WEBVTT - A Quiet, Tax-Free Haven Is Braced for Change 0:00:05.720 --> 0:00:07.200 Welcome to Trillions. I'm Joel Webber and. 0:00:07.200 --> 0:00:12.800 I'm Eric Belchernas. 0:00:13.920 --> 0:00:17.280 There's this theme that we've been talking about for a while, Eric, 0:00:18.040 --> 0:00:21.240 and you've been wanting to do it. I've been resisting. 0:00:21.760 --> 0:00:23.880 So I don't know how many episodes we've done. 0:00:23.880 --> 0:00:26.200 Maybe two hundred we should actually count. 0:00:26.560 --> 0:00:30.440 And there's probably only like forty categories of ETFs, meaning 0:00:30.440 --> 0:00:34.080 we've covered many categories multiple times that we've never covered 0:00:34.080 --> 0:00:38.600 this one because because of me. Yeah, well, and I 0:00:39.000 --> 0:00:42.360 understand it is arguably one of the more boring sounding categories. 0:00:43.120 --> 0:00:44.960 I mean I was talking about I would put it 0:00:45.200 --> 0:00:48.200 right up around short duration bonds. 0:00:48.200 --> 0:00:49.080 Have you done that one? 0:00:49.200 --> 0:00:53.080 We have? Yeah, because money markets, this is municipal bonds. 0:00:53.720 --> 0:00:55.840 Now, hold on, I'm gonna fall asleep. 0:00:56.520 --> 0:00:59.920 Before people tune out here. Listen a couple things for 0:01:00.200 --> 0:01:04.840 of all, One of the most red analysts in Bloomberg 0:01:04.880 --> 0:01:08.920 Intelligence is Eric Kazatski, my colleague. I've known her for 0:01:09.040 --> 0:01:13.839 years and he's very colorful writer too, And people really 0:01:15.160 --> 0:01:18.160 use Muni's, especially if you're planning a portfolio for a 0:01:18.160 --> 0:01:21.759 real person. The after tax yield on these bonds is great. 0:01:21.800 --> 0:01:25.520 I remember interviewing Bogel Jack Bogel and he was a 0:01:25.520 --> 0:01:28.640 big Muni guy. He loved Muni's for his portfolio. And 0:01:28.680 --> 0:01:31.600 when I look at some of Eric Kazyski's headlines, what 0:01:31.680 --> 0:01:34.840 I like about them is they're so tangible. La Fires, 0:01:36.440 --> 0:01:40.920 Texas Battleship, JFK Airport, the Hollywood Strike, DeSantis, and Disney. 0:01:41.360 --> 0:01:43.640 There are Muni pegs to a lot of stuff that 0:01:43.680 --> 0:01:45.880 we love and know. So I think. 0:01:45.840 --> 0:01:47.760 America is built on the municipal bonds. 0:01:47.800 --> 0:01:51.640 It really is. It runs on Muni's basically. So we 0:01:51.680 --> 0:01:52.559 are going to try to. 0:01:52.480 --> 0:01:54.880 Get in other words, a long overdue episode. 0:01:54.960 --> 0:01:57.279 We're going to try to make Muni's cool today. Yeah, okay, 0:01:57.320 --> 0:01:59.080 that's our that's our time. I'm going to try to 0:01:59.120 --> 0:02:01.920 keep you awake, riveted, and Eric will too. 0:02:02.280 --> 0:02:04.200 I'm in, I'm in. Eric has the bigger job, though, 0:02:04.200 --> 0:02:06.880 I'm so ready and joining us on this episode. Eric 0:02:07.080 --> 0:02:11.120 Kazatski an analyst with Bloomberg Intelligence who's also the co 0:02:11.200 --> 0:02:17.000 host to the podcast Masters of the Universe, this time 0:02:17.040 --> 0:02:22.000 on Trillions Muni Land. Eric, Welcome to Trillions. 0:02:22.880 --> 0:02:25.280 Hey, I'm happy to be here, and what a setup. 0:02:25.320 --> 0:02:28.120 I wasn't sure where that was going at first, but 0:02:28.320 --> 0:02:31.000 you guys turned it around at the last minute. Thank you, Eric. 0:02:31.600 --> 0:02:35.560 You know, as baltun is set up here. Long overdue conversation. 0:02:35.760 --> 0:02:39.880 So why do investors like municipal bonds? 0:02:40.919 --> 0:02:42.960 I mean it's really simple. Do you like paying taxes? 0:02:43.160 --> 0:02:44.440 I don't like paying taxes? 0:02:46.120 --> 0:02:48.280 Okay, So why are they so boring? 