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The Alternatives Mason: Building Alts Knowledge Brick by Brick | Episode 17 | The Psychology of Investing featuring Eben Burr
11 Plays4 months ago
Welcome to The Alternatives Mason: Building Alts Knowledge Brick by Brick. Banrion Capital Management uses technology to help independent advisors scale and educate themselves on alternative investments. Since education is such a big piece of the Banrion mission and business, we are excited to kick off this series to dive into the nits and grits of the alternatives space. Episode 17 "The Psychology of Investing" features Eben Burr, President of Toews Asset Management.
As President of Toews Eben helps oversee the culture and direction of the firm which specializes in creating strategies designed with the clients financial and emotional wellbeing in mind. Eben advocates bringing behavioral psychology, introspection, and empathy into portfolio construction, planning, and communication.
Eben is a lecturer and coach of applied behavioral finance as part of the Toews Managing Investor Behavior™ program. He also facilitates communications between the investment management team at Toews and its partners and producing advisors. He holds the Series 7, 65, & 63 licenses. Prior to joining Toews, Eben was the principal of the Burr Tibbs Group, consulting for private equity and high net worth individuals in New York City real estate. Mr. Burr graduated from Oberlin College with a BA in history in 1995, attended architecture school in Paris at L’Ecole Bleue and received a Master’s Degree from Pratt in New York City in 1999. He is currently attending Kansas State University where he is pursuing a graduate certificate to become a Certified Financial Therapist, expanding on his experience to learn to train professionals who want to improve clients’ financial health by integrating relational, behavioral, cognitive and emotional elements with personal finance. He lives in Manhattan with his wife and son and lots of guitars.
Connect with Eben
Learn More About Toews Asset Management: Toews Corporation
Follow Toews on 𝕏: @toewscorp
Connect with Eben on 𝕏: @ebenburr
Connect with Eben on LinkedIn: Eben BurrLearn More About Banrion: Banrion Capital Management
Follow Brittany on 𝕏: @Brittany_Mason
Follow Banrion on 𝕏: @Banrion_Capital
Subscribe to our YouTube Channel: @BanrionCapital
Important Disclosures:
The opinions expressed on the “The Alternative Mason Podcast” are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security.
It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results.
The guests featured on this program are participants on Banrion Capital Management’s platform. As such Banrion may receive payment for their participation as a platform partner.
Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.
Investments are not FDIC-insured, nor are they d
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Transcript
Introduction to Alternative Mason Podcast
00:00:01
Speaker
Welcome to the Alternator's Mason Podcast with host Brittany Mason, Chief of Staff at Bonner & Capital Management. You'll learn how to build alternative knowledge brick by brick. Bonner & Capital Management uses technology to help independent advisors scale and educate themselves on alternative investments. Since education is such a good piece of what we do, we are excited to kick off the series and dive into the midst and midst of the alternative space.
00:00:31
Speaker
Hello, everyone.
Guest Introduction: Evan Burke
00:00:32
Speaker
It is Brittany Mason, your host of the Alternative Mason, coming to you live right here from the green couch with another episode. I'm really excited for our guest today, Evan Burke. He is the president of Tay's Asset Management. He sits on the investment committee where he helps oversee the culture and direction of the firm. Tay specializes in creating strategies that attempt to limit portfolio losses in declining markets with clients' financial and emotional wellbeing in mind.
00:01:00
Speaker
Evan is also the president of Behavioral Investing Institute where he oversees the training of advisors to integrate relational and cognitive and emotional elements with personal finance to build better plans and stronger bonds.
Evan's Musical Background and Upbringing
00:01:14
Speaker
He also advocates with bringing behavioral psychology introspection and empathy into the portfolio construction planning and communication. He resides in New York City with his wife and son and a lot of guitars. So you're a musician, huh?
00:01:30
Speaker
Yep, I've been playing in bands since I was a kid. And fortunately, I've never used my real name in a band, so I'm un-Googleable. Oh my. Oh my. What is your alias? What's your... Well, if I told you my alias, then I'd be Googleable. I've used different names in every band I've ever been in. Oh, okay. That's cool. That's fun. And what kind of music do you like to play? Loud and fast.
