Welcome And Foundational Episodes

Voices [0:00]

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

Mostly Queen Mary [0:18]

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

Mostly Uncle Frank [0:36]

Thank you, Mary, and welcome to Risk Parity Radio. If you are new here and wonder what we are talking about, you may wish to go back and listen to some of the foundational episodes for this program. And the basic foundational episodes are episodes one, three, five, seven, and nine. 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.riskparty radio.com. Inconceivable! And all thanks to our friend Luke, our volunteer in Quebec. Sacker. We'd be helpless without him.

Voices [1:35]

I have always depended on the kindness of strangers.

Mostly Uncle Frank [1:41]

Because other than him, it's just me and Marion here. I'll give you the moon, 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 [1:52]

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

Mostly Uncle Frank [1:55]

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

Voices [2:03]

Top drawer. Really top drawer.

Mostly Uncle Frank [2:07]

Along with a host named after a hot dog.

Voices [2:10]

Light in the French. Here I go once again.

Mostly Uncle Frank [2:31]

And first off.

Charity Campaign And Listener Email Priority

Mostly Uncle Frank [2:34]

First off, we have an email from Geraldo.

Voices [2:37]

Top drawer. Really top drawer.

Mostly Uncle Frank [2:41]

And Geraldo rates.

Mostly Queen Mary [2:44]

Hi, Frank and Mary. I hope you are both doing well. I want to thank you again for all you do, and sorry for the loss of your mother. Even though she was up there in age, it is still painful to lose your mother. Mine passed away last year, and I miss her every day. We sold our home in Florida and decided to go on a road trip up the East Coast. Next time we're in town, we'll let you know in advance to see if you and Mary would be open to going to lunch with us.

Voices [3:44]

What's the answer, Mr. Sacred Geometry? Sacred Geometry. The Golden Ratio. The Golden Ratio.

Mostly Queen Mary [3:55]

We have most of the money from the sale of our home in cash since the market has been too high to buy. Do you think it's worth buying treasuries now that the bond market is going crazy? Thanks again for sharing your valuable time and experience with us. We just made a $1,000 donation for the top of the t-shirt campaign.

Voices [4:15]

Yes!

Mostly Queen Mary [4:16]

Hopefully it's not too late. We would have done it sooner, but we were preparing for our trip to the Dominican Republic where we are today. Heraldo.

Mostly Uncle Frank [4:46]

As most of you know, we don't have any sponsors on this program. We do have a couple of charities we support, the Father McKenna Center and Fairfax Casa. And we are wrapping up the Top of the T-shirt campaign. And we're doing it in style because it looks like we're going to push over $80,000 in donations. And a lot of that is just due to latecomers such as yourself in the past week. 100 pot los on the newcomers. 400 pot loss against the newcomers.

Voices [5:14]

200 what lose against.

Mostly Uncle Frank [5:17]

Because we accept donations all year round. And they are very welcome. 500 for the newcomers.

Voices [5:26]

Contest by multiple elimination.

Mostly Uncle Frank [5:28]

You are one of our very special donors in that you've been down to the center and done a little volunteering down there. Dennis remembers you and thanks you again for all of your support. At this time of year, we're getting in our new year-long volunteers. We have two of them from the Jesuit Volunteer Corps, Joanna and Allie, who will be working with us to man our food pantry and our volunteer coordination for the next year.

Voices [5:56]

Oh, I get it. Let me try.

Mostly Uncle Frank [5:59]

Mary was also in the Jesuit Volunteer Corps when she got out of college, and so we are always predisposed to such volunteering. She says, make sure they have a Moosewood cookbook, because that is what the Jesuit Volunteer Corps uses to make their meals, which they need to do on a budget. Because they all live in a little group home together and work together while they do their volunteering for a year or two at organizations like the Father McKenna Center. And that's really how we operate. Most of our labor is provided on an unpaid basis. We have lots of human leverage going on down there. But as always, if you are a donor to the Father McKenna Center or to Fairfax Casa, you get to go to the front of the email line as all of our emailers have done today. Just make sure you mention it in your email so we can duly move you to the front of the line. Thank you also for your condolences on my mother's passing. I am pleased to report that my father does seem to be adapting, as well as a 97-year-old man in assisted living can do.

