Rafael Ortega:
00:00:00
This is what I've been looking for, right? I can create a portfolio. I can finally create a portfolio that is truly diversified, that is using everything that we know we can use. So that means not only assets, but also strategies. We can try to balance those things out. It's gonna be a great long-term, sharpe ratio portfolio. It's gonna be stable, it's gonna be all weather, and then we can get it to the volatility that people actually want, right? And if they want an 8% volatility portfolio, we can do that without losing balance. If you want a 12% volatility portfolio, we can now do that. And it's not losing balance, right?
Rodrigo Gordillo:
00:01:45
Hello and welcome everybody Today I have a very special guest, a friend of mine and, and colleague Rafael Ortega which is a Spanish investor, not from Latin America, but from Spain, and he is currently a senior investment fund manager at Andbank Wealth Management, where he manages a bunch of portfolios including permanent portfolio ideas, all terrain, return stacking, and what he calls the, off-road investor approach, which are custom built portfolios for institutions and high net worth individuals. Yeah, this is a, interview that I've been wanting to have for a while now. I'm also, been doing his podcast in Spanish, called The Off-Road Investor for over a year now. Rafa? Yeah. Yeah. And I struggle a little bit with the nomenclature in Spanish when it comes to our industry, and I'm sure Rafa's gonna go through the same, it's my turn to make him suffer a little bit and do it in English. But, I figured that, it would be a great time, to bring him on board because I think, broadly speaking, when we talk about return stacking, and the way that we've really garnered attention is how do people stack returns above a 60 40 portfolio or 80 20 portfolio, or a hundred percent equity plus portfolio. But, And then you get into, okay, what else can we do with the return stacking? Maybe there's a more balanced approach to building a portfolio and you get to an ultra terrain approach. But Raf actually came the other way around. He started, when I met him, anyway, he's gonna tell us his background, but when I met him, he actually had already started thinking about, the concept of a balanced portfolio and then built himself into all terrain. And now he's thinking about in the latest iterations of doing 60 40 plus or a hundred plus. so yes, he is a fantastic partner. he actually has taken the Return Stacked Portfolio Solutions moniker and, and on our behalf started creating, the brand in Spain. So we'll talk a little bit about that, but before I get into all of the fun stuff, I, do want the audience to get a, bit of a background on you and how you started as a, as an engineer and ended up in Return Stacking, Portfolio Solutions. So maybe give us a, broad overview of your history.
Rafael Ortega:
00:04:13
first of all, sorry for my English, I, all the investing information I consume is in English, but then I never speak about investing in English, so I'm sure some of the words are not gonna come and maybe Rodrigo can help as I've been helping him in Spanish. the thing is, I started not as an investor, right? I did engineering. I thought I was gonna be some sort of consultant and I actually started in a, one of those big consultancy firms as an analyst. But that lasted only a couple of months because then, I was studying and living in Madrid my family is from Valencia, that's another city in the east of Spain. And my family used to run, my mother used to run a small business and then she was sick and went on a The business was in a crisis and, I felt like the prodigal son that had to come back and, do something about that. My have a younger brother, he was still studying. And, my father had recently passed away, so we were go going through a, like a huge family crisis we solved it eventually. And then at that point I was looking at, like any family and any business, what do you do when you make more than you when than you consume? So what do you, what do we do with those savings? But obviously I was, youngish like 20 something, but I was looking at, family money. I, hadn't really made that. Also something that had taken a couple generations to build. I started looking online on what do you do when you invest? And everything I found was, trading or, oddly enough, in Spain there's a huge value investing culture. So I got into, the Warren Buffets and Benjamin Hams and all of that. I also. had a look at what had been done in the past. And my mother used to work with a local bank, and I very, very fast I found that most commercial banks, first of all, in Spain until now, most people just relied on their state pension. financial literacy is very, low. Only the newer generations are starting to see that they, will need to have some savings, the future. So basically, everyone worked with their commercial bank, which just gives you, closet indexed funds that are expensive. strategy is expensive. That's not gonna take you anywhere. And, I, just couldn't find a solution that made sense or made sense for me. When I looked at a value investor, they would say have these great marketing things, you know, value is what you get, but price is just what you pay. And that's, that sounds great, but if you've just gone through a crisis like I have just done, and if your savings are 50% down, it doesn't matter that you tell me that the value isn't down. The price is what matters if, when you need your savings, right? Most people, or at least my understanding of this was most people need to balance out participating protecting. You need both of those. And that to me is what makes sense to almost everyone. And I started looking at market history and other strategies and I just didn't see it. I saw those 50% draw downs. And then even if you have a theoretically balanced portfolio with stocks and bonds, those also go through huge draw downs when there's inflation. And just looked around and I couldn't see anything that I could believe in, right? Or that I, liked. I don't know how, I just don't know how found Harry Brown and the permanent portfolio idea, and
Rodrigo Gordillo:
00:08:04
You don't remember?
Rafael Ortega:
00:08:05
I don't know what I saw it the first time, right? Just, I must have read a blog post or something, and that just clicked. I, I read it and I thought, okay, this makes so much sense to me. And for those who don't know, basically the permanent portfolio idea is that, we're gonna have economic cycles, we're, they're really bad at anticipating the next step of the cycle, or even if we know what's gonna happen, we have to also have the timing right. It's just too difficult. But at the same time, we do know that different assets, and then eventually I found that different strategies, also have this behavior. They behave in different ways in different environments. And that is something you can believe in, right? We know that's gonna happen eventually. It's not in the short term, but in the medium term that, eventually happens. So you can map those. And the simplest version of this would be a portfolio that has something that works for growth, something that works for deflation, something that works for inflation, and then something that will work in a recession. Brown, had stocks, bonds, gold and cash, or invested cash. And so you have three assets that are, high volatility, that's 75% of the portfolio, 75% of the portfolio have low correlation, and then you have a buffer, which essentially is de-levering that portfolio for you. So, you have a conservative approach investing has low volatility, good returns. It works in different market, scenarios. I think what you're showing here is yeah, the different asset classes and what do we expect right from them. But not only what do we expect, like what do we know is gonna happen, right? The theory.
Rodrigo Gordillo:
00:09:57
Yeah. Yeah. That's a thing that's a kind of the key thing here, right? So, what I'm showing here for those that aren't, watching and listening is just the performance of some periods where we've seen inflationary stagnation, inflationary boom, deflationary bust, and disinflationary boom. which are just fancy names for when the intersection between high or low inflation shocks and positive or negative inflation shocks happen. And, and you can see clearly, right? And this is, I think the big unlock when you get into this world is, okay, everybody wants to just do better. Warren Buffett value investing and throw in a little bonds just to reduce risk. But the reality is that a lot of retirees in the last few years that put a hundred percent of their money in bonds have realized that even bonds have risk. and you can, and you don't have to have a lived experience that tells you that for them to modify your behavior. before we saw the 2022 inflation shocks, you and I had already come to the conclusion that high inflation would be bad for both equities and bonds at the same time. But, and this chart here just shows, inflationary stagnation, you're, you, what you generally saw historically was commodities, gold, and in this case, trend following, we'll get to that. But, Harry Brown is more traditional assets, right? More gold than anything. And, and then inflationary boom, which is high in inflation, accelerating growth, everything floats up, but the biggest winners are commodities and gold. disinflationary boom, which is what our lived experience, and most investors lived experience has spent most of their time on is high accelerating growth shocks and falling inflation. And that means, of course, that equities and bonds are gonna do well. And I think that's why the 60 40 has become so prominent and deflationary bust is when you have a bear market and, a negative growth shock and slowing growth without inflation, right? So that's generally equities down, commodities down, and then you see bonds really picking up the baton trend following and, and commodities, sorry, and, gold bonds and trend following, getting hurt. So that's when you understand that framework, you're like, oh, okay. We need to think about my families, in your case, right, It was my family's wealth going forward, and Harry Brown basically, from what I understand, it was fairly simple and the original idea is just, a quarter, cash gold equity loan, right?
Rafael Ortega:
00:12:32
seems, it's, simple that it looks silly, but if you look at it from what I know now, I. Actually the three assets are kind of risk parity, equal X, right? Because it's called stocks and long-term, bonds. And those kind of have the same volatility, right? So you're actually doing like a risk parity from those three. And then the other one is just a buffer. It's just de-leveraging the portfolio. So you have the conservative approach because he was trying to find a solution that anyone could do and that it made sense for almost anyone. So the conservative approach to that made a lot of sense. Also, we can go on that a little later, right? But with only, if you only have stocks, quantum gold, there are still sometimes where those three can go down, down especially through, some crisis and shocks. And so he wanted something that would protect you even then, right? something that was
Rodrigo Gordillo:
00:13:30
Yeah.
Rafael Ortega:
00:13:31
all-terrain I found that,
Rodrigo Gordillo:
00:13:34
I can I just pause there for one second? One thing that I think few people understand is when we say bonds, most people think about that aggregate bond index. Aggregate bond portfolio that has a, generally speaking, has a duration of six to seven years. Volatility profile of four or 5%. and the key behind balance is making sure that the maniacs aren't taken over the asylum, right? That, you don't want equities to be four tenths of volatility of your bond portfolio. And there's two ways of doing that leverage, which we'll talk about in a sec, but more importantly here, if you go out the curve, and the longer the duration, the more the volatility, therefore the bigger the impact when you need it the most and the bigger the impact when you're getting hurt. But it's, if it's balance and risk across equity and bonds, that's the way to do it. So when we talk about bonds, here, we're, really talking about lingerie bonds, which nobody does, right? Because it's too volatile, because bonds are supposed to be safe, they're not supposed to be volatile. And it's so funny because they could be whatever you.
Rafael Ortega:
00:14:41
exactly. So I started my like, own personal portfolio, like for, the company, for the business or the family, however you wanna see it. And it was a permanent portfolio, and I started talking about the permanent portfolio with, different banks because I was trying to get, those long-term bonds in that gold position. And it was almost impossible, right? And everyone looked at me like, like 25%? what? they, they couldn't, understand. And then also I, started looking online and finding more people. Eventually I found you guys and I found other, all weather solutions or all-terrain solutions. But, at that point in time, that's, that I was like my first aha moment where, as we've said before, once you see it, you just can't unsee it. And I noticed that no one in Spain, or in the Spanish internet world was actually talking about this. Like absolutely no one. And even in the anglosphere, as I, I like to call it, though, you can find people talking about programing portfolio ideas and all weather, it's, there, there's more people doing it and there's obviously like you guys and more people doing it. but it's not that, it's not standard, right? Like it's more of a niche thing. In, in the, in Spain or in Spanish absolutely no one was talking about this. So that sent me through, double path, one of, okay, there's a business opportunity here. So I, this makes a lot of sense. It makes sense for me. There's obviously more people than it makes sense for. I need to learn more about this and, get my license and become an advisor and start preaching this. And then on the other side, I need to, keep learning more and more about how to implement these strategies better and better. And that's how I found you guys. I found, my favor with this Trinity approach. I found, eventually found Corey. I found Ray De, Ray Dalio and all of his, all of his, pupils and all of those, risk party ideas. So I just, spent the last decade and a half, reading and trying to see what people were doing in the space and then trying to get my way through compliance teams and, Spanish institutions to try to get these things back so that investors in Spain can actually, have a portfolio that does this.
Rodrigo Gordillo:
00:17:19
Yeah, being a trail blazer is not always fun.
Rafael Ortega:
00:17:22
Yeah along the way I, I built, a community of people that believe in this, right? So when, As you were saying, When, you came up with the, that all-terrain paper Return Stacking Anything. I see, I started learning about trend following. Anything I see, I just see it from this, structural diversification standpoint. I just can't see it any other, any other way I.
Rodrigo Gordillo:
00:17:53
Yeah. And, I'll give you credit. you are, I, always tell people that you're the Corey Hoffstein of the, Spanish investment space because when you say you built a community, you really are an incredible writer and synthesizer of information. even the stuff that we've written that we think we synthesize, when, you take your take, when you have your take and your go, it is so much easier to under to understand. So kudos and credits to you for being able to do that for a community that has literally never heard of most of this stuff, at least in the US you didn't, it's wide enough. And Canada, that you can reach some people. you're starting from scratch. Every single person you're talking to like has never heard about this, right? And so you, I think you must have learned by slamming your head against the wall how to communicate with a community and create a, pretty large one, as I see it now.
