Join Jeff Malec and Brian Stutland, Portfolio Manager at Equity Armor Investments, as they dive deep into the complex world of market volatility, AI’s transformative potential, and strategic investing. Drawing from his extensive trading experience, Stutland offers unique insights into the VIX, option strategies, and navigating today’s dynamic market landscape. From the dot-com era to the current AI revolution, they explore how volatility can be an asset class, discuss the potential economic impacts of technological innovation, and share strategies for protecting and growing investment portfolios. Whether you’re a seasoned investor or curious about option strategies and market dynamics, this episode provides a fascinating look at the intersection of technology, finance, and strategic risk management. – SEND IT!
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From the Episode:
Blog post: LJM Autopsy
Blog post: The ’96 Bulls: A Masterclass in Portfolio Construction
Check out the complete Transcript from this week’s podcast below:
Volatility’s Heartbeat, the AI Boom, and MJ’s Bulls with Equity Armor’s Brian Stutland
Brian Stutland 00:08
How long the bear market lasts is tough to sort of stomach for people and but ultimately it goes from the lower left to the upper right. So I’m going to keep on owning stocks. And if I’m a long term investor, you know, I’ll take some lumps if I’ve, if I’ve harvest some volatility along the way. I’m ahead of the game.
Jeff Malec 00:24
Welcome to The Derivative by RCM Alternatives, Send it!
Brian Stutland 00:27
Hi. This is Brian Stutland, Portfolio Manager at Equity Armor Investments, here to talk about volatility in the markets on The Derivative.
Jeff Malec 00:42
All right. Brian, how are you great? How you doing? Jeff, good. I’m I can’t remember if the last one we did. I don’t know if you were had this background. So I’m going to start asking you some personal questions about your book shelf here. So STS, was your floor badge.
Brian Stutland 01:05
That’s correct. Yeah, people nicknamed me status on the floor or Stutz, short for stunt on my nickname. But yeah, that was, that was my badge for many years.
Jeff Malec 01:17
Status, stuts, I like Stutz better. Then what else you got here? Like a little boys or girls basketball team or something? I can’t tell what’s happening
Brian Stutland 01:27
there. I got from well on this side, right there, this spring, Mustang baseball boys. I was coach of the team. My co coach got me the plaque. We went undefeated and won the championship. It’s nothing great, but it’s kind of a funny thing to put in the background. It was, it was a good time for all the boys playing. And then next to that, also have the World Trade Center, obviously, you know, sadness around that event, but kind of started trading my own book the day before 911 actually, on the trading floor at the Options Exchange. So kind of a weird, weird, crazy day as it was, but especially for me to, like, try and start off as a new trader and then not know what the heck was going on, and then the markets were closed. So kind of keep that in the back of my memory is, yeah, beginning points
Jeff Malec 02:16
can always get crazy in a hurry. Yeah, I gotta hold on real quick. Gonna, you know, as long as we’re talking eighth grade boys, right, right? Was the what was this? 22 so what was my son? I think they might have been eighth grade. Yeah, eighth grade boys, fall ball, ball champs.
Brian Stutland 02:37
Yeah, it’s always look it’s, it’s, as we saw with the World Series this last weekend, it is so hard to win a championship like even when you have it right there, for you sitting there, it’s never easy to be the best. So you know, whether it’s fall ball or Mustang house league or whatever it’s it’s still hard to win whatever you’re whatever you’re doing, so be proud
Jeff Malec 02:57
of it. The fun part of that one for us, we had it was all like his buddies from the eighth grade, and then they in Chicago, you usually leave your eighth grade school and go to a different high school. And was like, the last hurrah, those guys together, which was, yeah, go out on top. Yeah, that’s it. The rest are just boring family, lovely family pictures. I’m sure you just got those out of the frame. Those aren’t real. That’s not your real family, right? Exactly. Those were the people in the frame when you bought it. Yeah, had
Brian Stutland 03:25
to find some good looking people to put in there. Love it. So
Jeff Malec 03:29
thanks for coming on. We were just hanging out down in Nashville at the talking hedge event, which was good time. So want to expand on some of that stuff, but and we’ve done a few podcasts. We’ve done one with you before. We did one with Joe, so we’ll put those in the show notes for kind of background stuff, and you can touch on a little bit as we go. But, uh, we won’t spend the whole time on background, because we’ve already done that. So anyway, was on a call with an advisor today, and was an interesting, fortuitous thing as you were about to come on. So he was kind of saying, I’ll summarize was, hey, I don’t really hear about the VIX anymore. Is the VIX dead? What’s going on with the VIX? Why don’t I hear about it anymore? Seems boring now. So my red flags and alarms were screaming in my head, but wanted to start there and ask you of like, hey, what’s where’s the VIX? Where’s it been? What’s going on?
Brian Stutland 04:19
Yeah. I mean, there’s times when the VIX is boring. I mean, really, the natural movement of that kind of product, it’s calculating what traders expect implied volatilities to be for the next 30 days in the s, p, and it’s like a heartbeat, like, sometimes you’re in the resting heartbeat, there’s nothing going on, and it is boring. And then there’s times where, you know, you exercise, and the heart rate elevates. It can’t stay that way forever, and then it comes back down to the Resting, resting level. I think we’re kind of in this resting level. But what’s really interesting about it? I don’t think it’s dead, so to speak, because when you look at it, it’s kind of trading at somewhat elevated levels, given the like severity of the bull market, right? That. We’ve seen in the last call it, you know, two years since, basically the boom of of AI and and basically we got past 2022 you would expect the VIX to kind of be like around a 12 or 11 or something like that, given how well the markets behave. But, and in fact, it seems like the VIX doesn’t want to go below 15 or 16. And when traders look at that to me, that says there’s some sort of level of risk in the marketplace. To me, I think it’s probably just because valuations have gotten stretched so far on the s, p, that there’s a little bit of worry. Can it? Can it keep going? How far can the market keep going? So I actually think it’s a pretty good indicator of what’s really going on, and it’s very tradable. So I mean, you can forget about it, but I rather trade it as an asset class, because there’s really some key potential benefits as we talked when we were down in Nashville at the talking hedge conference.
Jeff Malec 05:52
Yeah. And then rattle off you did this down there. Rattle off your quick metrics for a vix of 10 equals blah, blah, blah. You’re rattling those off at the conference. That’s good stuff for people to know.
Brian Stutland 06:05
Yeah, sure. So like a 16 vix would represent the market, expecting, most of the time, a 1% Daily move in the market over the next 30 days.
Jeff Malec 06:15
Right? The Bell Curve, basically, right? Yeah, yeah.
