Ep. 35: Steve Orr – Managing Director and CIO at Texas Capital

Steve: The damage Dodd-Frank did to making purchasing a house more difficult cannot be overstated. The media doesn't like to talk about it. Nobody likes to talk about it because, once again, Congress came in and did something, and you can say they overreacted or whatever. And again, this is Steve's opinion. This isn't necessarily the bank. This is just me talking. But they've made it so much harder to get loans, especially for folks in our world who have a variable income.

Tarek: Welcome to the Y'all Street. Today, I speak with Steve Moore, the CIO of Texas Capital.

intro: It's 100% legit. So, Chris, you want a cup of coffee? I just want to be the best. Thank you, brother. Thank you, sir.

Tarek: Steve, would you like a cup of coffee?

Steve: Yes, sir, I would.

Tarek: Look at this custom coffee mug I got for you. It's the state of Texas from the top down.

Steve: It is incredible. I've never seen anything like it. Thank you. That is terrific.

Tarek: Now, how we drink out of it, I don't know.

Steve: Go with the panhandle.

Tarek: I went with the Rio Grande.

Steve: Very nice.

Tarek: Worked all right.

Steve: Very nice.

Tarek: So we're sitting here literally on Yallstreet.

Steve: That's right.

Tarek: I mean, this is the mecca. This is downtown Dallas.

Steve: Heartbeat.

Tarek: Texas Capital, heavily involved with this idea or this concept of Yallstreet and recruiting all of these financial firms down to Texas. What does it mean for you?

Steve: Well, for me, it's a fantastic opportunity, not of a lifetime, not of a generation, but of history for all of us to have all this inflow into the state where people finally recognize the natural advantages of being down here in the south, of a young workforce, of ample supplies of water, sunshine, space, real estate reasonably priced compared to the rest of the country, and overall, a relatively low base of taxation. So just all those natural advantages just make for a fantastic opportunity for people of all ages to live the life they want as opposed to live the life regulated somewhere else.

Tarek: And you're seeing this migration in droves, not just from the tech sector, which is getting a lot of publicity, but also the financial community, JP Morgan, Goldman Sachs. You have three stock exchanges now coming to Texas. You have New York Stock Exchange, NYSE Texas, NASDAQ Texas, and the Texas Stock Exchange. So, you know, there's a reason why people are flocking down to the state. And you mentioned many of them. Another one is a really positive business climate.

Steve: It is. And that's largely thanks to the governor and the legislature over a long period of time. I got to tell you, a legislature that only meets every two years is a really good thing. But we would be just fine here, I believe, if we just had one stock exchange. Those other folks, those other big banks, they can stay up in New York. That's OK. But them coming also helps us ultimately in attracting talent. So there's a net benefit there for sure. Now, I used to joke in some of my speeches three or four years ago that, hey, Texas is full. I kind of mean it now. We're getting kind of full, at least in the triangle. If you look at Dallas-Fort Worth down to San Antonio over to Houston, there's still a lot of empty land in Texas, for sure. But the triangle is getting pretty crowded at times.

Tarek: Yeah, that Texas triangle is now the eighth largest economy in the world. Isn't that right? I mean, it's pretty remarkable when you think that the economy in just the area between those three major metropolitan areas is greater than Canada. It's greater than Russia. You think about the impact that that has on just the overall U.S. economy, and it's growing by leaps and bounds. And look, Texas Capital is at the center of that. And I want to hear a little bit about that journey for you. You're the chief investment officer of Texas Capital Private Bank. Rob Holmes came in several years ago and has completely transformed the bank. Can you talk a little bit about what Texas Capital is today and where it's going?

Steve: Absolutely. So one quick point about that, in addition to the growth in the triangle, we have 54 S&P 500 companies here in the state now. And we're on the verge of probably another four or five more in the next couple of years, thanks in part to those stock exchanges. So this momentum, this trend is going to continue. And our vision was, hey, we want to have a Texas bank for Texas businesses. And that sustained us pretty well for the first 20 years. And the founders had a vision of, hey, let's have something for Texans in Texas. And so Rob came in. It's hard to believe it's already been five years. And he said, hey, look, let's take that. Let's supercharge it. Let's be a full service bank. And we're to the point today where we can do anything the G-SIBs can do. So the global, systemically important, whatever you call those, mega banks in New York and London, we have all the same stuff. So we actually hold, or we can hold, 35 currencies in your checking account. There's no currency, legal currency. Legal currency that we can not transact in, and at any size. And investment banking, new bond issues, new stock issues, we can do it all. And we do do it all for our clients. And so the idea that we would work with a small business, SBA loan, get them started. And then walk them up into midsize, walk with them all the way along with advice, with business partners, accounting firms, law firms, all that we do business with and have friends with and relationships with. Whenever you need something, we're there for you, walking your way up through middle market into corporate banking. And then finally, what's that generational planning look like? And that's where the private bank comes in. Because in the very early days of the bank, we had relationship managers and bankers who were bringing firms in, and they would have a liquidity event or a dividend recapture. And the money would go off somewhere else. That's not good. We have trust powers. Let's do something about it. And so that was the origin of the private bank 20 plus years ago. And soup to nuts, financial plan, estate plan. We don't write documents, but we help all the lawyers around town, each of these major cities, help our clients get where they want to go estate planning wise. Generational planning for how they want to transition that wealth, for instance. And then on my side, I run the investment team, the investment committee. And my guys run everything from money market fund to the Texas index to full line of customer strategies. We're supposed to call them strategies, not models nowadays. And then we have a number of SMA accounts with large cap call writing and municipal bonds of different durations and maturity. So full gamut of services. And really, our investment operation kind of stands alone inside the private bank and providing services to the trust department and to private clients and family offices. And a really fast growing part of our business, just like you talked about with these companies coming in last five years, we're managing more and more corporate cash and corporate money for our business clients. So a lot of fun, a lot of growth. And there's just really no stopping us at this point.

Tarek: You know, I think it's interesting.

Steve: I think the sort of the small to midsize businesses today are, it's one of the most underserved areas in the economy.

Tarek: And, you know, we've seen, you know, just in family households, how it's a case of the haves and the have nots, the middle class is kind of going away. And I'm seeing that also in business, that middle class businesses are also going away. In one form or another, either, you know, private equity is coming in and buying them out, which we see in droves with like HVAC companies and plumbing companies, et cetera, that these are not turning into generational businesses. And, you know, for companies that are listing on stock exchanges, they're now much, much bigger than they were historically. I was talking to, you know, the team at TXSE about this very thing is that they really want to, you know, for lack of a better term, democratize the ability to take a company public and do so at fees that are a lot lower than what they are right now. So, you know, certainly I think there's a lot to be said about the current climate in Texas. And I think the interest and the willingness, not only from the government, but also from the banks to help and support businesses succeed. So I think that's really great. I am curious about just your day-to-day. What is your day-to-day role at the bank? You talk about the high level, what you manage and what you're responsible for. But what does a typical day look like for you?

