Voices [0:00]

A foolish consistency is a hub bobble by the little mind. A dog by the little space and the philosopher and the 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

Welcome And Quick Housekeeping

Mostly Queen Mary [0:19]

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.

Voices [1:44]

I'll give you the moon, right? 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 518. Today on Risk Party Radio, 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.

Voices [2:27]

I gotta have more cowbells. I gotta have more cowbell.

Mostly Uncle Frank [2:31]

Yes, it is kind of turning into the year of the cowbell. But we'll get to more of that later.

Voices [2:39]

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

Mostly Uncle Frank [2:44]

Before we get to that, we will have some emails. But even before we get to that.

Voices [2:49]

Let's talk about something important. Put that coffee down.

Top Of The T-Shirt Campaign

Mostly Uncle Frank [2:55]

And it's something important I'd like to talk to you about is the launching of this year's Top of the T-Shirt campaign. The second running of the Top of the T-Shirt campaign. As most of you know, we do not have any sponsors on this program. We do support a couple of charities, including the Father McKenna Center, which supports hungry and homeless people in Washington, DC. The main fundraising event that we have every year at the Father McKenna Center is called the Walk for McKenna, and it is a walk that we all do in September. We had about 500 people out there last year, and this will be the tenth running of the walk for McKenna. Now, as part of the Walk for McKenna, we hand out t-shirts. And as part of the run-up to the walk for McKenna, we raise money. And as part of what you get for donating, is you get to put your name or logo on the t-shirt. And the more money that you or your organization gives, the higher on the t-shirt and the larger your logo or name will appear. Last year our listeners donated nearly $70,000 to the Top of the T-shirt campaign. Which means the Risk Parity Radio logo went to the top of the t-shirt and was displayed very prominently.com if you want to check it out. And so we'll be running this campaign for the next couple of months here. See how well we can do in part due. But let me give you some reasons why you might want to participate.

Voices [4:34]

Here's something we hope you'll really like.

Mostly Uncle Frank [4:37]

First off, we have some very generous listeners who have already stepped up to the plate and would like you to join them. Last year, one of our listeners who wishes to remain anonymous, which is all fine and good, we call him Matthew 63, as a designation. Matthew 63 put up $15,000 in matching funds last year to kick us off. And in my back and forth with him, one of the main reasons he did it is he wanted to inspire other people to also give. And to join him out front. And his wish was granted this year. We have another listener, also anonymous, who has chosen the moniker 4J, who is joining Matthew 63 and is putting up $10,000. So between the two of them, we already have $25,000 pledged to be matched to get us started. Forever two or three are gathered, baby.

Voices [5:32]

Yeah, baby, yeah.

Mostly Uncle Frank [5:34]

I believe 4J just is opening up a donor-advised fund in the past year and wants to give it a little test run and couldn't think of anything better than the Father McKenna Center, but what could be better than the Father McKenna Center? Maybe Fairfax Casa, but not this season. Father McKenna Center is number one this season. And so by putting up those matching funds, listeners Matthew 6.3 and 4J are inviting you to join them in this august effort, and would be most pleased if you did.

Voices [6:04]

Well, maybe it's like Casey says, Phil ain't got a soul of his own, just a little piece of a big soul. The one big soul that belongs to everybody.

Why This Charity Punches Above Weight

Mostly Uncle Frank [6:16]

But now let's talk also about the Father McKenna Center itself and what we do and why you might want to give, even apart from our matchers. And since this is a financial podcast, I am going to focus on issues of leverage and efficiency and why our organization gives you more for your charitable buck and punches well above its weight. Because the basic work we do, which is to feed hungry and homeless people, is done by lots of organizations in lots of places because it's needed in lots of places. But I think we do it a little better than a lot of organizations do. And a lot of that comes from the leverage we've been able to achieve. That the money you're donating effectively counts more than once because of the other resources that we've brought to bear from other directions. Our space is provided by the Gonzaga College High School. It is in the basement of the church, St. Alochi's Church, which is attached to the high school, and has been in continuous service since 1859. But since the space is provided by the school, we are not paying rent. We are not paying for the physical plant that goes on there in terms of the electricity and air conditioning and things, which means we are spending as little as possible of our donors' money on overhead like that. The second form of leverage that we take advantage of is in-kind donations, particularly from the grocery stores in the local area in Washington, D.C. So just about every day, the Father McKenna Center van, we have one vehicle, does the rounds to the various grocery stores and picks up all kinds of groceries, particularly fresh groceries, because this is something that we try to do for our clients that other organizations are not as able to do, which is actually provide fresh food and not just things in boxes and cans. And that's what our food pantry is all about. So those two forms of leverage alone, the space and the donated food, is actually worth close to a million dollars annually. But our biggest source of leverage is our volunteers. We do not have a very big staff down at the Father McKenna Center. It's more like a volunteer fire station kind of size staff of eight people that are paid full-time and a few part-timers here and there. But most of the labor provided there is provided by volunteers, and we have about a thousand volunteers every year. Some of them are just there for a couple hours or a couple days or a week. We have college immersion programs where people come for a week and stay there, sleep there, and provide services. I think we have about 20 colleges that do that.

