Welcome And What We Do

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! All thanks to our friend Luke, our volunteer in Quebec. Sacosh. 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. I'll give you the moon, alright?

Voices [1:46]

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 [2:05]

Really 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 502.

Voices [2:19]

It's time for the grand unveiling of money.

Mostly Uncle Frank [2:23]

Which means it's time for our weekly portfolio reviews of the eight sample portfolios you can find at www.riskparty radio.com on the portfolios page. This is turning into a Christopher Walken kind of year.

Voices [2:36]

I'll be honest, fellas, it was sounding great, but I could have used a little more cowbell.

Mostly Uncle Frank [2:43]

Well, before we get to that, we're gonna have some emails, of course. And before the emails, I have a few serendipitous musings this morning.

Voices [2:52]

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

Mostly Uncle Frank [2:57]

So one of the reasons I don't record this on video is I frequently record it in my bathrobe. So I'm sitting here in my easy chair with a cup of coffee. Put that coffee down.

Voices [3:13]

Coffee's for closes only.

Mostly Uncle Frank [3:16]

And I happen to be wearing this Mandelbroat set t-shirt that my friend Optimus Bill just sent me yesterday. I am Optimus Bill. Optimus Bill has gift giving as one of his love languages, so he frequently sends us things that remind him of us.

Voices [3:36]

Try the wine.

Mostly Uncle Frank [3:55]

Which I'll link to in the show notes.

Voices [4:01]

I did not know that.

Mostly Uncle Frank [4:04]

But anyway, before this podcast, I was listening to Masters in Business, which is Barry Ridholz's podcast where he interviews really high-level financial people. And today he was interviewing Jean-Philippe Bouchaude, who's the chairman of the Capital Fund Management, which is called so-called CFM, and deals a lot in managed futures, believe it or not. Bouchade is actually a physicist who knew Benoit Mandelbrot of the Mandelbrot set and worked with him back in the 1990s and early 2000s and was quoted in Mandelbrot's book about finances. So everything's coming together while I'm sitting here wearing my Mandelbrot set t-shirt.

Voices [4:41]

Everything is proceeding as I have foreseen.

Mostly Uncle Frank [4:57]

I'll link to that video and podcast in the show notes. For all you physics and finance nerds out there.

Voices [5:05]

I'll show them all.

Mostly Uncle Frank [5:07]

But now let's attend to what you actually want me to talk about this week, which is a little less esoteric.

Voices [5:14]

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

Mostly Uncle Frank [5:20]

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

Voices [5:25]

What does Matt Damon say on that Bitcoin commercial? Fortune favors the brave!

Mostly Uncle Frank [5:29]

And Matt Wright's.

Mostly Queen Mary [5:31]

Hi, Aunt Mary and Uncle Frank. Attached, please find my donation to Fairfax Casa. 100 billion dollars. It has been eye-opening hearing the stories from their work. Thank you for that. I have a question about future portfolio withdrawals. We are late 40s with no children and a golden ratio inspired portfolio.

Voices [5:56]

A number so perfect. Perfect. We find it everywhere. Everywhere.

Mostly Queen Mary [6:01]

My wife will be retiring at the end of this year, and I plan on working part-time for three to seven more years, or until a fateful meeting with the Bobs.

Voices [6:12]

Good one. Oh, that's terrific, beers.

Mostly Queen Mary [6:15]

I have tracked our earning, investing, and spending since 2017 and have a good handle on our numbers.

Voices [6:23]

Would you be a good sport and indulge us and just tell us a little more?

Mostly Queen Mary [6:29]

Today, we spend just under $118,000 annually, $70-30 mandatory discretionary, which is about 4.4% of our portfolio value. Over the next 20 years, our annual expenses will fall away slowly. No more FICA, no more mortgage, no more ACA as we reach Medicare age, and so on. I project that at age 65, our annual expenses will fall to $97,000 in 2026 dollars. That would be a roughly 3.8% withdrawal rate from age 65 forward. You have mentioned several times that spending inflation is personal, not CPI average. But is there any reason we shouldn't use a fixed withdrawal rate plus annual CPI to force withdrawals and avoid hoarding? We are comfortable drawing down the portfolio as we age and would rather start spending on upgrades. Think cabins and not tent camping.

Voices [7:27]

The best, Jerry, the best.

Mostly Queen Mary [7:29]

And give more to family, local, and international charities while we are still alive.

Voices [7:34]

I don't want to dream about making more money, I want to spend it. God, you have nothing but nightmares.

