Voices [0:00]

A foolish consistency is the hub goblin 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 [0:37]

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.

Voices [0:52]

Expect the unexpected.

Mostly Uncle Frank [1:00]

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]

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

Voices [1:23]

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

Mostly Uncle Frank [1:27]

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. Which is answer your emails.

Voices [2:02]

Surely you can't be serious. I am serious, and don't call me surely.

Mostly Uncle Frank [2:08]

But before we get to that, just one little programming note. I did appear on the Choose FI podcast this week, which was hosted by Ginger Gray, and we discussed the book The Five Regrets of the Dying by Bronny Ware, along with some related materials that you may find interesting and kind of go with episode 436 of this podcast. So I'll link to that in the show notes. It's episode 574 of the Choose FI podcast. And you can check that out at your leisure.

Voices [2:40]

The pleasures are unlimited.

Mostly Uncle Frank [2:43]

But now without further ado.

Voices [2:45]

Here I go once again with the email.

Mostly Uncle Frank [2:48]

And first off. First off, we have an email from Grant.

Voices [2:56]

You have a gambling problem.

Mostly Uncle Frank [2:59]

Grant, our favorite gambler. You could ask yourself a question. And Grant writes.

Mostly Queen Mary [3:06]

Uncle Frank, it's Grant here. Your you propony rider from Waco. I heard you mention me on episode 464. I just wanted to let you know I'm still here and came to drop off my donation to the Father McKenna Center.

Voices [3:21]

Yes!

Mostly Queen Mary [3:22]

I've been here all along, listening to every episode. I haven't had much to say as everything has been working as expected, just as it should be. Growing, rebalancing, withdrawing, and living the early retirement fire life. Lucky? As I mentioned last time, I'm running a modified golden butterfly portfolio using triple levered ETFs and Bitcoin ETFs. Boy howdy, it's exciting. Well you have a gambling problem. I no longer have UPRO in my stable, but I've split that allocation into TQQQ and TNA. Now, TNA is not a true levered small cap value ETF. I do not believe one exists yet, which makes me quite melancholy.

Voices [4:08]

You are correct, sir! Yes!

Mostly Queen Mary [4:11]

But I prefer leverage over perfect diversification, especially when paired with TQQQ. Do you believe TNA is a good fit to pair with TQQQ? Is there a better levered small cap value ETF that I should consider? Enough beating around the bush. I've come to confess that I'm a filthy degenerate and Bitcoin ETFs are not enough for me.

Voices [4:33]

You can't handle the gambling problem.

Mostly Queen Mary [4:36]

I hold some micro strategy, aka M S T R as well. I still believe in its core thesis, and I expect incredible performance in the long term, but the last few months have been quite ugly. But hey, that's okay. It has provided some great rebalancing opportunities. MicroStrategy, or strategy as they are now known, is all old news.

Voices [4:57]

Forget about it.

Mostly Queen Mary [4:58]

What I wanted to talk to you about today is one of their new preferred funds, STRC, known as Stretch. Every month, Strategy, whose goal is to keep the price of STRC between $99 and $101, can adjust the interest rate up or down. They can print more shares or buy them back. This has a direct impact on the supply and demand of the fund, keeping the price near the target, all while offering a dividend significantly higher than anything else that I've seen. STRC is currently paying 10.5% annualized monthly, and I suspect they will be paying 10.75%, if not 11%, by the time you read this. The dividend is even classified as a return of capital, which I believe defers the income taxes. I love your opinion on return of capital or dividend tax handling. The biggest risk is Bitcoin itself. This fund only works if Bitcoin grows faster than the dividend rate. Bitcoin will continue to increase in value against the dollar as long as governments continue to debase their fiat currencies.

Voices [6:06]

It's said that governments are cheaped by the double tongues. There is iron in your words of death for all Comanche to see. And so there is iron in your words of life. No signed paper can hold the iron. It must come from men.

Mostly Queen Mary [6:58]

If you only need 5-6%, suppose one could go all in if you can account for the risk of long-term viability of Bitcoin. But I'm not going all in, at least not yet.

Voices [7:08]

Of what? The money in your account. It didn't do too well. It's gone.

Mostly Queen Mary [7:13]

I may be a filthy degenerate, but I am not crazy.

Voices [7:17]

Are you crazy? Or just plain stupid.

