1 00:00:03,160 --> 00:00:08,320 Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. 2 00:00:10,480 --> 00:00:13,800 Speaker 2: Hello and welcome to the Money Stuff Podcast, your weekly 3 00:00:13,840 --> 00:00:18,080 Speaker 2: podcast where we talk about stuff related to money. I'm 4 00:00:18,079 --> 00:00:19,960 Speaker 2: Matt Levine and I write the Money Stuff column for 5 00:00:20,000 --> 00:00:20,800 Speaker 2: Bloomberg Opinion. 6 00:00:21,560 --> 00:00:24,520 Speaker 1: And I'm Katie Greifeld, a reporter for Bloomberg News and 7 00:00:24,560 --> 00:00:26,200 Speaker 1: an anchor for Bloomberg Television. 8 00:00:27,120 --> 00:00:29,400 Speaker 2: And he were talking about just one topic today. 9 00:00:29,600 --> 00:00:29,760 Speaker 1: Yeah. 10 00:00:29,840 --> 00:00:32,760 Speaker 2: That topic is you showed a horse this week. 11 00:00:34,360 --> 00:00:38,720 Speaker 1: I was gonna say ets, but yeah, okay, so yeah 12 00:00:38,720 --> 00:00:41,640 Speaker 1: I did. I rode my horse this weekend. His name 13 00:00:41,760 --> 00:00:46,159 Speaker 1: is Gus. He's about fifteen hands. For the equestrians in 14 00:00:46,200 --> 00:00:50,040 Speaker 1: the audience, which is all of the audience after listening 15 00:00:50,080 --> 00:00:55,600 Speaker 1: to the Money Stuff podcast, it's a good sized size, 16 00:00:55,720 --> 00:00:59,720 Speaker 1: mine size. So he is technically a horse. The only 17 00:01:00,120 --> 00:01:04,240 Speaker 1: to listen to me. Listen to me. A dividing line 18 00:01:04,280 --> 00:01:05,000 Speaker 1: between a horse. 19 00:01:05,760 --> 00:01:07,880 Speaker 2: See think he's a person. 20 00:01:07,880 --> 00:01:10,319 Speaker 1: No, no, no, he does have a personality. But the 21 00:01:10,360 --> 00:01:12,839 Speaker 1: dividing line between a horse and a pony is just tight. 22 00:01:12,920 --> 00:01:15,840 Speaker 1: Some people think it's age. No, it's just tight. So 23 00:01:16,040 --> 00:01:18,679 Speaker 1: he for a while because I got him before he 24 00:01:18,760 --> 00:01:21,080 Speaker 1: turned three, like a couple months before he turned three, 25 00:01:21,080 --> 00:01:23,120 Speaker 1: so he was still a baby and still growing. For 26 00:01:23,160 --> 00:01:25,520 Speaker 1: a while, I had a large pony, but he has 27 00:01:25,920 --> 00:01:28,279 Speaker 1: grown to the point where he is now technically a horse, 28 00:01:28,600 --> 00:01:30,280 Speaker 1: which we're very thrilled for him for. 29 00:01:30,959 --> 00:01:35,480 Speaker 2: So you are, on occasion a competitive I. 30 00:01:36,840 --> 00:01:40,160 Speaker 1: Am so I ride dressage. There's a thing called the 31 00:01:40,280 --> 00:01:45,240 Speaker 1: United States Dressage Federation. On my older pony, whose name 32 00:01:45,319 --> 00:01:48,960 Speaker 1: is Batman. I've had him since I was twelve. Batman 33 00:01:49,120 --> 00:01:51,720 Speaker 1: is a pony. Batman is a large pony, small horse, 34 00:01:51,920 --> 00:01:54,120 Speaker 1: but the line is fuzzier there because he's he's like 35 00:01:54,160 --> 00:01:57,080 Speaker 1: fourteen two hands for the equestrians in the audience. I 36 00:01:57,120 --> 00:01:59,240 Speaker 1: got up pretty high in the levels with Batman. We 37 00:01:59,280 --> 00:02:04,120 Speaker 1: got up to third life. It goes training. Let me 38 00:02:04,120 --> 00:02:05,760 Speaker 1: tell you about it. Okay, we can cut all of 39 00:02:05,760 --> 00:02:08,480 Speaker 1: this if it's boring. Oh no, So when you when 40 00:02:08,480 --> 00:02:12,400 Speaker 1: you showed your sage in the United States, there's intro level, 41 00:02:12,480 --> 00:02:16,200 Speaker 1: there's training level first, second, third, fourth, then you get 42 00:02:16,240 --> 00:02:18,919 Speaker 1: into like Grand Prix and stuff like that. 43 00:02:19,200 --> 00:02:24,560 Speaker 2: I wish that the audience see demonstrating what Prix looks like. 44 00:02:24,760 --> 00:02:27,239 Speaker 1: I tried to like embody the horse doing Grand Prix. 45 00:02:27,560 --> 00:02:29,320 Speaker 1: So with Batman, we got up to third level and 46 00:02:29,320 --> 00:02:32,440 Speaker 1: we did pretty good. Gus is just starting out. This 47 00:02:32,639 --> 00:02:36,040 Speaker 1: was his second show ever. We showed training level. He 48 00:02:36,120 --> 00:02:38,639 Speaker 1: did a great job. I will say I was so 49 00:02:38,720 --> 00:02:39,320 Speaker 1: proud of him. 50 00:02:39,560 --> 00:02:42,560 Speaker 2: From Instagram, I got the impression that you and Gus 51 00:02:43,840 --> 00:02:44,760 Speaker 2: one we. 52 00:02:44,639 --> 00:02:49,000 Speaker 1: Want a blue ribbon. But for context, we're showing training level. 53 00:02:49,280 --> 00:02:51,480 Speaker 1: Like I'm a pretty good rider at this point, so 54 00:02:51,520 --> 00:02:54,960 Speaker 1: it's like pretty easy and the classes were super small. 55 00:02:55,320 --> 00:02:57,640 Speaker 1: I actually posted that on my close friend's story. 56 00:02:57,720 --> 00:02:58,440 Speaker 2: Oh no, I'm. 57 00:03:00,080 --> 00:03:02,640 Speaker 1: It's totally fine because it felt a little bit embarrassing 58 00:03:02,840 --> 00:03:06,200 Speaker 1: because it was such a small class and it's training level. 59 00:03:06,280 --> 00:03:10,120 Speaker 1: But Gus did a great job. Yeah, he got a 60 00:03:10,160 --> 00:03:12,960 Speaker 1: little bit scared. The wind was blowing in a way 61 00:03:13,000 --> 00:03:15,160 Speaker 1: he didn't like, but you know, he was really brave 62 00:03:15,200 --> 00:03:20,280 Speaker 1: about it. So hats off to Gus. It really is 63 00:03:21,200 --> 00:03:25,600 Speaker 1: you have to understand horses are flight animals. They don't fight, 64 00:03:26,200 --> 00:03:30,760 Speaker 1: and the horse ancestors who survived were the really scared 65 00:03:30,800 --> 00:03:34,720 Speaker 1: ones who started running at the first sign of danger. 66 00:03:34,840 --> 00:03:37,520 Speaker 1: So I mean it's written in their ancestral coat to 67 00:03:37,560 --> 00:03:38,440 Speaker 1: be scared of things. 68 00:03:38,720 --> 00:03:40,520 Speaker 2: Like there's a nice metaphor there or something. 69 00:03:43,120 --> 00:03:46,280 Speaker 1: So that transitions nicely to what we're talking about today. 70 00:03:46,680 --> 00:03:50,640 Speaker 2: Sadly, we're actually talking about it. Yeah, yeah, your favorite topic. 71 00:03:50,880 --> 00:03:53,000 Speaker 1: You know, you would think I would be more excited 72 00:03:53,240 --> 00:03:56,480 Speaker 1: about what we're doing today. I wouldn't think that we're 73 00:03:56,520 --> 00:03:59,080 Speaker 1: talking about some pretty nitty gritty stuff when it comes 74 00:03:59,080 --> 00:04:00,280 Speaker 1: to ETFs at the top. 75 00:04:00,400 --> 00:04:02,520 Speaker 2: No, we're talking about I don't know. I guess we're talking. 76 00:04:02,400 --> 00:04:05,560 Speaker 1: About well, we're talking about taxes and how to dodge them. 77 00:04:05,640 --> 00:04:06,160 Speaker 2: Yeah. 78 00:04:06,240 --> 00:04:12,120 Speaker 1: Yeah, we're also talking about derivatives enhanced exchange traded funds, 79 00:04:12,280 --> 00:04:15,280 Speaker 1: which re chilled traders love because they're being hawked them 80 00:04:15,360 --> 00:04:18,400 Speaker 1: on YouTube. And then we're gonna talk about Jamee Street. 81 00:04:18,480 --> 00:04:20,040 Speaker 2: You we're gonna start by dying on Jane Street. 82 00:04:20,120 --> 00:04:26,200 Speaker 1: Let's start with James Straw. I forget how you described it. 83 00:04:26,760 --> 00:04:27,839 Speaker 2: They're like vampire. 84 00:04:28,320 --> 00:04:32,160 Speaker 1: No, no, They're like these this secretive market maker that 85 00:04:32,520 --> 00:04:34,480 Speaker 1: we read about all the time. 86 00:04:34,600 --> 00:04:37,200 Speaker 2: I do feel like Jane Street sort of went from 87 00:04:37,520 --> 00:04:40,680 Speaker 2: nothing to extreme prominence, and like the course of my 88 00:04:40,960 --> 00:04:43,560 Speaker 2: being aware of financial markets, and like there was a 89 00:04:43,600 --> 00:04:47,040 Speaker 2: point where they were truly under the radar, nobody had 90 00:04:47,080 --> 00:04:50,440 Speaker 2: heard of them thing and now there are several chapters 91 00:04:50,480 --> 00:04:53,159 Speaker 2: of a Michael Lewis book. You know this, you know 92 00:04:53,160 --> 00:04:56,800 Speaker 2: they represent fifteen percent of stock trading or whatever the numbers. 