Welcome And Episode Setup

Voices [0:10]

If a band is not keeping pace in his companion, perhaps it is because he hears a different drummer. A different drummer.

Mostly Queen Mary [0:19]

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

Mostly Uncle Frank [0:36]

Thank you, Mary, and welcome to Risk Parity Radio. If you are new here and wonder what we are talking about, you may wish to go back and listen to some of the foundational episodes for this program. And the basic foundational episodes are episodes 1, 3, 5, 7, and 9. Yes, it is still in my memory banks. We have also created an additional resource, a collection of additional foundational episodes and other popular episodes.

Voices [1:07]

We have top men working on it right now.

Mostly Uncle Frank [1:14]

Top men. And you can find those on the episode guide page at www.riskparody radio.com. Inconceivable. All thanks to our friend Luke, our volunteer in Quebec. Zach Gosh. 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, 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 [2:05]

Really top drawer.

Mostly Uncle Frank [2:07]

Along with a host named after a hot dog.

Voices [2:10]

Light in the Francis.

Mostly Uncle Frank [2:13]

But now onward, episode 548. Today in Risk Perty Radio, we're going to take a little detour from what we usually do around here and do a follow-up episode to what we started talking about in episode 532. And this concerns the blog known as Early Retirement Now and the author of that blog. I had been asked by a number of listeners to address two blog posts that were made there at the end of July. One is called Can We Increase the Safe Withdrawal Rate with Risk Parity? And the other one is called How to Lie with Personal Finance Part 4. And what I noted in episode 532 is that over the past several years this blog has become increasingly sensational and inflammatory with a lot of diatribes against various people, of which I am only one. So you may want to go back and listen to that if you hadn't before. And there is also a video attached in the show notes that you may want to take a look at as well. I will relink to that here

Why Early Retirement Now Matters

Mostly Uncle Frank [3:20]

as we go forward. But before we get to the blog posts themselves, I think we need to put this in context so that you can understand the history I have with this blog and this particular author and the analysis that he had previously done, because that's also very important for this discussion. So the Early Retirement Now blog first appeared in about 2016. It was one of many early retirement blogs that were appearing around that time. And like most of them, it was about that particular author's path to financial independence and how they achieved it. So I read that and many others that were appearing at the time. The strategy that the author used to achieve financial independence was a form of geo arbitrage. So he had been working for a bank in the Bay Area, making a large salary and spending a lot of money, relatively speaking. So what he did to achieve financial independence was move. He retired from the bank, left the Bay Area, went to a much lower cost of living area in Washington State, and essentially downsized his family's lifestyle. So they were spending a whole lot less money, something like half of what they used to spend. And I recall him reducing his total expenses to somewhere between $80,000 and $100,000 annually, which sounds like a lot, but it's not a lot if you'd been living as a banker or a lawyer in a major metropolitan area. So it's a similar idea to the Frugalwoods blog, if you're familiar with that. So while I found that interesting, like most people, I found that strategy to be kind of unattractive, both from having to move and from a perspective of having to downsize or downscale our lifestyle. But what was more interesting and applicable to us was the fact that he had constructed a calculator, which he called the toolbox, built on spreadsheets for doing analysis of portfolios with a large data set. So I had already been using the data sets at Portfolio Visualizer and at Portfolio Charts to do various analyses, but having this third calculator, if you will, allowed me to confirm what I was finding from those other sources. So I took advantage of the tool and some of the analyses that he had published using the tool, including safe withdrawal rate series number thirty-four, which showed that adding gold to a portfolio tended to increase the safe withdrawal rate of the portfolio. We talked about that many times in the past. But I really didn't have any particular contact with this particular author. I did meet him once in 2019 at the FinCon Convention, which was being held in Washington, DC, which convinced me that I did not want to go to any more FinCon conventions. But I did meet a few interesting people there and some who have now become close friends, such as our friend Optimus Bill. Anyway, the next time I had any contact with this author was in 2022. And in 2022, specifically at the end of September, the beginning of October 2022, he asked to appear on this podcast to talk about safe withdrawal rates and other things. Then I told him, well, we don't have any guests on this podcast, so that's not gonna happen. But I did offer to have a Zoom call with him to talk about whatever he wanted to talk about. And so we did have that call on, I believe, October 10th, if my email serves me here, October 10th, 2022. Or it might have been October 9th. And the outcomes or outputs from that, I then recorded in episode 223, if you're interested in listening to that. But one of the things I asked him to do that day, or on October 10th, 2022, was to use his calculator to analyze a risk parity style portfolio that I gave him. And I made it a essentially a simplified version of a golden ratio kind of portfolio where I moved the 10% in alternatives into stocks and included the 6% cash in with the bonds. So the portfolio I gave him to analyze was 27.5% S P 500, 27.5% small cap value. And I asked him to do 15% each in long-term treasuries, short-term treasuries, and gold. Now he said he couldn't do that at the time because he did not have loaded up the long-term treasury data in the calculator at that time. So what we agreed to do is just instead of having long and short-term treasuries, we just did 30% intermediate treasury bonds. And I wanted him to set it up because there are some quirks with the early retirement now toolbox where in order to model size factor and value factor, you have to put in percentages. And I wanted to make sure we were using the right percentages for what we were trying to analyze. So I just asked him to tell me what were the right percentages for this. And he said the way to model that would be 30% FAMA French SMB factor and 27.5% HML factor. And those are in the toolbox spreadsheet under the FAMA French factors. So he ran the analysis himself and sent it back to me with a link to a Google spreadsheet, which I saved and I still have. And his comments on the output were quote, very impressive performance over the bear market since 1929. This is over 30 years with capital depletion as the objective. And he provided the fail-safe around the five prominent market peaks, which is basically when the CAPE ratio is high, and then the fail-safe by decade in terms of percentages. And he says even if you switch off the FAMA French factors, you still get a safe withdrawal rate of more than 4%. So that was his analysis at the time. That is what he said about a risk parity style portfolio at that time in October of 2022. So then I went ahead and compared that output with his preferred portfolio, which is a 75-25 portfolio, SP 500 and intermediate treasury bonds. And he claims that is the best portfolio anyone could ever hold in retirement for a high safe withdrawal rate. And so anything better than that must be better than the best. So I've taken those two printouts from the early retirement now analysis that the author did himself, and I'll attach those in the show notes and you can look at those. And then I've also attested a summary video and a summary slide presentation so you can compare the risk parity style portfolio with the 7525 portfolio according to the author of the blog using his own tool. I didn't do any of this. It's all him. If this were a championship game, a high school championship game in football or soccer, we would say that it was played on his field with his rules, he was the referee, he was the scorekeeper. All I did was show up with a team to play the home team, which is the 75-25 portfolio. So what were those results? I'll summarize them briefly for you here, but I do invite you to go look at these yourself. So the safe withdrawal rate for the 7525 portfolio, based on this analysis, is 3.84%

The 2022 Toolbox Backtest Results

Mostly Uncle Frank [10:51]

