E12. Rafael Ortega: Using Return Stacking To Build an All-Terrain Portfolio

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Hey, everyone.
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Corey Hofstein here.
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I wanna personally invite you to an event
that's all about rethinking portfolio
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construction.
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On October 8, we're hosting the return stacking
symposium at Cboe Global Markets in Chicago.
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It's a one day in person deep dive into capital
efficient strategies, and we're featuring
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speakers like Jonathan Glidden, CIO of Delta
Airlines, Patrick Casley from One River, and
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Mark Horbul, managing director of the
systematic strategies group at Canada Pension
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Plan.
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This is your chance to hear directly from the
institutional allocators leading the charge on
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portable alpha and return stacking.
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But space is limited, so head over to
returnstacked.com/symposium to learn more and
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register.
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Hope to see you there.
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This is what I've been looking for.
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Right?
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I can create a portfolio.
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I can finally create a portfolio that is truly
diversified, that is using everything that we
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know we can use.
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So that means not only assets, but also
strategies.
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We can try to balance those things out.
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It's gonna be a great long term, sharp ratio
portfolio.
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It's gonna be stable, it's gonna be all
weather.
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And then we can get it to the volatility that
people actually want.
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Right?
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And if they want an 8% volatility portfolio, we
can do that without losing balance.
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You want a 12% volatility portfolio, we can now
do that, and it's not losing balance.
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Right?
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Hello, and welcome to the GetStacked investment
podcast, where we delve into the exciting new
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world of return stacking.
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Join us as we break down complex financial
concepts into accessible insights, speak with
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leading experts in the space, and analyze real
world applications for return stacking.
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GetStacked is here to help you break out of the
traditional portfolio construction mold and get
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you to start thinking differently about the
path to successful investment.
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Corey Hofstein is the cofounder and chief
investment officer of Newfound Research, and
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Rodrigo Gordillo is the president and portfolio
manager of Resolve Asset Management Global.
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Due to industry regulation, we will not discuss
any funds managed or sub advised by these firms
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on the podcast.
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All opinions expressed by podcast participants
are solely their own opinion and do not reflect
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the opinion of neither Newfound Research or
Resolve Asset Management Global.
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This podcast is for informational purposes only
and should not be relied upon as a basis for
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investment decisions.
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Clients of these firms may maintain positions
and securities discussed in this podcast.
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For more information, visit returnstack.com.
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Hello, and welcome everybody to another episode
of the Get Stacked Investment Podcast.
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Today, I have a very special guest, a friend of
mine and colleague, Rafael Ortega, which is a
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Spanish investor, not from Latin America, but
from Spain.
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And he is currently a senior investment fund
manager at Anbank Wealth Management, where he
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manages a bunch of portfolios, including
permanent portfolio ideas, all terrain, return
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stacking, and kind of what he calls the the off
road investor approach, which are custom built
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portfolios for institutions and high net worth
individuals.
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Yeah.
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This is a interview that I've been wanting to
have for a while now.
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I'm also I've been doing his podcast in Spanish
called the Off Road Investor for over a year
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now.
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Right?
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A year and a half, I think.
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Yeah.
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And I I struggle a little bit with the
nomenclature in Spanish when it comes to our
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industry, and I'm sure Rafa is gonna go through
the same.
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It's my turn to make him suffer a little
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bit and do
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it in English, but I figured that figured that
it would be a great time to bring him on board
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because I think broadly speaking, when we talk
about return stacking and the way that we've
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really garnered attention is how do people
stack returns above a sixtyforty portfolio or
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an eightytwenty portfolio or 100% equity plus
portfolio.
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But and then you get into, okay.
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What else can we do with the return stacking?
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Maybe there's a more balanced approach to to
building a portfolio and you get to an ultra
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rain approach.
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But Raf actually came the other way around.
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He started when I met him anyway, he's gonna
tell us his his background.
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But when I met him, he actually had already
started thinking about, you know, the concept
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of a balanced portfolio and then built himself
into all terrain.
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And now he's thinking about in the latest
iterations of doing sixty forty plus or a 100
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plus.
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So yes, he is a fantastic partner.
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He actually has taken the return stack
portfolio solutions moniker and on our behalf
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started creating the brand in Spain.
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So we'll talk a little bit about that.
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But before I get into all of the fun stuff, I
do want the audience to get a bit of a
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background on you and how you started as an
engineer and ended up in return stacking
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portfolio solutions.
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So maybe give us a broad overview of your
history.
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Okay.
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Well, first of all, sorry for my English.
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I all the investing information I consume is in
English, but then I never speak about investing
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in English.
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So I'm sure some of the words are not gonna
come, and maybe Rodrigo can can help.
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As I've been helping him in Spanish.
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The thing is I started not as an investor.
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Right?
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I did engineering.
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I thought I was gonna be some sort of
consultant and I actually started in a, you
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know, one of those big consultancy firms as an
analyst.
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But that lasted only a couple of months because
then I was studying and living in Madrid.
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And my family is from Valencia.
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That's another city in the East Of Spain.
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And my family used to run, my mother used to
run a small business.
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And then she was sick and went on a, like, sort
of a depression.
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The business was in a crisis, and I felt like
the prodigal son that had to come back and do
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something about that.
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My I have a younger brother.
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He was still studying, and my father had
recently passed away.
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So we were going through a huge family crisis.
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And we solved it eventually.
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And then at that point, I was looking at, you
know, like any family and any business.
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What do you do when you make more than you when
than you consume?
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So, what do you, what do we do with those
savings?
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But obviously, I was, I was youngish, like 20.
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But I was looking at, well, you know, family
money.
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I I hadn't really made that.
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Also, something that had taken a couple
generations to build.
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I started looking online on like, what do you
do when you invest?
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And everything I found was, you know, trading
or oddly enough in Spain, there's a huge value
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investing culture.
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So, I got into, you know, the Warren Buffets
and Benjamin Rathams and all of that.
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I also, you know, had a look at what had been
done in the past, and my mother used to work
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with a local bank.
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And I've very very fast, found that most
commercial banks well, first of all, in Spain,
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until now, most people just relied on their
state pension.
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So, you know, a financial literacy is very,
very low.
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And only the newer generations are starting to
see that they they will need to have some
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savings right for for the future.
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So basically everyone worked with their
commercial banks, which just gives you closet
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indexed funds that are expensive.
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So, you know, mediocre strategy is expensive,
but it's not gonna take you anywhere.
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And I I just couldn't find a solution that
makes sense or made sense for me.
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Right?
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And I looked at a value investor.
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They would say, they have this great marketing
things, you know, value is what you get, but
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price is just what you pay.
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That sounds great.
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But if you've just gone through a crisis like I
have just done, and if your savings are 50%
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down, it doesn't matter that you tell me that
the value isn't down.
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The price is what matters if when you need your
savings.
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Most people, or at least my understanding of
this was most people need to balance out
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participating and protecting.
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You need both of those.
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And that that to me is what makes sense to
almost everyone.
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And I started looking at market history and
other strategies, and I just I just didn't see
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it.
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Right?
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I saw those 50% drawdowns.
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And then even if you have a theoretically
balanced portfolio with stocks and bonds, those
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also go through huge drawdowns when there's
inflation.
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And I just looked around and I couldn't see
anything that I I could believe in, right, or
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that I I I like.
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And I don't know.
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Like, I just don't know how.
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I found Harry Brown and the permanent portfolio
at the end.
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You don't remember?
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I don't I don't know where I saw it the first
time.
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Right?
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I just I must have read a blog post or
something.
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And that just clicked.
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I I read it, and I thought, okay.
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This makes so much sense to me.
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And for those who don't know, basically,
permanent portfolio idea is that, you know,
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we're gonna have economic cycles.
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We're terribly bad at anticipating the next
step of the cycle or even if we know what's
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gonna happen, we have to also have the timing
right.
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It's just too difficult.
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But at the same time, we do know that different
assets and then eventually I found that
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different strategies also have this behavior.
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They behave in different ways in different
environments.
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And that is something you can believe in.
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Right?
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We know that's gonna happen It's not in the
short term, but in the medium term that
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eventually happens.
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So you can map those, and the simplest version
of this would be a portfolio that has something
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that works for growth, something that works for
deflation, something that works for inflation,
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and then something that will work in a
recession.
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Brown basically had stocks, bonds, gold, and
cash or invested cash.
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And so you have three assets that are high
volatility, that's 75% portfolio.
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They have low correlation between them.
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And then you have a buffer which essentially is
delevering that portfolio for you.
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So you have a conservative approach to to
investing.
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That has low volatility, you know, pretty good
returns.
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It works in different market scenarios.
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I think what you're showing here is like, yeah,
the different asset classes and what do we
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expect, right?
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From but not only what do we expect, like, what
do we know is going to happen, right?
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The theory.
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Yeah, yeah, that's the thing, that's like kind
of the key thing here, right?
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So, so what I'm showing here for those that
aren't watching and listening is just the
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performance of some periods where we've seen
inflationary stagnation, inflationary boom,
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deflationary bust and disinflationary boom,
which are just fancy names for when the
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intersection between high or low inflation
shocks and positive or negative inflation
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shocks happen.
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And you can see clearly, right?
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And this is I think the big unlock when you get
into this world is okay, everybody wants to
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just do better, you know, Warren Buffett value
investing, and throw in a little bonds just to
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reduce risk.
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But the reality is that a a lot of retirees in
the last few years that put a 100% of their
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money in bonds have realized that even bonds
have risk.
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And you can and you don't have to have a lived
experience that tells you that for them to
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modify your behavior.
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You know, before we saw the 2022 inflation
shocks, you and I had already come to the
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conclusion that high inflation would be bad for
both equities and bonds at the same time.
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But in this chart here just shows, you know,
inflationary stagnation, your your what you
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generally saw historically was commodities,
gold.
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And then in this case, trend following, we'll
get to that, but Harry Brown is more
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traditional assets.
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Right?
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More gold than anything.
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And and then inflationary boom, which is high
inflation accelerating growth, you know,
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everything kind of floats up, but the biggest
winners are commodities and gold.
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This inflationary boom, which is what what our
lived experience and most investors lived
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experience that has spent most of their time on
is high accelerating growth shocks and falling
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inflation.
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And that means, of course, that equities and
bonds are gonna do well.
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I think that's why the 6040 has become so
prominent.
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And deflationary bust is when you have a bear
market and and and a negative growth shock and
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slowing growth without inflation.
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Right?
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So that's generally equities down, you know,
commodities down, and then you see bonds really
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picking up the baton trend following and and
commodities sorry.
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And gold bonds and trade falling getting hurt.
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So that's when you understand that framework,
you're like, oh, okay.
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We need to think about my family's in your
case, right, it was my family's wealth going
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forward.
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And Harry Brown basically from what I
understand it was fairly simple.
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In in the original.
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Yes.
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Yes.
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A quarter quarter for
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cash gold.
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That's pretty long.
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Right?
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00:13:30,784 --> 00:13:37,139
It seems, I mean, it's it's kind of so simple
that it looks silly.
232
00:13:37,139 --> 00:13:44,100
But if you look at it from from, you know, from
what I know now, actually, the three assets are
233
00:13:44,100 --> 00:13:46,580
kind of risk parity equalized.
234
00:13:46,580 --> 00:13:46,820
Right?
235
00:13:46,820 --> 00:13:50,764
Because it's called stocks and long term bonds.
236
00:13:50,924 --> 00:13:53,964
Those kind of have the same volatility, right?
237
00:13:54,125 --> 00:13:56,924
So you're actually doing like a risk parity
from those three.
238
00:13:56,924 --> 00:13:58,845
And then the other one is just a buffer.
239
00:13:58,924 --> 00:14:03,269
It's just deleveraging a portfolio so we have
the conservative approach because he was trying
240
00:14:03,269 --> 00:14:07,590
to find a solution that anyone could do and
that it made sense for almost anyone.
241
00:14:07,590 --> 00:14:11,029
So the conservative approach to that made a lot
of sense.
242
00:14:11,029 --> 00:14:14,149
Also, we can go on to that a little later.
243
00:14:14,149 --> 00:14:14,309
Right?
244
00:14:14,309 --> 00:14:19,024
But we only if you only have stocks, bonds, and
gold, there are still some times where those
245
00:14:19,024 --> 00:14:23,345
three can go down, especially through through
crisis and shocks.
246
00:14:23,424 --> 00:14:27,264
And so we wanted something that would protect
you even then.
247
00:14:27,264 --> 00:14:27,825
Right?
248
00:14:27,825 --> 00:14:29,985
Something that was truly altering.
249
00:14:30,379 --> 00:14:31,580
And when I found that part
250
00:14:31,820 --> 00:14:33,820
Can I can I just pause there for one second?
251
00:14:33,899 --> 00:14:40,059
One thing that I think few people understand is
when we say bonds, most people think about that
252
00:14:40,059 --> 00:14:47,355
aggregate bond index, aggregate bond portfolio
that has a, you know, generally speaking, a
253
00:14:47,355 --> 00:14:51,995
duration of six, seven years, volatility
profile of four or 5%.
254
00:14:53,355 --> 00:14:59,754
And the key behind balance is making sure that
the maniacs aren't taking over the asylum.
255
00:14:59,754 --> 00:14:59,995
Right?
256
00:14:59,995 --> 00:15:04,090
That you don't want equities to be four times
the volatility of your bond portfolio.