Rafael Ortega:
00:18:45
think whenever I read your stuff, I, feel like, okay, this is written for someone that knows what we're talking about, and I always try to, water it down into the essence of it because I'm usually talking to retail, right? I, most in Spain, most funds are sold, right? People that do invest with me buy my funds, right? they buy the idea and then they go into the, strategy. I have no, no commercial, team. I, just do education and people find our stuff, and if they have the similar, if they buy into the idea or the philosophy. Then they eventually, invest or they do something similar and then preach it around and then that hits other people. But, that, that's basically what I've been trying to, trying to do. But always with that focus on that, there's many things I don't know, but I do know that, diversification works and that the true diversification is what I think, I think Adam is the first person I read that said structural diversification. And that just, again, I think one of the things that all-terrain or -weather investors don't have is the same nomenclature. And I think that's something that value investors have and other investors have, and that brings a lot of those people together and then that creates a community and that helps the ideas grow. So I like how, you guys have been, interviewing people that are supposedly your, competitors, but, in the way I see it they're, not your competitor, right? Your competitor is, someone that's doing a index, fund, robo advisor thing or, just a highly active in the sense of stock picking, stock picking strategy. we're doing something different and we need to speak about it, without trying to hide what we're doing. Like with the example of return stacking, I think it's very clear. I think the reason people buy return stacking is that you're actually saying what you're doing and you're not scared of saying what you're doing. And, you're not scared of defending the idea that you're trying to defend. It's tough. 'cause you're saying things
Rodrigo Gordillo:
00:21:04
Yeah.
Rafael Ortega:
00:21:05
leverage, manage futures. especially when I, every time I bring something to the table, as you were saying, no one's certain like when I have to explain, or global macro or carry strategies, like most of the, time people are like, what a new thing again.
Rodrigo Gordillo:
00:21:25
Yeah, we feel your pain for sure. And yeah, this is why communication and having the ability to synthesize things as well as you do is important here. but let's, go back to, you have this interesting permanent portfolio approach and your revolution towards like where, you got stuck and then how return stacking might have unlocked some value there.
Rafael Ortega:
00:21:53
thing is, when I started with a permanent portfolio for myself, but when I got the opportunity, I actually became a financial advisor. That's where I got my first clients and that I started to grow a base of, investors that were interested in, adding something different to their portfolios, right? That's how I, actually started and eventually I got the opportunity to start a small fund. So, I could build a strategy and people could go into the strategy instead of me, managing everyone's little portfolio. and I thought at the time, this was an error, by the way, but at the time I thought that most people wanted something that was not as conservative, right? The permanent portfolio's problem. and, I don't think it's a problem. I think it's, made, it's on purpose, but it's a pretty conservative strategy. It's conservative in many ways. It's conservative because it has low volatility. It's conservative because it's only using biggest assets around because, Brown was thinking about something that, was fail safe. It wouldn't blow up. But there, he, preached this, late seventies, early eighties. And, eventually there's more things that we can do with our portfolio, right? There's more, going on now that didn't exist then, and that maybe you can bring into your strategy. And I was trying to find something that was, more, I wanna say balanced, but, really, that was equivalent to a 60 40, at least in most people's minds, right? Something that was, medium risk. Let's call it medium risk, but yeah, something that was equivalent to a 60 40. and every time I tried to build a portfolio, design, a portfolio that was matching 60 40 volatility, I was losing the balance, right? Because you have to have more stocks. If you have to have more stocks, then suddenly those stocks are running the asylum, as you were saying. Then if I add diversifiers on the other side, I get more tracking error, and then people are gonna ask questions when those diversifiers are not working. So it was, it was a tough challenge. I, think I built a portfolio that was, it's still on now, it's transitioning to a return stack version of the portfolio, but it's something that was, let's say, around 50% equities or 60% equities, and then the rest was, an all-terrain defense, right? But. If you want more volatility and you don't use leverage, the only way to do this is to get more stocks in. And then when stocks fall, your all terrain defense is not gonna recoup all those losses. It's just gonna be more, you have more trust on the fact that it's gonna work, better than just bonds, because bonds can also fall sometimes. And all-terrain defense is gonna work more times. It's gonna, it's gonna work against those stocks, but it's not really gonna, recover the loss that you got. It's just gonna, what's the word I'm looking for a word that it's not Rodrigo but it's like you're, look, you're like diluting your risk in a more efficient way, but it's not really, you're not really balance things, balancing things out. That's. And every
Rodrigo Gordillo:
00:25:17
Yeah, that, that.
Rafael Ortega:
00:25:18
into, okay, so maybe we get defensive equities and maybe we do some, momentum thing on top. And I was just trying lots of things to find balance and with, with, traditional strategies. It's just now I think it's just impossible. Like you, you're never gonna, you always have to take more risk in the form of cycle risk and.
Rodrigo Gordillo:
00:25:42
So let me, lemme pause there for a second and just show an old, an oldie, but a goodie. We've been talking about this already, right? But this one just shows a chart of gold, global equities, commodities, and 10 year treasuries, right? Roughly speaking, I don't know, 19, this is 1990 to 2023. Roughly speaking, they all make the same amount of return, but obviously the paths are wildly different, right? So which one do you want to choose is is always the question. And from the perspective of risk balancing these, again, we talked about long-term treasuries, I'm using the 10-year. If you run a simple equal risk contribution analysis to try to make sure that we balance things off, you're looking at 42% in treasuries, 29% in trend following here, 15% in global equities, 12% in commodities to get a hundred percent portfolio. And of course the 10,000 foot view of that is that you get this smoothed out line that kind of crosses in the middle of everything, but actually slightly outperforms over the long term, mainly due to the rebalancing benefit, That, that diversification premium. Now, while this line looks amazing, right? let's, this is a, I was trying to think about a different way of explaining to people why is it that an equal risk portfolio is generally going to not provide the returns that a high risk portfolio like equities is gonna provide? And the reality is that it's not true over many decades, right? If you think about the equity risk premium, right? What's the equity risk premium? depends on, global equity, risk premium, what is it? 3.5%, 4% above cash, right? So it's say notional, we're looking at 6% annualized, right? Term premium, is two, 3%. when you actually look at all these returns, they all at the end, as we can see from this graphic, roughly make the same return. The problem is that by diversifying you're clustering that return around that long term more often. And sadly, a 60 40 investor, an 80 20 investor tends to see more double digit years than you do when you're balanced. And that's painful. And that reduces risk and reduces, long-term returns. So you have to wait a long time to be able to say, okay, we did it. We did the same or better than with lower risk. And the reality is that it's boring for most people. When you create this portfolio and you have a 4% volatility portfolio, you're constantly apologizing for not putting enough risk on. And the reality is that you're up until recently, you were limited as to what you could do in terms of giving people what they wanted, which is, look, I'm used to, a standard deviation in my portfolio of 12%, 15%. Like I'm okay with that. I'm okay with the drawdowns that I've seen. Can you give me that? And the answer was no. The answer was no. This, you get this is the maximum balance portfolio you can get. and so anyway, I thought I'd paused there and show people what we were, what we're.
Rafael Ortega:
00:28:49
the, that graph, because I, love it because, it makes so much sense and then no one likes it in real life because in life, I like to sometimes show this and people will always choose that dark blue line, then show it starting in 2010 and then that just
Rodrigo Gordillo:
00:29:11
Right.
Rafael Ortega:
00:29:11
flat. great risk return, like gr great, sharpe ratio, but it's just boring. It just gives you a couple percentage points, while some of the other strategies in this, exactly that point in time, it's gonna be stocks,
Rodrigo Gordillo:
00:29:30
Yeah,
Rafael Ortega:
00:29:30
you those double digit deterrence and like incredibly high sharp ratios. And it doesn't matter how many times you show this, people are gonna be okay when they see it. And then after a couple of months of, low volatility, low returns, they're gonna ditch it.
Rodrigo Gordillo:
00:29:48
exactly.
Rafael Ortega:
00:29:48
just the way it is And,
Rodrigo Gordillo:
00:29:50
and it, and to their credit, if they feel they're leaving money on the table because they can take more risk, it's, a problem.
Rafael Ortega:
00:29:57
that's exactly the problem I, I was running into. I wanted to add more diversification because I knew it worked. I, thought the portfolios were gonna be, more resilient more all-weather and I was, all in on that. But the more diversification you add, diversification works so well that volatility goes down and the volatility goes down, eventually returns go down too. then I wanted a bit more volatility and a bit more return and I needed to have more stocks there. And then I was losing that balance and then I was going back and forth between those two things, right? More volatility always meant, that you had to sacrifice returns. And then when you had more stocks in, I was saying that I was all weather, but I wasn't all weather 'cause I had 50 to 60% equities in my portfolio, right? way that a 50 to 60%, equity portfolio is gonna be all weather because then you would need a leveraged defense, Something that was not just a mix of gold bond, bonds and, and trends following and other alternative strategies. Though that was gonna be an all-weather defense, but not an all-weather portfolio. was the problem.
Rodrigo Gordillo:
00:31:12
Yeah.
Rafael Ortega:
00:31:12
And then when you came up with the return stacking, paper that I. was my second aha moment where I saw it. I couldn't unsee it. I remember guys did a, late livestream or maybe an episode, I'm not sure. And I went on the chat and asked, you were saying, you know how return stacking, we'll talk about this now. like how it can create some tracking error, whatever. And I think I said something like, okay, but what if you don't care about the tracking error? Let's talk about a theory. and think one of you like brushed it off a bit, okay, maybe
Rodrigo Gordillo:
00:31:51
Yeah. Because 99% of our audience cares about that. Gonna fuel lunatics like us. Yeah.
Rafael Ortega:
00:31:58
I emailed you like, okay brother, we need to talk because if I can do this, this is what I've been looking for, right? I can create a portfolio. I can finally create a portfolio that is truly diversified, that is using everything that we know we can use. So that means not only assets, but also strategies. We can try to balance those things out. It's gonna be a great long-term, sharpe ratio portfolio. It's gonna be stable, it's gonna be all weather, and then we can get it to the volatility that people actually want, right? And if they want an 8% volatility portfolio, we can do that without losing balance. If you want a 12% volatility portfolio, we can now do that. And it's not losing balance, right? You're not getting, you're getting more risk, you're getting more, you're getting exposure, which is what you want, but you're not getting it through a concentrated cycle risk bit, which is what you do when you have a 50 to 60% equity portfolio. And I, that I went crazy around the idea and, luckily, and a half or something later, we finally did it. And we have, portfolios on that can actually implement these, these concepts in, Spain. So very grateful
Rodrigo Gordillo:
00:33:16
Yeah, and more, most of the battle that I saw you fight is a battle that we fought originally too in Canada is you're not just fighting a battle of ideas, but you're, running into operational roadblocks. compliance teams don't want you to do X, Y, Z, the even platforms don't even have the capability of providing you what you want or you being able to invest in US ETFs that you, that use gold and stuff like, it's just been a constant struggle and you've mostly fought through all that. tell us a little bit about that journey.
Rafael Ortega:
00:33:53
Yeah. So the thing is that, I mean it's counterintuitive, right? I'm trying to say that I'm building something that is leveraged. It's a hundred percent leverage, but it's actually a balanced, allocation, right? And that goes against everything that everyone has heard in, or everyone that you get, that's learning about investing will, will get as that association that leverage more leverage means more risk. to be fair, all that's equal. Yeah. more
Rodrigo Gordillo:
00:34:30
Yeah.
Rafael Ortega:
00:34:31
more risk. it all depends what we're comparing, right? 'cause I think, everyone would understand that if you have a very risky thing and a very unrisky thing, and sometimes you can leverage the unrisky thing and it will still be less risky than the risky thing. But anyways, the, the thing here is that, I found that the solution to this problem is how you frame it, right? People think more leverage means, more risk, more leverage means that you're chasing higher returns. That's not what we're doing, right? We're using leverage after we're diversifying. So the right order is you have a certain amount of risk. Now we are diversifying and we're adding true structural diversification to different assets and different strategies. So we're bringing volatility down and because volatility is down, your returns are down, and we're using leverage to recover the exposure you lost through diversification. So we're using leverage after we're diversifying. And again, this is another of the things that I think everyone in the world should be using because if you do the math and match, amount of added exposure so that it matches the, risk through added exposure matches the reduction in risk you get through diversification, you're doing that thing that, the phrase? Eating your cake or what is it?
Rodrigo Gordillo:
00:36:04
I, you are, yeah, you're having your cake and eating it too, having your diversification cake and eating, eating it too. Yeah.
Rafael Ortega:
00:36:13
so it's, that is the right order, right? We're reducing risk and then we're using leverage to recover the lost risk. Another way to see it is that you're actually, this is, okay, this is from a, all-terrain, point of view. If you look at it from a traditional portfolio where you have, stocks and bonds you're adding, more diversification through stacking, that is defensive leverage. You're adding more defense to your portfolio. So if you do it right, and if you do the math. Most of the times, you're not really adding that much risk. It comes with, with, its, what's the word? With its, contra or
Rodrigo Gordillo:
00:36:56
Yeah, it's, you can say counterpoints, it comes with this off, with, its, there's other offsetting things that happen by when you use leverage, but not necessarily in the same way.