0:02:49.600 --> 0:02:52.280 I think because people are confused by them. But look, 0:02:52.400 --> 0:02:54.120 at the end of the day, it's the simplest thing 0:02:54.160 --> 0:02:56.960 to understand. Right, Hey, Look, you live somewhere. 0:02:57.040 --> 0:02:57.720 Has a school. 0:02:58.000 --> 0:03:01.720 Undoubtedly that school was built with tax exempt bonds. You 0:03:01.800 --> 0:03:04.919 have been to a sports game lately, a concert, Undoubtedly 0:03:05.200 --> 0:03:09.200 those have been built with tax free bonds. Airports, roads, bridges. 0:03:09.560 --> 0:03:11.760 It's just the easy stuff you see every day that 0:03:11.800 --> 0:03:14.080 gets ignored the most. That's really what it comes down to. 0:03:14.400 --> 0:03:18.240 Okay, So there's this tax exemption that munieds benefit from. 0:03:18.280 --> 0:03:20.919 How does that work and why are they exempt? 0:03:21.639 --> 0:03:21.919 Yeah? 0:03:22.080 --> 0:03:24.560 I mean, well, so it's been tax law for almost 0:03:24.600 --> 0:03:26.520 one hundred years. I mean, the market has been around 0:03:26.560 --> 0:03:31.120 that long. But essentially, what you do is the issuer 0:03:31.160 --> 0:03:33.840 gets a benefit to borrow at a lower rate, and 0:03:33.880 --> 0:03:36.600 that's passed on to the buyers of those bonds and 0:03:36.880 --> 0:03:40.240 they get to save the interest that comes in as 0:03:40.280 --> 0:03:43.440 income from their federal and state taxes. Now, it doesn't 0:03:43.440 --> 0:03:45.320 all work the same. Some states have different laws. But 0:03:45.360 --> 0:03:48.360 let's just assume that they're all federally in state tax free. 0:03:48.720 --> 0:03:52.080 It's just simple for this conversation. So look, it's a 0:03:52.120 --> 0:03:55.040 double benefit, right. The issuers get the benefit of borrowing 0:03:55.080 --> 0:03:58.240 lower and the investors get the tax free income. It's 0:03:58.280 --> 0:03:59.119 really as simple as that. 0:04:00.240 --> 0:04:02.640 Real quick, Okay, let's just bring one up here. The 0:04:02.680 --> 0:04:07.240 I shares California Municipal Bond etf CMF is the ticker it. 0:04:07.560 --> 0:04:09.720 I have a yield here of two point eight percent. 0:04:10.400 --> 0:04:12.640 So what is the because when I when you talk 0:04:12.800 --> 0:04:15.240 un these people talk about after tax yield, what would 0:04:15.240 --> 0:04:17.760 be the tax equivalent yield? How much more do you 0:04:17.800 --> 0:04:20.039 get if you lived than say California. 0:04:21.000 --> 0:04:23.279 It's so you use the role of two here, right, 0:04:23.360 --> 0:04:25.400 Just figure in these high tax dates like New York, 0:04:25.440 --> 0:04:26.520 New Jersey, California. 0:04:26.680 --> 0:04:27.560 Just double the yield. 0:04:27.640 --> 0:04:29.120 You'll probably get pretty close. 0:04:28.920 --> 0:04:31.720 Because you know, the highest tax back in California, you're 0:04:31.720 --> 0:04:34.040 looking at like thirteen point three percent. You add in 0:04:34.080 --> 0:04:37.520 federal taxes Medicaid, you're up near fifty percent, So five 0:04:37.520 --> 0:04:40.839 point six percent on a taxi equivalent basis. 0:04:41.360 --> 0:04:43.080 That's pretty cool. See that they don't put that in 0:04:43.120 --> 0:04:45.039 the data need because that's keeping you do. 0:04:45.200 --> 0:04:48.120 Yeah, Eric, I need you for something else here, which 0:04:48.160 --> 0:04:52.080 is why is that taxes in status potentially at risk? 0:04:53.200 --> 0:04:55.640 Well, it really comes down to the returning president. He 0:04:55.760 --> 0:05:00.520 has a mandate in his mind to roll out of 0:05:00.560 --> 0:05:02.800 the Tax Cuts and Jobs Act. And look, it's going 0:05:02.880 --> 0:05:05.599 to cost anywhere three and a half four point six trillion, 0:05:05.680 --> 0:05:08.359 I don't know, pick a number, any number, but you 0:05:08.440 --> 0:05:10.680 need a way to pay for it. And every election 0:05:10.839 --> 0:05:13.279 cycle