93 00:04:57,160 --> 00:04:59,040 Speaker 2: So they're pretty big, and they get a lot of 94 00:04:59,120 --> 00:05:01,240 Speaker 2: articles about them because they're pretty interesting, and each of 95 00:05:01,240 --> 00:05:04,440 Speaker 2: the articles has to say they're very press shy and 96 00:05:04,480 --> 00:05:10,120 Speaker 2: at yeah, you know, they're not that pressure the information. Yeah, 97 00:05:10,160 --> 00:05:12,160 Speaker 2: but I feel like the press they get is good 98 00:05:12,560 --> 00:05:15,320 Speaker 2: in the sense that it's like, look at these guys. 99 00:05:15,360 --> 00:05:18,680 Speaker 2: They make so much money. And my first thought was like, 100 00:05:18,720 --> 00:05:20,960 Speaker 2: that's gotta be good for recruiting, but of course, like 101 00:05:21,600 --> 00:05:23,760 Speaker 2: it's bad for recruiting. There are a lot of people 102 00:05:23,760 --> 00:05:25,840 Speaker 2: who want to go into finance to make money, and 103 00:05:25,880 --> 00:05:27,720 Speaker 2: you want to hire the other people, the ones who 104 00:05:27,760 --> 00:05:30,000 Speaker 2: are going to go into finance, like solve weird puzzles 105 00:05:30,360 --> 00:05:33,240 Speaker 2: and like Jane Street, to be clear, I sometimes do 106 00:05:33,279 --> 00:05:34,920 Speaker 2: puzzle hunts in New York City. 107 00:05:35,360 --> 00:05:37,920 Speaker 1: So what does that mean, Matt. It's a puzzle hunt. 108 00:05:38,000 --> 00:05:40,520 Speaker 2: It's like it's a little bit like dressage, but no, 109 00:05:40,600 --> 00:05:42,920 Speaker 2: you like, it's like a scavenger hunt, but like the 110 00:05:42,920 --> 00:05:43,920 Speaker 2: clues are weird. 111 00:05:43,680 --> 00:05:45,440 Speaker 1: Puzzles like geo cash. 112 00:05:45,560 --> 00:05:48,880 Speaker 2: I don't know, Okay, it's like a scavenger hunt, but 113 00:05:49,400 --> 00:05:52,800 Speaker 2: a complicated puzzle cliss and it's a very financial industry thing. 114 00:05:53,279 --> 00:05:56,279 Speaker 2: And like you basically you go and there's like eight 115 00:05:56,279 --> 00:05:58,960 Speaker 2: teams from Goldman and like three teams from Jane Street, 116 00:05:59,040 --> 00:06:01,080 Speaker 2: and then like a bunch of other hig freakoncy trading firms, 117 00:06:01,240 --> 00:06:02,880 Speaker 2: and like it's always like Jane Street like a big 118 00:06:02,920 --> 00:06:04,880 Speaker 2: puzzle hunt firm, you know, like you go to Jane Street. 119 00:06:05,400 --> 00:06:07,120 Speaker 1: Do they dominate the puzzle hunts. 120 00:06:07,440 --> 00:06:09,640 Speaker 2: No, it's like pretty competitive the puzzle hunts. 121 00:06:09,680 --> 00:06:09,880 Speaker 1: Cool. 122 00:06:09,920 --> 00:06:12,160 Speaker 2: Look, I think they're good at puzzle hunts. So it's 123 00:06:12,160 --> 00:06:14,400 Speaker 2: like real puzzle solving people. If you do out too 124 00:06:14,480 --> 00:06:17,760 Speaker 2: much of a reputation for being a giant lucrative pot 125 00:06:17,760 --> 00:06:20,320 Speaker 2: of money, then you'll attract people who want the giant 126 00:06:20,360 --> 00:06:24,360 Speaker 2: lucrative pot of money, and those people you might hypothesize 127 00:06:24,560 --> 00:06:27,080 Speaker 2: will be worse at solving puzzles. I wrote something like 128 00:06:27,120 --> 00:06:30,479 Speaker 2: that and someone emailed me to say, you're right. I've 129 00:06:30,480 --> 00:06:33,920 Speaker 2: known people who worked to Jane Street, and like, early 130 00:06:34,000 --> 00:06:37,159 Speaker 2: on it was people who liked puzzles and didn't like 131 00:06:37,240 --> 00:06:40,080 Speaker 2: staying that late at work, and then they made more money, 132 00:06:40,120 --> 00:06:42,640 Speaker 2: so they got people who liked money and want to 133 00:06:42,640 --> 00:06:45,120 Speaker 2: stay later at work. So the culture has deteriortor oh 134 00:06:45,200 --> 00:06:46,840 Speaker 2: my god, in the sense that people like work harder 135 00:06:46,880 --> 00:06:47,480 Speaker 2: and make more money. 136 00:06:47,480 --> 00:06:48,800 Speaker 1: Well, I was going to say, like, how do you 137 00:06:48,800 --> 00:06:51,640 Speaker 1: control for that in the interview setting, Well. 138 00:06:51,520 --> 00:06:52,440 Speaker 2: You ask them puzzles. 139 00:06:52,760 --> 00:06:55,400 Speaker 1: Yeah, and you see if they're having fun. 140 00:06:55,640 --> 00:06:58,800 Speaker 2: Yeah, it's a little that's funny, right, you can't really, 141 00:06:58,880 --> 00:07:00,800 Speaker 2: there's only so many puzzles can do. If you're not 142 00:07:00,880 --> 00:07:03,279 Speaker 2: having fun doing puzzles, right, Yeah, you're really good at 143 00:07:03,279 --> 00:07:05,800 Speaker 2: all the puzzles and you like don't have that sparking 144 00:07:05,800 --> 00:07:07,040 Speaker 2: your eye, you're still probably. 145 00:07:06,839 --> 00:07:09,920 Speaker 1: Fine, right, there's not a certain light in your eyes. 146 00:07:10,120 --> 00:07:13,040 Speaker 2: Yeah, if you're just like grudgingly good at puzzles, you'll 147 00:07:13,040 --> 00:07:16,120 Speaker 2: be okay, Yeah, fine, yeah, because the puzzles do result 148 00:07:16,200 --> 00:07:16,600 Speaker 2: in money. 149 00:07:16,680 --> 00:07:18,640 Speaker 1: Yeah, if you work at Jane Street, do you have 150 00:07:18,680 --> 00:07:20,000 Speaker 1: to like trading ETFs? 151 00:07:20,320 --> 00:07:20,440 Speaker 3: Uh? 152 00:07:20,720 --> 00:07:22,920 Speaker 1: No, Okay, well it seems like a lot of people 153 00:07:22,920 --> 00:07:23,680 Speaker 1: at Jane Street do. 154 00:07:24,080 --> 00:07:27,200 Speaker 2: Yeah. But like Jane Street is in the news because 155 00:07:27,200 --> 00:07:30,200 Speaker 2: the Ft had another like profile of them that had 156 00:07:30,200 --> 00:07:32,800 Speaker 2: a lot of interesting facts and sort of quotes, and 157 00:07:32,840 --> 00:07:35,840 Speaker 2: they do quote they're like head of fixed income saying 158 00:07:36,160 --> 00:07:39,840 Speaker 2: basically like their business models, like they automate something and 159 00:07:39,880 --> 00:07:42,880 Speaker 2: then they go up one level of abstraction and they 160 00:07:42,920 --> 00:07:44,880 Speaker 2: automate that so they can sort of do higher and 161 00:07:44,960 --> 00:07:48,320 Speaker 2: hire more complicated, more value adding things by like automating 162 00:07:48,320 --> 00:07:51,400 Speaker 2: all the stuff below it. And like that's kind of 163 00:07:51,440 --> 00:07:54,160 Speaker 2: the common pattern and equities trading for the last twenty years. 164 00:07:54,600 --> 00:07:57,400 Speaker 2: It is not really the pattern and fixed income trading, 165 00:07:57,440 --> 00:07:59,640 Speaker 2: and like Jane Street has been kind of pushing bond 166 00:07:59,640 --> 00:08:02,360 Speaker 2: trading to be more automated. But the point of that 167 00:08:02,680 --> 00:08:06,600 Speaker 2: is that if you like solving puzzles and automating things, 168 00:08:07,280 --> 00:08:09,800 Speaker 2: you don't have to care that much about trading ETFs because. 169 00:08:09,560 --> 00:08:10,320 Speaker 3: Like, you know, you're. 170 00:08:11,720 --> 00:08:14,360 Speaker 2: Puzzle. It's another puzzle. It's like you know, the computer 171 00:08:14,440 --> 00:08:16,080 Speaker 2: is doing something amount of the ETF trading for you, 172 00:08:16,240 --> 00:08:17,800 Speaker 2: or like some of the pricing for you. But it's 173 00:08:17,840 --> 00:08:22,880 Speaker 2: clearly a place where people like the psychological aspect of trading. 174 00:08:22,960 --> 00:08:24,760 Speaker 2: One of the better pictures of Jane Street it comes 175 00:08:24,760 --> 00:08:27,480 Speaker 2: from Michael Lewis's book about Sam Beckman Free who worked 176 00:08:27,480 --> 00:08:29,640 Speaker 2: there for a while, and it's a lot of like 177 00:08:30,240 --> 00:08:34,600 Speaker 2: puzzles and people betting against each other and people learning 178 00:08:34,800 --> 00:08:38,000 Speaker 2: the perils of adverse selection firsthand by like having their 179 00:08:38,000 --> 00:08:40,720 Speaker 2: interviewers like trick them. So you know, it's a it's 180 00:08:40,800 --> 00:08:44,199 Speaker 2: a trading firm but it's not like people whose first 181 00:08:44,200 --> 00:08:46,120 Speaker 2: love is ETFs like you, right. 182 00:08:46,320 --> 00:08:50,640 Speaker 1: Right, So talk to me about portfolio trading, where of 183 00:08:50,679 --> 00:08:55,080 Speaker 1: course ETFs factor in mightily. Portfolio trading is something that 184 00:08:55,120 --> 00:08:58,320 Speaker 1: I write about every couple of years and sort of 185 00:08:58,360 --> 00:09:00,640 Speaker 1: relearn the mechanics of it every of years. When I 186 00:09:00,679 --> 00:09:02,120 Speaker 1: have to write about it, I would say that I 187 00:09:02,120 --> 00:09:03,560 Speaker 1: get it, but I don't understand it. 188 00:09:03,920 --> 00:09:07,559 Speaker 2: So portfolio is trading a portfolio of bonds. Basically, it's 189 00:09:07,559 --> 00:09:11,400 Speaker 2: like there are investors who will need to sell a 190 00:09:11,400 --> 00:09:13,920 Speaker 2: lot of bonds at once, right, who like their thing 191 00:09:14,000 --> 00:09:16,040 Speaker 2: is not like I'm going to like slightly adjust the 192 00:09:16,120 --> 00:09:19,680 Speaker 2: exposure of my bond portfolio, but like I'm an endowment 193 00:09:19,920 --> 00:09:22,600 Speaker 2: and I'm moving from forty percent bonds to thirty percent bonds. 