Opening Quotes And Show Setup

Voices [0:00]

A foolish consistency is the hub goblin of a little mind. Adored by little statesmen and philosophers and divine. 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, thanks. 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.riskparody radio.com. Inconceivable. 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 move, all right?

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.

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 531. Today on Risk Party Radio.

Voices [2:19]

It's time for the grand unveiling of money.

Mostly Uncle Frank [2:22]

Which means we'll be doing our weekly portfolio reviews of the eight sample portfolios you can find at www.riskparty radio.com on the portfolios page. And it was kind of a crazy week last week, with all the stocks going up three to five percent in most cases. Gold going up over seven percent.

Voices [2:42]

I love gold.

Mostly Uncle Frank [2:46]

It was like everybody got a free car or something. We don't really know. I suspect that it has something to do with the US and Japanese intervention and weakening the US dollar and Scott Besson's commitment to be doing whatever it takes to maintain that.

Voices [3:23]

Of course, rewire it. Yeah, are you gonna make it all 220? Yeah, 220, 221, whatever it takes.

Mostly Uncle Frank [3:30]

But we don't really need to worry about it because we're not trying to time the markets.

Voices [3:34]

Forget about it.

Condolences And Listener Community

Mostly Uncle Frank [3:36]

But before we start talking about all that.

Voices [3:40]

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

Mostly Uncle Frank [3:45]

And first off. First off, we have a pair of emails from Thirsty Horse and Joanne.

Voices [3:54]

Up in through the desert on a horse with Ronane. It felt good to be out of the rain.

Mostly Uncle Frank [4:02]

And Thirsty Horse writes.

Mostly Queen Mary [4:05]

Dear Frank, I am so sorry to hear about your loss and wishing you and your family strength and peace during this time. Given how you talk about your parents, I realize this must be hard for you, and I'm glad you were all with her when she died. The Golden Ratio book was a nice signal from the universe. Regards, Thirsty.

Mostly Uncle Frank [4:23]

And Joanne writes.

Mostly Queen Mary [4:26]

So sorry to learn of your mom's passing, thinking of you and your family during this difficult time. Thanks to you and Mary for being examples of living with purpose and grace.

Mostly Uncle Frank [4:37]

So I pick these two emails as just representative of actually a whole pile of emails and messages and cards, all expressing condolences on the loss of my mother. One of the nicest ones I got was also from our listener, Susan, in Mississippi, who also lost her mother in the relatively recent past. But I just wanted to say how grateful I am for this audience. Besides working with Mary and being able to raise money for our charities, the best thing about this podcast for me has been the development of this audience and the relationships I've been able to develop out of that. And I never really expected that when I started this as a COVID project back in 2020 and nobody else was listening to it at all. But it's funny how good things can happen if you just go out and try to do something or create something. It's probably a lesson we should all learn about retirement that it's nice to make lists of stuff you want to do, but ultimately you need to go out there and do it and figure out whether it's working for you or not and see where it leads. In a sense, it's like being young again and having your parents say, Well, why don't you try this sport or try to play this instrument or just try this thing because you really don't know what you like or you're going to be good at until you try, and when you get to retirement, you're kind of back at that square one. Richard Rohr actually talks about this in his book Falling Upward.

Charity Update And Tax Smart Giving

Mostly Uncle Frank [6:12]

But I really do appreciate you, and I do pledge to try to keep this podcast very listener-focused and unconflicted. Because I know that's important to a lot of people here. And a second reason I picked Thirsty Horse's email to read is he's one of our donors to the top of the t-shirt campaign for the Father McKenna Center.

Voices [6:32]

Excellent.

Mostly Uncle Frank [6:34]

As most of you know, we don't have any sponsors on this program. We do have two charities we support, Fairfax Casa Fermary and the Father McKenna Center for Yours Truly. And I am currently the chairman of the board of the center. I did want to update you on our top of the t-shirt campaign where we are raising money for our walk for McKenna, and we have two listeners who have put up $25,000 in matching funds. That's Matthew 63 and 4J.

Voices [7:02]

Top drawer.

Mostly Uncle Frank [7:05]

And I'm pleased to report we've reached the matching already.

Voices [7:10]

Yeah, baby, yeah.

Mostly Uncle Frank [7:12]

I was down there yesterday talking to Ben, our intrepid young director of development, who's actually pretty much the age of our middle child.

Voices [7:21]

Who are you calling dinner?

Mostly Uncle Frank [7:23]

And he said Risk Parity Radio had already raised over $34,000, not including the matching funds.

