostly Mary [3:05]

And Julie T writes, Is there a good reason not to use PFF in place of some or all of the money market component in the Golden Ratio portfolio? My thought is that I may not necessarily be taking out 6% every year, so why not let some of it sit there and continue to throw off dividends?

Mostly Uncle Frank [3:22]

Well, the short answer is yes, you can do that. Probably be a good idea depending on the rest of your circumstances. The longer answer is that remember that these portfolios on the portfolios page are sample portfolios and they are designed to be altered to fit your particular circumstances. Now the Golden Ratio lends itself to that because its basis is The 42% in stocks, 26% in treasury bonds, and then 16% in gold. That stock portion, you can allocate the way you think a stock portion ought to be allocated. But then after that, you have this 16%, which we've divided into a 10 and a six. And that allows you to make your portfolio more or less aggressive by adjusting what you're doing with that's 16%. In the sample portfolio, we have 10% that we put into REITs and 6% we put into cash, mostly because we wanted to have a portfolio that had a cash component that showed how you could manage a retirement portfolio like that by having the cash and living off it for a year and then replenishing it when you rebalance at the beginning of the next year. that you use it. But if you don't need cash, obviously you can put it into other things. So example, I have a version of that in an IRA where I've decided to take that last 6% and buy some more REITs and a commodity fund and something that invests in MLPs and pipelines because I wanted it to be more aggressive on that side. I don't need cash sitting around in an IRA. You can imagine different variations on this theme. So if you go back to, say, episode 27 when we were talking about utilities funds, we put forth a version of the golden ratio that had utilities in it instead of REITs. And that might be more advantageous, say, if you're working with just a taxable account and you don't want that ordinary income coming out of REITs. You'd rather have qualified dividends coming out of utilities for the most part. You could also imagine a more conservative version of this where, say, you had 10% or the 16% In a short-term bond fund like SHY, which would be much more of a kind of cash reserve, it would make it look more and perform more like the golden butterfly portfolio. But that would be for somebody who wants to make the portfolio more conservative than it is. And there are going to be infinite variations on this theme, as you can imagine. So what you've hit on thinking, well, maybe I'll put PFF for this 6% of this. is the right way to be looking at this? How do I modify this for my particular circumstances that make sense to me? And if I've got these things that I want to invest in, either because they throw off some income or I have some individual stocks or I wanted to put some crypto in there for a couple of percentage of this or some commodities or some other thing that you just feel like you want to be in, you could put it as part of that 6%. And you would still have the same kind of principles that underlie this Golden Ratio Portfolio. So if PFF makes the most sense for you, then you should use it. Groovy, baby! And thank you for that email. Second off. Second off, we have an email from Justin, and Justin writes：Frank, I'm running the data for my monthly portfolio review.

Mostly Mary [6:59]

ran across an interesting tidbit. LTPZ was down 6.73% in January. Well, from the start and end dates I used. Meanwhile, inflation was at 7% annualized or 0.58% on a monthly basis. Doesn't look like those TIPS are doing their job for sure. Tough month. Of the 29 assets I track closely, only three were positive. PDVC up 7.93% over the same period. GOF up 5.25, including dividends, and KRBN up 1.89%. Anyway, just thought you might get a kick out of that, Justin.

Mostly Uncle Frank [7:38]

