WEBVTT - The No Downside ETF 0:00:05.760 --> 0:00:06.480 Welcome to Trallians. 0:00:06.480 --> 0:00:12.479 I'm Joel Webber and I'm Eric Valchunis Eric. 0:00:12.480 --> 0:00:14.600 Every once in a while we come across the thing 0:00:14.840 --> 0:00:19.360 that feels like a big deal, maybe a good thing, 0:00:19.800 --> 0:00:22.720 really good thing for investors, and this one really piqued 0:00:22.760 --> 0:00:23.799 my interest. 0:00:24.480 --> 0:00:27.120 Yeah, there's a new category that's getting big quickly and 0:00:27.160 --> 0:00:29.920 it's really we call them the buffer ETFs. Target out 0:00:30.040 --> 0:00:32.720 target outcome is another name for them, and there's been 0:00:32.760 --> 0:00:35.320 there's dozens of them. But there was a story written 0:00:35.360 --> 0:00:38.239 by Bloomberg News that had a headline that really just 0:00:38.280 --> 0:00:40.320 caught people's attention. This story got a lot of reads 0:00:40.840 --> 0:00:43.400 and it was basically along the lines of, hey, here's 0:00:43.400 --> 0:00:47.280 a new fund that offers one downside protection. 0:00:47.720 --> 0:00:49.000 Downside protection. 0:00:49.240 --> 0:00:52.880 That's what I like, Yeah, everybody does. I think there's 0:00:52.920 --> 0:00:55.280 also a too good to be true element to it 0:00:55.320 --> 0:00:57.160 as well, and so clearly you're going to click on 0:00:57.200 --> 0:00:59.560 that and say what's going on here? And I think 0:00:59.600 --> 0:01:01.440 it's just excuse to get into the buffer funds and 0:01:01.440 --> 0:01:04.920 what they do and the audience they serve. I just 0:01:04.959 --> 0:01:07.720 looked recently they've taken in over five billion this year. 0:01:07.760 --> 0:01:10.839 That's a twenty three percent organic growth rate. That's about 0:01:11.000 --> 0:01:13.120 triple the ETF industry as a whole. They're now up 0:01:13.160 --> 0:01:16.080 to about thirty billion dollars. And this search I did 0:01:16.240 --> 0:01:17.920 isn't even catching them all. It's only the ones with 0:01:17.959 --> 0:01:20.360 buffer in the name. But anyway, it's a whole big category. 0:01:20.360 --> 0:01:22.080 Black Rocks jumped in and so I think it's a 0:01:22.080 --> 0:01:25.240 good time to revisit this, in particular this one that 0:01:25.280 --> 0:01:26.959 has one hundred percent downside protection. 0:01:28.120 --> 0:01:30.480 Joining us on this episode. We're gonna have Bruce Bond, 0:01:30.840 --> 0:01:34.360 the CEO and founder of Innovator Capitol Management, as well 0:01:34.360 --> 0:01:37.959 as Graham Day, the chief investment officer, and we're going 0:01:38.000 --> 0:01:42.080 to talk about the Innovator equity defined protection ETF with 0:01:42.160 --> 0:01:52.200 the ticker t Jewel, this time on trillions no downside Bruce, Graham, 0:01:52.320 --> 0:01:53.560 Welcome to the Trillions. 0:01:53.560 --> 0:01:56.200 Great to be here, guys, really happy to be here. 0:01:56.280 --> 0:01:57.280 Thanks for having us guys. 0:01:57.360 --> 0:02:00.919 Okay, Bruce, I'm gonna start with you. Do you prefer 0:02:00.960 --> 0:02:05.080 the term buffer ETF or defined outcome? 0:02:06.240 --> 0:02:10.680 We prefer the term defined outcome to cover the whole 0:02:10.840 --> 0:02:18.359 category of these defined outcome type ETFs, which includes buffers, accelerated, 0:02:19.400 --> 0:02:24.080 income based and now you know the defined protection ETFs 0:02:24.120 --> 0:02:26.840 as well, so we look at defined outcome kind of 0:02:26.840 --> 0:02:29.720 as an umbrella, and buffers is a category within that. 0:02:29.919 --> 0:02:33.200 Okay, so is this too good to be true? I 0:02:33.200 --> 0:02:35.680 mean I put money in and then a little bit later, 0:02:36.040 --> 0:02:39.639 like chaos unfolds. There's no downside. I only get upside. 0:02:39.680 --> 0:02:41.520 That seems like there's a catch. 