Lead-Lag Live

Trading Through Market Shifts with David Dziekanski

• Michael A. Gayed, CFA

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The markets have shifted into a new volatility regime, and traders need fresh tools to navigate these choppy waters. In this illuminating conversation, Michael Gayed hosts David Dziekanski (Founder and CEO of Quantify Funds), Mike Venuto (Co-Founder of Tidal ETF Services), and Michael Silva (trader and host of Figuring Out Money) to explore innovative trading strategies for today's challenging market environment.

David introduces Quantify's groundbreaking launch of four new "stacked" ETFs that provide a revolutionary approach to thematic investing. Unlike traditional leveraged funds, these products offer 100% exposure to two carefully paired stocks within a single fund, creating effective 2:1 leverage with built-in rebalancing. The newly launched funds include APED (MicroStrategy/Coinbase), LAYS (NVIDIA/AMD), SPCY (NVIDIA/SMCI), and ZIPP (Uber/Tesla) - each targeting high-interest themes from cryptocurrency to artificial intelligence.

The conversation delves into the mechanics behind these innovative products, explaining how they solve one of the most challenging aspects of portfolio management: executing those difficult rebalances between correlated assets, especially during earnings seasons or market turbulence. As David explains, "These are prepackaged vehicles offering rebalancing in an ETF that you don't have to think about."

Silva shares practical insights on adjusting trading strategies during periods of expanded volatility, while Venuto illuminates the structural tax advantages ETFs offer over traditional investment vehicles. The panel also explores Quantify's successful BTGD fund, which applies the stacking approach to Bitcoin and gold, demonstrating how automatic rebalancing can capture value during volatile market swings.

For traders navigating today's unpredictable markets, this discussion offers valuable perspectives on using innovative investment vehicles to maintain tactical exposure while managing risk more effectively. Whether you're looking to trade through earnings season, add tactical leverage to your portfolio, or simply understand the evolving landscape of ETF innovation, this episode provides crucial insights for surviving and thriving in volatile markets.

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Speaker 1:

I don't think I've ever done a space this early, 9 am Eastern, but you know why not? We'll see how big of the audience is here. For those that are listening, appreciate those that are attending. Please do me a favor like and repost this so that the algo tries to push this out. Would be much appreciated. Many of you know that I've done a lot of spaces in the past, pivoted more towards video and selectively doing some spaces for various clients of mine on the lead lag media side. This space is sponsored by Quantify Funds, a firm that more and more people should know about that. My friend, mr David Jankowski is the man behind.

Speaker 1:

I think this is going to be a timely discussion from a lot of perspectives. I have myself been very loud about the last two and a half three weeks in what seems to be a return to a more normal market, and when I say normal market, I'm talking about correlations returning to the way they were pre-2020. And we're going to be touching on that how to think through the volatility that's playing out here and new ways of trading through it. So I see Mr Mike Silvers here. Mike, if you want to come up, feel free anytime. You know you're more than welcome Anybody else that's here that wants to engage, ask questions, just interact. Don't hesitate to click on that bottom left micro request button.

Speaker 1:

With all that said, my name is Michael Guy, a publisher of the lead Lagerpore. Joining me is with me is Mr David Chikansky Quantify Funds. David, I believe you're there. I'm here. Good morning, mike. How are you Good? I'm good man, I'm good. By the way, for those that are not aware or never met Mr Chikansky in person, the guy is ripped. Mr Chikansky in person. The guy is ripped, and I'm trying to become more like him. I'm waking up every morning at 4 am. I look to him as like a guy that I want to kind of aspire to, and he got some pretty successful funds, which we'll talk about too here. But, dave, introduce yourself. Who are you? What's your background? What have you done throughout your career?

Speaker 2:

What are you doing right now of Quantify Funds? Today is our second launch day. We launched our first ETF in the fall, the Bitcoin Gold ETF, stkd. Bitcoin BTGD is the ticker and today we are launching four stock pairs in the AI, crypto and driverless cars space. A lot of people have adopted use of leverage ETFs over the last couple of years, mainly because, quite frankly, it's been a lot more costly to get margin on a platform level basis and we think a lot of that gap has been filled in by the leverage ETF space. So we're very happy today to launch our next four ETFs.

Speaker 2:

First is stacked MSDR and coin. So for $1 in the ETF you get $1 of exposure to both MicroStrategy and Coinbase. Ticker APE to A-P-E-D, which is our main crypto themed ETF launch for the day. We have two in the artificial intelligence space, both stacking NVIDIA, one with AMD and one with SMCI. Nvidia and AMD is ticker LAYS L-A-Y-S. Nvidia and SMCI is ticker S-P-C-Y.

Speaker 2:

And lastly, but is the driverless car theme, which is Uber and Tesla 100% exposure to both Uber and Tesla in the same ETF with the ticker Z-I-P-P. So these are meant to be trading tools but also can be held for longer than traditional leverage ETFs. They don't have a daily reset outlined in their perspective as a prospectus as some of these other leverage ETFs do. So these are great ETFs to add a little leverage to your portfolio. Trade through earnings season on a common theme add a little leverage to your portfolio. Trade through earnings season on a common theme. We've seen a lot of you know outside of really the last three months dominance by the mega caps in all sectors and industries and the concept tiers. You can get really good concentration in some of the top names within the theme or sector and allow us to rebalance between the two, adding a little bit of benefit of diversification in there.