257
00:15:04,090 --> 00:15:06,889
And there's two ways of doing that leverage,
which we'll talk about in a sec, but more
258
00:15:06,889 --> 00:15:12,330
importantly here, if you go out the curve and
the longer the duration, the more the
259
00:15:12,330 --> 00:15:16,625
volatility, therefore, the bigger the impact
when you need it the most and the bigger the
260
00:15:16,625 --> 00:15:17,904
impact when you're getting hurt.
261
00:15:17,904 --> 00:15:21,825
But it's if it's balance and risk across
equities and bonds, that's the way to do it.
262
00:15:21,825 --> 00:15:25,024
So when we talk about bonds here
263
00:15:25,425 --> 00:15:28,240
We're doing really talking about luxury.
264
00:15:28,320 --> 00:15:29,440
Year thoughts.
265
00:15:29,440 --> 00:15:29,759
Right?
266
00:15:29,759 --> 00:15:31,360
Not Which nobody does.
267
00:15:31,360 --> 00:15:31,600
Right?
268
00:15:31,600 --> 00:15:34,079
Because it's too volatile because bonds are
supposed to be safe.
269
00:15:34,079 --> 00:15:36,000
They're not supposed to be volatile.
270
00:15:36,000 --> 00:15:37,279
And it's so funny because
271
00:15:37,519 --> 00:15:39,279
So I started by whatever you want.
272
00:15:39,279 --> 00:15:39,759
Exactly.
273
00:15:39,759 --> 00:15:45,274
So I started my my, like, own personal
portfolio, like, for for the company, for the
274
00:15:45,274 --> 00:15:47,434
business, for the family, however you wanna see
it.
275
00:15:47,434 --> 00:15:48,875
And it was a permanent portfolio.
276
00:15:48,875 --> 00:15:49,355
Right?
277
00:15:49,754 --> 00:15:56,154
And I started talking about the permanent
portfolio with different banks because I was
278
00:15:55,559 --> 00:15:59,000
trying to get, you know, those long term bonds
in that gold position.
279
00:15:59,000 --> 00:16:00,679
It was almost impossible.
280
00:16:00,679 --> 00:16:00,919
Right?
281
00:16:00,919 --> 00:16:03,399
And everyone let me like, what?
282
00:16:03,399 --> 00:16:05,480
Like, 25% of like, what?
283
00:16:05,799 --> 00:16:08,519
Like, they they couldn't understand.
284
00:16:09,065 --> 00:16:12,904
And I also I I started looking online and
finding more people.
285
00:16:12,904 --> 00:16:18,825
Eventually, I found you guys and I found other
other you know, old weather solutions or all
286
00:16:18,825 --> 00:16:19,784
different solutions.
287
00:16:20,345 --> 00:16:26,949
But at that point in time, that's that was like
my first moment where where as we've said
288
00:16:26,949 --> 00:16:30,789
before, once you see it, you just can't unsee
it.
289
00:16:31,110 --> 00:16:41,294
And I noticed that no one in Spain or in the
Spanish Internet world was actually talking
290
00:16:41,294 --> 00:16:41,934
about this.
291
00:16:41,934 --> 00:16:43,215
Like, absolutely no one.
292
00:16:43,215 --> 00:16:47,774
And even in the Anglosphere, as I I like to
call it, you know, though, you can find people
293
00:16:47,774 --> 00:16:51,850
talking about corporate portfolio ideas and on
whether It's it's there.
294
00:16:51,850 --> 00:16:53,370
There's more people doing it.
295
00:16:53,370 --> 00:16:56,169
There's obviously like you guys and more people
doing it.
296
00:16:56,970 --> 00:17:01,850
But it's not that, you know, it's not the the
the standard.
297
00:17:01,850 --> 00:17:02,250
Right?
298
00:17:02,250 --> 00:17:04,184
Like, it's more of a niche thing.
299
00:17:04,744 --> 00:17:09,545
In in the in Spain or in Spanish, absolutely,
no one was talking about this.
300
00:17:09,545 --> 00:17:12,904
So that sent me through a double bath.
301
00:17:13,144 --> 00:17:14,744
One of okay.
302
00:17:14,744 --> 00:17:16,825
There's a business opportunity here.
303
00:17:16,984 --> 00:17:19,420
So I this makes a lot of sense.
304
00:17:19,420 --> 00:17:20,299
It makes sense for me.
305
00:17:20,299 --> 00:17:23,019
There's obviously more people that it makes
sense for.
306
00:17:23,019 --> 00:17:28,460
I need to learn more about this and get my
license and become an adviser and start
307
00:17:28,460 --> 00:17:29,420
preaching this.
308
00:17:30,059 --> 00:17:36,904
And then on the other side, I need to, you
know, keep learning more and more about how to
309
00:17:36,904 --> 00:17:39,544
implement these strategies better and better.
310
00:17:39,544 --> 00:17:40,664
And that's how I found you guys.
311
00:17:40,664 --> 00:17:43,464
I found, you know, my favor with this strategy
approach.
312
00:17:43,464 --> 00:17:44,264
I found Corey.
313
00:17:45,144 --> 00:17:52,820
I found Ray Dalio and all of his of his pupils
and all of those Risperity ideas.
314
00:17:52,820 --> 00:18:00,259
So I just I spent the last decade and a half
breathing and trying to see what people were
315
00:18:00,259 --> 00:18:01,220
doing in this space.
316
00:18:01,694 --> 00:18:08,894
And then trying to get my way through
compliance teams and and Spanish institutions
317
00:18:08,894 --> 00:18:15,869
to try to get these things back so that
investors in Spain can actually have a
318
00:18:15,869 --> 00:18:16,990
portfolio that does this.
319
00:18:16,990 --> 00:18:17,230
So
320
00:18:17,630 --> 00:18:18,029
Yeah.
321
00:18:18,029 --> 00:18:20,509
Being a train y'all blazer is not always fun.
322
00:18:20,509 --> 00:18:21,069
Yeah.
323
00:18:22,909 --> 00:18:28,349
Along the way, I I built, you know, quite a
community of people that believe in this.
324
00:18:28,349 --> 00:18:28,750
Right?
325
00:18:28,750 --> 00:18:36,005
So when as you were saying, right, when when
when you came up with the that alter a vaper or
326
00:18:36,005 --> 00:18:39,444
return stacking, anything I see, I started
learning about trend following.
327
00:18:39,524 --> 00:18:46,059
Anything I see, I just see it from this
structural diversification standpoint.
328
00:18:46,059 --> 00:18:49,820
I just can't see it any other any other way.
329
00:18:49,820 --> 00:18:50,460
I I
330
00:18:51,180 --> 00:18:51,500
Yeah.
331
00:18:51,500 --> 00:18:53,819
And and I'll give you credit.
332
00:18:53,980 --> 00:19:00,115
I mean, you are I I I always tell people that
you're the Corey Hastin of the Spanish
333
00:19:00,115 --> 00:19:05,075
investment space because when you say you build
a community, you really are an incredible
334
00:19:05,075 --> 00:19:07,315
writer and synthesizer of information.
335
00:19:07,315 --> 00:19:07,794
Right.
336
00:19:07,875 --> 00:19:10,914
Even the stuff that we've written that we think
we synthesize.
337
00:19:10,914 --> 00:19:16,279
When when you take your take when you have your
take and your go, it is so much easier to to
338
00:19:16,279 --> 00:19:16,840
understand.
339
00:19:16,840 --> 00:19:22,839
So kudos and credits to you for being able to
do that for a community that has literally
340
00:19:22,920 --> 00:19:24,840
never heard of most of this stuff.
341
00:19:24,840 --> 00:19:30,204
At least in The US, you did it's wide enough in
Canada that you can reach some people.
342
00:19:30,204 --> 00:19:31,884
I mean, you're starting from scratch.
343
00:19:31,884 --> 00:19:35,565
Every single person you're talking to, like,
has never heard about this.
344
00:19:35,565 --> 00:19:35,804
Never.
345
00:19:35,804 --> 00:19:40,444
And so you I think you must have learned by
slamming your head against the wall how to
346
00:19:40,444 --> 00:19:43,565
communicate with the community and create a a
pretty large one as I see it.
347
00:19:43,565 --> 00:19:43,804
Yeah.
348
00:19:43,804 --> 00:19:47,450
I think whenever I read your stuff, I I feel
like, okay.
349
00:19:47,450 --> 00:19:51,049
This is written for someone that knows what
we're talking about.
350
00:19:51,289 --> 00:19:57,690
And I always try to water it down into the
essence of it because I'm usually talking to
351
00:19:57,690 --> 00:19:58,170
retail.
352
00:19:58,474 --> 00:20:01,595
I most in Spain, most sponsors shop.
353
00:20:01,595 --> 00:20:02,154
Right?
354
00:20:02,315 --> 00:20:05,275
People that do invest with me buy my funds.
355
00:20:05,275 --> 00:20:09,434
They they buy the idea, and then they go into
the the strategy.
356
00:20:09,434 --> 00:20:12,555
I have no no commercial team.
357
00:20:12,555 --> 00:20:17,910
I I just do education and people find our
stuff.
358
00:20:17,910 --> 00:20:22,470
And if they have the similar you know, if they
if they buy into the idea or the philosophy,
359
00:20:22,789 --> 00:20:24,630
then they eventually invest.
360
00:20:24,630 --> 00:20:28,875
Or they do something similar and they reach it
around and then that gets other people, right?
361
00:20:28,875 --> 00:20:33,355
But yeah, that's basically what I've been
trying to trying to do.
362
00:20:33,355 --> 00:20:39,115
But always with that focus on that there's many
things I don't know, but I do know that
363
00:20:39,195 --> 00:20:46,609
diversification works and that the true
diversification is what I think I think Adam is
364
00:20:46,609 --> 00:20:50,450
the first person I read that said structural
diversification.
365
00:20:50,450 --> 00:20:55,970
And that just, again, I think one of the things
that all terrain or weather investors don't
366
00:20:55,970 --> 00:20:58,994
have is the same nomenclature.
367
00:20:59,075 --> 00:21:03,474
And I think that's something that value
investors have and other investors have, and
368
00:21:03,474 --> 00:21:08,434
that brings a lot of those people together, and
then that creates a community and that helps
369
00:21:08,434 --> 00:21:09,634
the ideas grow.
370
00:21:09,954 --> 00:21:16,599
So I like how, you know, you guys have been
interviewing people that are supposedly your
371
00:21:17,559 --> 00:21:22,119
competitors, but in the way I see it, they're
they're not your competitor.
372
00:21:22,119 --> 00:21:22,279
Right?
373
00:21:22,279 --> 00:21:30,455
Your competitor is, you know, someone that's
doing a index fund, you know, robot visor thing
374
00:21:30,455 --> 00:21:38,649
or or just like a highly active in the sense of
stock picking stock picking strategy.
375
00:21:38,649 --> 00:21:45,210
We're we're doing something different, and and
we need to speak about it without trying to
376
00:21:45,210 --> 00:21:46,089
hide what we're doing.
377
00:21:46,089 --> 00:21:48,730
Like, with the example of return stacking, I
think it's very clear.
378
00:21:48,730 --> 00:21:53,285
I think the the reason people buy return
stacking is that you're actually saying what
379
00:21:53,285 --> 00:21:56,484
you're doing and you're not scared of saying
what you're doing.
380
00:21:56,965 --> 00:22:00,644
And you're not scared of defending the idea
that you're trying to defend.
381
00:22:00,644 --> 00:22:01,444
It's tough.
382
00:22:01,684 --> 00:22:02,325
That's what you're saying.
383
00:22:02,325 --> 00:22:03,125
It's like Yeah.
384
00:22:03,125 --> 00:22:05,819
You know, leverage, manage futures.
385
00:22:06,220 --> 00:22:10,380
For me, especially when I every time I bring
something to the table, like, as you were
386
00:22:10,380 --> 00:22:11,660
saying, no one's hurting.
387
00:22:11,660 --> 00:22:16,220
Like, would I have to explain, you know,
arbitrage or global macro or carry strategies?
388
00:22:16,275 --> 00:22:19,315
Most of the most of the time, people are like,
what?
389
00:22:19,315 --> 00:22:20,195
A new thing?
390
00:22:20,195 --> 00:22:21,075
I get one.
391
00:22:23,394 --> 00:22:23,795
Yeah.
392
00:22:23,795 --> 00:22:25,154
We feel your pain for sure.
393
00:22:25,154 --> 00:22:32,029
And so, yeah, I mean, this is why communication
and having the ability to synthesize things, as
394
00:22:32,029 --> 00:22:39,070
well as you do is important But let's go back
to, you know, you have this interesting
395
00:22:39,070 --> 00:22:45,755
permanent portfolio approach and your
revolution towards like where you kinda got
396
00:22:45,755 --> 00:22:49,595
stuck and then how return stacking might have
unlocked some value there.
397
00:22:49,595 --> 00:22:56,234
So the thing is when I started with a permanent
portfolio for myself, but when I got the
398
00:22:56,234 --> 00:22:58,554
opportunity, I eventually became a financial
adviser.
399
00:22:58,554 --> 00:23:03,500
That's when I got my first clients and that I
started to grow a pace of investors that were
400
00:23:03,500 --> 00:23:06,859
interested in adding something different to
their portfolio.
401
00:23:06,859 --> 00:23:08,700
That's how I actually started.
402
00:23:08,859 --> 00:23:14,974
And eventually I got the opportunity to start a
small fund So so I could build a strategy, have
403
00:23:14,974 --> 00:23:20,255
people go into the strategy instead of me, you
know, managing everyone's level portfolio.
404
00:23:21,615 --> 00:23:29,190
And I thought at the time this was an error, by
the way, but at the time, I thought that most
405
00:23:29,190 --> 00:23:32,069
people wanted something that was not as
conservative.
