[00:02:14]Adam Butler: No complaints.

[00:02:15]Mike Philbrick: Fantastic.

[00:02:16]Corey Hoffstein: Someone who's allergic to forecasting, this makes me deeply uncomfortable. So excited to get into it, Rod.

[00:02:22]Rodrigo Gordillo: Me and you both buddy. Me and you both, but you know what? We got to get you to something. We got to give you something to talk about on Thanksgiving Eve, right? Tomorrow's a big day, you cooking?

[00:02:31]Corey Hoffstein: I am, I'm cooking a little, some, stuffing, is what I'm bringing to the party.

[00:02:35]Rodrigo Gordillo: What people don't know is that I've been to a Corey Hoffstein Thanksgiving cookout, and he does a fantastic job of stacking spices on top of spices. Not so much this year right here, though, you're doing a little bit less, because of the children.

[00:02:51]Corey Hoffstein: Yeah, my wife aptly pointed out I could not sit in the kitchen and drink bourbon all day while she took care of the children. I will be chipping in with childcare this year.

[00:03:02]Mike Philbrick: Guy’s got to cook.

[00:03:03]Rodrigo Gordillo: I love it. I love it. All right, why don't we get into today's special programming. We're going to do a bit of a fast pace. We're going to get everybody's opinion on what products they like the best. Everybody's going to get about six minutes to talk about their best product ideas. And then it's, for the rest of the four minutes we're going to, or more, we're going to try to ask some questions, maybe poke some holes in the thesis, I don't know, whatever comes out of that. But let's start with the elder statesman, Mr. Mike Philbrick. I can probably guess what you're going to be talking about. You've been around the Bloomberg and podcasting rounds, talking about a little bit of global macro stuff. Why don't you wow us with what your view is for…

[00:03:53]Corey Hoffstein: You countdown as to when the six minutes starts? Mike?

[00:03:56]Mike Philbrick: Yeah, sure.

[00:03:58]Corey Hoffstein: All right. Ready?  2, 1…

[00:04:02]Mike Philbrick: Perfect. Obviously my topic is RSSX, that is the Return Stacked® Stocks and Gold and Bitcoin ETF. And in that ETF, you get $1 of large cap stock, large cap U.S. stock exposure, and then stacked upon that, you get $1 of a Gold/Bitcoin portfolio that is risk weighted. And in that risk weighting, you end up with 80% Gold and 20% Bitcoin. And we do that via a simple volatility weight. You don't want the maniac running the asylum, which might be Bitcoin in this case. So we want to equalize the risk contribution to the stack between Gold and Bitcoin. And today that works out to about an 80/20 split. And, that changes over time. And the rates are, the weights are adjusted as volatility changes over time.

It's a 500 day look back. I won't get into all those details, but what you have is a nice scarce asset portfolio stocked on top of your traditional U.S. stocks. And the reason I'm so excited about that, I think is, let's go back over the long arc of U.S. financial, fiscal, monetary, fiscal and monetary evolution. It all started back in 1945, post World War II. That's when money was still hard, all the way till 1971. And that debt expansion in that era was tethered to actual production. But then we entered the era of fiat globalization. In 1971, we went off the gold standard and gold growth was increasingly borrowed, and financialization of our economy starts at that point, and it accelerates.

And then we get into 2008, where some great stuff happens. That was a wonderful time to be in this business, wasn't it Adam? My God. Growth just is increasingly borrowed. Financialization, debt explodes, rather yields are pinned to zero and the market stops really pricing risks, and just starts price coordination.

Then you heap on top of that 2020 where we have a massive amount of debt that's printed, and we pass the event horizon. We're now in the fourth phase, the permanent monetization phase. This is where deficits are no longer errors, but they're actually features of the design of the system. So the state needs to borrow to sustain this illusion. And the drivers of this are the continued debt levels I already pointed out.

We passed that 100% to GDP debt level. We've got structural deficits of six to 8%. Real yields now must remain negative over time. The Fed can no longer materially shrink balance sheets. QE is permanent. We are in an infinite liquidity loop. When that happens, you've got scarce assets becoming an incredibly important part of a traditional asset portfolio. And I think in particular, if we look at the next year, and you look at this administration, it's a growth with tolerating higher inflation, and some liquidity coming down the pipe. And those factors should be very good for both Gold and Bitcoin stacked upon stocks, which should also respond well.

At the same time that backdrop is happening, we've had an interesting occurrence geopolitically, as Russia invades the Ukraine in February of 2022, and all of a sudden they have some assets confiscated from them, and that caused the rest of the world to look at their sovereign reserves and say, are my sovereign reserves so sovereign? And that's when we started this thousand tonnes of year, a thousand tonnes of gold each year being bought by other nations around the world.

And you've seen the U.S. dollar share of the global reserve network dropped to about 40%. This is not ideologic. It is structural. Sovereign nations are hedging against this. And so I think it behooves investors to do the same thing. We're now entering a multipolar monetary world. Alright, quietly, persistently.

So in that world, you want scarce assets. You want Gold stability, hedging inflation, geopolitical risk, and falling real rates. And you want the new kid on the block, Bitcoin, that hedges the monetary debasement, that liquidity expansion, and that long-term dilution of fiat, with a growth kicker. So Gold protects purchasing power. Bitcoin grows purchasing power. So we've got these two assets and they attack this problem in different ways.

