Voices [0:01]

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.

Mostly Mary [0:17]

A different drummer 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.

Voices [0:49]

Yeah, baby, yeah.

Mostly Uncle Frank [0:51]

And the basic foundational episodes are episodes 1, 3, 5, 7, and 9. Some of our listeners, including Karen and Chris, have identified additional episodes that you may consider foundational, and those are episodes 12, 14, 16, 19, 21, 56, 82, and 184. Whoa, and you probably should check those out too, because we have the finest podcast audience available.

Mostly Mary [1:26]

Top drawer, really top drawer.

Mostly Uncle Frank [1:30]

Along with a host named after a hot dog.

Voices [1:34]

Lighten up Francis.

Mostly Uncle Frank [1:36]

But now onward to episode 389. Welcome to our pre-Christmas Risk Parity Radio special.

Voices [1:44]

Marsh Whoopie Ah. Welcome to our pre-Christmas Risk Parity Radio special. Mush Wubby Ah, wubby, nyah Land how.

Mostly Uncle Frank [2:01]

Actually we're not going to have a pre-Christmas Risk Parity Radio special Wahoo. Actually we're not going to have a pre-Christmas Risk Perry Radio special Woo-hoo Nothing. But we will have some appropriate references sprinkled in the program.

Voices [2:20]

The tradition of Festivus begins with the airing of grievances. I got a lot of problems with you people. Now you're going to hear about it.

Mostly Uncle Frank [2:30]

What we will be doing today is our weekly portfolio reviews of the eight sample portfolios you can find at wwwriskparryraidercom On the portfolios page.

Voices [2:42]

Oh no, not the bees, not the bees, ah.

Mostly Uncle Frank [2:47]

Yes, the bees did come to visit last week. We'll be talking about that a little later. But before we get to that, and first off, we have an email from John.

Voices [3:06]

What are you?

Voices [3:06]

serious, john. You want to do that to the kid. Do what? Hey, john, hey, let's go to the John. Huh, john, let's go.

Mostly Mary [3:16]

Well, wouldn't he outgrow those jokes?

Voices [3:18]

Look, kids are mean. Look, I just want him to have a happy childhood too, but long.

Voices [3:22]

John Silver. I mean, I don't know what to say.

Mostly Mary [3:25]

And John writes Hello Frank, thank you for what you do Very helpful. I just found you a few weeks ago and have listened to your first nine podcasts. I am looking to transition my current portfolio to a risk parity portfolio and now seems the right time to do it near the top of the market. I know that's a guess A bit about me. My wife has been retired for 20 years and is 65. She is 10 years older than me and makes a small income as an artist.

Mostly Mary [3:53]

I am retiring on March 1st 2025 at age 55 and have been a VTI, voo and CHIL for many years across all my accounts and this has served me very, very well. I play with stocks in my taxable brokerage and sell covered calls and cash secured puts to pump gains. I enjoy that as a hobby and intend on continuing in retirement. I bring in a little more than $120,000 per year doing that. As far as assets go, I think I have over-saved a bit. I have maxed everything I could every year for quite some time. My house will be paid for this coming spring and we have no other debt. We have $5.8 million in investments and cash and another $1.6 million in home equity, house contents etc. My wife started Social Security at 65. For $2,500 per month. I will wait until 70 when I will get $5,400 per month. I will receive a pension lump sum of $685,000 this coming week that I was going to roll into an IRA and build it to create my own pension cash flow of $9,000 per month, beginning at age 65.

Mostly Mary [5:03]

I have been contributing $30,000 per year to arrived real estate to build a REIT with properties and the private credit fund for monthly income. I expect that to be about $1,700 per month by age 65. We have a 24-year-old daughter who is finishing grad school and all her costs are covered. We would expect to contribute to goals for her such as a house payment etc. We live in Northern Virginia and our costs are $150,000 for everything life and home related $30,000 for travel and $70,000 in taxes. So $250,000 per year. We would like to travel the world in retirement and maybe live in other countries for two to three months and use those as jumping off points to see the world. We have also started a donor advice fund with Daffy and plan to give throughout our retirement and split the estate between our daughter and charity when we pass.

Mostly Mary [5:54]

This may be too much detail but it brings me to a few questions. One if this was your setup and goals, what would you do? Two now that you have gathered so much knowledge, which portfolio setup would you do? Two now that you have gathered so much knowledge, which portfolio setup would you use Golden butterfly? Three are there other things I should be considering? Thank you so much for spending your valuable time reading this, john.

Mostly Uncle Frank [6:20]

Well, John, you came to the right place.

Voices [6:22]

Yes.

Mostly Uncle Frank [6:23]

Because we live in Northern Virginia and I retired about four or five years ago at age 55 or 56. Surely you can't be serious. I am serious and don't call me Shirley and so I'm well positioned to tell you all about this and what we've done, and what we've been doing without taking up too much time.