Brian Stutland 06:19
So like, Yeah, think of it like a bell curve, or do you ever like on The Price Is Right? The Plinko chip? Yeah, yeah. So, I mean, think of it like, drop the Plinko down the middle, and where is it gonna like, kind of sort of land, which is mostly like in the middle, right? So most of the time a 16 VIX is at 1% Daily move. Now, the VIX trades a little bit more elevated than expected moves due to some nuances of the skew and the s, p, but, but think of it that way. So the market’s expecting 1% Daily moves with the VIX at 16. Basically, if you double it to 32 that would be 2% moves and so on and so forth, right? So vix 80 is, you know, call it 5% Daily moves, like we saw in March of 2020, like at the onset of covid pandemic, right? And so you can kind of look at that and say, where, how are people expecting the s and p5 100 to move over the next 30 days, and when it really can’t get below 15 or 16, it’s not like we’re seeing 1% Daily moves, right? We’re not seeing those 1% Daily moves, yet expectations are to see that move. So to me, that says, hey, there’s some level of risk. I’m willing to put a little risk premium on my option trade because valuations are stretched or whatnot, and it’s just not trading down like I said, I would like to see it probably like 11 or 12. That’s probably more realistic of of the actual realized volatility of the market.
Jeff Malec 07:43
And do you think some of what’s going on is we’re seeing a little 99 internet boom stuff of spot up, vol up, like, these things are going up so fast that vols reacting right? People aren’t used to that. Like, how can vol go up when the market’s going up? But, yeah,
Brian Stutland 07:57
I mean, yeah, we did. I mean, basically I kind of like, liken it to like, 1994 was kind of like, kind of like the emergence of Netscape. Then you had AOL. I traded in the pit in Netscape when I became a market maker.
Jeff Malec 08:10
Nice, you should have saved some of that paper. Have it up on the wall there. I know,
Brian Stutland 08:14
right. Yeah, that’s what I should, should have in the background. But basically what we saw from 94 and on is the VIX went up when the market went up. And the reason being is, I think there’s a very high correlation. Well, first of all, volatility in the marketplace. We have a newsletter called the ripple effect. And we call it the ripple effect because it’s like, you can’t drop a bowling ball in a pool on one corner of the pool and not expect a wave to reach the entire pool at some point. You know, it might be smaller on the other end, but there is this ripple effect. And the ripple effect usually starts in the credit markets and valuations. And so in the 90s, we saw valuations continue to expand, like we’re seeing now. We saw a revolutionary type technology development in the Internet and email and everything else, like we’re seeing now with AI. And so those two things coinciding together, I would expect vol to go up vix and the market to go up, maybe for the next, you know, four or five years until we reach some, you know, cuss of of a blow.
Jeff Malec 09:14
Four or five years, it
Brian Stutland 09:16
could be, I mean, look at like, 94 I mean, you know, if 94 was, let’s call it 2023, when open, AI started, right? Yeah, we’re kind of in year two, maybe 9596 that lasted all the way to 99 I mean, if you look at what the NASDAQ did from 94 to 2000 peak, it was like a 700% return in a major, major index.
Jeff Malec 09:39
So people were just jumping over themselves to lever and get in more and more and more.
Brian Stutland 09:45
Yeah, yeah. So, and then, you know, along the way, obviously there were some, there were some shakeouts. And then 99 we had the Russian debt crisis. So we sort of had, like, this emergency rate cut decision. We haven’t, we have not seen that yet, which I expect to come at some point. We are seeing. That the Fed cut rates. They started cutting rates in 2024 just like they started cutting rates in 1994 but rate cuts are right now. They’re kind of systematic, right? They’re like, looking at the data they’re analyzing. We haven’t had an emergency rate cut situation, so that’s probably coming, and that’ll probably create some bubble issues, kind of event.
Jeff Malec 10:21
I disagree on that one. I think they’re done with the like, unannounced emergency stuff, right? Like their lesson learned is, like, be transparent, telegraph what you’re going to do way ahead of time. Don’t spook people.
Brian Stutland 10:34
But, right? Well, I guess I should say, I should say, yeah, the emergence of, like, the Russian debt crisis kind of came on fairly quickly. You had long term capital management go under. So it’s like an emergency event kind of driven not, you’re right, maybe not an emergency rate cut like we saw back then, where you had traders basically running back to the trading floor to get on when the Fed announced a surprise quarter point in the middle of their Fed meeting. Like I don’t think we’re going to see that, but we are going to probably see some sort of, like, major carpet shakeout event. Why
Jeff Malec 11:05
were they? Why weren’t they on the floor during the Fed meeting? They were expecting them to finish the meeting first?
Brian Stutland 11:10
Yeah, I think traders were just like, coming back from lunch, you know, like we, I was in the pit Cisco and Oracle, where the options trading in there was actually the number one rated pit on the scrotal Board Options
Jeff Malec 11:21
Exchange at the time in terms of volume, you’re saying, Yeah, both volume. And
Brian Stutland 11:25
then there were like, a rating system by the brokers that would rate the quality of pits, and we would get rated number one. Escalators were right behind us, right? And you could just see guys, like, running back up the escalator to, like, dash onto the floor as like, the markets roared and came back and fun times. Fun times.
Jeff Malec 11:44
What? What do you see that’s similar and different between that 99 like when you were there trading those options and and today, like, the same sort of froth, or not as much. What do you think?
Brian Stutland 11:57
Well, you are seeing the same level of like, elevated forward looking PES and valuations on companies, right? And if you look at it too, I saw, like a published report by by JP Morgan, that when you know, when you see PE is up here in like, forward peas, not just like trailing, but forward looking peas, which analysts are, you know, trying to determine how earnings are going to come in, and when they sit in, like, the low 20s to 25 like the 10 year historical return after that point is not very good. It’s rather flat. So you’re seeing the same sort of, like elevated PE levels that we saw in the 90s. I think the only difference here is that AI is like, you know, whether it’s open, AI Gemini, whatever one of the llms are building out. They’re building out like a central nervous system in the brain that can be used for robotics, better business productivity, etc, etc. Down the road, it’s like, is there really a valuation to that, or is that just like, what are people willing to pay to have a central nervous system, right? And then let’s plop it into robotics. Let’s pop it into like, our business and AI agents and all that kind of stuff. And and then is the secondary level really, the next valuation that we have to really analyze? And the first one doesn’t really matter. It’s just question of, you know, are they going to get too frothy in their debt and borrowing with each other to play out? So that’s maybe the one difference is, that is, you know, we’re still kind of in the early I don’t think we’re in 99 yet. You know, put it that
Jeff Malec 13:24
way, you just touched on that. So I’ll ask you, any worries with this vendor financing that seems to be happening?
Brian Stutland 13:31
Yeah, I hear a lot about it, because it’s like the circle of life. You know, one guy borrows money to build this one, and this person then is promises to buy whatever, and I’ll give you equity. And, you know, there is some concern that that wheel could stop. But I, like I said, I think we’re still in, like, the build out phase, where that that cycle can kind of continue and continue. The question will be really, like, we the second, like the palantirs of the world, right, that are actually building out practical uses of AI and applications, you know, right now, it’s basically like the new version of the CIA Palantir. But the palantirs of the world will, they start to use this whole hold ecosystem so that all the borrowing and that circulation actually gets, you know, put to use, right? I think
Jeff Malec 14:23
that will people pay for it. That’s the other Right, yeah.