Speaker 1:

First of all, I don't think FinTwit has any clue what goes into launching a fund. So before we get into the current environment, the strategies, I want to talk about the product development process for you. You had a pretty successful launch with BTGD, the Stacked Bitcoin Gold Fund. Talk me through the process of developing a fund.

Speaker 2:

Yeah, it's a very long, timely, stressful and costly process. You can get an ETF from inception idea to market really in about 100 days. The more complex and unique it is, sometimes it can take a little bit longer. We have partnered with Best of Bre ETF white labeling platform title. Mike the CIO is on the call here, listening as well. It's much easier to come to market with a partner than trying to create your own trust, even if you're a multi-billion dollar firm. There's just so much logistics that go into it the quality and caliber of the actual lawyers writing your prospectus with you, et cetera and making sure you can get something through the SEC in a very clean process. And that's just the start of it. And from there, just really getting the messaging out is equally as complex from a compliance perspective. Dealing with FINRA and the SEC and trying to make sure everything is clean and above board is a very timely and costly process, but it's also a very rewarding one.

Speaker 2:

I've been in the ETF industry for about 20 years and seen the evolution and it was a lot more difficult 15 years prior than it is today, while it's still very, very difficult and complex and takes a lot of execution and a lot of avenues in sync simultaneously. At the same time, if you do work with really good partners, it can be done in a very relatively cost effective manager process and timeline. So we filed for this in December and we're now launching in early March. And given we are trying to do new, innovative things in this space, as you alluded to stocking individual stocks on top of each other here, you know we're very, very proud with the speed at which we've been able to bring these to markets. And yeah, it's not an easy process. It's an evolving process. I'd say the compliance side of it is the most confusing, quite frankly, and it makes it very, very hard to get the messaging out. So we do do very much appreciate any support you have in reposting any material we do actually get through this crazy compliance world?

Speaker 1:

Is it fair to say that people's perception around around the industry is wrong, meaning they don't understand? It's not really about being a portfolio manager. It's more about being a product developer.

Speaker 2:

It's a little bit of both, and it depends what kind of products you're bringing to market. There's a lot of successful entrepreneurs that have brought what I like to call trust me products to the market, where you have to build up your own credibility as a manager in the space and really sell on your own ability to maneuver in different markets. We've seen the wave of success from people such as Cathie Woods and a lot of other follow-ons in that space too. But it's equally as complex to actually create a what we like to call a trading vehicle, or a vehicle that you could almost understand, and understand what you're going to expect from it, in 30 seconds. So can I look at this product? Can I see its investment philosophy and its outline, understand it, comprehend it, understand how I could potentially use it in my portfolio in a very, very quick manner? And that's equally as difficult, especially if you're trying to do that in an innovative way, offering new things that the marketplace hasn't seen before.

Speaker 1:

It looks like Mike is back. Let's see if, mike, that's working for you. Hey, mike, can you hear me? Yes, there we go. So I'm waiting for Mike Silva to launch the Trust Me Bro ETF, to play off of David's point there. But, mike, go ahead, introduce yourself.

Speaker 3:

How's it going everybody? Michael Silva, here I trade mainly. Most people know me from the YouTube. I have a channel there called Figuring Out Money where I try to do daily stock market briefs, give my analysis on the market and then actively trade it.

Speaker 1:

So the nice thing with this is that we're going to have a discussion around trading and then vehicles to trade with. You know product development and then vehicles to consider, you know, in this kind of environment. So I want to keep going to you, mike, on this before we get into the opportunity set. I'm curious what your take is on the last three weeks here of volatility. I don't know if everyone suddenly is bearish. I don't know what people think. Even if I knew what people thought, I don't think it matters, because it depends on how they're positioning. What have you been doing in the last several weeks here as markets have gotten more violent?

Speaker 3:

Yeah, so now nine full trading days since we slipped below the flip line, and that is one of the elements that I use for understanding when market conditions change. So when we do slip under this, when the S&P 500 slips under it, we typically see an expansion of volatility. At least, that's kind of where my forecast goes to. And knowing that volatility expands, right, I try to keep my bias as most undirectional as possibly. But I look to see what the market's pricing as far as a range of risk goes, to really help me identify some key levels in the market.

Speaker 3:

And since then, I mean, it's been yeah, it's been some rough volatility. However, like even this trading week, so far it's all within the market's expectations. The market priced in for the SPY about a $12 expected move, the S&P 500 priced in about a $120 expected move and we slipped outside of that range but came back in it. Now we're right back down to it. So there's nothing. The market's still well within its expectations right now of what it priced in the prior week. Market's still well within its expectations right now of what it priced in the prior week.

Speaker 1:

How important is it for you from a trading perspective to have a very sort of tight, relatively small number of things to trade Meaning? I think the challenge for a lot of people is that they end up looking at a huge watch list of a bunch of stocks and a bunch of ETFs and they maybe get some analysis paralysis or they get distracted because of the number of things they're looking at. And do you typically have kind of a short list of things that you actively go in and out of?

Speaker 3:

It becomes a short list. However, it starts kind of wide, so I'll cast a wide net and then I'll hone it in. I like to look for I'm mostly a technical trader, I add some basic fundamental stuff in there every once in a while, but then I look for the stocks that are contracting, that you see period of volatility where they're kind of tightening up, and I try to hop on the right side when obviously volatility expands and by doing so, if you're right, you can catch a nice move. However, if you're wrong, you should understand where that risk level is and be able to get out relatively quick.