Voices [6:42]

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

Mostly Uncle Frank [6:49]

So congratulations on your retirement and welcome to the next adventures in life.

Voices [6:55]

Like a garbage truck dropped off the Empire State Building.

Mostly Uncle Frank [7:02]

So let's talk about your finances here First. It looks like you are over-saved, which is good. Not incredibly over-saved, but well over-saved, because you have $250,000 of expenses and $5.8 million in investments. You probably only need really $5 million to cover that nut. So you basically got $800,000 extra there, but I'm not even including all of this money that's going to come online in the next decade or so, which seems to include about $90,000 in social security payments, another $108,000 in some kind of a pension, $20,000 in some kind of repayments, and then you've also got some trading going on, which I view as a side business that seems to be generating $100,000 a year or more doing that.

Mostly Uncle Frank [7:54]

So the easiest way to look at this would be what do I need in a retirement portfolio just to cover that $250,000? And that answer is about $5 million. So you could take five million dollars of your net worth, set it up in a retirement portfolio and then you have that to cover the 250k. Then you have a whole bunch of options as to what to do with the rest of it and when to spend it, because you're probably going to be wanting to spend more of it early on. You got that extra $800,000, basically, that you could devote to other spending between now and age 65, when all this other money is going to come online. So the upshot is you really don't have financial problems.

Voices [8:34]

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

Mostly Uncle Frank [8:39]

You have many other opportunities to live life, though, and we'll be talking about those in a little bit. So the way we handled this was to move our finances to a conservative portfolio, a risk parity style portfolio, and we did that actually several years before I pulled the plug on full-time employment, and I think you want to get on that now, as soon as possible, because your real risk here is a market crash between now and the time you retire. That goes on for some period of time, because right now, the way your portfolio is set up, you could be in for a decade-long downturn. We see a 1970s or an early 2000s kind of scenario kind of scenario. On the other hand, if you move to a conservative portfolio, one of these risk parity style portfolios, they typically only had downturns of three or four years. So that is the risk that you're facing right now, and if you want to deal with that right now, you need to de-risk your portfolio by moving to something more conservative.

Mostly Uncle Frank [9:41]

What we use as a portfolio is a modification of the golden ratio portfolio, so in its simplest format, that looks like half stocks, which are divided into growth stocks and value tilted stocks, 25% in treasury bonds, 15% in gold and 10% in managed futures. But if you're just looking for some basic guidelines as to what kinds of portfolios tend to yield the highest safe withdrawal rates, we know from Bill Bengen's work 30 years ago and he's going to confirm it and has confirmed it in recent interviews that the portfolios with the highest safe withdrawal rates typically have allocations to stocks that are only 40% to 70%. Now it's very popular for people to have 75 percent or more in stocks these days. I think that's a big mistake, I think it's greedy and I think it doesn't account for the kinds of decades of the early 2000s or the 70s.

Mostly Uncle Frank [10:36]

If you want to do something like that, what you'll probably be doing is what I see most of these Boglehead types and other people doing, which is holding lots of stocks and not spending money. That's a strategy. It'll work fine. I don't think it's a good strategy because you've got to live your life. You need to spend the money, or you should want to spend the money.

Voices [10:56]

Are there no prisons? Plenty of prisons. And the union workhouses? Are they still in operation? They are, I wish I could say they were not. And the treadmill and the poor law? They're still in full vigour, I presume Both very busy, sir. Oh, from what you said at first, I was afraid that something had happened to stop them in their useful course. I'm very glad to hear it. I don't think you quite understand us, sir. A few of us are endeavouring to raise a fund to buy the poor some meat and drink and means of warmth. Why I wish to be left alone. Since you ask me what I wish, sir, that is my answer. I help to support the establishments I have mentioned. Those who are badly off must go there. Many can't go there and some would rather die. If they would rather die, they'd better do it and decrease the surplus population. Besides, it's not my business, Isn't it, sir? No, it is enough for a man to understand his own business without interfering with other people's. Mine occupies me constantly. Good afternoon, gentlemen.

Mostly Uncle Frank [11:57]

Then the other features are to split your stock holdings between growth and value. You can diversify it in many other ways, but just doing that tends to increase the safe withdrawal rate by about half a percent. So between 40 and 70 percent in stocks. Use treasury bonds as your bonds For the longer term holding. It should be intermediate or long-term treasury bonds. As far as cash is concerned, keep it less than 10%. We know, going all the way back to the first Bengen study, that once you started putting more than 10% in T-bills in a portfolio, it decreased or deteriorated as to its long-term performance, and that admonition has held despite the popularity recently of gigantic piles of cash that go on for years and years. I would not advise you do anything like that and then use alternative investments. We have studies going back 100 years now showing that if you add 10 to 15% of gold in a portfolio it tends to increase the safe withdrawal rate Period Full stop.

Voices [13:04]

Didn't you get that memo?