Mostly Queen Mary [7:54]

Thank you for any thoughts and apologies for the ramble, Matt.

Voices [7:58]

My dad said he listened to Matt David and lost all his money. Yes, everyone did, but they were brave in doing so.

Mostly Uncle Frank [8:05]

Well, first off, thank you for being a donor to Fairfax Casa. As most of you know, we are running a promotion these days to support Mary's charity, which is the Fairfax Court Appointed Special Advocates, of which she is one. That goes by Fairfax Casa, C-A-S-A. And they are volunteers who advocate for children who are going through the foster system. So they get appointed by the court to assist one child at a time or one family of children at a time. And since April is Child Abuse Prevention Month, we decided to run this promotion in March and April. It's going quite well, as Mary has reported and will report again next week. Mostly because we have some of the most generous listeners on the planet.

Voices [8:49]

Really top drawer.

Mostly Uncle Frank [8:51]

But if you do give to Fairfax Casa or my charity, the Father McKenna Center, you do get to go to the front of the email line, which Matt has done here.

Voices [8:59]

Yes!

Mostly Uncle Frank [9:00]

And we'll put that link in the show notes again, and you can also find it at the support page at www.riskperdiore.com. Just make sure you mention it in your email so we can duly move you to the front of the line. And so now getting to your email. Well, first, congratulations for being astute and doing forecasting the right way, which is to recognize that for most retirees, your spending in real terms is likely to go down over time.

Voices [9:28]

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

Mostly Uncle Frank [9:32]

That is the base rate. Your inflation rate is likely to be one to two percent less than the CPI, which means in real terms your spending goes down. And I can tell you that our nominal spending has been going down for the first five years of retirement, mostly getting these pesky children off our dole.

Voices [9:50]

Well, you call this a happy family. Why do we have to have all these kids?

Mostly Uncle Frank [9:54]

But it's gonna go back up this year for a renovation project that we're starting actually on Monday. Anyway, I agree with you that I think you probably should try to spend more money. I would target five percent. Because honestly, with that projection of your spending going down, you could actually support a 6% withdrawal rate if you run the calculations. Because if we are doing our sort of standard calculations using the CPI, but then we modify that to use the base rate for inflation for retirees, that adds 0.5 to 1% just right there in terms of a projected safe withdrawal rate. That's from Morningstar's last report on this topic. And so there is no reason not to start spending that money sooner rather than later. I heartily agree that cabins and not tin camping will likely to get more people to go with you, including your spouse and family members. But I'm glad you're thinking about these things and really thinking about being intentional about this and not just following your foolish consistency habits that you don't need anymore. So I know one way that people approach this to increase their spending is to actually just take the excess every month or so and put that into some kind of savings account or money market with the idea that you're gonna find a way to spend it by the end of the year or give it to a charity, or at least just have that as a pot of money that it's kind of waiting to be spent, and you're always looking at it saying, Okay, we had this money, let's go figure out what we can do with it. Let's go upgrade that cabin again.

Voices [11:32]

So your dreams are too ordinary. You should uh upgrade them.

Mostly Uncle Frank [11:36]

And oftentimes that provides the psychological impetus, just being able to see the excess money building up in some place. You can call that your spending bucket. Some people call that a fun bucket.

Voices [11:48]

What do you mean, funny? Funny how? How am I funny?

Mostly Uncle Frank [11:51]

Whatever you want to call it. You can call it a ladder or a flower pot if you want to. Maybe a pie cake, I don't know. But you should also kind of do this on an experimental basis. Basically, you're taking this money, you're spending it on something you probably wouldn't ordinarily do or had not done in the past, but then you need to reflect on that after you've spent it maybe in the next six months or a year with your wife and or children or anybody else who counts. That did you get value out of that? Was that fun? Did that enhance your life, or was it not really worth the the money? And then keep doing the things that are working and stop doing the ones that aren't. Because it's also not wrong to retain some frugality habits, if you will, for things you just don't care about as much. As an example, for me, I've been retired for now five years or so and thought by now I'd be replacing my car. But the truth is I don't drive much anymore, so it matters less and less to me, so I'm still driving a 15-year-old car. And if you use less than one tank of gas every month on average, like I do, you don't feel any point in replacing it because it would just sit there so you could look at it.

Voices [13:01]

That's not an improvement.

