Ladies and gentlemen, welcome to the business Brew.
I am your host, Bill Brewster. As always, this episode is a
returning Wes Gray episode. Wes ping me and said that he had
an innovation that could be interesting to the audience and
he has worked on solving the problem of concentrated
positions in people's portfolios.
If they want to get out of a concentrated position and into
the S&P. This episode covers how a
qualified purchaser could do that.
I make no reps or warranties as to the accuracy of the
information in this episode. Everyone should reach out to
Wes, but at the end of the day, if you don't know who Wes is,
you can listen to a number of podcasts.
We we did one earlier, but Wes spends time trying to figure out
solutions for people and launches ETFs to solve the
problems that he identifies and whatnot.
And I thought it was an interesting conversation,
especially, you know, I bring up the example of Berkshire in the
episode. Let's say that you don't want to
live with the secession planning risk, but you've owned Berkshire
for 40 years or your family's owned it for that long or
Microsoft or anything, right? I I think it's an interesting
episode for wealth planners, qualified purchasers, people
with concentrated positions, or anyone interested in some of the
nerdy ETF stuff that's going on, which seems to be where a lot of
the innovation and finance is coming.
At least the good stuff. You could always find yourself
the next back, but I'm not sure that's too innovative.
Anyway, I digress, nothing in this show is financial advice.
Everything is for entertainment purposes only.
Please contact contact your financial advisor before making
investment decisions and do your own due diligence.
Enjoy the show. All right, ladies and gentlemen,
we got Wes Gray Part 2 here and Wes ping me.
He said, hey, we might, you know, it might be a timely
conversation. I, I have a, a conversation that
might be helpful for people with single stock concentration
issues. And funny enough, I have one of
those I'm sitting in a position where I was gifted Microsoft
right? And it, it, the, I think the
cost basis in that position is $0.98, might be $1.20.
Regardless, the whole thing is taxable and I, I know that I
don't know more than the market knows on Microsoft.
So when you get me up and, and said, hey, there is maybe a way
to get out of that position in a tax advantage way.
So I'd love to hear what you have to say.
I as as soon as you hit me up, I said, yeah, let's do this.
So I don't know how long this episode is going to be, but I
think people should hear about it.
And if nothing else, hopefully we get something on people's
radar. So welcome back and thank you
for pinging me. Yeah, yeah.
Appreciate you having me on. And like, I don't say this
lightly, but this is I think a big innovation in this very
exact situation where people have a lot of very contrary
securities that don't qualify for other tools we have.
And and you're like, I would like to diversify, but at the
same time I would not like to get, you know, raked over the
coals and fees and bankers and all the complexity that is, you
know, generically speaking is involved in.
Handling, yeah. So what?
So one of one of one of the solutions is what a fund that
basically you contribute your securities to and you pay X
amount of fees and you end up with an S&P portfolio at the end
of it, right? Yeah.
So, so let me, let me walk you back and how we got here, right.
So, so as you know, we run at this point a large ETF
infrastructure company and behind the scenes we're always
thinking about cost and investing and obviously taxes
and being tax efficient is a critical component of investing.
Someone actually told me recently, if you're a taxable
investor, you're playing the investing game in nightmare
mode. Whereas like the, you know,
endowments and pension funds, they play it in like story mode.
So 100% we're totally screwed relatively.
We're playing the game literally on nightmare mode.
And so one of the things that we've brought to market, that's
a quick side. Yeah, total bullshit that
someone like Harvard doesn't pay taxes and the individual
investor does. Right?
Like. Yeah, yeah, it's crazy.
So I agree. Thank you for bringing solutions
to the market. Yes, it's just.
We're all just, well, unless you move to Puerto Rico like I did.
But when I say we, I mean, I mean like American citizens
normally who aren't crazy enough to move down here.
You know, you got a big tax problem.
You can also just move, but that's voting with your feet and
hard to do. So what what we do on the
infrastructure side is as you know, stepping back ETF has one
of the best tax structures you can find effectively.
You can manage your capital inside the ETF and as long as
you're long term oriented, you own an ETF structure, it can
effectively compound tax free until you choose to sell it.
So it's a tax deferral structure basically?
And the reason behind that is the ETF is your investment.
What the ETF does within it is non taxable through creation,
redemption mechanisms and what not.
You got it. It's the Rick statue,
specifically 852B6 that that you know, if you trade through
baskets and what have you, they're basically non taxable,
right? You got to you got to actually
can't just do it for pure tax reasons, But you know, you
change investments, that's investment merit you can change
without having to deal with taxes.
You got it. So obviously it's basically a
four O 1K effectively, right? You can kind of think of it like
that easily. Like I can swap out my Microsoft
go buy Exxon no problem. And eventually I'm going to pay
taxes. It's just deferred to 2030, 40
years or whenever the heck you want to actually pay your taxes
or you can just donate it or whatever.
But anyways, ETF is awesome. Great.
Next question. Well, I would love to put my
capital in the ETF, but I'm stuck in a hedge fund, a mutual
fund, a limited partnership or my own Schwab account or, you
know, or like, you know, my grandma gave me a trust that has
zero basis in like the Dow 30. You know, what am I going to do?
Like, I would love to do that, but how do I move?
And I'm not going to sell this to get into an ETF structure
because then I have to pay a massive tax bill.
So that's where this section of the code, it's called Section
351 comes in, which probably speaking is widely used in
corporate America for like business formation.
But within that statute, you can also use it to fund a Rick, a
regular investment company like an ETF.
However, it comes with baggage and that baggage is a
diversification requirement where we're specifically you can
only put up to 25% in a single security like so you could do
24.99 Microsoft, but then you have to the rest has to be more
diversified. Specifically, there's the 50%
rule where the top five contributed securities in your,
your contribution can't be more than 50%, right?
So if you have 11 stocks, 11 stocks equal weight, no problem,
right? You have 24.99 Microsoft and
then 75% a bunch of random other things, also not a problem.
But this is a hard and fast treasure regulation where if you
want the tax free treatment in the in the transition to get ETF
shares, you have to be diversified.
So and, which is awesome. At least that's solve 1.
But but now let's walk through that one before we get to the
next solve. On just real quick, to the
extent that you can opine on the legislative thought behind it is
the idea if I'm using any sort of capital, regardless of
whether or not it's appreciated to find or found an investment
company, it's fine that we're going to let people defer taxes.
Is that kind of the thought process behind giving people
that option? So the original history on 351,
it's been around for like 7080 years now at this point.
Is that the idea just at a, it's, it says essentially you
can contribute property to form a new C corporation.
And the reason they put that in there is, is let's say we're
just going to go start like a shoe company, right?
You make Nikes, I make cowboy boots.
