1 00:00:06,440 --> 00:00:13,840 Speaker 1: Welcome to Trillions. I'm Jeweber and I'm Eric bel Tunis Eric. 2 00:00:13,840 --> 00:00:15,840 Speaker 1: Who are we talking to this week? This is uh. 3 00:00:15,880 --> 00:00:19,240 Speaker 1: We actually made a last minute decision to bring uh 4 00:00:19,480 --> 00:00:22,479 Speaker 1: these guests on because there was some news. There's a 5 00:00:22,480 --> 00:00:26,120 Speaker 1: company called Simplify who we've been watching very closely. It 6 00:00:26,239 --> 00:00:30,480 Speaker 1: was started by Paul Kim who was it Pimco worked 7 00:00:30,480 --> 00:00:32,640 Speaker 1: on bond, new bill growth, that kind of thing, so 8 00:00:32,680 --> 00:00:35,120 Speaker 1: he comes from that pedigree, started an e t F shop, 9 00:00:35,240 --> 00:00:38,360 Speaker 1: hired some interesting people we've had. Uh. We had a 10 00:00:38,360 --> 00:00:41,560 Speaker 1: good zoom call with them about six months ago and 11 00:00:41,880 --> 00:00:44,680 Speaker 1: they're doing well. They're kind of up to looks like 12 00:00:45,240 --> 00:00:48,880 Speaker 1: seventy million assets. That's a fift growth rate this year. 13 00:00:49,560 --> 00:00:51,959 Speaker 1: And what's interesting about them is they keep making these 14 00:00:52,000 --> 00:00:55,400 Speaker 1: interesting hires and what they're doing with some of their 15 00:00:55,400 --> 00:00:58,480 Speaker 1: E t F s is doing options overlays. It's part 16 00:00:58,480 --> 00:01:02,760 Speaker 1: of a bigger trend of package trades and we've seen 17 00:01:02,760 --> 00:01:05,759 Speaker 1: this in the Innovator and buffer products. This is becoming 18 00:01:05,800 --> 00:01:08,720 Speaker 1: more popular as the market gets uh you know, froth 19 00:01:08,760 --> 00:01:11,920 Speaker 1: theer and froth theier. People want some protection and so 20 00:01:12,080 --> 00:01:15,720 Speaker 1: the idea of using options is becoming a popular move 21 00:01:15,800 --> 00:01:18,960 Speaker 1: and so they recently made a couple of big hires, 22 00:01:19,000 --> 00:01:21,399 Speaker 1: including Mike Green, who a lot of people know if 23 00:01:21,440 --> 00:01:23,920 Speaker 1: you're on Twitter. He used to work with Peter till 24 00:01:24,360 --> 00:01:27,840 Speaker 1: he was at a logic after that, and then he's 25 00:01:27,880 --> 00:01:32,480 Speaker 1: famous for having some worries about passive. He's famous for 26 00:01:32,520 --> 00:01:35,480 Speaker 1: battling the bitcoiners on Twitter. I give him credit. Takes 27 00:01:35,480 --> 00:01:39,200 Speaker 1: a brave person to combat to combat some of those folks. 28 00:01:39,760 --> 00:01:43,080 Speaker 1: But he's just a really original thinker. And we've had 29 00:01:43,080 --> 00:01:46,080 Speaker 1: many chats, and so I wanted to get that this 30 00:01:46,319 --> 00:01:49,320 Speaker 1: capture this young firm and their growth, and also look 31 00:01:49,360 --> 00:01:51,080 Speaker 1: at these products. We've had a couple of requests to 32 00:01:51,120 --> 00:01:54,840 Speaker 1: talk about these downside protection type products that use options. 33 00:01:54,880 --> 00:01:57,520 Speaker 1: So I thought that would be the idea here and 34 00:01:57,600 --> 00:02:05,880 Speaker 1: joining us James Safer, Bloomberg Intelligence ETF analyst this time 35 00:02:05,960 --> 00:02:12,040 Speaker 1: on trillions Simplify. Paul Michael, James, thanks for joining us 36 00:02:12,040 --> 00:02:16,560 Speaker 1: on trillions pleasure. Thank you for the invite. It's Paul Michael. 37 00:02:16,560 --> 00:02:18,880 Speaker 1: Before we start with you, I want to bring James 38 00:02:18,880 --> 00:02:21,840 Speaker 1: in here. James, can you talk to us You know 39 00:02:21,919 --> 00:02:25,960 Speaker 1: about the strategy um this option overlay strategy quite a bit. 40 00:02:26,400 --> 00:02:28,680 Speaker 1: Can you give us your assessment of what the space 41 00:02:28,720 --> 00:02:31,200 Speaker 1: looks like, Yeah, so Eric kind of touched on this, 42 00:02:31,320 --> 00:02:33,800 Speaker 1: but right now is like a unique point in the 43 00:02:33,840 --> 00:02:36,120 Speaker 1: asset management industry. There's a lot of people talking about 44 00:02:36,639 --> 00:02:39,040 Speaker 1: the death of the sixty forty portfolio. We are at 45 00:02:39,040 --> 00:02:41,360 Speaker 1: all time highs in the equity markets, we are near 46 00:02:41,440 --> 00:02:43,560 Speaker 1: all time loads and just off of all time loads 47 00:02:43,560 --> 00:02:46,600 Speaker 1: and rates. So people are looking for different ways to 48 00:02:47,280 --> 00:02:49,880 Speaker 1: sort of adjust their portfolios. They're not set in the 49 00:02:49,919 --> 00:02:53,120 Speaker 1: sixty forty portfolios. Advisers looking for ways to eke out 50 00:02:53,120 --> 00:02:56,560 Speaker 1: additional return or additional yield, and a lot of the 51 00:02:56,560 --> 00:02:59,640 Speaker 1: new ETFs are mentioned are using like option overlay strategies 52 00:02:59,639 --> 00:03:02,600 Speaker 1: are as you mentioned the buffer products with have specific 53 00:03:02,600 --> 00:03:06,840 Speaker 1: specified downside protection, but capped upside um simplified does this 54 00:03:06,919 --> 00:03:10,160 Speaker 1: and it just kind of alters the risk of the 55 00:03:10,200 --> 00:03:13,160 Speaker 1: investments that you have and whatever funds you're choosing, and 56 00:03:13,320 --> 00:03:15,400 Speaker 1: all of this is just the way that some people 57 00:03:15,400 --> 00:03:17,720 Speaker 1: and advisors and it's being spoken about. There's a lot 58 00:03:17,720 --> 00:03:20,000 Speaker 1: of money coming into this these types of strategies to 59 00:03:20,360 --> 00:03:22,600 Speaker 1: kind of maybe take a few percent of the equity side, 60 00:03:22,639 --> 00:03:24,720 Speaker 1: some money out of the fixed income side, and eke 61 00:03:24,760 --> 00:03:28,359 Speaker 1: out additional return and without altering your risk profile too much. 62 00:03:28,400 --> 00:03:30,680 Speaker 1: So it's just a lot of people just figuring out 63 00:03:30,720 --> 00:03:34,639 Speaker 1: different ways to um get a more risk, higher risk 64 00:03:34,639 --> 00:03:37,720 Speaker 1: adjusted return or more eke out more yield, and they're 65 00:03:37,720 --> 00:03:40,760 Speaker 1: doing it with options strategies and the area is booming. 66 00:03:40,760 --> 00:03:43,760 Speaker 1: We're over ten ten billion dollars in this area for 67 00:03:43,800 --> 00:03:46,600 Speaker 1: the most part, depending on how you slice and dice 68 00:03:46,720 --> 00:03:49,240 Speaker 1: the marketplace, with the bulk of that being in those 69 00:03:49,240 --> 00:03:53,600 Speaker 1: buffer products. Okay, Paul, you co founded this. What did 70 00:03:54,080 --> 00:03:56,680 Speaker 1: you have in your pitch deck that James left out 71 00:03:56,760 --> 00:03:59,840 Speaker 1: right there? So thank you for the chance to answer 72 00:03:59,880 --> 00:04:03,320 Speaker 1: this question. Um this is my third et F platform, 73 00:04:03,440 --> 00:04:06,200 Speaker 1: and I started at Pimpco. As Eric alluded to, My 74 00:04:06,320 --> 00:04:09,000 Speaker 1: last stop was actually a principle for about five years 75 00:04:09,040 --> 00:04:11,560 Speaker 1: right where I helped build their business up to a 76 00:04:11,560 --> 00:04:15,680 Speaker 1: little over four billion. But at at Simplify. The sort 77 00:04:15,720 --> 00:04:21,520 Speaker 1: of key thesis that we wanted to address was helping 78 00:04:21,560 --> 00:04:27,080 Speaker 1: advisors build much more interesting portfolios and using options and 79 00:04:27,240 --> 00:04:33,240 Speaker 1: derivatives to shape distributions to better address a very specific 80 00:04:33,320 --> 00:04:36,560 Speaker 1: investment goals. So it may be goals such as risk 81 00:04:36,680 --> 00:04:42,200 Speaker 1: mitigation or interesting or an uncorrelated return enhancement as well 82 00:04:42,240 --> 00:04:45,760 Speaker 1: as income generation. And it's a really good time from 83 00:04:45,760 --> 00:04:49,159 Speaker 1: a number of fronts. So from the regulatory front, UH, 84 00:04:49,240 --> 00:04:52,800 Speaker 1: the timing was very important to see the SEC modernize 85 00:04:53,120 --> 00:04:57,120 Speaker 1: the regulatory framework on the use of derivatives by registered 86 00:04:57,160 --> 00:05:01,719 Speaker 1: investment companies and so what that did was basically catch 87 00:05:01,839 --> 00:05:04,680 Speaker 1: up the US to some of the other regulatory frameworks 88 00:05:04,720 --> 00:05:07,600 Speaker 1: out in places like Europe in the use it's format. 