Speaker 2:

Mike's point there about everyone seemingly being very bearish in today's world. We actually are collecting and we'll start issuing research on flows in the leverage ETF space. But if you look over the last one month and you kind of sum up all the products by category and equate for the 2x and 3x and long and short flows, et cetera, Bitcoin leveraged ETFs have had over $4 billion of outflows over the last month. 20-year treasury leveraged ETFs have had $2.4 billion of inflows and Qs have had almost $15 billion worth of outflows over the last month in the leveraged ETF space. So it really shows kind of back to what you said there, Mike, that a lot of people, while I think there's some reason to be bearish, for sure it seems like the entire investment community in consensus is bearish at the same time, which always makes me think that we might be early on that move and you know, an upside wall of worry climb can be pretty significant while waiting for that bearish play to come to fruition.

Speaker 1:

Let's talk about the stacked new funds that you're bringing to market, because that relates very much to the idea of how many things a trader looks at. There's been a lot of interesting demand for a lot of let's call them more retail type of demand, right? So we've seen a proliferation of high yielding cover call deep out of money put to generate yield type of strategies. We've seen a proliferation of levered single stock funds. What you're doing is different, david, in that it's not traditional, which is probably why you'll be successful. You have to find that white space where Vanguard and BlackRock are not playing. Talk to me about sort of the reasoning for you in terms of creating these stacked funds.

Speaker 2:

Yeah, this is a very nice marriage between an institutional strategy of packaging leverage in a 40 act type product and fun trading tools, kind of, and finding that middle ground between the two. As you alluded to, there's been a lot of success in individuals and hedge funds and RAs trading leverage ETFs, single stock leverage ETFs, etc. But oftentimes we find that they're really investing in a theme more so than an individual name, and it's just a lot harder to depend on yourself to make those really hard rebalances. So think, if you're going into earnings week and you really want to bet heavily on, for example, artificial intelligence companies, et cetera, chip companies, choosing two, and are balancing between the two, and you've, you know, let's say, amd reports first and pops, the whole rest of the space pops as well Are you going to actually rebalance out of AMD into the other names that are have earnings later, in that in that quarter the rebalance all gets done for you within this? So this is a way to mix both like what they call capital efficient and portable alpha strategies.

Speaker 2:

That was, you know, in the 40 act product, the least first release to market by PIMCO, If you remember the PIMCO stock plus funds, and then in the ETF space over the last couple of years has gained a lot of adoption with launches from wisdom tree, uh return stack ETFs, which, uh, which is a partner of ours on these, and obviously our first Bitcoin gold product, and these are a little bit more high volatile versions of all that. These, I think, are the highest volatility of any portable alpha or stack products in the marketplace. But volatility can be very good, especially for traders when you're trying to find that momentum swing. This is a very good way to play that AI theme, the driverless car theme, crypto theme, or a week, a month, three months, et cetera. You have a little more confidence in holding this long-term than a traditional leverage ETF.

Speaker 1:

Maybe I missed it, but sorry. I apologize. But what is the rebalancing interval? What causes the rebalance?

Speaker 2:

So it is an active fund. We are targeting somewhere between a 5% and 10% drift. So we anticipate rebalancing a couple of times a week and also on creations and redemptions. But anytime there's a big move, for example through like an earnings period, you will absolutely see rebalance at that point. So, doing that difficult rebalance in your portfolio, which we've been talking about a lot with our first ETF Difficult rebalancing your portfolio, which we've been talking about a lot with our first ETF, the Bitcoin and gold ETF, btgt we launched that right before the election.

Speaker 2:

If you think about, bitcoin ran from about 70,000 up to 108,000, has fallen since and gold has taken up the slack. Are you doing those difficult rebalancing between these two assets? In that case, that's a scarcity play, a currency debasement play. We find a lot of allocators allocate to both Bitcoin and gold, but they're not rebalancing between them. Similarly, if you are betting on the AI theme, are you doing those difficult rebalances between your favorite names in the space? So these are prepackaged vehicles that are offering this in an ETF that you don't have to think about and is being done for you.

Speaker 1:

Mike Silva, I'll go to Venuto in a second. I want to hear your thoughts on rebalancing. I think when people think about traders, they think that they're going in and out fully Obviously. It's much more nuanced than that. Do you, in the management of your portfolio, do any kind of more systematic type of rebalancing between different investments, different trade ideas?

Speaker 3:

As far as systematic goes, no, I don't have a systematic, necessary process. Once I see a trade set up, I'll initiate what I'm looking for as far as risk for that individual one and go from there. I like this idea, these funds, though, and being a little bit more concentrated, so can't wait to kind of dive specifically into those. But for me right now, when I initiate more specifically so people understand, I do have a different process for swing trading, day trading and then investing right. So it's all separate across the board for me. But when I'm swing trading, I'll initiate the trade based off of the setup and what I see, and the risk will be set, and I'll adjust the risk as the trade either goes in my direction Actually, that's the only time that I'll adjust the risk If it goes in my direction, if it comes against me, then it's just going to stop me, mr Verduto it's been a minute.