And we're like, geez, Bill, we should set up a new, a new
company who can contribute the, the Nikes all contribute to
cowboy boots and, and we'll have this great conglomerate will be
more efficient, blah, blah, blah.
But the problem is, if there wasn't a tax code, there could
be an implied tax on the contribution of the asset.
Right, it's a realization event. Yeah.
And that that would just destroy a capital formation into capital
efficiency entrepreneurship, right.
So that's kind of the intent is like if people have property,
want to kill better ideas, more efficient ideas, better
solutions by like imposing a tax when when they're just trying to
like get more efficient and like they're eventually going to pay
their tax at some point. But we shouldn't like stymie
better capital formation, right? So and then so within 351, it's
been around forever on just generic C Corp funding.
And then, of course, some smart guys, I'm sure along the way set
up, let's fund a Rick and what does contribute Microsoft and
then turn it into SRP or whatever, right?
And so obviously they're not that dumb.
And so they created additional treasure regs that say, wait a
second, if you're going to set up a new C corporation and
you're going to have it qualified as a Rick so we can
avoid double taxation, that's what all mutual funds and ETFs
essentially qualify as. You have an additional rule,
diversification, because we don't want you to get a free
ride where you're going to basically get a free opportunity
to diversify without some penalty.
Because why? Why should common equity get the
same treatment as real estate? But I digress.
Yeah, that's true. And then so then there's another
structure which which is the exchange funds because there's
another rule with partnerships. So partnerships have another
section of the tax code and like it's section 721 and then
obviously 350 one. They're like cousins basically,
right? Because what the partnership law
says, all right, we'll let you guys do that.
You can actually, Bill, you can throw in your Microsoft and if
you go rally up some friends or whatever, you can all contribute
your zero basis single stock position into a partnership.
And then you guys effectively attain diversification, right?
Because if let's say you find 30 your buddies, you all got 30
random things. That's another way to quote UN
quote, like get diversification. But if you do that, which is
totally allowed, they say, OK, Bill, you're cheating because
you're getting diverse, that's OK, But I'm going to impose A7
year lock up on that. So so on the partnership side,
they say, OK, you want to do the divert the non diversified, A
diversified thing, all good. But you have you have to be
committed to that for seven years.
We got to make it painful for you at least, right?
Whereas 351 you know, if they didn't put the additional Reg on
Rick's, you'd be like, well, I'll just do that because I
don't have any seven-year requirements.
So that that's why the rules are married up where 351 as long as
you contribute diversified property, at least according to
what the IRS thinks is diversified, you can do the tax
retreatment and there's No 7 year lock.
If you want to do the, the single stock thing and get
diversification, they're like, OK, you can do that via the
partnerships, which is not 351, that's 721.
But now you're going to have a seven-year lock up.
So, so that, that's how they, they've have it structured and,
you know, whatever, I don't know what, who made those rules that,
you know, they, they hashed us out.
There's, there's, there's actually a great paper if you
Google. Am I the only one that's paying
taxes? It's, you know, some lawyer
wrote up this thing about the whole history of 351 exchange
funds and the whole ball of wax. And he's just, you know, saying
like this is crazy. Like who comes up with all these
rules, you know, for people to do defraud?
And again, I'm not a politician. I just take the rules and then
we use them to our advantage to maximize value for people,
right? So anyways, that's a lot of
complication, I'm sure for your listeners here, but it's very
important to understand because this is basically all the
different tools that you can use to solve the kind of problems
that you're dealing with. So anyways, going back to
ETFETF, great tax efficiency, lot of people would like to just
do the simple transaction of how can I just take my $100 million
and turn it into an ETF? I'm just a family office because
I'd rather just manage my money in that.
Well, there's a catch. If you want to run an ETF, you
have to be regulated and you're subject to all the scrutiny and
craziness that I got to deal with all day.
Most people don't want to do that.
And So what what has happened through a million conversations
where people are like, I would love to invest in ETF, but I
want to deal with regulation there.
I was like, well, I don't have a solution for it.
So we came up with this new fund idea in this ticker that's
actually going live on on July 3rd AAUS.
And what it is it, for lack of a better term, it's boring
Vanguard fun. It's a cheap, low cost beta plug
because a lot of people that, you know, I don't need, I don't
it's we're not even going to argue about like factors and all
the other stuff that I do. You know what great.
You know, buying the market is good enough for government at
work. And and if you just want that
done cheap and low cost, we're going to deliver that or try to
right, seek to deliver that for compliance purposes.
And so, but what I'm going to help you do is help you
transition your hodgepodge of crap you got over here into that
structure tax free via Section 351.
And people obviously love this idea, right?
Because like, hey, can I just get cheap beta and simplify my
life? Awesome.
We've solved that second problem, your situation and many
other situations. Hey, Wes, I have $100 million of
Tesla. Great.
Do you have anything else? No, I have 100 million of Tesla.
Well, you can't do 351 because you don't qualify.
Well, what are you going to do for me?
I would like to get, you know, beta too.
You know, that would be awesome. I was like, I don't have a
solution. And then so the last few years
we've been trying to figure out how can we legally and within
the intent of all the laws and all that fun stuff, how can we
leverage exchange funds, which we talked about before, that is
a scenario where we can contribute a single stock and
take advantage of ETF structures.
Bingo. We've solved it.
And I, and I shouldn't say we, I contributed a lot of terrible
ideas and a lot of terrible brainstorming, but our partners
at this firm called Cash solved it because this has been two
years of like, you know, working through all the 40 act rules,
all the tax lawyers and talking all these white shoe law firms.
And we kept running into snags and, and Shree who, who's the
founder of cash, you know, actually has the silver bullet.
They've solved it. So, and I'll let him talk to you
later on the weeds because, because he can give it to you,
but I can give you the, the nickel tour and the bottom line.
Now if you would like to contribute a non diversified
portfolio, let's just say you have 100 mil of Microsoft only
because I've. What if What if I don't have 100
million? Let's let's say I got.
A million. $700,000 of. So they're taking K min.
However, there you go this because the this exchange from
they're doing it, they need it to be broad and have a lot of
investors. You still have to be a qualified
purchaser basically. So you can do a low amount, but
you have to affirm. Saying 100 million seemed out of
reach. Yeah.
So like, like, what are we talking?
About in real. Person terms, you could be in
real person terms, the technique will go down to 1%.
I'm sorry. OK.
But there's still a, a technical requirement.
You gotta be a qualified person. You gotta have like at least 5
million, I think liquid net worth or whatever the heck that
rule is. But you know, but the so you
have to be kind of rich or at least affirm you're rich.
But the actual amount you contribute doesn't have to be
like insane, but it's it's definitely not something that
like Joe and. Susan, so you have to affirm
that you're rich and you got to contribute at least $100,000 is
that? Exactly, yes.