Rafael Ortega:
00:37:05
you will have, error, right? It comes in the form of tracking error. It comes in the form of your volatility is gonna be more stable, which, sounds good until you see it live, right? That you're actually getting hurt more, very little, but all the time.
Rodrigo Gordillo:
00:37:22
Yeah, more often. But,
Rafael Ortega:
00:37:24
it more.
Rodrigo Gordillo:
00:37:25
yeah, so that's, the thing I wanted to, 'cause we've chatted about this a lot, and this is, this comes from Corey's saying that risk, cannot be, trans cannot, be eliminated. It can only be transformed. And so how do you, talk about that?
Rafael Ortega:
00:37:41
Again. I think the way to make people understand this is to do it in the right order, right? So the right order should be how much risk are you willing to take in the form of volatility, in the form of expected drawdowns, et cetera, right? Once that is clear, then how do we take that risk and how do we do it in the most efficient way? If you build a portfolio, again that is just stocks and bonds, you are taking a lot of market risk. I've heard you say many times that when you look at S&P 500 and you use an ETF, that ETF is unleveraged. But if you look at the companies beneath the ETF and you look at the leverage within the companies in the ETF, you're actually using three times leverage, right? If I remember right. Something
Rodrigo Gordillo:
00:38:29
Yeah. Three to one. Four to one. Yeah.
Rafael Ortega:
00:38:32
you're taking market cycle risk and we don't have that market cycle risk because that tends to. Crash. eventually, like once every, whatever years, it will, it, we will get into that part of the cycle where stocks just don't work and you get those big drawdowns. You want to take that risk and that risk is the risk that you're diversifying, right? So you wanna add other things that are gonna move in different ways, ebb and flow in different moments, and it's the same amount of risk, but if you take the risk in smaller doses, the same amount of risk, it is much better than just feeling like there's no risk, which is how a 60 40 portfolio feels when everything is going your way. And then one day, you don't know when, it's gonna come and it's gonna hurt you. And there's a man, how do you say this in English? There's a. asymmetry in the way returns come right with that
Rodrigo Gordillo:
00:39:31
Yeah,
Rafael Ortega:
00:39:32
understands where 10%, draw down you, you're back at zero with 11%, but a 50% draw down needs a hundred percent. So the same amount of
Rodrigo Gordillo:
00:39:41
to break back.
Rafael Ortega:
00:39:42
way to take that risk is to try and do it in smaller doses. Smaller doses makes a lot of sense until you feel it when the other person is not feeling it, right? And that's what happens.
Rodrigo Gordillo:
00:39:56
So, you know what, Corey and I yesterday, were having we're looking at how to tell this story about this, right? This idea that there's an, there's. There's risk inequities and there's risk in all-terrain or equal, we're looking at an equal risk portfolio of assets. And so what I, wanted to see is how often you're in drawdown in, in the S&P 500 on a daily basis, right? So how often are you hitting new high and started losing money versus how often you're in drawdown? I think we did trend following. We did gold. What's fascinating, there's a drawdown in recovery chart that we often use. I'll see if I can find it here, later, but, which is you start losing money and then you recover. and if it's zero, it means you're making new highs all the time. So the top of the chart is flat as long as you're making new highs. And when you we're looking at trend following and trend following is, could you guess how often on a daily basis the SocGen Trend Index, is making new highs?
Rafael Ortega:
00:40:54
I would say very little, right? Because I feel it's like you're losing all the time and then suddenly you get that big win. I think what.
Rodrigo Gordillo:
00:41:02
Yeah, it's like it's around 12% on a daily scale. It's around a third on a monthly scale. And when you look at the chart, when you actually look at the S&P500, it is like making new highs. It feels, I haven't done the actual numbers, but it just, it's flat that chart of drawdown and recovery is flat most of the time. And then you have 2008 and you just lo lose and lose and lose and it's a massive drop. But you never see that in the history of the SocGen index. You never see that lose and lose. draw downs in recoveries, draw downs in recoveries, draw downs in recoveries. and so I think that tracking error
Rafael Ortega:
00:41:37
I was asking even you get it to the same level of volatility, so it's like it's structurally different.
Rodrigo Gordillo:
00:41:44
Is structurally different. There is, there's some, like you're just getting more, it's, look, it's the skewness of the S&P500, Then you have the big fat tail. The moment you start adding diversification, you add bonds and equal risk, you add gold and equal risk, you add some diversifiers, you now have a more consistent like series of drawdowns every year, right? So you'll see your, your, like the area under the curve for those that remember statistics, is roughly the same between a diversified portfolio and the S&P500. It's actually less, but roughly the same. The difference is that area under the curve is showing up every year more often, and most of the area under the curve happens in big abrupt losses for the S&P500. So the experience here is, something that is important, right? The experience is how often do you feel like you're winning versus your alternative portfolio,
Rafael Ortega:
00:42:39
I think I'm lucky here in being to communicate this because I've been talking about the permanent portfolio for so long, and that is something that
Rodrigo Gordillo:
00:42:48
right?
Rafael Ortega:
00:42:48
people, I would say in the investing community in Spain at least know about. Even if they don't believe in it or they don't use it, they know about it because we've been talking like for a very long time. Sort of everyone knows that this is like an all-terrain solution and they've seen how it be behaves just behaves differently, right? Sometimes it's in a drawdown when the S&P or in, Europe, most people use the MSCI world as the reference, but, stocks are going up and this might be flat or going down because I don't know, bonds are down or gold is down or something else is going on. So they, they're used to this idea. And then from the permanent portfolio to, a return stacked opera portfolio, which would be like our most, I, now, I, never say risky. I'd say it's just the most efficient portfolio, but, our most efficient offering would be like a 12% volatility, portfolio that is a mix of stocks, bonds, gold, and then trend carry and other diversifiers that would be smaller position like Bitcoin or arbitrage or whatnot. And so they, they're used to seeing that this thing is its own thing, right? the difficulty now is, explaining what a trend following is, which again, I've been talking about this for longer, but maybe carry is something that people hadn't been introduced to lately, and starting with a drawdown is never
Rodrigo Gordillo:
00:44:25
Yeah. It's tough.
Rafael Ortega:
00:44:27
but they've seen, drawdowns in gold and they've seen drawdowns in long-term bonds, which is something that, everyone was saying, like, why do you have long-term bonds in the permanent portfolio? Why do you have gold? So we're used to explaining, having odd things in the portfolio that everyone knows that you shouldn't have. But,
Rodrigo Gordillo:
00:44:49
Yeah. Everybody knows that you shouldn't have right now.
Rafael Ortega:
00:44:52
Everybody knows. I've, learned that, one, two things, right? Diversification works. The second would be that, things happen and then the experts show up, It's always that way around. So yeah, never trust the experts.
Rodrigo Gordillo:
00:45:08
Yeah. I don't understand why you own gold. It's lost nothing. It's lost money. you should have known. We should. Let's get out of it. X post.
Rafael Ortega:
00:45:19
the other way around, right? Like gold is an all time high. So
Rodrigo Gordillo:
00:45:22
Why don't we buy more gold?
Rafael Ortega:
00:45:24
would you own 25% on your portfolio? Or 20% out of 200 even in a off-road portfolio, obviously you have to.
Rodrigo Gordillo:
00:45:35
Yeah, and I have, let's see if I can share this one here. yeah, this is from the an A brochure, the All Terrain portfolio. So we run a couple of model portfolios, ourselves in the return stack, website returnstack.com website. But this is just an expert of the simplest all-terrain portfolio. I think it's levered 150%. It's basically all world, seven to 10 year treasuries, gold, and the, like some commodities and a CTA index. And this is another thing that I, think we get trapped into is, I think the nomenclature is clearly appealing, this idea of all terrain. But I think what the, what, it projects is never lose. And this is an important distinction. I think you, I think the idea of saying all-terrain is just a more efficient portfolio. You're still in a four by four going through some rough terrain and you will fall. The issue is, are you gonna get stuck in the ditch? And we've used a lot of imagery here on you and me, when talking about the off-road investor and all-terrain, and I think the important thing is it is a four by four. I think we can get outta most ditches. you don't want to be driving a Ferrari in this environment. And and this just shows.
Rafael Ortega:
00:46:53
pot holes, right? And when you drive through those, you're gonna feel it. if you've ever a four by four, going through a, offroad path, it's not driving, a, Tesla to the supermarket. It's very.
Rodrigo Gordillo:
00:47:08
Yeah. That's right. That's right. And it, really is like when you look at the year over year here, that the all-terrain does experience shallower, annualized losses and less of them. and you're getting a, the sharpe ratio of this simple portfolio here is around 25, 24, sharpe points higher, so more efficient for every unit of risk you're getting more units of return. But in this case, the example here is to lever it up to the point where it has the same risk as a traditional 60 40 portfolio. So the thing about this small edge is that over, over time, you see the value, drawdowns are lower and so on, but in any given year, you're like, why are we doing this again? it seems like we're getting the same returns, but it's a lot more complex to understand. And what I've found is that, where this really becomes abundantly clear is when a, an asset class that people are overexposed to really goes through a, not a two month or three month, but a significant series of, years, whether they're flat or down, where you see the value of all the other pistons in the motor, doing well. And it doesn't always happen that way, right? Like it, what tends to happen is you have these shallow losses in gold and recovery, shallow losses in bonds and recovery, shallow losses in equities and recovery. And it just chugs along and adds a little bit of value. It's super different. and then there will be a prolonged bear market in equities where you see the all-terrain, especially something like this, just chug along positively. And that's when you see the value. it does take time to see the, long-term value here and it requires a lot of faith. And so a lot of education
Rafael Ortega:
00:48:59
you have to be careful with the way you frame that too, because if we say that, I think I've said sometimes like the overall portfolio needs a crisis in order for you to see, like a big difference, right?
Rodrigo Gordillo:
00:49:17
why you have it. Yeah.
Rafael Ortega:
00:49:18
when you say a crisis, people are gonna think, know, a, a 10% draw down is a crisis or a 15% draw
Rodrigo Gordillo:
00:49:25
Yeah. Liberation day draw down. Yeah.
Rafael Ortega:
00:49:27
you need a really tough scenario to see that huge difference to appear, right? Because if not, you just see that it juggles along at that level of volatility. And it can be doing that for, I've, run the back test suit, so, I can see you, you can get maybe four or five years where it does the same thing that a equally, equally volatile stock and bond portfolio. And so the question there is, why am I using this expensive, solution that is so complex when a very simple one can give you the same, returns, right? it's because in your backpack, you have a lot of things there that you just didn't need. That doesn't mean that you're not gonna need them in the future. Like the sensible thing is always to be prepared. You need to be prepared always. And if we don't get a terrible, I hope we don't get that terrible car market right. we're gonna do okay too. you, it's not that bad. but yeah, sometimes I find myself thinking do I want a, like a terrible bear market for equities? So, that, people see the value of this. but yeah.
Rodrigo Gordillo:
00:50:52
No. that's that. Yeah. Don't we all, I, my anecdote to that is that I was doing this stuff in '08, and I remember the phases of emotions, Phase one, OC September, like Lehman goes down September, October. I'm feeling so good, right? I've been talking about it for a few years. Portfolios are doing great. everybody's losing their minds. Clients don't even know what's, my clients didn't know it. Like, why is everybody so worried? 'cause they were looking at portfolios in different light and, and so the first was relief and satisfaction. We want that. And then you, have January, February, and advisors aren't showing up to their desks. Associates are having to talk to clients that are crying on the phone. Family and friends are losing their jobs. And then you're like, crap, I really need this to turn around right now. It, is, there is, it is a double-edged sword to I wanna show the value of this, and this is important, but also I don't want to ever have to use those tools. I hope I never have to show you what, how important those tools were. I just need you to trust me so that when it does happen. And so by the end of it, I was just begging for things, to change. And then when things changed, then the markets roared 80% and you're still making 9%, 10% a year, especially when I was non levered. So it is, as an all-terrain, provider and, investor, you go through these emotions. At the end of the day, it ti it comes down to does it, is it a sound, philosophical, fundamental investment strategy that works over time? And I, I think it's tough to, once you take the red pill, tough, to say no, it doesn't. and even this year, I'm looking at just eyeballing the kind of the off-road portfolio, versus an 80 20, right? 80 20 year to date is up again. And I had a draw down, around 13% drawdown. and, in a recovery, and I'm looking at, and, an iteration offroad roughly around the same risk, actually lower risk, down, less peak to trough and flat for the year. And they seem identical, but the reality is that one is a levered portfolio and the other one isn't. Right? And the risk of, hey, it's a levered portfolio, that's risky. Again, if you're using defensive leverage. Not so much, it had a shallow draw down. It's now back to break even. And and there were tools in there that the 60 40 didn't have like gold, right? That really helped offset a lot of the losses on the, on the levered side. And so the question is, what would've happened if this continued to go down 20, 30, 40, 50%? Would they continue to be in tandem like we saw in this shallow loss? And history has shown us that no. It's, very, it becomes a very different portfolio, in a continuation, but hopefully we'll never see that. Hopefully we'll just compete, like hopefully the ultra terrain is able to compete. Hopefully the ultra terrain gives what people need in terms of what they care about, which is, am I gonna have enough returns to make, my, to pay my bills when I retire? Or, grow to get a good retirement nest egg. But again, if they, if it does happen, it's important to understand the moving parts and the value that they add. If God forbid anything really bad happens.