Mostly Uncle Frank [13:03]

And after commuting for nearly 30 years, any day that I don't have to drive is a good day. I also have a 20-year-old bicycle. I've replaced all the parts on it multiple times, but the frame is still 20 years old. And I like it, and it works well for me, so I don't replace it. But we do enjoy spending money on other people, so we had 11 people over for Easter and had a lot of that meal catered, and that was a lot of fun. That was a good use of our money as this this renovation we're about to embark on, and the travel and just giving money away or just buying things for other people.

Voices [13:39]

But suddenly I begin to see a bit of good luck for me. Cause I've got a golden ticket, I've got a golden twinkle in life The point of this is I'm commending you that you're doing this the right way, that spending is like a muscle that you need to build.

Mostly Uncle Frank [14:11]

But the key is to actually go out and do it intentionally and not be sitting around saying things like, I just don't know what I would ever spend money on.

Voices [14:20]

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

Mostly Uncle Frank [14:30]

Your heirs are gonna be 60 years old and not need the money at that point in time. It's a very inefficient and bad planning, honestly, if you talk to wealth management people like Jim Grubman. I think most people can try a little harder and do a little better if they actually make an effort at that. So, hopefully those musings help a little bit. It cuts whack thank you for being a donor to Fairfax Casa. Hope you enjoy your meeting with the Bobs, your fateful meeting whenever that occurs. What what would you say you do here?

Donor Thanks And Fairfax CASA Push

Voices [15:15]

And thank you for your email. Let's see. You are Michael Bolton? Yeah. Say your real name. Yeah. Are you any relation to the pop singer? No, it's it's just a coincidence. I'll be honest with you. I love his music. I do. I'm a Michael Bolton fan. For my money, I don't know if it gets any better than what he sings when a man loves a woman. But you must really love his music, huh? So tell me, what's your favorite song of his? I don't I don't know. I guess I sort of like them all. That's Orion of the exact same way, but it must be twice as hard for you being to have the same name as him. I celebrate the guy's entire catalog. Anyway, let's get down to business, Michael. Second off.

Mostly Uncle Frank [16:08]

Second off of an email from Michael. You know, you you can just call me Mike. And Michael writes.

Mostly Queen Mary [16:16]

Hi, Mary and Frank. Please see attached receipt for my donation to Fairfax Casa and subsequent match by my company. No need to mention my name or donation on your podcast. Just want to let you guys know that I'm still listening and learning something new on each episode. With much gratitude, Michael.

Voices [16:34]

When a man loves a mama and keep his mind on nothing else.

Mostly Uncle Frank [16:51]

Well, Michael, you're going for all the points here. First by addressing Mary first, as opposed to addressing me.

Voices [17:03]

I need your hugging.

Mostly Uncle Frank [17:10]

And being a generous donor to Fairfax Casa and taking advantage of your company match. So of course we are going to mention your email on the podcast.

Voices [17:21]

Looks like a medieval warrior.

Mostly Uncle Frank [17:24]

As I've said before, and we'll say again, we have the finest podcast audience available.

Voices [17:30]

Yeah, baby, yeah.

Mostly Uncle Frank [17:32]

Who are both financially savvy and very generous. And that is something we celebrate every time we make a podcast. Thank you for everything you do, and thank you for your email.

Voices [18:09]

This is your celebration.

Mostly Uncle Frank [18:12]

Next off, an email from Steven.

Voices [18:16]

Hey Steve!

Mostly Uncle Frank [18:17]

And Steven writes.

Mostly Queen Mary [18:19]

Hi, Frank and Mary. You reference Bridgewater's four quadrant model quite often, and it intuitively makes sense that different asset classes would perform differently in different economic environments. But I wanted to identify what specific class goes in each quadrant. Google found me several answers, and of course they all disagree with each other, and none cite any evidence at all. Going through your back catalog, I finally found episode 90, where you seem to put bonds at lower left, gold at upper left, small cap value at upper right, and large cap growth at lower right. However, I wanted to verify this for myself. So I downloaded CPI and GDP historical data from the St. Louis Federal Reserve, aka Fred, and downloaded back test data from 1968 to 2025 for VUG SIM, VBR SIM, TLT SIM, and GLD SIM from testfolio. Then I plotted whichever class did best in each period. A nice weekend project, right?