406
00:23:32,069 --> 00:23:32,309
Right?
407
00:23:32,309 --> 00:23:34,069
The portfolio's problem.
408
00:23:35,509 --> 00:23:37,029
And I I don't think it's a problem.
409
00:23:37,029 --> 00:23:41,509
It's it's made it's it's on purpose, but it's a
pretty conservative strategy.
410
00:23:42,164 --> 00:23:43,684
It's conservative in many ways.
411
00:23:43,684 --> 00:23:46,005
Conservative because it has low volatility.
412
00:23:46,005 --> 00:23:51,525
It's conservative because it's only using the
biggest assets around because Brown was
413
00:23:51,525 --> 00:23:53,924
thinking about something that, you know, was
fail safe.
414
00:23:54,244 --> 00:23:56,005
It wouldn't blow up.
415
00:23:57,690 --> 00:24:03,769
But there, you know, he he reached this, you
know, late seventies, early eighties, and
416
00:24:03,769 --> 00:24:07,369
eventually, there's more things that we can do
with our portfolio.
417
00:24:07,369 --> 00:24:07,529
Right?
418
00:24:07,529 --> 00:24:12,649
There's more stuff going on now that didn't
exist then and that maybe you can bring into
419
00:24:12,649 --> 00:24:14,065
your your strategy.
420
00:24:14,144 --> 00:24:23,585
And I was trying to find something that was
more I wanna say balanced, but really, I mean,
421
00:24:23,585 --> 00:24:28,065
something that was equivalent to a 64 b at
least in most people's minds.
422
00:24:28,065 --> 00:24:28,384
Right?
423
00:24:28,384 --> 00:24:31,000
Something that was medium risk.
424
00:24:31,000 --> 00:24:33,559
Well, let's call it medium risk.
425
00:24:33,559 --> 00:24:35,720
But, yeah, something that was equivalent to a
sixty forty.
426
00:24:36,279 --> 00:24:42,119
And every time I tried to I tried to build a
portfolio or design a portfolio that was
427
00:24:42,119 --> 00:24:47,035
matching sixty forty volatility, I was losing
the balance, right?
428
00:24:47,035 --> 00:24:48,794
Because you have to have more stocks.
429
00:24:49,275 --> 00:24:54,234
If you have to have more stocks, then suddenly
those stocks are running the asylum as you were
430
00:24:54,234 --> 00:24:54,714
saying.
431
00:24:54,875 --> 00:25:00,529
Then if I add diversifiers on the other side, I
get more tracking error and then people are
432
00:25:00,529 --> 00:25:03,650
gonna ask questions when those diversifiers are
not working.
433
00:25:03,650 --> 00:25:05,970
So it was it was a tough challenge.
434
00:25:05,970 --> 00:25:10,930
I I think I built a portfolio that was it's
still on.
435
00:25:11,105 --> 00:25:15,345
Now it's transitioning to a return stack
version of of the portfolio, but it's something
436
00:25:15,345 --> 00:25:23,585
that was, let's say, around 50% equities or 60%
equities, and then the rest was an all terrain
437
00:25:23,585 --> 00:25:24,544
defense.
438
00:25:24,545 --> 00:25:24,785
Right?
439
00:25:25,259 --> 00:25:31,180
But if you want more volatility and you don't
use leverage, the only way to do this is to get
440
00:25:31,180 --> 00:25:32,140
more stocks in.
441
00:25:32,140 --> 00:25:41,414
And then when stocks fall, you know, your all
terrain defense is not gonna recoup all those
442
00:25:41,414 --> 00:25:41,815
losses.
443
00:25:41,815 --> 00:25:48,375
It's just gonna be more you have more trust on
the fact that it's gonna work better than just
444
00:25:48,375 --> 00:25:50,855
bombs because bombs can also fall sometimes.
445
00:25:51,029 --> 00:25:53,829
An altering defense is gonna work more times.
446
00:25:53,910 --> 00:25:59,830
It's gonna it's gonna work against those
stocks, but it's not really gonna, recover the
447
00:25:59,830 --> 00:26:01,029
loss that you got.
448
00:26:01,029 --> 00:26:01,269
Right?
449
00:26:01,269 --> 00:26:03,765
It's just gonna, the word?
450
00:26:03,765 --> 00:26:05,445
I'm looking for a word that is not coming,
brother.
451
00:26:05,445 --> 00:26:05,684
You know?
452
00:26:05,684 --> 00:26:10,644
But it's like, you're like you're like diluting
your risk in a more efficient way, but it's not
453
00:26:10,644 --> 00:26:13,684
really you're not really balance things
balancing things out.
454
00:26:13,684 --> 00:26:16,019
That's just not and, Yeah.
455
00:26:16,019 --> 00:26:20,340
And try to find ways into, okay, so maybe
you'll get defensive equities and maybe we do
456
00:26:20,340 --> 00:26:25,700
some, you know, dual momentum thing on top and
I was just trying lots of things to find
457
00:26:25,700 --> 00:26:32,095
balance and with with, you know, traditional
strategies, it's just now, I think it's just
458
00:26:32,095 --> 00:26:37,535
impossible that you, you're never going to, you
always have to take more risk in the form of
459
00:26:37,535 --> 00:26:38,654
cycle risk.
460
00:26:39,134 --> 00:26:39,774
And
461
00:26:40,015 --> 00:26:45,214
so let me let me pause there for a second and
just show an old an oldie but a goodie.
462
00:26:45,934 --> 00:26:47,509
You know, we've been talking about this
already.
463
00:26:47,509 --> 00:26:47,750
Right?
464
00:26:47,750 --> 00:26:52,150
But this one just shows a chart of coal, global
equities, commodities, and and ten year
465
00:26:52,150 --> 00:26:52,710
treasuries.
466
00:26:52,710 --> 00:26:53,269
Right?
467
00:26:53,589 --> 00:26:57,509
Roughly speaking, I don't know, '19 this is
1990 to 2023.
468
00:26:57,509 --> 00:26:59,349
Roughly speaking, they all make the same amount
of return.
469
00:26:59,565 --> 00:27:01,724
But obviously the paths are wildly different,
right?
470
00:27:01,724 --> 00:27:04,604
So which one do you wanna choose is always the
question.
471
00:27:05,244 --> 00:27:09,644
And from the perspective of risk balancing
these, again, we talked about long term
472
00:27:09,644 --> 00:27:11,004
treasuries are using the ten year.
473
00:27:11,720 --> 00:27:16,920
If you run a simple equal risk contribution
analysis to try to make sure that we balance
474
00:27:16,920 --> 00:27:23,480
things off, you're looking at 42% in
treasuries, 29% in trend following here, you
475
00:27:23,480 --> 00:27:28,355
know, 15% in global equities, 12% in
commodities to get a 100% portfolio.
476
00:27:28,835 --> 00:27:35,154
And, of course, the 10,000 foot view of that is
that you get this smoothed out line that kinda
477
00:27:35,154 --> 00:27:40,519
crosses in the middle of everything, but
actually slightly outperforms over the long
478
00:27:40,519 --> 00:27:46,119
term, mainly due to the rebalancing benefit,
that that diversification premium.
479
00:27:46,839 --> 00:27:51,480
Now while this line looks amazing, right, like,
let's let's this is I was trying to think about
480
00:27:51,480 --> 00:28:00,204
a different way of explain to people why is it
that an equal risk portfolio is generally going
481
00:28:00,204 --> 00:28:05,484
to not provide the returns that a high risk
portfolio like equities is gonna provide.
482
00:28:05,484 --> 00:28:08,970
And the reality is that it's not true over
many, many decades.
483
00:28:08,970 --> 00:28:09,130
Right?
484
00:28:09,130 --> 00:28:11,450
If you think about the equity risk premium,
right?
485
00:28:11,450 --> 00:28:12,970
What's the equity risk premium?
486
00:28:13,690 --> 00:28:15,930
Depends on, you know, global equity risk
premium.
487
00:28:15,930 --> 00:28:16,250
What is it?
488
00:28:16,250 --> 00:28:17,450
Three and a half percent?
489
00:28:17,690 --> 00:28:19,130
Four percent above cash.
490
00:28:19,130 --> 00:28:19,609
Right?
491
00:28:19,690 --> 00:28:20,970
So it's a notional.
492
00:28:20,970 --> 00:28:22,650
We're looking at 6% annualized.
493
00:28:22,650 --> 00:28:22,809
Right?
494
00:28:23,505 --> 00:28:30,304
Term premium is, you know, two, three you know,
when you actually look at all these returns,
495
00:28:30,464 --> 00:28:34,065
they all at the end, as we can see from this
graphic, roughly make the same return.
496
00:28:34,065 --> 00:28:41,279
The problem is that by diversifying your your
clustering that return around that long term
497
00:28:41,519 --> 00:28:42,400
more often.
498
00:28:42,960 --> 00:28:48,320
And sadly, a sixty forty investor and eighty
twenty investor tends to see more double digit
499
00:28:48,320 --> 00:28:51,294
years than you do when you're balanced.
500
00:28:51,694 --> 00:28:51,855
And
501
00:28:51,855 --> 00:28:58,095
that's painful, and that reduces risk and
reduces, you know, long term returns.
502
00:28:58,095 --> 00:29:00,494
You have to wait a long time to be able to say,
okay.
503
00:29:00,494 --> 00:29:00,974
We did it.
504
00:29:00,974 --> 00:29:04,409
We did the same or better than with lower risk.
505
00:29:05,769 --> 00:29:09,369
And the reality is that it's boring for most
people.
506
00:29:09,369 --> 00:29:15,369
When you create this portfolio and you have a
4% volatility portfolio, you're constantly
507
00:29:15,369 --> 00:29:18,009
apologizing for not putting enough risk on.
508
00:29:18,250 --> 00:29:24,204
And the reality is that you're kinda up until
recently, you were limited as to what you could
509
00:29:24,204 --> 00:29:29,644
do in terms of giving people what they want and
which is, look, I'm used to a standard
510
00:29:29,644 --> 00:29:32,250
deviation in my portfolio 12%, 15%.
511
00:29:32,250 --> 00:29:33,610
Like, I'm I'm okay with that.
512
00:29:33,610 --> 00:29:35,289
I'm okay with the drawdowns that I've seen.
513
00:29:35,289 --> 00:29:36,009
Can you give me that?
514
00:29:36,009 --> 00:29:37,130
And the answer was no.
515
00:29:37,610 --> 00:29:37,930
Right?
516
00:29:37,930 --> 00:29:38,650
The answer was no.
517
00:29:38,650 --> 00:29:39,529
This you get this.
518
00:29:39,529 --> 00:29:42,330
This is the maximum balanced portfolio you can
get.
519
00:29:43,544 --> 00:29:46,585
And so, anyway, I thought I'd kind of pause
there and show people what
520
00:29:46,585 --> 00:29:47,384
they for a second.
521
00:29:47,384 --> 00:29:47,704
We brought
522
00:29:47,704 --> 00:29:55,660
the background because I I love it because it
makes so much sense and then no one likes it in
523
00:29:55,660 --> 00:29:56,700
in real life.
524
00:29:56,700 --> 00:30:02,700
Because in real life, I like to sometimes show
this, and people will always choose that dark
525
00:30:02,700 --> 00:30:07,740
blue line, but then show it starting at 2,010.
526
00:30:08,380 --> 00:30:09,740
And then that just goes Right.
527
00:30:09,740 --> 00:30:10,460
Flat.
528
00:30:10,779 --> 00:30:11,019
Great.
529
00:30:11,284 --> 00:30:12,804
Like great risk return.
530
00:30:12,804 --> 00:30:14,964
Like great rate shock ratio.
531
00:30:15,125 --> 00:30:16,565
But it's just boring.
532
00:30:16,565 --> 00:30:22,644
It just gives you a couple percentage points
while some of the other strategies in this
533
00:30:23,284 --> 00:30:25,444
exactly that point in time.
534
00:30:25,444 --> 00:30:26,484
It's going to be stocks.
535
00:30:27,880 --> 00:30:32,599
Are giving you those double digit returns and,
like, incredibly high Sharpe ratios.
536
00:30:32,599 --> 00:30:35,559
And it doesn't matter how many times you show
this.
537
00:30:35,880 --> 00:30:42,275
People are gonna be okay when they see it, and
then after a couple of months of of low
538
00:30:42,275 --> 00:30:44,755
volatility, low returns, they're gonna ditch
it.
539
00:30:44,755 --> 00:30:47,714
It's it's just the way it's just the way it is.
540
00:30:47,714 --> 00:30:48,194
And
541
00:30:48,595 --> 00:30:53,555
And and it and to their credit, if they feel
they're leaving money on the table because they
542
00:30:53,555 --> 00:30:55,154
can take more risk, it's it's a problem.
543
00:30:55,470 --> 00:30:58,349
That's exactly the problem I I was running
into.
544
00:30:58,349 --> 00:30:58,829
Right?
545
00:30:58,990 --> 00:31:02,109
I wanted to add more diversification because I
knew it worked.
546
00:31:02,109 --> 00:31:09,984
I I thought the portfolios were gonna be, more
resilient, moral weather, and I was all in on
547
00:31:09,984 --> 00:31:10,464
that.
548
00:31:10,464 --> 00:31:16,384
But the more diversification you add,
diversification works so well that volatility
549
00:31:16,384 --> 00:31:17,184
goes down.
550
00:31:17,664 --> 00:31:21,184
And if volatility goes down, eventually returns
go down too.
551
00:31:21,184 --> 00:31:21,664
Right?