Rafael Ortega:
00:54:17
it's funny 'cause I was thinking that's exactly what's taken me now full circle to, okay. I can't convince everyone to be an all-weather investor because it, people are just not built in their mind for that. They like taking risk. they believe in stocks and, they're value investors or they're whatever, I don't know, they, want stocks and they want businesses and they believe in the markets and they're capitalists. So whatever they, have in their mind. you still can use, diversification without sacrificing returns, right? You couldn't do it before. You can do it now. And that's what I was saying, right? You can add to a hundred percent portfolio that, a hundred percent stocks, whatever kind of thing you're doing, a hundred percent stocks, you can add some diversifiers on top of that. And if you do the right amount, you're not gonna feel the difference and you're just gonna get that extra return from the stacking. So even if you're just looking at returns, return stacking makes sense. If you're looking at, maybe you want a little less risk. Not concentrate your defense on bonds, then you can use return stacking to have a more diversified defense, which is what I was trying to do before, but now I think I'm doing it more efficiently again. add more defense to that defense that we did. We didn't do that before with stacking.
Rodrigo Gordillo:
00:55:47
Yeah.
Rafael Ortega:
00:55:47
There's so many other ways to use stacking that when I put myself in other kind of investors' boots, my mind is exploding because I just can't understand. If you know about it, why wouldn't you do it? I just don't see a world where in a couple of decades this the norm, right? Everyone will use
Rodrigo Gordillo:
00:56:11
Where it's not, where it's not standard of care for the financial industry.
Rafael Ortega:
00:56:15
using 20. I see that. if you have a any version of a 60 40 right? Like your indexed stock in one portfolio, you can easily add 10, 15%, stack. Without affecting your overall risk and just get some extra returns. Not like it, will happen eventually. You're adding things that are, they make money over time. we know that not all the time, but now you can get a diversified set of things that make money over time. You put them on top of your traditional portfolio. Tracking error is gonna be minimal. Volatility wise, it's gonna be almost the same, and you're just gonna get some extra returns.
Rodrigo Gordillo:
00:56:56
Yeah. And, but ca and the thing is that, the caveat to all of that is that, we're saying it will, but the reality is that, you look at some diversifiers, A QR went through a three year period where their, alpha sleeve just lost money, and now it's killing it again. Like it's, it depends on timeframe. There will be losses, there's no guarantees. But, again, these are sound, a lot of these are very sound ideas. even if you're a hundred percent equity investor and you decide to stack some bonds, the question is, term premium going to exist in the future if you're able to stack an extra 1% just by doing a hundred percent equities? 20% bonds. Alright. You're adding diversification. Do you believe in term premium? Do you believe that bonds are gonna make returns above cash? Especially if you're taking duration risk? it seems like a reasonable thing. if
Rafael Ortega:
00:57:43
I know, we, we have to,
Rodrigo Gordillo:
00:57:45
Yeah,
Rafael Ortega:
00:57:45
we have to,
Rodrigo Gordillo:
00:57:47
we have to Yeah. Temper expectations. Yeah.
Rafael Ortega:
00:57:51
I feel like that stock investors never do this, but okay, let's temper expectations.
Rodrigo Gordillo:
00:57:55
Yeah. Let's us do what we.
Rafael Ortega:
00:57:58
but, I can see a world where one of those diversifiers can fail on you even in the long term, but the more of them you add on, you know, the more probable is than, you know that, than a series of things that have made money over time in the long term. If you add them together and you have a diversified set of them, will eventually probably make some money and that will be something that will be on top of what you are doing right now and it won't affect your portfolio.
Rodrigo Gordillo:
00:58:30
Yeah.
Rafael Ortega:
00:58:30
so.
Rodrigo Gordillo:
00:58:32
And I, think you're right. I think the big unlock for guys like you and me who both started on the All-Terrain camp and were like, this is the only way. when you take that away for a second and okay, investing is a religion. Everybody has their own religion and, their, they're all, they're value investors, but there's a bunch of, there's a bunch of like sects within value investors too, right? and there's a, there's all terrain investors in there. There's a bunch of sects. So everybody has their own point of view. The, big unlock here is saying, okay, let's not try to shove all terrain down the throat to be down people's throats, but rather the realization that, oh, this is just a tool. And, if we can provide tools for advisors and investors to apply their own religion in a much more efficient manner. Then we should help 'em do that. And I think we're, we both later in our careers, have been like, okay, you know what? Let's empower the world's population. You're gonna tackle Europe. We'll tackle the, anglosphere, to just do a little bit better. And I think that's, you're, you are coming at it now that's what you're gonna start offering soon. and, it makes total sense to me, and I'm actually quite, pumped about it, from this, how it's gonna work in, Europe from your perspective.
Rafael Ortega:
00:59:54
Yep.
Rodrigo Gordillo:
00:59:55
All right. we covered a lot. Is there anything that I, that you think would be useful? Any parting words?
Rafael Ortega:
01:00:02
I. Yeah. maybe I, it's more of a question that I'm asking you, but,
Rodrigo Gordillo:
01:00:12
sure.
Rafael Ortega:
01:00:12
I'm seeing, more interest in return stacking portable alpha. the last couple of months have been pretty crazy with, lots of shops opening up new ideas. I understand there's a, one of the reasons why this hadn't happened before was, had to do with, the regulation in the States. I, we're looking at how this is evolving in, Europe, but like, how, do you see, first of all, the landscape in the States in the rest of the world.
Rodrigo Gordillo:
01:00:45
Sure.
Rafael Ortega:
01:00:46
things in Canada too. How do you, see this evolving States.
Rodrigo Gordillo:
01:00:51
Sure. Yeah.
Rafael Ortega:
01:00:54
The transition to other markets like Europe, where, I've started, as you were saying before, we, found a way to operate, but like we've had to go through many.
Rodrigo Gordillo:
01:01:06
We're, going through loopholes right now to get you the exposure that you need with your bank, right? So it's, I think, like anything new, it's been around for 40 years, right? I think I've, used this analogy before. There's a bunch of, for people who don't wanna die of a heart attack, there's a bunch of tests that have been approved and been recommended for doctors to give their, patients for years. in order to, assess whether you're a high risk for heart attack or not, that are not being done by the vast majority of doctors, even though they've been around for 20 years. And so it requires, in this case and some experts to bang down the door and say, no, everybody needs to get their a OB numbers. And they, everybody needs to get their lp, sorry, LP little a numbers checked. And these are things that. Nobody really knows about today. They just care about cholesterol, total cholesterol, even though it's a good indicator. But our maximum indicator it's, it takes decades, right? And, portable alpha has been around for 40 years and it's taken a few people, trying to say the same thing in different ways and communicate. And then when it becomes important, there's a groundswell right now, if you look at how many times the word portable alpha has been searched, it's gone from nothing to, an insane amount in the last two years, especially. probably we helped in a little bit in that. Now institutions have to pay attention. Like we know for a fact that Morningstar is having to think about a new category that's going to put all portable alpha people in there. And then the next question is who's behind the curve? And I think the usage structures behind the curve, they have these weird rules about, how one can invest in derivatives and it makes it really difficult and really expensive to provide the best possible, stack because of that. And I'm sure that'll slowly start to change, because there's going to be too many people that matter to them, forcing them to lighten up a little bit, right? So that groundswells is coming. People are asking more and more about it. once a category in Morningstar, exists and other platforms will have to think about it as well and categorize, there's a reticent from existing funds that have been using portable alpha from ever to saying the word leverage. I think these,
Rafael Ortega:
01:03:33
I,
Rodrigo Gordillo:
01:03:34
yeah, de-stigmatizing is gonna be huge.
Rafael Ortega:
01:03:37
it everywhere. And I know what it is. Right? But before I,
Rodrigo Gordillo:
01:03:42
Yeah.
Rafael Ortega:
01:03:43
were not saying it you can find it, right? That you'll eventually find, this fund,
Rodrigo Gordillo:
01:03:50
and the goal here is to de-stigmatizing.
Rafael Ortega:
01:03:52
to a benchmark, and then you actually end up finding out that it's doing stocks plus something and then that's why they're getting those returns, right? So
Rodrigo Gordillo:
01:04:01
Yeah.
Rafael Ortega:
01:04:01
I see it everywhere, but I see people using it and not saying they're using it. And again, that going back to what I said before about being very transparent on, okay, this is what we're doing, and we explain it
Rodrigo Gordillo:
01:04:14
Yeah.
Rafael Ortega:
01:04:15
that you don't get scared and, you see it's okay and it works. And, is exactly how works. Think
Rodrigo Gordillo:
01:04:23
Yeah. And I think a bigger unlock is also Like anything, portfolio construction can be anything, portable alpha can be any sort of iteration. Keeping it as simple as possible with the one plus one that, that we've really focused on talking about Lego blocks, I think, again, bringing it down to a level where people can understand it, understand what they can put in and what they can take out. And being upfront about what the stacks are is the big unlock versus we just, how do we outperform? We, just do overlay stuff. Just trust us. We're gonna, we're gonna just do our own thing. And you just need to, batten down the hatches and, investing it long term. We're trying to be like open kimono. Here's exactly how it works. You should know and let's really understand what the risks that you're taking by using portable alpha return stacking leverage are, and dispel some of the myths and understand some of the risks. it's gonna be a long, journey to get brought at auction, but I, like I said, 40 years from now, I'd be shocked if everybody's portfolio doesn't have at least a little bit of this. That's
Rafael Ortega:
01:05:28
see it.
Rodrigo Gordillo:
01:05:29
Yeah.
Rafael Ortega:
01:05:29
Hopefully Europe moves a little faster and I can introduce things because right now I'm seeing that I'm always the first person to ask, or the first person in anything that is portable alpha esque in Europe. Now in Canada too. I think I'm, one of the biggest.
Rodrigo Gordillo:
01:05:48
Yeah.
Rafael Ortega:
01:05:49
So I'm, trying to be there at the forefront of, it, but really enjoying it because I think we're very, early and,
Rodrigo Gordillo:
01:05:58
Very early and it's exciting and you see that like when you put things together and you, I'm like, oh my God, this is so good. We just need to give it, we just need to show it out and give it some time. And it's always it always, because of the operational burden of doing something new, it's always, you're putting things out two years later than what you want it to. Like we wrote the paper in 2021 and we wanted to launch something at the end of 2021. Had we done that, the visual obvious story would immerse, would emerge. And what's happened is it took everybody two years to, to let us do what we needed to do. And we launched at the teeth of a, drawdown in some of these stacks, right? we're just gonna have to muddle through and keep on telling the story. And you're a good partner to have in Europe.
Rafael Ortega:
01:06:41
Let's see. Let's see how it goes. We'll keep pushing it.
Rodrigo Gordillo:
01:06:45
Okay, Rafa, this has been awesome. we should do this more often. Your English is much better than my Spanish, which is, which is incredible, for somebody that hasn't done this in English. thanks again. We will, if anybody wants to find you work and they find you on social media and on your websites and so on,
Rafael Ortega:
01:07:05
I'm on Twitter mostly at Paton, which is, R-I-V-E-R-P-A-T-R-I-M-O-N-I-O. we'll have it down there the links,
Rodrigo Gordillo:
01:07:19
in show notes.
Rafael Ortega:
01:07:21
and then if you wanna read about Return Stacking in Spanish, you can actually find me if you look for Return Stacked Portfolios.es that's the Spanish, webpage. And there we're basically talking about return stacking and doing, covering all the, on the stuff that you guys are doing. Trying to bring it again, the main difference is that we're looking at retail investors instead of, advisors. So that's why I some of ideas.
Rodrigo Gordillo:
01:07:52
Yeah, I, would definitely encourage people to go to the site and there's a little button on your Chrome that says translate and does a pretty good job of just try to read a few and read it from a different angle, that, that Rafa is really good at. So definitely visit the site, read some of the blog articles we'll have you on more often. and, keep doing what you're doing, man. You're doing God's work. Thanks for joining today.
