Mary and Others [0:01]

A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines.

Mostly Uncle Frank [0:10]

If a man does not keep pace with his companions, perhaps it is because he hears a different drummer.

Mary and Others [0:17]

A different drummer 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 Expect the unexpected. 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.

Mostly Uncle Frank [1:04]

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. 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 multi-million dollar portfolios over a period of years.

Mary and Others [1:43]

The best, jerry the best.

Mostly Uncle Frank [1:48]

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. What we do is, if we need that extra push over the cliff you know what we do Put it up to 11. 11, exactly. But whomever you are, you are welcome here. I have a feeling we're not in Kansas anymore. But now onward to episode 368. Today on Risk Parity Radio, it's time for our weekly portfolio reviews of the eight sample portfolios you can find at wwwriskparityradiocom on the portfolios page. I'm putting you to sleep. We'll also be doing our monthly distributions for October, which happened last week. Boring. But before we get to that, I'm intrigued by this how you say emails, and First off.

Mary and Others [2:57]

First off, we have an email from Andrew and Andrew writes Heya Frank, noting your use of TNA and UPRO as long-term buy-and-hold constituents of various leveraged reference portfolios. True apples-to-app apples requires a careful analysis and portfolio visualizer Bottom line. Each fund costs between 50 to 100 basis points versus its benchmark more or less the fee differential. Likely worth it, given the room a levered fund opens up for complementary diversifiers. The assumption here is a monthly rebalancing which also costs time and some transaction fees and slippage not modeled by Portfolio Visualizer. For what it's worth, here is the Portfolio Visualizer link. Hope this is helpful. Best Andrew.

Mostly Uncle Frank [3:56]

Well, thank you, Andrew, for your analysis and the link that you provided, which I will put into the show notes.

Mostly Uncle Frank [4:03]

Yes which I will put into the show notes.

Mostly Uncle Frank [4:07]

Yes, one thing you need to realize about Portfolio Visualizer today is that they have limited the amount of data available for backtesting specific ticker symbols, and that is limited to 10 years, so it's of very little use really.

Mostly Uncle Frank [4:21]

They do have the full data set available for asset classes, however, which you can still use for some of this. I would also take a look at the new analyzer called TestFull, which we've referenced before and I'll put again in the show notes. That will allow you to take things like the S&P 500 or the Russell, get a long data set, add some leverage to it and then also put in a drag factor, which you might want to do with something like this. I probably would not monthly rebalance any portfolio like this, simply because I think these work better when you rebalance them on optimization bands or rebalancing bandsans, where you wait until they go a percentage outside of a allocation and then rebalancing when they trip that. But there are many ways to set that up, either on Portfolio Visualizer or on the Testfolio site, and so if you are interested in those sorts of things, meaning you have a gambling problem then hopefully you can use some of these resources and thank you for your email.

Mostly Uncle Frank [5:44]

Second off. Second off, an email from Jeff. Here is the human heart which you can see is actually located in the center of your chest.

Mary and Others [5:57]

Oh, gnarly.

Mary and Others [6:00]

And Jeff writes Dear Frank and Mary, I have a portion of my portfolio in tactical allocation strategies that I follow on the website AllocateSmartly Strategies recommended by Meb Faber, gary Antonacci, among others. Some of these portfolios that I combine have backtests to 1970, with returns above the stock market, lower drawdowns and some with sharp ratios over one. What do you think of these? I've heard it said that managed futures have historically had returns between stocks and bonds and do well in drawdowns, as do these strategies. Are they really much different than managed futures? I use both managed futures and technical allocation. I've not heard you talk about these and want to know what you think. Thanks, jeff.

Mostly Uncle Frank [6:47]

Hey, you guys had shirts on when you came in here. There's something happened to them. Mom, come on, spicoli, just put the shirts back on. Well, I was not familiar with that website, allocate Smartly. I am familiar with all kinds of different kinds of trading strategies and since it was a subscription service, I did not join it, but I did look at the description on the page. It appears to be a dynamic allocation kind of strategy that they're talking about there, where you would actually change your baseline allocations based on some factors in the market, whether it be trend, momentum or something else.