Well, Justin, that does illustrate my ever ending point about TIPS is that they actually do not do in real life what supposedly they are supposed to do. Forget about it. And, I mean, just looking at what's going on with some of these things year to date, And we're talking about something that's supposed to do well during an inflationary period. I was looking at the year-to-dates yesterday, TIP is down over 4%, LTPZ is down over 10% year-to-date. Meanwhile, on the things that actually do well at inflation, PDBC commodities is up about 9.9% year-to-date, COM, our more muted commodities fund, COM is up 6. 2.2% year to date. Even something like this fund that I talked about in the last episode, KWBP, which just invests in common property and casualty insurance companies like Allstate, that's up 4% year to date. Meanwhile, something like VIOV, which is a small cap value fund, is down some, but it's only down 4.3%. So you're better off owning something like that for inflation. than you are any of these tip funds. Yeah, baby, yeah! But I was thinking about this while I was listening to some podcasts this last week and one of the podcasts I listened to was Money for the Rest of Us with David Stein, whose 10 questions we use to analyze investments here. This is in episode 374 and someone asked him about risk parity portfolios and this podcast in particular which he mentioned there and he discussed how This approach, the way he likes to characterize it, is a role-based approach to portfolio construction with the idea that each thing in your portfolio performs a specific role. Now, he had elaborated on this much more if you go back to his podcast 306, where he talked about this in more detail, but that is an accurate representation or characterization of the risk parity approach, that each thing in your portfolio is supposed to do well in a particular environment. You had only one job. And so if you have something that's supposed to do well in an inflationary environment, it better do well. Otherwise, you should replace it with something else that does better. And that is how you're thinking about what you want your assets to do, that you want some of them to do well in the environment with increasing inflation and increasing growth, you want some to do well when both of those are declining, decreasing inflation, decreasing growth that gets you to treasury bonds. And then you want all the ones to do well when inflation's going up and growth is going down or vice versa. That is reflected often in the correlation numbers between these assets. That if something is going to do well in one kind of environment, it's going to do poorly in another kind of environment and have a low or negative correlation with the other asset. So you want to be able to look at the assets in your risk parity style portfolio and say, this is the job of this asset. This is when I expect it to do well. You had only one job. And either increase the returns of this portfolio substantially or decrease the volatility of it substantially or some combination thereof. And so we've seen the problem with TIPS is they actually don't do the job they're supposed to do very well. which has performed well in these inflationary environments. They're kind of mediocre.

Mostly Voices [11:12]

You had only one job.

Mostly Uncle Frank [11:16]

And then they don't give you the diversification because they tend to fall at the same time the stock market falls. And I think it's because they're kind of an oxymoron. A bond that does well in inflationary environments is an oxymoron.

Mostly Voices [11:27]

Fat, drunk, and stupid is no way to go through life, son.

Mostly Uncle Frank [11:31]

You wouldn't expect bonds to do well in inflationary environments. Generally, so why try to use a wrench as a hammer? Why don't you just get a different hammer that works well for its job and not fiddle around looking for the wrench that makes the best hammer? That's what tips are. A wrench trying to be a hammer. Forget about it! We don't need those kinds of things in our portfolio. They just take up space for something that could be doing a better job at what it's supposed to do. Am I right or am I right or am I right? Right, right, right. But if you're interested in more of that take on risk parity style of investing, I would go back and listen to episode 306 of David Stein's Money for the Rest of Us podcast. I'll link to that in the show notes. And you can listen to the one that he just did, although it's abbreviated from the explanation that he provided. I guess this was last year sometime. But thank you for that email. And our next email comes from Jeffrey, who donated directly to the Father McKenna Center.

Mostly Mary [12:40]

And Jeffrey writes, Frank, I made a donation and attached the receipt here. Hopefully my email will be read on the podcast. Question number one, what is the thinking about adding volatility funds like VXX or SVXY funds to a portfolio meant for a medium to long time horizon? Those funds by nature lose money over the long term. Over several years, they lose upwards to 60% of their value. So if you add them to a portfolio over a period of years, you will always end up with less money than if you hadn't added them. I see why they make the Sharpe or Sortino ratio better because they do reduce volatility since they move inverse to the stock market. However, unless you are rebalancing on those exact days when stocks are really down and when the VIX is really up, Eventually, those volatility ETFs will go back down. Is the brief increased drawdown you have to experience really worth losing money in VXX over the long term? Question 2. What is your opinion on dividend investing? I have a relative who eschews modern portfolio theory and simply holds a basket of conservative dividend stocks. Think Colgate, MMM, Johnson & Johnson, and various utilities, chemical companies, etc. He started investing many years ago after reading the stories of average people like Ann Scheiber, a woman who never made more than $4,000 a year, but bought several dividend stocks early in her life, never sold them, and died a multimillionaire. He sent me this link. So, I discussed with him the uncertainty of the future, the low volatility of the risk parity portfolios, and the all-weather nature of them. His take is that volatility is not relevant to him because once he buys a stock, he is there forever. So he pays no mind to the ups and downs in price, only to the dividend payments he receives, which he points out actually went up in 2000 and in 2008, when the market itself went down double digits. He says he is buying himself and his heirs a perpetual annuity which will pay out increasing dividends for the remainder of his life and his family's life. He says this is investing the old-fashioned way. He just counts his dividend checks and does not worry about the market or macro outlook. What is your opinion on a method of investing like this to supplement retirement income? Thanks, Jeffrey. All right, these are interesting questions.

