Animal Spirits Podcast - Talk Your Book: Investing in Treasuries During a Debt Crisis

Episode Date: June 5, 2023

On today's show, we spoke with Alex Morris, Founder and CIO of F/m Investments on how Treasury ETFs work, why the 1mo is yielding so much, how government defaults could affect treasuries, and much more! Visit https://www.ustreasuryetf.com/ to learn more.   Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.   Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com   Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Ben Carlson are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits Talk Your Book is brought to you by U.S. Benchmark Series. You can go to U.S. Treasuryetf.com to learn more about their targeted ETFs. I think they have three months, six month, 12 month, two year, three year, five year, seven year, ten year, year, 20 year, 30 year. The whole yield curve. It's at U.S. Treasuryetep.com. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Ridholt's wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions.

Clients of Ridholt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. This conversation with Alex Morris was recorded in the, not lobby. What do you call that area? The foyer? It's definitely not the foyer that's in a house. I don't know. Kind of a hallway.

We were supposed to be doing it outside and weather intervened. We were supposed to do it by the pool. We had our nice new animal spirits, tropical brother shirts on. The best part about it all, we walk across the, we're walking across from the bathroom. There's a huge open area with these tables. And we see two gentlemen across the way, also wearing Tropical Brothers shirts. And I immediately, I pointed. Those are our guys.

And one of them was Alex. who is on the show, and they were good sports about it and wore their shirts and we were supposed to be outside, didn't work out. We still got our Miami vices to drink while we were recording live, but we got to do a live show and it was great, right? I thought as far, sometimes it's a little harder to do those live shows, dude in person because there's just a different energy, especially when you're- Well, especially where there's people staring at you that are standing. So if we were on stage, it would have been, you know, whatever. We've done that before, but this is a bit of a different, but I think we did okay. All right, getting just getting to the product real

quick. So we're talking to U.S. Benchmark Series. What they do is they have targeted maturity fixed income ETF. So if you want just to own the 10 year inside of an ETF, you can do it, which sounds like how did that not exist? Because there was no yield to be had, so it didn't matter. In fact, it is mind boggling that the ticker, T-Bill was available. Given that there's like people that sit on tickers, T-B-I-L was available, which just speaks to where we came from, a world with zero interest rates and nobody wanted it. So we are in a much different environment today, that's for sure. Well, so we talked to Alex Morris, who helped founder the company, and he said last year at the conference we were at, they rolled out the product. They basically rolled out the idea.

It hasn't even, hadn't even been opened yet. Now they have more than a billion dollars. And it is one of those, oh, why didn't I think of that? Why didn't anyone else ever think of this? And it really makes a lot of sense. So we had a great talk with him about the debt ceiling and how treasuries are paid out and how the whole thing works and how D.C. is involved. And it was, you think of treasuries as being a little more boring, obviously, than the stock market. This was still a very interesting conversation. Agreed. So with that, here is our conversation with Alex Morris. We are rejoined today by Alex Morris. Alex is the founder and CIO of FM Investments.

Alex, good to see again. Good to see you guys. All right. Let's do the origin store. What brought me here? Yeah. How? Why? When? Yeah, is this what happens when you're supposed to be a doctor and you're kind of get lost on the way to med school? I'm an engineer twice over, you know, which is amazing that they let me out of the house or

I leave. And told my parents, I wasn't going to go to med school and looked at me like, well, what are you going to do with your life? I'm like, oh, well, go find myself in, you know, Southeast Asia. And when they told me I had to pay rent and I was broke, I end up getting a job in finance because they're the only folks who are available to people who miss. missed all of the big meetings in life. So I ended up at a hedge fund. We started it from $0,000, raised about $3 billion in 18 months.

It's kind of frightening. It's like being on a skateboard with a rocket strapped to your back. How did you raise so much money so quickly? Ponses scheme? No, it was actually just a lot simpler. Big pension funds with folks who had had a prior hedge fund that blew up, you know? Close that down. New name, new logo, moved down the street, open it up with some of your friends, and off you go.