552
00:31:21,664 --> 00:31:26,319
So then I wanted a bit more volatility and a
bit more return, and I needed to have more
553
00:31:26,319 --> 00:31:30,719
stocks there, and then I was losing that
balance, and then I was going back and forth
554
00:31:30,799 --> 00:31:32,079
between those two things.
555
00:31:32,079 --> 00:31:32,319
Right?
556
00:31:32,319 --> 00:31:37,599
More volatility always meant that you have to
sacrifice returns.
557
00:31:38,105 --> 00:31:44,025
And then when you had more stocks in, you know,
I was saying that I was all weather, but I
558
00:31:44,025 --> 00:31:48,105
wasn't all weather because I had 50 to 60%
equities in my portfolio.
559
00:31:48,105 --> 00:31:48,345
Right?
560
00:31:48,345 --> 00:31:54,740
There is no way that a 50 to 60% equity
portfolio is gonna be all weather because then
561
00:31:54,740 --> 00:31:57,059
you would need a leveraged defense.
562
00:31:57,059 --> 00:31:57,380
Right?
563
00:31:57,380 --> 00:32:04,795
Something that was not just a mix of gold bonds
bonds and trend following and other strategies.
564
00:32:04,795 --> 00:32:08,475
That that was gonna be a no weather defense,
but not a no weather portfolio.
565
00:32:08,475 --> 00:32:08,955
Right?
566
00:32:08,955 --> 00:32:10,075
That was the problem.
567
00:32:10,075 --> 00:32:10,394
Yeah.
568
00:32:10,394 --> 00:32:19,899
And then when you came up with the return
stacking paper, that I that was my second
569
00:32:19,899 --> 00:32:22,940
moment where I saw it.
570
00:32:23,099 --> 00:32:25,019
I I couldn't unsee it.
571
00:32:25,019 --> 00:32:29,500
I remember you you guys did a a live livestream
or maybe an episode.
572
00:32:29,500 --> 00:32:30,140
I'm not sure.
573
00:32:30,140 --> 00:32:35,865
And I went on the chat and asked, you were
saying, you know, how redone stacking will talk
574
00:32:35,865 --> 00:32:39,465
about this now, you know, like how it can
create some tracking error or whatever.
575
00:32:39,465 --> 00:32:40,664
And I think I said something like, okay.
576
00:32:40,664 --> 00:32:42,664
But what if you don't care about the tracking
error?
577
00:32:42,664 --> 00:32:43,785
Let's still go on a third.
578
00:32:43,785 --> 00:32:46,585
And I think and I think, why don't you, like,
brush it off a bit?
579
00:32:46,585 --> 00:32:48,480
Like, okay.
580
00:32:48,480 --> 00:32:49,119
Maybe Yeah.
581
00:32:49,440 --> 00:32:51,440
Because because 99% of our audience.
582
00:32:51,440 --> 00:32:54,640
99% of the viewers, I'm not thinking about
this, but I I think you're
583
00:32:54,640 --> 00:32:55,680
lunatics like After
584
00:32:55,680 --> 00:32:57,039
that is what I Yeah.
585
00:32:57,039 --> 00:32:59,759
I emailed you like, okay, Ravi, we need to talk
to this.
586
00:32:59,920 --> 00:33:03,375
If I can do this, this is what I've been
looking for, right?
587
00:33:03,375 --> 00:33:05,534
I can I can create a portfolio?
588
00:33:06,255 --> 00:33:11,375
I can finally create a portfolio that is truly
diversified, that is using everything that we
589
00:33:11,375 --> 00:33:12,414
know we can use.
590
00:33:12,414 --> 00:33:15,214
So that means not only assets but also
strategies.
591
00:33:15,599 --> 00:33:17,839
We can try to balance those things out.
592
00:33:17,920 --> 00:33:21,599
It's gonna be a great long term, sharp ratio
portfolio.
593
00:33:21,599 --> 00:33:23,999
It's gonna be stable, it's gonna be all
weather.
594
00:33:24,160 --> 00:33:29,085
And then we can get it to all the volatility
that people actually want.
595
00:33:29,085 --> 00:33:34,204
And if they want an 8% volatility portfolio, we
can do that without losing balance.
596
00:33:34,204 --> 00:33:39,164
If you want a 12% volatility portfolio, we can
now do that, and it's not losing balance.
597
00:33:41,450 --> 00:33:42,410
You're getting more risk.
598
00:33:42,410 --> 00:33:46,330
You're getting more you're getting exposure,
which is what you want, but you're not getting
599
00:33:46,330 --> 00:33:53,210
it through a concentrated cycle risk bet, which
is what you do when you have a 50 to 60% equity
600
00:33:53,210 --> 00:33:53,849
portfolio.
601
00:33:53,849 --> 00:33:54,329
Right?
602
00:33:54,330 --> 00:34:02,515
And I'd say that I I went crazy around the the
idea, and luckily, a year and a half or
603
00:34:02,515 --> 00:34:06,755
something later, we we finally did it, and we
have portfolios on that kind of actually
604
00:34:06,755 --> 00:34:12,275
implement these these concepts in in Spain.
605
00:34:12,275 --> 00:34:14,360
So very grateful for Yeah.
606
00:34:14,360 --> 00:34:14,519
For
607
00:34:14,519 --> 00:34:15,000
that.
608
00:34:15,000 --> 00:34:19,079
And, I mean, more most of the battle that I saw
you fight is a battle that we fought originally
609
00:34:19,079 --> 00:34:24,440
too in Canada is you're not just fighting a
battle of ideas, but you're you're you're
610
00:34:24,440 --> 00:34:27,894
running into operational roadblocks.
611
00:34:28,855 --> 00:34:31,894
Compliance teams don't want you to do x y z.
612
00:34:32,934 --> 00:34:37,655
You know, the even platforms don't even have
the capability of providing you what you want
613
00:34:37,655 --> 00:34:43,449
or you being able to invest in US ETFs that you
that use gold and stuff.
614
00:34:43,449 --> 00:34:48,250
Like, it's just been a constant struggle, and
you've mostly kind of fought through all that.
615
00:34:48,250 --> 00:34:50,969
So tell us a little bit about that journey.
616
00:34:51,210 --> 00:34:51,449
Yeah.
617
00:34:51,449 --> 00:34:56,284
So the thing is that I mean, it's
counterintuitive.
618
00:34:56,284 --> 00:34:56,684
Right?
619
00:34:56,684 --> 00:35:02,045
I'm trying to say that I'm building something
that is leveraged.
620
00:35:02,045 --> 00:35:07,404
It's a 100% leverage, but it's actually a
balanced allocation.
621
00:35:07,404 --> 00:35:07,724
Right?
622
00:35:07,724 --> 00:35:16,820
And that goes against everything that everyone
has heard in or everyone that you get everyone
623
00:35:16,820 --> 00:35:21,059
that's learning about investing will will get
us as that association, that leverage.
624
00:35:21,405 --> 00:35:24,125
More leverage means more risk.
625
00:35:24,125 --> 00:35:24,684
Right?
626
00:35:24,684 --> 00:35:30,364
And to be fair, all else equal, yeah, you know,
leverage means more risk.
627
00:35:30,765 --> 00:35:33,965
But it all depends on on what we're comparing.
628
00:35:33,965 --> 00:35:34,204
Right?
629
00:35:34,219 --> 00:35:39,819
Because I think also everyone understand that
if you have like a very risky thing and a very
630
00:35:39,819 --> 00:35:45,019
unrisky thing and sometimes you can leverage
the unrisky thing and it will still be less
631
00:35:45,019 --> 00:35:46,875
risky than the thing.
632
00:35:47,355 --> 00:35:55,355
But the thing here is that I I found that the
solution to this problem is how you frame it.
633
00:35:55,355 --> 00:35:55,835
Right?
634
00:35:55,835 --> 00:35:59,114
People think more leverage means more risk.
635
00:35:59,114 --> 00:36:01,835
The more leverage means that you're chasing
higher returns.
636
00:36:02,660 --> 00:36:04,660
But that's not what we're doing.
637
00:36:04,660 --> 00:36:08,180
We're using leverage after we're diversifying.
638
00:36:08,260 --> 00:36:12,579
So the right order is you have a certain amount
of risk.
639
00:36:13,220 --> 00:36:18,355
Now we're diversifying and we're adding true
structural diversification to different assets
640
00:36:18,355 --> 00:36:19,555
and different strategies.
641
00:36:19,795 --> 00:36:21,715
So we're bringing volatility down.
642
00:36:22,514 --> 00:36:25,555
And because volatility is down, your returns
are down.
643
00:36:25,795 --> 00:36:31,170
And we're using leverage to recover the
exposure that you lost through diversification.
644
00:36:31,170 --> 00:36:33,730
So we're using leverage after we're
diversifying.
645
00:36:33,969 --> 00:36:39,730
And, again, this is another of the things that
I think everyone in the world should be using.
646
00:36:39,969 --> 00:36:48,405
Because if you do the math and match the amount
of added exposure so that it matches the, you
647
00:36:48,405 --> 00:36:51,204
know, the the added risk through added
exposure.
648
00:36:51,364 --> 00:36:58,049
Matches the reduction in risk you get through
diversification, you're doing that thing that
649
00:36:58,049 --> 00:36:59,250
what's what's the phrase?
650
00:36:59,250 --> 00:37:01,170
Eating your cake or what is it?
651
00:37:01,170 --> 00:37:01,650
I
652
00:37:02,529 --> 00:37:04,690
I I you're yeah.
653
00:37:05,250 --> 00:37:07,809
Having your cake and eating it.
654
00:37:07,809 --> 00:37:08,049
Yeah.
655
00:37:08,049 --> 00:37:10,289
Having your diversification cake and eating it.
656
00:37:10,289 --> 00:37:10,769
Exactly.
657
00:37:10,769 --> 00:37:13,625
So yeah, so it's that is the right order.
658
00:37:13,625 --> 00:37:13,864
Right?
659
00:37:13,864 --> 00:37:18,824
We're reducing risk, and then we're using
leverage to recover the lost risk.
660
00:37:18,824 --> 00:37:19,304
Right?
661
00:37:19,304 --> 00:37:22,985
Another way to see it is that you're actually
this is okay.
662
00:37:22,985 --> 00:37:25,945
This is from a old point of view.
663
00:37:26,260 --> 00:37:29,860
If you look at this from a traditional
portfolio where you have, you know, stocks and
664
00:37:29,860 --> 00:37:36,980
bonds, and then you're adding more
diversification through stacking, that is
665
00:37:36,980 --> 00:37:38,340
defensive leverage.
666
00:37:38,340 --> 00:37:40,980
You're adding more defense to your portfolio.
667
00:37:41,375 --> 00:37:47,054
So, if you do it right, if you do that, of the
times, you're not really adding that much risk.
668
00:37:47,054 --> 00:37:50,335
It does with with with its what's the word?
669
00:37:50,335 --> 00:37:53,135
With its or
670
00:37:54,440 --> 00:37:56,119
you can say it counterpoints.
671
00:37:56,119 --> 00:38:01,079
It comes with its There's other offsetting
things that happen when you use leverage, but
672
00:38:01,079 --> 00:38:01,960
not necessarily in the
673
00:38:02,039 --> 00:38:02,599
Exactly.
674
00:38:02,599 --> 00:38:05,640
So you will have tracking error, right?
675
00:38:05,640 --> 00:38:07,239
It comes in the form of tracking error.
676
00:38:07,239 --> 00:38:12,925
It comes in the form of your volatility is
gonna be more stable, which sounds good until
677
00:38:12,925 --> 00:38:14,204
you see it live.
678
00:38:14,204 --> 00:38:14,445
Right?
679
00:38:14,445 --> 00:38:19,164
But you're actually getting heard more very
little, but all the time.
680
00:38:20,125 --> 00:38:20,525
Yeah.
681
00:38:20,525 --> 00:38:21,244
More often.
682
00:38:21,244 --> 00:38:21,805
But Yeah.
683
00:38:21,805 --> 00:38:21,965
So you
684
00:38:21,965 --> 00:38:22,925
feel it more.
685
00:38:23,085 --> 00:38:23,485
Yeah.
686
00:38:23,485 --> 00:38:28,900
So that's that's the the thing I wanted to to
because we've chatted about this a a lot, and
687
00:38:28,900 --> 00:38:34,339
this is this comes from Corey's saying that
risk cannot be cannot cannot be eliminated.
688
00:38:34,339 --> 00:38:35,380
It can only be transformed. And
689
00:38:34,980 --> 00:38:39,414
And so how do you how do you talk about that?
690
00:38:39,734 --> 00:38:45,335
Again, I think I think the the way to make
people understand this is to do it in the right
691
00:38:45,335 --> 00:38:45,815
order.
692
00:38:45,815 --> 00:38:45,974
Right?
693
00:38:45,974 --> 00:38:50,855
So the right order should be how much risk are
you willing to take in the form of volatility,
694
00:38:50,855 --> 00:38:53,255
the form of expected drawdowns, etcetera.
695
00:38:53,255 --> 00:38:53,494
Right?
696
00:38:53,494 --> 00:39:01,469
Once that is clear, then how do we take that
risk, and how do we do it in the most efficient
697
00:39:01,469 --> 00:39:02,110
way?
698
00:39:02,190 --> 00:39:07,469
If you build a portfolio again that is just
stocks and bonds, you're taking a lot of market
699
00:39:07,469 --> 00:39:07,789
risk.