Voices [8:59]

Young America, yes sir.

Mostly Uncle Frank [9:01]

Then we have lots of high school students, not only from Gonzaga High School, but all the high schools in the area that want to send groups of students over to serve meals and do other work, are welcome to do that. And we have a lot of that going on. And then we have some volunteers that are essentially there full time. And they're mostly very old or very young. I would like to tell you about a couple of them so you can get an idea of who we're talking

Volunteer Stories That Make It Real

Mostly Uncle Frank [9:25]

about. First one is Don, and I'll link to a nice little interview of him in the show notes. Don't been with the Father McKenna Center for more than a decade, and he and his wife used to volunteer there together. He works in the main kitchen of the food line. Now Don lost his wife a couple years ago, but he still comes in and although he says only works two days a week, I seem to see him there a whole lot more than that. But people like Don are really retirement role models for the rest of us when we're thinking about retirement in our forties, fifties, or sixties. Don't 20 years ahead of us, and he's living his best life in retirement. You'll see that in the video. That he was fully engaged with his marriage as long as it lasted, and then he's fully engaged with his community, even after he lost his wife, especially a lot of the youngest people we've got there. So part of the money that you give to the Father McKenna supports the work of people like Don, whom I'm thinking that most of us would like to be someday. Second person I'd like to tell you about is Annie, who's on the other end of the spectrum. She just graduated from college, and I also have a video of her to show you, and we'll link to in the show notes. Both of these videos are exceptional, by the way. And were also created by another volunteer, so we didn't pay for them either. Annie is a member of the Jesuit Volunteer Corps. But let me just step back and give you some advice. If any one of your children are ever dating somebody who's in the Jesuit Volunteer Corps or has been in the Jesuit Volunteer Corps, that person is probably a keeper. That person is probably somebody you would like to have as a son-in-law or daughter-in-law. How do I know that? Because Mary was in the Jesuit Volunteer Corps right after college. And she would tell you that was one of the most formative experiences, if not the most formative experience that she had at that age. Because you not only go and do good work, you learn to live in a community and you learn to live on very little. So when our kids were growing up and they might complain about the food that was being offered. She had a lot better stories to tell than I did, which are more like when I was in the Jesuit Volunteer Corps, I lived on potatoes for an entire week at a time. Or something of that nature. And she did walk in the snow both ways because it was in Milwaukee, mostly in the winter time, and she was teaching school for most of her service in the Jesuit Volunteer Corps.

Voices [12:00]

And that's the way it was, and we liked it. We loved it.

Mostly Uncle Frank [12:05]

The Jesuit Volunteer Corps is also the model for things like AmeriCorps, Vista Volunteers, and even the Peace Corps to an extent. It's designed for recent college grads to go off and do a year of service before they continue on with whatever trajectory they plan on having. Now the Jesuit volunteer we have right now is an exceptional person. Her name is Annie. She graduated from Harvard with a degree in biology. She's eventually on her way to medical school. She's exceptionally talented. But right now she's running our food pantry, which is a job that we used to have to pay a full-time employee to do. And when you watch her video, as I'm sure you'll do, you'll see what this experience is meaning to her. And if you're like most of us, you'll say, yeah, that's that's the kind of thing I want to support. I'll be everywhere.

Voices [12:56]

Wherever you can look, wherever there's a fight so hungry people can eat, I'll be there.

Mostly Uncle Frank [13:03]

A lot of people our age, 50 and older, tend to complain about what these young people are doing or not doing, that they're not doing public service and they're sitting around on their phones or social media all day long, not growing and not being productive.

Voices [13:19]

You're not going to amount to Jack Squad.

