Animal Spirits Podcast - Talk Your Book: The Prophet of Capital Preservation

Episode Date: February 6, 2023

On today’s show, we had Darren Schuringa, CEO and Founder of ASYMmetric ETFs on to discuss market volatility, how leverage works within leveraged ETFs, how ASYMmetric utilizes leverage and trend following, and much more! Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.   (Wealthcast Media, an affiliate of Ritholtz Wealth Management, received compensation from the sponsor of this advertisement. 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. 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.) Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits talkbook is presented by Asymmetric ETS. Go to ASYMShares.com to learn more about their three different funds, all rules-based. We're going to get into them on the show today. That's ASYM Shares.com. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Battenick and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Battenick and Ben Carlson work for Ritt Holtz Wealth Management, all opinions. Opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritthold's wealth management.

This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. Your voice got a little radio guy. It was like a very smooth intro. You know what I mean? Did you feel that? It's because I've been sick lately, so I've got the bear's on down.

Maybe. That was a fun one. We had a good talk today with Darren Schringa from Asymmetric ETS, which is a new company to us, and we said it was one of the more interesting conversations we've had in a while. We haven't gotten many in a while, but for three or four years there, our inbox at least once a week was someone saying, I want to put at least part of my portfolio in something with leverage because I'm in my 20s and in my 30s. I have decades to compound.

I know I'm going to have more volatility. If I can take advantage of the leverage, I want to use it, and I think it's going to work out in the end because I'm a long-term investor. We should have Sean plot those emails when they came in against the S&P 500. They'd definitely clustered. Probably be at zero now. And the answer was always, you're going to lose 70, 80, 90 percent during the expert market. You just are in a two or three, whatever it is. And some of those funds have a lot of the NASDAQ three times ETF.

A lot of people wanted that one. And there hasn't really been a good answer in terms of how to use leverage intelligence. And so we talked to Darren today, and they have a new fund coming out that is going to use some price and volatility-based signals to determine when leverage should be put on. And that's during an uptrending market with lower volatility. And I thought that was interesting in terms of not just having leverage on all the time, but having it on when you're in a market that is more well-suited for it. I think the strategy makes sense. You know what I like about it? It's not like a billion signals. It's not like super convoluted and overly complex.

Tactical stuff does need to be relatively simple, I think. You can't have it be a black box. Anyway, I don't want to step in too much of this conversation because it was a little bit on the longer side, but it was fun, and I hope you learned something. This was maybe the most Michael Badnick pushback we've seen. You kind of went into lawyer mode for a little bit and cross-examined the witness, and he provided answers. It's a good exchange, and that's the whole point of this show for it, I think, is that there's sure. should be some back and forth in terms of understanding what's going on here. What are the pros and cons? What are people seeing? What are people aren't seeing? And then determines yourself where this

makes sense. Then he was a great support about it. So I think you'll enjoy this conversation. Here it is with Darren Scheringer from Asymmetric ETFs. We are joined today by Darren Scheringa. Darren is the co-founder and CEO of Asymmetric ETFs. Darren, welcome to the show. Michael, pleasure to be here. Thanks for having me. Yeah, of course. All right. So before we get into the product. Just give us, like, if you would, approximately 20 seconds. I know it's close. I'll give you 30. Just give us a little background. How do you get to the company? Investors need a better way to invest. And in fact, there is a better way to invest. Retail investors today have been taught that you need to accept a lot of volatility if you want to generate returns

over time. And you look at the difference between high net worth individuals or institutions. What do they say when they go to their investment advisors, don't lose my capital, right? That's the first thing they say, and that's a huge difference in disparity between what retail investors are asking for and what institutions. Asymmetric ETFs brings institutional solutions down to retail investors. So were you in the institutional world before this? I was, yes. So my background is probably as storied as any ETF manager in the business. I ran a five-star mutual fund. Yeah, no, seriously, I'm not, I thought about this in the shower this morning. It was really weird. I'm going over my background. It's like, is this really me when I think about all these things?

I ran a five-star mutual fund. I was behind one of the largest hedge fund seeds in the United States, based on this technology, which is called asymmetric risk management technology. When I left my firm, it's like, well, maybe you're just with the right firm. I left my firm, started another firm called Yorkville. At Yorkville Capital, we were the best performing manager in North America out of all strategy styles, market caps over a five-year period of time. We're generating 25% per annum.