Mostly Uncle Frank [7:34]

My general experience with these is that they're usually overfitted to the data, which means they've taken the past data and monkeyed around with a bunch of rules to match it up so it comes out with the best outcome. When you do something like that, you do have an overfitting problem and it is actually likely that the thing will underperform in the future. So you have to know whether something has been done on a prospective basis or on an historical basis. And then there's a general principle here that the more rules that you put into a system, the more likely it is to be some kind of curve-fitted thing or overfitted to the data, and this is why I think it'd be difficult to rely on these sorts of things as a long-term strategy, because you can't be confident that what they did in the past is likely to occur in the future. With a complicated strategy like the ones they described, these would also be pretty tax inefficient in a taxable account, especially if they're trading things every month and adjusting percentages.

Mostly Uncle Frank [8:42]

Now, what they are doing here is similar in some ways to managed futures, but actually different. Overall. It's similar in that they are looking at trends. It looks like they're looking at trends on asset classes but it is different in that they are making adjustments in a portfolio relative to other assets in the portfolio. So in any given month, you might have more or less of the stock market, more or less of gold, more or less of bonds, more or less of any particular asset that you are including in the portfolio. So a managed futures strategy is a much simpler idea. You're just looking at a market and deciding whether to be short or long based on some formula that is usually a trend following formula, and then you do that for 12 or 20 or 50 markets or however many you want to follow.

Mostly Uncle Frank [9:40]

I would say for me personally, I think this is getting a little bit too complicated and a little bit too uncertain, depending on what rules you are trying to implement here. I think it was Corey Hofstein who said that. Never underestimate naive diversification as a strategy, and that is the kinds of strategies we talk about here, where you have a basic setup of a portfolio with fixed allocations and then you are rebalancing to that fixed allocation periodically. If you are trying to change the allocations, you are obviously doing some kind of market timing, and so, instead of rebalancing by buying the low thing and selling the high thing, you may actually be buying the high thing and hoping it goes higher, or selling the low thing and hoping it doesn't recover. So I don't doubt that at least some of these strategies will outperform the market, at least in certain time frames and periods.

Mostly Uncle Frank [10:34]

Unfortunately, I don't doubt that at least some of these strategies will outperform the market, at least in certain timeframes and periods. Unfortunately, I don't think you can predict which one of these strategies is likely to be the best one going forward, and so you are probably adding some volatility to the portfolio when you're pursuing something like this. It'll either perform much better than a static allocation strategy or much worse, and you won't know which one it's going to be in the next decade or so. So I think I would just stick to using managed futures as just another allocation in a broader portfolio and not attempt to adjust the allocations based on some trading strategy. But I would be interested to see what kind of results you get if you're using these sorts of things and, probably more importantly, what sort of drawdowns are you likely to experience with any of these strategies, both in depth and in length? Interesting stuff, and I will provide that link in the show notes for anyone who wants to check it out. And thank you for your email.

Mary and Others [11:40]

Why don't you get a job, Mr Coley? What for you? Need money.

Mostly Uncle Frank [11:47]

All I need are some tasty waves, cool buzz and I'm fine. Next off, an email from Ron and.

Mary and Others [12:13]

Ron writes I'm getting not authorized recently when trying to download the podcast in Overcast. Any other reports of this?

Mostly Uncle Frank [12:22]

Well, ron, this email is from a couple months back, but no, I don't have any insight into what problems you might be having on Overcast with it. You can't handle the dogs and cats living together. Just so everybody understands the way podcasting works, and what I use is a podcasting service called Buzzsprout in my case, and so I will upload the podcast to Buzzsprout, which then distributes it to all of the regular places you find podcasts, whether that's Apple or Spotify or Overcast, and now they got rid of Google Podcasts and they go to YouTube. But sometimes there is some kind of delay or error between Buzzsprout and whoever they're uploading it to, and I don't always get notifications as to what's going on with that. Usually, they clear up by themselves at some point.

Mary and Others [13:15]

They just write it off. Write it off what?

Mostly Uncle Frank [13:23]

Jerry, all these big companies, they write off everything. You don't even know what a write-off is, do you? No, I don't, but they do, and they're the ones writing it off. Did have to go reset apple podcast at one point and had to reset it when they moved from google podcast to youtube, but typically I try not to be involved with that. That's why we use a podcasting service. What, what would you say, you do here? I have people skills. I am good at dealing with people, can't you understand that? So if you're having trouble getting the podcast on a particular platform, I would just switch to another platform, and YouTube seems to be very reliable if you don't have Apple Podcasts or Spotify. Sorry, I couldn't really answer your question, but hopefully that explanation helps and thank you for your email. It's not that I'm lazy, it's that I just don't care. Last off, last off. We have an email from Javier, really, and Javier writes Hi Frank.