194 00:09:22,640 --> 00:09:26,040 Speaker 2: I'm selling, you know, a giant pile of bonds, And 195 00:09:26,679 --> 00:09:29,320 Speaker 2: traditionally you would do that. You could call a bank 196 00:09:29,360 --> 00:09:31,280 Speaker 2: and sell each bond and it would take a while 197 00:09:31,480 --> 00:09:33,720 Speaker 2: because they'd price each bond and you'd sort of like 198 00:09:33,760 --> 00:09:35,360 Speaker 2: pay a bit ask reread on each bond, and it 199 00:09:35,400 --> 00:09:38,880 Speaker 2: was like inefficient. And people realize that trading a whole 200 00:09:38,880 --> 00:09:42,840 Speaker 2: portfolio of bonds, you can price the portfolio itself. Rather 201 00:09:42,880 --> 00:09:46,280 Speaker 2: than sort of think individually about each individual bond. And 202 00:09:46,679 --> 00:09:51,079 Speaker 2: in particular, what people like Jane Street realized is like 203 00:09:51,120 --> 00:09:53,720 Speaker 2: they are all these bondtfs, bond ETFs. You can like 204 00:09:54,000 --> 00:09:56,840 Speaker 2: hand in some bonds and get back shares with the ETF. 205 00:09:57,440 --> 00:10:00,640 Speaker 2: The bonds that you hand in are going to be 206 00:10:00,640 --> 00:10:02,959 Speaker 2: bonds that are supposed to go on the ETF. There's 207 00:10:03,000 --> 00:10:06,000 Speaker 2: a lot of flexibility to create shares of the ETF 208 00:10:06,120 --> 00:10:09,040 Speaker 2: because like a bond index, ETF just can never like 209 00:10:09,160 --> 00:10:13,080 Speaker 2: exactly contain the index. It's like impossible to recreate a 210 00:10:13,120 --> 00:10:15,920 Speaker 2: bond innecks precisely like a big bond because like a 211 00:10:15,920 --> 00:10:17,840 Speaker 2: lot of bonds, and like you know, you can't like 212 00:10:17,920 --> 00:10:20,079 Speaker 2: buy fractions of bonds, and like bonds are not always 213 00:10:20,120 --> 00:10:22,040 Speaker 2: out liquid, and so every bond ETF is going to 214 00:10:22,120 --> 00:10:24,360 Speaker 2: you know, have some sampling where they're like sort of 215 00:10:24,360 --> 00:10:27,000 Speaker 2: tracking their index, but they're not exactly the index. What 216 00:10:27,000 --> 00:10:28,319 Speaker 2: that means is like if someone wants to tell you 217 00:10:28,400 --> 00:10:30,240 Speaker 2: a thousand bonds, you can go to an ETF and 218 00:10:30,280 --> 00:10:33,000 Speaker 2: be like, overy this thousand bonds, would you like them 219 00:10:33,240 --> 00:10:35,480 Speaker 2: in exchange for shares of the ETF, And the ETF 220 00:10:35,520 --> 00:10:36,920 Speaker 2: will like do some math and be like, yeah, we'll 221 00:10:36,920 --> 00:10:38,599 Speaker 2: take eight hundred and seventy six of those bonds and 222 00:10:38,640 --> 00:10:40,360 Speaker 2: then you just got rid of all those bonds. And 223 00:10:40,400 --> 00:10:43,439 Speaker 2: so Jane Street and like other you know, bond market 224 00:10:43,440 --> 00:10:45,560 Speaker 2: makers who are also ETF market makers can do this 225 00:10:45,640 --> 00:10:49,880 Speaker 2: transaction where they will buy some pension funds a thousand 226 00:10:49,920 --> 00:10:52,720 Speaker 2: bonds from them and hold some of them on their 227 00:10:52,720 --> 00:10:54,760 Speaker 2: balance sheet, but also squash a lot of them into 228 00:10:54,800 --> 00:10:58,720 Speaker 2: an ATF get back these like very easily tradeable, fungible 229 00:10:58,720 --> 00:11:01,680 Speaker 2: ETF shares, And so they've like kind of turned this 230 00:11:01,760 --> 00:11:04,560 Speaker 2: complicated problem of buying all these bonds, they've reduced it 231 00:11:04,600 --> 00:11:07,360 Speaker 2: mostly to a similar problem of like selling ETF shares. 232 00:11:07,679 --> 00:11:09,600 Speaker 2: So it's a much more efficient way to do it. 233 00:11:10,000 --> 00:11:12,520 Speaker 2: And it's become a big part of bond trading in 234 00:11:12,559 --> 00:11:16,040 Speaker 2: the last like ten years. And it's like very electronified 235 00:11:16,040 --> 00:11:18,120 Speaker 2: if people are doing it with computer models rather than 236 00:11:18,200 --> 00:11:20,120 Speaker 2: like putting their finger in the air and trying to 237 00:11:20,120 --> 00:11:22,040 Speaker 2: figure out how much each bond is worth. Yeah, it's 238 00:11:22,040 --> 00:11:23,920 Speaker 2: like a move to like kind of equities like trading 239 00:11:23,920 --> 00:11:24,440 Speaker 2: for bonds. 240 00:11:24,600 --> 00:11:28,000 Speaker 1: Yeah, and it hinges on the creation and redemption mechanism 241 00:11:28,160 --> 00:11:29,960 Speaker 1: that is inherent to ETFs. 242 00:11:30,000 --> 00:11:32,360 Speaker 2: I'm not sure it always always does, because like you 243 00:11:32,360 --> 00:11:34,360 Speaker 2: could sort of have the same concepts and just hold 244 00:11:34,400 --> 00:11:36,439 Speaker 2: the bonds in your balance sheet. But yeah, and practice. 245 00:11:36,040 --> 00:11:38,199 Speaker 1: Like a huge balance. 246 00:11:37,920 --> 00:11:40,880 Speaker 2: Sheet and is like using an ETFs as kind of 247 00:11:40,880 --> 00:11:41,480 Speaker 2: the balance sheet to. 248 00:11:41,440 --> 00:11:45,040 Speaker 1: Buy My understanding and maybe this is because you know, 249 00:11:45,080 --> 00:11:48,280 Speaker 1: I'm coming from the ETF perspective, is that portfolio trading 250 00:11:48,760 --> 00:11:51,160 Speaker 1: picked up in a big way as bond ETFs. 251 00:11:51,520 --> 00:11:52,960 Speaker 2: No, that's right, that's right. Yeah, that's right. 252 00:11:53,080 --> 00:11:53,760 Speaker 1: Yeah, that's right. 253 00:11:53,800 --> 00:11:56,000 Speaker 2: It is. It is very closely linked to ETFs. 254 00:11:56,080 --> 00:11:58,480 Speaker 1: I'm kind of surprised that portfolio trading isn't bigger though 255 00:11:58,760 --> 00:12:01,360 Speaker 1: I know it's becoming a bigger part part of overall 256 00:12:01,400 --> 00:12:04,040 Speaker 1: bond trading, but I think it's still in like single 257 00:12:04,080 --> 00:12:06,520 Speaker 1: digit percentage of overall bond trading. 258 00:12:06,679 --> 00:12:08,199 Speaker 2: I mean, why did you trade bond? 259 00:12:08,600 --> 00:12:09,719 Speaker 1: Why did you trade? 260 00:12:10,160 --> 00:12:12,000 Speaker 2: You know, I've written about this acause I have been 261 00:12:12,000 --> 00:12:14,440 Speaker 2: thinking about private credit. Like there's historically you buy bonds, 262 00:12:14,600 --> 00:12:16,200 Speaker 2: you know, like a ten year bond. You you know, 263 00:12:16,320 --> 00:12:18,480 Speaker 2: You're like, I have a ten year liability, so I'm 264 00:12:18,480 --> 00:12:19,839 Speaker 2: going to buy a ten year bond to match it, 265 00:12:19,920 --> 00:12:21,800 Speaker 2: and I'm just hold it for ten years, right, So 266 00:12:21,840 --> 00:12:23,480 Speaker 2: why do you trade bonds. I mean, one reason you 267 00:12:23,520 --> 00:12:26,079 Speaker 2: trade bonds is because you are a pension pond that's 268 00:12:26,080 --> 00:12:28,599 Speaker 2: like decided to move some of your allocation out of 269 00:12:28,640 --> 00:12:30,559 Speaker 2: bonds or whatever. But a lot of the reasons you 270 00:12:30,600 --> 00:12:32,520 Speaker 2: trade bonds is like you like a particular bond, right, 271 00:12:32,520 --> 00:12:35,120 Speaker 2: Like you're some sort of like credit fund manager where 272 00:12:35,160 --> 00:12:38,120 Speaker 2: you are making some sort of relative value trade that 273 00:12:38,160 --> 00:12:40,000 Speaker 2: one bond is good and one bond is bad, and 274 00:12:40,040 --> 00:12:42,160 Speaker 2: so then you're not like, oh, buy my hundred bonds 275 00:12:42,160 --> 00:12:44,199 Speaker 2: at once, right. But yeah, I mean there are a 276 00:12:44,240 --> 00:12:47,240 Speaker 2: lot of people who have needs to move whole portfolios 277 00:12:47,240 --> 00:12:48,760 Speaker 2: and that's becoming a big business. 278 00:12:48,920 --> 00:12:52,200 Speaker 1: Oh let's talk about the fact that Jane Street doesn't 279 00:12:52,200 --> 00:12:54,680 Speaker 1: have a CEO. We've talked about this before. I do 280 00:12:54,880 --> 00:12:57,040 Speaker 1: love it. It's so cool because again you think about 281 00:12:57,080 --> 00:13:02,320 Speaker 1: this secretive trading firm. Paik As the Ft says. I 282 00:13:02,360 --> 00:13:04,360 Speaker 1: feel like the fact that they don't have a CEO 283 00:13:04,440 --> 00:13:08,800 Speaker 1: and they're run by like this like faceless entity does 284 00:13:08,920 --> 00:13:10,760 Speaker 1: kind of add to that image. 