89 00:05:07,720 --> 00:05:11,400 Speaker 1: Basically what that means is now companies can bring much 90 00:05:11,440 --> 00:05:15,320 Speaker 1: more interesting combinations of strategies that just did not or 91 00:05:15,360 --> 00:05:18,320 Speaker 1: could not fit into the forty act rapper. So that 92 00:05:18,480 --> 00:05:21,640 Speaker 1: tied with the sort of demand for e t f s, 93 00:05:22,240 --> 00:05:29,440 Speaker 1: the long running advantages of ETO, specifically tax deferral, transparency, 94 00:05:29,600 --> 00:05:34,400 Speaker 1: easier access, as well as I think individual preferences and 95 00:05:34,480 --> 00:05:38,400 Speaker 1: comfort on the use of derivatives. We we have the 96 00:05:38,400 --> 00:05:42,000 Speaker 1: financial crisis way in the rear view mirror at this point, 97 00:05:42,120 --> 00:05:46,040 Speaker 1: and I think the comfort on the use of derivatives 98 00:05:46,080 --> 00:05:50,560 Speaker 1: to help portfolios, the stigma associated with the dangers or 99 00:05:50,720 --> 00:05:55,200 Speaker 1: pitfalls of derivatives UM as well as individuals learning to 100 00:05:55,400 --> 00:05:59,800 Speaker 1: trade things like single stock options and institutions looking for 101 00:06:00,279 --> 00:06:03,400 Speaker 1: ways to solve portfolio challenges, i e. How do you 102 00:06:03,480 --> 00:06:08,320 Speaker 1: hedge in a world of high correlations and low interest rates. Um, 103 00:06:08,360 --> 00:06:11,480 Speaker 1: it's a perfect time for a brand new company that 104 00:06:11,520 --> 00:06:15,080 Speaker 1: focuses right in that sweet spot. So, Paul, that was 105 00:06:15,120 --> 00:06:17,760 Speaker 1: a really good overview, And I just want to try 106 00:06:17,760 --> 00:06:20,520 Speaker 1: to get more into the details of how this the 107 00:06:20,600 --> 00:06:22,680 Speaker 1: e t f s work. Like I said, we've gotten 108 00:06:22,680 --> 00:06:25,600 Speaker 1: a lot of requests from people to go into some 109 00:06:25,640 --> 00:06:28,040 Speaker 1: of the options using e t f s that offer 110 00:06:28,120 --> 00:06:32,080 Speaker 1: downside protection and really to understand exactly how they tick. 111 00:06:32,440 --> 00:06:34,720 Speaker 1: So let's look at SPD. This is your biggest one 112 00:06:34,839 --> 00:06:37,640 Speaker 1: is to simplify us when you plus downside convexity e 113 00:06:37,720 --> 00:06:40,159 Speaker 1: t F, which when I first saw this file I 114 00:06:40,160 --> 00:06:42,520 Speaker 1: thought was a bit of an oxymoron to have simplifying 115 00:06:42,560 --> 00:06:45,080 Speaker 1: convexity in the name. It was the first DTF with 116 00:06:45,120 --> 00:06:47,760 Speaker 1: the word convexity in the name. Um, So let's walk 117 00:06:47,760 --> 00:06:50,039 Speaker 1: through what's in it and then you tell me why. 118 00:06:50,320 --> 00:06:52,600 Speaker 1: Um So, I've got the SMP five hundred e t 119 00:06:52,760 --> 00:06:54,920 Speaker 1: F I VV is a holding and then it looks 120 00:06:54,920 --> 00:06:58,719 Speaker 1: like there's five put options with various months and various 121 00:06:58,760 --> 00:07:01,320 Speaker 1: strike prices. Um, you know, it looks like they go 122 00:07:01,400 --> 00:07:04,320 Speaker 1: all the way out into June two. So just if 123 00:07:04,320 --> 00:07:06,520 Speaker 1: you could walk us through what's going on here, why 124 00:07:06,600 --> 00:07:09,080 Speaker 1: you pick those and what the return stream should look 125 00:07:09,120 --> 00:07:11,640 Speaker 1: like with this thing. Sure, so at the highest level, 126 00:07:11,720 --> 00:07:15,480 Speaker 1: we're trying to stay true to the beta. In this case, 127 00:07:15,560 --> 00:07:18,040 Speaker 1: the beta that we're offering inside of this is the 128 00:07:18,200 --> 00:07:23,960 Speaker 1: SMP five very popular, very very highly used for US 129 00:07:24,040 --> 00:07:27,320 Speaker 1: large cap exposure UM, and so we're taking that as 130 00:07:27,360 --> 00:07:30,840 Speaker 1: a starting point. And then what we're doing is if 131 00:07:30,880 --> 00:07:34,120 Speaker 1: you could think of it as surgically modifying the distribution 132 00:07:34,280 --> 00:07:37,240 Speaker 1: using options, but in a way that does not take 133 00:07:37,280 --> 00:07:41,600 Speaker 1: away the upside or the day to day returns of 134 00:07:41,600 --> 00:07:44,960 Speaker 1: that beta. So it's gonna give you pretty much SMP fire. 135 00:07:45,320 --> 00:07:48,880 Speaker 1: But what we've laid on through options is one in 136 00:07:48,920 --> 00:07:52,040 Speaker 1: the case of our flagship strategy, the two tail version 137 00:07:52,560 --> 00:07:56,680 Speaker 1: UH Spicy, we've added about percent of the portfolio and 138 00:07:56,880 --> 00:08:01,120 Speaker 1: downside hedges, so we're buying les eggs of deep out 139 00:08:01,120 --> 00:08:04,280 Speaker 1: of the money puts, which tend to be cheap and 140 00:08:05,000 --> 00:08:09,200 Speaker 1: from at least from a probabilitistic return perspective, we think 141 00:08:09,360 --> 00:08:12,680 Speaker 1: they're fatter tales and ree equity returns than what are 142 00:08:12,720 --> 00:08:16,360 Speaker 1: priced in these options, and so they provide a really 143 00:08:16,400 --> 00:08:20,440 Speaker 1: interesting way to protect the portfolio with very very modest 144 00:08:21,120 --> 00:08:25,560 Speaker 1: use of capital and on relatively unique for our strategies 145 00:08:25,600 --> 00:08:29,200 Speaker 1: were also enhancing the upside. And I know Mike has 146 00:08:29,240 --> 00:08:34,479 Speaker 1: a ton of comments or opinions on this, but we think, uh, basically, 147 00:08:34,480 --> 00:08:38,280 Speaker 1: the market structure um as well as all sorts of 148 00:08:38,520 --> 00:08:43,200 Speaker 1: fiscal and monetary policies make the upside a significant risk 149 00:08:43,280 --> 00:08:46,840 Speaker 1: as well in terms of keeping up with the purchasing 150 00:08:46,880 --> 00:08:50,559 Speaker 1: power of that investment portfolio. So we focused on both 151 00:08:50,600 --> 00:08:56,920 Speaker 1: sides and create customized scientific option overlays unique to each 152 00:08:56,960 --> 00:08:58,800 Speaker 1: of the tails, and we do it in a way 153 00:08:58,840 --> 00:09:03,120 Speaker 1: that mitigates the cost that of that option strategy and 154 00:09:03,160 --> 00:09:07,520 Speaker 1: delivers about at one point a beta. Okay, Mike, I 155 00:09:07,559 --> 00:09:10,720 Speaker 1: wanna ask you because you came from a hedge fund 156 00:09:10,760 --> 00:09:13,640 Speaker 1: background and so I want to talk about that, But 157 00:09:14,200 --> 00:09:16,880 Speaker 1: I also just gotta ask, like, what's it like to 158 00:09:16,920 --> 00:09:21,640 Speaker 1: have Paul as your boss instead of Peter Teal Uh. Well, 159 00:09:21,760 --> 00:09:23,719 Speaker 1: we're still new in this process, but I will tell 160 00:09:23,760 --> 00:09:26,480 Speaker 1: you that Paul smiles a lot more. Um. It is 161 00:09:27,320 --> 00:09:31,440 Speaker 1: the reason for the move from hedge funds to the 162 00:09:31,480 --> 00:09:34,400 Speaker 1: e t F space is actually exactly what Paul articulated. 163 00:09:34,400 --> 00:09:37,520 Speaker 1: The rules have changed and so products that were not 164 00:09:37,880 --> 00:09:41,360 Speaker 1: able to be created in the E t F space 165 00:09:41,440 --> 00:09:44,120 Speaker 1: or in the retail space are now actually available in 166 00:09:44,120 --> 00:09:47,199 Speaker 1: the way they just haven't been before. And you know, 167 00:09:47,280 --> 00:09:50,640 Speaker 1: broadly Eric was referring to this earlier. My career is 168 00:09:50,720 --> 00:09:55,319 Speaker 1: largely characterized by trying to identify how the regulatory regime 169 00:09:55,360 --> 00:09:57,760 Speaker 1: is changing, how the market structure is changing. And for 170 00:09:57,800 --> 00:09:59,679 Speaker 1: the first time this is now open and so I'm 171 00:09:59,720 --> 00:10:02,079 Speaker 1: thrilled to be on board with the Simplified team. Join 172 00:10:02,160 --> 00:10:05,360 Speaker 1: my friend Harley Bassman, who's another you know, legend in 173 00:10:05,400 --> 00:10:08,000 Speaker 1: the in the rate space in particular, who's going to 174 00:10:08,040 --> 00:10:11,640 Speaker 1: be introducing similar products um and I think the opportunity 175 00:10:11,679 --> 00:10:14,600 Speaker 1: to be kind of first out of the gate with 176 00:10:14,679 --> 00:10:19,240 Speaker 1: some really fantastic products that introduce convexity, right and so 177 00:10:19,320 --> 00:10:21,880 Speaker 1: convexity we can talk about that dynamic, but the simplest 178 00:10:21,880 --> 00:10:24,240 Speaker 1: way to think about it is that you're creating a 179 00:10:24,320 --> 00:10:28,800 Speaker 1: structure that can potentially participate with more than to the 180 00:10:28,880 --> 00:10:32,320 Speaker 1: upside and yet avoid portions of the downside. You're just 181 00:10:32,400 --> 00:10:36,640 Speaker 1: changing the shape of that distribution. That's an incredibly exciting 182 00:10:36,679 --> 00:10:40,240 Speaker 1: opportunity to an adventure to be part of. When when 183 00:10:40,280 --> 00:10:44,679 Speaker 1: did you recognize, especially in the hedge fund world, that 184 00:10:44,679 --> 00:10:48,360 Speaker 1: that there was going to be an opportunity to actually 185 00:10:48,360 --> 00:10:51,160 Speaker 1: like enhance what et s were capable of. Well, so 186 00:10:51,200 --> 00:10:54,679 Speaker 1: the rule change occurred, Um, Paul, correct if I'm wrong. 187 00:10:54,679 --> 00:10:58,200 Speaker 1: I think it was last June. Um, yeah, officially October, 188 00:10:58,880 --> 00:11:02,480 Speaker 1: but it's been shadowed for at least a number of ryers. 