based on its performance in the 1920s. The safe withdrawal rate for the risk parity style portfolio is 4.91%. So basically 25% better than what is supposed to be the best portfolio for safe withdrawal rates. But you can learn a lot more from this by analyzing what you might call the box score, because this also breaks it down by decade. So for the 1920s, the 75-25 safe withdrawal rate is 3.84%. For the risk parity style portfolio, it's 6.16%, so 232 basis points better. For the 1930s, it's 4.91% versus 4.35%, so 56 basis points better. And that is true for almost every decade. The risk parity style portfolio wins in the 20s, the 30s, the 50s, the 60s, the 70s, the 90s, and the 2000s. And the safe withdrawal rates in all of these decades are well over 5%, except for the 1930s, where it's 4.91%. Now, when does the 75-25 portfolio do better? It does better if you start your safe withdrawal rate in the 1940s or in the 1980s. And so in the 1940s, 7525 safe withdrawal rate is 5.98% versus the risk parity style portfolio safe withdrawal rate of 5.32%. And in the 1980s, it is 7.21% for the 75-25 and 7.11% for the risk parity style portfolio. Now, obviously, those are very high withdrawal rates, and what it really is showing you is that in many of these decades, particularly in decades where the stock market is performing very well, which we know in hindsight, which included the 1940s and the 1980s, those are where the 7525 portfolio does better. But in all the other cases, in the average cases and in the worst cases, in the 30s, the 70s, and the 2000s, the risk party-style portfolio does way better, a lot better. And it's not even close. So if you're looking for the worst case scenario analysis, which is what we are measuring here, we're not measuring total returns. That would be a different goalpost. The goalpost that we are using here is a safe withdrawal rate. The risk parity style portfolio is head and shoulders above the 7025 portfolio, according to the analysis of the toolbox at early retirement now. Using the actual data and not data that somebody made up or manipulated. So, what else can we learn from this analysis by looking at these kind of box scores, if you will? What we can also learn is which of these portfolios does better in circumstances where we know historically the market was at or near an all-time high and CAPE ratios were high by definition. And that is provided in this data output fail-safe around five prominent market peaks. And what we learn from that is that a risk parity style portfolio does exceptionally well at those points in time. So for the 1929 peak, risk parity style portfolio wins 6.16% to 3.84% for the 75-25. If you started your retirement in the 1960s, safe withdrawal rate for risk parity style portfolio is 5.43% versus 3.82% for the 75-25. If you started in 1972, 1973, risk parity style portfolio safe withdrawal rate of 6.84% versus 4.31% for the 75-25. If you started your retirement in 1999 to 2000, risk parity style portfolio safe withdrawal rate of 6.64% versus 4.3% for the 7525. And then looking at the last one, this is the only one where 7525 wins. If you started your retirement in 2008, then we have 5.45% for the risk parity style portfolio and 5.6% for the 75-25, mostly owing to the great performance we've had in the markets over the past 16 years. So the executive synthesis of that from the slide presentation states that risk parity fundamentally alters the sequence of returns risk profile. By integrating factor tilts and gold, it dramatically raises the floor of safe withdrawal rates during historical worst-case scenarios while sacrificing only marginal upside during historical full runs. And the difference is 177 basis points. 6.1 versus 4.33. So what that's really telling you is you don't have a problem with high valuations or cape ratios or anything like that if you are using a well-diversified portfolio that is not overweighted to these large cap and large cap growth stocks. That's what that's telling you. And here's the final verdict on structural takeaways from the analysis and the slide presentation. First point, the 4% rule is vulnerable. For a pure 75-25 portfolio retiring at historical market peaks, a 4% withdrawal rate fails. Sub-4% fail-safes were recorded in both 1929 and 1964. Next point, the 5.4% universal floor for risk parity. Across 90 plus years of extreme market history, spanning depressions, world wars, and stagflation, risk parity never produced a fail-safe withdrawal rate below 5.32%. And the final point, structural diversification dictates sequence risk. Asset class diversification combined with internal equity factor tilts proves systematically superior to a binary stock bond allocation during catastrophic macroeconomic shocks. Now, just as an aside, I also asked him to run the same analysis, but change the rate of inflation instead of using the CPI to use CPI minus one, which is actual experienced inflation for an average retiree. And when he did that on the risk parity style portfolio, you got a safe withdrawal rate overall of 5.43%. And for most decades, it was well over six and often over 7%. For high CAPE ratio periods, it was 6.79% if you retired in 1929, 5.98% if you retired in 64 to 69%, 7.49% if you retired in 72-73%, 7.4% if you retired in 1999 to 2000, and 6.13% if you retired in 2008 or 2009. So if he wanted to write up an analysis of risk parity style portfolios and compare them, he could have done it right then and there in October of 2022, using the analysis that he had just done. And he could have done more analyses for the whole range of risk parity style portfolios that we might use for retirement purposes. Because recall, we're not just talking about any risk parity style portfolio you can construct, but one that falls within the parameters that we talk about around here ad nauseum and that have been written up in Paula Pant's blueprint and are well known to everybody that listens to this podcast. But the author of that blog did not do that, and in fact, ever since then he's been trying to suppress that. And the way he's tried to suppress that is by lying about what we're actually doing over here, misrepresenting that, making up data that doesn't exist, putting his big thumb on the scale, and then also denigrating and trying to defame us. Because what he has posted is legally defamatory. It's that bad. And it's become kind of an obsession of his. The last time I ran into him in person was at the Economy Conference in the spring of 2025. I made a presentation where I talked about some of these findings, re-ran them in his calculator, and in the portfolio charts calculator, and in portfolio visualizer because you're going to get the same kind of results in all the calculators. That's how you know you're on the right track. And he actually tried to heckle me during my presentation at Economy, believe it or not. There are plenty of witnesses to that incident. But I'll also link to that presentation in the show notes. I've posted it before. A lot of this behavior reminds me of somebody who lost a championship at some point in their past and has been Monday morning quarterbacking it ever since. Basically saying, Well, we would have won if my players would have been faster, or if

Sequence Risk And The Real Goalposts

Mostly Uncle Frank [19:40]

your players weren't so good, or if we performed like we did in this one part of the game and not the whole game. Or if we weren't playing for high safe withdrawal rate and we were playing for something else, like high overall returns over time. And that's generally true of everything. If you assume the facts of something are different, you can get different outcomes. But those aren't real outcomes. Those are just things you made up or that you're hoping will be true at some point. But what it leads to is a lot of fallacies that are known as straw man arguments, where you misrepresent what the other side is doing, and goalpost shifting arguments, where you might change the dates of when things are being played, you might change what you're trying to measure, you might apply a harsh standard to your opponent's team and an easier standard to your team. So what kind of people do things like that? What kind of people present that way? Well, if you know anything about rhetoric or fallacies or have studied that, you know that these people are called biased skeptics. That is a technical term. A biased skeptic. Now, what is a bias skeptic? Well, you can ask your favorite artificial intelligence, and it will give you an answer like this. It's not controversial as to what these are. Here's the definition. A bias skeptic is someone who claims to evaluate claims objectively using critical thinking and doubt, but selectively applies their scrutiny to serve a predetermined conclusion or worldview. Instead of maintaining equal standards of evidence across all viewpoints, a bioskeptic demands an extraordinarily high, often impossible bar of proof for arguments they dislike while accepting weak, unvetted, or flawed evidence for positions they already support. The key characteristics one is selective cynicism. A bioskeptic applies intense scientific or logical rigor when debunking ideas that challenge their belief system, but completely drops their critical guard when presented with information that confirms it. This is a form of confirmation bias. Next characteristic, moving goalposts. Surprise, surprise. Whenever evidence is presented to address their doubts, a bioskeptic continuously raises the standard of proof required so the claim can never be quote. Proven, unquote, to their satisfaction. Next characteristic, pseudo skepticism. True skepticism is about withholding judgment until sufficient evidence is present. Pseudoskepticism assumes a claim is false from the start and works backward to find flaws, error hunting rather than truth seeking. And finally, weaponize doubt. A bioskeptic uses doubt not as a tool to get closer to an objective truth, but as a defense mechanism to shield their existing identity, political views, or other interests from counter evidence. Alright, where do we most commonly run into biosceptics in real life? Well, the answer is pretty obvious. It's in politics, and it is the political season, so you've seen a lot of examples of that. Politicians frequently use straw man arguments. They misrepresent what their opponent has said, or they take it out of context. Or they try to misdefine their opponent, calling all liberals communists and calling all conservatives fascists, is kind of a prime example of that. One of the more egregious examples of that I heard recently was in this Texas Senate campaign where one of the candidates got sick and the other side began spreading a rumor that he had checked into a mental hospital in Ohio or something like that, which was then picked up by the New York Post or something like that. Because sometimes this goes beyond misrepresentation and to outright fabrication. Another popular fallacious argument to use is moving the goalposts, and you see that in a couple ways. Some of it is just complete distraction. So if you recall the former Attorney General Pam Bonnie was brought in for Congress to talk about these Epstein files and what the government was doing about them. And at some point somebody asked her a question about some disclosure, and she said something like, The Dow is at 50,000, you should be paying attention to that. That is an attempt to move the goalpost from what you don't want to talk about to something that is irrelevant to the conversation and it's just a distraction. The more subtle way to use moving the goalpost is to manipulate the data or only present part of data. And you've probably seen that most recently with respect to various ads about the price of oil, the price of gas, or the price of diesel on various dates and compared to some other date, say in the last administration. And oftentimes those dates are just cherry-picked depending on who's making the argument to make their side look better than the other one. But that kind of cherry picking of data by moving time frames or talking about some other data or assume data is classic goalpost shifting. Oftentimes you'll see goalpost shifting and straw man arguments combined. But you can see this is why most people find politicians and politics to be distasteful. Because you have a bunch of people making fallacious arguments and running around denigrating each other with assorted other insults. Now, where else do you often see biased skeptics where you often find them where people have a hardened view or belief system about a particular thing? A good example of that would be people in the flat earth society who will go around making up all kinds of conspiracy theories about why those pictures of the earth are fabricated and all sorts of other complicated explanations for why that earth is really flat and not round. These are often people who have adopted a certain set of beliefs as part of their identity, and so they will make up anything to preserve that identity and start spouting conspiracy theories or accusing the other side of hiding something or any number of conspiracy type theories and very complicated explanations often. Because they often have savior complexes attached to that. They want to convince you that they are correct in whatever their belief is and you need to believe this too to save you from some alleged peril, maybe falling off the earth, running out of money in retirement, something like that. So the next question in my mind was whether the author of the Early Retirement