285 00:13:10,920 --> 00:13:13,280 Speaker 2: You know they have, like they'd like four founders. Yeah, 286 00:13:13,360 --> 00:13:15,760 Speaker 2: couldn't name them. There's one guy who's still there's like 287 00:13:15,800 --> 00:13:17,400 Speaker 2: one of the founders. And for a while I just 288 00:13:17,440 --> 00:13:19,400 Speaker 2: looked yesterday and he doesn't shop up on LinkedIn or 289 00:13:19,400 --> 00:13:21,160 Speaker 2: I couldn't find him, but like for a while, his 290 00:13:21,240 --> 00:13:23,559 Speaker 2: LinkedIn just said like I had his name, and it's 291 00:13:23,559 --> 00:13:26,920 Speaker 2: a like Trader had like quantitative trading for him. It's 292 00:13:27,000 --> 00:13:29,880 Speaker 2: like a top resident, like a top linkin. I was 293 00:13:29,920 --> 00:13:31,840 Speaker 2: thinking about that when I was writing about the guy 294 00:13:31,880 --> 00:13:35,040 Speaker 2: who has been suing David Einhorn or green Light for 295 00:13:35,160 --> 00:13:37,920 Speaker 2: months because he wants to call himself the former head 296 00:13:37,960 --> 00:13:40,160 Speaker 2: of macro at green Light and green Light is suing 297 00:13:40,240 --> 00:13:42,480 Speaker 2: him and he's suing them and it's a mess, and 298 00:13:42,520 --> 00:13:47,080 Speaker 2: it's like really really good trolling, and it's like one 299 00:13:47,080 --> 00:13:49,720 Speaker 2: way to live is to like sue, to be able 300 00:13:49,760 --> 00:13:51,800 Speaker 2: to call yourself the job title you think you deserve. 301 00:13:51,840 --> 00:13:53,800 Speaker 2: Another way to live is just trader on your LinkedIn. 302 00:13:54,000 --> 00:13:56,559 Speaker 2: Like it's a different it's a different level. But yeah, 303 00:13:56,559 --> 00:13:59,880 Speaker 2: they know have a CEO. They run everything by committee. 304 00:14:00,160 --> 00:14:01,600 Speaker 2: I don't know, like I wrote this, like it just 305 00:14:02,000 --> 00:14:04,080 Speaker 2: they give off the impression of just being like a 306 00:14:04,200 --> 00:14:06,800 Speaker 2: group of buddies who'd like to solve puzzles together and 307 00:14:06,840 --> 00:14:09,000 Speaker 2: like the puzzles create a lot of money for them, right, 308 00:14:09,000 --> 00:14:12,120 Speaker 2: it doesn't seem like a traditional like hierarchical you know, 309 00:14:12,240 --> 00:14:13,160 Speaker 2: business organization. 310 00:14:13,400 --> 00:14:16,920 Speaker 1: Yeah, specifically, the company calls itself a functionally organized structure 311 00:14:16,920 --> 00:14:21,080 Speaker 1: consisting of various management and risk committees. Just amazing. I 312 00:14:21,120 --> 00:14:23,320 Speaker 1: mean if this was a smaller company, I'd be like, 313 00:14:23,400 --> 00:14:26,040 Speaker 1: I don't know, I don't know how long that can last. 314 00:14:26,120 --> 00:14:28,560 Speaker 1: But obviously they're doing well for it. 315 00:14:28,760 --> 00:14:30,640 Speaker 2: That feels like the sort of thing that can last 316 00:14:30,640 --> 00:14:32,520 Speaker 2: more easily if you're a smaller company, right, I mean, 317 00:14:32,560 --> 00:14:34,160 Speaker 2: like one thing in this a FT article is like 318 00:14:34,160 --> 00:14:36,520 Speaker 2: they've become really big. It is harder to be non 319 00:14:36,560 --> 00:14:39,400 Speaker 2: hierarchical when you have that many people. You know, a 320 00:14:39,440 --> 00:14:41,760 Speaker 2: lot of how that business works is like they all 321 00:14:41,800 --> 00:14:43,720 Speaker 2: trust each other and so there's not a real, you know, 322 00:14:43,840 --> 00:14:47,720 Speaker 2: deep hierarchical supervision. And that's harder to do if there's 323 00:14:47,760 --> 00:14:51,880 Speaker 2: three thousand people instead of three hundred. And also, they 324 00:14:51,920 --> 00:14:55,040 Speaker 2: make so much money, and so all those people have 325 00:14:55,720 --> 00:14:58,840 Speaker 2: grown accustomed to making a certain amount of money. And 326 00:14:59,240 --> 00:15:01,640 Speaker 2: the article's like you they're one like even flat year, 327 00:15:01,680 --> 00:15:04,240 Speaker 2: and people are going to be really dissatisfied because you know, 328 00:15:04,640 --> 00:15:06,760 Speaker 2: you're sort of relying on the money growing every year 329 00:15:06,840 --> 00:15:07,640 Speaker 2: to make everyone. 330 00:15:08,080 --> 00:15:10,160 Speaker 1: Yeah, I guess why I would be skeptical with a 331 00:15:10,200 --> 00:15:12,680 Speaker 1: small company is just because I would assume human ego 332 00:15:12,760 --> 00:15:15,280 Speaker 1: comes in at some point where like one guy or 333 00:15:15,360 --> 00:15:18,840 Speaker 1: gal wants to say I'm in charge, it's me, I'm 334 00:15:18,920 --> 00:15:21,640 Speaker 1: I'm responsible for our success and I call the shots. 335 00:15:21,920 --> 00:15:24,800 Speaker 2: That's just this trait a large company, except that there's 336 00:15:24,880 --> 00:15:26,160 Speaker 2: more people might want to do that. 337 00:15:26,440 --> 00:15:28,480 Speaker 1: But I guess I'm saying I'm obviously it worked for 338 00:15:28,480 --> 00:15:31,520 Speaker 1: them another large company and it's still working. Is there 339 00:15:31,560 --> 00:15:36,320 Speaker 1: any conditions under which where this couldn't work for Jane Street? 340 00:15:36,560 --> 00:15:36,680 Speaker 2: Oh? 341 00:15:36,800 --> 00:15:53,520 Speaker 1: Yeah, when it happens, we'll talk about it. Yeah, let's 342 00:15:53,560 --> 00:15:58,800 Speaker 1: talk about taxes. There's a really interesting ETF filing this week, 343 00:15:59,080 --> 00:16:02,120 Speaker 1: the Cambria tack. So we're ETF and Matt what you 344 00:16:02,160 --> 00:16:05,000 Speaker 1: were describing with portfolio trading, where you know, this big 345 00:16:05,000 --> 00:16:09,920 Speaker 1: institution comes with this like big basket of bonds, maybe 346 00:16:10,000 --> 00:16:14,400 Speaker 1: random bonds, they give them to a Jane Street and 347 00:16:14,440 --> 00:16:17,640 Speaker 1: then they get ETF shares in exchange. That's kind of 348 00:16:17,680 --> 00:16:22,160 Speaker 1: like the process of this ETF. And I have to say, 349 00:16:22,560 --> 00:16:25,880 Speaker 1: I'm not familiar with not that familiar with swap funds 350 00:16:25,920 --> 00:16:29,320 Speaker 1: or exchange funds, but this is basically those. But in 351 00:16:29,360 --> 00:16:32,120 Speaker 1: the ETF wrapper. Maybe you can make heads or tails 352 00:16:32,160 --> 00:16:32,360 Speaker 1: of this. 353 00:16:32,840 --> 00:16:37,240 Speaker 2: Yeah, So a swap fund is like conceptually you have 354 00:16:37,400 --> 00:16:41,440 Speaker 2: like a big undiversified stock position. For instance, you work 355 00:16:41,480 --> 00:16:42,480 Speaker 2: at a company and you want a lot of your 356 00:16:42,520 --> 00:16:45,680 Speaker 2: own company stock, and you want to get out of 357 00:16:45,680 --> 00:16:49,320 Speaker 2: that position and like get into an SMP five hundred fund, right, 358 00:16:49,360 --> 00:16:51,400 Speaker 2: you want to diversify, and so to have a more 359 00:16:51,440 --> 00:16:54,760 Speaker 2: normal diversified portfolio and not just on your own company stock. 360 00:16:56,600 --> 00:16:58,240 Speaker 2: Then natural thing to do is you sell the stock 361 00:16:58,320 --> 00:17:01,120 Speaker 2: you buy n SMP fund. But when you do that, 362 00:17:01,160 --> 00:17:03,000 Speaker 2: you pay taxes on your stock. And if it's you 363 00:17:03,040 --> 00:17:05,080 Speaker 2: know you've owned it for all time, it's appreciated a lot. 364 00:17:05,119 --> 00:17:07,159 Speaker 2: You pay a lot of taxes. People figured out as 365 00:17:07,280 --> 00:17:12,280 Speaker 2: like if you contribute property into a partnership, when you 366 00:17:12,320 --> 00:17:14,760 Speaker 2: form a partnership and you get back shares of the partnership, 367 00:17:15,119 --> 00:17:17,600 Speaker 2: this is not taxified, but that is come on and 368 00:17:17,720 --> 00:17:20,119 Speaker 2: make it so that's not a taxable transaction. So like 369 00:17:20,160 --> 00:17:22,399 Speaker 2: you don't have any gain, you don't have to pay 370 00:17:22,400 --> 00:17:24,439 Speaker 2: any taxes. You just get shares of the partnership, and 371 00:17:24,480 --> 00:17:26,320 Speaker 2: when you eventually sell your shares of the partnership, you 372 00:17:26,320 --> 00:17:28,840 Speaker 2: pay taxes. And so what people do is like they 373 00:17:28,840 --> 00:17:32,440 Speaker 2: get ten tech company employees of different companies and they 