[Music]

hello everyone and welcome to sel

insights today I have an honor to have

my special guest David or uh David is a

hedge fund manager of militia Capital

also he recently launched an ETF uh o RR

is is the ticker and U his ETF is doing

incred incredibly well so far even

though lunch was recently uh also he's

why I call him is because he's one of

the rare uh guys that actually killed

the market and that's exactly what he

did with his hge fund since

2018 uh he generated generated 2,000

gross per for his investors uh David

welcome thank you uh okay uh first of

all uh I would I would uh like to ask

you can you tell us something about

yourself what's interesting is that you

started as a I mean you were a

professional poker player and from then

then on after that you created a hedge

fund and did incredibly well yeah I I

just sort of played poker uh you know in

high school and then in early University

um I I planned on becoming an accountant

after University but uh because the

financial crisis happened right at the

same time I graduated you know there

were no jobs um yeah so I just started

playing poker more

seriously um and I actually moved out to

Thailand uh you know just sort of a Life

Adventure at the same time and um yeah

so I just played poker out there for

till

2017 uh so about almost uh seven years

of profession poker out in

Thailand um and I had some money saved

up I was really sick of playing poker at

that point so I started sort of

self-learning about investing I didn't

have any of sort of the you know

traditional background at all I just

sort of started reading about Market

anomalies lots of academic

papers um not not the bad kind of

academic papers that tell you that

Market's efficient yeah I mean I one of

them the one that because I learned I

studied economics as one of my majors in

University and you know they always said

how efficient markets are but then this

one paper I read early on S when I was

learning about self- learning about

investing it's called bet bet against

beta um this is a great paper you can

sort of Google it um and it showed that

the contrary to the efficient market

theory it's stocks that had the lower

beta that outperformed and they didn't

they were really thorough in this paper

they they showed it wasn't just stocks

it was bonds it was currencies it was

Commodities those would all outperform

also and then on top of that they look

different time frames they different

countries and it all like across every

thing you could think about it this sort

of anomally persisted so in the

efficient market theory they say you get

paid more for taking on more risk if you

take a higher beta bet you you're

supposed to earn more but actually the

exact opposite was happening uh and then

I realized well wait a minute what if I

sort of short you know that kind of more

speculative uh volatile thing and I'm

getting along the less volatile boring

profitable thing uh that sort of became

the backbone of what I was doing early

on that's that's that's that's actually

amazing I mean it's uh also uh like from

the perspective of f French uh model in

investing and I mean factors so you

would you would basically go along uh

value Factor uh and short probably

momentum growth or or something like

that yeah it's sort of like that because

it was more like the two factors would

be I was long small and

midcaps and I uh I didn't short the

large caps because the large caps they

don't have as much dispersion there's

not really as much opportunity there but

I short the small caps as well but then

I'd be shorting yeah the sort of

speculative

non-profitable rapidly growing hyped up

thing uh over time I've tailored this a

lot though because you know if you're

just long and short only those two

factors you have this horrible mismatch

and uh when it blows out against you it

gets really bad so now I'm mixing way

more factors than I used to that's sort

of the big change over the years um

especially avoiding the

really crowded speculative shorts I mean

that's the biggest I don't short any of

those anymore and you did the early

yeah I was pretty heavy in those and

then um it's not that it just sort of

went pretty bad because joring never

went that bad for me but I realized well

if something like Neo like this is a

pretty bad electric vehicle company uh

it went from like a150 up to like 50

bucks or whatever yeah and that was just

it wasn't based on earnings or anything

so you if that stock can do that and

you're saying well

you know let's say it goes from a150 to

10 bucks you're like well now it's this

amazing short right it has to be amazing

just because the thing's gone up it does

not have to be a better short than

before at all so you know then over time

I realized these sort of speculative

stories aren't good shorts at all so

yeah yeah I mean I I I have to agree

especially because I I got burned on the

shorting paler up until

recently because uh I I was I was uh

patient I was getting in and out of the

position and I mean I I completely agree

and uh uh also we have a micro strategy

I mean micro strategy is like 50 70% uh

from from the alltime high but uh not

not only micro strategy and you also

recently had a post about about micro

strategy uh how you see it I mean uh I

mean from the perspective of beta

actually yeah I mean that's just um yes

so the post is saying that Bitcoin is

about two times beta today in the modern

market and then micro strategy is around

you know it's basically lever 2x levered

Bitcoin so you have a 4X beta and then

there's these 2x micro strategy products

out there so you have the sort of

8X uh beta bet and then on top of that

people are playing call options on those

yeah so

uh yeah that's sort of been driving uh

the market and toward at the peak of

micro strategy guys were dming me how no

I'm I'm wrong this is actually an

infinity money machine and you just

don't get it or whatever it's like I

don't think I'm the one who's missing

anything here uh yeah but also it's a

that's the kind of dangerous short

because now you know even though I maybe

that one could work out it so bad but

even now it's like now you have a bunch

of shorts who want to Revenge trade the

thing because they got hit so bad on the

way up now you're gonna have all yes I

know and like I'm sure anyone who short

sells reading this like half of the guys

listening are like God I'm shorting it

it's like well that's the problem you

know that this thing uh I think in the

hands of a skilled Trader and everything

or risk management or like if you're

just betting is if you're only betting

on a tiny percent of these speculative

things and let's say you're pairing it

long Bitcoin yeah that's going to work

out over a few years for sure so you

know as long as you're betting just a

few perent total of the entire portfolio

on companies like that let's say micro

strategy is like a half a percent that's

probably fine yeah and also I think that

uh when it comes to shorts like that I

think the risk management is definitely

the most important thing because I mean

it can go 100 200 300% up and uh even

though if you're 1% invested into the

position is going to hurt and uh my

logic behind shorts like that is that I

usually do it shortterm and uh I would

basically get 10 20% and I'm out so

because I know that I mean once the

market starts going up as you said it's

four times beta

so it's crazy it's it's it's going to

it's going to hurt you so what I want to

show right now uh I would go first

through your hedge fund and then I would

uh go to your ETF that you recently

launched and uh I mean this this

performance is remarkable I mean you did

incredibly well what's interesting is

