Welcome And Foundational Episodes

Voices [0:00]

A foolish consistency is the hobgoblin of little mind, adored by little statesmen and philosophers and divines. If a man does not keep pace with his companions, perhaps it is because he hears a different drummer. A different drummer.

Mostly Queen Mary [0:18]

And now, coming to you from Dead Center on your dial, welcome to Risk Parity Radio, where we explore alternatives and asset allocations for the do-it-yourself investor. Broadcasting to you now from the comfort of his easy chair, here is your host, Frank Vasquez.

Mostly Uncle Frank [0:37]

Thank you, Mary, and welcome to Risk Parity Radio. If you 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. Sacosh. We'd be helpless without him.

Voices [1:36]

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 [1:53]

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.

Mostly Queen Mary [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 [2:14]

But now onward, episode 519. Today on Risk Party Radio, we're just gonna do what we do best here. Which is attend to your email. And so without further ado.

Peter Wants To Leave Work

Voices [2:26]

Here I go once again with the email.

Mostly Uncle Frank [2:29]

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

Voices [2:36]

So I was sitting in my cubicle today and I realized ever since I started working, um, every single day of my life has been worse than the day before it. So that means that every single day that you see me, that's on the worst day of my life. What about today? Is today the worst day of your life? Yeah. Wow, that's messed up.

Mostly Uncle Frank [3:03]

And Peter, right?

Mostly Queen Mary [3:05]

Hi, Frank and Mary. Thanks for all you do. We've donated to both the Fairfax Casa and the Father McKenna Center, and we are happy to support them. I've attached some documentation for that. Yeah, baby, yeah. I wanted to send this email because my birthday is imminent. Because then I won't be 37 anymore. I'll be 38. Which means I won't be able to say with accuracy, I'm 37, I'm not old. Death stalks you at every turn. And for this podcast, I think that'd be a crime to pass up that opportunity. Well, it does. I would love to hear your thoughts on our family's financial readiness for me to depart my career path and for us to try to reinvent our lives. I'm married with two kids, both under eight years old, and we hope to add one more to the family.

Voices [3:53]

Why? What have children ever done for me?

Mostly Queen Mary [3:56]

Our financial situation. We have 1.3 million saved and invested. Our yearly expenses for the past three years have been around $70,000 to $72,000, which includes our mortgage payment but is minus tithing. We live a standard frugal lifestyle, buy things used, don't get new cars, etc. But we haven't been intensely trying to decrease our expenses. We have a lower than average cost of living where we are, and we don't have state income tax. Our projected post-work expenses probably are around $65,000 to $70,000, including a lower amount of tithing and including health care and with no mortgage since we just paid it off. Our house is worth approximately $315,000 and we paid it off at the end of last year. We have a HELOC for $150,000 at 7.4% variable interest, specifically as a buffer to hedge against sequence of returns risk. I'm in a highly paid job that I've had for less than two years, but I've been in my profession for nine years. My work situation. I've done perhaps the bad thing of learning a lot about early retirement, and also by reading books such as Your Money or Your Life, or The Second Mountain, and listening to podcasts, etc.

Voices [5:15]

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

Mostly Queen Mary [5:20]

While early retirement is fantastically exciting, I think the knowledge of what life could be has made the work more like drudgery. I want to live a fuller life, and as every day goes by, I am sad that I'm working a job that I don't really enjoy and am bored by and is generally stressful. I want to try to optimize a happier life at home and focus on our kids' education.

Voices [5:43]

I don't care about the children, I just care about their parents' money.

Mostly Queen Mary [5:47]

My work is structured in a way that I'm the only one responsible for my work. So if I'm not working on it, it doesn't get done. And if I take time off, I usually have to crunch for a few days to stay on track. Because of this, I'm finding that I'm not taking very much of the unlimited PTO. I recognize it's entitled thinking to imagine an even better life than the one I have, because I know that many people would love the opportunities I have now. But I'm not able to close the Pandora's box that is early retirement in my mind.

Mostly Uncle Frank [6:18]

Well, let's start the insanity.