00:01:58
Speaker
would be the broad genre of the bands that I've been in. Like rock, alternative, like heavy metal. Speed metal, thrash metal, death metal, punk. Oh my gosh. Did you at one point have like long hair and do the headband? I love it. I love it.
00:02:20
Speaker
All right. Well, you know, what I like to do here on this podcast is I like to really start at the beginning, you know, how did you come into this industry and, you know, into the role that you're doing now? And, you know, I really love to know what is your first, what was your first introduction to finance? What was your first, you know, memory of, of money?
00:02:43
Speaker
So I grew up without very much money in downtown Washington, D.C. And my parents were academics and they instilled in me the importance of saving, but they didn't know about investing. It just was out of their realm.
00:03:01
Speaker
But for them, the most important thing was education. And my father passed away. My mother's still alive. And she still takes classes. And education is still a really important part of her life and mine as well. I think that the search for new information, knowledge, and the integration of that into one's
00:03:25
Speaker
daily existence and what they put out there into the world has definitely come from my parents. But for money, it was saving. That's what they knew how to do. They knew how to save. And so we would take my meager birthday money
00:03:41
Speaker
as a kid and walk to the the neighborhood bank which was this sort of art deco marble you know monument to money right and it felt very powerful to be in the space and to get my little bank book with the balance printed on it and it was across the street from a library of congress so it's like you know monument to knowledge across the street from a monument to money and i remember feeling a sense of awe of being in the building itself
00:04:11
Speaker
and the importance of putting that little bit of money away each time that I could.
00:04:19
Speaker
I was fortunate that my parents allowed me to pursue different educational whims, really. I didn't have a particular direction. I didn't come out of high school saying, I want to study business or I want to study finance. And they were kind of OK with that and just let me experiment and learn. I've had a job since I was 12. I've been continuously employed since I was 12. In fact, I had just turned 12.
00:04:44
Speaker
There was this hardware store that we used to go to because we were fixing up this old broken house. And when I was 11, I went there and I was like, you know, I want a job. I'll sweep up a parking lot, doesn't matter. And the guy was like, eh, come back when you're older. You're a little young. And two weeks later, I turned 12 and I went back and he gave me the job. He's like, all right, you've got, you know, you've got chutzpah. So that was my first job at like 12 and two days.
00:05:12
Speaker
So working hard, saving, which then I learned investing after that has always been a part of my life. And my sister is a math teacher and has always been very good with numbers. That wasn't so much my thing. Creativity was more my background. I went to architecture school in Paris.
Art and Finance Intersection
00:05:35
Speaker
that was going to be my question because you know you're a musician so it's like typically people gravitate towards you know right brain or left brain and so yeah it's fascinating that you went into this industry. Yeah I mean I think you know there there is a lot of creativity in this industry it's just masked in numbers at times and I think that the
00:05:59
Speaker
You know, art and finance overlap is not tremendous, though there are those of us. And in fact, Daniel Crosby, who's a behavioral finance specialist, is putting together a podcast of people in finance who love and know about music. So we're gonna talk about the overlaps of the two. So that'll be- I love him, Crosby. He's amazing. Yeah, he's a fantastic guy.
00:06:26
Speaker
So my path was somewhat circuitous leading me to graduate school here in New York. And I've been here for 27 years. I've been at TABES for 15 years. I was in the sketchy world of New York City real estate before that, where everyone just communicates by suing each other and yelling at each other. It's really unpleasant. So I don't miss that.
00:06:51
Speaker
Yeah, yeah. Oh my goodness.
Investment Strategies and Risk Management
00:06:54
Speaker
Well, so how do you feel that Tay's unique approach to portfolio management sets it apart, you know, as far as other traditional investment firms?
00:07:06
Speaker
We specialize in mitigating risk, so limiting downside and volatility in both fixed income and equities, which if you were to look to the managers with the most money, the Blackrocks and vanguards of the world, that's not their thing. Participating in the market for as little as possible is their thing. And so we bring
00:07:31
Speaker
an alternative vision to what it means to be successful in someone's plan. And when you look at the, what I would call over-reliance on indexing right now, it turns a blind eye to the fact that just being in the market can lead to financial ruin sometimes.
