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 [0:37]

Thank you, Mary, and welcome to Risk Parity Radio. If you have just stumbled in here, you will find that this podcast is kind of like a dive bar of personal finance and do-it-yourself investing.

Mostly Voices [0:53]

Expect the unexpected. It's a relatively small place.

Mostly Uncle Frank [0:57]

It's just me and Mary in here. And we only have a few mismatched bar stools and some easy chairs. We have no sponsors, we have no guests, and we have no expansion plans.

Mostly Voices [1:11]

I don't think I'd like another job.

Mostly Uncle Frank [1:16]

What we do have is a little free library of updated and unconflicted information for do-it-yourself investors.

Mostly Voices [1:24]

Now who's up for a trip to the library tomorrow?

Mostly Uncle Frank [1:27]

There are basically two kinds of people that like to hang out in this little dive bar. You see in this world there's two kinds of people my friend. The smaller group are those who actually think the host is funny regardless of the content of the podcast. Funny how? How am I funny? These include friends and family, and a number of people named Abby. Abby someone. Abby who? Abby normal. Abby normal. The larger group includes a number of highly successful do-it-yourself investors, many of whom have accumulated multimillion dollar portfolios over a period of years. The best Jerry, the best. And they are here to share information and to gather information to help them continue managing their portfolios as they go forward, particularly as they get to their distribution or decumulation phases of their financial life.

Mostly Voices [2:40]

What we do is if we need that extra push over the cliff, you know what we do? Put it up to 11. Exactly. But whomever you are, you are welcome here.

Mostly Uncle Frank [2:57]

But now onward to episode 229. Today on Risk Parity Radio, we're just going to do what we do best here. And so without further ado, here I go once again with the email. First off. First off, I have an email from my contact info.

Mostly Voices [3:17]

Oh, I didn't know you were doing one. Oh, sure.

Mostly Uncle Frank [3:21]

And my contact info writes, glad you had a nice trip, Frank. Good to have you back.

Mostly Mary [3:24]

So your sons row. Cool. Great activity and great exercise. Do they have a favorite stationary rowing machine? In my humble opinion, the sound bites are wonderful.

Mostly Voices [3:36]

Yeah, baby, yeah!

Mostly Mary [3:40]

Finance is serious stuff, but some take it too seriously, especially those wearing suits. You can't handle the dogs and cats living together.

Mostly Uncle Frank [3:48]

Well, it's always good to be back. Yes! Even if we're time delayed here, I see you sent your email on November 2nd, and so this must have been our trip to Boston and to Maine. First to watch our sons row and then to have a little vacation in Acadia and parts thereby. The best Jerry, the best.

Mostly Voices [4:14]

And it was a most excellent little trip. Will Laddie Frickin' Die?

Mostly Uncle Frank [4:22]

It's funny how much rowing has occupied our lives, our families lives. Given that neither Mary nor I were rowers, our kids were always good athletes because they take after their mother in that respect. Well, what's there to eat?

Mostly Voices [4:37]

Knock it off, Napoleon. Make yourself a dang quesadilla. Fine. I'll be back tomorrow.

Mostly Uncle Frank [4:45]

Mary doesn't always like me to tell this, but she was a Division I athlete in track. and also an excellent swimmer and basketball player. But when our eldest son went to high school, one of his good friends was interested in rowing and didn't have anybody to go to learn to rowing camp with. And so our eldest went to learn to rowing camp. And eventually that became his primary sport. And then the other two followed. And so we had three rowers in high school and three rowers in college. Shirley, you can't be serious. I am serious. And don't call me Shirley.

Mostly Voices [5:23]

And they are still all involved in the sport in one way or another.

Mostly Uncle Frank [5:27]

Our eldest coaches both at the college level and the high school level. Oh, I get it. Let me try. As for the rowing machines, we've typically gone with the tried and true Concept 2. I can't speak to the various models, But our middle son did get another machine for Christmas from Santa Claus.