Mostly Queen Mary [6:21]

We could save probably $100,000 more by waiting till the end of the year, and of course we'd have more cushion if I waited longer, but I'm noticing my performance, interest, and motivation slipping day by day. And it's gone. Poof. And I need to figure out what to do. The questions I would appreciate help with. One, I feel like we're on the edge of stable financial independence. Is it foolhardy at this point for me to consider exiting my peak earning potential years? Am I just dreaming and hoping it's too hard and not being realistic? 2. One of my biggest concerns is our after-tax position. We have $535,000 in after-tax investments and cash with the rest in IRA accounts and Roth IRA accounts with no cost basis left. Should we treat our investments like one big pile of money, like you've said is the best practice, and put tax efficient assets in our after-tax brokerage? Or would it be wise to put more bonds in there while we perform Roth conversions and have to wait for the five years so we avoid penalties because our after-tax portion isn't huge? I've heard you talk about similar options for other situations, and I'm not positive where we fit exactly. In this case, because I'm only 37, 72T seems unwise to commit to a withdrawal plan with so many years ahead of us before me and my wife were 59.5, so the after-tax brokerage will probably be it for the next five years. As far as the asset allocation piece, I like the stock exposure, but I'm also greatly appealed by the comparative safe withdrawal rate benefits of a risk parity style portfolio. We tried to get some help from a financial planner and we specifically asked for help with a risk parity portfolio, and they came up with an asset allocation that looked a lot like Ray Dalio's all-weather portfolio. It was very bond-heavy, and when the planner suggested corporate bonds, I kind of lost my confidence in their asset recommendations. Up to this point, we've just been lucky that I bought into the concept during our accumulation phase of nearly 100% VTO slash VTI from Simple Path to Wealth and a Motley Fool publication aimed at teens that I read over 20 years ago.

Voices [8:40]

Yes!

Mostly Queen Mary [8:41]

That being said, I'm definitely still on level two investor territory. Right now, it's just that I trust your methodologies more for various reasons out of the sea of other strategies, but I still have a lot to learn.

Voices [8:54]

Rex Quando, we use the buddy system. No more flying solo. You need somebody watching your back at all times.

Mostly Queen Mary [9:02]

One note that I think is relevant. I don't really have a solid post-exit cash flow plan. I just bought a car to rent out on Turo, more just to prove to myself that I can do something outside my comfort zone and make a little bit of money without a job.

Voices [9:17]

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

Mostly Queen Mary [9:20]

I also have a little money, like $200 a month or something, I make from a content business I made a few years ago. In short, I think I can find other income sources if I need to. But I also do want to stop chasing dollars and also figure out my life too. I think my wife and family would appreciate it if I wasn't holed up in my office trying to figure out something all day. I just don't have enough perspective to know how much of a problem we would be in with a 4.8 to 5.5% withdrawal rate. I've arbitrarily thought that 5% is a reasonable max we should be taking out. We haven't done anything drastic to cut back, so maybe my fears are moot and we could just downsize a bit. Hopefully this all makes sense. Would appreciate your thoughts. Our current total asset allocation, VOO slash VTI 31%, AVUV 20%, GLDM 8%, DBMF 4%, VGLT slash VGIT 30%, individual stocks 1%, cash six percent, our after tax asset allocation, gold GLDM 12%, bonds 5050 VGIT slash VGLT 30%, large cap VTI slash VOO 32%, small cap AVUV, 15%, managed futures, DBMF, 10%, individual stocks 1%. Our target allocation, although we've not completed the transition here yet, VOO VTI, large cap growth 30%, AVUV, small cap value 20%, GLDM gold 15%, DBMF managed futures 10%, VGLT slash VGIT, long term slash midterm treasury bonds 21%, cash 4%.

Voices [11:25]

Is there any way that you could sort of just zomp me out so that like I don't know that I'm at work? In here? Could I come home and think that I've been fishing all day or something? That's really not what I do, Peter. However, the good news is I think I can help you.

Mostly Uncle Frank [11:49]

Well, Peter, you got a lot going on here. And you're wearing Mary out, too.

Voices [11:57]

Mary, Mary, I need your hugging.

Mostly Uncle Frank [12:05]

But first off, thank you for being a donor to both Fairfax Casa and the Father McKenna Center. As most of you know here, we do not have any sponsors on this program. We do support a couple of charities. Right now we are focusing on the Father McKenna Center, which supports hungry and homeless people in Washington, D.C. Full disclosure, I am the chairman of the board of that charity.

Voices [12:28]

Will Lottie Fricking DO!