Geopolitical risks rise, Gold responds. Central banks want to diversify reserves, Gold responds. Bitcoin monetary supply expands, Bitcoin responds. Real yields fall, liquidity returns, Bitcoin responds. So when we did our publications back in the summertime, remember we were talking about from fringe to foundational, and we were talking about how institutions, endowments, and sovereigns were coming. And we've seen that. We've seen sovereign nations come over the top, certainly on Gold purchases, but we've also seen, we've also seen states in the U.S. start to set up the rails for strategic Bitcoin reserves. Texas just bought some Bitcoin.

[00:09:48]Corey Hoffstein: Cut his mic.

[00:09:49]Mike Philbrick: Okay.

[00:09:51]Rodrigo Gordillo: You're done buddy.

[00:09:53]Adam Butler: Okay. because my question's going to dovetail on where you were, at the end there. One of the objections that I've often expressed about Bitcoin versus Gold is that Gold has this sort of explicit endorsement by global governments. Bitcoin hasn't historically, but as you say, we have seen in in the very last few weeks, and through the Genius Act, making this all sort of possible from a policy perspective. Certain states and other institutions begin to formally endorse Bitcoin. Give us a few examples of what, of who has actually taken…

[00:10:31]Mike Philbrick: So just recently, Texas bought $10 million worth of Bitcoin for their strategic Bitcoin reserve, the biggest energy producer in the U.S. So that is a small amount of money for Texas, make no mistake. But at the end of the day, it's off of zero. New Hampshire, a hundred million dollars bond issuance backed by Bitcoin. And you have about a half a dozen other states that have in their legislation already passed the legislative requirements to lay down the rails for strategic Bitcoin reserves. So we are seeing that institutional adoption.

And remember we were talking back in the summer that institutions, endowments and sovereigns don't move on a moment's notice in a day. It takes them quarters, it takes them committee meetings, it takes them time to get the rails set up, get the legislation through, and we've actually seen that follow through occur.

[00:11:23]Adam Butler: Yeah. The other thing that I, that caught my eye was the fact that, for example, the Harvard Endowment, showed that they've got IBIT on their balance sheet. Which was another sort of, what you're seeing is institutional endorsement, but of a variety of different types of institutions. And I think if you want to be long Bitcoin, that's the type of trend that you want to see.

[00:11:48]Mike Philbrick: Precisely. And I think the structural nature of the way we've set up the product is incredibly important, right? So a 10% allocation to RSSX gives you a 2% allocation to Bitcoin and an 8% allocation to Gold, which is a really nice combination. And then you've got that rebalancing that's coming in. So Bitcoin's having a drawdown, Gold's having a great day, you're rebalancing that, so you get a nice diversification benefit. You also get a lower volatility of the entire portfolio, and you've incorporated a couple of percent of Bitcoin in your portfolio.

[00:12:23]Corey Hoffstein: Adam, I do want to point out that the Bitcoin on Harvard's portfolio could very well just be a basis arb play. It's hard to tell, when institutions are reporting, whether they're buying it for the underlying asset or whether they're doing a more complex trade.

Mike, a little more pushback on the Bitcoin side. I'm curious how you'd respond to the correlation of Bitcoin. Two things like the NASDAQ 100 seems to have gone up and risen to a new structurally structural plateau, whereas Gold remains fairly uncorrelated from equities, except for in like severe liquidity stress. Where do you see it decoupling here? Like, what's the risk of just, we're just adding more, effectively, equity beta on top of an all, an equity base.

[00:13:10]Mike Philbrick: Yeah, I think to some degree that's true. Again, the way Bitcoin functions is, as liquidity comes into the system, it floods the system, and it eventually gets to the highest risk asset with the highest beta. So that's where your Bitcoin is going to provide that growth side of the aspect, to the consistent debasement over the long period of time.

So you've got Gold as that sort of traditional asset. That's that 10, 12 to 15 vol asset. But again, this is position sizing. This is why Bitcoin is such a smaller position in the portfolio, because it responds to a different tail of the debasement. Yes, at the moment it is still quite correlated to the NASDAQ. But you'll see decoupling of that as we go forward, as the asset gets more financialized, as it gets more adopted across that endowment institutional, a framework as well as having now significant size in the actual Bitcoin ETFs, which allows further hedging opportunities. So the asset's definitely going to mature.

That's one of the features of this younger asset being able to actually grow purchasing power, where I think Gold really serves the role of preserving the purchasing power. And I think that's why we structured the product so nicely. And that's why I think it's just such a perfect pick for 2026.

[00:14:30]Rodrigo Gordillo: Also, I never looked at this until you guys brought it up, but looking at the rolling 252 day correlation between the Q’s and Bitcoin at the, when was it, April 29th, 2024, the correlation, the rolling correlation was 13%.

[00:14:48]Mike Philbrick: Yep.

[00:14:49]Rodrigo Gordillo: Now it's as high as 46%. That's it's, this is not a structural change. This is, again, like any asset can have positive, negative correlation, positive rolling correlation with the Gold and equities at times, with bonds at times. The key is not perfect correlation. I think that's what people are missing, right? I just don't see it based on its history and it's the type of just structural reasons why it exists that it is identical to buying Q’s is, it doesn't, that doesn't play at all for me, from a structural diversification perspective.

[00:15:20]Mike Philbrick: It's certainly non-stationary, that correlation, but again, sizing is important. I think we've accomplished by volatility-sizing that, and then incorporating it with your Gold. This is just a nice, it's just a nice complement to your Gold, really.

[00:15:35]Rodrigo Gordillo: So we can move on to the interesting narrative that's coming up next. Are you ready, Mr. Butler? Why don't you tell us a little bit, tell us a little bit about your trade?