Mostly Uncle Frank [14:54]

Let's talk about question one, dealing with these volatility funds. This is a great unsolved problem that we know that volatility is uncorrelated with stocks and just about anything else. So it would be nice to include it in a portfolio. the main problem with the funds that we have available is they do tend to lose money over time, as you pointed out. We've talked about this in a couple other episodes where we talked about some alternatives. You want to listen to episode 114 with BTAL, episode 146 with CROC. Those are both also alternatives to volatility funds. But it's interesting also, the volatility funds are different themselves. So right now we have in our two of our sample portfolios, one of them we have VIXY, which is short term volatility options or futures. And then we have VIXM in the Leverage Golden Ratio Portfolio, which is medium term. And you can see they perform differently over this period that VIXM is actually up since we bought it in July. It's less volatile and less subject to the drag on these sorts of things, whereas the VIXY Although it's up this past week, it's still down for the year. Now also recall we are rebalancing these in a couple of different ways. One way is by the annual rebalancing, but the other way is that we are taking out of the best performing asset every month. So if we did have a month with a giant spike in the VIX, we would be taking our distribution out of that fund. But I do agree that these are experimental things we're working with here. We do not have a great solution for this right now. And so that's why we exclude it from kind of our base portfolios, like the Golden Butterfly and Golden Ratio, where we're just looking mainly at stocks, bonds, and gold and commodities. If you want to learn more about the use of volatility in portfolio construction, I'd go back and listen to the episodes about the Dragon Portfolio also. Those are episodes 53, 55, 98, and 110. The Dragon Portfolio is run by the hedge fund Artemis Capital, and they have an explicit large component of that portfolio devoted to volatility itself. I'm not sure exactly how they handle that investment, but it's complicated if you're not using a fund. All right, now let's talk about dividend investing. Since this gets everybody excited whenever the topic comes up.

Mostly Voices [17:40]

You are talking about the nonsensical ravings of a lunatic mind.

Mostly Uncle Frank [17:44]

All right, to understand this kind of investing, you need to understand the history of why this was desirable to do in the past and where it came from.

Mostly Voices [17:56]

I love the paps and the shot of Jack and whatever he's having. Have a Diet Coke. This is a bar, you have a drink. Oh, but gin and tonic? Not a boy. Because it's not like it doesn't work.

Mostly Uncle Frank [18:09]

It has worked for a very long time. But why did people choose this method of investing back in the 1950s and 60s and 70s in particular? And the main reason was efficiency. Because transaction costs were very high. in those eras. And typically you also needed to trade in 100 share round lots. So the easiest way for a small investor to get into the stock market was actually through drip programs where you could buy small amounts of shares from the companies themselves and then let the dividends accumulate and reinvest them without paying those kinds of large transaction fees. you wouldn't have wanted to invest in a mutual fund in the 1960s because you were probably paying an 8% load to get into a fund like that. So if you wanted to be a savvy do-it-yourself investor, this was one of the only ways you could actually do that. Accumulate shares of companies that would pay dividends over time and just leave them alone. This was also a good way to minimize your taxes by also minimizing transactions and keeping them all on the buy side so you were never selling the shares themselves, but you were still able to get money out of them. I liken this style of investing to driving what were the most popular cars back in the day. You were talking about something like a Chevy Impala or its sister the Caprice Classic. The most popular cars for people to drive in the 1960s or 1970s or maybe a Gran Torino.

Mostly Voices [19:57]

How about you just hand over them keys to that Gran Torino? How the hell does everybody want my car? Well, I'm not surprised. Yeah, you don't know the half of it.

Mostly Uncle Frank [20:08]

But would you drive those today? Would you go out and buy that kind of vehicle today? No, you wouldn't. unless you were doing it for nostalgia purposes.

Mostly Voices [20:20]

And I'd like to leave my 1972 Gran Torino to Tao Van Lore. On the condition that you don't chop top the roof, don't paint any idiotic flames on it, and don't put a big spoiler on the rear end, it just looks like hell. If you can refrain from doing any of that, It's yours.