Mostly Voices [5:54]

Young America, yes sir!

Mostly Uncle Frank [5:58]

And so they've had a very large toy to play with over the past few days. But that's probably enough of family musings at holiday time here. We both know I'm training to become a cage fighter.

Mostly Voices [6:12]

Since Wayne Kipp, you have the worst reflexes of all time. Try and hit me, Napoleon. What? I said come down here and see what happens if you try and hit me. Such an idiot. I wanna see what your best move is. Jeez. I'm glad you enjoy the podcast and thank you for your email. Second off. Second off, we have an email from Mark.

Mostly Mary [6:41]

And Mark writes：Thank you Frank for your thoughts on JEPi. I agree with everything you said, especially the tax points, which are key. You may already know this, but I can be more specific about is this time going to be different with JEPi's 3.0 approach? It comes down to two important differences from the 2.0 generation. Unlike QYLD and others like it, JEPI isn't writing covered calls on the core holdings at all, the 80% low volatility equity holdings. This is a big difference from the 2.0 generation that caps the upside and has unlimited downside for the core holdings of the ETF. The 20% that is doing covered calls is using an equity linked note structure. And that is really the new innovation that is either going to work or not work. I admit this part of the fund is a bit murky slash unclear, which is never good. I am also not an ELN expert, but my understanding is that ELNs have a guaranteed return of principal, just like most notes and bonds do. So in theory, this offers the best of both worlds：access to the income from the covered calls with downside protection slash guaranteed return of principal for that 20% of the fund. If the ELN's actually work is described, it would seem to address the deterioration over time problem head on in a deterministic fashion. But it does sound too good to be true, which is part of why I wanted your thoughts on it. We will find out together if it's too good to be true over time.

Mostly Voices [8:17]

Hey, what do you say we both be independent together, huh?

Mostly Uncle Frank [8:24]

Well, for those scoring at home, Mark is referring back to episode 215 where he had asked a lengthy question about this buy right product that has been heavily marketed by JP Morgan called J-E-P-I. And I won't repeat all that because you can go back and listen to it if you want, but suffice it to say it's not something that I recommend for various reasons. And you should always be suspicious of Financial products that are heavily marketed, whether they are insurance products or exotic things like this in ETF form or what are known as structured products. Because only one thing counts in this life. Get them to sign on the line which is dotted. One of the more insightful things I've heard Paul Merriman say in the past was that his experience as a financial advisor that all of these types of products, if something is heavily marketed, what it's telling you is that there are some kind of fees built into it that would make it something that the purveyor would want to push out and heavily market because the fees obviously have to cover the marketing in addition to whatever fees are associated with managing the product itself. So the fact that a financial product is heavily marketed is always a red flag as to its fee structures. Now, as for the ELN structure, which also might be an exchange traded note structure, what you're basically talking about is a contract that the fund will have with a bank or set of banks or maybe the purveyor of the fund in this case, since it is a bank. And it's usually structured as some kind of a swap contract. So if a particular index goes up, then the bank may have to pay into it. If it goes down, then the bank may get paid by it. Those are the simplest kind of structures for these things. Now, those things can be efficient and is part of the reason they have become widely used. But they also can blow up if they're not properly structured. Where you would typically see something blow up is if it's investing in something like a three times commodity leveraged fund or something involving the volatility index. So there always is an additional risk there because you are not necessarily investing in the underlying index or investment, but could be investing in effectively a contract that is a derivative of that. These kinds of structures are also found inside of variable annuities.

Mostly Voices [11:20]

Watch out for that first step. It's a doozy.

Mostly Uncle Frank [11:24]

And they typically are designed to ensure that the purveyor of the product makes a sufficient return from the investors. It's all one big crapshoot, anyhoo. So again, it's kind of a natural disincentive as to why you might not want to invest in something like this just because of its complexity.

Mostly Voices [11:43]

Am I right or am I right or am I right? Right, right, right.