And then I got a seed for one of the largest hedge fund seats because it's, It's like, boy, institutional investors aren't going to come into this asset class I was investing, given the volatility that sprung up. We need to find a solution that has one objective in mind, which is preservation of capital in a bare market. Provide protection against bare market losses. Because whether you're an institutional or an individual investor, how do you view risk? How much money do you lose me? It's not what's the standard deviation. How much did you lose me?

So that was our goal. Provide protection on the downside. And then see what happens to the returns. And the beautiful thing is the path to wealth creation is capital preservation. Before we get into some of the strategies, are you looking to decrease volatility by being tactical and timing the market? Are you doing it using options? What's the overall strategy?

Great question. I was told never to say great question to people. You can cut that if you want. That's a good podcast trope. It's a way to think through. Everyone likes having great questions. So you're really intelligent. That's a smart question.

So the answer to that question is we don't use derivative. is our strategies don't use derivatives. So we're not an option-based strategy. And if you look at a lot of option-based strategies last year, they failed. Why? Because they were full of treasuries as the secure asset. Well, treasuries are secure until you're in a rising interest rate environment. You're not secure any longer in treasury.

So structurally, they're flawed. And if you look at our solutions, no options in there. We are looking at the market in our technology at its core that I developed over a decade ago. And again, was behind this hedge fund seed back in 2015. And we brought it now to down to retail. investors, at its core asymmetric risk management technology is measuring market risk. And think of it. If you know with a high degree of confidence, whether you're in a bull or bare market, you know how to position a portfolio either to protect or to profit. You want to be net long to capture the

upside. And you want to be either in cash or net short if you want to make money in a bare market. So that's ultimately what we're doing with our technology or what our technology is doing. So what sort of things are you measuring to determine what sort of market regime you're in? We're looking at two price-based signals. I call it our John Bogle moment. I don't know if you know who John Bogle is, but he was the... Is that a joke? Sir, is that a joke?

Yeah, exactly. I hope your listeners do this well. I'm trying to be funny, animal spirit, because we're looking at John Bogle said most investors, most active managers don't outperform the market. The best you can do is get market returns and pay the least amount of fees, and you're going to be better off than 80%. Our John Bogle moment was you can't predict where the markets are going to go. It's impossible.

It's a fool's game. and you try to do it, just going to lose a lot of money. So the best you can do, and this is what our technology is, with a high degree of confidence, it tells us where the market is right now. That's the good news. The bad news, that's Rearview Mirror. That's the weakness of our technology. It's Rearview Mirror.

But the good news is bull markets or bare markets, they last for an extended period of time. Generally speaking, you're going to be in a bull market for moving towards the 10-year time frame where the last couple in a bare market. You're going to be sort of 12 to 24 months in a bare market. So if you know where you are early on in the cycle, you have a lot of a bull market to capture on the upside and a lot of a bare market to protect from on the downside. So two price-based signals tell us with a high degree of confidence where we are currently. That's more or less using some sort of trend following, whether we're going to up trend

or downtrend. So two, yes. So the first one we call our price momentum indicator ban, which is looking at the price movement of the market. And that's trend following. We're looking at the 200-day moving average. It's primarily what drives our price momentum indicator. Is the market above it?

It's trending up. Is it below it, it's trending down? When you say the market, what do you mean, the S&P or is it individual stocks you're tracking? In this case, it can be any market. We have these signals running on hundreds of markets globally. It's a highly scalable technology, but primarily our two solutions that we're going to talk about later on on the show are looking at the S&P 500. So it's any market, but let's just call it the S&P 500 for now.