[00:15:46]Adam Butler: I think this actually bolts on to Mike's thesis relatively well, and I think the increase in correlation between Bitcoin and the NASDAQ actually plays into this a little bit as well. I think we're clearly in this sort of Ponzi phase of the cycle, and really the question is, how long is this going to persist?

We've got, this Mag Seven. They've gone out, they've raised a pile of debt. They're going to need to raise a pile of equity down the road, all to fund the expected future purchases of effectively, chips that they're going to fill up with the, these, data centers with, right? And so to the extent that Bitcoin is the vanguard of the liquidity, or speculative spear, then, to the extent that the market from here is going to continue to be bolstered by speculation more than sort of real economics, I think we may expect Bitcoin and NASDAQ to continue going up a little bit more, with a little bit more coordination.

If that relationship breaks down, then you know, we might see lower correlation, and that's actually when you do want to see lower correlation between Bitcoin and the NASDAQ. So I guess my, my pick this for next year is RSBT and RSBY. So the Return Stacked® Bonds and Trend, and the Return Stacked® Bonds and Futures Yield or the Bonds and Carry strategy. And this is really just leaning a little bit against the prevailing equity enthusiasm.

Recent analyses have shown that we're currently at pretty near all-time highs, if not at all-time highs, in terms of the equity, the proportion of equities on citizens' balance sheets, right? So, we're relying on equities to the largest extent ever for the future growth in our household wealth. And historically that's been a sign of caution that maybe investors are over enthusiastic about equities. They've already committed all that they feasibly can commit to equities without enduring quite a bit more leverage to take on greater exposure. Another thing is that obviously the valuations, the earnings yield, especially of U.S. equities, but because U.S. equities so dominate the global equity baskets, the earnings yield, even for global equities, are relatively low relative to history.

And if you look at a chart, which I'm going to throw up here now of the earnings yield of stocks versus 10, the, I'm just trying to, of stocks relative to the yield to maturity of the 10 year bond, Treasury bond, and cash yields at the moment, for the first time in kind of a decade, they're all about the same. And as a rough approximation, this suggests that maybe equity, forward returns from here, are going to be about the same as bonds and cash. And so maybe reaching for that extra return from equities may not be as well rewarded.

So bonds offer this natural ballast in portfolios, and they also have fairly low volatility and a highly reliable return stream over the next kind of five to 10 years. So they play a really valuable role.

But more importantly, I want to, emphasize that the trend and carry portions of this are highly beneficial, right? So you've got this kind of low expected returns. I'm going to skip a few things so that we stay on track, and I'm going to focus in on, I, first of all, trend on its own is fantastic, right? You're expressing the view that there's price continuation, that the prices are going to continue in the current direction, whether they're going up or whether they're going down. Carry expresses kind of the opposite bet, that the price is going to hover where it is, but while it's hovering, I'm going to clip coupons, or I'm going to clip dividends on my holdings and I don't really care if the price shoots higher or the price shoots lower. So from a structural standpoint, they express a very different view about how to collect returns in markets. It's in an equity portfolio owning both momentum stocks and value stocks, they're just highly complementary. And we do see this kind of structural diversification evolve over time where, you know, typically both trend and carry have a low correlation to stocks, a low correlation to bonds, and a low correlation to one another.

And so let me just show - this is the long-term average correlation between stocks, bonds, carry and trend. And you can see that carry and trend do have a positive correlation over time. As we saw that correlation does vary quite a bit at the moment. For example, trend has a positive beta to global equities, whereas carry has a negative beta to global equities. So they, at the moment, are quite structurally nice diversifiers. They're just looking at different sources of information in order to position. But even over the long term, the correlation is relatively low.

And the ideal situation is to hold both of these in the portfolio, because they work so nicely together, right? So in general, the idea is you want to own RSBY, RSBT because you want to continue to emphasize that bond ballast in the portfolio as we're certainly in the more speculative phase of the equity and liquidity cycle. But you also want to bolster the portfolio in general by stacking on top both trend and carry exposures, that work great as diversifiers for your traditional portfolio, but also work wonderfully together.

[00:22:09]Rodrigo Gordillo: Thanks. I think you actually did it in six minutes.

[00:22:12]Corey Hoffstein: I was just about to do the ten second countdown. Now it's going to really confuse people. There's going to be someone at home timing this going, ah, this timing doesn't add up. And they're not going to realize we edited stuff out.

[00:22:29]Rodrigo Gordillo: That's great, Adam, although I will say that I think the most controversial part of your presentation is not the carry and the trend, but the bond component. This idea that bonds are persona non grata right now. For the vast majority of my conversations anyway, people think that the correlations between equities and bonds are forever positive and that there is no, you said the word ballast between equities and bonds. What do you respond to that idea that it's no longer useful as a diversifier?

[00:22:58]Adam Butler: I think the question that investors need to ask themselves is, is the probability of experiencing a normal cyclical recession zero, right? If it's not zero, then what is the asset class that is fundamentally designed to do well in a recessionary environment? And really from a classic asset allocation standpoint, the only answer there is bond duration. I think owning zero bonds or owning zero bond duration, I think is imprudent, even if you've got strong conviction that we're in a sort of sustained debasement environment, where you may end up with yield curve controls, et cetera.

I do think there's just a non-zero probability of us having some kind of, even if it's a light recession, having a fairly normal cyclical recession, at which point those bond holdings on their own are going to just structurally probably exhibit that negative correlation to equities that we had been used to in cyclical recessions over history, and you're going to be really happy to have that ballast in the portfolio at that time.