that you started with 50,000 I suppose

it was your own money right yeah that

was like a portion of my poker money

yeah and I mean here you in first year

you outperformed S&P by 4% but what what

was interesting is that in 2019 it was

at 200k and then 2020 1.1 million and I

mean this year was uh remarkable I mean

171 gross and uh from 1.1 million to 16

million and uh what I also respect about

you is that you charge 0.5% yearly

management fee and

25% over the S&P 500 500 returns I mean

you could probably go with 1% management

fee 1.5 even maybe with those kind of

returns and I I don't think your

investors would have any kind of problem

yeah I've been pretty blatantly

undercharging it's funny because

normally there'd be like a negotiation

there but my LPS tell me like man you

you should probably charging more like

you're undercharging they they actually

tell me this plainly and I'm like I

don't really care I might actually get

rid of the um S&P 500 hurdle next year

because uh you know now that I'm backing

these other PMS uh I don't want to force

them to undercharge so much uh but I'm

going to wait to make sure the

multi-manager thing works first and uh

can you can you tell me

from your philosoph philosophical

perspective how did you evolve through

this through this period period I know

you were first one guy and then you

realize that you need to employ more

people so because once you uh reach the

uh certain assets under management it's

a different kind of game and also how

would you structure that game let's say

one game is from like 100k to 10 million

second game is from like 10 million to

probably 100 million and completely

different game is probably from 100 or

500 million yeah I think that's well

said that you're even realizing that

there's a difference some guys sort of

think that they should be you know

investing their account the same way

like A5 billion dollar hedge fund

manager is and uh yeah you definitely

shouldn't so um basically the the key

strengths of a really small account and

the key downside so key strengths you

can play anything on the entire Market

including warrants I mean you can have

an extreme Edge in these warrants I mean

the the implied value that they're

trading for it's a blatant huge discount

so if you can find anything

fundamentally real that has warrants you

know you have an amazing bet

automatically um that's one example uh I

don't think it's worth getting to it too

much because it it w't won't scale but

you know if you if you notice something

early on you can juice your return that

way you should do it and then another

big Advantage you have as a small player

is the you have no no friction cost you

can get in and out of a position

immediately you're not going to move the

market you have no idea what a luxury

that is like uh now it is if I change my

opinion on a lot of stocks you know it

take a few days at least for me to get

out of the thing and you know if I have

a strong read on the situation that's

like oh I need to get out of this thing

quickly you know you're actually

weighing like well should I be pushing

the price against me or should I just

hope the bad news doesn't come out in

the next few days and that's um I'm at

my my partition today is like 70 million

so you know that's going to become a way

bigger problem later on um and then so

that those are the strengths you have as

a small player anyway and um the

weakness is you have a big spread cost

so if you just sort of have a buy and

hold and no short-term trading no you're

not exploiting any of the small uh

anomalies in the market um you're you're

like let's say you're running 300% gross

leverage like I was your your implied

loss there is like 7 8% a year you know

yeah so and this I don't think this is

the right format to explain the spread

cost but that's that's a really big cost

so you actually as a small player you

need to be exploiting the small things

if you're like a levered investor

um yeah I think that summarizes the

really small accounts and then

I think like from 10 to 20ish million

you you can still do some of that stuff

like but then after that point it really

just goes away and at that point you

have to rely more on like a bit longer

term trading mostly unless you're there

there are some styles that you can

specialize in like liquid volatile

situations uh so I'm not talking about

that but

otherwise yeah you're basically moving

from this sort of uh

uh exploiting these small anomalies to

still having you can still have the

luxury of playing almost any stock in

the Market at that scale which is really

nice but that that also will go away

gradually as you get bigger and that

will for sure eat into your Edge and

then on the flip side your your spread

cost savings you know it's already

gotten pretty good deal at that point on

Interactive Broker so you know now you

have to start thinking about well how do

I get enough

New Edge you know at like 50 million

bucks or

whatever so from like let's say 50

million it's

uh there's no way to exploit the

inefficiencies that retail Traders can

from yeah the really big edges are

totally gone at that point so like if

you're doing um after hours trading for

example as a small scale player you can

actually get like yeah a really nice

bill for 4% position right there and but

now at 50 million you you it's not even

going to move the account value even if

you do a bunch of really good trades

so yeah yeah you can't do that anymore

yeah I mean I completely agree

especially from the point that we as a

family office uh we uh invest as a large

family office I mean we plan to launch

launch a fund in Serbia uh so we try to

invest like large investor would would

invest but from different perspective we

also try to exploit what large investors

cannot so I can see the both sides of

the spectrum for example what we like to

do is we like some of the nanocaps and

nanocaps uh can go 5x 10x in a really

short span of time and as a larger

investor you cannot go inside I mean

there are some companies that have like

10 10 million market cap I mean you can

invest like one few hundred K and that's

pretty much it and if it goes like 100%

it's not going to do much for for your

uh performance so I completely agree but

uh would you say that from the let's say

500 million is uh actually we spoke

about it uh and that's why you said that

you're are going to employ more people

uh that uh once you get to 500 million

uh it's then again completely different

game from Up up to dep uh amount yeah so

my my opinion is you know at even like

maybe 150 200 million I could still have

like a pretty good Edge but after that

you know it really starts falling off

even more and uh it really starts with a

hedge fund kind of fee so I'm

undercharging and maybe it's okay longer

than other funds but other funds man you

know you're paying a hedge fund fee on a

guy when it's just mathematically very

very hard for him to win at that point

so for a single manager fund running 500

million bucks it doesn't make any sense

at all to me I don't think that a hedge

fund b or a hedge fund vehicle is

correct at all for that most of the time

uh there's a couple outlier talented

managers and maybe that'll push to a

billion or 1.5 billion that's the most

it goes but in practice what happens is

fund managers just sort of keep growing

you know and then they're two billion

dollars and then they don't have an edge

anymore and then uh that's especially

true if your LP is paying taxes you know

yeah that's why I mean Buffett is

cherished so much because his tax

strategy was incredibly good through the

decades I mean yeah what what he did

was because so many people pretend like

they've really studied or appreciated