Scalability of technology, but S&P 500. So whether the S&P is an up market or down market, technically, the second one, again, price-based indicators, we're looking, we're at. involved because you know how important volatility is to overall investment decisions. And if you've ever followed the VIX, you know how bad the VIX is at trying to make investment decisions based on the VIX. You're always late. Especially this year. Oh, yeah. Even in 2020, the VIX was elevated and stayed elevated from the end of the COVID correction right through for a whole year. So if you use the VIX,

you would have been out of the market. Price ball, which looks at the S&P 500, the actual price movement of all the securities within the S&P 500 and comes up with what the display is. And generally, in simple terms, as market risk rises, dispersion increases. So the stocks between the best and the worst start to blow apart. And I liken that to the three states of matter. And a bull market dispersion is water in a solid, right? It's tight. Everything's moving up. And there's not a lot of dispersion. Things are moving up. As you start to increase as market risk is the S&P 500 risk starts to increase, the molecules, the dispersion of the stock starts to move apart, start to get into a liquid. And then when you get into a bear market and you get panic selling, if you've ever lived through one,

a lot of people haven't yet. I've lived through a couple now. People are selling everything. Correct. So you get dispersion blows apart. And it's like a steam. And it's actually a good analogy, right? When people are panicking, things just get me out.

And it doesn't matter what I can sell. And sometimes it's not even what you want to sell. You sell only what you can sell because that's the only thing you can get a bid for. Would you say the market's a little gassy right now? It is. So price of all, again, our proprietary measure of realizing. volatility of the market. Michael's way too proud of himself for that joke. I'm sorry. I should have made a comment. It's a little flagellant, yes. It has price fall, unlike the VIX over the past month, it's almost doubled. Price falls moved up into

risk off territory, which is above 10. So we've had a reading, which is, again, different than the VIX. We're saying, no, market risk has been rising over the past month as the market's been going up. The VIX has actually been going down. And the beauty of price fall, and this is a big statement, but check it out. It's real. Price fall is never wrong. It's a statistical measurement of what's actually going on. We're not putting on any thought. We're just actually measuring with the dispersion of the securities in the S&P 500 is. There's a lot of truth. Listen, there's no opinion about the price of a security and it's volatility. Those are factual statements. So I'm with you on that. This strategy, is there like four quadrants where it's downtrend, up trend, and volatility

rise and volatility falling? Yes, there are. So basically, we simplified it in a different fashion for investors. We lean into stoplight analogies, to traffic light analogy. So it's a stoplight. There's three levels of risk for the market. Bow market, you're a green light, bear market, you're a red light, and an uncertain market, you're a yellow light when it demands caution because there's signals that things don't look so good. In a bull market, realize volatility's low, and the market's trending up. The other extreme in a bear market realized volatility is high and the market's trending down. Are we yellow right now? Or are we still red? We're yellow right now. Okay. We're yellow. We entered this month. The strategies rebound on a monthly basis. So 12 times a year, they take a reading based on the

end of the month. Our signals are running real time 24 hours a day. But at the end of every month, we take a reading and then we reset the portfolio. Again, it's quantitatively driven. So the technology resets the portfolios at the end of the month. And then they stay there for the next month. This is rules-based. You're not making shit up. We're not making shit up. No, exactly. Because if you look at it, we all have opinions and we all have emotions. And if you start to get involved, your emotions, you can become, I know this from experience. I can become my own worst enemy. I'll speak for myself.

You should have seen me last night in-game betting during the Eagles game. I bet, right? Yeah. How much does the exposure change then, between the red and the greenly, how much exposure will change within your strategies? So it depends on what strategy it is. We'll all have different investment objectives. And so why don't I use that as a little bit of a segue to sort of talk about the three different approaches. So I said, in my starting comment, opening comment, there is a better way to invest, correct, one that's founded on capital preservation. And all of our strategies are powered by asymmetric risk management technology, which at its core is designed to provide protection against catastrophic losses. So the three different approaches that we offer currently are smart equity.

I'm waiting for why is it smart? Well, let me ask you a question, Darren. Why is it smart? Oh, thank you. Thank you, Michael. Because it offers market returns with a fraction of the risk. And that's smart. Come on, come on.

