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 are new here and wonder what we are talking about, you may wish to go back and listen to some of the foundational episodes for this program. And the basic foundational episodes are episodes 1, 3, 5, 7, and 9. Yes, it is still in my memory banks. We have also created an additional resource, a collection of additional foundational episodes and other popular episodes.

Voices [1:07]

We have top men working on it right now.

Mostly Uncle Frank [1:14]

Top men. And you can find those on the episode guide page at www.riskparty radio.com. Inconceivable! And all thanks to our friend Luke, our volunteer in Quebec. Zachos. We'd be helpless without him.

Voices [1:35]

I have always depended on the kindness of strangers.

Mostly Uncle Frank [1:41]

Because other than him, it's just me and Marion here.

Voices [1:44]

I'll give you the moon, alright? I'll take it.

Mostly Uncle Frank [1:48]

We have no sponsors, we have no guests, and we have no expansion plans.

Voices [1:52]

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

Mostly Uncle Frank [1:55]

Over the years, our podcast has become very audienced focused, and I must say we do have the finest podcast audience available.

Voices [2:03]

Top drawer.

Mostly Uncle Frank [2:07]

Along with a host named after a hot dog.

Voices [2:10]

Lighten up Francis.

Mostly Uncle Frank [2:13]

But now onward, episode 484.

Voices [2:18]

Now here's something we hope you'll really like.

Mostly Uncle Frank [2:21]

Today on Risk Party Radio, it's time for our weekly portfolio reviews of the eight sample portfolios you can find at www.riskparty.com on the portfolios page. And what a long, strange week it's been.

Voices [2:38]

Real wrath of God type stuff. Fire and brimstone coming down from the skies, rivers and seas boiling. Forty years of darkness, earthquakes, volcanoes, the dead rising from the grave.

Mostly Uncle Frank [2:48]

Well, the end results for the month are pretty good. In fact, they're really good.

Voices [2:53]

That is the straight stuff, oh funk master.

Mostly Uncle Frank [2:56]

But we'll get back to that later on because the markets are still open on Friday as I'm recording the first half of this podcast.

Voices [3:04]

Human sacrifice, dogs and cats living together, mass terrified.

Mostly Uncle Frank [3:09]

But before we talk about the mayhem.

Voices [3:12]

I'm intrigued by this. How you say emails.

Mostly Uncle Frank [3:18]

And first off. First off, I have an email from Sebastian.

Voices [3:24]

This is something I've never told anyone before. Something so strange, so terrible. Forgive me if I sound quite mad, but it's true all the same. Sebastian saw the face of God.

Mostly Uncle Frank [3:37]

I'd like to hear about that. And Sebastian writes.

Mostly Queen Mary [3:43]

Hello, Frank. Hello, Mary. I just donated to the Father McKenna Center. Thank you for doing the good work there and with Risk Parity Radio. This 60-year-old male feels at the beginning of financial independence according to the 4% rule. My work income is 100% commissions, and I love my work.

Voices [4:11]

Second prize is set of steak knives.

Mostly Queen Mary [4:14]

I will let this business run until it stops running. That said, when my last commission turns out to have been my very last one, I would like to know that I have organized my nest egg in as good a shape as I can. My equity in my personal residence, nor social security are any part of my calculations. That said, I like to think of 65 as a good planning year to be there, with Medicare and Social Security hopefully also being there with me, LOL. I have allocated my financial assets somewhat according to the Golden Ratio portfolio, with currently, at the beginning of 2026, still too much cash. Equities, 41%, bonds 22%, gold 15%, alternative 10%, cash international 12%. However, like a patron with a coupon for the Olive Garden, I have taken the liberty to substitute the bonds allocation by filling this with a combination of a TIAA portfolio, which is being liquidated by annuitization over seven and five years respectively, and two residential single-family rental homes, which have positive cash flow as well as sizable equity. The monthly TIAA payments I can invest in VGLT as they trickle in. The real estate is not easily liquidated. If I leave the physical income-producing assets out of the formula, I feel I am reducing the already small equities allocation too much. One, am I too early to be in this type of portfolio, still accumulating for an unknown number of years? Two, am I breaking the risk parity benefits of the golden ratio portfolio? Three, how do you think of individually residential real estate as part of a drawdown portfolio? Why can't I have my cake and eat it too? Best Sebastian.

Mostly Uncle Frank [6:19]

Well, first off, thank you for being a donor to the Father McKenna Center. As you all know here by now, at least those of you not living under a rock.

Voices [6:28]

Are you stupid or something?