Mostly Uncle Frank [12:32]

And we are currently working on the top of the t-shirt campaign for the Father McKenna Center, which you can hear all about in episode 518, our last episode. But we already have two listeners, Matthew 63 and 4J, who have stepped up to put up $25,000 in matching funds that we are working on matching right now. And then we'll see how far we can get.

Voices [12:57]

You never know what you're gonna get.

Mostly Uncle Frank [13:00]

So anything you can donate now will be matched. At least for the next two to three months here. And of course, all donations do move you to the front of the email line, as Peter has done here. Excellent. And I will put the donation link again in the show notes. If you do donate, please make a note of it in the comments section of your donation form so that it can be properly credited to the Risk Parity Radio matching campaign. And thank you again for your support.

Is 1.3 Million Enough

Mostly Uncle Frank [13:31]

So starting with the big picture here, you've got a family of four, two kids under eight years old, and your annual expenses are about seventy thousand dollars, and you currently have one point three million saved and invested. Now, is that enough to support a seventy thousand dollar annual expense? Well, yes, you could probably make it work, but it might not be very pleasant. But I think more importantly, I think you should recognize that given where you are in life, your expenses are likely to increase until your kids are about high school age or college age. Especially if you have another one. So your situation is much different than a single person or just a couple. And so without really knowing anything about where you're living or exactly what your expenses are, I would bump those up to $100,000 as kind of a target amount, which would give you a nice big buffer given what you're spending right now. At a 5% withdrawal rate, that would imply you need $2 million invested. And while that sounds like it's a lot more than $1.3 million invested, it's actually not. The reason it's not is because of the miracle of compounding. That even if you didn't invest any more money, you would likely get there in the next five to seven years, I would say, with kind of average market performance. And if you're putting $100,000 a year into that, that would be getting you there even a lot quicker. But it strikes me that the real issue here is not the finances per se, it's that you don't like your job, which is very common.

Voices [15:14]

I uh I don't like my job, and uh I don't think I'm gonna go anymore.

Mostly Uncle Frank [15:20]

And the real question is how long could you stick that out? But the reason I say that I sense that is the real problem, which therefore does not really call for a financial solution per se, is that you have not specified what you would be doing with yourself if you were not working that job. And so I think you should get some clarity about that before making any drastic decisions. Right now, you're looking at this as a binary choice between this job and no job. I don't think that's the real actual choice you have here.

Voices [15:55]

Choose. What do you mean choose? We don't understand. Choose. Choose the form of the destructor.

Mostly Uncle Frank [16:07]

Because basically, you could take any job you wanted that even covered part of your expenses. Suppose you took a job that just covered your $70,000 annual expenses, the rest of your money would grow and you would get to financial independence in just a few years. So if you feel like you can't stick it out with what you're doing right now, I would be thinking about what else could I do that would cover all or most of our expenses for however long we need to do that. No, I have no way of knowing what else you're qualified to do, so it's difficult for me to tell you you should do this, that, or the other.

Voices [16:45]

Occupation. Gladiator. Did you kill last week? No. Did you try to kill last week? Yes. Now listen, this is your last week of unemployment insurance. Either you kill somebody next week or we're gonna have to change your status. You got it? Yeah. Sign.

Mostly Uncle Frank [17:05]

But I probably would be thinking of this more holistically, not so much about the money you would make from a job, but how does this fit into your family and your community? You mentioned tithing, which suggests that you are part of a religious community or some other kind of community. And communities that tithe generally tend to value productivity of the members of their community, which may actually be one of the reasons you're working so hard right now, because that's kind of the baseline expectation that you go and be productive and then you can tithe more. And maybe what you're feeling is just too much pressure to be too productive as opposed to just being moderately productive. But I do think one of the things you need to take into account, because I think it is meaningful to you, is well, what would your wife think of this? If you weren't working, what would the other people in your community think of this if they're important to you? We always say don't do things because other people want you to do them, but on the other hand, if you're part of a community where people ascribe to certain behaviors and certain standards, that is going to be important to you. Another question I had was whether your spouse could make an income, because that would also change the calculus here and the dynamics. But you didn't mention it, so I'm kind of assuming there's no interest in that. But you do need to sit down and have a conversation with your wife about how you're feeling about all of this. You know, you might come up with a solution that looks kind of like, you know, honey, I'm really unhappy with my work here. And while I think we could get by without me working here, I don't want to risk any hardship to our family. But what you might be thinking about is let's put another date on this. I mean, you're about to be 38 years old. What if you just said to her and to yourself, I'm gonna stick this out till I turn 40. And then we're gonna see where we are, and if it looks good, then I'm gonna stop doing this. You may find that just putting some kind of terminal date that you both understand and are working towards may actually relieve the stress you're feeling right now. My experience is you can put up with almost any hardship if you know when it's gonna end. It's when you don't know if or when it's gonna end, is when it becomes intolerable. But I would be having those kinds of conversations with her to see what she thinks.