Mary and Others [14:35]

First of all, congratulations for the great work you and Mary do. Like millions in this country, I'm an undocumented immigrant who faces discrimination and roadblocks every day in my search for a better life for my family. The investment vehicles are extremely limited to us. Since you're a lawyer and savvy investor, do you have any recommendations for us to invest for our retirements when we have no access to tax-sheltered retirement accounts and without being the traditional go-back-to-your-country mantra I hear daily? Thank you for everything you do, javier.

Mostly Uncle Frank [15:09]

Well, the short answer is you can always use a regular brokerage account to save and invest in. While there are now many different kinds of retirement accounts and special accounts in the US, traditionally people just used a regular brokerage account, whether they were in the US or not in the US, and most people use that anyway, at least as a supplement to their other retirement savings accounts. Now, if you are not a citizen or resident of the United States, it is very difficult to deal at all with US banks or US securities firms or brokerages, because federal law requires them to collect all kinds of information, and so many of them are just not willing to deal with it. Deal with it. I know Vanguard, for instance. If you move outside the US and you don't have a US address anymore. Even if you're a US citizen, they don't want to deal with you anymore, because it's too much work on the compliance side for those sorts of things.

Mostly Uncle Frank [16:06]

The basic solution, though, is just to open a brokerage account in another jurisdiction, and if you look at interactive brokers in particular, that is kind of a worldwide brokerage with sites set up not only in the United States, but in a number of other jurisdictions, I think, including Ireland and Singapore and several others, and most of those jurisdictions do not have the sorts of issues that you have with US law and they are much more accustomed to dealing with people from outside their jurisdictions opening up accounts there and they have a good website and they have an app and you can trade worldwide with them. I have an account with Interactive Brokers. It's here in the US, but they really are designed to be a worldwide operation. So I would check into that and hopefully that helps and thank you for your email.

Mary and Others [16:58]

And now for something completely different.

Mostly Uncle Frank [17:01]

And the something completely different is our weekly and monthly portfolio reviews of the eight sample portfolios you can find at wwwriskparityradarcom on the portfolios page. Just looking at what the markets did last week, it was not much for the most part. The S&P 500 was up 0.22% for the week. The Nasdaq was up 0.10% for the week. Small cap value, represented by the fund VIOV, was down 0.67% for the week. Gold was down fractionally it was down 0.29% for the week. Long-term treasury bonds looks like they were the big loser last week. Gold was down fractionally it was down 0.29% for the week. Long-term treasury bonds looks like they were the big loser last week. The representative fund VGLT was down 2.49% for the week. Reits, represented by the fund REET, were down 1.84% for the week. Commodities were the big winner last week. Commodities represented by the fund PDBC were up 4.23% for the week. Preferred shares, represented by the fund PFF, were down 0.33% for the week and managed futures, represented by the fund DBMF, were down 1.38% for the week. And all of that translated into marginally negative outcomes for these sample portfolios.

Mostly Uncle Frank [18:16]

And moving to those portfolios, first one's the All Seasons. This is a reference portfolio. That's only 30% in stocks. It's got 55% in intermediate and long-term treasury bonds and the remaining 15% in gold and commodities. It was down 0.74% for the week. It's up 9.55% year-to-date and up 11.21% since inception in July 2020. For the month of October, we are withdrawing from this portfolio at a 4% annualized rate, so that'll be $32 from cash. Most of these portfolios are distributing from cash because a lot of dividends were paid at the end of September. It'll be $304 year-to-date and $1,627 since inception in July 2020.

Mostly Uncle Frank [19:06]

Now moving to these bread-and-butter portfolios. First one's Golden Butterfly. Golden Butterfly is comprised of 40% in stocks in a total stock market fund and a small cap value fund, 40% in treasury bonds divided into long and short, and 20% in gold. This one was down 0.63% for the week. It's up 11.45% year-to-date and up 34.32% since inception in July 2020. We're distributing out of this one at a 5% annualized rate. That'll be $46 in cash for October and that's $432 year-to-date and $2,210 since inception in July 2020.

Mostly Uncle Frank [19:53]

Now moving to the next one, the golden ratio. This one's 42% in stocks divided into three funds 26% in long-term treasury bonds, 16% in gold, 10% in a REIT fund and 6% in cash in a money market fund, from whence we take all the distributions for this portfolio. It was down 0.7% for the week. It's up 12.76% year-to-date and up 31.98% since inception in July 2020. For October, we'll be taking $45 from the cash instead of 5% annualized rate. It'll be $420 year-to-date and $2,171 since inception in July 2020. $2,171 since inception in July 2020. All of these portfolios started at about $10,000.