Mostly Uncle Frank [6:30]

We don't have any sponsors on this program, but we do have a charity we support. It's called the Father McKenna Center, and it supports hungry and homeless people in Washington, D.C. Full disclosure, I'm the board of the charity and the current treasurer. But if you go to the charity, you get to go to the front of our email line. Two ways to do that. You can donate directly at the website, as Sebastian has done here. I'll link to that in the show notes. Or you can go to the support page at www.riskpartyware.com and become one of our patrons on Patreon. Either way, you get to go to the front of the email line, but make sure you mention in your email so I can duly move you to the front of the line. Now you've got three questions here. Your first one is, are you too early to be in this type of portfolio? And the answer is, well, I'm not sure. Probably not. You're probably fine in this type of portfolio. The reason I'm not sure is because I don't know anything about what your level of expenses are or how much you've accumulated. And those are the real issues here. Because obviously if you only had a quarter or half of the money you needed to retire, you would need to be a lot more aggressive. But if you've already got that much money or close to that much money, maybe even at least 75% of that much money, you're probably just fine because these portfolios continue to grow. And some people actually do use them as accumulation kind of portfolios because they like the smooth ride. There's a nice article by Tyler of Portfolio Charts about this. I'll link to it again in the show notes. But it basically compares what it's like to accumulate in something like a golden ratio portfolio versus an all-stock portfolio. Now you did mention that you're at the beginning edge of financial independence already at age 60. To me, that indicates you have enough, especially when you're gonna add in Social Security. And I don't know how you've accounted for that yet. Because I don't know the relative sizes of these numbers either, which matters. So I'm guessing you're probably fine. But that is just a guess.

Voices [8:33]

A crystal ball can help you. It can guide you.

Mostly Uncle Frank [8:37]

Next question. Number two, are you breaking the risk parity benefits of the golden ratio portfolio? And the answer is maybe a little, but not a lot. The only variation you have here that's of meaningful consequence is the money you have in this annuitized thingamabob from TIAA.

Voices [9:00]

We can put that check in a money market mutual fund, then we'll reinvest the earnings into foreign currency accounts with compounding interest, and it's gone.

Mostly Uncle Frank [9:09]

If that's coming out of that now, you can almost just treat that like as a stream of income that you're then putting into these treasury bonds. Now remember what treasury bonds are for in this kind of portfolio, because I've been getting a lot of emails recently where people want to substitute everything else under the sun for the treasury bond component. Whether they be corporate bonds or insurance contracts or real estate or something else like that. So remember what the purpose of treasury bonds is in this kind of portfolio. Remember we're not holding these bonds for income. Forget about it. And we don't expect them to outperform anything in particular. They're there for really one reason only, and that's to be recession insurance. Because we know, going back at least to the 1950s, that every time there's a recession, the correlation between stocks and bonds goes negative, the bonds go up in value, the stocks go down. You can sell the bonds, buy more stocks, and do a nice little rebalancing operation where you sell bonds high, buy stocks low.

Voices [10:13]

Think quick, think positive. Never show any sign of weakness. Always go for the throw. Buy low, sell high. Fair, that's the other guy's problem.

Mostly Uncle Frank [10:23]

And that's kind of a feature, not a bug, of having treasury bonds in a mostly stock portfolio. Now, so the question is for any asset, whether it's the ones you're talking about or some other one, try and answer all these questions at once, even though you keep asking them, and there's more of them in the in the queue. The question for whatever your alternative asset is going to be: will this thing go up in value during a recession? And if the answer is no, then it is not a real substitute for treasury bonds.

Voices [10:52]

That's the fact, Jack! That's the fact, Jack!

Mostly Uncle Frank [10:56]