700
00:39:07,784 --> 00:39:13,385
I've heard you say many times that, you know,
when you look at the SP 500 and you you use an
701
00:39:13,385 --> 00:39:16,025
ETF, that ETF is unleveraged.
702
00:39:16,105 --> 00:39:20,984
But if you look at the companies beneath the
ETF and you look at the leverage within the
703
00:39:20,984 --> 00:39:25,890
companies in that ETF, you're actually using
like three times leverage, right?
704
00:39:25,890 --> 00:39:27,489
If I remember right, something like that.
705
00:39:27,489 --> 00:39:28,530
Three to one, four to one.
706
00:39:28,530 --> 00:39:29,010
Exactly.
707
00:39:29,010 --> 00:39:29,250
Yeah.
708
00:39:29,250 --> 00:39:36,530
So, you're taking market cycle risk and we
don't want to have that market type of risk.
709
00:39:36,530 --> 00:39:37,170
Forget that.
710
00:39:37,170 --> 00:39:43,275
That tends to crash eventually, like, once
every, whatever years, it will, it will, we
711
00:39:43,275 --> 00:39:46,875
will let me do that part of the cycle where
stocks just don't work and you get those big
712
00:39:46,875 --> 00:39:52,474
draw outs, you want to take that risk and that
that risk is the risk that you're diversifying,
713
00:39:52,474 --> 00:39:52,715
right?
714
00:39:52,715 --> 00:39:57,329
So, you want to add other things are going to
move in different ways, have them flow in
715
00:39:57,329 --> 00:40:04,449
different moments, and it's the same amount of
risk, but if you take the risk in smaller
716
00:40:04,449 --> 00:40:10,885
doses, the same amount of risk, it is much
better than just feeling like there's no risk
717
00:40:10,885 --> 00:40:14,804
which is how a $60.40 portfolio feels when
everything is going your way.
718
00:40:14,964 --> 00:40:19,844
And then one day, you don't know when it's
going to come and it's going to hurt you and
719
00:40:19,844 --> 00:40:23,364
there's a there's a how do you say this in
English?
720
00:40:23,364 --> 00:40:28,659
There's a asymmetry in the in the way returns
come, right?
721
00:40:28,659 --> 00:40:34,339
If that, you know, everyone understands where
10% draw down, you you're back at zero with
722
00:40:34,339 --> 00:40:37,619
11%, but a 50% draw down needs 100%.
723
00:40:38,394 --> 00:40:44,074
So the same amount of risk, the efficient way
to take that risk is to try and do it in
724
00:40:44,074 --> 00:40:45,994
smaller doses.
725
00:40:46,154 --> 00:40:52,289
Smaller doses makes a lot of sense until you
feel it when the other person is not feeling
726
00:40:52,289 --> 00:40:52,690
it.
727
00:40:52,690 --> 00:40:53,089
Right?
728
00:40:53,089 --> 00:40:54,289
And that's what happened.
729
00:40:54,369 --> 00:40:55,089
So you know what?
730
00:40:55,089 --> 00:40:59,650
Corey and I yesterday were having kind of we're
kind of looking at how to tell the story about
731
00:40:59,650 --> 00:41:00,049
this.
732
00:41:00,049 --> 00:41:00,289
Right?
733
00:41:00,289 --> 00:41:06,304
This idea that there's an there's there's risk
in equities and there's risk in all terrain or
734
00:41:06,304 --> 00:41:09,264
equal we're looking at an equal risk portfolio
of assets.
735
00:41:09,984 --> 00:41:17,744
And so what I what I wanted to see is how often
you're in drawdown in in the S and P 500 on a
736
00:41:17,744 --> 00:41:18,704
daily basis.
737
00:41:18,704 --> 00:41:19,025
Right?
738
00:41:19,280 --> 00:41:23,679
So how often are you hitting new high and
started losing money versus how often you're in
739
00:41:23,679 --> 00:41:24,079
drawdown?
740
00:41:24,079 --> 00:41:25,199
I think we did trend following.
741
00:41:25,199 --> 00:41:26,159
We did cold.
742
00:41:26,719 --> 00:41:30,320
What's fascinating, there's a drawdown and
recovery chart that we often use.
743
00:41:30,559 --> 00:41:35,115
I'll see if I can find it here later, but which
is like you start losing money and then you
744
00:41:35,115 --> 00:41:35,595
recover.
745
00:41:35,595 --> 00:41:38,954
And and if it's if it's zero, it means you're
making new highs all the time.
746
00:41:38,954 --> 00:41:42,555
So the top of the chart is flat as long as
you're making new highs.
747
00:41:43,115 --> 00:41:46,795
You know, when you we're looking at trend
following, and trend following is could you
748
00:41:46,795 --> 00:41:52,179
guess how often on a daily basis the Softgen
trend index is making new highs?
749
00:41:52,260 --> 00:41:53,940
I would say very little.
750
00:41:53,940 --> 00:41:54,179
Right?
751
00:41:54,179 --> 00:41:58,340
This feeling is like you're losing all the
time, and then suddenly you get that big whip.
752
00:41:58,340 --> 00:42:00,894
I think that's that's what I would like.
753
00:42:00,894 --> 00:42:03,934
It's like it's around 12% on a daily scale.
754
00:42:03,934 --> 00:42:05,855
It's around a third on a monthly scale.
755
00:42:05,934 --> 00:42:10,255
And when you look at the chart, when you
actually look at the S and P 500, it is like
756
00:42:10,255 --> 00:42:11,295
making new highs.
757
00:42:11,295 --> 00:42:15,739
It feels haven't done the actual numbers, but
it just it's flat that that chart of drawdown
758
00:42:15,739 --> 00:42:17,820
and recovery is flat most of the time.
759
00:42:18,059 --> 00:42:23,179
And then you have 02/2008, and you just lose
and lose and lose and lose, and it's a massive
760
00:42:23,179 --> 00:42:23,579
drop.
761
00:42:23,579 --> 00:42:26,539
But you never see that in the history of the
stock gen index.
762
00:42:26,539 --> 00:42:28,059
You never see that lose and lose and lose.
763
00:42:28,059 --> 00:42:31,724
You'll see drawdowns and recoveries, drawdowns
and recoveries, drawdowns and recoveries.
764
00:42:31,965 --> 00:42:34,764
And so I think that tracking error
765
00:42:34,925 --> 00:42:40,125
So I was just thinking, even if you if you get
it to the same level of volatility so it's like
766
00:42:40,125 --> 00:42:41,244
it's structurally different?
767
00:42:42,630 --> 00:42:43,909
It's structurally different.
768
00:42:43,909 --> 00:42:47,109
There is there's some like, you're just getting
more it's look.
769
00:42:47,109 --> 00:42:48,949
It's the skewness of the S and P 500.
770
00:42:48,949 --> 00:42:49,429
Right?
771
00:42:49,429 --> 00:42:51,190
And then you have the big fat tail.
772
00:42:51,190 --> 00:42:54,389
The moment you start adding diversification,
you add bonds and equal risk.
773
00:42:54,389 --> 00:42:55,670
You add gold and equal risk.
774
00:42:55,670 --> 00:42:56,710
You add some diversifiers.
775
00:42:57,335 --> 00:43:02,855
You now have a a more consistent, like, series
of drawdowns every year.
776
00:43:02,855 --> 00:43:03,094
Right?
777
00:43:03,094 --> 00:43:08,534
So you'll see your your like, the area under
the curve for those that remember statistics,
778
00:43:08,855 --> 00:43:14,480
you know, is is roughly the same between a
diversified portfolio and the S and P 500.
779
00:43:14,480 --> 00:43:16,880
It's actually less, but roughly the same.
780
00:43:16,880 --> 00:43:23,039
The difference is that that area under the
curve is showing up every year more often, and
781
00:43:23,199 --> 00:43:27,744
most of the area under the curve happens in big
abrupt losses for the S and P 500.
782
00:43:27,744 --> 00:43:31,184
So the experience here is is something that is
important.
783
00:43:31,184 --> 00:43:31,425
Right?
784
00:43:31,425 --> 00:43:36,304
The experience is how often do you feel like
you're winning versus your alternative
785
00:43:36,304 --> 00:43:36,864
portfolio.
786
00:43:36,864 --> 00:43:42,869
I think I think I'm kinda lucky here in being
able to communicate this because I've been
787
00:43:42,869 --> 00:43:46,469
talking about the permanent portfolio for so
long, and that is something that Right.
788
00:43:46,630 --> 00:43:52,630
Most people, I would say, in in the investing
community in Spain, at least know about.
789
00:43:52,630 --> 00:43:56,894
Even if they don't believe in it or they don't
use it, they kinda know about it because we've
790
00:43:56,894 --> 00:43:59,375
been talking, like, for a very long time.
791
00:43:59,775 --> 00:44:06,910
And and sort of everyone knows that this is,
like, an all terrain solution, and they they've
792
00:44:06,910 --> 00:44:09,710
seen how it be behaves just behaves
differently.
793
00:44:09,710 --> 00:44:10,190
Right?
794
00:44:10,190 --> 00:44:17,550
Sometimes it's in a drawdown when the SMB or or
in in Europe, most people use the MSCI world as
795
00:44:17,550 --> 00:44:22,965
the reference, but, you know, stocks are going
up and this might be flat or going down because
796
00:44:22,965 --> 00:44:26,565
I don't know, bonds are down or gold is down or
something else is going up.
797
00:44:26,724 --> 00:44:35,429
So, they they are kind of used to this idea and
then from the portfolio to a return stack off
798
00:44:35,429 --> 00:44:40,949
road portfolio which would be like our most now
I I never say risky.
799
00:44:40,949 --> 00:44:43,110
I say it's just the most efficient portfolio.
800
00:44:43,429 --> 00:44:50,275
But our most efficient offering would be like a
12% volatility portfolio that is a mix of
801
00:44:50,275 --> 00:44:57,474
stocks, bonds, gold, and then trend carry, and
other diversifiers that would be smaller
802
00:44:57,474 --> 00:45:00,275
positions like Bitcoin or arbitrage or or
whatnot.
803
00:45:01,640 --> 00:45:07,960
And so they they're kind of used to seeing that
this thing is its own thing.
804
00:45:07,960 --> 00:45:08,440
Right?
805
00:45:08,440 --> 00:45:14,755
The the difficulty now is, you know, explaining
what trend following is, which I I again, I've
806
00:45:14,755 --> 00:45:18,355
been talking about this for longer, but maybe
Carrie is something that people haven't been
807
00:45:18,355 --> 00:45:23,795
introduced to lately, and starting with a draw
down is never, never great.
808
00:45:23,795 --> 00:45:24,755
It's always tough.
809
00:45:25,155 --> 00:45:31,010
But they've seen, you know, drawdowns in gold
and they've seen drawdowns in long term bonds
810
00:45:31,010 --> 00:45:35,809
which is something that everyone was saying,
you know, like, why do you have long term bonds
811
00:45:35,809 --> 00:45:36,849
in the permanent portfolio?
812
00:45:36,849 --> 00:45:37,969
Why do you have gold?
813
00:45:37,969 --> 00:45:45,144
So, we're used to explaining having odd things
in the portfolio that everyone knows that you
814
00:45:45,144 --> 00:45:46,025
shouldn't have.
815
00:45:46,264 --> 00:45:47,385
But Yeah.
816
00:45:47,385 --> 00:45:47,784
Yeah.
817
00:45:47,784 --> 00:45:48,105
Right.
818
00:45:48,105 --> 00:45:50,025
Everybody knows that you shouldn't have right
now.
819
00:45:50,025 --> 00:45:50,904
Everybody.
820
00:45:51,119 --> 00:45:53,920
I've I've learned that one two things.
821
00:45:53,920 --> 00:45:54,160
Right?
822
00:45:54,160 --> 00:46:00,079
Diversification works, and the second would be
that things happen, and then the experts show
823
00:46:00,079 --> 00:46:00,560
up.
824
00:46:00,960 --> 00:46:01,280
Right?
825
00:46:01,280 --> 00:46:02,960
It's always that way around.
826
00:46:03,724 --> 00:46:06,765
So, yeah, never trust the experts.
827
00:46:06,844 --> 00:46:07,405
Yeah.
828
00:46:07,644 --> 00:46:10,204
I don't understand why you you own gold.
829
00:46:10,204 --> 00:46:11,244
It's lost nothing.
830
00:46:11,244 --> 00:46:12,204
It's lost money.
831
00:46:12,525 --> 00:46:13,965
Like, well, you should have known.
832
00:46:13,965 --> 00:46:15,085
We should let's get it.
833
00:46:15,085 --> 00:46:18,019
Also, now now it's getting the other way
around.
834
00:46:18,019 --> 00:46:18,179
Right?
835
00:46:18,179 --> 00:46:18,420
Right?
836
00:46:18,420 --> 00:46:20,340
Like, gold is an all time highs.
837
00:46:20,340 --> 00:46:21,860
Why don't we buy more gold?
838
00:46:21,860 --> 00:46:29,505
Why would you own 25% of on your portfolio or
or 20% out of 200 in a in a portfolio,
839
00:46:29,824 --> 00:46:31,585
obviously, you have to sell it.
840
00:46:32,224 --> 00:46:32,545
So
841
00:46:33,025 --> 00:46:33,505
Yeah.
842
00:46:33,824 --> 00:46:37,425
And I have see if I can share this one here.
843
00:46:39,744 --> 00:46:40,144
Yeah.
844
00:46:40,144 --> 00:46:44,730
This is kinda from a brochure, the all terrain
portfolio.
845
00:46:44,730 --> 00:46:49,210
So we run a couple of model portfolios
ourselves in the Returnstack website,
846
00:46:49,210 --> 00:46:50,329
returnstack.com website.