Voices [7:31]

Wow, wooways are very nice.

Mostly Uncle Frank [7:34]

And that's a lot of money, and I'm deeply grateful for everybody who's participated.

Voices [7:40]

Great success.

Mostly Uncle Frank [7:42]

But we still really have until the end of August, because they're designing the t-shirts now, and we'll put that out to have them created in early September, which means you still have time to donate to the top of the t-shirt campaign. And I hope you will join your fellow listeners in doing that.

Voices [8:00]

Show me the money! I need to feel you, Jerry! Show me the money! Jerry, you better yell! Show me the money!

Mostly Uncle Frank [8:07]

You can do that through the link I'm gonna put in the show notes to the Father McKenna Center donation page, or through the support page at www.riskparty.com. Either way, you get the extra added bonus of going to the front of the email line. Because otherwise the line is about six months long now. Just two other notes. The Father McKenna Center has now got a hundred percent rating on charity Navigator for being a highly efficient charity that gives you the most charitable bang for your buck, if you will. We accept donations in just about any form you can give them. Cash, credit cards, clothing, and of course, donated shares. I recently donated some appreciated shares of UPro to the Father McKenna Center.

Voices [8:58]

Oh no!

Mostly Uncle Frank [9:00]

And avoided a lot of capital gains.

Voices [9:03]

That is the straight stuff, O Funkmaster.

Mostly Uncle Frank [9:06]

So consider that when you are making your donations as to how they make them the most tax efficient. And we love all those donor-advised funds out there.

Voices [9:16]

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

Mostly Uncle Frank [9:20]

The other note I had is our director, Dennis D. said that one of our risk parity radio listeners, Geraldo, actually paid a visit down there unexpectedly the other week. And if you are in the DC area and you want to know what goes on down there, it's on Capitol Hill at the corner of North Capitol and I Street, so it's readily accessible. It's in the basement of the St. Aloys' church there. But stop by and maybe you'll get some swag. Dennis says he was able to give Geraldo one of our t-shirts from one of our former campaigns. We do have some keychains and hats and things as well.

Voices [9:58]

I get a car! I get a car! Everybody gets a car!

Mostly Uncle Frank [10:04]

So please do stop in if you're in the area, and you may even see me down there. I usually try to go down there at least once a week. Anyway, thank you all so much for everything you've done for me and for the Father McKenna Center, and for Mary and for Fairfax Casa. And thank you all for all of your emails and messages about the passing of my mom.

Voices [10:27]

Mine is the sunlight.

Stocks And Bonds Only Drawdown Plan

Mostly Uncle Frank [11:14]

Second off, we have an email from Matt.

Voices [11:17]

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

Mostly Uncle Frank [11:21]

And Matt writes.

Mostly Queen Mary [11:22]

Hi, Frank. Hope you are well. Thank you for your podcast. My question is the following If you could not use a risk parity portfolio, gold, managed futures, etc., in your drawdown phase and could only use stock and bond ETF slash index funds, what would your portfolio hold? What funds, what percentage of each fund, etc.? Matt. My dad said he listened to Matt David and lost all his money.

Voices [11:50]

Yes, everyone did, but they were brave in doing so.

Mostly Uncle Frank [11:53]

