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 Queen 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 [0:36]

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.

Voices [0:52]

Expect the unexpected.

Mostly Uncle Frank [0:59]

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.

Voices [1:10]

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

Mostly Uncle Frank [1:13]

There are basically two kinds of people that like to hang out in this little dive bar.

Voices [1:18]

You see, in this world, there's two kinds of people, my friend.

Mostly Uncle Frank [1:22]

The smaller group are those who actually think the host is funny regardless of the content of the podcast.

Voices [1:30]

Funny how? How am I funny?

Mostly Uncle Frank [1:32]

These include friends and family and a number of people named Abby.

Voices [1:38]

Abby someone. Abby who? Abby Normal. Abby Normal.

Mostly Uncle Frank [1:47]

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.

Voices [2:00]

The best, Jerry. The best.

Mostly Uncle Frank [2:03]

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.

Voices [2:22]

What we do is if we need that extra push over the cliff, you know what we do? Put it up to a wall.

Mostly Uncle Frank [2:29]

But whomever you are, you are welcome here. But now onward, episode 457. Our usual three, I think we'll do at least five. Some of them are short. And so without further ado.

Voices [2:55]

Here I go once again with the email. And first off.

Mostly Uncle Frank [3:00]

First off, an email from Neek. Neek from the Netherlands.

Mostly Queen Mary [3:06]

No way.

Mostly Uncle Frank [3:08]

And Neek writes.

Mostly Queen Mary [3:10]

Dear Uncle Frank, while driving home from Sweden, it takes a while, I stumbled across your podcast just as I had completely exhausted my playlist. Was I in for a ride?

Voices [3:21]

If you change your minds on the first game line.

Mostly Queen Mary [3:38]

Only to discover you're on hiatus. So, of course, the only thing left to do was start back at the beginning again.

Voices [3:45]

You're insane, gold member!

Mostly Queen Mary [3:48]

With all this new knowledge, I decided to take some chips off the table and shift my portfolio to a golden ratio variation this August. I do love gold. I love gold. Watching the different asset classes move together steadily upward is almost mind-blowing. Poof. Learning to trust the performance and ignoring the daily yo ho ho beat of the drums should also help me resist the urge to check too often. I also really enjoy the sound bites. May I suggest a few from the movie Old School? It's full of great lines and music. Thank you, truly, for everything you and Mary have done. Pro bono. Warm regards, Neek from the Netherlands.

Mostly Uncle Frank [4:36]

Well, Neek, your wish is our command.

Voices [4:39]

We're going streaking through the quad and into the gymnasium. Come on, everybody! Woo! Come on! We're streaking! Come on! Come on! We're running! Come on! We're streaking!

Mostly Uncle Frank [4:54]

At least for the moment.

Voices [4:56]

We're streaking! Frank! Hey, honey! Hey! What the hell are you doing? We're streaking! Frank, get in the car! Everybody's doing it! Now! Mary, Mary! Why you bugging?

Mostly Uncle Frank [5:19]

Neek did get to go to the front of the line here because he is a donor to the Father McKinnon Center. As most of you know, we do not have any sponsors on this program. We do have a charity we support. It's called the Father McKinnon Center. It supports hungry and homeless people in Washington, D.C. Full disclosure, I am the board of the charity and the current treasurer. If you give to the charity, you get to go to the front of the email line. There are two ways to do that. You can do it as Neek has done here by becoming a patron on Patreon, which you do through our Risk Party Radio website page on the support page at www.riskparty.com, or you can go directly to the Father McKenna website and make a donation there. Either way, you get to go to the front of the line. Just make sure you mention it in the subject line or your email itself so that I can move you to the front of the line. Now you didn't really have a question. I do wonder what it was like to be listening to 455 episodes all in one sitting or in a couple of sittings. But uh probably driving back through Sweden made it more palatable. I recently saw that picture of the bridge and tunnel from Malmo to Copenhagen, which is similar to the bridge tunnel combo over and under the Chesapeake Bay in Norfolk, Virginia. But I digress. As for the recent performances of watching everything go up in September, yeah, that is not usual. And in fact, September was probably one of the best months on record, at least since we started this podcast for these kinds of portfolios, mostly due to the extreme positive performance in gold.