Voices [19:22]

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

Mostly Queen Mary [19:27]

At first pass, I tried inflation versus growth for quarterly periods. For the podcast listeners, this looks like one four-colored blob in the middle, with a few outliers of random colors in the lower left and upper right quadrants. Maybe it'll be better with annual periods. Nope. We see narrower ranges on both axes but the same overall pattern. Then I listened again and realized you said rising and falling in your description. So I tried plotting change in inflation versus change in growth. How does that look? Quarterly is just another blob with a few random outliers of all colors in all directions. Well, let's do annually too for good measure. Finally, something different. This plot is much more evenly distributed, but it still looks like all four classes represented about equally in every quadrant. There are no clear winners. Maybe looking at each color separately will help. Okay, I can sort of see GLD as being center to upper left. Same for TLT and center to lower left. But I put VBR in center to lower right and VUG in center to upper right, the reverse of what you proposed. And this ignores the large overlap between all classes in the center and how much worse this all looks with quarterly periods versus annual. I'm not convinced there's any real correlations here at all, though I don't have enough of a background in statistics to quantify that. So, what is the basis for your placement of these classes and even the use of this model at all? Is this a case of all models are wrong but some are useful? I could agree that the model makes it easy to teach the need to diversify, and maybe pretending it's true causes us to behave in a way that works well in practice for another reason. Some argue the same of the efficient market hypothesis. Or are we being foolishly consistent with old dogma and need to find a better model? Thanks, Stephen and Cincy.

Voices [21:26]

I won't deceive you, Mr. Stryker. We're running out of time. Surely there must be something you can do. I'm doing everything I can. And stop calling me Shirley.

Mostly Uncle Frank [21:36]

Well, Stephen, first thank you also for being a donor to Fairfax Casa. Stephen is one of our patrons on Patreon, which you can do on a monthly basis if you go to our support page at www.riskpartator.com. We will be taking all that money for March and April and giving it to Fairfax Casa. In addition to the other monies we collect. Now I do. I admire your efforts here, Stephen, but I do not have any way of really evaluating what you've done here.

Voices [22:07]

It's an entirely different kind of flying, altogether. It's an entirely different kind of flying.

Mostly Uncle Frank [22:14]

I'm actually having a little bit of trouble making heads or tail of everything in these graphs that you sent me. Which I did not ask Mary to describe in detail.

Voices [22:24]

Mary, Mary, why you bugging?

Mostly Uncle Frank [22:33]

But I think what you're trying to do is reinvent the wheel here, and I probably would not try to do this because the four-quadrant model has been around for 30 years as the four-quadrant model. They had various other names before that. And there have been reams and reams of material written on this, including answering the question that you're trying to answer with your analysis here. So your first instinct was right, except you didn't pursue it far enough. Your first instinct being, why don't I ask Google? These days, what you want to do is have a conversation with your favorite artificial intelligence bot. And so I went and started that process for you and put in the following prompt into Google Gemini. And the prompt is, is there databased research that verifies the four quadrant model? And so let me read you the short paragraph answer and then the references that it gave me. And the answer is yes. The framework of categorizing the economy into four quadrants based on growth and inflation and mapping specific assets to those quadrants is heavily supported by empirical data. Several major financial institutions and academic researchers have back tested this model across decades of market history to verify its effectiveness. And then it cites to the following Research Affiliates, a major quantitative firm, published a study titled Beware the Shocks in the Road, which rigorously tested the four-quadrant model using real market data from 1960 to 2020. And no, I'm not going to go book these things up, but you certainly can on Google or otherwise. I'm just giving you the names of them so you can find them.

Voices [24:10]

So are you going to get another job?

Mostly Uncle Frank [24:12]

I don't think I'd like another job. Number two, the Merrill Lynch investment clock. Before risk parity became a buzzword, Merrill Lynch, now B of A securities, utilized a highly respected data back framework called the investment clock. It uses the exact same two axes, economic growth and inflation, to divide the business cycle into four phases: reflation, recovery, overheat, and stagflation. Merrill Lynch analysts back tested this model using data from the early 1970s forward. And the historical data perfectly aligns with the risk parity quadrants or for quadrant model. Next one they mentioned is the Journal of Portfolio Management, Macro Surprises. In 2019, researchers from the Mann Group, a major alternative investment management firm, published a peer-reviewed study in the Journal of Portfolio Management titled The Impact of Macroeconomic Surprises on Asset Returns. The researchers analyzed decades of daily data, specifically isolating days where the government released unexpected economic data to see how assets reacted in real time. The data confirmed the core thesis of the four quadrant model, blah, blah, blah, so on and so forth.

Voices [25:23]

Yada yada yada.

Mostly Uncle Frank [25:24]

Yada yada yada.

Voices [25:25]

Yada yada yada.

