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 [0:39]

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. Yeah, baby, yeah! And the basic foundational episodes are episodes 1, 3, 5, 7, and 9. Some of our listeners, including Karen and Chris, have identified additional episodes that you may consider foundational. And those are episodes 12, 14, 16, 19, 21, 56, 82, and 184. And you probably should check those out too because we have the finest podcast audience available.

Mostly Voices [1:28]

Top drawer, really top drawer.

Mostly Uncle Frank [1:31]

Along with a host named after a hot dog.

Mostly Voices [1:35]

Lighten up, Francis.

Mostly Uncle Frank [1:38]

But now onward, episode 344. Today on Risk Parity Radio, we're just going to be tending to your emails. We have a eclectic collection here. Looks like I picked the wrong week to quit amphetamines. But after this, we'll almost be done with all of the emails from April. It's not that I'm lazy. It's that I just don't care. So if you sent me one in the last month or so, we will be getting to those in the next month or so. Looks like you've been missing a lot of work lately. I wouldn't say I've been missing it, Bob.

Mostly Voices [2:19]

And so without further ado, Here I go once again with the email. And?

Mostly Uncle Frank [2:27]

First off, we have an email from Dr. Anonymous.

Mostly Voices [2:31]

Aren't you the grandson of the famous Dr. Victor Frankenstein who went into graveyards, dug up freshly buried corpses, and transformed dead components into? Yes, yes, yes. And Dr.

Mostly Mary [2:48]

Anonymous writes, Hey, Frank and Mary, I thank you for an amazing podcast with such valued information.

Mostly Voices [3:06]

The question I have for you is, how do I start to find a lawyer for estate planning, trusts, wills, personal injury, malpractice, contract review, starting a business, or any need throughout my life? Are you speaking of the worm or the spaghetti? Why the worm, sir?

Mostly Mary [3:13]

Besides the normal Google search of lawyer for X in X state or friend of a friend, is there a database of lawyers where I can start searching? What is the best practice to reach out for representation? What questions should I be asking to see if we're a good fit? How do I know a bad versus a good lawyer? Any other pearls you could pass along to help? Thanks, Dr. Anonymous.

Mostly Voices [3:36]

Yes, it seems to me I did read something of that incident when I was a student.

Mostly Uncle Frank [3:44]

But you have to remember that a worm with very few exceptions is not a human being. Well, looks like I'm gonna have to go dig out my lawyer hat again for this one. I don't like your attitude. What else is new? It's funny to me how sometimes we just get questions about things that have nothing to do with the topic of this podcast but happen to be something I know something about anyway. I'm holding you in contempt of court. And I'm happy to answer at least some of those kinds of questions occasionally, especially in your case, because you gave to the Father McKenna Center. And for those of you who are unaware, we do not have any sponsors for this podcast, but we do have a charity. It is the Father McKenna Center, which serves hungry and homeless people in Washington, DC. I am on the board and am currently the treasurer. And if you donate to the Father McKenna Center, you get to go to the front of the email line, which is why Dr. Anonymous is right up there at the front of the email line.

Mostly Voices [4:46]

You know, I don't mean to embarrass you, but I'm a rather brilliant surgeon. Perhaps I could help you with that hump. What hump?

Mostly Uncle Frank [4:56]

And you can do that in two ways, either through The support page, which goes to Patreon, and you can donate there, or you can go directly to the Father McKenna Center and donate through the donation page. In any event, let me know if you do and you send your email in so I can move to the front of the line. Yes! But now getting to your eclectic question, which seems to be all about finding a lawyer for personal business. And affairs. You can't handle the Benaise. We could spend entire episodes on such questions, but we will not be doing that. But I will give you some pointers and tips, if you will. First off, lawyers are a bit like doctors in that they tend to specialize.

Mostly Voices [5:44]

Hearts and kidneys are Tinker Toys. I'm talking about the central nervous system.