And then effectively what what you know, I'm going to simplify
this, but we can only take an AAUS diversified contributions.
You individually cannot do this. However, if you go through an
exchange fund, they will be able to and they already have,
they'll be able to pull a composite of people that have
all kinds of crazy stuff. And then they can set up the
structure so that if they have another LP, it can have the
diversification requirements contributing to my deal and then
I can give them AUS back in return.
So now effectively you're you're leveraging exchange fund
structure, but you're basically getting immediately diversified
and you're going to be able to track the S&P from day one and
you're still going to have to have a seven-year hold and all
these other other things. It solves the problem that
you're trying to solve is how do I, how do I tax efficiently
diversify away from all in Microsoft?
This is the answer is the bottom line.
And then, yeah, so I'll stop there and I'll tell you.
So important. Things.
Let's just really talk about big hypotheticals.
Yeah, I have a concentrated position hypothetically in
Berkshire and Buffett is retiring.
And I say to myself, self, I'm not sure I want to take on all
the risk of, you know, whatever the session and that entity,
there is potentially a pool that I can contribute my Berkshire
stock into. I will be an LP in that pool
that that LP group will contribute the capital to this
other entity and then I can have S&P exposure as opposed to
Berkshire exposure. Who's the GP?
So we, so legally, it's very important we've, even though
we're working together with Cash, Cash is the advisor to the
exchange funds and we have 0 economic affiliation, which is
very important for the 40 Act because to the extent that
they're going to invest in our ETF and their limited
partnership, it's very important that we have no economic
affiliation, which we don't, right.
So, so they manage that, they manage the exchange fund
apparatus and that's what their whole business does, just like
our whole business is ETF operations back office.
You know, essentially their story is, is the founder of that
firm. He's, I think it was a big Uber
or Waymo. Like he had the, he had the
classic problem. Most entrepreneurs have great,
I'm rich and I have a bunch of Uber stock.
Let me go talk to these Wall Street people because they must
know what they're doing. And then, you know, if you're an
engineer type, you go talk to them.
You're like, oh, great, this is basically a big rape and pillage
farm. Like none of this stuff is a
good idea. And and so he's like, they're
all just trying to figure out how to keep their fees.
Yeah, yeah, exactly. And, you know, really smart
people, like engineer types, like he is like they, they can
quickly cut through all the noise and be like, wait a
second, this is the worst idea ever and all your options are
terrible. You know, Ding, Ding, Ding, I
have capital and I need to solve my own problem anyways.
I'm going to go set up my own firm.
And we're going to do this the right way.
We're going to do this with technology, with efficiency, not
with like, you know, 'cause that business exchange from business
is at least 30-40 years and it's dominated by two players that
will remain nameless. But they're not exactly like the
innovative. In the world on exchange funds
are big. Yes, that's the other thing.
So the other. So it's one thing for us to
figure out how the hell do we do we help people actually get to
like an S&P like exposure quickly to solve the
reversification problem. But then we also need to do the
good old fashioned Jack Bogle principles of how do we also
make this cheap, transparent and easy, as easy as possible.
And so that's the second thing that we've done with those guys
is, you know, because we obviously our culture is like,
how do we do this as cheap and efficient as humanly possible.
And his culture is the same. So when you marry 2 cultures of
a bunch of cheap bastards that you know, hate fees and hate
taxes and all that stuff, you know, it's a good marriage.
Because now, now we have a composite package that's, you
know, arguably at least going to be half the cost.
You know, for example, like the all in cost to do all this.
You know, if you have like $1,000,000 plus, I think it's
like 50 bips or something like that, including the ETF fee.
And then after seven years, you know, if you just, if you get
distributed out the ETF, it's like the 15 bips or whatever it
is. So so you get everything cheap.
After seven years, can you ask to get distributed in kind?
Yes, so it's there's a lot of like technical things, but yes,
basically what happens after seven years now you're past like
the the ability for them to come back and say we're going to do
that effective sell back seven years ago.
You can get distributions in kind pro rata.
And so the concept here is is like, you know, any and everyone
wants to be an ETF structure. It's low cost, transparent and
super tax efficient for the long game.
And so, but the problem is, you know, I got concentration, so
I'm going to have to deal with the seven-year problem.
But then after that, you know, I can get rid of the LP apparatus
because that's also just baggage at this point.
You know, now I can get distributed in kind tax free
assets out of the partnership and I just hold this beautiful
low cost, tax free or, you know, tax efficient ETF for however
long you're going to do it. So the exit is a lot cleaner in
the old days with exchange funds because we've seen this and we
have a lot of these as contributors to the 351 is you
get dumped this pile of like 30 stocks and a whole bunch of
other stuff you don't really want with low basis.
And you're like, I haven't really solved my problem.
You know, I donated NVIDIA and I got back a bunch of triple Q
stocks and and now I got to deal with them forever.
Like now I got a 351 anyways into an ETF.
So this is much like we're trying to pull out steps of the
process to make it more efficient for folks.
Yeah. So I mean, it's, this is like a
big solve to all the problems that people have with
concentrated stock. It's unfortunate we can't make
it insanely easy because we have to have to comply with all these
complex tax rules and whatever. But we can at least make it as
cheap as soon as possible and achieve like the core goal,
which is like get diversified as quick as possible, keep costs
and taxes minimized. You know, we could try to
optimize on that as best we can, which we have.
If Jesus were in finance, this is what he would dedicate his
time to. I think so.
This is like a. Certain.
This is Jack Bogle. But, but if he had tax awareness
on his mind, he was going to go down a rabbit hole on on a lot
of these crazy rules and and dig into these entrenched businesses
that have been around for 40 years.
So like one of the questions, because I, I think the idea
speaks for itself. If you understand the
conversation thus far, I don't think there's that many.
I'm sure there are questions and maybe you can can bring them up.
But in all your research, I guess question one was would be
how important is tax efficiency in aggregate returns over 1's
lifestyle? That'd be question one.
Question 2 is, let's say I believed the West Gray work in
the past and let's say I want some sort of momentum or a value
tilt. Is that where this is eventually
going or what do you see in the future?
Yeah. So we, we do all these things.
You know, I personally, if I'm going for the 23rd 2030 year
horizon and, and I believe in like value momentum or different
factors or tilts, like I'm going to do them and I'm going to try
to keep the fees and taxes as low as possible.
And that's what I actually do. And we have funds that do that.
However, I do not, it's unrealistic that I'm going to
sell everything to everybody. It's always going to be very
boutique Y, But there's one other thing that we know people
love the S&P or the broad U.S. market.
And could we argue for days on end about why I think that'll
underperform over long haul versus like some factor funds?
Sure. But like 99% of people don't
care and they're just like shut up, give me cheap beta and it's
some point. You just, I'll tell you what.