Mostly Uncle Frank [25:26]

And the fourth thing cited is Bridgewater's all-weather story back test, which I've referred to at least in one paper. And what it reads here is while Bridgewater popularized the theory, they also provided the data to back it up to prove the model wasn't just a product of the modern financial era. They engineered a back test of the four quadrant risk parity model going back to the 1920s. Now, in addition to that kind of research that you can do, we've also cited to various things on this podcast that I will dig out and give to you. One was from our friend Alexi, the dude.

Voices [26:01]

So that's what you call me, you know, uh that or uh his dudeness or uh duder or uh you know Bruce Dickinson, if you're not into the whole brevity thing.

Mostly Uncle Frank [26:12]

Who brought this to our attention, I think, in 2022, and it is some articles at Resolve Asset Management talking about all of this material and giving you that four quadrant model with the assets lined up in it. Another one's a little essay that one of our listeners actually did with a similar chart. And then I'll give you another one from Hedgeye, who tries to predict which quadrant is going to be active next and pick assets in that quadrant to try to outperform the market, which is a lot of what these hedge funds actually try to do. At least all the ones that are interested in using macroeconomic factors to pick investments are all using a variation of the four quadrant model. And this is just a list of assets that perform well in each of the four quadrants, and I'll put that up as well. But let me give you some other concepts and shortcuts, if you will. One thing you need to realize is all of these things are probabilistic. So when we're saying that one asset performs best in this particular quadrant, we're not saying that is a certainty that if you have that kind of quadrant, that asset will definitely perform on a short-term basis well in that quadrant. This is probabilistic, so it has a high probability of performing well, is really the technical way of stating that. That for instance, in a recession, treasury bonds have a very high probability of performing well, whereas stocks have a very high probability of performing poorly. Now, that relationship has a 100% correlation since the 1950s, and we've cited a paper on that that shows that whenever macroeconomic systems go into the recession quadrant, you see a negative correlation between treasury bonds and the stock market. And we've cited a paper on that. I'll see if I can dig that up and link to it again by a researcher named Claudia Moisa, M-O-I-S-E. It is also generally true that in environments with positive growth and relatively low inflation, as in like 1 to 4%, those are generally a Goldilocks kind of environment that's very conducive to the stock market. And we have a lot of that environment most of the time, which is why the stock market tends to perform pretty well most of the time. That is also an environment where bonds are relatively inert. And so if you look at the most recent history of markets in the past three years, say, since we were done with the stagflation in 2022, you've basically seen that kind of environment with bonds essentially going nowhere and stocks doing pretty well. Now we did also cite to a nice presentation from Bloomberg a couple of years ago about what performs well in various inflationary regimes. And one of the things that does well in either severe deflation or severe inflation, which would be negative growth rates or inflation greater than 4%, is managed futures. And if you think about the year 2022, that was actually kind of a unique test case that you always want to be looking at because it actually has this odd characteristic of the calendar year matching up almost perfectly with the environment involved, this stagflationary environment that we really hadn't seen since the 1970s. And so you can see how both stocks and bonds perform poorly in that environment, whereas something like managed futures perform well. You also see that parts of the stock market performed well in that environment. And that's also true in those kinds of environments. And those kinds of things that perform well are things that essentially can transmit inflation through from their cost to their customers. And that includes things like energy companies, anybody that deals in commodities, essentially companies that deal in commodities, and things like property and casualty insurance, which can pass through that cost while also holding a lot of short-term debt so they benefit when interest rates are rising because they're getting more money on their short-term money. At least that's my interpretation as to why property and casualty insurance companies did so well in 2022 when everything else was doing poorly. Now, what about something like gold? Well, gold has very odd characteristics that make it uncorrelated with just about everything else, because it's not as reliant on these factors as other assets. It is more reliant on global issues like whether central banks across the world are buying or selling more gold or not. It generally has the best chance of doing well in everything other than the Goldilocks environment because it's not very interesting in eras like the 1980s where growth was generally good, inflation was generally falling, and so stocks and bonds do well in that kind of environment generally. But it can do well in all of the other quadrants. And here's another shorthand way of thinking about this. We know, just looking at the base rates over the last hundred years or more, that the stock market tends to go up about 70% of the time in real terms, about 75% of the time in nominal terms. And so knowing that, if that were more true, you wouldn't need to invest in anything other than the stock market. That's why 100% stock portfolios generally work pretty well so long as you're not taking much money out of them. So if you have a healthy allocation to stocks, say 40 to 50 percent or more, that will essentially take care of all of those environments, and you don't really need to think too hard about what's going to perform well. And so then you can focus on, well, what about the environments when the stock market is not performing well and what are the general characteristics of those? Now, as it turns out, about half of those environments of that 30% is the 15% of environments where you are in a recession. And we know what performs well in a recession, that is treasury bonds. And so that's why you have these treasury bonds in your portfolio, as this recession insurance for that 15% of the time when you're gonna end up with a recession and stocks are probistically probably gonna perform pretty poorly, and treasury bonds are probistically gonna perform pretty well, and that's why they're there, and that's kind of the only role they really have in this kind of portfolio. Which means you want to have some but not too many. But then you have this other 15%, which is basically all other environments where the stock market doesn't perform well. Those are generally gonna be things like your stagflationary environments and just oddball situations, and that is generally where things like managed futures tend to outperform, and gold often outperforms. So if you want to think about these assets in a very simplistic way, you would say that we have stocks because that's for 70% of the environments we're likely to encounter. We have treasury bonds, that's for 15% of the environments we're likely to encounter. And then we have these alternative assets, which are essentially for the other 15%. Now, that's a crude way of looking at this, but it's actually fairly accurate when you get down to what kind of macro allocations you want to be using for these kinds of portfolios. And if you look at the history of bad years or decades of the stock market, that also tells you why you want to have value stocks because if you look at a period like 2022 or the early 2000s or the 1970s, you see that value stocks outperformed growth in bad stock market environments, and that tells you why to diversify between growth and value in your stock holdings. So while the four quadrant model is the technical explanation, and you could get very granular as to which asset you think is going to perform the best in each one of those things, and people debate that all the time, you probably don't need to get to that granularity with the kind of thing we're trying to do here, which is to construct a naive portfolio, meaning we're not trying to predict which quadrant is coming next, that generally performs well in most of these environments and therefore has a higher safe withdrawal rate. Anyway, all I'm saying is that there's just a ton of research out there about this. There's a lot of material that's already there that you just need to mine, and then there are other ways of thinking about this that get you to the same place from slightly different angles.