Speaker 4:

How are you doing? Oh, my goodness, it's been a while. It's been a minute. Exc Markets are all crazy and we've got some new ideas coming out here. So I'm the co-founder of Tidal. We help people launch, grow and operate ETFs. We've done that for Guyad. We've done it for David Weisskopf's down there. He does it with us too. Most of the people you guys have referenced today we've helped. Today we're currently servicing about 200 ETFs and about $30 billion Real. Excited about these ideas. You know, just the idea that you can get leverage that doesn't decay, the idea that you can, you know, stack two stocks. Obviously, me being more of a crypto person, I'm mostly excited about the micro strategy coin, um, and it's just a interesting way for traders to get exposure uh, dave, going back to you, um, we have a new product launch.

Speaker 1:

How do you even get people to be aware of it? I mean, obviously we're doing a space, so part of this is is awareness that. But let's face it, the ETF landscape is um incredibly crowded.

Speaker 2:

Yeah, uh, you have to kind of attack it from all angles. You send out a press release in the morning, you talk to reporters, you do some PR work, you start getting the Google SEO engine going. You start getting Twitter and Reddit marketing going we're doing Twitter spaces here engine going. You start getting twitter and reddit marketing going, we're doing twitter spaces here. But it's really just not one thing. You have to do all things at the simultaneously, which is kind of what I alluded to.

Speaker 2:

The difficulty of launching an etf is just a lot of things that have to happen at the exact same time.

Speaker 2:

Um, but if you do it well and you put it out there and you have a clean message, uh, obviously the marketplace will decide what they want to trade, and that's up to the marketplace and we can have a pretty good judgment of what we think might do well. But really you just have to keep honing in your messaging and getting it out in front of people as much as possible. I don't think it's too different than, quite frankly, an e-commerce sale in that you need to see it a number of times and think about it before you will consider it and maybe that fourth, fifth, sixth time you see it. If it's an idea that does resonate with you, maybe then it ends up on your watch list. We're always available for follow-on calls with advisors and individuals to talk in detail about how these products work. So sometimes that'll lead to phone calls with allocigators and then, if it's something they want to begin trading, we hopefully start seeing some flows from it.

Speaker 1:

Mike Silva, how important is longevity for you of a fund? How important is trading volume? You know I I'm so myself always blown away that people don't understand that volume in an etf doesn't really mean very much as long as you put a limit order, as long as the underlying is liquid. You know that's, that's what matters, not the, not the actual thing that's going on at the moment in the end of the ticker.

Speaker 3:

But you know, for as for you as a trader, how do you think through all that for me as a trader? How do you think through all that For me as a trader? I do find it important to have liquidity. I do prefer tight bid-ask spreads, and if I'm working with something that's a little bit wider, I have to use obviously more limit-style orders On tighter spreads. I'm okay with a different type of order. Mean then, as far as volumes go, I mean it really depends, right. So if it is more of a longer term hold and it's in an etf that has just a decent amount of volume, it doesn't need crazy amounts. I'm fine with it. But for more of the shorter term intraday trading, I like to see significantly more liquidity, and that's the that's the challenge, right, mike?

Speaker 1:

I mean, you've got to kind of get people to be aware of a fund and there's kind of a chicken or egg dynamic where they want to see the volume. But for there to be volume, people have to actually not need to worry about volume. Veduto, you have been through enough of these in your career and you've launched a ton of different products under title. Uh, talk me through, sort of um, your initial impression of the idea when chikensky brought it up to you um and um.

Speaker 4:

It's just such a natural extension of the bitcoin and gold concept. Um, and seeing the institutional versions that you know, uh, cory had done and and how that was resonating with that audience. Obviously, with these, the audience is people who are more do-it-yourselfers, right, like there's this thing called statement risk, where financial advisors aren't going to put the ticker aped in their client portfolio. But it draws the attention of the people who are, you know, maximalist and and love the micro strategy and things like that. So Noddick's been writing a lot about this lately. He calls them, I think, black hat products. That's fine, it's. It's not, it's not our job to say this is how you should invest your money. It's not our job to say this is how you should invest your money. Silva can tell people that right. Or a financial advisor can tell people that what we can do is provide really capital efficient tools, tax efficient tools, things that give leverage or margin that would be expensive for you to get on your own. Instead, we package it up and rebalance it and do all the stuff in the background. So, yeah, these are actively managed. The value of the active management is rebalancing, it's tax efficiency, it's things like that. It's not that we're making investment decisions on a day-to-day basis and something like this to help In the ETF world.

Speaker 4:

These are exposures and there's been lots of great examples of exposure being the way to success, right. I think ETF started 30 years ago as a better way to get exposure to the S&P 500, right. Then you have leaps and bounds when you have a better way to get exposure to the S&P 500. Then you have leaps and bounds when you have a better way to get exposure to gold in 2005. And obviously the most successful launch ever is the Bitcoin ETFs a little over a year ago, exposure to Bitcoin right. So this is just exposure to leverage that's hard to get on two stocks, just exposure to leverage that's hard to get onto stocks. And that's the value prop that you're handing people a tool to make things work. I was receptive and I'm excited about the way it's been put together and we'll see how the market takes it today.