Mostly Uncle Frank [13:23]

And while that's true for many of them, it's also true that many of them do want to serve, do want to have the kind of experience that she's having, because they know it will help them grow as people and be valuable to them in the future. And Annie's thinking about how that will help her be a better doctor eventually. And so this is also the kind of thing you're helping to support when you give to the Father McKenna Center. And the kind of massive leverage that we truly have. And so I hope you will participate in our campaign. You've been so supportive over the years that we've been raising money for the Father McKenna Center. And I really genuinely appreciate it and I'm very grateful. As always, you do get to go to the front of the email line if you donate to the Father McKinnon Center. And I've got that to entice you with in addition to the encouragement of Matthew 6.3 and 4J.

New Board Role And Conflict Note

Mostly Uncle Frank [14:14]

And finally, I'd be remiss if I didn't tell you about my conflict of interest. I will become the chairman of the board of the Father McKenna Center starting on Monday.

Voices [14:23]

Well, am I right, Stephen Edy?

Mostly Uncle Frank [14:26]

You bet, Frank.

Voices [14:27]

You know it, chairman! You were a little slow that time. Sorry. Sorry, Frank. Sorry, forget it. You're all right.

Mostly Uncle Frank [14:35]

It appears that I've inadvertently stumbled into another job and will have to stop watching several hours of Kung Fu every day to make room for it. You ever watch Kung Fu?

Voices [14:47]

I love Kung Fu. Channel 39. Totally. You should come over and watch Kung Fu tonight. Okay. Great. Okay.

Mostly Uncle Frank [14:57]

But I am looking forward to it and consider it a great honor to be serving in this way, particularly when you consider that many of the board members I work with are very much more qualified to do this job than I am. Some of them have served on many, many charitable boards. Some of them are ex-deans from Ivy League universities. But they picked me, and so I'm gonna do the best job I can.

Voices [15:21]

You ever hear to start by the little engine that could? Let me tell you that. Deep, deep in the jungle, there was a little engine that could be chugging his way across the inner middle. This little engine mission was to take some BK47 and the nuclear payload over the mountain to the 2063 Battalion. Needless to say, well in our position.

Mostly Uncle Frank [16:10]

But speaking of other jobs, I suppose it's time now to get to your emails. And so without further ado.

Voices [16:16]

Here I go once again with the email.

Mostly Uncle Frank [16:19]

And first off.

Listener Portfolio Email On Permanent Portfolio

Mostly Uncle Frank [16:22]

First off, we have an email from Aaron.

Voices [16:25]

Aaron! Where are you? Where is Aaron right now?

Mostly Uncle Frank [16:32]

Aaron was very prolific with the emails in December. I think this was his third and last one that he sent during that period. And Aaron Wrights.

Mostly Queen Mary [16:43]

Hi, Frank. I've been a strong proponent of the permanent portfolio for several years. I've read nearly all of Henry Brown's books, as well as Craig Rowland's The Permanent Portfolio, Harry Brown's Long-Term Investment Strategy, and Eric Delorier's Investing Equanimity, The Logic and Wisdom of the Permanent Portfolio. Of the many model asset allocations I've explored, the permanent portfolio's logic has always resonated with me the most. While I greatly admire its simplicity and resilience, I don't follow the classic equal weight version myself.

Voices [17:17]

Forget about it.

Mostly Queen Mary [17:19]

Instead, I've created a modified allocation that retains its core philosophy but adjusts the weightings to better support a higher perpetual withdrawal rate.

Voices [17:28]

You need somebody watching your back at all times.

Mostly Queen Mary [17:32]

My portfolio breaks down as follows: 25% total stock market split evenly between US and international, 25% small cap value stocks split evenly between US and international, 25% gold, 20% long-term treasuries, 5% cash, short-term treasuries. I've been reluctant to introduce additional asset classes because I believe these four, stocks, treasuries, gold, and cash, already capture the most diversification benefits. Anything beyond these seems to offer only marginal improvements, and I feel that I lack sufficient long-term historical data in other asset classes to feel confident enough to include them. This modified allocation bears some resemblance to the golden butterfly, though with a higher exposure to both stocks and gold, and a significantly reduced cash position. My rationale for trimming cash is that the tight money recessions it is primarily meant to hedge against are typically short-lived, resulting in relatively brief drawdowns that I'm comfortable accepting in exchange for a higher perpetual withdrawal rate. I slightly reduced the long-term treasury weighting while keeping gold at 25% based on my back tests on portfolio charts across 13 different countries, which showed that higher gold allocations, beyond the typically recommended 10 to 15%, improved the perpetual withdrawal rate in most cases. These findings were reinforced by Tyler's article on portfolio charts titled What Global Withdrawal Rates Teach Us About Ideal Retirement Portfolios, which suggested that the optimal portfolio across most countries includes approximately 30% gold and 20% in government bonds. I'd love to get your perspective on my portfolio as well as my rationale for adjusting the weightings. What, if anything, would you change? If you could only add one additional asset class to it, which would you choose and how would it fit into the portfolio? Thank you in advance for sharing your thoughts, Aaron. Why didn't you answer me the first time I said it, huh?