189 00:11:03,000 --> 00:11:05,119 Speaker 1: And so the challenge that I had in that context 190 00:11:05,280 --> 00:11:07,240 Speaker 1: was I have no skill set in terms of launching 191 00:11:07,240 --> 00:11:10,080 Speaker 1: e t s. I have a history of participating in 192 00:11:10,160 --> 00:11:13,840 Speaker 1: launching hedge funds. Sort of join up with an organization 193 00:11:13,880 --> 00:11:16,360 Speaker 1: that is really skilled in launching those ETFs was really 194 00:11:16,360 --> 00:11:20,280 Speaker 1: one of the key components in terms of the opportunity itself. 195 00:11:20,360 --> 00:11:23,080 Speaker 1: I became aware of it in early one is my 196 00:11:23,120 --> 00:11:26,880 Speaker 1: friend Harley Basman made the transition over to simplify and 197 00:11:27,000 --> 00:11:29,040 Speaker 1: basically said, hey, you gotta take a look at this, 198 00:11:29,400 --> 00:11:32,240 Speaker 1: and I came to the conclusion that he was right. 199 00:11:33,360 --> 00:11:35,800 Speaker 1: So quick question, you guys keep talking about the rule change. 200 00:11:36,480 --> 00:11:39,160 Speaker 1: The rule change you're talking about is that? Is that 201 00:11:39,200 --> 00:11:42,280 Speaker 1: the ability to do in kind transactions with options? Is that? 202 00:11:42,440 --> 00:11:45,360 Speaker 1: Is that the rule change of referencing it's it's not, 203 00:11:45,400 --> 00:11:47,640 Speaker 1: Although that one is also an important one. So in 204 00:11:47,679 --> 00:11:53,880 Speaker 1: October sec past essentially a modernized regulatory framework on the 205 00:11:53,960 --> 00:11:57,679 Speaker 1: use of derivatives. It's it's been long in sort of 206 00:11:57,960 --> 00:12:02,280 Speaker 1: the pipeline and then was formally finalized and passed, and 207 00:12:02,320 --> 00:12:05,880 Speaker 1: that again modernizes the use of derivatives. UM, as I 208 00:12:05,920 --> 00:12:10,240 Speaker 1: alluded to earlier, does the other point you're making, UM 209 00:12:10,320 --> 00:12:14,960 Speaker 1: only magnifies the opportunity because not only are you permitting 210 00:12:15,000 --> 00:12:18,040 Speaker 1: the use of derivatives inside of an et F rapper 211 00:12:18,320 --> 00:12:24,000 Speaker 1: or vehicle, you're now giving it a tax advantage relative 212 00:12:24,120 --> 00:12:27,520 Speaker 1: to maybe other ways of holding that same option. Much 213 00:12:27,600 --> 00:12:31,720 Speaker 1: like ETFs have have a tax advantage in holding single 214 00:12:31,960 --> 00:12:36,880 Speaker 1: single name stocks and bonds, you're now able to redeem 215 00:12:36,920 --> 00:12:41,520 Speaker 1: out in kind single name stock options, including options on 216 00:12:41,600 --> 00:12:44,640 Speaker 1: e t F s, and so that creates a whole 217 00:12:44,720 --> 00:12:49,800 Speaker 1: new ability to creatively think about really interesting ETF strategies 218 00:12:49,840 --> 00:12:54,000 Speaker 1: that are very tax efficient. UM. Let me jump in here, 219 00:12:54,120 --> 00:12:58,760 Speaker 1: because over the years there's been many downside hedge TTF 220 00:12:58,880 --> 00:13:02,160 Speaker 1: that's been air You that it looks good on paper, 221 00:13:02,200 --> 00:13:04,440 Speaker 1: but in a bull market, a lot of them dragged, 222 00:13:04,679 --> 00:13:07,560 Speaker 1: And I get your idea is to not drag as 223 00:13:07,640 --> 00:13:11,200 Speaker 1: much and get as much upside, and then assuming that 224 00:13:11,320 --> 00:13:13,280 Speaker 1: the more of the market gets bubbly, which probably leads 225 00:13:13,280 --> 00:13:16,880 Speaker 1: to Mike Green's you know, passive bubble theory where when 226 00:13:16,880 --> 00:13:19,840 Speaker 1: you do have these downturns they get steep, right. So 227 00:13:20,040 --> 00:13:23,560 Speaker 1: this this way you're protecting your downside. Is this the 228 00:13:23,600 --> 00:13:26,240 Speaker 1: type of product that you use on top of, say 229 00:13:26,360 --> 00:13:28,959 Speaker 1: a Vanguard five fund or do you sort of are 230 00:13:28,960 --> 00:13:33,280 Speaker 1: you trying to replace that whole part of the portfolio. Um? 231 00:13:33,280 --> 00:13:37,000 Speaker 1: How are you presenting this in terms of portfolio construction 232 00:13:37,040 --> 00:13:42,200 Speaker 1: to advisors? Um, we are presenting it as a tool. 233 00:13:42,400 --> 00:13:45,160 Speaker 1: So for some advisors, they they they viewed as a 234 00:13:45,200 --> 00:13:48,880 Speaker 1: dollar for dollar replacement of their equity beta in the 235 00:13:48,920 --> 00:13:52,360 Speaker 1: case again of our SMP strategies. And it makes sense 236 00:13:52,400 --> 00:13:56,439 Speaker 1: in the context of a higher risk adjusted return potential 237 00:13:57,120 --> 00:13:59,719 Speaker 1: through similar reasons at a sixty forty off and out 238 00:14:00,040 --> 00:14:04,679 Speaker 1: forms equity beta in that by cutting off the downside, 239 00:14:04,880 --> 00:14:09,560 Speaker 1: you're you improve the compounding and potentially improve your geometric returns. Right, 240 00:14:09,600 --> 00:14:13,000 Speaker 1: And so that sort of concept UH is an attractive 241 00:14:13,000 --> 00:14:16,959 Speaker 1: one for one. But in today's environment, where yields are 242 00:14:17,080 --> 00:14:22,840 Speaker 1: essentially at negative real rates, UM, the advantages of UH 243 00:14:22,840 --> 00:14:26,160 Speaker 1: sort of having that fixed income is offset by the 244 00:14:26,160 --> 00:14:28,840 Speaker 1: negative carry of that fixed income. And so in that case, 245 00:14:28,880 --> 00:14:32,680 Speaker 1: if you could create some other way to directly hedge 246 00:14:32,720 --> 00:14:35,600 Speaker 1: downside instead of instead of relying on fixed income, it 247 00:14:35,640 --> 00:14:38,960 Speaker 1: could actually also improve your returns. And so we may 248 00:14:39,040 --> 00:14:41,560 Speaker 1: be getting a partial dollar out of your fixed income 249 00:14:41,640 --> 00:14:43,800 Speaker 1: bucket as well as the equity bucket. And so those 250 00:14:43,800 --> 00:14:46,800 Speaker 1: are the two main use cases that we found. But 251 00:14:46,960 --> 00:14:50,000 Speaker 1: our core value proposition is that we're trying to keep 252 00:14:50,040 --> 00:15:01,720 Speaker 1: and maintain that roughly one beta exposure. So, Mike, um, 253 00:15:01,800 --> 00:15:06,280 Speaker 1: you and I have had several discussions both offline over 254 00:15:06,360 --> 00:15:10,080 Speaker 1: I B and then on Filbox podcast, which if you 255 00:15:10,120 --> 00:15:12,880 Speaker 1: want background on Mike's thoughts on passive and his worries 256 00:15:12,920 --> 00:15:16,520 Speaker 1: about it, go listen to that podcast. Um, he goes 257 00:15:16,560 --> 00:15:19,480 Speaker 1: over all of it there. But you're you are known. 258 00:15:19,640 --> 00:15:21,400 Speaker 1: Oh you're also on Odd Lots and I thought that 259 00:15:21,480 --> 00:15:22,920 Speaker 1: was a good one too. You went over all that 260 00:15:23,000 --> 00:15:26,240 Speaker 1: on that, which is a sister podcast to ours. So 261 00:15:26,440 --> 00:15:29,120 Speaker 1: but let's just for people out there, Mike's a little 262 00:15:29,160 --> 00:15:33,240 Speaker 1: worried about passive being a sort of problem. And now, 263 00:15:33,320 --> 00:15:36,760 Speaker 1: so when I tweeted about your coming over to simplify, 264 00:15:37,240 --> 00:15:41,760 Speaker 1: of course, you had some knuckleheads out there. They're like, Oh, 265 00:15:41,800 --> 00:15:44,440 Speaker 1: what's going on here, Mike? I thought you said the 266 00:15:44,600 --> 00:15:46,800 Speaker 1: S and P S dune, you know, passives of bubble. 267 00:15:47,560 --> 00:15:52,080 Speaker 1: How does this is? How is this in tune with 268 00:15:52,160 --> 00:15:56,000 Speaker 1: your thoughts on passive or is there a little bit 269 00:15:56,000 --> 00:15:58,480 Speaker 1: of a conflict there? So I don't think there's a 270 00:15:58,520 --> 00:16:00,960 Speaker 1: conflict at all. I mean, the point that I have 271 00:16:01,080 --> 00:16:04,320 Speaker 1: continually made on passive is is that it is changing 272 00:16:04,360 --> 00:16:07,840 Speaker 1: the market structure, right, that it is influencing the behavior 273 00:16:07,880 --> 00:16:10,480 Speaker 1: of markets. And we see this both in the behavior 274 00:16:10,600 --> 00:16:13,280 Speaker 1: of rallies and in the behavior of selloffs. The selloffs 275 00:16:13,400 --> 00:16:18,440 Speaker 1: are more frequent in terms of the negative skew that 276 00:16:18,520 --> 00:16:20,840 Speaker 1: presents in the market and others. The market's propensity to 277 00:16:21,000 --> 00:16:25,840 Speaker 1: crash is rising over time. Propensity for highly correlated selloffs 278 00:16:26,080 --> 00:16:29,840 Speaker 1: is rising over time. At the same time, the dynamics 279 00:16:29,880 --> 00:16:32,560 Speaker 1: of the shift to passive away from active are creating 280 00:16:32,600 --> 00:16:35,160 Speaker 1: many of the themes that we hear in the market 281 00:16:35,240 --> 00:16:39,200 Speaker 1: right the by the dip type mentality, etcetera. What you have, 282 00:16:39,320 --> 00:16:46,040 Speaker 1: by