Mostly Queen Mary [7:22]

Anyway, I just wanted to check in and give you a heads up, a chance to ponder on STRC and return of capital dividend handling. Happy Trails, Uncle Frank, and of course the exalted and most gracious Queen Mary, Vaya Condios. Grant.

Mostly Uncle Frank [8:03]

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 McKenna Center. It supports hungry and homeless people in Washington, D.C. Full disclosure, I am on the board of the charity and am the current treasurer. If you give to the charity, you get to go to the front of the email line, as all three of our emailers have done so today.

Voices [8:26]

Yeah, baby, yeah.

Mostly Uncle Frank [8:28]

Two ways to do that. First, you can go to the Father McKenna website and donate on the donations page, which I'll put in the show notes. Or you can go to our support page at www.riskparty.com and become one of our patrons on Patreon. Either way, you get to go to the front of the line, but please do mention it in your email so that I can duly move you to the front of the line. Now get into your email. For those of you who do not know Grant, he is our favorite gambler and has been fiddling around with leverage funds since at least episode 104, at least that's where he first emailed in, and that was in 2021, at the time he was all loaded up in 100% UPRO and become financially independent on that, and then has switched to a kind of levered golden butterfly type portfolio. But if you want to look up what he's been doing over the years, go search the name Grant at the podcast page at www.riskparty.com, and you will find all of the emails where we talked about his various gambling exploits with leverage funds. But he has been very successful at it.

Voices [9:56]

You never count your money. When you're sitting at the table, there'll be time enough to count when the dealing's done.

Mostly Uncle Frank [10:08]

So getting to this email and your questions. First one was about TNA, which is a levered small cap fund based on the Russell Small Cap Index. Yeah, I've never been happy with TNA and I've held it in small proportions, mostly in some of these experimental portfolios. I think if you're gonna pair TQQ with something, you'd be better off pairing it with something that is strictly more value, like one of those two value tilted funds we have in the levered golden ratio portfolio that follow either the Dow or utilities. Because the Russell Small Cap Index is one of the worst performers and holds a lot of junk, including a lot of small cap growth that you really don't want to be tracking. Unfortunately, there is no levered small cap value fund, at least not one that I'm aware of. And I suppose you could take leverage in another way if you've got your portfolio at Interactive Brokers or something like that. You could just take margin and get to the same result. But anyway, I'm sure you will find some way to gamble with that.

Voices [11:13]

That's the fact jack! That's the fact jack!

Mostly Uncle Frank [11:17]

As you have with some of these other things you're talking about here. Now getting to micro strategy, now known as strategy. Oddly enough, that company is within walking distance from my house, so I could go up there and knock on Michael Saylor's office door. It is interesting, they did take down the old micro strategy logo off the building and put up the new strategy one with a little bitcoin thing next to it. And I see that often when we go up there. It's at Tyson's Corner, if you know where that is, near the mall. So he's basically turned that company into methods of speculating on Bitcoin with various derivatives and other formulations. MSTR, the stock for it, now operates almost as like a closed-end fund that invests in Bitcoin. And it has not done so well this year. I think it's done worse than Bitcoin, actually. The money in your account, it didn't do too well, it's gone. But that's because you are with a closed-end fund kind of structure, you're always going to be either trading at a premium to its net asset value or trading at a deficit to its net asset value, depending on how people are feeling about the whole strategy. I picked the wrong weight, quick sniffing brew. This other concoction they've just created this year, STRC, is technically a preferred shares fund. And the way it's supposed to work is as you describe, it's supposed to just be stable in terms of its price between $99 and $101. And then somehow they adjust the interest rate on it, or it's not really an interest rate, it's a rate of return, and pay out these gaudy 10 or 11% payouts.

Voices [13:07]

It's time for the grand unveiling of money.

Mostly Uncle Frank [13:11]

So far, it has not really performed like it's supposed to. In fact, its current share price is 96 something, which is well below what it's supposed to be. And I would be really concerned that this thing is going to decay or have problems over time, like most of these kinds of derivative products, which is what it really is. Both strategy and this new fund STRC are really kind of derivatives of Bitcoin, is how I would describe them. Now, if this dividend is classified as return of capital, that means they're technically just giving you your money back. It's like you gave them $100 and they're giving you $10 back and calling that a return. So it's not really a return, it's a return of capital of your own money. I realize that's kind of an accounting gimmick to get around taxes because return of capital is not taxed. Eventually it will be taxed though, because there is no free lunch with respect to this. And so at some point, the dividends, if they keep paying them, are going to have to be taxed. Because you cannot return more than 100% of the capital. I am highly doubtful this will return 10% a year for any extended length of time, unless Bitcoin does go to the moon. It is entirely dependent on the price of Bitcoin. And if Bitcoin does not continue to go up, this thing will not be able to pay out consistently over long periods of time, and it will decay, much like a lot of these other buy right kind of funds, which this is kind of analogous to. Honestly, I don't think I would fiddle around with these things, either MSTR itself or STRC. I think you're better off if you're going to speculate on Bitcoin to just speculate on Bitcoin and not fiddle around with these weird structures, hoping you're gonna get some kind of bonus out of them. Because I don't think you probably will over time.

