Kick off the first episode of 2026 with a fun, draft-style market showdown as host Jeff Malec is joined by David Dziekanski and Zed Francis on The Derivative. Using funky categories and plenty of hot takes, the trio drafts everything from “wait, that’s still a thing” trades to market overreactions, false idols, and narratives that didn’t survive the year. Along the way, they break down crypto cycles, volatility, cash, and derivatives, mixing sharp insight with dry humor and real debate. It’s a loose, fast-paced way to start the year, packed with strong opinions, laughs, and a few bold predictions. SEND IT!
______________________________________________________
______________________________________________________
From the episode:
David on the Derivative:
Zed on the Derivative:
- Protecting the Portfolio not with Long Vol, but with Long Gamma, with Convexitas
- The Polymath Pod: Jason Buck and Zed Francis talk rates, vol, and cheeseburgers?!
- WTF is LDI, and What’s working in Vol Trading with Zed Francis of Convexitas
Check out the complete Transcript from this week’s podcast below:
The 2025 market review draft, talking Bears, Crypto Cycles & AI Paradoxes with David Dziekanski & Zed Francis
Jeff Malec (00:13)
All right, happy new year, everybody. Welcome back to the show. Welcome back to the derivative. ⁓ I am wearing my Christmas present, Bear’s Quarter Zip. It’s been lucky. We’ve been having a fun ride with the Bears here in the city. Two more wins to get to the Super Bowl. Not sure if that will happen, but we’re enjoying the ride. ⁓ Welcome back to the podcast. We’ve got a great group of guests set up for you this year.
We started out with this one, a little bit of fun with David Dorinski from Quantify Funds. I have trouble always pronouncing his last name, so apologies already. And Zed Francis of Convexitas. We did a little draft kind of thing where we were hitting on 2025 themes as a bit of a draft. So it was kind of fun, a little different, but I hope you guys enjoy it.
It’s not quite our Nate Burgazzi skit we opened the season with last year. That was fun, but a little off the wall. But hope you enjoy it. ⁓ I asked RCM to build me out a whole new home office background here. I got denied, but we switched to a new podcast platform. We’re in HD here on YouTube. So I apologize to all of you. Have to see me in HD after many years of being in the sun, sailing, skiing, all that good stuff.
⁓ But it’s all good. Lastly, we want to hear from you guys. ⁓ Did you like an episode? Did you think they were terribly boring, terribly interesting? You want to hear more about volatility? You want to hear more about trend? ⁓ Drop us a line at invest at rcmam.com. Invest at rcmam.com. You don’t have to invest if you don’t want to, but that’s where we’ll get the emails. ⁓ Get enough of them. We’ll start to get the guests you guys want and
Maybe even have a mailbag and get into some of these questions and comments. So that’s it. Enjoy the show. ⁓ We’ll be back next week with Robert Mullen of Marathon Resource Advisors. Talk about Venezuela. What was happening there? Is the oil even valuable? Does anyone want to even get it out of the ground? All that good stuff. Plus what’s happening with gold, uranium, ⁓ all across the resource spectrum. So that was a fun one. Check it out next week. Send it.
Jeff Malec (02:36)
Hello, everybody. Welcome to 2026. We’ve got two of my buddies here, Zed Francis, and David’s not that good of a buddy because I still can’t pronounce his last name, but David D. Can you pronounce it for us, David?
David Dziekanski (02:48)
My mother’s still struggling pronouncing it as well, so no stress.
Jeff Malec (02:51)
No stress.
Happy New Year to you guys. Zed and I are both in our Bears… Bears quarter zips. Is that a Johnny O?
Zed (02:56)
Yeah.
This is Costco this past weekend for 20 bucks. There you go.
Jeff Malec (03:02)
mine’s Johnny-O, so I’m double representing Chicago. ⁓
That’s the brother of, who was Batman, Chris O’Donnell? His brother was a North Shore guy and started ⁓ Johnny-O golf attire. So it’s good to see them come out with the Bears one. David, you’re somewhere fun, it looks like.
David Dziekanski (03:20)
Yeah, I tend to work remote out of Costa Rica at the beginning of the year solely because I am a sun child and it’s just really hard to keep your motivation in 16 hours of darkness in New York City. I spend ⁓ most of my time here in a small box outside of the sun anyway, but it’s nice to pop out in the morning and get a little bit of sunlight before I start my work day.
Jeff Malec (03:40)
I love it. You’re on the Pacific side probably. Yeah. Awesome. And we talked a little off air, a couple little mini surf sessions in, keep the brain fresh.
David Dziekanski (03:50)
Yeah, it’s baby surfing. It’s like nice two to five foot waves in bathtub like water. So I think when a lot of people hear I’m surfing, they’re like, you’re chasing these massive big waves. Absolutely not. I’m a terrible surfer. I’ve surfed probably 50 times in my life and I thought I was going to be so much better than I actually am at this point. But I think I caught like four or five good waves this morning at about 50 minutes before I started my work day.
Jeff Malec (04:12)
Zed, you’re here. It’s warm in Chicago today. We’re doing fine.
Zed (04:15)
Yeah,
I did my Divvy bike ride in. It was comfortable. Yeah.
Jeff Malec (04:18)
Really? Today?
Any fun? What’d you guys do over the New Year? Is anything fun?
Zed (04:24)
No, we were local, out to my folks, Western Burbs, with brother and all the kids. But it’s good for all those kids’ cousins to hang out with each other. So, local, but ⁓ fun enough.
Jeff Malec (04:36)
And David, what about you? Were you in New York? Times Square?
David Dziekanski (04:37)
Yep.
No, we hosted. No,
certainly not. We actually I was for one period that said joined us for but we I hosted two micro conferences.
in mid December and rolled that right into a bell ringing at NASDAQ that Zed joined us for our first ETFB TGD, which was about 75 people two days before Christmas. So very thankful for everyone who showed up in the dead of winter right before Christmas, but we also have three funds on deck launching soon. So I really haven’t slept much since November. I’m very excited for these things to get out to the marketplace.
Jeff Malec (05:11)
be fun. So both these guys have been on the pod before. We’ll put links to those in the show notes to go learn about what they’re doing and their products.
⁓ So I wanted to do something a little fun today. Thank you guys for being up for it. I’m a big Bill Simmons podcast listener. He does these little drafts and whatnot in the sports world, sometimes entertainment world. So thought we could do one in the markets world, interest rates, commodities, et cetera, et cetera, crypto. So I’m going to go through a couple little segments, and we’ll do a little bit of a snake draft.
⁓ First one, maybe we’ll let David go first. So if David takes your answers, Ed, you gotta move on to something else. You got it? And vice versa. I’ll go last the first time just to set you guys up for success. So let’s get into it. First one is the, ⁓ wait.
Zed (05:59)
you
David Dziekanski (06:00)
back in a row.
Jeff Malec (06:03)
That’s still a thing, market. let’s talk. David, what’s your first draft pick for weight? That’s still a thing. Trend or asset class that kind of unexpectedly surfaced in 2025.