And the answer for most of these assets is no. Because being stable or not doing anything during a recession is not the same as going up in capital appreciation during a recession. Now, is that really horrible and is it gonna kill you? The answer is no. Because remember, we only have recessions about 15% of the time. So basically, we're like rolling a die every year, and if it comes up one, that's a recession, and if it doesn't come up one, then we don't have a recession. Actually, the odds are less than that. It's more like one in seven. And if we don't have a recession, you would actually not like to have the treasury bonds. You'd like to have something else. And if we have a 2022, the odds of which are like rolling snake eyes on two dice, or about one in 36 or 1 in 40, then you really don't want to have treasury bonds. Well, you really don't want to have any bonds at all in that circumstance. So what will happen here is if there is no recession, or if it's a really mild recession, a really quick recession like we had in 2020, and you don't have your treasury bonds in this portfolio, it's going to go down more than it would if you did have the treasury bonds in the portfolio, and you don't have a rebalancing ability with that. But it may not be that painful unless it's like a 2008 scenario or a 2000 to 2003 scenario. The latter one, the really painful things that it just kept going on and you kept watching your stocks go down every year for three years in a row, at least the growth ones. So I think the chances are you're going to be just fine with this. And maybe there's a one in twenty chance that you're not going to be just fine with this, but all that would mean is that you'd have to cut back on spending or work a little longer. Beginning to your third question, how do I think of residential real estate as part of a drawdown portfolio? Well, I think you need to look at it in in one of two ways and not both. So if you are holding real estate for the rents, for the income, then you treat it like a pension or a side job or something that's just generating income because you can't both sell it and get the income out of it. And in that case, you just subtract the net income from your overall expenses and the rest of your portfolio needs to cover the rest of those expenses. And there's no real issue with that per se, other than it is illiquid. You can't rebalance it by taking shingles off of it and selling them and buying more gold or buying more stocks or something like that. But that may be just fine if it's generating a cash flow. The assets you really need to worry about in retirement are the ones that are both illiquid and not generating any income. And so that would include your residential real estate you're not renting, whether it's your primary home or your secondary home. Those are expense sources and not sources of income, even though they are assets. Now, if and when you decide to sell the real estate, then it does essentially move over from the column of being like an income source to being an asset then that can be used in the portfolio because it becomes liquid and then you can buy other things, rebalance with it, or whatever you'd like. And that's the difference between, say, holding a REIT fund in a portfolio and holding a piece of real estate. That the REIT fund is liquid, that you can buy and sell it whenever you want, whereas the residential real estate itself is not liquid. So I think this should all work fine for you. One thing I noted is that you have cash slash international at 12%, and I'm not quite sure what that meant when you put that in your email. Because I didn't didn't think you meant that you had multiple currencies, but maybe you do. Usually if they're international bonds or stocks, you would put them with your stocks or bonds.

Voices [14:57]

Yeah.

Mostly Uncle Frank [14:58]

Didn't you get that memo? And if you're not, you are definitely holding too much cash while you're still working in particular. Eventually you want to keep that cash amount to 10% or less in terms of a portfolio that generates a high safe withdrawal rate. And that's from Bill Begin's research that goes back to the 1990s and he's confirmed recently. So you might kill two birds with one stone by moving some of that cash or excess cash into these treasury bonds, and then you've kind of solved both of those problems at the same time. If you're really worried about the treasury bonds, what you would probably do is use some of that to buy a strips fund, which acts kind of like a levered version of VGLT. Of course, if you don't want that, ultimately, you're gonna have to sell it at some point. Now I am assuming that you are thinking about tax optimization here in terms of the location of these assets, so that you want to put your bonds and other income generators, including any big piles of cash throwing off ordinary income, into your traditional retirement accounts first, because then you can shield that ordinary income from having to pay taxes on it while you're still working. But that is a topic I've talked about before, but you have not asked about, so I will not continue on.

Voices [16:15]

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

Mostly Uncle Frank [16:18]

You can always search tax location on the podcast page, and it'll bring up some podcasts talking about that topic in more detail. So, thank you for being a donor to the Father McKenna Center. Hopefully, what I just said helps you in some way, shape, or form. And thank you for your email.

Voices [16:38]

I couldn't, wouldn't face the horror of the truth. Even that last day in the Encantadas. When Sebastian left me and spent the whole blazing equatorial day in the clothes nest of the schooner, watching that thing on the beach until it was too dark to see. And when he came down the begging, he said, Well, now I've seen him, and he meant God. Do you believe he saw God? He saw the whole thing there that day on the beach. But I was like you. I said no. I refuse to believe. Until suddenly last summer, I learned my son was right. That what he had shown me in the Encantadas was the horrible, the inescapable truth. Second off.

Mostly Uncle Frank [17:29]

Second off, we have an email from Mark.

Voices [17:34]

All hail the commander of his majesty's Roman legions, the brave and noble Marcus Vindictus.

Mostly Uncle Frank [17:42]

And Mark Wright?

Mostly Queen Mary [17:44]

Greetings from Richmond, Frank and Mary. I sent some more money to the charity and was glad to hear they have a program to deal with the cold in addition to the hunger.

Voices [17:53]

Yes!

Mostly Queen Mary [17:54]

I have two questions that can hopefully be dispensed with quickly and easily. First off, I had heard somewhere, possibly on Rational Reminder, that we should reconsider our asset allocation based on the tax treatment of the individual account. As a simple example, say we have 50% stocks in a pre-tax account and 50% bonds in a taxable account. Our effective tax rate is 40%. Since the government owns 40% of my pre-tax account, our asset allocation is not actually 50-50, but closer to 3050 or 3862. This person used it as an excuse to have the same distribution across all accounts, which seems less than ideal from a tax standpoint. Second and last off, how do I factor in Social Security when I consider my present status of financial independence? For my family, it's about $100,000 a year, which is not nothing, but comes about a decade post-retirement. Do I use some present value of a future cash flow calculation? Maybe I just set up some separate ladder instrument outside of my NESDEG to cover Social Security for a decade. Anyway, thanks for all you do. Hope to share a beer again soon and to meet Queen Mary, Mark.

