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 [0:37]

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 foundational episodes for this program. And those are episodes 1-3-5-7-10. and nine. One of our listeners, Karen, has also reviewed the entire catalog and has additional recommendations as foundational episodes. Ain't nothing wrong with that. And Karen's recommendations are episodes 12, 14, 16, 19, 21, 56, and 82, in addition to the first five that I mentioned. Now, I realize women named Karen get a bad rap these days, but I assure you that all of our listeners are intelligent, thoughtful, and savvy. Yes! And don't forget that the host of this program is named after a hot dog. That's not an improvement.

Mostly Voices [1:41]

Lighten up, Francis.

Mostly Uncle Frank [1:46]

But now onward to episode 194. Today on Risk Parity Radio, it's time for our weekly portfolio reviews. Of the seven sample portfolios you can find at www.riskparityradio.com on the portfolios page. And we also have our monthly distributions to talk about.

Mostly Voices [2:06]

It's time for the grand unveiling of money! But before we get to that, I'm intrigued by this, how you say, emails.

Mostly Uncle Frank [2:18]

And first off, we have an email from Visitor1109 and Visitor1109 writes,

Mostly Mary [2:32]

Frank, do you subscribe to the newsletter from Dunn Capital? They do a periodic podcast for investors who are interested in their commodity trend following products. It has been interesting to listen to them over the past couple years because their performance is often the opposite of the rest of the market. If you do get a chance to look at their site, please try to explain why their mutual funds perform so poorly, but their hedge fund is reported to perform well.

Mostly Uncle Frank [3:02]

Well, I actually do not subscribe to Dunn Capital's newsletter. I did go to their website, but was unable to get registered for whatever reason. There's something going on there, at least when I tried. I do listen to Top Traders Unplugged, which is their podcast. It's hosted by Niels Casterup Larsen. It's a Danish gentleman who runs their European operations.

Mostly Voices [3:38]

And if you are interested in trading, it is quite the listen.

Mostly Uncle Frank [3:42]

'Cause it's all about trend following strategies for people who are in the weeds about it. I had done some commodities trading on futures and options contracts way back in the 1990s before there was an internet to use for it. Used to call people on the phone to make trades. The money in your account, it didn't do too well. It's gone. But after I had children, it became too much work.

Mostly Voices [4:10]

I don't think I'd like another job. It's kind of a theme around here.

Mostly Uncle Frank [4:14]

And so I quit doing it. It's not that I'm lazy.

Mostly Voices [4:18]

It's that I just don't care.

Mostly Uncle Frank [4:22]

Now over the years, various outfits, including Dunn Capital, have created mutual funds and other structures to try to sell their trading prowess, essentially, to the public and accredited investors mostly. The reason most of those things have not succeeded is a combination of the difficulty of coming up with one strategy that works well and just the fee structures. The fees on those things are generally too high. And in recent times, I'm talking about the past 10 years, managed futures and trend following strategies have not worked very well. And so many of those funds, or most of those funds, have actually closed. Dunn Capital is one of the few that is really left. So I can't tell you specifically why their funds have performed badly, but it doesn't surprise me. The good news is, is that we are beginning to see some ETFs now created in the past few years that are low fee enough and seem to perform well in a managed futures friendly environment like the one we've been having for the past six or eight months or so. And so funds like DBMF that we've reviewed and COM, which is a commodities fund with a very simple trend following strategy, it's long only. Both seem to have held up well and done the job that you would want to see them do. And if you're looking for the episodes where we talked about those specifically, they're episodes 55, 57, and 99. What's important and nice about those kinds of funds is they are very uncorrelated with your stocks, bonds, gold, or anything else for the most part. And so they do make a nice addition to risk parity style portfolios. So I'm hoping in a few more years we can say that this problem has been solved, at least for do-it-yourself investors who want to have some exposure to managed futures. but don't want to be trading them themselves or have to deal with expensive funds and fees. And maybe Dune Capital will get into the mix with their own ETF. We'll have to wait and see and wait to see how much they want to charge for it. I am aware of another fund called KMLM that is also a managed futures fund that seems to have done Well, or similarly to DBMF recently. I think I first heard about that from our listener Alexei. His dudeness or duder... But that's another one out there to keep an eye on if you are interested in including managed futures in your portfolio. So this is an area I am watching. You have a gambling problem. And thank you for your email. Second off. Second off, we have an email from Keith, who may have actually been the visitor that sent the last email. These came off the website and sometimes they get a little bit garbled. And Keith writes? Love the show. I never miss an episode. Yeah, baby, yeah! Well, I'm glad you're enjoying the show, Keith. I enjoy the show too. Shirley, you can't be serious. I am serious. And don't call me Shirley. And I enjoy the emails because we have a very nice set of intelligent and savvy listeners who bring a lot of interesting things to my attention. Yes. So I learn a lot from you and I hope you're learning something from me. You are talking about the nonsensical ravings of a lunatic mind. Since I haven't plugged it in a while, we do have a support page that you can go to. We do not have sponsors or are looking for funding for the show. What we're asking you to do is donate to a charity called the Father McKenna Center, and it serves homeless and hungry people in Washington, DC. Full disclosure, I am on the board there and I am now the treasurer of that organization, at least for the next year. I don't care about the children.