Voices [7:08]

Why I go in and out of coma is all the French toast, please.

Mostly Uncle Frank [7:16]

I know he's doing well because they caught him trying to feed blueberries to somebody who's on a liquid diet and should not be eating blueberries. And when my father is off breaking rules, you know that he's in good spirits. Seems to be a family trait, I guess.

Voices [7:39]

Breaking the law, breaking the law. Breaking the law, breaking the law. Breaking the law, breaking the law.

Reinvesting Cash And Treasury Fears

Mostly Uncle Frank [7:49]

But getting to your question, the answer is yes, you do need to get your cash reinvested. It can't be sitting around forever. But on the other hand, it doesn't need to be done all at once if you're uncomfortable with that. Just make sure you have some kind of a schedule to get your investments where they need to be. Although there's lots of news about all this turmoil in the bond market, if you do look at the performance of long-term treasury bonds this year, they're down like 2%, so that's not very tumultuous in the grand scheme of things.

Voices [8:21]

Forget about it.

Mostly Uncle Frank [8:23]

So what I would do is just write this down on a calendar that you're going to make certain investments on certain dates or at certain times, and then just execute on it because whether you do it today or this year or next year is probably not going to matter in 15 or 20 years. And that is the time frame we're really talking about here. It's just as long as it gets done and it's not sitting around in cash for years on end. We'll actually have the same issue coming up for us since we are selling the house that we own that my parents formerly occupied. And that's gonna go through early next year, I think, and then we'll be faced with a pile of cash and what to do with it.

Voices [9:01]

It's time for the grand unveiling of money.

Mostly Uncle Frank [9:05]

And I think we'll probably just keep the spending money and cash and spend it, and then invest the rest of it along with our other investments. So don't mind the Wrath of God type stuff in the news.

Voices [9:18]

Real Wrath of God type stuff.

Mostly Uncle Frank [9:20]

That's what they do. That's how they attract their clicks and eyeballs there.

Voices [9:24]

Fire and brimstone coming down from the skies, rivers and seas boiling. Forty years of darkness, earthquakes, volcanoes, the dead rising from the grave, human sacrifice, dogs and cats living together, mass hysteria.

Mostly Uncle Frank [9:36]

But don't beat yourself up if you don't have it all invested in some short period of time, because that's really not that necessary either. Hopefully we will see you someday and have a meal together.

Voices [9:49]

Today we have four appetizers, excuse me. Uh Moul Marinière, pate de Froigois, Baluga Caviar, eggs benedictine, tate de poireux, it's liquet, frog's legs amandine, or oeuf decaille Richard Shepherd. Little quail's eggs and a bed of pureed mushroom. It's very delicate, very subtle. A wise choice, monsieur. And now, how would you like it served? All uh mixed up together in a bucket? Yeah, with eggs on top. But of course, avec des oeuf fruit. Don't skip on a pad, eh? Oh, monsieur, I assure you, just because it is mixed up with other things, we would not dream of giving you less than the full amount. In fact, I will personally make sure you have a double helping.

Mostly Uncle Frank [10:37]

In the meantime, enjoy your time in the Dominican Republic. Thank you for being a donor to the Father McKinnon Center and for being a volunteer at the Father McKinnon Center. And thank you for your email.

Using SBLOC Or Margin For Liquidity

Mostly Uncle Frank [11:06]

Second off, we have an email from Mark.

Voices [11:11]

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

Mostly Uncle Frank [11:19]

And Mark writes.

Mostly Queen Mary [11:20]

Hello, Brother Frank and Sister Mary, longtime listener, one-time contributor, and a recurring donor through our donor advice fund to both the Father McKenna Center and Fairfax Casa.

Voices [11:32]

Yeah, baby, yeah!

Mostly Queen Mary [11:34]

A couple of items, one very focused, the other ponderous. I am grateful to Optimus Bill and to you for bringing securities back line of credit S block loans onto my radar.