So this guys who had run a long-short equity fund for a long time, shut it down after a decade, had their family offices, thought they give it a go, brought us on. And we raised money from like the Australian pension fund and like these massive allocations. And it was a great time to be in global macro. And it worked. So from there, how did you get into the ETF industry? Take a hop to come to a private bank in California from a friend's dad who gave me a job at a good time and then did a small turn in investment banking. And then ultimately found myself in Washington, D.C. because I met a girl and fell in love, and she called my bluff where I called hers

and were married now and have two kids. And the only people I really knew in D.C. who weren't in like a family business were these folks out at Fortigent. It's a family office group and called them up, which basically showed up unannounced. They took my meeting because we'd kicked them out of the hedge fund like four years earlier where we're like,

we don't need you to fleece Americans. We'll do that all on our own for two and 20. We don't need to split it with you. They took the meeting to yell at me. And two weeks later, or they offered me a job to run capital markets, which didn't exist. We built that, sold it to LPL. Turns out, I'm not a great employee in a big organization,

big shock for those who know me. And from that, then, did my contract, left and started this firm with the idea that they're really good portfolio managers out there. The folks we know, we're good at managing stocks and bonds, but they're not really good at running businesses. So what if we just did all that other stuff for them? And we did. Along the way, I met a guy named Pete Baden and his partner, Jed Hennessy,

We started this group called Genoa together, and then Pete came to me one day with a cookie idea. At the back end of it, we created the benchmark series. When was this cookie idea? It's about February of last year. And then at this conference, the Inside ETF conference, 2022, we came, previewed it. Folks didn't laugh us out of the room. So we filed for our first ever ETF, kind of working out what is an ETF? So you came to the conference with $0 in assets last year?

$0, a good idea and not even a fully vetted PowerPoint. When did you get your first check in the mail to start funding things? August 9th of last year. And how much money is in the benchmark series today? Almost $1.6 billion. All right. Incredible. So everything in life is about timing. It's all about timing.

Especially with the ETF launches. Because if you did this, if you had this great idea in 2018, you'd be out of business. Yeah, we wouldn't have made it past the first day of trading. So what was the first product that really started to get traction? T-Bill was probably the first. still the biggest today, you know, is when it came out, sort of immediately got action to the point that most folks didn't believe it, it was real, and then just took off. And T-Bill is what?

T-Bill is the 90-day on the run product, so it was high yield, it was in the right part of the curve at the right time, and, you know, delivered on its promise every day. So where is the most money now in terms of your products? Still in T-Bill. So T-Bill, then U-2, then U-10, and then sort of, oh, that's probably not true. It's probably the short end. T-bill, U2, the six-month, which is X bill, and the 12-month, which is O bill. All right, let's zoom out and let's do a little bit of macro stuff.

My first question on this topic is, is the Fed done manipulating interest rates? Well, manipulating. Compliance is not going to like that one. I mean, if you believe Governor Bullard today, the answer is no. What do you say? He said there's two more coming this year. Now, he also hadn't been in the news in a while, so that's pretty much a shtick, is talk about interest rates going to the moon, so he gets airtime, but they're probably not done.

I mean, whether it's one more, just to prove that they have, you know, the chutzpah to do it, I wouldn't be surprised if we saw a little more action from them before we're through. So we don't know for sure, but why do you think the long end of the curve has remained so anchored and hasn't moved as much if the Fed's been jacking up short-term rates? They just don't believe them or they don't think inflation's here to stay? why have 10 and 20 and 30 year rates not come up as well? I think that the generous view is long-term. Folks believe the Fed gets this under control, right?

You'd only really want to see the tenure in 5, 6, 7 if you really thought we had long-term problems. So folks seemed to, the market seems to be pricing in a short-term problem, right? Now, whether or not you agree that the Fed can get this under control and the central banking experiment works will be determined. And if you look at the one month today, you would, you could be believed if you didn't buy into argument. The last two times the Fed hiked, so one month, so it was, there was one in May, was the last one in March? March. The last two times that they height, 25 basis points,

immediately the two year took a nose dive. Yep. Which is like just, the markets was like, you know, when Mount Burgundy says, I don't believe you? Right. That was the bottom market. But today, not to be too short term, but both the two year and the 10 year, which had been going sideways since the middle of March, are both breaking out to the upside. Yeah. Do you think that's because the market is now saying, okay, rates are going to be higher for longer? Do you think that's because economic data is still strong and maybe we're not going to a recession? What do you think the bond market is going? Can I just flag the fact that Michael is doing technical analysis and interest rates?