Well, interesting question, Matt. Kind of gets to how we do construct these kind of portfolios. I guess the first off-the-shelf solution is you could just adopt what Bill Bengins recently done in his book, The Richer Retirement Book. And Tyler Portfolio Charts created a version of that and put it up on his portfolio charts website. I'll link to that in the show notes. And that portfolio had a 4.7% safe withdrawal rate over the past hundred years or so without employing any kind of variable withdrawal strategies. And I know Bill Bangin's also been working on different kinds of variations of portfolios just involving stocks and bonds. I'll see if I can link to that work he's got going on at his website in the show notes. So you might want to check that out too. But if you're purely working from what we're talking about here, I would start with the blueprint that Paul Pant created, which is kind of some basic guidelines for a portfolio with a high safe withdrawal rate. And what you'll learn from that is that the role of the alternative assets in one of these portfolios is basically twofold. One is to be zero correlated with both stocks and bonds, which is going to be hard to do if you're adding stocks and bonds. But we'll talk about that. And then it's also to generate a significant return that is somewhere between stocks and bonds. So thinking about what that means in this context, if you're trying to fill that hole with stocks and bonds, the first thing you'd say is you probably don't want to add any bonds because they're not going to have a significant return or a high enough return. And in fact, I would probably keep the bonds in this kind of portfolio to one-third or less of the portfolio. And that would include bonds and cash. So if you look at something like the golden ratio portfolio, 26% of that is alternatives. And the recommendations on the blueprint are alternatives between 10 and 25%. So one simple way to approach that would be to take something like gold miners, a fund like GDX. So that's stocks, but it invests in gold miners. Now, I've as I've said before, those do not actually work quite as well as gold in a portfolio because they have this positive correlation to the rest of the stock market and they are quite volatile. But you could use those in a pinch to have an alternative asset that is qualifying for your criteria of being a stock fund. I'd probably only use 10% or something like that. Now, the other way to approach this would be to look at segments or parts of the stock market that tend to have lower correlations with the rest of the stock market. And so what are we talking about there? We're talking about things like REITs and utilities and perhaps some sector funds. And we have talked about all of those in the past. If you want to go find those episodes, go to the episode guide page at www.riskperdurator.com and use that little drop down to find the episodes that are specific investment analysis, and you'll see episodes related to things like utilities and REITs and sector funds. And you can check those things out because those are the kinds of things that you would want to think about adding to this portfolio. You would still want this portfolio to have at least half of it value tilted, regardless of what you came up with there. But a lot of these sector funds, like utilities, are naturally value tilted. Another thing I would probably definitely add to this would be an allocation to property and casualty insurance companies, which is something I actually hold and is something I've talked about extensively. This is what I learned from Warren Buffett, because that's what really what Berkshire Hathaway is at its core, is a gigantic insurance company that invests in all kinds of other things. But you can emulate that with a fund like KBWP. And if you actually compare that to Berkshire Hathaway, they perform very similarly over the past 15 years. I think KBWP, I think, has outperformed Berkshire by a fraction of a percent or something like that. So I'd look in adding something like that to the portfolio. So just for fun, I went over to Test Folio and pulled up a golden ratio portfolio, modified it slightly so it would back test all the way to 1972, and then modified it by taking out the golden managed futures and sticking in some property and casualty insurance companies. I used KBWP and then a older Fidelity fund before that, and then mid-cap value even before that. Test folio allows you to sequence funds for longer back tests if if you have one that doesn't have a longer history. And then I also threw in SPMO, which is a momentum fund. And you'll see the results. The alternative portfolio was not as good. It was able to survive a four percent withdrawal rate pretty easily, though. And that's in adjusted for inflation in this simulation I ran. But that's basically just a starting point. You would have to experiment with all kinds of things if you really wanted to do this. Of course, it is really a academic or nail-gazing exercise for most people, except for perhaps the next email that we're gonna talk about. Because it is kind of silly to pretend you live in a world where certain things aren't available when in the real world they are available.

Voices [17:30]

Are you stupid or something?

Mostly Uncle Frank [17:33]

That's just really not a very good approach to life, generally. Because it speaks to somebody who is consumed by various phobias of things instead of dealing with reality in a more productive way, shall we say.

New Zealand Constraints And Fund Substitutes

Mostly Queen Mary [18:52]

Firstly, thank you for your show. I first heard you, Frank, on Choose a Fi explaining the difference between bond types and their use cases. That episode was a light bulb moment for me and showed the depth of your investing knowledge.

Voices [19:05]

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

Mostly Queen Mary [19:10]

I am writing from New Zealand. I'm in my early 50s and planning for retirement at 60, earlier if I can. Most of my current portfolio is invested through a local fund that invests into VT. It's the simplest structure to access here, and I like it for its diversification across markets. I'm about to sell an investment property, and when that capital becomes available, I'm considering shifting toward a golden ratio style allocation. I'd like to tilt it slightly more aggressively, around 60% equities, 10% gold, 6% managed futures, and 24% medium and long-term bonds. Here's where I run into constraints. In New Zealand, the ETFs I can access are mostly global bond funds, largely treasuries with some agency exposure, VT and other regional market groupings, and broad U.S. small cap and mid-cap blend funds, and a U.S. large cap growth fund. I can't access a true small cap value fund locally. For managed futures, the only viable local option is an Australian Domocelled AQR wholesale fund, which is accessible but requires more effort than investing in US ETFs even, but less management. I can invest directly in US ETFs, but New Zealand's tax rules impose roughly a 1.5% annual drag, so it's not ideal if I want to access AV, UV, or DBMF. My questions are: one, given these constraints, is it reasonable to simply stick with my fund into VT and forego small cap value in my equities portion? 2. For the alternative sleeve, is it worth the extra effort to access the Australian AQR Managed Futures Fund? Investing in Australian funds has no tax advantages for New Zealand investors, which is a cork of our system. 3. If not, are options like a New Zealand listed Australian Resources Fund, Global Infrastructure Fund, or Global REITs Funds reasonable substitutes? Or are they too far from what managed futures provide, which I probably feel they are, but not sure what else I can do. Thanks again for all the work you do. Your show has been a huge help. Alan.