what Buffett did but he shut down his

hedge fund you know so he's doing what

I'm talking about and he realized well

if I want to add value for people I

can't charge them hedge fund fees

anymore so he did birkshire and he

didn't charge

anything uh I you know I'm sort of doing

this ETF path to sort of do an in

between for a while and charge a really

low fee but I'm also going to have a

permanent Capital vehicle in the end

where I'll charge zero fee and that's

the way fund managers should be doing it

uh it's not even close I I'll ask you

one more question regarding the the the

hedge fund and then we'll move to the

ETF which I think a lot of viewers is

are going to find really interesting uh

but uh uh regarding your hedge fund uh

you are closed for uh new investors

right yeah I don't accept money right

yeah you you don't accept money right

now but I would like to ask you uh as I

said earlier from uh have your uh

investment philosophy evolv over time uh

I mean uh I think that any serious

investor can cannot be cannot depend on

the news on the different analysts uh

experts and stuff like that you need to

uh have your own uh way of thinking and

that was actually the first thing I

learned from my uh CEO and mentor and uh

how do you see that and where you from

the start someone that uh was uh having

completely completely independent

thinking or was

it later

on I was totally independent from the

beginning and I think that's the way

everyone should do it like I think

reading cide analyst reports I think

that's just a liability for people um I

think trying to like figure out why

someone's 13f positions are good from

these fund managers who are managing way

too much money that's just another trap

um I yeah I really think the only way to

do it is to go in and try to block

everything out and think about the

investment and what you think you know

unique thing you know about it like do I

do I understand this does it seem cheap

you know and actually think genuinely in

terms of what's the expected present

value of cash flows that's going to get

paid to shareholders that's the key

number to focus on and uh you know

I guess some maybe good guys can use

eitaa as a proxy for that but that's

another trap I think you know don't

think about EA think about earnings

growth versus how much they're going to

pay out to shareholders every year

that's that's a that's it and you don't

need some really fancy formula you just

need to ask the qualitative questions of

you know what's the what's the earnings

growth going to be mostly right

because people people think you can just

just buy like an 8 PE stock that's not

growing and but Management's even only

paying a 3% dividend and the dividend is

not growing and they think oh it's eight

times earning it's a cheap stock right

but you know it's like what's the

present value of that actually what are

you 3% a year and you're just sort of

hoping something Good's gonna happen and

I swear with stocks like that usually

something bad happens instead and then

you know and I have the negative return

so I don't know but

yeah I think the other thing is I would

get away from the whole mindset of I'm a

value investor or I'm a growth investor

completely quality investor you you just

got to get rid of that because as soon

as you try to

um yeah as soon as you try to box

yourself into a certain style it it's

just no good you need to think about all

of that

um you know sometimes a stock for that's

trading for 30 times earnings is is

actually pretty cheap because the

earnings growth is predicted able and

it's a really high quality business and

that that's more of a value stock than

most value stocks and then you know

conversely

um I don't yeah that that's all it is

it's

just don't don't try to invest with like

a set narrow criteria it will get you I

I I completely agree and I mean as you

said everyone should be flexible and

that's something that Stanley driller

talks a lot about and I mean uh you

always need to look at different

opportunities and I mean that's why you

are invested in Japan right now Japan is

a market that's uh extremely cheap when

we look at other developed markets and

uh do you do uh both long and short in

Japan

or I'm not shorting in Japan yet I might

get into it later um but I have like one

Japanese short on sort of test the

waters um nice thing about shorting

American companies is you get the um the

positive carry but in Japan you don't

really get you don't earn any sort of

you don't have the wind at your back on

those kind of shorts because the

interest rates are too low in Japan so

yeah and that's why I have to ask you

are you worried about Yen carry

trade I mean I I'm like 50% hedged on my

Japanese Longs

so I'm not really trying to express a

view yeah you know one way or the

other um but I think the guys who were

like long American stocks on borrowed

Yen I was expressing a pretty strong

View and uh but if you're if you're in

the Yen carry trade partially to fund

Japanese Longs that are a lot earning in

Yen you know that that's not really the

same thing it could blow out temporarily

like like it did last August but that

was already a hell of a hell of an

explosion and so anyone doing that that

trade on Leverage they're already gone

so that was like a 1987 style crash

right so that you know you got to

appreciate what that means um basically

all the guys who were heavy in that

trade are out of business and you don't

see anyone really talking about that

trade anymore right or even back then

you didn't see it so it didn't even

start off that crowded or anything and

and I feel like now it's probably not

very dangerous uh now that people in

that got washed out

already yeah so you think people learned

from that actually those that didn't get

uh uh destroyed from from the from what

happened last

August yeah I

think mostly I'm kind of surprised

nobody even talks about it like this is

a subject where no one on Twitter is

talking about it and I have never I've

talked to a bunch of different fund

managers and things and no one even

really talks about well you can borrow

this currency for free yeah now it's

half a percent a year exactly and it's

kind of weird it's like what else can

you borrow for half a percent a year

yeah it's basically free

money yeah and you know

but yeah that that's a really weird

trade because another weird thing about

that trade is it's been working

spectacularly for 15 years yeah it's

like this sort of quiet just extreme

Alpha like you want to say the Spy went

on the bullet run man think about long

stocks on borrow Yen I mean that trade

killed it because you know the Yen got

weaker at the same time as you were

paying nothing and I mean is it over now

I don't know

but yeah yeah uh okay I I I have to ask

you regarding

2020 how did you manage to to do so well

on Longs and shorts I mean that year is

outlier for example in 2022 you did like

uh you lose money on Longs but you did

incredibly well on shorts I mean that

was a horrible year for stocks but you

did I mean also

2019 uh 5821 and then 2020 65

64 yeah the um 2020 was a pretty unique

year because uh the way running with

high grow leverage works is that you go

into the event right and then after the

ball blows out to over and iFix goes to

over 60 you basically have to cut most

leverage so that means uh on that drop I

made a lot on shorts but because I had

to cut leverage I didn't have very many

shorts on after the drop so then I was

just sort of riding stupidly cheap

stocks long with you know a few

shorts okay okay that oh my God man that

that was that must have been amazing

right yeah it was it was it was cool

because it sort of got the fun kick