00:07:56
Speaker
And it's been a while. So people don't really believe that that's true anymore. And these cycles happen, right? You know, we think about the lost decade between 2000 and 2010 where nobody made any money at all. And there are companies like Cisco, which is an integral part of basically like everything in computers that still hasn't regained its share price from the beginning of 2000, right? So,
00:08:22
Speaker
Catastrophic things happen in markets. They don't happen frequently though. So one loses track of the fact that they can have a really disastrous impact on someone who is at or in retirement or can scar a person who's younger to the point where they're so conservative with their money that they're not building the wealth that they should be over time.
00:08:46
Speaker
So we build strategies that allow people to remain invested, to participate in markets, but also to know that they're not going to get killed when, and I say when, not if, the next catastrophic market comes. We've been very fortunate with the Fed support over the last couple of significant declines where just let's dump money out of helicopters and everything will be fine. And it worked, right?
00:09:13
Speaker
So we're going to have to pay that money back at some point, which people are really good at sort of pushing that off to the next.
00:09:22
Speaker
generation, you know, the boomers don't care. The Gen Xers, they'll probably do some pushing. And then how far can you push it until someone has to pay it? So having strategies in a portfolio where you do have the inexpensive long exposure, because one does need to participate in the basic movement of the market. But
00:09:45
Speaker
Is it okay to limit that upside slightly in exchange for not getting killed when markets inevitably do take a dive? And what we haven't seen in a while, which historically does and will happen again, is when they stay down for an extended period of time.
00:10:04
Speaker
That is something that's sort of outside of most people's vision right now. You know, people feel
Market Dynamics and Preparedness
00:10:13
Speaker
like, all right, the S&P is overly concentrated. That's kind of, right, common knowledge, right? But what does that mean? Well, what it means for most people is that their S&P position's been doing great. That's what it means. So it's not a bad thing for most people right now. It's a great thing.
00:10:34
Speaker
NVIDIA has been cranking. So we had 26% last year. The S&P is up 12% or whatever it is this year. So that concentration has been working in people's favor. And that very well can and has and will eventually turn against folks. And while I'm an optimist and it's important to embrace the boom while it's happening,
00:10:58
Speaker
We also need to acknowledge that those periods of market devastation will happen again and to be prepared for them in a way that doesn't hinder growth in the meantime. So optimists, but so hoping for the best preparing for the worst. Yeah, exactly. Yeah. And so how do you approach decision making then during turbulent times like that?
00:11:25
Speaker
Well, it's important to have the decision structure built in advance of turbulent times. So one can think of turbulent times as just a generally difficult time to make a decision in business. Business is change always. So every decision is difficult. And if you're thoughtful about them and you're not just
00:11:51
Speaker
making a spur of the moment decision than sticking to it right or wrong, most decisions should be slightly difficult. And if you're talking about turbulent market times, if you don't have a structure built in place with decision architecture for what one is going to do when one is faced with a significant decline or inflation, if you don't have that structure built already, you're likely not going to execute it well in a time of stress.
00:12:22
Speaker
I practiced martial arts for a very long time until I just started getting injured rather than hurt, which I didn't like. I got too old. And you drill things over and over and over again so that in a time of stress, someone punching you in the face, or markets dropping, or inflation, you already have the reflexes built in.
00:12:44
Speaker
And those reflexes have to be built on a plan for a specific situation and outcome, which is our financial or physical survival. Trying to talk someone back from the edge generally doesn't work. You need to keep them from getting to the edge in the first place is the way I look at it.
00:13:10
Speaker
So I mean, from everything from the internet bubble burst to COVID-19, you know, all these different financial crisis. What are some of those strategies that you have in place during those turbulent times that have been, you know, really reliable to see you through?
00:13:30
Speaker
Understanding why you have everything in your portfolio that you do, which sounds really obvious, but we come across with frequency, people who are like, oh, I liked the sales person. They had a good story. And they don't really understand the mechanics of what's in their portfolio and how and when it will bite them. Everything in the portfolio will be painful at some point or another.