0:02:42.480 --> 0:02:46.040 Yeah, well there really is no catch. It is a 0:02:46.080 --> 0:02:48.360 great product. It took us a while to get it out, 0:02:48.960 --> 0:02:51.079 and I think to be able to tell people that 0:02:51.120 --> 0:02:53.680 you can now participate in the equity markets with no 0:02:53.880 --> 0:02:58.320 downside risk and with upside now you are giving a 0:02:58.360 --> 0:02:59.239 couple things up. 0:02:59.639 --> 0:03:01.440 One of the Oh there's the catch, okay, yeah, what 0:03:01.520 --> 0:03:02.040 do I give up? 0:03:02.080 --> 0:03:02.280 Yeah? 0:03:02.320 --> 0:03:05.560 So I guess, yeah, I mean catch you're giving up 0:03:05.560 --> 0:03:09.359 the dividend, so you don't receive the dividend, and you're 0:03:09.400 --> 0:03:13.880 also giving up the upside over two years above sixteen 0:03:13.960 --> 0:03:17.800 point six percent, you know, so any performance over sixteen 0:03:17.800 --> 0:03:20.519 and a half percent, let's say you're giving that up. 0:03:20.840 --> 0:03:23.280 So you're giving up the dividend and that and so 0:03:23.360 --> 0:03:26.000 those are the gives up. So there's nothing free within 0:03:26.080 --> 0:03:29.520 the investing world, as we all know. But to be 0:03:29.520 --> 0:03:32.959 able to understand you don't have downside, but you get 0:03:33.040 --> 0:03:36.840 that amount of upside is a huge benefit to many 0:03:36.880 --> 0:03:38.800 many people in the investing world. 0:03:39.000 --> 0:03:42.640 Do you keep whatever's above sixteen percent. 0:03:43.760 --> 0:03:47.320 No, we don't keep it. What happens is we take 0:03:47.360 --> 0:03:49.680 the dividend and we buy part of the options with 0:03:49.720 --> 0:03:52.040 the dividend. But then we don't quite have enough money 0:03:52.120 --> 0:03:54.400 just using the dividend to buy the options, and so 0:03:54.840 --> 0:03:58.000 we have to sell a call and we determine where 0:03:58.040 --> 0:04:00.320 the cap is by how much money we have to 0:04:00.400 --> 0:04:03.320 raise in order to finance this package. We want the 0:04:03.360 --> 0:04:07.000 options package to be a zero cost package for investors, 0:04:07.320 --> 0:04:10.120 and so we set the cap there. So where's really 0:04:10.200 --> 0:04:13.120 We're selling off the upside to get a little more 0:04:13.200 --> 0:04:16.360 money to finance the package. And that's really what happens, 0:04:16.400 --> 0:04:18.680 and the way we're able to give you the downside 0:04:18.800 --> 0:04:21.600 protection and give you a certain amount of the upside. 0:04:21.640 --> 0:04:24.080 Gram Let's come in here. That was a deep endo 0:04:24.120 --> 0:04:26.039 the swimming pool. Can you break that down a little 0:04:26.080 --> 0:04:26.680 bit before. 0:04:26.480 --> 0:04:30.360 Me, guys, It's really simple. All we're doing is, as 0:04:30.400 --> 0:04:35.600 Bruce was saying, in giving up unlimited upside potential, you're 0:04:35.920 --> 0:04:39.640 exchanging that for the certainty of having a one hundred 0:04:39.680 --> 0:04:44.320 percent buffer and if you think about long term the 0:04:44.640 --> 0:04:48.279 ability to get some equity upside in today's market where 0:04:48.279 --> 0:04:51.640 it's at all time highs, where people are really scared 0:04:52.200 --> 0:04:55.279 of what do I do. Do I just keep giving 0:04:55.320 --> 0:04:57.279 my money to the banks and letting them sit in 0:04:57.279 --> 0:05:01.120 the deposits, or do I invest in the markets but 0:05:01.200 --> 0:05:04.520 also have that one hundred percent protection and so to 0:05:04.560 --> 0:05:08.839 have a sixteen percent upside over two years, history suggests 0:05:08.880 --> 0:05:11.640 that's a better spot to be than if you were 0:05:11.680 --> 0:05:14.440 just sitting on the sidelines in cash. 0:05:14.480 --> 0:05:16.480 Okay, there's a lot of questions on where this fits 0:05:16.480 --> 0:05:18.680 into portfolio, who it's for, But before we get there, 0:05:18.839 --> 0:05:22.080 just while we're on the product