Voices [19:10]

Mary, Mary, I need you again.

Mostly Uncle Frank [19:19]

Well, it's good to hear from you again, Mark, and thank you for being a donor of the Father McKenna Center as well. Mark and I did share a beer a couple of months ago at a local establishment. I took two. They were small.

Voices [19:35]

Have you decided? Oh, get the swordfish. Best swordfish in the city. The best, Jerry. I love the salmon. And you? Uh, you know what I think? I'm just gonna have soup. Yeah, I'll save the meal for another time. Another tongue. What other tongue? Early I'm not that hungry. This is the dinner. The soup counts. Soup's not a meal? You were supposed to buy me a meal. I'm not stopping you from eating. Go ahead and eat. Get anything you want. But I don't want anything but soup. Then that's the meal. But I had the hot dog. I didn't tell you to have a hot dog. Who told you to have a hot dog? Hey, I give you a brand new Armani suit, and you won't even buy me a meal. All right, fine. Get the soup!

Mostly Uncle Frank [20:31]

And I would enjoy seeing you again the next time you come to the area. We had a nice dinner with Mr. Ed, also. I think that was last month. Hello. I'm Mr. Ed. What's funny, if you bring your spouses, they find they have a lot in common. I have the same problems with us.

Voices [20:51]

Mary, Mary, why you bugging?

Mostly Uncle Frank [20:57]

In terms of this finance stuff.

Voices [21:00]

Gosh!

Mostly Uncle Frank [21:01]

There's a lot of commiseration that goes on in these little gatherings. But getting to your questions. Okay, first off, this tax question. I hope your effective tax rate is not 40%. Because remember, the effective tax rate is supposed to be the sum of all of the marginal tax rates you're paying from zero up to whatever. And so if it's forty percent, your marginal rate is well over fifty percent. But anyway, aside from that, if you heard this on Rational Reminder, I would be questioning whether it's relevant at all because Rational Reminder is a Canadian podcast, and oftentimes, particularly with taxes, they're talking about the Canadian system, which just works a whole lot differently from the US system. And there isn't really any analogous analysis to be done there. I don't think this approach that you've described, though, is very helpful at all, because it really confuses assets and liabilities.

Voices [21:57]

What you just said. Is one of the most insanely idiotic things I have ever heard.

Mostly Uncle Frank [22:04]

For whatever reason, some people have this idea that what you're supposed to do in these retirement calculations is move the liability of taxes over to the asset column and try to adjust the value of the assets based on this taxation adjustment. So basically, you say your assets are less than they are based on some adjustment due to taxes. I think it's just bad accounting.

Voices [22:30]

At no point in your rambling, incoherent response were you even close to anything that could be considered a rational thought.

Mostly Uncle Frank [22:40]

Taxes are an expense. They go in the liability category. The real issue you're trying to deal with is estimating them on an annual basis. And that is actually not really determined on the returns in the account, except for things that are paid in income in a taxable account. Because the taxable events for a retirement account is when you're taking money out of it, not when it's making gains in the account or doing something in there. The taxable events for something outside the account is either it's paying income or you're selling it and there's a capital gain involved. But these things are not directly related or in even many years related at all, that is what your tax bill is, to the returns you made on your investments. So it becomes an almost impossible task to actually accurately change the value of your assets because they're in a certain account or not, if you're trying to do this on the asset side of things. And certainly using effective tax rates or ordinary tax rates or any particular rate and just applying that to an account, that is clearly wrong.

Voices [23:50]

Wrong!

Mostly Uncle Frank [23:51]

It's hopelessly wrong. It's stupidly wrong.

Voices [23:54]

Everyone in this room is now dumber for having listened to it.

Mostly Uncle Frank [23:59]

And if you see somebody doing that, I would say they don't know what they're doing.

Voices [24:04]

I award you no points, and may God have mercy on your soul.

Mostly Uncle Frank [24:09]

But a lot of people turn this into some kind of Dunning Kruger problem. They try to be too clever by half, and they come up with the wrong answer.

Voices [24:17]

Right? Wrong!

Mostly Uncle Frank [24:18]

So the better approach is this: treat your assets as assets. Don't make adjustments for taxes or other things you find floating around in the air. Arrange them in your accounts to optimize by tax location, as we just talked about, with the idea that whatever your taxes are gonna be, you are trying to minimize what they are. Not for one year, but for the whole series of years you're paying them, hopefully. But then on the liability side of this, you do need to estimate what your taxes are every year, and know it's not mysterious and it's not too hard, and it's not something like, oh, I don't know what tax rates are gonna be. You can't handle the crystal ball. Why don't you just use your CPA, look at your current returns and why you have them and how that's likely to change in the future, and do the job like a sensible person who knows what an asset and a liability is.

