[0:01]

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.

Mostly Uncle Frank [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.

Speaker 2 [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. It's a relatively small place. 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.

[1:11]

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

Speaker 2 [1:13]

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

[1:23]

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

Speaker 2 [1:26]

tomorrow. So please enjoy our mostly cold beer served in cans and our coffee served in old chipped and cracked mugs, along with what our little free library has to offer. Welcome Of the eight sample portfolios you can find at wwwriskpartyradiocom on the portfolios page, and just a preview of that.

Mostly Uncle Frank [2:10]

I love gold.

[2:14]

But before we get to that, I'm intrigued by this how you say Emails.

Speaker 2 [2:22]

And First off. First off, we have an email from Lucas, and Lucas writes.

Mostly Uncle Frank [2:33]

Hey, frank and Mary, Thanks for all you do for the finance community. Along with the unhoused vulnerable population in the DC area, I made my first donation to the Father McKenna Center today.

[2:45]

Yes.

Mostly Uncle Frank [2:46]

Quick question are you aware of a list or database of tickers that have the longest history for backtesting? I know Testful has some presets, but looking for a wider variety to get the best test possible.

Speaker 2 [3:04]

May the force be with you, lucas. The force is strong in this one. Well, I see Lucas has managed to move his email to the front of the line. Ramming speed, ramming speed. Now, how did he do that? Pray tell.

Speaker 2 [3:19]

Well, as most of you know, this podcast does not have any sponsors, but we do support a charity. It's called the Father McKenna Center and it serves hungry and homeless people in Washington DC. Full disclosure I am on the board of the charity and am the current treasurer. But the way this works is, if you donate to the charity and let me know in your email, I will move your email to the front of the email line. There are a couple ways you can do that. One is to go to the support page at wwwriskparadisecom and you can join our patreon for the monthly donors and all that money is collected and sent to the father mckenna center. Or you can just donate to the father mckenna center directly through their donation page, which may be more convenient for you. For tax purposes, we also accept shares of stock, qualified charitable distributions and just about anything else that you want to give, including food and clothing. But anyway, if you give and you let me know in your email, I will move your email to the front of the line. But now let's get to that email.

Speaker 2 [4:34]

Well, there are a number of places that you might find data and ticker symbols. The most robust is actually the Fama French database that is kept by Ken French and is used by all the academics and has been imported into various tools and databases. One of our listeners just recently pointed us to the Bogleheads database that was referenced in episode 370. If you get the Early Retirement Now toolbox from Early Retirement Now, there's data in there that goes all the way back to 1871, although the more robust data really dates to 1926. Now, most of the data I'm talking about is limited to asset classes and the S&P 500 and things like 10-year treasury bonds. It's much harder to find ticker symbol data and it's very varied. Portfolio Visualizer used to be the best place to do that, but now you have to pay for it if you want to get all of their ticker symbol data.

Speaker 2 [5:38]

And it did go back quite a ways from any of the tickers back into the 1980s for a few things, and maybe the 1970s for a few more, but right now, the free version of that only will let you use 10 years of ticker symbol data, so it's not very useful anymore for that. It still has longer data sets going back to the 1970s for a lot of asset class data, and I know more robust data sets exist, but they're generally behind paywalls, because constructing old data, particularly prior to the 1970s, is actually a difficult task. In the end, though, I actually think it's better to focus on the broader asset class data, because when you are doing portfolio construction, you really aren't focused on particular tickers. For the most part, what you are focused on are asset classes represented by that kind of data, and then which tickers you use is a later decision, because, as we know, there are newer funds essentially doing the same thing as older funds, but doing it better, either because they're in an ETF form now, or they're just cheaper, or they just have some kind of better construction method involved the early 2000s or the 1970s for a particular ticker symbol. You're never going to be quite sure as to whether that backtest is really worth anything or not.