Voices [7:17]

This is gold, Mr. Bond. I think you've made your point, Goldfinger. Thank you for the demonstration.

Mostly Uncle Frank [7:24]

But this kind of thing can happen essentially when you have a weak dollar with everything being priced in dollars. That is going to be good for international stocks, good for gold, and good for U.S. stocks as well. It's fairly neutral as far as bonds are concerned most of the time. So I would not be expecting that on a regular basis. Usually there is something performing badly out of the lot, or if most things are performing badly, then there's something performing well. But you can see everything become positively correlated, at least for a short period of time, which is normal in the probabilistic world that we live in. A mathematical property hardwired into nature.

Voices [8:03]

Secret, secret, secret, secret.

Mostly Uncle Frank [8:06]

So we're very glad you're enjoying the podcast. Look forward to your future questions. Thank you for your donation, and thank you for your email. Did you or did you not have a good time at the party?

Voices [8:19]

I had an awesome time. Frank, I know that you had an awesome time. Okay? I think the entire town knows that you had an awesome time. Second off.

Mostly Uncle Frank [8:29]

Second off?

Voices [8:33]

I just want to say one word to you. Just one word. Yes, sir. Are you listening? Just so you plastics.

Mostly Uncle Frank [8:46]

And Dustin writes.

Mostly Queen Mary [8:48]

Hi, Frank and Mary. I continue to enjoy your show. The clips keep getting better, and the content remains top drawer. Really top drawer.

Voices [8:58]

Really top drawer.

Mostly Queen Mary [9:00]

It's been a couple of years since my first email, and while I've been meaning to follow up with another question, it's going to have to wait.

Voices [9:07]

I'm sorry, but all questions must be submitted in writing.

Mostly Queen Mary [9:10]

I saw this email from Ray Dalio and couldn't resist sending it to you for your comments. Do you see this as an actual valuable contribution to society, or just an example of someone whose ego has hit an all-time high? A really big one, yeah. Which is huge. Alternatively, could this be the beginning of a societal shift where people of extreme wealth seek to eternalize themselves with AI?

Voices [9:36]

And here's how it works. I'm going to ask you four questions about the film you've just seen. Four questions. They're not difficult. But being able to count to four helps.

Mostly Queen Mary [9:47]

Really? Good. Not too far-fetched. This could be a Black Mirror episode.

Voices [9:56]

Flip-flip-flip-flip-flops, flop, flops. Great. If you see me, give me a wave. I love to see style. Let me also enjoy a good laugh.

Mostly Queen Mary [10:10]

When can we expect a digital Uncle Frank?

Voices [10:13]

Not gonna do it. Wouldn't be prudent at this juncture.

Mostly Queen Mary [10:16]

I bet Mary would love that. Cue the Run DMC clip. In all seriousness, I'd love your musings on this. Side note, I just made a donation to the Father McKenna Center, screenshots attached, because I can't wait two months to see if this turns into a rant. Best, Dustin.

Voices [10:43]

Would you like me to seduce you? What? Is that what you're trying to tell me?

Mostly Uncle Frank [10:49]

Well, first off, thank you also for being a donor to the Father McKenna Center, which is why you too moved to the front of the email line, Dustin. Now, as for this email, what Dustin is referring to is an email from Ray Dalio introducing the new digital Ray Beta with Voice, which appears to be an AI version of Ray Dalio that will answer your questions.

Voices [11:14]

This is pretty much the worst video ever made.