00:14:00
Speaker
period. It's knowing when those pain points are going to be and making sure they don't align all together at one point. Like the spokes on a bicycle wheel, they have to be opposing one another, not all on one side, or the wheel won't roll. So when we look at the structure to build in place in advance of a declining market or
00:14:30
Speaker
a pain point, it has to be an understanding also of how bad it can get. You don't wanna shy away from the conversation of terrible markets can and will happen. Let's talk about what they're gonna be like, what you're likely to feel at that time and just sort of normalize that emotional response because we all have it, right? I mean, if anyone, the most recent example of something
00:15:01
Speaker
Longer lasting and terrible in terms of decline is Bitcoin, right? You know, 2020 market bounced back so quickly by the time people got their statements, they didn't even realize the S&P had dropped 33%.
00:15:16
Speaker
2022, again, it was relatively short-lived and people were more focused on inflation than they were necessarily on their portfolios. And I think a lot of people in their portfolios got a pass because so many things did poorly. They were taught that bonds were the safe part of their portfolio and bonds got clobbered. And so the sort of advisor response was, well,
00:15:43
Speaker
This is unprecedented, right? The you word. Unprecedented. People love saying that. It's not unprecedented. It just hasn't happened in a long time. And so you weren't ready for it. There we go. Sorry, dude. You weren't ready. It's not unprecedented. I'll go on. Sorry.
00:16:03
Speaker
So making sure that the emotional side of that is handled in a way that is palatable for your end user, right? You may talk to a blue collar worker or a high net worth individual or a teacher differently, but the messaging is the same.
00:16:27
Speaker
You may use different words to describe what your process is or how you talk to them, but the messaging always has to be consistent. And to understand where they are likely to experience difficulty and where they're likely to feel the threat of their mortality as represented by their assets,
00:16:53
Speaker
And to acknowledge that, to normalize it and help them work through it, which requires a lot of introspection. It requires a lot of patience and it requires empathy.
00:17:08
Speaker
and applying all those in a way that doesn't seem contrived, that will be applicable for the listener, for the user, that's not gonna make them feel like, what is this like woo woo nonsense, if they're not the kind of person to embrace that, or,
00:17:25
Speaker
to make them feel heard that, yes, this is hard, and we're gonna get through it. Because sometimes people just need to vent, right? Sometimes they need to vent, then they get over it. Other people, they won't tell you. You will consider, you know, if you are keeping track of your individual advisors, you know, if you note them as like, this person is a delegator, this person is a nervous nelly, this person's a pita. And if you don't know what that means, you can look it up.
00:17:54
Speaker
and this person comes in as a delegator and then one day they leave because they were a delegator and till it got too difficult for them, they weren't gonna have the conversation with you because they're private in that way, they're just gonna leave. So in turbulent times, you don't wanna be the person who's losing clients, you wanna be the person that's gaining clients and that's when clients change hands.
00:18:21
Speaker
Let's see. That's where you can really make your moves.
Behavioral Investing Institute and Advisor Coaching
00:18:27
Speaker
So that leads us into a great discussion about the Behavioral Institute, Investing Institute that you created. So is it because you saw these types of patterns and behavior with people that you started this or what inspired you to start the Behavioral Investing Institute?
00:18:46
Speaker
In about 2011, Phil Taves and I had seen the patterns of, and people in 1999, they'd allocated to Taves thinking, okay, this is good, I need some risk management in my portfolio. And then in 1999, the NASDAQ's going up one bazillion percent, and they're like, what do I need this for?
00:19:08
Speaker
then their portfolios get decimated. We do extremely well during the dot-com bust. And money starts flying in the windows in 2003. People are like, oh, I want that thing that just did really well, right? The classic buying yesterday, buying what did well already, return chasing. And then around to the end of 2007, the beginning of 2008, when the great financial crisis had already started, people again were like, eh, what do I need risk management for?
00:19:36
Speaker
Then our most aggressive portfolio is only down 3% when the S&P is down in the 50s. And again, the money starts coming in the windows in 2009 and 10, after we already did our job. And so we were looking at the saying like, this is not working for the end user.