Biased Skepticism Explained With Examples

Mostly Uncle Frank [26:10]

Now blog is in fact a bioskeptic, and how long has he been a bioskeptic if he is one? Because I can tell you from the podcast we've done on some of his prior posts, it sure seemed like they were full of goalpost moving and straw men and other kinds of arguments that are commonly used by bioskeptics. And those episodes, if you want to go back and listen to some of those, there aren't that many of them. Episodes 517, 447, 401, that's a particular good one, 319 and 261, in addition to 223, which I already mentioned. So this is where I was able to employ the power of artificial intelligence. Because artificial intelligence is very good at reviewing large piles of information and analyzing it for you and sorting it for you. So I went to Gemini. This was back around the time I made episode 532, and I first asked it for a definition of a bioskeptic, which I just gave to you. Then I asked it to analyze the entire early retirement now blog, in particular the safe withdrawal rate series, but the rest of the blog posts, and tell me whether or not the author of that blog is a bioskeptic. And the results were very unequivocal. That of course he is. It gave me lots and lots of examples and lots of different blog posts. And I had it summarize those in a slide presentation and in a video, which I already posted to YouTube and I'll link to again in the show notes, but he's basically a bias skeptic in spades. And what it says in the slide presentation summary. The author's safe withdrawal rate series is a textbook archetype of bias skepticism. Formidable mathematical rigor is deployed not just for truth seeking but as an impenetrable shield for narrative protection. He applies extreme apocalyptic stress tests to dismantle mainstream heuristics while displaying profound uncritical generosity towards his proprietary models. And that's a form of goalpost moving or the double standard used by goalpost movers. So in summary, here's a few things. He demands that portfolios he doesn't like must survive 60 continuous years of multi-decade bear markets. He demands that things he doesn't like must survive the absolute worst 1% of historical anomalies simultaneously, the 1929 Great Depression and 1966 stagflation, and contends that modest 4.25% withdrawal rates are mathematically obliterated and labeled dangerous. It's got to save you from those things. On the other side of it, when he's talking about his own stuff, he assumes flawless execution of complex option strategies and derivatives by retail investors during panics. He treats complex historical valuation mean reversions such as CAPE ratios as immutable laws of physics. He labels ultra-conservative 3.25% withdrawal rates as prudent despite the human cost. So he does things like claim that people are too stupid to follow variable withdrawal strategies and reduce their spending in retirement, but on the other hand, they can execute equity glide paths and options overlays using his methods. He assumes retirees lack the agency to trim a budget by 10% during a recession, yet simultaneously assumes those same retirees can flawlessly execute counter-cyclical derivative trades during a black swan panic. And another goalpost moving thing he does is selectively use historical data. He basically uses history when he likes the result and says it's wrong when he doesn't like the result. So, for example, he treats the hundred-year historical relationship between Schiller Cape and future returns as some kind of permanent law of finance while dismissing a hundred-year dataset for small cap value. He says one historical data set is foundational, but the other one is noise. Even though these datasets are very similar and are derived from the same data. And there's a good contrast between the way he uses cape ratios, which is to depress spending as much as possible, and somebody like Michael Kitsis or Bill Bengen would use a cape ratio, which is to say that no, you don't need to depress spending, but if you have lower cape ratios, then you can probably increase spending. So they use it as a possibility of spending more money, not as a possibility of spending less money. Anyway, the analysis was very conclusive and unequivocal. That from the beginning, the author of this blog has demonstrated that he's a biaskeptic. This seems to be part of his identity. It's part of this savior complex that he seems to have. And the fact that other people have come along with different ideas and better ideas has caused him to go into this kind of protective mode where he's been lashing out at everybody who disagrees with him. By the way, in case you're wondering, I also did ask it to analyze whether I was a bias skeptic. And it says, now you're more like an empirical contrarian. I'll take it. All that means is that I use facts to contradict conclusions that other people have drawn. So with that as backdrop, now let's turn to these blog posts in particular. When I started reading the blog posts, I quickly realized we're back in straw man land, we're back in goalpost moving land. This is very similar to the other kinds of blog posts he's made, diatribes against various people in recent years. And I thought to myself, this is going to be a real slog to go through all of this. There's probably at least a couple dozen fallacies and other problems in here. But then I said to myself, well, why don't I just use artificial intelligence to analyze this and find all the fallacies for me? It'll save me some time. Again, thinking there might be a couple dozen. So I ran the analysis and had it summarize it for me in a table with a cover page and some other information, and I'm going to link to that in the show notes so you can check it out yourself. But there weren't just a couple dozen issues here. What we ended up with is a master table and synthesis combining 64 logical, empirical, and rhetorical fallacies and distortions, with 18 disparaging statements, five conceptual operational misrepresentations, and post-publication comment distortions for a total of 72 total items. But I'll just read you the basic summary here. The critique spanning part 64, dated July 27, 2026, and part 4, dated July 29, 2026, combines aggressive and ad hominem rhetoric with structural data manipulation, shifting benchmarks, and conceptual misrepresentations. First point, rhetorical belittling and defamatory framing. Educational creators and DIY retail investors are cast as charlatans, Dunning Krueger financial influencers, or naive and gullible marks consuming hooey, junk science, and commercial false advertising, culminating in comment threads comparing peers to an amoeba with an abacus. By the way, that's also evidence of malicious intent for a defamation case. Point number two, empirical data manipulation and proxy modeling. Adaptive trend following ETFs, e.g. DBMF, are modeled using static linear regressions with permanent negative 28% short equity drags. Gold is evaluating using 100 years of government price pegged data, 1871 to 1971, and asymmetric fee friction is applied exclusively to alternative assets. That is a straw man extravaganza, where he's creating data instead of using real data. Point number three, gold post shifts and double standards. The author continuously moves the criteria of proof, stripping factor tilts, small cap value before testing, shifting success metrics from drawdown mitigation to bull market equity growth, and requiring multi-asset models to survive high cape regimes with 0% failure while giving traditional stock bond baselines a pass for failing under identical shocks. All kinds of goalposts moving in double standards. Just wait till we get to the fake definitions. Number four, conceptual misrepresentations. Systematic rules-based factor indexing is mischaracterized as active, quote, stock picking, unquote. Retail heuristics are dismissed for lacking 1300-person institutional hedge fund staffs, and volatile assets are evaluated on isolated trailing price charts rather than within a rebalanced portfolio system. So as I mentioned, I will post this list in this chart of these 72 items for anybody to look at. I'm also putting up two slide presentations that go along with that. There's too much for one. And there is also a video summarizing these problems that