David Dziekanski (06:09)
Yeah, my…
I’ll talk more about an investment philosophy, but my weight that’s still a thing is the four year cycle in crypto. I actually do think that it caused a little bit of pullback in the fourth quarter of crypto because a lot of people didn’t see this continuous rally that they had hoped for and then got a little bit scared that we were in the tail end of this four year cycle. But our philosophy really is if you look at the new allocators to crypto,
They’re not the ones that have 60, 70, 80, 120, 150 % of their portfolio in crypto. They’re picking up single percentage points of their portfolio in crypto. So they’re actually buyers on the way down. And also to relate it to the halving cycle, I think one of the things that caused the four year cycle was when you had a halving in the supply of crypto and that having cut the supply significantly,
that makes sense if supply cuts significantly that you’re going to then have an uptick in prices and that might dwindle back down. But where the supply number is in crypto or Bitcoin right now at 86 basis points, you we went from 172 basis points down to 86 basis points. So that actually really wasn’t a massive cut in supply. So I actually don’t think the last rally could be attributed to the halving.
Jeff Malec (07:29)
Explain that
real quick. What’s the 172 and 86?
David Dziekanski (07:32)
So every four years the amount of supply in Bitcoin cuts in half and so we are now at a point where the supply is about 86 basis points a year. Prior to that it was 172 basis points before that and a supply… Yeah.
Jeff Malec (07:50)
So that means 0.86 % of
what’s left is going to be released this year.
David Dziekanski (07:55)
Well, 0.86 will have new supply in terms of reference to the entire amount of Bitcoin that’s out right now. But I think in past cycles, when you were going from 15 % supply to, you know, seven and a half, that was a huge cut in supply. But going from 1.72 % of supply down to 86 basis points in supply, it wasn’t actually a massive supply cut. So I think the rally just happened to randomly align.
Jeff Malec (08:01)
Yeah, yeah,
David Dziekanski (08:24)
with that pullback, but it wasn’t necessarily caused by that pullback. And so I think my long-winded answer as to wait that still thing is investing in Bitcoin on this four-year cycle because it’s no longer a pop driven by this massive cut in supply. And there’s an entirely new pool of allocators that are allocating to this and they aren’t overexposed. If anything, they are dipping their toes in the water and eager to add to their portfolios on any real pullback.
Jeff Malec (08:30)
Yeah.
under.
And I’m going to work on my debate with you for when I see you in Miami or whatnot next that the supply isn’t really a thing because there’s so many derivatives and infinite abilities to split it. So I’ll work on that. If it’s a good debate, we’ll put it out on another podcast. Zed, wait, that’s still a thing. Second pick.
David Dziekanski (09:05)
Good.
Zed (09:08)
All
right. I’ll go with like leaning into the weight. That’s still a thing. I’ll go with the jobs report. Like, does anybody care anymore? I can tell you right now, the options market doesn’t care about what’s coming up this Friday. It’s barely pricing as any event. So I think it’s as simple as sure. Obviously we had a couple of months where there was just no data, but ultimately the data has been such junk for the last handful of years.
Jeff Malec (09:17)
you
Zed (09:35)
that I think the importance of these releases has just diminished greatly. So we’re at this weird time where there’s a significant amount of involvement of both fiscal and monetary policy in the day-to-day lives of the market and frankly individuals. And in theory, some data is supposed to be helping, we’ll call it make those decisions. But at the same time, don’t think anybody thinks the data is anything useful.
Jeff Malec (10:01)
Right.
Zed (10:01)
So I
feel like that fits the number one seed of weight. Is that still a thing?
Jeff Malec (10:05)
Right. But do you think that’s because
people have gone beyond relying on the government for that data? Like huge hedge funds are doing their own channel checks and whatnot and kind of can generate their own metrics?
Zed (10:17)
Yeah, I think there’s a blend of how they’re currently, you know, sourcing the data is becoming, we’ll call it, not very efficient or useful. So yeah, the government data just naturally is not as interesting because it doesn’t provide much accuracy. And I think, yes, people are finding, we’ll call it, sources. But I think at the same time, I think everybody’s confused on
how the heck do you categorize people that aren’t essentially W-2 earners? And because that group of cohort, yeah, the cohorts accelerated so much that I think just it’s messing with all of it. So I think everybody’s just more just like, well, what does consumption look like? And like, if that’s going well, that probably means people have jobs and they’re able to buy things and move on with their life. you know, whether unemployment’s three, four, five percent, I don’t think that’s really telling a whole lot.
Jeff Malec (10:46)
Right. Uber drivers.
Yeah.
Zed (11:08)
you
Jeff Malec (11:09)
And
do you see it when you’re trading in the option market? Like it used to be a thing that the vol would move, everything would move and now it’s no longer. So you stop trading off it, then the next guy, right? It’s almost like a self-fulfilling prophecy.
Zed (11:19)
Yeah, I mean, like, NFP morning always was a, you know, event that was priced in to markets. And when monetary policy is more involved, the tend to accelerate, you know, because it’s like, geez, because of this one number, they’re either going to cut or hike or whatever. Right. It’s like it has like very specific, you know, reasoning that causes the market to have significant movement. And the last basically six ish, the markets not only not moved.
on any of the releases that actually took place. But the market’s not pricing in anything that’s a non-normal movement on Friday. right. Volant bonds, Volant S &P, the whole market’s just like, yeah, there’s this number, but I don’t even know what to do with it.
Jeff Malec (11:54)
bonds or SMP you’re saying.
It sounds dumb when you say it out loud, like that the Fed was going to rely on this single number from a single like survey. But all right. My weight, that’s still a thing will be cash. Right. Like for what we average four and a half percent T bill rate. And a lot of wealthy investors I know are just happy to be in cash. And who cares if things are going up 25 percent in S &P and AI? I’m earning my five percent over there in the T bill market. And ⁓
Happy to call it a day. ⁓
Zed (12:31)
I don’t know,
cash seems pretty bad, Jeff. You know, there’s this thing called taxes. And your wealthy friends are only getting two and a half after they pay all those.
Jeff Malec (12:36)
Yeah.
Well, some of my wealthy friends are in Puerto Rico, so they pay no tax on the box trades in Puerto Rico. yeah, all right, good point. Taxes are still a thing, okay.
David Dziekanski (12:43)
Hahaha
Jeff Malec (12:58)
Directly pulled from Bill Simmons his nephew Kyle who’s kind of the unsophisticated guy apologies Kyle. So what’s your nephew Kyle thesis? I’ll go first here The unsophisticated or dumb sounding strategy that outperformed all other assets in 2025 I’ll go with silver
don’t have the actual stats there, but silver’s huge rally towards the end of the year, last two months, left gold a bit in the dust over those two months. Always kind of gold’s redheaded stepchild, little brother kind of thing. But more importantly, it has way more practical uses than gold. Gold’s the store of value. Silver’s actually used in solar panels and some other stuff. So my nephew Kyle thesis would be silver.
said we’ll let you go first and David gets last pick now. Or you get next and David gets last.