Voices [34:39]

That is the straight stuff, oh funk master.

Mostly Uncle Frank [34:43]

Which means while you're welcome to try to reinvent the wheel, uh, you don't really need to do that here. And I probably would not try because it's a difficult statistical thing to do, and there's a good chance that you're going to come out with incorrect answers due to some kind of weird statistical modeling error if you are not kind of practiced in this area, like those big research outfits that I talked about earlier are. So hopefully that helps. Continue to be curious, but do look at the what we call the prior art before trying to reinvent the wheel. And thank you for your email.

Voices [35:22]

There's a party going on right here. A celebration to last throughout the years. So bring your good times and your laughter too. We gon' celebrate your party with you. Come on now. Let's all celebrate and have a good time.

Mostly Uncle Frank [35:47]

Last of Last of We have an email from Al.

Voices [36:01]

I can call you Betty. Betty when you call me call me.

Mostly Uncle Frank [36:09]

And Al writes.

Mostly Queen Mary [36:11]

Hi Frank and Mary. I was just curious if you guys are attending or speaking at any future events. Would really like to meet you someday. My wife and I live in Northwest Indiana, and if you happen to be passing through, we'd be glad to take you to dinner. I really enjoy and appreciate the podcasts. I've learned so much and apply it. I'm also starting to share what I've learned with my kids. Thank you, Al.

Mostly Uncle Frank [36:34]

Well, I'm glad you're enjoying the podcast, Al, and that you feel you can share it with your children. It's interesting that people who are not that interested in finance often will listen to this for the humor or I don't know, other reasons that only they know about. Another one of my listeners has a six-year-old daughter whose favorite clip is the I drink your milkshake one from There Will Be Blood.

Voices [37:04]

Hey, if you have a milkshake, and I have a milkshake. And I have a straw. There it is. That's a straw. Watch it. My straw reaches a crew's through and starts to drink your milkshake. I drink your milkshake. I drink it up.

Mostly Uncle Frank [37:37]

And we had them over for dinner, and I performed that for her to much delight. Some of the people who run in Fairfax Casa Circles have also been tuning into our podcast and have been duly entertained, or at least they say they're entertained.

Voices [37:54]

This is pretty much the worst video ever made.