Jeff Malec 14:32
Love it. So this feeds into, and heard you say before, right? There’s actual individual stocks at play here. So you, more than anyone I talked to a lot of other managers. They’re like, Hey, forget all this stock and AI is risky. It could blow up at any minute. You need to hedge. You need to do this and this. But I’ve heard you a few times be like, No, own that stuff. That’s great. Own that over there, do this over here. So kind of, I don’t know if I set that up correctly, but tell us what you kind of, how you think. About that of yeah, there’s some great stuff to own out there. Own it,
Brian Stutland 15:02
yeah. I mean, look like I, you know, kind of said at the beginning of the show here, right, that the NASDAQ went up 700% over like a five or six year period, right? So that stuff can really continue to go and I think, you know, there’s a place in the portfolio for it. Now, the question is, is, how do you manage that, so that it’s not the end all be all to your entire portfolio. And so, yeah, the Nvidia’s of the world are going to be the leaders. Can you just own the video? No, you have to look at AMD. And then I just heard that Cornell University, just a week ago, came out and validated GS it, which builds, like a an APU that takes up a lot less energy, a heck of a lot less energy to do some calculations. So somebody’s going to come along and build a better chip, right? Somebody’s going to come along and build a better LLM platform. But do I have to own, like, this part of the world? Yeah, I think technology this, this is a game changer that we’re going to see forever, when you get these like, you know, 2530 year, like, revolutionary things that happen. I want to own it. I want to be in it. Now, the question is, is, like, what kind of timeframe are we in, and how can I continue to diversify my asset allocation? One way we do it, you know, as a portfolio manager, is we buy volatility. So, you know, to the point, I know we’ve talked about the VIX up, stocks up, but you know, that’s where you want to own volatility as an asset class. You want to own some optionality in the market. You want to own some stocks and sort of put that together as a sort of good mix, if that’s the right macro environment that we’re in, and I think we’re in that that macro environment.
Jeff Malec 16:39
So expand on that, right? People been trying to own VIX, or talk first about how you can’t actually own the VIX, so how do you sell for that? But then after that, of like, people been trying to do this for years and years and years without much success, because it’s a massively declining asset. So tell us how you solve that puzzle.
Brian Stutland 16:59
Yeah, I think, I mean, I think on the first part, when you look at owning the VIX, right, you can directly, well, kind of indirectly, own it through vix future contracts. So these are volatility futures contracts. They’re traded at the SIBO. You can use options, or you can use the futures contract themselves. You can make a directional bet on where you think the VIX is going to be. Now that the nuance to it. Unlike most commodity products out there, oil, you buy an oil futures contract, there’s embedded storage and transportation costs and sort of like a supply and demand factor as well, vix and volatility futures. It’s just a bet. I’m just going to add time of expiration, we’re going to settle our bet up and cash settle it. It’s called a cash settled product. We’re not delivering, you know, a barrel of oil or or a bushel of corn or whatever, right? So, zero waiting for zero transport. Yeah, right. So there’s zero transport, there’s zero carry. So what we’re really doing is just, where’s the VIX going to be? Let’s say 30 days, on expiration from now, right? And that just becomes strictly supply and demand, right? So the VIX future can trade above the VIX for right now, it can trade below it, but on that 30 days, they’ll meet each other, but in between there, there can be movement above and below the VIX. And so because VIX is sort of mean reverting. It’s an insurance product. People are the demand is usually to overpay for that futures contract. And so there’s a little bit of an extra cost, right? If you overpay for the futures contract, if nothing happens at settlement, the futures contract will go back down to VIX, and you’ll have paid, like, a little extra than you should have. And so sort of watching that structure on how that trades becomes more of a trader’s game than it does. I’m just going to buy volatility futures contracts or a VIX, Etn or ETF, which I can own to buy the VIX, the expected return of that is not positive over time, right? It mean, reverts with levels of spikes and back down, like that heartbeat that I talked about. So you want to make sure you you harvest that volatility to your point of, how do you trade this? You have to harvest your volatility when those events happen
Jeff Malec 19:13
and then. But do you guys also harvest throughout right if there’s a little bit where you can start to kind of make it more of a neutral carry along the way until those spikes,
Brian Stutland 19:22
right? Yeah. So what we like to do is, you know, let’s say you do get, like a small, mini spike, then that’s a time to sort of, you know, maybe take some profits on the volatility side, sell that out and buy stocks at a lower price, and vice versa. The other way. The other thing you can do is, is you can trade it like a long short. You can look at other pieces of the market that maybe have some time decay value to them. I know some some traders out there will don’t own a structured note at one portion, part of the portfolio, which is almost like an option selling strategy, technique, while they own volatility in. Another with stocks, right? So you got some your notes that are kicking out premium with some defined risk. You’ve got your stocks, you’ve got your long volatility position, right? For us, we actually trade S, P options, and, like I said, we shift through the VIX futures contracts accordingly to, like, look at that contango. Like, I call it that premium of the volatility futures contract above the VIX itself, and to determine what’s the, you know, best one to kind of own to mitigate some of the buy and hold decay
Jeff Malec 20:30
loss to which is the cheapest one? Essentially, right?
Brian Stutland 20:34
So there’s times where, like when you look at the VIX Futures Curve, for example, February might be at a call it $1 premium to the vix index, and November could be at 75 cents, which is expiring, you know, just in a couple weeks, right? So there’s only really a quarter point difference between Feb and no, but 75 cents between no and the VIX now. So you know, do you want to hold something that’s going to lose 75 cents in the next two weeks or cents in the next two weeks? Or do you want to hold something that’s going to lose a buck over the next four months? Right? So we kind of like look at that kind of decay time, decay value, and make an analysis on how to hold vix features.
Jeff Malec 21:14
And it’s always, mostly always elevated above the spot VIX, just because nobody knows what’s going to happen over the next 3060, 90 days, whatever. Well, you use the uncertainty premium,
Brian Stutland 21:27
yeah, yeah, yeah, that’s a good way to put it. It’s the uncertainty premium on the market. And so imagine a bull market that’s kind of going and going right, the level of uncertainty, I think, starts to rise. And so you typically see this premium in a bull market, a bull trending upward market where there’s going to be some uncertainty that’s going to happen, you know, somewhere down the road, or upcoming very soon. Vice versa, if you have an event like covid pandemic. Actually, we saw vix futures trade at a nasty discount to the VIX itself. Well, you know, you’re talking five, 610, bucks lower than vix was. Why? Because the volatility event is happening, and now people’s expectations in the future are for volatility to subside and come back down to normal,
Jeff Malec 22:12
like it can’t get any worse type of Right, right?
Brian Stutland 22:16
But sometimes that makes for some really good opportunity, actually, to own that on those contracts at that moment, even though they are probably going to come down and it’s probably going to be a loser, um, sometimes you catch those at such a steep discount that those are good to sort of own against, let’s say, a long beta position in the market.
Jeff Malec 22:36
And how do you protect, or right, if you’re monetizing along the way to kind of offset that carry. How do you protect against you got out of all your protection, and the thing keeps going down. There’s a second leg down, or a second, third week down, or whatever, and you’ve already monetized everything now you’re on the wrong side.