it comes up that you know, muni bonds are 0:05:13.320 --> 0:05:15.320 going to be at risk. And I think it really 0:05:15.320 --> 0:05:18.200 comes down to the fact that people assume that those 0:05:18.320 --> 0:05:21.279 people who are buying munis are sitting around with top 0:05:21.320 --> 0:05:24.680 hats and monocles, just smoking cigars and enjoying all this 0:05:24.760 --> 0:05:26.880 tax free income. But if you look at where the 0:05:26.880 --> 0:05:29.040 money's going in muni's, I'm sure we're going to touch 0:05:29.040 --> 0:05:31.280 on this. It's going to eats, it's going to SMEs. 0:05:31.560 --> 0:05:32.120 And these are. 0:05:32.240 --> 0:05:36.799 Low cost, low dollar fee structures that are attracting people 0:05:36.880 --> 0:05:39.640 not in the highest brackets. So you know, that's really 0:05:39.680 --> 0:05:41.120 sort of where the risk comes in. It's going to 0:05:41.120 --> 0:05:41.840 impact everyone. 0:05:41.880 --> 0:05:45.880 So just to be clear here, nothing is happening yet, 0:05:46.120 --> 0:05:50.160 but it's just part of the chatter about the Trump's 0:05:50.240 --> 0:05:53.840 tax cuts, which will become a conversation this year since 0:05:54.640 --> 0:05:56.479 he's back in the White House and has control of 0:05:56.480 --> 0:05:59.039 Congress and those tax cuts are expiring at the end 0:05:59.040 --> 0:05:59.360 of the year. 0:05:59.440 --> 0:06:02.840 Right, Yes, So the Houseways and Means put out a 0:06:02.880 --> 0:06:06.640 wish list the fifty pages long, and the union exemption 0:06:06.680 --> 0:06:08.800 going away was one of the items on there. But 0:06:08.920 --> 0:06:10.919 another thing you need to know about people in munialand 0:06:10.960 --> 0:06:13.000 we'd love to be part of the current news cycle, 0:06:13.240 --> 0:06:14.840 and this is just another way for us to sort 0:06:14.880 --> 0:06:15.760 of pop in there. 0:06:15.600 --> 0:06:18.080 Not to be boring and be part of the es. Yeah. 0:06:18.120 --> 0:06:20.599 Yes, actually thing I tell people that all the times, 0:06:20.600 --> 0:06:22.839 Like you give me a headline, I'll show you the 0:06:22.839 --> 0:06:26.320 ETF PEG and I like that too. Eric, I, well, 0:06:26.400 --> 0:06:28.880 let's go to La fires. Explain to me the Munich 0:06:28.920 --> 0:06:31.960 connection here, because I saw you had a note that. Again, 0:06:32.000 --> 0:06:34.040 his notes do really well readership wise. 0:06:33.800 --> 0:06:37.720 So yeah, so Los Angeles fire is just another instance 0:06:37.839 --> 0:06:40.360 of nature just wreaking havoc on our market. 0:06:41.000 --> 0:06:41.200 You know. 0:06:41.279 --> 0:06:44.680 Look, every year you got hurricane damage in Florida. Inevitably, 0:06:44.720 --> 0:06:47.279 it's hitting areas where you know, people are paying taxes. 0:06:47.320 --> 0:06:51.880 Those taxes support general obligation bonds, you know, hospitals, colleges, 0:06:51.960 --> 0:06:55.520 things are impacted by these weather events. And unfortunately California 0:06:55.680 --> 0:06:57.960 it really sort of got out of control with this 0:06:58.040 --> 0:07:01.360 sort of unseasonal fire that took everyone by surprise. By 0:07:01.400 --> 0:07:04.120 the numbers, we sort of calculated that there was potentially 0:07:04.160 --> 0:07:08.520 about seventy billion of you know, MUNI sort of tangentially. 0:07:07.920 --> 0:07:09.440 Related projects at risk. 0:07:10.160 --> 0:07:12.559 What it's actually going to shake out to too early 0:07:12.640 --> 0:07:15.280 to tell still, you know, but look, the totality of 0:07:15.280 --> 0:07:17.400 the damage would certainly call a lot of people by surprise. 0:07:18.040 --> 0:07:20.200 And what does that mean for bondholders? 