Voices [19:38]

Huh? I'm just, you know, I'm just asking, you know, I said it like four times, so why didn't you say it the first time I said Aaron? Because it's pronounced Aaron? Stop it! You done messed up, Aaron!

Mostly Uncle Frank [19:53]

Ah, the permanent portfolio. Yes, the permanent portfolio is an antecedent to what we do today. And we talked about this all the way back in those introductory episodes one, three, and five as part of the history or development of these kinds of portfolios. Just for reference, what's in the permanent portfolio, which you can also find in portfolio charts, is 25% in a total stock market fund, 25% in gold, 25% in long-term treasuries, and 25% in cash or money market fund or short-term bonds. It's a very stable kind of portfolio with a very low ulcer index. But as you've recognized, it also has just a lower return profile because it doesn't have that many stocks in it. And that is its principal drawback for uses in various ways. If you're really, really conservative, yeah, you can go with something like this. But ultimately it's not that efficient, particularly long term, because of the small allocation to stocks and then the very large allocation to cash, which kind of acts as a cash drag on the portfolio overall. And I remember reading Craig Rowland's book when it came out. The permanent portfolio got a resurrection right after the great financial crisis. This it dates back to the 1970s and 1980s when Harry Brown was writing these books, and I do have some of those and I've read them. You can see why that people didn't want to invest in it back then because it was a really big pain in the butt as far as getting allocations to things like gold that were not in an ETF or fun form. And there were some mutual funds created to replicate it, but they had too high of fees, I would say. And then it also became a kind of magic button or shiny object for people that adopted the same politics of Harry Brown, he's a libertarian, and also people who were essentially doomers and would have wanted to hold lots of gold in physical form.

Voices [21:56]

I love gold.

Mostly Uncle Frank [22:00]

And that was the problem I sensed with books like Roland's, which were seemingly more interested in the formula of it, as opposed to just taking it as an example and then modifying it for a different purpose.

Voices [22:13]

That is the straight stuff, oh funk master.

Mostly Uncle Frank [22:16]

I think you really do need to go Bruce Lee on the thing and take what is useful, discard what is useless, and add something uniquely your own. And I think you've done a good job at that, because raising the allocation of stocks is really what needs to happen in this, and reducing the amount of cash in it is really what needs to happen in it. And that's exactly what you've done.

Voices [22:40]

You're all right.

Mostly Uncle Frank [22:42]

And so what you've come up with does fall within the kind of the general criteria or guidelines of portfolios that tend to have higher safe withdrawal rates. And there's a nice synopsis of that attached to episode 514, which is the blueprint that Paula Pant did after interviewing me. And so what those basic guidelines are is you need to have 40-ish to 70-ish percent in stocks divided into growth and value, 10 to 25% in alternatives that are uncorrelated with both stocks and bonds, 15 to 30% in intermediate and long-term treasury bonds or some kind of equivalent like strips, and then less than 10% in cash. And the portfolio you've chosen fits all of those criteria.

Voices [23:26]

Yes!

Mostly Uncle Frank [23:27]

And so it's fine for all of those reasons. The main differences in these portfolios has a lot to do with what your allocation to stocks is, because the higher it is, the more potential you have in terms of returns, which is not guaranteed, but you are also exchanging that for more volatility in the portfolio. So it's likely to have steeper drawdowns. But as Bill Bangkin found, there's kind of this mesa of portfolios with between 40-ish percent in stocks and 70-ish percent in stocks that all have similar safe withdrawal rates and have a lot of similar characteristics. So the difference really isn't that great. And I do think your rationales make sense, particularly if you're trying to get a more efficient portfolio in terms of sharpen Sortino ratios that has a higher safe withdrawal rate. Now you asked if I could add only one additional asset class to it, what would I choose and how would it fit in the portfolio?

Voices [24:23]

Choose. What do you mean choose? We don't understand.