Voices [11:47]

I am Optimus Bill.

Mostly Queen Mary [11:50]

Especially after a few unexpected big ticket expenses several years ago. Two new used cars, French drains to protect our home from future floods, and a new driveway after flood damage in 2022, we have been keeping $150,000 to $200,000 in a municipal bond fund in our brokerage account as an emergency fund for the unknown unknowns. It has always seemed like an unwelcome drag on the brokerage account when we use it so infrequently. After your recent episode, episode 532, I see options that would let me put these funds to work. I spoke with Fidelity this past week about an S Block. Important points to note that steered me to a margin count instead. Setting up an S block would eliminate our ability to pay bills online through our brokerage account. Setting up an S Block would invalidate our debit card. Setting up an S B block would eliminate our easy online contributions to our donor-advised fund. We would instead need to contact an agent at Fidelity to initiate the process. We have instead opted for a future margin loan to address unexpected big ticket cash flow needs at just over 5.5% interest should it be needed. This allows us to keep far less cash or easily accessible bonds while having access to the margin loan for large, lumpy, unanticipated expenses at a very reasonable borrowing rate. We few. And this brings me back to St. Dolly, who showed us all how to live our best lives by giving our abundance back to those in need.

Voices [14:09]

I'll be everywhere, wherever you can look. Wherever there's a fight so hungry people can eat, I'll be there. I'll be in the way guys yell when they're mad. I'll be in the way kids laugh when they're hungry and they know supper is ready. I'll be there too. I don't understand it, Dolly. Me neither, Mom, but just something I've been thinking about.

Mostly Queen Mary [14:44]

St. Dolly, pray for us. Thanks to you both and to this community for all that it does.

Voices [14:53]

When I'm dead and in my casket.

Mostly Uncle Frank [15:26]

And I agree with you that we should be grateful to Optimus Bill, even though he's very long-winded. He does make substantial contributions to this podcast and asks good questions that are relevant to a lot of people, particularly as they get into their retirement years.

Mostly Queen Mary [15:44]

This whole thing is nonsense.

Why Brokerage Collateral Beats HELOC Risk

Mostly Uncle Frank [15:46]

And I think just about anybody with a substantially sized brokerage account would be wise to look into S blocks or margin accounts. Not because they intend to actually use them, but simply as a backstop and a source of liquidity if it ever becomes necessary. Because just knowing it's there does make it a whole lot easier not to be rolling around in giant piles of cash and ladders, buckets, and flower pots that nobody really needs.

Voices [16:16]

Forget about it.

Mostly Uncle Frank [16:18]

And I would think of them as just like having a HELOC, except I think actually the S block and the margin account are going to be more accessible than a HELOC might be in a real bad downturn like we saw in 2008. I still remember a lot of horror stories for people who essentially had their HELOCs canceled when the property values in their area fell substantially. And that's not going to happen to you if you have a lot of collateral in the form of a significantly sized brokerage account. I suppose I should mention that the episode that Mark is referring to is episode 532, when we're talking about the S blocks and margin accounts. If you want to go check that out again. But I'm glad you're able to pick up that idea and run with it, because I do think it will help you sleep a little better at night.

Voices [17:16]

It's early mid-afternoon, huh? Well, I took the liberty of putting away something in your tea. What are you talking about? I'm putting you to sleep! You are fooled! Is there an antidote? Of course there is. Right here. But it'll cost you a guinea.

Mostly Uncle Frank [17:34]

And we've had our margin account for, I want to say 13 years now. And made good use of it from time to time for sure. Now getting to your second topic, yeah, I am really grateful and surprised, and just really happy about the way this podcast has evolved, both in terms of helping me and Mary support our charities and just the kind of little community we've formed here. Fredo. You're my older brother, and I love you.

Voices [18:09]

But don't ever take sides with anyone against the family again. Ever.

Mostly Uncle Frank [18:15]

We are small but mighty, as long as we don't take ourselves too seriously.