and large is a um unthinking allocation mechanism that 283 00:16:46,200 --> 00:16:49,520 Speaker 1: simply relies on Americans participating through their four oh one 284 00:16:49,600 --> 00:16:52,480 Speaker 1: case or people around the world participating through their retirement 285 00:16:52,480 --> 00:16:55,840 Speaker 1: programs or through their deductions. That they're making from their 286 00:16:55,840 --> 00:16:59,680 Speaker 1: paychecks or regular contributions. And the rules of passive in 287 00:17:00,040 --> 00:17:02,520 Speaker 1: ones the behavior of the market and just the simplest form. Right, 288 00:17:02,560 --> 00:17:04,719 Speaker 1: the rules of passive are as simple as did you 289 00:17:04,720 --> 00:17:07,560 Speaker 1: give me cash? If so, then by did you ask 290 00:17:07,600 --> 00:17:09,879 Speaker 1: for cash? If so, then sell? And the work that 291 00:17:09,960 --> 00:17:12,879 Speaker 1: I have focused on is the impact of introducing that 292 00:17:12,960 --> 00:17:18,560 Speaker 1: systematic type of strategy on market behavior. What that really does, 293 00:17:18,720 --> 00:17:20,960 Speaker 1: and what I've been very clear on is is that 294 00:17:20,960 --> 00:17:24,320 Speaker 1: that change in the distribution of outcomes that occurs because 295 00:17:24,320 --> 00:17:29,080 Speaker 1: of the influence of passive means that options are improperly priced. 296 00:17:29,640 --> 00:17:32,360 Speaker 1: And so throughout my career I've been a value investor 297 00:17:32,440 --> 00:17:34,520 Speaker 1: in the context not of saying, you know, here's a 298 00:17:34,560 --> 00:17:37,440 Speaker 1: super cheap company based on my estimate of future free 299 00:17:37,440 --> 00:17:41,080 Speaker 1: cash flows, but instead to say, here's a super cheap 300 00:17:41,400 --> 00:17:44,920 Speaker 1: instrument or security that can be purchased at a price 301 00:17:45,000 --> 00:17:48,240 Speaker 1: that inaccurately reflects the future distribution of outcomes for the 302 00:17:48,320 --> 00:17:52,679 Speaker 1: underlying product. Right, That's what we're doing. It simplify, right, 303 00:17:52,720 --> 00:17:56,919 Speaker 1: the the ability to overlay the options and participate in 304 00:17:57,000 --> 00:18:00,720 Speaker 1: the inflation that's occurring because of the passive dynamic, but 305 00:18:00,840 --> 00:18:04,280 Speaker 1: to do so in a way that protects investors both 306 00:18:04,280 --> 00:18:07,120 Speaker 1: to the downside and from the risk of a market 307 00:18:07,160 --> 00:18:10,480 Speaker 1: that effectively runs away from them is as I said, 308 00:18:10,520 --> 00:18:13,359 Speaker 1: like it didn't exist technically before. You couldn't do it 309 00:18:13,400 --> 00:18:16,439 Speaker 1: from a regulatory framework, and now suddenly you can. And 310 00:18:16,480 --> 00:18:19,520 Speaker 1: the second component is is that the options themselves don't 311 00:18:19,560 --> 00:18:22,760 Speaker 1: accurately reflect these prices, creating the opportunity to do stuff 312 00:18:22,760 --> 00:18:25,800 Speaker 1: that I think of as true value investing. We talked 313 00:18:25,800 --> 00:18:28,520 Speaker 1: about the broad allocation e t s. We've talked about 314 00:18:28,520 --> 00:18:32,959 Speaker 1: the benefits of taking part of your six your inequities 315 00:18:33,040 --> 00:18:35,640 Speaker 1: or party fix income and putting him in these broader 316 00:18:36,160 --> 00:18:37,800 Speaker 1: um e t s. You guys have launched, but you 317 00:18:37,800 --> 00:18:42,800 Speaker 1: guys also have launched a suite of more specific, targeted 318 00:18:43,040 --> 00:18:46,159 Speaker 1: thematic ETFs almost using kind of the same strategy with 319 00:18:46,480 --> 00:18:49,440 Speaker 1: hoping to get additional upside in like v car, which 320 00:18:49,480 --> 00:18:52,920 Speaker 1: is robocar, disruption fintech, and v fin um a whole 321 00:18:52,960 --> 00:18:55,760 Speaker 1: bunch of these. Can you just talk about how you 322 00:18:55,840 --> 00:18:59,359 Speaker 1: view those being used, how you chose the strategies to launch, 323 00:19:00,200 --> 00:19:03,720 Speaker 1: and anything you have to say about them. Sure, um, 324 00:19:03,760 --> 00:19:06,920 Speaker 1: And so just just because we started off with broad 325 00:19:07,000 --> 00:19:09,560 Speaker 1: beta does not mean that's sort of where fixed fixated 326 00:19:09,640 --> 00:19:14,320 Speaker 1: on UM. We're also trying to solve advisor and investor 327 00:19:15,160 --> 00:19:19,760 Speaker 1: demand for things like concentrated investing, which often play out 328 00:19:19,760 --> 00:19:23,159 Speaker 1: in thematic investing. And so what we've done is create 329 00:19:23,680 --> 00:19:26,879 Speaker 1: very hyper concentrated e t s again that push the 330 00:19:26,880 --> 00:19:32,280 Speaker 1: boundaries to what's permissible in a forty act vehicle UM, 331 00:19:32,359 --> 00:19:36,400 Speaker 1: and also concentrate further by enhancing the upside potential by 332 00:19:36,400 --> 00:19:41,000 Speaker 1: buying buying single names stock options mostly calls on some 333 00:19:41,080 --> 00:19:44,320 Speaker 1: of our key names in the portfolios that hang on 334 00:19:44,359 --> 00:19:47,560 Speaker 1: that theme. And the idea from a high level view 335 00:19:47,720 --> 00:19:52,000 Speaker 1: is kind of do what Warren Buffett and Carl Lyken 336 00:19:52,119 --> 00:19:55,160 Speaker 1: and other famous investors have done in their careers, which 337 00:19:55,280 --> 00:19:59,800 Speaker 1: is really concentrated into a few few key names to 338 00:20:00,040 --> 00:20:04,640 Speaker 1: you take advantage of their relative growth to the universe 339 00:20:04,720 --> 00:20:07,440 Speaker 1: or potential growth, and then do it in a risk 340 00:20:07,520 --> 00:20:11,360 Speaker 1: measured way where we're also embedding sort of downside hedges, 341 00:20:11,560 --> 00:20:14,560 Speaker 1: so that if you're not exactly right with your timing, 342 00:20:14,560 --> 00:20:17,000 Speaker 1: it could still have a structure that creates this really 343 00:20:17,000 --> 00:20:22,280 Speaker 1: concentrated upside, but much more diversified and hedge downside. So 344 00:20:22,359 --> 00:20:26,000 Speaker 1: that's the interesting thing. At the very highest level, it's 345 00:20:26,040 --> 00:20:30,080 Speaker 1: it's a variance maximization structure. So you've concentrated, you have 346 00:20:30,640 --> 00:20:34,600 Speaker 1: relatively high variance names, and you have a structure that 347 00:20:34,680 --> 00:20:37,840 Speaker 1: captures moves when they go up in a way to 348 00:20:37,880 --> 00:20:41,760 Speaker 1: sort of diversify and mitigate the downside when they don't 349 00:20:41,800 --> 00:20:44,520 Speaker 1: go up as fast. Yeah, so these these strategies can 350 00:20:44,600 --> 00:20:47,920 Speaker 1: theoretically almost compound almost like some of the leverage gts 351 00:20:48,520 --> 00:20:50,760 Speaker 1: UM if you if it starts really going in those calls, 352 00:20:51,160 --> 00:20:54,760 Speaker 1: those upside calls get hit, which is extremely interesting from 353 00:20:55,160 --> 00:20:57,480 Speaker 1: our point of view. The other thing is themes is 354 00:20:57,520 --> 00:21:00,480 Speaker 1: like I feel like it's always been talking about last year, 355 00:21:00,560 --> 00:21:03,000 Speaker 1: themes are taking over sector investing because people don't want 356 00:21:03,040 --> 00:21:05,600 Speaker 1: to invest in a specific sector like themes are easier 357 00:21:05,640 --> 00:21:08,159 Speaker 1: to talk about. They're taking away some of the thunder 358 00:21:08,240 --> 00:21:10,560 Speaker 1: from smart beta, E t F s UM. So it 359 00:21:10,640 --> 00:21:13,320 Speaker 1: just makes complete sense to kind of packages in these 360 00:21:13,320 --> 00:21:17,480 Speaker 1: other strategies. Yeah, when you said the hunger for concentration, 361 00:21:17,480 --> 00:21:19,119 Speaker 1: I just want to hone it on that. In a minute. 