Mostly Uncle Frank [20:42]

Because we just have better ways of doing things today. More efficient ways of doing things today. So what has changed from that era in terms of investing? Why is this the age of steel for investing where we're talking about something that actually came out of the stone age of investing? Get off my lawn. And the biggest difference is that Transaction fees have gone away essentially. There are no transaction fees to buy stocks, funds, to buy and sell them. You don't need to get the dividend out in order to sell part of your holdings, even $10 worth of it, and use that so you can create your own dividend for zero cost. Get down, no money down, get down now. you can also invest in funds that are very cheap. They're not 8% loads or 2% annual fees or anything like that. We have index funds that are very cheap to hold and those are all kinds of specialized funds now too. Even dividend paying funds, which is not that great of an idea for other reasons which I'll get to. So you don't need to go to the trouble of trying to pick stocks that are both going to pay income and last forever because they might not last forever. And that does lead us to the drawbacks of that old style of investing. And one of them is that these companies don't last forever and they don't pay their dividends forever. You keep using the word. I don't think it means what you think it means. There is a lot of what you would call survivorship bias when people talk about this. It was like so and so invested in Coke and Procter and Gamble and see how that worked out and they still are paying dividends to this day. What about the ones that failed? That everybody was putting their money in to get those dividends and they failed? I'm going to link to an article in the show notes. about these kind of failures from a website, www.dividend. com, that advocates for this kind of investing. It is called the Biggest Dividend Stock Collapses of All Time. And these didn't occur that long ago.

Mostly Voices [23:13]

What's up, God? The money in your account, it didn't do too well, it's gone.

Mostly Uncle Frank [23:16]

Number one, General Motors went bankrupt. And it's gone.

Mostly Voices [23:20]

Number two, J.C.

Mostly Uncle Frank [23:24]

Penney suspended 20 cent dividend completely by 2012. And it's God!

Mostly Voices [23:28]

Number three, Kodak.

Mostly Uncle Frank [23:33]

And it's God! Number four, RadioShack. And it's God! Five, Barnes & Noble. And it's God! Six, Books-A-Million. And it's God! Seven, Washington Mutual. That turned out real well, didn't it? And it's gone. Used to be called the Walmart of banking, and it blew up. Number eight, the McClatchy Company, invested in a lot of newspapers founded in 1857.

Mostly Voices [24:01]

And it's gone.

Mostly Uncle Frank [24:06]

Who would have thunk that it would just die a miserable death at the beginning of this century? But it's gone, and its dividend is gone, and if you put your money in it, it's gone. Uh, what? It's gone. It's all gone. Number nine, Citigroup. In 2007, dividend payments for Citigroup were at an all-time high of 54 cents. And then by January 2009, they were slashed to one cent. And it's gone. Dividends all gone. Number 10, right aid. In 1999, Rite Aid share price began to tumble and its dividend was suspended completely. And it's God! Number 11, Bank of America. And it's God! Number 12, BP, British Petroleum. And it's God! Number 13, American International Group. And it's God! Number 14, Ford. And it's God! In the concluding paragraph of this article, the dividend stock world is littered with its fair share of disasters. The factors that led to the downturn of once mighty dividend payers vary greatly. Some companies simply failed to change the times, while others have incompetent management to blame. Still others took on massive risk that eventually came back to bite them. Most of these companies exhibited at least one of the following signs before their massive dividend cuts. A sharply falling share price or a lack of dividend raises over a long period of time. Great.

Mostly Voices [25:44]

We can just put that into your retirement account and make it go to work for you and it's gone.

Mostly Uncle Frank [25:47]

What does that tell you? That tells you that there is an inherent risk in this style of investing that one or more of your companies may blow up. Now if you look at the website that you just gave me, there's a couple of sample portfolios there that somebody Put together in the middle of 2020. They decided that it would be a good idea to invest in AT&T at that point in time. I think their investment is down about 30% right now. Surely you can't be serious.

Mostly Voices [26:14]

I am serious. And don't call me Shirley.