Voices [19:31]

She counted three. She counted three. Son of a fetch! You have any idea how far that cabin is.

Mostly Uncle Frank [19:49]

Am I just dreaming and hoping too hard and not being realistic? I don't know whether it's foolhardy. I'm not sure it makes sense, and I don't think peak earning years should be the test. Because frankly, if you stay in your profession, most peak earning years don't happen until you're in your fifties.

Voices [20:08]

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

Mostly Uncle Frank [20:12]

So I don't think that's a good metric. That does play into my intuition that this issue of productivity kind of pervades the way you think and the way people in your community think. But I don't think being in your peak earning year should be the measuring stick about what you decide to do here. What what would you say you do here? Because money is only one of the purposes for working. And I think I've otherwise answered that

One Portfolio And Early Access Options

Mostly Uncle Frank [20:44]

question. Your second question was whether you should treat your investments like one big pile of money. Like I've said, it's a best practice and put tax-efficient assets in your after-tax brokerage account. Yes, I think you should do that. I think you should almost always tr treat all of your assets like one big pile of money unless it's specifically designated for a specific purpose at a specific time. But it's much more tax efficient if you're just talking about money to live on, to treat it all as one big pot and then use allocation to optimize it for tax purposes and other purposes. So, yeah, I'd have the same thoughts about this as I did in episode 514 with the email from Rebecca, who is about your age as well, and has two children. How about that? Now, with respect to 72T, I'm not sure you're considering all your options here. Because the best way to use 72T if you're going to use it is not to put everything you've got into a 72T plan, but it's to break off a piece of your traditional retirement assets, put them in a specific IRA that you're then going to apply 72T to. So that could be just $50,000 worth of stuff, or it could be $100. thousand dollars worth of stuff and you could have as many IRAs starting at different times with different 72 Ts going on as you wanted to so it's a lot more flexible device than I think you're really thinking about here and you can split up those retirement accounts into as many IRAs as you would want or that would be useful. I would definitely get the book Taxes to and through early retirement by Cody Garrett and Sean Mullaney because a lot of what you need to know comes out of there including using 72T. Sean Mullaney also has a site called the Phi Tax Guy which with a lot of other information about this that may be useful to you. But essentially you have a lot of options here in terms of how you would get that money out and I don't think that's going to be a big hurdle ultimately.

Risk Parity Bonds And Corporate Bonds

Mostly Uncle Frank [22:49]

Now your experience with talking to an advisor about an all-weather style risk parity style portfolio is typical because when most people hear that they are thinking of the exact kind of portfolio that Bridgewater was using, which is a very bond heavy portfolio. It looks kind of like that all-weather portfolio we use as a reference portfolio for the sample portfolios. And that's really why that is there because it shows you why that's probably not something you would want to use for the purpose of a retirement portfolio or living off of it's just not designed for that in that way. What that is actually designed for is to create something that is very conservative, very efficient and then you're supposed to add leverage to it. That is how sort of commercial prepared risk parity funds look if you look at something like RPAR or UPAR or the Fidelity Mutual fund that's a risk parity fund, which ticker escapes me at the moment. But all of those follow that classic design but that design is really not designed for a retirement style portfolio which is why we've modified it and you end up getting things that look more like a golden butterfly portfolio or a golden ratio portfolio that have more stocks in them and conform to the characteristics that Bill Bangin has described for efficient portfolios for taking withdrawals out of. And that's also the reason that corporate bonds really don't have a good place in the kinds of portfolios that we're trying to use here. Because the problem with bonds in general is that they are just lower return assets. They are lower return than the stocks they are lower return than the alternatives and so they are the lowest return assets that we deal with. They're also very tax inefficient so they're very undesirable for that purpose especially in taxable accounts of course so they could really only have two functions in this kind of a portfolio one would be stability and the other one would be diversification. As far as stability is concerned that's short-term bonds and as we know from Bill Bengins' research you got to keep those things to less than 10% of your portfolio or you're going to end up with a cash drag over long periods of time.