Mostly Uncle Frank [13:06]

You can also add other assets so long as they are uncorrelated with both stocks and bonds, which limits the alternatives to things like managed futures, because things like private equity and private debt are correlated with stocks and bonds, so you would not use those as your alternatives, and if you construct a portfolio along those guidelines with low-cost funds, you can easily have something that has a safe withdrawal rate in excess of 5%, and that's not including using variable withdrawal rate strategies, which can add up to another percent on top of that, which I kind of think of as all the buffer you really need. So that's what we would do, and that's what we're doing right now. But now let's get to the important stuff, because your financial life is pretty much set, as long as you don't screw it up. The only thing that would worry me on your list of potential screw-ups here are either not converting your VTS, ax and chill portfolio to something more conservative, and then whatever you're doing in terms of selling covered calls and that kind of strategy, that can work fine. I don't know what you're doing, though, so I can't comment on it. I would be careful with it in terms of tax efficiency, and try to do that in retirement accounts because the more transactions you have, the more taxes you're going to pay in a taxable account.

Mostly Uncle Frank [14:34]

And the truth is most people who adopt covered call strategies do not actually outperform a buy and hold strategy of the underlying asset over time. There has to be some kind of stock picking going on in there for that actually to create alpha or an outperformance. The trouble is you're not going to see that the underperformance until you get a big dip in the stock market and then a recovery. Because that is where these strategies tend to get behind during that recovery period Because basically you start having your stuff getting called away and you're missing out on the re-appreciation during a quick recovery period, which is generally how these things work when you actually do a market crash. But if you enjoy doing that and you feel confident with it, then continue to have at it. However, do not let that tail wag your investment dog, if you will.

Voices [15:31]

Who let the dog sound? Hoorah, hoorah, hoorah.

Mostly Uncle Frank [15:34]

Hoorah. All right. Now let's talk about the interesting question here, which is the other things you should be considering, because you have a whole host of non-financial things you need to be considering here. You need to both figure out what do you want to do with yourself in retirement and then also, how do you prioritize certain activities based on your current age and what you might be able to do now that you can't do later. And what jumps off the page to me in your email is that you guys want to do some traveling.

Mostly Uncle Frank [16:07]

Your spouse is 65 years old. You need to get on that right away, because you probably only have five really excellent adventure traveling years left and probably 15 of just generally good traveling years left before your wife turns 80. Because I can tell you from observing many 80-year-olds they do not travel as well, they do not enjoy traveling as much as they did when they were younger. So I would probably make that the first priority. Sit down with your wife, make a big list of all the travel adventures you think you want to have in, say, the next decade, and then prioritize those based on how physically strenuous they're likely to be. So if you're going to go to Antarctica, do that soon. If you're going to be doing things at high altitudes places like Peru or Bhutan or Nepal do that soon. You can deprioritize things like cruises or riverboats in Europe, because you can still do those in another decade and you'll still enjoy them just as much. But this tells me another thing your travel budget is probably too little at $30,000 a year. I would add $50,000 to that, at least for the next few years, and really go bonkers on this Travel so much that you get it out of your system.

Mostly Uncle Frank [17:28]

If you've never done high-end travel, do some of that where it's just you and your spouse. You get a whole package. They provide you with guides every day. You just show up in the hotel. They take you places. You do things you don't have to think about any planning whatsoever. We just did one of those in Peru last year for our 30th anniversary. We're doing one with some friends in South Africa this year.

Mostly Uncle Frank [17:54]

But if you've never done that, you should do that. Spend the money on it, because I think your goal should be by the time your wife turns 70, you have done all of the big adventure kind of travels that you think you want to do, and I would not skimp on the cost. Definitely do not do that. You have $800,000 sort of floating out there. You could put that in cash and use that as a gigantic travel budget or whatever else you might want to buy. I know we've been talking about travel because that's what you focused on, but it could be other things and you're going to enjoy them a lot more in the next five or ten years than you will after that. So now is the time. Let's do it.

Voices [18:37]

Let's do it.

Mostly Uncle Frank [18:43]

And your other priority should be whatever your spouse wants to do, because the older person has less life to live, so they should get preference in terms of what the couple is actually doing and in that light, I would also deprioritize anything that you might be doing on your own in terms of travel or time away from home. Now is the time for you guys to be together and having adventures.

Voices [19:11]

Farm boy, fill these with water, please, as you wish.

Voices [19:24]

That day she was amazed to discover that when he was saying as you wish, what he meant was I love you.

Mostly Uncle Frank [19:33]

And even more amazing was the day she realized she truly loved him back it's not time for you to start a new career or a hobby that takes you away from your wife for long periods of time. Now, once you've gotten that out of your system, or at least planned it and prioritized it, then you also need to start thinking about what will you be doing with the rest of your time when you're not traveling, and this does not need to be decided all at once, and it should not be decided all at once. It's something you can ease into over the next few years and basically what you should be doing is making a list of things you think you want to do and then go trying them out and seeing if you like them or not, because it's just as important to not be doing things you don't want to do, like having another job.