Speaker 2:

Yeah, I think for a long time our industry has said that, you know, the intelligent investor is the institutional RIA, and what we've really found is, I mean, if you look at some of the forums on Reddit, some of the back tests that these people are doing and the discussions they're having, in many cases I think some of the retail world is doing a much higher level of due diligence on their portfolio construction, and you're seeing it with the asset flows into vu and spy, and while all of these, like leveraged products, are gaining steam as well, the real gorilla in the room is just the s&p 500 related products that just keep taking in massive, massive assets, and so what we think is a lot of the retail space is just, quite frankly, doing this more boring thing buying a lot of uh, s&p 500, whether it's through SPY or VU, or I think VU just finally passed SPY recently and these are the, you know, these types of leverage trading tools are how they're rounding up their portfolio, how they're expressing their opinions and, quite frankly, we think they're doing it in just as an advanced, if not more advanced, way than some of the advisory world that we've seen over the last 20 years.

Speaker 2:

These guys are really trying to crowdsource investment ideas from people such as Mike on this call, et cetera, and put them into action and act quickly and oftentimes a lot quicker than financial advisors are willing to act in their client books, and I think that's why you're seeing a lot more adoption from the retail space in these types of products versus from the RIA space, but that might change over time as well.

Speaker 1:

How is that leverage achieved? How are you achieving that? And for us, going 100%. You know the two stocks.

Speaker 2:

Yeah. So with the single stock, with the leveraged stack single stock world, there are no futures on individual stocks, so the primary source of leverage here is through swaps. In some cases we will also consider using options as a source of leverage Coming out of the gates. Right now, all of these products, all the leverage is received from swap agreements, so it's again a much more cost-effective form of leverage than you can get traditionally as an individual investor on your brokerage account, and that's why we think there's a lot of appetite for these types of products, for B2GD, the Bitcoin and gold product, that we're accessing our leverage to the futures market.

Speaker 1:

Mr Silva, when you trade, do you do anything on the leverage side? Are you doing margin? Are you levered funds? I mean you know? And if you do, how do you, how do you manage the risk there?

Speaker 3:

Yeah, I definitely use those leverage funds very simply, so I like to use them. Once again, it depends on either if it's a day trade or swing trade. When it comes to swing trading, I like to use the leverage funds because it'll allow me to kind of keep some more capital to the side and I typically will just lessen the positions a bit. But if it is a really, you know, a-plus setup, concentrated trade, I can go a little bit heavier. I named the space.

Speaker 1:

It's time to lock in, and I've been, in my typical fashion, posting that a little bit ominously, because I do think that this could end up being a much bigger volatility event than people realize. I think it goes beyond Trump, because I keep looking at the end and I keep thinking to myself this is going to explode again, you're going to have one of those scares. I have been early on the Japan thesis, but I still maintain that the end point remains the same. It's just about the when, and I say that not as a perma bear, I say that as a logical human being, looking at the situation that is before us, beyond just a chart and even beyond the yen itself, the way it looks, just looking at Japan's inflation picture. So, if we are in a growth scare, a more volatile environment. Dave, what's sort of the thinking from a communication perspective when it comes to bringing funds to market in what looks like it could be a cycle shift?

Speaker 2:

Well, first off, I'll say more granularly over the long term I don't disagree with you, but I do think the same statement can and has been said for for years, not from yourself, but from other practitioners in the marketplace in fairness it's been said for years, by me too.

Speaker 1:

Now, in fairness, I also said gold.

Speaker 2:

Yeah, I got very bullish on gold, october 2023 and all this, but anyway, yeah yeah, I mean, that's the beauty of the market there's always two sides of every coin, um, and you know, while I do think there's a lot of fundamental larger term risks to our overall economy, actually trying to call when that plays out can be very much fool's game.

Speaker 2:

On a day to day basis, these are, you know, standard deviations that can be plus or minus three to five years in some cases, and so, whether it's a short term bounce back trade or a longer term trade, we created these vehicles for that upside swing right.

Speaker 2:

So, quite frankly, if your timeline is off by like six months, there's a lot of upside to be had over the next three to four months, as we've seen over the last couple of years. And these are products that, while you know they do have a lot of volatility, are built and constructed so that you can put them in your portfolio and maybe not have to watch them every single hour or every single day, because there is this rebalancing feature in them, and so they make them more suitable for what we like to call leverage for the long run, and so they're way to add a little bit of leverage to your portfolio and in an investment thesis behind, for right now you know, driverless cars, ai and and crypto, etc. Um, and doing so in a way that, like you get that same oomph with a lot of these leverage etfs, but you do have a little bit more assurance that there's some level of rebalancing going on within the product that allows you to hold it and have less decay, as mike the new to point it out doesn't that?

Speaker 4:

doesn't that resonate for you somehow?

Speaker 1:

uh, yeah, I mean I kind of have a. It's funny that that said so. Um, I'm actually starting at 10, am doing ama. Ask me anything on reddit on the subreddit on uh leverage, etfs exactly on that paper leverage for the long run. So, yes, I, uh, I can certainly relate to the idea of tactical leverage. I do think what's missing this is.

Speaker 2:

I will say there's tactical leverage. This is structural. We're not trying to do anything other than offer 100 exposure to both so that when you look at this, you should have a pretty good assurance of what did, for example, micro strategy do today? What did coinbase do today? Add those two together. That's generally what it should provide you on a day-to-day return yeah, no, I think that's fair.

Speaker 1:

now, is it also also fair to say that, if you're going to do this type of a product, they have multiple funds covering multiple pairs of stocks you want to have, as as you want to have, stocks that are independently volatile of each other but in general have high volatility. But that, that rebalancing aspect, I think, is where the alpha really gets to be interesting.