And I just want to say, I'm not, I'm just pointing it out. I don't know if that's part of your process. I'm just looking at the charts, my friend. It's fair. I mean, I think that one is not to do with the long term, but everything to do with June 1st. You know, now folks have come from being Fed watchers to what is, you know, Speaker McCarthy and President Biden doing, hour by hour, what are they eating for dinner? You know, are they going to meet in secret? You're just seeing lots of folks worried about will the U.S. default on June 1st, or now it turns out it might be June 6th, and then maybe June 15th, but. Oh, so you think the rate rises are because of the debt stuff? I think that debt stuff is driving everything on the curve and everything to do with the Fed. Well, look at the one month right here. So I've got the one month pulled up, and it has to be.

positioning because this thing crashed to like below three and a half percent in a matter of weeks and then three weeks later it's at 5.7 so that initially is people front running it and then then selling it yeah they're afraid that they're not going to get their interest payments right people don't want to be in one-month T bills right now because they're worried something could happen and they don't get paid back if they were worried wouldn't it be a lot higher than five percent look at what you took off though I mean you need a lot of people to be really worried to move the one month that far because there's a lot of one-month bills out there but But I mean, the other question is, if you're really worried by not getting paid, shouldn't

you be getting out of the dollar entirely? Like, we shouldn't be arguing about whether it's 3, 5, 10, or 20. It should be infinity, right? Like, I heard a bunch of folks talking today, you know, last few weeks about, oh, well, if the government misses a debt payment, it's going to be on this side of the curve, not there, which is kind of ludicrous because a defaulted debt is a defaulted debt. Like, if we're talking about a company that went, you know, bankrupt, we wouldn't be talking

about do we want on their 10 or their 20-year debt? That's true. If you own a six-month T-bill, who cares versus a one-month? So this is window dressing, then? A little bit. I think it's just, there's some latent fear. Folks are driving yields up, particularly on the short end, because the thought is, well, that's the one that always has to be paid back most immediately.

You've got a little more time to pay back your existing 90 days in your one year, and you only make interest payments twice a year on everything else. So you've got a little more time. Have you seen that in your flows where money's coming out of the short-term T-bill funds? Money just keeps coming into the short-term funds. And we've actually seen the last. two weeks, money come into the middle and the long end of the curve. We launched the 30-year fund a couple of weeks ago, and now all of a sudden money's coming in to the very, very

far end for the duration lovers who just are betting on price movement. So Ben's made the case that staying ultra short is a no-brainer, given the shape of the curve. And that's mostly true. However, there is real risk that if the curve uninverts, that there'll be reinvestment risk at the short end, obviously. Of course. And you're not going to get the benefit of price appreciation if the rates come down in the middle of the curve or the long end of the curve. That's true. And if you look at the way we stay on the run, you know, we're constantly reinvesting in that. So your duration will naturally stay where it is or extend from, you know, versus holding on to it. But like if we pulled up the market timing Hall of Fame,

will be nobody there. Right. And just be three of us looking around. And, you know, It's hard to really call that, particularly when you're working with just the sheer size of what the Fed does. There's $31 trillion in debt out there. There's only $5 trillion in cash money in the economy. So you need to move a lot of money to really injure this, but you need just a few stupid statements by politicians before everyone freaks out. So we're talking about what is causing these different differences in rates at different maturities. The bond market is typically known as the smart money. Do you think it's harder to follow the bond market now in terms of macro signals because the Fed is so involved?

I think it's probably always been hard. I mean, right, it's still an OTC market. We're trading bonds today, the same way we were in like, you know, 1600s Amsterdam, you know, right next to the tulip bulbs. And sure enough, they seem to be a little bit alike. But I think the Fed's, you know, yield curve control, which it's not doing directly in the same way Bank of Japan did, but through influence and through messaging has certainly influenced it. But, I mean, if you look at new issues in the debt market, they're just not anywhere near what they were a year or two years ago. I mean, it's not that credit is dried up, but it's really come down.

Do you know on the corporate side? On the corporate side, so just pure credit. I mean, the ABS world is still present, but mortgages are far less plentiful than they used to be. It turns out folks, a lot of buy big houses when you can get a three handle or a two handle. They don't want to do it at six or seven. So you're starting to see some of the credit tightening just coming to that market in general. Some of it is like arguing, like, if you looked at just the yield curve, you'd say it's so inverted that this has to be a recession. But if you looked at spreads, you'd say, wait, this isn't look all that bad.