AI Audit Finds Dozens Of Fallacies

Mostly Uncle Frank [35:10]

we'll also post to YouTube that all goes together. But that is to say, I'm providing you with all this material because I do not intend to go through all 72 of these problems on this podcast. We would be here for hours. What I will do is go through some of the high points or low points, as the case may be. But I think through all of this, we need to keep our eyes on the actual goalposts and the actual game that's already been played that I talked about in the first part of this podcast. Because the real question is, does anything that he's published in July change the outcome of the analysis that he did in October of 2022 when he was not trying to be a biaskeptic and attack people? And the short answer is no, it doesn't. His toolbox still shows that a risk parity style portfolio is a better portfolio to hold for drawing down on than a 75-25 portfolio. And that is the real question. Because your choice is not risk parity style portfolio or some imaginary perfect portfolio. Your choice is always between portfolio A and portfolio B. And since we've defined what those are, we can analyze what those are and come up with a firm conclusion, as we already have, using his analysis and his toolbox from October of 2022. But we'll see whether anything that he said in these recent blog posts changes or disturbs those findings. But let's be clear on what we're comparing and the basis for saying that portfolio A is better than portfolio B. First, the metric we're comparing them on is a safe withdrawal rate, measured the same way for both portfolios. So we can use the 30-year with a static withdrawal system as a proxy for that, even though we know that you can vary your withdrawals and get a higher safe withdrawal rate out of that. And that you can use that method to extend a 30-year time period out to essentially forever. So what are the portfolios we're comparing? Well, on his side, it's 75% SP 500 and 25% intermediate treasury bonds. And on the risk parity side, it is the portfolios that we have defined in the polypant blueprint. And those portfolios have somewhere between 40-some percent and 70-some percent in stocks divided into growth and value. They have somewhere between 15 and 30% in intermediate and long-term treasury bonds. They have between 10 and 25% in alternative assets that are defined as assets with returns that are between stocks and bonds, but are uncorrelated with both stocks and bonds over long periods of time. And these portfolios have less than 10% in cash or cash equivalents. And what method are we using to compare these portfolios? Well, we are using actual data, the data that we can find and that data that can be replicated on other sites, because if you come up with some analysis and it's using some data you made up, and you can only replicate it on your site in your spreadsheet, it's not worth very much. The hallmark of a good analysis is that it is replicable on many different data sets, and therefore is not dependent on somebody's opinions or chosen assumptions and can be objectively verified by using other sources. Because ultimately, the real question is how does this translate into your real life? Do you want to hold a 75-25 portfolio and limit your withdrawals to somewhere around 3% or less? Or do you want to hold a risk parity-style portfolio and take out five or maybe even six percent? Or at least have the option to do that. So now let's look at these two blog posts specifically. Now, ordinarily when you're doing something like this and somebody makes obvious mistakes, you tend to attribute that to incompetence and not to dishonesty or intentional misrepresentations. But when you're dealing with a bias skeptic in the area where they are a bias skeptic, you have to assume that anything that they have assumed that's wrong that helps their argument is done out of dishonesty and they know exactly what they're doing. Here we also have somebody who has positioned themselves as some kind of uber competent ex-quant savior person. At least that's the way he wants to portray himself. So we have to assume that every time he makes a mistake that's in his favor, it's due to dishonesty. So turning first to Safe Withdrawal Rate Series Part 64, that blog post. The first big dishonest thing we see here is this false construction of DBMF, constructing a fake DBMF. Now, DBMF is a managed futures fund that follows an index. It's well established, there's a prospectus, there's all kinds of literature about how it works. We've cited it. We assume that he's read it, we assume that he's actually competent. And if that's true, what he's created here is completely dishonest. So the first thing he's done is kind of a stupid junior quant trick, which is curve fitting. So he's taken something that is not DBMF, a mixture of things, and then adjusted the returns on it by adding T-bills to it so that it looks a little bit like DBMF from 2000 to 2026, at least when you look at the endpoints. So the endpoints match up. That is basic curve fitting. It's a dishonest way to present data. He calls it a replication, but it is really just curve fitting. And what are the components he puts in here? He puts in a negative exposure to the S P 500 and a negative exposure to 10-year treasury bonds, as if you were taking leverage and shorting them. That's inaccurate and completely dishonest. As he well knows from studying DBMF, DBMF follows trends. So with respect to the S P 500, for example, the S P 500 is going up most of the time. So most of the time, DBMF is actually long the SP 500 or at least flat the S P 500. The only time that DBMF is opposite the S P 500 is when the SP 500 is actually going down, like in 2008 or 2022. And the same thing is true with Treasury bonds. When Treasury bonds had a big rally, say in like 2014, DBMF picked that up and benefited from it. It was positive Treasury bonds. In a year like this year, when treasury bonds are taking it on the chin and interest rates are going up, yes, DBMF is short Treasury bonds. The 5% allocation to gold is a throwaway, but again, DBMF can be long or short gold. DBMF also invests in the markets of currencies and oil, and that is nowhere presented here. I was dishonest to exclude those. But most of the dishonesty here is his use of this earn momentum thing that he created. That is a completely concocted item that he created in a different blog post. The problem with the earn momentum thing on its face is that it is only long things, it is never short. So that cannot possibly be a proxy for DBMF. And you can actually see how different these things are just by looking at this graph, because in order for this to be a real proxy, it would have to track it pretty closely year to year, because you'd be rebalancing in and out of this thing as it goes up and down in these years. And so you can see gigantic gaps here in places like between 2012 and 2015. There's no correlation between how these are functioning. Also around 2018, and then the worst offenders are most recently, because in 2022 that was one of DBMF's best years. He is not modeling that. The reason DBMF went up that year so much was because both stocks and bonds were taking it on

The Fake DBMF Proxy Problem

Mostly Uncle Frank [43:40]