Mostly Uncle Frank [21:56]

This email is from February. Hopefully, you're still. Listening and have been waiting patiently. Before I get to your question, I should mention that there actually is a financial independence conference that is going to take place in New Zealand this year. And I know my friend Optimus Bill from Catching Up to Fi will be attending and presenting at that conference, along with many other notables. I will see if I can find a link to that in the show notes if you're interested in it. But as far as I know, that's the first time they've done one of those there. Maybe we should call it Economy for Hobbits. Sorry, I couldn't resist.

Voices [22:36]

Tell me where is Gandalf, but I much desire to speak quick. Tell me where is Gandalf for I much desire to speak quick.

Mostly Uncle Frank [22:43]

Now, getting to your question, it's an interesting question paired with the one we just answered because it's a similar answer that you do kind of need to look around at what funds you have available to fill in the holes you're missing there. It sounds like you can just fill the alternatives hole in with a gold fund itself. And while it'd be nice to have some managed futures in the portfolio, I would not go out and get something that comes at a high cost. Because that actually was the problem with managed futures funds before kind of the most recent round of them came out. They used to be just too expensive to be worth it. Because if you're paying two, three, or four percent, which is what those old mutual funds used to carry on them, it was just taking too much away from the returns to make it a useful allocation. You really want to get that below 1%, and then it's not so bad because your allocation to it is only going to be about 10% of the portfolio anyway, in most cases. I did run some searches on chatbots to try and find value funds for you, because if it's not a small cap value, at least it it could be a value fund that would be a step in the right direction. I honestly did not find anything that was that attractive, but I didn't do a whole lot of searching, and I would do that if I were you. I think artificial intelligence actually is very good at finding funds in other jurisdictions, or much better than I can do on my own. Basically, you can say something like, What is the closest thing I have available to a fund like AVUV in New Zealand or whatever jurisdiction somebody else might be in? I think there is a small cap blend fund that's available, which would help a little, although I wouldn't allocate too much to that because of the small cap growth component in it. What you are really interested in here is finding things that are really value tilted. And even if it's a mid-cap value or a large cap value or a total value, I think that would be kind of your best choice in circumstances like this. And yeah, you can also look at some of these resources and infrastructure funds or global REITs, but they're really not going to be the same as just a straight value tilt. Again, what I would probably do is model similar funds in test folio that are US-based funds, and then ask an artificial intelligence to find you corresponding funds that are available in your jurisdiction. At least that's a process I would undergo to figure this out. I did run a quick search for Australian-based value tilted funds, or small cap value tilted funds. And it gave me RQI Australian Small Cap Value, Dimensional Australian Small Company Trust, Investors Mutual Limited Small Cap Fund, Maple Brown Abbott Forager Funds, Thorny Opportunities Limited, TOP West Oz. And then it also mentioned a Van Ack Australian Equal Weight ETF. I did not go further than that, but those would be the kind of things I would be investigating, both for cost and then what is actually in them and where they would fall in the style boxes in terms of being value tilted. But those are some ideas and hopefully a process you can go through to find a few things that'll fill these holes in the portfolio. And I'm sorry I couldn't be more definitive than that. But hopefully it'll help. Even a little bit. And thank you for your email.

Market Snapshot And Core Portfolios

Mostly Uncle Frank [27:04]

And the extremely fun thing we get to now is our weekly portfolio reviews of the eight sample portfolios you can find at www.riskpartyrade.com on the portfolios page. As I mentioned before, it was a pretty happy week last week for no particular reason. But that's the way things work. So looking at the markets, the SP 500 represented by VOO is now up 14.02% for the year so far. The Nasdaq 100 represented by QQQ is up 17.97% for the year so far. Small cap value continues to lead the way, at least amongst the equities. Representative fund VIOV is now up 23.23% for the year so far.