Add Managed Futures, Cut Gold Risk

Mostly Uncle Frank [24:30]

What I would definitely choose is managed futures. And I would reduce the gold allocation and put some managed futures in there with it. And the reason for that is I think it would reduce the volatility of that portfolio without really reducing its return profile. Because managed futures have some peculiar attributes, which makes them diverse in a couple of ways that are go beyond just simple correlations with other assets. One of those is because it can go short, it can actually act as a break on some of these other assets. So for instance, in 2022, when your long-term treasuries were doing horribly, managed futures are doing fantastically because they were essentially taking the other side of that trade. And the same is true with any period when stocks are falling or gold is falling, that it can pick up that trend if it goes on long enough. The other thing is a characteristic called SKU. And with most of these risk assets, you see them have a lot of decent periods, like the stock market is up 70% of the time. But when it's up, it's usually not up 50% or something like that. Now, when it falls, it can go down 50%. And so the returns are skewed in that its bad years are way worse than its good years on average. A managed futures fund is the opposite of that. That it's more likely to have a whole series of mediocre years, that its bad years are going to be small, bad, and not big bad for the most part, whereas its good years are going to be really, really good. And those characteristics also tend to help diversify a portfolio. So I think you're likely to have the same return profile by adding some managed futures in here to substitute for part of the gold, but have a lower risk profile. At least that's my opinion, which is somewhat learned, but it is an opinion. In terms of back testing and information, I have cited to a kind of review, I think it's from the Journal of Financial Management, about essentially a hundred-year analysis of what if you were investing in these kind of managed futures strategies going back a hundred years. And it does reflect these sorts of characteristics, even though the funds themselves have really only been around since the eighties or the nineties, and the strategy itself in its modern form has been around since the 1970s. But that's just kind of trimming around at the edges of this. I think what you have there is all fine and good if you want to keep it. Great success. So hopefully that helps. And thank you for your email.

Voices [27:28]

Second off.

A 75 Percent Stocks Portfolio Reality Check

Mostly Uncle Frank [27:29]

Second off of an email from hostile witness.

Voices [27:35]

Hold up your right hand. Do you swear to tell the truth, the whole truth, and nothing but the truth to help you guys? Yeah. Ms. Vito, uh, you're supposed to be some kind of expert in automobiles. Is that correct? Is that correct? You please answer the counselor's question. No, I hate him. Your honor, may I have permission to treat Ms. Vito as a hostile witness? Don't you think I'm hostile? Now wait till you see me tonight. Do you two know each other? Yeah, she's my fiancee.

Mostly Uncle Frank [28:08]

Well, that would certainly explain the hostility. And hostile witness writes.

Mostly Queen Mary [28:14]

I've moved on from my maniacal maximum perpetual withdrawal pursuit.

Voices [28:19]

You can't handle the gambling problem.

Mostly Queen Mary [28:22]

Philosophically, versus you, I think, I lean more towards maximum income in retirement versus optimizing sharp and sortino, riding a pony that many may not want to ride. I.e., I may be higher on the efficient frontier, but further to the right. I acknowledge my daffy here, but I don't have a gambling problem, Homer.

Voices [28:48]

What's with you anyway? I can't help it. I'm a greedy slob. It's my hobby. Save me!

Mostly Queen Mary [28:57]

I can't make a portfolio that looks better to me in the default retirement spending chart on Tyler's platform than this. All 25% each. Gold, GLDM, large cap growth, V U G, Small Cap Value, VBR, Small Cap Blend, VB. As you put this up against your preferred ones, why do you prefer yours? Where is my AUC slash high school integral warped math instinct leading me astray? You have a gambling problem. Tear me apart here. Don't let Mary modulate your correction of my ignorance and inappropriate risk taking. We use the Socratic method here. But I love you guys very much. Thank you forever. Seriously, if I can convince my kids of your wisdom's merit, they're gonna be good too. P.S. not a donor to the Father McKenna Center, but I'm in Montana, and my personal philanthropy is largely school age food insecurity solutions right now, so similar, but close only counts in horse grenades. Andy Dwyer.

Voices [30:03]

Can't believe her at Hogwarts! No, that's Buckingham Palace.

Mostly Queen Mary [30:08]

Hogwarts is fictional. Do you know that? It's important to me that you know that. I can wait. Yeah, sure, forever to. Thank you, guys, regardless.

Voices [30:18]

At times you may feel that you have found the correct answer. I assure you that this is a total delusion on your part. You will never find the correct, absolute, and final answer.

Mostly Uncle Frank [30:33]

So you've got a portfolio here that is essentially 75% stocks and 25% gold. And so, yes, it really is an accumulation kind of portfolio, is where I would put it. It's interesting, Bobby Elliott has presented this fairly often, that portfolios that have gold instead of bonds in them tend to perform just as well or better than, say, a 75-25 stock bond portfolio. Going back to the 1970s when you could first start buying gold and it was off the gold standard. The reason I wouldn't want to hold something like this is it's subject to a 40% drawdown. And you can see that just by running it in test folio. And I would rather keep my drawdowns to more like 20% than 40%. Which means fewer stocks and additional assets like bonds to deal with recessions because when it did have that 40% drawdown, it was 2008, as you can imagine. The other thing I would say is that the large allocation to small cap blend and small cap value has worked very well in the past.