Voices [20:24]

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

Mostly Uncle Frank [20:26]

As it is to be doing things. So how do me and Mary spend our time and what things do we like doing? Well, besides this podcast hobby I've got here we also teach a class at Georgetown which we'll start doing next term again. That's in the law school and trial practice. I also serve on the board of a charity. I also still do some legal consulting on the side and I like to ride a bicycle, which I've been trying to do about 100 miles a week at least when it's nice outside. Mary prefers to go to the gym and she has a personal trainer and does a lot of yoga. She is also a court-appointed special advocate, which is kind of a professional volunteer position that assists with children who are removed from various homes, go into foster care and then hopefully are adopted. And we volunteer at church and we do a lot of stuff with family Anarchy.

Voices [21:30]

Anarchy, anarchy. There they are. What in tarnation? Anarchy. I don't even know what that means, but I love it. That is it. I want to explode. I put the lid right on the jar. Mama, no, ricky, no, I will not have my grandbabies acting like shiftless wild hobos. All right, now, you boys listen up and you listen? Good, now I am declaring granny law, and if you do not obey granny law, I will paint your back porch red. We make the rules, not you. Hey Ouch, you're going to break us like wild horses, ain't you?

Mostly Uncle Frank [22:17]

It's the beginning of a new age. Mary is the eldest of six children and there are 20 children in the next generation between the ages of 1 and 30. And that's just her side of the family. For more on this and what I do, I would invite you to go listen to my last Choose FI episode. It's episode 508 of that podcast, the Choose FI podcast, where I talk about my general approach to life. At this point in time, I think there's two things you should think about trying to avoid or not get wound up in. One is creating another hero's journey out of whatever you're doing next. And especially, don't start a business Unless you really really wanted to do that and you've been thinking about it for a long time. But there is an unfortunate tendency, I see, that people who have hobbies suddenly think that they need to monetize them to make them more meaningful. That is generally not true.

Voices [23:23]

That's not how it works. That's not how any of this works.

Mostly Uncle Frank [23:27]

You've been on a hamster wheel and the point of being retired is that you don't have to do things for money anymore, you don't need to monetize your life anymore. So I would be focused more on things that are likely to enhance your relationships with other people, and also things that are of some kind of creative expression, and to make your decisions about what to do and how to spend your money based on those kind of priorities. So some resources. My favorite one is actually the Five Regrets of the Dying by Bronnie Ware, because what people do tend to regret at death is not developing their relationships more, not engaging in personal expression and working too hard for money. And so, if you, charlie, munger that question as to inverting it. So how do I avoid the five regrets of the dying? You do that by focusing your efforts on developing and maintaining relationships and personal expression. That is separate and apart from any need to make money out of something.

Mostly Uncle Frank [24:34]

There are three books that I like to refer people to actually four books now, about the transition to retirement. There are two by Arthur Brooks. One is called Strength to Strength. Another one's called Build the Life you Want. They're relatively recent. They are both very good. He's an excellent writer and he also brings together and melds both Eastern and Western philosophies. He's also been on a lot of podcasts interviewed about these books, and on YouTube you can look that up if you just want to get a flavor for the books before reading them. Another one I would read one of my older favorites is by Richard Rohr. It's called Falling Upward. It is also about the transition from one career or life into another phase of life where you have to go back and kind of relearn things or learn new things. And then there's also one by James Brooks called the Second Mountain, which also deals with a lot of these kinds of issues, although I think the first three that I mentioned are better than that one.

Mostly Uncle Frank [25:37]

Now there are new books coming out in this genre all the time. They mostly say the same kinds of things. After you've read a few of them, they all seem to get back to some of these five regrets of the dying, in my view. Most recently there's a new one out by Daniel Pink. It's called Regret. Now you learn from regret. There's one by Daniel Crosby called the Soul of Wealth. Both of them have been interviewed recently on podcasts. And then there is a new one from the FI community by Jordan Grumet, called the Purpose Code that I think will be coming out in January, and I would go ahead and read enough of those kinds of books in that genre to get a feel for what works and what doesn't in a life that is not career-focused or is no longer career-focused.

Mostly Uncle Frank [26:27]

Another area that I think you should look into, if you haven't looked into it already, is the topic of flow states, as in how do we do things that get us in this kind of zone or feeling of complete integration with our surroundings or whatever activity we're involved with. The best writer on that these days is somebody named Stephen Kotler, k-o-t-l-e-r, and he wrote a book called the Art of Impossible, which is more about getting into flow states to create things in a more of a career setting. But I would just read the chapters that are just about flow states themselves. And if you want to go all the way back, you read Mihaly Csikszentmihalyi's book Flow, which is what started all of that as a topic Because that's also a goal that I have is how can I do things that get me into flow states? And so, after you've read some of those books and gone on some traveling adventures, you can come back and start trying out new things. You do seem to be a prime candidate to be on a board of a charity.