Mostly Uncle Frank [20:46]

Next one's our risk parity ultimate. I'm not going to go through all 15 of these funds. We will talk about one of them in a second here. This one was the best performer last week. It was actually down only 0.08% for the week, so almost flat. It's up 15.83% year-to-date and up 23.60% since inception in July 2020. For October, we'll be taking $41 from the cash portion of it. That's at a 5% annualized rate. It'll be $382 year-to-date and $2,369 since inception in July 2020. Date and $2,369 since inception in July 2020.

Mostly Uncle Frank [21:22]

What was interesting about this one last week is that it has a 5% exposure to a fund called KBA that invests in Chinese A shares. You've been following the financial news. All those Chinese shares have been going up like gangbusters in the past couple weeks. Kba itself was up 17% last week and is up about 25 to 30% in the last two weeks. So we will probably be distributing out of that sometime in the future, since it's definitely the best performer of the year so far, since rebalancing this portfolio has been interesting to watch, at least recently, because we've seen spikes in various assets it holds, first in the cryptocurrencies earlier this year and now in these Chinese A shares, and these are very much uncorrelated with the rest of the holdings or have a very low correlation, but it does lead to some very interesting harvesting opportunities.

Mostly Uncle Frank [22:16]

Now, moving to our experimental Well, you have a gambling problem. These all involve leveraged funds in the portfolios, and so they are much more volatile than the first four I was talking about. First, one of these is called the Accelerated Permanent Portfolio. This one is 27.5% in a levered bond fund TMF, 25% in a levered stock fund UPRO, 25% in a preferred shares fund PFF and 22.5% in gold. It was down 1.98% for the week, it's up 17.82% year-to-date and up 7.98% since inception, july 2020. We are distributing $41 out of it for October. That's at a 6% annualized rate, and it is coming out of YouPro this month Not enough cash. That'll be $371 year-to-date and $2,552 since inception in July 2020.

Mostly Uncle Frank [23:20]

Next one's the aggressive 50-50. This is our most levered and least diversified of these portfolios. It was down 2.37% for the week. It's up 15.11% year-to-date but down 5.6% since inception in July 2020. We'll be taking $36 out of it for October. That's at a 6% annualized rate. It will come out of cash. It'll be $294 year-to-date and $2,530 since inception, july 2020.

Mostly Uncle Frank [23:51]

Next one's one of the newer portfolios the levered golden ratio. This one is 35% in a composite fund called NTSX, that is, the S&P 500 and treasury bonds levered up 1.5 to 1. 25% in gold, 15% in a REIT O, 10% each in a levered small cap fund, tna, and a levered bond fund, tmf, and the remaining 5% in a managed futures fund, kmlm. It was down to 1.86% for the week. It's up 14.85% year to date and down 0.61% since inception in July 2021. For October, we will be taking $35 out of it in cash or from cash. It's at a 5% annualized rate. That'll be $319 year-to-date and $1,486 since inception in July 2021.

Mostly Uncle Frank [24:45]

Now moving to our last one and newest one, the Optra portfolio. One portfolio to rule them all and yes, that's a joke. What do you mean? Funny, funny how this one is 16% in a levered stock fund Upro. 24% in a composite value tilted fund, a worldwide value tilted fund called AVGV, from Avantis, 24% in a strips treasury bond fund, govz, and the remaining 36% divided into gold and a managed futures fund, dbmf. It was down 0.79% for the week. It's up 6.25% year-to-date and since inception, which occurred in July 2024. We are distributing out of this at a 6% annualized rate. That'll be $53 from cash for October and $156 year-to-date and since inception in July 2024. And that completes our weekly and monthly reviews. And now I see our signal is beginning to fade.

Mostly Uncle Frank [25:54]

If you have comments or questions for me, please send them to frank at riskparityradarcom. That email is frank at riskparityradarcom. Or you can go to the website wwwriskparityradiocom. 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, overcast or otherwise, and like subscribe. Give me some stars, a follow or a view. That would be great, okay, thank you once again for tuning in. This is Frank Vasquez with Risk Parity Radio signing off.

Mary and Others [26:37]

Is that all sawdust? 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.