0:07:21.360 --> 0:07:24.160 You know, hopefully nothing right. We want to be benign 0:07:24.200 --> 0:07:26.080 and in the background, and we want to sort of 0:07:26.160 --> 0:07:29.160 keep on with the you know adage that there's never 0:07:29.200 --> 0:07:31.720 been a true MUNI default from an act of God. 0:07:31.960 --> 0:07:34.080 We haven't seen one yet. I don't really think you're 0:07:34.080 --> 0:07:36.080 going to see one here. It doesn't mean there's not 0:07:36.120 --> 0:07:38.440 going to be litigation that's going to be painful, especially 0:07:38.480 --> 0:07:41.240 for LA Department of Water and Power. The Water Department 0:07:41.320 --> 0:07:43.640 is already smacked with the lawsuit. Not sure how it's 0:07:43.640 --> 0:07:45.480 going to play out, but they could have some liability. 0:07:45.560 --> 0:07:48.720 Right when has there been defaults? What would cause one? 0:07:49.240 --> 0:07:51.559 Well, I mean you have defaults as far as Puerto Rico, 0:07:52.240 --> 0:07:55.200 as far as Detroit, you know, and New York back 0:07:55.200 --> 0:07:57.160 in the seventies. Right, it really comes down to bad 0:07:57.200 --> 0:08:00.640 fiscal management. Bad fiscal management has caused more issues immuniland 0:08:00.840 --> 0:08:03.360 then weather and nature related events at this point. 0:08:03.120 --> 0:08:05.160 So do you cover that, Like, do you look at 0:08:05.160 --> 0:08:08.720 where maybe the code red situations are, where there's like 0:08:09.400 --> 0:08:11.720 total mismanagement of funds. I don't know why I keep 0:08:11.760 --> 0:08:13.960 thinking of Illinois, like are they like that? 0:08:15.240 --> 0:08:18.520 Your right to think that. Yeah, Look, we try and 0:08:18.720 --> 0:08:20.880 turn on the lights and see where the cockroaches are 0:08:20.920 --> 0:08:24.040 running as much as possible. But you know the problem 0:08:24.080 --> 0:08:27.480 is these are slow burned things, right, Detroit played out 0:08:27.520 --> 0:08:30.120 over years. It wasn't a new issue. Puerto Rico, same thing. 0:08:30.480 --> 0:08:33.959 You know, certainly Chicago, Chicago board ed, Illinois. They all 0:08:34.000 --> 0:08:36.880 have their problems. The problem is they're able to kick 0:08:36.920 --> 0:08:37.880 the can down the road. 0:08:38.200 --> 0:08:38.400 You know. 0:08:38.440 --> 0:08:39.800 We just try and stay on top of it and 0:08:39.800 --> 0:08:42.120 tell investors sort of where the risks are. 0:08:43.040 --> 0:08:46.000 So let's talk about practical application. Let's say you have 0:08:46.040 --> 0:08:50.040 a munique portion of a portfolio. The two biggest ones 0:08:50.040 --> 0:08:52.640 on the market are MUB and vtebs. That's our shares 0:08:52.640 --> 0:08:56.240 in Vanguard. Those have like thirty five and forty billion dollars. 0:08:56.240 --> 0:08:59.360 They're the studs. Like most categories, it's like the two, 0:08:59.800 --> 0:09:02.559 the big two have the top ETF. So should someone 0:09:02.600 --> 0:09:05.040 just buy one of those and call it a day, 0:09:05.120 --> 0:09:07.480 or like, what does a munich analyst think of those 0:09:07.520 --> 0:09:11.720 two sort of big timers. 0:09:11.800 --> 0:09:15.040 It's like vanilla ice cream. It's great, it's a fine flavor, 0:09:15.120 --> 0:09:17.240 it's a top seller, but like, you can only have 0:09:17.320 --> 0:09:19.520 so much of it, right, Everybody wants some variety, and 0:09:19.600 --> 0:09:22.280 that's the beauty of the ETF market is that it's 0:09:22.360 --> 0:09:25.440 bringing in a lot of alternative flavors and small boutique 0:09:25.480 --> 0:09:27.840 ice cream providers. Let's say you know, MUB and b 0:09:27.920 --> 0:09:30.320 TEP are great, right, measured by flows, they are. They're 0:09:30.320 --> 0:09:33.520 the biggest creatures, sort of like roaming around Uniland. The 0:09:33.559 --> 0:09:36.080 problem is they miss a big portion of the market. 