Voices [25:05]

You're not going to amount to jack squats so you want to limit that kind of exposure.

Mostly Uncle Frank [25:12]

And then when you're thinking about diversification what is the most diversified types of bonds with respect to your other assets, your stocks and your other alternatives and those are treasury bonds. So you almost get there by default and then they perform the role of being recession insurance in the portfolio. And corporate bonds just don't do any of those things as well as treasury bonds do so they don't have a very good purpose in the portfolio. That is the straight stuff oh funkmaster most advisors don't appreciate that because they aren't thinking of that in this way. They're not thinking of the four quadrant model that is kind of the basis for the way we would construct a diversified portfolio. What they are typically thinking of is treating all the stocks as kind of one stock portfolio and all the bonds as one kind of bond portfolio. So they're looking at the bonds in relation to other bonds which really makes no sense at all when you're thinking about it because you don't hold separate portfolios. You have one big portfolio that everything needs to work together with.

Voices [26:30]

Do you understand?

Mostly Uncle Frank [26:32]

Which is typical because they're generally applying kind of cookie cutter off the shelf formulas. And you'll learn some of it in CFA school but most of the people you're talking to will not have had a formal exposure to this kind of work and this kind of diversification. And finally looking at your target allocations I thought that looked fine as far as being within the ballpark of the kinds of portfolios that work well for these purposes I would make sure that you always have a year's worth of cash at least a year's worth of cash and whether that's four percent of your allocation or five percent of your allocation or even six percent of your allocation I would be thinking of that in terms of what do we actually think we need for the next year going forward and making sure we have that much in cash or about that much in cash. Always money in a banana stand. Because whenever you're talking about your short-term assets the practical is more important than the theoretical and then the only other thing you need to do is reallocate these things so they're as tax efficient as they can be given the accounts that you have. So you've got some thinking to do and some conversations to have but I think you're going to be in good shape overall you actually do have more options than I think you realize right now.

Voices [28:07]

So hopefully that helps thank you for being a donor to both Fairfax Casa and the Father McKenna Center and thank you for your email our high school guidance counselor used to ask us what you would do if you had a million dollars. It didn't have to work and then invariably whatever you'd say that was supposed to be your career so if you wanted to fix old cars then you're supposed to be an auto mechanic. So what did you say? I never had an answer I guess that's why I'm working in Inatech well what about you now what would you do? Besides two chicks at the same time? Well yeah nothing nothing huh?

Mostly Queen Mary [28:43]

I

Alejandro Asks For A Visual Aid

Mostly Queen Mary [28:44]

would relax all day I would do nothing second off second off we have an email from Alejandro Do not ask him for mercy and Alejandro writes Hello Frank and Mary first time email from binge listener slash fan slash disciple just be glad you get to hang with me.

Voices [29:07]

You're right Frank sorry Frank well it's your choice you can open for me at the Meadowlands or headline at the TikTok in the let me begin by saying thank you for your hobby which has greatly educated many of us.

Mostly Queen Mary [29:19]

Thank you for all the charity work you support as well. I am so grateful that in my interest and curiosity in learning about Risk Parity I stumbled upon Risk Parity Radio in early 2021. I recall not enjoying the sound bites but as I listened more and more I realized I wouldn't have it any other way. It's the best. The best Jerry the best I am still accumulating although I have been transitioning to golden ratio because I had realized I was Bon Jovi I'm contributing to the portfolio into the asset classes as needed. Since I am not taking any distributions it's kind of hard for me to grasp the distributions just yet. Show me the money show me the money yes show me the money I'm sure I know but I want some reassurance in episode 478 in the email from Chad you discussed the redistributions and the rebalancing. I believe I need a visual and so I was hoping if you'd be so kind as to put it in notebook LLM.

Voices [30:27]

Surely you can't be serious.

Mostly Queen Mary [30:28]

I am serious and don't call me surely I believe this would not only help me to explain it to my wife but I believe other listeners would benefit. By the way I still like to listen to the episode where Mary almost had enough concerning the praise lavished upon Frank. My wife and I laughed about it listening to it. Please don't ever change there are many listeners who do listen and benefit from your podcast. Wish you both the best as well as Luke for your endeavor.