Mostly Voices [8:50]

I just care about their parents' money.

Mostly Uncle Frank [8:55]

Anything that you can do there would be greatly appreciated and you can donate directly or you can sign up and become a patron on Patreon for the show and we will send the proceeds from that to the Father McKenna Center. Groovy, baby. And thank you for that email and your support.

Mostly Voices [9:14]

Okay, everybody, everybody chill.

Mostly Uncle Frank [9:17]

Last off. Last off, we have an email from Brad. And Brad writes.

Mostly Mary [9:25]

Hi, Frank. Thanks for all your work on the podcast. I'm slowly working my way through the entire archive. Your analyses of particular funds are especially useful and when it comes to garbage funds, I appreciate the fact that you don't pull your punches and cut through the marketing nonsense. I'd love to hear your opinion on the Cockroach Portfolio for Mutiny Fund. It looks like a modern take on the permanent portfolio thanks to the long volatility and trend following components and overall 2.2 times leverage. My main concern about this fund is the relatively high fee. And I'm curious whether this can be justified given the leverage involved and the fact that long volatility products that claim to avoid long-term decay do tend to be expensive. There is a management fee and a performance fee on the portfolio itself of about one in ten, I think. But if you dig a little deeper into the subscription agreement, it says that the break-even is around 6% after factoring in all the costs of the underlying funds. It sounds crazy to me that any portfolio could have an effective fee of over 6%, but all of their backtests are net of these total fees and yet still show performance superior to that of an all stock or 60/40 portfolio. Now that we have ETFs like COM, CTA, CYA, and TA-IL available, do you think that a DIY version of Cockroach could compete on an after-fee basis? I'm finding it very hard to model cockroach in Portfolio Visualizer.

Mostly Uncle Frank [11:20]

Would the SGCta index and CBOE Eureka Hedge Long Volatility Hedge Fund Index be reasonable long-term data sets to stand in for the modern commodity trend and long volatility ETFs? Well, Brad, I went and took a look at this link to the Mutiny Fund Cockroach Portfolio. I had heard about this on a podcast or two in the past six months or so, and it does seem to me that they listened to my first few episodes, basically episodes one, three, and five of this podcast, and used that information to construct this web page that you link to. And the idea from the portfolio came from there. It is a commercial preparation and it sounds like it's got really high fees and so I would be unlikely to invest in this sort of thing. I'm gonna enjoy watching it though to see how well it performs and compare it to our do-it-yourself risk parity style portfolios. But the most important thing you should read on that page you link to is the notes at the bottom. and note 3 says that their study is an academic exercise and it's not based on any actual trading. So I do not expect there would be any way to duplicate what they are doing and do a back test on it. I agree it does seem like they've taken a permanent portfolio and divided their portfolio into quadrants and then shoved various things into various quadrants. To me, this looks too complicated on its surface, and I think some of the assets that are in there are just unnecessary, particularly things like private equity. I don't see any reason or need that a do-it-yourself investor or even this kind of fund needs to include private equity, given the costs associated with it. They also do things like include four percent in Bitcoin and call that a defensive asset. That's not how Bitcoin has performed in its short history. In fact, it seems to be more of a risk on asset that is highly correlated with small cap growth stocks and the tech sector in particular. So to me, it does not look like they used a proper correlation matrix to construct this thing. and they also did not think about how much of each asset class that you actually wanted to have for a balanced portfolio based on the volatility and return characteristics of each asset. Because you do not want to divide your portfolio into straight four or eight parts for the most part. That usually does not work, particularly when you start adding things like volatility strategies, managed futures, and cryptocurrencies. But I will be watching this with great interest. Perhaps they will put out an ETF version like RPAR. But in any event, it's too expensive and too complicated, at least the way they've presented it so far. I think is do-it-yourself investors, what we want to be thinking about is how can we take the raw ingredients and combine them ourselves into low-cost portfolios that are maximally diversified in accordance with the Holy Grail principle.