Brian Stutland 22:52
Yeah? Well, I mean, look, I mean the VIX, I always tell people it’s like a merry go round, like you really never know when it’s going to stop. Sometimes, there are some, you know, indicators and trend followers that have some techniques, like, if they see the VIX making, like, a lower high and the market making lower lows, right? So stock market still going down, but the VIX is not going up anymore, right? People use that as like, oh, wait, there’s got somebody selling puts in the market to keep the VIX suppressed, because the VIX is calculated off of S, P options. So if option premiums are coming down, there’s got to be somebody picking levels on the put side, like, saying, hey, the market’s going to reach a bottom somewhere. I don’t know where it is. It’s going to reach a bottom somewhere, and they sell put premium that brings the VIX down. So that’s sort of an indicator of, like, maybe the market’s going to turn do I take everything off strategy and volatility? No, because of that merry go round effect, right? I might lessen the position. What other traders might do, which is, I think a very interesting technique is so in our fund, we’re long stocks and long volatility, right? It actually can that sort of position can act as a really good rebalancer, you know, Jeff, we, like, kind of talked about, like, do you still have to own Nvidia? Well, if volatility is high, our fund maybe is not going to perform as well, because you have, you’re owning this volatility component that might be coming down. Even if the market’s going down, we’re going to continue to own that volatility position. But that might give you a time when volatility type, trim positions in our trading strategy and buy those Nvidia risky assets at that moment in time. And even if you get hit a little bit, hopefully over time, that equation kind of reverses itself. Yeah, you get the rebalance effect, yeah. So, um, kind of it can act as a really good, just inherent rebalancer. And I kind of would like the history has shown. If you stick with that rebalance, it does work. I mean, look, you look at the history of stocks, they go from the lower left on a chart to the upper right over a long period of time. There’s just a lot of volatility in between. And it’s a question of how big and how long that shakeout is going to last. 99 2000 was like a three. Year bear market after that, right? 2008 was like a year long bear market. How long the bear market lasts is tough to sort of stomach for people and so, but ultimately it goes from the lower left to the upper right. So I’m going to, you know, I’m going to keep on owning stocks, and if I’m a long term investor, you know, I’ll take some lumps if I’ve, if I’ve harvest some volatility along the way, I’m ahead of the game.
Jeff Malec 25:31
What are your thoughts? Do you have? Right you see way more covered call strategies and alternative income. That’s really just selling calls or selling premium. So all that stuff added up. And I think that’s the highest growth AUM mutual fund or ETF category, right? Of like, alternative income, options income, yeah, so tons and tons of people selling options. So I don’t know if there’s a question in there, but just talk about that a little bit of like, what does that little bit of like, what does that do? Does that affect the markets? Is it pushing around the option prices that you guys are looking at? Does it push around the VIX?
Brian Stutland 26:09
I mean, I think it definitely has an effect on the option prices, right? I mean, yeah, the level of growth of option premium selling has been absolutely enormous. Then you couple that with like, zero DT options and that trading aspect of it. And so I like the premium that once was on all those trades that made it worth it to sell the option premium, I don’t think is quite there on a risk adjusted basis anymore. It’s very easily to tell people, Hey, we’re going to give you, know, a yield of seven to 10% a year, or maybe more, by selling this option premium overlay. But what they don’t tell you is, by selling that call on the market, by selling the call right a call option is the right to own the market, no matter how high it goes. If you’re selling that away, you’re giving up the upside. And we’ve just seen like these V shape moves back up. I mean, it’s, we’re going on five, six years now, of nasty, volatile shakeouts to the downside, and the rip back up is just as as nasty and violent and happened so quickly. You know, not to like, you know, I don’t like bashing like anybody, so to speak. But just, just as a case in point, example, JP Morgan hedged equity fund. You know, they’re only up like 5% this year, with the markets up 15, 16% or whatever, because they just been called away. They a lot of these design option selling strategies pay for their insurance on the downside by selling away the upside. And that can be a very dangerous trading strategy, and
Jeff Malec 27:41
if you get too big, you have to get you have to sell closer and closer and closer to to get enough money. Or as the volatility goes down, you have to sell closer and closer to the market.
Brian Stutland 27:49
Yeah, it’s more of a as volatility goes down, you sell closer and closer to where the market is at. And now you’re at more and more risk of being called away to the upside. And if we’re in a 919, 90s like scenario that that’s just you’re missing and and possibly, like, you know, slightly inflationary environment, like, you don’t want to be called away when there’s also inflation, right? You got to at least make money on the stock equity side of things to pay for inflationary costs. So it’s, it can be just a nasty strategy where you’re just giving up not enough to make enough money.
Jeff Malec 28:26
That’s a good thought experiment, right? Like, we don’t know where we are in that 94 to 2001 right? So if you gave up a half year upside for eight years to protect against a 60% drawdown, yeah, that’s a loser. Probably, right? Yeah, it’s definitely someone do the math for me, but that’s probably definitely a loser, yeah? So that’s where you guys are coming from. And like, No, I want to participate as much as possible in that upside, right, have as small a drain as possible, and go from there. Yeah,
Brian Stutland 28:57
exactly. It’s like, I think when we talk to our conference, I like the word that you use is like, we’re kind of, like your first responders into a situation. Like, we want to capture the emergency situation on the downside and protect that. Now, there is a cost to it. We try and mitigate that, but we also the emergency upside move too. We want to participate in that to a degree so that we can, you know, continue to feel the valuation move higher, or whatever it is. And so it’s kind of like playing the like, the wings, the wings to the to the market.
Jeff Malec 29:32
That’s a good I’m going to point a new one, like, for the first responders, was a guy at Makita. It’s been borrowed by one river, and now, so I’ve been borrowing it. But interesting, the thing you said there like, you’re viewing it more as like, I’m not necessarily the I am the first responder in the volatility side, but what you really want me is, I’m the first one like, back in the party, like the boat tipped over, the sharks are in the water. I’m the first one back in the boat, right and. Let’s go. Let’s get this tour back, back going,
Brian Stutland 30:02
yeah, right, yeah, it is, you know. So I guess I’m kind of like your tour guide, and you never want to kayak a level five river without knowing where, like, the rapids are going to catch you, right? So we kind of, like, get around that and avoid it, and then, you know, then we’ll catch the fast moving stream back to the upside, maybe not. I mean, this year, this year, our strategies have outperformed the market because the the v shape off of April, like tariff tantrum, has been so sharp. But you know, we won’t necessarily always capture all of the upside. We’ll, but we’ll, we’ll still be in the game. We’ll still, we still capture most of the
Jeff Malec 30:38
upside, but structurally, you’re not calling away your upside correct, so your drag, if any, is going to be from the protection from like, paying over and over again that vix and not being able to harvest enough to
30:49
offset that Correct. Correct? Yeah,
Jeff Malec 30:53
I like this kayak on the rapids. So some of the guys are getting into the rapids, and they just pull the kayaks over to the side and walk the rest of the river, right, right. Some know exactly where the rapids are, and they can navigate the rapids. And then, boom, they’re in flat water. And now you’re gliding down the river. You’re going to get there 10 times faster than the people walking
Brian Stutland 31:13
correct, because they, they stepped aside, they, you know, got shaken out by by everything that happened. And then the river is moving, you know, nice and steady but fast, down down the road, and they’re and they’re walking, so, yeah, I mean, that’s, and, you know, you’re, you’re actually kind of, in some way, taking the other side of the trade of all this option premium selling that’s going on, and it’s such a big market, I think there’s opportunity to take the other side In advantage of that. I mean, that’s what I did as an option trader, as a market makers, I was, you know, I was taking the opposite side of a trade and then granted. As a market maker, I was trying to, you know, make my nickel or dime and lay off that risk very quickly, you know, in seconds, minutes or whatever. But this is, you know, this is someone for taking the opposite side of of all that order flow and paper that’s gone into option premium selling that’s out there. And
Jeff Malec 32:05
what do you think that’s a huge, like, blow up risk for the market and economy overall, all that option selling? Or is it just going to be like a people get disenchanted with it because they’re only made 5% this year instead of 20%
Brian Stutland 32:18
I think it’s more of like disenchanted with it. You know, there will be a man. We’ve seen groups blow up from taking, like, unmitigated unprotected option, selling risk to the market, whether it’s to the upside or downside.