So I, I mean, this specific specific example that I'm
thinking about is I have one of my kids accounts that in the
pandemic, I bought him Transdime and I bought him Constellation
and I bought like I, I think he's got Microsoft and Amazon,
right? These are like big concentrated
positions relative to that account size.
Yes, I. Don't want him to inherit some
portfolio that he either AI don't think I know more than the
market on those names now. BI don't think he's going to
know more. I would love to rather than give
him that, give him an S&P fund. This is a great solution to
that. I guess the follow up is can it
get even better where I can give him a factor allocation down the
road? Like is that kind of where this
is going? You could.
And like so on your first point, like just my dad is in this new
fund we're doing, doing a 351 because he has that exact
situation. Like my great grandmother died
and there's like literally they got like these 30 Dow stocks
with 0 basis and he can't do anything.
He's like, I don't want the Dow 30.
I want something that's actually dynamic.
So he's like, that's perfect, right?
And I'm not going to convince my dad about all the geeky PhD
stuff that I do because he's like, what are you talking
about? Like not worth it.
Now you could, you could not do this in the exchange fund
context, right? And that's a long story.
But the exchange funds, there's a lot of rules and we need to
have good economic substance. And we're trying to solve a much
bigger problem of just how do we get people in like diversified
indexes like like like that's already complicated enough.
So using that mechanism to do what you're talking about, it's
not realistic, but there we do this all the time.
Let's say you want to be in a factor fund or something
different that's active or what have you, but you want to move
from A to B. That's just good old fashioned
ETF infrastructure. And we do that, like I said, all
the time where you would just say, hey, I've got the problem
is you need to have like, you know, at least 5000 mil,
probably composite with like you and your friends, whoever it is.
And you could take all those securities under 351, transition
them to an ETF. And then if that ETF's mandate
is to do value momentum? Tactical.
Whatever. You could, you could do this
type, but but that's only, it's a long story sign worth talking
about here. But for a lot of reasons the
exchange fund vehicle can't do that kind of stuff yet.
We'll maybe work towards that. But 351 you can definitely do
that. And we we already have a bunch
of funds on our platform that are active ETFs that were that
since you started out as you know low basis concentration of
you know, portfolios of securities effectively.
But you need to have a group that has 50 million or whatever.
Well yeah and that that's just because the cost to operate an
ETF, even though we're we're trying to bring that down as
much as humanly possible yeah operating a registered fund is
just a pain in the ass. So so you're looking at burning
just for easy math 200 KA year just to run the thing.
So, so you know, if you only got like $1,000,000, they cost 200 K
to operate, that's not a good ROI, right?
But so you really need like 5000 mil because you need enough
scale so that the frictional cost of like running and
operating a registered fund, it's not so painful where the
net present value of like the tax and other benefits outweigh
the the cost. Otherwise it just doesn't make
any sense. So that's why I say the scale is
important. So let's say there are a few
people listening that do have that kind of scale.
Is that? Is it possible to have a
situation where you contribute A concentrated position and you
can do it to an ETF that runs the mandate that you would like
it to run? So the answer on that is no,
that that that domain is still very restricted to.
You got to have 351 qualified contributions to do right.
You, you couldn't do like, hey, I got Microsoft like I'm all
Microsoft. Like it doesn't qualify for the
25% or the 50% rules. So you're like, geez, like I'm I
would be ineligible for 3:51. It's, it's not plausible right
now to do that. And that that's because it's a,
it's a bunch of esoteric like tax stuff and what have you.
It's we just can't do that. They're like the exchange funds
are providing A gent the way we got structured.
They're providing a genuine economic service.
They're not just like a conduit to the ETF, right.
We don't, we don't that that doesn't make any sense because
now you get and you run a foul like step doctrine and some
other esoteric tax things. You every time you do stuff, you
got to make sure there's like genuine economic substance and
like value add at every part of the chain.
Otherwise you're that, you know, which makes sense, like, Oh, you
guys are doing 10 different Ponzi schemes to achieve a
certain tax objective and none of this stuff has any like
beyond just tax, you know, that's you shouldn't be doing
stuff like that. So you are and I, you're not
saying you're doing it, but you are clearly not doing any type
of Ponzi scheme. My interest is you're saying
that I can contribute A concentrated position and get
the S&P. I'm curious, can I do a
concentrated position to get Q Val and if not, why not?
Yes. And and that that's that's
because of what I was just mentioning there.
It's that like there's additional value add at like the
exchange fund level where they're hurting multiple cats
and it's got it. They're trying to form to like a
broad benchmark index and they're not.
It's not only owning the ETF, it's going to own other things
to massage to get to that broad based.
Exposure. Whereas if all if, let's just
say you set up an entity on the exchange fund side and you're
like, hey, here's an idea. I'm just going to set up this
exchange fund and literally all it's going to.
To avoid taxes, obviously. Economic substance or investment
reasons, yes. So that's the key.
There is anytime there's anything you do where it's just
100%, the only reason you're doing it is for tax reasons.
That's not the right answer, right?
It's fine if there's an investment economic reason, like
a genuine business purpose to it.
And maybe there is, there is, but but you want to make sure
that you have that because anytime you do something that
that's just clearly like, like, like the answer like, and that
makes sense to be like, well, for taxes, taxes reasons.
Well, I got at least have one business reason.
If you give me a few business reasons and maybe we could work
on that, but we're not there yet.
So, so that, that'd be something that that, you know, that maybe
down the road we could, we could well.
OK. I I might be able to get there
part of my ignorance with this follow up, but what is the
business reason that I can contribute and end up with the
S&P? Yeah, because that's not the
only thing you're you can, you're going to get right.
The business purpose is a lot of people that go into exchange
funds, they they might want to own multi, you might want to own
Triple Q, You might want to own S&P growth, you might want to
own S&P, you might want to do a bunch of things.
And S&P itself is going to be a core component of all those
exposures. However, you might have tilts
and do other things on the portfolio management side to, to
massage to that particular exposure, but it's never going
to be like 100%, just the ETF exposure, right?
And there's also The thing is you have to do a lot of
management, like if you're trying to manage to the index,
you know, you, you can also take on contributions continuously,
which is we can't do that on ETF side.
But it there's a lot more. There's basically a lot of
activity and a lot of issues you got to deal with beyond just
like I'm going to take money, put an ET.
Yeah, and that's important. And that's the way they've got
it structured is it's got to be adding economic value to do to a
bunch of other things. So even on on their side, you
can't just say, Hey, I'm going to do this and then just, you
know, become an ETF only there's got to be you got to be doing
some an economic activity. I, I guess, I guess that if I
wanted to put on my argumentative hat, what I would
say is to the extent that I believe that capital is under
allocated to value stocks and I am trying to allocate capital in
a proper manner, I would prefer to have a value tilt rather than
the S&P. I.