Mostly Uncle Frank [11:17]

This has become actually kind of popular these days. I've seen several versions of this. Paul Merriman has one on his website, which isn't a voice thing, but a chat bot that's supposed to mimic what he would say. And Professor Scott Galloway also had one of these things. Although after running it for a week or two, he actually took his down because he's actually concerned that people would develop relationships, unhealthy relationships with these AI bots, as apparently some younger people are doing, causing them to do terrible things to themselves. So yeah, I think this is kind of a fad or a wave of the future. I know that Paul Merriman complains that his chat bot doesn't always answer the way he would have answered, and I suspect Ray Dalios will suffer from that same problem too, which I think is probably endemic with these sorts of things.

Voices [12:11]

That's not an improvement.

Mostly Uncle Frank [12:13]

Now, is this an example of someone whose ego has hit an all-time high with respect to Ray Dalio? I don't know, possibly. The thing is, Ray Dalio has consciously changed his sort of outlook on life about ten years ago. And this happened based on him reading Joseph Campbell's work about the hero with a thousand faces and then talking to his family about the fact that when you're done with your hero's journey, what you're probably supposed to be is sitting around telling everybody what you learned on that hero's journey. And so that was his original intent because he actually used to be a really prickly person that people did not like interviewing because he was very combative, but he decided to share everything he happened to know, which is both good and bad, because there's a lot of things he knows that are very useful, and a lot of things that probably aren't that useful. One of the things that always amuses me or interests me is that particularly these very talented investors who have done very well often want to portray the idea that it is their habits that made their success, or kind of the way they run their business is what made their success. And Ray Dalio is one of those because he's got this weird management of the way he used to do Bridgewater that people have talked about and written about. Warren Buffett does the same thing, being this kind of folksy guy. The truth is the reason these people are successful has nothing to do with these kind of management or personal habits or whatever. It's because they just have enormous talent. So it's like saying that, well, if I adopted the habits of Tiger Woods or Roger Federer, suddenly I'd be a great golfer or a great tennis player. It's like, no, you wouldn't. You don't have that talent. Forget about it. The same thing is true for a lot of these investors or anybody that's had a great deal of success based on talent in their particular field. That I think a lot of these sort of habits wisdom kind of thing is way overrated and is not going to really make you a very successful person, even if you do make your bed every day. I think that was Stanley McChrystal's or some other famous general's book about making your bed every day. I think these people probably would have succeeded regardless of what habits or management systems they ultimately employed within reason. So you do need to be careful about what you may think you should be learning from the very successful.

Voices [14:46]

You're not going to amount to Jack Squat!

Mostly Uncle Frank [14:52]

Now, would I ever roll out a bot? Probably not myself, although I've had more than one listener, including our friend Luke in Quebec, who helped us with the website, talk about creating AI bot Frank or Ritz Parody Radio AI bot.

Voices [15:08]

We have top men working on it right now. Who?

Mostly Uncle Frank [15:16]

Top men. I certainly probably wouldn't put a whole lot of effort into it myself because, as you know, I don't think I'd like another job. But if somebody else wants to create such a thing, I'd be entertained to see it and interact with it. I would imagine that it would suffer from the same defects that all these other ones suffer from, in which case the responses it gives are kind of a 70 to 80% accurate as to what the individual would actually say.

Voices [15:45]

Have you ever heard of Plato, Aristotle, Socrates? Yes, morons.

Mostly Uncle Frank [15:51]

So I'd have to say this is certainly not a priority. On the other hand, our website does have advanced search capability now, including all of the transcripts that Luke has uploaded and attached to all the podcasts themselves. So that's probably of use to some people here.

Voices [16:08]

That is the straight stuff, O Funkmaster.

Mostly Uncle Frank [16:12]

And maybe we should just leave it at that, at least for the moment. Sack. So thank you for your donation. I'll be happy to answer questions in the flesh when you have them. And thank you for your email.

Voices [16:28]

There's more. Because you are going to see it as well. Yes, it. Yes, it, yes. Namely. The Max Sedrums are in the story. And afterwards, that is directly following. My Max Sedrum. So sit back. Relax. And enjoy.