itself, just explain as 0:05:22.120 --> 0:05:25.200 best you can what you're doing in the portfolio. You 0:05:25.240 --> 0:05:28.880 talked about selling the upside. What kind of options are 0:05:28.920 --> 0:05:32.520 you using, how often are you changing the options, what 0:05:32.680 --> 0:05:33.839 kind of options are they? 0:05:34.520 --> 0:05:37.080 It's really simple at the end of the day, these 0:05:37.120 --> 0:05:40.400 are three options positions that we're holding. And the beauty 0:05:40.480 --> 0:05:43.679 of the defined outcome ets is that once that basket 0:05:43.720 --> 0:05:47.520 of options is set, it is fixed for the entirety 0:05:47.520 --> 0:05:50.000 of the outcome period. There's no active management, there's no 0:05:50.040 --> 0:05:54.400 one pulling levers behind the curtain. That's what gives all 0:05:54.440 --> 0:05:57.040 investors a defined outcome. And so we start with a 0:05:57.120 --> 0:05:59.600 deepend the money call on the S and P five 0:05:59.680 --> 0:06:03.760 hundred that gives you the long exposure to the S 0:06:03.800 --> 0:06:07.080 and P five hundred, and then, as Bruce mentioned, we 0:06:07.240 --> 0:06:10.880 use the implied dividend inside that deep in the money 0:06:10.920 --> 0:06:15.360 call to help fund the at the money put so 0:06:15.400 --> 0:06:17.520 and at the money put is what gives you that 0:06:17.640 --> 0:06:21.760 one hundred percent downside protection. Now the dividend is not 0:06:22.080 --> 0:06:26.240 enough to cover that cost of that protection, and so 0:06:26.320 --> 0:06:29.640 that's where we go out and we put the market 0:06:29.640 --> 0:06:33.440 makers on the option side into competition and tell them, look, 0:06:33.480 --> 0:06:36.760 we need to finance this downside protection. At what level 0:06:36.800 --> 0:06:40.320 can we sell a call the highest level possible to 0:06:40.400 --> 0:06:44.120 finance the remainder of the cost of the protection. In 0:06:44.120 --> 0:06:47.279 this case, it was sixteen point six percent. We sell 0:06:47.360 --> 0:06:50.960 that call. That's what gives the cap to investors, but 0:06:51.000 --> 0:06:54.880 it's also what helps finance that at the money put. 0:06:56.160 --> 0:06:59.040 When these products come out they sometimes have dates around them. 0:06:59.080 --> 0:07:01.640 Is this is this one T jewel, which by the way, 0:07:01.720 --> 0:07:03.480 sounds like a like a rapper. It's a cool name, 0:07:03.520 --> 0:07:05.479 it's like a It just kind of rolls off the tongue. 0:07:05.480 --> 0:07:07.039 Whoever got that took your good job? 0:07:08.120 --> 0:07:08.480 Do you? 0:07:08.560 --> 0:07:11.160 These are designed to start on the day that they 0:07:11.200 --> 0:07:13.760 come out, kind of right. It's not a lot of 0:07:13.760 --> 0:07:17.200 other ETFs, including leveraged the leverage resets every day. This 0:07:17.240 --> 0:07:19.240 is a little different. Can you just explain how the 0:07:19.280 --> 0:07:20.400 timing works. 0:07:20.680 --> 0:07:22.880 Yeah, and Eric, maybe even before we do that, we 0:07:22.920 --> 0:07:25.840 didn't really talk about, Okay, what is this product and 0:07:25.840 --> 0:07:27.800 how does it work a little bit, you know, just 0:07:27.880 --> 0:07:32.080 kind of the overview for everyone. Yeah, basically, t jewel 0:07:32.200 --> 0:07:36.800 It was listed on the first of July, and you 0:07:36.960 --> 0:07:40.920 have to hold this product for two years in order 0:07:40.960 --> 0:07:44.720 to get the sixteen point six percent. So you buy 0:07:44.800 --> 0:07:48.000 that and then over a two year period, if the 0:07:48.040 --> 0:07:51.080 market is up twenty percent, you get sixteen point six 0:07:51.120 --> 0:07:53.240 If the market is up ten percent, you just get 0:07:53.280 --> 0:07:56.760 ten percent, So you get all the way up to 0:07:57.320 --> 0:08:00.480 sixteen point six percent. Now, the beauty of this product 0:08:00.560 --> 