[00:24:18]Corey Hoffstein: Can we go back to the slide where you were showing the rolling correlations of carry and trend to equity? How would you respond to the, maybe to the points someone might make, which is these look like they're oscillating on opposite frequencies here. Are you just canceling each other out most of the time? Like, why bother having both? Are they just canceling each other?

[00:24:40]Adam Butler: Yeah, I mean you can make the same thing about, same argument about diversification in general, right? Like the whole idea of diversification is you're going to hold assets that hopefully are going to do different things for different reasons. but because they are, they, trend doesn't have perfect signals. On average, if you, all the bets in the trend portfolio, you're right kind of 50.5% of the time, if you're lucky. It's about the same in the carry portfolio, right? So the direction of the actual information that's contained in the portfolio is highly uncorrelated, whereas, the direction, that, that of risk, main risks that the portfolio is expressing at any given time may be more or less aligned, right? Yeah, you might have some overlap in the portfolio from time to time, but in general, you're getting benefits from seeking information and edges from very different points of view, or perspectives.

[00:25:45]Rodrigo Gordillo: It is I always like to explain it like, you have two antennas that are trying to capture one signal, which is the price going to go up or down? And those antennas are tweaked in slightly different ways, and over time there's a lot of noise. You said something like, they have a slight edge. And so the good news is that sometimes when one antenna is working, the other one might be just receiving nothing but noise. And then the other antenna is receiving signal and the other one's nothing but noise. And sometimes they both tend to capture a signal together and there's kind of a bit of magic, but ultimately, the ensemble ends up providing a much cleaner picture of the signal.

So it, it really is a complementary, as you said, right? And if it was, if one was 90% hit rate and the other one was 50, would be most definitely using 90. But because they're both 51, 52 better using them both, so that we have a better experience in our short time horizon.

[00:26:40]Adam Butler: Quickly, structurally too, they're designed to be most un-alike around turning points. And that actually ends up being a really nice property. In markets where you're at the, you're really bleeding into trend as trends go to extremes, carry is typically pushing the other way around the same time, and kind of moderating that trend signal and so you don't get beaten up nearly as badly on the way, if you had more a concentrated trend approach without the carry. And, I think there's a lot of benefit there.

[00:27:17]Mike Philbrick: So, keep bonds in the portfolio, obviously. And structurally I think bonds will be across a lot of portfolios as we might imagine. Are there any other structural or side benefits to incorporating some managed futures into the portfolio that if it could hold bonds, probably hold some stocks too. It'll probably be a typical 60/40 U.S. based portfolio. Is there any other benefits to having some managed futures built into that?

[00:27:40]Adam Butler: Yeah, thanks Mike for the reminder. You're right. One of the great things about managed futures is that you've, you're not just betting on stocks and bonds, but you're also, you've also got all this commodity exposure as well, right? You've got all various different energy contracts, oil and gasoline, natural gas.

You've got copper, gold, silver, et cetera, and you've also got currencies, right? If we're in a period of systematic currency debasement, then there is the potential for the managed futures portfolio to just be short a basket of currencies or longer basket of currencies or short currencies that are expected to be debasing more aggressively and long currencies that are expected to be debasing less aggressively, et cetera, over time.

You don't, in the current environment. The allocation to stuff like commodities in the, in your equity portfolios is very small. It's pretty near the lowest allocation to commodities ever. And so this gives you a chance to even up your, the diversification overall in your portfolio, and get some of that commodity exposure. You can't build all these data centers with a lot of, without a lot of energy and a lot of copper, a lot of silver. And so it's nice to be able to capture those bets as well.

[00:28:53]Rodrigo Gordillo: Okay, I think we covered that topic fairly well. Thanks, all right, Corey, over to you. You got six minutes to plead your case.

[00:29:05]Corey Hoffstein: I get to set my own timer? You guys going to trust me on this timer? All right, so I am going to be talking about the Return Stacked® Bonds and Merger Arbitrage Fund. We always like to say we don't have favorite children. This is a strategy that I really pushed for internally to get out the door, and it's one that I am super excited about for both structural and cyclical reasons.

Okay, that brings us back to RSBA, Bonds plus Merger Arb. Every dollar you invest, you're going to get a dollar of a diversified ladder of U.S. Treasuries, plus a dollar of a Merger Arb strategy.

Why now? Why for 2026? The answer is quite simply investment grade corporate bonds. Their spreads are near all-time lows. I think investment grade option adjusted spreads are around 80 basis points at the time of recording today. Over the last decade, the median and mean are actually about the same, around 130 bips, right?

So if you just revert to the mean, you're talking about a headwind of, call it 500 basis points of return against corporate bonds. So for people who have a traditional stock/bond portfolio, and those bonds are very investment grade, corporate heavy, right? You are sitting at a point where the return opportunity is probably the thinnest and the risk is probably the highest.

And so I think it's a great opportunity to diversify out of those investment grade corporate bonds where credit is already highly correlated to equities, and you're sitting at a point where credit is, credit risk is, in my opinion, not paying you very well for bearing it, and diversifying that with a bond plus Merger Arb portfolio.

The overall risk vol of RSBA looks very similar to an investment grade corporate bond fund, but the return driver, you get the same sort of duration return driver from the Treasuries underneath. But that Merger Arb, our premium is very different historically, correlation of only about 0.3 to the credit risk premium. So in my opinion, a very attractive diversifier into the portfolio. How much longer I got, Rod,

[00:34:07]Rodrigo Gordillo: You got two more minutes, a minute and a…

[00:34:09]Corey Hoffstein: I got two whole more minutes. Wow. I could keep, I was speed pitching here. All right, let's focus on this picture, because I think this picture really tells about what makes Merger Arb so attractive.