Zed (13:51)
I’ll
go with your just buy Korea. I think Korea is like this little corner that people don’t really pay attention to, but ultimately Korea is a great, we’ll call it risk barometer. They, a class of investors, really enjoy risk taking. And so when you have a global experience of risk on, they…
tend to lean into it even more. So even though the first four months of the year were a little choppy, ultimately this was a big risk on year. I mean, you can’t find any asset class that basically was red. mean, if you were invested, it worked, right? Like forget diversification, it’s just all green. And when you have that kind of risk on mentality, like the Koreans tend to do ⁓ a little bit more than the rest.
Jeff Malec (14:37)
You think that’s like a high beta basically play like you pay invest in Korean you get a that’s also playing into Europe and Asia finally outperform this year a little bit right last year
Zed (14:47)
Yeah, like international, you
know, right. I think the concept like everybody’s like, oh, man, international crush S &P 500. You’re like, S &P was still up, you know, high double digits here, like, you know, 17 odd percent. Like it’s a pretty darn good year. Yes. You know, our Koreans were, think, somewhere in the 70s. But I think, yeah, they I think they’re more of like almost like what maybe Bitcoin used to be or something like that. That’s like, is is money just flowing into markets like
that’s probably a market that’s going to do better.
Jeff Malec (15:17)
David, pick number three. Pick number six.
David Dziekanski (15:18)
Yeah,
my nephew, thesis is retail buying the dip. I think most of retail outperformed the institutional world buying the dip. think a lot of the institutional world is trending towards the trend following space. And I think 2025 was just a really difficult year for trend followers since most of markets moved on policy changes and not so much on just market mechanics.
And I think the institutional world has been waiting for about a decade for retail to get burned on just buying the dip. But again, we saw another year of just those emotionless retailers just like throwing money into the market on drawdowns and outperforming most institutions. So we’ll see if that can continue. I do feel that we will continue to have market drivers caused from policy changes more so than market mechanics. that would line up for the
the unabashed retail investor buying the dip to potentially continue to outperform.
Zed (16:15)
That’s the tip.
Jeff Malec (16:16)
I was one of those
punters in April, like selling puts on core weave and those kinds of Exercised and then it all worked out. Hey, here we go.
Zed (16:22)
That’s
a great one. Trying ⁓ to the exact numbers, but Citadel Securities produces, we’ll call it a weekly note. And because they see a lot of the flow, especially from the retail arena, they kind of just put together some of their summary stats. So it’s only their universe, but they’re 25 % of the universe. Yeah, exactly. But it’s something crazy. think they said that this is specifically ETFs.
Jeff Malec (16:43)
They are the universe.
Zed (16:49)
But retail was net sellers of ETFs only two days in all of 2025. And the week of the tantrum we had in April, it was like the largest inflows they’ve ever seen kind of thing. the data backs up David’s pick.
Jeff Malec (17:08)
Right. Which leads into my next segment is the overreaction bowl of who took the cake. And we’ll let David go first here of what was the biggest overreaction in 2025. I think we just mentioned two prime candidates.
David Dziekanski (17:21)
Yeah, I think ⁓ so my statement for the overreaction bull is be wary of a market that has run for three years in a row. I think you alluded to there’s a lot of institutional investors that quite frankly have made a good amount of money and have been increasing their cash on the sidelines and looking at historical context of like a three year bull market. But if you look at, for example, how U.S. equities, treasuries and the dollar traded in April, the world is treating
the US economy much more like an emerging market economy, quite frankly, as they should with the massive deficits we’re running. So I think people underestimate and underappreciate how big and long a rally can truly be when you’re running these massive deficits, especially in the face of all time highs and equities. So I think a lot of the institutional world sitting in cash, and I think Zed can talk more to this,
Jeff Malec (18:10)
overreacting to
deficits and valuations, basically you’re saying? Yeah.
David Dziekanski (18:14)
Yeah, exactly. You everyone’s been
calling the US overpriced for a long period of time. But if we’re just pumping all of this money into the system, that money has to end up somewhere.
Jeff Malec (18:23)
and we’re looking more and more like a banana republic. So I like that take, right? Like, hey, we should price this accordingly. We’re an emerging market.
Zed overreaction bowl pick.
Zed (18:31)
That’s not bad.
This is not as good as David. He’s winning these things. I would say probably the concentration story, because I feel like that’s what everybody’s talked about basically on every quarterly note for years now. And it just keeps cranking along. And ultimately, I think the story is their earnings concentration is growing at essentially the same pace.
So there’s a reason for this concentration in a handful of names. And I think I just got to pay attention to when do the earnings no longer say that’s the right story. Then it might actually be something to pay attention to. But when you’re a third of their earnings, I guess you’re allowed to be 40 % of the S &P 500.
Jeff Malec (19:16)
Doesn’t it seem like the institutional investors feels like they’re gaming that game, right? Like, hey, if we’re going to rotate out, we’re putting it back into one of the other mega caps, right? So it like net-net, it kind of keeps that game going when maybe they lowered their exposure on one leg of it, which there’s probably some fancy dispersion trade explanation for that. But that’s what I see.
David Dziekanski (19:31)
I also had…
Zed (19:31)
No,
You
David Dziekanski (19:35)
Also, I
think the largest companies in the US today versus in…
past high levels of concentration are so much more diversified. They’re almost economies within themselves. They have so many different lines of business and such a diversified revenue stream that it’s no longer just like a single offering as a company that’s floating to the top. ⁓ their ability to access credit better than anyone else, better than some governments in this world, you know, allow them to continue to
Jeff Malec (20:07)
Yeah, true.
David Dziekanski (20:10)
climb up the percentage points of how much, for example, the S &P top 10 make out of the, or make up the S &P 500.
Jeff Malec (20:18)
⁓ I think you guys both missed on this pick and the clear number one in this category is the Liberation Day sell-off right like talk about overreaction the mother of all overreactions we were Everyone was we were gonna die. It was 180 percent tariffs out of that came the taco trade, which I love Trump always chickens out Which became a thing which was back to you David of buying the dip right like the retail led the way there by this dip This isn’t real ⁓
David Dziekanski (20:44)
I was
going say I don’t know if I missed out or already used that answer.
Jeff Malec (20:46)
Yeah, all right, true.
Zed (20:47)
Ha ha ha ha ha ha.
Jeff Malec (20:49)
I don’t think you said liberation day, so I’m going to sneak it into my answer. All right. The guess
David Dziekanski (20:51)
Fair.
Jeff Malec (21:05)
I guess we’re all pricing this in now. What’s a consensus trade that became crowded and then failed to play out? I think we also just talked about that, so that’s going to get tough. We’re to get tough on the
bottom end of this here, but I’ll go with, and probably going to steal one of your picks, but the aggressive Fed cuts, right? I think everyone was in that trade bond markets could reflect that and didn’t really come to pass. We had the cuts, but what were they calling it at the end there? A hawkish cut, which doesn’t make sense, but right. It was a cut with hawkish language of like, Hey, we’re not doing these. We’re not going back to zero anytime soon.
Zed (21:34)
You
Jeff Malec (21:39)
That would be mine and I think I’ve lost track but I think who’s next? Zed?
