David Orr

The Militia Long/Short Equity ETF has launched! The ticker symbol is $ORR and it just began trading. The strategy is similar to my hedge fund, investing in global stocks up to 150% long and 100% short. This strategy will typically have lower correlation and beta to the market than most public investments. This means that during a strong bull run $ORR will have a tough time keeping up. But in a weak market $ORR is expected to outperform. My reasons for launching $ORR rather than growing my hedge fund: Many of the investments in my hedge fund are illiquid and I won’t be able to trade them if my hedge fund grows too big. This is why I’ve been turning away new investors. However, well over half of my bets scale well and $ORR will invest in that portion. The $ORR ETF will have a lower edge due to its larger scale, and thus it has a much lower fee to match. I have a strong opinion that hedge fund fees are incompatible with large AUM generally, not just for my fund. Most people don’t know it but Buffett pointed out that even Berkshire’s track record would have been mediocre with hedge fund type fees. This is by far the biggest reason I want to launch an ETF. I want to do right for the people investing with me, who are trusting me with their money, rather than sell out like most other hedge fund managers do. The $ORR ETF has less risk than my hedge fund because it uses less leverage and isn’t short many microcap stocks, which can have extreme volatility. This is a more appealing product to risk averse investors. The ETF vehicle has many benefits: Simplified, favorable taxes for the ETF holder. Can be owned on margin and in retirement accounts. Daily liquidity. Due diligence on ETFs is simpler than hedge funds, convenient for institutional investors. Compliance isn’t an issue for institutional investors. Allows me to rebalance longs without a tax hit. Both very small and very large investors can join, neither of which could invest in my hedge fund. Expenses stated in the prospectus: The 1.3% management fee is accurate, which is around .65%/year fee per 100% gross leverage managed. The 18.84% gross expense ratio is very misleading. These items cause the stated expenses to be very high but are not real economic costs: 1. When a stock or ETF that I’m short pays a dividend it gets counted as an expense. In reality, whenever dividends are paid the underlying stock or ETF drops by roughly the same amount. Thus, the real economics are neutral. The ETF will be heavily short high dividend investments at the start. 2. When I short a stock or an ETF, I am paying to borrow the shares. On average, my larger scale shorts cost 1%/year to borrow. This is considered an expense. However, when I short sell I am simultaneously borrowing shares from one guy and selling them to someone else. That someone else pays cash for these shares, which the ETF holder earns interest on. Thus, I will be earning a positive carry on that short. But the way the “expense” gets calculated, the interest earned from being short does not offset the cost of borrowing. 3. The margin interest paid for being over 100% gross long. Unlike the first two items, this is a real expense but the expected return of the stocks we own is higher than the interest cost. Frankly, the way the expense ratio gets calculated in the ETF prospectus is nonsensical. Regulators should update this number to better reflect reality. But since they don’t, and since most people do not understand this, ETF managers are reluctant to do anything in their portfolio that causes this official number to go up. Well, I say to hell with that. I’m just going to do whatever I think has the maximum expected value even if this hurts marketing to many potential investors. Points about the $ORR ETF at launch: * Until the ETF reaches ~$50-$150 million AUM, I will not be able to short more than 10 individual stocks or ETFs. This is due to the unusual mechanics of short selling in an ETF vehicle and associated implied cost. Thus, $ORR will be shorting mostly bad ETFs in its early days. This isn’t so bad. There’s a big edge in shorting some of these bad ETFs and I even make these same big bets in my hedge fund. But I want to be transparent: the ETF won’t have its full edge until we hit a bit larger scale. * While the ETF has low AUM you should be careful with trade execution. Do not use market orders. You will get the best fills if you use limit orders and buy between 10 AM and 3:30 PM ET. If you're buying in large size, contact your broker and do a Request for Quote (RFQ) to get best execution. Also, if you want to invest >$10 million and want more liquidity, you can reach out to me and I can help coordinate with a market maker. Regulation on public posts, or why I haven’t posted about the ETF until now: Every post I make about the ETF needs to get approval, including replies to questions in this thread. The turnaround time for approval is 5 days and costs money. Thus, I won’t be able to reply to your questions here. Instead, I will gather a list of questions and write up a FAQ. Oddly, I am allowed to reply to questions on podcasts. If you run a podcast and want to discuss the ETF, I’d like to go on. - Thanks to Sam Lee @svrnco for partnering with me on this. Besides financially backing it, there was an awful lot of overhead work and other hurdles when launching an ETF. He did a great job handling most of that work so that I could focus on investing. For more information about ORR ETF, a prospectus, fees and risks militiaetf.com

@LepoulpePoulpo @glbeaty @RodriGo_ethe @cremieuxrecueil It's totally bizarre. ... How about we just allow competitive and see what happens?

On the supply of doctors I think this is the major bottleneck - but this is not a US problem, most if not all western countries have it. Doctors are a powerful corporation everywhere. Also, surprisingly, I found out that having more doctors is an impopular idea, at least here in France.

Since 1965, life expectancy in the USA has increased by 7 years. We gained: 2 years from smoking 1 year from cutting leaded gasoline (Insane that was a thing) 1/2 a year from cleaner air 1/2 year from safer cars And we lost 1 year from obesity. That leaves roughly 4 years gained from healthcare. And around 3 years of that is from better heart disease treatment, which is only 10% of US healthcare spending. We spend 20% of GDP on healthcare. Do the math and we spend 15%+ of GDP on healthcare to gain 1 year of life expectancy. There is no way in hell that is worth it. People are better off opting out of US healthcare entirely. Fraud is not an unrealistic word to use. However, most of the people involved probably do have good intentions and think they're helping people. But the truth is quite the opposite, the healthcare industry is hurting Americans in a serious way.