00:19:56
Speaker
Right? The advisors are leaving right before they needed us and coming in right after they needed us. This isn't working. So how can we work with the advisors to teach them about behavioral finance, which at the time was not the sort of common part of every conversation that it is now. So how can we teach them about the expected emotional responses to difficult situations and how to
00:20:26
Speaker
work with clients to keep them aligned. So it was more definitional back then. And then people were really into it and they thanked us and they're great. And then, you know, we follow up with them and now I haven't changed anything in my practice. Okay. Well, that was a waste of time. And then, okay, well, what do we need? We need tools for them to use. So we built a bunch of these really great tools for them to use in their practice when determining, all right, is it, is now the right time to change a manager or, um, taking clients through a,
00:20:56
Speaker
a tool to talk about the different challenges that they're gonna face, an investment owner's manual. We built all these wonderful tools and advisors loved them and they, again, didn't change anything in their practice. Okay, we need to hold them accountable. We'll start a coaching program. So we started this coaching program, which was fascinating. I learned so much from these wonderful advisors who were willing to really open up about their practices
00:21:24
Speaker
the challenges they face and difficult clients that they would share with us. And that's when we really started to be able to have a serious impact on advisors' practices and their relationships and building trust with their clients. From a business perspective,
00:21:42
Speaker
It was a terrible model, totally unscalable. We're doing one-on-one coaching for a year. It was not a scalable process. And so we worked with all these great advisors and learned a ton from them and then compressed it into what is more of a
00:22:05
Speaker
quarterly service with a lot in between. I would say the formal part of his premier advisor services is quarterly, but that's only the formalized part. There are always discussions in between there about challenging clients, about difficult portfolio situations and about expectations and how they can be met and exceeded and trust can be enhanced. And understanding
00:22:38
Speaker
the whole process within the plan. So okay, here's our plan, but how are we gonna reach that end goal, those end goals? And how are you gonna have a media diet that doesn't have you often like crazy zone?
00:22:57
Speaker
And how are we gonna build the advisor to be the thought leader in the relationship so that the clients are going to treat that advisor as the absolute last word and what they should be doing
00:23:15
Speaker
and the decisions that they're making, whether it's in buying versus leasing a car, or how to handle an inheritance, or what kind of investments to be in and when they can retire. All of those sorts of financial decisions
00:23:34
Speaker
should come back to the advisor. And if they're not, then there's a trust element missing that we can help them work through. But ultimately, and this is something interesting in the behavioral finance world, the behavioral finance world steers way clear of portfolios. They do not want to make portfolio recommendations. They just want to deal with the people part of it for the most part.
00:24:00
Speaker
Now to me, that's half the issue because what's triggering these emotions is what's going on in the portfolio. So if you're not dealing with that part of the equation, then you're leaving half of it out. So minimizing the volatility in a portfolio will minimize the volatility in the emotional range of the client. Absolutely, absolutely.
00:24:28
Speaker
You know, and my background is so different. You know, as our listeners know, I really only went into finance in recent years.
00:24:37
Speaker
And I had more of a fear about it because I thought it was just going to be all numbers and more analytical. And I didn't understand that there is this whole other aspect of really building that relationship with your client and the importance of that. I would love to know, do you have a success story that you could share from perhaps someone that you went through the process of the Behavioral Investing Institute?
00:25:07
Speaker
Yeah, you know, we have a really unlikely character who I think very highly of who comes from a, you know, anonymize them, but they come from out West from a very
00:25:24
Speaker
tough city, tough town where it's, you know, it's ranchers and farmers and it's not, it ain't San Francisco. Let's put it that way, right? Like it's not where one is, you know, going to their yoga class in the morning.
00:25:40
Speaker
And they early on did the coaching, understanding that they needed a deeper connection with their clients and they were having trouble figuring out how to do that. Because it is, for lack of a better word, a macho society where they're from. And they were having a difficult time
00:26:00
Speaker
establishing connection with them on a deeper basis, then here's my money. Do well with it. Get back to me when it's grown, you know, and realizing there are all these other elements that in their life and the decision making that they were participating in was was harming them. You know, they were doing things that were actively working against their best interest. And so this person went through the coaching. They started using the tools that we gave them
00:26:29
Speaker
And they still do. And this was years ago. And it's still a cornerstone of their process. And they've built the trust that's enabled them to grow their business significantly.