Mostly Uncle Frank [5:55]

And that is who you are looking for because a specialist in one area That is essentially all they do. So they know it very well and can do it very efficiently and they are up on the latest changes in their particular practice area. So for example, if you're looking for a lawyer that does estate planning, trust wills, et cetera, you are going to look for somebody who is just in that practice and that's all they do. The same would be true of a lawyer that is involved in malpractice cases, whether they're a plaintiff side attorney or a defense attorney. Usually the defense attorneys are affiliated with insurance companies, but not always. And then you may also be looking for somebody who works in small business or a lawyer who is specialized in real estate transactions. Now, what kind of lawyer or law firm are you looking for? Generally, if you are an individual, you are looking for somebody at a very small firm. and hopefully somebody who has a couple of decades of experience. Because oftentimes the way legal careers run is lawyers come out of law school, they work for a larger firm or organization, and after some time, a number of them decide that they would prefer to work in a smaller environment. So they take their knowledge and skills from that and open their own firms or join up in smaller firms. And that is essentially the kind of lawyer you are generally looking for as an individual. Because you will not be able to pay somebody enough money at a large law firm to do this kind of work. And large law firms, for the most part, do not like to represent individuals because it creates more conflicts for them without creating lots of revenues for them. And that's just the business of law. That's the fact, Jack.

Mostly Voices [7:47]

That's the fact, Jack.

Mostly Uncle Frank [7:50]

Every time a law firm takes on a client, they are going to conflict themselves out of any work that is on the opposite side of the transaction or litigation from that client. And that is another reason that lawyers and law firms tend to end up specializing on one side or another. Either they do all defense work or all plaintiff's work. or all one particular kind of work for one particular kind of client, because it's more efficient and it reduces the possibility of having conflicts of interest. It's funny how we're required to take conflicts of interest very seriously in the legal profession.

Mostly Voices [8:27]

What do you mean funny? Funny how?

Mostly Uncle Frank [8:31]

Whereas financial services is a wild, wild west where there's almost no such thing as a conflict of interest.

Mostly Voices [8:39]

Because only one thing counts in this life. Get them to sign on the line which is dotted.

Mostly Uncle Frank [8:43]

But they don't have ethical rules to follow like lawyers do. At least not ones with any real teeth.

Mostly Voices [8:51]

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

Mostly Uncle Frank [8:55]

Anyway, where are you gonna find such people? Honestly, as you suspected, the best way to find lawyers in your area, and they should be in your location, particularly if they're doing things like trusts and estates work under state law is by word of mouth. And this works in a couple of different ways. First, you may ask your other professional providers. For instance, if you have a CPA who does your taxes, you may ask them whether there are law firms that commonly work with their clients on trusts and estates work and whether there's somebody that is used for insurance. If you are running a particular kind of business, you may ask other people in those lines of business who they use for their legal work. Because again, you're hoping to find somebody that is doing the same thing over and over again, and that's the kind of service you want to get from them. Now the other way of finding lawyers is by asking other lawyers. Surely you can't be serious. I am serious. And don't call me Shirley. Because typically lawyers, even in big firms, will often know somebody in a smaller firm or who can give a recommendation. Or they can ask around their big firm to say, Does anybody know somebody who does trust and estate's work in Mississippi or something like that? And so when I get requests, I will often ask a couple of different people whether they know somebody who does that kind of work. because lawyers are happy to pawn off or give away work that they don't want to do anyway or they don't know how to do anyway. So if you find a good trust and estates lawyer you like, for example, you could ask them as to who would they go to for a small business lawyer and they may know a couple of different people who do that kind of work in a different firm. It's very common, particularly in legal communities with a bunch of smaller firms. so I would probably use all of those kinds of methods before resorting to more broader searches. There is no one great place database of lawyers to search for lawyers. There are lots and lots of them, but a lot of them are pay to play and it's hard to know how well the information there is vetted. You can use those databases obviously to find lawyers who do a certain kind of practice who live near you. And you will find some firms that way and they all will have websites describing what they do. And so you can look at them from that perspective. Now, after you've found a few names, you literally just need to call them up. And if you were referred by somebody, say, I've been referred by so and so, and then start talking with them about whether it makes sense for you to retain them or not for whatever you want them to do. I would still probably do that by phone call these days. And in fact, a phone call probably works better these days than email, because email is always suspicious, and there are scams run by people sending out emails to lots and lots of lawyers to get them involved in some kind of scam or other activity. And so, I'd much prefer to get a phone call first, rather than an email. But an email works as well if you can't get a hold of them by phone for whatever reason. But you basically just want to set up a call and talk to them. These days I don't think you need to go to their office, but if you wanted to go to their office you could do that as well. Now, what kind of questions should you be asking them? Well, one question you should ask them is how do they charge, but I wouldn't be asking that as the first question. I would be asking them first, about whatever your problem is or whatever you want them to do. And if they know what they're doing, they'll be asking you a series of questions about what you want them to do to put it into the proper context of what can be done. Oftentimes, prospective clients will show up with ideas about what can be done which are not realistic. And a good lawyer will say, well, we really can't do that, but we can do something like that, which is this. and then hopefully if you're not in the middle of an emergency, you'll be able to interview more than one person. Make sure at the end of the call you understand the nature of their representation. For instance, a lot of trusts and estates lawyers will do work at a set fee for a particular package of stuff. A lot of other lawyers just work by the hour. And then it's possible if you are a plaintiff in a Personal injury case that they would work on contingency.