Voices [27:52]

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

Mostly Uncle Frank [27:56]

Gold, as I mentioned, made a big recovery. It was down considerably, well, more than 6%. Representative fund GLDM is now up 0.68% for the year so far. Long-term treasury bonds represented by the fund VGLT are now the laggard for the year. They are down 2.29% for the year so far. REITs, represented by the fund REET, are up 14.51% for the year. Commodities, represented by the fund PDBC, are up 30.19% for the year. Preferred shares represented by the fund PFFV are up 3.31%. And managed futures are still managing to do just fine. Representative fund DBMF is up 11.22% for the year so far. Moving to these portfolios. First one's the all seasons. This is a reference portfolio. We keep around for reference. It's only 30% in stocks and a total stock market fund, 55% in intermediate and long-term treasury bonds, and the remaining 15% in golden commodities. It's up 1.99% for the month of August already. It's up 5.63% year to date, and up 30.21% since inception in July 2020. Moving these kind of bread and butter 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 up 2.93% for the month of August so far. It's up 7.52% year to date, and up 71.55% since inception in July 2020. And I did it again like I did last week. We are modifying this golden butterfly on a reverse glide path. So the allocation to the total stock market fund and small cap value fund are now 20.5%, and the allocation to short-term treasury bonds is now 19%. So there.

Voices [29:52]

Looks like a medieval warrior.

Mostly Uncle Frank [29:54]

Next one's golden ratio. This one is 42% in stocks divided into a total stock market fund and a small cap value fund. 26% in long-term treasury bonds, 16% in gold, 10% in managed futures, and 6% in cash in a money market fund. It's up 2.97% for the month of August. It's up 7.72% year to date, and up 66.33% since inception in July 2020. Next one's the Risk Parity Ultimate, kind of the kitchen sink portfolio here. I'm not going to go through all 12 of these funds. It's up 2.99% for the month of August so far. It's up 7.71% year to date. And up 50.52% since inception in July 2020. Now moving to these experimental portfolios.

Leveraged Experiments And Return Stacking

Voices [30:41]

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

Mostly Uncle Frank [30:48]

These all involve leverage funds, so don't try this at home.

Voices [30:52]

You have a gambling problem.

Mostly Uncle Frank [30:55]

First one's the accelerated permanent portfolio. This one's 27.5% in TMF, a levered bond fund. 25% in UPRO, a levered stock fund. 25% in PFFV, a preferred shares fund, and 22.5% in gold, GLDM. It's up 5.39% for the month of August. It's up 6.68% year-to-date and up 31.08% since inception in July 2020. Next one's the Aggressive 5050. This is our most levered and least diversified of these portfolios. And worst performer by far. It is one-third in a levered stock fund, UPRO, one-third in TMF, a levered bond fund, a remaining third in ballast in a preferred shares fund and an intermediate treasury bond fund. It's up 5.04% for the month of August. It's up 7.36% year to date, and up 5.53% since inception in July 2020. Next one's a levered golden ratio. This one's a year younger than the first six. It is 35% in NTSX, that's a composite. S P 500 in Treasury Bond Fund levered up 1.5 to 1. 15% in AVDV, that's an international small cap value fund. 20% in gold, GLDM, 10% in KMLM, it's a managed futures fund. 10% in TMF, a levered bond fund, and the remaining 10% in UDOW and UTSL, levered funds that follow the Dow and a Utilities Index. It's up 3.7% for the month of August. It's up 8.65% year to date, and up 30.23% since inception in July 2021. And now moving to our last portfolio and newest one, the Opter Portfolio. One portfolio to rule them all. It's a return stacked portfolio. And it is ruling them all, by the way. It is 16% in UPRO, that's the Levered S P 500 fund. 24% in AVGV, which is a worldwide value tilted fund. It's a fund of funds. 24% in GOVZ, it's a Treasury strips fund, the remaining 36% in managed futures and a gold fund. It's up 4.52% for the month of August so far. It's up 13.19% year to date, and up forty six point zero five percent since inception in July 2024. And that concludes our portfolio reviews.

Voices [33:24]

Well the Frickin' Die!

Mostly Uncle Frank [33:28]

It's a much better August than June and July. Which is usually the opposite of the way it is. Usually things start to get worse in August, but that's why we don't try to market time things.

Wrap Up Listener Requests And Reviews

Mostly Uncle Frank [33:46]

But now I see our signal is beginning to fade. If you have comments or questions for me, please send them to Frank at RiskPardyRear.com. Then email us frank at riskperdira.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 haven't had a chance to do it, please go to your favorite podcast provider and like subscribe and 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.

Voices [34:19]

Signing off the wind gun down.

Disclaimer And Sign Off

Mostly Queen Mary [35:15]

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.