00:00:00
This is what I've been looking for, right? I can create a portfolio. I can finally create a portfolio that is truly diversified, that is using everything that we know we can use. So that means not only assets, but also strategies. We can try to balance those things out. It's gonna be a great long-term, sharpe ratio portfolio. It's gonna be stable, it's gonna be all weather, and then we can get it to the volatility that people actually want, right? And if they want an 8% volatility portfolio, we can do that without losing balance. If you want a 12% volatility portfolio, we can now do that. And it's not losing balance, right?
Rodrigo Gordillo:
00:01:45
Hello and welcome everybody Today I have a very special guest, a friend of mine and, and colleague Rafael Ortega which is a Spanish investor, not from Latin America, but from Spain, and he is currently a senior investment fund manager at Andbank Wealth Management, where he manages a bunch of portfolios including permanent portfolio ideas, all terrain, return stacking, and what he calls the, off-road investor approach, which are custom built portfolios for institutions and high net worth individuals. Yeah, this is a, interview that I've been wanting to have for a while now. I'm also, been doing his podcast in Spanish, called The Off-Road Investor for over a year now. Rafa? Yeah. Yeah. And I struggle a little bit with the nomenclature in Spanish when it comes to our industry, and I'm sure Rafa's gonna go through the same, it's my turn to make him suffer a little bit and do it in English. But, I figured that, it would be a great time, to bring him on board because I think, broadly speaking, when we talk about return stacking, and the way that we've really garnered attention is how do people stack returns above a 60 40 portfolio or 80 20 portfolio, or a hundred percent equity plus portfolio. But, And then you get into, okay, what else can we do with the return stacking? Maybe there's a more balanced approach to building a portfolio and you get to an ultra terrain approach. But Raf actually came the other way around. He started, when I met him, anyway, he's gonna tell us his background, but when I met him, he actually had already started thinking about, the concept of a balanced portfolio and then built himself into all terrain. And now he's thinking about in the latest iterations of doing 60 40 plus or a hundred plus. so yes, he is a fantastic partner. he actually has taken the Return Stacked Portfolio Solutions moniker and, and on our behalf started creating, the brand in Spain. So we'll talk a little bit about that, but before I get into all of the fun stuff, I, do want the audience to get a, bit of a background on you and how you started as a, as an engineer and ended up in Return Stacking, Portfolio Solutions. So maybe give us a, broad overview of your history.
Rafael Ortega:
00:04:13
first of all, sorry for my English, I, all the investing information I consume is in English, but then I never speak about investing in English, so I'm sure some of the words are not gonna come and maybe Rodrigo can help as I've been helping him in Spanish. the thing is, I started not as an investor, right? I did engineering. I thought I was gonna be some sort of consultant and I actually started in a, one of those big consultancy firms as an analyst. But that lasted only a couple of months because then, I was studying and living in Madrid my family is from Valencia, that's another city in the east of Spain. And my family used to run, my mother used to run a small business and then she was sick and went on a The business was in a crisis and, I felt like the prodigal son that had to come back and, do something about that. My have a younger brother, he was still studying. And, my father had recently passed away, so we were go going through a, like a huge family crisis we solved it eventually. And then at that point I was looking at, like any family and any business, what do you do when you make more than you when than you consume? So what do you, what do we do with those savings? But obviously I was, youngish like 20 something, but I was looking at, family money. I, hadn't really made that. Also something that had taken a couple generations to build. I started looking online on what do you do when you invest? And everything I found was, trading or, oddly enough, in Spain there's a huge value investing culture. So I got into, the Warren Buffets and Benjamin Hams and all of that. I also. had a look at what had been done in the past. And my mother used to work with a local bank, and I very, very fast I found that most commercial banks, first of all, in Spain until now, most people just relied on their state pension. financial literacy is very, low. Only the newer generations are starting to see that they, will need to have some savings, the future. So basically, everyone worked with their commercial bank, which just gives you, closet indexed funds that are expensive. strategy is expensive. That's not gonna take you anywhere. And, I, just couldn't find a solution that made sense or made sense for me. When I looked at a value investor, they would say have these great marketing things, you know, value is what you get, but price is just what you pay. And that's, that sounds great, but if you've just gone through a crisis like I have just done, and if your savings are 50% down, it doesn't matter that you tell me that the value isn't down. The price is what matters if, when you need your savings, right? Most people, or at least my understanding of this was most people need to balance out participating protecting. You need both of those. And that to me is what makes sense to almost everyone. And I started looking at market history and other strategies and I just didn't see it. I saw those 50% draw downs. And then even if you have a theoretically balanced portfolio with stocks and bonds, those also go through huge draw downs when there's inflation. And just looked around and I couldn't see anything that I could believe in, right? Or that I, liked. I don't know how, I just don't know how found Harry Brown and the permanent portfolio idea, and
Rodrigo Gordillo:
00:08:04
You don't remember?
Rafael Ortega:
00:08:05
I don't know what I saw it the first time, right? Just, I must have read a blog post or something, and that just clicked. I, I read it and I thought, okay, this makes so much sense to me. And for those who don't know, basically the permanent portfolio idea is that, we're gonna have economic cycles, we're, they're really bad at anticipating the next step of the cycle, or even if we know what's gonna happen, we have to also have the timing right. It's just too difficult. But at the same time, we do know that different assets, and then eventually I found that different strategies, also have this behavior. They behave in different ways in different environments. And that is something you can believe in, right? We know that's gonna happen eventually. It's not in the short term, but in the medium term that, eventually happens. So you can map those. And the simplest version of this would be a portfolio that has something that works for growth, something that works for deflation, something that works for inflation, and then something that will work in a recession. Brown, had stocks, bonds, gold and cash, or invested cash. And so you have three assets that are, high volatility, that's 75% of the portfolio, 75% of the portfolio have low correlation, and then you have a buffer, which essentially is de-levering that portfolio for you. So, you have a conservative approach investing has low volatility, good returns. It works in different market, scenarios. I think what you're showing here is yeah, the different asset classes and what do we expect right from them. But not only what do we expect, like what do we know is gonna happen, right? The theory.
Rodrigo Gordillo:
00:09:57
Yeah. Yeah. That's a thing that's a kind of the key thing here, right? So, what I'm showing here for those that aren't, watching and listening is just the performance of some periods where we've seen inflationary stagnation, inflationary boom, deflationary bust, and disinflationary boom. which are just fancy names for when the intersection between high or low inflation shocks and positive or negative inflation shocks happen. And, and you can see clearly, right? And this is, I think the big unlock when you get into this world is, okay, everybody wants to just do better. Warren Buffett value investing and throw in a little bonds just to reduce risk. But the reality is that a lot of retirees in the last few years that put a hundred percent of their money in bonds have realized that even bonds have risk. and you can, and you don't have to have a lived experience that tells you that for them to modify your behavior. before we saw the 2022 inflation shocks, you and I had already come to the conclusion that high inflation would be bad for both equities and bonds at the same time. But, and this chart here just shows, inflationary stagnation, you're, you, what you generally saw historically was commodities, gold, and in this case, trend following, we'll get to that. But, Harry Brown is more traditional assets, right? More gold than anything. And, and then inflationary boom, which is high in inflation, accelerating growth, everything floats up, but the biggest winners are commodities and gold. disinflationary boom, which is what our lived experience, and most investors lived experience has spent most of their time on is high accelerating growth shocks and falling inflation. And that means, of course, that equities and bonds are gonna do well. And I think that's why the 60 40 has become so prominent and deflationary bust is when you have a bear market and, a negative growth shock and slowing growth without inflation, right? So that's generally equities down, commodities down, and then you see bonds really picking up the baton trend following and, and commodities, sorry, and, gold bonds and trend following, getting hurt. So that's when you understand that framework, you're like, oh, okay. We need to think about my families, in your case, right, It was my family's wealth going forward, and Harry Brown basically, from what I understand, it was fairly simple and the original idea is just, a quarter, cash gold equity loan, right?
Rafael Ortega:
00:12:32
seems, it's, simple that it looks silly, but if you look at it from what I know now, I. Actually the three assets are kind of risk parity, equal X, right? Because it's called stocks and long-term, bonds. And those kind of have the same volatility, right? So you're actually doing like a risk parity from those three. And then the other one is just a buffer. It's just de-leveraging the portfolio. So you have the conservative approach because he was trying to find a solution that anyone could do and that it made sense for almost anyone. So the conservative approach to that made a lot of sense. Also, we can go on that a little later, right? But with only, if you only have stocks, quantum gold, there are still sometimes where those three can go down, down especially through, some crisis and shocks. And so he wanted something that would protect you even then, right? something that was
Rodrigo Gordillo:
00:13:30
Yeah.
Rafael Ortega:
00:13:31
all-terrain I found that,
Rodrigo Gordillo:
00:13:34
I can I just pause there for one second? One thing that I think few people understand is when we say bonds, most people think about that aggregate bond index. Aggregate bond portfolio that has a, generally speaking, has a duration of six to seven years. Volatility profile of four or 5%. and the key behind balance is making sure that the maniacs aren't taken over the asylum, right? That, you don't want equities to be four tenths of volatility of your bond portfolio. And there's two ways of doing that leverage, which we'll talk about in a sec, but more importantly here, if you go out the curve, and the longer the duration, the more the volatility, therefore the bigger the impact when you need it the most and the bigger the impact when you're getting hurt. But it's, if it's balance and risk across equity and bonds, that's the way to do it. So when we talk about bonds, here, we're, really talking about lingerie bonds, which nobody does, right? Because it's too volatile, because bonds are supposed to be safe, they're not supposed to be volatile. And it's so funny because they could be whatever you.
Rafael Ortega:
00:14:41
exactly. So I started my like, own personal portfolio, like for, the company, for the business or the family, however you wanna see it. And it was a permanent portfolio, and I started talking about the permanent portfolio with, different banks because I was trying to get, those long-term bonds in that gold position. And it was almost impossible, right? And everyone looked at me like, like 25%? what? they, they couldn't, understand. And then also I, started looking online and finding more people. Eventually I found you guys and I found other, all weather solutions or all-terrain solutions. But, at that point in time, that's, that I was like my first aha moment where, as we've said before, once you see it, you just can't unsee it. And I noticed that no one in Spain, or in the Spanish internet world was actually talking about this. Like absolutely no one. And even in the anglosphere, as I, I like to call it, though, you can find people talking about programing portfolio ideas and all weather, it's, there, there's more people doing it and there's obviously like you guys and more people doing it. but it's not that, it's not standard, right? Like it's more of a niche thing. In, in the, in Spain or in Spanish absolutely no one was talking about this. So that sent me through, double path, one of, okay, there's a business opportunity here. So I, this makes a lot of sense. It makes sense for me. There's obviously more people than it makes sense for. I need to learn more about this and, get my license and become an advisor and start preaching this. And then on the other side, I need to, keep learning more and more about how to implement these strategies better and better. And that's how I found you guys. I found, my favor with this Trinity approach. I found, eventually found Corey. I found Ray De, Ray Dalio and all of his, all of his, pupils and all of those, risk party ideas. So I just, spent the last decade and a half, reading and trying to see what people were doing in the space and then trying to get my way through compliance teams and, Spanish institutions to try to get these things back so that investors in Spain can actually, have a portfolio that does this.
Rodrigo Gordillo:
00:17:19
Yeah, being a trail blazer is not always fun.
Rafael Ortega:
00:17:22
Yeah along the way I, I built, a community of people that believe in this, right? So when, As you were saying, When, you came up with the, that all-terrain paper Return Stacking Anything. I see, I started learning about trend following. Anything I see, I just see it from this, structural diversification standpoint. I just can't see it any other, any other way I.
Rodrigo Gordillo:
00:17:53
Yeah. And, I'll give you credit. you are, I, always tell people that you're the Corey Hoffstein of the, Spanish investment space because when you say you built a community, you really are an incredible writer and synthesizer of information. even the stuff that we've written that we think we synthesize, when, you take your take, when you have your take and your go, it is so much easier to under to understand. So kudos and credits to you for being able to do that for a community that has literally never heard of most of this stuff, at least in the US you didn't, it's wide enough. And Canada, that you can reach some people. you're starting from scratch. Every single person you're talking to like has never heard about this, right? And so you, I think you must have learned by slamming your head against the wall how to communicate with a community and create a, pretty large one, as I see it now.
