The Derivative - What happens in Vegas…. Gets Dished on this Pod. Overheard at a Derivatives Conference, Part 1

Episode Date: June 2, 2022

Viva Las EQ Derivatives... This week Jeff journeys back to the Windy City from Sin City, where he is joined by a special guest, Mutiny's very own Jason Buck @JasonMutiny. In this episode, they give essential insight into this unique conference for options traders, hedge funds, and insurers. They break down everything you need to know about the event and key takeaways like what was being said, what wasn't said, and what caught their attention. Jason and Jeff dive into topics like; the vibes at EQD, Russian Energy, Commodity supercycles, Multi-Assets including Hedges/Risk Premia, Backtesting, Puts & Dips, the unknown (unknowns), the smartest guys in Vol, and so much more. But the fun doesn't end there...we're putting a part-2 to this discussion on Jason's Mutiny Investing Podcast! So go check it out on your favorite podcast platform, Apple, Spotify, whatever you got...SEND IT! Chapters: 00:00-01:50 = Intro 01:51-16:08 = Vegas Vibes, Russian Energy, "Greenflation", term structure, Carry, & Commodity super cycles 16:09-27:36 = Multi-Asset Hedges, Risk Premia, Back testing, Puts & Dips 27:37-48:04 = The Unknown Unknowns: Skew is crashing, global risks, sell-offs, inflation, & the smartest guys in long Vol 48:05-58:19 = Liquidity & the S&P Index, Dispersion, & the end game for Supply of Derivative tools Follow along with Jason on Twitter @JasonMutiny and @MutinyFunds and for information on Mutiny Funds visit mutinyfund.com Don't forget to subscribe to The Derivative, and follow us on Twitter @rcmAlts and our host Jeff at @AttainCap2, or LinkedIn, and Facebook, and sign-up for our blog digest. Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit www.rcmalternatives.com/disclaimer

Welcome to the Derivative by RCM Alternatives, where we dive into what makes alternative investments go, analyze the strategies of unique hedge fund managers, and chat with interesting guests from across the investment world. Welcome to June. You made it through the least fun five months to start a year in quite some time. This relentless grind lower in stocks, bonds, and crypto. I miss the good old-fashioned panic-stricken sell-offs. But you know what I don't miss?

The chance to go to Vegas and hear the best in the business dish on derivatives. That's right. Yours truly attended the EQ Derivatives Conference in Vegas last week with none other than Mutiny Fund's Jason Buck. What was said, what wasn't said, what caught our attention. We're breaking it all down in this two-part episode. Part one's right here. And we're going to put up part two over on Jason's Mutiny Investing Podcast.

Go find that on Stitcher. People use Stitcher anymore? I don't know. Find it on your favorite pod platform, Spotify, Apple, whatever you got. Check the show notes for the link. So send it. This episode is brought to you by RCM's VIX and Volatility Specialists and its Managed Futures Group. We've been helping investors access volatility traders like the ones we just heard from at this conference. It can help you make sense of Gamma, Vega, Vanna, and all the rest.

Check out the newly updated VIX and Vol white paper at rcmults.com under the education slash white papers tab. And now back to the show. Okay, we are here with Jason Buck of Mutiny Funds. The two of us were just out in Las Vegas at EQ Derivatives Conference, which is not sure what it's trying to be actually, but it's got a lot of option traders, hedge funds, insurers that use option overlays, exchanges that sell the options

for all those groups to use. So it's kind of a collection of all these different groups that are using quote unquote derivatives to manage risk and drive returns. Jason, what were your overall thoughts? What was the vibe there in Vegas? I think what's interesting,

I want to touch on EQD real quickly too. It's like, I think it's just like EQD or EQ derivative is the best source for the derivative sides of hedge funds, or like you said, insurers as well. So if you want to learn about options, volatility, and derivatives, I think EQD and all their writing, they used to publish a physical magazine, which was great. Now it's all online, but that's probably the best source for learning about our space in general. And I thought the conference is great. They throw, you know, multi-conferences all over the world. I think they were just in Barcelona. Then we went to the global in Vegas and I think upcoming they

have Australia and Singapore, but the idea is they cover the world of options, derivatives, and a lot of the times primarily do the lens of ball. But as Jeff referenced, it's like, you know, you're looking at it from multiple perspectives. You're looking at it from the vendors and providers to from data to execution to, you know, options and volatility hedge fund managers to the insurance side too, which is always fascinating, I think, for the rest of us to see people running ridiculous amounts of money. But the overall vibe in general that I got, like the consensus was that we've had an orderly sell-off here in the S&P and, youP and that we haven't seen this pickup and ball, especially fixed strike ball. And they're talking about just the headwinds when you have just an orderly grind down. When the market is grinding down lower than

the expected or implied volatility or variance would expect over the next 30 days, this is when you could see a grind down in markets and then not a pop in volatility. So that was like the general consensus. And I think we'll get into certain trades that have been working and we'll question if they continue to work, like dispersion. Everybody's kind of hot on dispersion. And then outside of vol space, as we'll get into with the first talk here, is trend following. Everybody kept mentioning trend following, commodity trend following, and how well that's doing. So it's interesting to kind of broaden that scope over multiple asset classes and different forms of derivatives. So overall, it was a fantastic two days at the Wynn. And just

hearing these different talks from practitioners at every level was a really interesting way to get some context to our entire space. And we should say two things. One, we chatted for a minute after the conference. Jason went back to California. I went back to Chicago. And so classic day after Vegas style. We're in sweatshirts and hats here. If you're seeing this on video, you know that if you're listening to the pod, you don't. So day after Vegas vibes here for us. I feel like my voice might be a little scratchy as well. And to clarify, it wasn't like we were out drinking and partying. It's just like talking to people, like yelling over the music in Vegas. It's like, yeah, it's just the extroversion is what's making us exhausted. And obviously the trip and just the 24 7 nature of any sort of event. Yeah, we'll speak for yourself. There was a little bit of you were crushing the tables. So and then I also want to just, when we're talking about EQD, it's a highly institutional crowd, right? This isn't retail traders trying to learn how to trade options.