Steve: The CIO job here and in a lot of places is you're running committees, you're running groups, you're assigning projects, you're making sure stuff's on time. But then you're also, especially in the banking, in the SEC, RIA environment, you are delegated almost to compliance. You're delegated into audit, you're delegated into the regulators. So whenever these folks are coming in to do their audits or their reviews, you're a point person for better or for worse. And so that in turn means almost like middle management, you got to make sure that the operations are tight and that the databases are up to date for all the notes that you've done in your committee and the rationale as to why you made an investment, all those sorts of things. So it's definitely not, I've got a mandate, here's my accounts, here's my benchmarks, go beat them. That's portfolio management. And so that's what my guys do. And I sort of take the arrows for them. And so does my boss, Brian Kuhls, who heads up the private bank. So a little bit different than what I thought it'd be.

Tarek: So on that note, I know you love the markets and we're going to talk about the markets here in a little bit. But you have your team that is diving into the strategies and developing the strategies, et cetera. How are you assessing whether or not the strategies are aligned well with where you think the economy is going or where you think equities are going or wherever the investments are? What is that dynamic like, those conversations? I'm interested in your investment team, how you're guiding them on a day-to-day or a week-to-week basis.

Steve: So let me come at that from a different angle. So when you talk about strategies in particular, you can talk about the whole portfolio approach or we can talk about certain strategies. So you'd be surprised how much of the industry is client-driven, where some family or an individual has an idea of they want X. And it turns out there's so many other people who want X, whether it's large cap covered call writing or it's some sort of mid-cap value strategy or they only want red state municipal bonds or something that we do an awful lot of, Texas-only municipal bonds. And guess what? There's a market for that. So that's not where you came from in that question, but it's reacting to the market, providing a service, if you will. But over on the strategy side, at the total portfolio level, that's where you get more, is the economy giving me what we need? Is the market giving me what we need? And so we call it the four R's process. So we start with what the expected returns are out there. What's a reasonable forecast for GDP growth, inflation, dividend growth, earnings growth? What's reasonable out there? And it's fascinating. There's a whole industry of what they call capital market assumptions that are, look out five years, 10 years or whatever. And they're supposed to be the gold standard. That is, this is what we think this asset class is going to do. Used car parts for the next 10 years are going to return 3%. And large cap value is going to return 7. Large cap growth is going to return 9 with a standard deviation of this. And remember, put on your stats hat from when you were back in school. Standard deviation is only 62% of the time. So there's some tales out there that people don't like to talk about. So expected returns. Are they available to meet this client's goal? Because we've got to start with a financial plan. You want to get a family. They come in and we want this, we want that. It's like, wait a minute. Let's make sure your state is going the way you want, especially when we have that second marriage situation. And let's make sure what you want to do with your life or what your legacy goals are, how you want to transfer to the next generation. Once that's set, then we can get an idea of what risk you're really able to take and what your time horizon is. And then it's my job, my team, design that portfolio or use one of our standard portfolios to try and pull that goal forward in time. And we pull that goal forward in time. When we bring that horizon date by producing better returns, there's some big grins in the room. And so that's ultimately what drives us every day. Now, I'm very competitive. For me, it's benchmarks. But for my team, it's all about, let's make those clients really satisfied. Let's pull that date forward. So that starts with, are the returns available in the market? Now, these CMAs I was talking about, they're kind of hurting. There's a lot of, you know, it's hard for you to distinguish between consultant A, B, or C, or D, and big institutional publisher like BlackRock, et cetera. They're in a tight band. Maybe we go a little bit different in places and certain asset classes.

Tarek: It seems like your service level is a bit more bespoke than what people are typically accustomed to.

Steve: Yeah, it has to be. It has to be because every family is different. And every, you know, you can lump people into broad groups, but that's not really fair.

Tarek: Do you have debates internally about where the market is going, like you and your team? Is everybody on the team, you know, when you sit down and you talk about, let's say, you know, the impact on tariffs or where you think the economy is going to expand or contract, or if you think the economic or the, say, the outlook for the S&P 500 is bullish or bearish, do you have internal debates? Are there people on either side of the fence there?

Steve: Certainly, that's what investment committee is all about. You get in the room, throw stuff at the wall. The last two weeks, it's been a bit of a struggle. When the hockey stuff's on, the Olympics, people are just, you know, it's not been as... But no, low volatility sort of... Debates follow volatility.

Tarek: Right.

Steve: So when vol falls below, say, 14 or so, you got to kind of poke people a little bit. And that is one aspect of the CIO job that I didn't anticipate is actually having to be a people manager. But for me, it's learning on the job for sure.

Tarek: Let's talk about your history a little bit and how you got into this role.

Steve: So... Got a long time. Yeah.

Tarek: Where did you start? When did you start? How did you start?

Steve: Sure. So lawn mown money. So my father would tell me, here's what I'm doing with my broker, and we're buying these stocks and stuff. And so I started looking at the stock pages in the Houston Chronicle.

Tarek: Even as a teenager?

Steve: Oh, yeah. Yeah, absolutely. And so lawn mown money would go into keep the car running, you know, begging for dates and a lot of begging and buying stocks or asking my dad's broker, hey, can you buy this in my dad's account kind of thing? And that went along fine, losing money. Didn't know why I was losing money because, you know, the newspaper said this company was doing really well. And so I just kept struggling with that through college. And my last semester, I had a money and banking course and I talked about bonds and...

Tarek: This is at UT?

Steve: Yeah, this is, yeah, this is UT. And yes, I was going to class. And I can't dramatize this enough, but the professor's up there and he pulls this bond out of the newspaper and he says, all right, here's Chrysler. And I forget what the coupon is. It was like, maybe it was like a 12 and 3 8 coupon due in five years or something. And he's talking about it and explaining the attributes. And he gets to the fact that it's the senior debt and how... And we already knew enough to know that the equity gets crammed down. You know, stockholders lose everything. But these guys get the plants. And being a car nut and an auto racing nut, I thought, man, you mean I get the plants? I get to build what I want? This has got to be the coolest thing ever. So what's the whole thing with bonds? And so I went to summer school to get some accounting because we couldn't get it at UT back then. Of course, you can now, thankfully. And got on as a bond analyst in an economics group. And so from there, it was just how fast can I learn? And I haven't stopped learning yet. And I wake up every day with sort of that imposter about, do I know enough? And thankfully, this is the kind of role, if you will, where curiosity is expected.

Tarek: Yeah, so I am interested in the steps that led you to that role. So, you know, you go from being an analyst to what was the next leg in that journey?