Voices [25:15]

You can't handle the dogs and cats living together.

Mostly Uncle Frank [25:19]

And you said this person used this as an excuse to have the same distribution across all accounts, which seems less than ideal from a tax standpoint. I agree with you, this person is stupid, and they're paying more money than they need to. And so if they're pig headed and they don't want to change what they're doing, I would not waste my time having discussions with them about it.

Voices [25:44]

Forget about it.

Mostly Uncle Frank [25:45]

As the saying goes, do not waste your time trying to teach pigs to sing. It wastes your time and annoys the pig. And I think of that often when I hear what people say when they found some system on TikTok or YouTube or some strange place.

Voices [26:07]

Do you think anybody wants a roundhouse kicked to the face while I'm wearing these bad boys? Forget about it.

Mostly Uncle Frank [26:14]

Anyway, let's go to your second question. Your second question is how to factor in Social Security. Well, from the standpoint of retirement calculations, it is a future stream of income that starts on a specific date and then is inflation adjusted. So if you go to a calculator like the financial goals tool at Portfolio Visualizer, which is part of the Monte Carlo analyzer, it will allow you to start and stop cash flows anytime in the future. And so you could model this in there, just making sure that you say, okay, I'm taking this in 10 years, so you put in the right numbers in the right boxes and model away. Of course, you have to add or subtract spousal benefits and other things and make sure you get the timing right for these things. But that's the simplest way to model this, is just another cash flow that's coming in. And you would do the same thing with a rental real estate cash flow or a job that is stopping in a certain period of time or anything else like that. And any decent retirement calculator will allow you to do that. Which means if your calculator does not allow you to do that, you don't have a decent retirement calculator. But you can also do it on spreadsheets. Okay, your next sub-question was do you use a present value of a future cash flow calculation? You would only be doing that if you were trying to assign it a value in terms of a net worth statement. And I don't think using a DCF calculation is actually the easiest way to do this. The better way to do this is not to try to do the discounted cash flow analysis, but to treat this as an annuity and then go price this as an annuity that's starting in the future. It's a deferred annuity. It has an inflation adjustment, so you'll have to use an annuity that's got at least a 3% cola attached to it. It'll get you the closest as you can. You can actually do this at immediateannuities.com. And if you go there and start playing around with ages and when you want to start an annuity, you can basically create something that looks like your Social Security or some other pension payment. And then you can see how much that would cost to buy in today's dollars. And that is probably the best estimate you can get as far as what is it worth today in today's dollars for a net worth calculation. And the reason you can be confident in that is because it's a market-based valuation. And then you don't have to do a DCF analysis and guess at discount rates and other things like that, which is ultimately the problem with most DCF analyses, is that you know they are wrong from the get-go because you have to make these assumptions and put them in there. Whereas if you do a market-based calculation like you would here, then you don't have that problem. And this is a point of frustration with me because most financial advisors don't get this. There are multiple ways to do valuations and for multiple purposes. And I think this is natural to me because I work with valuation experts for a couple of decades. But a discounted cash flow analysis is only one way to do a valuation. The other two common ones are can you get a market price for whatever this thing is? And then can you do comparables like you would do with residential real estate? But those are actually just the tip of the iceberg in terms of how you can do valuations. Anyway, that's what I would do if you're trying to do it for a net worth calculation. That might be interesting academically. Honestly, it's not worth that much in terms of real life planning because what you really care about is this stream of income that's coming at a certain point. And in terms of planning, you may be correct that you set up a separate ladder instrument outside of the nest egg to cover essentially that income stream that you're not getting right now from Social Security. And the reason you might want to do it that way is that will probably get you to a place where you can spend the most money possible. Because if you ignore Social Security, then you are underspending your portfolio, which might be fine when you're 20 years away, but when you're less than 10 years away, suddenly that number becomes very meaningful. And if you're talking about, well, I want to spend more money in the next 10 years, why don't I figure out what this would look like when I get to Social Security, know what that bogey is, and then take enough money out of my nest egg to cover that for the period from now until then. And that is actually an appropriate place you could use something like a tips ladder if you really want to.