the chin. They were in crisis. So DBMF at one point was up over 30%, finished up 20% for the year, and that's just exactly when you needed it to do that. His proxy does not reflect that reality. And it does not reflect the reality of this year. What is going on this year for DBMF is that. Oil is in crisis, it is going up a lot, treasury bonds are in crisis, interest rates have been going up a lot. Both of those things have contributed to an outperformance of DBMF this year, and that is not captured by his proxy, other than this crude curve fitting thing that he did. Now he also knows that the purpose of something like DBMF is to perform well in crises, and that's really how it is diversified from everything else in the portfolio. So besides 2022, some of the best years for DBMF this century were in 2002 and 2003 when the stock market was crashing, 2008, when the stock market was crashing, is also picking up positive trends in treasury bonds and things like gold then. And also a year like 2014 and what was going on then. In 2014, foreign stocks were crashing. DBMF also follows emerging markets and developed markets and the trends there. And so what it was picking up on there was the crisis in foreign currencies, the dollar was rising strongly against them, and also the fact that US stocks were very positive that year, foreign stocks were negative, and then treasury bonds were going up by about 20%, at least on the long end. So, in no way, shape, or form is what he created a reasonable proxy for DBMF, should not be using it in any analysis. And the only reason it serves him is because it makes his analysis look better, because it does not capture the actual features of something like DBMF. In other words, it's a straw man. It is a classic thing that biased skeptics do. Create fake things and call them real and use that for an analysis. Now the next straw man he's created here is how he accounts for the factor tilts. He comes up with a formulation, a proxy, that looking at his first chart tends to undervalue or underexpose the portfolios he's using to the value factor. And how do I know this? Because he did it the right way back in 2022. Back in 2022, for a 55% stock allocation divided into the S P 500 and value, he assigned percentages of about half of the 55%, 27.5% and 30%. He did not do anything like that in this new analysis. What he didn't in this new analysis create another straw man, put his thumb on the scale so that the factor tilts are not as pronounced as they ought to be, like he did in 2022, when he wasn't engaging in bias skepticism and said our risk parity style portfolio performed very well. As a consequence, we can't rely on any of the analysis that he's using with these factor tilts, and we also can't rely on any of the analysis where he's just ripped them out entirely because that is a scenario that has not occurred that is basically saying these value-tilted funds perform exactly like the S P 500 when we know they don't. But this also reveals a fundamental limitation with this whole toolbox he's got here. This was a reasonable tool to be using eight or 10 years ago. It is no longer that useful a tool when you have things like test folio and we have more sophisticated retirement calculators when we have artificial intelligence to create and run these things for us as well. The problem with this, the inherent problem with the way this is structured, is that it turns all of the stocks in your portfolio, particularly US stocks, into kind of one big blob. So it's not like holding multiple funds, it's like holding some kind of amorphous blob that he creates by adjusting these factors. And you're only rebalancing it against the other assets, you're not rebalancing one stock fund against another. So it creates another automatic distortion or straw man that causes this to be a garbage in, garbage out process that is created. Now you can easily see the difference between holding, say, the SP 500 and a portfolio that is half large cap growth and half small cap value. If you just go over to test folio, they've got all the data there for this back to the 1920s, just like he's supposed to have in this calculator. And if you create a portfolio that is just the SP 500 and you compare that to a portfolio that is half large cap growth and half small cap value that's rebalanced on an annual basis, you will see that the half and half portfolio is better in almost any reasonable time frame you can think of, including his favorite cherry pick time frame where you start at 1980 instead of starting at some reasonable date. So I put a link to that in the show notes with the entire data set going all the way back to the 1920s. But you can change the dates in there and you can see that holding a portfolio that is half large cap growth and half small cap value is just a better idea from a risk reward perspective than just holding an S P 500 fund. And that is the power of factor-based diversification that is not reflected in what he's doing here. All right, now we have another straw man assumption in this section. He claims that a more realistic fire scenario is to have a 50-year time horizon with a 25% final portfolio value target, as if you are essentially taking away 25% of the portfolio and saying you're never going to spend that and you're going to die with it. And he says that's a good assumption because me and my wife use it. Okay, that is not a good assumption. That is not how most people behave. What most people do, and this is well known in the financial services literature, which I'm sure he's familiar with, that what real retirees do, no matter what their age, is they tend to project leaving nothing or leaving the leftovers. Basically, they say, well, I'll save for my long-term care and some other things, and whatever's left is left, and that's fine. We don't need to reserve a specific amount. That is what real retirees do as an intention. This does create a paradox because the behavior does not tend to follow intention. What actually goes on is that six out of seven retirees underspend their portfolios anyway, and so they end up with at least as much as they started with, if not more. And that is the trajectory that he's on right now. But who does this kind of assumption appeal to? Who is this modeling? This is modeling people who want to hoard money. And if you go back through the entire history of this blog, it is not really about safe withdrawal rates. It's not about cape ratios. It's about hoarding money. That is the central theme that drives the whole thing. That is why he cut his expenses way down in retirement, essentially by half. Most people don't want to do that. Only people who want to hoard money do things like that. This is why he's assuming that everybody wants to end up with 25% of their portfolio reserved, so you just take it away from the calculation to begin with. That is not a reasonable assumption. That is an assumption that hoarders would follow. In other places, he assumes that a variable withdrawal strategy is too complicated for somebody to be able to follow. That's not true. But what that lends to is hoarding more money. He also assumes that inflation is going to be higher than CPI in many instances. That is not true either. That is an assumption made by somebody who wants to hoard money. In fact, as we know from lots of research that he's familiar with, the trajectory of retirees, particularly as they age, and if you're modeling a 50-year retirement, you have to account for this because you're talking about the last half of that as somebody who's essentially age 70 through 95. Their inflation rate is going to be CPI minus 1 or CPI minus 2. That is a reasonable assumption for that. Again, he does not account for that either, because he'd rather make assumptions that encourage hoarding. Big hoarding. Now, good financial advisors have recognized this is wrong. People like Michael Kitzes have recognized this is wrong, that the way he's using Cape Ratios is wrong, and that these assumptions are unrealistic. There's a nice blog post by Jesse Kramer that we've cited to before. I'll see if I can put that again in the show notes. It's about it's unrealistic to make all these conservative assumptions because all you're doing is just guaranteeing that you're going to end up with many, many times what you started with while not spending your money. If you're doing that, you're just showing a preference for hoarding money and dying with as much as possible. And we can see that from his behavior over the past 10 years. The last time I heard him talk about his personal situation, which is this summer, he said they haven't been spending their money. They spend about 2% out of the portfolio. He doesn't sell anything. Number go up is a fundamental part of his identity. That is how he values himself. Now, has he increased his spending? Well, yes, but guess what? It didn't have anything to do with inflation. It was just a choice. He's basically created a variable spending plan for himself. If his numbers keep going up enough, he'll spend a little more money. So while his portfolio has gone up two and a half times or something like that, his spending has gone up 75%. In my mind, he should have been spending 75% more at the beginning. He could have, could easily have. There was no reason he couldn't. So his plan is extremely undesirable unless your real goal is to continue to accumulate money and die with as much as possible. On a relative basis, we are spending 150% more than he is spending. And it's not going to frivolous things. It was going to support my parents, my kids, their education, charities. All things that make our lives better. All things that research shows improves your well-being and your overall life. And he's not doing any of that. He's not even trying to do any of that. And that's fine if somebody wants to do that, but they should just go off and do it on their own. They shouldn't be running around becoming a bias skeptic, running around telling other people they can't spend money. Just because you don't want to spend money doesn't mean you get to go around telling other people they can't spend money and running around telling lies about what other people are doing. It's not going to end well. Alright, what's the next big dishonest thing he's got here? That's actually right in one of the headings. He is comparing factor tilting with stock picking, and he's saying those are the same thing. Okay, this is like the politicians calling all liberals communists or calling all conservatives fascists. You're essentially moving the goalpost to something else and then pretending that that is what the other person is doing when that is not what they're doing. So it's both a moving the goalpost and a straw man if you want to categorize it. And how do we know this? Well, you can answer this question in 30 seconds. Get out your favorite chat bot and ask them. Is factor tilting considered stock picking? That's what I asked

Factor Tilts Are Not Stock Picking

Mostly Uncle Frank [55:30]