Voices [27:56]

The pleasures are unlimited.

Mostly Uncle Frank [27:59]

But I'd let that one ruminate for a little while. I will tell you it's much more gratifying to actually be involved with an organization that you are giving money to than it simply is to give money to something.

Voices [28:12]

It's all the same to you.

Mostly Mary [28:15]

I'll drive that tanker.

Mostly Uncle Frank [28:19]

All right now just finishing up here with a couple more points. In your email you mentioned your 24-year-old daughter. I would start funding her Roth IRAs as long as she's got income, because that's a good way to transfer some of the wealth and also to have nice discussions with her about investing.

Voices [28:39]

No more flying solo. You need somebody watching your back at all times.

Mostly Uncle Frank [28:44]

And then you can think about what other advancements on the inheritance you want to provide and at what intervals. But that always depends on the child themselves and their capabilities. And then there's always the question of where you want to live. We enjoy living in Northern Virginia. We actually live very close to Tyson's Corner, and so I view this as kind of one of the most convenient places on the entire planet that one could live, given the proximity to airports, anything you'd ever want to buy and many other things. But maybe you don't want to live around here anymore or would prefer to live somewhere else, and I would be thinking about that.

Mostly Uncle Frank [29:19]

I don't think it's a big rush, but we've also thought about when are we going to downsize this big house? Right now we have lots of people coming here. We like to entertain, we like to have large family gatherings and other things going on here. So we're planning to stay put for another decade or so, but after that we'll probably downsize and move somewhere near wherever our children are or hopefully, grandchildren by then. But that's just another consideration you may want to make, and maybe you kind of do what we do, which is wait and see what your daughter's going to be doing and where she's going to be located, and then think about whether you want to move closer to wherever that is. That's probably at least five or ten years down the road for you, but I think I've now covered everything, or most everything you wrote about Oof. Hopefully at least some of that helps, and thank you for your email.

Mostly Mary [30:22]

Second off.

Voices [30:34]

Second off. We have an email from Jane Jane Jane Jane Jane, jane, jane, jane Jane Jane Janeosit Jane Posit, jane Posit, jane Posit.

Mostly Uncle Frank [30:45]

And Jane writes.

Mostly Mary [30:47]

Hi, could you do an episode on QSPNX? My summary is that it is an extended trend version of DBMF, slash KMLM, with only 0.2 correlation to these and no correlation with stocks and bonds. Sure, this version is rather expensive. Who is taking a cut? And a minimum $2,500 investment? But we are not judging investments based on their individual results only, but on their place in the portfolio. I'd like to hear your thoughts if this could have a place in a portfolio.

Voices [31:20]

Jane.

Voices [31:20]

Oh, please stop, Let me go. I can't bear this.

Mostly Uncle Frank [31:25]

Well, I probably will not do a whole episode on QSPNX, but we can talk about it here. First of all, what is QSPNX? Qspnx is a mutual fund run by AQR, which is Cliff Asness's hedge fund shop and mutual fund shop. It is called the AQR Style Premia Alternative Fund. I will link to in the show notes their website, which is very informative, and I would recommend you download the fact sheet and summary prospectus at least. So this thing employs a lot of alternative strategies involving value, momentum, carry and defensiveness. That's how they describe it.

Voices [32:08]

It's an entirely different kind of flying altogether. It's an entirely different kind of flying.

Mostly Uncle Frank [32:15]

So it is a fund of alternative strategies and where would it go in a risk parity style portfolio? It would go in that alternative category with gold or managed futures, those sorts of things. Now it does have a lot going for it and a few drawbacks, as you've observed and as I've looked up in Testfolio myself. It does have a very low correlation with both stocks and bonds. It's effectively uncorrelated with them. So it fits squarely in the alternative category, and I mean good alternative category. So it checks the box there. It also has decent returns that are similar to a managed futures fund and it's been around over a decade and is well managed.

Mostly Uncle Frank [33:00]

Now, on the drawback side, there are basically two drawbacks. One is this is a very complex managed fund and I really cannot describe what exactly it's doing at any given point in time because it's involving a number of separate strategies that are basically being put on and off by somebody who is presumably monitoring something. It is not an index fund. It is a very much managed strategy fund that is similar to the kinds of things that a pension fund would hire a alternatives manager to do alternatives manager to do and this kind of fund is specifically designed to be a small allocation in a very large kind of family office kind of portfolio. What this means is I don't have any good way of telling you whether its past performance is going to be indicative of its future performance, because it's so complicated and you really are relying on the managers at AQR, who are probably the best managers in the world that you have access to, to do this sort of thing. So if you're going to use a fund like this, this is a good choice to make.