0:08:04.120 is that you can't lose money on the downside if 0:08:04.120 --> 0:08:06.880 you buy day one. So if the market's down five percent, 0:08:06.920 --> 0:08:08.880 you don't lose. If it's down ten percent, you don't lose. 0:08:08.920 --> 0:08:11.960 If it's down twenty percent from July first, you don't 0:08:11.960 --> 0:08:14.680 lose any money, and I think that's what people are 0:08:14.720 --> 0:08:16.200 so excited about. So I just want to make sure 0:08:16.200 --> 0:08:19.720 everybody understands this. Although what Graham's talking about with the 0:08:19.720 --> 0:08:22.000 call bonds, and I mean with the calls and the 0:08:22.040 --> 0:08:24.360 options and all this stuff, it's not kind of confusing 0:08:24.440 --> 0:08:27.320 for some people. What they really need to do is 0:08:27.320 --> 0:08:29.680 look at this at face value. You buy it on 0:08:29.760 --> 0:08:32.040 the first of July, or you can really buy it anytime. 0:08:32.080 --> 0:08:34.320 If you look at the website, you get the upside 0:08:34.360 --> 0:08:36.280 of the market up to sixteen and a half percent 0:08:36.600 --> 0:08:38.880 and you have no risk on the downside. But you 0:08:39.000 --> 0:08:40.840 have to stay in it for two years in order 0:08:40.880 --> 0:08:43.880 to receive that. And that's really what people are so 0:08:43.960 --> 0:08:46.439 excited about. So storry to interrupt. I just want to 0:08:46.440 --> 0:08:48.040 make sure everybody understood where we were. 0:08:54.960 --> 0:08:58.280 Do people religiously buy on the first day and then 0:08:58.600 --> 0:09:00.480 nobody buys it? Or do you find some people come 0:09:00.520 --> 0:09:03.400 into these products after a couple months or a year. 0:09:03.920 --> 0:09:05.560 Is there a benefit to buying it a year in 0:09:05.760 --> 0:09:08.640 let's say the market is down or up, like, is 0:09:08.679 --> 0:09:11.880 there a trading crowd that gets into this even if 0:09:11.920 --> 0:09:15.200 they're not sort of maybe the older investor looking to 0:09:15.280 --> 0:09:17.720 protect their wealth and they go in day one, Is 0:09:17.760 --> 0:09:21.040 there any thing you can do with this after day one? 0:09:22.240 --> 0:09:26.600 Eric? Yes. For the most part, though, we do find 0:09:26.640 --> 0:09:29.440 advisors like to buy at the very beginning of the 0:09:29.440 --> 0:09:32.320 outcome period. They like to understand that they have the 0:09:32.360 --> 0:09:36.000 full downside buffer, they have the full upside cap. And 0:09:36.040 --> 0:09:39.360 I think one of the things that we realized early 0:09:39.440 --> 0:09:42.440 on when we brought these products back in twenty eighteen 0:09:42.640 --> 0:09:45.720 was that what I alluded to before, when you look 0:09:45.760 --> 0:09:49.800 at the defined outcome, that package of options is fixed 0:09:49.800 --> 0:09:52.520 for the entirety of the outcome period. That means it's 0:09:52.520 --> 0:09:56.280 someone who buys, say six months into an outcome period, 0:09:57.040 --> 0:09:59.959 they can still achieve a defined outcome. Now, their outcome 0:10:00.120 --> 0:10:03.000 may look a little different. The price of the underline 0:10:03.120 --> 0:10:05.000 and the options have moved, so the price of the 0:10:05.000 --> 0:10:08.080 ETF has moved. But now if they had a one 0:10:08.160 --> 0:10:10.360 year out from pater to start and they're six months in, 0:10:10.840 --> 0:10:15.040 now they have a unique six month defined outcome that 0:10:15.080 --> 0:10:18.880 they can achieve. And so we've seen a growing number 0:10:19.080 --> 0:10:23.640 of advisors who have grown comfortable with using these ets. 0:10:24.280 --> 0:10:26.360 Maybe they started buying at the very beginning of the 0:10:26.360 --> 0:10:29.480 outcome period, but now they look and realize, well, this 0:10:29.559 --> 0:10:33.200 payoff is really intriguing to me and my clients for 0:10:33.400 --> 0:10:37.319 this next six months. In terms of the trading community, 0:10:37.400 --> 0:10:41.160 I think there's definitely some and we've been talking with 0:10:41.200 --> 0:10:45.880 some institutions that have used options in sophisticated ways, but 0:10:45.920 --> 0:10:49.560 the ability to access a package of options via single 0:10:49.600 --> 0:10:54.440 ETF is far more efficient for them than it is 0:10:54.480 --> 0:11:00.000 to recreate the options package, trade those individual option legs 0:11:00.120 --> 0:11:03.520 tax full event every single time you're managing this portfolio options. 