374 00:17:32,480 --> 00:17:35,120 Speaker 2: all put their shares into a pot and they get 375 00:17:35,160 --> 00:17:38,000 Speaker 2: back ownership, the partial ownership of the pot. And so 376 00:17:38,119 --> 00:17:41,439 Speaker 2: now instead of owning their undiversified share in their own company, 377 00:17:41,640 --> 00:17:44,720 Speaker 2: they own like a slice of shares of ten companies, 378 00:17:44,800 --> 00:17:48,440 Speaker 2: and so they have a more diversified portfolio. And these 379 00:17:48,520 --> 00:17:50,800 Speaker 2: ETF guys realize you could do that in ETF where 380 00:17:50,840 --> 00:17:52,679 Speaker 2: basically you go out to like a bunch of retail 381 00:17:52,680 --> 00:17:56,840 Speaker 2: investors who have portfolios at like Fidelity or whatever where 382 00:17:56,840 --> 00:17:58,879 Speaker 2: they own not like a bunch of ETFs, but they 383 00:17:58,880 --> 00:18:02,919 Speaker 2: own like you know, Tesla and Berkshire, Hathaway and whatever. Right, Yeah, 384 00:18:02,960 --> 00:18:05,320 Speaker 2: and they can all PLoP that into a pot and 385 00:18:05,359 --> 00:18:07,480 Speaker 2: get back and the pot is an ETF, and they 386 00:18:07,520 --> 00:18:09,439 Speaker 2: get back shares of the ETF and now they go 387 00:18:09,480 --> 00:18:12,360 Speaker 2: from having a fairly short list of holdings to having 388 00:18:12,400 --> 00:18:14,280 Speaker 2: a more divers like a share of a more diversial 389 00:18:14,320 --> 00:18:17,400 Speaker 2: plot set of holdings. And yeah, pay taxes. 390 00:18:17,640 --> 00:18:20,919 Speaker 1: So the part that sort of breaks my brain is 391 00:18:21,040 --> 00:18:24,280 Speaker 1: the CTF. The ticker is tax which is a great ticker. 392 00:18:24,359 --> 00:18:27,720 Speaker 1: I can't believe that that hasn't already been used expected 393 00:18:27,760 --> 00:18:30,000 Speaker 1: to launch in December. So it's going to run a 394 00:18:30,000 --> 00:18:33,000 Speaker 1: strategy that favors value and quality shares with low or 395 00:18:33,040 --> 00:18:35,639 Speaker 1: no dividend yields to avoid being taxed on those payouts. 396 00:18:35,840 --> 00:18:41,399 Speaker 1: So what people come to them with the stocks that 397 00:18:41,440 --> 00:18:44,359 Speaker 1: they own aren't necessarily the stocks that are going to 398 00:18:44,400 --> 00:18:46,359 Speaker 1: be in the CTF. 399 00:18:46,720 --> 00:18:47,680 Speaker 2: I guess that's right. 400 00:18:47,880 --> 00:18:51,960 Speaker 1: I mean, unless they're soliciting people with specifically value in 401 00:18:52,040 --> 00:18:53,560 Speaker 1: quality shares, well, I think they are. 402 00:18:53,760 --> 00:18:56,480 Speaker 2: There are some limitations on you know, you need to 403 00:18:56,520 --> 00:18:59,240 Speaker 2: have like a certain amount of diversivation in your portfolio already, 404 00:18:59,400 --> 00:19:01,119 Speaker 2: so there are limits. I'm like what you can bring in, 405 00:19:01,320 --> 00:19:03,320 Speaker 2: Like if you come in with like I only have Tesla, 406 00:19:03,400 --> 00:19:05,919 Speaker 2: they'll say no, yeah, but yeah they can they can 407 00:19:06,040 --> 00:19:08,240 Speaker 2: rotate out of stuff. We talked on the podcast a 408 00:19:08,280 --> 00:19:09,480 Speaker 2: couple of weeks ago. I was like, I used to 409 00:19:09,520 --> 00:19:12,160 Speaker 2: own I call index mutual funds. Yeah, and I've moved 410 00:19:12,160 --> 00:19:14,520 Speaker 2: to ats because they're tax advantages. If you get emails 411 00:19:14,560 --> 00:19:17,040 Speaker 2: about like what are the tax advantage, the tax advantage 412 00:19:17,080 --> 00:19:20,359 Speaker 2: is like when someone puts money into an ETF, the 413 00:19:20,359 --> 00:19:23,040 Speaker 2: ETF doesn't go buy like the underlying stock, and when 414 00:19:23,040 --> 00:19:25,600 Speaker 2: someone takes money out of the ETF. The ETF doesn't 415 00:19:25,640 --> 00:19:28,840 Speaker 2: sell the stock. There's this weird creation in kind creation 416 00:19:28,920 --> 00:19:31,480 Speaker 2: redemption mechanism where like Jane Street goes and buys the 417 00:19:31,480 --> 00:19:34,439 Speaker 2: stocky and like contributes it to the ETF. And the 418 00:19:34,480 --> 00:19:36,240 Speaker 2: reason for that is like there's like these weird old 419 00:19:36,280 --> 00:19:39,000 Speaker 2: tax rulings saying that if you do it in this way, 420 00:19:39,600 --> 00:19:43,160 Speaker 2: the ETF doesn't incur capital gains taxes on the stock 421 00:19:43,200 --> 00:19:45,080 Speaker 2: that it gets rid of because I'm not selling it, 422 00:19:45,080 --> 00:19:49,119 Speaker 2: it's getting rid of it. And and so people in 423 00:19:49,160 --> 00:19:53,480 Speaker 2: the ETF world are very focused on like never selling stock. 424 00:19:54,200 --> 00:19:57,480 Speaker 2: So you know, if you contribute sty to this ETF, 425 00:19:57,920 --> 00:19:59,760 Speaker 2: the ETF might want to rotate out of that stock 426 00:19:59,760 --> 00:20:03,560 Speaker 2: into something different, but like they can't sell it. That's 427 00:20:03,640 --> 00:20:07,400 Speaker 2: not necessarily a problem because as like Bloomberg's Zach Miter 428 00:20:07,480 --> 00:20:11,080 Speaker 2: has written about, there is a mechanism for an ETF 429 00:20:11,119 --> 00:20:12,480 Speaker 2: to say I don't want to own this stock. I 430 00:20:12,480 --> 00:20:15,199 Speaker 2: want to own that stock. And basically what will happen is, like, 431 00:20:15,720 --> 00:20:18,800 Speaker 2: you know, a Jane Street, an authorized participant will come 432 00:20:18,840 --> 00:20:20,960 Speaker 2: to it with the stock it wants and hand that 433 00:20:21,040 --> 00:20:24,119 Speaker 2: in in a special creation basket to get new shares. Yeah, 434 00:20:24,160 --> 00:20:26,880 Speaker 2: and it'll take out a redemption basket of the old 435 00:20:26,880 --> 00:20:29,440 Speaker 2: shairs so that you can it's called a heartbeat transaction. 436 00:20:29,560 --> 00:20:31,960 Speaker 2: Oh god, it's a way for them to avoid every 437 00:20:32,000 --> 00:20:34,520 Speaker 2: selling stock. So it's a long answer to your question. Yes, 438 00:20:34,760 --> 00:20:38,280 Speaker 2: they can move from what people put in to what 439 00:20:38,320 --> 00:20:40,800 Speaker 2: they want, but they have to do it through these 440 00:20:40,840 --> 00:20:43,920 Speaker 2: like in kind creation and redemption transactions because the goal 441 00:20:44,000 --> 00:20:46,600 Speaker 2: is to never pay taxes. Not never, but you know, yeah, 442 00:20:46,760 --> 00:20:47,399 Speaker 2: defer taxes. 443 00:20:47,480 --> 00:20:50,240 Speaker 1: I mean that's my understanding. Is that again, like you 444 00:20:50,280 --> 00:20:54,640 Speaker 1: can bring them whatever I mean, not quite whatever, but yeah, 445 00:20:54,680 --> 00:20:57,399 Speaker 1: and then they magic it into value shares. 446 00:20:57,960 --> 00:21:01,000 Speaker 2: Yeah. I'll also say I wrote this much like with 447 00:21:01,040 --> 00:21:02,879 Speaker 2: the bond ETFs, they don't have to like have an 448 00:21:02,880 --> 00:21:05,000 Speaker 2: index and then like mats that index exactly right, Like 449 00:21:05,040 --> 00:21:07,600 Speaker 2: they can you know, if you bring them stuff and 450 00:21:07,600 --> 00:21:09,440 Speaker 2: you're like, yeah, it's pretty value eat, then they can just. 451 00:21:09,359 --> 00:21:11,399 Speaker 1: Hold that, right, doesn't emulate the spirit. 452 00:21:11,480 --> 00:21:13,680 Speaker 2: They don't need like zero tracking ert or whatever index 453 00:21:13,720 --> 00:21:15,560 Speaker 2: they have, because like they're giving you something else, right, 454 00:21:15,560 --> 00:21:17,760 Speaker 2: They're giving you this like tax advantage, So like yeah, 455 00:21:17,800 --> 00:21:18,920 Speaker 2: if you have like a little tracking. 