Mostly Mary [0:01]

A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines.

Mostly Uncle Frank [0:10]

If a man does not keep pace with his companions, perhaps it is because he hears a different drummer, a different drummer.

Mostly Mary [0:19]

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

Mostly Uncle Frank [0:37]

Thank you, Mary, and welcome to Risk Parity Radio. If you are new here and wonder what we are talking about, you may wish to go back and listen to some of the foundational episodes for this program.

Voices [0:50]

Yeah, baby, yeah.

Mostly Uncle Frank [0:52]

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 [1:27]

Top drawer, really top drawer.

Mostly Uncle Frank [1:31]

Along with a host named after a hot dog.

Voices [1:34]

Lighten up Francis.

Mostly Uncle Frank [1:37]

But now onward to episode 445. 1945. Mary and I are pleased to be back from our sojourn to Greensboro, north Carolina to visit our middle son. Hmm, I sense no danger here. How could they be dangerous?

Voices [1:57]

They're covered with free cheese. All I know is Mr Krabs said, Patrick, don't do that.

Mostly Uncle Frank [2:16]

I'm happy to report we survived 1 am, karaoke at a local watering hole and a few other adventures.

Voices [2:19]

I bet there's rich folks eating from a fancy dining car. They're probably drinking coffee and smoking big cigars.

Mostly Uncle Frank [2:26]

Including seeing the largest bureaus in High Point, which are building sized.

Mostly Mary [2:32]

It's top drawer, really top drawer.

Mostly Uncle Frank [2:36]

And so we are ready to get back and tend to your emails.

Voices [2:40]

So, without further ado, here I go once again with the email.

Mostly Uncle Frank [2:46]

And First off. First off, we have two emails from John.

Mostly Mary [2:52]

Um, how about, John? That's nice and simple.

Voices [2:55]

What are you serious?

Mostly Mary [2:57]

Well, yeah.

Voices [2:58]

John, you want to do that to the kid.

Mostly Uncle Frank [3:01]

And for his first entreaty, john writes Hello Frank and Mary, greetings from Charlottesville.

Mostly Mary [3:09]

I've recently immersed myself in your podcast after Frank's name was mentioned several times and or interviewed on the Afford. Anything, choose a Fi and Catching Up to Fi podcasts.

Voices [3:19]

That is the straight stuff. Oh funk master.

Mostly Mary [3:22]

I started with the newest 10 to 20 episodes of Risk Parody Radio, then went back to the beginning as Vizzini said, inconceivable and I'm now up to 222 toward the end of 2022. It's been great fun to binge, listen and hear the evolution of the pod. You're insane. Gold member. Some highlights that I've written down so far. One the stark introductory episodes with no soundbites and lots of reading of percentages and fun names. I gotta tell you those were a little rough to get through. I survived by inserting the appropriate soundbites in my mind.

Mostly Uncle Frank [3:58]

No more flying solo.

Mostly Mary [4:00]

I may do an edit of an episode at some point for fun to set it right. Two a complete game changer. The standardization of massive quantities of sound bites. Somewhere around episode 70 or 80.

Voices [4:12]

Expect the unexpected.

Mostly Mary [4:14]

Four of five dentists say the sound bites are a feature, not a bug.

Voices [4:18]

You need somebody watching your back at all times.

Mostly Mary [4:21]

Three more cowbell equals more small cap value starting around episode 150. I got a fever and the only prescription is more cowbell. Before then, cowbell was used several times but for various purposes, before finally setting naturally on SCV Babies before we're done here, y'all be wearing gold-plated diapers. Four consistently plugging the Father McKenna Center starting around episode 170. I'll donate soon.

Voices [4:52]

I need to feel you, jerry, show me the money. Jerry, you better yell, show me the money.

Mostly Mary [4:59]

Five, the dive bar analogy starting in episode 206.

Voices [5:04]

Sometimes you want to go where everybody knows your name. The dive bar analogy starting in episode 206.

Mostly Mary [5:12]

As an inexperienced investor, it took me some time to wrap my head around the ideas of risk parity uh, what? Asset class diversity and assembling portfolios that help to maximize safe withdrawal rates versus maximizing growth accumulation?