This is people that have been doing derivatives on the stock indices mainly, but also rates and everything for dozens of years before Jason knew what an option was, before I knew what an option was. They've been in the game a very long time. And so this is all the pensions and the endowments and the insurers talking to the hedge fund managers and the index providers that provide those products. Yeah. So context, I think Josh Heller, I think it runs like $450 billion in hedges in Australia for Australian pensions to give you a context there to like some of the insurers were that size or even potentially larger. But then in the audience,

like I just realized I didn't have a chance to say hi to Blair Hall, who's been in this industry for like longer than I've been alive. And so you have like, yeah, I saw him across the room at once. I need to find him at one of the breaks, but didn't get a chance to talk to him. So that gives you an idea of the context of who's in the room. And it's probably, I did a rough count. I think it was less than 200 people. But like Jeff said, it's like institutional insiders in the ball and derivative space. So it's a really, really, truly interesting crowd.

So we'll jump right in. The first, and we're not going to go panel by panel, but we'll just mention something. The first guy, Michael Hay. I can't even remember where he was from. Didn't take that down. Sorry, Michael. Sock gen, talking commodities, right? Big topic, all that's going on there. First, he's, is he British? Not sure what he is. I think he's British, but he pronounces it aluminum. Aluminium, which I love. So my big takeaway from him is whatever's happening in Russia, this is crazy if anyone thinks we can just shut off Russia and meet anywhere near the demands that Europe needs.

He's saying they're so reliant on Russian gas and just totally unrealistic to think that Europe can replace the energy coming out of Russia within the next 15, 20 years. I think he said, even if all these perfect pieces came into place to replace all that, there's still be 12% short of the supply that's needed. Uh, my other takeaways there talking about greenflation, which I hadn't heard it called that before. Michael Cow, excuse me, Urban Cowboy on Twitter talks about this a lot in his tweet threads of like, hey, this big push to greener energy is actually going to make the fossil fuels

make all that sea mass of inflation in the interim because it takes a ton of energy to build that green stuff he had some great examples on what that takes i can't remember them um and you like that but to me there was also like i disagreed with that a little bit of like he's saying like okay it takes whatever four barrels of equivalent oil to produce one barrel of equivalent oil on a wind farm or something to build that farm to pull the metal out of the out of the earth to produce one barrel of equivalent oil on a wind farm or something to build that farm, to pull the metal out of the earth, to build that tower and those blades. But I'm like, that's a one-time cost, right?

So it kind of was saying like, right, once it's built, that's a sunk cost. And now you're going to get the benefit of that over time. So I disagreed with that a little bit. Like you're saying, whether it's aluminum or aluminium, which is interesting too, like you're saying, it's actually hard at these conferences to figure out where people are from because people are born in one place, they get educated in another country, and they're working in like a third or fourth country. So you have these like blended accents kind of everywhere, which is cool. But like that, he was talking about how dirty it is to actually

produce aluminum. Whether you're using freshwater or saltwater, you got to pump that in. And the energy input costs to make aluminum have always been very difficult. But I think what was... At least I took notes on things that jumped out at me. And so what was interesting is we're so entrenched in the commodity and commodity trend markets that maybe not a lot jumped out at us. I've seen multiple presentations over the last six months, especially at post-Russia about how everybody thinks, you know, just the supply side is totally screwed. We have these bullet whip effects that are not going to be, you know,

they're going to affect the system for years ahead. And that a lot of people think we're in a commodity super cycle, but you've lived through this enough times to know as a CTA that, you know, commodity super cycles come and go and they tend to evaporate quicker than people realize. So once again, though, this is a great way to have trend managers that are doing all different types of lookbacks and speed to which they'll adjust to markets. But that's what he's trying to show. And I've seen multiple presentations on this, that the perturbations in Russia and Ukraine can reverberate throughout the system for years to come, not only on the oil side, but particularly, obviously, everybody's talking about on the grain side, you know, with winter

wheat, et cetera, and the exportation is like, and how screwed does Egypt get or something like that, that's getting all those exports? And then are they getting ahead of it with domestic reserves? And does that lead to more hoarding and spiking of prices because of lack of float for lack of a better term in the commodity space? So like, go ahead. I was just going to jump in real quick there. He also was mentioning the massive lack of CapEx in not just oil, right? It's pretty well publicized.

Like they stopped drilling wells, the shale CapEx way down. But in the metals industry, he had tons of charts on showing just, there's been a massive lack of reinvestment in metal mining. And they've just been paying out dividends to the investors, to the shareholders. So that's, right, you've got the Russian forest, you've got just inflation overall, right?

People making more money, more money in the system, pushing prices up, and then the massive lack of investment in accessing these commodities more. And that's part of that green inflation is it's the irony of ESG is nobody's made investments in the oil companies. The oil companies don't want to do any CapEx, which leads to these run up in prices. And then everything ESG, the input costs come from the old economy, raw materials. So that's the part of the irony of that circular feedback loop with green inflation is like to get to a green world, you're going to have to use all the dirty world to get there. And nobody's put in many money in CapEx because of ESG over the last decade. So now this puts us in an interesting conundrum where we're kind of getting

put into checkmate. And how long that continues, we don't know. It was also funny because I'm sitting here thinking, why are we talking about commodities when we're talking about equity derivatives? But I think he mentioned that of like, hey, never thought I'd be at this conference talking commodities we're back baby well yeah part of that my phone started again yeah that's what that was actually my first note he said commodity meetings have doubled in the last six months so he's like in a normal year let's say i take 150 calls in the entire year in the first five months i've taken 300 calls so everybody yeah commodities are fresh and hot

in people's mind again. And then you might've stepped out to the hallway for something, but he had a bunch of great charts on like what the different shapes of the commodity curves look like. He was saying 80% of commodities right now are in what he calls convex backwardation, where front months are higher and then it convexly moves lower over time, which is saying, right, that's prices showing there's tons of lower supply right now. So prices are high because we can't do it right now. But the expectation over time is we'll eventually get to that stuff. I had a question for us later on, like how is carry doing so well

when all these markets are in backwardation? For now, it's an unanswerable question. You're rolling up the curve, right? You're either the idea with a term structure carry rate is you're rolling up or rolling down. What I think was interesting and what you just said that I definitely missed that part is like, I don't think I've thought enough about this of whether when you're in backwardation, is that curve concave or convex in backwardation? And that's like what you're saying when it's convex,

you kind of have that hump rolling down showing it. It's the near term supplies everybody's worrying about. When it's concave, then you may have a longer problem in the system. So you think that that may set transitory

when it's more of a convex shape to the even backwardation of the term structure. Yeah, that was and he had 12 different, right? Or maybe I guess it's only eight different. So convex, concave, backwardation, contango, and then all the different, what do prices

look like? Or what does carry look like for each of those in each of those environments, which was cool. Yeah. I think whenever you have volatile dislocations, like we're seeing now, especially in the term structure is that is a target rich environment for carry, right? Like I think you have quiet markets when carry can do okay. When it dislocates,

carry can get really burned on the left tail. But then when it resets that higher vol environment and is more steady, then that's when carry is going to do exceedingly well. So that's why I would think that term structure or commodity term structure carry is doing so well. Right, and in that backwardation, you're selling the more

expensive it's going to revert down to spot um and then just a question i took down here and he was asking why is oil at 105 110 whatever we're not destroying demand um i seem to disagree somewhat with that but he was saying uh oh, he had some charts. Burden's still only 4% globally, some metric of it. Once it's over 4%, it tends to cause recession, but the impact of those higher costs is still below 4%.