Jeff Malec 32:31
Like, we’ll put the ljm autopsy in the in the show notes, yeah,
Brian Stutland 32:37
famous one, yeah, among. I mean, there’s a handful of others over the years, right?
Jeff Malec 32:42
But most of these are covered. Calls correct understanding, so you can’t really blow up on that correct.
Brian Stutland 32:49
That’s why I’m saying so, like, they’re not uncovered. They are covered. They’re not, you know, taking endless risk on the market. But so that’s why I think it’s going to be disenfranchised move, you know, like, hey, look, you know, I mean, I think this year advisors, especially, like, you know, if you were an investment advisor and you were in, like, some sort of defined risk strategy, it’s only up five or 6% this year, and the market’s up 15 people are going to be like, what’s What’s going on? Why am I missing all this? You
Jeff Malec 33:23
so let’s talk about your equity piece you’re in that fast moving, smoother water. Two programs, right? One is doing more s, p, focus, one, NASDAQ focus. So which one you want to start with? Explain how the equity piece
Brian Stutland 33:37
works. Yeah. So normally, as Portfolio Manager, we you know, volatility. It moves so fast, like the harvesting the crop, happens so fast that you only need to own a little bit of it. You know, call it like 10% the other part is mixed with that 90% of equities. So obviously, we know the VIX. Let’s just start with the S, P portfolio management. The VIX is calculated off of 30 day options on the S p5 100, right? So it has a very high tide correlation to the s p5 100 itself. So our stock picking wants to correlate to the s p5 100. Now, the beauty of using some stocks, and why you don’t necessarily need 500 companies or an index, is because there can be some tax loss harvesting that you can do along the way, you know, where two stocks behave very similar, and they go down together. You can sell out of one, take the tax credit, buy the other, and still ride, you know, back to the upside the same way. That’s number one. Number two is it like search for areas that are going to provide tailwinds to the economy, not all 500 names like right now, you know Procter and Gamble. I don’t know what that is doing for you right now, right? He’s on my teeth clean, yeah, right, yeah, yeah. But it’s not, it’s not, you know, there’s no tailwind from the economy going out from Procter and Gamble right now. So you can then. Choose those like, you know, 40 or 50 names, like we do, and sort of structure, like, we’re, like, a little bit overweight. Obviously, I’ve talked a lot about AI. I’m a believer in it. So we’re a little bit overweight Information Technology relative to the s, p, we’re a little bit overweight utilities, because I think there’s going to be huge energy build out that occurs along this way with data centers and everything that we’re already seeing happen.
Jeff Malec 35:21
Yeah, check my nuclear stocks. Hold on. Yeah, right. It’s my number one trade. Yeah, they’re getting hammered today, actually. But hold on. We lost the script. So there’s one program is S P focus. One’s NASDAQ focus. So on the S P side, it’s 9010, 9010, correct. And the 90s doing active individual stocks plus index,
Brian Stutland 35:45
mostly just active individual stocks, right? Okay, so, yeah. So that’s going to give a high correlation to the s, p, but then when you add the volatility component with it, now you kind of like create a portfolio that’s more like a large cap value, low volatility fund, right where, you know, we’ve kind of proven we’ve never had a month over month down more than 6% since we started in 2019 we’ve we typically have like half the draw down to the market. So it’s kind of like this 50 beta protection. So it kind of makes like, I said, this low volatility strategy, when you take S, P with, with our vix volatility now, versus the NASDAQ side of it, when we take the NASDAQ stops, and we’re just going to trade NASDAQ 100 that’s we want to own. That’s the growth in the market. When you put like an all growth stock picking behind with the volatility component. Now you’ve actually kind of like almost replicated the S P, almost replicated downside risk, like the S and P, but upside of like a NASDAQ kind of thing. You’re not going to get all of the NASDAQ to the upside, but you’re going to get a lot of it. So when we sit that, we set that around 85 or 90% you know, it’s like almost adding, like, a higher beta equity position into the into the mix for somebody that you know, we tell advisors S and P, stock picking with volatility is like a low vol. You almost could use that to replace your low volatility for your moderate conservative, we actually get benchmarked by morning stars, moderate conservative index,
Jeff Malec 37:24
which is the weirdest thing I’ve heard. I thought you were trying to get a, like, a voter buck or something moderate conservatives. Yeah, that’s a, that’s an actual index. What’s in there?
Brian Stutland 37:34
It’s just like, your balanced, fun, blended thing, like a, like
Jeff Malec 37:38
a Proctor and Gamble.
Brian Stutland 37:40
Well, no, it’s, it’s, no, it’s balance fund managers, fixed fixed income, you know, like a full Balanced fund approach, right? Like, like, mix of fixed income equities, whatever blend Got it, got it that, like, your moderate conservative investor would want to be in moderate conservative, yeah, and then your, your NASDAQ with our hedge, is going to be more for somebody that wants to take some risk in the market, right? Like you’re more growthy kind of individual, but kind of feels like, hey, the market’s a little frothy. I don’t know if I want to keep going with this thing. I want to add some protection to it. Then NASDAQ with volatility is a good one to own,
Jeff Malec 38:18
and that makes it look more like the SMP you’re saying Correct, correct. But just in terms of volatility, the the downside should be much less, right?
Brian Stutland 38:26
It can, but because you have that higher beta, sometimes the vol components not going to hedge out as much as, like, you know, the other fund, right? So in 20, in 2022, like, you know, we were down, I think 18, 19% on the year. But 2023 you know, when the markets were back up, we were up like 36% so it’s going to behave more like an S and P kind of thing and put a hedge. Now, the thing that was interesting about 2022 is that the second half of the year, actually, the market went down and vix went down, right? That’s, yeah, that’s the one area of risk where volatility is not not occurring, realized volatility is not occurring. It’s just kind of like a slow grind down, but
Jeff Malec 39:12
where you want a second responder,
Brian Stutland 39:14
yeah, right, right. But like, like, you know, the tariff tantrum in April or whatever, then NASDAQ with volatility is very good, because volatility spiked very hard, very quickly, then it did cut drawdowns, right? So that that would be the goal is like, if we get a very nasty downside shakeout, hopefully NASDAQ, with vix gives you less drawdown than the s, p,
Jeff Malec 39:34
and there’s some basis right there, like that. Vix isn’t completely covering the NASDAQ. Do you guys measure that? What’s that? What’s that look like? What’s that basis?