Voices [5:28]

We had the tools, we had the talent.

Mostly Mary [5:32]

Naturally, I looked for a sporting analogy and I think I found one in sailing. I'm not any kind of sailing expert I spend my money on bicycles, not boats but my understanding is that a sailboat and skilled crew can make forward progress in just about any kind of wind by using the ideal sail for the conditions and using it in the right way. Sometimes the wind is a stiff tailwind and sometimes a crosswind and sometimes a headwind, so the amount of forward progress can vary a lot, but there can almost always be forward progress unless there is truly no wind or there's such a big storm that you get blown off. Course the amount of forward progress can vary a lot, but there can almost always be forward progress unless there is truly no wind or there's such a big storm that you get blown off. Course the money in your account it didn't do too well it's gone. It's not a perfect analogy, but it works for me and perhaps might be useful for other novices, as long as they have a rough understanding of sailing.

Mostly Mary [6:24]

One of the benefits of listening to older financial podcast episodes is the benefit of hindsight. I've had more than a few chuckles at some of the emails that Mary has read, knowing what was to come in the future. But this one I listened to today had me rolling. And an email from Rick in episode 219, 11-23-2022. Rick wrote gold, you seem to love it.

Voices [6:46]

I love gold.

Mostly Mary [6:50]

However, lately it is proving to be a waste of space in a portfolio. It has only one job and it's not doing it. Isn't it part of the foolish consistency thing you advocate against to keep adding this useless asset class to our portfolios? Yeah, sure it helped in the past, but in this day and age shouldn't we update our concepts?

Voices [7:09]

That one didn't age quite so well.

Mostly Mary [7:12]

From that point in 2022 until the end of June 2025, gold has had a compound annual growth rate of about 28%.

Mostly Uncle Frank [7:21]

Bow to your sensei. Bow to your sensei.

Mostly Mary [7:24]

I don't actually have a question to ask yet. I just wanted to say hello, Say thank you for giving us the gift of financial information, knowledge and wisdom that you've been able to share, along with the gift of your humor.

Voices [7:35]

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

Mostly Mary [7:41]

If you're ever down in Charlottesville and have some time aside from visiting family, I'd love to meet up and buy you a cold can of beer at a local dive bar.

Voices [8:02]

Beer. Best wishes, John.

Mostly Uncle Frank [8:03]

And for his second missive, john also writes Hi Frank and Mary.

Mostly Mary [8:10]

I just made a donation yesterday, july 31st, to the Father McKenna Center. I hope I made it in time to add to the Top of the T-Shirt campaign.

Voices [8:19]

Yeah, baby, yeah.

Mostly Mary [8:25]

Please add episode 436 to the list of foundational episodes. I recently finished listening to the entire back catalog, including at least a dozen repeats, and I would rank number 436 as a must listen. I'll follow up later with some more serious questions, but for now I have several risk parody questions that I would depreciate your thoughts on. Oh boy, is this great One. I've heard quite a bit about lazy portfolios on the internet, and then I listened to an investing podcast about a one fund ETF for people who aren't lazy but have so much money they just care. The ticker symbol is DGAF, thoughts Two I'm thinking about getting into REITs and recently found out about a niche REIT fund that invests in privately owned landfill sites Weird right. Ticker symbol is GIGO. Should I invest? Three I read a recent white paper by Oswald the Motorhead that alleges Big Pharma, along with the French, are behind the recent decade's mediocre performance for cowbells.

Mostly Mary [9:35]

I gotta have more cowbells I gotta have more cowbells and that they, big Pharma and the French, were secretly planning to somehow contaminate US cowbells in order to boost theS cowbells, in order to boost the price of French cowbells during next year's Tour de France bicycle race. Is this even possible? Is there an EFT for this Four? I'm confused about safe withdrawals. I'm planning to quit amphetamines, quit drinking, quit smoking and quit sniffing glue. Should I do it all at once or sort a dollar cost average my way out? Keep up the great work, john.