Mostly Uncle Frank [37:58]

In terms of attending and speaking at future events, there's only one we do each year, and that's the Economy Conference in Cincinnati in March of each year. Because I have to tell you, I really do not like attending conferences. I spent too much of my career essentially living in hotels and traveling around and doing all that. And so that does feel like work to me. And I actually don't learn well in those kinds of environments either. I learn better, but just by reading the material on my own. And as you can imagine, Mary has very little interest in attending such things. But she does accompany me to economy, and that is enough conference for the two of us each year.

Voices [38:40]

It turned into quite a proposition. I can hardly keep up with the orders. I'm afraid I'm gonna have to limit my journeys to one a year. But on which night should I go out? It wasn't a hard decision to make.

April Rebound And Asset Class Check-In

Mostly Uncle Frank [39:10]

And so these days my priority is to spend as much time with Mary as possible. And so running off to conferences on my own would not be conducive to that, shall we say. So with certain limitations, my general rule is not to travel at all unless Mary's with me. Which probably sounds pretty strange to many people, but they don't have my history. But what we really do enjoy is having little dinners or lunches or one-on-ones with various listeners and various groups of other people. So I'll like go to our local choose FI meetings, participate in book clubs online and things like that. And Mary and I really do enjoy when listeners look us up when they come into town. We had a very nice lunch the other week with two of our listeners, the main one being Andrew and his wife Sarah, who like a lot of our listeners are extremely interesting people and they're actually theologians, and she's actually a minister. And they presented us with some books they've written, which we are reading right now and very much enjoy. But I think I'll talk more about them in in the next episode without giving too many personal details, of course. But anyway, we would love to meet you someday because what I've found is that I really enjoy interacting with our listeners and people who are not sort of public personal finance people. Because it's interesting to learn how people are actually using this in their real life, and most of them are not using it to have a podcast or go to conferences or anything like that. At least not the people that listen to this podcast. It's more of a means to an end and not the end, which I do find inspiring and is kind of what we're trying to do here. Anyway, thank you for writing in. Hopefully, we will meet you and your family someday. And thank you for your email. 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.riskper.com on the portfolios page. It's interesting what a difference a month makes. As it seems like all of the badness in March has been replaced by goodness in April. But I should have known that by the end of March I was beginning to see people on personal finance boards start talking about getting out of the market and waiting till the storm passes and blah blah blah blah blah. Yada yada yada. And when you see amateurs making those noises, that's often a time when the market turns around. Although I wouldn't make any bets on that. So just looking at where the markets are these days, the SP 500, represented by the fund VOO, is now up 4.42% for the year so far. The Nasdaq 100, represented by QQQ, is now up 5.75% for the year so far. But small cap value is kicking their butts. And if you hold one of the kind of funds that many of our listeners hold that we talk about a lot from Avantis, AVUV is now up 15.54% for the year so far, and the international version of that AVDV is up 14.92% for the year so far.

Voices [42:58]

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

Mostly Uncle Frank [43:06]

Gold continues to shine, although it hasn't been doing much recently. It's only up 12.50% for the year so far. That's GLDM.

Voices [43:16]

I love gold.

Mostly Uncle Frank [43:20]

Long-term treasury bonds represented by the fund VGLT are up 0.86% for the year so far. REITs represented by the fund REET are up 10.48%. Commodities represented by the fund PDBC are still leading the way because oil is still inflated. It's up 27.09% for the year so far. Preferred shares represented by the fund PFFE are up 1.99% for the year so far. And managed futures are still managing to be up, although not as much as before. Representative fund DBMF is up 7.23% for the year so far. It was interesting. I mean, you can actually see the diversification aspects. You can feel the difference. Because it was, for example, one of the few things that was down yesterday when everything was going up.

Voices [44:10]

Feel the you can difference, difference, difference. You can see then feel the difference.

Eight Sample Portfolios Results

Mostly Uncle Frank [44:16]

And that's really what you want to see. It's really a characteristic of a diversified portfolio. That when things are going really well for most things, there is something in your portfolio that's not performing very well or going down. And then when everything seems to be performing badly, there is something in your portfolio that is at least flat, if not positive. Because then you know that your asset choices are actually doing their jobs in whatever quadrant we might be going into next. Now, moving to our sample portfolios. First one is this all seasons portfolio we keep around as a reference portfolio. It's only 30% in stocks. It's got 55% in intermediate and long-term treasury bonds. And the remaining 15% in golden commodities, which have been helping it a lot. So it is up 3.25% for the month of April. It's up 4.93%, year to date, and up 29.34% since inception in July 2020. Moving to these more bread and butter kind of portfolios. First one's a gold and butterfly. This one is 40% in stocks divided into a total stock market fund and a small cap value fund.