Steve: Sure, so it was clear. Now, you got to remember, this is mainframe. So you have a 3278 terminal four inches from your head. There is, I'm sure, permanent cathode ray damage somewhere in my brain. I don't know what. But hopefully, that was not something growing in there.

Tarek: I'm imagining you with much bigger glasses.

Steve: You're right. Yeah, right. Good point. And I had a Wang mini terminal. And we were coding everything in Fortran and doing Monte Carlo simulations overnight, 1,024 paths, wrote in Fortran, and so did a lot of coding. And I didn't, it's like we were just, we were forecasting. We were looking in the future. We're projecting interest rates, all this kind of stuff. And it's like, wait a minute. How do we get from there to the markets? And so a sales trader job opened up at a regional bank on the municipal bond side. I was at a mini issuer, this logical transition. So I started trading. And from there, went to grad school. And because in the mid 80s, if you couldn't see through a building yet, especially in Austin, you were going to within six months. And so the banking industry was cratering well before.

Tarek: Oil and gas?

Steve: Well, yeah, we went from, what, $22 to $9 pretty quick at one point. But this was well before 87. Things were starting to fall apart. Mid-85 was kind of the real estate peak in Austin. And IT guys in our group were quitting to go manage real estate and be brokers and stuff. And it's like, geez, didn't this just happen a few years ago? We've been through this again. And so grad school found a mutual fund firm that was kind enough to let me intern. And then they said, well, wait a minute. Don't you know something about muni bonds? Weren't you a trader or something? So I helped run their muni mutual funds while I was in grad school. And then from there, literally, as my witness, answered an ad in the Wall Street Journal for Caterpillar to run money on their money management group. So they were just starting an RIA to run money for the pension plan and take all those managers and put them into a mutual fund structure called a preferred group and then go sell them to the dealers. It was phenomenally successful.

Tarek: Now, did you have to relocate to do that?

Steve: So I went to Peoria. Yeah, I dragged my bride up there. And we learned that the world does have four seasons.

Tarek: Yes.

Steve: Not just one and a quarter like they do here in Texas. And it was just a fantastic place to raise a family, start a family. Just really enjoyed it up there. Great people. And it's terrific memories. And we came to a point where our son was born in Peoria. And we wanted to be here down the road. And so just like the Soviets, it worked so well having a five-year plan. We put a five-year plan in place. And within about eight months, I was back in Irving running money for associates. So instead of five years later.

Tarek: Right.

Steve: So I ran the book for them. They had a bunch of property and casualty companies. And they had a credit life company. So when you would go into an associate's office in Greece and borrow money for your food stand, you would sign off a credit life premium. And I don't think we ever paid out a claim, one. And they were regulated insurance companies. So had a lot of experience dealing with the insurance regulators and running total return money. And from there, Sandy Weil had a bad dream on Labor Day one year and bought us and folded us into Citigroup. And at the time, I was, in addition to these insurance companies, I was also running a muni arbitrage. So I would go out and have the commercial paper guys raise money. So there's your money cost. Throw on a money cost risk element on top of it from the finance guys. And you got to hurdle that by some reasonable ROA. Well, they throw me into this group with the trailer leasing guys and the copier guys. It's like, OK, this is kind of interesting. And so they're up there. And they're really interesting folks. I had no idea about this. But we have all these tractor trailers going around the country with associates logos on them. And their ROA is like 0.9. And so when you divide by the tax rate, you get this return on equity of, I don't know, somewhere in the high single digits, whatever it was. I was like, OK, you know, it's interesting business. Copiers are the same thing. I mean, all these copiers on lease all over the country. Great, interesting. And so they said, well, you know, and here's Steve Orr. And he buys municipal debt. And they did. OK, I'm buying muni bonds. And I'm shorting futures contracts or swaps, whatever is available that's reasonable for that particular bond on a case by case basis to take out the interest rate risk and just earning the spread because the muni curve is usually pretty positively steep, you know, slope. So there's a good arbitrage there. And they said, well, you know, tell us what you're doing. I said, well, you know, this is what I do. I buy municipal bonds. I hedge out the rate risk. And my ROA is, you know, 3.8. And my return on equity is 39%. And you could just see these people just they were just like, what? And then all of a sudden, they're all standing up applauding. And I realized they stuck me here because I'm dragging their average up. It's like, OK, fine, whatever, I don't care. And then soon enough, the guys at Solomon on the risk desk figured out that there was some yokel down in Texas buying muni bonds without them knowing about it. And they said, well, you can come up here on the ARB desk or you can go talk to HR. So I went over and talked to HR and they said, well, we got one more package. And the lady said, I'm not going to take this package. You can have it. It's like, OK, fine. So I can stay in the state. And so I ended up running money for Communities Foundation by SMU and a wonderful group of people doing some fantastically great stuff all over the state. And had a great time there taking their fund, if you will, from bottom quartile to top. We rode through 08, 09, into 13, and then came here. Recruited here to build a business. Kind of wanted one more chance to actually build something. And Rob and the team have been very gracious and let me do that. So it's very exciting. But what's really interesting about that time is when you see this time period of 87, 92, 94, 98, 02, 08, to really March of 09. You may even say 07 to 09. Then 13. And then 2020. All of those cases, correlation on risk assets go to one. So everything you were taught in school about diversification and that fixed income is this trampoline that bounces when stocks go down and rarely works.

Tarek: Yeah, that's what I want to get into. What were the key learnings through all of those periods? Because you can't replace the wisdom of living through those events and dealing with the behavioral impacts of how that affects your trading or your investment allocation or dealing with losses, either realized or unrealized. I'm curious, you mentioned the correlation piece. What other learnings have you been able to take away through all of those periods? And I guess as a follow-up question, I know that you are a charter market technician as well. So you also look at the technicals, not just the fundamentals. How has that impacted how you look at the markets?

Steve: I think the one thing to take away from all those is people don't value cash enough. And to always have a ready reserve isn't necessarily to be in cash, but it has to be in something very liquid where you're able to really live Warren Buffett. And when others are panicking and throwing the baby out with the bathwater, you can step in. You don't have to step in at the bottom. And CMT teaches you this. You don't have to be at the bottom. But in that downdraft, and when it's bumping along and it starts back up, and you see a couple of crosses, you can meaningfully step in and take advantage.

Tarek: Speaking of cash, Buffett's over 300 billion, I think. Something like that, yeah.

Steve: At this point. Yeah, he's more of a net seller than anything right now.

Tarek: Yeah, so what does that communicate?

Steve: You can say a number of different things about that, but what it tells me is his guys, with all their firepower, all their connections, with the legions of people trekking to Omaha, that there's just not the ideas at the moment that are worth committing to. And we know, what has Charlie Munger taught us over and over again, wait for the fat pitch. So in their mind right now, there are no fat pitches. And when you look at valuation, so when we stack our indicators and score them every month for our families and our longer term strategies, because we don't have any whipsaw fast stuff. It's, we're out to always get the medium and long-term waves in the market. If we can ride those successfully for our clients, even a 60% win rate, as you know from CMT land, our clients are going to do very well. And we're going to pull that horizon.