Yeah, I think, I mean, I may miss that part of his presentation, but I've seen a lot of, like I said, compounding presentations over the last six months. And one of the ones

that everybody feels is like the camel that breaks the straws back is uh 200 oil so that at 110 115 like we're not like we're not we're not anywhere near that yet what what kind of we're talking a paper straw that the camel breaks is bad like i like doing the opposite just to get people's like brains to break for a second uh and then this was only a commodity guy could say this he's spending coming saying uh well high oil is what caused people to skip their mortgage payments in 08 which caused the the gfc which i hate calling it the gfc and you all have made me morph into that um what would you like to call it the 0708 financial crisis yeah exactly, exactly. So we all go short.

But like, you've actually been talking a lot about this. But it is a thought that's been around for decades is that, especially from commodity guys, is that oil affects markets more than anything. And so like you've been saying, it's like, until we see a sell-off in oil, we're not going to see the S&P truly rebound. And oil just keeps creeping higher.

So there's always been a correlation with that. I mean, going back several decades. I mean, we'll see if it holds up this time or not. And then you mentioned commodity super cycles, the four, well, three main ones, 1870 to 1913, 1946 to 1973, 2000 to 2008, when my buddy Jim Rogers started calling it. He's not really my buddy, but we had him on the pod. And then the question is, is this a new one? The vibe there was yes in metals, which for everything we just talked about, all this greenification needs a lot of metals. Plus, right, battery production is enormous cause of that.

And oil, probably not. Because once you you right there eventually there should be some tipping point um but the cure for highest prices is high prices right with commodities moving on so all right speaking of multi-asset, all those commodities. So there was a panel on, okay, how do you tail hedge multi-assets? Pretty well covered. How do you tail hedge in equities by way out of the money puts? Although that was also a big theme that that's not as easy as it looks. So cool panel here was basically getting into the whole, we're in stagflation which assets do you look at how do you cover these things uh we'll throw it out to your buddy cory hofstein here that there was on stage said uh is risk parity broken because of what's happening in bonds

uh which i know drives him crazy so you have any thoughts on that? Remember what we were doing there? Yeah. So, well, there was an interesting cross asset panel, but I think even though it was supposed to be cross asset, I think they were talking primarily about equity vol. So, the general consensus was once again that- And 60-40, right? Yeah. That's been an orderly sell-off. So, how is this orderly sell-offoff affected 60-40? But once again, the consensus was dispersion is doing well again. Another consensus that was interesting, intraday trend is back. So intraday trend goes in and out of vogue, typically, right? Everybody thinks intraday trend is doing really well again. And then for a few years, they'll be like, intraday trend doesn't work anymore. And then it'll be back again. But everybody seems to hate intraday trend usually. The two parts I thought that stood out to me and also shout out to Anit Chakra from Janice Henderson. I enjoyed him on that panel also.

It was talking about the difference between contractual versus statistical hedges. So this is where we get into the cross-asset class. And we've heard this called many different things. But when he's talking about contractual hedges is like, say, when you're buying a put on the S&P because you have S&P beta. So you don't have any basis risk. And then when he's talking about statistical hedges is when we start to take a little bit of basis risk. So that's when 60-40, when you're using bonds to offset your risk in stocks, or you start using cross asset class volatility plays, whether then you start going into bonds,

interest rates, FX, all of these different ways to potentially provide hedges against S&P. But now you have basis risk, meaning there's not a correlation of one between S&P and these other asset classes, where if you buy that put on S&P, the correlation is one because that's the contractual obligation. But on these statistical hedges, and this is what they spent most of their time on, what's been very interesting to us over time is you have a conundrum there. If your clients are primarily exposed to S&P 500 beta, you need those contractual hedges against the S&P 500. But right now, like we're talking about, we have this orderly sell-off where vol is high.

And so you have to really pay for these contractual hedges. And so fixed strike vol is high. So we're even seeing in sell-offs, volatility coming down on the price you've paid. So if that vol is high, it behooves you to look across assets to find cheaper convexity. But when you do so, then you take the basis risk that you're not really necessarily protecting against the S&P exposure. But that's why we've seen managers like 36 South that are doing exceedingly well in this environment because they have a cross-asset class search for cheap convexity anywhere. And so that's what I thought was the most interesting piece about that panel. And I'll stop there, but I'll tease the next one I thought was interesting on that panel,

are backtests relevant? Yeah. So I had it down as three types of hedges. The mechanical or structural hedge puts the statistical hedge, which is bonds. Hey, these have, which I'm going to say always with big air quotes, because it's really only the last 30 years. But over the last 30 years, they rally when equities go down. So you should hold them as a defensive asset in a portfolio. So that's a statistical correlation that you're needing and expecting to hold. And then event hedges, which are in search of cheap convexity, wherever it might be. Russia dislocates natural gas or something, and you can buy these cheap calls. I got a hedge, even though it wasn't tied to anything really in my portfolio. And then one other piece there I'll say throughout was interesting there of that question of, is it too late to hedge? And part of them were saying right on an institutional level, a lot of times it's like, no, it's never too late to hedge. We have to have it in those portfolios

for its payoff profile. And you have to have it there for the ability to hold the risk assets. So you could say it's too late to hedge, but then you should also be reducing your risk asset budget. If you want to pile more into those risk assets in the down move, then you should have the hedges on for sure. Yeah. That's to say there's trade-offs everywhere. You can have those hedges on even when they're expensive, or you can reduce the hedges, but then you need to reduce your exposure. So, or you can take basis risk and use a proxy hedges,

which opens you up to basis risk. So it's conducted all the way around. And that's, it was kind of, maybe we'll get to that later. It's like my other consensus from the event was Vineer Bansali's old paper about diversifying your diversifiers.

