Let's start with the obvious.

Markets have been pretty volatile since the start of the US-Israel/Iran war on February 28.

That, in and of itself, isn't all that surprising.

Wars can do that sort of thing.

But, lucky us (!), markets have been volatile in this very 2026 kind of way, where war and social media musings collide to make volatility sharply two-sided.

Sometimes, all of that within the same actual minute.

I suppose that's directly related to what Vineer Bhansali was telling us about on TREUSSARD TALKS.

Vineer has gone from theoretical physics to trading extreme-event risk for a living. You can find our conversation “Tail Risk, Market Structure, and Building Resilience” here.

Historically, we've been accustomed to markets breaking "to the downside" when they break.

Things would be chugging along as they often do, slowly and incrementally. Then some bad news would come out of nowhere. Maybe an accident of some sort deep inside the plumbing of markets. And stocks would drop meaningfully and suddenly.

Think October 1987.

Think 2010 Flash Crash.

That prompted financial economists to adopt things like jump-diffusion processes (aka Poisson distributions) in their modeling to capture out-of-nowhere drops.

But now we have out-of-nowhere jumps up.

That's just what it is. Another reminder to live in the world as it is, not as you think it should be. And thus we must adjust to that new reality, even if it's purely man-made.

The potential for two-sided "jumps" means managing risk to the downside and the upside.

Not sure that's the kind of thing that keeps you young.

But it definitely should motivate you to stay on your game.

Now, given this reality on the ground, me commenting on where markets stand "right now" feels particularly unhelpful. If there is a social media outage, let me know. Maybe then… But not now.

To make this a little more productive, let's zoom out.

Let's talk about the rise of a new $1-trillion business, as the very talented Justina Lee and Denitsa Tsekova over at Bloomberg recently put it:

The business of "slashing the tax bills of rich investors."

Let me start by saying that, as a student of financial markets and of financial engineering, this may be one of the rare cases where actual deep innovation is happening.

That's particularly refreshing to those of us trained to identify "innovation-as-theater" marketing.

The reason Justina and Denitsa's piece is so timely is that there has been a wide range of developments there.

Let's bucket them into two categories, for simplicity.

Clearly, what's not in the list is the old-school mutual-fund structure.

Let me be very clear:

Mutual funds have a lot of positive attributes. Tax efficiency doesn't top that list.

I won't go into every detail. That's what the Bloomberg piece is good for (followed by hours of due diligence).

But here is the simple version.

Let's start with ETFs.

Think of an ETF as a box.

You can put things inside boxes.

And boxes are defined geometrically by their sides.

Once you have that 3-D object in mind, it's easier to understand why people tend to say that "ETFs can be more tax efficient" and why ETFs open the door to tax-management innovation.

With standard mutual funds (also a box), as a first-order approximation, you can only buy and sell financial assets "within the box." You can bring cash into the box. You can take cash out of it. But all the trading of stocks, bonds, and whatever else, happens inside the box.

And anything that happens inside the box, you own the tax implication for it. If the fund bought shares, they went up in value, someone asks for some of their money, the fund has to sell some of those shares at a gain to pull cash out. And you face a tax bill.

ETFs have a funny rule that allows them to create and redeem baskets of securities “in kind" (that's a lot of jargon, stick with me).

Not all securities, but some. Think US stocks, for instance.

Basically, if there is selling pressure (people want money in exchange for their ETF shares), the ETF can hand securities to a party outside the box to create liquidity. There is a certain "poof" quality to the transaction. The trading technically doesn't happen inside the box, and thus the tax implication doesn't live with the box and its owners.

Once you realize this technical difference, you can do all sorts of things, like "buying shares" of a new ETF not with cash, but with shares of stocks you currently own. Since you're not selling those shares, you're just "contributing them," you don't realize the gains at the time of exchange. That can allow you to get more diversification, for instance, without an immediate tax bill. That's the world of 351 exchanges.

By the way, I talked about this to Brent Sullivan a few months ago. Brent is the Editor of The Tax Alpha Insider publication. Our conversation on TREUSSARD TALKS is here.

Lots of rules. Lots of boxes to check.

Mechanics, not magic, as always.

But real.

And potentially valuable as a portfolio-management tool.