456 00:21:18,760 --> 00:21:22,959 Speaker 1: Ert, it's fine, I do wonder. So the idea is 457 00:21:23,000 --> 00:21:25,840 Speaker 1: like they're going to have these investors with these stocks 458 00:21:26,320 --> 00:21:28,800 Speaker 1: coming to them. I want to know, like, how are 459 00:21:28,800 --> 00:21:31,520 Speaker 1: they're soliciting yes, people to come to them. Is this 460 00:21:31,600 --> 00:21:33,679 Speaker 1: like a builded and they will come situation? Do they 461 00:21:33,680 --> 00:21:37,280 Speaker 1: have people lined up already? I wonder how much sort 462 00:21:37,280 --> 00:21:39,400 Speaker 1: of chumming of the waters that they've done. 463 00:21:39,640 --> 00:21:43,159 Speaker 2: Yeah, I don't know. My sense is that this is 464 00:21:43,200 --> 00:21:45,919 Speaker 2: like an advisor's product, right, Like this is like a 465 00:21:46,000 --> 00:21:48,320 Speaker 2: thing that you can go out and pitch to financial 466 00:21:48,320 --> 00:21:50,119 Speaker 2: advisors and like, oh, that's a great idea, right, and 467 00:21:50,119 --> 00:21:52,080 Speaker 2: then like the financial advisor is like a cool thing 468 00:21:52,160 --> 00:21:55,000 Speaker 2: to tell her client, you know, like if you want 469 00:21:55,000 --> 00:21:57,320 Speaker 2: to diversify your like portfolio of six stocks, here's a 470 00:21:57,359 --> 00:21:59,280 Speaker 2: way to do it without paying taxes. Like that's a 471 00:21:59,359 --> 00:22:01,919 Speaker 2: cool piece of value added advice for the advisor to 472 00:22:01,920 --> 00:22:06,160 Speaker 2: give the client. It's not necessarily something that you watch 473 00:22:06,200 --> 00:22:08,760 Speaker 2: a YouTube tutorial about and then and then do it. 474 00:22:08,840 --> 00:22:10,240 Speaker 1: Right, Are you trying to transition? 475 00:22:10,440 --> 00:22:11,560 Speaker 2: I think I'm trying to transition. 476 00:22:11,760 --> 00:22:14,320 Speaker 1: Well I have a few more things, Okay, So in 477 00:22:14,320 --> 00:22:16,560 Speaker 1: the same way, like I wonder how many people like 478 00:22:16,600 --> 00:22:19,119 Speaker 1: they've already lined up or maybe they launch and then 479 00:22:19,119 --> 00:22:21,560 Speaker 1: they go out to the financial advisors et cetera. Or 480 00:22:21,560 --> 00:22:24,400 Speaker 1: maybe they're already in touch with that network. It's interesting 481 00:22:24,760 --> 00:22:26,560 Speaker 1: and fun to think that, you know, you and I 482 00:22:26,600 --> 00:22:30,439 Speaker 1: could go just buy shares of this ETF for what reason, 483 00:22:30,560 --> 00:22:34,440 Speaker 1: I don't know why we would, but because it's an ETF, 484 00:22:34,480 --> 00:22:37,000 Speaker 1: anyone can buy it. There have no control over who 485 00:22:37,040 --> 00:22:38,040 Speaker 1: actually owns this thing. 486 00:22:38,359 --> 00:22:40,560 Speaker 2: Yeah, nor did they care. I mean, they love it 487 00:22:40,600 --> 00:22:41,960 Speaker 2: if it's just more people bought it. 488 00:22:42,040 --> 00:22:46,119 Speaker 1: But wouldn't that be weird if they did a little weird? 489 00:22:46,240 --> 00:22:48,600 Speaker 2: I mean my assumption is it's like any other equity. 490 00:22:48,920 --> 00:22:51,919 Speaker 2: I don't like the tilt towards value, right, just want 491 00:22:51,960 --> 00:22:53,600 Speaker 2: to own a value You after me like this one's 492 00:22:53,640 --> 00:22:55,919 Speaker 2: performance is good. Maybe you have a thesis that is, 493 00:22:56,000 --> 00:22:59,800 Speaker 2: like the people whose accounts at Fidelity have a lot 494 00:22:59,800 --> 00:23:04,720 Speaker 2: of concentrated appreciated positions are really good investors, and this 495 00:23:05,080 --> 00:23:08,879 Speaker 2: ETF will somehow attract their really good portfolios and it 496 00:23:08,920 --> 00:23:11,880 Speaker 2: will have a it will have a better portfolio through 497 00:23:12,000 --> 00:23:13,800 Speaker 2: like the wisdom of the crowd of. 498 00:23:13,720 --> 00:23:19,080 Speaker 1: People with Yeah, maybe it does. It's a little shaky, 499 00:23:19,119 --> 00:23:22,360 Speaker 1: I would say. I just I wonder about the retail investor, 500 00:23:22,400 --> 00:23:25,919 Speaker 1: who's you know going through one. 501 00:23:25,600 --> 00:23:28,359 Speaker 2: That if you're just like browsing. You know, robin Hood, 502 00:23:28,359 --> 00:23:30,040 Speaker 2: and you see a thing with a ticker tax Like, 503 00:23:30,080 --> 00:23:30,720 Speaker 2: that's pretty good. 504 00:23:30,880 --> 00:23:31,520 Speaker 1: Yeah you might. 505 00:23:31,640 --> 00:23:33,800 Speaker 2: You might just buy it exactly. I like, I like 506 00:23:33,880 --> 00:23:36,040 Speaker 2: not paying taxes all Yeah. 507 00:23:35,800 --> 00:23:38,399 Speaker 1: I am fascinated. So again, according to this article written 508 00:23:38,560 --> 00:23:42,040 Speaker 1: by Justina Lee and Wildna Hirich, this is expected to 509 00:23:42,080 --> 00:23:45,680 Speaker 1: launch in December. I am so interested to see how 510 00:23:45,680 --> 00:23:49,640 Speaker 1: big it gets, if at all, I don't know. It's interesting. 511 00:23:49,680 --> 00:23:51,200 Speaker 1: First of it's kind an etf land. 512 00:23:51,880 --> 00:23:56,320 Speaker 2: You do need people to buy it, yeah, like, I 513 00:23:56,359 --> 00:23:59,040 Speaker 2: guess the point of it is actually to let people 514 00:23:59,200 --> 00:24:02,800 Speaker 2: transform their parts, yeah, like actualist and then hold it 515 00:24:02,800 --> 00:24:04,800 Speaker 2: for a long time and not pay taxes. But eventually 516 00:24:04,800 --> 00:24:05,679 Speaker 2: you want to be able to sell. 517 00:24:05,560 --> 00:24:09,359 Speaker 1: The thing, right, But I imagine that's where the bulk 518 00:24:09,400 --> 00:24:10,880 Speaker 1: of its asset growth will come from. 519 00:24:10,960 --> 00:24:13,960 Speaker 2: Yeah, and those people will be sort of buy and 520 00:24:14,000 --> 00:24:17,560 Speaker 2: hold investors because their whole purposes do not pay taxes. Yeah, 521 00:24:17,680 --> 00:24:18,320 Speaker 2: you don't need. 522 00:24:18,160 --> 00:24:32,639 Speaker 3: Anything to buy it. 523 00:24:33,480 --> 00:24:35,239 Speaker 1: So how about YouTube? I mean, I don't know if 524 00:24:35,280 --> 00:24:38,600 Speaker 1: anyone's going to be uh pitching tax on YouTube? Maybe though, 525 00:24:38,640 --> 00:24:41,960 Speaker 1: But anyway, this isn't a good segue. Help me out? 526 00:24:42,760 --> 00:24:46,560 Speaker 2: Was good? So the taxi thing is interesting because, like 527 00:24:46,640 --> 00:24:48,000 Speaker 2: as I said, it does kind of feel like a 528 00:24:48,000 --> 00:24:50,240 Speaker 2: financial advisor product, right. It feels like the sort of 529 00:24:50,240 --> 00:24:53,359 Speaker 2: thing that like you're like, I want to diversify, and 530 00:24:53,359 --> 00:24:55,240 Speaker 2: your advisor's like, wait, let me show you something. 531 00:24:55,480 --> 00:24:55,960 Speaker 1: Mm hmmm. 532 00:24:56,600 --> 00:24:59,959 Speaker 2: A lot of ETFs are almost the opposite of financi 533 00:25:00,080 --> 00:25:04,439 Speaker 2: advisor products. They're like a way to let anyone with 534 00:25:04,520 --> 00:25:09,960 Speaker 2: like a Robinhood account buy a thing that you could 535 00:25:10,280 --> 00:25:12,600 Speaker 2: historically have gotten from a financial advisor. And so if 536 00:25:12,640 --> 00:25:14,880 Speaker 2: you're like in a sort of like somewhat upper tier 537 00:25:14,960 --> 00:25:19,000 Speaker 2: financial advisor relationship, they will sell you all sorts of 538 00:25:19,000 --> 00:25:22,040 Speaker 2: weird derivatives if you're willing to listen. And these are 539 00:25:22,040 --> 00:25:26,399 Speaker 2: called structured notes. And there's actually like a recent court 540 00:25:26,440 --> 00:25:29,159 Speaker 2: case where like the founder of a big tech company 541 00:25:29,359 --> 00:25:32,520 Speaker 2: is like wealth advisor, like First Republic put all of 542 00:25:32,560 --> 00:25:35,600 Speaker 2: his money into like these terrible structured notes that like 543 00:25:36,080 --> 00:25:39,440 Speaker 2: paid like five percent fees, and like they kept you know, 544 00:25:39,480 --> 00:25:41,359 Speaker 2: they're like four year notes, and they kept rolling him 545 00:25:41,359 --> 00:25:42,960 Speaker 2: every nine months because they want to get new fees. 546 00:25:43,480 --> 00:25:50,000 Speaker 2: That business people there's some skepticism about that business. But anyway, 547 00:25:50,000 --> 00:25:51,760 Speaker 2: you can get like all sorts of weird derivatives from 548 00:25:51,800 --> 00:25:54,119 Speaker 2: your financial advisor in the form of structured notes. But 549 00:25:54,320 --> 00:25:56,920 Speaker 2: historically you could only get that from like your financial advisor. 