That's what I felt like was also kind of the theme of the generally across the two days we spent there. And then the question I didn't ask the one guy in the panel who runs risk premium for Fidelity, right of like, there's some papers out there. Once a factor becomes a known factor, it loses its factor ability. So a risk premium platform is just allowing institutional investors to say, I want to get the carry factor, the

momentum factor, the value factor, on and on and on. Or a lot of those can be selling options. So I just want the volatility capture factor. So I wanted to ask, based on that paper, what's the degradation from when you backtest a strategy, which will come back to your backtest, versus when it's academic papers written on, versus once it hits the factor platform? The more assets go into that, the more it's going to degrade that signal. After the fact, he kind of of admitted might be somewhere between 20 and 30% at each layer. Yeah. As, as every, uh, arbitrage eventually gets arbed away. Right. And

by the time they public to academic literature and we, that's where you're referencing factors is that's, that's what we saw. And as soon as they had the crisp data from university of Chicago and all the factor research and it's been widely published academically, you know, does that disappear? And I think it was like Farouk at Fidelity, but this will give some color too to the event. Like you were asking that question in one of our breakouts.

And then it was interesting, like, you know, obviously people are speaking their books. So if like you work at Fidelity, you have to think about how do you educate and speak to Fidelity clients. And so like Farouk kept talking about factors, right? And it was interesting, like Jem Carson, and when we were talking in the hallway too,

it was like, these guys are using, you know, decades old ideas of thinking about markets. He's like, factors are dead. Like the idea is fact, but like, but they're speaking to Fidelity clients and they're trying to make things legible. So they're talking about factors. And Jem's like, what the hell are they talking about

with factors? Like, what does that even mean anymore? Although I'll point out like cliffhangers and value as a factor, just that simplistic strategy has now doing really well in the last six to 12 months. So you can argue both sides. Maybe it does really well now. And then the money flows back in and it starts to underperform. Yeah. And I think what, and then what came up at the very end was with Mike at Parametric

Portfolio is like the idea of are backtests relevant? And there was like kind of a debate between Mike and Farouk about, are they relevant? And like, how do you use them? And as we know, it's like, there's so many implicit biases that go into backtests. You know, backtests are only a rear view mirror and they tend not to work in real time. And it's like, how do we use backtests as crutches? Or I think about them as intuition pumps, but it's almost like, and then we never present clients a bad backtest that crutches or I think about them as intuition pumps, but it's almost like, and then we never present clients a bad backtest that goes from the top left to the bottom right. We always show them a backtest that goes from the bottom left to the top right.

So it was an interesting question, especially as markets change, players change in markets, any sort of long-term backtest may be irrelevant given the market structure and market dynamics. So I'm just curious, we didn't talk about that. If you had any takes on backtests. When I started my old firm, Attain, I built out this great looking spreadsheet, showed how much money we're going to make and took it to my father who started a few businesses and said, dad, what do you think of this business plan? And he just looked at me and goes, nobody ever loses money on a spreadsheet, son. So that's the key to back test of like, yes, like you said, they're always going to be good or you throw them in the trash. And kind of back to my other point of like,

what's the degradation? And there were some questions, other panels of like, what did you write practitioners? Like, what did you use for slippage on the equity option cross correlation? Right. All these different things. And they're like, so I think they're valuable, but I think you always have to take them with a grain of salt. The problem is, right, if you go too far in that direction, you say like, okay, well, we could lose 100% and everything and you'll never allocate to anything, right?

So if you run all the Monte Carlos, you say, okay, here's my worst case scenario. I always even discount those worst case scenarios and say, you could lose way more in that, but eventually you have to put a foot in the water, right? You have to believe in what you're doing and say, okay, I like this back test, right? I'm not trusting it that it's going to produce a six sharp for the indefinite future, but I'm going to trust it to basically give me the faith to go into this. And then you can control position sizing and whatnot. Well, and then I remember that actually it was, it was succinctly

put. Chris Cole actually was the first one to ask a question and he asked the panel. Yeah. What, what, what would you, uh, what would you, what do you do to invalidate a back test? And it was crickets. And then like Chris and I are texting each other as we asked it, I'm like, Chris, you know what they do. It's like, if it doesn't prove what your a prior is where you throw that one in the trash, like you just said, like you just like we're implicit biases and we don't even realize it. But that, that is an interesting conundrum is like what, what actually would invalidate the back test. And that's what it's hard to do. Like we all think, Oh, I'll have an idea and then I'll test it. And if it, if the test doesn't work, I'll invalidate it. But then we always change

a parameter to make it work. And then you test in sample out of sample, but then real life never works like in sample or out of sample. So that was a, it was an interesting question where Chris just silenced the room with like basically like seven words. Uh, and the guy, Mikey mentioned, he did have a nice quote saying back test show that back tests don't work. Yeah, that was great. That was a good one. It reminded me of my, one of my favorite lines of 90% of statistics are misleading. Yeah. The next panel, I'll just jump ahead for it. Cause I don't know if you took notes on this, but the next panel was on like the risk of, of bonds as a hedge and how to mitigate it. And I didn't have a lot of notes on this one, but I did write down, got to remember who actually said it on the panel. I want to say it was Ben Bowler, head at Equity Drivers at Bank of America. But he talked about the three free puts that

everybody's been seeing for the last two to four decades. And those three free puts were the Fed put, bonds as a negatively correlated positive carry hedge, and buy the dip mentality. And I just thought that was a succinct way of putting it is like a lot of managers or even investors have only seen for the last two, three, four decades, these three forms of free puts and moving forward, are we about to lose all three forms of free puts? Yeah. What even happens if you lose one of the three, right? So I wrote that down somewhat similar, like your bonds, you get the coupon with a free equity put attached. Right. Right. So that's like, why not do 60-40? You get this huge, huge free benefit to it. And then another way of saying that is that dips became alpha.

If you were willing and able to buy that dip, that became your alpha versus just a buy and hold strategy that's going to reduce, lose some money and then make it back. They're adding on the dips. The next panel title was navigating portfolios through unknown unknowns. And we found on the panel, actually, the title came from Veneer Bansali at Longtail Alpha. And we'll get into why it was unknown unknowns, where most of the time it felt like we were talking about known unknowns until the very end. But it was Veneer chris cole from artemis michael green from simplify and jim carson from kai so a lot of our friends on that panel so obviously we're going to probably take more notes on that panel be more interested in that panel although i was telling the guys later i was like they should just put me on stage like a impressionist and i could basically give all of their speeches i know i'm

all so well now that like i would just have my internal debate. Let's do that for another pod later this year. Like I'll dress up in costume. 20 minutes. You're Jim. Go. Yeah. For the next 20 minutes, you're Mike Green.