Voices [31:44]

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

Mostly Uncle Frank [31:50]

And I would say that small caps will at least meet the market in the future, although I do not count on them necessarily outperforming the market in the future. I also would probably get rid of the blend or growth component that is in the small cap blend, because small cap growth actually has the worst risk reward of all of the factor combinations of the three-factor model. This does remind me a little bit of what Larry Suedro does, and he's almost all small cap value in his equity portions, and then he's got all these alternatives because he's got less than 30% in equities, but I think it's all US and international small cap value.

Voices [32:31]

Guess what? I got a fever, and the only prescription is small cowbell.

Mostly Uncle Frank [32:38]

And that's an aggressive position that some years will perform fabulously like last year, and other years will underperform the market substantially.

Voices [32:48]

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

Mostly Uncle Frank [32:52]

So you can hold something like this, but do expect a bumpy ride and a potential problem if there is a very big recession.

Voices [33:01]

Fasten your seat belts. It's going to be a bumpy nut.

Mostly Uncle Frank [33:07]

This would have been really ugly in the 1930s, unless you took the gold and actually invested in gold miners, in which case you would have done okay then. But it was a different monetary standard at the time, and a lot of things were different. So hopefully that helps. And thank you for your email.

Voices [33:25]

We do brain surgery here. You teach yourselves the law, but I train your mind. You come in here with a skull full of mush, and you leave thinking like a lawyer. Last off. Not Genzo! That's right, pal, and I bet you know what that means.

Leveraged Gold And Stocks Plus Crystal Balls

Mostly Uncle Frank [33:53]

And Genzo writes.

Mostly Queen Mary [33:55]

Hi, Frank and Mary. I'm sending this early in January as an annual review of sorts, but I presume you'll be reading it in March or April. Not that I mind. In fact, I'm ecstatic. I had to keep pinching myself all through 2025.

Voices [34:10]

Oh boy, I'm rich! I'm wealthy! I'm socially secure! I'm rich! I'm rich.

Mostly Queen Mary [34:19]

We've discussed my portfolio before, and no need to rehash it, other than to say that it's leveraged and heavily tilted towards international factors and gold. Well, you have a gambling problem. According to Testfolio, my return in 2025 was 36% with a minuscule ulcer index of 2.3. Groovy baby! Here's the link to those results. I wanted to give another shout out to GDE. If there is such a thing as a GDE fanboy, then I am one. Since I last wrote, the assets under management have gone from somewhere under 100 million to over 500. A much more comfortable level for me at least. And I noticed something else unusual. Vanguard allows trading of GDE. As far as I've been able to tell, they don't allow trading of any other leveraged ETF on their platform. Not sure if GDE just slipped through the cracks or if they've allowed it some special privilege. One actual question. Have you played around with the crystal ball over at Research Affiliates? It's very pretty.

Voices [35:28]

This is the one that I tend to use more often. I have a cow site boom and I have a black obsidian one here.

Mostly Queen Mary [35:37]

They have specific factor predictions, which is fun. For example, developed international small cap value will have a real return of 7.6% over the next 10 years, while US large cap growth will be negative 1.1%. This confirmation bias is strong. Do tools like this have any value for you?

Voices [35:59]

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

Mostly Queen Mary [36:05]

Would you ever tilt your portfolio based on such outsized predictions from a reputable shop like Research Affiliates? You might have to try a free account to try this thing. Here's the link. Happy New Year, Genzo.

Voices [36:19]

Genzo, drop your stuff.

Mostly Uncle Frank [36:26]

Well now, another listener with a gambling problem. Who would have thunk it?

Voices [36:31]

You can't handle the gambling problem.

Mostly Uncle Frank [36:34]

Congratulations on your returns last year. Yes, that's what happens when you put leverage in a portfolio and it performs well. It performs a whole lot even better. Inconceivable. Just so everybody knows, GDE is actually a fund that is essentially 90% in the SP 500 and 90% in gold. That's the equivalent exposures. So obviously, in any year where gold goes up 65%, GDE is going to do even better if the stock market does better. And so since at least one of the stock market or gold has had a very good year in the past several years, GDE has performed, I think, 33% in 2023, 44% in 2024, and 73% in 2025. Now it is only up 3% this year.