Rafael Ortega:
00:18:45
think whenever I read your stuff, I, feel like, okay, this is written for someone that knows what we're talking about, and I always try to, water it down into the essence of it because I'm usually talking to retail, right? I, most in Spain, most funds are sold, right? People that do invest with me buy my funds, right? they buy the idea and then they go into the, strategy. I have no, no commercial, team. I, just do education and people find our stuff, and if they have the similar, if they buy into the idea or the philosophy. Then they eventually, invest or they do something similar and then preach it around and then that hits other people. But, that, that's basically what I've been trying to, trying to do. But always with that focus on that, there's many things I don't know, but I do know that, diversification works and that the true diversification is what I think, I think Adam is the first person I read that said structural diversification. And that just, again, I think one of the things that all-terrain or -weather investors don't have is the same nomenclature. And I think that's something that value investors have and other investors have, and that brings a lot of those people together and then that creates a community and that helps the ideas grow. So I like how, you guys have been, interviewing people that are supposedly your, competitors, but, in the way I see it they're, not your competitor, right? Your competitor is, someone that's doing a index, fund, robo advisor thing or, just a highly active in the sense of stock picking, stock picking strategy. we're doing something different and we need to speak about it, without trying to hide what we're doing. Like with the example of return stacking, I think it's very clear. I think the reason people buy return stacking is that you're actually saying what you're doing and you're not scared of saying what you're doing. And, you're not scared of defending the idea that you're trying to defend. It's tough. 'cause you're saying things
Rodrigo Gordillo:
00:21:04
Yeah.
Rafael Ortega:
00:21:05
leverage, manage futures. especially when I, every time I bring something to the table, as you were saying, no one's certain like when I have to explain, or global macro or carry strategies, like most of the, time people are like, what a new thing again.
Rodrigo Gordillo:
00:21:25
Yeah, we feel your pain for sure. And yeah, this is why communication and having the ability to synthesize things as well as you do is important here. but let's, go back to, you have this interesting permanent portfolio approach and your revolution towards like where, you got stuck and then how return stacking might have unlocked some value there.
Rafael Ortega:
00:21:53
thing is, when I started with a permanent portfolio for myself, but when I got the opportunity, I actually became a financial advisor. That's where I got my first clients and that I started to grow a base of, investors that were interested in, adding something different to their portfolios, right? That's how I, actually started and eventually I got the opportunity to start a small fund. So, I could build a strategy and people could go into the strategy instead of me, managing everyone's little portfolio. and I thought at the time, this was an error, by the way, but at the time I thought that most people wanted something that was not as conservative, right? The permanent portfolio's problem. and, I don't think it's a problem. I think it's, made, it's on purpose, but it's a pretty conservative strategy. It's conservative in many ways. It's conservative because it has low volatility. It's conservative because it's only using biggest assets around because, Brown was thinking about something that, was fail safe. It wouldn't blow up. But there, he, preached this, late seventies, early eighties. And, eventually there's more things that we can do with our portfolio, right? There's more, going on now that didn't exist then, and that maybe you can bring into your strategy. And I was trying to find something that was, more, I wanna say balanced, but, really, that was equivalent to a 60 40, at least in most people's minds, right? Something that was, medium risk. Let's call it medium risk, but yeah, something that was equivalent to a 60 40. and every time I tried to build a portfolio, design, a portfolio that was matching 60 40 volatility, I was losing the balance, right? Because you have to have more stocks. If you have to have more stocks, then suddenly those stocks are running the asylum, as you were saying. Then if I add diversifiers on the other side, I get more tracking error, and then people are gonna ask questions when those diversifiers are not working. So it was, it was a tough challenge. I, think I built a portfolio that was, it's still on now, it's transitioning to a return stack version of the portfolio, but it's something that was, let's say, around 50% equities or 60% equities, and then the rest was, an all-terrain defense, right? But. If you want more volatility and you don't use leverage, the only way to do this is to get more stocks in. And then when stocks fall, your all terrain defense is not gonna recoup all those losses. It's just gonna be more, you have more trust on the fact that it's gonna work, better than just bonds, because bonds can also fall sometimes. And all-terrain defense is gonna work more times. It's gonna, it's gonna work against those stocks, but it's not really gonna, recover the loss that you got. It's just gonna, what's the word I'm looking for a word that it's not Rodrigo but it's like you're, look, you're like diluting your risk in a more efficient way, but it's not really, you're not really balance things, balancing things out. That's. And every
Rodrigo Gordillo:
00:25:17
Yeah, that, that.
Rafael Ortega:
00:25:18
into, okay, so maybe we get defensive equities and maybe we do some, momentum thing on top. And I was just trying lots of things to find balance and with, with, traditional strategies. It's just now I think it's just impossible. Like you, you're never gonna, you always have to take more risk in the form of cycle risk and.
Rodrigo Gordillo:
00:25:42
So let me, lemme pause there for a second and just show an old, an oldie, but a goodie. We've been talking about this already, right? But this one just shows a chart of gold, global equities, commodities, and 10 year treasuries, right? Roughly speaking, I don't know, 19, this is 1990 to 2023. Roughly speaking, they all make the same amount of return, but obviously the paths are wildly different, right? So which one do you want to choose is is always the question. And from the perspective of risk balancing these, again, we talked about long-term treasuries, I'm using the 10-year. If you run a simple equal risk contribution analysis to try to make sure that we balance things off, you're looking at 42% in treasuries, 29% in trend following here, 15% in global equities, 12% in commodities to get a hundred percent portfolio. And of course the 10,000 foot view of that is that you get this smoothed out line that kind of crosses in the middle of everything, but actually slightly outperforms over the long term, mainly due to the rebalancing benefit, That, that diversification premium. Now, while this line looks amazing, right? let's, this is a, I was trying to think about a different way of explaining to people why is it that an equal risk portfolio is generally going to not provide the returns that a high risk portfolio like equities is gonna provide? And the reality is that it's not true over many decades, right? If you think about the equity risk premium, right? What's the equity risk premium? depends on, global equity, risk premium, what is it? 3.5%, 4% above cash, right? So it's say notional, we're looking at 6% annualized, right? Term premium, is two, 3%. when you actually look at all these returns, they all at the end, as we can see from this graphic, roughly make the same return. The problem is that by diversifying you're clustering that return around that long term more often. And sadly, a 60 40 investor, an 80 20 investor tends to see more double digit years than you do when you're balanced. And that's painful. And that reduces risk and reduces, long-term returns. So you have to wait a long time to be able to say, okay, we did it. We did the same or better than with lower risk. And the reality is that it's boring for most people. When you create this portfolio and you have a 4% volatility portfolio, you're constantly apologizing for not putting enough risk on. And the reality is that you're up until recently, you were limited as to what you could do in terms of giving people what they wanted, which is, look, I'm used to, a standard deviation in my portfolio of 12%, 15%. Like I'm okay with that. I'm okay with the drawdowns that I've seen. Can you give me that? And the answer was no. The answer was no. This, you get this is the maximum balance portfolio you can get. and so anyway, I thought I'd paused there and show people what we were, what we're.
Rafael Ortega:
00:28:49
the, that graph, because I, love it because, it makes so much sense and then no one likes it in real life because in life, I like to sometimes show this and people will always choose that dark blue line, then show it starting in 2010 and then that just
Rodrigo Gordillo:
00:29:11
Right.
Rafael Ortega:
00:29:11
flat. great risk return, like gr great, sharpe ratio, but it's just boring. It just gives you a couple percentage points, while some of the other strategies in this, exactly that point in time, it's gonna be stocks,
Rodrigo Gordillo:
00:29:30
Yeah,
Rafael Ortega:
00:29:30
you those double digit deterrence and like incredibly high sharp ratios. And it doesn't matter how many times you show this, people are gonna be okay when they see it. And then after a couple of months of, low volatility, low returns, they're gonna ditch it.
Rodrigo Gordillo:
00:29:48
exactly.
Rafael Ortega:
00:29:48
just the way it is And,
Rodrigo Gordillo:
00:29:50
and it, and to their credit, if they feel they're leaving money on the table because they can take more risk, it's, a problem.
Rafael Ortega:
00:29:57
that's exactly the problem I, I was running into. I wanted to add more diversification because I knew it worked. I, thought the portfolios were gonna be, more resilient more all-weather and I was, all in on that. But the more diversification you add, diversification works so well that volatility goes down and the volatility goes down, eventually returns go down too. then I wanted a bit more volatility and a bit more return and I needed to have more stocks there. And then I was losing that balance and then I was going back and forth between those two things, right? More volatility always meant, that you had to sacrifice returns. And then when you had more stocks in, I was saying that I was all weather, but I wasn't all weather 'cause I had 50 to 60% equities in my portfolio, right? way that a 50 to 60%, equity portfolio is gonna be all weather because then you would need a leveraged defense, Something that was not just a mix of gold bond, bonds and, and trends following and other alternative strategies. Though that was gonna be an all-weather defense, but not an all-weather portfolio. was the problem.
Rodrigo Gordillo:
00:31:12
Yeah.
Rafael Ortega:
00:31:12
And then when you came up with the return stacking, paper that I. was my second aha moment where I saw it. I couldn't unsee it. I remember guys did a, late livestream or maybe an episode, I'm not sure. And I went on the chat and asked, you were saying, you know how return stacking, we'll talk about this now. like how it can create some tracking error, whatever. And I think I said something like, okay, but what if you don't care about the tracking error? Let's talk about a theory. and think one of you like brushed it off a bit, okay, maybe
Rodrigo Gordillo:
00:31:51
Yeah. Because 99% of our audience cares about that. Gonna fuel lunatics like us. Yeah.
Rafael Ortega:
00:31:58
I emailed you like, okay brother, we need to talk because if I can do this, this is what I've been looking for, right? I can create a portfolio. I can finally create a portfolio that is truly diversified, that is using everything that we know we can use. So that means not only assets, but also strategies. We can try to balance those things out. It's gonna be a great long-term, sharpe ratio portfolio. It's gonna be stable, it's gonna be all weather, and then we can get it to the volatility that people actually want, right? And if they want an 8% volatility portfolio, we can do that without losing balance. If you want a 12% volatility portfolio, we can now do that. And it's not losing balance, right? You're not getting, you're getting more risk, you're getting more, you're getting exposure, which is what you want, but you're not getting it through a concentrated cycle risk bit, which is what you do when you have a 50 to 60% equity portfolio. And I, that I went crazy around the idea and, luckily, and a half or something later, we finally did it. And we have, portfolios on that can actually implement these, these concepts in, Spain. So very grateful
Rodrigo Gordillo:
00:33:16
Yeah, and more, most of the battle that I saw you fight is a battle that we fought originally too in Canada is you're not just fighting a battle of ideas, but you're, running into operational roadblocks. compliance teams don't want you to do X, Y, Z, the even platforms don't even have the capability of providing you what you want or you being able to invest in US ETFs that you, that use gold and stuff like, it's just been a constant struggle and you've mostly fought through all that. tell us a little bit about that journey.
Rafael Ortega:
00:33:53
Yeah. So the thing is that, I mean it's counterintuitive, right? I'm trying to say that I'm building something that is leveraged. It's a hundred percent leverage, but it's actually a balanced, allocation, right? And that goes against everything that everyone has heard in, or everyone that you get, that's learning about investing will, will get as that association that leverage more leverage means more risk. to be fair, all that's equal. Yeah. more
Rodrigo Gordillo:
00:34:30
Yeah.
Rafael Ortega:
00:34:31
more risk. it all depends what we're comparing, right? 'cause I think, everyone would understand that if you have a very risky thing and a very unrisky thing, and sometimes you can leverage the unrisky thing and it will still be less risky than the risky thing. But anyways, the, the thing here is that, I found that the solution to this problem is how you frame it, right? People think more leverage means, more risk, more leverage means that you're chasing higher returns. That's not what we're doing, right? We're using leverage after we're diversifying. So the right order is you have a certain amount of risk. Now we are diversifying and we're adding true structural diversification to different assets and different strategies. So we're bringing volatility down and because volatility is down, your returns are down, and we're using leverage to recover the exposure you lost through diversification. So we're using leverage after we're diversifying. And again, this is another of the things that I think everyone in the world should be using because if you do the math and match, amount of added exposure so that it matches the, risk through added exposure matches the reduction in risk you get through diversification, you're doing that thing that, the phrase? Eating your cake or what is it?
Rodrigo Gordillo:
00:36:04
I, you are, yeah, you're having your cake and eating it too, having your diversification cake and eating, eating it too. Yeah.
Rafael Ortega:
00:36:13
so it's, that is the right order, right? We're reducing risk and then we're using leverage to recover the lost risk. Another way to see it is that you're actually, this is, okay, this is from a, all-terrain, point of view. If you look at it from a traditional portfolio where you have, stocks and bonds you're adding, more diversification through stacking, that is defensive leverage. You're adding more defense to your portfolio. So if you do it right, and if you do the math. Most of the times, you're not really adding that much risk. It comes with, with, its, what's the word? With its, contra or
Rodrigo Gordillo:
00:36:56
Yeah, it's, you can say counterpoints, it comes with this off, with, its, there's other offsetting things that happen by when you use leverage, but not necessarily in the same way.