0:09:36.559 --> 0:09:39.120 They're passive, which is not a bad thing, but they 0:09:39.120 --> 0:09:41.559 don't invest in hospitals, they don't invest in higher ed 0:09:41.720 --> 0:09:43.880 they don't invest in bonds that are subject to alternative 0:09:43.880 --> 0:09:46.560 minimum tax. We wrote a note earlier in the year 0:09:46.640 --> 0:09:49.560 they miss about eighteen percent of the investable market for 0:09:49.720 --> 0:09:53.520 unis just based on their sort of stringing criteria, and 0:09:54.040 --> 0:09:56.760 unfortunately that eighteen percent makes up a big portion of 0:09:56.800 --> 0:10:00.240 returns in every single year. So I think investor are 0:10:00.240 --> 0:10:07.559 missing out right. 0:10:08.480 --> 0:10:10.960 I remember back I don't know five six years ago, 0:10:11.080 --> 0:10:14.559 MUB was the big category leader by far. Then Vanguard 0:10:14.600 --> 0:10:17.839 launched one started climbing the charts VTEB, and I remember 0:10:17.920 --> 0:10:20.319 MUB I think was twenty five basis points. Vanguard was 0:10:20.360 --> 0:10:24.480 like six or seven, and MUB slashed its fee in 0:10:24.559 --> 0:10:27.920 one shot from twenty five to seven. And I thought, 0:10:28.520 --> 0:10:30.520 that's why I call it the tyrodome. Jrol. You're the 0:10:30.600 --> 0:10:34.520 leader of the category, most volume, most assets, but you 0:10:34.679 --> 0:10:37.720 know what's about to happen, and you basically cut off 0:10:37.880 --> 0:10:40.720 both legs and an arm. That's it. I've never seen 0:10:40.720 --> 0:10:44.439 self cannibalization that great. But there's still number one. 0:10:44.480 --> 0:10:44.920 It worked. 0:10:45.200 --> 0:10:47.480 I mean, had they not done that, I think vteb's 0:10:47.480 --> 0:10:50.480 three four times bigger. So that's also something Eric. Just 0:10:50.520 --> 0:10:54.600 before we get to the unique ETFs, the MUNI mutual 0:10:54.640 --> 0:10:57.280 funds they're all active, right, There really is not a 0:10:57.280 --> 0:10:59.880 lot passive there. And here you have two ETFs at 0:10:59.880 --> 0:11:03.040 f five basis points each. How much does that factor 0:11:03.080 --> 0:11:05.720 into all the money that's rushed here, Given that most 0:11:05.760 --> 0:11:08.559 mutual funds are like, you know, eighty basis points to 0:11:08.640 --> 0:11:10.240 maybe one point five percent. 0:11:11.120 --> 0:11:14.439 It's factored in a ton When you think about who 0:11:14.520 --> 0:11:16.720 the majority of folks are buying this thing, right, you 0:11:16.760 --> 0:11:18.800 have a lot of retail people just directly buying. But 0:11:19.040 --> 0:11:21.040 it's also part of platform investing. 0:11:21.120 --> 0:11:21.320 Right. 0:11:21.440 --> 0:11:23.960 So if I'm an RIA, I'm charging one percent on 0:11:24.000 --> 0:11:26.880 a portfolio, and I can go from let's say, splitting 0:11:27.080 --> 0:11:29.240 a thirty basis point fee with a mutual fund and 0:11:29.320 --> 0:11:32.800 keeping seventy to keeping ninety five and I have fives 0:11:32.840 --> 0:11:35.360 you know for investing in MUB or VTAB. That sounds 0:11:35.440 --> 0:11:39.280 much better to me, right, And my clients are probably 0:11:39.320 --> 0:11:42.720 like none the worse off as far as exposure. But 0:11:42.960 --> 0:11:46.839 I think again, two different styles, right, If you're worried 0:11:46.840 --> 0:11:49.599 about performance, you may not want to go dout on 0:11:49.640 --> 0:11:52.600 the road. If you're focusing on just acid allocation and fees, 0:11:52.880 --> 0:11:55.280 they're certainly the most attractive thing out there. 