Zed (21:43)
Sure, I’ll stay same category, but I’ll go with long end rates. I think that was a very crowded trade to be short the long end. obviously the reasons are we’re running deficits, we have all this debt, we’re continuing to be fiscally stimulative, all these things. And the tenure ultimately was boring the entire year.
Jeff Malec (21:49)
Mmm.
Zed (22:08)
fun wiggle was the snap rally, snap sell off that first week of April and otherwise been incredibly range bound and boring. So yeah, I think that was a very common trade to be short long end. And ultimately they got, you didn’t work.
Jeff Malec (22:23)
And you’re saying short rates there thinking long term long rates would go down long the price.
Zed (22:28)
Long rates go
- Yeah, price down, yields up.
Jeff Malec (22:31)
Yeah, yeah. Got
it.
David Dziekanski (22:32)
My answer will be similar to the reason why we have this concentration bubble, but it’s the never ending wait for the rally in small caps. think everyone has just been for the last 10 years waiting for this rally to come. But I think as we alluded to before, these larger companies are so much more advanced. They have so much better access to credit. They actually do have earnings like much of the much of the Russell 2000.
doesn’t have earnings. And I think so many people have just been waiting for this bounce back in the Russell 2000 that just never seems to come. And, you know, there are definitely some phenomenal small cap companies, but there are also a whole lot of zombie companies that the fact that we keep pumping so much stimulus into the economy almost makes it hard for these companies that should be, should fail to fail and fall out of the Russell 2000.
Jeff Malec (23:22)
But they also traded more this year, last year. I keep saying this year, 25. Any listeners if I say this year, I mean last year. 2025. But they were trading almost in lockstep with the 10-year, seemed. Anytime there was a big rates went down, the Russell was rocking and vice versa. So it became more of just a rates trade based on what you’re saying. They don’t have access to as cheap a capital, and it really hits their balance sheets and their profits.
Alright, where are at?
somewhat related here. I’m going to pass on that one. That one’s too good. this one’s fun. All right. This would have been front page news in 2019 story. What was a major event that barely registered because markets have become so desensitized? I’ve forgotten who’s first. I’ll let Zed go first. I’m going to start writing it down. Zed.
Zed (24:05)
Alright, I
think this one’s easy, so I’m glad I get to go first. The government shut down. mean, did anybody care at any point during that entire saga? Right, well I feel like even when you walk past TV and they had some news channel on, they weren’t even talking about it. Those people are desperate for daytime entertainment and they were even bored of it.
Jeff Malec (24:14)
Yeah.
We’re about to have another one, right?
Which is what, why, who knows?
Zed (24:32)
I think everybody understands what happens with it. Everybody eventually gets their paychecks. They don’t really, really turn off that many services. Keep on carrying on.
Jeff Malec (24:42)
Yeah. David.
David Dziekanski (24:44)
My answer
would be the perpetual calling for the end of the dollar dominance. I know the dollar was down probably 10, 11 % versus a basket of international developed currencies and it had run up a lot in the last couple of years. So we really just retraced that what we had earned back or what we had gained in the last couple of years. And while we do believe all currencies are going to devalue against scarcity assets.
there really is no better horse in the race on the currency front. Like whose currency do you feel more comfortable holding right now over the next three years than the US dollar? I’m not saying the US dollar is good. I think a lot of assets will outperform the US dollar. I just don’t necessarily know if the Euro is going to outperform the dollar, for example, over the next five years. Yep.
Jeff Malec (25:27)
cleanest dirty shirt ⁓
thesis. I was reading some conspiracy that this whole Venezuela thing is just a move to prop up the dollar. Like if they were getting oil into China, that would sell in one terms, would destabilize the dollar. to your point, seems like just another let’s unravel that conspiracy and the dollar’s going to die.
David Dziekanski (25:46)
Following on that conspiracy theory, I also have read that it’s going to make us more likely to push our might with the Middle East, right? Every time there was geopolitical conflicts with the Middle East, the price of oil spiked. So what did we do? We opened up a pipeline to oil elsewhere. So I actually think it could actually add to more geopolitical unrest because now any future conflicts with the Middle East shouldn’t cause oil to spike as much.
Jeff Malec (26:12)
But that would make it less volatile now. Yeah. Yeah. And who is it up to me? So this would have been news in 2019. I’m going to go with all the trillion dollar companies. How many do we have now? Right. Like I remember when it was like, oh, Apple might become the first trillion dollar company. And now we have Nvidia went from nowhere into I don’t know what they’re at, five trillion. So
David Dziekanski (26:14)
That would.
Zed (26:19)
Yeah, see you.
Jeff Malec (26:36)
That’s to your dollar story too, maybe that doesn’t mean as much because that isn’t worth as much in today’s terms. But that would have been a huge story back then that America has one company that’s larger than many of countries GDP in the
David Dziekanski (26:49)
We’re pretty close to potentially our first almost trillion dollar IPO, right?
Jeff Malec (26:54)
Who’s that?
David Dziekanski (26:54)
SpaceX. They’re talking about SpaceX’s ⁓ IPO in the $1.5 trillion range, which that has to be an all-time record.
Jeff Malec (26:56)
yeah, yeah, that’s the trillion.
Yeah.
Zed (27:02)
Better issue, little float.
David Dziekanski (27:04)
Go ahead.
Jeff Malec (27:05)
All right, next. The false idle report, the false idle chart, indicators that everyone watches that completely stopped working or gave misleading signals.
I’m going to go with the gold versus S &P, managed futures versus S &P, anything versus S &P basically, as so blown out. Well, gold’s opposite example. But to me, everyone who was like, oh, this is undervalued versus commodities, right? Undervalued versus S &P, we’re going to buy commodities, hasn’t been working. Hasn’t worked at all. Who’s next? Zed, go for it.
Zed (27:40)
I don’t know that’s necessarily false idle, but I’ll just go with volatility in the US. So volatility ultimately was just too high the entire year, frankly. It was way too high starting in kind of early February all the way through the end of March. Yes. we had implied volatility. Then of course, yes, we had a chaotic, we’ll call it 10 trading days.
Jeff Malec (27:58)
We’re talking implied or realized? Yeah.
Zed (28:06)
But then throughout that, the rest of the year, really, really elevated volatility in comparison to what was actually happening day to day in markets. And I do think a lot of that was, we’ll call it, know, institutional style investors got a little risk reduction in April and kind of never got back in. And so they were constantly in this seat of being light risk relative to benchmark.
And nobody likes to, you know, sell when it’s down and then buy when it’s up because then they could get the double whipsaw. So I think, I think they were using options a lot, uh, the rest of the year for what we’ll call a directional positioning, which has kept volatility very elevated in comparison to it should have been.
Jeff Malec (28:52)
Do think they’re buying, they’re going long via options was depressing realized basically?
Zed (28:57)
I don’t think it was necessarily affecting realized, but it was definitely elevated and implied in comparison to what it should have been.
Jeff Malec (29:03)
Got it.
Right. They’re bidding it up to get in versus spending all that on getting for real back in.