Rafael Ortega:
00:37:05
you will have, error, right? It comes in the form of tracking error. It comes in the form of your volatility is gonna be more stable, which, sounds good until you see it live, right? That you're actually getting hurt more, very little, but all the time.
Rodrigo Gordillo:
00:37:22
Yeah, more often. But,
Rafael Ortega:
00:37:24
it more.
Rodrigo Gordillo:
00:37:25
yeah, so that's, the thing I wanted to, 'cause we've chatted about this a lot, and this is, this comes from Corey's saying that risk, cannot be, trans cannot, be eliminated. It can only be transformed. And so how do you, talk about that?
Rafael Ortega:
00:37:41
Again. I think the way to make people understand this is to do it in the right order, right? So the right order should be how much risk are you willing to take in the form of volatility, in the form of expected drawdowns, et cetera, right? Once that is clear, then how do we take that risk and how do we do it in the most efficient way? If you build a portfolio, again that is just stocks and bonds, you are taking a lot of market risk. I've heard you say many times that when you look at S&P 500 and you use an ETF, that ETF is unleveraged. But if you look at the companies beneath the ETF and you look at the leverage within the companies in the ETF, you're actually using three times leverage, right? If I remember right. Something
Rodrigo Gordillo:
00:38:29
Yeah. Three to one. Four to one. Yeah.
Rafael Ortega:
00:38:32
you're taking market cycle risk and we don't have that market cycle risk because that tends to. Crash. eventually, like once every, whatever years, it will, it, we will get into that part of the cycle where stocks just don't work and you get those big drawdowns. You want to take that risk and that risk is the risk that you're diversifying, right? So you wanna add other things that are gonna move in different ways, ebb and flow in different moments, and it's the same amount of risk, but if you take the risk in smaller doses, the same amount of risk, it is much better than just feeling like there's no risk, which is how a 60 40 portfolio feels when everything is going your way. And then one day, you don't know when, it's gonna come and it's gonna hurt you. And there's a man, how do you say this in English? There's a. asymmetry in the way returns come right with that
Rodrigo Gordillo:
00:39:31
Yeah,
Rafael Ortega:
00:39:32
understands where 10%, draw down you, you're back at zero with 11%, but a 50% draw down needs a hundred percent. So the same amount of
Rodrigo Gordillo:
00:39:41
to break back.
Rafael Ortega:
00:39:42
way to take that risk is to try and do it in smaller doses. Smaller doses makes a lot of sense until you feel it when the other person is not feeling it, right? And that's what happens.
Rodrigo Gordillo:
00:39:56
So, you know what, Corey and I yesterday, were having we're looking at how to tell this story about this, right? This idea that there's an, there's. There's risk inequities and there's risk in all-terrain or equal, we're looking at an equal risk portfolio of assets. And so what I, wanted to see is how often you're in drawdown in, in the S&P 500 on a daily basis, right? So how often are you hitting new high and started losing money versus how often you're in drawdown? I think we did trend following. We did gold. What's fascinating, there's a drawdown in recovery chart that we often use. I'll see if I can find it here, later, but, which is you start losing money and then you recover. and if it's zero, it means you're making new highs all the time. So the top of the chart is flat as long as you're making new highs. And when you we're looking at trend following and trend following is, could you guess how often on a daily basis the SocGen Trend Index, is making new highs?
Rafael Ortega:
00:40:54
I would say very little, right? Because I feel it's like you're losing all the time and then suddenly you get that big win. I think what.
Rodrigo Gordillo:
00:41:02
Yeah, it's like it's around 12% on a daily scale. It's around a third on a monthly scale. And when you look at the chart, when you actually look at the S&P500, it is like making new highs. It feels, I haven't done the actual numbers, but it just, it's flat that chart of drawdown and recovery is flat most of the time. And then you have 2008 and you just lo lose and lose and lose and it's a massive drop. But you never see that in the history of the SocGen index. You never see that lose and lose. draw downs in recoveries, draw downs in recoveries, draw downs in recoveries. and so I think that tracking error
Rafael Ortega:
00:41:37
I was asking even you get it to the same level of volatility, so it's like it's structurally different.
Rodrigo Gordillo:
00:41:44
Is structurally different. There is, there's some, like you're just getting more, it's, look, it's the skewness of the S&P500, Then you have the big fat tail. The moment you start adding diversification, you add bonds and equal risk, you add gold and equal risk, you add some diversifiers, you now have a more consistent like series of drawdowns every year, right? So you'll see your, your, like the area under the curve for those that remember statistics, is roughly the same between a diversified portfolio and the S&P500. It's actually less, but roughly the same. The difference is that area under the curve is showing up every year more often, and most of the area under the curve happens in big abrupt losses for the S&P500. So the experience here is, something that is important, right? The experience is how often do you feel like you're winning versus your alternative portfolio,
Rafael Ortega:
00:42:39
I think I'm lucky here in being to communicate this because I've been talking about the permanent portfolio for so long, and that is something that
Rodrigo Gordillo:
00:42:48
right?
Rafael Ortega:
00:42:48
people, I would say in the investing community in Spain at least know about. Even if they don't believe in it or they don't use it, they know about it because we've been talking like for a very long time. Sort of everyone knows that this is like an all-terrain solution and they've seen how it be behaves just behaves differently, right? Sometimes it's in a drawdown when the S&P or in, Europe, most people use the MSCI world as the reference, but, stocks are going up and this might be flat or going down because I don't know, bonds are down or gold is down or something else is going on. So they, they're used to this idea. And then from the permanent portfolio to, a return stacked opera portfolio, which would be like our most, I, now, I, never say risky. I'd say it's just the most efficient portfolio, but, our most efficient offering would be like a 12% volatility, portfolio that is a mix of stocks, bonds, gold, and then trend carry and other diversifiers that would be smaller position like Bitcoin or arbitrage or whatnot. And so they, they're used to seeing that this thing is its own thing, right? the difficulty now is, explaining what a trend following is, which again, I've been talking about this for longer, but maybe carry is something that people hadn't been introduced to lately, and starting with a drawdown is never
Rodrigo Gordillo:
00:44:25
Yeah. It's tough.
Rafael Ortega:
00:44:27
but they've seen, drawdowns in gold and they've seen drawdowns in long-term bonds, which is something that, everyone was saying, like, why do you have long-term bonds in the permanent portfolio? Why do you have gold? So we're used to explaining, having odd things in the portfolio that everyone knows that you shouldn't have. But,
Rodrigo Gordillo:
00:44:49
Yeah. Everybody knows that you shouldn't have right now.
Rafael Ortega:
00:44:52
Everybody knows. I've, learned that, one, two things, right? Diversification works. The second would be that, things happen and then the experts show up, It's always that way around. So yeah, never trust the experts.
Rodrigo Gordillo:
00:45:08
Yeah. I don't understand why you own gold. It's lost nothing. It's lost money. you should have known. We should. Let's get out of it. X post.
Rafael Ortega:
00:45:19
the other way around, right? Like gold is an all time high. So
Rodrigo Gordillo:
00:45:22
Why don't we buy more gold?
Rafael Ortega:
00:45:24
would you own 25% on your portfolio? Or 20% out of 200 even in a off-road portfolio, obviously you have to.
Rodrigo Gordillo:
00:45:35
Yeah, and I have, let's see if I can share this one here. yeah, this is from the an A brochure, the All Terrain portfolio. So we run a couple of model portfolios, ourselves in the return stack, website returnstack.com website. But this is just an expert of the simplest all-terrain portfolio. I think it's levered 150%. It's basically all world, seven to 10 year treasuries, gold, and the, like some commodities and a CTA index. And this is another thing that I, think we get trapped into is, I think the nomenclature is clearly appealing, this idea of all terrain. But I think what the, what, it projects is never lose. And this is an important distinction. I think you, I think the idea of saying all-terrain is just a more efficient portfolio. You're still in a four by four going through some rough terrain and you will fall. The issue is, are you gonna get stuck in the ditch? And we've used a lot of imagery here on you and me, when talking about the off-road investor and all-terrain, and I think the important thing is it is a four by four. I think we can get outta most ditches. you don't want to be driving a Ferrari in this environment. And and this just shows.
Rafael Ortega:
00:46:53
pot holes, right? And when you drive through those, you're gonna feel it. if you've ever a four by four, going through a, offroad path, it's not driving, a, Tesla to the supermarket. It's very.
Rodrigo Gordillo:
00:47:08
Yeah. That's right. That's right. And it, really is like when you look at the year over year here, that the all-terrain does experience shallower, annualized losses and less of them. and you're getting a, the sharpe ratio of this simple portfolio here is around 25, 24, sharpe points higher, so more efficient for every unit of risk you're getting more units of return. But in this case, the example here is to lever it up to the point where it has the same risk as a traditional 60 40 portfolio. So the thing about this small edge is that over, over time, you see the value, drawdowns are lower and so on, but in any given year, you're like, why are we doing this again? it seems like we're getting the same returns, but it's a lot more complex to understand. And what I've found is that, where this really becomes abundantly clear is when a, an asset class that people are overexposed to really goes through a, not a two month or three month, but a significant series of, years, whether they're flat or down, where you see the value of all the other pistons in the motor, doing well. And it doesn't always happen that way, right? Like it, what tends to happen is you have these shallow losses in gold and recovery, shallow losses in bonds and recovery, shallow losses in equities and recovery. And it just chugs along and adds a little bit of value. It's super different. and then there will be a prolonged bear market in equities where you see the all-terrain, especially something like this, just chug along positively. And that's when you see the value. it does take time to see the, long-term value here and it requires a lot of faith. And so a lot of education
Rafael Ortega:
00:48:59
you have to be careful with the way you frame that too, because if we say that, I think I've said sometimes like the overall portfolio needs a crisis in order for you to see, like a big difference, right?
Rodrigo Gordillo:
00:49:17
why you have it. Yeah.
Rafael Ortega:
00:49:18
when you say a crisis, people are gonna think, know, a, a 10% draw down is a crisis or a 15% draw
Rodrigo Gordillo:
00:49:25
Yeah. Liberation day draw down. Yeah.
Rafael Ortega:
00:49:27
you need a really tough scenario to see that huge difference to appear, right? Because if not, you just see that it juggles along at that level of volatility. And it can be doing that for, I've, run the back test suit, so, I can see you, you can get maybe four or five years where it does the same thing that a equally, equally volatile stock and bond portfolio. And so the question there is, why am I using this expensive, solution that is so complex when a very simple one can give you the same, returns, right? it's because in your backpack, you have a lot of things there that you just didn't need. That doesn't mean that you're not gonna need them in the future. Like the sensible thing is always to be prepared. You need to be prepared always. And if we don't get a terrible, I hope we don't get that terrible car market right. we're gonna do okay too. you, it's not that bad. but yeah, sometimes I find myself thinking do I want a, like a terrible bear market for equities? So, that, people see the value of this. but yeah.
Rodrigo Gordillo:
00:50:52
No. that's that. Yeah. Don't we all, I, my anecdote to that is that I was doing this stuff in '08, and I remember the phases of emotions, Phase one, OC September, like Lehman goes down September, October. I'm feeling so good, right? I've been talking about it for a few years. Portfolios are doing great. everybody's losing their minds. Clients don't even know what's, my clients didn't know it. Like, why is everybody so worried? 'cause they were looking at portfolios in different light and, and so the first was relief and satisfaction. We want that. And then you, have January, February, and advisors aren't showing up to their desks. Associates are having to talk to clients that are crying on the phone. Family and friends are losing their jobs. And then you're like, crap, I really need this to turn around right now. It, is, there is, it is a double-edged sword to I wanna show the value of this, and this is important, but also I don't want to ever have to use those tools. I hope I never have to show you what, how important those tools were. I just need you to trust me so that when it does happen. And so by the end of it, I was just begging for things, to change. And then when things changed, then the markets roared 80% and you're still making 9%, 10% a year, especially when I was non levered. So it is, as an all-terrain, provider and, investor, you go through these emotions. At the end of the day, it ti it comes down to does it, is it a sound, philosophical, fundamental investment strategy that works over time? And I, I think it's tough to, once you take the red pill, tough, to say no, it doesn't. and even this year, I'm looking at just eyeballing the kind of the off-road portfolio, versus an 80 20, right? 80 20 year to date is up again. And I had a draw down, around 13% drawdown. and, in a recovery, and I'm looking at, and, an iteration offroad roughly around the same risk, actually lower risk, down, less peak to trough and flat for the year. And they seem identical, but the reality is that one is a levered portfolio and the other one isn't. Right? And the risk of, hey, it's a levered portfolio, that's risky. Again, if you're using defensive leverage. Not so much, it had a shallow draw down. It's now back to break even. And and there were tools in there that the 60 40 didn't have like gold, right? That really helped offset a lot of the losses on the, on the levered side. And so the question is, what would've happened if this continued to go down 20, 30, 40, 50%? Would they continue to be in tandem like we saw in this shallow loss? And history has shown us that no. It's, very, it becomes a very different portfolio, in a continuation, but hopefully we'll never see that. Hopefully we'll just compete, like hopefully the ultra terrain is able to compete. Hopefully the ultra terrain gives what people need in terms of what they care about, which is, am I gonna have enough returns to make, my, to pay my bills when I retire? Or, grow to get a good retirement nest egg. But again, if they, if it does happen, it's important to understand the moving parts and the value that they add. If God forbid anything really bad happens.