Gemini. Let me read you some of the answers here. It says, no, factor tilting is not considered stock picking. In modern portfolio construction, factor investing is classified as systematic active or rules-based quantitative investing, whereas stock picking is discretionary active management. They sit in fundamentally different philosophical and mechanical categories. And then it lists five differences between the two of them. In stock picking, the primary unit of analysis is an individual company. In systematic factor tilting, the primary unit of analysis is a broad characterization of a factor. In stock picking, the selection process is just discretionary and subjective, looking at individual valuation models and forecast of companies. In systematic factor tilting, the selection process is quantitative, algorithmic, and rules-based. It's not stock picking. In discretionary stock picking, diversification and exposure is concentrated. Risk is driven by idiosyncratic or company-specific outcomes. In systematic factor tilting, diversification and exposure results in highly diversified selections, hundreds to thousands of holdings. Risk is driven by systematic factor premiums. In discretionary stock picking, turnover and trading is event driven, selling when an analyst changes their price target or thesis breaks. In systematic factor tilting, turnover and trading is continuous rules-driven rebalancing. In discretionary stock picking, the theoretical foundation is alpha generation by exploiting individual market mispricings of individual companies. In systematic factor tilting, the theoretical foundation is factor risk premiums and multi-factor asset pricing models. So those two things are just not the same. And to equate them as similar things or the same things is dishonest. It's fundamentally dishonest. And it's the kind of thing that biased skeptics do. Because their arguments are fundamentally based on dishonest assumptions. Alright, then right under the first heading about stock picking, he goes off into this goalpost moving, cherry-picked small cap value analysis, where he fixates on starting his analysis at 1980 or starting it in 2006. I'm not going to go over this again. If you want to go back to episode 401, that's where we really talked about this. He's dishonest about this as well. But that is classic goalpost moving when you're cherry picking start dates for things. Because it's interesting if you go back and look at that link I referenced about the 50-50 portfolio versus the SP 500. You can see how this changes through various regimes. So during the 1970s and up to 1981, when he likes to start his analysis, the 50-50 portfolio of large cap growth and small cap value outperformed the SP 500 by 5.9% per year on average, per year. It was a huge outperformance. During the next period where he likes to start the great bull market of the 1980s and 1990s, the SP 500 and the 5050 portfolio performed almost exactly the same. The 50-50 portfolio outperformed the SP 500 by 0.2% a year. Then you get to the lost decade. The 50-50 portfolio outperformed the SP 500 by 4.4% per year and was positive, whereas the SP 500 was negative for that decade. And then we get to current times and the performances are about the same since 2010, the 50-50 portfolio versus the SP 500. What that is telling you is that goes into this reason for factor diversification, that the most important time to have that kind of diversification is when markets are bad, like in the 1970s or the early 2000s. That's why you want to have that diversification because that is where you're going to have the lowest safe withdrawal rates and having that diversification between value and growth will save you. And that's just in the data. And it's dishonest to not acknowledge that. So most of the rest of this analysis is kind of pointless because he's already selected these straw men and put them in this analysis to get the results that he's looking for. These conclusions first, then set up the straw man so you get the conclusions that you want. And he keeps referring to factor tilting as stockpicking all the way through this, which is dishonest every time he says it. Saying a lie over and over again may work for politicians, that's how they work. But it's fairly offensive when you're trying to snow your readers with that kind of BS or biased skeptic. But another big goalpost shifting fallacy he's got operating here and throughout this analysis is he's changed the period of analysis. If you recall from the analysis he did back in 2022, we're looking at the decades from the 1920s up to the present time. He changes that for this analysis. All of a sudden, instead of looking for that period, which makes sense, he's only analyzing a period that goes from the 1900s to the 1970s, and this is in all his charts. That really makes no sense. You can't exclude the last 50 years from this analysis. And he didn't exclude it in the analysis before, so there's no reason to exclude it here. In addition, prior to the 1920s, you don't have the data to do the analysis, other than the straw man data that you've made up and inserted in there. So it's not an analysis of anything that's real at all. It's an analysis of straw men. The other reason that you would goalpost move the way he has done, so you are only going to the 1970s in your analysis is because prior to the 1970s, gold was pegged to the dollar. And so the only time it changed was when it was devalued, the dollar was devalued in the 1930s. Other than that, it's a pretty inert asset for this period of time. After the 1970s, though, gold has been a very active asset because we're in a different economic regime as far as the dollar is concerned. We're on a fiat only system that we weren't on before, which is different. And so gold has had an average return since the 1970s of around 8%. It's actually outperformed the SP 500 this century. But this analysis is specifically designed to generate lower safe withdrawal rates by moving the goalposts in this way that he did not do in 2022. He should have just repeated the same analysis he did in 2022, even if he was going to change some of the parameters. So there are a number of other fallacies listed in that big long list of 72 items. But it's sufficient to say that with what I've just told you about the straw man and the goalpost moving and the other issues with this, none of this analysis holds any water because it's contrived. If you make up fake data and shove it into a calculator, you're going to get fake results out of it. More importantly, this does not change in any way the analysis he did back in 2022, showing that the risk parity style portfolio outperforms his 75, 25 in spades. There's nothing here that refutes that. There's nothing here that changes that. When you're actually using real data, his portfolio is worse for drawing down upon than a risk parity style portfolio. So let's now move to this other blog post, which is entitled How to Lie with Personal Finance Part 4. And so this blog post is characterized by two big lies that permeate the entire blog post and make it a completely dishonest presentation. The first big lie has to do with what aspects of risk parity we are using at risk parity radio. Because as we've said from the beginning, and as he knows, we are not trying to create a hedge fund at risk parity radio. We are not trying to use the CFA manual parameters of risk parity to create a portfolio for a do-it-yourself investor. We're not doing any of that. What we are doing is applying what is called the holy grail principle about diversification from Ray Dalio and the four quadrant model, which also is referenced in the papers from Bridgewater and Ray Dalio and many others, by the way. The four quadrant model is not unique to risk parity. The second big lie has to do with what we're actually recommending for retirement portfolios, but we'll get to that. But instead of actually addressing what we're doing with risk parity, this blog post just goes off into a frolic and detour of a bunch of narrative about various things that are not relevant to what we're doing, and we've never said we are doing that. We are not using 1,300 employees to create a hedge fund like Bridgewater. We are not making complicated variance calculations or other kinds of calculations to construct these portfolios. We are not relying on the all-weather portfolio as something that we would be using in retirement. That's why we call it a reference portfolio only. And he knows that. But he spent pages and pages talking about the definition of risk parity and arguing that, oh, this isn't real risk parity, it's something else. This is all a distraction. This is all goalpost moving. This is all pam bonding saying, look at the Dow instead of the Epstein files. It's a meaningless distraction because it's not actually addressing anything that we're doing that's meaningful here. It's funny, at one point he says the better, more appropriate label for these strategies should be risk budgeted or risk aware or risk management rather than risk parity. He says that's because risk parity is a mathematically well-defined term, and none of the strategies satisfy this very unambiguous condition. Again, this is just trying to cast dispersions on something. And labeling things, how you label things, does not change how they perform. It just doesn't. If I was savvy, I would have called it diversification maxing. We could have diversification maxing radio. I heard on another podcast that maxing. Maxing is actually the word of the year since it's used in so many social media contexts. Or we could have called it Holy Grail Principle Radio, but that also would have been confusing. Again, none of this matters in the grand scheme of things because it does not change how any of these

Hoarding Assumptions And 50 Year Models

Mostly Uncle Frank [1:06:20]

portfolios are performing. And it doesn't change the fact that, according to him and his analysis in 2022, a risk parity style portfolio like the one we use for drawing down on is superior to his 75-25 portfolio. So he can complain all he wants about misuse of words and definitions, but it doesn't change anything. And here's the thing he knows all of this if he's paid attention at all to this podcast, because we go over this stuff over and over and over again. But in this circumstance, he's even more dishonest than that. Because not only does he have all of the evidence from the podcast and our descriptions of what we are using out of Bridgewater and what we are not using and why. That explains all this. And if he would really was wanting to be honest in this blog post and presentation, he would have started with what I say in this email instead of writing a number of pages about his disapproval of the way we're using words. So I wrote this email on June 2nd, 2025, and this was in advance of a podcast that we recorded for the Stacking Benjamins podcast. And I'll just read it to you because it's very clear. I said to him, to Joe, and to Dana, I want to clarify something for you before we record, which is the meaning of the term risk parity, about which you have expressed some confusion in the recent past. That's directed at Joe in particular. It actually has two related but different meanings depending on the context. One meaning is highly technical, and the other more common or colloquial, like the way the word theory means best factual explanation based on rigorous analysis and testing in science, but might mean just best explanation I have right now outside of that context. We can actually blame Tony Robbins for the two meanings of risk parity that have evolved over time. The first is the technical or textbook meaning that is described in detail in the CFA manual pertaining to portfolio construction. This usually involves relatively complex portfolios that are statistically balanced, usually on a volatility or other risk metrics, and that end up being bond-heavy and involve leverage. This is what most financial professionals are thinking of when the term risk parity is mentioned, but it is not what your audience is likely to be thinking about if they have heard the term at all. What they are likely thinking of comes out of the book Money Master the Game from 2014, where Tony Robbins interviewed Ray Dalio about his holy grail principle. The holy grail principle is simply the idea that to construct a robust portfolio, you should use uncorrelated or low-correlated assets. Ray Dalio talked about that and risk parity and gave Tony a simplified version of such a portfolio involving stocks, treasury bonds, gold, and commodities. Because of that book, that one simple portfolio became known as the risk parity portfolio in the minds of the personal finance public around that time. As this has evolved over the last 10 years, people have started referring to all similar simplified portfolios like that as risk parity portfolios, largely to distinguish them from traditional stock bond portfolios. Here is an example of some portfolios in that grouping. And there's a citation to portfolio charts in the category of risk parity in the portfolios listed there. You can see that they are all relatively simple and typically involve four to eight funds. And that included the golden butterfly and golden ratio portfolios. So in this second context, all risk parity really means is a simplified portfolio inspired by Ray Dalio's Holy Grail principle. You can see why people prefer the term risk parity to that mouthful of an explanation. Risk parity style would probably be the more apt application and is the one I often use. When I am speaking about risk parity portfolios on my podcast, I am usually talking in the second context, i.e. risk parity style or a simplified portfolio inspired by Ray Dalio's Holy Grail Principle, and not in the CFA manual sense. Because while the Holy Grail Principle is the most important principle in constructing or designing portfolios for a drawing down on, achieving risk parity is not the goal of that exercise. Rather, the goal is to achieve a higher projected safe withdrawal rate via diversification with uncorrelated assets. But I thought Holy Grail Principle Radio would be a very confusing name for a podcast about investing. I hope that clarifies things in your mind. I'd like to avoid getting hung up on semantics or a discussion of the CFA manual. Now only Dana responded to this email and she thanked me for the explanation. And she said that is good to know for reference. So if the blogger here was really being honest and wasn't being a biased skeptic, he would have started with an explanation like that, which is very clear and very simple, and does not require a long diatribe about the use of various words and variances and 1,300 people working at a hedge fund and the whole pile of nonsense that the first part of that blog post is comprised of. That is a gross misrepresentation of what we're doing. It is very dishonest, and it is only the kind of thing that a politician or other biaskeptic would do. So let's talk about this second big lie or big misrepresentation that permeates this blog post. And that big lie is that we are recommending that people use all of the eight sample portfolios as potential retirement portfolios. That's not true. We've never said that. We've said the opposite. And he knows that. So since he knows that and he's deliberately misrepresenting that, he's just lying about what we're doing. We talk about this ad nauseum when we talk about these portfolios, particularly when we're rebalancing them and doing other things with them or talking about them individually as to why they are there and what purpose they serve for the purpose of this podcast. The last time we talked about this was actually in episode 539, and we went through all eight of the portfolios to talk about why they're there and what purpose they serve for the context we're using them in. So, since everybody who listens to this knows this, including the author of this blog, the only two portfolios out of those eight that we would use a say sample or something to build a retirement portfolio on with a high safe withdrawal rate are the golden butterfly portfolio and golden ratio portfolio. And we've never said anything to the contrary. We have the all seasons portfolio there as a reference portfolio. That's why we say it's a reference portfolio. The purpose of keeping it there is to show that it is too conservative to be used as a retirement portfolio, particularly if there's no leverage in it. It is a reference to compare the portfolios like the golden butterfly and golden ratio to. So every time he acts like we're using that portfolio as a retirement portfolio in this blog post, he's lying. With respect to the risk parity ultimate portfolio, we say we use that as a kitchen sink. It is there to show examples of different kinds of assets that somebody might use, but nobody is going to be using all of those different assets that are in that portfolio. Again, it's there as a sample illustration. That's why it's got things like a long short fund in it and Bitcoin in it. Because a lot of people have questions or wonder what would that be like in a portfolio. Well, having a sample portfolio gives you an idea of what that's like. Alright, the other four portfolios, the accelerated permanent portfolio, the aggressive fifty-fifty, the levered golden ratio, and the opter portfolios, they are all experimental portfolios. That's why we call them experimental portfolios. That word has a meaning, experimental. That means we're not using them as something we would rely on or use in retirement. Rather, they are there to see what will happen if we take leverage in various portfolios and apply high safe withdrawal rates to them. Because a lot of our listeners are interested what you can do with leverage. And so we have some experiments. We're not worried about whether they succeed. We're not retiring with something like that. As I mentioned in episode 503, if you want to go back and listen to that, our personal portfolio, for the most part, looks like a version of the Golden Ratio portfolio that is more aggressive and has some international stocks and some property and casualty companies in it. So in this context, most of the rest of this blog post is kind of ridiculous. All these accusations, oh, it performs so badly. Yes, I know the aggressive 50-50 performed so badly. That's the point. It's an illustration. The reason it performed badly is because it has got all that leverage in it and it's not very well diversified. And you learn something by looking at something like that. Because knowing what not to do is just as important as knowing what to do. But if you're not curious and you don't try, you're probably not going to learn anything. And so now that we have test folio, you can and you should, to the extent you're interested in various formulations of these portfolios, go and test them over there, run them over there, back test them over there, do other things with them over there. It's a very powerful tool that we didn't have when we started this podcast. Well, let's just take a look at another couple of highlights or lowlights here. In sections five and six, he's claiming that risk parity returns look disappointing. Most of his argument in these sections are essentially him saying that he has a crystal ball that says that the future is going to be different than the past hundred years. And therefore his 75-25 portfolio is going to kind of leap up, rise up somehow, and be the best portfolio in the future. That is just a crystal ball and wishful thinking on his part. Because as we know from the analysis that he did in 2022, the 75-25 portfolio