Voices [30:56]

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

Mostly Uncle Frank [31:00]

But that is a very legitimate or tried and true way to essentially fill a gap. Usually the best answer is to model this in multiple ways, is if you did the latter thing or didn't do the latter thing, and then you can see what seems to work the best. Because it also matters how big the gap is and things like that. From our perspective, I had not been incorporating Social Security into our calculations when we were in our 50s, or at least at the start of retirement, simply because I felt it was too far away and I wanted to kind of leave it as a buffer, if you will. Now that we're in our 60s, I am also going to be looking at this more closely because I do want to make sure that we are able to spend as much money as possible in our 60s, when those dollars are really the most valuable in many circumstances when you're talking about travel or other physical activities and not shortchanged ourselves. And the closer it gets to being a reality, the more real I can count on it and include it in a calculation. That's what I'm talking about. So these are all good thoughts. You must have written this email before Miller time. Everything you always wanted in a beer and less. Thank you for being a donor of the Father McKenna Center. I hope to see you again soon, maybe this year sometime. And thank you for your email.

Voices [32:22]

Can I take your order? What kind of soup do you have? Okay. I'll have tomato soup and uh tuna toast. Hello, kidnapping. This is it, you know. This is the meal. So stuck up, buddy boy. What are you talking about? This isn't a meal. Yes, it is. Soup and sandwich. That is a meal. You're supposed to buy me dinner in a nice restaurant like Mendy's. I tried to do that. This is lunch in a coffee shop. Doesn't matter. This isn't a this completes the transaction. Soup and a sandwich for a brand new Armani suit. Is that any kind of a gesture? Yep. Last off.

Mostly Uncle Frank [33:10]

Last off, we have an email from James.

Voices [33:13]

Hey Jim Baby! I see you brought up reinforcements. Well, I'm waiting for you, Jimmy Boy.

Mostly Uncle Frank [33:21]

And James writes?

Mostly Queen Mary [33:23]

Frank. The test folio tool seems to have a significant limitation as it does not currently simulate small cap value stocks prior to the 2000s based on use of some of its built-in portfolios. The oldest SCV ticker symbol I could find is DFSVX. The limited time frame seems to make any analysis involving SCV stocks not useful. Q, I need more cowbell clip.

Voices [33:49]

It doesn't work for me. I gotta have more cowbells. I gotta have more cowbell.

Mostly Queen Mary [33:54]

Am I missing something? This got me wondering how portfolio chart models SCV stock for earlier time frames. Back to the 1970s, it's claimed. I could not find this information at their website. Do you know?

Voices [34:08]

Babies, before we're done here, y'all be wearing gold plated diapers.

Mostly Uncle Frank [34:14]

Well, James, I know you sent this email in September, because that's how long this cue still is now. But lucky for you and lucky for me, they've actually fixed this.

Voices [34:24]

Yeah, baby, yeah.

Mostly Uncle Frank [34:27]

There is now a ticker, VBR Sim, that gives you small cap value data going back to 1928 using the Fama French data that's available there in Testfolio, and in fact it's pretty easy to access if you're on the backtester page. Look under the little asset class thing, and it's right there. And you can start out a portfolio with that or just put it in wherever you'd like. Now, if you want to know about the data used at portfolio charts, Tyler's got this huge page there all about data sources. Because he spends a ridiculous amount of time going after data, not only US data, but data from a number of other countries. I'll see if I can link to that page in the show notes. It's not obvious when you get to the site. But yeah, it's basically the same kind of data, so there's no mysteries. This is a funny thing that frequently comes up, though, I think, with respect to analyzing portfolios and assets. Oftentimes people have some preconceived notion as to what they think is the right answer or the way something performed, and they're just wrong about it in their head, and you show them the actual data, and they have cognitive dissonance. And so their first reaction is not to say, oh, I guess I was wrong. Their first reaction is to say, Oh, there must be something wrong with this data. This is a conspiracy. That's what this is. As if somebody who's been working on some website for years on end isn't going to have meticulously tried to find the best data for whatever they're using. Now it's possible that people make mistakes with the data, but chances are if you think something's true and you look up data and it's not true, you're probably the one that's in error, not the site you're looking at. And no, people are not hiding the data or the information from you either.

Voices [36:23]

One big conspiracy, and everyone's in on it.

Mostly Uncle Frank [36:29]

I did run into a problem with test folio just yesterday, or today, depending on what day we're at. Had to do with a mutual fund called PARWX, which is a Parnassus value fund. But anyway, the data for that for last year is clearly an error, and it seems to have taken the mutual fund price and not the total return. Because if you when you look on there, it looks like the returns for that fund were about 7% in 2025 when they were actually 19.04%. So, yes, sometimes you will run into anomalous errors like that, but it is usually about some specific fund or something more obscure than an entire asset class for decades on end. I ran into another person recently who claimed that the data for gold prior to 1980 was different from that after 1980. And the answer to that is no, you're wrong about that too, because it's generally the price of London bullion on the London Exchange at 3 p.m. every day, and that was the data that is typically used in places like Portfolio Visualizer from 1968 or 1970 all the way up till 2004, and then they typically use the price of GLD after that because that's when you finally had an ETF. But again, this is a lot of people imagining things are wrong because they have an idea in their head that that is wrong.