0:11:03.559 --> 0:11:07.839 And so we're seeing the application of these ets extending 0:11:07.960 --> 0:11:12.000 from simply using day one the people using throughout the 0:11:12.040 --> 0:11:16.600 outcome period, to now getting some of these institutions involved 0:11:16.600 --> 0:11:17.040 as well. 0:11:17.920 --> 0:11:19.840 One other thing I would add to you guys too, 0:11:20.000 --> 0:11:22.040 just to think about. So let's say you bought in 0:11:22.200 --> 0:11:25.760 day one and then at a at the year point, 0:11:25.920 --> 0:11:28.560 let's say the market's up ten or fifteen percent and 0:11:28.600 --> 0:11:31.040 the ETF's up eight percent. You know it's not going 0:11:31.080 --> 0:11:33.679 to be up as much as the EGF. Listeners need 0:11:33.720 --> 0:11:35.960 to understand that it's going to trail a little because 0:11:35.960 --> 0:11:38.480 there's a lot of time value in there. Only at 0:11:38.480 --> 0:11:40.280 the very end of the outcome period you're going to 0:11:40.320 --> 0:11:42.880 get one to one on the upside with the SMP. 0:11:43.920 --> 0:11:47.040 And but just think about anytime you could use this 0:11:47.200 --> 0:11:49.960 if the market's up, and if the ETF is up, 0:11:50.000 --> 0:11:51.960 you can roll it into a new one at the 0:11:52.000 --> 0:11:55.000 reset time and you lock in whatever that gain is. 0:11:55.120 --> 0:11:57.240 You can't lose it after that, you know, so you 0:11:57.360 --> 0:11:59.760 just step up, you continue to lock your gains in. 0:12:00.320 --> 0:12:02.320 I can see a lot of people using it like 0:12:02.400 --> 0:12:04.080 that into the future if the market's up. 0:12:04.720 --> 0:12:08.400 And so this to me, especially after last year, because 0:12:08.400 --> 0:12:10.360 sometimes I see a product like this and I'm like, 0:12:10.760 --> 0:12:13.960 why not just like diversify old school, have some treasuries, 0:12:14.000 --> 0:12:17.120 have some stocks. But after last year, treasuries and stocks 0:12:17.120 --> 0:12:20.679 both went down a lot, And so how big of 0:12:20.720 --> 0:12:23.600 an opening did that create? Because I get the appeal here, right, 0:12:23.679 --> 0:12:26.240 You've got older investors especially who have a lot of gains. 0:12:26.280 --> 0:12:28.000 I was going to say, like a retiree. 0:12:28.080 --> 0:12:31.000 This just seems like, yeah, what is the average age 0:12:31.200 --> 0:12:33.719 in these funds? Got to be like seventy? I mean 0:12:33.720 --> 0:12:35.240 I can't I mean, you wouldn't use this if you're 0:12:35.320 --> 0:12:36.360 thirty years old, right. 0:12:37.240 --> 0:12:40.040 Yeah, it's hard to track. But you know one other thing, 0:12:40.160 --> 0:12:42.280 you know, because they're ETOs, we don't know everybody that 0:12:42.360 --> 0:12:45.679 owns them. But the thing to remember is that like 0:12:45.800 --> 0:12:50.760 seventy five percent of investable assets are in pre retirement 0:12:50.840 --> 0:12:55.040 and retirement accounts. That's where most of the money is located. 0:12:55.600 --> 0:12:58.720 And so those people that are getting ready are looking 0:12:58.760 --> 0:13:02.199 at retirement, are almost in retirement or saying I don't 0:13:02.240 --> 0:13:04.439 want to put my money at risk, and Eric, you're right. 