started earlier than it would have

probably yeah I mean from 1.5 and what

happened then I mean you went from 1.5

to 16 million yeah those are the year

end numbers

so

uh yeah so friends sort of were

contributing I was doing it through like

friends personal accounts uh in 2020 and

then the fund launched in

2021 uh so when the fund launched of

course a lot more money came in and then

I kept doing well throughout 2021 so

more money just kept blowing in and and

then

uh 2022 was when you actually showed the

what you know to do and uh I mean this

looks like uh have you seen returns from

Michael

Platt no uh actually his returns look

similarly to to this I mean it's uh it's

completely crazy I mean he also did

really well in

2022 and okay cool yeah I I didn't I'm

going to look him up for sure after this

yeah I mean I I'll send you after this

okay so since your uh fund is uh close

for outside investors you decided to

launch an ETF uh o RR is is the ticker

is listed on NASDAQ and uh this is a

website can you see the website yeah uh

so there's a ticker uh fun type is

active ETF regarding regarding this uh

uh I think that we shared the view uh

that you shared The View when I say that

active fun active money management is

coming back in fashion uh because

everyone is concentrated in s similar or

completely the same strategies and

basically doing the same thing and we

had uh Nifty 50s in like 50 years ago 40

40 50 years ago when there were like 50

stocks that everyone thought going to go

up forever and then that didn't happen

so also if we look for example

to there was a guy in Market hedphone

Market Wizards series Joe Wi he uh did

till like from 98 to 2012 he was like

9% uh average annually while S&P was uh

negative I mean and he was doing long

short basically and uh now uh looking uh

forward uh I think especially this year

is a good time to launch an ETF like

this and I'm really happy that you did

uh and uh how how do you see the the

future uh regarding the fund industry

from passive and active

perspective yeah I think um I mean

passive investing keeps gaining

share tons of active managers have shut

down last year even I think it's welld

deserved I think they're really

bad

um and you know you can only charge a

huge fee on bad performance for too you

know so long and eventually people say

screw this I'm going to go with the

passive thing that keeps going up and

then of course that's going to overcrowd

the passive Investments which I think it

clearly already has I could see passive

investing maybe taking another big leg

up that could happen of course who knows

but do I think that

the index can keep compounding at this

rate long term not not a chance uh once

people start selling out of the

retirement account they're selling huge

amounts of money at that point on this

sort of gain and there's not going to be

enough buyers to offset that and then

those stocks will start going down you

know once that's been not working for a

long enough time people get bored and

sick of it and then you know you could

see a pretty big collapse but it's it's

hard to say exactly if that'll happen as

it did historically maybe this time is

different I've talked about that a

little bit on Twitter recently where I

said you know if you look

at people like to make fun of people who

say this time is different but look at

the occurrences of a recession so 500

years ago every other year was a

recession you know was this Harvest

better or worse than last year if not

it's a recession and then in the

industrial revolution you know you

started having recessions a bit less

often but still pretty bumpy yeah every

10 years

basically yeah and then it's gotten to a

point where it went from every other

year to every few years to every five

years now it went every 10 years so we

had one 80 90 2000

2010 and then uh you know now we haven't

had one

for uh not sorry not 20 uh yeah so we

have we haven't had one in 15 years now

basically besides Co which

that was sort of a special that people

wouldn't really count that as an

economic recession exactly so that's

different

um you know so if if we're not going to

have a recession you know it's it's

maybe markets can get a lot more crazy

than they have historically of course so

yeah I think that's something to keep in

mind if you're a long short guy you know

if you're trying to compare to the past

or something yeah I mean I I I

completely agree and there's actually a

really good book it's called applied

macroeconomics

and portfolio management something like

that I can't remember the full name and

uh it was a guy from I think CEO of mar

Lynch or something like that he wrote

the book ex CEO and he actually made the

same point that you did that uh in

historically we had much more recessions

and they occurred much more often and

now we we have uh I mean if you look

from the historical perspective economic

cycle was basically doing this and now

because of the Fiat money and the

monetary system that we live in and the

exploitation of Keynesian economics in

my opinion uh we we uh don't have

it the often as we do as we did

historically but now uh recessions and

the market drops are much more violent

and I think that's something that's

going

to be for probably for the next Years or

or decades we'll have large onee drops

or twoe drops and then we'll have

aggressive ways aggressive moves

up yeah I think the point about

especially the the government debt side

the fiscal side where they're just

spending like crazy

there's an argument of course that that

will all catch up to us I think that

could easily be the case as well that

could also explain why we haven't had

recession in so long um so it's a pretty

complicated

uh question but yeah for my part I'm

doing my best to say I don't know I mean

if I'm being honest I think today's

index valuations are completely insane

and uh it's not going to end well but

maybe I'm wrong I you know this is this

is a harder thing to control right this

is uh the kind

of even if I'm right maybe the price

will go against me even from here 20

years somehow and you know that's just

not a game I'm interested in thinking

too much about instead I'm looking for

you know cheap companies that I'm pretty

sure are going to go up based on real

fundamentals and I'm going to try to

short crappy companies and try to avoid

hype you know that's all I'm trying to

do and if I do that well then I don't

really have to worry about you know that

that sort of macro it'll drive a person

crazy you know yeah I mean and and and

it's impossible I remember beginning of

2023 everyone was projecting recession

everyone yeah I wasn't I in my letter I

said I I don't think we're gonna have a

recession so that's I mean well done and

I mean I remember s Stanley Draco Miller

he was like if I had to guess I would

say end of 2023 begin of 2024 Stanley

was he was projecting recession at the

beginning of

2023 but not only him a lot of different

guys I mean even a guy from uh uh his

name is from U Morgan Stanley I think

Mike Wilson

right Perma bear guy he was also like I

mean he cap capitulated in 20123 or 2024

I mean and I read pretty much every

analysis of a large investment

institution uh at the beginning of each

year that's what we do here and just for

the interesting information and but

what's interesting is that everyone is

uh wrong usually by W wide margin I mean

everyone every single one of

them yeah that one that was a weird case

because I was also bullish on housing

stocks back in 2020 which people thought

was crazy but my whole point back then

was how can you have a recession when

like many trillions of dollars in real

terms just it got inflated