Go. Just argue with myself. It'd be great. Yeah. And this was like when we saw this panel, both of us work a lot with those guys. So this was like, all right,

we got to go. We got to see these guys all on the same stage. A big worry that no one was going to be able to get a word in on the same stage um but they seem to do okay they seem to respect each other's time a bit and i'll i'll start with uh i forget what the setup to the joke was yeah it was uh oh about scoring so yeah chris chris cole started with c-warp maybe this will jog your memories like oh yeah so it started started out with Chris Cole talking about his wins above replacement value and thinking about portfolio construction. So what Chris has found through doing all this exploration into Chris Cole's CWARP, Cole's wins above replacement portfolio value is like,

how do you put other things in your portfolio value that are unqualified or negatively correlated that actually improve the returns of your portfolio. And to jump to the conclusion is the only things you should pay for are long volatility and trend following. That's the only things you should pay for, for portfolio diversification. And what about wins above replacement value is like sometimes you don't need to be scoring the most points if you help the team win. So wins above replacement value is about the portfolio of the team. And if you help the team win. So wins above replacement value is about the portfolio of the team. And if you help the team either like defensively and not necessarily shows in your offensive statistics,

you can be a great team player that helps improve the portfolio. The great example always is Dennis Rodman, you know, rebounding skills help the bulls score more points, even if Dennis Rodman didn't score points. Yeah. Right. So does that, does that drag you? Yeah. Yeah. He starts off his next thing with like, that was interesting, Chris.

He's like, reminded me of myself in college, uh, dating my dating strategy in college, which was don't score a lot, but always part of the team. Uh, so he delivered it much better.

Got a big laugh out of the room. And then I was worried veneer wasn't going to get any words in, but he got a little bit in. So. Veneer was laid back for like the, the first half of the room and then i was worried veneer wasn't going to get any words in but he got a little bit in so veneer veneer was that laid back for like the the first half of the panel because they that you even called it before you're like veneer's not going to get a word in edgewise he doesn't know like what he's dealing with these guys but then so one of the things that jim started to hit on um that he talks about on twitter publicly as well and it was kind of consistent with the whole kind of two days is that we're seeing a flattening of vol on crashes. And what I mean by that is flattening of fixed strike vol.

Like vol is coming in and flattening, skew is flattening on crashes because people are already pre-hedged. And so that skew has been bid up. Then when we see these slight, you know, kind of like dip crashes, people are actually selling off their puts and we see skew flattening. So once again, it's the price you pay. So if you're buying out of the money puts and you're paying a high price for them, and you even see the markets come down a little bit, but they didn't come down more than expected. So realized in popover implied, you're going to see

skew come in and flatten. And so therefore you're going to lose money or potentially barely break even on your hedges, even though the market's coming down. And that's what happens in an orderly sell-off. And that's why I think it was part of the overall vibe of the whole event. And so he's saying that basically, as long as vol has continued to be oversupplied, as we've seen, this is going to continue to happen. And then I'll skip ahead to the back end on it because what Jem did talk about later was he thinks we are though in the fifth innings of people being hedged and that trope of a hedge market doesn't crash is they all, they all started talking about this

panel. They're seeing little inklings that people are starting to take off their hedges. So that people that maybe, you know, once they, they, they're convinced to do hedging and then the hedges start not paying off on, on, on small down moves, then they think hedging doesn't work. And so they start taking off the hedges and that leaves the market vulnerable to that crash. And so that's what he's saying. We're starting to see the green shoots there that people are not relying on hedges anymore, but it was like one of the most hedged markets through that echo volatility of March, 2020 through election ball. And then into Q4 of last year, people were starting to have a lot of hedges on. So if we're going to see that supply of hedges come down or not. And then Mike Green brought it up on the flip side of that equation is the

big institutional level short vol is down a lot, right? You had the XIV and the CIVIXI coming into Feb 2018 were a big example of that. I think he's even talking the CalPERS or who was it in Canada, like a systematic vol selling program that's come in way in after March of 2020, right? There's just not the appetite to sell that at scale yet. Yeah, and we'll maybe talk about that later on the insurance panel. Same kind of thing. They said they're not selling Vega in size anymore or even buying Vega in size because

they have other alternatives and things have changed in the insurance industry from a regulatory perspective. The other thing that Chris Cole to echo that sentiment, I thought he had a good quote. He said, it's hard to have a bear market in a bull market in fear. Yeah. So they're saying if skews been bit up, it's, you know, it's very hard to have a bear market, but I always like to bring up though, too. It's like, yes, that trope works that a hedge market doesn't crash. But if we break through that inflection point, there's always an air pocket after that. So 90% of the time works all the time until we have a huge problem after that. So even though most people would want to eventually take off their hedges, that's the way we don't necessarily think about markets that way. Because what if

there's that one event, even though it's maybe worked for the last 10 times, there's none that says it's going to work for the 11th time. Right. It's almost counterintuitive, right? You should be hedging the further away, not the normal drawdown, but the abnormal drawdown. But Mike Green, I agree that like long vol is certainly not cheap.

And he's seeing any payoffs from here in the vol space being pretty symmetrical in terms of the risk for the cost versus the payoff, which I'd argue there again, I'm like, yes, assuming it's a 20 to 30% drawdown. I don't think if it's a 2008 style, right. S&P is down 56%. I would argue it's still quite asymmetrical. Yeah. I thought that was interesting to argue about my mic that with the higher skew and then you're paying higher for implied that these shorter sell-offs in duration and even in depth, that it's more like Delta one instruments. And yeah, so you're getting that linear payoff. Well,

you'll take the linear payoff at least it's better, but you'd prefer convexity. But then Ben Eifert talks about later in his panels, he still thinks the deep out of the money or longer term stuff has, you can still find a lot of convexity there. It's just not paying off yet. It's like if we get a sharper sell-off and realize really spikes have been implied, we'll see some serious convexity there. And we'll get into maybe why and what tenors later. But one thing I want to touch on too, I don't know what the next on your notes is, they asked him what they all thought the risks were. So, you know, it's I hate when our managers become a macro tourist, but, you know, these guys can't help themselves.

So so they asked him what they, you know, because it started to devolve into like the global landscape and what are the macro events they're worried about. And once again, we were talking about gray swans or known unknowns in this in this section, which was the bulk of it. And Chris Cole was banging the drum of corporate solvency again. And to his point, it's like you don't see real volume markets until you see just absolute credit default. And so that reverberates through the system.