0:13:04.480 --> 0:13:06.560 Typically you would say, you know, let's say you get 0:13:06.600 --> 0:13:09.000 a windfall, you get a million blocks, and you're like, okay, 0:13:09.000 --> 0:13:10.760 well I need to buy a little bond. I got 0:13:10.840 --> 0:13:12.760 to buy a little You don't have to think about 0:13:12.760 --> 0:13:13.480 that anymore. 0:13:13.679 --> 0:13:14.520 If you don't want to. 0:13:14.559 --> 0:13:17.000 You can just buy this and say, Okay, I get 0:13:17.080 --> 0:13:20.199 all the upside up to sixteen percent over the next 0:13:20.280 --> 0:13:22.280 couple of years. I got no risk on the downside. Why, 0:13:22.360 --> 0:13:24.880 I think about what I want to do, and I 0:13:24.880 --> 0:13:29.000 think those are the options that this gives people that 0:13:29.080 --> 0:13:32.120 they didn't have access to before. One other thing, Eric, 0:13:32.160 --> 0:13:35.560 you can appreciate this. The SEC has never approved the 0:13:35.679 --> 0:13:40.040 name protection and the name of any other ETF until now. 0:13:40.640 --> 0:13:45.760 It's called defined protection ETFs that innovators bringing. That's a 0:13:45.760 --> 0:13:48.000 big deal. It tells you a lot about how the 0:13:48.040 --> 0:13:49.360 SEC has seen them as well. 0:13:49.720 --> 0:13:53.200 How were those conversations. Did it take a lot to 0:13:53.360 --> 0:13:57.000 convince them, because they are pretty conservative when it comes 0:13:57.040 --> 0:13:58.840 to putting certain words in the name. 0:14:01.800 --> 0:14:05.840 Eric, you know, really know. In fact, what you'll find 0:14:05.880 --> 0:14:07.880 when you bring a lot of products to market is 0:14:07.920 --> 0:14:11.480 that the SEC has a significant amount of input when 0:14:11.520 --> 0:14:14.600 it comes to the final name, and so you are 0:14:14.960 --> 0:14:18.200 it's almost a collaboration with them. And so we were 0:14:18.240 --> 0:14:21.160 actually very surprised that this was one of the iterations 0:14:21.200 --> 0:14:23.960 that they had come back to us with. And so 0:14:24.040 --> 0:14:26.560 I think to Bruce's point, that kind of reaffirms that 0:14:26.600 --> 0:14:31.440 they understand the value add proposition of this ETF and 0:14:31.480 --> 0:14:34.760 it being the first ETF that for this outcome period 0:14:35.000 --> 0:14:37.560 is going to provide investors what they have one hundred 0:14:37.600 --> 0:14:39.160 percent buffer on the downside. 0:14:39.320 --> 0:14:42.120 Okay, so here's the question that I really want to know. 0:14:43.080 --> 0:14:44.040 What took so long? 0:14:45.520 --> 0:14:45.760 Yeah? 0:14:45.800 --> 0:14:49.200 Exactly. Well, you know, if good things take time, y'all, 0:14:49.240 --> 0:14:52.200 you know that, so it uh, yeah, it took a while. 0:14:52.480 --> 0:14:57.560 And you know, I think in our approach to the business, 0:14:57.600 --> 0:14:59.520 what we do is we look at the market and 0:14:59.560 --> 0:15:02.160 we say what do people need, what do they really want? 0:15:02.400 --> 0:15:04.480 What are they using today that we might be able 0:15:04.520 --> 0:15:07.000 to do better. And so if you look at the 0:15:07.040 --> 0:15:10.800 annuity business, this is why do people buy annuities for 0:15:10.880 --> 0:15:13.000 the insurance. They want to know they're not going to 0:15:13.040 --> 0:15:16.360 lose that money, right, and so this provides that to them. 0:15:16.560 --> 0:15:20.880 Or even market link CDs that banks issue, why do 0:15:21.000 --> 0:15:23.320 people buy those because they want to know they can't 0:15:23.360 --> 0:15:27.600 lose money. Well, guess what's insurance companies? I mean, heaven forbid, 0:15:27.640 --> 0:15:31.640 we have a huge environmental calamity in these insurance companies. 