away so now all these homeowners have

way way more money than before at least

short term so it just seemed impossible

to me basically that we would have a

recession in that particular environment

it didn't make any sense today I don't

really have a strong opinion I don't

know because that sort of was

a benefit that gave a boom for a few

years and then after that that's sort of

it and now new anyone getting a mortgage

today now has a much higher mortgage

rate and

everything um it sort it could work the

other way where mortgage rates just sort

of gradually very slowly grind down

nobody can really refinance then and uh

you know that's sort of a not that's

more of a an area where people don't

have a ton of extra money and you could

actually have a recession

so yeah I mean I that's actually really

interesting uh uh point of view I I to

be honest I didn't talk uh think about

the home builders uh last year even

though uh some of large investors were

buying them and they were really cheap

at the time if I remember cor correctly

I remember lar that was my my my biggest

bet back then was the Mi homes and you

could buy it for essentially homes for

like 50 50 cents on the dollar plus you

got this profitable business on in

addition and uh and I think what people

really missed there was the fact that

never before in American history for

such a long time like for a decade

people could get a mortgage for like

3% and then right after covid people can

get a mortgage for even like a lot less

and a lot of people did

get the way lower interest rate they

swapped their mortgage out and you know

that's an incredible amount of money

they made so fast when we got inflation

so but but obviously we don't have

remotely the same setup

today exactly and I think those uh

people that fixed the rates at such low

levels aren't willing to sell because to

buy something new I mean that's why home

builder case is still intact in a in uh

some way if if I mean if everything goes

uh well if you don't some don't have

some kind of uh recession or something

something like that uh let's uh go back

to your ETF what I really like about

your ETF is that it's doing incredibly

well uh I

mean there we have it and uh from

percentage point it's up since uh

uh let let's say 15th of January uh it's

up like 4

4.2% 4% and if we add for example NASDAQ

I mean we have a completely different

situation and uh I mean it's uh I mean

congratulations man good good good

timing to to launch an ETF so uh yeah

and that was a good one too because we

we're like Almost 100% net long there so

that was uh really yeah we uh our net

exposure is uh yeah I think it's maybe

75% long or something like that

something like that so then it all comes

comes down to the structure of your ETF

and uh there we can have the everything

is completely transparent I suppose this

is a hedge right no that's the cash

proceeds from Short Selling okay and

then

um and then what happens is we're we're

50% hedged on the

Yen right so like we have I think 50 or

60% gross long exposure to Japan right

now and so if you're uh you know

borrowing Yen there you have also extra

USD that way although I don't think

that's even showing up here

but um so yeah we we're sitting on a

pretty big USD balance but it's not

because we're sitting on cash exactly

it's just because you know that's the

way the Leverage is is working here yeah

yeah uh thank you for the explanation

and I mean we can see for example energy

transfer uh I mean it's really defensive

position uh and so that might be the the

one of the reasons why for example I

mean you don't you don't have like

growth names here basically it's a as

you saidil from Phil opical perspective

you uh try to find good opportunities uh

you don't go momentum factor or or stuff

like that oh yeah yeah everything here

is uh really just based on fundamentals

I'm not doing this thing where I'm

buying the 20 times Revenue stock I'm

not uh focusing on growth stocks I'm

focused on I mean these aren't all low

multiples

um but actually if you go to Morning

Star it'll summarize the stats of the

portfolio which I think is really cool

so if you type in like militia ETF you

can see things like the average PE ratio

of the stocks Morning Star yeah this is

like a really cool um you click

portfolio so the second link or yeah

click portfolio

there they've done a really good job

here and so

uh if you scroll down a little bit more

you'll see the uh stats of the portfolio

of the underlying

stocks yeah I cannot see sadly

everything Financial metrics yeah you

don't need to see that one it's the

one's up above it's the um you can see

like the earnings growth and things um

the price to earnings ratio is

9.8 the sales growth is 7% a year the

dividend yield is 4 % the price to cash

flow is six you know these are just good

numbers and then the underlying

businesses are not bad so normally you'd

have numbers like that and the

businesses are just crap like the sales

growth instead of being positive might

be negative uh or the cash flow growth

maybe that's negative but in this case

you have both a low PE a pretty solid

dividend yield you know pretty good cash

flow growth

growth um so that's you know that's

what's going to do well the cash flow

keeps growing at over 7% a year and if

the dividend is 4% a year you know and

then it's got some leverage involved so

you know now you're talking about

earning a pretty solid return there yeah

and I mean with this I mean with this

and free cash flow growth I mean they

are going to buy back the stock raise

the dividends and and so on and also

it's really really defensive let's say I

mean when momentum start stops working

uh everyone is going to pile into this

stuff I mean it's shown historically

that when

momentum doesn't work value works and

what's really interesting is that value

small value Factor actually outperformed

pretty much anything in the last like 40

years which is really

interesting yeah I think because that

anomaly became so known the uh as a

basket especially in the USA the small

value stocks got bid too high yeah which

actually pushed the returns down so

that's why I think value investing

hasn't been working so great if you pick

the index of them but if you sort of

look beneath the surface you can yeah

make an honest attempt at saying how

good is the business quality here you

know and if the business quality is

pretty good and it's a value stock then

you know that's what you're looking for

yeah I mean I completely agree I I went

through the Russell 2000 pretty much

every position and uh if you talk about

2000 of course and like I also I also

saw that you came to the same conclusion

that like at least 50 or more perc of

the companies are fundamentally not

doing well even more yeah it's it's just

a big trash Heap I mean it's really

really bad um

that's why I mean that's the biggest

short in the ETF is the covered call

version of that

um so there we have it uh amongst your

positions if I'm not mistaken yeah there

it is so what's your logic I I think

that everyone is uh going to ask the

same question uh there we have like 31%

of the net assets short disposition what

is this this is basically uh let's show

it sorry it's r yld d yeah Y what we

have here this ETF I mean this chart

chart is looking horrendous horrendously

and it but it pays a large dividend

right probably around

10% yeah it's a bit more than 10% a year

so the chart's not as bad as it looks

because it is paying that big fat

dividend but and it's one actually yeah

yeah those are new popular

strategies yeah

basically uh one nice thing about

shorting this in the ETF is that the

upside is capped and I'm trying to keep

like in the hedge fund structure if