Voices [37:30]

Uh what? It's gone. It's all gone.

Mostly Uncle Frank [37:33]

But it is a decent mechanism for adding leverage to a portfolio. The reason I don't prefer funds like that is I really don't like to be dealing with more than one asset class in one fund. And this is more of a personal preference than anything else because you do then have to kind of pull the thing apart to really see what you have overall in terms of your portfolio. And you can't do a straight rebalancing between, say, gold and stocks with something like that, which may or may not be important to you. As for what you can trade at Vanguard or not trade at Vanguard, I do not keep track of things like that because I do not use Vanguard as my brokerage. It has too many idiosyncratic problems like that, where they decide kind of arbitrarily which funds they'll let you trade or not trade.

Voices [38:24]

That's not an improvement.

Mostly Uncle Frank [38:27]

And I honestly don't think any other brokerage has those kinds of restrictions.

Voices [38:32]

Fat, drunk, and stupid is no way to go through lifestyle.

Mostly Uncle Frank [38:35]

Now, the second part of your question have I played around with the crystal ball over research affiliates?

Voices [38:40]

My name's Sonia. I'm going to be showing you um the crystal ball and how to use it or how I use it.

Mostly Uncle Frank [38:46]

The answer is no, I have not. I try not to play with too many crystal balls.

Voices [38:52]

Now the crystal ball has been used since ancient times. It's used for scrying, healing, and meditation.

Mostly Uncle Frank [39:00]

I will link to it in the show notes so people can check it out. I would not think it would have that much value to me because I do not trust any predictions about the future based on evaluation metrics, even though I know people try to time the market that way.

Voices [39:15]

You can actually feel the energy from your ball by just putting your hands in and out.

Mostly Uncle Frank [39:20]

From my perspective, that's just been a failed methodology since the great financial crisis.

Voices [39:25]

Now you can also use the ball to connect to the spirit world.

Mostly Uncle Frank [39:29]

And if it works in the future, you'll won't know whether it's a random event or it's a meaningful output.

Voices [39:36]

It's kind of looking at the aura around the ball. See the movement of energy around the outside of the ball.

Mostly Uncle Frank [39:43]

I would rather just not try to time the market at all and instead rely on diversification to solve any problems we have. So when people say, well, large cap growth or large caps of uh very high PE today or CAPE today, and they might die tomorrow. At least that's the forecast. It's been the forecast for over a decade.

Voices [40:04]

Are you stupid or something?

Mostly Uncle Frank [40:06]

My response to that is, well, why are you holding all of those? Nobody's telling you you need to hold all of your stocks in a SP 500 or a total stock market fund that's heavily weighted towards large caps.

Voices [40:18]

Stupid as it stupid does, sir.

Mostly Uncle Frank [40:20]

To me, the solution is just diversification. Just don't hold all your stocks in that sector and hold a good portion of them in value and small caps and perhaps international, but maybe to even divide your internationals between large cap growth and small cap value, roughly. To me, that's a much better solution than trying to time markets using these kind of valuation metrics.

Voices [40:41]

You are correct, sir. Yes.

Mostly Uncle Frank [40:46]

Because if you do that, then your portfolio will not be subject to the same valuations as these quote troublesome unquote metrics posed to some people. I always get the feeling that many people just want to feel smarter and go market time these things or say things about these things when they could just use diversification to solve the problem.

Voices [41:08]

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

Mostly Uncle Frank [41:18]

Because if you look at just about every time that high valuations have resulted in market crashes, you could have solved the problem by just holding value stocks, whether that's the 1970s, the early 2000s, or 2022.

Voices [41:31]

Yeah. Didn't you get that memo?

Mostly Uncle Frank [41:34]

And so I vote for the simple solution of easy diversification and not the complicated solution of trying to market time with Cape Crystal balls.

Voices [41:43]

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

Mostly Uncle Frank [41:48]

I will let others date Sonia. So hopefully that helps. And thank you for your email.