So Merger Arb again, is this idea that you're buying into these individual deals after they're announced, but before they're completed. And so you may hold a portfolio of individual stocks that are just trading at a price that's going to approach the eventual buyout price, taking on the risk that the deal falls apart.

What you find in the U.S. is that deal law makes it very hard for these deals to not eventually complete, unless regulators get involved. And the example I love to use here is Elon Musk buying Twitter. He said he is going to buy it, the deal gets accepted and then he tries to back out, and he can't back out.

That's how strong deal law is in the U.S.. And so what you find is that sort of the left tail of Merger Arb is not highly correlated with credit and equities. It is when everything is being affected by liquidity risk, it still has that ultimate liquidity risk. But from an economic perspective, you don't find the same left tail risk that you often see with credit and equities being so coupled from a true sort of corporate structure perspective. This is the, an opportunity to diversify into something that I think is highly defensible as a risk source, like why it should go up and make money over time. You are truly bearing risk and getting paid for it, but something that should remain structurally uncorrelated from what you already have in your portfolio.

[00:35:48]Rodrigo Gordillo: All right, Corey, so can we just, can I just dig a little deeper on this chart? So we see a very aggressive correction here during Liberation Day, or the, what do we call it, the…

[00:35:59]Corey Hoffstein: Tariff Tantrum is…

[00:36:00]Rodrigo Gordillo: Tariff Tantrum, I think is the new name. Yeah. and you see a minor correction in merger arbitrage. Now these are the excess returns for both credit and merger arbitrage, the index that we follow. Talk to me about how people should perceive credit. Like the full credit fund or ETF or credit category, when you add in there the term premium.

[00:36:28]Corey Hoffstein: Yeah, So what we're really talking about when we buy an investment grade corporate bond is you're effectively getting Treasuries plus the credit risk premium. And so when you look at the returns of an investment grade corporate bond, you fund, you can actually distinguish between those two. So in this case, what we are showing is just the credit risk part, right? The part that's getting stacked on top of duration, the same way we think about RSBA being, right, that duration component with Merger Arb stacked on top.

So to isolate the stacks, that's effectively what Figure 11 here from our Q3 commentary is showing, the credit stack versus the Merger Arb stack. Both of these are getting put on top of Treasuries in market sell offs. Often there is a flight to safety and so the underlying sort of duration component can end up going up during periods like this, and actually more than offset the losses coming from either the credit component or in our case, the Merger Arb component. But what we really want to highlight again, is even in these acute sell offs that can happen, right?

If you're stacking Merger Arb on top of something like Treasuries, it's less likely that it's going to be a one for one offset. You might actually see a fund like this go up during those periods because Merger Arb is just less likely to sell off the same way credit is. So the way to think about this again, is just take these lines and you would stack them on top of core Treasury returns to think about what is the return of something like RSBA look like, or what's the return of an investment grade corporate bond fund look like?

[00:38:08]Mike Philbrick: Can you, do we have a couple minutes still? Can you speak to the, I think every advisor out there is going to be fairly familiar with credit, and have some of that in their portfolio, but trying to build some intuition for them around what's Merger Arb, what's deal flow like, how do I access it? Like, just how does it work, from that perspective? So how do you get access to this risk premium that you're talking about and how does it vary over time?

[00:38:37]Corey Hoffstein: The simplest way to think about this is, let's say a deal gets announced. So some company is buying another company and says we're going to buy them for a hundred dollars. Stock is currently trading at 80. Immediately after the deal is announced, assuming the underlying company accepts the deal, that stock price is going to jump from 80 to say $95, even though it was accepted at maybe a hundred.

It doesn't trade all the way up to a hundred though because of a couple reasons. One, the deal's not closing immediately. So there's a time value of money there in that spread. The second is you don't, there, there's when the, they think the deal is going to get closed, but there is some uncertainty there, right?

There might be some government intervention that could slow it down. So you get a little bit of a premium there of how much risk are we pricing, and that takes longer for this deal to close than we initially are pricing. And then the second is the actual risk that the deal doesn't close at all. The government actually intervenes. Regulators don't want it. The deal falls apart, at which point, right, that stock price is going to come crashing down.

And so those risks that you're taking on are ultimately what you're getting paid for. Another way to think about this is right, a lot of people like value investors might have been buying that stock with the expectation of a catalyst, right? They buy at 80, it jumps to 95. they don't want to hold for the last $5, right? They've got other places to deploy their capital. They need some liquidity. You are providing liquidity to them to sell into. So you're also earning a potential premium there. So those aspects of the risk you're actually bearing, plus providing the liquidity service to investors who want to get out is where you're earning a return.

And then what you're effectively doing is you're watching the deal and you're saying, okay, I'm going to buy in at 95, and ideally I'm going to close this out when the deal happens and I'm going to earn that last $5. But you are actively watching the deal for signs that, oh, the risk profile has changed, something has happened. I actually think the probability of this falling apart is higher than the market is pricing. Maybe I have to reduce my size or get out the deal entirely. We're always evaluating

[00:40:51]Mike Philbrick: I suppose you could see deals widen where they become attractive again. And then what about the actual deal flow? Like, how much of it do you get? How, credit is, obviously there's many issuers and so on. What's the breadth and depth of the market?

[00:41:06]Corey Hoffstein: So in the U.S. there's typically hundreds of deals per year, but this can be, cyclical. So like Q1 for example of 2025 was incredibly dry for deal flow. Deal flow has since picked up. A lot of people assume deal flow is inherently cyclical, right? But there's many aspects to deal flow to consider.