What We Mean By Risk Parity

Mostly Uncle Frank [1:17:10]

is not just a little worse than the risk parity style portfolio, it was a lot worse. It's about 25% worse on the overall number and worse in almost every decade since the 1920s, except for the decades when everything was just hunky-dory and the stock market was going up, like the 1980s. In that case, it doesn't matter what kind of portfolio you have because you could take 5, 6, 7, even 8% and not have a problem. A safe withdrawal rate is based on worst-case scenarios. So you need to focus on the worst decades for that, like the 1970s or the early 2000s. And as we know from episode 401 of this podcast, when we looked at his analysis of small cap value, it was obviously goalposts moving and cherry-picked, because in fact, in this century, small cap value has basically outperformed the SP 500. And you can go back and look at the testfolio results there. So his crystal ball doesn't work unless he cherry picks the dates of the data by moving the goalposts. Now, in section six, he also makes a false accusation that I've been hiding data to conceal things. He makes that in a couple of places. This is a very common thing for politicians and other biased skeptics to use. If you're being dishonest, you accuse the other side of being dishonest first. He does a lot of that. Accuses everybody else in the world of being dishonest. So in this case, he's talking about a table that we used to have on the website with some monthly returns. But what he doesn't tell you is why we took it down, because we explained exactly why we took it down on the podcast. I don't see that explanation anywhere in this. But it's in episode 479 if you're looking for it. When we were redoing the website with our friend Luke in Quebec, I looked at that chart and realized that I had made a mistake when constructing it in the first place. Because instead of showing just raw returns, what it was actually showing was raw returns plus the drawdowns or taking into account or adding on the money we were taking out of it, which resulted in not just an apples and oranges problem, but a whole fruit basket problem, in that you could not compare the portfolios against each other or against anything else unless you were also using the same drawdown method to compare them with. And because of that, I couldn't really use that data for anything to compare things. And so what I suggested, and what we actually do is simply use test folio to do these comparisons, because you can put any portfolio you want in a testfolio, adjust the dates to the dates we have for these portfolios on the podcast or any other dates you want, and then you can subject them to various drawdowns, and you can do the same drawdown for all of them. So there wasn't anything nefarious going on there. And for him to accuse us of doing something nefarious when we've explained exactly what it is, and he did not cite that, that is a big dishonest effort on his part again. Mischaracterizing what we're doing and why. In fact, you can see the returns for the portfolios on each of the portfolios page. And if you want it in more detail, you can run them in test folio, and I hope you do. So it looks like he tried to take some of that data and do some kind of analysis with it or recreation with it. But if he's taking that data and mixing it with other data, you are mixing apples and oranges. And that's not the way to do things. There's a garbage in, garbage out process. Again, you can do any analysis you want, rated test folio. And that's what he should have been doing if you really wanted to compare these things. So again, most of these analyses he's doing rely on modified data and cherry-pick data and mismatch data. It is interesting, and this gets at this big lie about what we're doing with these portfolios. He does recognize in section six, he says the golden butterfly and golden ratio portfolios did okay, though they slightly lag the 75-25 in almost all stats, lower return, lower sharp ratio, longer drawdowns. And he said the golden butterfly portfolio has a 23.92% drawdown instead of a higher drawdown for the 75, 25%, and 6040. Okay, this reveals several things. First, it's an admission that the portfolios that we would recommend somebody use for retirement did okay in his mind. And that would go for all of the kinds of portfolios we recommend that are talked about in the blueprint that we've already talked about. Because these portfolios fit that profile, which is a mixture of what we got from Ray Dalio with the Holy Grail principle, what we've learned from Bill Bangin and others as to how to construct a portfolio with a high safe withdrawal rate. Yes, I know that's not strictly risk parity as in the CFA manual, but that's not the point. But you see, even here he's moving the goalpost because he's comparing the returns of a 75-25 portfolio to the golden butterfly and golden ratio portfolios. That is not the goalpost. The goalpost is a higher safe withdrawal rate in the worst conditions. So if you're going to compare returns, we know over long periods of time that something with a higher proportion to stocks is likely to outperform something with a lower proportion to stocks. That's why you use that as an accumulation portfolio. But that's not the metric we're judging these portfolios on. And we're not judging them on lower sharp ratios either, especially when you're talking about a time frame that is a few years. And that's the other thing. We know that a 75-25 portfolio should outperform a risk parity style portfolio when things are going well in the stock market, and that includes periods like we've had since 2010. There have been hardly any drawdowns, we haven't had any bad decades, we haven't had any big recessions. And so, of course, the 75-25 portfolio should outperform in those kind of conditions, but that isn't the goalpost we're really measuring on. The goalpost that's important is how do these things perform in the worst conditions? And we know that a 75-25 portfolio in the worst conditions has a drawdown of 10 to 13 years. It can go down 40%. And the risk parity style portfolios have max drawdowns of like four years and 20-some percent. And that hasn't changed. Looking at the past few years has not changed any of the data or the analysis that he did in 2022, which shows exactly what I'm talking about. The fact of the matter is we've been in a Goldilocks period the past number of years with only one bad year. All the portfolios recovered, the golden butterfly, the golden ratio, the 75-25, a 60-40. But that doesn't tell you anything about an overall safe withdrawal rate or the safety of the portfolio in the future. But if we do want to focus on the recent drawdown in 2022, we can do that. I've set this up over at Testfolio. I'll link to this in the show notes. It's basically got the golden butterfly and golden ratio sample portfolios there, along with the one that I use or a model of the one that I use from episode 503, and then a 75-25 portfolio. And if you're worried about that year and what happened in that year, you see that the 7525 portfolio was the worst one. And all of the risk parity style portfolios had shallower drawdowns. Which makes sense because small cap value outperformed the SP 500 or large cap growth