Mostly Voices [14:38]

Go and tell your master that we have been charged by God with a sacred quest.

Mostly Uncle Frank [14:46]

It is good to see this though, because it does show us where I believe portfolio construction is going away from simple stock and bond combinations. to use all of the assets that are available to the extent you can find them in lower cost ETFs. And that is why I say this is the age of steel as far as investing is concerned.

Mostly Voices [15:11]

There's no need to fear, underdog is here.

Mostly Uncle Frank [15:16]

Because we have much better opportunities to construct these kind of portfolios and do it ourselves. I view all of these commercial preparations as something to watch and compare to your own results, because my experience is you can do better as a do-it-yourself investor constructing risk parity style portfolios than the commercial preparations that are available, including RPAR, which we talked about in episodes 31 and episode 142. So you might want to go give those a listen, because we talk more about commercially prepared constructions there. But I would not spend too much time trying to model this thing yourself, because God knows what they actually used for their academic study. Forget about it! And thank you for that email. Now we're going to do something extremely fun. And the extremely fun thing we are about to do is our weekly and monthly portfolio reviews of the seven sample portfolios you can find at www.riskparityradio. com on the portfolios page. I think we just finished the best month for the stock market since sometime in 2020, and last week was quite good too. The best, Jerry, the best. Just reviewing what happened there, we saw the S&P 500 up 4.26% for the week. NASDAQ was up 4.70% for the week. Gold was up, too. I love gold.

Mostly Voices [16:57]

Gold was up 3.63% for the week.

Mostly Uncle Frank [17:01]

Treasury bonds, represented by the fund TLT, that's long-term Treasuries, took a break last week and they were down 0.94% for the week. Do you expect me to talk?

Mostly Voices [17:14]

No, Mr. Bond, I expect you to die!

Mostly Uncle Frank [17:17]

REITs represented by the fund R-E-E-T were actually the big winner last week. They were up 6.23% for the week. Commodities represented by the fund PDBC got back on the winning streak too. They had been mostly down for the past couple of months, but they were up 4.69% last week and preferred shares represented by the fund PFF were up 2.42% for the week. And now moving to our seven portfolios, the first one is this reference portfolio, the All Seasons that is overly conservative. It's 30% in total stock market fund VTI, 55% in long and intermediate treasury bonds, and then the remaining 15% is divided into gold, and commodities, GLDM and PBDC. It was up 1.49% for the week. It is down 11.93% year to date and is up 0.15% now since inception in July 2020. As far as our distribution for August, we are distributing out of this at a 4% annualized rate, which translates into $31 that we will be distributing from it for August. We'll take that from cash since there is $46 left in the portfolio and that will total $266 year to date and $827 since inception in July 2020. Moving to our three bread and butter portfolios that are more comparable to a 60/40. First one is Golden Butterfly. This one's 40% in stocks divided into Total stock market fund and a small cap value fund. It's got 40% in treasury bonds divided into long and short and 20% in gold, GLDM. It was up 2.07% for the week. It is now down 9.3% year to date. Not too bad in a year like this. The worst year in the last 50 some, at least the worst six months. since about 1970 or something like that. And it is up 12.66% since inception in July 2020. We are distributing out of this at a 5% annualized rate, and so that will translate into $42 for August. We will take it from VIoV, which has been the best performer since we rebalanced last week. Should have been more careful in rebalancing because then we would have had some cash left over and not have to sell another fun to make the distribution. But anyway, that will give us $357 year to date from the distribution and $1,138 since inception in July 2020. It's also notable that this portfolio has gone back above $10,000 where it started and now has a balance of $10,170. Moving to our next portfolio, the Golden Ratio. This one's 42% in stocks in three funds. that include large cap growth, small cap value, and a low beta or minimum volatility fund. It's 26% in long-term treasuries, 16% in gold, 10% in a reit fund, REET, and then 6% in cash. It was up 2.32% for the week, is down 12.52% year to date, not too shabby all things considered. It's up 10.92% since inception in July 2020. For August we'll be taking $42 out of it. We always distribute out of cash for this portfolio. It's at an annualized rate of 5%. And we will have distributed $355 year to date and $1,136 since inception in July 2020. Our next portfolio is the Risk Parity Ultimate, which we discussed in detail last week, so we won't go through all the 15 funds that are in it. But it was up 2.22% for the week. It is down 15.8% year to date. It is up 6.38% since inception in July 2020. We are distributing out of this at a 6% annualized rate, and so it'll be $47 and it will also come out of the small cap value fund VIoV for this portfolio, given its performance last week. We will have distributed $409 out of this portfolio year to date and $1,329 since inception in July 2020. Now moving to these experimental portfolios that we have here that involve leveraged funds. and can be quite volatile.