That would be my argument for it.
I think it's a damn good argument and what I would say is
that will be forthcoming, but it's like everything starting
off most brain dead basic, yeah, no doubt type stuff.
Yeah, next hit a single and then worry about hitting more the.
Next step might be broad equal weight indices.
Yeah, like, like. Yeah, that would make sense.
Yeah, Yeah. And then then maybe like Level
3, you know, down the road as like, you know, work on all the
kinks and all, and we learn more about what people want, what's
the marketplace desire? You, you could do things like
you're talk about like, Hey, we're going to put these, you
know, Q Val strategies or whatever.
But it it's just one of these things where this is already
like 351 itself is, is already innovation squared and we're
finally up on the S curve on that.
What I'm talking about here is like the innovation of
innovation at the tippy end of the spear where most people
don't even haven't even followed this conversation at this point.
And we're just going to do that like the most Barney style basic
conservative hard to screw up and S&P 500 broad generic U.S.
equity can't screw that up too bad.
Yeah. And then to your point, we'll
add complexity down the road. I'll tell you what, if adding
complexity works, you can probably end up contributing
your holdings in the fund or ETF that you own to the new ETF and
then do it that way. But I do, I do think there's a
legitimate argument to be made that as far as business purpose
goes, allocating to value or potentially emerging markets
that are value like they're. Oh yeah, yeah, for sure.
There's, there's diversification reasons.
There's, you know, I mean, a lot of things you could do like
lowering fees, more capital efficiency, more scale.
There's a lot of different arguments of just anytime you,
you like syndicate capital in like a, in like a pool, which is
an economic service itself. And then that capital can then
be allocated into like a certain exposure, like value or whatever
what the heck it is. There's there's definitely easy
ways to build economic substance there.
But you know, we're, we're, it's just slow and steady wins the
race on anything like in tax base especially.
Yeah, No, it makes sense. It's the pithy responses to
avoid taxes. The real responses.
Yeah, once we've gotten over issue A, which is, does this
have economic substance? I it's, it's a logical extension
to be like, OK well can I have any tilts in here?
Because if you can, theoretically at the time it
should work. Yes, 100%.
And and there's, there's also, I mean, yeah, there's a lot of
considerations here because you can also as long as you don't
change like your fundamental investment policy, like if the
shareholders are like, you know what, we're going to pound sand
on this whole market cap weighted thing.
We just want to go equally great.
We could probably have a 60 day notice and do that, especially
if there's like, you know, if we get a sense that you know, as
the fiduciary to the fund and like listen to shareholders,
that's what they want to do. I mean, in the end, like like
ETFs are kind of like a, it's like a corporation that doesn't
have poison pills. The shareholders vote in the end
like it's if they want something in the end, they are the boss
because they could all the people run the thing if they
want it. They could have a proxy and say,
you know what, Wes is an idiot. We're hiring Bill, we're going
to have a proxy. We're going to vote Bill in and
Bill's going to run as wacko, you know, crazy value momentum
upside down. Whatever strategy it is, you
could do that. It's and that's.
I like that whole hypo until you said everything that I was doing
is wacko but. Yeah, well, you know, you know,
I think it's, I don't think it's Percy Wacko, you know what I
mean? Whatever, whatever thing that
you pitch people that you that is a better idea.
You know, the ETF structure is hyper democratic because one
share, one vote. And if 51% of the shares are
like, let's do this or that, I mean, they can make that happen.
OK, so so if you're sitting on the other end of this mic and
you're listening and you have 10 people that you think you can
have it, can can I have in your solution?
Can I have a like a the only word I'm thinking of is
consortium. It's definitely not.
We might not be the regular syndicates.
Yeah, OK. So.
You have a syndicate of 10. Can I call you up and be like
Wes, look, I got $100 million here between 10 guys.
This is what we want to do. How do we get where we want to
go? Will you build that solution?
Yeah, we we could definitely do that.
However, they would if they wanted to do it, if they want to
run their own ETF as like a syndicate because they think
they got a better investment approach and want to pull their
capital together. The only way we can facilitate
that right now is they'd have to be able to distribute or have to
contribute diversified contributions.
That 351 stuff the, the singles they couldn't do like, hey, you
know, we all got, you know, 1, you know, like whatever $10
million position. So we all got 10 mil.
We got to 100 mil because none of those are 351 qualified.
You, you could do a partnership, I guess, technically, but that
then you're not going to enjoy the, the beauty of like the, the
ETF structure from like a compounding tax free
perspective. So, but if, but if you got a
bunch of buddies, we're we're like, hey guys, we all got 24.99
in random securities, but then we got 75% and other stuff and
we can all contribute 351 qualified property.
And let's say it's a bunch of U.S. equity because you're like,
you know what, we're going to do this other strategy that's way
better, you know, long game, fine, let's all contribute the
property. We all, you know, make sense.
It's we're contribute diversified property.
We get the tax free exchange. And then once we all have that
in our new ETF, we all sit around the table and say, all
right, great. What what's the economic
landscape say? And you know, let's maneuver
and, and buy this or do that depend on what the, you know,
the circumstances are. And you could totally do that.
And that that's what people are doing.
It is just, and that's kind of the intent of 351.
The idea is, is how can I, you know, move my capital and do
capital formation, you know, such that I can, you know, maybe
have more fish investing, lower cost investing, more tax fish
investing. You know, maybe you have a
business too. Like there's an obvious business
case there because if you have 10 people who have a lot of
money and they're like, I'm going to have a lot of skin in
the game. And I think we have relatively
good ideas. Let's set up an ETF, which is
great for our own capital, but we now have a business because
now we have a ticker. That anyone on Schwab could buy
and and now we're in the asset management business at scale day
one. That's a that's like the, I mean
that's a great business case. We don't have to think about
that one because that's obvious. As you know, the biggest barrier
to entry in our business is how the heck do I get the capital to
launch the ETF profitably. It's very challenging to have an
ETF at 5 million at launch when you're blowing KA year on fees,
whereas it's impossible. So if I can somehow use 351 fund
up a new corporation here with 100 mil and day one, it's break
even and I have crazy operating leverage going forward.
I mean, that's the greatest business of all time.
Yeah, well, what Anecdotally, I've heard you want 30 million.
Yeah. You think that's?
Fair. It's what I would say is all
asset management, I mean. 30,000,067 basis points, right,
yeah, fees, so. Yeah, I mean, you could do
anything. We used to tell people not that
long ago 5 mil was like. Launch an ETF.
If you wanted to be. If you're willing to be crazy
and you're hardcore entrepreneur and you have the passion like
Perth is is the prime example of that with her Freedom ETF.
Like I gotta interview her. Yeah, yeah, she's, she's got a
great story, but she's a, she's a legacy man.