Zed (29:09)
Yeah, just
buy, just buying stocks. Yeah. And I think that’s why like out of the first two days, a lot of the, we’ll call it really out the strong outperforming names and sectors rallied like crazy the first one, two, three days of this year. because again, if you’re lightweight and they did really well, that means you’re lighter weight and you’re using options essentially to stave off that experience before buying until you got to reset the track record.
Jeff Malec (29:12)
Yeah.
Zed (29:34)
And sure enough, like, holy cow, like, those names moved.
Jeff Malec (29:37)
So, right, coming in 26, let’s get back to, so does that mean, does that mean in your book, like maybe we see more normalized vol environment in 26?
Zed (29:40)
Let’s get back to neutral.
Yes, I think so. And you’re already seeing it in plights. They’ve collapsed in the last, you know, basically two weeks relative to that excess spread that they were carrying for much of 2025.
Jeff Malec (29:57)
David got a false idol maybe
David Dziekanski (29:59)
Yeah, Falsidle
is…
fundamental investors investing on, for example, PE ratios, the Schiller PE ratio. I think we saw a run in value when interest rates first spiked in 2022 and so 10 years of growth outperforming everyone said, yes, value is finally back. But that has since fallen by the wayside again. And I think we talked about it earlier, like money has to find a way. And so if we keep pumping so much money into the system, people are choosing to invest in companies that are actually growing all
albeit are expensive, more so that companies that don’t have a lot of growth, even though they have maybe significantly more attractive like price to equity ratios. And I’m surprised Hussman still has any of his hair left.
Jeff Malec (30:42)
I don’t know why I thought you were gonna answer ETH there. Is there like the Bitcoin-ETH relationship? Did that break down last year?
David Dziekanski (30:48)
Yeah, so one of the best Wall Street trades for about a two year period was going long Bitcoin and short ETH and that’s reverted a little bit last year during the Genius Act and JP Morgan issuing its stable coin. So I don’t expect that to continue going forward. I think there’s real validity in some of these other cryptocurrencies. You you related Bitcoin to gold. I look at Bitcoin to gold similar as ETH to Bitcoin. Bitcoin and gold are pure store of values.
While silver might have some store value tendencies, it’s also a technology play just like ETH is a technology layer for things to be built upon. So while that did do really well last year, if you’re trying to find a pure store value play, in our opinion it’s still Bitcoin and gold that are the purest forms of store values, whereas ETH, silver are more driven by GDP growth because they are actually part of the growing economy.
Jeff Malec (31:41)
And who was it? Tom Lee or someone famous using air quotes famous like that came out with they’re like, if this is answer. And I think it went down like 30 % the day starting the day after that.
David Dziekanski (31:51)
Right.
Tom Lee had a hell of a year in 2025 though, launched a multi-billion dollar ETF firm and chairman of BNMR. I don’t know if he would do the BNMR again if you could ask him behind closed doors, but definitely a good year for Tom Lee.
Jeff Malec (32:07)
What was that? I’m
not understanding what you’re saying. The BNMR? What is that? Is the ticker?
David Dziekanski (32:12)
BMNR is the publicly traded company that is essentially a DAT, a digital asset treasury company that holds Ethereum. And the thesis was at least you could earn some yield on Ethereum. So it could have been considered a better digital asset treasury company than just pure Bitcoin. We all know at some point there’s the C-level executive. Exactly.
Jeff Malec (32:20)
Mm.
It was like a micro strategy copycat kind of Got it.
Which is just, what are they now? Strategy? Just strategy?
David Dziekanski (32:40)
Just strategy, yeah. Next year there’ll be strat, so.
Jeff Malec (32:43)
Alright, next. is the dog that didn’t bark. So, widely predicted crisis or blow up that was inevitable, felt inevitable but never happened.
I’ll go first here. The inflation, Inflation’s rampant. We got to get under control. Can the Fed do the perfect landing? Looks so far like sort of they did. Could argue grocery prices, healthcare, things are still a little bit out of control. But overall inflation, right, grains were moving lower throughout. Metals finished strong, but were mixed throughout.
So at least in the commodity markets, from my view, inflation wasn’t really present. I’ll let David go second here.
David Dziekanski (33:20)
Yeah, I’ll go next. I think the response to Liberation Day, obviously, we talked a little bit about how the markets responded, but I think many people expected almost a boycott of the U.S. economy in response to tariffs. And I think that was never really truly seen or felt. You saw businesses expecting massive drops in tourism in the U.S. And while there was a little bit of that in the very short run, that seems to have gone by the wayside oftentimes, in my opinion, in many cases, because
However rash he might have gone, approached it and getting it done, we were responding to tariffs on the other side. So I think a lot of people walked back the statement that there was going to be a complete boycott on traveling in the US and doing business with US-based companies.
Jeff Malec (34:03)
Zed, Dogg, and then Bark.
Zed (34:04)
Yeah, I’ll go with like similar thing, but like specifically the tariffs causing, you know, a recession or problems like whether it was inflation or things along those lines. I think the like, we’ll call it like the silly math behind it of why it was less of an aggressive problem than what people are originally thinking out of the gate is like, you know, I’m sure everybody here has seen shark tank at some point in their life. And most of that is consumer products that are
likely actually built over in China who obviously had the worst wrath of all these terrorists. And the panel always asks, what do you sell it for? And they’re like, we sell it for 100 retail, $80 online. And they’re like, how much does it cost you to get here? And they’re like, it’s $20 landed. And you’re like, OK, so ultimately, when you go to this shop, you’re paying $100. But it costs them $20 landed, which also
contains the transportation cost. So maybe that a hundred dollar thing, the actual cost to make it is, you know, 10%, 15 % of the whole thing. So when there’s a 50 % tariff and only 10 % of it, you’re like, well, the, the price that you know, goes up five. And I’m pretty sure everybody along that chain probably ate a little bit, right? So it’s like there, there’s more space in there for a lot of the products and they like, we’ll call it heavy tariff arena space.
Jeff Malec (35:19)
Yeah.
Zed (35:26)
⁓ versus that the headline where you’re paying what actually was getting tariffed
Jeff Malec (35:31)
So to paraphrase you, this $100 helmet cam to go skiing is not really going to be $200 because of tariff. Only $10 to $15 of that is the tariff portion. I did just get a new helmet cam, by the way. No, it might have been a little more.
Zed (35:41)
portion. Easier to digest. It was only a hundred bucks. I’m impressed.
Jeff Malec (36:01)
All right. Almost there. Are we sure this is a good? Are we sure this is good? Right. This is Bill Simmons is like, are we sure the bears are good? Which I could argue here and I hear that sentiment. So a rally, an asset class, anything you want to think of, are we sure this is good?
⁓ I’ll start because I doubt either of you will say this and just which I’ve been saying for years, but private equity Right. Are we sure this is good? I’ll give a honorable mention of private credit Are we sure this is good thing? It’s worked out great for a lot of people, but when does the music stop without any data or science there? I’m just gonna throw that one out as a draft pick We’ll let David go next these can be rhetorical you don’t need to back it up with any data
David Dziekanski (36:39)
Yeah, I’ll add on to… I’ll add on… I’ll add on… Yeah.