847
00:46:50,329 --> 00:46:53,849
But this is just an excerpt of the simplest all
terrain portfolio.
848
00:46:54,755 --> 00:46:56,835
I think it's levered a 150%.
849
00:46:56,835 --> 00:47:03,315
It's basically all all world, seven to ten year
treasuries, gold, and the like, some
850
00:47:03,315 --> 00:47:05,315
commodities and a CTA index.
851
00:47:05,875 --> 00:47:13,489
And this is another thing that I I think we get
trapped into is I think the nomenclature is
852
00:47:13,489 --> 00:47:15,809
clearly appealing, this idea of all terrain.
853
00:47:15,969 --> 00:47:19,969
But I think what the what what it projects is
never lose, and this is an important
854
00:47:19,969 --> 00:47:20,690
distinction.
855
00:47:21,250 --> 00:47:25,114
I think you I think the idea of saying all
terrain is just a more efficient portfolio.
856
00:47:25,114 --> 00:47:28,315
You're still in a four by four going through
some rough terrain, and you will fall.
857
00:47:28,315 --> 00:47:28,795
Yeah.
858
00:47:28,875 --> 00:47:32,235
The issue is the issue is, are you gonna get
stuck in the ditch?
859
00:47:32,235 --> 00:47:32,795
Right?
860
00:47:33,034 --> 00:47:38,890
And we've used a lot of imagery here on you and
me, when talking about the off road investor
861
00:47:38,890 --> 00:47:40,010
and all terrain.
862
00:47:40,650 --> 00:47:42,890
And I think the important thing is it is a four
by four.
863
00:47:42,890 --> 00:47:44,650
I think we can get out of most ditches.
864
00:47:44,809 --> 00:47:47,289
You don't wanna be driving a Ferrari in this
environment.
865
00:47:47,369 --> 00:47:47,610
Right?
866
00:47:48,505 --> 00:47:50,425
And this just kinda goes
867
00:47:50,585 --> 00:47:52,025
You're driving through the pot coffees.
868
00:47:52,025 --> 00:47:52,184
Right?
869
00:47:52,184 --> 00:47:54,505
And when you drive through those, you gotta
feel it.
870
00:47:54,505 --> 00:48:01,280
Like, if you've ever been in a a four by four
going through a an an an off road path, It's
871
00:48:01,280 --> 00:48:05,360
not driving, you know, a a Tesla to the
supermarket.
872
00:48:05,519 --> 00:48:06,320
That's right.
873
00:48:06,480 --> 00:48:07,039
That's right.
874
00:48:09,119 --> 00:48:09,359
That's right.
875
00:48:09,359 --> 00:48:14,984
And then it really is like, when you look at
the year over year here, you see that the all
876
00:48:14,984 --> 00:48:21,464
terrain does experience shallower annualized
losses and less of them.
877
00:48:21,464 --> 00:48:22,025
Right?
878
00:48:23,304 --> 00:48:32,869
And you're getting the sharp ratio of this
simple portfolio here is around 25, 24 sharp
879
00:48:32,869 --> 00:48:34,069
points higher.
880
00:48:34,069 --> 00:48:36,949
So more efficient for every unit of risk,
you're getting more units of return.
881
00:48:36,949 --> 00:48:42,469
But in this case, the example here is to to
lever it up to the point where it has the same
882
00:48:42,469 --> 00:48:44,389
risk as a traditional sixty forty portfolio.
883
00:48:45,364 --> 00:48:45,684
Right?
884
00:48:45,684 --> 00:48:50,164
So the thing about this small edge is that over
over time, you see the value.
885
00:48:50,164 --> 00:48:51,925
Drawdowns are lower and so on.
886
00:48:52,324 --> 00:48:56,244
But in any given year, you know, you're like,
why are we doing this again?
887
00:48:56,244 --> 00:48:59,444
Like, it seems like we're getting the same
returns, but it's a lot more complex to
888
00:48:59,444 --> 00:48:59,764
understand.
889
00:49:00,289 --> 00:49:09,889
And what I found is that where this really
becomes abundantly clear is when an asset class
890
00:49:09,889 --> 00:49:15,864
that people are overexposed to really goes
through a, not a two month or three month, but
891
00:49:15,864 --> 00:49:20,984
a significant series of of years, whether
they're flat or down, where you see the value
892
00:49:20,984 --> 00:49:24,505
of all the other pistons in the motor doing
well.
893
00:49:24,505 --> 00:49:26,424
And it doesn't always happen that way.
894
00:49:26,424 --> 00:49:26,664
Right?
895
00:49:26,664 --> 00:49:30,799
Like, what tends to happen is you have these
shallow losses in gold and recovery, shallow
896
00:49:30,799 --> 00:49:33,760
losses in bonds and recovery, shallow losses in
equities and recovery.
897
00:49:33,839 --> 00:49:36,079
And it just kinda chugs along and adds a little
bit of value.
898
00:49:36,079 --> 00:49:36,719
It's super different.
899
00:49:36,719 --> 00:49:42,704
And then and then there will be a prolonged
bear market in equities where you see the alter
900
00:49:42,704 --> 00:49:46,144
rain, especially something like this, just
kinda chug along positively.
901
00:49:46,304 --> 00:49:47,744
And that's when you see the value.
902
00:49:48,384 --> 00:49:55,105
So, you know, it does take time to see the the
the long term value here, and it requires a lot
903
00:49:55,105 --> 00:49:55,505
of faith.
904
00:49:55,500 --> 00:49:55,980
Right?
905
00:49:55,980 --> 00:49:57,180
And so on education.
906
00:49:57,260 --> 00:50:03,659
Also, you have to be careful with the way you
frame that too because if we say that you know,
907
00:50:03,659 --> 00:50:11,315
I I think I've said sometimes, like, the off
road portfolio kinda needs a crisis in order
908
00:50:11,315 --> 00:50:14,914
for you to see, like, a big difference.
909
00:50:14,914 --> 00:50:15,474
Right?
910
00:50:15,474 --> 00:50:16,514
Why you have it?
911
00:50:16,514 --> 00:50:22,835
But when you say a crisis, people are gonna
think, you know, a a 10% drawdown is a crisis
912
00:50:22,260 --> 00:50:23,460
or a 15% draw.
913
00:50:23,460 --> 00:50:23,619
Right?
914
00:50:23,619 --> 00:50:24,260
Liberation.
915
00:50:24,260 --> 00:50:24,579
So you
916
00:50:24,579 --> 00:50:33,139
need you need a a really, really tough scenario
to see that huge difference to appear.
917
00:50:33,139 --> 00:50:33,300
Right?
918
00:50:33,300 --> 00:50:39,824
Because if not, you just see that it chuckles
along at that level of volatility and it can be
919
00:50:39,824 --> 00:50:42,144
doing that for effects on the back test.
920
00:50:42,144 --> 00:50:43,264
So so I can see you.
921
00:50:43,264 --> 00:50:50,119
You can get maybe four or five years where it
does kind of the same thing that an equally
922
00:50:50,119 --> 00:50:53,000
volatile stock and bond portfolio.
923
00:50:53,320 --> 00:51:01,094
And so the question there is, why am I using
this expensive solution that is so complex when
924
00:51:01,094 --> 00:51:05,014
a very simple one can give you the same
returns.
925
00:51:05,014 --> 00:51:05,494
Right?
926
00:51:05,735 --> 00:51:09,335
And it's because you're you're you're in your
backpack.
927
00:51:09,335 --> 00:51:12,454
You have a lot of things there that you just
didn't need.
928
00:51:13,014 --> 00:51:15,494
That doesn't mean that you're not going to need
them in the future.
929
00:51:15,494 --> 00:51:19,090
Like the sensible thing is always to be
prepared.
930
00:51:19,329 --> 00:51:21,170
You need to be prepared always.
931
00:51:21,170 --> 00:51:28,449
And, you know, if we don't get a terrible
market, I mean, I hope we don't get a terrible
932
00:51:28,449 --> 00:51:29,410
car market.
933
00:51:29,489 --> 00:51:29,650
Right?
934
00:51:29,974 --> 00:51:31,574
We're gonna do okay too.
935
00:51:31,574 --> 00:51:35,255
You it's not that that bad.
936
00:51:36,215 --> 00:51:43,255
But, yeah, sometimes I I find myself thinking
like, do I want a, like, a terrible bear market
937
00:51:43,255 --> 00:51:44,295
equities?
938
00:51:44,454 --> 00:51:48,170
So so that people see the value of this.
939
00:51:48,730 --> 00:51:49,449
But, yeah, everyone's
940
00:51:49,849 --> 00:51:50,250
Yeah.
941
00:51:50,250 --> 00:51:50,409
Yeah.
942
00:51:50,409 --> 00:51:51,449
Well, that's that yeah.
943
00:51:51,449 --> 00:51:59,305
Don't we all you know, my anecdote to that is
that I I was doing this stuff in o '8, and I
944
00:51:59,305 --> 00:52:01,065
remember the phases of emotions.
945
00:52:01,065 --> 00:52:05,065
You know, phase one, September like, Lehman
goes down.
946
00:52:05,065 --> 00:52:07,785
September, October, I'm feeling so good.
947
00:52:07,785 --> 00:52:08,184
Right?
948
00:52:08,184 --> 00:52:10,105
I've been talking about it for a few years.
949
00:52:10,184 --> 00:52:12,025
Portfolios are doing great.
950
00:52:13,144 --> 00:52:15,280
You know, everybody's losing their minds.
951
00:52:15,280 --> 00:52:19,359
Clients don't even know what's my clients
didn't know like, why is everybody so worried?
952
00:52:19,359 --> 00:52:22,159
Because they were looking at portfolios in
different light.
953
00:52:22,559 --> 00:52:26,400
And and so the first was relief and
satisfaction.
954
00:52:26,400 --> 00:52:27,039
We want that.
955
00:52:27,039 --> 00:52:32,525
And then you you have January, February, and
advisers aren't showing up to their desks.
956
00:52:32,684 --> 00:52:36,125
Associates are having to talk to clients that
are crying on the phone.
957
00:52:36,605 --> 00:52:38,445
Family and friends are losing their jobs.
958
00:52:38,445 --> 00:52:39,965
And then you're like, crap.
959
00:52:39,965 --> 00:52:42,364
I really need this to turn around right now.
960
00:52:42,849 --> 00:52:43,250
Right?
961
00:52:43,250 --> 00:52:49,010
It it is there's it is a double edged sword to
kinda I wanna show the value of this, and this
962
00:52:49,010 --> 00:52:51,969
is important, but also I don't want to ever
have to use those tools.
963
00:52:52,050 --> 00:52:55,250
And I hope I never have to show you what how
important those tools were.
964
00:52:55,250 --> 00:52:57,010
I just need you to trust me so that when it
does happen.
965
00:52:57,515 --> 00:53:00,875
And so by the end of it, I was just begging for
things things to change.
966
00:53:00,875 --> 00:53:06,635
And then when things changed, then the markets
roared 80%, and you're still making 9% of
967
00:53:06,635 --> 00:53:08,555
percent a year, especially when I was non
levered.
968
00:53:08,555 --> 00:53:08,954
Right?
969
00:53:09,114 --> 00:53:14,900
So it is, you you know, as an all terrain
provider and investor, you go through these
970
00:53:14,900 --> 00:53:15,539
emotions.
971
00:53:16,179 --> 00:53:22,579
At the end of the day, it it comes down to does
it is it a sound philosophical fundamental
972
00:53:22,579 --> 00:53:25,059
investment strategy that works over time?
973
00:53:25,940 --> 00:53:30,085
And I and, you know, I think it's tough to once
you take the red pill, tough tough to say no.
974
00:53:30,085 --> 00:53:30,404
No.
975
00:53:30,404 --> 00:53:31,125
It doesn't.
976
00:53:31,444 --> 00:53:36,885
And even this year, I'm looking at just
eyeballing the kind of the off road portfolio
977
00:53:36,885 --> 00:53:38,644
versus an 8020.
978
00:53:38,644 --> 00:53:39,204
Right?
979
00:53:39,364 --> 00:53:42,484
8020 year to date is up again.
980
00:53:42,900 --> 00:53:51,460
Another drawdown, around 13% drawdown and and a
recovery, and I'm looking at an, you know, an
981
00:53:51,460 --> 00:53:55,619
iteration in off road roughly around the same
risk.
982
00:53:55,619 --> 00:54:01,614
Actually, lower risk, but, you know, down less
peak to trough and flat for the year.
983
00:54:01,614 --> 00:54:05,215
And they seem identical, but the reality is
that one is a levered portfolio and the other
984
00:54:05,215 --> 00:54:05,614
one is.
985
00:54:05,614 --> 00:54:06,255
Right?
986
00:54:06,655 --> 00:54:08,175
And the risk of, hey.
987
00:54:08,175 --> 00:54:11,179
It's a levered portfolio that's risky.
988
00:54:11,179 --> 00:54:14,299
Again, if you're using defensive leverage, not
so much.
989
00:54:14,299 --> 00:54:17,019
You know, it had a shallower drawdown.
990
00:54:17,019 --> 00:54:18,859
It's now back to breakeven.
991
00:54:18,940 --> 00:54:26,454
And and there were there were tools in there
that the 6040 didn't have, like gold, right,
992
00:54:26,454 --> 00:54:32,454
that really helped offset a lot of the losses
on the on the levered side.
993
00:54:32,454 --> 00:54:39,510
And so the question is, what would have
happened if this continued to go down twenty,
994
00:54:39,510 --> 00:54:40,869
thirty, 50%?