Like, like she got in like, I mean, I don't even know how she
did it honestly, but, you know, fight you.
We would do that in old days because if you just have the
hustle, the passion and the willingness, people were willing
to invest in smaller funds and then you could scale with them.
Nowadays, though, especially after 21 when there's all these,
like, crazy funds that started and they went bankrupt because
remember, the market went up a whole bunch and then tack and
all the crazy things went down. I remember 17.
Yeah. Yeah, exactly.
Well, luckily, as you know, you know, like, what's the Warren
Buffett quote? Like, you know, when the tide
goes out, you figure out who doesn't have their underwear on.
That's what happened in ETF business.
And now advisors and allocators are like, wait a second, you're
5 million, you're not making money on this fund.
And and if I'm in this for like long term investing and you go
bankrupt in a couple years, that ain't good.
So so now we usually tell people that makes.
Sense because you are, you own the ETF.
So if you own the subscale ETF, you own nothing.
You're, you're own, it's kind of like when you own a bank that it
doesn't have great credit, you're a depositor, but you're
also now an equity owner. You didn't even know that,
right. So same thing here.
If you own an ETF that's that's super under water, not properly
capitalized, you're you're kind of like an investor in ETF, but
you're also eating the risk of the ETF business because if it's
yeah with. None of the fee upside might.
I with none of the upside exactly so so that's why and and
that's all the good news is that's usually where the
innovation and good ideas are, but there's now the risk of
like, well, do I want to be the bag holder?
So that's why we tell people 25 mil, that's kind of like where
your rough break even. And if you have 25 mil in the
fun and you're decently well capitalized, you got a very high
probability of staying alive. You know, for certain cultures,
not everybody, but but you know, that's enough for like, you
know, an allocator who's pretty savvy.
Can you know, hey, what's your financial statements?
You got 25 mil, you're close to break even or, or right around
there. OK, you know, we're we're
willing to do this. And if obviously 50 mil, 100
mil, all those are infinitely better because it's a signal
that you're going to be around for a long time, which is very
important for a, for a vehicle that's built on tax deferral
like I need you to be around for 20 years.
Yeah, no shit. If you if you blow out in year
3, I've got zero and yeah, huh. Well, I mean, you could get your
money. I mean, if an ETF it's not a big
deal. If like if an ETF has to
liquidate it, it's extremely orderly thing however.
What? You get it in kind, yeah.
You can't. It's a taxable event.
So that's the problem that like, like if you, if you, if you go
into an ETF and now you got low basis and all of a sudden they
blow out in two years, you know you're going to get, you either
sell or you have to get the cash distribution.
Those are all taxable. You can't redeem and kind the
securities without a tax. Head, why is that?
That's just the law. You could technically 351 out.
That's that's one way to exit now, but that's complicated.
OK, that's interesting. So does that go to the creation
redemption issue like? Like what?
Yes. But I haven't understood about
ETFs and you may be answering it here is I've always understood.
OK, fine. I own the the SPY and you know,
like whatever it trades, but I'm only I only own that entity.
So that's what I'm trading at a smaller scale.
I own not an operating business per SE, but like the ETF ticker
and I don't own the underlying and and is that why the
underlying is allowed to flip? No, no, no.
So to be clear, if you own an ETF, you do own the underlying
directly, OK. It's it's like it's very clean
because you want people to have strong confidence like, hey,
when you own that ETF, it is always redeemable for the
underlying securities effectively.
And that's that. And you want that, right,
Because you don't want to have like weird derivatives or off
balance sheet like counterparty risk.
That would that would just Add all kinds of problems.
But an ETF is literally like, like a certificate that says
this is, I own a stake in that fund and that pool of securities
that are custody at a, at a segregated custodian.
I, I don't have any broker dealer risk boom, we're money.
Good on that. The, the way the tax deal works,
remember, is the only people that are legally allowed to
trade with an ETF are authorized participants.
So we, we never trade with an individual because it's illegal.
They're not a broker dealer. So I'm my counterparties and my
clients technically are like the banks, like the market makers,
right? They're the only ones that are
legally allowed to transact with an ETF like they can give you.
Transact with the bank if I put an order in to buy an ETF, I
know this is in the weeds, but yeah, the bank is selling me the
ETF and they are buying it from you and they're the
intermediary. Well, let me walk you through an
example that'll make this crystal clear.
So you put an order for 10,000 shares of XYZ at Schwab?
Yep. What's happening there, The
market maker, they're going to post a bid ask spread, right?
And the bid ask spread is generally speaking, going to be
what is the cost to acquire, dispose of 10,000 worth of the
underlying securities that you're about to acquire here,
right? So S&P, it's going to be cheap
small spread, micro cap, crazy stocks.
It's going to be a big spread because someone's got to go buy
the stocks. But the market maker is
literally going to short sell 10,000 shares out of thin air
and they haven't they have special liquidity and exemptions
on short selling for ETF market making because we need liquidity
like they get they get special exemptions on like number of
days and all this other stuff anyways.
So so they short sell 10,000 out of thin air and then that's what
you're buying, right? So you're when you put that buy,
the reason it's getting filled is because they're just creating
like out of thin air 10,000 shares.
That market maker is now immediately going to go buy that
underlying basket because they're they're not in the
business of yeah. They don't want directional
risks. Pissing in the wind, yeah.
So so they're going to be like Roger that, sell you 10K.
We are now going to go buy the underlying that represent those
10,000 shares. Then that same day, you know
they're going to call it come to us for creation.
They're going to say, hey guys, we're going to deliver in these
these, these 10, these, these blocks of, of portfolios that
represent 10,000 shares of ETF. We're going to look at it, you
know, review the order, make sure it's accurate.
Great. They deliver in kind those
securities. And then we issue new ETF shares
because whenever we take in securities that represent
shares, we issue new shares. If we destroy shares, we kick
out underlying securities. So then that market maker, he,
he who's got that short position, they're going to
immediately turn in the underlying stocks, get ETF
shares to collapse or short position.
They're clean, you have your securities, they're clean.
And they made the spread on the, you know, the bid ask spread to
sell you for the, you know, this whole thing.
But they're able to perfectly arbitrage and very easily
arbitrage essentially every day. OK.
That's why ETFs, generally speaking, have very, very tight
price to NAV is because it's literally free money and there's
a massive, you know, huge market making actually half the people
down in Puerto Rico, they do what they call index or ETF
arbitrage. And they're just sitting there
with their supercomputers waiting for, you know, the one
basis point, you know, of spread between like the basket and the
ETF shares or vice versa. And, and so there's a very, very
robust marketplace of like prop traders and market makers and
then, you know, liquidity people that they're just sitting there
on standby to do this arbitrage because it's, it's seamless.
You can do it every day. You can collapse the the trade.