Don't bullshit a bullshutter. I know, exactly. But the beautiful thing is you can check out the performance. So that's A-Spy. That's our smart equity category and look at it. Since going live back in 2020, it captured the majority of the upside of the S&P 500. And on the down market last year, it cut losses in more than half through the low. You've got the simple trend following the volatility. I totally get it. I don't say simple

majority of it. I love the simple moving average. What exactly are you doing? Like if you're above, are you in indexes? Are there individual stocks in here? What's going on exactly? So we'll stay with smart equity right now. With smart equity, then ultimately the technology measures where market risk is and bull market, bear market, then what does the technology do? It changes the net exposure because I said we don't use derivatives, correct? So there's no option strategy here. So, It changes net exposure. So in a bull market, we're net long. Our goal is to capture 75% of the upside of the market. And in a bear market, we actually go net short. Our fund has the ability to generate positive returns in really bad markets, which is unique in the marketplace because there aren't any other turnkey solutions that I'm aware of that have that ability. There are dedicated short funds that do that, but there's no turnkey solutions. How short does that fund go then? Not much. I'm a hedge fund manager. Ask Goldman Sachs. What do they do when market risk starts rising and they pull in their horns, their prop trading desks. They lower their gross exposure and they lower their net exposure. We're an institutional strategy. Offer to retail investors. We do the same thing. We lower our gross exposure. We lower our net exposure. So that's two forms of protection, two lines of protection. Why? The most amount of money you can lose, gentlemen, is what? 100% of what you got invested. Exactly. 100%. So you don't have a lot invested when the market's

trending down and voles high. You stand to lose it all. You know what I mean? So have very little investments. We lower gross exposure. We raise a lot of cash and we go 25% net short. We just want to have money that has the potential of earning a positive return in bull or bear markets. But so what are you net long and net short? Are these indexes or individual securities? So now, and again, in our smart equity, which is a spy, which is the, asymmetric version of the S&P 500, we are long a low beta securities, in fact. Okay, so we're taking the S&P 500 is our investment universe and we're screening it for the lowest beta names within the S&P 500. And then if we only did that, we'd end up with a lot of

reeds and utilities historically. So then we are sector neutral. We have 11 sectors that match the S&P 500's weights and we take the lowest betas within each sector. So what we want is a long book that generally moves with the market, directionally, upward down, but with less volatility. In essence, if you look at A-SPI, what it's doing, it's doing what Min-Vol funds are doing for investors is giving you Min-Ball exposure with one big difference. Min-Vol funds, because they're equity, they're going to move with the S&P-500 in really bad times. Correlations spike.

They move towards one. And if you look at historically SPLV, USMV, they're going to drop and hit their lows pretty much on the same day as the S&P 500. The question is, did they lose more or less? Ours, because we dynamically manage net exposure, our technology does, we have the ability to move in the opposite direction, which is what's happened historically. Why do that? Why not own the S&P when you're above or why not own high beta when you're in a bull market? What is it about low-val stocks that is conducive to this strategy? Because we fund integrity. It's a term I use. We actually want to deliver what we promise. So the volatility thing to you really is,

is a big part of this, obviously, that you're almost doubling down on keeping volatility low in the fund. We are. That's exactly it. Ben, so if you look at this structure of our fund, everything that we do is designed to, we want to be the MinVall equity exposure within your portfolio. At the end of the day, a core equity holding, and that's designed to get that seven to 10 percent steady equity returns in bowler bear markets. And so everything that we do from a structuring standpoint is designed to deliver that. So that's why we do it. But now, Michael, today we're recording a little before the February 1st. This will come out after February 1st.

We're launching two new funds tomorrow. We're taking the same technology, asymmetric risk management technology designed to provide capital preservation at its core. And we're a slight twist on them. One is Z-Spy, which is our smart alpha, okay, Z-Spy. And Z-Spy, what is designed to do now, same as A-SPI. It's measuring the market risk of the S&P 500, but the difference is now when we're in a bull market,