So, what's the regulatory environment? Will it change the likelihood of companies doing acquisitions? What's access to capital look like? What's organic growth opportunities look like versus how much growth do they have to, I don't want to say force, but force inorganically through acquisition. So all of that plays into what sort of deal flow you're ultimately seeing in the market.

But there are still, even in the lowest deal flow years, there are still hundreds of deals that are going on. And to your point, some of those deals make it announced, and get, from an active methodology gets screened out as being unattractive. Like, they're fully priced. there's not a lot of risk premium left in there, or we think it's overpriced.

It's overvalued relative to the risk that's in there based on the index model that we use. And we might wait. So what we saw in Q1, for example, was there was a lot of deals that got announced that our model did not find attractive. And then liberation day happened and because of market liquidity considerations, some of the deals spreads blew out. And that was a great entry point for the model to enter back into the deals. And so we saw very little activity in Q1 and a whole lot of activity pick up in Q2.

[00:42:42]Mike Philbrick: One last follow on question. Is your pick in 2026 one of a structural nature, or is it one of a sort of a cyclical opportunity coming into 2026, or a bit of both?

[00:42:53]Corey Hoffstein: A bit of both. So the, so to me this is a structural 10 year play. But I think people who haven't made the move yet, right? Again, I go back to that base 4% from Treasuries plus a 3% risk premium, that I think plays out nicely over the next decade for people who want that sort of return. But for people who do have bonds and do have investment grade corporate bonds, I think this is a great time to consider switching.

And by the way, I thought it was a great time at the beginning of 2025 and what we saw since the launch of this fund is nearly identical returns between RSBA and investment grade corporate bonds, but with a full 100 basis points less of vol, and a couple percentage points lower drawdown. And so that to me is what we're looking for is, right, same if not better return profile, with less risk, and I think this is exactly the type of point you want to diversify out of investment grade credit, because those spreads are so thin.

[00:43:53]Rodrigo Gordillo: Very good. True to your childhood nickname, Corey. Safety Boy chooses bonds and the lowest volatility stack we have on the docket that is.

[00:44:01]Corey Hoffstein: It is a nice barbell between me and Mike, with the spiciest product, possibly me with the least volatile product.

[00:44:08]Rodrigo Gordillo: Yeah, no kidding. No kidding. I'm not too far off here because I am going to talk about RSSB, another fairly straightforward, easy product. So RSSB is Return Stacked® Global Stocks and Bonds ETF. This one gives you a hundred percent exposure to global equities and a hundred percent exposure to ladder Treasury portfolio.

Now, the reason I like this, notwithstanding the fact that I think it would be a good idea for people who are a hundred percent S&P maybe diversifying global. Maybe we see we get to pick up on some currency debasement issues as well as some of the global growth that we're seeing. That seems to be slightly better than what we're seeing in the U.S.. But from a structural perspective, the reason I like this, and I love showing this chart because RSSB provides investors with an interesting option, right?

You can, when you create a portfolio, let's say a 50/50 equity/bond portfolio, you have the option of using all your money and buying 50% in global equity ETF and 50% in global, in a U.S. bond ETF, or you could have the option of just buying 50% of RSSB and remaining the rest in cash.

And you can see that both of those equity lines are basically identical. Now, the question I always ask anybody I talk to about this is, which one gives you more optionality? I think having some cash to do other things with is pretty good. Now, we've talked about diversifiers, we talked about Gold, we talked about Bitcoin. We've talked about trend following and carry. All of those things are things I love, but they are highly volatile. I prefer those diversifiers in a prepackaged solution that can mask a lot of the line-item risk and volatility, by virtue of the fact that the other stacks inside of it are going to likely zig when the other ones zag.

So it's less of an eyesore for your own portfolio if you're an advisor, for your clients to be pointing out how poorly trend following is doing this quarter, especially because there again, the high volatility aspect of it, makes it on a quarter to quarter basis as a single line-item, very complicated. Now, let's say that instead, so you can do that, get those diversifiers, endorse everything everybody said, put them into prepackaged solutions.

But what can we do if we were to say, sell 10% of your equity, sell 10% of your bonds, right? You raised 20 percent cash. You are going to use half of that to buy RSSB. What can you do with that other $10 in cash that you weren't doing before? And I think what I really like in this space, especially in the coming year, where we're going to see a lot more volatility, where we want as many kind of diversifiers that are going to be more steady, where there's going to be less reasons to give up on your portfolio.

I like these lower volatility alternative funds that are out there. and then we just talked about Merger Arb as being one of them. Things like SPAC Arb, convertible arb, certain market neutral funds that have been around for a couple decades with very low volatility, relatively good Sharpe ratio. There's not a lot of adoption because you know, who wants a 5% returner when you can get 20% and a 60/40 of the last 10 years. And so they're useful, especially if you can stack them on top. And then because you're going to take line-item risk, their steady nature is going to get you into trouble less. So you get to stack these diversifiers, you get into trouble less.

And at the end of the year, even if you are, somebody points out that you, that look, this, these three funds that I, that you chose are not performing as well as the 60/40 did, you can then just show them, hold on a second. We got the 60/40 plus the excess returns of these alternatives. So my pick is really yes to everything. I would hide the volatility in prepackaged solutions and I would use the capital efficiency of RSSB to get that, those alternatives, low volatility alternatives that we don't yet offer. How'd I do? I don't even know. Did anybody time me?

[00:48:18]Corey Hoffstein: You've got two minutes left.