00:26:42
Speaker
And that trust that their clients have in them is then backed up by us. We are not only providing them portfolios, you know, things like MRSK, Managed Risk ETF, that's Option Hedged Equities, that does a great job participating on the upside and has done exceptionally in reducing downside, but
00:27:07
Speaker
We're also part of that advisor's knowledge bank.
Balancing Human and Financial Needs
00:27:12
Speaker
When they come to something that is, they feel stuck, they have us as a sounding board. And we have a team here who both work on the analytical side as well as the communications. So it's always about balancing the human needs and the financial needs.
00:27:35
Speaker
always. And so we take that really seriously. And while building a strategy using our nimble fixed income solutions is great, but do they understand what that's going to look like in a portfolio? Do they understand how it's different from just buying the cheapest thing you can? Do they understand how
00:28:02
Speaker
that's when that's going to be uncomfortable versus when the cheap bond fund is going to be uncomfortable and making sure that they are comfortable and that that information is reinforced over time is crucial.
00:28:21
Speaker
So is there one tactic that you can think of that would be the fastest way to build human connection or to connect with someone? For our listeners, they can use it in their personal lives too. I think that's universal. That goes far beyond just even portfolio construction and the financial industry. What is the fastest way to try to establish a human connection?
00:28:51
Speaker
You know, trust is built slowly and lost quickly. So we love to try and do things quickly, right? Like that is our goal is to get it done as fast as possible, as a species right now, right? You can't, you can't build trust quickly.
00:29:11
Speaker
And I think that if you try to find a shortcut to building trust, you may erode it rather than take the steps necessary to build it. I think being really upfront about challenges is key.
00:29:30
Speaker
You know, I had thumb surgery a while ago and I went to see a couple of specialists here in New York City. And one of them was like, yeah, yeah, your thumb's gonna be fine. Don't worry about it. You know, you'll do some PT and it'll be fine. And the other one's like, it's your thumb. This is gonna be really tough. It's gonna take a while and you're gonna really need to do your exercises in physical therapy and it's gonna be difficult.
00:29:55
Speaker
That's the guy that I went to. You know, I didn't want someone who was gonna candy coat what the experience was gonna be just to get my business essentially, right? Like they're a surgeon, they want my business. So I think listening is such an obvious one that man, it's remarkable how many times I meet people who are just terrible listeners.
00:30:21
Speaker
It's shocking. They're just waiting till I finish talking so that they can say the thing they want to say. They're not listening. So acknowledging that the experience of being an investor is hard. Listening to what they're saying between the words, understanding where they come from,
00:30:47
Speaker
What their grandparents did for a living will inform how their parents raised them, which will inform their money scripts. Like what do they say about money inside their own heads that is going to impact them as investors and as clients? I think those are the slow ways that are important parts of building trust.
00:31:14
Speaker
I think you make a wonderful point. I mean, if you're trying to force or quickly establish that, it's like it comes across inauthentic. So that's a really good point. So how would you describe your leadership style in three words? I mean, servant leadership.
00:31:39
Speaker
It's two words, sorry. I feel like, you know, I'm so privileged to have gotten to grow with Taves. I think there were four of us when I started and I don't take that lightly and I have a ton of respect for the people that I work with and I'm here to facilitate their excellence, whether it's through education, sharing what I've learned, helping them
00:32:09
Speaker
do what they are already good at, giving them the tools that they need, helping them problem solve and get to the next level in their professional career, that to me is success in my leadership. I love it. I love it. That's all very important.
00:32:33
Speaker
I also really want to talk to you about something that happened recently that we've discussed and it is the evolution of AI and deep fakes.
AI Scams and Business Caution
00:32:44
Speaker
And I mean, what is happening in our world? I mean, people are being scammed left and right. And as this evolved, I mean, we definitely have to consider, you know, older generations and especially that may be more vulnerable to these types of scams.