It's doing what you said. It's adding leverage. So now, if we're right and our technology is right, that volatility is low, the market's trending up. If you're ever going to add leverage, again, ask Goldman Sachs. The time to do it is now. And we're going to add leverage to the upside of the upside of the upside of the S&P 500 in a bull market. Sorry to cut you off. Same signals just in a bull market. You're going to go a little harder. That's it. In a bull market, we're going to go a little harder. have been the second change in a bull market. We're still going off to the same protection on the downside. Nothing's going to change on the downside. The difference is this. Because, again, fund integrity, what Z-Spy designed to do? Z-SPI is designed to generate alpha over the S&P 500. That's why investors are buying it. Our long exposure to the market in Z-SPI is actually the S&P 500. We want to give investors what they're looking for. If the market's up 10 percent and we put 200

percent leverage on, which is what we're going to do, we'd expect to be up 20 percent. And that's which Z-Spy is designed to do. So it's no longer low beta because this isn't the core equity position. This is an alpha generating position. This is a satellite position within your portfolio that's meant to generate alpha over the S&P 500. How does this differ from some of the ETFs that are like 2x that have the daily reset that doesn't actually give you 2X on the upset or downside? This addresses that problem, Michael. So what we're doing, I feel so excited about this product launch because that's daily returns, daily leverage. You need to reset every day. And if you look at SSO, which is your leveraged S&P 500, 2X, over a long period of time. Look at the chart. It's

flat, basically. So you're not getting leverage returns. If you look at Z-Spy's chart, and it's published now on Bloomberg, the index data, you're getting significant alpha over the S&P 500. We're offering period return. So let me cut to the point. Z-SPI addresses the problem of traditional leverage funds because it offers period returns versus daily leverage returns. So if you held Z spy for a bull market that was up 100% over X number of years, you'd expect Z spy to be up roughly 200% over that period of time. A few questions, because this seems like an interesting development. I didn't know that's what this did. It's 200% exposure in bull and bear markets, or only, are there signals in this as well? Signals in it. It's on the S&P 5. And the same three

signals. Risk on, risk elevated, risk off. Okay. What are you doing? What sort of derivative are you using to get that actual true 2x return? The first part of the book, which is 90% of the exposure, is we own the underlying securities of the S&P 500. So we own the stocks of the S&P 500. And then when our technology tells us we're in a bull market for the next 110%, we're using the futures on the S&P 500. Future's, okay, that makes sense. To give us our leverage exposure. So that difference by basically being 100% long the underlying and adding 100% leverage in addition to it in the form of futures is what gives us our period returns versus daily returns and daily leverage. And how is that different from what the other funds are using that don't get you the actual

exposure? Are they using options? They're using all leverage. So the problem with all leverage is now your compounding rates of return every single day. If you go up, use big numbers 100% one day and 50% down the next day up and down and up and down with 100% leverage, you're getting amplification of every single daily moves on your leverage portfolio. So the problem is compounding your rates of return on a daily basis. For us, you have two separate books,

each basically 100% of the market, right? 100% in the underlying securities of the S&P 500 and 100% leverage. Both are moving one to one with the market over a period of time. So we're not getting this amplification of leverage impact, which gets hit by daily returns. Just a little technical question for the tax nerds out there. How does adding futures to an ETF, does it change anything from a tax perspective or make it any different from the holders of people who have not in a tax deferred account? Let me answer that by looking at A-SPI.

Because A-SPI, too, when we're hedging, our downside, we actually use futures to hedge our short-exposure. So A-SPI has been live now a couple of years. In our first year, 2020, A-SPI had zero long-term or short-term capital gains, and we were using leverage within the portfolio. We were using futures to hedge in the portfolio. So we would expect similar results that in Z-SPI, that we're going to be able to offer leverage in a tax-efficient fashion for investors because of the structure of an ETF. So again, boring from what we have experienced in A-SPI. All right. My question is this. You spent your career in the institutional world. I think this is maybe an overgeneralization, but ETFs are more of a retail

oriented product. I'm not sure where investors would mentally bucket a strategy like this. So what are some of the challenges that you face that maybe you thought you were going to face? How has your experience been like transitioning from that world to this one? I've become the profit of capital preservation, honestly, because the mantra that investors have been sold today is alpha generation. And you need to outperform in an up market. because you're going to have a ton of volatility in a bare market. There's nothing you can do. You're just going to have to buy and hold, suck up the volatility, and that's the way it goes.