Mike Green's number one risk was China. He still thinks that's a huge looming risk that we're losing attention span for. And Cem Karsan actually echoed Mike Green's on China, but then he talked about fiscal policy and any sort of fiscal mistakes there. And then you're talking about that rise in US dollar and the wrecking ball that the dollar can present. And then what I liked as a veneer came out of left field

and said, he thinks the big known unknown is Japan. And so he's like- Kind of an audible gasp in the audience, right? I'm like, well, Japan. What, why Japan? What did he say? Do you remember? Basically, like everybody has been quieted by Japan and the idea right now.

And, you know, I don't have any hero trades, but the one I do really like right now is shorting JGBs, you know, especially because, you know, they've said they're going to yield curve control. They're going to pin it at 50 bps. But it'll be interesting if the market can break it through there. So is this another Soros ERM kind of experience? But why I think they trade so interesting is that because everybody got burned for decades on short JDBs. And so you have all this recency bias with a lot of managers that if you told them you're

short in JDBs, people think you're a lunatic. So I wonder if that's part of the trade. And so that's why Veneer just thought- Just for those non-professionals out here, shorting JGBs, Japanese government bonds, shorting them, short the bond, rates higher. So it's basically betting that the Japanese central bank can't keep their rates pinned at 50 bps and that it's going to go up to 1%, 2%, whatever. And the size and the convexity you can get there, especially when everybody's on the other side, is always interesting.

And I think what... And what we've seen in US bonds here, like the convexity on that, to start this year has been huge. Nobody thought coming off that zero bound, right? Any move in rates that get huge convexity there. Yeah, and I think that Veneer's point was everybody's focused on China and Russia.

And so like the reverberations that we're already seeing with China, I mean, Japan cracking that those could reverberate much larger than China or Russia potentially could. Two things going back. Jim talked a little bit about, which I've talked with him on the pod and some others on the pod of like, are we in the golden age of options trading? Some people said, are you kidding? I used to be able to trade options in 1995. I think you've said that. You were trading options from your... But he had some good points. You've

got Robinhood, you've got the technology, but he thinks it's more of people's brains have evolved to the place. Investors' brains have evolved to the place where they want this... They're understanding non-linearity more and they want to be able to bet on multiple different types of outcomes versus just, I like the stock. I want it to go up. Like, okay, I like the stock over this time period, this volatility. So people are moving into the 3D space, essentially. A lot of that is bad that we've seen in meme stocks and in Robinhood and all

that of like, people don't know what they're getting into. But I think overall, I agree with them that with them that yeah the the kimono is open the lids off whatever the saying is and people are rushing into this 3d chess space um and i think a lot of good will come of it right you can you can hedge better and maybe we're seeing that like the hedge you can hedge all these different paths of indices a lot better um yeah i think that jem's been doing a great job of banging the drum on this. And that's why he was hating on the factors and he's saying people are talking like a decade old is that everybody he thinks...

Factors are linear. Yeah, linear. And everybody's making binary bets, right? It's either up or down. And his point is you actually get the full distribution through options trading. And like you're saying, you're talking 3D now because we add the factor of time. And that's why it gives you the broader paintbrush, but also it gives you the full distribution. And this is why he thinks options are the tail that wags the dog in that sense is

like because of the size of the markets and the distributions and how that can move markets as people try to hedge it on kind of flows over pros kind of idea. Yeah, Jem has always been banging that drum. And I think it's an interesting way to think about markets is like, yeah, most people are living in a linear world where we should be living or a two-dimensional world where we should be living in a three-dimensional world. Mike Green talked a little bit about the duration sell-off or it's been mostly a duration sell-off so far in rates. He thinks the interesting thing is what happens next, right? If we get some higher rates in the longer end and stuff, if corporates, he's saying, are already having trouble getting credit, which feeds back into Chris Cole's thing.

He said the debt to GDP or corporate bond to GDP or high yield, high yield issuance to GDP is the highest it's ever been. Highest it's ever been in this rising rate environment. What does that look like? How many companies can't make their payments? Abe was saying like 100% of corporate profits are going to have to go to just covering that debt, right? Which is unsustainable. So they'll either shut down or restructure the debt, right? They have to do something. That's Hyman Minsky's credit cycle. We eventually get to what he called Ponzi finance, where you start off being able to service principal and interest. Then as times get better, we then only service interest. And then as times get better, then we can only use debt to service the interest rate debt. So that's what he called Ponzi finance. And that's what Chris is eventually getting to as rates rise. They can't service their debt at all. And does that lead to cracks in the system?

And Chris's contention is that you really need stuff like credit defaults or deflationary bust to really rock markets. It's not necessarily any sort of- Yeah, it's unholy. Far cascades. Yeah, exactly. That liquidity and solvency are more important than anything else. Well, I think the point there is that's when people really panic, right?

Like we're going out of business. I don't care what it costs. Sell this piece or that piece, right? That's what really drives acceleration. And that's his argument right now is that, yeah, that's why we see organized sell-off because it's just in financial assets. We're not seeing like solvency issues.

I mean, he thinks they're under the hood. So we'll see. And what was interesting, I thought the other interesting piece that Chris brought up was that he said, you know, basically inflation subsumes equity vol. So if you think about what Chris and my buddy Corey always talk about is like, volatility cannot be destroyed, only transmuted or transformed. And that would be Chris's contention is that if we're not seeing a rise in equity vol, it's because inflation is eating up all that volatility so or is that another way it's it's uh manifesting itself itself in inflation instead

of an equity ball exactly yeah thank you um not to cut you sorry then i had under veneer this is funny just they finally let him talk that was my note but veneer came around at the end. So Veneer talked about the tiger problem, which you know, I'm going to love. And hopefully like Taylor jumped on that too. He's probably going to write an essay on it because I knew Taylor would love this tiger problem, but it comes from like computer science. But the question really around the tiger problem is what do you do when you don't know? And that's why Veneer had that title originally of navigating portfolios through unknown unknowns. So if you can't know anything, even though the panel is mainly talking about known unknowns, Veneer got to this in the end is like, you have to diversify your diversifiers,

which Veneer wrote a great paper on. I highly recommend people look it up. And then you have to focus on the consequences. So you want optionality and you don't want to optimize portfolios. So his point was when you think you know what's going to happen in the future, people tend to over-optimize to efficient frontiers and take on too much leverage, where if you go from the basis of, I don't know anything, so I'm going to focus on the consequences and provide myself with robust optionality, is that's how you construct portfolios for these times. It's why there was the Santa, the Maria and the Pinta.