Mostly Voices [13:40]

Wilkie, your tobacco company has turned this beautiful specimen into a horrible, twisted freak.

Mostly Uncle Frank [13:48]

Who could love me? But you're not going to find contingency relationships outside of really that kind of work. After that, assuming you want to retain them and you've agreed that you're going to retain them, the lawyer will then send you a retention letter. which you will probably then countersign. You may also have to deposit some money as a retainer depending on the kind of work that they are doing for you. But all of that can be negotiated. And the smaller the firm is, the more flexible they're probably going to be on negotiations. All right, and your last question, how do you know a bad versus a good lawyer? Well, you can look them up. There are databases of people that have been Subject ethical complaints and other complaints usually through the bar association at the state bar of whomever you're talking about. So go ahead and use your search engines to find out whether there's something nefarious in this particular lawyer's past. The next question is are they attentive and do they follow a schedule? Because it's difficult to work with somebody who is not attentive and and is not good at following schedules. And that not only includes them, but their office, because oftentimes when you're working with a firm, you would hope and want them to delegate administrative kind of work to a paralegal or something who's just sending you documents or forms or things like that. So that's what I'm mainly looking for, is attention and diligence, because chances are, if they have a successful practice in whatever field they're in, They probably know that field pretty well and are very competent in it. The kinds of work that most lawyers do for individual clients is not rocket science.

Mostly Voices [15:40]

It's not creating new precedents or anything like that.

Mostly Uncle Frank [15:48]

And you would not believe how much of bad lawyering is just Simply missing deadlines or not filing something in the correct office or those sorts of obvious screw ups. But if you have somebody that's careful and diligent about that stuff, they're probably not going to have those problems. Not gonna do it.

Mostly Voices [16:14]

Wouldn't be prudent at this juncture.

Mostly Uncle Frank [16:17]

The other thing a good lawyer should be able to do is explain to your satisfaction what they are doing and why they are doing it, as opposed to doing something else. Because if they can't explain it, it might be a sign they don't really know what they're talking about very well. Generally, that's not a problem to run into unless you're dealing with somebody who's very young. But this is probably enough for lawyer questions on a podcast about portfolio construction. Looks like I picked the wrong weight to quit sniffing glue. Hopefully that helps. I think what might help the most is if you focus on getting, for instance, that estate planning lawyer first because that's something that just about everybody with any significant assets or a family is going to need. And if you start with that, that person can often recommend other kinds of lawyers who you may need.

Mostly Voices [17:21]

No more flying solo. You need somebody watching your back at all times.

Mostly Uncle Frank [17:25]

Hopefully all of that helps, or at least some of that helps. And thank you for your email. What'd you say?

Mostly Voices [17:33]

What? What'd you just say? What'd I say? I'm holding you in contempt of court. Second off.

Mostly Uncle Frank [17:46]

Second off, we have an email from Lance.

Mostly Voices [17:50]

Lance Latchley, secret chimp. And Lance writes. Long-term bond fund question.

Mostly Mary [18:00]

I see that VG LT has primarily 10 to 20 year bonds. whereas EDV has 20 to 30 year bonds. Also, during the last rate hike cycle, March 2022 to August 2023, VGLT was down about 25%, where EDV was down about 35%. So wouldn't the inverse be true? In other words, wouldn't EDV perform about 10% better than VGLT as the Fed starts to cut rates? Lance.