And that's not what institution-ill investors are buying. They say, if that's the best you can give me, I'll find somewhere else. And so if you look at their portfolios and the structure of institutional portfolios, they're very different than what advisors are selling retail investors today. Would you agree with that? I wouldn't. So what we're doing, so the challenge is because we're bringing an institutional solution that the market had been barred from buying before by the SEC.

because their clients weren't accredited investors or qualified investors. It's like, why would I ever look at something like that? I can't even get it from my client's accounts. I can't put it in small positions across the board. So I've never looked at it because I can't sell something. I haven't even been educated to think about a world where capital preservation is the driver of wealth accumulation. So it's been a tough battle, Michael, like to really educate. It's like, no, you're thinking about the world all wrong.

People actually want to smooth a ride to get to the same place. You've got to decouple them from this alpha generation that you're talking and saying, no, the most important part is you, where are you in terms of your goals and objectives in reaching your retirement goals or if you're in retirement that you're not going to outlive your money and decouple from the S&P 500, decouple from NASDAQ, don't worry about that, worry about yourself and are you on target? And our fund are put in place to help investors stay on target to achieve their financial goals. Where would this fit in? Is this like an alt sleeve? Is this somewhere in between stocks and bonds? How should investors think about implementing this? Thank you for asking that.

And we actually addressed that in the most recent prospectus on Moore and Z-Spy, that Moore is our smart income product we're bringing out. I need to tell investors where this fits because they have no idea. Like, I was speaking with an advisor the other day, love the product. And he says, well, where does it go? And we were talking about A-SPI, I said, A-SPI is a core equity position. Think about it. It's market returns with a fraction of the risk.

What are you looking for in your equities? When you budget, you're looking for it to generate 7 to 9%. That's what you should be looking at when you're making a financial plan for someone in your equity allocation, 7 to 9% over time. And if we do that and you keep adding money over time, you're going to get to your retirement goals. So that's what AISB is designed to do. It's designed to hit that equity-like return with less volatility. So it's not an alt-sleeve.

It's a core equity position. This should be the majority of your equity exposure in the portfolio. I got to push back because it's a good pitch. but where does this go wrong? In other words, any time somebody says equity like returns, and I'm not saying you're saying with bond like volatility, but you're saying market returns with less risk, which we all know, the risk-for-word relationship,

it's pretty good, it's pretty tight. So how does this go wrong? What's a bad environment? Darren, isn't the big risk for people in terms of setting expectations of what this can do is that the whipsaw, where market is up 10% and down 10% and up 10% and down 10% from month to month, you get out and the market takes off or you get in in the market fall?

So that whipsaw, that has to be the risk in the short term. That's the risk in the short term. That's the worst market for a strategy like ours that's looking at price movements. I mean, the market goes way up. Exactly what we've gone through. Look at last year. Last year was a market that the S&P 500 was up 9%, down 8%. So look at last year's results.

We're down 10% at the low. The market was down 24%. And then if you look at our maximum drawdown over time, so this is why it's saying that's not even pushback. It's just look at the facts. Our maximum drawdown is 10%. So equity market, what's the maximum drawdown on the S&P 500? Yeah, we know.

It's bad. Fitty. Fitty, man. It's one-fifth of the downside. But wait, the max drawdown down, it's since the strategy's been alive because certainly at some point the strategy will be down more than 10%. No. So going back to 1999, because it's rules-based.

We forward-tested. We don't back-test. We're applying the same rules as the market trending up, is all low going back to 1999, applying those to the S&P 500 in a bull market. Here's our exposure to bear market. Here's our exposure. And you look at that, going back through two bear markets, the worst we've experienced in our generation, you're looking at 10% maximum drawdown.

So this kept pace with the overall market with a max drawn up 10%. That sounds hard to believe. Yeah, I know. It's incredible. You know the Ron Burgundy Giff, I don't believe you? And I'm not saying I literally don't believe you, but that just came to mind. It just sounds incredible. I think it is.

It's mind-blowing for people to come out and step out into a new world where there's just a different way of investing. And if there's ever a time now, is it? You look at last year, your 6040 portfolio failed. And here's the test, Michael. I love people. I ask them, I've heard too good to be true from people. How could it not be?

It's the holy grill of investing. Market returns with a fraction of the risk. Do you realize what I'm saying? If you don't buy, you're the idiot, not me. If I'm telling you the truth, you're the idiot, not me. You know what I mean? So seriously, so when you look at the market returns, if you look at the 6040 portfolio, for example,

logically, take something to the extremes. That's the way you test an argument, right? And it's like, okay, if that's your premise, I take it to the extremes that falls apart. 60-40 fell apart already when interest rates were zero. 40% of your portfolio is not earning any money, but has risk now. And then 2022 actually made that come true. It's like nothing was it not earning any money. It lost money on both equity and fixed income.