Speaker 2 [7:20]

The kind of ad hoc solution that I've used for this problem is generally just to take whatever idea that you are trying to test and test it on as many different calculators and data sets as you can find, because what you're looking for are consistent results, even if they aren't exactly the same, and in most cases you're simply comparing one portfolio to another portfolio on some kind of metric. That's why I really also like the Portfolio Matrix tool at Portfolio Charts. Also like the portfolio matrix tool at portfolio charts, because it just gives you that functionality of comparison all in one place and you can put in your portfolio in asset classes and then compare it to a whole bunch of different ones. Now it is limited, however, to data past 1970 and it does not include things like managed futures. For that you're going to have to go to Testfolio, which is the best source for that right now, because you have at least data back to the 1990s there.

Speaker 2 [8:12]

I am aware that Cliff Asness at AQR has done some kind of 100-year study of managed futures, but I don't think they're using specific ticker symbols and I'm not sure exactly how they constructed their database for that. This is actually a big topic of academics finding data, cleaning up data and making sure you're using the best data available. Prior to the work of Fama and French, this was an extremely difficult or impossible task, and a lot of the work they actually did was simply putting together long data sets, which, fortunately, you can still go to Ken French's website from Dartmouth and find all kinds of old data there. It's just not going to be in ticker symbol format and it's not that user-friendly. It's really designed to be downloaded and then stuck into some kind of other calculator that you're using with it. Anyway, sorry I couldn't give you a more definitive answer to this question, but hopefully I've given you some useful ideas and thank you for your email.

[9:17]

Luke trust me.

Mostly Uncle Frank [9:22]

second off second off, we have an email from hanalore gee, I think y'all swelling off and hanalore writes what would be the best location brokerage ira roth for a gold fund, given tax?

Speaker 2 [9:39]

this is gold, mr barney well, it's really going to depend mostly on where you have the most space. But if you have space in a traditional IRA after you've stuffed all your bonds in there, then that is also a good place to stick an allocation to gold. The next place you would probably stick it is in the regular brokerage account and then in the Roth IRA. The reason I put the Roth IRA last on that list is gold is historically not a growth asset. It's a defensive asset. Now I realize that this year it's better than all the growth assets and it's up 32% on the year, but most years are not like that.

[10:22]

Forget about it.

Speaker 2 [10:23]

Now you've also noted that gold has some peculiar tax rules that apply to it, and we talked about those back in episode 303 and linked to some articles back there. If you want to read about it I'm not going to try and explain it too carefully on a podcast because I always misstate something but the way it ends up working is that it can be taxed up to your marginal tax bracket, but no higher than 28%, and that's a long-term capital gain. Or if it's held for less than a year, then it's taxed at your ordinary marginal tax bracket as ordinary income. One thing you're allowed to do with it is tax loss harvested against something else, so that if you have a gain in gold and you're able to tax loss harvest something else, you can offset those two things, and I'll link to an article in the show notes that talks about that.

Speaker 2 [11:16]

There's a recent Investopedia article that came out that I thought was good about the discussion of this, and there are different funds that have different tax treatment depending on whether they're holding physical gold or they're holding some kind of futures contracts. But again, this is in the articles that I've posted before and I'm not going to try and regurgitate all that here. The truth is that most of the time you're really not buying or selling much gold in a portfolio. This year is going to be an exception for many people and you can see that that a lot of months we are selling gold out of our sample portfolios to support the distributions, and when we did our rebalancings we were selling gold, not buying it. But now I'm doing a bit of rambling.

[12:02]

One trick is to tell them stories that don't go anywhere, like the time I caught the ferry over to shelbyville.

Speaker 2 [12:10]

I needed a new heel for my shoe so I would use that traditional ira if you have room, and if you don't, then you can probably manage it just fine in an ordinary brokerage account. I would probably only use the roth if you had lots and lots of room in the Roth account. Otherwise you probably want to be putting your equities in there. Hopefully that helps and thank you for your email.