Mostly Uncle Frank [34:13]

The other issue, though, is that it's expensive. This variation of the fund carries an adjusted expense ratio of 1.76. So it's about as expensive as a fund in this area as you can find these days. It looks even more expensive in some of the documents, but it has to do with the way leverage is accounted for in this fund and some of the long-short strategies that it's employing. And that expense ratio is the biggest drawback here, because, obviously, whatever these managers are doing, they have to beat that nut before you get any returns out of it. That being said, even with that kind of expense ratio, it has performed adequately in its category, if you will. So the bottom line is can you use this in a risk parity style portfolio. The answer is yes as one of your alternatives.

Voices [35:05]

Yes.

Mostly Uncle Frank [35:06]

I would not carry a very large exposure to it simply because of that fee, and it's not something I would personally use, simply because I don't have a whole lot of confidence as to how it's going to perform in the future, as it is based on manager skill and not on some index or pseudo index like something like DBMF. But if I were to see it in somebody's portfolio, I would say, well, that looks like it'll work for that purpose and if you feel comfortable with it in that role, you could certainly use it that way. I'm actually kind of hopeful that AQR will finally break down and start creating ETFs out of these old mutual funds, because that would really be the bee's knees.

Voices [35:49]

This is great. This is the bee's knees.

Mostly Uncle Frank [35:52]

item nine and to me that is kind of where all of this is going. I'm not sure Cliff Astis is prepared to do any such thing, but you never know. I've seen enough.

Mostly Uncle Frank [36:05]

Shut it down, bury the hatch, sell the land and dispose of him. This never happened. Things have been changing, and if DFA was kind of forced to do it, I think others, like AQR, may feel the need as well, because they're likely going to be undercut by other people who are creating similar products in an ETF form that's cheaper to use, like Avantis did to DFA.

Voices [36:33]

You seem a decent fellow, I hate to kill you. You seem a decent fellow. I hate to die.

Mostly Uncle Frank [36:41]

You seem a decent fellow. I hate to die, so I know that wasn't a full episode, but it's probably enough and thank you for your email.

Voices [36:49]

Help Help Jake stop this crazy thing.

Voices [36:55]

Jake Help, help.

Voices [37:00]

Last off.

Mostly Uncle Frank [37:02]

Last off an email from Christoph Christoph K From a Deutschland email address.

Voices [37:11]

Ausgesichert.

Mostly Uncle Frank [37:13]

And Christoph writes.

Mostly Mary [37:15]

Hello Frank, I just listened to Risk Parody Radio, episode 16, and what you are saying from minute 4 to 7. Do you still believe the same is true? It is so eye-opening listening to that four years later. Greetings, christoph. But first we have a special guest, rainier Wolfcastle, star of the reprehensible.

Voices [37:37]

McBain movies. Jay, my new film is a mix of action and comedy. It's called McBain let's get silly. Did you ever notice how men always leave the toilet seat up?

Mostly Uncle Frank [37:50]

All right, just to orient people, what was I talking about in minute four to seven in episode 16?

Voices [37:57]

That's the joke.

Mostly Uncle Frank [37:59]

That was an episode about bonds, and what I was talking about in particular there was that timing interest rates, or attempting to time interest rates, is generally a fool's errand just as trying to time the stock market is a fool's errand just as trying to time the stock market is a fool's errand. Laughing time is over, yet timing interest rates is a very popular sport and is very much encouraged by lots and lots of the financial services industry, including a lot of people who ought to know better, and there are a lot of loud voices on both sides of this. These are the kinds of experts that Philip Tetlock refers to as hedgehogs, people who have this kind of one-world view that they continually promote.

Voices [38:43]

The film is just me in front of a brick wall for an hour and a half. It cost $80 million. How do you sleep at night On top of a pile of money with many beautiful ladies?

Mostly Uncle Frank [38:56]

And so that ends up in this context as people who are constantly predicting recessions and lower interest rates. Nice to see you. And then, on the other side of that, you are having people that are constantly predicting inflation and having higher interest rates.

Voices [39:14]

Excellent With McBain out of the way. Nothing can stop us.

Mostly Uncle Frank [39:19]

And, of course, whatever happened recently, whatever side is correct, will stand up and say see, I knew it was going to happen and I predicted it. Aren't I brilliant? The geek shall inherit the earth. However, in most cases, they've been predicting the same thing for a decade or more, and if you are just predicting the same thing over and over again, waiting for it to come true, you're not good at predicting anything. Forget about it. That is just a broken clock syndrome. But what this has led to is a lot of people trying to market time, interest rates or market time, jumping in and out of various fixed investments. We saw a lot of really bad moves, particularly by amateurs, in the past couple of years, where, after 2022, a lot of people jumped out of their stock saying, oh look, I can get 5% short-term interest rates, and so they put all their stock money into something like that, and then they missed out on the rallies of 2023 and 2024 and screwed themselves.

Mostly Mary [40:24]

That's not an improvement.