Mostly Uncle Frank [18:38]

Well, your assessment of the relative performance of these funds is basically correct.

Mostly Voices [18:41]

You are correct, sir, yes. And let's just review the kinds of funds we're talking about here.

Mostly Uncle Frank [18:48]

We're talking about standard long-term bond funds. The granddaddy of those is TLT. Vanguard also has a version called VGLT, which is essentially the same thing. I think Schwab's is called SCHQ, and there are other ones out there. But all of those are investing in long-term treasury bonds in a fund structure that has generally an average duration of just shy of 20 years. Often they're labeled as the 20-year bond fund, but the duration is actually like 17 or 18 years. Those are kind of a standard component of many portfolios and you will find some of those, for instance, in a total bond market fund. So they are a standard and basic piece of portfolio construction because they are the most diversified bond from stocks and also have enough volatility in them that they will move substantially during a recessionary crisis like a 2008 or a 2020. Now, there are also now a set of even longer duration bonds that are usually strips or zero coupon bonds. And the first one of those to come on the market in ETF form was EDV, which is a Vanguard fund. There are now two others. One is called ZROZ and one is called GOVZ. Now EDV is based on one index and the other two are based on another index. The other two are actually kind of more standardized in terms of the great scheme of things and indexes. And although ZROZ and GOVZ have a slightly higher expense ratio, I do find them to be better for this purpose than EDV is. And I've also found that EDV has sometimes some strange distribution characteristics at the end of the year where a large distribution is made in December that is often related to capital gains and just how they manage the thing. But anyway, in terms of portfolio construction, these do function almost like having some leverage in a long-term treasury bond fund. So as you've observed, it's generally about one and a half times the movement between, say, EDV or ZROZ and something like TLT or VGLT. So if VGLT goes up or down 2%, You'll usually see ZROZ or EDV go down or up 3%. And that can be useful either in a slightly leveraged portfolio or in something where you just want to hold less of the long bond component. So you can imagine that you could hold 20% of EDV or ZROZ and it would perform like 30% of VGLT in a portfolio. So it's kind of a space saver in that respect. On the other hand, it does add overall volatility of the portfolio. And so when you have a year like 2022 in particular, where stocks and bonds were both moving in the same direction, it will multiply the gains of the losses of the entire portfolio. And so that is the caveat mTOR part of the strategy there. So in the end, it does depend on what else you're putting in your portfolio and whether you are trying to construct something that is a particularly low volatility, like say a golden butterfly portfolio, or you're willing to take more risk and volatility like you might find in a kind of standard 60/40 or 70/30 kind of portfolio. But it definitely is another tool in the toolbox that you may find useful. That is the straight stuff, O Funk Master. But as always, make sure you're using the right tool for the job. Release thorns. And thank you for your email.

Mostly Voices [22:57]

He stands for justice. He has no beard. He's the agent of calm when trouble is near. Landslee, what you gonna do? It'll be a really big show.

Mostly Uncle Frank [23:12]

Next off, we have an email from John. Here's Johnny. And John writes, hi Frank.

Mostly Mary [23:24]

I recently put this list of gold ETFs together that may be of interest to other listeners when looking at gold investment choices. If you see a benefit for others, please pass it along. I'm a long time listener, love the show, John G. The best Jerry, the best Jerry, the best.

Mostly Uncle Frank [23:41]

Well, yes, there are a proliferation of gold ETFs out there these days. Unfortunately, that has caused them to reduce their expense ratios over time. I think we're down to ones with 0.09 and 0.1 as expense ratios. And I believe that is I-A-U-M and GLDM. are the cheapest ones these days, but there are a number of other ones out there. We have talked in the past about another one called PHS, that's spelled P-H-Y-S, that is designed as a trust structure to make its taxation more like any other thing with capital gains, because the taxation of gold and gold funds is kind of screwy. But that does have a higher expense ratio, and so I'm not sure it's really worth it. At least I haven't found it to be worth it. Anyway, I will provide your list to the listenership. It'll be in the show notes. And thank you for your email. I love gold.