[12:36]

So I decided to go to Morganville, which is what they call Shelbyville in those days. So I tied an onion to my belt which was the style at the time. Now to take the ferry cost a nickel and in those days nickels had pictures of bumblebees on them. Give me five bees for a quarter, you'd say. Now, where were we? Oh yeah, the important thing was that I had an onion on my belt which was a style. At the time. They didn't have white onions because of the war Last off.

Speaker 2 [13:15]

Last off, we have an email from Joe.

[13:18]

No, Joe Joe.

Mostly Uncle Frank [13:36]

And Joe writes. And joe writes hi, frank, I'm interested in your optra portfolio. First time I've considered levered funds. I believe the back test linked on your portfolio page overstates performance because of how you model UPRO Using SPYTRL equals 3, ampersand E equals 0.92 at 16%. Compares much better to actual UPRO performance. It also eliminates the need for a negative cash position, which I feel is more relevant to leverage via margin loans than a levered fund. Here's the testfulio backtest showing the difference. Thanks for everything you do for your listeners, joe.

[14:15]

You are correct, sir.

Speaker 2 [14:17]

yes, Well, thank you for doing this work, joe, and thank you for the link. I think this is very helpful for modeling purposes. Link. I think this is very helpful for modeling purposes. Testfolio is a relatively new tool and has a number of features on it that I haven't really even figured out how to best use, and it seems like you have, at least with respect to this. But this is why I always like to say that we have the finest podcast audience available.

Mostly Uncle Frank [14:49]

Top drawer, really top drawer.

Speaker 2 [14:52]

Because you guys are really on the ball in a lot of ways and really help me make this a better podcast.

[14:58]

That's the fact, Jack. That's the fact, Jack.

Speaker 2 [15:03]

So thank you for all you do and thank you for your email.

Speaker 2 [15:08]

Now we're going to do something extremely fun, and the extremely fun thing we get to do now is our weekly portfolio reviews of the eight sample portfolios you can find at wwwriskpartyradiocom on the portfolios page. And it was a good week for these portfolios On the portfolios page. Nano was a good week for these portfolios. Just looking at what the markets did last week, the S&P 500 was up 0.85% for the week. No-transcript. Small Cap Value had a banner week last week. Our representative fund, VIOV, was up 2.66% for the week.

[15:43]

I'm telling you, fellas, you're going to want that cowbell.

Speaker 2 [15:48]

Gold was also up again.

Mostly Uncle Frank [15:50]

I love gold.

Speaker 2 [15:54]

It's up over 32% this year.

[15:59]

And that's the way. Uh-huh, uh-huh, I like it.

Speaker 2 [16:02]

Which of course means it's attracting a lot of interest from the hoi polloi.

[16:08]

All my life I've been in love with its color, its brilliance, its divine heaviness.

Speaker 2 [16:15]

If you are investing in gold, please do it like a professional. Use ETFs. Do not be running around buying gold bars from Costco or gold coins from wherever.

[16:27]

I welcome any enterprise that will increase my stock.

Speaker 2 [16:31]

And treat it like a long-term holding, like most other things in your portfolio. It can work well if you're willing to hold it for a decade or more. But if you are going to be jumping into it whenever it's on a run, like it is this year, and then jumping out of it when you feel bad about it, like you probably would have 10 years ago, then it's not for you. Forget about it. But I think if you have a little discipline and I know my listeners do then it probably is for you, at least in your decumulation portfolio.

[17:02]

You need somebody watching your back at all times.

Speaker 2 [17:06]

Anyway, moving along, long-term treasury bonds, represented by the fund VGLT, were up 0.14% for the week. Reits, represented by the fund REET, were up 2.00% for the week. Commodities were the big loser last week, I think the price of oil fell. Our representative fund, pdbc, was down 4.13% for the week. Preferred shares, represented by the fund PFF, were up 0.69% for the week and managed futures, represented by the fund DBMF, were up 0.11% for the week. Moving to these sample portfolios, first one's this reference portfolio, the All Seasons. It's only 30% in stocks. It's got 55% in intermediate and long-term treasury bonds and the remaining 15% divided into gold and commodities. It was up 0.25% for the week. It's up 9.44% year-to-date and up 11.11% since inception in July 2020.