362 00:21:20,080 --> 00:21:24,600 Speaker 1: We are noticing this clear barbelling of flows where it's 363 00:21:24,600 --> 00:21:27,679 Speaker 1: either dirt chief beta or wild and crazy you know, 364 00:21:27,800 --> 00:21:29,960 Speaker 1: something very different. This is sort of the artifact I 365 00:21:29,960 --> 00:21:33,280 Speaker 1: guess if you will, themes are right in there. Um, 366 00:21:33,280 --> 00:21:37,520 Speaker 1: this is this because portfolios are barbelling. People are just 367 00:21:37,880 --> 00:21:40,600 Speaker 1: they're gonna they're gonna have this cheap base and then 368 00:21:40,680 --> 00:21:43,040 Speaker 1: sort of decorate it with what we tend to refer 369 00:21:43,080 --> 00:21:44,920 Speaker 1: to as hot sauce. I mean, is that what you're 370 00:21:44,920 --> 00:21:48,320 Speaker 1: finding from advisors is that why you're in fact in 371 00:21:48,359 --> 00:21:51,560 Speaker 1: your area you have the barbell going right there in 372 00:21:51,680 --> 00:21:56,760 Speaker 1: terms of the product line. Well, so I would actually, 373 00:21:57,080 --> 00:21:59,399 Speaker 1: um take a stab at that. I think again for me, 374 00:21:59,640 --> 00:22:02,199 Speaker 1: part of of the interesting dynamic that we're seeing with 375 00:22:02,280 --> 00:22:04,879 Speaker 1: theme stocks, etcetera is is that it's a reflection of 376 00:22:04,920 --> 00:22:07,560 Speaker 1: the market fragility dynamics we're talking about, right, So in 377 00:22:07,640 --> 00:22:12,240 Speaker 1: many of these situations, the core buyers and holders of 378 00:22:12,320 --> 00:22:14,280 Speaker 1: these theme stocks are going to be the vanguards and 379 00:22:14,320 --> 00:22:17,560 Speaker 1: black rocks of the world. The question is, can you 380 00:22:17,640 --> 00:22:22,880 Speaker 1: gain increased convexity or rocket fuel to an exposure because 381 00:22:22,960 --> 00:22:26,040 Speaker 1: you decide to make a concentrated bet in that area, right, 382 00:22:26,080 --> 00:22:29,560 Speaker 1: and the ability to articulate that and to do so 383 00:22:29,640 --> 00:22:33,360 Speaker 1: in a manner that is easily accessible and tradeable from 384 00:22:33,359 --> 00:22:36,520 Speaker 1: an r A framework, It's tough to see that is 385 00:22:36,520 --> 00:22:41,880 Speaker 1: not offering value to the community. Just before we move 386 00:22:41,960 --> 00:22:45,760 Speaker 1: on to the limitations, I think Joe's gonna about limitations. 387 00:22:46,040 --> 00:22:50,199 Speaker 1: Paul Um back to the i VV and then the 388 00:22:50,240 --> 00:22:54,560 Speaker 1: puts and that tail risk hedge yep UM. Have you 389 00:22:55,119 --> 00:22:58,320 Speaker 1: tested this in environments? And do you know about how 390 00:22:58,400 --> 00:23:01,399 Speaker 1: much of the market downturn you save? Like, do you 391 00:23:01,400 --> 00:23:04,679 Speaker 1: have any way to quantify what you're saving there? Because 392 00:23:05,280 --> 00:23:09,400 Speaker 1: the Bruce bond Over an innovator, he has these exact metrics. 393 00:23:09,440 --> 00:23:12,639 Speaker 1: You know, you'll you'll have the stomach the first five percent, 394 00:23:12,720 --> 00:23:15,080 Speaker 1: but then after that will cover you know, he's very 395 00:23:15,119 --> 00:23:16,919 Speaker 1: clear on this is exactly what you get. How do 396 00:23:16,960 --> 00:23:20,199 Speaker 1: you answer that question to somebody who's like, well, how 397 00:23:20,280 --> 00:23:23,479 Speaker 1: much will this save me if the market tanks? So 398 00:23:23,560 --> 00:23:28,560 Speaker 1: you can't get a precise forward looking number, but there's 399 00:23:28,560 --> 00:23:32,199 Speaker 1: certainly a lot of historical episodes going back way to 400 00:23:32,359 --> 00:23:35,600 Speaker 1: the you know, periods like the Great Depression UM, where 401 00:23:35,640 --> 00:23:38,800 Speaker 1: you could estimate UM sort of draw downs and sort 402 00:23:38,800 --> 00:23:43,040 Speaker 1: of the limits and timing of those drug downs. UM 403 00:23:43,200 --> 00:23:47,359 Speaker 1: in a nutshell by buying very deep out of the 404 00:23:47,400 --> 00:23:51,160 Speaker 1: money puts, they act as a shock ups over, almost 405 00:23:51,200 --> 00:23:54,159 Speaker 1: like a rubber band. It's it's hard to forecast exactly 406 00:23:54,160 --> 00:23:57,720 Speaker 1: what that force is, but it's it's a very powerful force. 407 00:23:58,440 --> 00:24:01,520 Speaker 1: And UH, which is the term convexy right gamma and 408 00:24:01,600 --> 00:24:05,919 Speaker 1: equity terms it basically, at the further and faster you fall, 409 00:24:05,960 --> 00:24:09,680 Speaker 1: and higher the implied volves go up, these options significantly 410 00:24:09,760 --> 00:24:13,480 Speaker 1: increasing value. And so if you look back at a 411 00:24:13,600 --> 00:24:17,560 Speaker 1: very generic one percent of your portfolio and sort of 412 00:24:17,600 --> 00:24:20,240 Speaker 1: a thirty percent put, this is not our strategy, but 413 00:24:20,280 --> 00:24:25,040 Speaker 1: I'm just talking generically that going into March, that one 414 00:24:25,080 --> 00:24:27,879 Speaker 1: percent would have done more than the work of a 415 00:24:27,960 --> 00:24:32,719 Speaker 1: forty percent allocation to long treasuries. So very modest amount 416 00:24:33,040 --> 00:24:37,920 Speaker 1: of out of the money puts effectively protects the entire portfolio, 417 00:24:38,000 --> 00:24:41,120 Speaker 1: or has the potential to protect the entire portfolio as 418 00:24:41,160 --> 00:24:45,200 Speaker 1: a full on, hard duration allocation to the longest UH 419 00:24:45,280 --> 00:24:49,240 Speaker 1: treasuries out there. Um, that's powerful, right. That really speaks 420 00:24:49,240 --> 00:24:53,280 Speaker 1: to how much UH sort of a help these puts 421 00:24:53,320 --> 00:24:56,440 Speaker 1: can have. The drawback is constructing it in the right 422 00:24:56,480 --> 00:25:00,200 Speaker 1: way and having a systematic approach that makes sure you're 423 00:25:00,200 --> 00:25:03,480 Speaker 1: not over spending on protection and buying the right strikes 424 00:25:03,480 --> 00:25:07,399 Speaker 1: and looking for opportunities where options are cheap. Okay, Michael, 425 00:25:07,520 --> 00:25:10,480 Speaker 1: what are the limitations or the or the potential limitations 426 00:25:10,480 --> 00:25:13,080 Speaker 1: of the strategy. Well, I think Paul just hit on 427 00:25:13,080 --> 00:25:15,439 Speaker 1: one of them, right. The history doesn't repeat at rhymes, 428 00:25:15,440 --> 00:25:17,359 Speaker 1: and so we're never going to know exactly what the 429 00:25:17,400 --> 00:25:20,520 Speaker 1: performances of a derivative overlay strategy. It's going to depend 430 00:25:20,560 --> 00:25:23,119 Speaker 1: on where volatility rises, is going to depend on the 431 00:25:23,160 --> 00:25:26,359 Speaker 1: shape of the volatility surface or the curve that that 432 00:25:26,560 --> 00:25:29,760 Speaker 1: exists in the volatility space. It's going to depend on 433 00:25:29,760 --> 00:25:31,840 Speaker 1: the speed of the decline, etcetera. Right, so these are 434 00:25:31,880 --> 00:25:34,560 Speaker 1: all factors that you have to consider when you're thinking 435 00:25:34,640 --> 00:25:37,919 Speaker 1: about protecting a portfolio or how to manage against that. 436 00:25:38,320 --> 00:25:40,600 Speaker 1: And then there's the further issue that you have of 437 00:25:40,920 --> 00:25:44,520 Speaker 1: you know, is the picture of the past an accurate representation. 438 00:25:44,680 --> 00:25:48,160 Speaker 1: We went through two thousand seven eight, passive strategies were 439 00:25:48,240 --> 00:25:50,440 Speaker 1: roughly fifteen percent of the market. Today they're somewhere in 440 00:25:50,440 --> 00:25:54,280 Speaker 1: the neighborhood oft and more than half of all the 441 00:25:54,320 --> 00:25:58,720 Speaker 1: managed assets. And so understanding those differences means that you're 442 00:25:58,760 --> 00:26:02,280 Speaker 1: never going to have perfect insight. And candidly, I have 443 00:26:02,400 --> 00:26:05,600 Speaker 1: not seen the claims of we'll do exactly this protection, etcetera. 444 00:26:05,680 --> 00:26:08,720 Speaker 1: But I would challenge the ability to make that type 445 00:26:08,720 --> 00:26:13,879 Speaker 1: of statement. Um. There is a secondary benefit, though, is 446 00:26:13,920 --> 00:26:17,760 Speaker 1: you move away from using interest rates to protect your portfolio. 447 00:26:17,800 --> 00:26:20,840 Speaker 1: What you're really relying on with the interest rate dynamic 448 00:26:21,440 --> 00:26:24,680 Speaker 1: is the FEDS reaction function. Is the Central Bank going 449 00:26:24,760 --> 00:26:28,600 Speaker 1: to cut interest rates in reaction to a decline in 450 00:26:28,800 --> 00:26:33,200 Speaker 1: equity prices? All right, that's a relatively recent phenomenon in 451 00:26:33,320 --> 00:26:35,560 Speaker 1: terms of markets that really only began to emerge in 452 00:26:36,640 --> 00:26:39,160 Speaker 1: the aftermath of long term capital management in the Asian 453 00:26:39,200 --> 00:26:44,399 Speaker 1: Financial crisis, brief episode of it with the crash seven. 454 00:26:45,400 --> 00:26:48,360 Speaker 1: But here you're talking about doing something differently because if 455 00:26:48,359 --> 00:26:52,320 Speaker 1: you're embedding derivatives that are tied directly to the stock market, 456 00:26:52,440 --> 00:26:55,320 Speaker 1: so puts on the S and P five hundred, for example, 457 00:26:55,960 --> 00:26:58,800 Speaker 1: you have a reduced level of what in the industry 458 00:26:58,840 --> 00:27:01,159 Speaker 1: is referred to as basis risk, or the risk that 459 00:27:01,240 --> 00:27:04,800 Speaker 1: the protection that you bought in your portfolio doesn't actually 460 00:27:04,840 --> 00:27:08,280 Speaker 1: protect your portfolio because it's not directly tied to it. Right. 461 00:27:09,600 --> 00:27:12,959 Speaker 1: So there's some improvement and there's some increase in uncertainty 462 00:27:13,000 --> 00:27:16,480 Speaker 1: around other aspects of it. Ultimately, I don't think people 463 00:27:16,520 --> 00:27:19,000 Speaker 1: have a choice because what we've seen is the FED 464 00:27:19,080 --> 00:27:23,320 Speaker 1: has so aggressively targeted market selloffs and risk off events. 