Tarek: You're the house at that point.

Steve: What's that?

Tarek: You're the house at that point in the casino.

Steve: Yeah, yeah.

Tarek: If you're trading 60, 40.

Steve: And we're pulling that date forward for them and making them very happy. So, you know, that structure, if you will, is all about PE, price to sales, price to book, all that valuation stuff. That's 10 year horizon, 10 years. And people act like it's today, it's today. Well, the market's rich. Well, it's rich compared to where it was. I can't say if it's going to get richer or not. I just have to read the chart. And if I'm still in an uptrend, if the primary trend is higher, am I supposed to fight that? You know, my bench press is getting better, but it ain't that strong. So trend is 18 to 36 months. We double weight trend. That's where your price momentum, your moving averages, your stochastic, all those things come into play for us. And we look at all of them. And we do ratios. So we'll look at RSP versus MAG-7, RSP versus S&P, each sector versus its equal weight. We'll look at all those.

Tarek: For the guys on your investment team, is that part of the criteria is they need to be technically proficient in technical analysis?

Steve: No, I don't ask a lot of that. And I have one member on the team who is taking advantage of this kind of new trend. We've had CFA level one courses for a number of years in a lot of the universities, kind of a prep course. And now CMT, thankfully, has started doing the same thing. And so I have one individual, bless his heart, he's knocked him out of the park, both levels. And he says he wants to finish CFA first. I'm down with that. But I'm like, oh man, come on. But no, I don't require that of my guys. But I do require them to listen to me for a couple of minutes, explain why this RSI is doing it or what a divergence looks like. And then Scott, who's had level one also, and then one of my trader guys, Colin, has worked his way through all three levels. And so I put them on the spot a lot. Because I want to keep them sharp. And they're real good about it. So finally, sentiment, if you're a Flip Wilson fan, it's a church of what's happening now. Are we fair? Are we agreed? So sentiment just makes sure it's a scoring tool that just makes sure, hey, this is a good time. So when you see valuations come back to neutral, trend is neutral to positive, or even just neutral, and then sentiment is just in the toilet, you've got to have that liquidity. It's time to go. And we've had those signals six times, maybe, in the last seven years, eight years. So they're not uncommon. But you need to be ready. And that's what I learned out of 94 with Greenspan saying, oh, 50 basis points, intermediate, intermediate height, wham. And 2013 with begging for QE, 2011 QE again with the euro, on and on and on. I don't need to beat you up with that. But all these times when risk assets don't perform the way the finance techs say that they're supposed to, and they give you an opportunity, to step in. Because think about 2020, when aliens descended on the Earth and told us to stop going to work, right? It was a paranormal experience. Calm down. Did we revoke the Constitution in any way?

Tarek: No.

Steve: Were property rights taken away?

Tarek: No.

Steve: Did we still have a judicial system where we could reclaim our property?

Tarek: Yes.

Steve: You add all those up, the fundamentals are still there, the economy's still there. It's just a matter of being patient. And cash was a big help.

Tarek: So when you were talking about the risk assets and the correlation all going to one in a lot of these downturns, and one of the ways that you can kind of call it diversify during those periods is by having some cash on the sidelines. Are there other ways that you look to diversify to protect yourself and the portfolios against those type of movements?

Steve: You know, we always talk about having a market weight in fixed income duration, and that's served us pretty well right now as we're kind of bottoming along and starting this 40-year uptrend in rates. We're just not moving as fast maybe as the charts might suggest for a lot of reasons.

Tarek: We got to come back to that comment, but continue.

Steve: Yeah, okay, great. So how many hours are you going to be here? And the idea is, can I earn that coupon over cash? So cash today, our money market fund is paying like a 357, very competitive with the rest of the money market world. And, you know, 10-year treasuries at a 405, that's a pretty weak spread for nine years, nine and a half years of exposure. And then, you know, corporates, investment-grade corporates are maybe three quarters of a percent to 1%, depending on what you're looking at over that. So that's not a lot of compensation. The spreads are very compressed. So anytime there's any kind of market movement right now, Tarek, we're always ready to kind of jump down in duration. And there's been plenty of studies you can look at out there. When you talk about cash liquidity, not going full market weight duration in bonds, but using an intermediate, like a one to 10 index. And that's always something that we kind of want to have in our back pockets. Another way to do that, and what people have successfully done since 2020, is to use high yield as a proxy. Because a high yield index has a duration, weighted average time received cash flow is about three years. So people think, oh, I'm not getting quite the interest rate risk. Well, that's fine. But you're jumping on credit risk there, and you just need to be aware it's very tight right now. You know, 280, 285 on the high yield index is nosebleed territory.

Tarek: Let's talk about private credit, and then we'll go back to the bond market here in a second. So been some pretty big news recently in the private credit markets. Is this a canary in the coal mine or owl in the coal mine, if you will?

Steve: Ooh, yeah. My 2006, 2007 spidey sense says yes. And it's a reason to step carefully. And if I look back three years from now, and my team says, gee, Steve, we missed it. You know, everything was trading at 80 cents, and it came back to par, fine. Our clients didn't see that moving around on their statement. That's a good thing. So we do have clients that are in some private credit vehicles. And I think the software as a service business is not just one sector in a private credit portfolio. I think there's many other industries, industrials, et cetera, that have software as a service embedded in them and that are subject to some of these same forces that are going on with AI right now. So it is a time to step back and be cautious there for us.

Tarek: I want to get into the current situation markets, but go back to bonds here for a minute.

Steve: You just said that we're about to enter into a, what is tantamount to a 40-year bear market in bonds?

Tarek: Yeah. What are the ramifications and impact of that? I mean, from housing market to, you know, we were talking about small business and the challenge of having access to capital, how important it is to have access to cash. I mean, the reverberations of that are huge.