It did. Let me ask you this. Go ahead. Finish your thought. I'm sorry. No, I'm being a bad host, you, you, you know, no, Michael, I like it. Where I say to me, test, like, look at the logic here. Ben hit the worst environment.

It's a sideways market. We just went through it. And this is what the technology did. If you look at it, when you're testing this to the extreme, it's based on two price-based signals that are looking at the price movements of the market. So the market breaks down and technically, and then vols spikes,

and we only see these spikes involved from price vol and bare markets. And I can show you stats, obviously, with that. So those are the two metrics. And then when it does it, it changes net exposure. It's either net long in a bull market to capture the majority of the upside, min-vaal stocks, or it has very little exposure in a bear market. and it's slightly net short, the S&P 500, which is the insurance, to make money in a bear market.

That's what it's doing. It's not complicated, but it's elegant. Everything that we're doing in terms of structuring our fund, this is my best idea. My whole life has gone into this way of managing money, and it was good enough that one of the largest hedge fund sees based on this technology after a year of due diligence. So it's too good to be true for retail investors because they haven't seen any of it before, but it's not too good to be true in reality. All right. Well, I got to say, Dan, that was a hell of a pitch. And I don't mean that in the negative sense. You're a good salesman. And I mean that sincerely, positively, all good things. You know, when you see back tests like go like this and then the product launches and it goes sideways or down? Is this going to be one of those?

Well, no, because it's gone live. So the beauty, look, nothing's perfect. Bernie Madoff was perfect. And look what happened there. It was a fraud. And so everyone got killed. But here, it's the same technology that was used in the back test. It's the same technology that's been used in other products.

But when it went live, I was waiting and seeing too. And it's like, wow, we got the worst environment. Well, the first question I had, too, is, what am I giving up on the upside? And then we had 2021. And it's like, well, we're supposed to capture 75% of the upside. Because even in a bull market, we're little heads. We always want to be safe. We never want to disappoint our investors by saying,

hey, we lost you more money than the market because we were long, high beta names or because we had leverage in A-Spy. And then we get last year, and we didn't make money, but we certainly cut losses by half at the low. More than that, down 10% versus down 24 and change on the S&P 500 at its low in, what, end of September.

So it's like you can look at the market now, which is so beautiful. And then part of it, too, Michael, is our new products are all powered by asymmetric risk management technology. So there's no human element. It's the same measuring market risk, whether it's the S&P 500 or some other market, to tell us, are we in a bull or bare market? We're not always going to be right because it's looking rearview at the price movement of the market.

But with a high degree of accuracy, it's going to tell us where we are now. Things change every second. It's not going to tell us where we're going to be tomorrow. But that's okay because we manage risk then in the structure of the portfolio, right? maximum exposure we're in a bull market, minimum when we're in a bare market. So everything that we're doing is institutional strategies that are designed to preserve capital. And by not losing money, we don't need to make as much on the upside to still be that slow and steady. And I've come up with this recently just in talking with investors is in investing, slow and steady truly wins the

race. And that's our goal. And then the other thing that I've come up with, and I'm giving you guys these sound bites right now because they mean so much to me is what's the eighth? wonder of the world, according to Einstein. Compounding rates of return. Bro, that's what we're trying to lean into. I thought you were going to say blockchain. Yeah, no. But that's like, I don't know anything about blockchain. You asked me about blockchain. You have the wrong guest on, but I know a lot about capital preservation, the benefits of leaning into compounding rates of return. And that's what we're trying to do. We're leveraging here with our technology to lean into compounding rates of return because that's a whole new way of investing for investors. It's not about alpha. It is long term,

but you're going to get that by losing less money. And it's better for your investors. It's better for your business if you're an advisor because it smooths your revenue streams up. It helps your investors to sleep better at night. And there's an asymmetric payoff to pain. The pain of losses is much greater than the pleasure of gains. Ask any gambler, you know what I mean?