[00:48:19]Mike Philbrick: Yeah.

[00:48:20]Rodrigo Gordillo: God. Okay, I'll leave it. Why don't we open it up for questions, because I'm sure there's plenty to say about the simplest ETF we have.

[00:48:29]Mike Philbrick: What other use cases are you seeing when you talk to advisors out there? You've got one for adding these low vol diversifiers. Are there any other use cases since we've launched this that you see, that are quite unique and interesting in, from your perspective?

[00:48:44]Rodrigo Gordillo: Yeah, the one that we're trying to get people to think about more and more, and it may seem like a small thing, but over time when I look at portfolios and advisors’ model portfolios, they're not 60/40. I just had one this week where I added it up and I'm like, you do not have a 60/40 portfolio. You have a 39/59 portfolio. There's 2% in cash that you're being forced to leave in there for fees or withdrawals. There's some regulatory reasons. There's compliance reasons why you have to have cash, but you're basically leaving money on the table by not re-upping into that.

So you could simply just sell 1% of your records, 1% of your bonds, buy 2% of RSSB, and in essence, you are getting full exposure to, if you x-ray into the portfolio, you're getting a 60/40, but you're leaving $2 cash for whatever compliance reasons that you need, or operational reasons you need that cash. In fact, some, an advisor group a couple of months ago just basically doubled that exposure to cheat a little, and maybe provide some excess returns to pay for some of the fees, without adding too much volatility.

So those, that's a key use case that we're seeing more and more, and I think every single person should adopt if they're actually wanting to get that full market exposure. There are other use cases. I think Corey you talked to a tactical team, which I thought their use case was interesting as well.

[00:50:12]Corey Hoffstein: Yeah, there was a team, and I think there's a graph in this presentation, Rod, maybe we can flip to it, where again, they had their classic 60/40 sell 10% of your stocks. Sell 10% of your bonds. Yep. This one right there is perfect and put 10% in RSSB, and then they've got 10% of their capital free sitting in T-bills.

And while it's sitting in T-bills, these two portfolios should generate nearly identical returns as we showed in that hypothetical example beforehand. But what they were then saying was, that 10% free gives them a lot of optionality to allocate tactically. Now some people might tactically allocate it and rotate it among asset classes.

This group was saying, we think the market's a little bit overvalued. We're going to have the cash on hand so that if the market does have a nice pullback, we can deploy it. And we realized that when we deploy it, we are now effectively levered. Like they were going to buy stocks and they would go from a 60/40 to a 70/40, but this was the tool that allowed them to do that without having to figure out where the capital's going to come from.

They didn't have to go from a, say a 60/40 to a 70/30. They go from a 60/40 to a 70/40, right? And all they wanted to do was increase the equities, not increase the equities, and sell the bonds. so that's one of the sort of tactical ways we've seen it used. I've also seen it used not to sell your thunder here, Rod, but with the higher net worth clients who get capital calls, they often get capital calls during market drawdowns, and they need to come figure out where to get the money from. Having more cash sitting on the sidelines for family offices or high net worth clients and covering the cash drag, but being able to opportunistically deploy it as you get cap calls is one way in which I've seen this tool used. So this is our most boring, most flexible tool.

[00:51:58]Rodrigo Gordillo: I like that one because one of the things I pointed out to the, especially the single family office, is that are, they know they're going to get, they, there's a potential to get capital called at the worst possible time, is by doing this upfront where you have the cash already. Like you could just sell your equities at the time that it's happening, sell some equities at the time that it's happening, buy RSSB. Then grab the cash and sell it. But you're taking execution risk at the worst time where spreads are widening, where your volatility could give you widely different, valuations. So if you do this upfront, when there's low volatility, you do it, you plan it out, you get your allocation in, you keep that cash on hand when the capital call comes, you just have some cash to give out without having to enter the market. So it just reduces execution risk when, you're in need.

[00:52:48]Corey Hoffstein: Rod, let me give you the pushback that I get from everyone. Whenever I talk about this product, which is why would you stack bonds in a flat or inverted yield curve environment? Aren't you losing money?

[00:53:00]Rodrigo Gordillo: Yeah. the answer right back to them is, do you own no bonds or equities in your portfolio? That's one way to think about it. If you think that there's no value in owning bonds whatsoever, you should go ahead and not buy RSSB, right? You shouldn't have any bonds. That's a tactical call, but most people already have a bond component, and this is just a way of creating capital efficient portfolios with the existing allocations that you have.

That's one of my kind of important responses. And the reality is that most people do have some bond allocation. I rarely see advisors especially that have zero. And then the other thing is a path dependency of it all right. You talked about it already. It's what are, what is a ladder bond portfolio yielding today? And using that formula that you described, you can have a level of certainty that over a 10 year time period you are going to get that yield, but the volatility of like cash yield is quite high. If, what happens to that bond component, if all of a sudden yields go to zero again? How is that portion of your portfolio going to react? It's going to go up in price, right? It's going to go up in price. It also acts as a portfolio diversifier.

If a non-inflationary, aggressive bear market comes into play, that portion of your portfolio has some value and you has some cash when you need it the most to be able to deploy in other things. so there's those three reasons, right? If you want to just understand the yield that you're going to get, you get the yield. If you want to understand the path dependency and the value of that, there's that path dependency element, and then the diversification during a bear market. Those are very good reasons to still own bonds. Would you guys add anything to that?