Zed (36:43)
You
David Dziekanski (36:44)
I’ll add on to that if you was a blue owl that came out with the closing fund with their private credit and traded down about 40 % on day one. So I think that the markets tend to agree it’s rebounded a bit since. But you know, I think the name of the game has been if you’re a private equity firm in the last couple of years is great. Now we got to create a private equity sleeve to fund our private equity firms that we can’t that we can’t sell. So I’ll
Jeff Malec (37:04)
Equalitza.
And you saw
private equity took EA Sports private. So I think you’ll see more of that. Like we’ve run out of private companies to buy. So we’re going to start buying public company. Like you have to change your name then.
David Dziekanski (37:12)
Yeah.
So my, we sure this is good will be the end of the end to one of Zed’s earlier comments of the worry of long-term treasury rates not really blowing out last year. I think this could be there. could actually see yields spike just because again, our deficits and debts are at such massive levels and you’re seeing central banks ownership of US-based treasuries drop significantly. So sometimes people are right on the trade in just early.
think that people have kind looked past the fears of yield spikes on the Treasury markets, but it is something that you could actually see occur in the future just because we have a mismatch of supply and demand. There’s just a massive amount of supply and a shrinking demand for those assets.
Jeff Malec (38:01)
And real quick before you go, Zed, what’s the outcome of that, right? If it’s basically you’re saying the market versus the Fed. If the Fed’s like, hey, we’re trying to cut and spur things, but the bond vigilantes are like, no, you need to pay more. This is way too risky. Like that’s causing bond market volatility. That’s causing equity market volatility. Run to crypto.
David Dziekanski (38:18)
We pissed that off so much, he left.
Jeff Malec (38:20)
Any one liner what that will do to the market if that happens? Could do.
David Dziekanski (38:26)
It would be very bad, think, if 10-year rates get to 5 % or higher, a lot of bad things happen. think we avoided…
real issues from the market from rates being so high because they weren’t that high for that long. They came back down a little bit. But I think, you there’s only so many people who can put all cash offers on their house margining their equity accounts. At some point, you do have to rely on people actually getting 30 year mortgages on assets that are cheaper than the actual value of that house in the rental market. And so if you see rates spike
Jeff Malec (38:40)
Hmm.
David Dziekanski (39:01)
much further from here that mismatch between the cost of ownership versus the cost of renting just continues to erode.
Jeff Malec (39:08)
That’s why they’re
going to do the 50-year mortgage. pay. Just save a couple hundred dollars a month. It should work out fine, those extra 20 years. ⁓ Sorry, Zeb, we took all the good stuff there for you.
David Dziekanski (39:11)
or yield control, Or yield curve control.
Zed (39:11)
You
David Dziekanski (39:18)
Yeah.
Zed (39:20)
No, that’s good. No, as
I say, this is not too familiar, but I just wrote my year on note on it. So I’m still going to lean in. on your page, you’re calling it fiscal addiction. But ultimately, it’s in my opinion, like, can we continue to finance growth? And to me, you know, your your big three cohorts are government, corporates and consumers. Government is obvious. You’re like, we’re not raising taxes. So like, this is all borrowed.
to finance growth and ultimate.
Jeff Malec (39:45)
They just put out a
50 % increase in defense spending.
Zed (39:49)
Yeah,
and right now, forget anything going into the future, we went from pre-2020 for like 30 years, government spending being around 20-ish percent of GDP, to over the last five years, it’s almost 25. So it’s, you know, it’s become a more meaningful portion of GDP. like, forget what the right number is, we just know that the government is more important in terms of growth and that they’re borrowing to achieve it. Corporate.
Jeff Malec (40:16)
And you’re saying that’s only
one leg.
Zed (40:18)
There’s
a one like corporates, uh, you know, are going to enter a refinance cycle and, and a debt finance growth cycle here. Um, it’s been pretty boring since 21 in terms of corporate issuance. Uh, but that’s about to change in 26. So it’s like your, your high yield guys normally can issue kind of like three to seven year paper. Like they have to refi all of that low coupon stuff from 2021 coming up here. But on top of that, like.
the big beautiful bill is definitely trying to get folks to invest in infrastructure and R and D and that’s coming from borrowing ultimately. So we all know the AI stories. That’s going to be a big version of it, but there’s going be a lot of corporates essentially borrowing to build something, to go ahead and fully depreciate it year one. So that’s going be where a lot of growth is coming from is corporate is borrowing. And that ultimately the consumer, everybody knows that the
you know, elderly, really wealthy folks ultimately are spending money based on asset appreciation. So, you know, they’re financing growth from the market going up, but the lower kind of half of well-to-do folks are also financing expenditures via market appreciation, which is very different prior to 2020 versus post 2020. So ultimately, like all the components of GDP are like
The market better stay open or else consumption can collapse from all of these various folks.
Jeff Malec (41:48)
You’re
saying the credit market’s better.
Zed (41:51)
Yeah,
you better be able to keep on issuing debt or else you’re gonna you’re gonna run into problems and and ultimately it should be that’s all like it’s all tied to the same thing, right? So everything should likely be more correlated We should have all these like events where nothing nothing nothing happens like shoot like something seemingly was small happened But get large movement out of it because it’s so interconnected from the same source. I can we continue to finance growth?
David Dziekanski (41:56)
Thank
Jeff Malec (42:17)
sure it’s a good thing to have all three legs of the stool be based on credit.
Zed (42:21)
It’s prob- probably not lovely.
Jeff Malec (42:24)
The consumer too, like do
you see those stats of it was, I’m going to make it up, but it was something like 40 to 60 % were using the like pay later, you know, a firm, all those things that are directly on the website now. Like, oh, sure. Like I don’t need to buy this. And you gave an interesting nugget there to me. the, a lot of the, maybe it was, I’m just like stock loan and borrowing against portfolios. A lot of those tools maybe weren’t available when the boomers were.
in their 30s, 40s, right? They were actually spending actual cash versus, so what does that do to portfolios moving forward? Or maybe they’re like, either they’re levered and they have to get out quickly, or they don’t have as much compound growth and they’re not as wealthy 20, 30 years in the future.
Zed (43:03)
No, a variable
prepay forward used to be for 100 million plus. Now you can just go into Schwab and put on a collar and take out a loan at Sofer plus 50 basis points if you have half a million bucks in the account. Anybody can use these tools.
Jeff Malec (43:17)
Yeah, hey.
But you know what I’m saying? What does that do for future compounded growth? Like we’ll have way less multi-deca millionaires in the future because they’ve been paying Schwab instead of paying themselves.
we’ll finish it up with the… I got two more. One, the conversation nobody wants to have. We’ll let you keep going there,
Zed (43:46)
All right. I’ll go with affordability crisis because the solutions to it are generally not great. Right. It’s ultimately, you know, you need to the prices to go down to make things more affordable for the most part. But I’ll tell a story. You know, even even the youths like real youths understand this. So we were running errands this weekend and my six year old Isla is sitting in the back of the car and she just out of out of the blue goes,
How much is a house? And my wife, Neve, goes, Isla, it’s expensive. It’s like a million dollars. And she pauses for a second and then a very, you know, serious, calm voice just goes, you gotta be fucking kidding me. So I think, you know, that even sounds crazy to a six year old.