550 00:25:56,960 --> 00:25:59,600 Speaker 2: You could just go out in the market and buy 551 00:26:00,040 --> 00:26:04,440 Speaker 2: all these weird derotas and ETF. People realized that they 552 00:26:04,480 --> 00:26:06,919 Speaker 2: could sell a lot of these weird derotors to people 553 00:26:07,080 --> 00:26:10,800 Speaker 2: in the form of ETFs, and that people had a 554 00:26:10,880 --> 00:26:13,040 Speaker 2: deep hunger for that and would go on YouTube and 555 00:26:13,080 --> 00:26:16,760 Speaker 2: watch videos about like buy right strategies where you like, 556 00:26:17,160 --> 00:26:19,200 Speaker 2: you know, buy some stocks and then you sell call 557 00:26:19,200 --> 00:26:22,160 Speaker 2: options every month and you get you you know, as 558 00:26:22,160 --> 00:26:24,840 Speaker 2: they say, earn yield on the stocks, yeah, which, like 559 00:26:25,040 --> 00:26:27,400 Speaker 2: anyone in the options the world will get really angry 560 00:26:27,640 --> 00:26:30,960 Speaker 2: if you say you're earning yield by selling options, because 561 00:26:30,960 --> 00:26:33,679 Speaker 2: that's not like yield. Yeah, good people do it. Or like, 562 00:26:33,720 --> 00:26:35,840 Speaker 2: you know, there's like we've talked, i think on the 563 00:26:35,840 --> 00:26:39,560 Speaker 2: podcast about buffer ets we have, which are like you 564 00:26:39,600 --> 00:26:41,840 Speaker 2: buy a stock and you kind of collar it, or 565 00:26:41,840 --> 00:26:43,560 Speaker 2: you buy the SMP and you put a collar on it, 566 00:26:43,800 --> 00:26:45,520 Speaker 2: so you can't lose that much money, but you also 567 00:26:45,520 --> 00:26:47,760 Speaker 2: can't make that much money. Yeah, And there's other stuff, 568 00:26:47,760 --> 00:26:50,399 Speaker 2: you know, like the liberty ets, which you also talked about, 569 00:26:50,400 --> 00:26:54,840 Speaker 2: are just you know, they're essentially Derodo's products, and you 570 00:26:54,880 --> 00:26:57,439 Speaker 2: can sell all that stuff to retail, you can package 571 00:26:57,480 --> 00:26:59,359 Speaker 2: it into an ETF and then anyone who wants to 572 00:26:59,400 --> 00:27:02,119 Speaker 2: can buy it. There's a guy in a Bloomberg article 573 00:27:02,119 --> 00:27:04,320 Speaker 2: saying it's like potato chips, it's like sneakers. Anyone can 574 00:27:04,359 --> 00:27:07,439 Speaker 2: buy it, which is not historically true. A lot of like, 575 00:27:07,640 --> 00:27:11,160 Speaker 2: you know, products that financial advisors sold, and so they 576 00:27:11,160 --> 00:27:13,280 Speaker 2: talk you about like democratizing access to this stuff that 577 00:27:13,480 --> 00:27:15,639 Speaker 2: before you have to have an advisor, you know, you 578 00:27:15,680 --> 00:27:17,840 Speaker 2: have to have a relationship with a bank. Now you 579 00:27:17,840 --> 00:27:21,639 Speaker 2: can click a button on your Robinhood account. And the 580 00:27:21,720 --> 00:27:25,639 Speaker 2: downside of that is like you might wonder do people 581 00:27:25,720 --> 00:27:30,679 Speaker 2: know what they're getting? But one, they can read read it, 582 00:27:30,720 --> 00:27:34,119 Speaker 2: and watch YouTube where people will tell them probably a 583 00:27:34,119 --> 00:27:40,520 Speaker 2: great length, what they're getting. And two again this business, 584 00:27:40,680 --> 00:27:44,320 Speaker 2: as a financial advisory business does not have an unblemished reputation. 585 00:27:44,720 --> 00:27:48,600 Speaker 2: Like some number of financial advisors also wouldn't tell their 586 00:27:48,600 --> 00:27:52,000 Speaker 2: clients what they're getting, but they would be proving their 587 00:27:52,000 --> 00:27:54,359 Speaker 2: hands together about the five percent fees, and then like 588 00:27:54,440 --> 00:27:56,800 Speaker 2: clients would get blown up on these things. So it's like, yeah, 589 00:27:57,240 --> 00:28:01,520 Speaker 2: buy like the lower fee, you know, relatively more transparent 590 00:28:01,560 --> 00:28:03,160 Speaker 2: ETF version of it. That's so bad. 591 00:28:03,359 --> 00:28:08,560 Speaker 1: Yeah, there's some great reporting in this article because Denisa 592 00:28:08,600 --> 00:28:12,000 Speaker 1: Taykova and Fildna Hirich again wrote this piece. So they 593 00:28:12,040 --> 00:28:14,560 Speaker 1: watched all the YouTube videos they you know, scraped Reddit, 594 00:28:15,000 --> 00:28:17,720 Speaker 1: et cetera. They found thirty eight year old Todd Aken. 595 00:28:18,080 --> 00:28:20,480 Speaker 1: He has a growing YouTube channel that promises to teach 596 00:28:20,480 --> 00:28:24,080 Speaker 1: followers how to feed off these lucrative ETF payouts in 597 00:28:24,160 --> 00:28:28,280 Speaker 1: a diversified portfolio. I let the dividends replace my nine 598 00:28:28,320 --> 00:28:30,760 Speaker 1: to five. That's the motto. I live and die with 599 00:28:30,800 --> 00:28:32,440 Speaker 1: the results. So I was. 600 00:28:32,400 --> 00:28:38,040 Speaker 2: Surprised dividends are technically it's like hm hm, it's like 601 00:28:38,480 --> 00:28:41,560 Speaker 2: technically a horse. They're technically dividends in that they are 602 00:28:41,560 --> 00:28:45,920 Speaker 2: difidends from the ETF, but they're not like did they're option. 603 00:28:46,360 --> 00:28:48,360 Speaker 1: Let's talk about that a little bit. I mean, they 604 00:28:48,400 --> 00:28:51,000 Speaker 1: did quote some people who were criticizing that, and one 605 00:28:51,040 --> 00:28:53,840 Speaker 1: of the big criticisms of these is that it's return 606 00:28:53,880 --> 00:28:56,680 Speaker 1: of principle, right is the fancy word for it. 607 00:28:56,680 --> 00:28:58,760 Speaker 2: It's not return of principle either, it's. 608 00:28:58,640 --> 00:29:00,960 Speaker 1: What is it? Then? Is it to prenou Is it 609 00:29:01,000 --> 00:29:01,840 Speaker 1: return of capital? 610 00:29:02,080 --> 00:29:04,560 Speaker 2: But what I'm yeah sorry. As a tax matter, it 611 00:29:04,600 --> 00:29:06,440 Speaker 2: might be return for I don't know. Yeah, but like 612 00:29:06,960 --> 00:29:09,040 Speaker 2: you know, a lot of these ETFs, what happens is 613 00:29:09,120 --> 00:29:13,480 Speaker 2: that like every month you get a ten percent cash 614 00:29:13,520 --> 00:29:15,560 Speaker 2: distribution and also the value of the thing goes down 615 00:29:15,600 --> 00:29:18,840 Speaker 2: by eleven percent. Yeah, but what it is is that 616 00:29:18,840 --> 00:29:21,240 Speaker 2: it's option premium. Like you're selling options every month, and 617 00:29:21,280 --> 00:29:23,240 Speaker 2: like if the options move against you, then you lose 618 00:29:23,280 --> 00:29:25,080 Speaker 2: more money than you may but like you get paid 619 00:29:25,120 --> 00:29:25,920 Speaker 2: for the option. Yeah. 620 00:29:25,960 --> 00:29:28,320 Speaker 1: Well to that point, they have a great example in here. 621 00:29:28,360 --> 00:29:30,480 Speaker 1: You take a look at the Yield Max Coin Option 622 00:29:30,560 --> 00:29:35,080 Speaker 1: Income Strategy ETF. It's based on Coinbase. I believe it's 623 00:29:35,160 --> 00:29:37,440 Speaker 1: sent more than one hundred percent of its current share 624 00:29:37,560 --> 00:29:40,520 Speaker 1: value back to holders as cash in the past year. 625 00:29:40,920 --> 00:29:43,280 Speaker 1: That's despite the fact on its holtal Road turn bas 626 00:29:43,360 --> 00:29:47,160 Speaker 1: is so far in twenty twenty four it is trailing 627 00:29:47,200 --> 00:29:48,160 Speaker 1: coin Base itself. 628 00:29:48,600 --> 00:29:51,280 Speaker 2: It's down and absolutely dums too. Yeah, the coinbase is up, 629 00:29:51,360 --> 00:29:52,080 Speaker 2: this thing is down. 630 00:29:52,120 --> 00:29:54,800 Speaker 1: But does the end investor care if they're getting cash 631 00:29:54,880 --> 00:29:59,320 Speaker 1: back in some form, like they're getting a payout in 632 00:29:59,400 --> 00:30:02,120 Speaker 1: some form, Do they really care if it's not. 633 00:30:02,760 --> 00:30:05,560 Speaker 2: They're getting back less than they put it? Yeah, it's 634 00:30:05,680 --> 00:30:07,640 Speaker 2: they yielded more than one hundred percent of the current 635 00:30:07,680 --> 00:30:09,440 Speaker 2: stock price, but it is less than one hundred percent 636 00:30:09,480 --> 00:30:12,200 Speaker 2: of the block price a year ago. They've gotten back 637 00:30:12,240 --> 00:30:13,080 Speaker 2: less than they put in. 638 00:30:13,280 --> 00:30:16,000 Speaker 1: Yeah, well that's what I struggle with, and I don't 639 00:30:16,000 --> 00:30:17,080 Speaker 1: know if I want to keep this in but. 640 00:30:17,080 --> 00:30:21,880 Speaker 2: Like not yield. Yeah, it's option premium. Like you buy 641 00:30:21,920 --> 00:30:24,200 Speaker 2: a stock, right, you sell options on the stock, so 642 00:30:24,240 --> 00:30:27,560 Speaker 2: you get paid five ten percent of the value of 643 00:30:27,600 --> 00:30:30,360 Speaker 2: the stock in option pain. Right. Then if the stock 644 00:30:30,360 --> 00:30:32,320 Speaker 2: goes up, you don't get most of the gains of 645 00:30:32,320 --> 00:30:34,880 Speaker 2: the stock going up because your gains are capped at 646 00:30:34,880 --> 00:30:37,400 Speaker 2: the option because you're selling out of many co options. 