What was the Pinta? Right. Right. Right. Hey, one of these three, let's send them on, which is probably dumb because they're all going to get caught in the same storm, weren't they? Like, yeah, exactly. They all follow each other. They're 100 yards away from each other. They tired. But I also love Benir said he had some good lines on the Fed. The heads of central banks are lawyers, not economists. And he's saying they have a problem and they can't solve all three at the same time.

Inflation, employment, and GDP. And you push on one lever, something else is going to pop up. You push on that head, the old whack-a-mole game. And then he finished with, we should all thank the Fed for our jobs in

long volatility because because eventually right they're gonna make it make it pay off um and then i'll give uh i don't know if this is uh talking out of school but i think he's talking about it publicly i'll give him more color it's like for those that don't know uh veneer is also a helicopter pilot a jet pilot and uh and dabbles in writing screenplays. So once again, vying for most interesting man in the world. And a backcountry snowboarder. Yeah, exactly. So that's what you and I love talking about is like, why do our long ball guys always take like enormous risk in their personal lives?

Yeah. Noel Smith on the pod a couple weeks ago, right? He does like this mountain biking flips and aerials and stuff. Veneer, right? And he actually had a good thing he's like well on the plane there's four stages of flight and there's a checklist and so to his point of like there's known unknowns what happens if an engine fails and he's like when i was flying out here i'm like how many engines we'll leave we'll leave that one be but he flew out on a two

engine jet and then uh and then for those who don that are not Chris Cole loves to be a rock climber. My favorite one that I, it blows my mind is, uh, Bastion Balesta likes to do ice climbing and then, and paddle boarding on, on throat, like across frigid lakes in, in, in the Swiss Alps. I mean, like it's, it's, that one is like crazy to me. Uh, and then the question I asked some stupid question of like uh around can a hedge mark hedge market crash and then later on i wanted to say the question i wanted to ask him to my mind if we took all four of you guys right out of this room into the poker room and you're playing poker

against each other who's who's coming out ahead that would have been a better question right that's really interesting now you got me thinking. I think any of my answers, if anybody listens to this, they're going to be upset about. But I was thinking like, who's going to be best, not necessarily at the mathematics of the hand? Because I think that's just going to be base rates. I feel like Jen would be like a loose player and kind of playing on the hands

and like making you right, like pushing. Veneerers like super tight holding back yeah um waiting for the the top pair and then i'm thinking like who's going to be best at like playing the player because that's what they're eventually going to get to is the psychology of it and my my first leap was to actually mike green on that yeah yeah and then chris would be somewhere in the middle he'd be dynamic right he'd be like sometimes tight tight yeah sometimes aggressive that'd be fun but then I I was also thinking though on your sense like Jem could throw everybody off because he'd be talking the whole game you know you'd be

throwing it and yeah look over here look over here Veneer might get bored I don't know like yeah uh that's an interesting question we jump in the time machine and go back and ask that yeah that's great hard part like we said it's like we know all these players and even you know especially on this panel but even throughout the few days is like uh kind of know what they're going to say so i only wrote down things that kind of jumped out at me that were unusual so i apologize for not you know giving broader swath to like their actual arguments because i think you can find those in other places or if you you follow these guys, you'll know exactly what they are.

I just think, and got touched on another panel, one thing I wrote down of Mike Green brought up the big reduction in the number of option market makers, right? It's just a few handful of firms. What does that do? That's Corey's liquidity cascade paper. What does that do in some sort of cascade, some sort of liquidity event? They don't have, right? They're not a public utility. They don't have to guarantee liquidity to the market. Yeah. So that's a good one because actually to get more color on that,

the second day at lunch, Mike Green, Chris Sidial and I were having this conversation and it's twofold that, and if you haven't read Chris Sidial's Ambrose paper recently about this topic as well as like, not only you consolidated down to like four banks at like the OTC option level. So that's a worry that you have to consolidate four banks. Then like you're saying, we've consolidated down to like four market makers in the electronic options, you know, whether it's SIG, Wolverine, Optiver, and Citadel. And so like on the electronic listed markets, they can pull liquidity at any time. And then what happens to the OTC

where you're taking counterparty risk and we're down to like four banks and then maybe they're having the same trades on. That was what we saw. They're still not talking to each other with the Archegos blow up where they're all like

adding incredible leverage to that system. So yeah. We saw their fastest out the door wins, right? Goldman's always the fastest out the door. We're out of here. Hey guys, let's stick into this together as they're running out the door. This next one was benchmarks and volatility. Yeah. So I have a few notes on this cause I thought it was interesting.

And it's, once again, much more like institutional panel. But I thought what was interesting is like they were talking about liquidity primarily, right? And Stacey Gilbert that runs tens of billions. Is that right?

I don't know. But yeah, she was super smart. Oh, yeah. I pulled it up. Yeah. Maybe 40 some billions. Yeah. Stacey Gilbert at Glenmead

was talking about during the crisis, the world goes to indexes for liquidity. And so I wrote that down because we think about this often as we talked about at the beginning of this is like the idea of your contractual risk that you're tied to S&P beta with buying S&P puts, or you can take basis risk and go out and look for convexity and other marketplaces to hedge your S&P risk. But the interesting thing is like, do you need to do that if the world marketplaces to hedge your S&P risk. But the interesting thing

is, do you need to do that if the world's instrument for liquidity is S&P? So like Wayne Himmelson and I have talked about this a lot, this is why he believes in S&P index options, is because that is the global source of liquidity. And when liquidity dries up and the world crashes, everybody rushes into the S&P 500, whether it's SPX or SPX options, e-mini options. It's the most liquid market in the world. And when everybody's searching for cash and liquidity, that's where everybody rushes into. And it's like a self-fulfilling prophecy, right? If you know everyone's rushing into there, that's where you're going to be, that's where you're going to trade. Right. And I think part of that is too,

we haven't seen that real fear and panic for everybody to rush in. And that's why we're saying the hedge market doesn't crash or vols oversupplied. And I think you of that is too, like we haven't seen that real fear and panic for everybody to rush in. And that's why we're saying like the hedge market doesn't crash or vols oversupplied. And I think you had a good analogy. I'll let you talk about like insurance, right? Like a housing insurance is like, if everybody has a housing insurance, nobody's necessarily worried about their house burning down. But if you only have a million dollars of house insurance and your house is valued at 2 million and the fire starts, you're going to be rushing to get that other extra million in coverage. Is that like a fair assessment is your high five and your kids yeah uh he got back from space camp at midnight last night and just woke up 12 14 chicago time uh well done son after my own heart bed at midnight