0:15:31.640 --> 0:15:33.560 So of them go down or something, I mean, it's 0:15:33.600 --> 0:15:36.960 a real concern on people's minds these days. These do 0:15:37.040 --> 0:15:39.920 not have credit risk. You don't have to wonder what 0:15:39.920 --> 0:15:43.240 they're invested in. You can see what's in there and 0:15:44.160 --> 0:15:47.720 it's not tax will when it resets, and so you 0:15:47.760 --> 0:15:50.240 don't have the credit risk, you don't have the tax risk. 0:15:50.520 --> 0:15:52.680 You just let it go into the future and you 0:15:52.720 --> 0:15:54.440 know when you sell it you have to pay the 0:15:54.480 --> 0:15:57.200 tax that's there, but you don't have to pay the 0:15:57.240 --> 0:15:58.400 tax until you sell it. 0:15:59.640 --> 0:16:03.480 I remember looking through some teachers retirement plans with some 0:16:03.560 --> 0:16:07.480 of variable annuities, and the fees were ridiculous. I mean, 0:16:07.840 --> 0:16:11.760 these teachers were getting gouged in my opinion, Can you 0:16:11.800 --> 0:16:15.040 talk a little bit about that industry versus the fees 0:16:15.080 --> 0:16:16.680 on this and what the savings is. 0:16:16.720 --> 0:16:21.200 Like, Eric, I think that's you kind of hit the 0:16:21.280 --> 0:16:24.160 nail on the head when you look at the way 0:16:24.200 --> 0:16:27.960 the ETF industry has evolved. It's been taking these exposures 0:16:28.040 --> 0:16:31.600 that have been less liquid, more expensive, less tax efficient, 0:16:32.200 --> 0:16:36.240 and making them accessible to all investors at the same price. 0:16:36.760 --> 0:16:39.920 And that price is often significantly lower than what you 0:16:40.040 --> 0:16:43.440 see in the insurance market. And so that's really no 0:16:43.600 --> 0:16:48.520 different of what we've done here with Tjewel. We've taken 0:16:48.560 --> 0:16:51.320 a look at an area of the market where we 0:16:51.360 --> 0:16:54.480 were looking at the numbers twenty twenty two eighty billion 0:16:54.520 --> 0:16:59.000 dollars of fixed index annuity sales. So that's products in 0:16:59.040 --> 0:17:01.720 the insurance market that give you some of the equity upside, 0:17:02.400 --> 0:17:05.960 but give you that principle protection on the downside. The 0:17:06.000 --> 0:17:08.840 problem is the fees are high. They tend to be 0:17:09.000 --> 0:17:11.399 five six years in duration. Your money is locked up, 0:17:11.440 --> 0:17:13.040 you want to get out after a year, you're going 0:17:13.119 --> 0:17:16.920 to have a hefty surrender charge. And that doesn't even 0:17:17.000 --> 0:17:22.280 take in consideration the tax implications of those structures. And 0:17:22.320 --> 0:17:27.119 again the ETF has shown the power of deferring taxes 0:17:27.200 --> 0:17:30.240 and what that can do for the end investor. You 0:17:30.720 --> 0:17:34.679 add that, uh, you know, you add that dynamic to 0:17:35.280 --> 0:17:39.000 this ETF, the tj U L there's a massive value 0:17:39.000 --> 0:17:42.600 added potential that investors can unlock because when you look 0:17:42.600 --> 0:17:45.840 at market link CDs, when you look at insurance products, 0:17:46.560 --> 0:17:50.480 market link CDs have what's called phantom income. Now that's 0:17:50.520 --> 0:17:53.960 a fancy term for you. Essentially are going to be 0:17:54.000 --> 0:17:56.639 paying taxes along the way on gains that you have 0:17:56.720 --> 0:18:00.600 not yet received at an ordinary income rate. You look 0:18:00.640 --> 0:18:06.000 at fixed indextinuities. Once those policies come due in five 0:18:06.080 --> 0:18:09.960 or six years, you're going to be paying ordinary income 0:18:10.040 --> 0:18:15.800 taxes on gains the ETF you defer those gains. You 0:18:15.920 --> 0:18:17.639 choose if you want to sell after a year in 0:18:17.680 --> 0:18:20.960 a day, it's going to be long term cap gains. 0:18:21.000 --> 0:18:25.040 And so you think about the tax alpha potential that 0:18:25.080 --> 0:18:28.639 the ETF wrapper delivers on top of the liquidity, on 0:18:28.680 --> 0:18:31.560 top of the fact that there's no credit risk, on 0:18:31.640 --> 0:18:35.000 top of the fact that there's no surrender charges. There's 0:18:35.119 --> 0:18:38.560 a huge benefit that we think we are giving to 0:18:38.640 --> 0:18:42.760 the end investor. And there's a huge market for this 0:18:42.880 --> 0:18:48.919 type of participation in the market. But having that known goffer. 