0:11:56.120 --> 0:12:00.439 Okay, So hot sauce has come for every ETF I 0:12:00.440 --> 0:12:03.520 can think of, what does hot sauce in muni bonds 0:12:03.600 --> 0:12:03.960 look like? 0:12:04.280 --> 0:12:07.400 So, you know, one thing that was launched very recently 0:12:07.559 --> 0:12:12.160 was Spider has target Maturity Muni bonds, So for example 0:12:12.160 --> 0:12:16.760 at Spider SSGA MY twenty twenty eight, so that's a 0:12:16.880 --> 0:12:19.040 niche version, so that that means all the bonds mature 0:12:19.120 --> 0:12:21.080 in that year. That way you can like time your 0:12:21.120 --> 0:12:24.080 duration a little bit. We've seen some other things launched 0:12:24.080 --> 0:12:27.400 like tax aware muni bonds, a lot of short duration 0:12:27.720 --> 0:12:32.800 muni bonds, high yield, I know high yield. Eric was 0:12:32.840 --> 0:12:36.400 one that back when COVID happened. Eric and I talked 0:12:36.440 --> 0:12:39.839 a lot because there was NTF HYD which is the 0:12:39.880 --> 0:12:43.800 van k hig yield muni and this thing traded it 0:12:43.960 --> 0:12:47.560 like twenty to thirty percent discounts to NAV. And of 0:12:47.600 --> 0:12:50.280 all the bond ETFs, this was the worst in terms 0:12:50.280 --> 0:12:53.920 of it obviously held the least liquid stuff that its 0:12:54.440 --> 0:12:56.920 price was deviating that much from the NAV, although the 0:12:56.960 --> 0:12:59.400 NAV was based on old bond prices, so it was stale. 0:13:00.360 --> 0:13:02.560 And it's interesting that ETF, even though it was so, 0:13:03.720 --> 0:13:06.480 it turned into a closed then fund essentially it's took 0:13:06.520 --> 0:13:09.320 in more assets since then and the volumes the same, 0:13:09.360 --> 0:13:11.840 So it seems like people know how to roll with that. 0:13:12.240 --> 0:13:14.360 But Eric, what's the liquidity like in this scene? Like, 0:13:15.040 --> 0:13:17.400 is a high old MUNI bond etf like something that's 0:13:17.800 --> 0:13:20.240 for normal people or is that something that really just 0:13:20.280 --> 0:13:22.040 traders should use. No. 0:13:22.600 --> 0:13:25.720 I think there's a lot of liquidity, right. Look, what 0:13:25.880 --> 0:13:28.880 happened in the early days of COVID, I feel like 0:13:29.040 --> 0:13:31.560 is a complete anomaly, right, And I think the market's 0:13:31.559 --> 0:13:34.280 a lot more prepared from a market structure standpoint than 0:13:34.320 --> 0:13:37.200 it was in twenty twenty. A lot more things have changed. 0:13:37.240 --> 0:13:39.000 So let's say we had a sharp sell off again, 0:13:39.040 --> 0:13:41.760 I think the folks who are running hid if I 0:13:41.880 --> 0:13:44.360 was them, I would imagine they have a much deeper 0:13:45.200 --> 0:13:47.960 ig basket of bonds to throw over the side of 0:13:47.960 --> 0:13:50.640 the boat. If there's some sort of like sharp correction 0:13:50.720 --> 0:13:52.800 then there was back then, right, just to sort of 0:13:52.800 --> 0:13:56.000 like hedge against that. But you know, look, I think 0:13:56.040 --> 0:13:58.440 the fact that this market is really sort of like 0:13:58.520 --> 0:14:01.080 if you think about it in terms of the the 0:14:01.679 --> 0:14:03.520 you know, the fun companies are going to go to 0:14:03.559 --> 0:14:05.760 where the puck is right, and they're all skating toward 0:14:05.840 --> 0:14:09.920 high yield active, you know, sort of restructuring the old 0:14:10.000 --> 0:14:12.280 mutual funds, wrapping them in an ETF wrapper. 0:14:12.520 --> 0:14:13.680 That really is sort of the. 0:14:13.960 --> 0:14:16.079 Play of the day when it comes to this dimmunity 0:14:16.160 --> 0:14:18.679 space right now, and we're seeing sort of that play out, 0:14:19.240 --> 0:14:21.680 and the fact they're all crowding into the high yield space, 0:14:21.920 --> 0:14:24.600 it means that they still see an opportunity there. What's 0:14:24.640 --> 0:14:26.800 going to be interesting to see if the market responds 0:14:26.840 --> 0:14:29.640 from an issuing standpoint to sort of keep the lights 0:14:29.680 --> 0:14:31.760 on and keep the supply going to feed all these 0:14:31.760 --> 0:14:32.520 new projects. 