Brian Stutland 39:44
No, I mean, it’s a very good point, right? Because, like I said, the VIX is calculated off of S P options, and S P options are calculated and anticipated off of the S P index. So there could be this, like disjoint thing that happens, where the NASDAQ is moving, not correlated to the S P. Year not having some sort of beta to it. Typically we see about a 1.2 to 1.3 beta of NASDAQ to the S and P but like you said, there could be that basis point risk where it doesn’t line up, like 2022 the NASDAQ was down, I think, like 33% with the S and P down 18. So it was a lot worse than 1.2 beta. And that’s some of the risk in sort of putting NASDAQ with with volatility and VIX, some of the risk to do that, but, but we
Jeff Malec 40:30
there’s no such thing as the NASDAQ VIX.
Brian Stutland 40:34
You know what there? There was an attempt to create vix futures trading. There was vol Q index, which was calculated off of like at the money NASDAQ options, and then they listed volatility futures contracts on vol Q, and they really didn’t find the right liquidity that people didn’t really love the way of the calculation of it. And so really never, really never took off, so there’s not a good long volatility match for the NASDAQ and so that, like our design here is like,
Jeff Malec 41:06
maybe we should roll it back out, right? Seems like a needed product with everyone long all these tech stocks.
Brian Stutland 41:12
Well, it might be coming soon to a theater near you. I’m not gonna,
Jeff Malec 41:15
oh, breaking news here, yeah, tell us more.
Brian Stutland 41:21
I can’t talk too much because we’re we’re working on a few things here to figure something out, but that, that you’re right, that, you know, probably a better proxy kind of contract with the NASDAQ, given, you know what, 60% of the market cap now is like NASDAQ stocks in the s and p, I believe so well, I
Jeff Malec 41:40
was gonna be my next question. Like, this, seems like that basis risk is becoming less and less and less because of that fact, of like, the SP is littered maybe it’s the wrong word or Bejeweled with tech stocks. Yeah, um, versus 510, 1520, years ago, not
Brian Stutland 41:56
yes, yeah. I mean, I mean still, like, I think Information Technology sits at like 30% 35% in the s, p. So it’s not like, it’s not even a majority still yet. But you know, obviously these market cap companies are having an effect. And I mean, just look at the earnings last week, right from the mag seven. We saw we saw Amazon, we saw Microsoft come out. We saw Google come out, like meta. All these things were removing the volatility last week, you know, on these like, seven names, right?
Jeff Malec 42:24
Yeah, what’s your thoughts? My take is that all this AI is massively deflationary, and right? You’re going to have these people coming out of college making 100 to 300 grand at Google or whatever. Those jobs go away, and then what does that do downstream for the economy? So I think you’re like this, AI boom is putting itself out of business eventually, right? Like you’re so what are your thoughts on that? Who knows? Oh,
Brian Stutland 42:53
man. I mean, I could probably have another hour long podcast discussion on this. But, I mean, yes, I think the risk to it, that I don’t think is in the market right now, to be honest with you, is this, you’re right, this massive deflationary effect that this can all have. Because ultimately, if AI is taking jobs and making or or just kind of shifting things and making things more efficient, then there’s less money that to go around to people, right? And then that just kind of brings things down, I
Jeff Malec 43:26
mean, to buy the products that the companies are using the AI to sell, right? So it’s like, circular weirdness, and everyone be like, well, the buggy companies like, everything pivots in the economy. But I’m like, This feels different. Maybe I’m just old and thinking that, but feels different this time, which are dangerous. I
Brian Stutland 43:44
don’t think so. I mean, I tell people like, I think the day is coming, not tomorrow, but the day is coming where we’re just, you know, sheep herding around the field. And, you know, you want to go eat some grass somewhere, go do that, but there’s nothing really else going on besides doing that.
Jeff Malec 43:59
What do you mean by that? Like that, like, that the AI is just taken over and we don’t have anything to do, yeah, yeah. I mean, in a good way, though, that’s the best. It’s like Star Trek. Like, there’s no money, everything’s fixed and taken care of. I don’t know if you’re a Star Trek fan, but
Brian Stutland 44:16
yeah, yeah, no, I am. And I mean, that’s, you know, that’s the Sci Fi world of it. Like you just live in this bubble and you’re protective and taken care of, but there’s really nothing for I mean, look, if you want to go play play a game of baseball, like we can recreate a fall ball League of our own and not have to worry about it, right?
Jeff Malec 44:33
Exactly. Yeah.
Brian Stutland 44:35
So yeah, it’s, look, The Rise of the Machines is, the point is to make businesses more efficient. We are still in the very early innings of that. I mean, I think you look at it Apple iPhone that actually put a reasonable device in your hand to communicate with others, like going back to 94 to 2007 right? The iPhone
Jeff Malec 44:57
that took three iPhone came out, and I was. Seven,
Brian Stutland 45:00
yeah, yeah. So, so that took 13 years to happen. I think there’s probably that same, you know, 10 to 15 year window from 2023 on, where you have something really usable and marketable and happening all the time. And then that thing is going to grow for the next 10 years after that. So, you know, we’re still, you know, call it 10 to 20 years away from, like this major, massive deflationary effect, but there is going to be more and more of it. I mean, look, when I went to the trading floor, right? I started in 98 The floor was open outcry. You had a quote reporter taking your orders. You wrote things on paper. You shouted, buy and sell. And, you know, by 2003 there were a lot of jobs, not there anymore, right? A lot of people out of work and and had to go find something else to do.
Jeff Malec 45:48
And by now, none of those. John, I mean, still in the options, but in the future, no, yeah,
Brian Stutland 45:52
and the financial markets are the leading insight on what’s going to happen. It usually happens first. I mean, I had a touch screen in 2001 when I started right before 911 I had a touchscreen. Or people like, what is that? Yeah, like, it was, it was very common on the floor, so it seemed normal there. But if I told somebody else about it, they’d be like, Oh, that’s the future whatever. I mean, we didn’t see the iPad for years after that. So it does give a little insight of what could happen, if the trading floor is any indicator of, like, Rise of the Machines and what happens, then there’s gonna be a lot of people out of jobs. It, it worries me.
Jeff Malec 46:28
And then my my other medium hot take is wired. I’m seeing all these chat gpts running ads. I’m like, if you’re already starting to run ads on, like, how to make pasta for your girlfriend, that doesn’t seem like a good sign. It seems like we’re topping to me, based on my unscientific ad indicator.
Brian Stutland 46:50
Is that going to be the new the malloc ad indicator?
Jeff Malec 46:53
Yeah, the malloc ad indicator. But like, what? Right? If you’re just making money hand over fist and there’s more demand you can handle, why are you already running ads? It’s probably because it’s like, there’s going to be a winner, take all, maybe, and everyone’s trying to get the most users to be that winner.
Brian Stutland 47:08
Yeah, I, you know, like I said, I think right now, like the initial build out, open, AI, and everything else, it’s the central nervous system to, I think ultimately robotics, which is going to happen later on down the road, like very sophisticated robotics, like acting like a human being, kind of robotics, whether that’s a chip that goes in our brain or it’s an actual robot doing the work.