0:18:48.720 --> 0:18:52.720 In place, Okay, strong pitch, I think I understand the 0:18:52.720 --> 0:18:55.719 product a little bit better. Now, what could go wrong? 0:18:56.320 --> 0:18:58.920 What could make me not get the protection? 0:18:59.160 --> 0:19:03.119 Yeah, of March twenty twenty, or like a black Swan event, 0:19:03.359 --> 0:19:05.760 or I don't know, what would make me. 0:19:06.080 --> 0:19:08.719 There's there's none of Yeah, there's yeah, Joel, It's I mean, 0:19:08.720 --> 0:19:11.480 it's a great question. And again a lot of people 0:19:11.480 --> 0:19:13.879 will say this just sounds too good to be true. 0:19:14.520 --> 0:19:20.200 That the ETF owns options. Those options are exchange traded options. 0:19:20.440 --> 0:19:25.200 They are guaranteed for settlement by the OCC. The OCC 0:19:25.280 --> 0:19:28.040 has been identified by the US government as a too 0:19:28.359 --> 0:19:34.000 important to fail institution, and so that's your counterparty when 0:19:34.040 --> 0:19:37.479 it comes to the underlying options. The OCC has been 0:19:37.480 --> 0:19:40.560 around since the seventies. They have never defaulted on any 0:19:40.600 --> 0:19:46.480 of their obligations. So that's your counterparty. Now obviously contrasts 0:19:46.480 --> 0:19:50.680 that to a bank or insurance company. We have found 0:19:50.720 --> 0:19:54.840 investors saying we would much rather prefer having our counter 0:19:55.080 --> 0:19:58.840 party be the OCC, as opposed to an insurance company 0:19:59.000 --> 0:19:59.560 or a bank. 0:20:00.240 --> 0:20:02.040 So what can go wrong? Let me let me run 0:20:02.040 --> 0:20:05.000 at that real quick guys, I don't mean to jump in, 0:20:05.040 --> 0:20:08.440 but so really on the downside, you own to put 0:20:08.480 --> 0:20:11.920 one hundred percent put at the money, can't lose money 0:20:11.920 --> 0:20:14.960 if the market goes down. To remember, these are spy options, 0:20:15.640 --> 0:20:19.400 most liquid options in the world right, so unbelievably adopted 0:20:20.080 --> 0:20:22.919 a deep pool of options, so you really have no 0:20:23.040 --> 0:20:26.399 risk there. So the only risk someone really has if 0:20:26.440 --> 0:20:29.280 the market goes up significantly above the cap. 0:20:29.920 --> 0:20:30.520 That's it. 0:20:30.600 --> 0:20:36.080 That's your risk. And we find most people that are saying, Okay, 0:20:36.080 --> 0:20:38.960 I'm going to get one hundred percent downside protection. I'm 0:20:38.960 --> 0:20:41.679 good with sixteen. I can live with that. I'm happy 0:20:41.720 --> 0:20:44.840 with that, and I don't need more than that, and 0:20:45.440 --> 0:20:47.399 I'm willing to give up what is above that to 0:20:47.520 --> 0:20:51.120 know I can't lose going down. That's that's really your risk. 0:20:51.280 --> 0:20:55.280 And that's sixty percent over two years, sixteen over two years. 0:20:55.400 --> 0:20:58.440 What's interesting is the S and P annually I think 0:20:58.480 --> 0:21:01.600 going back fifty one hundred years returns about eight point 0:21:01.600 --> 0:21:05.280 five nine percent, So it's almost the average return of 0:21:05.359 --> 0:21:07.720 the S and P. So I get it. 0:21:07.720 --> 0:21:11.040 I mean it's actually to that end. You guys must 0:21:11.040 --> 0:21:13.480 have done a lot of back testing on this, like 0:21:13.680 --> 0:21:15.480 what did you learn from that process. 0:21:16.960 --> 0:21:19.879 Yeah, I think you know what we found is and 0:21:20.000 --> 0:21:23.359 you look at today's market and you've got a JP 0:21:23.480 --> 0:21:26.480 Morgan in their second half outlook, they said that twenty 0:21:26.480 --> 0:21:28.960