[00:54:55]Corey Hoffstein: Oh…

[00:54:55]Adam Butler: You did well, threw you a curve ball there on that was…

[00:54:59]Corey Hoffstein: It's the number one question we get. And I think, at the risk of, I don't mean to offend anyone here. I think it, it's a misunderstanding. To your point Rod, if people have literally taken all duration out of their portfolio, I think it's a valid question, but a lot of times I, they're thinking far too much on the line-item instead of the portfolio benefit. And, so I think you explained it beautifully. Look, I think we're coming to the top of the event here. As, the sole judge, I will award myself winner. I think my idea was the best. I appreciate you guys trying, they were good efforts,

[00:55:36]Adam Butler: Are you handing out participation trophies?

[00:55:38]Corey Hoffstein: Yes. And the true millennial fashion, you will all get participation trophies, but I get the actual trophy.

[00:55:43]Mike Philbrick: Yeah, put mine in the trash.

[00:55:45]Rodrigo Gordillo: Is this your actual trophy? That's what Mike will give you that Bitcoin.

[00:55:50]Mike Philbrick: I would take that trophy.

[00:55:52]Corey Hoffstein: It'll be really fun to revisit this in a year and see what happens. Because again, to the point you made earlier, Rod, I chose the least volatile answer. I bet I could, I'm not going to do it, but I bet I could forecast within 2% where the return of my fund ends up, in a high, you look at something like RSSX, cool, you're talking spicy, and that's the fun of this exercise.

[00:56:20]Rodrigo Gordillo: Yeah. Spicy, at the end of the day, you could forecast your 2%. When Mike does a 50 handle, that's going to be…

[00:56:27]Corey Hoffstein: It's going to be 2%. I was saying I could forecast within 2%.

[00:56:30]Rodrigo Gordillo: You've taken a safety bet in the line item, but the question is, have you, have you reduced the overall risk of a portfolio versus Mike and Adam's calls? And that's something I struggle with. I'm not sure that may be the case. But if equities go down 40%, are…

[00:56:52]Corey Hoffstein: If you're in a 60/40, you're in a 60/40 and that 40 is heavily credit based. And if you swapped from credit to something like Merger Arb, I think yes. Because if you look at, let's use 2008 as an extreme example. Corporate bonds were still down, right, because credit was so bad. Now obviously that was a credit crisis, but credit was so bad compared to what duration did. That would not necessarily have been true if you stack something like Merger Arb on top of bonds, on top Treasuries.

[00:57:22]Mike Philbrick: The key there is the correlation…

[00:57:24]Rodrigo Gordillo: Nice Judo there, Corey…

[00:57:25]Mike Philbrick: The correlation of credit to equity versus merger equity

[00:57:31]Corey Hoffstein: And see again, we're talking about my product again. So clearly…

[00:57:35]Rodrigo Gordillo: Because we're so offended by your self-giving of the prize. This is absurd.

[00:57:39]Mike Philbrick: No, I don't mind him giving himself the prize. The fiat that it's denominated in when divided by Gold or Bitcoin over the next number of years.

[00:57:50]Rodrigo Gordillo: Gone full Canadian macro on us just…

[00:57:52]Corey Hoffstein: I didn't tell you I was hedging. I was hedging my prize by taking the fiat prize and buying Gold and Bitcoin with it.

[00:58:00]Adam Butler: Speaking of which, make sure to hit the Like button and the comments, express your enthusiasm for a Gold Bitcoin backed trend stack.

[00:58:10]Mike Philbrick: Exactly.

[00:58:11]Corey Hoffstein: So Adam can get the product he wants.

[00:58:13]Adam Butler: Or just Gold-backed for due to…

[00:58:15]Mike Philbrick: Do that, if we're going to do that, please express your support for an Ethereum/Silver stack.

[00:58:26]Rodrigo Gordillo: Gents, that was, that was awesome. I hope it was useful for anybody listening or watching this video. Before we sign off, I just wanted to first of all, thank everybody who's watching and all of our supporters. It has been a fantastic year for us. I want to thank my team as well. The, our team for the incredible effort they've put together.

We did the symposium, our first, our inaugural symposium in October, which was, incredible. Like just bringing like-minded people, getting the institutional players to come down and actually talk about what they've been doing, the return stacking they've actually been doing with live results for decades.

And then. Trying to educate the new entrance into the return stacking space. Got a lot of great feedback and we have, I think in large part, thanks to that education process, breached the billion dollar mark for our ETF suite, which is pretty, pretty fantastic for an emerging manager doing alternatives and using leverage. Who, who would've thought?

[00:59:29]Mike Philbrick: Category of 10 other competitors.

[00:59:31]Rodrigo Gordillo: But yeah, that's the other thing, like Morningstar now has a new category for this space, which is, this is a paradigm shift. I keep telling people that portfolio construction as we know it for retail, has changed. We are now, we now have tools at our disposal and clarity within those tools that is, likely to elevate everybody's game.

So that's exciting for the industry. It will probably have a couple of new interesting products up our sleeve in the new year. We have poly market that I'm going to put up based on these bets today. That's going to be exciting to follow. JKJK regulators not doing any betting on that. but yeah, it's been a great year.

Thank you everybody for your support. If you have any questions, and always reach out on social media for all of us who're, we're fairly active in both LinkedIn and X. If you want to reach out directly to our product specialist team, just go to Returnstacked.com/contact and you'll be able to schedule something on the calendar there, and keep an eye out for more content in the new year. Anything else, gents?

[01:00:42]Corey Hoffstein: Thank you everyone.

[01:00:44]Rodrigo Gordillo: All right. Thank you everybody and happy holidays. this is going to go after, hopefully before New Year's and after Christmas. So happy New Year to everybody and we'll see you in 2026.