465 00:27:23,359 --> 00:27:26,000 Speaker 1: With the policy of cutting interest rates, that we've now 466 00:27:26,160 --> 00:27:28,800 Speaker 1: ended up at a point where those bonds offer almost 467 00:27:28,800 --> 00:27:33,439 Speaker 1: no prospect of reasonable return and you're effectively buying, you know, 468 00:27:33,600 --> 00:27:37,280 Speaker 1: a synthetic put on your equity portfolio when you buy 469 00:27:37,280 --> 00:27:39,959 Speaker 1: a ten year treasury or a thirty year treasury, with 470 00:27:40,080 --> 00:27:42,879 Speaker 1: significant uncertainty as to whether that's going to deliver the 471 00:27:42,920 --> 00:27:46,520 Speaker 1: return profile that you're hoping for. All Right, I want 472 00:27:46,520 --> 00:27:49,639 Speaker 1: to shift a little bit too, this sort of ambition 473 00:27:49,920 --> 00:27:52,600 Speaker 1: that you guys have. You know, it's not just the 474 00:27:52,600 --> 00:27:55,080 Speaker 1: products that you've come out with and the hires that 475 00:27:55,119 --> 00:27:58,760 Speaker 1: you've made. I've seen a really interesting filings from Simplify. 476 00:27:58,960 --> 00:28:00,640 Speaker 1: I know you can't talk at them, so I'll throw 477 00:28:00,680 --> 00:28:03,879 Speaker 1: them all out there for the listener and then just 478 00:28:03,960 --> 00:28:06,159 Speaker 1: lets you comment on however you want. You have a 479 00:28:06,160 --> 00:28:08,320 Speaker 1: filing for a c d X E t F. This 480 00:28:08,400 --> 00:28:11,880 Speaker 1: is a basically a credit default swap ETF. That term 481 00:28:11,920 --> 00:28:14,600 Speaker 1: has a lot of uh, you know, people have a 482 00:28:14,600 --> 00:28:16,520 Speaker 1: lot of feelings when they hear that, although there was 483 00:28:16,880 --> 00:28:20,960 Speaker 1: one tried before. You have an equity plus bitcoin ETF. 484 00:28:21,040 --> 00:28:24,000 Speaker 1: You have a inverse vall E t F. Another one 485 00:28:24,040 --> 00:28:27,679 Speaker 1: that gets people the fields right there, although it's not 486 00:28:27,840 --> 00:28:30,520 Speaker 1: all the way one time inverse, I think it's half 487 00:28:30,560 --> 00:28:36,240 Speaker 1: for inflation convexity, gold convexity. I mean, you really have 488 00:28:36,359 --> 00:28:40,840 Speaker 1: this interesting arsenal of products in the pipeline that really 489 00:28:40,880 --> 00:28:43,920 Speaker 1: put you on on a trajectory to be almost like 490 00:28:44,000 --> 00:28:48,600 Speaker 1: the alternative issuer. You know, is that is that your 491 00:28:48,600 --> 00:28:51,479 Speaker 1: goal here is too is to really own that spot. Um, 492 00:28:52,360 --> 00:28:55,680 Speaker 1: what's the grand vision here? So I think it's one 493 00:28:55,760 --> 00:28:59,040 Speaker 1: level higher than that which alternatives tend to be a 494 00:28:59,160 --> 00:29:01,760 Speaker 1: smaller Porsche and of a portfolio. Right, So what we're 495 00:29:01,800 --> 00:29:06,800 Speaker 1: really trying to do is create either improved beta's or 496 00:29:07,120 --> 00:29:13,000 Speaker 1: really take existing beta's, deep public accessible beta's and turning 497 00:29:13,040 --> 00:29:17,240 Speaker 1: them into either return generators or or sort of better 498 00:29:17,280 --> 00:29:21,160 Speaker 1: building blocks for portfolios. And again, in the context of 499 00:29:21,240 --> 00:29:26,520 Speaker 1: a forty years sixty forty paradigm that's embedded itself in 500 00:29:26,880 --> 00:29:30,680 Speaker 1: every sort of retirement channel out there, we want to 501 00:29:30,760 --> 00:29:34,400 Speaker 1: provide an alternative way to think about ASSE allocation that 502 00:29:34,440 --> 00:29:37,720 Speaker 1: can navigate the road ahead. So if you think about 503 00:29:37,840 --> 00:29:44,040 Speaker 1: views on either extreme inflation or deflation, very few et 504 00:29:44,240 --> 00:29:46,800 Speaker 1: F platforms in my view, have U sort of a 505 00:29:46,840 --> 00:29:51,880 Speaker 1: significant offering that works when rates go up or when 506 00:29:52,120 --> 00:29:56,000 Speaker 1: inflation picks up as an example, right, and also very 507 00:29:56,080 --> 00:30:01,760 Speaker 1: few platforms offer sort of exposure to UH ways of 508 00:30:01,920 --> 00:30:06,720 Speaker 1: navigating times when risk assets i e. Short vowel assets 509 00:30:06,720 --> 00:30:09,200 Speaker 1: sell off. So can we offer things that are much 510 00:30:09,240 --> 00:30:12,680 Speaker 1: more long volatility that take the other side, but doing 511 00:30:12,760 --> 00:30:15,800 Speaker 1: in a way that can be put into a portfolio 512 00:30:16,040 --> 00:30:19,720 Speaker 1: that has a positive expected value and can help meet 513 00:30:19,760 --> 00:30:23,240 Speaker 1: investors returns. And so that's sort of how we view 514 00:30:23,600 --> 00:30:26,160 Speaker 1: the building blocks. It's not so much. Again, Let's go 515 00:30:26,240 --> 00:30:29,280 Speaker 1: for a ten or twenty slice of somebody's portfolio and 516 00:30:29,320 --> 00:30:34,480 Speaker 1: give something interesting, it's really less reimagining and create another 517 00:30:34,640 --> 00:30:39,120 Speaker 1: path for much more interesting as allocation frameworks and give 518 00:30:39,240 --> 00:30:44,120 Speaker 1: advisors that tool that before have never been accessible, even 519 00:30:44,200 --> 00:30:47,880 Speaker 1: two very large advisors, things that require things like is 520 00:30:47,960 --> 00:30:52,000 Speaker 1: does right UM which even um relatively large hedge funds 521 00:30:52,200 --> 00:30:57,400 Speaker 1: may not have access to UH. Create interesting again, strategies 522 00:30:57,400 --> 00:31:01,440 Speaker 1: that take advantage of capital efficient see balance sheet efficiency, 523 00:31:02,000 --> 00:31:05,440 Speaker 1: really interesting and thoughtful use of leverage in a very 524 00:31:05,600 --> 00:31:08,080 Speaker 1: risk focused way. So those are all the things that 525 00:31:08,120 --> 00:31:11,400 Speaker 1: we have down the road, and you're you're starting to 526 00:31:11,440 --> 00:31:13,720 Speaker 1: see the filings and sort of hinting out where we're 527 00:31:13,720 --> 00:31:17,040 Speaker 1: trying to take this place. By the way, Joel, this 528 00:31:17,160 --> 00:31:19,640 Speaker 1: is you know when people are like, oh, they're e 529 00:31:19,800 --> 00:31:23,000 Speaker 1: t s are a bubble, and I'm like they kind 530 00:31:23,000 --> 00:31:25,200 Speaker 1: of quite ets with beta. I'm like, no, they actually 531 00:31:25,280 --> 00:31:28,640 Speaker 1: make e t s to capitalize on the bubble bursting 532 00:31:28,880 --> 00:31:32,600 Speaker 1: or people, I think sometimes forget that. It's really fascinating 533 00:31:33,200 --> 00:31:36,400 Speaker 1: that all this stuff is being put into this structure. Yeah. Yeah, 534 00:31:36,440 --> 00:31:39,240 Speaker 1: it's like a wrapper around a roup. I would say, 535 00:31:39,640 --> 00:31:42,120 Speaker 1: building on what Eric just said, Michael Birnie talked about 536 00:31:42,320 --> 00:31:46,120 Speaker 1: passive PUBB ETF and investing in small cap values specifically, 537 00:31:46,440 --> 00:31:48,560 Speaker 1: and then cited a couple of names you've invested in, 538 00:31:48,560 --> 00:31:51,800 Speaker 1: like game Stop and other other names that were like 539 00:31:52,560 --> 00:31:54,960 Speaker 1: passively owned, which is way higher than the average. So 540 00:31:55,000 --> 00:31:56,960 Speaker 1: it just shows that a lot of times, even extremely 541 00:31:57,000 --> 00:32:00,240 Speaker 1: smart investors don't have the true understanding of exactly et 542 00:32:00,400 --> 00:32:03,720 Speaker 1: s and passive investing or what we call passive investing. 543 00:32:03,720 --> 00:32:06,280 Speaker 1: I should say, because there's a there's a spectrum, but 544 00:32:06,400 --> 00:32:09,400 Speaker 1: there's definitely a big gap in this understanding even among 545 00:32:09,560 --> 00:32:13,920 Speaker 1: super intelligent investors. James, I, I I just wanted to um 546 00:32:13,960 --> 00:32:16,320 Speaker 1: emphasize the point that you're making there, right, which is 547 00:32:16,760 --> 00:32:18,480 Speaker 1: when you look at a lot of the theme stocks 548 00:32:18,480 --> 00:32:20,000 Speaker 1: that you look at a lot of the behavior that's 549 00:32:20,040 --> 00:32:23,480 Speaker 1: happened in markets, it tends to have happened in these 550 00:32:23,520 --> 00:32:27,120 Speaker 1: stocks that have high concentrations of ownership. Whether that's because 551 00:32:27,160 --> 00:32:30,760 Speaker 1: there are significant option quantities that are outstanding against them, 552 00:32:30,880 --> 00:32:35,120 Speaker 1: or whether there are passive players who perversely choose to 553 00:32:35,240 --> 00:32:38,160 Speaker 1: add to stuff effectively, as new money comes in, they'll 554 00:32:38,160 --> 00:32:41,240 Speaker 1: buy more of something as it goes higher, reinforcing momentum 555 00:32:41,280 --> 00:32:44,920 Speaker 1: type characteristics. Again, those are the opportunities that we think 556 00:32:44,960 --> 00:32:47,640 Speaker 1: we have the chance to take advantage of that