Mostly Uncle Frank [10:15]

Well, john, sounds like you are fully immersed in what we do around here.

Voices [10:20]

We're signing, signing, signing.

Mostly Uncle Frank [10:23]

And still kicking a bit. You think anybody wants a roundhouse kick to the face while I'm wearing these bad boys. Regarding your first email, I don't think I've ever had somebody do a summary of the podcast from the beginning. Now, that was weird wild stuff. From the beginning, that was weird wild stuff. But you have to realize that at the beginning there wasn't anybody listening to this podcast, so I didn't have any emails to respond to.

Voices [10:49]

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

Mostly Uncle Frank [10:53]

And it was really a COVID project. I thought I'd make maybe 100 episodes and lay down some things that I wanted to preserve for our adult children. Why?

Voices [11:05]

What have children ever done for me?

Mostly Uncle Frank [11:07]

The soundbites came a little later, when I ran across something called the 4K Downloader, which allowed me to download all kinds of things from all kinds of sources Gosh, kinds of sources, gosh.

Voices [11:30]

And I suppose, unlike most podcasters, I do all of my own editing, which I actually enjoy, believe it or not.

Mostly Uncle Frank [11:41]

So it was a natural extension. Once I got some positive feedback, which actually occurred very soon after I made the first ones at least my family found it a lot more interesting, don't?

Mostly Uncle Frank [11:54]

ever take sides with anyone against the family again and I don't think I was actually on the board of the Father McKenna Center until about six or eight months into the podcast and that just kind of evolved with the emails and kind of trying to find a way to prioritize them. I also had this support page, which in most cases people are actually trying to collect money to fund their podcast, but it didn't seem to make sense, given how cheap my production values are, that I really needed that kind of support. This is pretty much the worst video ever made and it is much more fun and rewarding simply to funnel the money to a good cause.

Voices [12:40]

What are we doing here? You promised you'd visit the penguin the day you got out. Yeah, so I lied to him. You can't lie to a nun.

Mostly Uncle Frank [12:57]

We've got to go in and visit the penguin. Your sailing analogy actually is quite an apt one for what we do around here. If you go back to those first episodes where we're talking about the history of risk parity and the all-weather portfolio from Bridgewater, the whole idea there was to come up with a portfolio that had assets that would do well in each kind of economic weather you might regularly experience. And so you end up with a four-quadrant model and then some other graphs and things showing which assets perform well in which kind of economic environments, and then, using that information, you construct a portfolio with it that has some of everything, so that it will not ever get stuck, even if there isn't much wind at all or it's going in the wrong direction. Oh, mr Marsh, don't worry, we can just transfer money from your account into a portfolio with your son and it's gone.

Mostly Uncle Frank [13:51]

I'll link to a nice blog post that one of my listeners did talking about the whole topic, and it does have the nice graph of the four quadrants with a bunch of assets situated on it, but I think that's a nice graphical representation of what we're trying to do here in terms of diversification. Now, as for my listeners' predictions, yes, they are kind of amusing sometimes. So are you ready? Yeah, hold on. I forgot to put in the crystals. Okay, turn it on.

Voices [14:24]

I forgot to put in the crystals. Okay, turn it on. Kill, kill, turn it off, turn it off. It's a piece of crap, it doesn't work. I could have told you that crap.

Mostly Uncle Frank [14:45]

It doesn't work. I could have told you that one thing I've assiduously tried to avoid is trying to predict future economic environments, because the whole idea of having a very diversified portfolio is you shouldn't have to do that and you'll still be okay crystal ball can help you, it can guide you but I've noticed there are essentially two arguments that people will make when they don't want to invest in some asset that is unfamiliar to them or they just dislike for whatever reason, and the first one is well, look how poorly this asset has performed recently.

Mostly Uncle Frank [15:19]

It must be done, I guess, forever in time, and so one set of investors will give that reason for not investing in something, and then another set will say, oh, look at how well this has performed recently. It must be too high for me to invest in. And so if you go through the whole history of this podcast, particularly for things like gold early on, you'll get these comments that, oh, look at this, it hasn't really done much recently. But nowadays the people that don't want to invest in are like oh gosh, it's too high now for me to invest in. It's funny they never say that about things that they already invest in, even though the same logic certainly applies to stock market index funds or whatever other investment that you might consider.