So someone has to be wrong. Well, someone will ultimately be wrong, or we'll find out that it will be a recession that we can't detect, right? Like, we call a recession because we call a recession, right? N.EBR gets together, a bunch of folks in Cambridge, Massachusetts say, hey, it's a recession. But if it just rolls its way slowly through parts of the economy, and they never actually get, get that critical mass, you kind of get the same effect. And I mean, we're in a potentially recession where everyone has a job. So how can you have a recession when everyone is employed? Yeah, I think you can't have one in the aggregate, but I suspect it can hit. Like pockets?

Yeah, individual sectors of the economy. It's not a great day. We've seen that already. Yeah, you see, it's not a great day to be in big tech. Right. Right. That used to be, they were hiring people to hire people to hire more people. And those folks were all gone. And big tech's talking about cuts. The investment banks, they've cut pretty heavily, but they hire fast. they fire fast. So can't really take much out of that signal. Getting back to the the product, which is you're targeting the maturities on the yield curve, whether it's one month, three year, or 12 month, whatever. Well, what are the products? So there's the 90 day, the six month, 12 month, 12 month, 2, 3, 5, 7, 10, 20 year. Okay. That's a lot of decisions for an advisor to make

who I assume is responsible for driving most of these flows at this point. That's probably right. Why shouldn't an advisor target a specific part of the curve versus being quasi-agnostic to say, like, all right, I want to be in the belly, but like I don't know that I want like the three or the five or the this or that? Like why target an actual maturity as opposed to being more diversified? So we think advisors should be diversified. We just want to give them the tools to target those most liquid chunks. So if you want to be in the belly, there's no reason why as an advisor you shouldn't pick what percentage. if it was just a third three, a third five, and a third seven.

What is the belly? Three to seven? Yeah, three to seven. Okay. Once you get ten, ten's kind of the edge, then 20 and 30 of the long bonds that, you know, behave on their own little world. And the 20 years, kind of a unique animal that every decade or so, the Fed decides to stop or the Treasury decides to stop issuing.

So some days it's there, some days it's not. There's a lot of, there's no, no, the uninversions or the decline. Is uninversion a word? I think so. All right. They're like snowflakes. Not all of them are the same or none of them are the same. That's probably right.

So if you were to anticipate a recession or a softening economy or the Fed cutting or rates coming down or whatever, maybe you would say like, okay, give me all of the duration, right? Yeah, you'd go a long duration. However, that's not necessarily where the most juice is going to be. It might be that you get this sort of weird uninverting where it happens like at the three or more than, say, the 20 year. Yeah, I mean, the question, just given how strange the curve looks now, right? It's not purely inverted.

It's got kind of a hump on one end. Is this sort of like, you know, large meal making its way through the boa constrictor where the lump just kind of makes its way through the belly of the curve until eventually it comes out the back end? But that's a condition we've never seen before. We're used to the curve kind of just being on a pivot point or a teeter totter. And this one looks like it's going to take a different shape as it works its way, you know, out of this.

And look, June 1st comes around. We're not out of the woods, necessarily. We still have to contend with high interest rates. rates that will be high for the next year. And yes, it's been a pretty abrupt ride to get here, but the only thing that we don't know different from getting here is what it's like to stay here. Because the market seems to be pricing in a pretty, you know, late 2023, early 2024 set of cuts. They get pretty much back to zero or certainly to two. And that would be a pretty abrupt drop as well. Usually that's the kind of thing that happens because of a recession.

Are advisors asking you for guidance on how they should think about allocating, or are you not having those conversations? Advisors certainly ask. Retail investors ask, and our answer is really facts and circumstances-based. There's not like one size fits all. That's why we built all 10. Decide where you need to be and where in the market you are. And we hear great arguments for every side of the equation here, like things that say you should go long duration, some that say you should stay ultra short. Some who say, you know, they should just pack up, invest in lead and squirrel pelts and homesteads in Montana and just quit this whole thing altogether. So it's hard to say. I think most folks who come to us, though, and are asking for on the more cash proxy side, pushing to the short end and folks who are, you know, planning on something happening, encouraging them to extend duration out into the middle and to the middle and to the middle or far into the curve, but get ready to do that and start, you know, edging into that as time unfolds. Ben had a good theory today that we were talking about, about why the Fed might cut that has nothing to do with the overall health of the economy. Ben, lay it out with your tinfoil hat, please.