But, but if you're subscale and you shut down the ETF, what
you're redeeming all those? So Yep.
So on a liquidation, what happens generally speaking,
everyone recommends just sell your actual shares because it,
you're we're going to put out notice like, hey, this thing's
liquidating in 60 days and it, you could literally wait around
to like get the liquidation payment where we, well, in the
end, sell everything. The NAV after you sold all the
stocks, it's just cash will then distribute.
But then you got to wait for two weeks.
It's a huge nightmare. Sell the ETF in the marketplace,
you're going to get, you know, basically fair market value, no
delays, no complications, nothing.
You just take your cash and move on.
Yeah, right. That makes sense.
Yeah, you could do liquidation payment, but that's just more
brain damage for no benefit. So most people you know fund
before liquidation is like $2,000,000 because someone
forgot to sell it basically. So the ETF's liquidation is not
to distribute in kind all the securities to the owners.
It's just sell the securities, distribute the.
Cash we have to, that's why it's a taxable.
Event. Yes, and you can't.
And the other thing, remember we can't distribute the securities
in kind to you because you're not allowed to trade with the
fund. Yeah, you send it to the bank,
to the market makers. Yeah, because the banks broker
dealers and and so there's no way there's there's no way to
like somehow get you the shares without create a taxable event
because I, because I it's illegal.
I, I have to go to the to the market maker and then and then
that's on their books as a, as a Mark 1099 transaction.
They can't then turn around. It just doesn't work.
It's impossible to do that. And you probably wouldn't want
that because I can only imagine, you know, if I got my brain
started on, on tax ideas, if they start allowing things like
that, you can do, you know, you don't want to open up Pandora's
box, basically. Why not?
Just just because. Like if you could somehow
distribute securities out of ETFs or mutual funds without
paying tax, you know, in kind. It's just, you know, there, I'm
sure you can figure out all kinds of like interesting
schemes and ideas. I don't have any at the top of
my top of my head, but generally speaking, it's just just not
allowed. Because remember, also like a
Rick, like a register investment company they had, they also have
special regulations where their fees are tax deductible, but
they also can't distribute losses, right?
Whereas Smas fees aren't deductible.
You can distribute losses, right?
So I'm sure there's all kinds of crazy like, well, I'll do the,
I'll do the ETF for this. Like I, I, I, yeah, I'd have to
sit down and think, but I guarantee if you start loosen
the rules, you know, I could put my head and I'll be able to come
up with the greatest thing that's ever happened.
But you know, so, so they just need to make sure that, you
know, you got to keep the rules in place and keep people in a
box because there's going to be some PhD that's going to figure
out how to like optimize very quickly Or nowadays, just ask
ChatGPT. Yeah, no doubt.
It's probably smarter than the PhDs, which actually you should
do that I guarantee if you went to ChatGPT because I use it a
lot now for for just ideas. It's wild.
Right. Oh, it's it's crazy, but you
could ask it that question like, hey, ChatGPT, here's the rule
set. Here's like all the ETFs here
and it'll start laundress the tax codes.
Just assume ChatGPT that I could distribute securities in kind
out of a mutual fund or ETF without tax consequence.
How would I tax optimize this and build a structure such that,
you know, I can achieve XY or Z? Almost certainly it it'll give
you like the greatest idea ever. And you're like, whoa, yeah, we
should, Yeah. You know what works about that
is the prompt that you gave it. Just assume right because it's
it. Yeah.
Thanks man. And I do that all the time.
I mean and then you then you also say okay, that's too
egregious. Can you give me some economic
substance or business reasons of of you?
Know why I can do this? Yeah, and they're like, Oh yeah.
I mean the things insane man. Yeah, yeah, the problems are
really important. I've I've been like studying a
lot about this. I've I'm a year late and I
acknowledge that but it's wild. I'm what you need, What I found
is if you just you, you need to unfortunately know a lot to make
it very effective because you can call it on.
It's bullshit and hallucinism. Who hallucinate?
What do they call it? Hallucinations, yes, I think.
Whatever that word is, yeah, yeah, it's.
But if you can give it very targeted, like, no, look at this
code and then also make sure you're aware of this code and
it'll literally say like, oh, wow, actually a good idea.
Let me reanalyze that with that knowledge.
And like, so if you're like pretty smart about the topic,
but you just want it to like even be smarter and like
creatively, like it's crazy. You just don't want to act.
You don't want to just say, hey, please go find me this.
Yeah, it'll just have to be pretty specific.
You know what's interesting? Specific.
I sort of wonder, and I'm playing around with this lately,
Yeah, if you're not an expert in something and you say to it.
So on a tax code part, OK. Yeah.
You know XYZ and it gives you an answer.
I've started to ask it. Is there a part of the code that
you might be missing? Right?
Like something like that? Yes, what I do also is say I do
this now I always do deep research and I say please give
me sources on everything. Yes, and I want direct links to
the sort site it and I do not hallucinate and spend more time
if you have to. Yeah.
Like you just got to like, literally kind of like, like be
mean to it. I need sort like, kind of like a
student, like when I was a professor.
No, I need sources. Wikipedia doesn't count.
I need, I need you to cite it. I need like the page number.
Like you kind of like tell like a student, Like, no, I need you
to do this correctly, do your research like accurately.
And then, you know, and if you tell it, you'd be mean to it.
It'll actually be like, oh, yeah, yeah, yeah, sorry.
I was just trying to tell you what you wanted to hear.
And I'm sure it's probably smart enough now.
It actually still tell me what I want to hear, but at least it's
doing it in a sophisticated way where I don't even know at this
point. Dude, you know, it's wild is
like perplexity from my understanding has been trained
and some of these models, I know perplexity is the rappers.
So there's models within perplexity, but my understanding
is some of these models deliver things to you in a more they
appreciate your feelings. So like people to your point,
you have to be mean to IT. People feel like, Oh, I don't
want to be mean to the model, right?
But the model doesn't give a shit.
But there's this perception that it's got feelings, which is kind
of interesting. It's, I mean, I used to not be a
buyer. I'm like you, I was late to the
party. I was like, all right, whatever.
These tech guys trying to get overvaluation on their stock.
They're going to pay 100%. Isn't that the bias that that we
have? Yeah, it's a value bias.
Yeah. Yeah, I started.
I've done all these studies on value companies and fuck these
guys. Exactly.
But then I then I started using the thing and I kept using it
more and I'm like, Oh my God, this stuff is, this is scary.
Actually, I kind of agree with these tech guys a little bit
now. And maybe they're not, you know,
FOS like they might be on to something.
Because this stuff, it's, it's honestly, it's fast.
Well, dude, the bull case for the S&P is that your operating
margins are going to go a lot higher because you need fewer
people, right? I mean, that's.
Yeah. That's at least what I think it
is. Yeah, scale tech, like less
people, you know, more, more return on every dollar invested.