really 557 00:32:47,680 --> 00:32:51,480 Speaker 1: haven't existed in the markets in the past. And simultaneously, 558 00:32:51,560 --> 00:32:54,320 Speaker 1: that means that we can allow investors to participate in 559 00:32:54,360 --> 00:32:58,080 Speaker 1: what feels like craziness to us, but also feel some 560 00:32:58,120 --> 00:33:01,800 Speaker 1: degree of protection to the downside. So, Michael, does that 561 00:33:01,840 --> 00:33:04,320 Speaker 1: mean that you could potentially get into a place where where, 562 00:33:04,360 --> 00:33:07,840 Speaker 1: like right now, you're using sort of broader indexes, but 563 00:33:07,960 --> 00:33:11,960 Speaker 1: you could get into one where you're customizing and doing 564 00:33:12,000 --> 00:33:14,920 Speaker 1: so based on trends that you're seeing in certain places. Yeah, 565 00:33:14,960 --> 00:33:18,520 Speaker 1: it's difficult to talk about the product development framework um 566 00:33:18,520 --> 00:33:21,239 Speaker 1: other than what's already been filed. Eric referred to a 567 00:33:21,240 --> 00:33:24,960 Speaker 1: couple of these things. What I hope Simplify becomes known 568 00:33:25,000 --> 00:33:27,960 Speaker 1: for is actually something that Paul alluded to before, which 569 00:33:28,000 --> 00:33:31,640 Speaker 1: is the thoughtful construction of these products and the appropriate 570 00:33:31,800 --> 00:33:35,840 Speaker 1: use of leverage. So, for example, a short volatility e 571 00:33:35,920 --> 00:33:40,160 Speaker 1: t F. People are obviously familiar with products like x 572 00:33:40,240 --> 00:33:43,640 Speaker 1: I V that, um, you know, blew up quite spectacularly 573 00:33:43,880 --> 00:33:48,680 Speaker 1: in February of two thou eighteen. They're also familiar with 574 00:33:48,720 --> 00:33:51,560 Speaker 1: two times or three times levered S and P type products, 575 00:33:51,720 --> 00:33:55,000 Speaker 1: or you know, Russell products, etcetera. What you often find 576 00:33:55,040 --> 00:33:58,080 Speaker 1: with those is that they were created, in my view, 577 00:33:58,120 --> 00:34:02,880 Speaker 1: without a a a significant amount of thought behind should 578 00:34:02,920 --> 00:34:05,920 Speaker 1: we do this? Is this appropriate for investors? Is this 579 00:34:06,040 --> 00:34:08,920 Speaker 1: the right degree of leverage? When you create products that 580 00:34:09,040 --> 00:34:12,799 Speaker 1: have the linear payouts that those products historically have had, 581 00:34:12,880 --> 00:34:15,839 Speaker 1: and all you're doing is attaching significant leverage to it, 582 00:34:16,360 --> 00:34:19,759 Speaker 1: you actually increase the odds of events like the February 583 00:34:20,520 --> 00:34:24,319 Speaker 1: eighteen volmerged where a very popular two plus billion dollar 584 00:34:24,400 --> 00:34:26,239 Speaker 1: e t F went to zero in a single day, 585 00:34:26,440 --> 00:34:30,239 Speaker 1: right or effectively to zero in a single day. UM, 586 00:34:30,360 --> 00:34:32,520 Speaker 1: we can do better than that, and we can be 587 00:34:32,640 --> 00:34:36,560 Speaker 1: much more thoughtful about how to appropriately construct these products 588 00:34:36,560 --> 00:34:39,440 Speaker 1: we're not trying to create the you know, three four 589 00:34:39,560 --> 00:34:43,799 Speaker 1: five scent return things. We're trying to replace products in 590 00:34:43,840 --> 00:34:48,040 Speaker 1: people's portfolios that no longer work, for example, bonds. So, Paul, 591 00:34:48,080 --> 00:34:50,360 Speaker 1: it sounds like you have things on a white board 592 00:34:50,400 --> 00:34:53,040 Speaker 1: that are really exciting, and then there's some other things 593 00:34:53,120 --> 00:34:54,799 Speaker 1: on the other side of the whiteboard that might be 594 00:34:54,960 --> 00:34:58,200 Speaker 1: farther away. And I'm curious, like, like, what, you know, 595 00:34:58,320 --> 00:35:01,200 Speaker 1: the name of your company is simple, Why how many 596 00:35:01,280 --> 00:35:04,319 Speaker 1: products do you think you'll ultimately have here? I get 597 00:35:04,400 --> 00:35:07,520 Speaker 1: a lot of complaints internally on how fast we're moving. Uh, 598 00:35:07,640 --> 00:35:11,640 Speaker 1: we have nine currently and have another six on docket 599 00:35:11,680 --> 00:35:15,600 Speaker 1: and probably another six waiting right beyond that, So I 600 00:35:15,600 --> 00:35:18,759 Speaker 1: could easily see thirty or forty t f s and 601 00:35:18,880 --> 00:35:22,720 Speaker 1: you know, in a couple of years um, which most 602 00:35:22,960 --> 00:35:27,440 Speaker 1: being very very very unique and solving very very big 603 00:35:27,480 --> 00:35:31,040 Speaker 1: problems for advisors. And that's sort of the sort of 604 00:35:31,080 --> 00:35:34,759 Speaker 1: the urgency behind how how aggressive we're trying to tackle this, 605 00:35:34,880 --> 00:35:37,960 Speaker 1: because it feels like there's this window of opportunity to 606 00:35:38,040 --> 00:35:41,640 Speaker 1: move fast, to just feed into that creativity and opportunity 607 00:35:41,960 --> 00:35:45,319 Speaker 1: and really address some of the biggest challenges that we 608 00:35:45,400 --> 00:35:55,319 Speaker 1: feel are not being addressed properly today. Mike Green. One 609 00:35:55,320 --> 00:35:56,960 Speaker 1: thing you said on the last time we were on 610 00:35:57,000 --> 00:36:01,040 Speaker 1: the podcast at Phil's Phil's pod cast was and it's 611 00:36:01,040 --> 00:36:04,640 Speaker 1: stuck with me. You said that the government and just 612 00:36:04,719 --> 00:36:08,120 Speaker 1: in general, they now look at the stock market as 613 00:36:08,160 --> 00:36:13,200 Speaker 1: America's retirement savings. And Yellen said something along the lines 614 00:36:13,239 --> 00:36:16,239 Speaker 1: of how active bond mutual funds. We're going to have 615 00:36:16,280 --> 00:36:18,839 Speaker 1: to unload all these bonds in the middle of March, 616 00:36:19,360 --> 00:36:21,560 Speaker 1: and it was going to be fire sale, and she 617 00:36:21,640 --> 00:36:23,440 Speaker 1: kind of alluded that's why they stepped in, which was 618 00:36:23,480 --> 00:36:27,080 Speaker 1: part of my hunch. It seems like the whole mutual 619 00:36:27,160 --> 00:36:30,640 Speaker 1: fund industry, active and passive, is the new too big 620 00:36:30,680 --> 00:36:35,400 Speaker 1: to fail thoughts. Unfortunately, I think that's right, And you know, 621 00:36:35,440 --> 00:36:37,719 Speaker 1: I referred to this earlier, that the Federal Reserve has 622 00:36:37,719 --> 00:36:40,840 Speaker 1: taken a much more active role in quote unquote protecting 623 00:36:40,920 --> 00:36:45,799 Speaker 1: the market. Right, so the reaction function to declines has 624 00:36:45,880 --> 00:36:50,240 Speaker 1: become more aggressive over time, and it has become quicker 625 00:36:50,280 --> 00:36:53,359 Speaker 1: to be instituted. Right on, in two thousand, we saw 626 00:36:53,400 --> 00:36:57,200 Speaker 1: a dramatic market decline with relatively limited intervention. By the 627 00:36:57,239 --> 00:36:59,640 Speaker 1: time we got to two thousand and twenty, you know, 628 00:36:59,760 --> 00:37:03,000 Speaker 1: the within days and weeks of the market declined beginning 629 00:37:03,000 --> 00:37:06,359 Speaker 1: the Federal Reserve is rolling out unprecedented programs. Right. Part 630 00:37:06,400 --> 00:37:08,239 Speaker 1: of the reason why that's happening is to say, the 631 00:37:08,239 --> 00:37:10,439 Speaker 1: FED is relied in the post two thousand eight, post 632 00:37:10,520 --> 00:37:14,680 Speaker 1: GFC environment on the wealth effect to stimulate the economy, 633 00:37:14,760 --> 00:37:17,839 Speaker 1: recognizing that a sizeable and growing fraction of the US 634 00:37:17,880 --> 00:37:21,719 Speaker 1: population relies on self directed retirement accounts to provide for 635 00:37:21,760 --> 00:37:26,439 Speaker 1: extended retirements, etcetera. I don't know that there is any 636 00:37:26,480 --> 00:37:29,960 Speaker 1: way out of that, but the tools that are becoming 637 00:37:29,960 --> 00:37:32,600 Speaker 1: of the tools that they have available are becoming fewer 638 00:37:32,640 --> 00:37:35,840 Speaker 1: and fewer. Right, So the ability to cut interest rates 639 00:37:35,920 --> 00:37:39,399 Speaker 1: from the six percent level in two thousand I'm sorry, 640 00:37:39,440 --> 00:37:43,480 Speaker 1: two thousand seven and we were at nine percent, right, 641 00:37:44,320 --> 00:37:47,439 Speaker 1: that's now largely gone. We can't cut those interest rates 642 00:37:47,520 --> 00:37:50,640 Speaker 1: much further from zero without it becoming potentially contractionary because 643 00:37:50,680 --> 00:37:54,560 Speaker 1: it becomes effectively attacks on wealth. So that the need 644 00:37:54,719 --> 00:37:58,800 Speaker 1: for investors to take the steps to protect their portfolios, 645 00:37:59,320 --> 00:38:01,919 Speaker 1: in my view, is actually growing. At the same time, 646 00:38:01,960 --> 00:38:03,960 Speaker 1: of course, that the confidence in the Fed's ability to 647 00:38:04,000 --> 00:38:06,520 Speaker 1: protect the markets through you