Mostly Uncle Frank [40:26]

And the same thing happens with all kinds of attempts at market timing. Moving up and down the yield curve is another thing that I see people trying to do, and so, no, I still don't think that's a good idea, because if you're planning a portfolio of fixed allocations or relatively fixed allocations for a long period of time I'm talking decades what goes on with interest rates in any particular year is not a reason for jumping in and out of various fixed income investments or jumping up and down the yield curve. You're much better off simply rebalancing in or out of these things as the interest rates fluctuate, because we are more interested in decades-long fluctuations and not what goes on in any one to three year period. So, yes, I still believe that market timing interest rates is a bad idea, no matter how shiny that crystal ball is that you have.

Mostly Mary [41:23]

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

Mostly Uncle Frank [41:29]

That, I'm sure, is telling you exactly what inflation, interest rates and the possibility of recessions is going to be in the next one, three, five or ten years.

Mostly Mary [41:40]

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

Mostly Uncle Frank [41:45]

Because unless you actually believe in that crystal ball, it probably has not worked in the past. Most of them haven't. You are just on a fool's errand.

Mostly Mary [41:54]

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

Mostly Uncle Frank [41:58]

And I do note that just about anyone who has declared victory in predicting higher interest rates has been doing so for over a decade, and so if you are wrong for a decade and then you happen to be right, you're still just wrong. Wrong Because, according to a lot of those people, our long-term interest rates should be 6%, 7% or 8% today, based on what they said last year.

Voices [42:23]

Right Wrong.

Mostly Uncle Frank [42:25]

So, yes, it's still true. I still believe that you should pick an allocation to the bonds you're holding, stick with it and just rebalance in and out of it over time.

Voices [42:34]

I can't avenge my partner's death with this pea shooter. I don't want to hear it, McBain.

Voices [42:39]

That tenon of yours is against regulations. In this department we go by the book.

Voices [42:46]

By book. All right, mcbain, bye book, bye.

Mostly Uncle Frank [42:50]

Hopefully that clarifies that Meeting adjourned and thank you for your email.

Voices [42:56]

He certainly broke up that meeting.

Voices [42:58]

Right now I'm thinking about holding another meeting in bed, oh.

Voices [43:04]

McBain, and now for something completely different.

Mostly Uncle Frank [43:10]

And the something completely different is our weekly portfolio reviews, of the eight sample portfolios you can find at wwwriskparityreviewcom on the portfolios page. And it seems like we doubled down on the mid-December doldrums at least last week, I think the Dow was down what? 10 days in a row.

Voices [43:30]

Until you pin me, George, Festivus is not over.

Voices [43:34]

Oh, please someone stop this.

Mostly Uncle Frank [43:37]

Let's rumble. I read something that was the longest streak since 1974, in that all of our gains since the election have been wiped out and it's gone Poof, which means a lot of these asset classes are only up about 25% on the year instead of 30%. The Santa Claus rally may have started on Friday. We'll see what happens next week.

Voices [44:02]

Where's that money? You silly, stupid, old fool, where's that money? Do you realize what this means? It means bankruptcy and scandal and prison. That's what it means.

Mostly Uncle Frank [44:14]

But looking at how bad it was last week, the S&P 500 was down 1.99% for the week. The NASDAQ was down 1.75% for the week. Small cap value, represented by the fund VIOV, was down 4.97% for the week. However, there was a dividend distribution in that fund that's going to be paid next week. That amounted to 1.79% of that. Gold was down a little. Gold was down 0.95% for the week. Long-term treasury bonds, represented by the fund VGLT, were down 1.67% for the week. Reits, represented by the fund REET, were the worst performers last week. They were down 5.29% for the week. However, that also does include another dividend of 3.72% that's going to be paid next week. So a lot of these are a little bit distorted on a weekly basis. Commodities, represented by the fund PDBC, were down 1.85% for the week. Preferred shares, represented by the fund PFFV, were down 0.42% for the week and managed futures managed to be down only 1.07% for the week, at least, as our representative fund DBMF was. I think the KMLM managed futures fund was actually up last week, at least until Friday. Now moving to these portfolios, which actually look a little worse than they are, simply because a lot of dividends were declared last week but will not be paid until this week, which means things look artificially worse this week and will look artificially better next week.

Mostly Uncle Frank [45:48]

With that being said, we move on to the first one. This is the all seasons. It's a reference portfolio. It is 30% in stocks and a total stock market fund, 55% in treasury bonds divided into intermediate and long-term, and 15% in golden commodities. It was down 1.62% for the week. It's up 7.34% year-to-date and up 8.97% since inception in July 2020.

Mostly Uncle Frank [46:16]

Moving to these kind of bread-and-butter portfolios, first one's Golden Butterfly this one is 40% in stocks divided into a total stock market fund and a small cap value fund. They both distributed dividends or will be this week. It's got 40% in treasury bonds divided into long and short, and 20% in gold. It was down 2.06% for the week. It's up 11.44% year-to-date and up 34.32% since inception in July 2020. Next one's golden ratio this one's 42% in stocks divided into three funds 26% in a long-term treasury bond fund, 16% in gold and 10% in a REIT fund, and 6% in cash. It was down 2.1 to 5% for the week. It's up 11.63% Year-to-date. It's up 30.66% since inception in July 2020. Year-to-date, it's up 30.66% since inception in July 2020. Next one's, risk Parity Ultimate. I'm not going to go through all 15 of these funds. It was down 2.42% for the week. It's up 12.45% Year-to-date. It's up 20.03% since inception in July 2020. Now moving to these experimental portfolios involving leveraged funds. Don't try this at home.