Steve: Yeah. So when I talk about that, I specifically am referring to the U.S. treasury curve and probably more correctly, the 10-year treasury in particular. And so when you think about 40 years, you can walk backwards, at least to the Civil War, if not to the revolution. And, you know, look at the cotton back bonds that Lehman was working back in Alabama when they got started. And even back to the revolution, these 40-year cycles are pretty consistent. Maybe they're a nickel or so, five years or so, either side. But that double bottom that we had on the 10-year, when it reached a half a percent, that was the 40-year bottom from Volcker's double-digit peaks in the early 80s. And this next cycle has one if. You know, there's always tons of ifs you can come up with, but there's one big if for me. And I don't think we get to double digits at the peak of that cycle, 38, 42 years from now. But is the U.S. treasury 10-year going to be at 8%? That's, I think that's very reasonable. What does that mean for mortgages? Yeah, you're back to a 10, 10 and a half. And so I think about, for me, my time horizon with my first mortgage being an 11 and then having to get a, and then moving to Texas and getting a 7 and a half and then getting a second at 8 and a half, it's sort of normal. Good businesses, good business plans, good operators are always going to be able to get money. We should, in all reasonable logic, get ourselves back to a scarcity Fed balance sheet. So from 1912 to 2009, the Fed balance sheet operated is what the economists like to call scarcity. In other words, the Fed balance sheet was largely the amount of currency in circulation. You know, okay, fine. Hey, the Fed system, that's their job, is to process checks, print currency. You know, they take in bad beat up dollars with the people making little marks on them and tears and they burn them and then they put new paper out. It's a steady business and it's very necessary for the economy. But this idea that they could take an expansive reading of the act and blow the balance sheet up to basically support congressional spending because that's all they've really done is take this deficit spending and monetize it. So you think about that. The Treasury issues debt. Fed buys it. Fed creates electronic dollars. Have you ever heard of digital currency? Did you know we've had digital currency for a long time?

Tarek: That's what I tell people all the time.

Steve: Yeah, so they create those dollars in the banking system. And the reason why coming out of 09 and this quantitative easing of all this Fed buying these securities didn't create inflation was because the bank said, hey, look, these are excess reserves and you can't lend them. In fact, you got to put them back here at the Fed and we're going to pay you for them, which has now resulted in the Fed being fed down, a Fed income statement being upside down. That's another topic. So my point about small business, mid-sized business being access to credit, it's going to take a long time, if ever, to go from this abundant balance sheet down to the scarcity, the way it quote unquote used to be. Warsh seems to be inclined to go that direction. Whether or not he'll be able to drag the Board of Governors someday along and the rest of the voting members, I don't know, not willing to say yet. But it sure sounds good in terms of the Fed economists, great job, tons of data, lots of interesting stuff. But is this really the role of the Fed? And it is refreshing that we're at least having the conversation because ultimately having reasonable access to credit is a Congress, a regulatory, and a Fed issue. And so we can do all we want with SBA and running around talking to small business operators and our competitors do the same. But until those things line up to make it easier, it's going to be an issue. And it's a point that you raise it well, but you're raising it in the context of what's the absolute level of rate that a small business has to pay?

Tarek: Right.

Steve: And if they put up collateral, if they have good financials or whatever, there's reasonable ways around that. But right now, a small business paying a three-month floating rate plus 6%, they're already at nine.

Tarek: Yeah, I mean, it's hard money lending almost at that point.

Steve: Yeah. So nine up to 13, where's their margin? Are we really hampering that many businesses if you're fluctuating in a 3% or 4% range? I don't know, but I will tell you, we're one of the very few banks that can help them hedge that.

Tarek: That's great. I think about just the housing market. And right now, I know a lot of Gen Zers who say it's just the idea of owning a home is a pipe dream. It's an impossibility. Even at the lower end of the scale at a $550,000 home at 6%, you're spending $3,000 a month.

Steve: Yeah.

Tarek: Just on a mortgage, not counting insurance and taxes and all of that stuff, maintenance, et cetera, et cetera.

Steve: It's nuts.

Tarek: So it raises the question, ultimately, what gives there? Because if interest rates are going to move higher and your interest on those homes are gonna move higher, I mean, this is the difference from the 1970s, or at least in the 1970s, you could still buy a home for what did it cost you, $30,000 to buy a home. These days, it's just a lot more expensive. So either the cost of homes is going to decline, which is going to bring everybody's net worth down. Anybody that owns a home, their net worth is going to decline or it's going to price out an entire generation out of the housing market. So maybe that's a good segue into, we'll call it the deep dive, your deep acronym, if you wanna get into that and maybe touch on that question.

Steve: Yeah, it's a fantastic lead in. And if you weren't gonna say it, by golly, I was because home formation in the United States, you can talk about the white picket fence and the idea of nesting and everything, which is very valid. And it was sold for generations as the American dream. Well, it turns out the dream's kind of real, that if you can have household formation from 24 to 44, you get a much more stable country. You get people who are committed. You get people who are invested literally in their towns and communities and willing to take an interest in building those communities as opposed to, well, I'm renting and I'm gone. So household formation to me is a very key part of demographics. The damage Dodd-Frank did to making purchasing a house more difficult cannot be overstated. The media doesn't like to talk about it. Nobody likes to talk about it because once again, Congress came in and did something and you can say they overreacted or whatever. And again, this is Steve's opinion. This isn't necessarily the bank. This is just me talking, but they've made it so much harder to get loans, especially for folks in our world who have a variable income. If you're not a W-2 person, it's really difficult. And more and more what we're finding with, whether you wanna call it AI tools or work from home or whatever, that more and more people are contractors for a variety of reasons, mainly lifestyle, nothing wrong with that. But they don't realize that they're creating an artificial barrier under Dodd-Frank to being able to get a mortgage. And the second part of that is you just saw this executive order from the administration to remove the endangerment finding on carbon emissions for the EPA. Well, that's gonna be litigated. It's not gonna go very fast or anything, but it is part and parcel of land use regulation that has driven up the cost for developers. So has it doubled in the last 10 years for developers to buy land, entitle it? And by, I mean, entitlement, that's the sewer lines, the roads, utilities. I don't know, but it looks like it's really been a key contributor to making it tougher to going out on the prairie and sticking the three flagpoles in the ground and building the playground and calling it the, I don't know, here's the Sheffield and here's the Churchill and you can choose your roof color. I get all that, but that's what we see in Texas. But some of us don't like the fact or some of us are kind of raising our eyebrows at taking away good farmland for that. But in some cases, in some areas, that's the only choice a developer has. And so we look at it as, and we talk about this in the investment committee, is just a multi-pronged problem. We've got to get Congress to back off. We've got to get more sensible land use. We've got to make it easier for folks to start housing developments. And some of the slack has been taken up by multifamily in some areas. But again, there's a density aspect to that that stresses other parts of the infrastructure. So something's got to change and it needs to change soon.

Tarek: Yeah, and with multifamily, I mean, it makes it much more difficult to have children. And there's the space for children in general. So it puts a headwind on demographics. We're actually seeing now, I think it's, if I remember correctly, I saw a chart that said in 2026, the number of new 33-year-olds will decline for the first time in about five or six years. 33 was traditionally right around the age of new family formation and the time that somebody bought a house. And so you're seeing that roll over. My generation, Gen X, rolled over, I think in 2006, right before the last housing crisis. And so much of our economy is driven to housing in one form or another that you just start thinking about just the universal impacts of that. Your acronym DEEP, D is for demographics and then EEP, what do those stand for?