Voices [37:58]

Wrong! Wrong!

Mostly Uncle Frank [38:01]

Anyway, you have got your small cap value in test folio all the way back to 1928, so have at your analyses.

Voices [38:10]

Guess what? I got a fever! And the only prescription is more cowbell.

Mostly Uncle Frank [38:17]

And hopefully that helps. And thank you for your email.

Voices [38:21]

It's a conspiracy man.

Mostly Uncle Frank [38:25]

Now we are 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 www.riskpartyreal.com on the portfolios page. And we'll also talk about our monthly distributions for February. January was actually a very good month for these portfolios, at least until the last day. And it's gone. Poof. But it still didn't dampen the monthly returns too much. The last ten days were very strange for some assets like gold when they went up between 10 and 15% and then dropped 10% on the last day of the month after the new Fed chair was announced.

Voices [39:12]

I think you've made your point, Goldfinger. Thank you for the demonstration. Do you expect me to talk? No, Mr. Bunt, I expect you to die.

Mostly Uncle Frank [39:21]

But I wouldn't read too much into any of that since we're long-term investors here.

Voices [39:26]

The crystal ball can help you.

Mostly Uncle Frank [39:30]

Just looking how the market's finished for the month of January and year to date. VOO, the SP 500, is up 1.45% for the year so far. The NASDAQ 100, represented by QQQ, is up 1.23% for the year so far. Small cap value has gotten off to a great start. Representative fund VIOV is up 6.72% for the year so far. But gold is still the big winner, even after the drop on Friday.

Voices [40:05]

I love gold.

Mostly Uncle Frank [40:09]

Representative fund GLDM is up 12.46% for the year so far.

Voices [40:13]

That's gold, Jerry. Gold.

Mostly Uncle Frank [40:15]

Long-term treasury bonds are not doing much. Representative fund VGLT is down 0.13% for the year so far. REITs represented by REET are up 2.89%. Commodities are doing well. Representative fund PDBC is up 9.58%. Preferred shares represented by the fund PFFV are up 2.07%. And finally, managed futures are still managing to do well. Representative fund DBMF is up 4.03% for the year so far. Moving to these portfolios. First one is this reference portfolio called the All Seasons. We keep around for comparison purposes really. It only has 30% in stocks and a total stock market fund. It's got 55% in treasury bonds, intermediate and long, the remaining 15% in golden commodities. It's up 2.2% for the month of January and year to date. It's up 25.98% since inception in July 2020. For the month of February, we'll be withdrawing $34 for the distribution. It'll come out of accumulated cash. It'll be $68 year to date and $2,142 since inception in July 2020. Moving to these kind of bread and butter 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. It is up 4.5% for the month of January and year to date. It's up 66.74% since inception in July 2020. For the month of February, we'll be withdrawing $53 that will come out of gold. It's at a 5% annualized rate. It'll be $104 year to date and $2,967 since Inception July 2020. Next one's Golden Ratio. Golden Ratio Seekers. The Golden Ratio. This one's 42% stocks divided into a large cap growth fund and a small cap value fund, 26% in long-term treasury bonds, 16% in gold, 10% in managed futures, and 6% in cash. It is up 3.91% for the month of January and year to date, and up 60.43% since inception in July 2020. For the month of February, we'll be withdrawing $51. It always comes out of the cash in this portfolio. It's at a 5% annualized rate. It'll be $100 year to date and $2,903 since inception in July 2020. Next one's the Risk Parity Ultimate. Not going to go through all 12 of these funds, but it's up 3.64% for the month of January and year to date. It's up 44.83% since inception in July 2020. And for the month of February, we're taking out $54. It's going to come out of accumulated cash. It's at a 6% annualized rate. It'll be $107 year to date and $3,074 since inception in July 2020. I should mention that all of these data points are listed or will be listed on the website, so you can check them out there. We're now going to move to these experimental portfolios.

Voices [43:37]

Pony Stark was able to build this in a cave with a box of scraps.

Mostly Uncle Frank [43:44]

These all involve leverage funds, so don't try this at home, even though I know some of you do.

Voices [43:50]

Well, you have a gambling problem.