00:33:02
Speaker
And yeah, let's talk AI. Let's talk AI. Yeah. So on the scam front, well, OK. So AI, we could talk about that all day long. And I feel like we're kind of in a 2000 zone with AI, where it's like all the hype.
00:33:25
Speaker
but we're still a little ways away from the massive adoption and monetization and total utility of AI. So we're not there yet. We're all sort of dipping our toes in and trying to see where it's applicable and what we do. In terms of the problematic elements of it,
00:33:54
Speaker
You know, I think what you're alluding to is I had a meeting in California recently with a woman whose daughter works for a big tech firm and that firm had a large, or had a leadership meeting. And in that leadership meeting, the CEO asked the CFO to wire $7 million to a specific account.
00:34:20
Speaker
This was just a leadership Zoom meeting, a regular leadership Zoom meeting. And okay, that's a little weird, but CEOs can be weird. That's their prerogative, right? They can do that kind of stuff. And after the meeting, the CFO called the CEO to ask details about the wiring of the seven million bucks. And that CEO was not on that Zoom meeting. Someone had gotten into their calendar, set the meeting up, knew who to have on the meeting, sent the Zoom link out,
00:34:50
Speaker
and got everybody on there and no one in that leadership group recognized that it was a live deep fake of the CEO. Her face, her voice, someone else controlling them in a conversational and live manner. This was not sort of scripted.
00:35:09
Speaker
No one got it. Now, you know, CFOs are in the business of being careful with money. So, you know, it's sort of natural that they would have followed up on that somewhat weird request. But when we think about our family, who are not in the business of tracking money, and who are vulnerable to scams, especially older people,
00:35:34
Speaker
It's terrifying. And as soon as I got out of that meeting, I called my mother, my sister, my wife, and I established a secret word for us so that if any of them got a FaceTime from me or a voice call that was legitimately, seemingly, my voice saying, hey, I'm in trouble, I need money, they would ask that secret word. And if the fake me couldn't produce it, hang up.
00:36:01
Speaker
Because that is going to be big business for scammers. So quickly, it's already happening. It's, you know, it's, it's evolving so fast. Do you feel that we should be a lot of people are relying on AI and chat GPT and, you know, all of these different tools now, do you feel we need to be cautious about integrating these types of programs into our everyday business? Do you feel we should be a bit cautious, more cautious?
00:36:32
Speaker
I think everyone is being pretty cautious about it because even, I mean, it seems like from what I understand, even the best versions of this thing, you know, that we've just sort of call AI, but it's many different things, right? Gets you 80% of the way there.
00:36:50
Speaker
And I think one of the great things about education and a lifelong pursuit of education is knowing the difference between almost right and right. And chat GPT can produce an almost right version of something, but it's not quite right. So one needs to fix it. One needs to adapt it.
00:37:19
Speaker
to the specific needs and character of that situation.
00:37:27
Speaker
Yeah, we need to be careful. Yes, there will be mistakes. Yes, there will be scams. And this is part of the development of any new technology that it will be misused. It will be used for bad things and people will lose jobs and new jobs will be created. And it's
00:37:51
Speaker
part of the change that is ever present. And I'm excited about it. And I look forward to it in all of its craziness as it's applied. There's gonna be a lot of benefits to it, but yes, we have to still be cautious with how we're utilizing it. As we evolve and as it evolves and we create new, you know,
00:38:21
Speaker
precautions and regulations, then hopefully the law can speed up with it as it's evolving faster.
Alternative Investment Strategies
00:38:31
Speaker
As far as alternatives, do you have any favorite alternative strategies that you like to use? Well, working for a manager that
00:38:45
Speaker
produces alternative products. I think that our hedged equity strategy, MRSK, ETF, our agility shares, managed risk ETF is top in class.
00:38:59
Speaker
We're using options to hedge US equities and we have a dynamic strategy where we can roll the options up. If the market moves up, we can monetize them on the way down. We're also selling shorter dated calls and put spreads that can generate significant income in declining volatile markets. It's something that really allows an investor to stay invested in equities.