Voices [45:28]

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

Mostly Uncle Frank [45:34]

40% in treasury bonds divided in long and short, and the remaining 20% in gold. It's up 4.41% for the month of April. It's up 6.6% year to date, and up 70.08% since inception in July 2020. Next one's golden ratio.

Voices [45:54]

A number so perfect, perfect. We find it everywhere, everywhere. A mathematical property hardwired into nature. The golden radio. What's the answer? What's the answer? The golden ratio. The golden ratio.

Mostly Uncle Frank [46:29]

This one's 42% in stocks divided into a large cap growth fund and a small cap value fund. 26% in treasury bonds, 16% in gold, 10% in managed futures, and 6% in a money market in cash. It's up 5.05% for the month of April. It's up 6.29% year to date, and up 64.11% since inception in July 2020. Next ones at Risk Parity Ultimate are Kitchen Sink. I'm not going to go through all 12 of these funds, but it's up 5.51% for the month of April. It's up 6.01% year to date, and up 48.14% since inception in July 2020. Now moving to these experimental portfolios that all involve leverage funds. 25% in UPRO, that's a levered stock fund. 25% in PFFV, a preferred shares fund, and 22.5% in gold, GLDM. It's up 8.5% for the month of April so far. It's up 5.75% year to date, and up 30.52% since inception in July 2020. Next one is the Aggressive 50-50. This is the least diversified and most levered of these funds and worst performer by far. It is one-third in a levered stock fund UPRO, one-third in a levered bond fund TMF, and the remaining third in a preferred shares fund and an intermediate treasury bond fund is ballast. It's up 9.9% for the month of April. It's up 2.91% year to date, and up 1.16% since inception in July 2020. And yes, this thing can typically go up or down 10% in one month. Which is one of the reasons it has all of its problems.

Voices [48:38]

Well, you have a gambling problem.

Mostly Uncle Frank [48:41]

But that's what makes it a good experiment with leverage. Next one's a levered golden ratio. This one is 35% in a composite fund called NTSX, that is the S P 500 and Treasury Bonds levered up 1.5 to 1. It's got 15% in AVDV, that's a international small cap value fund. 20% in gold, GLDM, 10% in a managed futures fund, KMLM, 10% in TMF, that's a levered bond fund, and the remaining 10% divided into UDOW and UTSL, which are a levered fund based on the Dow and a levered fund based on the Utilities Index. It's up 6.14% for the month of April. It's up 8.41% year to date and up 29.96% since inception in July 2021. It's a year younger than the first six. And moving to our last one, the Optra Portfolio. One portfolio to rule them all.

Voices [49:40]

One ring to rule them all. One ring to find them. One ring to bring them all. And in the darkness, I stand in the land of where the shadows lie.

Mostly Uncle Frank [50:00]

And it is in fact ruling them all. This one's only been around since 2024. It is a return stacked style kind of portfolio. So it's 16% in UPRO, that is a levered SP 500 fund. 24% in AVGV, that is a worldwide value tilted fund. It's actually a fund of funds. 24% in GOVZ, the Treasury Strips Fund, and the remaining 36% divided into Gold and a Managed Futures Fund, GLDM and DBMF. It's up 7.24% for the month of April. It's up 9.09% year to date, and up 40.75% since inception in July 2024. Which is pretty good, considering it's been around for less than two years. And has the same basic risk profile as a hundred percent SP 500 portfolio. So it looks like Joy has returned to Mudville, at least for the month of April. But we'll see what the rest of the month has to bring us. It is just interesting to see this year that all of the alternatives are outperforming the traditional funds that people might hold. But that happens sometimes, and so that's why we hold them.

Voices [51:18]

Let me put it this way. Yes, morons. Really?

Mostly Uncle Frank [51:26]

But now I see our signal is beginning to fade. If you have comments or questions for me, please send them to Frank at RiskPardyRoo.com. And email us frank at riskpertyrear.com. Or you can go to the website www.riskperdyradio.com. Put your message into the contact form and I'll get it that way. If you have any chance to do it, please go to your favorite podcast provider and like, subscribe, give me some stars, a follow, a review. That would be great. Okay. Thank you once again for tuning in. This is Frank Vasquez with Risk Purdy Radio. Signing off.

Voices [52:05]

We're gonna have a good time tonight. Let's celebrate. It's alright. We're gonna have a good time tonight. Let's celebrate. It's alright. Let's celebrate celebrate.

Mostly Queen Mary [53:04]

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.