Mostly Uncle Frank [26:18]

And everything you read about AT&T is they have incompetent management and they don't know what they're doing. Do you really want to put a big chunk of your portfolio into an incompetently managed company?

Mostly Voices [26:26]

It's a trap!

Mostly Uncle Frank [26:29]

Because it pays a big dividend and you hope it will continue in the future. Forget about it!

Mostly Voices [26:33]

I don't think you do. I award you no points and may God have mercy on your soul.

Mostly Uncle Frank [26:41]

So dividend investing in individual companies relies on your ability to research these companies, to continually monitor these companies, and to pick ones that will go on forever. When you're gone, most people can't do that. That's why you're much better off with a fund. But even if you have a so-called dividend paying fund, that really is not also the best way to allocate money. And why is that? It's because things we didn't know, again, things we did not know in the past that we know now. And what are these things? With respect to dividends, dividend paying stocks is not a factor that is meaningful. You don't know why a particular stock is paying a dividend. It doesn't tell you anything about it in terms of factors that financial analysts use to divide up funds and determine which ones perform better or perform differently in different environments. Now, what are the real factors you should be focusing on? They are factors like value. They are factors like low volatility. They are factors like quality. A lot of those funds in those categories do pay dividends, but you are much better off focusing on something like that than on whether something pays a dividend or not because it doesn't tell you anything anymore. A lot of companies who have excess cash don't pay dividends. Now what they do is do share buybacks because they're more efficient. and you wouldn't want to exclude those companies just because they're not throwing out a dividend. So if you did want to follow a strategy like this, but is designed for the 2020s, you would be looking to buy funds that invest in value, low volatility and quality. Then you would take the dividends that those throw out because they are bigger than, say, Total Stock Market Fund. And then you supplement it by selling a little piece of it when you need to for your income. And that since that comes at zero transaction fees and is going to be a long-term capital gain, that is more efficient. That is better. That makes more sense than dividends. It just does. Don't be saucy with me, Bernaise. But why do people cling to this? It goes straight to one of our meta principles for this podcast. A foolish consistency is the hobgoblin of little minds, adored by little statesmen, philosophers, and divines. The reason people adhere to this is because somebody used it in the past or they have used it in the past. There's no other reason for it. You would not invent this style of investing today if there wasn't some history of it. Bow to your sensei. Bow to your sensei. Now, all of that being said, the plan that your relative has for managing his retirement investments is just fine. It's just fine for what he's doing. And the reason for this is largely has to do with taxes. Because if he's going to sell any of these long-held companies, he's probably going to have to pay significant taxes on that. And if he doesn't need the income, there's no point in selling that just to transfer it to something else. That's because when he dies, we're talking about in a taxable brokerage account, there'll be a stepped up basis for whoever inherits that. So you can effectively for go any taxation on those things by just holding on to them until you die. The other way to use them would be to send them off as charitable contributions, which is also advisable when you've accumulated something with a large capital gain on it, because then you get full credit for the entire contribution, but you don't have to pay any capital gains taxes on it. So I would not tell him to change what he's doing, especially if he doesn't need the money. I would disabuse him of the notion that his heirs are necessarily going to follow the same pattern because once they get those shares and they don't have that capital gains liability, their best choice is going to be to sell those immediately and invest in something else that's more efficient and makes more sense for where they are in their lives and their portfolios and is not the remnant of what somebody else was doing. If you wanted to make sure that that didn't happen, he's going to have to set up a more complicated structure involving a trust. And they do have things called Dynasty Trusts now that can last for a thousand years. But you need to have a trustee, you need to have management of this trust if you really wanted to have something that nobody else is going to touch and they were only going to be able to get the proceeds from the dividends off of. So it may not be worth all that. Honestly, I would seek on leaving a legacy in a different way. First of all, if you don't need the money, why don't you just give it to your heirs right now? So you can enjoy watching them enjoy it or being educated or buying a house or putting them in their IRA or whatever they want to do with it. But he could easily transfer those shares. Again, tax issues, can't help that. But the other important point to take in account here is to why it may be particularly inappropriate for him to say, Go for a risk parity style portfolio or a different style of portfolio. Remember, our goal here is to maximize projected safe withdrawal rates. If you go back to our first episodes, we want to maximize our projected safe withdrawal rates because we want to have more money for us to spend and live on and use now while we're alive in our retirements and not have it being stacked up for somebody else to use when we're dead. If your goal is to stack up more money for somebody else when you're dead, then you do want a more accumulation style portfolio, that is more stocks. Of course, you're going to have to reduce your safe withdrawal rate, but maybe that's fine because maybe you don't need the money. In the end, it's all about your goals. And you set your goals first, and then you construct your portfolio to meet your goals. It's a big mistake to choose a methodology for investing and then accept the goal that it was designed for. If you're doing that, you're letting your money dictate your life, as opposed to letting yourself dictate what your money does for your life. But enough of this mini ranting. Damn, Padre. You are persistent, aren't you? It's time for you to get off my lawn. So tenderly, your story,