What Changes And What Does Not

Mostly Uncle Frank [1:25:10]

by somewhere between 20 and 30%, depending on which funds you're looking at. Managed futures went up 20% that year. Gold was only down 4% that year. So if you had a risk parity style portfolio, you're looking at it and say, oh, well, this is diversified. I have some things that are performing decently and some things that aren't. If you had the 75-25 portfolio, yeah, you might be panicking because you see everything going down. You don't have anything that's going up. And you know that historically you could be down over a decade with a portfolio like that, so that you don't know whether you're beginning a bad decade or not. If you have the risk parity style portfolio, you're sitting there going, oh well, it's gone down. It'll probably go back up within two, three, four years like it always has. And I have things I can sell here and use for my distributions that are going up and rebalance out of the things that are high and into the ones that are low. All right, then moving along to section seven of this, we see another set of straw man arguments. Now, here, instead of using historical data or basing this on historical data, he's basically assigned some return profiles to various assets. And I'm not sure where these things came from, other than he made them up. So he's got the S P 500 at 9%. Historically, that's been 10 to 11%. Large cap growth at 8.5%, that's not correct. Small cap value at 10%. Then he's got intermediate and long-term treasury bonds at 4.5 to 5%. That's closer, generally 4 to 6% historically. And then here's the big fudge and the big thing that throws off everything. He evaluates gold as having a return of 4.5%. That's not true. Since 1970 and gold became tradable, the compounded annual growth rate for gold is about 8%. You could use 7 to 8%. It's been more than the SP 500 this century. But to be using an artificially low return for that is just dishonest. And that is what drives the rest of this analysis. So if you artificially make the assets that we're using for the risk parity style portfolio look worse than the ones you're using, of course you're going to get better results for your portfolio. That is just another straw man argument and a garbage in, garbage out analysis like most of this. And of course, he doesn't account for managed futures anywhere in this section, not even the fake managed features thing that he created. But we've defined what we call a good alternative asset in that blueprint that we created. A good alternative asset has zero correlation to both stocks and bonds over long periods of time, and also has a return profile that is somewhere between stocks and bonds at least. So if you are assuming something that does not have those characteristics, regardless of What you're labeling it as, that is not something that we would be using in a risk parity style portfolio for a high safe withdrawal rate. Fortunately, the things we are using, golden managed futures, do conform to those characteristics, and you can't change that just by making up different characteristics for this. If you want to know what a good return to use for any asset, just go over to test folio, put the asset in there, all the data they have available for that asset, and it'll give you a compounded annual growth rate. And that is going to be a better estimate than any of these other predictions about the future or whatever other crystal balls you may be using. And then finally, he's got some comparison here between the S P 500 and then a portfolio that has large cap growth and large cap value. I'm not sure what the point of that is. They perform about the same. But if you simply just change your large cap value allocation to a small cap value allocation and run it from the year 2000, you'll see that that greatly outperforms the SP 500. And you can see that from the link I've provided in the show notes just by changing the start date. So where does this all end up? This all ends up where we started. Nothing in these blog posts changed the conclusion that he arrived at when he did the analysis back in 2022. All of the straw men, all of the moving the goalpost, all of that stuff, none of that changes that outcome. And that outcome shows that a risk parity style portfolio that is designed for a high safe withdrawal rate is going to be a better choice for drawing from than a 75-25 portfolio or anything like that that just has two funds. And the only way that's not true is if you have a crystal ball that says that the future is going to be markedly different from the past. Not just a little bit different, but both very different from the past and very different in favor of that portfolio. Because the future could be very different and even more unfavorable to the 7525 portfolio. And that is just as likely or more likely than the 7525 portfolio doing better in the future, simply because that is a much riskier portfolio with a higher exposure to equities. That kind of portfolio, that is a S P 500 heavy portfolio with a large cap concentration like that. If you're going to be using something like that as a retirement portfolio, your real strategy needs to be don't spend much money. Keep your withdrawal rate low. And if you're going to have a withdrawal rate of less than 3%, around 2%, like our blogger friend here, you can do whatever you want. But that's not the point of retirement. The point of retirement is not to accumulate more money until you're dead. All the research about human well-being shows that that is not a good strategy for life. Because that strategy involves you working for your money. The money is the goal. A better strategy for life is to use the money as a tool to fit other goals in your life that include things like giving some of that money away. But that's not what's going on over at early retirement now. It's about big hoarding, that's what it's about. And becoming a bias skeptic to defend that strategy with all the dishonesty that entails. So I appreciate if you're still with me. I'm sorry I had to make this episode, but I figured it would be better just to put this all in one place. Because one thing I know about dealing with bias skeptics is that you shouldn't waste your life fiddling around

Wrap Up And Listener Requests

Mostly Uncle Frank [1:31:40]

with them and only deal with them as much as you have to. I learned this from an interesting place. I read a biography more than 10 years ago about Alfred Russell Wallace. Now who was that? Alfred Russell Wallace was the co-discoverer with Darwin of the theory of evolution. And he lived a very interesting life in the 19th century. He was kind of like this Indiana Jones character running around in the Amazon jungles and often New Guinea and other places, bringing back samples of all kinds of stuff for people to study. But one of the most unfortunate incidents in his life was he got wound up having to deal with a flat earther person, a bioskeptic. And they supposedly were going to run some tests to show that the earth was either flat or round with some surveying equipment. And guess what? The bioskeptic flat earther person cheated, essentially creating some straw man findings that seemed to show that the earth was flat. And this whole back and forth ended up taking up several years of Alfred Russell Wallace's life, a big waste of time, and he regretted it. So learning from that, I did resolve at that time not to spend a lot of time with people in politics or other types of biased skeptics or people believing in conspiracy theories or whatever. And that certainly applies to this particular blogger. Because the problem with these people is they use any interaction with honest people as an excuse to promote themselves. Because they get very jealous when they feel that somebody is taking their spotlight. And this is obvious from particularly this second blog post, where he goes on to talk about how I've been on bigger pockets, forget about money, choose FI, afford anything, and other podcasts. And apparently he doesn't think he's got enough airtime. Well, here's the thing. I was invited to each and every one of those podcasts. I have never asked to be in a podcast like our blogger friend here has, insinuated himself trying to get on my podcast, and I don't know. I assume he's been trying to get on other people's podcasts. The reason I go on other people's shows is because people ask me because I have something interesting to say. If you are a bias skeptic, people get tired of you after a while. They get tired of the dishonesty, and they don't want to be promoting that. Because if they know you're saying false things and you might say them on their show, it just makes them look bad. And it's no wonder with all of these diatribe posts that he's been posting for the past several years that people have become fed up with them and don't want to deal with them. But you know what? That's not my problem. And I'm not interested in doing things that would promote such a person. So in terms of this podcast, I'm only going to deal with him as much as I have to, and hopefully laying down all of this in one show can just refer people back to this, and we really won't have to talk about this person much more again. That's my hope. But if we do, we will be making liberal use of artificial intelligence, which is very good at fallacy spotting. At least that's what I've learned from this process. We will return to our regularly scheduled programming in our next episode. And now, finally, I see our signal is beginning to fade. If you have comments or questions for me, please send them to Frank at RiskPardyRader.com. That email is frank at riskpartywater.com. Or you can go to the website www.riskparty.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. Thank you once again for tuning in. This is Frank Vasquez with Risk Party Radio. Signing off.

Mostly Queen Mary [1:35:35]

The Risk Parody Radio Show is hosted by Frank Vasquez. The content provided is for entertainment and informational purposes only and does not constitute financial, investment, tax, or legal advice. Please consult with your own advisors before taking any actions based on any information you have heard here, making sure to take into account your own personal circumstances.