Speaker 2:

There's the rebalancing aspect, but you also want to make it investable on a thematic basis too. So you know some pairs have better diversification benefits than other. But all pairs are better than just leveraging the same stock on top of itself, right, even if it's just the magnitude of movement through an earnings period, of how, for example, amd might do versus NVIDIA, you know, on whatever earnings day that stock pops, it's likely going to pop more than the rest of the category. There's going to be some sort of diversification benefit, even in very trending stocks or correlated stocks, to do that rebalance between the two.

Speaker 2:

So our most diverse basket is the Bitcoin and gold ETF, btgd. The correlation over a 10 year period between Bitcoin and gold is about 8 percent and it varies over time, and so there's varying level of benefits from the rebalancing mechanisms. But they're all superior to just stacking the same product on top of itself. And that's not to say you can't trade leverage ETFs. But I think the people who do it well are constantly rebalancing their portfolio to get that exposure they want, and this is a way to have that same sort of oomph and leverage in your portfolio, while we are doing a lot of the mechanics behind the scene, to do the rebalancing within the products as opposed to making you do it at the end of the day, to true up your intended exposure for your overall portfolio.

Speaker 1:

Speaking of mechanics. I think that's a good transition to Venuto on the tax efficiency side of how ETFs work. Part of this AMA I'm doing is people are saying, well, if you were to create a leverage for the long run taxable fund at some point, there's no benefit to just doing it yourself. They're not factoring in the heartbeat trades. So maybe Venuta might be interesting for the audience to do a little bit of an education lesson on how that tax efficiency for an active ETF is achieved.

Speaker 4:

Sure, I was saying earlier, etfs are about 30 years old. The first one was designed to be SPY, right, the S&P 500. And it was designed for traders, right. There was no thinking at all about buy and hold ETFs when these things were created. The functions of it, the fact that it has this ability to create and redeem shares intraday, which was necessary to make it a really cool product for traders ended up with a happy accident that they didn't figure out till three, six, nine months later, which was hey, if we can create and redeem intraday, we don't have to redeem the stocks that are down. We can sell those and realize a loss in the portfolio, but let's redeem all the stocks that are up in that basket. But let's redeem all the stocks that are up in that basket and therefore the actual sale of the 10 stocks that are up the most doesn't happen in the fund trading right, and they have an exemption. So, essentially, the ETF wrapper is designed unintentionally in a way where it gets out of the big problem that SMAs and hedge funds and especially mutual funds have, which is you can often be forced to pay taxes on gains you didn't even receive. They could be in there for 20 years and you buy into a mutual fund and the next day they sell Apple that was up 300% over those 20 years. You're going to get a tax bill. It's ridiculous. It's antiquated technology. So the happy accident of the ETF structure makes it substantially more tax efficient.

Speaker 4:

Now comes the slight disclaimer when it comes to these funds. These are using swaps. It's a little bit more complex. The rebalancing can be done with certain things, but it's not as tax efficient as a traditional kind of buy and hold, like index. That said, anything with leverage is going to have those concerns right, because you're doing one thing to get above the other. So that's kind of the process and it's pretty amazing. There's very few guarantees in the world of finance, but for a taxable investor I can almost guarantee that the same strategy in a mutual fund and in an ETF you're going to get a better return in the ETF after taxes.

Speaker 1:

Dave, I don't know if you want to add some thoughts on that.

Speaker 2:

Yeah, I mean. So you have to look at like, how tax efficient would a strategy like this be otherwise? And what are the costs of leverage you're paying? And really the reduced cost of leverage here we think still makes it worthwhile for a taxable investor. And obviously if you're doing this in retirement assets, you don't have any issues with taxes. So leveraged ETFs as a whole are not as tax efficient as a plain vanilla equity ETF, but they still can be pretty tax efficient compared to mutual funds and hedge funds and SMAs really add no discredits versus those. So you're on an even playing field to everything else. You're just not as tax efficient as a traditional equity ETF that can have, quite frankly, every single stock in its portfolio go up. Have the managers decide they want none of those exposures by the end of the year and and recognize there's no capital gains for the shareholders in that rotation.

Speaker 1:

Mike Silva, how, as a trader, that's always the challenge. Right, it's like you might have great trading gains but if you're doing a taxable account you got to maybe outperforming by just not trading at all. Do you think about taxes at all when you're trading, and what kind of accounts are you trading in?

Speaker 3:

Yeah, I do think about taxes. I see it every year. So once again, it's different for every account. So when I think of shorter term trading, first off, if you're paying taxes, that means you're making extra money. That's how I look at it. I don't give out tax advice. I have a CPA for all that good stuff, but I definitely have my longer term accounts structured differently. So I'll trade some of my swing trading is done through my Roth and then I have some shorter term accounts that I'll just pay whatever's due. And then there's also obviously other products that have tax advantages. So it's a pretty complex world and I tend to stay away from it and let the professionals kind of help me, help guide me through all that stuff.

Speaker 1:

Chicanxie. So you've got these four that are launching today, I think just for those that are new here. Maybe repeat those, but also talk to me about kind of future plans, assuming that these are successful. And you know, I think if we're in a volatile environment then the rebalancing will be even more beneficial as a backdrop. But you know other things that are coming down the pipeline from Quantify Funds.