00:39:29
Speaker
while also acknowledging that difficult times do and will occur. And interestingly, people have used it in a way that we weren't fully anticipating when we created it. So a lot of people will use it. They'll take the allocation out of equities if they want to lower the downside in a portfolio.
00:39:50
Speaker
But what we weren't expecting is for people to take an allocation out of fixed income if they wanted to boost the return, but not necessarily increase the downside potential. So we weren't expecting that as a way in which people would use it, but a lot of people have used it that way. And on the fixed income side,
00:40:14
Speaker
We've been running tactical bonds since the mid-90s and they're part of our models back then. We've launched mutual funds and then an ETF and have all these in model format as well, where we can tactically shift from high yield to aggregate to cash
00:40:35
Speaker
And we are very nimble with that. We can get out of the way quickly. So for instance, in 2020, we got out of the market in February when it was still, you know, people were still calling it the Chinese flu. Like people had no idea, right?
00:40:52
Speaker
So we were out well in advance of the world shutting down and this becoming a massive crisis. And as a result, we barely lost. I mean, I think our drawdown during that period was less than 1%.
00:41:10
Speaker
when looking at something like high yield, which I think was down in the upper teens during that period. And again, in 2022, much less drawdown than even conservative bond portfolios. So in times of crisis, we see opportunity.
00:41:32
Speaker
But one has to also understand that, and of course, acknowledge that we're not in crisis most of the time. So it has to be something that also keeps up in a meaningful way so that it's not problematic between those times, which is where we dwell most of the time. Last year,
00:41:50
Speaker
was the first year since 2000 that the consensus was we were going to have a negative year in the S&P. We've been tracking this since 2000. Every year, the top strategists predict positive markets consistently since 2000. Last year was the first year they predicted negative. And what happens? The S&P is up 26%. So prediction is a fool's game. We seek to be reactive.
00:42:18
Speaker
to what is actually happening, not predicting what might happen based on what is happening from second to second. It's just too difficult. And so when people talk about market timing, they're talking about trying to predict the future. No one can predict the future, but we can react to what is happening. And that is really important differentiator in what we do.
00:42:41
Speaker
That is a really important point and a good thing to remember. Where do you see the future of Taze in the next five to ten years?
Vision for Tay's Future
00:42:55
Speaker
I'm excited for the team that we have in place now. We've built out a wonderful group of people who I have so much respect for and admiration for and such expertise that it's really an honor to work with the people that we have on our team now.
00:43:19
Speaker
I see a deepening in our relationships through our practice management arm, Behavioral Investing Institute. I see an enhancement to portfolios around the world. We're looking at international expansion as well, which is interesting.
00:43:42
Speaker
I think that a lot of people internationally, they understand like, yes, we need to own US markets, but those people are crazy, meaning us. And so having a hedge in place is really appealing to them. So I look forward to international expansion. I look forward to our growth.
00:44:04
Speaker
in impact on the philosophy of investing in this country and beyond, and having thought leadership with the partners that are advisors, that are platforms, that are broker dealers, that are RIAs, and sharing in their growth and experience. Those are some of the things that I'm looking forward to.
00:44:28
Speaker
That was fantastic and so exciting for the future. Is there anything else you'd like to leave our listeners with before we go? You know, I do little two to three minute videos about once a week sort of thought pieces on the economy and markets and the world we live in. So if you want to check those out, you can connect with me on LinkedIn. It's just my name, Eben Burr on LinkedIn.
00:44:53
Speaker
Yes, please everyone go give him a follow. Thank you so much for taking the time to chat with us today. I hope our listeners learn something I know I did. And yeah, everyone make sure you don't forget trust building trust takes time. And also create that safe word with your friends and family because you know our world is changing very quickly. So
00:45:17
Speaker
Thank you everyone for tuning in. Thank you again for joining us in this discussion and we will see you next time right here from the green couch. Thanks so much for having me. Take care.
00:45:31
Speaker
The opinions expressed in this program are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or any specific security. It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results.
00:45:56
Speaker
Any indices referenced for comparisons are unmanaged and cannot be invested into directing. As always, please remember, investing involves risk and possibly loss of tackle. Please seek advice from a licensed professional.