Mostly Uncle Frank [16:51]

Next off, we have two emails about the website. Chris Des Tabarnak. And the first one of those is from Dale.

Voices [17:03]

I'm Chip. I'm Dale. With just a couple of crazy rascal ounce to have some fun.

Mostly Uncle Frank [17:11]

And Dale writes.

Mostly Queen Mary [17:13]

Really like the alternative website. One, not sure how consistent you are wanting to be, but you don't give a July 2024 balance totals for the 2024 Golden Butterfly, all seasons, or golden ratio rebalance. You do for the previous three years, and it's nice to have as a reference. Two, you don't explain why for your distributions you divide the monthly balance by 240. I assume it's because you have a 20-year time horizon and so it's 20 times 12. Maybe explain this. Otherwise, much cleaner than the OG version. Thanks for all you do, Dale.

Mostly Uncle Frank [17:46]

And the second one is from Hydromod.

Voices [17:50]

Oh, but I don't know you were doing one.

Mostly Uncle Frank [17:53]

And Hydromod writes.

Mostly Queen Mary [17:55]

I looked over the new site. Seems clean and straightforward. I think it meets its purpose well.

Voices [18:01]

Yes!

Mostly Uncle Frank [18:02]

Well, I'm glad you guys are liking the new website. I think just about anybody who has seen the old one and used the new one prefers the new one.

Voices [18:10]

I could have told you that.

Mostly Uncle Frank [18:12]

As I mentioned, it does have some advanced search capabilities and it does seem to work a lot faster the way Luke has set it up.

Voices [18:20]

The best, Jerry. The best.

Mostly Uncle Frank [18:22]

It's good to have top men that can work on such things. Top men. As for your questions, Dale, yeah, I can probably update those balance totals. I need to go back and check. That shouldn't be a big deal since I have all of the screenshots from all of the weeks of recording these things and putting them up. As to your question about the distributions and how we do that, I think I've answered this question recently in the past. This is just a mathematical shortcut. So that if you are taking distributions at a 5% annualized rate and you want to break that down into a monthly amount, you would basically divide by 20, divide the total by 20 to get to the 5% annualized amount, and then divide that amount by 12. Now a shortcut for dividing by 20 and then dividing by 12 is simply to divide by 240 in the first place. And so if you divide by 240, you get to a monthly annualized distribution of 5%. I don't think I really need to write all that out on the website, but maybe I can at least indicate that it's just a mathematical shortcut and there's no real magic there.

Voices [19:42]

What's the answer? What's the answer? What's the answer? Sacred geometry, sacred geometry, sacred geometry.

Mostly Uncle Frank [19:50]

But I am glad you are enjoying the new website because I am too. It really works well.

Voices [19:57]

Yeah, baby, yeah!

Mostly Uncle Frank [19:59]

And we can all thank Luke again for that.

Voices [20:02]

And we have the tools, we have the talent.

Mostly Uncle Frank [20:06]

And thank you for your emails.

Voices [20:09]

Last off.

Mostly Uncle Frank [20:11]

Last off? We have an email from Carter. If you've got a problem with business, you get Carter. And Carter writes.

Mostly Queen Mary [20:22]

Frank, thanks so much for everything you do. I've learned a lot. So amazing and helpful.

Voices [20:28]

Real wrath of God type stuff. Exactly.

Mostly Queen Mary [20:30]

My question is this: how does one calculate using gold futures contracts to add exposure to gold? How can I determine how much exposure is effectively added by buying one, two, three longer-term micro gold future contracts? How would I determine what percentage of my portfolio a single contract represents? I'd like to add a little gold exposure to complement the equities, but don't want to tie up too much of the portfolio in a non-productive asset. I'd rather use leverage or margin, so I assume futures contracts is an efficient way to do so. You have a gambling problem. Please let us know how to consider this as a strategy versus an ETF. Carter.