647 00:30:37,960 --> 00:30:40,840 Speaker 2: If stock goes down, you take that entire loss. You 648 00:30:40,880 --> 00:30:42,520 Speaker 2: do this every month, right, So every time the stock 649 00:30:42,560 --> 00:30:44,640 Speaker 2: goes down, you take the entire loss, and then you 650 00:30:44,680 --> 00:30:47,480 Speaker 2: sell options struck at like whatever ten percent above the 651 00:30:47,520 --> 00:30:50,120 Speaker 2: current price. And so the stock goes down, you sell 652 00:30:50,160 --> 00:30:53,440 Speaker 2: options struck below where you start it okay, and then 653 00:30:53,480 --> 00:30:56,160 Speaker 2: the stock goes back up. You don't get back to 654 00:30:56,160 --> 00:30:58,479 Speaker 2: where you started. You do get some option pain. It 655 00:30:58,560 --> 00:30:59,920 Speaker 2: is over and over again. You have a very ball 656 00:31:00,120 --> 00:31:02,920 Speaker 2: stock like coinbase, where it goes down a lot you 657 00:31:03,000 --> 00:31:05,680 Speaker 2: lose money goes up, you don't make all the money back. 658 00:31:06,040 --> 00:31:08,480 Speaker 2: Keep doing this, you keep getting the option premium every month, 659 00:31:08,480 --> 00:31:11,720 Speaker 2: which is valuable, but you lose much of the appreciation 660 00:31:11,800 --> 00:31:13,520 Speaker 2: of the stock, and you bear all of the losses 661 00:31:13,560 --> 00:31:15,400 Speaker 2: of the stock. And over the course of a year 662 00:31:15,600 --> 00:31:17,360 Speaker 2: coinbase goes up, you don't get most of the games, 663 00:31:17,400 --> 00:31:18,920 Speaker 2: but you do get the losses every time it goes down, 664 00:31:18,920 --> 00:31:22,600 Speaker 2: and you end up making back less than you put in, 665 00:31:22,720 --> 00:31:25,160 Speaker 2: even though you're getting paid option premier every month. 666 00:31:26,080 --> 00:31:29,600 Speaker 1: But I guess like that option premium every month is 667 00:31:29,720 --> 00:31:32,280 Speaker 1: enough that these people keep buying because these things have 668 00:31:32,360 --> 00:31:33,960 Speaker 1: exploded they are so popular. 669 00:31:34,960 --> 00:31:37,200 Speaker 2: Well, this is like a classic strategy, right, I mean, 670 00:31:37,320 --> 00:31:39,080 Speaker 2: like this is by writing. Right, It's like you buy 671 00:31:39,120 --> 00:31:43,360 Speaker 2: a stock and you sell call options. And I was 672 00:31:43,360 --> 00:31:45,320 Speaker 2: thinking about, like one reason this thing exists is like 673 00:31:45,360 --> 00:31:48,280 Speaker 2: you can just do that yourself. But if you do 674 00:31:48,320 --> 00:31:50,960 Speaker 2: it yourself, you have to sell like one hundred share. 675 00:31:51,080 --> 00:31:53,640 Speaker 2: You know, options contract is one hundred shares, and so 676 00:31:54,240 --> 00:31:56,240 Speaker 2: you have to buy a hundred shares of coinbase, which 677 00:31:56,280 --> 00:31:59,760 Speaker 2: is like, you know, seventeen eighteen thousand dollars and so 678 00:31:59,800 --> 00:32:01,280 Speaker 2: this so you know, you can buy one shot of 679 00:32:01,280 --> 00:32:03,080 Speaker 2: the ETF if you want, and so do you get 680 00:32:03,080 --> 00:32:08,200 Speaker 2: the same exposure for a lower dollar amount. So it 681 00:32:08,280 --> 00:32:14,360 Speaker 2: is a popular strategy, but it you know, people talking 682 00:32:14,360 --> 00:32:16,720 Speaker 2: about it as a volatility defending strategy, which kind of 683 00:32:16,760 --> 00:32:18,719 Speaker 2: is because you get the premium every month. It's like 684 00:32:18,880 --> 00:32:20,560 Speaker 2: when the stock goes down, you don't You're don't really 685 00:32:20,560 --> 00:32:21,600 Speaker 2: shield that, except. 686 00:32:21,800 --> 00:32:26,640 Speaker 1: Yeah, I do like that. They quoted Hamilton Rainer in here. 687 00:32:26,800 --> 00:32:30,080 Speaker 1: So he manages Jeffie, which is like the JP Morgan 688 00:32:30,160 --> 00:32:32,160 Speaker 1: equity premium making ETF, which is. 689 00:32:32,080 --> 00:32:34,720 Speaker 2: A totally normal by right, started. 690 00:32:34,360 --> 00:32:37,520 Speaker 1: This whole craze. One of the things that really contributed 691 00:32:37,520 --> 00:32:41,080 Speaker 1: to the boom, and these types of ETFs. And he's 692 00:32:41,480 --> 00:32:44,560 Speaker 1: so funny because he's he's kind of old school, like 693 00:32:44,600 --> 00:32:46,800 Speaker 1: he managed these types of strategies and mutual funds and 694 00:32:46,880 --> 00:32:48,880 Speaker 1: then brought them over to the ETF rapper. They have 695 00:32:48,920 --> 00:32:53,280 Speaker 1: been enormously popular and it's become this like Frankenstein's Monster 696 00:32:53,400 --> 00:32:57,200 Speaker 1: sort of situation because obviously he doesn't like things such 697 00:32:57,240 --> 00:33:00,160 Speaker 1: as the yield max coin option income strategy ETF, and 698 00:33:00,200 --> 00:33:02,720 Speaker 1: he's quoted in the story saying that, like, not everything 699 00:33:02,800 --> 00:33:05,960 Speaker 1: needs to be in the ETF rapper et cetera, et cetera, 700 00:33:06,160 --> 00:33:09,239 Speaker 1: and these types of funds are a good example of 701 00:33:09,280 --> 00:33:11,360 Speaker 1: that in his view of what doesn't need to be 702 00:33:11,360 --> 00:33:12,280 Speaker 1: in the ETF wrapper. 703 00:33:12,360 --> 00:33:16,920 Speaker 2: But why not you know, like strategy feels a little gambling, right, 704 00:33:17,000 --> 00:33:18,720 Speaker 2: This is a little bit of like a you know, 705 00:33:19,000 --> 00:33:22,480 Speaker 2: like a retail day trader gambling product. But if people 706 00:33:22,520 --> 00:33:25,360 Speaker 2: want that exposure, Like why should they have to trade 707 00:33:25,400 --> 00:33:27,760 Speaker 2: one hundreds share lots of options? Why not do it 708 00:33:27,800 --> 00:33:29,840 Speaker 2: in the ETF forum. Yeah, I don't know. 709 00:33:30,040 --> 00:33:32,440 Speaker 1: Yeah, this is like let the people trade. 710 00:33:32,920 --> 00:33:34,960 Speaker 2: You know, like the people selling these things talk about 711 00:33:34,960 --> 00:33:41,440 Speaker 2: democratizing these financial products, and I don't love these Like 712 00:33:41,520 --> 00:33:44,640 Speaker 2: I wouldn't buy any of these things, but like that's 713 00:33:44,680 --> 00:33:47,440 Speaker 2: just me. Like it's so clear that there is a 714 00:33:47,440 --> 00:33:49,760 Speaker 2: demand for this stuff, and you don't want to be 715 00:33:49,800 --> 00:33:52,240 Speaker 2: too dismissive of it because it is people like watching 716 00:33:52,280 --> 00:33:54,800 Speaker 2: YouTube videos and like learning about this stuff. As someone 717 00:33:54,840 --> 00:33:57,320 Speaker 2: who like grew up in the world of equity derivatives, 718 00:33:57,440 --> 00:34:01,320 Speaker 2: it's impressive how like widespread colledge of equity derivatives has 719 00:34:01,360 --> 00:34:05,080 Speaker 2: become the world of redhead. Right, there's like some truth 720 00:34:05,120 --> 00:34:09,359 Speaker 2: to the idea that this says, like democratizing sophisticated investing strategies. Now, 721 00:34:09,800 --> 00:34:15,360 Speaker 2: they're not always good investing strategies, right, And that was 722 00:34:15,400 --> 00:34:16,480 Speaker 2: the Money Stuff Podcast. 723 00:34:16,600 --> 00:34:18,600 Speaker 1: I'm Matt Levian and I'm Katie Greifeld. 724 00:34:18,960 --> 00:34:21,040 Speaker 2: You can find my work by subscribing to The money 725 00:34:21,040 --> 00:34:23,359 Speaker 2: Stuff newsletter on Bloomberg dot com. 726 00:34:23,040 --> 00:34:25,560 Speaker 1: And you can find me on Bloomberg TV every day 727 00:34:25,600 --> 00:34:28,680 Speaker 1: on Open Interest between nine to eleven am Eastern. 728 00:34:29,080 --> 00:34:30,799 Speaker 2: We'd love to hear from you. You can send an 729 00:34:30,800 --> 00:34:34,000 Speaker 2: email to Moneypod at Bloomberg dot net, ask us a 730 00:34:34,080 --> 00:34:35,480 Speaker 2: question and we might answer it on air. 731 00:34:36,000 --> 00:34:38,160 Speaker 1: You can also subscribe to our show wherever you're listening 732 00:34:38,239 --> 00:34:40,239 Speaker 1: right now and leave us a review. It helps more 733 00:34:40,280 --> 00:34:41,160 Speaker 1: people find the show. 734 00:34:41,840 --> 00:34:44,640 Speaker 2: The Money Stuff podcast is produced by Anna Masarakus and 735 00:34:44,680 --> 00:34:45,400 Speaker 2: Moses Onen. 736 00:34:46,080 --> 00:34:48,280 Speaker 1: Our theme music was composed by Blake Maples. 737 00:34:48,440 --> 00:34:49,919 Speaker 2: Brandon Francis Nunhim is our. 738 00:34:49,840 --> 00:34:53,080 Speaker 1: Executive producer, and Stage Bauman is Bloomberg's head of Podcasts. 739 00:34:53,320 --> 00:34:55,680 Speaker 2: Thanks for listening to The Money Stuff Podcasts. We'll be 740 00:34:55,760 --> 00:34:57,280 Speaker 2: back next week with more stuff. 741 00:35:00,160 --> 00:35:03,520 Speaker 3: The la