Mostly Uncle Frank [43:53]

First one's the accelerated permanent portfolio. This one's 27.5% in a levered bond fund. TMF. 25% in UPRO, which is a leverage stock fund. 25% in PFFV, that's a preferred shares fund. And 22.5% in gold. Although it's looking more like 30.74%. And this is gonna get rebalanced if it stays like that when we look at it for rebalancing on February 15th, which we may actually do early this year. It's up 4.68% for the month of January and year to date. It's up 29.2% since inception in July 2020. For the month of February, we'll be withdrawing $45. It'll come out of accumulated cash. It's at a six percent annualized rate, that's eighty-eight dollars year to date, and three thousand one hundred and ninety-five dollars since inception in July 2020. Next one's the aggressive 5050. This is the most levered and least diversified of these portfolios, and by far the worst performer. It is one-third in a leverage stock fund UPRO, one-third in a levered bond fund TMF, and the remaining third in ballast divided into a preferred shares fund and an intermediate treasury bond fund. It's up 1.1% for the month of January and year to date, and down 0.62% since inception in July 2020. We're withdrawing $34 out of it from accumulated cash for February. It's a 6% annualized rate. It'll be $68 year to date and $3,131 since inception in July 2020. Next one's a levered golden ratio. This one's a year younger than the first six. This one has 35% in NTSX, that is a composite levered fund that has the SP 500 and Treasury bonds in it. It has 15% in AVDV, which is an international small cap value fund that's been doing quite well. 20% in gold, GLDM, well, almost 25% in that now. 10% in KMLM, which is a managed futures fund, 10% in TMF, a levered bond fund, and the remaining 10% in a levered UDAO and a levered UTSL that follow the Dow and Utilities indexes. It's up 4.62% for the month of January and year to date, and up 25.41% since inception in July 2021. It's at a 5% annualized rate. It'll be $80 year to date and $2,060 since inception in July 2021. And the last one is the Opter Portfolio, a return stacked portfolio. One portfolio to rule them all, and it's still ruling. 24% in GOVZ, it's a Treasury Strips Fund, and the remaining 36% divided into Gold and a Managed Futures Fund. It's up 5.74% for the month of January and year to date, and up 36.44% since inception in July 2024. We'll be withdrawing $62 out of it out of accumulated cash for February. That's a 6% annualized rate. That'll be $121 year-to-date and $1,016 since inception in July 2024. And that concludes our weekly portfolio reviews. Just one sad note. The comedic actor Catherine O'Hara has passed away. Brooke. Don't do that.

Voices [47:49]

Ask Mr. O'Neill another question, dear. Tip? That's a really stupid name. Do you mind if I call you Tip Toenail? Tip Toenail. No, you can call me whatever you want. What the hell does that have to do with what I've been saying?

Mostly Uncle Frank [48:04]

I don't know. Who had a very long career starting with Second City and going through a whole lot of movies and up to Shits Creek recently.

Voices [48:13]

Oh, hello. Hi.

Mostly Uncle Frank [48:15]

We will end up on our feet in no time.

Voices [48:18]

Of course, by then our feet will be shoeless and filthy and mangled from walking on cigarette butts and broken beer bottles. Rub my back. What? No. I rubbed your back many a night when you were little. Yeah, in exchange for half my allowance. Fine. You may select one silver piece from my accessory case.

Mostly Uncle Frank [48:38]

And she played so many different characters so well and was so awesome.

Voices [48:52]

Loa Heatherton in concert Saturday at 10th!

Mostly Uncle Frank [48:57]

I certainly will miss her, and we will put a little clip from her early SCTV days, playing a bawdy character known as Dusty Town and a Christmas special. So listen to that at the end. And speaking of the end, now I see her signal is beginning to fade. If you have comments or questions for me, please send them to Frank at RiskParodyRadio.com. That email is Frank at RiskParodyRadio.com. Or you can go to the website www.riskpardy.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, and be some stars of follow, a review. That would be great. Okay. Thank you once again for tuning in. This is Frank Vasquez with Risk Purdy Radio. Signing off.

Voices [49:50]

Thank you, my best husband's gift yet. I could hear something stirring. It was my husband that louse. I screamed down the stairs, jacket back to this bed, but heard not a word from the weasel I whip. So I slipped up my house coat and stockings with care, but except for those items, my body was bare. I scammed the whole house, but my search was in vain. And visions of homicide danced through my brain. When I wanted such a sound, I ran to the door and tore open my gown. In the lustre of youth that I had long ago. My baby blue on chip here. But a man dressed in red from his head to his rear. I knew in a flash that it must be my cat. His course as they came. And he whistled and shouted and caught me by name. Mumma dusty, mumma dusty, mumma dusty, please dusty. Somebody winkle stiff something hairy. His legs were like fur trees. His chest was so hairy. Soon gave me some I had something to do with it. So I gave him the number and up the staircase. He ran into the bedroom and whistled so sweet. Now I fumble this come on, I get a heifer. Merry Christmas to Mama. And to Mama. I hope it is good for you. It's your one's for me. I'd like to invite my special guest to join me in one last Christmas salon. Divine Marcy for your boy. And of course, it's your whole mother. Yes, next week.

Mostly Queen Mary [51:35]

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.