Mostly Uncle Frank [16:07]

Of course, the favorite bad boy these days is treasury bonds, because, yes, they've had a terrible run for the past five years. Really, it's only been that one year, but that makes up for most of the performance in the last five. But if you really take a long-term perspective on this, as in decades long, you'll recognize that all assets go through bad decades essentially and that includes the stock market, which might have decades like the early 2000s or the 1970s or the 1930s. But if you're planning for worst case scenarios, that is what you need to plan for, because when the stock market's doing well, pretty much all portfolios will earn enough to cover whatever safe withdrawal rate you want them to cover.

Mostly Uncle Frank [17:02]

Anyway, there are lots of good examples of the Dunning-Kruger effect in action with respect to amateur investors talking about various asset classes that they are unfamiliar with, particularly if their knowledge comes primarily from the realm of popular personal finance and they've never gone beyond that to actually look at what professionals do and say and why they do and say the things they do. Fat, drunk and stupid is no way to go through life. Son, we do get down to Charlottesville on occasion to visit our eldest son when he's not up here. Too bad, that didn't kill me.

Mostly Mary [17:28]

No, Squidward, I meant good for your soul.

Voices [17:34]

Oh, please, I have no soul.

Mostly Uncle Frank [17:38]

And I'll be sure to look you up. Now, getting to this second email, the Inquisition.

Voices [17:45]

What a show, the Inquisition.

Mostly Uncle Frank [17:48]

Here we go and your Jolly Joker questions.

Voices [17:54]

I'm funny how I mean funny, like I'm a clown. I amuse you.

Mostly Uncle Frank [17:58]

First, the lazy portfolio D-G DGAF. Well, my thoughts are. I better not say what I think it means. I do try to avoid certain words. I thought it would be more amusing, though, to compare that to something with the most complicated name, and so I asked ChatGPT to find me the current annuities on sale with the most complicated names because only one thing counts in this life get them to sign on the line which is dotted and came up with this one which I thought this is too good to be true.

Mostly Uncle Frank [18:39]

It's called the power series index annuity with lifetime income plus multiplier flex multiplier flex fortune favors the brave and I'm sure the commission is charged based on the number of words in the name of this thing always be closing but if you were a super hoarder and you really wanted to flex, there's probably no better way than to use the multiplier flex that this thing offers I am hans, I'm diane, france, and we want to pump you up your next question about the REITs that invest in privately owned landfill sites.

Mostly Uncle Frank [19:25]

Ticker symbol is GIGO Garbage in, garbage out. I can actually say that one.

Voices [19:32]

I don't think it means what you think it means.

Mostly Uncle Frank [19:35]

I thought it'd be more interesting actually to look up companies that specialize in portable Johns Give it your name.

Voices [19:44]

Hey, john, hey, let's go to the John. Huh, john, let's go.

Mostly Uncle Frank [19:54]

And the two most prominent ones that came up are Waste Management and United Rentals, and these things are actually very excellent performers since 2010. Waste Management has a compounded annual growth rate of 16.79% since 2010, and United Rentals has a compounded annual growth rate of 32.71%, which I believe involves some leverage. Anyway, there's money to be made in the poop industry, although I'm not sure you would really want to construct a portfolio around garbage and poop, although that might be another interesting activity for you to think about pursuing one of these days.

Voices [20:29]

Well, Well, out with it.

Mostly Uncle Frank [20:38]

Now moving on to French Cowbell.

Voices [20:41]

I'm telling you, fellas, you're going to want that cowbell.

Mostly Uncle Frank [20:45]

Actually, french cowbell is the place to be these days. You go to AVDV, which includes your French small cap value stocks. That's up 30% this year so far, and even EWQ, which is just the regular French ETF exposure, is up a whopping 20% this year.

Mostly Mary [21:06]

Don't be saucy with me, Bernays.

Mostly Uncle Frank [21:09]

So there's room to move in French cowbell land.