Speaker 2:

Absolutely so. Again, my name is David Chukansky. I'm the founder and CEO of Quantify Funds. We just launched our second, third, fourth and fifth ETF. Today, our first ETF launched in the fall to leverage Bitcoin on top of gold, ticker BTGD. And today we launched four stock pairs in the AI space NVIDIA and SMCI ticker SPCY. Nvidia and AMD ticker LAYS. Microstrategy and Coinbase ticker 8APED. And Uber and Tesla ticker ZIPP, again for $1. In any one of these ETFs, you get 100% exposure to both stocks that were listed there, so it is an overall 200% exposure portfolio. But there is embedded diversification and rebalancing benefits by rebalancing between either Bitcoin and gold or two individual stocks within the theme of AI, cryptocurrency and driverless cars.

Speaker 1:

Back to Mike Silligan, going back to the environment that we're in now. When you're, when you're seeing a potential regime shift and you know you mentioned volatility kind of expanding Do you, do you put on a different hat to shorten up your time frames? Do you use different indicators? Talk to me about you know how a trading style maybe changes.

Speaker 3:

Yeah, absolutely. So there's two things that I look for in terms of when market conditions change. These are things that you know I personally use, and the two things are the. I just watched that gamma flip line like a hawk, and the two things are the. I just watched that gamma flip line like a hawk. So the thing with these gamma flip lines is you're going to have various services, that kind of alter like how they aggregate the data is going to be a little bit different, but it's kind of a zone.

Speaker 3:

And when we go under that flip line, so that right, there is a big warning shot to me where I'm going to probably see my style of trade, which is swing trading, breakout trading, trend trading, you're going to see a lot more wider range candles like wider range volatility, I guess we could say and a lot more whipsaws, fake outs, shakeouts. So typically in this environment, my foot comes off the gas and for the last nine days, that's exactly what I had to do. The second other thing that I look for is just the direction of a shorter term average, not necessarily whether it's above it or below it, but the direction of where it's going. And when you have the SPY, the SPX, q's, nasdaq, all this good stuff below these declining shorter term averages and you're under a flip line. It's kind of like one of those just ducking covers, and who likes this the most is typically active intraday traders, because you get a lot of two-sided trade yeah, that makes a lot of sense.

Speaker 1:

By the way, folks, make sure you follow all three of the guests here mike nuno, david kansky on the quantify phones and, of course, mike silva on the figure out money. He's got a great youtube channel. Big fan of mike. Uh in an in an. There are a lot of not so good people, as I've learned over the years, and, of course, my name is Michael Guy. This will be an edited podcast under Leadlag Live, which thankfully continues to get a lot of good attention. Chetansky talk about just the BTGD side of things, especially given this volatility that's gone on in the crypto space. Don't want to make it political, but clearly I think a lot of people would argue it's been a bit of a shit show I think is the way to say it with the announcement around the strategic reserve and some of these other dynamics that are taking place. That rebalancing is kind of cool that you guys are doing with gold and Bitcoin. Talk through that a bit.

Speaker 2:

Yeah, I mean I people always ask me for a expectation of price target on things such as Bitcoin, and what I always like to say is that I think it'll hit both 50,000 and 175,000 dollars. I just wish I could tell you which is going to happen first, and I kid, I don't know the exact numbers. But all I'm saying is that you know, a volatile asset will have one thing, and that's volatility, even if it is a upward trending asset over the long term. And that's why we were so excited to launch the Bitcoin Gold ETF, btgd, with the rebalancing embedded into the portfolio. You've seen it play out perfectly where, on Bitcoin's rise to 108,000, we were, every couple of days when the gap got wide enough, trimming a little bit of Bitcoin and buying a little bit of gold, and vice versa. The exact opposite has happened since then and this year, where every time Bitcoin's fallen, we're able to sell a little gold and buy some Bitcoin, and vice versa. So the choppiness you've seen in the last couple of weeks is very accretive to a strategy that's actually doing that rebalancing. And again, we found many allocators that, like both Bitcoin and gold, allocate to both Bitcoin and gold, and every time I ask them are you ever actually rebalancing between the two? You know, oftentimes they're allocated to amongst the common theme of scarcity of assets.

Speaker 2:

Bitcoin's mining rate is less than 1% 0.86%. Gold's mining rate is 1.75% less than 2%. The simple question of how much currency is going to be printed by the developed world, and generally it's about 7% to 9% a year, and so it's just an asset that is replenished at a slower rate than currencies are, and you could argue there's just going to be a perpetual increase in demand because of that. Now, shorter term Bitcoin moves are much more based on, obviously, as you mentioned, announcements on the strategic reserve. How much Bitcoin is micro strategy buying?

Speaker 2:

We do know that they've been a big portion of the Bitcoin purchases over the last like four months. So day to day, month to month, it's not as easy to look at the change in supply and demand. But again, if you're planning on holding both Bitcoin and gold for a long period of time, I think just seeing the last four months, you can start to really recognize the value of just quite frankly, simply rebalancing between those two assets. You know, we think if you're, for example, getting in a retirement account and you've been all equities and you want to dip your toes into Bitcoin gold. This is a perfect complement to a very broad, simple equity position.

Speaker 1:

I remember Venuto seeing you on CBC with Bob Pisani and you were bringing up some of the launches and you mentioned BTGD and I was watching I haven't had it on my screen and I was watching the volume and it was like 5 shares, 10 shares, 20 shares, 10 shares, 5 shares A lot of really small volume trades and it just causing a big sort of firestorm, I think in terms of just initial attention. Were you surprised by that? That you know traditional media outlets like that still have that kind of ability to move things for funds?