0:14:32.640 --> 0:14:34.800 It's interesting, Joe, one hundred and forty one billion in 0:14:34.800 --> 0:14:39.040 this category, twenty three billion active. But active makes up 0:14:39.080 --> 0:14:41.760 the majority of the number of ETF So, in other words, 0:14:42.160 --> 0:14:44.520 active is a lot of the new launches, a lot 0:14:44.520 --> 0:14:45.000 of the supply. 0:14:45.160 --> 0:14:47.200 And we know that active has been coming for fixed 0:14:47.400 --> 0:14:50.400 income forever, so that's not surprising, maybe not forever for 0:14:50.440 --> 0:14:54.840 the past couple of years. As Hot Sauce goes, I 0:14:54.920 --> 0:14:56.720 don't think that that's very spicy, Eric. 0:14:57.200 --> 0:15:01.240 I don't know. I mean hyd I'm not sure it 0:15:01.240 --> 0:15:03.520 gets much spicier than that. There's no leveraged Munich and 0:15:03.760 --> 0:15:07.160 this is icy as meaning land gets yeah, And I 0:15:07.200 --> 0:15:09.040 think that's part of why sometimes we don't look at 0:15:09.040 --> 0:15:12.440 it too much, like it never jumps away. That's why 0:15:12.560 --> 0:15:14.760 HYD at that time I called the Canary and the 0:15:14.760 --> 0:15:16.920 coal mine because it was trading at the deepest discount. 0:15:17.280 --> 0:15:20.160 But one thing I thought about this space, Eric, is 0:15:20.200 --> 0:15:22.600 this idea of like how to jazz it up a little, 0:15:23.240 --> 0:15:26.400 because when Eric talks about and his headlines, it gets 0:15:26.480 --> 0:15:28.120 my brain going better than when I look at the 0:15:28.160 --> 0:15:31.080 names of the ETFs. For example, how come they don't 0:15:31.120 --> 0:15:35.640 come out with hospitals and schools and because. 0:15:35.600 --> 0:15:37.760 In my opinion, this is I'm kind of into those 0:15:37.880 --> 0:15:39.840 reality ESG the things I know. 0:15:39.920 --> 0:15:42.480 Yeah, it's like it's like better than ESG because like 0:15:42.480 --> 0:15:44.600 I'm gonna invest in this and I literally know it's 0:15:44.600 --> 0:15:46.160 going to go to stuff that I like and want 0:15:46.160 --> 0:15:49.440 to support, versus ESG where it's like, don't you know, 0:15:49.680 --> 0:15:51.400 let's take out this stock even though it's not that 0:15:51.480 --> 0:15:53.960 bad whatever. I don't get why they don't want to 0:15:53.960 --> 0:15:56.440 play with the names focus on the tangible, yeah, and 0:15:56.480 --> 0:16:00.240 do more tangible stuff and thematic. It's weird to they 0:16:00.280 --> 0:16:00.800 haven't done much. 0:16:00.840 --> 0:16:03.560 They're like by la, like, yeah, it seems like you 0:16:03.560 --> 0:16:04.240 could get behind that. 0:16:04.400 --> 0:16:07.760 Yeah, help with la exactly. 0:16:07.960 --> 0:16:10.880 I don't disagree, but you know, it's interesting. Someone probably 0:16:11.000 --> 0:16:12.760 paid a lot of money to come up with these 0:16:13.160 --> 0:16:16.480 really snazzy tickers on some of these, and unless you 0:16:16.520 --> 0:16:18.720 know exactly what they're doing, you don't get a lot 0:16:19.400 --> 0:16:21.040 one of the ones I'll point to and we talk 0:16:21.080 --> 0:16:23.880 about hot sauce. I mean, look, I disagree. I think 0:16:23.880 --> 0:16:26.640 there is leverage to be had in the UNI ets 0:16:26.680 --> 0:16:29.520 space and RTAI is a perfect example of that. Right, 0:16:30.320 --> 0:16:32.040 you know, when rates were jumping up, this is one 0:16:32.080 --> 0:16:33.240 of the worst performers. 0:16:33.560 --> 0:16:35.240 Rates eased off a bit last year, it. 0:16:35.200 --> 0:16:37.040 Was one of the best performers, and it's one of 0:16:37.040 --> 0:16:40.720 the most levered muni ETFs out there. One year returns 0:16:40.800 --> 0:16:42.040 almost eleven percent. 0:16:42.240 --> 0:16:44.480 Okay, so this is just so people don't play the 0:16:44.560 --> 0:16:46.400 name of it, because I actually didn't know this one 0:16:46.680 --> 0:16:49.360 rare view tax advantage incoming to you. Yeah, that name 0:16:49.400 --> 0:16:51.400 is boring. I gotta be honest with you. And you're 0:16:51.440 --> 0:16:55.440 saying this has leverage in it. Yeah how much? What percent? Right? 