something's going horribly wrong on

shorts you know I I I can be more Nimble

there I can make more trading Decisions

by myself but in the ETF structure I

can't do that and so having you know

this be a core part of the ETF short

book means that you know it's so much

more robust from like me not having to

put out fires which I can't do as nimbly

in the

ETF um it really because the most this

uh ETF can really get you is a couple

percent a month or maybe 3% a month

that's the most you can lose so if I

have a 30% short position and I sort of

know I can lose a percent a month on

this thing as a percent of our nav and

that's that's a

reasonable you know uh amount to lose

per month without getting run over right

not and having something explode and you

don't really even know how you can

handle it in ETF structure it's a big

difference in the hedge fund where you

can't

trade I can't be nimble and be like oh I

can get in here and cover this thing

real fast I can't tell the ETF Trader to

do

this yeah yeah and uh I mean we also

have here uh that you went you have

sqqq you went sqqq yeah yeah that's

that's um that's more of a shorter term

tactical play because that's actually a

long position essentially a 21% long

NASDAQ position yeah but because of

what's going on in the market and the

volatility I sort of am guessing that

yeah the volatility drag of these 3x

levered products gets really nasty when

the Market's volatile so I'm guessing

that the volatility is going to chop

this thing up uh and that's my main

reason and then I have similarly the TNA

is the Russell 2000 version that's a

bull position so that's actually a short

position uh and these are actually going

to hedge each other a bit um

yeah yeah so that's the bet it's not

really I'm not really betting on the

direction of the market with those bets

I'm more betting on the market

environment Trump tariffs sure seem

choppy and crazy yeah this is a perfect

environment to be short that crap yeah

yeah uh okay

uh okay I'm not going to go anym to your

positions but uh what everyone is going

to ask for sure is why is there such a

large gross expense rati yeah because

The Regulators are really bad at at

making this uh I

mean that's not a real cost at all uh

and it's just really dumb that they

forced me to put that there even on

Morning Star they don't even put that

they show like the real one the net if

you click back on that thing you'll see

it um if you uh somewhere they'll see

they show the adjusted expense

ratio and I don't not trying to do the

uh adjusted numbers thing but I think if

you go back to quote it's

there sorry I I'm not using morning

Stars so yeah it's okay adjusted expense

ratio so they're putting the real number

this is what The Regulators forc me to

put I don't know it doesn't it doesn't

mean anything at all and and why is that

uh I mean why is it showing such a large

number yeah so I'm short like these bdcs

that pay a big dividend also

that's similar to the uh Russell 2000

covered call ETF where these things

can't go up that much on you too quickly

but in a different way so it's

Diversified um and those yeah so these

short dividend expenses are considered

an expense but it's in practice you know

you can look at the chart and you'll see

every time it pays a dividend the stock

drops by the exact same amount yeah so

that's not a cost at all it's it's just

not

real um so that's most of it and then

like a smaller part of

it um is like the cost of margin so

we're we're borrowing dollars to be a

bit more long that's considered an

expense um that's sort of a real cost

but we're also long more stocks with it

right so presumably the stocks will earn

more than that hurdle rate and then the

the last big one is the short the short

selling so when you when you short sell

you're borrowing stock from somebody

and in our portfolio there it's about 1%

to borrow um so the the impact on that

18% is pretty small as a percent but the

bigger impact is that it's not including

the short rebate so the ETF holder is

actually being paid 4% a year to be

short stocks yeah uh and that's not

again it's they don't put that to offset

the 18% or the margin interest or

anything

uh so that's just why it's more

nonsensical it's counting the expense

but it's not counting the the the

benefit yeah yeah uh I mean thank you

thank you for for the explanation I

think that you probably received a lot

of messages regarding that and it's so

large and you

know what's going on are you seriously

charging this much so you charge if I

1.6 right 1.4 something like that 1.3

1.3 yeah uh and that's also reasonable

for active uh long short strategy I mean

completely reasonable and I think that

we lack like last year or the year

before that I was looking for good uh

active long short ETFs and uh I only saw

vanilla ones basically S&P

703 or 7050 or or 130 or something like

that BAS basically it was uh one yellow

one there there there isn't there isn't

a good one there's like one there's one

like okayish one sort of uh it's not

really performed great but to their

credit it's going up at least and it

perform pretty decently through bare

markets so I think that was a reasonable

one but you know I I'm hoping that I'll

be able to do a lot better than that one

yeah and and I and I hope too and uh I

need to make a disclosure that uh we we

do own the the ETF and everything we say

here is not an investment advice so do

your own research and make your

investment decisions uh with your

financial advisor or on your own but uh

just for for the record nothing we say

here is an an investment advice and uh

okay but where uh where do you see the

this situation with Trump and the market

uh from of course nobody knows but

nobody knows that's my thesis yeah uh

you know there's a bearish argument that

you think he's actually a mad man who

just likes tariffs for the sake of

tariffs and he wants to watch the world

burn and he wants to actually Ally with

Russia and all this stuff yeah yeah I

don't do I do I actually think that's

true I think most likely it's not true

but it's possible uh maybe some parts of

it are true maybe none of it is true I

don't think anybody knows uh I won't

name him but this guy's even like a

progressive he's a self-described sort

of progressive left type guy he a big

hedge fund manager we're pretty friendly

uh despite having pretty different

politics but you know privately on phone

calls what he says is a lot different

than what he posts on on the internet

right so privately in phone calls he's

pointing out that past presidents you

know very uh some some US presidents

were these super wild crazy men like no

one could predict really what they what

they were or weren't capable of okay and

if you're thinking through um sort of

um like a period where there's no

conflict there's no

volatility maybe that's pretty bad thing

he just sort of adds volatility to a bad

situ like a calm situation he's creating

problems for no reasons right so in that

situation I would be very like this is

stupid why do we have Trump but if

you're in a spot where the world's

looking very dangerous in my opinion uh

we have a hot war in Europe and the

situation in taiwan's looking bad and

you sort of have this alliance between

Iran Russia and

China you know that looks like a

dangerous sort of war world that's a lot

different than the world we were in 20

years

ago yeah and so the point is having this

leader uh who I hope has a plan and he's

not actually a crazy person like he's

acting like he is one make no mistake

what I'm saying is clearly what he's

saying is on the surface it's crazy yeah

but does he act who knows what he

believes and doesn't so that's it's a