Mostly Voices [24:46]

Last off.

Mostly Uncle Frank [24:50]

Last off, we have an email from Eli. Eli Porter.

Mostly Voices [24:54]

Would you like to come forward and share your thoughts with us?

Mostly Mary [25:01]

Thank you, Father. And Eli writes. Hello, Frank. I've been reading up on managed futures ETFs and listening to a few of the previous podcast episodes where you've discussed them. One risk that I'm concerned about that I haven't heard discussed is is a hedge fund blow up risk. As I understand it, hedge funds have fund lockups so that investors can't all try to cash out during a downturn. That allows the fund to stay invested rather than liquidating positions at the worst time. Have you thought about how the mechanics of that would work for an ETF? If the ETF now started to trade at a significant discount during a downturn scenario, would this pressure to unwind be even worse than a hedge fund due to the open market nature of the ETF? Thanks for the consideration and the great podcast, Eli. Well, fortunately for all of us, ETFs do not work like hedge funds and they do not work like their elder predecessor closed-end funds. That's not how it works.

Mostly Voices [26:05]

That's not how any of this works.

Mostly Uncle Frank [26:10]

They're actually quite an innovative structure because behind an ETF, there is always one or more authorized participants who facilitate the liquidity of the ETF and are how an ETF keeps its price very close to the net asset value of what's in it. The older structure, the closed-end fund, could vary substantially in price from the value of its contents and would either normally trade at a discount or at a premium. ETFs don't do that, so they give you almost exactly whatever index or other thing they are following. Their value on the exchange matches the value of the contents of the fund. Now these authorized participants are generally the large banks, the Goldman Sachs and the JP Morgans and Bank of Americas of the world. They are working behind the scenes with the ETF provider to actually be buying and selling the components of ETFs. and that's how they maintain their liquidity and relative price stability. And I will link to a couple of articles in the show notes talking about ETFs generally and about these authorized participants and what they do. So the answer to your question is it's highly unlikely that some ETF would trade at a significant discount for any length of time longer than say part of a day, I would say. and if there are problems in the actual mechanics of the trading on an exchange, they will shut the exchange down and fix the problem. And the larger and more liquid a particular ETF is, the less likely it is to have any kind of mechanical dysfunction like you're talking about here. It certainly does not have the characteristics of a hedge fund being unwound. That's just not how it works. That's not how any of this works.

Mostly Voices [28:05]

But I suppose if you had a very thinly traded ETF of strange

Mostly Uncle Frank [28:09]

things, you could have some problems, I could imagine. But it's highly unlikely. What you really should be thinking about is ETFs as just the most modern technology for a fund, and that its predecessors being things like mutual fund structures, closed-end fund structures, trust structures, like what GBTC, that Bitcoin trust was before it became an ETF. And if you understand ETFs as being just a better technology for these kind of fund structures, you realize that they're really not anything different. And in fact, they are designed to be more efficient all around. And that's why you should be using them when you can, as opposed to some older, more obsolete kind of technology.

Mostly Voices [29:03]

Yes, I love technology, but not as much as you, you see. But I still love technology.

Mostly Uncle Frank [29:10]

So I'd have to say there's no non-negligible blow up risk for ETFs because they're just not structured like hedge funds. Forget about it.

Mostly Voices [29:21]

And they have the authorized participants behind them.

Mostly Uncle Frank [29:25]

to make sure that they do not blow up.

Mostly Voices [29:29]

You need somebody watching your back at all times. So hopefully that clarifies all of that.

Mostly Uncle Frank [29:37]

Take a look at the articles in the show notes and thank you for your email. But now I see our signal is beginning to fade. I will be around this weekend, so there will be another podcast where we do our Weekly portfolio reviews of the seven sample portfolios. You can find it at www.riskparityradio.com on the portfolios page and talk about monthly distributions. But then I'm going to go on hiatus again and go visit some family and so we'll miss another couple of episodes after that. So are you going to get another job?

Mostly Voices [30:10]

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

Mostly Uncle Frank [30:14]

As we watch the emails continue to stack up, And speaking of emails, 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, put your message into a 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, a follow, 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 Mary [32:04]

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.