I mean, I could believe that. But, you know, they used to say
that probably on AT&T, like, oh, they got a network monopoly.
They got every phone line on the planet.
Or like, you know, the old Washington Post Buffett thing,
like newspapers, they've got network monopoly.
You know, there's always some great story, but because we're
not smart enough to know like what the next innovation is
like. Yeah, because we can't even
envision it. And maybe that blows AI out of
the water. I don't know.
That's why I like. That hopefully AI doesn't get so
smart that it can start seeing the next innovation.
Then then it becomes a snake that's like eating itself and
creating the world. Then then we're all just along
for the ride. Yes, I actually that's my number
one concern is because like you know, most of the time it leans
on human knowledge and research to date.
But but the reality is like, well, is it smart enough to
actually do new research and add to that or is always just free
ride on all the stuff we fed it? And you know, it gets real good
if they can actually do their own research and build on
knowledge. And I'm just, I don't know, I'm
not a tech guy. But if if it ever gets to that
point now, it's like now it's on the exponential, Oh my God
phase. Whereas right now I still feel
like it's kind of hindered by in the end, by the collective
knowledge of all humans and all the crap we've put out there.
It kind of needs to use all that.
And it's really good about putting it all together.
But can it really generate new knowledge per SE or new ideas?
I don't know. I mean, I imagine it well at
some point. But well, you know, the
interesting conversation is, I've heard the argument that as
long as we it can watch what it's doing, then we can monitor
the progress and it's OK because somebody will know when to
unplug it. And then in the same
conversation, they will say, but boy, like AI created that move
and go that humans would never have been able to appreciate
until it did it. And it's like, well, how do you
know when, when we've sort of like jumped the shark versus
like, I don't know who? If we're monitoring it and we
don't know what the hell it's doing, what good is monitoring
it? Yeah, no, I'm, I'm with you.
I. Don't even know.
To be fair, I don't even know where I am on all this.
All I know is this is the biggest innovation that my eyes
have ever seen that I've actually bought into.
Because most of the time I am a guy that's like, this is
bullshit and I do not believe it.
And this has like tangible benefits that I can experience.
And for the first time, I've been like, wow.
Yes, I'm with you and when a couple of old fuddy Duddy value
guys are saying that because, you know, we're like the last
people to believe the the bullshit train of like the next
promised God out there or whatever, like I'm with you,
man, like like I'm sold at this point, like I don't know where
you guys are going to take this meaning like all these tech
people, but. Whatever you're doing is amazing
and it's it's going to be incredible.
It may be incredibly bad or good, but it's going to be
incredible. Well, that's right.
And look value as a factor may still outperform the AI Basket,
but AI basket is going to change the world.
And I just, I'm along for the ride and there's nothing I can
do to get off this train, so I might as well stay on it.
Yeah, yeah, No, I'm with you. Yeah.
And the, and the good news is, is Warren Buffett's ideas are
Evergreen, right? Yeah.
You know, price is what you pay, value is what you get.
You know, buying Joe's Chicken Shack at 2 times earnings could
still be a better investment to buy an open AI at 10,000
revenue. Even though open AI might change
the world and Joe's Chicken Shack is worthless, it might be
a better investment just on valuation.
So good news is that hasn't changed.
I don't think AI will ever, you know, take away macroeconomic
fundamentals, but maybe it will, who knows.
Well, and I and I think bringing it back to where the
conversation started, if you had an ETF of the AI Changers or the
Joe's Chicken Shacks, given those two starting initial
conditions, Joe's Chicken Shack, probably that ETF.
What? JSK or no?
Yeah. Yeah, yeah.
I'm sure there's a ticker we could we could come up with.
That's right, that's the one that I would want.
Yeah, I would too. It'd be the most hated ETF with
no AUM, but I'd be a buyer for the next 20 years versus the AI,
you know, 10,000 times earning fund.
But anyhow, all good man. Yeah, well, thanks for pinging
me, man. And you know, people want to
find you. Where can they find you?
We've done this before, but where can they find you?
Yeah, just, you know, alpharchitect.com, Twitter
Alpharchitect or just Wested Alpharchitect.
And yeah, I mean, like I said, if you've got this concentrated
public stock problem and you can't do a normal 351, like I'm
not saying our, our solution is perfect, but it's, it's getting
pretty good and and you're pretty limited in options.
So you might want to at least check it out.
All right, sounds good. Anytime you want to come on, you
hit me up. Well, I only have good ideas
every so often, so I get over. Talk like once every three
years. Yeah, we could talk.
Yeah, exactly. I'm good for a, a new innovation
every, you know, a couple years. It's only been a couple months,
so I look forward to the next time.
We've been on the the Fast Innovation train, but I can't
promise that forever, so all good.
Good for you, man. I I root for you and I do have
one, one follow up final question out of your businesses,
yeah. Has a Better Business been and I
know, I know Box was a major hit for you, but as a better
businessman coming up with your own ETFs or has been the ETF
platform? Well, the problem is like, like
it's hard to have one come before the other because they're
kind of like natural symbiotic things.
But, but business wise, you know, obviously platforms where
there's way more freedom, like we just had the value
opportunity, value creation opportunities much bigger
because, you know, I have a lot of crazy structuring ideas and,
and other things. They may not be applicable to
some weirdo 50 stock factor fund, but they might be
applicable to 100 operators who are like, I could definitely use
that, right. So it's just a platform where,
where, where like the innovations, they may not be
applicable to the very narrow boutique thing that we're trying
to do on investment side. It could be applicable to many
others and and it's just a scale deal, right, whereas we keep
getting bigger, we can drop the cost, we get more efficient, you
know, it just makes the service offering better.
So it's just, you know, that business just has massive
potential, whereas like. Big time, Sam.
Yeah, yeah, exactly. Like whereas you know, you know,
investment business is awesome and it's a way simpler business,
but it's not, you know, it's not going to be Vanguard or iShares.
Like it's just not, it's just not the nature of like a weirdo
boutique asset manager. You're not going to have a
trillion dollars and you know, realistically it's just
boutique, but the the platform, I mean.
Until you get boxed. Well, I mean, you could get
lucky. That was good.
Yeah, that was pretty. But you know.
Pretty good, as Larry David would say.
Yeah, yeah, yeah. But but like, you know, you
never want to budget for your best, you know, you kind of, you
know, you just always want to like have like humble
expectations on that 'cause, you know, the ETF business is
extremely difficult. And yeah, if you have a bunch of
hits, that'd be awesome, but that's unrealistic.
Well, good for you man, but it's it's been nice to watch you.
I said it before, I'll say it again.
I root for you and come on anytime.
Hey, I appreciate it, man, with gratitude.
Thank you very much. All righty.
None. The.