Voices [15:06]

That's not how it works. That's not how any of this works.

Mostly Uncle Frank [15:10]

I think basically these things will do really well if Bitcoin goes up a lot, and they'll do something terrible in the bed if Bitcoin goes down or stays down.

Voices [15:18]

The shit's gonna hit the fan.

Mostly Uncle Frank [15:23]

So you might as well just own Bitcoin itself, and you can buy it in an ETF form for convenience these days. So that's probably what I would do and not fiddle around with this stuff. I mean, it's not like you haven't found enough other things to gamble on, Grant.

Voices [15:40]

Matter of fact, I'ma bet you that that flight to Pittsburgh takes off before my flight to Houston. I made a bet in three years. I don't know. Come on. Keep things interesting, playing us a ton. How about two hundred? Well, Mr. Kramer. Looks like you're in the whole thirty-two hundred dollars. One more bet. Double money.

Mostly Uncle Frank [16:33]

And you say you're not crazy, but I'm not sure.

Voices [16:36]

You are talking about the nonsensical ravings of a lunatic mind.

Mostly Uncle Frank [16:42]

Anyway, I'm glad you've had success with these things. I do think it's interesting to watch from afar, and I do think some of our listeners are interested in such things, and they can go back and listen to the other podcast episodes where you've described what you've been doing. But as always, I urge you to be careful out there.

Voices [17:02]

You're not going to amount to jack squats. You're gonna end up eating a steady diet of government cheese and living in a van down by the river.

Mostly Uncle Frank [17:15]

Thank you for being a donor to the Father McKenna Center. And thank you for your email.

Voices [17:22]

You know, Mark, for the first time in our marriage, I can finally look down my nose at you. You have a gambling problem. That's true. Will you forgive me? Oh, sure. Remember when I got caught stealing all those watches from Sears? Well, that's nothing because you have a gambling problem. And remember when I let that escape lunatic in the house because he was dressed like Santa Claus? Well, you have a gambling problem. Oh, when you forgive someone, you can't throw a bag at them like that. Oh, what a gip. Second off.

Mostly Uncle Frank [17:57]

Second off, I have an email from Brian. Hey Brian, can't a place a wager? Brian from Canada. And Brian writes.

Mostly Queen Mary [18:12]

Hello, Frank and Mary. Greetings from Ontario, Canada. I first want to thank you both for all that you do to promote financial investing literacy and also to tell you what an inspiration I find you to be with respect to Mary's Casa work and your work with the Father McKenna Center. Frank, I also found the story you told about your parents on the Afford Anything podcast to be particularly heartwarming. I've made a small donation to the Father McKenna Center and enjoyed spending some time on their new website better understanding the good work that they do and that you are a part of it. The best, Jerry. The best. Now to the context, followed by two questions. The first one is pretty straightforward, and second, pretty general. I'm in my mid-40s and 80% of the way to my financial independence number with a plan to retire in five to ten years, or get laid off in the meantime, but could honestly live on the portfolio as it is now with some adjustments and nobody's going to starve. I want to transition to a more risk parity portfolio with new contributions, which for me mainly means buying gold. I already have TLT, VIOV, REITs, and some preferred. Given I'm investing living and spending in Canadian dollars and need to add the gold to my taxable brokerage because I have no room in retirement accounts, and gold ETFs in Canada are only taxed as general capital gains, 50% the rate of income, I need to decide whether to buy a hedged versus unhedged to CAD, gold ETF. Hedged would give me the pure movement in gold, denominated in CAD with no USD CAD exchange rate effect, but the hedging creates a performance drag. Unhedged has less drag but ends up being a bet on the CAD slash USD exchange rate. Some sources say unhedged is better for Canadians anyway, due to the Canadian dollar weakening in a crisis because the US dollar strengthens, and that this should enhance the crisis protection aspect along with less performance drag due to no hedging. What say you, hedged or unhedged gold for a Canadian investor? Second question, and thanks for putting up with this, high level, I'm aiming for the following allocations. I've tried some of the tools on portfolio charts to get there, but with 80% of the portfolio and CAD securities, this isn't always easy. We don't have the wide range of options that the US does. All that being said, these are high-level allocations, and I'm aiming for about a 5% withdrawal rate. Am I barking up the right tree? Canadian equity growth 9%, Canadian equity value 9%, US equity growth 8%, US equity small cap value 8%, international equity developed 12%, international equity emerging 4%, REITs 5%, preferred shares 15%, fixed income long-term treasuries 8%, fixed income intermediate 8%, gold 10%, cash 4%. That's 50% equity, not including the REITs, if you don't want to take the time to add it all up. Thanks again for everything you do. You're an absolute treasure.