Anyway, that's the world of "leveraging the ETF structure."

Now, the world of separate accounts.

Separate accounts are just what they sound like… accounts.

Your brokerage account is a "separate account."

Separate from what? From whom? Well, from other people.

That's an odd thing to underscore until you realize that it’s meant in contrast to mutual funds, once again. In a mutual fund, your money and your claim to the assets inside the box are commingled with the money and claims of everyone else who "owns the mutual fund." That's the whole point, isn't it?

The thing about "separate" accounts is they're yours, and nobody else's. Which means you control what gets bought and sold, and when. And since taxes are a function of the buying, the selling, and the timing of it all, you can see how "separate accounts" can theoretically give you more agency over when tax bills are realized.

But there is a tension, as there always is.

"Never sell" sounds like a nice enough way to delay paying taxes, but the goal of investing (or life, for that matter) is not to delay taxes. Not even close. It's about thoughtfully moving resources through time and space in the face of uncertainty. That means managing risk.

And never selling might manage your tax bill, but it doesn't manage risk. Your big winner might grow to the point of overwhelming other positions from a risk standpoint. Call that the winner's curse.

In separate accounts, you can do reasonably creative things like going long securities "you like" and going short securities "you don't like."

To the extent that the market doesn't really care what you like and what you don't like, some of the longs may lose you money by falling in value, while some of the shorts might lose you money by rising in value.

You can make lemonade out of those bitter lemons by realizing losses along the way. With those losses, you may be able to address your "risk management priorities" elsewhere.

Again, real. And potentially valuable from a holistic portfolio-management standpoint.

If you're hearing a "but" coming, you're an astute reader.

The above is not without complexity.

And risks.

At the cost of repeating myself, that's life.

Live in the world as it is. Not as you wish it were.

I've been up-close and personal with long-short portfolios in my life, including during some serious market volatility.

Long-short portfolios involve "leverage."

That's code for borrowing.

When you borrow money, there is a new party in the equation with some degree of control over your destiny. The party that lent you the funds.

You're renting space on their balance sheet. That's all fine and well when balance-sheet real estate is cheap. But don't take it for granted. Balance-sheet real estate can become scarce, and you're a tenant, not an owner.

Case in point. This headline from this week, from the folks at Citywire.

And that's before you get into the risk characteristics of short positions. A good day for someone else can quickly become a very bad day for you (for example, when a company you "didn't like" gets acquired at a significant premium to yesterday's price).

And while people may think harvesting losses is a nice by-product, it's not the objective of the operation. It never is and never should be… And it definitely doesn't feel that way when your short exposure to some random stock triples overnight.

That is why I said the following, as Justina and Denitsa were deep in the trenches doing their careful research work.

And if you're wondering what I mean by shifting legal and tax code interpretations, the U.S. Treasury recently suggested they're taking a "fresh look" at 351 exchanges. What comes of it, I do not know. But it’s worth thinking about.

That's in "Treasury Takes Aim at Booming ETF Move That's Slashing Tax Bills" by Denitsa Tsekova, Justina Lee, and Vildana Hajric (Bloomberg, February 27, 2026).

In the meantime, if you're still curious about how to think about what's going on in the Middle East and what it all means from a markets standpoint, I recently spoke with Nic Johnson about the oil market.

Nic is the former Head of Commodities at PIMCO, where he was a Managing Director.

Nic knows more than most about the physical world of commodities and the financial plumbing associated with energy trading. That’s what happens when you’ve spent time managing the largest commodity fund in the world…

Our conversation is here:

The Strait of Hormuz, Oil Markets, and the Futures Curve with Nic Johnson

We talked about the fact that the market is still expecting the oil shortfall to be largely temporary. We talked about the fact that $100-a-barrel oil is high but not demand-destroying per se. And thus, if oil runs low for a while, prices may have to be meaningfully higher to bring demand in line with available supply.

And Nic took us on a tour of energy derivatives trading, suggesting that the futures market is handling the stress well and that if this spills into a broader market crisis, it may be because of souring investor sentiment at large, not because of a technical mishap in energy markets, narrowly speaking.

All worth the 30 minutes or so that Nic and I talked.

Hope it helps.