Jeff Malec 47:31
I’m ready for the chip. I got to wear this whoop band all the time, like, just put something in my arm, but then how do I charge it
Brian Stutland 47:39
your own body’s energy, right? Yeah, but I cut you off. Sorry, no. So you know, when it comes to, like, this, this efficiency and what’s going to happen, you know, it’s, it’s going to take time to develop. And I think, like, like, I said, like, open AI is building out the central nervous system. What that is worth, I think, is many times more multiples than what the market’s willing to give it.
Jeff Malec 48:10
And you think there’s multiple central nervous systems, or can that work? Or does it need to be a winner? Take on.
Brian Stutland 48:17
I mean, if you, if you’re into like, the world of Zen, there can be multiple, right? It’s multiple upon multiple building it now there will probably be a handful of just winners outright, but, but there can be more than one, one winner to it especially, I mean, that’s that’s capitalism, right? Even if we have this massive deflationary like you’re saying, and if that were to happen, there would still be capitalism taking place.
Jeff Malec 48:44
There’d be one huge winner, yeah, yeah, with like the great the 10,000 shareholders of that huge winner are richer than their wildest dreams, and rest of us are in depression. But to your point, that’s why I got to own that stuff.
Jeff Malec 49:06
Let’s finish. You got, I think you mentioned this down on your panel down there hot take, or, like, what you see in the volatility space, like, I think you said no one’s ever seen or what could be bad is if it stays elevated for some weird period of time. Was that you Yeah, I think
Brian Stutland 49:26
you know what could be, what could be interesting? Well, two dynamics, I think you know, on a hot take. Number one, if you look at the move index, which is the volatility index on bonds, it’s trading at yearly, multi year lows right now. So there’s very little movement in price, movement in the bond market. And I talked about the ripple effect
Jeff Malec 49:45
after being somewhat crazy in like 22 and right coming off of covid wasn’t right. Move was pretty crazy,
Brian Stutland 49:52
yeah. And now it’s come all the way back down. So there’s little volatility going on with bond markets, right? There’s, you know, the Fed saying. Maybe there might be one more rate cut, but don’t put all your bets on it. So if we’re sort of like in this known static interest rate environment, you know, how is there volatility somewhere else? Well, there can be volatility somewhere else, because when you have like this liquidity in the bond market, people can flush money into the system, raise valuations to a degree where it’s like, well, this is maybe too I’m not going to get return on my my investment. And then you have this, like, you know, higher runaway volatility effect in the equity market. And then all of a sudden, the credit markets crumble after that, like, normally, it’s the credit markets that crumble first. This could be the opposite, where the equity market volatility gets so expansive that that pushes the ripple effect. You know, maybe you drop the bowling ball, the bowling ball is going to drop in the deep end of the pool instead of the shallower in this time. So I would just be cognizant of that, because, like I said, that’s where you can get runaway upside move on the market, and then a nasty flush up.
Jeff Malec 50:59
Is that I think of that like a whack, a mole, right? Like, oh, the bond volatility is low. It’s like getting artificially suppressed somehow. So where something else is going to pop up? Right, right? Yeah, while you’re trying to hold, oh, well, cover that, cover that, nope, Yeah, something’s gonna pop. Which, it seems like gold was the thing that has popped over the last two years. But, yeah,
Brian Stutland 51:18
well, I mean, gold has made a tremendous, massive run. I think a lot of it, you know, there’s obviously a big shift of of governments buying gold versus, like, the US dollar, you know, in the last few years. But, you know, some of that is rightfully justified, given the level of government debt that we’re taking on. I mean, we didn’t even talk about, which could be a whole nother podcast, is the government shutdown. I mean, it’s like the government shutdown, nobody even cares. I don’t hear anybody talking about it and and our deadline,
Jeff Malec 51:49
that line killed at the conference. You were like, hey, oh, by the way, the government shutdown. Is anyone here, in here even care? Yeah, nobody raised their hand. Nobody said a thing. You’re like, no, so weird. This isn’t even a thing,
Brian Stutland 52:01
I know, right? But, but the government debt is an issue, and I think that has a lot of tie to gold and that, you know, moving significantly higher in the last couple years, um, and so and so, maybe, as you push this, like bond volatility down, like the whack a mole, what’s going to pop up? Is it, you know, government debt? Is it? Is it valuations in the stock market? It’s going to move, it’s going to move to somewhere. So, you know, watch where that is. And that’s why I like owning volatility with stocks right now, because that could be, that could be the next vol movement.
Jeff Malec 52:31
And then what’s a weird vol scenario that could unfold? Right? Like, 22 is kind of our last weird vol period. Yeah. Mark it down. Vol me. So, like, what, what would be a weird vol thing that you could foresee that is trouble for some people, maybe not necessarily you, but for some,
Brian Stutland 52:50
yeah, well, I mean, it’s like, we kind of just said is, like, you know, mark it up, ball up. Like, normally, like, 75% of the time, I think that’s the stat, really, is that the VIX moves opposite of the S and P, historically the percent, the VIX goes up 4% vice versa, the other way, because vix can’t go to zero. Otherwise nothing would be trading, right? There’d be no volatility. So at some point the VIX levels off. So on a 1% up move in the market, in the s and p, vix historically goes down like two or two and a half percent, because eventually stops going down. And in fact, when they that kind of correlation is, this is what I’m talking about, is VIX has been down. You know, sitting here in the teens, we could see market move up, and vix actually go up, opposite of what happened in 20 the back half of 2022, so that’s a scenario to sort of look that’s could be weird, weird that plays out.
Jeff Malec 53:42
What are your thoughts? It seems every vix Spike has become shorter and shorter and shorter. Does that keep going? Do we just get like, hour long vix bikes? Or is that somehow need to end eventually?
Brian Stutland 53:55
I think kind of, I don’t really see it getting shorter. Let’s say in the last year, I see your point like, you know, from I think what happens is you have this big vol event, like we saw in 2020, and 2020 where that elevated volatility lasted for quite a number of months, right? Obviously, the pandemic drove that following that what typically happens is a period of, like the shorter spikes, you know, like, just micro burger spikes that people freak out. Then back to, like, you know, VIX is being reverting, like, we will have this longer, expansive volatility spike. We’re kind of like slowly turning the table on that. If you look at at the level of put buying the skew in the s, p, like that. What people are paying for a put premium versus a call premium of like, the same money Ness. We’re not seeing like we’re seeing a little bit more elevation in the put buying right now. So then you saw a year ago, versus when you see a rally and vol comes off. So maybe, maybe that prolonged vol expansion thing is going to is. Is getting ready to happen. But sometimes that takes a little bit to work out. We had a major, major volatility event in 2020, and sometimes, like now, we’re getting tighter volatility events. I expect a bigger, longer, drawn out volatility event to happen. You know, maybe that happens a year or two from now.
Jeff Malec 55:22
And let’s finish. We were talking the double 3p Jordan bulls down there. So equating it to portfolio theory, we did a blog post about it. We’ll put in the show notes. But who’s, who’s the volatility protector piece on that bulls team. I didn’t prep you for that, sorry.