powerful spot to be in as an opponent

okay that means the USA's opponents

don't know what the hell they're up

against either

that that is completely true

actually so that that's how I'm seeing

Trump uh I'm optimistic I'm not not

gonna say I'm Optimist I'm hopeful for

sure and

uh you know look at the Ukraine

situation he came out in such strong

support of Ukraine early on right after

the invasion am I like really to believe

that now all of the sudden he's buddy

buddy with Russia I mean no I don't

believe it at all

but you know hopefully I'm right you

know I think every even if you don't

like Trump even if you think you know

you don't like my politics whatever we

can all hope that like hope that I'm

right guys like you know we're on the

same team here yeah I mean I I I agree

with you uh but and I I think that uh I

see I see it from the point that there's

like uh not there's only like right and

left there's not a middleman there's not

someone that's going to look from the

side and be objective everyone is like

I'm Pro Trump and whatever he does I

support him and other ones are like I

hate Trump I hate everything about him

everything he does is horrible and

there's not a lot of people that are

like objective and being like okay this

is good this is bad this is good this is

bad I mean and uh that uh goes I

mean in the state of the world we live

in I mean everyone is pro Ukraine or Pro

Russia no body is like in the middle

being objective and uh uh and I think

that's the problem with the current

world and I think that's a healthy thing

about investing in the stock market

because if you are biased you're getting

destroyed I I mean for sure yeah I think

everyone should take a way more of an

approach to say you just don't know

Trump against Trump you don't actually

know guys and uh I don't know certainly

uh so yeah yeah I mean uh I I completely

agree but uh I think that bassent is a

good guy for the job I like the fact

that he wants to bring long-term

treasuries down uh hopefully he's going

to do it I mean if you look at

the where fed I mean where American

government spends like 1.2 trillion

right on interest expense I mean if you

want to lower the deficit that's uh one

that's in top three positions Medicare

interest and uh military so also it's

interesting uh that Europe is uh going

uh up it's outperforming America by a

wide margin since the beginning of the

year and since you are a tactical

investor are you looking somewhere

somewhere else other than Japan and US

yeah I mean I've got quite a few uh

European equities in the ETF I've like

this Spanish airports the Louis vaton

yeah you know I got that sort of Swiss

Railroad stock nobody ever talks about

that's good stock you know yeah I know I

was actually looking at them last year

and I didn't buy it to be honest I think

just it's a nice like it's not going to

have some outstanding return but it's

really easy to see that thing making 10%

a year it seems pretty predictable no

one's going to disrupt what they're

doing that type of investment seems

pretty damn good today you know that's

going to be hard to beat from here

and uh what are your thoughts on for

example Brazil Brazil is getting popular

again and I mean uh there as you said at

the beginning of the podcast that you

shouldn't be like I'm value investor I'm

this I'm that and a lot of those let's

say anti-growth

investors uh those that are like Pro

gold Pro gold stocks are a lot a lot of

them are bullish on uh Brazil for

example and don't I don't really

understand I've looked a few times I

just couldn't wrap my head around the

Brazilian situation uh politically

especially where it's going to go from

here the this the annoying thing about

Brazil

is I thought the old party they were

like a right-wing party but I didn't

think they were particularly good for

Brazil or at stocks either so it's hard

for me to be as bullish on

Brazil because I don't really know which

way that's going to go in

mentally um and then like the one

Brazilian stock I followed closely was

the oil company PBR yeah uh and you know

their the current government is actually

really screwing shareholders over in a

real way yeah and

so you know it's hard for me to be

bullish when that's the case um I like

Colombia a lot today because there you

can see that the Socialist president is

uh polling really poorly and he's most

likely going to lose and when he loses

the Colombian stocks are going to go up

although it sort of happened already to

some degree but I think they still have

some room to run I used to have the uh

Colombian Bank stock in the ETF but I

sold that on the jump but we still have

the Colombian oil companies uh they're

both really cheap um so I like that play

better in Colombia Brazil too hard today

yeah I agree even though we have uh

index has like 6% dividend yield which

is really attractive but still I mean if

there isn't a change in the in politics

it's uninvestable for me as well and I

mean I completely agree also interesting

uh possible interesting plays Norway as

well Norway has the more sophisticated

but fundamentally the the same problem

that they have left in in power and if

they lose which might not happen might

might happen uh it's going to be bullish

for Norway for example I mean because

because there's uh I like Scandinavia

because they have really high level of

corporate governance and they are really

I mean really transparent you know that

they're not going to lie in the yeah

it's it's weird I haven't looked more at

those stocks because they've actually

looked genuinely interesting and they've

actually seem to go up long term unlike

a lot of the world stock market uh I

really should take closer look for some

reason that's the one market like I've

looked through every Swiss stock and UK

stock and Spanish stock but for some

reason I never took the Nordic countries

seriously and I should what I wanted to

say two interesting one interesting

thing and one question and we can uh

slowly end our our podcast is first uh

what's really interesting is that uh

Southeastern let's say part of Europe is

really interesting because there's a lot

of extremely cheap

companies that are doing really well for

example

Slovenia uh did incredibly well last

year Romania for example as well and

there there you have uh some of the

banks or pharmaceutical companies that

went like like 50 60% up last year while

paying five 6 8% dividend however the

problem is liquidity liquidity is uh

really low and that that's the M main

problem of of this uh region of the

world because of Communism markets

aren't developed as well we had like

only 30 20 some 20 some other nations 30

years to develop uh working uh stock

stock market I would also like to ask

you what's your uh take on AI sorry man

I had

to yeah uh I think it's I think it's

real and I think it's going to be um

like for people with white collar jobs I

think a lot of them are going to be out

of work and you're not going to get work

again

and

um I people say it's going to be this

really bad thing for the economy and for

workers but I see it a lot differently

because in my opinion some of our best

Minds for the last 20 years they're

full-time job is like expanding

Microsoft SM or whatever or like doing

legal work for some corporation that

it's not actually helping anybody right

it's uh you know or like accounting

generally as a profession um it's just

better if a machine could do it all

perfectly and no human has to do that

it's just you save a bunch of

efficiency uh what are people going to

do instead I don't know probably

something more in the physical world I

think that there's an idea you should be

short white collar and long blue collar