Steve: So economy, engineering, energy, policy. So one of the things I like to start out with on demographics is I throw a US birth rate chart up there. It's actually a timeline graph and it's sloping downward and then it flattens and then it starts sloping down again to about 2023, I think is the last year I have data on. The flat part is today's college students. And so if you're a college administrator, your applicants the last couple of years look flat, maybe they're growing a little bit if you're advertising the palm trees and the floating river that you put in around your dorms. And that's cool, that's cool. Right up until three years from now when the pool starts shrinking a bit. And so the two jobs, I always try to, what's the two best jobs on the planet? What are the two worst jobs? I think the worst job right now on the planet is to be a Russian S-300 anti-aircraft system salesman because they don't appear to be working really well. And then the second job would be a small college president with no endowment because let's face it, the happy, I don't know if you follow the higher education inflation gauge has been running well above CPI for a long time now. And I know early on, 20 years ago it was professor salaries and then it became this sort of this arms race with the dorms and the facilities and all that kind of stuff. And quite frankly, there's a lot of folks I think that are really second guessing the need for college. And we've had a almost 70 year focus since Sputnik for our country that if you're going to get ahead and you're going to have greater lifetime earnings, you got to go to college. And of course, early on, it was patriotic, go learn math so you can build the next rocket or whatever. And so that's to me a change where we could look up in 20 years, Tarrant, and we could be back to the previous 400 years of college. You went to college because you were going to be a doctor or you were going into the seminary. And that was the only reason you went. And it was 7% of the population. And now it's what? The high teens, low 20s that actually matriculate with a degree.

Tarek: So education in general is changing at the speed of light. I mean, I remember when I went to school, they incorporated the TI-82 calculator into the curriculum. And so we would use graphing calculators as part of our overall learning because the technology was there. Prior to that, everything was done by hand. If you went to engineering school, it's all done by hand.

Steve: And slide rule.

Tarek: Yeah, slide rule. Exactly. And now with AI and ChadGBT and Claude and all these resources, what incentive is there to learn to read and write? You know, you could type in gibberish and it spits out Shakespeare at you. And now I'm not, obviously I'm not an advocate for that. I'm a huge advocate for education and having home libraries and all that good stuff, but it's hard not to see how this trend isn't going to impact people's level of intelligence.

Steve: I would argue just the opposite that my wife's very involved in coding in the schools and it's a fantastic tool having that Boolean logic, even for someone who's inclined toward history or inclined towards the arts to be able to ratchet down a decision tree that you and I know from engineering background is vitally necessary. But I keep teasing her saying, hey, it's not code so much as it's how do you write the prompt? And you better be really good with English if you're dealing with a large language model, especially the old LLMs we're talking about, you know, eight months ago that are doing probabilistic reasoning on the next four letters that you give it. I don't know so much about the new LLMs, but I'm proud to say here at Texas Capital, Don Golan and his IT guys, man, they're killing it. So we've got Clod Pro, we got Opus 4.6. I mean, it is really exciting.

Tarek: Yeah, talk about how are you incorporating that into your day-to-day routine?

Steve: So we're a bank and so everything's cautious, everything's careful, everything's very well thought out. And I move at what I think is a reasonable pace and everybody else laughs and thinks it's the speed of light. That's okay. But they're pulling back the curtains on that for us and we're very grateful. And we are taking every data set we can and putting them on there. And we're just taking the very first step. And so what we've been doing the last few weeks or so is, hey, now that once they sort of took the guardrails off for us, just take our data sets, because we do everything in 20-year increments, take our 20 years of data turret and just, we know these are the hot spots. We know here's where evaluation, trends, sentiment lined up and it hit it out of the park. Go find what you and I would call a local minima or a local maxima. Go find that second derivative spot in that wave where there might've been a one or 2% return that we may have missed, but don't whipsaw me. Now, telling it, writing the prompt to stop the whipsaw is kind of where I'm at at the moment. So any advice I can get on that, any help I can get, I'm all about that.

Tarek: You need to ask like a nine-year-old because these days they're becoming whiz kids at AI. It's incredible. You do a weekly roundup that I strongly recommend everybody watch on the website. It's just great. It just kind of covers recent news, things that are topical, what the bank's looking at, et cetera. In your last weekly roundup, you said, looking ahead to 2027, we've never had a recession in the third year of a presidential term. S&P has not declined in the 12 months after midterm elections since 1938. It seems like a pretty bullish statement. So let's maybe do a little bit of a round robin around the market, starting with equities. What is your outlook? It seems like the trend is your friend and the trend is up. Comments on that? By the way, I'm sorry to interrupt.

Steve: No.

Tarek: But despite what you said earlier with respect to SaaS companies and technology, because we're seeing the Mag 7 is plummeting within the overall S&P 500.

Steve: So just grab the Mag 7. From a technician historical perspective, it's a perfectly reasonable rotation at this point in a bull. For those of us who are tech believers, and maybe we can talk about Harold and George some other time, it's not much fun, but there's so much more stuff coming right now. There's a group at UC Berkeley that has figured out how to attach viruses to rare earths, to mine rare earths out of the rest of the dirt with these viruses. I mean, there's just so many cool things like that happening. There's a group, North Data, I don't remember the exact name, but there's a group that has used AI to go through all these mineral studies in the United States. And they've found thousands of materials that have magnetic properties that we didn't even know existed. There's so many cool things that are going to happen that are going to power earnings the next 10 years that we truly are on the verge of a new industrial revolution, without a doubt. And so when you talk about, geez, Steve, what about 26, 27? Well, the last letter, P, policy has primed that pump. So it was one thing to say, yes, the MAG-7, unlike .com, 98, 99, 2000, unlike 07, 08 housing, these guys are making money. Now, there's some folks, Fast Money, who don't like the fact that some of these guys are starting to raise money in the debt markets for data centers. Got it. Totally get it. It's more fun to fund things out of free cash flow. Hey, but the idea that OpenAI has 13 billion in revs and they claim almost 200 billion in revs in 2030, I mean, that's a short ramp to go really fast. More power to you, but, hmm. Anyway, policy, though, the P in deep has set the stage for this year and next at the very least. So we don't talk much about opportunity zones. Governors under this law, opportunity zones are permanent now. They've expanded the number of zip codes around certain areas in metropolitan areas where you can have more opportunity zones. So once July comes and the governors recertify these new opportunity zones, folks are going to be able to go in and drop a plant or rehab an existing building, stuff it full of equipment, get full expensing for that equipment, and if they hold onto the property under the opportunity zone rules, then keep the cap gains. I mean, come on. There's so many good things like that. And I'm not even scratching the surface of the list of everything that's, I know we're not supposed to call it the one big beautiful bill. What is it? The working something tax cut or something. But there are so many good things that are about to hit with that, that it gets me very excited. So I think another thing you see traditionally is governments, especially administrations, and facing a midterm will prime the pump. So it's one thing to say Congress acted, but there's still going to be a lot of stimulus happening this year. We're still a definite spending, deficit spending almost 1.8 trillion, unfortunately. So all that stuff feeds through. And I'm not quite as bullish on earnings this year. As Wall Street, Wall Street is still talking about 14% S&P 500 earnings growth this year. I'm 9 to 12, somewhere in there. I mean, still, that's a great year. Come on, man. You're growing 3X inflation. That's not bad. And to think that we could probably do another 7 to 8% next year is pretty reasonable. So just keep your multiple flat. You know, corrections, as you remember from your CMT stuff, corrections can take place in price, and they can take place in time. And so the longer, you know, we have this big topping formation right now in NASDAQ. You can argue we have a topping formation in S&P 500. Fine. Haven't done anything since November. Oh, gosh, the boredom. Oh, no. The 35% run beforehand. Yeah.