Jeff Malec (44:25)
Hahaha!
David Dziekanski (44:25)
Hahaha
Jeff Malec (44:28)
And really, that was on the low end. It’s like three million dollars.
Is she allowed to throw the F-bomb around like that as a six-year-old?
Zed (44:39)
She’s not allowed, but
she knows how to use it. That’s like, it’s like a once a quarter thing when it’s like she’s truly stunned.
Jeff Malec (44:47)
all right, love it. David, what’s,
⁓ nobody talking about that they maybe should be talking about?
David Dziekanski (44:52)
My response to that will be that the Fed still has the tools in place to handle the extremes of the business and market cycles. Big believer that, you know, the Fed has tools to handle and curb corporate and banking greed, but they’re just ill-equipped.
when that overspending is coming from the government level, they’re kind of just pushing against the string because at the end of the day, they’re always going to respond, in my opinion, first and foremost to unemployment. So it’s really hard to curb euphoria from the Fed when the government is the entity that’s adding so much liquidity to the markets.
Jeff Malec (45:27)
The euphoric one. ⁓
Mine is the AI paradox that I can’t believe more people aren’t talking about that drives me crazy. wake up in middle of night. It’s because I got a deck to invest in some AI anthropic thing. And the slide on there was like, this valuation is based on saving US companies $5 trillion in labor costs. $5 trillion.
Right, which is I think the whole labor market’s like 18 trillion or something. So I’m like, wait, who thinks taking five trillion out of the US labor market is a good thing? So to me, there’s a paradox. These things are right now priced as if they’re going to save all these companies five trillion. So if they succeed in that, the economy loses five trillion of spending power. If that’s all baloney and we don’t get those productivity gains, those things are way overpriced. So either you’re going to have the market fall
50, 60, 70 % based on them being overpriced or fall 50, 60, 70 % because you took all this money out of the economy. So, yeah, please.
David Dziekanski (46:24)
If I take the other side of that table, I would say, well,
it’s not good for participants in the economy. We’re seeing such a high percentage of spending come from the top 10 % that if it continues to cause asset prices to inflate, they will continue to have funds to spend. while 90 % of the economy might have little to no disposable income and will have serious wage pressure because of AI and face potential
unemployment because of AI, ⁓ theory, could asset prices could still float up because of it. And therefore spending from the top 10 % could continue to boost overall spending in our economy, even though it’s really imbalanced from a socioeconomic perspective.
Jeff Malec (47:05)
Like what are they buying at that point? They’re gonna buy an aircraft carrier? Just at some point, it’s like how many Aspen, Monte Carlo, how many houses can you have? Yeah, a lot, yeah. No limit, no limit.
Zed (47:12)
You
David Dziekanski (47:14)
Have you met them? There’s no answer to that question. So there’s no limit.
Zed (47:21)
And I
think, think adding out of that, I think the sad answer, to be honest, AI is probably best at replacing, we’ll call it 20 to 35 year old college grads, right? And so those in theory were the lighter wage earners at that point in their career path. So even though they’re, you know, we’ll call it quote unquote white collar jobs, like the wages lost is less substantial than you would think.
It’s not your average lawyer making 300 grand a year. This is the paralegal, that kind of thing. So it could take a lot longer before you see the problems of that.
Jeff Malec (48:02)
I don’t know, But I appreciate the points.
Okay, we’ll finish up with two things. One, best place you ate this year. Best restaurant, hot dog at a game, taco stand in Costa Rica, whatever you got. Zed, you probably got one teed up here, so I’ll let you go first.
Zed (48:24)
I think my favorite meal last year was Valhalla off of Division. I’m usually not like the tasting menu guy. Yeah, but it was, it’s very like, it’s actually like different and like good tasting menu, more just like, it’s a course meal rather than like, you know, a little bite of a bunch of things. But I it was really strong, fairly priced, nice people. That was probably my best one.
Jeff Malec (48:33)
I haven’t been there yet. You sent it to me,
Nice people
Zed (48:50)
Yeah, it was a fun experience.
Jeff Malec (48:53)
David, you
got one or you want me to go next?
David Dziekanski (48:55)
Nah, I’ll go first. I can’t recall the name because there’s a small shack on the side of the road in Costa Rica, but man, the fresh fish and ceviche you can find down here. You sit down, they’re like, this was caught two and a half hours ago. You just, that doesn’t exist in the U.S. where you get that kind of ⁓ fresh fish on your plate. So not as fancy as Zeds, but I think just as good.
Zed (49:00)
you
Jeff Malec (49:00)
Nice.
No.
Zed (49:13)
Ha ha.
Jeff Malec (49:14)
Does the ceviche, does the citrus acid have time to cook the fish in the two hours? Yeah. Yeah.
David Dziekanski (49:19)
So far so good, I haven’t gotten sick yet.
Jeff Malec (49:22)
Mine will be half humblebrag because we were in the Dolomites over after Christmas to New Year’s there. What was it called? Rufugio Birds, B-U-R-Z, I think. But up at the top of a gondola, sitting outside on these tables, the Alps in the background, and like the best pasta and pizza you’ve ever had right there on the mountain. So Rufugio Birds, I believe. And I’m probably butchering the name.
One more fun one, the best movie or show that you watched this year, last year. Eventually by the end of this pod I’ll get the last year, this year, correct. I’ll go first with the…
I’m gonna go Stranger Things finale, season five. I was expecting, I was a little worried about it, but it came out, it hit. Yeah. Who wants that grenade, anyone?
David Dziekanski (50:06)
I’ll give a two-part answer because I don’t actually watch a lot of movies these days. I just don’t have a lot of time. in the realm of sports, I grew up in New York City. I’ve been a diehard Knicks fan since I was a kid and we just have won nothing. So the Knicks just won the, what, an intra-season cup. that’s the closest thing, the Emirates Cup, that’s the closest thing I’ve felt as a winner, as a Knicks fan since the Larry Johnson four-point play back in my childhood. And then honestly, I would say…
Jeff Malec (50:15)
⁓
Yeah. The Emirates Cup. Yeah.
David Dziekanski (50:32)
some unbelievable battles on Twitter. think they’re much better than the Netflix or some series watching ⁓ Cliff Asness and Michael Green go back and forth once every six months on Twitter is ⁓ better than Netflix. So yeah.
Jeff Malec (50:36)
Yeah.
That is good.
You weren’t gonna, like the Knicks made a hell of a playoff run too. That was exciting. Yeah, but what do you got, Zed?
David Dziekanski (50:50)
It did, yeah. Still failed, but…
Zed (50:54)
Yeah, it was funny. was with our head of sales Will last night and we spent like 45 minutes talking about how terrible movies have been. So I more I like the like other side that feel like I haven’t like caught anything good. So I’ll just say the one that I probably was forced to see the most this year, which is K-pop Demon Hunters, because my girls, I think had that on a hundred times in the last two months.
Jeff Malec (51:14)
Yeah
God, thank God my kids are older and I didn’t have to endure
that. Okay, alright and then last I’ll just wild card anything you guys want to wrap up with 25, what you’re looking forward to in 26, which I know you both have something you’re looking forward to together. So take it from there.