Voices [47:33]

Well, you have a gambling problem.

Mostly Uncle Frank [47:36]

First one's an accelerated permanent portfolio. This one is 27.5% in a levered bond fund, tmf, 25% in a levered stock fund, upro, 25% in PFF, a preferred shares fund, and 22.5% in gold GLDM. It was down 3.61% for the week. It's up 12.2% year-to-date and up 2.82% since inception in July 2020. Next one's the aggressive 50-50. This is the most levered and least diversified of these portfolios. It's one-third in a levered stock fund, upro, one-third in a levered bond fund, tmf, and the remaining third in PFFV, a preferred shares fund, and VGIT, an intermediate treasury bond fund. It's down 4.11% for the week. It's up 9.75% year-to-date and down 9.99% since inception in July 2020. Basically, down about 10% in the last two weeks, but that's what lots of leverage does to you.

Mostly Uncle Frank [48:34]

Next one's the levered golden ratio. This one's 35% in a composite fund, ntsx that is, the S&P 500 and treasury bonds levered up 1.5 to 1. Got 25% in gold, 15% in a REIT fund O, actually an individualIT O 10% each in a levered bond fund, tmf, and a levered stock fund, tna, and the remaining 5% in KMLM, a managed futures fund. It was down 3.62% for the week. It's up 11.3% year-to-date and down 3.8% since inception in July 2021. And the last one is our newest one, the Optra portfolio. This one is 16% in a leveraged stock fund, upro, 24% in a composite worldwide value fund, avgv.

Mostly Uncle Frank [49:26]

That threw out a big distribution over the weekend or will be coming over the weekend. It's got 24% in a Treasury Strips Fund, govz, and the remaining 36% divided into gold and a Managed Futures Fund. It's down 4.08% for the week, including those distributions that haven't appeared yet. It's up 3.76% year-to-date and up 3.76% since inception, which was only in July 2024. And that concludes our portfolio reviews for the week. We'll see how this all actually pans out after we get the money from the distributions next week. But now I see our signal is beginning to fade. Just a little programming note this will be going out probably the Monday before Christmas and there probably won't be another episode for about another week. I believe we'll be having our traditional Talladega Nights Christmas dinner on the Monday before.

Voices [50:26]

Christmas.

Mostly Uncle Frank [50:28]

Which is always a feast of epic proportions.

Voices [50:33]

Dear Lord, baby Jesus, or as our brothers to the south call you, jesus. We thank you so much for this bountiful harvest of Domino's, kfc and the always delicious Taco Bell.

Mostly Uncle Frank [50:48]

Generally washed down with some Pabst Blue Ribbon.

Voices [50:51]

Shake and bake.

Mostly Uncle Frank [50:53]

I hope you all have a nice Christmas If you celebrate Christmas, and a nice holiday if you don't.

Voices [50:59]

I like to picture Jesus in a tuxedo t-shirt because it says like I want to be formal, but I'm here to party too, because I like to party, so I like my Jesus to party.

Voices [51:09]

I like to picture Jesus as a ninja fighting off evil samurai.

Voices [51:13]

I like to think of Jesus like with giant eagle's wings and singing lead vocals for Leonard Skinner with like an angel band and I'm in the front row and I'm hammered drunk hey Cal, why don't you just shut up?

Voices [51:26]

yes, ma'.

Mostly Uncle Frank [51:28]

In the meantime, if you have comments or questions for me, please send them to frank at riskparityradarcom. That email is frank at riskparityradarcom. Or you can go to the website, wwwriskparityradarcom. Put your message into the contact form and I'll get it that way. If you haven't had a chance to do it, please go to your favorite podcast provider and like subscribe. Give me some stars, a follow, a review. That would be great. Okay, thank you once again for tuning in.

Voices [52:05]

This is Frank Vasquez with Risk Parity Radio signing off. That sounds like a good day.

Voices [52:07]

Texas Ranger. How about you? Well, the teacher asked me what was the capital of North Carolina. I said Washington DC.

Voices [52:14]

Bingo Nice.

Voices [52:15]

She said no, you're wrong. I said you got a lumpy butt. She got mad at me and yelled at me and I pissed in my pants and I never did change my pee pants. All day I'm still sitting in my dirty pee pants.

Voices [52:27]

I whipped my bed until I was 19. There's no shame in that.

Voices [52:31]

Hey Cal, why don't you just shut up?

Mostly Mary [52:34]

Yes ma'am, 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.