Mostly Voices [33:43]

nothing more than what you see or what you've done, or what will be known. Standing strong, do you belong in your skin? Just wondering. And thank you for that email.

Mostly Uncle Frank [34:03]

Our next email comes from Anderson, and Anderson writes,

Mostly Mary [34:07]

Uncle Frank, I've enjoyed when you have analyzed specific funds and how you work through that process with David Stein's 10 questions. Would you be willing to do an episode on one of the common leverage funds that are discussed and used in your experimental portfolios, possibly UPRO or TMF? I am having trouble understanding how exactly these work versus a standard index fund such as VTI. As always, very much thanks for everything you do. My children will thank you in the future.

Mostly Uncle Frank [34:38]

Well, Anderson, that's a very good idea. And I've had that idea, but I haven't acted on it. I guess it's about time that I did. So maybe we'll take a break from emails next week and take a look at You Pro or TMF using the 10 questions or both. Thank you for reminding me. You are correct, sir.

Mostly Voices [34:59]

Yes. Last off.

Mostly Uncle Frank [35:03]

And last off, we have an email from My Contact Info and My Contact Info writes.

Mostly Mary [35:14]

Frank, in this podcast, Professor Lowe discusses his new book, which I mentioned in previous emails. I have followed his work and I think there are similarities between your approach and his view of markets. Food for thought? Check out Andrew Lowe, Finding the Perfect Portfolio：A Never-Ending Journey.

Mostly Uncle Frank [35:30]

And yes, I believe we just talked about this book in episode 150, so I won't elaborate too much here again. But the conclusion I drew from the book is that experts agree that The Markowitz idea of diversification is the holy grail of investing and ought to be applied in all circumstances, both within an asset class and across asset classes. And that it's exactly what we're trying to do here. Yeah, baby, yeah! So I'd have to say it's the best book written about this this year. Thank you for that email. Now we are going to do something extremely fun. And the extremely fun thing we get to do now is our weekly portfolio reviews of the seven sample portfolios you can find at www.riskparityradio.com. As always, we'll go through a review of the markets for comparison purposes. And this was another very volatile week. The S&P 500 was down 1.82% for the week. The Nasdaq was down 2.18% for the week. Gold was up. That's gold, Jerry, gold. 3.08% for the week. It was a big winner. I love gold.

Mostly Voices [36:46]

Long-term treasury bonds represented by TLT were down marginally,

Mostly Uncle Frank [36:50]

0.48% for the week. REITs represented by the fund R E E T were down 1.31% for the week. Commodities represented by the fund PDBC were up again. Up 1.81% for the week. Preferred shares represented by the fund PFF were down 2.09% for the week. And I just make one more note here. The small cap value fund that we invested in a number of these sample portfolios, VIOV was actually up last week. It was up 1.72% for the week, which is interesting. What you get out of that is that it does appear to be some kind of rotation going on from these growth stocks in particular the big large caps that have been leading the way for so long into more value kinds of shares. So even as the volatility goes on, you see this kind of rotation going on. And no, I'm not going to try to predict how long it's going to go on or where it's ultimately going. You can't handle the crystal ball. The other thing we saw that was interesting last week was on Friday afternoon you saw A flight to safety event. And this can happen when some kind of news hits the markets, some kind of black swan or other thing. In this case, it was the threat of Russia invading Ukraine. And you see what typically happens in a flight to safety event. And what happened was the stock market went down significantly, something like 500 points in the Dow. Treasury bonds went up significantly, a couple of percent. and the long-term treasury bonds. And then in this case, you saw gold go up substantially. Gold doesn't always do that. When the event is related to liquidity in markets, gold often will go down with stocks. But when it's some kind of existential crisis going on in the world, then gold frequently goes up. Now that only went on for an afternoon. Sometimes these events can go on for to months or more, you're talking about what went on in 2001 or in 2008. But it's almost like everybody stops doing what they were doing or thinking what they were doing was important and fixates on one particular thing. And then you see this flight to safety move by everybody all at once. Completely unpredictable as to when it's going to happen, how long it's going to happen. But the real point of having these kind of risk parity style portfolios is to be prepared for when that happens without knowing when We don't know.