Tell me about it. Okay, so how do you apply these same things to your income-based product? How does that work? Because that sounds like a totally different idea to me. Then it is. So it's still driven by asymmetric risk management technology. So, again, at its core, what does our technology do? It measures market risk.

So Moore is part of our smart income category. Why is it smart? Greater income with less risk. And so, again, greater income than what than the S&P 500 with less risk than the S&P 500. What Moore is doing now is it's taking asymmetric risk management technology and applying it to three high income asset classes, MLPs, reits, and utilities. So it's asking the same question. It's saying, okay, which one of them?

of these is in a bull market, which one is in a bare market. And if you're looking for income, income or high income or greater income is only good if principal value is secure. So by looking for asset classes in a bull market that have the potential of appreciation, we're answering that question of secure principal value. If you're appreciating it's the ultimate protection of capital, it's growing. And so what more does is it looks at MLPs reaching utilities, are any of these in a bull market. Oh, all three are super. we'll do is we're going to allocate a third, a third, a third to MLPs, a third, a third to utilities. And as you go along in a different environment, some of them will drop into

bare markets. And when that happens, then the technology say, oh, one of them's in a bear market. Okay, we're going to remove it from the portfolio and we're going to reallocate. So now if it's two or in a bull market, once in a bear, it'll be 50% invested in one and 50% in the other. Oh, hold on. Another one just dropped into a bear market. Now we'll be 100% invested in whatever the high-income asset classes. It's remaining. So last year, that would have been Master Limited Partnerships, right? Energy had a great year in 2022. So we would have been in energy out of REITs and out of utilities, the technology. Now, it's smart technology. So it says, okay, if they're all in a bare market and we're a high-income fund, back to my idea of fund

integrity, what do we do now? It's like, we just don't want to go into cash. No one's happy about sitting in cash. So it says, well, is there a bull market in treasuries? Because generally the relationship between treasuries and equities is negative correlation. So then it looks to the U.S. Treasuries. Are 30-year treasuries, 10-year treasuries, 90-day T-bills, or any of them in a bull market? If they all are, which one offers the maximum amount of the yield? And then the portfolio in this second setting, we'll move into the relative safety or security of U.S. treasuries at that point to still maximize income.

What about a year like last year when treasuries weren't in a bull market? So then we go to cash, preservation of principle. Well, when there's no bull market in equities, and the three MLP's reached utilities, these high-income producing asset classes or equities, there's no bull market in treasuries. Our goal is what? Preservation of capital. We want to sit on our capital because the beauty of that is. So now we miss the bare market, hopefully.

We preserve capital. When these asset classes come back in and start their next bull market run and we move back in or the technology moves back into, my sudden, your yields are way up. So you preserved your capital and you're picking up a whole lot more income on the upside as they start to move higher. That's the way we use more. So the difference with more is this. And really important, because Michael, to your question of pushback, leverage is a pushback with some advisors.

They don't use leverage. They don't use derivatives. And same with gatekeepers on the big platform. So more, no derivatives. There's no derivatives. It's either invested in equities that are high income produced equities that are in a bull market so your principal value is safe and you're maximizing your income. They're in treasuries when no bull market exists in equities.

Or finally, when things are really bad, they're in the safety of cash. And that's the way more works. Is this individual stocks or is it the indexes? Individual stocks. And the ticker is what? M-O-R. M-O-R-A, more of what investors are looking for, more income with less risk. Surprise that's not taken.

That's a good ticker. I was surprised, too, that you got that ticker. Did you have to pay someone off for that one? I looked it up, and it was a company that it delisted. So the ticker was taken, and it just became available. So more of what you're looking for, more income with less risk. Okay. All right, Dan, listen, this is a lot of fun.

I love the passion and energy, and the strategy is interesting. and we'll never forget to keep track of it. So thank you so much for coming on today. We really appreciate the time. Thanks, Michael. Thanks, Ben. Okay, thank you to Darren. Also, congratulations to Darren.

He told us he had a newborn baby at home and made some time for us to do the show still. So remember, asymmetric ETS, ASYM shares.com and send us an email Animal Spiritspot at G-Mild.com, and we'll see you next time. Thank you.