Voices [21:13]

Yeah well, you think it's funny? Huh, there's room to move as a fry cook man.

Mostly Uncle Frank [21:18]

You know I could be manager in two years. King God cook man. You know I could be manager in two years. King god reminds me. I had an interesting conversation with our intrepid website volunteer, luke, from quebec last week. We were discussing the ins and outs of poutine. I did find a golden ratio poutine recipe which I said to him. Maybe we can combine that in our diversified portfolio of all of the things we're talking about here and ask for your last question If you're going to quit amphetaminesamines, quit drinking, quit smoking and quit sniffing glue, I don't know what else you got weed, weed really you didn't mention what you were smoking, though you can't smoke weed period ultimately, it does come down to this, from the same source, of course.

Mostly Uncle Frank [22:31]

Anyway, thank you for your most astute observations and your sense of humor. Bad news Fog is getting thicker In the form of your questions. And fog is getting thicker In the form of your questions.

Voices [22:43]

And Leon's getting larger.

Mostly Uncle Frank [22:48]

And I would be remiss without thanking you for donating to the Father McKenna Center. As most of you know, we do not have any sponsors on this podcast. We do have a charity we support. It's called the Father McKenna Center. It supports hungry and homeless people in Washington DC. Full disclosure. I'm on the board of the charity and I'm the current treasurer. But if you give to the charity, you get to go to the front of the email line, as John has done here. Well, la-dee-freaking-da Smart man.

Voices [23:17]

The best, Jerry the best.

Mostly Uncle Frank [23:19]

There are two ways of doing that. You can either do it through the donation page at the Father McKenna website, which I will link to in the show notes again.

Voices [23:28]

I just did it and I'm ready to do it again. Don't tell me you don't do it.

Mostly Uncle Frank [23:33]

Or you can go to the support page at wwwriskpartyroadercom and become one of our donors on Patreon. Either way, you get to go to the front of the line, but please do mention that in your email so I can duly move you to the front of the line and thank you very much for these emails.

Voices [23:50]

I just wanted to have a happy childhood too, but long John Silver. I mean I don't know what to say.

Mostly Uncle Frank [23:57]

Last off. Last off, an email from Pete.

Mostly Mary [24:03]

What about Peter?

Voices [24:05]

Oh right, okay, Peter, sure, let's just put him up for adoption right now. Save the kid a lot of agony. I mean obviously no Peter, no Dick, no Rod.

Mostly Mary [24:13]

And Pete writes While exploring rebalancing options on Testfolio, I stumbled across something interesting. On Testfolio, I stumbled across something interesting. As you've discussed in previous episodes, there are various methods to rebalance portfolios, which are generally either time-based or triggered by some sort of tolerance band. I had decided to go with Gobind Daryanani's insight of a 20% relative band, based on his paper Opportunistic Rebalancing, which theoretically should be optimal to capitalize on diversifying assets. This works well with non-leveraged assets, as you can see from the generic 60-40 portfolio example. However, as soon as you sprinkle in a little TQQQ or UPRO, the yearly rebalance version beats the 20% band every time in both compounded annual growth rates and risk as measured by volatility and maximum drawdown. As you increase the allocation of leveraged ETFs, the advantage of yearly rebalancing over 20% band widens. Furthermore, the outcome doesn't change when you alter the tolerance band lower or higher, even when you aim for a band that would mimic a once-a-year rebalance.

Mostly Mary [25:23]

I'm not sure why this is. I think it has to do with the higher volatility of the leveraged ETFs triggering rebalancing at a time when non-leveraged assets haven't sufficiently deviated from their prescribed allocation. If that's the case, a solution might be to rebalance all non-leveraged assets using a 20% tolerance band and only rebalance the leveraged ETFs once a year. What do you think? On a separate note, I think it's time for another look at managed futures. Cta is doing some interesting things and seems to be truly differentiating itself from DBMF and KMLM, which seems somewhat more correlated. Deopresso Lie liber Pete.

Voices [26:04]

How many lumps do you want? Oh, three or four.