[18:05]

The numbers all go to 11.

Speaker 2 [18:09]

It really does go to 11, doesn't it? These go to 11. Now moving to these bread and butter kind of portfolios. First one's Golden Butterfly. This one is 40% in stocks divided into a total stock market fund and a small cap value fund, 40% in treasury bonds divided into long and short and the remaining 20% in gold GLDM. It was up 1.28% for the week. It's up 12.93% year to date and up 36.1% since inception in July 2020.

Speaker 2 [18:38]

Next one's Golden Ratio this one is 42% in stocks in three funds, including some large cap growth and some small cap value. It's got 26% in long-term treasury bonds, 16% in gold, 10% in a REIT fund and 6% in a money market fund. It's up 1.28% for the week. It's up 14.11% year-to-date and up 33.56% since inception in July 2020. Next one's the risk parity ultimate, our kitchen sink portfolio. I'm not going to go through all 15 of these funds, but that 5% allocation to that Chinese A-shares fund was very active again this week. It was up 5% on Friday alone. All that translated into this portfolio being up 1.25% for the week. It's up 16.16% year-to-date and up 23.93% since inception in July 2020. Now moving to these experimental portfolios.

Speaker 2 [19:37]

Look away, I'm hideous which didn't look so hideous this time around. These all involve leveraged funds. First one's the accelerated permanent portfolio. This one is 27.5 percent ina levered bond fund, tmf, 25 percent in a levered stock fund, upro, 25 percent in pff, a preferred shares fund, and 22.5 percent in gold gldm. It was up 1.42% for the week. It's up 18.80% year-to-date and up 8.87% since inception in July 2020.

Speaker 2 [20:11]

Next one's the aggressive 50-50, which is half stocks and half bonds. This is the most levered and least diversified of these portfolios and it tends to show in its volatility. It's one-third in a levered stock fund, upro, one-third in a levered bond fund, tmf, and the remaining third divided into Ballast, a preferred shares fund, pff, and an intermediate treasury bond fund, vgit. It was up 1.11% for the week. It's up 15.75% year-to-date and down 5.07% since inception in July 2020. Next one's a 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. It's got 25% in gold, 15% in a REIT O, 10% each in a levered bond fund, tmf, and a levered small cap fund, tna, and the remaining 5% in a managed futures fund, kmlm. It was a big winner. Last week it was up 2.44% for the week. It's up 17.77% year to date and up 1.92% since inception in July 2021.

Speaker 2 [21:23]

And moving to the last one and our newest one, the Optra portfolio One portfolio to rule them all. This one is 16% in a levered stock fund, upro, 24% in a composite value-tilted fund, a global value-tilted fund called AVGV from Avantas, 24% in a Strips Treasury Bond Fund, govz, and the remaining 36% divided into gold and a managed futures fund, gldm and DBMF. It was up 1.03% for the week. It's up 7.15% year-to-date and since inception in July 2024. It's only a few months old but it seems to have gotten lucky with a very good start date for it. Lucky, unlike the prior portfolio. But that concludes our portfolio review for another week, and now I see our signal is beginning to fade.

Speaker 2 [22:25]

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, wwwriskparityradarcom. 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, a follow, a review. That would be great. Okay, thank you once again for tuning in. This is Frank Vasquez with Risk Priority Radio, signing off.

[23:00]

I think you've made your point, Goldfinger. Thank you for the demonstration. Signing of

Mostly Uncle Frank [23:19]

The Risk Parody Radio Show is hosted by Frank Vasque Mr Bond, I expect you to die.