Tarek: Doesn't have to be a topping pattern.

Steve: Guess what? Earnings are continuing to grow. So what's that happening to PE? You know, as they used to say on Beverly Hillbillies, the Gazendas, you know, the bottom's getting bigger.

Tarek: Yep.

Steve: So earnings, you know, PE's coming down. So you're resetting for a future valuation 10 years out that it could be a better place. So that all sounds too simple. I know you were hoping for... No, no. Sounds like demand supply curve or something.

Tarek: No, this is great. You know, this past year we've had just enormous growth in precious metals and base metals across the entire complex. Copper's had a phenomenal run. What does the prospectus look like for that? You know, you were talking a little bit about some of the technology that's coming down the pike. And to me, you know, if the technology helps on the mining side, that could be potentially bearish, actually. Yeah. You know, as things get a little bit less expensive to mine or it's cheaper to mine stuff that's been traditionally harder to get. But any perspective on the metals markets?

Steve: So long-term bull. And again, I have to go back to policy. And this isn't a popular topic. And the fact is central banks began to buy more gold once the prior administration shut off SWIFT and froze the Russian assets after the Ukraine invasion.

Tarek: Nailed it.

Steve: That's your trigger. So since the invention of SWIFT, which is a U.S. invention, and even before that, World War II, folks who didn't like us and we didn't like them, they could still have their assets in the dollar, in U.S. banks, and property rights were respected. Now, you can be forgiven if you're South Africa or Greece or Switzerland that, gosh, maybe U.S. isn't going to be so friendly to me anymore. And that's the big driver. So now you throw on top of this a nascent recovery globally. Again, partly due to policy in Europe, policy, Europeans waking up that America has seen us through World War I, II, Marshall Plan, Cold War. And now we don't have to worry about the Folded Gap anymore, but we sure got our soft underbelly from the Ukraine and Belarus to worry about. Maybe we should start spending more on defense. Maybe we should start investing in ourselves. Well, hey, man, European defense companies, pretty nice multiples. Pretty good move here. You get a weaker dollar because people aren't using the dollar quite as much. It's still using over 85% of all global transactions. Dollar's still your bedrock. All this stuff about dollar going away. Now look at the dollar chart. I don't see it. I don't even see Plaza Accord $0.78. It's still $98, $99. So maybe I'm going on a little long in this segment. Maybe it's more than you want to hear.

Tarek: No, it's helpful. I think you mentioned just kind of the global markets, emerging markets like in Brazil are showing signs of life. Elsewhere around the globe, oil is showing signs of life. Again, after pretty significant consolidation, especially oil-related equities, XLE, Chevron, Exxon, all breaking out to new highs. So any opinions on that?

Steve: So yeah, you bet. Come on, I'm the black sheep in the family. I'm the only one in the family didn't go in the oil business. You kidding me? Yeah, so I am a little biased about drilling holes in the ground. First of all, my personal holdings aside, long-term, oil is still the fastest energy for your butt. So for every dollar you can throw at any power source, you get the most British thermal units, if you will, out of oil. Whether it's cracking into gas, you know, 3-2-1 crack, or you're getting gas out of the well also. It's still your number one. We're going to have internal combustion globally for as long as humans are around. It's just too efficient, if you will. Now, I would personally love to see more nuke. We've had 70 years experience taking our best and brightest kids and sticking them in steel tubes underwater with no nuke problems. And everybody's been just fine with it. Our Navy running around out there with nuke power plants. They've got it pretty well figured out. And these new small modular reactors where they put them down the ground and they're self-cooling, or they use salt or whatever, or the new thorium design that the Chinese took from us and they're putting the Gobi Desert. There's just a lot of ways to boil water and run a turbine.

Tarek: Well, I can't tell you the number of people who throughout the years have been bullish uranium. So you've got to be careful with that.

Steve: Finally.

Tarek: But finally, we're seeing breakouts in CCJ and Campbell Co. Yeah, the Sprott funds and everything. And yeah, that's certainly interesting. We had talked about housing briefly, but any outlook there?

Steve: You know, again...

Tarek: Home builders.

Steve: Yeah, they're finally starting to show a little bit of life here. And I would say life from a technician's perspective, the lows are higher. And that's good. You know, remember the big run-up in lumber? That's over with. The labor shortage, you know, we're going to get a handle on it. I think we're going to get a handle on it by small colleges not having the enrollment the next 5, 10 years that they expected. And these guys are out hammering and enjoying the sunshine and making lots of money.

Tarek: Oh, yeah.

Steve: So I'm bullish in a different way on housing because you think about our lifetimes, it's been the wave to the south. You know, the nine states of the Spanish colonial era that don't have property taxes. The multiples of states right now lowering property taxes, making it more advantageous to come south and west. And you're going to have, you're literally creating a vacuum in a lot of cities in the northeast and the north. And I am optimistic that there are some of our brethren and future children that are more hearty than I am and can live up there at the Arctic Circle in Indiana and make a go of it. And by the way, you know, they're going to want to see the bears in the new stadium there in Indiana.

Tarek: Yeah, don't send them up there this week though. We got two feet of snow I think we had in New England.

Steve: Yeah, it's tough. And so remember the New York Times said in 2024, they'd seen the end of snow. That's right. So I don't know, but there's, you know, these things go in swings and I just have to believe that taxes are going to get onerous enough to a point that they're going to depress property values. All of these states up north, and I'm not talking just the Detroit area. I'm not talking just northern Ohio. I mean, a number of states up there where over the next generation, things are going to get cheap enough that people are attracted back. There's some great things happening in Detroit and all the credit to Ford for rehabbing Michigan Central and turning that old station into a tech hub. It's fantastic. It's kind of out on the edge of the city, but maybe that can attract. Maybe there can be new housing out there. I mean, things like that are really energizing.