Mostly Uncle Frank [30:55]

By the way I'm in the process of making a donation to the Father McKenna Center Groovy baby well I'm glad you're enjoying the podcast and find it entertaining as well as informative I think you probably have to find it entertaining to continue listening to it.

Voices [31:16]

This is pretty much the worst video ever made.

Mostly Uncle Frank [31:19]

Because if you don't it's probably far too much to tolerate for most people and as for me changing my sense of humor or basic personality characteristics, I don't think that's gonna happen.

Voices [31:41]

Forget about it.

Mostly Uncle Frank [31:43]

It is very important for me to keep this as something that's non-commercial and fun to create what do you mean funny?

Voices [31:50]

Funny how? How am I funny?

Mostly Uncle Frank [31:52]

Now, as to your request for additional materials that go with episode 578 well I did go over to Google Notebook LM and create you something.

Voices [32:04]

Surely there must be something you can do I'm doing everything I can and stop calling me Shirley.

Mostly Uncle Frank [32:17]

And it is basically going through the answer we gave to Chad in episode 478 and making a little presentation. I made it in the style of El Greco but with lighter tones as El Greco usually has dark tones. But I thought it turned out pretty well but let me just tell you you don't need to wait months on end for me to create one of these things because you could actually do it yourself. And let me just tell you how I did it. It didn't take very long at all I went to Google notebook LM opened up a new folder there and then I went to YouTube and took the podcast episode and put the link to that in the folder in Google Notebook LM and then I just told it to make me a slideshow and I said focus on the question from Chad and the response I gave I said focus only on that. This is just a matter of putting the prompt in that you want it to focus on because if you tell it to just focus on one thing in a long podcast it will only focus on that thing and you can get exactly what you want in terms of a summary out of it pretty easily. If you followed all the instructional material you just said it every day it is way more responsive to specific prompts than you might think it would be which makes it an extremely useful tool for condensing a lot of lengthy material that you might find in a long podcast or a big pile of stuff. And you might just try that with other episodes of Risk Parity Radio.

Voices [33:52]

Maybe focus on the sound clips for some of them I drink your I drink it up every day I drink it up so hopefully that helps I'm glad you're enjoying the podcast and thank you for your email bounties dead say an email from Anderson You know Bunkin Baton we could have fed 600 men in the time it's taken you ham and order.

Mostly Queen Mary [34:34]

And

Anderson Tests Leverage And AI Ideas

Mostly Queen Mary [34:35]

Anderson writes Hi Uncle Frank two years ago I sent you the following accumulation portfolio and your commentary was greatly appreciated. I've been implementing that portfolio since that time and so far it is working well and beating the SP benchmark. However we have been in a bull market so small sample size. Uh what?

Voices [34:56]

The money in your account it didn't do too well it's gone.

Mostly Queen Mary [34:59]

I was talking to my uncle chat the other day yes this is chat GPT and yes we have become very close. I'm making some sweemoulah with Uncle Rico and we sorted through some recommendations and I wanted to get your thoughts current portfolio rebalancing quarterly UPRO 20% EDV 25% AVU V 35% AVDV 10% AVEM 10% proposed new portfolio rebalancing with bands at 20% for each ETF UPRO 25% EDV 15% AVUV 30% AVDV 15% DBMF 15% Uncle Chat thought this would lead to even higher returns with the addition of managed futures.

Voices [35:51]

I guess you could say things are getting pretty serious.

Mostly Queen Mary [35:54]

He also thought that using rebalancing bands combined with 200 day moving average for UPRO and AVUV could also increase returns. What are your thoughts on this? I am a scientist not a philosopher I am definitely one who likes to tinker and I also know that one of the cardinal sins for retail investors is to jump in and out of funds. You can't handle the gambling problem. However, in my mind I have to sort out if this is just me tinkering with the portfolio or just gaining knowledge as an investor and making changes slash improvements based on that.

Voices [36:30]

As always much appreciated Anderson Yeah the American pesticides don't work anymore because of the hippie environmentalists so I drove down to Mexico and got some good old fashioned DDT it's getting so Mexico is the only place you can be an American anymore.