Mostly Voices [39:28]

What do we know? You don't know. I don't know. Nobody knows.

Mostly Uncle Frank [39:32]

And so what we saw in most of our portfolios is very muted responses for the week and for yesterday in particular as well. So looking at our portfolios, they all seasons is our first one. This is our most conservative one. It's only 30% in stocks, 55% in treasury bonds, remaining 15% divided into golden commodities, the big winners last week. It was down to 0.31% for the week. It is up 8.01% since inception in July 2020. And on Friday, it was up 0.28%. Moving to our next three portfolios are kind of bread and butter ones. We have the Golden Butterfly. This one is 40% in stocks divided in the small cap value and a total stock market fund, 40% in treasury bonds, divided into short and long term, and then 20% in gold. It liked last week, given the move in gold, and so it was up 0.54% for the week. It is up 19.36% since inception in July 2020. Then we go to the golden ratio. This one is 42% in stocks, 26% in long-term treasuries, 16% in gold, 10% in a REET fund, and 6% in cash. It was down 0.16% for the week, so it really didn't move at all. On Friday it was up 0.01% and it is up 18.67% since inception in July 2020. Moving to our most complicated portfolio, the Risk Parity Ultimate. I won't go through all of these. I will note that the volatility fund in it was up 13.26% on Friday. But the portfolio overall was down 0.20% for the week. It was up 16.95% since inception in July 2020. Now we go to our experimental portfolios. These are the ones with leverage funds in them, and so they move around a bit more. And the first one is the Accelerated Permanent Portfolio. This is 27.5% in TMF, a leveraged bond fund. 25% in UPRO Leveraged Stock Fund, 25% in PFF Preferred Shares Fund, and 22.5% in GLDM. It was down 1.75% for the week. It was up 15.63% since inception in July 2020. And on Friday it was down 0.39%. Now moving to our most volatile portfolio, the aggressive 5050. This one suffered because it doesn't have any gold in it. which is one of its deficiencies, but it's good to see how that plays out and that's why we have it as a sample portfolio like that. So we have 33% in UPRO, the leveraged stock fund in this, and 33% in TMF, the leveraged bond fund, and then the remaining 34% is divided into an intermediate treasury bond fund and a preferred shares fund. It was down 3.06% for the week. It is up 18.46% since inception in July 2020. And moving to our last portfolio, our newest one, this one's only been around since July of 2021, the lever to golden ratio. This is 35% in a composite leverage stock fund that has the S&P and treasuries in it called NTSX, 25% in gold GLDM that helped it out, 15% in a reach called O Realty Income Corp, which also did alright last week. And then we have 10% in TMF Leverage, Treasury Bond Fund, 10% in TNA, a leveraged small cap fund. The remaining 5% is divided into VIXM, a volatility fund, and two cryptocurrency funds, BITQ and BITW. So it was actually up last week. It was up 0.17%, again it did not move too much. It moved 0.10% on Friday. during all the turmoil and is down 4.31% since inception in July 2021. But now I see our signal is beginning to fade. I think we will pick up this week with an analysis of UPRO or TMF. Put the emails on hold for a little bit. 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 put in your message in the contact form and I'll get it that way. If you haven't had a chance to do it, let's go to your favorite podcast provider and like, subscribe, give me some stars or review. That would be great. Okay. Thank you once again for tuning in. This is Frank Vasquez with Risk Parity Radio. Signing off.

Mostly Voices [44:28]

If I have to come back here again, it's gonna be ugly.

Mostly Mary [44:32]

The Risk Parity Radio show is hosted by Frank Vasquez. 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.