Brian Stutland 55:43
But, well, you know, what’s interesting is, you know, you almost can say Harper was right, like he was kind of like, you didn’t need him to score a lot. He played the point guard. He was a big, tall point guard, he could defend. I mean, people don’t. I mean, obviously Pippin, you know, great defensive player. Robin, great defensive player. Jordan, great defensive all around, obviously defensive player. But Harper really like his length and size to sort of lock down the small guard, and his ability to do that was, like, very key and instrumental to, like, sort of, you know, stopping, like, the the, you know, the sort of streaks on the scoring side of things. So slowing down the other team’s offense,
Jeff Malec 56:29
right? If the, if another team going on a run is the equivalent of the market selling off, right? He was the Hey, put, put that on that guy and stop this in its tracks. Yeah, yeah.
Brian Stutland 56:39
Or, at least, like, slow down the initial part of the of the other team’s offense, the guy bringing the ball up, let’s slow it down. Let’s make it difficult for him to make a pass. Let’s make it difficult for him to hit a three when the ball is, like rotating around. And so he kind of helped give stability to the to the whole team. And so, you know, that’s what that’s what the VIX and volatility is. By owning that as an asset class, you’re giving stability to the portfolio. Love it.
Jeff Malec 57:03
And I actually, in the blog post type our friend Mike Philbrick was equating this to these new old portfolios. And was saying Kerr like he was leaving Ron Harper out of it. Ron Harper started. Kerr came off the bench, actually, yeah, I think Kerr came off the bench and KU coach came off the bench. Harper was the guy, yeah. And then
Brian Stutland 57:23
you almost say, like that, that six man, like, it’s like, the overlay, right? The extra guy, like, to help protect, you know? So, you know, there could be some, some cases for that, too.
Jeff Malec 57:32
And then tell your story about seeing Jordan’s winning shot.
Brian Stutland 57:37
Oh, yeah. I mean this, this was super fun. So I used to be, I used to be a seed vendor for the Cubs and White Sox. Well, really, you joined local 236, I think a
Jeff Malec 57:46
seed vendor. Seat, seat. Seed like you were, what?
Brian Stutland 57:51
Yeah, no. So selling beer and hot dogs to people, you would join a union, and they would automatically, then get you employed to each local stadium, right? So, so you can, technically, you could work at the Wrigley Field. You could, you know, work with White Sox.
Jeff Malec 58:07
That’s why I sometimes recognize same guys. I’m like, Hey, I remember you from the bull. Yeah, okay, it says they’re, they’re part of the Union.
Brian Stutland 58:13
Yeah, it’s all the same union, right? Yeah. And we know how unions in Chicago work.
Jeff Malec 58:19
You’re not slinging one dog until you sign up for this union. Yeah, right.
Brian Stutland 58:25
Like we I even got to do like the World Cup in 94 when it was in Chicago at Soldier Field, because the union employed you had sold your field. And I would do like the bears, like first couple preseason games before going back to college for the semester. What was
Jeff Malec 58:39
your call? What’s that? What was your call? Beer here? Dog hair. Hey, beer here.
Brian Stutland 58:45
Hey, I thought so. Anyways, so you kind of before the game would start, like you’d arrive about an hour, an hour and a half before any event. And because you’re a part of a union, of course, it’s all seniority on, you know, who gets to sell what? Right back then, obviously Budweiser was like the best, like beer sale thing, right? So you had to be 21 to sell beer, and then that was the hottest thing. So the guys that had the most seniority got to sell Budweiser anyway. So you’d line up outside the stadium. At some point you’d get your assignment on what product you’re going to sell and what part of the stadium you’re going to
Jeff Malec 59:21
so like the kid selling the claw at the Cubs game, the like, foam bear cub claw, he’s last on the seniority list.
Brian Stutland 59:29
Yeah, right. Or, you know, cotton candy was probably kind of down the lower that only cater to, like, you know, a specific person in the crowd. So you’d line up outside the door, you’d get your assignment, you’d go into the stadium through that door. There would be security there, check make sure you had your badge on and everything, and then you’d go in. So me and my buddy, we obviously working through all the stadiums. We talked to other vendors. We knew where in the bull stadium, what door all the vendors would kind of like line up to get their assignment and go in and. And we’re like, this was game six, the first time the bulls beat the jazz. And we’re like, you know what, let’s, let’s go put our vending like, uniform on, even though it was like, you know, the apron or whatever that you had to wear, we brought our union card, even though it was slightly different uniform for the bulls. And we’re like, we’re gonna walk up pretend like we’re working and bending that game, and then we’re gonna go watch the game instead.
Jeff Malec 1:00:25
And this is of the finals versus Karl Malone in Utah. Game seven, Game Six. I think it was they went in six. Yeah,
Brian Stutland 1:00:32
they wanted six. I think that first year, right? Last second? Well, almost last second. Shot by Kerr so I told my buddy, and this is before, obviously cell phones. I’m like, All right, you go in first at this door. There’s like, a staircase that went up. I’m like, take the staircase up to the top whatever. You get to the top level, open the door and go in there, and I will meet you there. You know, before cell phones. Just like, okay, he goes in. I don’t know if I’m gonna find him or not, or whatever. I just gotta hope he’s there,
Jeff Malec 1:00:57
and then you were gonna go in five minutes later, whatever. Yeah, like, let him
Brian Stutland 1:01:02
take all the risk first, right? So he goes in three to five minutes pass by. I’m like, he hasn’t come up, so he’s either arrested, but he’s in. So I’m like, All right, I’m going in. I go in. I look confident. I walk past, like the security guys, if you know, show them my union card. I go up the stairwell. I take it all the way to the top. Open the door cliff. There you are. What’s going on? We’re in, you know, turns out that game, you know, Kerr hits the game winning shot. They win it. Who is it? Pippin or coup coach makes the steal on the inbounds. Bulls win the championship we got in. I mean, we were, you know, college kids just wanted to see a game, right? You know, I would do that now, but, but silly college kids doing
Jeff Malec 1:01:54
that, although, I’ll say the number of full grown adults with high paying jobs that I know that, like, basically snuck into World Series game back in 16. Yeah. Cubs was unbelievable. They were just like, Oh, if you go in near this gate and they have the, like, metal detectors that are, you know, those new style metal detectors where you just kind of pass through them, and then people are mulling around and that there’s no longer a turnstile, right? They’re like, scanning your ticket, right? Yeah. Basically was Bedlam, and they just kind of Maul around in there until they could the person turn their head, and they do, like, a boom, yeah? But like, literally, like five to seven people, I know that’s awesome.
Brian Stutland 1:02:36
We’re, well, I think nine years to the day, when they had the parade for the Cubs, and almost an identical World Series this weekend to what the cubs were, except the Blue Jays couldn’t come back in the extra innings to pull it off after blowing the lead. You know it’s Yeah, I guess if that one maybe is worth, worth going through.
Jeff Malec 1:02:58
That might be our new metaphor. Your your programs are Ohtani, right? You can hit home runs, and then you get out there and play defense and shut the other team down when you need it, when there you go, all in one player, yeah, that’s right. Love it. All right. Brian, great, talking to you.
Brian Stutland 1:03:15
We’ll see you soon. Okay, thanks for having me on here. Look forward to talking soon. All right,
Jeff Malec 1:03:20
take care. Yeah. Bye.
This transcript was compiled automatically via Otter.AI and as such may include typos and errors the artificial intelligence did not pick up correctly.