I was looking at the actual interest expense that the government is paying, and it's gone parabolic because rates are so much higher. They paid zero forever. Now, if you divide it by any sort of asset or GDP or whatever, it doesn't look nearly as bad as it did in the past. But if you just look purely at interest expense, it just did this. Right. Right. And I just don't know how long politically that can last where people are going to say interest expense is making up a bigger and bigger part of the budget, can we keep rates at five or six percent if that's happening? It's a good point. I guess the question would be, if we drop rates, though, and inflation takes off, we'll have the same effect, because we still have to pay government employees, and they

have cost-living adjustments based on CPI, just not to pay vendors who are going to jack their prices up, right? F-18s and F-35s are going to become that much more expensive, and we're going to need a lot of them. So I think you're probably right that that would happen. I just don't know what the net effect would be. And the question would be, could we just stop spending as much? Yeah. Always. No. That's really the argument going on today is, is it possible for a government, this government in particular, to say, hey, maybe we don't need that. Like, they're very good at saying yes. They're very bad at saying no. You're talking about the US consumer too, I think. The other thing is, so you mentioned the inflation side of things, you don't have the tips yet. Maybe

that'll come someday for you. I don't know if you can talk about that. But a lot of advisors I know were thinking that they had inflation all figured out. And in 2020, you know, I saw ahead of things. I'm moving all my fixed income from treasuries or corporates to tips. And then when rates rise in 2022, tips got just smushed, right? Yeah. Almost just as bad as regular treasures. And people thought, wait a minute, I thought I was getting inflation protection. Inflation took off. My tips got killed. Maybe you can talk about the different. between the inflation protection of tips and the bond part of tips, which obviously the bond part seemed to win out when rates rose. Yes, I mean, the idea that the government gave you a free ride

when CPI went up was always a little weird, right? I mean, and you had a bunch of phantom income that happened along the way. So the tips market also went soft because it required other people to want to buy them. And other folks, I think, just stopped believing that they were going to get all of that upside that they were promised and that they would get it for the foreseeable future. And in the interim, the government collected its tax on it, so it was pretty happy. Like, it didn't worry about that outcome, because it only promised you the interest payments, and the rest was on the come. And most of those tips are pretty long dated. So they had another seven, eight years where they had to pay the piper on it.

The interest rate risk was the thing that people didn't really think through, right? Right. Because a lot of those tips funds, if you're not in the short-duration tips, they're long duration. So if the rates can go up, they're going to get killed. And they did get smashed. Yeah. I want to talk about the potential ramifications of a default, before we get there, so remind me if I forget to ask you that, if we were to look at your flows, would we learn anything about what the market was doing? Like, do you think that you could look at your flows and then guess the market did this or that, or is it sort of not random, but is it not that, I don't know, is there no signal

there? It's probably not much. I mean, if you looked at volume, you could probably pick out days around the FOMC meetings a little bit. So does volume pick up around that before, after, during? right before during it's pretty quiet and then afterwards it tends to spike and I don't know if that's advisors moving it around if that's institutions but we see volume so you think people are trying to hedge like fed day some certainly are we have some folks who rang us up and told us that's what they're doing

so actually that reminds me could you explain to the audience who doesn't live in this world why is it so difficult to track ETF how come there's no transparency to who your customers are versus like a mutual fund for example yeah so it's like a stock We, in theory, can figure out who the end owner is after some period of time, but not in real time. And if you work with an advisor, it doesn't tell us who the advisor is. So when we send a proxy, we know where to send a proxy to, but we don't know how you got there, whether you came to the website and decided you want to buy it, whether an advisor put you into it or whether you're part of a fund managed by third party. So it's kind of hard for us to work out. Are you making your way into model portfolios?

We've had a number of allocators who've put us into portfolios, folks who've asked us to, you know, audition to be in portfolios. It's kind of the most boring pitch you've ever heard. We do this one thing. We do it for 10 things now, and that's all we do. Next meeting, please. I mean, this is kind of dumb, because if you were going to barbell your portfolio, you might as well just own an index-like product, but are people asking you to do that? I've had some have asked us to help them build spread. So what will be the difference between the two and the 10-year or the 90-day in the two-year, which are pretty common rates products.

you'd see sold on a desk somewhere on Wall Street. And all sorts of things in between. We have a lot of folks to say, hey, here's what we have today. I want to take duration up or down. What should I do to make it look like something else? And we're always happy to help folks with that. So you've said you're based in D.C.

I don't know if you know the answer to this or not, but let's say that we get to whatever the deadline date is in early June or whenever when the government runs out of money. There's no deal. There's the debt ceiling expires. What are the backup plans if there's no deal? in place to continue to pay these debts and the government to continue to function and send out, pay all their bills?