know, various memes of FED 648 00:38:06,560 --> 00:38:11,120 Speaker 1: printer Goesburg etcetera is growing higher and higher and higher. Right, 649 00:38:11,200 --> 00:38:14,279 Speaker 1: people have completely forgotten that the market could crash as 650 00:38:14,280 --> 00:38:17,960 Speaker 1: aggressively as it did in March. Now the perception is 651 00:38:18,000 --> 00:38:21,000 Speaker 1: you can't have any type of decline of of you know, 652 00:38:21,040 --> 00:38:27,480 Speaker 1: any sustained period or severity it is. It is fascinating. Um. 653 00:38:28,000 --> 00:38:31,840 Speaker 1: The more I just think and think about it, I'm like, yeah, 654 00:38:31,880 --> 00:38:35,239 Speaker 1: and plus all the book, it's all boom or retirement money, 655 00:38:35,320 --> 00:38:37,840 Speaker 1: and the boomers have all the power and there's a 656 00:38:37,880 --> 00:38:41,400 Speaker 1: revolving door it. I don't want to go conspiracy theory, 657 00:38:41,440 --> 00:38:43,799 Speaker 1: but it just seems like they they're just not going 658 00:38:43,840 --> 00:38:46,520 Speaker 1: to let the market go down. It's now almost like 659 00:38:47,360 --> 00:38:49,799 Speaker 1: socialized in a weird way, where they have to have 660 00:38:49,880 --> 00:38:52,719 Speaker 1: it stay up so people can take the retirement money out. 661 00:38:53,440 --> 00:38:56,040 Speaker 1: The point of the stock market, which is supposed to 662 00:38:56,040 --> 00:39:00,279 Speaker 1: be not really that bankable you know, used us to 663 00:39:00,280 --> 00:39:04,640 Speaker 1: be risky, has become the They shaped it to be 664 00:39:05,080 --> 00:39:08,200 Speaker 1: something that is more reliable, and now there's so much 665 00:39:08,200 --> 00:39:10,879 Speaker 1: money in it and it's hard to see where it ends. Well, 666 00:39:11,719 --> 00:39:13,759 Speaker 1: I think, uh, I think Eric's going to go to 667 00:39:13,760 --> 00:39:20,440 Speaker 1: a bitcoin island. Well, I think this will come to 668 00:39:20,480 --> 00:39:24,239 Speaker 1: crypto Yeah, I mean, um, Joel's joke about bitcoin Island. 669 00:39:24,280 --> 00:39:26,759 Speaker 1: I mean, I've I've said this elsewhere and i'll i'll, 670 00:39:27,239 --> 00:39:30,919 Speaker 1: you know, continue to stand behind it that people understand 671 00:39:31,040 --> 00:39:34,799 Speaker 1: that the system is growing increasingly fragile and growing increasingly 672 00:39:34,880 --> 00:39:38,080 Speaker 1: dependent on the need to keep stability right. And so 673 00:39:38,120 --> 00:39:40,520 Speaker 1: this play is right into the Hyman Minsky type framework 674 00:39:41,080 --> 00:39:44,320 Speaker 1: of the more you create stability, the more you build fragility. 675 00:39:44,400 --> 00:39:48,840 Speaker 1: The system when it breaks becomes catastrophic. We can't possibly 676 00:39:48,840 --> 00:39:51,440 Speaker 1: know when that's going to occur, but all I can 677 00:39:51,480 --> 00:39:55,160 Speaker 1: do is encourage people to recognize that the message that 678 00:39:55,239 --> 00:39:57,560 Speaker 1: they get from the stock market, right, the idea that 679 00:39:57,600 --> 00:40:01,040 Speaker 1: there's the expectations channel and the smart and brightest minds 680 00:40:01,040 --> 00:40:04,400 Speaker 1: in America are speculating in stocks and telling you the 681 00:40:04,600 --> 00:40:09,920 Speaker 1: forward expected returns associated with the US economy and income prospects, etcetera. 682 00:40:10,480 --> 00:40:14,640 Speaker 1: That's just not true in the presence of systematic strategies 683 00:40:14,680 --> 00:40:17,000 Speaker 1: that literally are as simple as did you give me cash? 684 00:40:17,040 --> 00:40:21,560 Speaker 1: If so, then by right, And that is really what 685 00:40:22,360 --> 00:40:25,719 Speaker 1: you know catches my imagination in terms of the opportunity 686 00:40:25,840 --> 00:40:30,240 Speaker 1: to build a better solution for investors and a set 687 00:40:30,280 --> 00:40:34,880 Speaker 1: of tools that simplify the process for investment advisors that 688 00:40:34,920 --> 00:40:38,760 Speaker 1: are trying to understand how to protect their portfolios, both 689 00:40:39,000 --> 00:40:41,720 Speaker 1: on a right tail outcome and on a left tail outcome. 690 00:40:42,760 --> 00:40:44,960 Speaker 1: I like how you slipped and simplified there, Michael, that 691 00:40:45,040 --> 00:40:48,719 Speaker 1: was good product. But yeah, how much does this? How 692 00:40:48,800 --> 00:40:53,839 Speaker 1: much does this actually help understand and explain the bitcoin phenomenon? 693 00:40:53,920 --> 00:40:57,479 Speaker 1: Right of Like if there's this inherent feeling that things 694 00:40:57,520 --> 00:41:00,279 Speaker 1: are getting more fragile, like here's this, I'll turn native 695 00:41:00,280 --> 00:41:04,239 Speaker 1: asset that no one's ever seen before. That's better than 696 00:41:04,320 --> 00:41:07,920 Speaker 1: nothing else, Right, Yeah, shouldn't this make you pro bitcoin? 697 00:41:08,040 --> 00:41:12,200 Speaker 1: Mike um when you say, shouldn't make me pro bitcoin? 698 00:41:12,320 --> 00:41:15,520 Speaker 1: So so, I just want to emphasize my view on 699 00:41:15,680 --> 00:41:17,839 Speaker 1: bitcoin is not whether it is going to go up 700 00:41:17,920 --> 00:41:20,000 Speaker 1: or down in the short term. Right. My view on 701 00:41:20,080 --> 00:41:26,400 Speaker 1: bitcoin is that it is distracting people from um participating 702 00:41:26,600 --> 00:41:30,760 Speaker 1: in a robust discussion around how to fix the system 703 00:41:30,880 --> 00:41:34,719 Speaker 1: the minute you choose an exit voice, right, which candidly 704 00:41:34,719 --> 00:41:37,920 Speaker 1: has happened historically before. Right. The nineteenth century was largely 705 00:41:37,960 --> 00:41:41,239 Speaker 1: about immigrants, immigrants from Europe and the rest of the 706 00:41:41,239 --> 00:41:44,359 Speaker 1: world coming to the New World in order to buy 707 00:41:44,400 --> 00:41:47,480 Speaker 1: a better future for themselves, taking an exit voice from 708 00:41:47,520 --> 00:41:49,680 Speaker 1: you know, the corrupt societies that they were part of. 709 00:41:49,800 --> 00:41:52,879 Speaker 1: Right today you see people trying to do that same 710 00:41:52,920 --> 00:41:56,600 Speaker 1: thing without changing their geographic location, and it just doesn't 711 00:41:56,760 --> 00:42:00,239 Speaker 1: work that way. You can separate yourself from authoritarian m 712 00:42:00,239 --> 00:42:03,120 Speaker 1: in danger by physically removing yourself and taking yourself an 713 00:42:03,160 --> 00:42:06,359 Speaker 1: ocean away onto a protected continent. You can't do that 714 00:42:06,440 --> 00:42:09,200 Speaker 1: by moving your bank account. Right. It's just it's not 715 00:42:09,360 --> 00:42:13,560 Speaker 1: an accurate representation or a realistic way to step out 716 00:42:13,760 --> 00:42:17,680 Speaker 1: of the system. And further, it doesn't create the opportunity 717 00:42:17,760 --> 00:42:22,520 Speaker 1: for building something better. That's my complaint about bitcoin, Paul, 718 00:42:22,640 --> 00:42:25,719 Speaker 1: last question for you favorite et F ticker other than 719 00:42:25,760 --> 00:42:30,600 Speaker 1: your own? Um, I've always liked PPNJ. I don't know 720 00:42:30,719 --> 00:42:33,640 Speaker 1: like tickers like that are fun um and and not 721 00:42:33,719 --> 00:42:35,960 Speaker 1: a direct competitor either, which is great. Good. There you go. 722 00:42:36,520 --> 00:42:40,359 Speaker 1: And my goal. What is Peter Til's favorite? I have 723 00:42:40,400 --> 00:42:48,160 Speaker 1: no idea. How about yours? Um x I V legend 724 00:42:48,960 --> 00:42:51,239 Speaker 1: People still tweet about it. I mean, if you if 725 00:42:51,280 --> 00:42:53,279 Speaker 1: you look dollar sign x I V, it's probably five 726 00:42:53,320 --> 00:42:58,120 Speaker 1: six tweets today. People miss that thing. Yeah, I would 727 00:42:58,160 --> 00:43:00,960 Speaker 1: love the opportunity to have another shot that, but um, 728 00:43:01,320 --> 00:43:04,320 Speaker 1: Instead we'll come at it from a different angle, Paul 729 00:43:04,560 --> 00:43:08,800 Speaker 1: Michael James, thanks for joining us on Trillions. Thank you guys, pleasure, 730 00:43:09,160 --> 00:43:18,160 Speaker 1: thanks for having Thanks for listening to Trillions. Until next time. 731 00:43:18,400 --> 00:43:21,200 Speaker 1: You can find us on the Bloomberg Terminal, Bloomberg dot com, 732 00:43:21,280 --> 00:43:24,520 Speaker 1: Apple Podcast, Spotify, and Warbils. Do you'd like to listen, 733 00:43:25,200 --> 00:43:28,040 Speaker 1: We'd love to hear from you. We're on Twitter, I'm 734 00:43:28,080 --> 00:43:31,160 Speaker 1: at Joel Wepper Show, He's at Eric Baltunus and you 735 00:43:31,200 --> 00:43:34,960 Speaker 1: could find James at j S E y f F. 736 00:43:35,560 --> 00:43:40,040 Speaker 1: For more unsimplified, go to simplify dot us. This episode 737 00:43:40,040 --> 00:43:43,600 Speaker 1: of Trillions was produced by Magnus Hendrickson and Jessica Levy 738 00:43:43,719 --> 00:43:49,160 Speaker 1: is the head of Bloomberg Podcast. Bye.