0:16:55.440 --> 0:16:57.760 I think it's up here, like thirty to thirty five percent, 0:16:57.880 --> 0:16:59.080 just sort of back of the envelope. 0:16:59.080 --> 0:16:59.840 I'd have to double check that. 0:17:00.040 --> 0:17:03.040 Yeah, the yield is five percent. That's pretty especially if 0:17:03.080 --> 0:17:04.679 you get an after tax yield of a little more 0:17:04.720 --> 0:17:05.000 than that. 0:17:05.440 --> 0:17:06.199 So there is spice. 0:17:06.560 --> 0:17:09.960 Yes, okay, Like I said, it's it's all relative, right, 0:17:10.080 --> 0:17:11.640 This is spicy for. 0:17:11.640 --> 0:17:13.960 The ghost pepper of New Zealand. 0:17:14.119 --> 0:17:18.760 Yes, Oh my god, let me look at the volatility here. Yeah. 0:17:18.960 --> 0:17:20.840 By the way, the volatility is still half the S 0:17:20.880 --> 0:17:23.439 and P. That's spicy over there. Yeah, it's like a 0:17:23.520 --> 0:17:25.800 kiddie ride in the equities. 0:17:26.480 --> 0:17:28.960 Yes, okay, Eric, I want to bring this back to 0:17:29.119 --> 0:17:34.080 this threat that seems kind of existential. Like if already 0:17:34.160 --> 0:17:39.439 it's really hard to care about Muni Land for a 0:17:39.480 --> 0:17:43.919 certain investor or, at least one name Joel, and this 0:17:44.040 --> 0:17:48.440 taxes emption goes away, how how existential does that make 0:17:48.800 --> 0:17:49.240 Uni Land? 0:17:50.080 --> 0:17:52.960 Think about it this way. You know, state and local 0:17:52.960 --> 0:17:56.840 governments still need to finance billions of dollars a year 0:17:56.840 --> 0:17:59.600 to keep the lights on right, keep things in good repair, 0:18:00.080 --> 0:18:02.760 and so if the exemption went away, it just means 0:18:02.760 --> 0:18:04.919 they're going to be borrowing in the tax will market 0:18:05.040 --> 0:18:07.240 at higher rates. I don't think they're gonna be borrowing 0:18:07.240 --> 0:18:10.280 where like Apple or Microsoft issue probably somewhere below that, 0:18:10.359 --> 0:18:12.720 but significantly more than they are now. And guess what 0:18:13.280 --> 0:18:15.879 they're passing that cost on to you. They're passing that 0:18:15.920 --> 0:18:18.320 cost on to mister balchiunis the passing it on to me, 0:18:19.320 --> 0:18:22.120 you know? And I think that's the underappreciated point here, right. 0:18:22.760 --> 0:18:25.520 We all sort of benefit from that collective subsidy that's 0:18:25.560 --> 0:18:27.760 being issued for the top hat and monocle crowd if 0:18:27.800 --> 0:18:29.639 we sort of want to go back to that analogy, 0:18:30.440 --> 0:18:33.280 but we're all sort of getting something for that as well, 0:18:33.680 --> 0:18:37.639 and it's less taxes than it could be. And I 0:18:37.640 --> 0:18:39.399 think that's sort of the point to really sort of 0:18:39.440 --> 0:18:41.840 head home with those who are making the decisions in Washington. 0:18:42.440 --> 0:18:42.600 Man. 0:18:42.880 --> 0:18:45.920 The lobbying, uh feels like it's going to be very 0:18:45.920 --> 0:18:48.600 allowed on this one. It's gonna it's gonna be an 0:18:48.720 --> 0:18:51.680 interesting thing to watch, especially at this moment that we've 0:18:51.720 --> 0:18:54.520 got a Magna crowd that's taken over uh, you know, 0:18:54.560 --> 0:18:56.919 the Republican wing and and you know, something like this 0:18:56.960 --> 0:19:00.280 seems like it'll be an interesting topic of cover station 0:19:00.400 --> 0:19:04.480 in the year to come. Yeah, Balchinus, any any final thoughts. 0:19:04.880 --> 0:19:07.840 No, I just wanted to kind of ask Eric as 0:19:07.880 --> 0:19:10.240 an analyst who sees all these ETFs coming out, because 0:19:10.240 --> 0:19:13.640