Mostly Uncle Frank [21:37]

Well, Brian, first thank you for also being a donor to the Father McKenna Center. Even if you are giving us Canadian dollars now, we'll take them. Loony loony loony. First, you mentioned Mary's Casa work, which we haven't talked about in a little while. Mary is a court-appointed special advocate, so she works with children who have been removed from their homes and placed in foster care while they work their cases through the court system. There is a nice video now about Mary's last case. Her case ended up in an adoption of four young boys, and it was named the adoption of the year for our county. It's a very heartwarming story. It's on YouTube. I'll link to it in the show notes so you guys can check it out. But I think you'll be warmed and inspired by it. And no, she's not in the video, although she is mentioned. It's really about the kids and their new parents. Moving to the next part of your email, congratulations on your progress towards financial independence. Sounds like you will get there in due course. And first you asked about gold and whether you should buy it essentially in Canadian dollars or US dollars. I won't use the terms hedged or unhedged because I think they're confusing. We'll just say Canadian dollars and US dollars for the purpose of this discussion. I think it probably makes more sense if you are using Canadian dollars to buy gold in Canadian dollars because ultimately it will have the same performance, if you will, with respect to all other currencies. Yes, there will be a difference. But the idea is gold acts like another currency. And so it generally makes more sense to buy it in the currency that you live in and work in to avoid having this other factor involved with it. And if you think it's performed well in US dollar terms, it's performed spectacularly in terms of other currencies over the past decade or so since the dollar has been so strong until this year.

Voices [23:43]

I love gold.

Mostly Uncle Frank [23:47]

So I would probably just buy it in a Canadian dollar ETF, and I assume that's more tax efficient, although it's not clear how the taxes work, at least from my perspective. I really don't know. It seems more favorable than the US, though. Now, as an aside, this is different than investing in treasury bonds, in which case I think you really want to be invested in US treasury bonds and not Canadian treasury bonds, at least for the most part. Because what you're really looking for there is the protection that the reserve currency gives you in any kind of a recession. And from what I've observed and learned over the past decade or so, it seems that holding the bonds in the reserve currency is your best option there. There is a very nice article and analysis that Tyler over at Portfolio Charts did about international investing and the use of gold in particular. I will link to that in the show notes. It's something you probably want to check out because he also has the ability to switch from US to Canada or a number of other countries there in terms of the analytical tools he's got, which I think are very useful. Next question about this portfolio you put together. Well, looking at the overall portfolio, yes, it looks like a very good portfolio if it's set up for withdrawal rates. You've got between forty something and seventy-something percent in equities divided into growth and value. Looks like it's also diversified across many countries, which makes a lot of sense if you're in Canada. The only thing I'm not really sure about is your fifteen percent in preferred shares. And I'm not sure exactly what that's invested in, whether it's Canadian or US or what you're doing with it. You typically would hold preferred shares if you are worried about being taxed at high US ordinary income rates, but you needed something that was kind of both stock and bond like. Holding 15% in those may actually drag down your overall performance over time. And you might consider reducing that holding and allocating that back over to either treasury bonds or an alternative, like more gold or managed futures. But I think overall you are barking up the right tree here. I hope you have run these as best you can in portfolio charts and other analyzers. Because that's what you really want to do with something like this. To the extent you can, because I realize that not all of these holdings have probably been around forever. So hopefully that helps. I'm glad you're enjoying the podcast and everything we do around here. Thank you for being a donor to the Father McKenna Center, and thank you for your email.