wakes up at noon 12 full hours he uh i don't think i was me on the insurance thing i really cory wrote about it recently but i thought you like rewrote about it maybe in our newsletter i think but um yeah or like or jem was talking about too like in cory both about like flying in a plane at 30 000 feet is that's the multiple evaluation you know versus like velocity and like there's a bunch of analogies for that but i'll also jump to like who is also on that panel is russell rhodes who is at you know sebo for a long time but now uh russell, Russell is head of research and consulting for EQD. So Russell always pulls up the great statistics. Cause he just got such a curious mind. It was

great talking to him at dinner on the first night, uh, before the event started. Um, but he's great glasses, right? Yeah. He had the red, the red, the red frame ones were really cool. I like those. Um, so he said, uh, he said, I can't believe I'm going to say this as the Dr. Vicks or whatever, but he's like, there's a lot more to volatility than Vicks. And he brought up this statistic. He said, well, this got me fired for saying this last time, but there's a lot more to volatility than Vicks because he literally worked for the CBO promoting Vicks. And then he said, and so he brought up, for example, the P put index,

which is basically long S&P beta, and then buying a negative 5% on the money put is down 15% year to date. And you're like, how does that make sense? And the market sold off 15%. Yeah, exactly. That protection is not paying out because like you said, volatility is not really manifesting itself. The other random statistic, and he was talking about this at dinner and then he brought up on the panel too, is like, he said said we've never seen a rebound from a bear market without vix being above 45 and so he's like is this the first time we're going to see that or or do we need and stacy actually came back and said she thinks that you need that capitulation in the end and she said we haven't seen that again yet and she's like could be still 12 to

18 months out you know out from now to 18 months. But did we ever get in a bear market? Well, that's what she said. And yeah, that's the question they were kind of saying too. And it's like, do you see this orderly sell-off turned into a disorderly sell-off? And that's when you're going to see the VIX above 45. And that's where we had the true crash and then eventual kind of rebound. So I had a few things. One, this was like the 17th time someone said dispersion's doing really well so during this panel here on this page i have i wrote down my spidey sense tells me dispersion worst performer moving forward yeah i think you wrote a note to

me while you're sitting there it's like number one dispersion doing great number two this is the high this is the top tick for this the top And so, yeah, we'll also get to that later too, as well as we go actually into the next panel, which was another one. Yeah, I just had one thing, Russell. I think he asked the question and nobody really answered it, but I thought it was interesting. Is the proliferation of products and tenors, I'm not sure if he said tenors, but is that smoothing ball, right? I can trade on Monday, I can trade on Wednesday, I can trade Friday. So it's the proliferation of that. And I've brought up to some option people are like, are we eventually going to get to hourly

options? Like, right. Like where's the end? These are for-profit exchanges, right. With big booths and dinners and giveaways here at this conference. What, what does the end game look like for the supply of derivative instruments to cover anything you can think of? And is that cause of smoothing of volatility overall? In the old days, if I could only do S&P, it kind of goes counter to what we just said of like, everyone's doing it in the S&P options, SPX options, because that's where the liquidity is, but maybe not so much anymore because they can also do these, these different tenors and what? Yeah. It was. So Joe Elmlinger from, uh, Lake Hill completely disagreed with us on that.

And he's like, well, where he's like, my gut reaction is no, but he's like, I need to think it through more. But like, I thought it was interesting that you're saying it's Russell saying is like, have we not seen the pop and VIX because of the proliferation of all these products and people can kind of disperse all of their tenors and smooth out the vol curves in that way. And so it was like, so that's what Russell's trying to hint at or guess at is he's trying to figure out, you know, the, once again, is like you're saying is it volatility is not just VIX. And so is this the, is this why we're not seeing it manifest in VIX? And I thought that was an interesting way of thinking about it is like, especially as we move down to those,-day options and people can use that finer paintbrush and disperse their hedging both long and short,

it'd be really interesting. I thought that was an interesting question. I'm not sure I know the answer either. When it speaks to dispersion too, if we haven't seen it there, we've seen it in other places. That's the definition of dispersion, right? We've seen it in single name stocks. We've seen it in the NASDAQ versus the S&P. Preston Pysh, And then when I touch on what Russell's also saying, and this is what we were talking about back tests earlier, is the markets change all the time. And so if we want, like you said, we were originally like quarterly option cycle, now we're down to like daily option cycle and we'll see even less than that. It's like, does your back test account for that? And like we said, we see inter-day vol

is where it's been all the action or overnight vol as well. And like, so it's like, if you're using, you know, open to close vol, you might not see a lot of this stuff. So, you know, markets can change pretty dramatically. So once again, that can dramatically affect the backtest. You mentioned the Stacy, she had a great quote on QT that I wrote down here. She's like, imagine we're out on the casino floor. Vegas really lends itself in the conference, right? You can quickly pull all these metal. So he's like, imagine we're out there in the casino floor and someone's throwing thousand

dollar chips onto the floor. Just right. Everyone's running. Pick them up. Pick them up. He's like, when it stops, if you didn't get one, you're really pissed off. She's like defining QT.t she's like that's where we are the the thousand dollar chips have stopped being thrown on the floor you either got one and

you wanted 10 or you did got none and you're pissed off and you're throwing a temper tantrum taper tantrum so to speak um so i thought that was a fun little yeah it was it was great for me to think about it that way because i've actually used a similar antidote but in a different vein and so thinking about that way helped me. I always said, imagine you go over to your neighbor's house on the first of the month and you give them $10,000 in cash. At first, he's going to be like, no, I can't take it, like all this stuff. And eventually get him to take it. And the next month, you come and give him $10,000 cash for the first of the month.

And you do that for like nine months straight. And then you stop. Your neighbor is going to hate you. And I actually use the analogy. You should have never given me that in the first place. Yeah. Right. I use the analogy for Chris Sidial.

Now we're talking about like athletes and everything. And like you, all the dependents and posse, that's what I was using it for is like, you start providing a living for your family and friends. And then you take that punch bowl away. You're going to be the enemy. Not that like, oh, thanks for the help. You really, you know, all that stuff. No, no, no, no.

At the end of the day, you're, thanks for the help. You really, you know, all that stuff. No, no, no, no. At the end of the day, you're the asshole. That's it for the episode today. Thanks to Jason Buck for his insight. Thanks to Jeff Berger for splicing this all together. Thanks to RCM for supporting. We'll see you next week on this channel. And make sure to head over to Mutiny Investing Pod for the second part of this conference breakdown.

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