Tarek: Yeah.

Steve: And so they make me bullish. And I long term. Yeah, I am. I'm a buyer of housing for sure. A long term.

Tarek: Last question.

Steve: Already?

Tarek: Yeah. The folks that are, you know, huge, huge crypto advocates, we're going to see Bitcoin at $40,000 or Bitcoin at $100,000 first. What direction are we going?

Steve: Oh, $40,000.

Tarek: Yeah.

Steve: Yeah. Every time it's crossed, since it crossed $1,000, it retraces $50,000. I mean, it's a great technician study. And the Constitution prevents it from being coinage.

Tarek: Yeah.

Steve: So why is it still here? Somebody's watching it.

Tarek: Oh, yeah. Well, it's interesting that the utility now, the shift into stable coins, because, you know, the narrative originally was this is a peer to peer payment system.

Steve: Right.

Tarek: And then the narrative changed to this is digital gold. And then the narrative is now stable coins, you know, backing with gold backing them. So do you have an opinion on the crypto markets in general and their utility?

Steve: To me, I really like the stable coin idea. I like the concept. Where I draw the line personally, this is just Steve, is I like the concept. I like the blockchain. I like the stable coin idea. The stable coin sandwich for foreign exchange is really interesting. We're seeing tests of where pushing for an exchange out of our Forex desk would take, you know, a day, day and a half. And we're competitive with everybody else in the world doing that. And the stable coin sandwich is 14 seconds. It's like, hmm, you know, that's pretty cool. So I know that's, you know, we have a working group that's looking at all that. But for me, I got to know where my server is, that my stuff is on. I don't want you striping and mirroring my file into Shanghai, Malaysia, wherever. If you can tell me that my polka dot or whatever, if we can name somebody that died, then we can, you know, freely use that name. But my coin is custodied where I can get at it and I have property rights and I have a judge, you know, then I'm interested. Does that make sense?

Tarek: Yeah, totally. For people that are listening, I would love you to just take a minute to talk about your Texas Capital ETFs that you have in the market. And then also where people can find you and get ahold of you.

Steve: Sure, sure.

Tarek: If you want them to get ahold of you or just your team.

Steve: Absolutely. Yeah, my team. So ETFs I can't talk about because I'm not licensed by that broker dealer.

Tarek: OK.

Steve: But I can tell you about the index.

Tarek: OK.

Steve: And if you had another hour, it's a great story. But let me just tell you about the Texas index. It is 200 plus companies that are the largest companies in the state. And they're ranked or they get into the index by having a certain amount of transaction volume, certain amount of market cap. Fine. S&P 500 is a market cap weighted index. So price times number of shares out. Fine. So is Wilshire. So is Russell. So is Selective, some of these others. But if you did that with just our Texas companies, you get this really interesting return profile. So you're going along just fine, doing better than mid cap. Some years it's better than S&P 500. Some years it's a little worse. And then all of a sudden, it just goes up to 98%. So great. This is exciting. And then it comes down 110%. Then it goes back up like 70%. What's that? GameStop. Oh, gosh. And then it was Tesla. It's like, well, this isn't going to work. It's not fair to anybody. And it certainly doesn't represent what's happening in Texas. And man, we beat our heads at Jed Riley on my team. The guy's barely 30, and he's losing hair over this. I felt bad for him. And we were kind of at our wits end in some meeting. And I literally just offhanded. And you and I know each other well enough that you may think I'm a little smart-alecky at times, very rarely. And I just kind of smarted off and said, well, look, just weight the sectors by their GDP contribution to the state. And that calmed that down. And then they were able to go on and just use kind of the syntax guys in London were able to put together a very meaningful index. And it seems to be working pretty well. And of course, we're really taking advantage of the value rotation right now because we don't have a lot of MAG-7 exposure. We have Tesla, of course. But it's just a great way to watch and participate in the growth of the state and the dynamics here of not only people coming in, but just of all the ideas of all the new technology. Just think about Musk and his operations taking Andy Beal's old rocket stand out there west of Waco and one engine stand. And now I don't know how many engine stands they have, and it's running lights out all the time. And they've come up with these reusable rockets and all the cool stuff happening down in Boca Chica. There's just so many things like that happening that people don't know about here in the state. So that is just, I think, tremendously exciting. We also have an oil index that's oil producers. It hadn't been a great story the last couple of years. But you know what that is? It's a mergers and acquisitions fund now, because it doesn't matter that prices are depressed. It doesn't matter that the marginal cost of a new frack well is about $60 a barrel. What matters is folks know, and one of the geologists people in my family told me years ago, he said, you know the problem, Steve, with the Permian Basin? I was like, nope. The problem is we don't know how big it is. Every time we look, there's another play, or the sprayberry goes a little further, or this woodbine level is bigger than we thought. And there's still a lot of gas up in Haynesville. There's still plenty of recoverables in East Texas. We've got the Eagleford. So that whole industry isn't going anywhere anytime soon. And Chevron's down there poking around Venezuela again. There's just lots of great things to talk about there. But again, the ETFs, that's a separate world. We did start the first money market ETF, which was kind of interesting. Tell me about that. So the concept was, can we use the ETF structure of a 1031 exchange between brokers and the trust? You know, all mutual funds are a trust by the Investment Company Act of 1940. And can we operate that trust as a 207 money market fund? And the gentleman who put all that together did a magnificent job, fought the SEC up one side and down the other. And pioneers take the arrows immediately. Schwab said, get off our platform. A couple other people said, oh, we want nothing to do with that. And within weeks, they had their own prospectus out and their own filing at the SEC. And that's the way it works. This thing is really interesting because, again, I can't sell it or anything, but I can tell you that if you look in the prospectus, it compounds every two weeks. So typical money market, $3.55, $3.58. This thing's running another 15, 20 basis points ahead. Yeah, it's just a way to get a little more yield, but still owning T-bills and government agencies. So anyway.

Tarek: It's texascapital.com. And how do people find you? And how do people listen to your weekly roundup?

Steve: Sure. Well, great support from the communications folks. I am on LinkedIn and all the stuff's posted there. I'm on X at TCBCIO. Really clever.

Tarek: I actually didn't know that. I need to write that down myself.

Steve: At TCBCIO. And every once in a while, I'll get my dander worked up about something and post something other than the videos. I need to get better about that because my mom looks at it. And so I got to communicate with mom once in a while. And the bank's website, of course, all the videos are listed there. So SteveOrr@texascapital.com. Anybody email me anytime.

Tarek: Great. I can't let you leave Y'all Street without your very own Y'all Street silver coin.

Steve: Woo. All right. That is awesome. Look at that.

Tarek: Thank you so much for your time.

Steve: Fun time.

Tarek: Steve, thanks!

outro: How do y'all drink this? That's the Y'all Street.