995
00:54:40,869 --> 00:54:44,389
Would they continue to be in tandem like we saw
in this shallow loss?
996
00:54:44,389 --> 00:54:44,869
No.
997
00:54:44,949 --> 00:54:46,630
And history has shown us that no.
998
00:54:46,630 --> 00:54:51,269
It's it's very it becomes a very different
portfolio in a continuation.
999
00:54:51,829 --> 00:54:53,684
But, hopefully, we'll never see that.
1000
00:54:53,684 --> 00:54:55,204
Hopefully, we'll just compete.
1001
00:54:55,204 --> 00:54:57,285
Like, hopefully, the all terrain is able to
compete.
1002
00:54:57,445 --> 00:55:01,204
Hopefully, all terrain gives what people need
in terms of what they care about, which is am I
1003
00:55:01,204 --> 00:55:05,605
gonna have enough returns to make, you know, my
to pay my bills when I retire or, you know,
1004
00:55:05,605 --> 00:55:07,445
grow to get a good retirement nest egg.
1005
00:55:07,929 --> 00:55:11,849
But, again, if the if it does happen, it's
important to understand the moving parts and
1006
00:55:11,849 --> 00:55:15,289
the value that they add if, god forbid,
anything really bad happens.
1007
00:55:15,289 --> 00:55:21,289
It's funny because I was thinking that that's
exactly what's taken me now full circle to
1008
00:55:21,375 --> 00:55:21,855
okay.
1009
00:55:21,855 --> 00:55:27,695
I can't convince everyone to be an all weather
investor because it that's some people are just
1010
00:55:27,695 --> 00:55:30,175
not built in their mind for that.
1011
00:55:30,175 --> 00:55:30,414
Right?
1012
00:55:30,414 --> 00:55:31,775
They like taking risk.
1013
00:55:32,175 --> 00:55:38,359
They they believe in stocks, and, you know,
they are value investors or they're whatever.
1014
00:55:38,359 --> 00:55:38,839
I don't know.
1015
00:55:38,839 --> 00:55:40,839
They they want stocks.
1016
00:55:40,839 --> 00:55:45,799
They want businesses, and they believe in the
markets and their capitalists.
1017
00:55:45,799 --> 00:55:53,894
So whatever they they have in their mind, you
still can use diversification without
1018
00:55:53,894 --> 00:55:55,175
sacrificing returns.
1019
00:55:55,175 --> 00:55:55,494
Right?
1020
00:55:55,494 --> 00:55:56,934
You couldn't do it before.
1021
00:55:57,015 --> 00:55:58,375
You can do it now.
1022
00:55:58,775 --> 00:56:00,550
And what I was saying, right?
1023
00:56:00,550 --> 00:56:07,590
You can add to a 100% portfolio, 100% stocks,
whatever kind of thing you're doing.
1024
00:56:07,750 --> 00:56:14,789
100% stocks, you can add some diversifiers on
top of that, and if you do the right amount,
1025
00:56:15,474 --> 00:56:19,875
you're not gonna feel the difference, and
you're just gonna get that extra return from
1026
00:56:19,875 --> 00:56:20,514
the stacking.
1027
00:56:20,514 --> 00:56:24,514
So even if you're just looking at returns,
return stacking makes sense.
1028
00:56:24,514 --> 00:56:30,650
If you're looking at, you know, maybe you want
a little less risk and not concentrate your
1029
00:56:30,650 --> 00:56:36,250
defense on bonds, then you can use return
stacking to have a a more diversified defense,
1030
00:56:36,250 --> 00:56:39,529
which is what I was trying to do before, but
now I think I'm doing it more efficiently
1031
00:56:39,529 --> 00:56:40,170
again.
1032
00:56:40,489 --> 00:56:44,409
We can add more defense to that defense that we
we didn't do that before with stack.
1033
00:56:44,864 --> 00:56:50,704
There's so many ways you can use stacking that
when I put myself in other band of investors'
1034
00:56:50,704 --> 00:56:56,065
boots, you know, my mind is exploding because I
just can't understand.
1035
00:56:57,664 --> 00:57:00,230
If you know about it, why wouldn't you do it?
1036
00:57:00,230 --> 00:57:07,670
Like, I I just don't see a world where in a
couple of decades, this is the norm.
1037
00:57:07,670 --> 00:57:07,989
Right?
1038
00:57:07,989 --> 00:57:08,789
Everyone will
1039
00:57:09,269 --> 00:57:09,670
Right.
1040
00:57:09,670 --> 00:57:11,989
Where it's not where it's not standard of care
for
1041
00:57:11,989 --> 00:57:18,704
the financial Everyone will be using I I see
that, you know, if you have a a any version of
1042
00:57:18,704 --> 00:57:19,664
a sixty forty, right?
1043
00:57:19,664 --> 00:57:27,679
Like your index stock and one portfolio, you
can easily add 15% stack on that without
1044
00:57:27,679 --> 00:57:30,639
affecting your overall risk and just get some
extra returns.
1045
00:57:30,639 --> 00:57:34,159
Not like it it it will happen eventually.
1046
00:57:34,159 --> 00:57:37,359
You're adding things that are they make money
over time.
1047
00:57:37,839 --> 00:57:43,054
We know that not all the time, but now you can
get a diversified set of things that make money
1048
00:57:43,054 --> 00:57:43,934
over time.
1049
00:57:44,175 --> 00:57:46,974
You put them on top of your traditional
portfolio.
1050
00:57:46,974 --> 00:57:48,735
Trapping error is gonna be minimal.
1051
00:57:48,735 --> 00:57:53,534
Volatility wise, it's gonna be almost the same,
and you're just gonna get some extra returns.
1052
00:57:53,534 --> 00:57:53,775
Right?
1053
00:57:53,775 --> 00:57:54,175
Why?
1054
00:57:54,175 --> 00:57:54,335
What?
1055
00:57:54,750 --> 00:57:59,949
And the thing is that the caveat to all of that
is that, you know, we're saying it will, but
1056
00:57:59,949 --> 00:58:03,389
the reality is that, you know, you look at some
diversifiers.
1057
00:58:03,389 --> 00:58:07,869
AQR went through a three year period where
their their alpha sleeve just kinda lost money,
1058
00:58:07,869 --> 00:58:08,829
and now it's killing it again.
1059
00:58:08,829 --> 00:58:10,605
Like, it's it depends on time frame.
1060
00:58:10,605 --> 00:58:11,644
There will be losses.
1061
00:58:11,885 --> 00:58:15,965
There's no guarantees, but, you know, again,
these are sound a lot of these are very sound
1062
00:58:15,965 --> 00:58:16,765
ideas.
1063
00:58:17,244 --> 00:58:21,244
Even if you're a 100% equity investor and you
decide to stack some bonds, I mean, the
1064
00:58:21,244 --> 00:58:24,550
question is, is term premium going to exist in
the future?
1065
00:58:24,550 --> 00:58:29,670
If you're able to stack an extra 1% just by
doing a 100% equities, 20% bonds.
1066
00:58:29,909 --> 00:58:30,230
Alright.
1067
00:58:30,230 --> 00:58:31,510
You're adding diversification.
1068
00:58:31,590 --> 00:58:32,949
Do you believe in term premium?
1069
00:58:32,949 --> 00:58:35,989
Do believe that bonds are gonna make returns
above cash, especially if you're taking
1070
00:58:35,989 --> 00:58:36,630
duration risk?
1071
00:58:36,804 --> 00:58:38,724
You know, it seems like a reasonable thing.
1072
00:58:38,965 --> 00:58:40,885
I mean, anyone of those can fix.
1073
00:58:40,885 --> 00:58:45,844
I mean, I I know I know we we have to, you
know, we have to we have to,
1074
00:58:45,844 --> 00:58:46,164
yeah.
1075
00:58:46,164 --> 00:58:46,724
How?
1076
00:58:46,804 --> 00:58:48,005
Temper expectations.
1077
00:58:48,005 --> 00:58:48,724
Temper expectations.
1078
00:58:48,724 --> 00:58:48,965
Yeah.
1079
00:58:48,965 --> 00:58:52,960
I feel like that stock investors never do this
but okay, let's temperate.
1080
00:58:53,039 --> 00:58:53,760
Yeah.
1081
00:58:54,079 --> 00:58:54,880
Let's us.
1082
00:58:54,880 --> 00:58:55,599
We will temperate.
1083
00:58:55,599 --> 00:58:56,000
Do what?
1084
00:58:56,000 --> 00:59:02,239
But you know, I can see a world where one of
those diversifiers can fail on you even in the
1085
00:59:02,239 --> 00:59:02,720
long term.
1086
00:59:02,720 --> 00:59:08,984
But the more of that new add on, you know, the
more probable is than, you know, than than a
1087
00:59:08,984 --> 00:59:13,465
series of things that have made money over time
in the long term.
1088
00:59:13,545 --> 00:59:18,824
If you add them together and you have a
diversified set of them, will eventually very
1089
00:59:18,824 --> 00:59:24,589
probably make some money and that will be
something that will be on top of what you are
1090
00:59:24,589 --> 00:59:27,469
doing right now and it won't affect your your
portfolio.
1091
00:59:27,469 --> 00:59:27,710
Right?
1092
00:59:27,710 --> 00:59:28,909
It makes so much sense.
1093
00:59:28,909 --> 00:59:29,389
Right.
1094
00:59:30,109 --> 00:59:31,230
And I I think you're right.
1095
00:59:31,230 --> 00:59:37,594
I think the big unlock for guys like you and me
who both started on the all terrain camp and
1096
00:59:37,594 --> 00:59:39,034
were like, this is the only way.
1097
00:59:39,994 --> 00:59:43,355
When you take that away for a second and you
see, okay.
1098
00:59:43,355 --> 00:59:44,635
Investing is a religion.
1099
00:59:44,954 --> 00:59:46,635
Everybody has their own religion.
1100
00:59:46,635 --> 00:59:50,074
And and they're they're all they're value
investors, but there's a bunch of there's a
1101
00:59:50,074 --> 00:59:53,010
bunch of, like, sects within value investors
too.
1102
00:59:53,010 --> 00:59:53,570
Right?
1103
00:59:54,610 --> 00:59:57,410
And there's there's all terrain investors,
there's a bunch of sex.
1104
00:59:57,410 --> 00:59:59,090
So everybody has their own point of view.
1105
00:59:59,090 --> 01:00:05,875
The the big unlock here is saying, okay, let's
not try to shove all terrain down the throat to
1106
01:00:05,875 --> 01:00:11,394
be down people's throats, but rather the
realization that, oh, this is just a tool.
1107
01:00:11,394 --> 01:00:18,034
And and if we can provide tools for advisers
and investors to apply their own religion in a
1108
01:00:18,034 --> 01:00:21,430
much more efficient manner, then we should help
them do that.
1109
01:00:21,430 --> 01:00:26,710
And I think we're we both later in our careers,
are have been like, okay.
1110
01:00:26,710 --> 01:00:27,269
You know what?
1111
01:00:27,269 --> 01:00:30,550
Let's empower the world's population.
1112
01:00:30,550 --> 01:00:32,070
You're gonna tackle Europe.
1113
01:00:32,150 --> 01:00:37,315
We'll tackle the, Anglosphere to just do a
little bit better.
1114
01:00:37,554 --> 01:00:41,635
And I think that's you're you're coming at it
now.
1115
01:00:41,795 --> 01:00:46,594
That's what you're gonna start offering soon,
and, it makes total sense to me.
1116
01:00:46,594 --> 01:00:50,980
And I'm actually quite quite pumped about it
from this how it's gonna work in in Europe from
1117
01:00:50,980 --> 01:00:51,780
your perspective.
1118
01:00:52,099 --> 01:00:52,739
Yep.
1119
01:00:53,460 --> 01:00:54,099
Alright.
1120
01:00:54,099 --> 01:00:55,380
Well, we covered a lot.
1121
01:00:55,380 --> 01:00:58,659
Is there anything that I that you think would
be useful?
1122
01:00:58,659 --> 01:00:59,940
Any parting words?
1123
01:01:00,339 --> 01:01:02,420
Let me I had some notes in here.
1124
01:01:04,974 --> 01:01:05,454
Yeah.
1125
01:01:05,454 --> 01:01:10,655
Well, maybe I it it's more of a question that
I'm asking you, but Sure.
1126
01:01:10,655 --> 01:01:15,775
I'm seeing more interest in the time stacking
Portable Alpha.
1127
01:01:16,414 --> 01:01:23,280
The last couple of months have been pretty
crazy with lots of shops opening up new new
1128
01:01:23,280 --> 01:01:23,920
ideas.
1129
01:01:23,920 --> 01:01:29,519
Like, I understand there's a one of the reasons
why this hadn't happened before was had to do
1130
01:01:29,519 --> 01:01:32,160
with the regulation in The States.
1131
01:01:32,994 --> 01:01:39,954
I with we're looking at how this is evolving in
in Europe, but, like, how how do you see first
1132
01:01:39,954 --> 01:01:43,235
of all, the landscape in The States or or in
the rest of the world?
1133
01:01:43,315 --> 01:01:45,635
You're doing some things in Canada too.
1134
01:01:45,795 --> 01:01:50,030
How do you how do you see this evolving in The
States market?
1135
01:01:50,030 --> 01:01:50,670
Yeah.
