Talk Your Book: Animal Spirits Live with F/m Investments

In this live episode of the Animal Spirits Podcast recorded in Washington, D.C., Michael Batnick and Ben Carlson welcome Alex Morris from FM Investments for a deep dive into fixed income investing, tax alpha, and the evolving landscape of ETFs. The conversation begins with a lively discussion on the bond market’s reputation as 'smart money,' examining how it correctly priced in inflation despite short-term rate hike skepticism. The hosts and guest explore the rise of FM Investments’ T-bill ETF—now nearly $7 billion in assets—as a standout product that succeeded due to timing, simplicity, and investor demand for yield. A major focus is on 'tax alpha'—the idea that post-tax returns are now a critical frontier in investing, especially as clients increasingly prioritize tax efficiency over traditional market-beating alpha. The team unpacks strategies like the Compounder series, which use options to defer dividend income and avoid 1099s, while cautioning against overly complex tax-avoidance products that may cross regulatory lines. Other topics include the risks of illiquid private credit wrapped in liquid ETFs, the role of market makers, and the broader implications of AI and demographic shifts on future credit cycles. The episode closes with reflections on the power of government debt, the importance of paying taxes, and the future of innovation in ETF design. Key takeaways include: (1) Tax alpha is now a primary goal for sophisticated investors, surpassing traditional alpha; (2) The success of the T-bill ETF highlights the demand for simple, transparent, yield-focused products; (3) ETFs that wrap illiquid assets like private credit require careful due diligence on liquidity and valuation; (4) Investors should avoid tax strategies that are too complex to explain in a few sentences; (5) The bond market’s predictive power remains strong, especially on inflation, but its behavior is shaped by massive cash inflows and global demand for U.S. Treasuries; (6) Innovation in ETFs must solve real problems, not just be interesting; (7) The future of investing lies in tax-aware, factor-based, and transparent strategies; (8) Even in a high-inflation, high-debt world, the U.S. bond market remains resilient—thanks to a vast pool of global capital.