Mostly Voices [22:19]

You never know what you're going to get.

Mostly Uncle Frank [22:22]

Well, not so much this past week. First one is the Accelerated Permanent Portfolio. This one is 27.5% in a leveraged bond fund, TMF, 25% in a leveraged stock fund, UPRO, and then we have 25% in PFF, a preferred shares fund, and 22.5% in gold, GLDM. It was up 2.78% for the week. It is down 27.77% year to date and is down 2.37% since inception in July 2020. We are now distributing out of this portfolio at an annualized rate of 6%. So we'll be taking $41 out of it for August and we will take it out of the Preferred Shares Fund PFF, which has been the best performer recently. We will have distributed $477 out of it year to date and $1,700 out of it since inception in July 2020. Moving to our next portfolio, the aggressive 5050. This one's 50% stocks and 50% bonds. It's also the most leveraged and least diversified of these portfolios.

Mostly Voices [23:31]

Tony Stark was able to build this in a cave. With a bunch of scraps.

Mostly Uncle Frank [23:40]

So it's got in at 33% in the leveraged stock fund, UPRO, 33% in the leveraged bond fund, TMF, and the remaining third is divided into a preferred shares fund, PFF, and an intermediate treasury bond fund, VGIT. It was up 2.85% for the week. It is down 34.4% year to date, still smarting. is down 4.61% since inception in July 2020. One thing you should realize about this portfolio is it was the best performer of the lot at the end of 2021 and has now sunk to be the worst performer of the lot. And that's all due to the leverage in it and the volatility it causes. So we will be distributing out of this at a 6% rate for August. We'll be taking $39. It's going to come out of PFF, the Preferred Shares Fund. And we will have distributed $467 year to date and $1,713 since inception in July 2020. All of these figures are also reported on the website if you want to look them up later at your leisure.

Mostly Voices [24:49]

Well, Ladi, frickin' da!

Mostly Uncle Frank [24:53]

And now going to our last portfolio, which has only been around since July 2021, this is the levered golden ratio. It is 35% in a composite fund called NTSX, which is S&P 500 and treasury bonds, and is levered up 1.5. And it's got 25% in gold, GLDM, 15% in a REIT fund, O. 10% each in a leveraged bond fund, TMF, and a leveraged small cap fund, TNA, and the remaining 5% is divided into a volatility fund, VIXM, and a Bitcoin fund, GBTC, at 3% and 2% of the portfolio respectively. It was a big winner last week of these portfolios, up 3.17% for the week. It is down 16.44% year to date. and is down 11.83% since inception in July 2021. We will be distributing out of this at a 5% annualized rate, which will translate into $34 from cash for August. There's enough cash to pay that. Just enough. We will have distributed $390 year to date and $687 since inception in July 2021. And that concludes our weekly and monthly portfolio reviews. We'll be making our distributions next week. But now I see our signal is beginning to fade. 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 there and I will get your message that way. We are about three weeks behind on the emails, but we will work to see how we can get caught up a little bit this week. If you haven't had a chance to do it, please go to your favorite podcast provider and like, subscribe, give me some stars. A 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 [27:39]

Here we go, baby. Yeah, hookah, hookah, hookah. I love you, katoons. Always have, always will. Yeah. Baby. I'm Alive, Rocking and Rolling. We love you. Elvis has just left the building.

Mostly Mary [28:09]

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.