Voices [26:41]

Somewhere a queen is weeping. Somewhere a king has a wife. Last off.

Mostly Uncle Frank [27:06]

Last off an email from Morad.

Mostly Queen Mary [27:09]

Top drawer. Really top drawer.

Mostly Uncle Frank [27:14]

And Morad writes.

Mostly Queen Mary [27:16]

Dear Frank, I've been meaning to email you for quite some time to thank you for all that you do for your listeners. No questions at this time. I think I've listened to all the episodes by now, and have learnt a ton from you, and not just about the mechanics of money and how to plan for retirement. I sincerely appreciate your insights on life and have read many of the books you've suggested. My wife hears me talk a lot about the insights I'm learning from you, so I guess she's a listener too. I remember in an early episode you mentioned that you're interested in learning about your listeners' professions. I'm a theologian by training, a medievalist, against my better judgment, and I currently teach at a regional Catholic University in San Antonio, Texas.

Voices [27:55]

How's it going, royal ugly dude? I'm the Earl of Preston. And I am the Duke of Ted. Put them in the Iron Maiden. Iron Maiden? Excellent! Execute them.

Mostly Queen Mary [28:18]

I'm a late starter, currently 40, but we're close to somewhat lean Coast VI situation if we retire in 19 years. Now that I'm less worried about whether we'll be able to retire at all, I'm thinking about my second mountain and how I can minimize my regrets at an old age as much as possible. I've also been thinking about ministry in some form or other, given that I can do without contributing to my 403B in a year or two. I am not sure what will come next, but I know that thanks to your retirement hobby, we will be in a better financial situation. And most importantly, my outlook on life has dramatically shifted. You've also set a very high bar for retirement hobbies. Eternally grateful for all the work you and Mary do, Maraud.

Mostly Uncle Frank [29:04]

Well, I know it's not clear from his email, but Maraud actually went down to the Father McKenna Center while he was visiting DC the other day and personally made a donation there and checked out the center and met Dennis and Ben. And they sent me some pictures, which I can't post on a podcast, but they were very nice pictures. Maraud also picked up a t-shirt from the top of the t-shirt campaign we ran for the Walk for McKenna that was held in September. And I just want to say how grateful we are, Maraud, for you doing that and particularly going down there to see what goes on there. Because as I've mentioned before, we have a very small staff down there. And it's kind of like a volunteer fire station where they're fighting a different fire every day.

Voices [30:00]

Work. Wow, this place is great. When can we move in? You've got to try this pole. I'm gonna get my stuff. Hey, we should stay here tonight. Sleep here. You know, to try it out.

Mostly Uncle Frank [30:22]

So when people come down to volunteer their support or bring donations, whether they're in money or food or anything else, it's always a really big morale boost. Because we really couldn't do what we do there without support from people like you, Muron. And I'm glad this podcast has been helpful to you and inspiring to you. And I'm hoping that you became even more inspired now that you've seen the Father McKenna Center in action in our church basement and gotten a t-shirt because they were really excited to see somebody who listens to Risk Purity Radio and is not from the DC area just show up the way you did there. So thank you again for doing that, and please do write in when you have a question, financial or otherwise, and we'll see what we can do to answer it.

Voices [31:10]

Can we fix it? Yes, we can. The revolution will not be televised. The revolution will not be brought to you by Zerox and Four Fox without commercial interruptions.

Mostly Uncle Frank [31:45]

But now I see our signal is beginning to fade. To those of you who celebrate Thanksgiving in the US, happy Thanksgiving. I'm not sure we'll have another podcast this week, but we'll see what happens. I will update the website on the weekend as I usually do. But in the meantime, if you have comments or questions for me, please send them to Frank at RiskPartyRader.com. Then email us Frank at RiskPartyRadar.com. Or you can go to the website www.riskpartyware.com. 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. And if you happen to be in town, contact me or pop by the Father McKenna Center, as Marat has done. Thank you once again for tuning in. This is Frank Vasquez with Risk Purdy Radio. Signing off.

Voices [32:43]

You got to know when to hold when the hold, know when to fold in the fly, know when to walk away, and know when to run. You never count your money. When you're sitting at the table, there'll be time enough to count. When the deal is done, you got to know when to hold up. Know when to fold up. No when to walk away. No when to run. You get out your money. When you're sitting at the table, there'll be time enough to count. When the deal is done.

Mostly Queen Mary [33:30]

The Risk Parody 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.