Rafael Ortega:
00:54:17
it's funny 'cause I was thinking that's exactly what's taken me now full circle to, okay. I can't convince everyone to be an all-weather investor because it, people are just not built in their mind for that. They like taking risk. they believe in stocks and, they're value investors or they're whatever, I don't know, they, want stocks and they want businesses and they believe in the markets and they're capitalists. So whatever they, have in their mind. you still can use, diversification without sacrificing returns, right? You couldn't do it before. You can do it now. And that's what I was saying, right? You can add to a hundred percent portfolio that, a hundred percent stocks, whatever kind of thing you're doing, a hundred percent stocks, you can add some diversifiers on top of that. And if you do the right amount, you're not gonna feel the difference and you're just gonna get that extra return from the stacking. So even if you're just looking at returns, return stacking makes sense. If you're looking at, maybe you want a little less risk. Not concentrate your defense on bonds, then you can use return stacking to have a more diversified defense, which is what I was trying to do before, but now I think I'm doing it more efficiently again. add more defense to that defense that we did. We didn't do that before with stacking.
Rodrigo Gordillo:
00:55:47
Yeah.
Rafael Ortega:
00:55:47
There's so many other ways to use stacking that when I put myself in other kind of investors' boots, my mind is exploding because I just can't understand. If you know about it, why wouldn't you do it? I just don't see a world where in a couple of decades this the norm, right? Everyone will use
Rodrigo Gordillo:
00:56:11
Where it's not, where it's not standard of care for the financial industry.
Rafael Ortega:
00:56:15
using 20. I see that. if you have a any version of a 60 40 right? Like your indexed stock in one portfolio, you can easily add 10, 15%, stack. Without affecting your overall risk and just get some extra returns. Not like it, will happen eventually. You're adding things that are, they make money over time. we know that not all the time, but now you can get a diversified set of things that make money over time. You put them on top of your traditional portfolio. Tracking error is gonna be minimal. Volatility wise, it's gonna be almost the same, and you're just gonna get some extra returns.
Rodrigo Gordillo:
00:56:56
Yeah. And, but ca and the thing is that, the caveat to all of that is that, we're saying it will, but the reality is that, you look at some diversifiers, A QR went through a three year period where their, alpha sleeve just lost money, and now it's killing it again. Like it's, it depends on timeframe. There will be losses, there's no guarantees. But, again, these are sound, a lot of these are very sound ideas. even if you're a hundred percent equity investor and you decide to stack some bonds, the question is, term premium going to exist in the future if you're able to stack an extra 1% just by doing a hundred percent equities? 20% bonds. Alright. You're adding diversification. Do you believe in term premium? Do you believe that bonds are gonna make returns above cash? Especially if you're taking duration risk? it seems like a reasonable thing. if
Rafael Ortega:
00:57:43
I know, we, we have to,
Rodrigo Gordillo:
00:57:45
Yeah,
Rafael Ortega:
00:57:45
we have to,
Rodrigo Gordillo:
00:57:47
we have to Yeah. Temper expectations. Yeah.
Rafael Ortega:
00:57:51
I feel like that stock investors never do this, but okay, let's temper expectations.
Rodrigo Gordillo:
00:57:55
Yeah. Let's us do what we.
Rafael Ortega:
00:57:58
but, I can see a world where one of those diversifiers can fail on you even in the long term, but the more of them you add on, you know, the more probable is than, you know that, than a series of things that have made money over time in the long term. If you add them together and you have a diversified set of them, will eventually probably make some money and that will be something that will be on top of what you are doing right now and it won't affect your portfolio.
Rodrigo Gordillo:
00:58:30
Yeah.
Rafael Ortega:
00:58:30
so.
Rodrigo Gordillo:
00:58:32
And I, think you're right. I think the big unlock for guys like you and me who both started on the All-Terrain camp and were like, this is the only way. when you take that away for a second and okay, investing is a religion. Everybody has their own religion and, their, they're all, they're value investors, but there's a bunch of, there's a bunch of like sects within value investors too, right? and there's a, there's all terrain investors in there. There's a bunch of sects. So everybody has their own point of view. The, big unlock here is saying, okay, let's not try to shove all terrain down the throat to be down people's throats, but rather the realization that, oh, this is just a tool. And, if we can provide tools for advisors and investors to apply their own religion in a much more efficient manner. Then we should help 'em do that. And I think we're, we both later in our careers, have been like, okay, you know what? Let's empower the world's population. You're gonna tackle Europe. We'll tackle the, anglosphere, to just do a little bit better. And I think that's, you're, you are coming at it now that's what you're gonna start offering soon. and, it makes total sense to me, and I'm actually quite, pumped about it, from this, how it's gonna work in, Europe from your perspective.
Rafael Ortega:
00:59:54
Yep.
Rodrigo Gordillo:
00:59:55
All right. we covered a lot. Is there anything that I, that you think would be useful? Any parting words?
Rafael Ortega:
01:00:02
I. Yeah. maybe I, it's more of a question that I'm asking you, but,
Rodrigo Gordillo:
01:00:12
sure.
Rafael Ortega:
01:00:12
I'm seeing, more interest in return stacking portable alpha. the last couple of months have been pretty crazy with, lots of shops opening up new ideas. I understand there's a, one of the reasons why this hadn't happened before was, had to do with, the regulation in the States. I, we're looking at how this is evolving in, Europe, but like, how, do you see, first of all, the landscape in the States in the rest of the world.
Rodrigo Gordillo:
01:00:45
Sure.
Rafael Ortega:
01:00:46
things in Canada too. How do you, see this evolving States.
Rodrigo Gordillo:
01:00:51
Sure. Yeah.
Rafael Ortega:
01:00:54
The transition to other markets like Europe, where, I've started, as you were saying before, we, found a way to operate, but like we've had to go through many.
Rodrigo Gordillo:
01:01:06
We're, going through loopholes right now to get you the exposure that you need with your bank, right? So it's, I think, like anything new, it's been around for 40 years, right? I think I've, used this analogy before. There's a bunch of, for people who don't wanna die of a heart attack, there's a bunch of tests that have been approved and been recommended for doctors to give their, patients for years. in order to, assess whether you're a high risk for heart attack or not, that are not being done by the vast majority of doctors, even though they've been around for 20 years. And so it requires, in this case and some experts to bang down the door and say, no, everybody needs to get their a OB numbers. And they, everybody needs to get their lp, sorry, LP little a numbers checked. And these are things that. Nobody really knows about today. They just care about cholesterol, total cholesterol, even though it's a good indicator. But our maximum indicator it's, it takes decades, right? And, portable alpha has been around for 40 years and it's taken a few people, trying to say the same thing in different ways and communicate. And then when it becomes important, there's a groundswell right now, if you look at how many times the word portable alpha has been searched, it's gone from nothing to, an insane amount in the last two years, especially. probably we helped in a little bit in that. Now institutions have to pay attention. Like we know for a fact that Morningstar is having to think about a new category that's going to put all portable alpha people in there. And then the next question is who's behind the curve? And I think the usage structures behind the curve, they have these weird rules about, how one can invest in derivatives and it makes it really difficult and really expensive to provide the best possible, stack because of that. And I'm sure that'll slowly start to change, because there's going to be too many people that matter to them, forcing them to lighten up a little bit, right? So that groundswells is coming. People are asking more and more about it. once a category in Morningstar, exists and other platforms will have to think about it as well and categorize, there's a reticent from existing funds that have been using portable alpha from ever to saying the word leverage. I think these,
Rafael Ortega:
01:03:33
I,
Rodrigo Gordillo:
01:03:34
yeah, de-stigmatizing is gonna be huge.
Rafael Ortega:
01:03:37
it everywhere. And I know what it is. Right? But before I,
Rodrigo Gordillo:
01:03:42
Yeah.
Rafael Ortega:
01:03:43
were not saying it you can find it, right? That you'll eventually find, this fund,
Rodrigo Gordillo:
01:03:50
and the goal here is to de-stigmatizing.
Rafael Ortega:
01:03:52
to a benchmark, and then you actually end up finding out that it's doing stocks plus something and then that's why they're getting those returns, right? So
Rodrigo Gordillo:
01:04:01
Yeah.
Rafael Ortega:
01:04:01
I see it everywhere, but I see people using it and not saying they're using it. And again, that going back to what I said before about being very transparent on, okay, this is what we're doing, and we explain it
Rodrigo Gordillo:
01:04:14
Yeah.
Rafael Ortega:
01:04:15
that you don't get scared and, you see it's okay and it works. And, is exactly how works. Think
Rodrigo Gordillo:
01:04:23
Yeah. And I think a bigger unlock is also Like anything, portfolio construction can be anything, portable alpha can be any sort of iteration. Keeping it as simple as possible with the one plus one that, that we've really focused on talking about Lego blocks, I think, again, bringing it down to a level where people can understand it, understand what they can put in and what they can take out. And being upfront about what the stacks are is the big unlock versus we just, how do we outperform? We, just do overlay stuff. Just trust us. We're gonna, we're gonna just do our own thing. And you just need to, batten down the hatches and, investing it long term. We're trying to be like open kimono. Here's exactly how it works. You should know and let's really understand what the risks that you're taking by using portable alpha return stacking leverage are, and dispel some of the myths and understand some of the risks. it's gonna be a long, journey to get brought at auction, but I, like I said, 40 years from now, I'd be shocked if everybody's portfolio doesn't have at least a little bit of this. That's
Rafael Ortega:
01:05:28
see it.
Rodrigo Gordillo:
01:05:29
Yeah.
Rafael Ortega:
01:05:29
Hopefully Europe moves a little faster and I can introduce things because right now I'm seeing that I'm always the first person to ask, or the first person in anything that is portable alpha esque in Europe. Now in Canada too. I think I'm, one of the biggest.
Rodrigo Gordillo:
01:05:48
Yeah.
Rafael Ortega:
01:05:49
So I'm, trying to be there at the forefront of, it, but really enjoying it because I think we're very, early and,
Rodrigo Gordillo:
01:05:58
Very early and it's exciting and you see that like when you put things together and you, I'm like, oh my God, this is so good. We just need to give it, we just need to show it out and give it some time. And it's always it always, because of the operational burden of doing something new, it's always, you're putting things out two years later than what you want it to. Like we wrote the paper in 2021 and we wanted to launch something at the end of 2021. Had we done that, the visual obvious story would immerse, would emerge. And what's happened is it took everybody two years to, to let us do what we needed to do. And we launched at the teeth of a, drawdown in some of these stacks, right? we're just gonna have to muddle through and keep on telling the story. And you're a good partner to have in Europe.
Rafael Ortega:
01:06:41
Let's see. Let's see how it goes. We'll keep pushing it.
Rodrigo Gordillo:
01:06:45
Okay, Rafa, this has been awesome. we should do this more often. Your English is much better than my Spanish, which is, which is incredible, for somebody that hasn't done this in English. thanks again. We will, if anybody wants to find you work and they find you on social media and on your websites and so on,
Rafael Ortega:
01:07:05
I'm on Twitter mostly at Paton, which is, R-I-V-E-R-P-A-T-R-I-M-O-N-I-O. we'll have it down there the links,
Rodrigo Gordillo:
01:07:19
in show notes.
Rafael Ortega:
01:07:21
and then if you wanna read about Return Stacking in Spanish, you can actually find me if you look for Return Stacked Portfolios.es that's the Spanish, webpage. And there we're basically talking about return stacking and doing, covering all the, on the stuff that you guys are doing. Trying to bring it again, the main difference is that we're looking at retail investors instead of, advisors. So that's why I some of ideas.
Rodrigo Gordillo:
01:07:52
Yeah, I, would definitely encourage people to go to the site and there's a little button on your Chrome that says translate and does a pretty good job of just try to read a few and read it from a different angle, that, that Rafa is really good at. So definitely visit the site, read some of the blog articles we'll have you on more often. and, keep doing what you're doing, man. You're doing God's work. Thanks for joining today.