Mostly Uncle Frank [11:50]

Now getting back to this Jeppy product, yes it will be interesting to see over time whether it tends to decay or not like most of these kind of products have done in the past. I would guess that if it's more successful than that you'll see more copycats of it. But I would not be holding my breath. And thank you for that email.

Mostly Mary [12:18]

Last off, we have an email from Eric and Eric writes, Dear Uncle Frank, I have what I believe is an important question and which I have not heard you address on any of your previous podcasts. The audience for this podcast is do-it-yourself investors interested in risk parity portfolios. However, you, me, and probably most of your listeners are not just investing for ourselves, but for our partners. Should we expect our partners to carry on as do-it-yourself investors after we die? Bring out your dead. Bring out your dead. If not, what is the practical alternative? After reading all these letters, I am sure Mary is more than capable, but what about my Mary? Mary Mary, why you buggin'? And what if my Mary isn't interested in investing like I am, or she just doesn't pick up the concepts well enough? You said you'd changed. I've spoken my piece and counted to three. She counted to three. Do it. She counted to three. Should she pay someone to drink her milkshake because that is the next best choice? Should I enroll another family member like an adult child or sibling to handle the do-it-yourself investment approach in my absence? I would appreciate your thoughts on this important but often not discussed manner. Thank you, Eric Incensey.

Mostly Voices [13:45]

I'm living on the air in Cincinnati.

Mostly Uncle Frank [13:53]

Well, these are some very good questions and questions for which there is no one best or right answer because it depends so much on the people involved and their capabilities. In our situation, I have written instructions down on one of the spreadsheets that's attached to our net worth statement, and Mary knows where that is and has access to it. Now, if that were not the case, then yes, I think I would be looking at or looking for somebody else to trust with those responsibilities. And depending on what your family is like, it could be somebody else in the family, but it also could be somebody that you hire. I am also hopeful that now that my sons have been listening to this podcast, that they will feel capable. Our eldest one has been saving diligently in his golden ratio style portfolio, as well as his girlfriend's been doing the same. We went over those things a couple days ago. But he is thinking of using that to perhaps buy another house next year. Now unfortunately most of those people these days would be charging by some assets under management model or something else that is not desirable from the consumer's perspective. But I think this presents a big opportunity actually for people in the industry who are exploring fee for service models and have been rolling those things out. Because I know if I were to meet an untimely demise, we would still have our tax accountant, we would still have our estate's attorney. It's not like they would be going away and they would fulfill those roles and get paid for them by the hour. I don't see any reason why you could not find a financial professional to do the same thing other than they are constrained by the business models of the place they currently work at. That's not an improvement. Unfortunately, I do not have any specific recommendations to make to you at this time, but I'm hopeful that this part of the industry will further develop into something that is in the best interests of the financial consumers, such as ourselves.

Mostly Voices [16:15]

That is the straight stuff, O Funkmaster.

Mostly Uncle Frank [16:23]

It would seem to me to be a natural adjunct kind of business to the fee-for-service models I see some financial advisors rolling out these days. So maybe in a few more years' time, I'll have a better answer to that. It's definitely a good thing to be thinking about as you age and have more dependents. And thank you for your email. But now I see our signal is beginning to fade. Decided just to make it a short one today, given we're in the middle of a holiday week.

Mostly Voices [16:50]

It's not that I'm lazy, it's that I just don't care.

Mostly Uncle Frank [16:54]

And we'll be having longer ones involving year-end reviews coming up in the next week or two here. 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 your message into the contact form and I'll get it that way. If you haven't had a chance to do it, please go to your favorite podcast provider and like, subscribe, give me some stars or review. That would be great. M'kay? Thank you once again for tuning in. This is Frank Vasquez with Risk Parity Radio. Signing off.

Mostly Voices [17:38]

Looks like you've been missing a lot of work lately.

Mostly Uncle Frank [17:42]

I wouldn't say I've been missing it, Bob. Good one. Oh, that's terrific, Peter.

Mostly Mary [17:48]

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.