If the government did price setting, I don't think they should set prices just only drugs. X procedure = Y cost, maybe adjusted *slightly/partially* for the postal code's cost of living. If we don't have enough doctors willing to do it at that price, make more doctors (rather than run at the perpetual shortage we've had). I think free market healthcare could work too. But it should actually be free market, with WAY more supply of doctors.

@orrdavid @LepoulpePoulpo @RodriGo_ethe @cremieuxrecueil Agree it could be far more efficient and efficacious, but there's not much of a limit to what sick people will spend to get well. If the U.S. sets drug prices short-run spending will drop. Long-run is less clear since drugs become ~free and are way cheaper than other treatments.

@LepoulpePoulpo @glbeaty @RodriGo_ethe @cremieuxrecueil I don't trust anything about the formal education system, so it's hard to really discern much of anything.

@glbeaty @orrdavid @RodriGo_ethe @cremieuxrecueil Has someone made a comparison with the education systems ? It's well known that the college fees are outrageous but most of them are actually remitted I've heard. In Europe, you will very rarely pay more than 10k€/year (except UK) and the best education is often free.

The way American healthcare works: Self employed and small biz families feel like they have no choice and buy in. Or often the employer subsidizes the insurance, forcing it another way, which happens for tax code reasons. Once bought in, the mentality of some people becomes, "Well I'm paying so much, I better find more reasons to use it. And it's death by a thousand cuts...

@glbeaty @LepoulpePoulpo @RodriGo_ethe @cremieuxrecueil I don't think it's inevitable though. If people were even allowed to buy into a true tail end insurance policy, they'd do that for less than half the cost. Or if the government would negotiate on behalf of Americans for set lower prices, we'd get it for less than half also.

@LepoulpePoulpo @glbeaty @RodriGo_ethe @cremieuxrecueil The only good defense I see for American healthcare: At the high end, we're probably indeed the best in the world. But even hard working middle class people don't get access to that, despite paying in a crazy amount.

@orrdavid @glbeaty @RodriGo_ethe @cremieuxrecueil Isn't the defense that in the end richer countries will spend more anyway ? My familly is involved in healthcare/medicine and nobody denies that America is better than Europe accross the board, except for prices

@glbeaty @RodriGo_ethe @cremieuxrecueil Here is chatGPT's summary. There is so much defense of American healthcare, and I super don't get it. More that double the spend for a 30% worse outcome.

I'm seeing around a .25 year gap for drug overdoses and .25 years for homicide. That seems more like a 25% explanation, not 50%? What am I missing? Americans spend more than double on healthcare, and we should assume there's *some* factor that increases life expectancy from this which offsets, too. Though we cannot quantify it.

@RodriGo_ethe @glbeaty Their obesity is only slightly lower, too.

@glbeaty @orrdavid What's the reason for the gap since the late 70s

@glbeaty The 8.8 is probably from birth, my numbers are from 5 or 40 (basically the same answer).

@orrdavid I don't think those numbers are right. NCHS shows +8.8 years -3 from drug overdoses. -2.4 from covid at its worst, though that's lessened. Obesity I think it closer to -2. U.S. spending isn't abnormal. People like buying healthcare, but only drugs can scale to meet the demand.

@penny_ether I'd point out too, that given technological progress generally over the last 60 years, it should be self evident that something went horribly wrong on these numbers.

@penny_ether Yeah it's roughly that.

@penny_ether I'm not talking about spending 0%. I'm talking about spending more like 5% instead of 20%.

@orrdavid It's not as though the extra year costed 15%+ of GDP... Eg, If we spent 0% of GDP on healthcare, you'd expect life expectancy to drop by far more than 1%, wouldn't you?

@markvalorian Quality of life is a fair point that's hard to quantify. For the life expectancy portion, quality of 79 years goes up, and you lose 1 year. It's a no brainer. Only if somene is extremely well to do is the pricetag worth it.

I’m not sure what could possibly be a better use of money than extending life any marginal amount. I’m not sure how you can just conclude carte blanche that it’s “not worth it.” What else could possibly be a better use of money? And that’s not even considering quality of life improvements that exist outside of lifespan which would add tremendous value.

Since tech's bottom in 2002:

Buffett lost to $QQQ since its inception, even though $QQQ launched in 1999.

Buffett also used hey margin loans and short selling early on. Buffett got famous *after* his track record became a closet index fund. People were criticized for saying Buffett lost his magic touch in 2000. But those people were not wrong if you look at the results.

@doumenzi I did, that was around .25 years lost. There are a handful of more minor things like that.

@orrdavid Now do drug addiction

@JR_Vaultis @JoinCrowdHealth That's wonderful, I hope their plan works.

@orrdavid @JoinCrowdHealth is attempting to do that. Though not officially “insurance” by definition

One self employed friend is paying 20k/year for his wife and two kids. In 5 year they'd have a 100k cushion.

@mr_victor7 It's a damn shame the government made true tail end insurance illegal, for operations that actualyl make economic sense, since that's the narrow spot where insurance should be used at all. Still, forgoing insurance entirely beats losing a huge % of your income.

@orrdavid There are catastrophic illnesses and long term conditions that could easily wipe out $100K. I think if people could at least get reasonably priced coverage for catastrophic then what you’re saying could make a lot of sense for the vast majority of healthcare needs.

With government intervention comes fraud, healthcare version. People would opt out, if only the government would let them.