Weekly Market Snapshot And Returns

Mostly Uncle Frank [42:01]

Now we are going to do something extremely fun. And the extremely fun thing we get to do now is our weekly portfolio reviews. So the eight sample portfolios you can find at www.riskpartyreader.com on the portfolios page. Recovery at the end of the week. And so just looking at the markets, the SP 500 represented by VOO is now up 9.09% for the year so far. The NASDAQ 100 represented by QQQ is up 17.37% for the year so far. But small cap value is out in front, at least in the stock market derby. Representative fund VIOV is now up 19.41% for the year so far. And funds like AVUV are up over 20%. Gold has come back down to Earth. Representative fund GDLM is now down 2.4% for the year so far. Poof! But as they say, trees do not go to the sky, so if something that goes up 20-some percent one year and 65% another year, you should not be surprised if the year after that it doesn't go anywhere. Long-term treasury bonds represented by the fund VGLT are up 0.03% for the year now. REITs represented by the fund REET are up 12.41%. Commodities represented by the fund PDBC are still riding high at 28.75%.

Voices [43:37]

I'm an oil man.

Mostly Uncle Frank [43:38]

Preferred shares represented by the fund PFFE are up 2.5%. And managed futures are managing to be up still substantially. Representative fund DBMF is up 10.27% for the year so far. And a lot of these funds have gone up and down a lot this year, but what you've noticed out of managed futures in particular is that. They've been very consistent and really haven't fluctuated all that much when you compare them to stock and gold funds and things like that. Moving

Sample Portfolio Results And Rankings

Mostly Uncle Frank [44:08]

to these portfolios, first one's the all-seasons portfolio. It's a reference portfolio. It's 30% in stocks and a total stock market fund, 55% in intermediate and long-term treasury bonds, and remaining 15% in gold and commodities. It's down 1.39% for the month of June so far. It's up 4.75% year to date, and up 29.13% since inception in July 2020. Moving to these bread and butter kind of portfolios. First one's golden butterfly. This one's 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 20% in gold. It's down 1.12% for the month of June. It's up 5.5% year to date and up 68.32% since inception in July 2020. Next one's Golden Ratio. This one's 42% in 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 and a money market fund. It's down 1.62% for the month of June. It's up 5.81% year to date, and up 63.37% since inception in July 2020. Next one's the Risk Parity Ultimate, our kitchen sink. I'm not going to go through all 12 of these funds, but it's down 1.51% for the month of June, it's up 5.97% year to date, and up 48.08% since inception in July 2020. Now moving to these experimental portfolios. Which all involve levered funds. Don't try this at home.

Voices [45:53]

Oh, there it is. Winner winner chicken dinner.

Mostly Uncle Frank [46:01]

First one's the accelerated permanent portfolio. This one is 27.5% in TMF, a levered bond fund, 25% in UPRO, a levered stock fund, 25% in PFF, a preferred shares fund, and 22.5% in gold. It's down 3.44% for the month of June. It's up 4.91% year to date, and up 29.49% since inception in July 2020. Next one's the Aggressive 5050. This one is our least diversified and most levered of these portfolios and the worst performer by far. It's one-third in UPRO, levered stock fund, one-third in TMF, a levered bond fund, and the remaining third in ballast in a preferred shares fund and an intermediate treasury bond fund. It's down 2.52% for the month of June. It's up 5.65% year to date, and up 3.85% since inception in July 2020. Next one's the levered golden ratio. This one's a year younger than the first six. It is 35% in NTSX, that is a composite levered fund of the S P 500 and Treasury bonds. It's actually similar in some respects to GDE, which we talked about earlier. It's got 15% in AVDV, that's an international small cap value fund, 20% in gold, 10% in KMLM, that's a managed futures fund, 10% in TMF, that's a levered bond fund, and the remaining 10% in a levered Dow fund and a levered utilities fund. It's down 2.62% for the month of June. It's up 6.03% year to date and up 27.1% since inception in July 2021. Moving to the last one, our OPRA portfolio, one portfolio to rule them all, and it continues to rule them all. It is a return stack portfolio, so we've got 16% in UPRO, that's a Leverett Stock Fund, 24% in AVGV, that is a worldwide value tilted fund, 24% in GOVZ, a Treasury Strips fund, and the remaining 36% in gold and managed futures. It's down 2.55% for the month of June. It's up 9.91% year to date, and up 41.81% since inception in July 2024. And that concludes our weekly portfolio reviews.

How To Write In And Support

Mostly Uncle Frank [48:23]

But now I see our signal is beginning to fade. If you have comments or questions for me, please send them to Frank at RiskPartyRader.com. That email is Frank at RiskPartyRoo.com. Or you can go to the website www.riskparty radio.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 some stars, a follow, a review. That would be great. Okay. Thank you once again for tuning in. This is Frank Vasquez with Risk Party Radio. Signing off.

Voices [48:59]

The wind screams. We're in the box. Let's go with a bad crush. It's all age. And it's the wood. It's a big crotch.

Mostly Queen Mary [50:06]

The Risk Parity 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.