Voices [21:10]

Look, it's Jimmy Carter. Could you build us a house, President Carter? We can't go back to ours. I'm sorry. These are for the truly needy. Yeah, get your own habit here. I'm on, Carter. Build us a house, you lazy bum. You have offended me, sir. I challenge you to come back in while you yellow belly.

Mostly Uncle Frank [21:29]

Well, Carter, I actually probably would not attempt this, because it seems to make things more complicated without giving you any particular advantage. I don't know if you've ever traded futures before. I have done so in the distant past. And in order to figure out how much exposure you are having, you just need to look at the size of the contract, which, depending on what exchange you are using, that information should be available there. The inherent problem with futures is that you need to roll them over, and that embedded in them is essentially an interest and volatility component based on the date in the future that they are scheduled for delivery. So futures were typically and are typically used as a mechanism for trend following or trading systems, which makes a lot of sense because they are also generally what you call Section 1256 contracts, so that they automatically qualify for a 60-40 division of long-term capital gains versus short-term capital gains, regardless of how long you hold them. So they are really designed as a trading or hedging vehicle and not so much for something that you would be holding in a long-term portfolio. Because you're going to have slippage problems, and also just when you roll them over, there may be effectively an interest rate differential so that it you're effectively not getting the same price depending on the shape of the futures curve at the particular time you are doing the transactions. So using futures actually probably is not the most efficient way of taking leverage in a portfolio. The most efficient ways would be to simply use a leveraged ETF or an ETF that combines gold with something else. For example, the ETF GDE combines gold with an exposure to the S P 500, which is up like 62% this year. And has one of the best performances over the past three years you can imagine. I think it was up 30% one year, 40% one year, and is up 62% this year. Shirley, you can't be serious. I am serious, and don't call me Shirley. But that has an automatic exposure or leverage there to gold on top of another asset. There are, in fact, ETFs that do two times gold. I probably would not use those because again, those are based on futures contracts and there can be some decay there. I know the return stacked group of ETFs also has some products, and at least one has an exposure to gold and actually some Bitcoin on top of US stocks. And I believe the ticker symbol for that is RSSX. So you can check that out. And then the other way you could get exposure to it without adding anything more to your portfolio would be to simply use margin interest. And if you're going to do that, I would do it at someplace like Interactive Brokers, which has the smallest margin rates available. Now, if you look at the sample portfolios, you'll see in the experimental portfolios essentially ways of doing this. For instance, if you look at that OPTRA portfolio, which is the last one, the way we've used or taken leverage in that is through the stock holding. So instead of having just an exposure to the SP 500, there's an exposure to UPRO, which effectively leverages up the portfolio. Then you just reduce the amount of holding of that particular holding, in this case it's to 16%, which then allows us to add more things like managed futures and gold in the portfolio. So it's not necessary that you actually take the leverage in the gold that you're talking about. You can take it in something else and get the same kind of results or exposures, I should say. So the bottom line is: yeah, while you could take an exposure to straight futures in gold to add some leverage to a portfolio, that lemon is probably not worth the squeeze here. The way you squeeze my lemon out, I'm gonna fall out of just because there are other much easier ways of doing this that do not require the kind of management and calculations that would be required to do this through futures contracts. Welcome to the 2020s, where you can get everything you want just through ETFs. Hopefully that helps, at least a little bit. And thank you for your email. But now I see our signal is beginning to fade. If you have comments or questions for me, please send them to Frank at RiskPartyRear.com. That email is Frank at RiskPartyRear.com. Or you can go to the website www.riskpartyreader.com, put your message into the contact form, and I'll get it all that way. If you haven't had a chance to do it, please go to your favorite podcast provider and like, subscribe, make some stars, a follow, a review. That would be great. Okay. Thank you once again for tuning in. This is Frank Vasquez with Risk Party Radio signing off.

Mostly Queen Mary [28:23]

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.