yeah agree Commodities are good

uh anything where you're actually making

a

physical um physical thing that

that's because there was that saying 15

years ago software is eating the world

and but if the cost of software goes to

zero it becomes a

commodity and AI can make a better piece

of uh software than any human could huge

team of humans and it can do it this in

like an hour

well then uh software will no longer be

eating the world I posted about that

booking.com for example where their

market cap is like $150 billion dollar

or so and then that's like a larger

market cap than all of the hotels in the

world or whatever is sort of what it's

implied or it's something close to that

or maybe the hotels are worth like

double the value but this is just a

website for booking hotels on the

internet okay this they're not actually

doing anything for the world it's just a

monopoly middleman that's all it is and

once those companies stop being able to

do that I think that maybe the people

who work in hotels and things regular

people can earn way more money again and

that's probably a good thing so yeah

yeah and uh I'll have to ask you sorry

man I have to ask you new question new

questions came to my mind uh first uh I

mean second question will be regarding

books uh of course we end the podcasts

regarding in uh uh your uh book

suggestions and uh but before that I

would uh to to conclude this

conversation so uh when you decide to

Long something and when you decide to

short something what are the factors you

take into

account yeah they're totally different

um so long investing is is really just a

simple

as I'm looking for something that can

pay me 10% a year or more in today's

market valuations if Market was a lot

cheaper I'd probably have a bit higher

hurdle you know maybe I'd be looking for

12 or 13% but if I'm pretty sure that

the real present value it's paying out

to shareholders is 10% a year you know

including the growth guys U you can't

just look at today's dividend yield for

Value guys yeah um but if if I'm really

convinced of that then this is so much

cheaper relative to the market than a

I'm earning this pretty good yield for

now and then B you know there's a good

chance you'll get some multiple

expansion as it catches up to the market

and the combined irr is really good

that's it on the long side there's

nothing more to it there's no industry

type or anything um and then on the

short side I'm primarily trying to avoid

getting run over so I just want to avoid

things that will go up a ton yeah on

like it's almost like the Dumber the

story is uh the more worried I am I I've

become in the last month or so I've been

becoming vocal about a bunch of shorts

that I normally wouldn't be attacking uh

but that's just because I I'm it's more

of a tactical short-term idea I think

there's a lot of weakness in the market

uh in speculative junky stocks yeah but

that's not that's a very shortterm thing

for me and uh once I think this brief

moment passes I'm just going to go back

to completely avoiding stocks like that

and instead I'm gonna focus on you know

the boring business that shouldn't exist

and the earnings are going down and it

probably won't exist in three years or

maybe another type of stock

is this is just really low return on

Capital it's got pretty bad management

who's going to sort of incinerate most

of the money that they do generate the

stock will probably go nowhere or down

slightly longterm that's also a great

short you know I'm not I don't have to

make a big score on everything I just

have to not lose too

bad yeah I mean uh what you said earlier

I mean I I had to short HS I mean h and

I mean I had to do it that went well

right that that that killed it I saw

yeah yeah that that that went especially

well but there's a lot of scams I I was

also short Reddit because I did a deep

research on Reddit and in my opinion

it's a scam company and uh on the other

hand uh paler in my view is manag

enrichment vehicle so it's and it's

dangerous to short the market leaders

and crowded shorts as you said but then

we have also companies like Warner bruss

Discovery and uh I mean companies like

like that like let's call them deep

value and uh but they are also crowded

in some way even though they fell so

much they they still have like 10 20%

days from time to

time do you also like completely ignore

them as well

I'm not in those ones I'm in kind of

similar more offbeat ones that people

talk about as much I think there's a lot

less squeeze risk uh yeah but yeah for

like paler and stuff that's the kind of

short

where like people like I'll put it this

way with that company people know who

the CEO is they can actually sort of

close their eyes and know who he is as a

person yeah anytime anytime you can do

that with a company I think you should

stay the hell away from the short this

guy can go on the news and start saying

some man and you're going to

lose 80% and you'll be like damn it he's

such a bastard and it's like no man you

made the mistake not him yeah yeah yeah

yeah yeah I I completely agree and I

mean okay man uh uh no more questions

regarding that

uh can you can you give us some

recommendations uh for for the books

that you enjoy

yeah um I'd say one of the more offbeat

ones because I could say ones that

people have probably heard of but yeah

yeah this one this one called the Scout

mindset um it's basically a book about

how to try to keep as open mind as

possible um try to go in and assume you

genuinely don't know things try to

figure out what's true not what you want

to be true try to avoid like a tribal

mentality yeah uh that's what the book

talks about um some of the exercises are

kind of hokey in it you don't really

have to do those but the ideas in the

book are good so I I would suggest that

because that's what kills people more

than anything markets is the sort of a

you know having to be right prove

yourself that you're right or whatever

rather than like you know being honest

with yourself or whatever so yeah I mean

if you don't admit it you're it's going

to happen again and uh as you said uh

regarding uh crowds I mean I see a lot

of companies as like elephants sitting

on a branch and what's crazy about the

markets is that uh branch is going to I

mean elephant is going to fall down but

because of the madness of the crowds a

lot of them are going to come under the

elephant and try to support him and uh

but uh that cannot happen for a long

time so some of them are going to escape

and some of them are not going to and uh

I mean see paler and all those companies

like that like yeah also also to be

clear today those might be fine ones to

press for a while yeah but don't forget

the game that you're playing because man

once the um once the stuff corrects and

things sort of settle for a while I'm

telling you man that guy's gonna get on

the news and he's gonna pump his

and you're gonna lose

so you know that's yeah just avoid the

brain damage unless you see a good

tactical short term reason to be short

is the short obvious fundamentally yeah

but that doesn't make you make money

yeah and especially the I'm against

staying in those shorts more than like a

week or two I mean you squeeze in one

day and that's pretty much

it okay man uh thank you a lot I really

I really enjoy this talk uh I would use

this opportunity to invite you next year

to come come again and and to see how uh

you did your fund did and your ETF of

course because I think that there's

going to be a large interest in in your

ETF and thank you a lot uh and I'll of

course put your links to X and other

networks for everyone else that's

interested all right thanks man thank

you see you man goodbye