1136
01:01:50,750 --> 01:01:51,789
I mean, like
1137
01:01:52,110 --> 01:01:57,309
The transition to other markets like like
Europe where, you know, I've started as you
1138
01:01:57,309 --> 01:02:01,974
were saying before, we we found a way to
operate, but, like, we've had to go through
1139
01:02:01,974 --> 01:02:04,934
many loops to actually be able to We're going
through
1140
01:02:04,934 --> 01:02:08,534
the polls right now to get you the exposure to
any with your bank.
1141
01:02:08,534 --> 01:02:09,015
Right?
1142
01:02:09,255 --> 01:02:16,150
So it's, I think, you know, like anything new,
it's been around for forty years, right?
1143
01:02:16,150 --> 01:02:18,069
I think I've used this analogy before.
1144
01:02:18,069 --> 01:02:23,269
There's a bunch of, for people who don't wanna
die of a heart attack, there's a bunch of tests
1145
01:02:23,269 --> 01:02:30,425
that have been approved and been recommended
for doctors to give their patients for years in
1146
01:02:30,425 --> 01:02:35,625
order to assess whether you're a high risk for
heart attack or not, that are not being done by
1147
01:02:35,625 --> 01:02:38,505
the vast majority of doctors, even though
they've been around for twenty years.
1148
01:02:38,940 --> 01:02:45,500
And so it requires, in this case, some experts
to kind of bang down the door and say, no,
1149
01:02:45,500 --> 01:02:53,045
everybody needs to get their APO B numbers and
everybody needs to get their Lp, sorry, Lp
1150
01:02:53,045 --> 01:02:54,325
little a numbers checked.
1151
01:02:54,325 --> 01:02:58,005
And these are things that nobody really knows
about today.
1152
01:02:58,005 --> 01:03:01,204
They just care about cholesterol, total
cholesterol, even though it's a good indicator,
1153
01:03:01,204 --> 01:03:02,244
our maximum indicator.
1154
01:03:02,325 --> 01:03:03,605
It's it takes decades.
1155
01:03:03,605 --> 01:03:04,005
Right?
1156
01:03:04,005 --> 01:03:06,885
And Porto Aleph has been around for forty
years.
1157
01:03:07,309 --> 01:03:13,710
And it's taken a few people, you know, trying
to say the same thing in different ways and
1158
01:03:13,710 --> 01:03:14,670
communicate.
1159
01:03:14,670 --> 01:03:18,190
And then when it becomes important, there's a
groundswell right now.
1160
01:03:18,190 --> 01:03:22,704
If you look at how many times the word Portable
Alpha has been searched, it's gone from nothing
1161
01:03:22,704 --> 01:03:25,824
to, you know, an insane amount in the last two
years, especially.
1162
01:03:26,224 --> 01:03:28,385
Probably, we helped in a little bit in that.
1163
01:03:28,784 --> 01:03:31,344
And now institutions have to pay attention.
1164
01:03:31,585 --> 01:03:36,704
Like, we know for a fact that Morningstar is
having to think about a new category that's
1165
01:03:36,704 --> 01:03:40,199
going to put all Portable Alpha people in
there.
1166
01:03:40,199 --> 01:03:43,480
And then the next question is, who's behind the
curve?
1167
01:03:43,480 --> 01:03:46,200
And I think the usage structure is behind the
curve.
1168
01:03:46,519 --> 01:03:53,855
They have these weird rules about how one can
invest in derivatives, and it makes it really
1169
01:03:53,855 --> 01:03:59,694
difficult and really expensive to provide the
best possible, you know, stack because of that.
1170
01:03:59,694 --> 01:04:06,094
And I'm sure that'll slowly start to change
because there's going to be too many people
1171
01:04:06,094 --> 01:04:10,059
that matter to them, forcing them to to kinda
lighten up a
1172
01:04:10,059 --> 01:04:10,300
little bit.
1173
01:04:10,300 --> 01:04:10,780
Right?
1174
01:04:11,179 --> 01:04:12,380
So that ground's also coming.
1175
01:04:12,380 --> 01:04:14,460
People are asking more and more about it.
1176
01:04:14,539 --> 01:04:19,820
Once a category in Morningstar, you know,
exists and other platforms will have to think
1177
01:04:19,820 --> 01:04:26,784
about it as well and categorize, There's a
reticence from existing funds that have been
1178
01:04:26,784 --> 01:04:28,704
using portable alpha from ever to saying
1179
01:04:28,704 --> 01:04:29,425
the word leverage.
1180
01:04:29,425 --> 01:04:29,984
Exactly.
1181
01:04:29,984 --> 01:04:30,464
That's what I was
1182
01:04:30,464 --> 01:04:31,025
gonna say.
1183
01:04:30,945 --> 01:04:39,340
Think I've I've This is is gonna be I see it
everywhere and now I go through this, right?
1184
01:04:39,340 --> 01:04:42,460
But before I and people were not saying it,
right?
1185
01:04:42,460 --> 01:04:45,420
You can find it, right?
1186
01:04:45,420 --> 01:04:47,179
That you you'll eventually find, you know, this
fund.
1187
01:04:47,179 --> 01:04:47,579
And
1188
01:04:47,980 --> 01:04:50,460
and and the goal here is to destigmatize.
1189
01:04:50,460 --> 01:04:54,674
And you end up finding out that it's doing
stocks plus something.
1190
01:04:54,674 --> 01:04:57,635
And and that's why they're getting those
returns, right?
1191
01:04:57,714 --> 01:05:03,795
So, now that I see it, I see it everywhere, but
I see people using it and not saying they're
1192
01:05:03,795 --> 01:05:10,239
using it, And again, that going back to what I
said before about being very transparent on,
1193
01:05:10,239 --> 01:05:11,599
okay, this is what we're doing.
1194
01:05:11,760 --> 01:05:12,800
And we explain here.
1195
01:05:12,800 --> 01:05:13,119
Yeah.
1196
01:05:13,119 --> 01:05:19,684
So that you don't get scared and and you see
it's okay and it works and this is exactly how
1197
01:05:19,684 --> 01:05:20,405
it works.
1198
01:05:20,405 --> 01:05:22,565
I think we're missing And I think
1199
01:05:22,565 --> 01:05:26,804
a bigger unlock is also like like anything, you
know, portfolio construction can be anything.
1200
01:05:26,804 --> 01:05:29,684
Portal Alpha can be any sort of iteration.
1201
01:05:29,925 --> 01:05:34,750
Keeping it as simple as possible with the one
plus one that that we've really focused on,
1202
01:05:34,909 --> 01:05:36,269
talking about Lego blocks.
1203
01:05:36,269 --> 01:05:41,389
I think, again, bringing it down to a level
where people can understand it understand what
1204
01:05:41,389 --> 01:05:47,835
they can put in and what they can take out and
being upfront about what the stacks are are is
1205
01:05:47,835 --> 01:05:51,355
the big unlock versus we just how do we
outperform?
1206
01:05:51,355 --> 01:05:52,795
We do we just do overlay stuff.
1207
01:05:52,795 --> 01:05:53,755
Just trust us.
1208
01:05:53,755 --> 01:05:58,554
We're gonna we're gonna just do our own thing,
and you just need to, you know, batten down the
1209
01:05:58,554 --> 01:06:00,474
hatches and and and invest in it long term.
1210
01:06:01,280 --> 01:06:03,359
We're trying to be like open kimono.
1211
01:06:03,359 --> 01:06:04,559
Here's exactly how it works.
1212
01:06:04,559 --> 01:06:05,440
You should know.
1213
01:06:05,679 --> 01:06:11,359
And let's really understand what the risks that
you're taking by using portable alpha return
1214
01:06:11,359 --> 01:06:15,519
stacking leverage are and dispel some of the
mess and understand some of the risks.
1215
01:06:15,764 --> 01:06:20,164
So it's gonna be a long journey to get broad
adoption.
1216
01:06:20,164 --> 01:06:24,964
But I like I said, forty years from now, I'd be
shocked if everybody's portfolio doesn't have
1217
01:06:24,964 --> 01:06:26,244
at least a little bit of this.
1218
01:06:26,244 --> 01:06:27,125
That's how I see it.
1219
01:06:27,125 --> 01:06:34,050
So, hopefully, Europe moves a little faster and
I can introduce things because right now, I'm
1220
01:06:34,050 --> 01:06:40,130
seeing that I'm I'm always the first person to
ask or the first person in anything that is
1221
01:06:40,130 --> 01:06:44,375
portable, alphas in in Europe, now in Canada.
1222
01:06:44,375 --> 01:06:46,934
I think I'm one of the biggest Yeah.
1223
01:06:46,934 --> 01:06:47,735
Now it's time.
1224
01:06:47,735 --> 01:06:52,695
I'm trying to be there at the forefront of of
it, but I'm I'm really enjoying it because I
1225
01:06:52,695 --> 01:06:56,614
think we're very, very early and Very early.
1226
01:06:57,140 --> 01:06:57,940
And it's exciting.
1227
01:06:57,940 --> 01:07:01,380
And you see that, like, when you put these you
put things together, you know, like, oh my god.
1228
01:07:01,380 --> 01:07:02,019
This is so good.
1229
01:07:02,019 --> 01:07:05,140
We just need to give us like, we just need to
show it out and and give it some time.
1230
01:07:05,140 --> 01:07:10,820
And it's always, like it always because of the
operational burden of doing something new.
1231
01:07:10,820 --> 01:07:13,925
It's always putting things out two years later
than what you wanted to.
1232
01:07:13,925 --> 01:07:17,605
Like, we wrote the paper in 2021, and we wanted
to launch something at the end of twenty twenty
1233
01:07:17,605 --> 01:07:18,085
one.
1234
01:07:18,485 --> 01:07:24,085
Had we done that, you know, the visual obvious
story would immerse would emerge.
1235
01:07:24,085 --> 01:07:29,250
And what's happened is it took everybody two
years to to let us do what we needed to do, and
1236
01:07:29,409 --> 01:07:32,449
we launched at the teeth of a of a drawdown in
some of these stacks.
1237
01:07:32,449 --> 01:07:32,769
Right?
1238
01:07:32,769 --> 01:07:36,769
So, you know, we're just gonna have to muddle
through and keep on telling the story.
1239
01:07:37,170 --> 01:07:39,089
And you're you're a good partner to have in
Europe.
1240
01:07:39,695 --> 01:07:40,175
Let's see.
1241
01:07:40,175 --> 01:07:41,054
Let's see how it goes.
1242
01:07:41,054 --> 01:07:42,655
We'll keep pushing it.
1243
01:07:42,655 --> 01:07:45,775
Rapha, this has been awesome.
1244
01:07:45,775 --> 01:07:47,215
We should do this more often.
1245
01:07:47,215 --> 01:07:53,534
Your English is much better than my Spanish,
which is which is incredible for somebody that
1246
01:07:53,534 --> 01:07:55,300
hasn't done this in English.
1247
01:07:55,300 --> 01:07:56,819
Thanks again.
1248
01:07:56,819 --> 01:08:01,940
We will if anybody wants to find you, where can
they find you on social media?
1249
01:08:02,339 --> 01:08:12,775
Well, I'm on I'm on Twitter mostly at river
patrimorio, which is R I V E R P A T R I M 0 N
1250
01:08:12,775 --> 01:08:13,655
I 0.
1251
01:08:14,614 --> 01:08:17,574
We'll have it down there in the in the links, I
guess.
1252
01:08:18,920 --> 01:08:23,800
And then if you wanna read about return
stacking in Spanish, you can actually find if
1253
01:08:23,800 --> 01:08:31,239
you if you look for returnstackportfolios.es,
that's the Spanish webpage and there we're
1254
01:08:31,239 --> 01:08:38,175
basically talking about return stacking and
doing covering all the on the on the stuff that
1255
01:08:38,175 --> 01:08:39,295
you guys are doing.
1256
01:08:39,375 --> 01:08:40,974
Trying to bring it again.
1257
01:08:41,215 --> 01:08:44,255
I think the main difference is that we're
looking at retail investors instead of
1258
01:08:44,255 --> 01:08:49,854
advisers, so that's why I twist some of the the
ideas.
1259
01:08:50,369 --> 01:08:50,770
Yeah.
1260
01:08:50,770 --> 01:08:55,409
I I would definitely encourage people to go to
the site, and there's a little button on your
1261
01:08:55,409 --> 01:09:02,210
Chrome that says translate and does a pretty
good job of just try to read a few and read it
1262
01:09:02,210 --> 01:09:06,064
from a different angle that, that Rafa is
really good at.
1263
01:09:06,064 --> 01:09:10,145
So definitely visit the site that and read some
of the blog articles.
1264
01:09:10,145 --> 01:09:11,425
We'll have you on more often.
1265
01:09:11,425 --> 01:09:11,984
Cool.
1266
01:09:12,465 --> 01:09:14,704
And, keep doing what you're doing, man.
1267
01:09:14,704 --> 01:09:15,744
You're doing God's work.
1268
01:09:15,744 --> 01:09:16,064
Great.
1269
01:09:16,064 --> 01:09:16,625
Thanks, Rob.
1270
01:09:16,625 --> 01:09:17,744
Thanks for joining today.
1271
01:09:19,670 --> 01:09:24,630
If you're enjoying the podcast, please consider
heading over to your favorite podcast platform
1272
01:09:24,630 --> 01:09:29,029
and leaving us a rating or review and sharing
us with friends or on social media.
1273
01:09:29,270 --> 01:09:32,005
It helps new people find us and helps us grow.
1274
01:09:32,164 --> 01:09:37,045
Finally, if you'd like to learn more about our
extensive research on the concept of return
1275
01:09:37,045 --> 01:09:40,805
stacking, please do head over to
returnstack.com.