Speaker 4:

I don't think that traditional media outlet has the ability to move it for a bad fund. Right, like I think the most important decisions in in growing a fund is made before the funds ever launched. Right, and it's it's listening and it's it's honestly it's figuring out what mike silva wants to buy and what uh, you know, return on dividends wants to buy and what all these various you know people that are talking to each other and to the do-it-yourselfers and the fire community and designing products based on what they're talking about, um and where they want to be. Like, we get a lot more product development help for our clients from Reddit and YouTube than we do from boring old textbooks at this point. Right, so BTGD resonated with people who heard about it on CNBC. If I was up there talking about yet another large cap fund that tilts towards value, I don't think it would have changed anything that day.

Speaker 2:

Also, I would say I think that's why a lot of growth is being had from not the traditional old money managers in the mutual fund space because products were built in a very specific philosophy to fit into a very specific way of doing portfolio construction philosophy, to fit into a very specific way of doing portfolio construction. It's just crazy how many product guidelines are still built on the idea of an allocator using like style boxes. Okay, this is my large-cap value manager, this is my large-cap growth manager. You know, when SMCI goes from micro-cap to knocking on the door of the S&P 500 and then back down real quick, you can see why that's a very antiquated strategy and that's why I alluded to before. You know, having a broad exposure whether it's with leverage or not, the S&P 500 and trading some of these more eclectic vehicles around it, it can be just as advantageous of a strategy as any financial advisor out there, of a strategy as any financial advisor out there and, quite frankly, sometimes you're able to actually move and trade quicker with more confidence, and that's why we've seen retail do so well in this rally. I mean, I think there was a really amazing chart last year that showed single stock leverage ETFs went from about $1 billion to $20 billion last year. That wasn't $20 billion of flows, that was like $12, $13 billion of flows and $7 billion of gains that the retail space primarily received in these products.

Speaker 2:

It's not going to be an upward trending market straight through all quarters, as we're seeing this year. There's been a lot more choppiness, there's been a lot more outflows, but you could argue this is a very interesting moment where the collective investment world on Fintwit is almost all collectively bearish right now and you're seeing that in flows and so it either plays out now or there's a massive wall of worry climb and, quite frankly, probably a lot of these growth stocks that have been hit 20, 30% for the first time in the last couple of years, independent of the rest of the market. You know this is really the first period in a couple of years where we've seen the mega caps take a pullback that hasn't as affected the broader market to a greater extent. That's the correlation that you're seeing. Returning to the market that you commented on earlier, so either this does unwind in a short manner or there will likely be, as we've seen over the last 15 years, a lot of upside to be had.

Speaker 1:

I think as we wrap up again, folks, please make sure you follow Mike Venuto, Mike Silva and David Gansby Do a quick kind of roundtable towards the end here, just with some big picture thoughts on how to deal with anxiety and uncertainty in this market environment. Mike, for you, your experience, you do this quite well. Mike Silva, what's your sort of suggestion or advice for those that are getting antsy about the way things are playing out?

Speaker 3:

First, just be thankful that the last two years are really easy. So it's bound for markets to get a little bit more difficult and if you want to take it a little bit easier and still be part of the market, you don't need to go YOLO every trade. So, in terms of higher volatility, I would say make your position size a little bit smaller, widen your stops and give yourself to just step aside, breathe a little bit and, most importantly, in times of this down capture type move, you don't need to capture every single move. So it's important to really just survive and then, when the next time comes, be ready to thrive.

Speaker 2:

No, I just wanted to thank everyone for joining us this morning and again, if you haven't heard, we are Quantified Funds. We just launched our, had our second launch day and launched four single stock leveraged pairs. $1 in any one of these four products gives you 200% exposure, 100 to each one of these stocks. Ape covers the crypto space for MicroStrategy and Coin Lays, and Spicy SPCY cover the artificial intelligence space, pairing NVIDIA with AMD and NVIDIA with SMCI, and Zip pairs Uber and Tesla in a driverless car theme. So thank you, guys all for joining us this morning and uh, final thoughts from mr venuto, the godfather godfather.

Speaker 4:

Um, so you know these are crazy times again, like I haven't seen volatility in a while. Um, you know, like I think a lot of us think that we had volatility in 2022. We really didn't. We just had downward markets in both bonds and stocks, which is way more unprecedented. That's not a normal market. It's probably been since 2015, since we've had what this is like, kind of choppy and stuff.

Speaker 4:

So I mentioned earlier the best decisions on an etf are made before it's launched, right, things like the ticker and is there an audience and can we structure it right and what's the right fee and all those the same with investing. So personally to me, I don't change anything when things get volatile. I I'm I'm not a trader. However, I do own things that trade right m foot from them with the managed futures and the trend following, and I personally put all of my accounts on public and on blossom. So everything that I do personally be student rest of the world, um, and my portfolio guys can go look at it, it's in my safe fire funds right, which own things like btgd and they're massively diversified. Barely moved the last couple days. Obviously, a little bit of crypto mixed in right. I also run block a big fan of that. My decisions today are no different than they were yesterday. It's just to keep buying I dollar cost average in as much as I possibly can, whenever I can. These volatile days don't bother me at all.

Speaker 1:

That's a good place to wrap this space up. Appreciate those that listened. Again, I'll have this edited as a podcast, and thank you to Chukansky, veduto and, of course, mr Mike Silva. Thank you, everybody.

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