Well, they won't be able to pay all their bills. So I guess now it's like, you know, when you're running out of money at the end of the month, who do you not pay first, right? Like you pay your rent or your mortgage, right? And then you try to not pay the utility company. Every few years the government shuts down and we stop paying employees. We're pretty good at that. And they kind of know they're going to get paid back at some point.

So that's probably a good first place to start for the government. It's a lot of vendors. I mean, there's a lot of people who sell stuff to the government. So Amazon probably isn't getting paid, but we're still going to pay the defense companies. So there are vendors they can stop paying who have provisions, no doubt, in their contracts for interest. And like any of us, if we don't pay a bill. But where do treasuries fall on that priority? I have to imagine they're first. I mean, it would be pretty frightening otherwise because even a few-day delay would just shake the foundation of what we do. I mean, treasuries are enshrined in law is the safest thing you can own. indeed many financial institutions are required to own them. So if the notion is we required a bank, you know, to own treasuries and then said, oh, by the way, they're not as safe as we thought, it would just kind of undo the whole thing. So I have to imagine they come first. So there's no reason for, I'll just say no reason, depending on your level of risk aversion.

I'm not worried at all about the U.S. government not repaying people that buy their debt. Is that a reasonable thing to say? It is. Does everybody take a breath? Yeah, I think, like, we're going to get through this one way or the other, whether we eliminate the debt ceiling, which is a fairly new convention. Didn't exist for all that long. Or we substantially extend it. The question is when and how much damage do we do between now and whenever the politicians get around to doing the right thing? I just have one more very important question. Where did you get such great style from? Oh, you guys, of course. If you're not watching now, Alex is wearing a nice Tropical brother shirt with me and Michael. We saw you. you over there in the convention hall, and we didn't realize you was you at first. We just thought it was two really stylish guys wearing Coptical Brothers shirts.

No, we took our cues from you. One more question from me about the correlation between stocks and bonds. Last year sucked for most investors. Bonds, which were supposed to provide safety, you can argue, actually drag down the stock market with them. Do you expect that correlation to continue, break? How should investors think about the ballast of their portfolio, ostensibly, with the risky part? For the last 50 years, there's a pretty good correlation. Stocks up, bonds down.

Interest rates were coming down to zero is kind of helping that. So interest rates staying level probably brings us back to that world. Interest rates coming down probably brings us back to that world. But I doubt highly that we continue to have them correlated to one. I mean, in a panic, all correlations go to one. We're zero, right? Or assets go to zero. So I think we're probably through the bulk of that.

But if rates stay high, that that correlation will become weaker. And then when rates go down, it should go back to the way it has been for the last 40 years. I don't know if you can reveal anything else on the horizon for a benchmark series. Benchmark probably sits where it is today. There aren't any of the benchmark tenors. But we've got a couple of things in the credit space we want to do. We've got some other treasury plays folks have asked us to do that we'll bring out. I have a horrible idea.

Yeah. What about individual corporate bonds, like Apple bonds? So we thought about it, but we can't do it. Why? Believe it or not, the SEC is kind of okay with it, but it's the IRS who determines if you can be an ETF. They don't want you to put, so like if you look at the single stock ETFs today,

they're neither single nor stock. They've got swaps and this other stuff. The IRS says to be an ETF, you have to have five issuers. Otherwise, you could just buy one stock and never pay capital gains. So they don't want you to do that. So you have to be diversified.

So we couldn't buy a single issuer, but we could buy five. What about fang bonds? you can buy I'll take 10% of that, please. Yeah, if you can buy all the fangs, you could do it. Oddly enough, though, you can also buy import-export bank bonds. They give those an exception.

They give treasury bonds, import-ex-bank bonds, and a handful of other government debt. But that's it. You just say something? Nope. Alex, what else? I think that's it. Where do we send listeners? U.S. Treasuryetf.com.

Wait, U.S. Treasuryetf.com? Yeah. Do you believe it? Good URL. All right. Thanks, Alex. Appreciate it. Thanks, guys.

Thanks, everyone. Okay, thanks to Alex. Again, great sport. Great style on the show with the Tropical Brothers shirt just with us. And they made a mean Miami Vice there. It was a great mix, right?

I did. Remember us at U.S.T.E.F.com and email us, Animal Spiratespot at email.com. Thank you.