Voices [18:20]

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

Mostly Uncle Frank [18:26]

And I've just been amazed by the quality of people I've met through this podcast and all of the good work that they want to do and their general approaches towards life. And when I say we have the finest podcast audience available, I really do mean that.

Saint Dolly And The Generosity Model

Mostly Uncle Frank [18:48]

And now let's talk a little bit about Saint Dolly. Since she really did walk that walk and talk that talk, I've often talked about having good stories to follow, good personal narratives. And part of that is picking good role models and people that we can actually emulate. And oftentimes with somebody so famous and so talented like Dolly Parton, there are parts of her life that we can emulate and parts that we can't. And I think just knowing what the difference of those two things is is often important as well. Because obviously she was ridiculously talented in terms of being a songwriter and performer, and she wrote literally thousands of songs, but she also had an incredible talent for business and business acumen that I don't think most of us can emulate either. I think the story of how she turned down Elvis really makes the point that Elvis wanted to record I Will Always Love You. And I think at the time, Elvis, of course, was Elvis, the biggest performer in the business, and Dolly Parton was just somebody really getting her start on the Porter Wagner show and building from there. So he thought he was doing her a favor by taking on her song, and of course, he wanted song rights for the song, in addition to being able to perform it. But Dolly kept all of the songwriting credit and all the revenues from that, which most performers and songwriters just don't have the wherewithal and business acumen to be able to do. And I doubt I would have made that choice also in her shoes, given the opportunity at the time. So I don't think that's something that most of us can emulate either. But what we can emulate was what ultimately is why everybody loves her so much, which was her generosity. Which began with her family but spread far and wide, both to scholarships and buying books for kids, and then even to funding vaccine research.

Voices [21:30]

And I wanted to tell everybody, I think you should get out there and do it too. I haven't changed one of my songs to fit the occasion. It goes vaccine, vaccine, vaccine, vaccine. I'm begging of you, please don't hesitate. Vaccine, vaccine, vaccine, vaccine. I know I'm trying to be funny now, but I'm dead serious about the vaccine.

Mostly Uncle Frank [22:00]

I think that is something that most of us here, at least anybody that's achieved some financial success, can emulate and can use in their real life. And you'll see what kind of impact it has on other people, and then what people think of Dolly Parton. Because there are other great songwriters and business people, but I don't think anybody's gonna remember Bob Dylan in the same way that they remember Dolly Parton.

Voices [22:24]

I came in from the wilderness, a creature void of form. Come in, she said, I'll give you shelter from the star.

Mostly Uncle Frank [22:43]

And that has a lot to do with what you do with your wealth and resources once you have it. And I should say she's not only generous with her money, but also generous with her spirit, generous with providing other people with opportunities. And generous in just about any other way you can think of somebody being generous.

Voices [23:02]

In every way that a person can be saved.

Mostly Uncle Frank [23:07]

And there's really nothing stopping us from emulating that, other than just getting out of our own way in terms of whatever fears or hang-ups or other problems that we've invented in our head that is preventing us from going forth and emulating Dolly Parton as best we can.

Voices [23:27]

No one can stop me.

Mostly Uncle Frank [23:30]

And if we can keep a little bit of that spirit here and encourage it, I am all for it.

Voices [23:39]

Emotions running high, yes.

Mostly Uncle Frank [23:41]

So thank you and the other listeners for making this community what it is. What it has become and what it hopefully is becoming. So I'm glad we're able to help you. Thank you for being a donor to the Father McKenna Center. And thank you for your email.

Voices [24:14]

Saying something about me.

Variable Retirement Spending With The 95% Rule

Mostly Uncle Frank [25:17]

And Zach writes.

Mostly Queen Mary [25:19]

Hi, Frank and Mary. Hope you both are well. I've been researching retirement withdrawal strategies, and I'm currently planning to implement a golden ratio style portfolio.

Voices [25:30]

A number so perfect, perfect. We find it everywhere, everywhere.