Zed (51:22)
You
David Dziekanski (51:36)
Yeah, very excited to kick off partnership with Convexitas on an income stacked lineup that we have launching on January 20th.
taking the concept of return stacking and applying it to the derivative income option space. That’s something we’ve been in the works on for about eight months. So very excited about that. And if you want one random market prediction, I would say I’m still so confused that Gen Z is enamored with home ownership. I think anyone who owns a home without a 30 year mortgage before 2022,
Jeff Malec (52:05)
Hmm. Yeah, like for the birds.
David Dziekanski (52:12)
is probably pulling their hair out. I don’t have any hair to pull out but I can pluck eyebrows you know. So I think 2026 is the year that hopefully I think Gen Z will stop being enamored with ⁓ home ownership.
Jeff Malec (52:23)
Well, I’m with just like, I have a great rate like from whatever 16 or something, right? But it’s like shit breaks, right? Like crap, this house is getting old, things break, I gotta replace it, I gotta do this. Who do you call? Like that’s the AI play, like become a plumber, become an electrician, you can’t even get those guys anymore, right? You can’t AI your way out of a plumbing problem. So anyway, I’m with you on that one. Zed, how about you?
Zed (52:48)
Well, I’d say I’m just very hopeful for Saturday night that it’s at least an entertaining game. My optimism is low. I just don’t want it to be a blowout. So hopefully ⁓ the cardiac bears at least make it very entertaining.
Jeff Malec (52:52)
Yes, I was hoping you’d say that.
Come on, man. Your optimism can’t be low. I’m high. That was one of the most fun times I had in all of 25 was my brother and my son and my daughter came a little late. And we were in a bar over here on Southport. I don’t know why they were just letting kids in the bar. But they did. And for that Packers Overtime win, the entire place was bedlam. Just random people hugging, jumping up and down.
Zed (53:05)
Alright
Jeff Malec (53:28)
Good time. So we’re confident.
Zed (53:29)
No,
most fun football game probably ever for a Bears fan.
Jeff Malec (53:33)
It was good.
I’m going to follow up on the derivative income, because are we sure that’s a good idea? Right? Like, a lot of people have gone against that of like, well, you’re just calling it income, but it’s option selling. So assuage my fears there of like, are we sure that’s a good thing? Which is probably another pod, but in two sentences.
Zed (53:38)
you
Yeah, now like the two sentences are, you know, definitely got to think of it as derivative income, not yield, not income. Like it is its own category. Like you’re, it’s more like credit spread risk. Like you are, taking risks to hopefully earn, you know, basically a volatility risk premium, like some, some mispricing in the market off of that. But then like the second sentence is, what matters the most is total return.
Jeff Malec (53:59)
Yeah.
Zed (54:14)
Right? know, like, so always focused on anything in that category. well, forget the distributions. What was the total return in that category? And was that total return appropriate for the amount of risk that the strategy was taking?
Jeff Malec (54:27)
But I think that second part’s the part most retail doesn’t understand. What risk are they taking on? And some of those products are mislabeled, think, or mismarketed of like, ⁓ it’s marketed as a yield and a bond when it has much more risk than that.
David Dziekanski (54:32)
Yeah.
Yeah, and I think just having distribution rates that, as that alluded to, far surpassed
the ability of the fund to actually generate in total returns. so I think a lot of the assets that have gotten the flows have given a little bit of a bad name to the whole category. But I think there’s a lot of good managers out there. We aspire to be one of those up and coming good managers. But back to the affordability crisis and looking at private equity and the real estate market, what else are you supposed to do besides for just own stocks or just own the S &P 500? Let’s say you’re a 55 year old, 65 year old,
approaching retirement. Are you just going to sit in ag? Are you going to just sit in TLT? Are you going to take your assets, try to buy a business or a rental property and compete with the institutional world on the rates they get? So I think if done and constructed well, it gives a level playing field from institutions to an individual allocating five dollars on cost of financing and structure. Now, as you alluded to, there’s probably been more bad than good, but there’s definitely good ways to do this that, you
give you at the very least a passive managed distribution stream. I won’t call it a return stream or an income stream, ⁓ but some sort of somewhat assured payment that hits your bank account on a weekly or monthly or quarterly basis.
Jeff Malec (55:49)
Yeah, yeah.
We’ve to do another part of that because I don’t understand the nuances of that of those distributions versus the total return versus the sounds like some people are gaming the system on that.
David Dziekanski (56:04)
And if
on that comment of gaming, I think the gamification has been retail had no other way to project what they would return on this other than to take the distribution.
multiply it by 12 and say 80 % I’m gonna make 80 % no, no, no, no, no, you’re gonna get distribution rates at an 80 % rate on a declining NAV assets the end of the day you might end up with just 15 20 25 percent total returns So I think just the inability to differentiate Expected total returns versus expected distributions was the problem because what they were missing was what is the expected total return of that strategy the underlying asset class and
Jeff Malec (56:21)
I’m in.
David Dziekanski (56:46)
and the added premium generated from the option side of it. And I think that would have totally changed their math and many, fewer people would have mortgaged their house to go all in on a single stock derivative income strategy.
Jeff Malec (57:00)
Yeah, I think I wrote a blog post on MLP’s once called, the yield, right? The price was down like 90%, but they’re getting an 11 % yield. They’re like, yeah, but the yield. I’m like, yeah, but the price. What’s wrong with you? Look at the price. All right, guys, this has been fun. Good luck to your Knicks. Good luck to our Bears.
Zed (57:13)
You
Jeff Malec (57:19)
Zed’s not confident. I’m going to give you a fully confident at home. Caleb’s going to deliver. This is going to be like a first nail in the coffin of the Packers for the next 10 years. They’ll probably fire their coach after this. I’m going to go.
Zed (57:30)
Alright, so what’s your score prediction then?
Jeff Malec (57:37)
- They’re gonna have like some botched, yeah, they’re gonna have some botched extra point or miss field goal or something. yeah, 2827.
Zed (57:37)
wow, nail biter.
Alright,
I’ll say 2419 bears. That’ll be my random one.
Jeff Malec (57:49)
Yeah.
Come on. David, what do you think as a mix fan?
David Dziekanski (57:53)
I can’t even give a prediction on this. would say I’m ill-equipped to do it. So I’ll let you guys do it and we’ll see what happens.
Jeff Malec (58:00)
Alright and last bit, how long are you in Costa Rica? Do I have time to get down there and do a quick surf session with you?
David Dziekanski (58:04)
You do, absolutely. I probably will travel back to New York once every 14 days for a couple days to take in any in-person meetings I need, but I’ll be here probably until future proof in early March.
Jeff Malec (58:16)
Love it. All right, guys, thanks soon
Jeff Malec (58:23)
All right, that’s it for the pod. Thanks to Jeff Berger for producing. Thanks to Zed and David for coming on and being willing to have a little fun. We’ll see you next week with Robert Mullen of Marathon Resource Advisors. Have a great week. Go Bears. Peace.