Mostly Uncle Frank [36:50]

Well according to my records the last Anderson email we answered was in episode 487. So hopefully I'm not repeating this or maybe it was a different Anderson I didn't go back and check. I wish it was probably those two boys Buford and Bernardo so just checking out the difference between your current gambling problem and your proposed gambling problem meaning there's leverage in these portfolios. Tony Stark was able to build this in a cave with a bunch of scraps yeah so it looks like you've replaced the emerging markets exposure with an exposure to DBMF and that probably would smooth out the overall characteristics of the portfolio and then you've raised the exposure to UPRO from 20% to 25% which is even more leverage. Any good if you look at the overall exposures in the proposed portfolio it's going to be 75% exposure to the S P 500 30% exposure to US small cap value and 15% exposure to international small cap value and that's a total of 120% without the alternatives or bonds exposure taken into account which is another 30%. Real Wrath of God type stuff exactly I'm not sure I'd trust the opinions of Uncle Chat with respect to these kinds of portfolios in particular are you stupid or something because you really don't know what kind of source material they are looking at and the length of time that these things have existed in their current fund forms is limited and so I didn't know whether you were asking about the specific funds or the asset classes and you're probably going to get different answers depending on that and depending on the entire day data series you're looking at so I'm not sure how much credence I would give to any kind of AI discussion or recommendations about one of these kind of portfolios. You can't handle the crystal ball I doubt I'd be in favor of trying to use moving averages for some kind of trading system. A crystal ball can help you it can guide you my experience is generally those don't work that well and they end up causing tax problems due to more transactions. Of course this might be in a retirement account and maybe that doesn't matter. What guy in a suit? No it's a tax collector Hey there SpongeBob But I have not done any analysis of that nor am I likely to do any analysis of that wouldn't be prudent at this juncture because this podcast really is not devoted to any kind of trading systems and I know people ask me about them from time to time.

Voices [40:04]

Forget about it.

Mostly Uncle Frank [40:05]

I'm afraid you're gonna have to go elsewhere for that kind of knowledge. Forget about it I'm only really aware of it because I've experimented with such things in the distant past and decided at some point it just was not worth the effort and not worth the potential tax consequences of dealing with those sorts of things. So I really do focus on simple management portfolios that's where I do apply the simplicity principle most often is to create naively diversified portfolios with relatively static allocations that can be rebalanced and not try to adjust the allocations either on a trading system or due to market conditions, which is frequently what people are actually trying to do with these things.

Voices [40:52]

You can actually feel the energy from your ball by just putting your hands in and out there are all kinds of newsletters out there that sell such systems.

Mostly Uncle Frank [41:01]

But if it really worked they probably wouldn't be selling it right or am I right or am I right? Right so if you want to try something like that you could but I wouldn't bet the farm on it now you can also use the ball to connect to the spirit world. And I would be mindful that the leverage you are putting into this portfolio is going to make it close to just as volatile as the stock market itself. You can't handle the dogs and cats living together I do think you're likely to have a better return profile in the overall stock market with the kind of portfolio you're proposing. It really does resemble one of these return stacked kind of portfolios. But if we do have a big downturn it will get very ugly because youPro moves in either direction very quickly like a garbage truck dropped off the Empire State Building. And even in our OPRA portfolio where the nominal percentage is 16% that thing has gone all the way from 10 up to 24% I would say in just the time we've had it and we haven't even had a really big downturn since we put that thing up there. So you better have an iron stomach if you're using that much of a leverage fund like you pro in any kind of portfolio. You can't handle the banese so that probably wasn't very helpful but maybe it was a little helpful and hopefully it was a little helpful I picked the wrong weight quitchniffer and thank you for your email He didn't fall inconceivable.

Emails And Reviews Before Sign Off

Mostly Uncle Frank [42:59]

If you have comments or questions for me please send them to Frank at RiskPardiRader dot com that email is Frank at RiskPardiRader dot com or you can go to the website www dot riskperdire dot com. Put your message into the contact form and I'll get it that way. If you haven't had a chance to do it please go to your favorite podcast provider and like subscribe give me some stars a follow a review that would be great okay thank you once again for tuning in this is Frank Basquez with Risk Parody Radio signing off in a cave stork in a cave ponystar in a cave I'm just grab in a cave a distract in a cave 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.

Mostly Queen Mary [43:58]

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