Mostly Uncle Frank [26:14]

Well, Pete, I have to tell you you're one of Mary's favorites, because anyone that puts anything in Latin in their email is going to get some extra points. For Queen Mary, who also studied Latin in school, I will link to this link you put in the show notes about the rebalancing with TQQQ or YouPro, by the way you have a gambling problem. Anyway, no, I don't have any particular explanation as to why the annual rebalancing would beat a 20% band rebalancing for this.

Mostly Uncle Frank [27:02]

I don't know although it is a limited data set. But the truth is I don't know that there's any kind of analysis showing what would be the optimal rebalancing when you start using things with high volatility or with leverage in them, like these two funds, so I can't tell you whether this is a random result or that it's statistically meaningful. I do think that when you start using things like this in a portfolio, or you're using things that are based on the VIX or other volatility ETFs and a few other exotic things, those may and are likely to require different rules for their rebalancings. But no, I don't know what the right answer to that is. I'm not a smart man, but you could be right as to your proposed solution to have different rules for different assets in the portfolio. Of course, that's going to make things a whole lot more complicated, and probably more complicated than they need to be for most people.

Voices [28:12]

You can't handle the gambling problem.

Mostly Uncle Frank [28:15]

But I think if you're fooling around with leveraged funds, you're really probably looking at something you're hoping to use as some kind of growth portfolio as opposed to a drawdown portfolio. Anyway, I'm not aware of any definitive research about this that would tell you what is the right answer. One way or another, forget about it Now. As for CTA, the Managed Futures Fund from Simplify, yeah, I have seen that that has performed pretty well, I think towards the end of last year, the beginning of this year, and has performed pretty well, I think, towards the end of last year, the beginning of this year, and has performed significantly differently than DBMF and KMLM. I'm not sure exactly what that means. I do know that it has a different exposure in it, in that it is focused pretty much all on commodities, whereas the other ones also include the other things that you would traditionally follow in a managed futures strategy, such as currencies and interest rates and stock markets.

Mostly Uncle Frank [29:15]

I still don't think CTA has been around long enough to really say a whole lot about it. We do have data for DBMF going back 20 years now and KMLM going back 30 years now, so those are the typical ones I would look at, since I have more of a basis of knowing how they will perform vis-a-vis the other assets in the portfolio, and they essentially have a zero correlation or a negative correlation with most other assets. But who knows, maybe CTA will do one better or maybe you would be best off holding a combination of them. But it seems to me if it's only going to be about 10% of the portfolio, you might not want to deal with more than one. Anyway, it's an interesting observation. I'll put a little link in the show notes. Well, you have a couple of links in your email. I'll put them in the show notes so people can check them out, and thank you for your email.

Voices [30:08]

By the way, how many lumps do you want? Oh better, give me a lot of lumps, a whole lot of lumps. Oh no, you don't, I'll help myself.

Mostly Uncle Frank [30:24]

But now I see our signal is beginning to fade. I believe I'm through all of the emails that were sent to me in April and May, but I had a lot of traffic then and I'm not confident that I included everyone. If you did send one back in April and May and you haven't heard an answer to it, please send it to me again so that I can follow up, and I apologize for not keeping track as well as I probably should.

Voices [30:54]

It's not that I'm lazy, it's that I just don't care.

Mostly Uncle Frank [30:59]

But hey, you get what you pay for.

Voices [31:01]

That and a nickel. Get your hot cup a jack squat.

Mostly Uncle Frank [31:07]

And, in the meantime, if you have new comments or questions for me, please send them to frank at risk party radiocom. That email is frank at risk party radiocom, or you can go to the website wwwriskpartyradiocom. Put your message into the contact form and I'll get it that way. If you haven't had a chance to do it, please go to your favorite podcast provider and like subscribe. Give me some stars, a follow, a review. That would be great. Okay, thank you once again for tuning in. This is Frank Vasquez with Risk Parity Radio signing off.

Mostly Mary [31:47]

Gobind Daryan. Now I can't say his name.

Voices [31:54]

Mary, Mary, I need your huggin'. O dulcis Vivo Maria.

Mostly Mary [32:43]

Vivo Maria 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.