Mostly Queen Mary [25:36]

I'd like to be able to spend more when and if the portfolio does well while minimizing sharp cuts in the bad years, especially since the golden ratio shouldn't stay down for many years based on past results. In researching, I came across the Bob Clyatt 95% rule. I know you're familiar, but just to make sure I have it right, you pick an initial withdrawal rate as a percentage for year one. In year two, if your portfolio goes up, you continue to withdraw that percentage. If your portfolio goes down, you only take a maximum of 5% pay cut, hence the 95% rule in any year. This allows you to both capture the upside of growth with more spending while not overreacting to negative years. My question comes to picking the initial withdrawal rate. Is there a site that would allow you to model this withdrawal strategy with a golden ratio portfolio? If not, do you have some guidance for picking an initial withdrawal rate? It seems like it would be higher than the safe withdrawal rate since this has a reduction mechanism and doesn't take the inflation adjustments, but I have no idea how to quantify that. Thank you both, and I will be praying for your family with your recent loss.

Mostly Uncle Frank [26:59]

Well, Zach, thank you for being a donor to Fairfax Casa. It has also moved you to the front of the email line. I guess you're a donor to both Fairfax Casa and the Father McKenna Center. I'd move you to the front twice, but this would get kind of repetitive.

Voices [27:18]

Idiot.

Modeling Withdrawals With Portfolio Charts

Mostly Uncle Frank [27:19]

So the good news is I do have a straight and clean answer for you that if you go over to portfolio charts, there is a retirement spending calculator where you can model things like the Bob Clyot 95% rule, or the Kitsis Ratchet, or many other variable withdrawal strategies, and you can put in whatever portfolio you want into there, including a golden ratio kind of portfolio. And even if you look in the notes for the calculator, it tells you exactly how to model the Bob Clyatt strategy.

Voices [27:57]

That is the straight stuff, oh funkmaster.

Mostly Uncle Frank [28:01]

Now I will say in practice, I tend to use the concept of a variable withdrawal strategy as kind of a buffer, if you will. And if you look at the last Morningstar report, which I can link to again, I think in the show notes, I'm talking about the state of retirement spending that they now do every year. They have a nice section in there about various kinds of variable withdrawal strategies. And the truth is all of them tend to improve the baseline safe withdrawal rate. And they all seem to improve the safe withdrawal rate in kind of a similar manner, no matter what kind of retirement portfolio you're talking about, as long as it's kind of similarly situated to those kinds of portfolios that Bangin said are the best ones, which are ones with 40% ish to 70% ish in stocks in them. When you get to retirement in practice, you'll find that your spending just isn't all that rigid, that there is a rigid portion, which is the mandatory spending, which for us we try to keep at 3% or less of the spending. But the remaining 2% that we assign to this often varies essentially between like 1% more than the mandatory or 3% more than the mandatory, depending on what's going on that year. You should also recognize that the easiest variable withdrawal strategy is simply to use what they call actual spending, because actual spending for most retirees is one to two percent less than the CPI in terms of inflation. And that by itself will raise the safe withdrawal rate from between 0.5% and 1%. So even if you're just doing something like that and don't have a more formal system like this Bob Clyot system or a Kitsis Ratchet or Guide and Klinger guardrails, you will still benefit from just having some flexibility or variability in your withdrawals. So for us, that means we're basically comfortable with spending six percent in any given year without thinking too much about it. Because when we look at our expenses and see that a lot of that is on variable stuff that is not likely to reoccur, like a giant vacation or a renovation or something like that, you realize you're gonna be just fine. But I do think that calculator, that retirement spending calculator is something that is very useful to play around with to get you a feel for what these various variable withdrawal strategies do, because it tells you how to do multiple ones there using these little sliders and things. So I would definitely go play around with that. And I will link to it in the show notes. 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.

Closing Thanks And How To Reach Us

Mostly Uncle Frank [30:50]

But now I see our signal is beginning to fade. If you have comments or questions for me, please send them to Frank at RiskPartyRadario.com at email us frank at riskpartyraer.com. Or you can go to the website www.riskpartyradio.com, put your message into the contact form, and I'll get it that way. If you have any chance to do it, please go to your favorite podcast provider and like, subscribe, 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 Party Radio signing off.

Mostly Queen Mary [33:11]

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.