WEBVTT - The Return of the Trump Put

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<v Speaker 1>Okna trillions.

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<v Speaker 2>I'm Joel Webber and I'm Eric belchernis Well, Eric, we

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<v Speaker 2>live in exciting times.

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<v Speaker 1>I think we've recorded a couple versions of this episode,

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<v Speaker 1>and here we are after the market's closed on Wednesday,

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<v Speaker 1>April ninth. What has happened?

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<v Speaker 3>I guess the Trump put is real. That's what we

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<v Speaker 3>found out today. So the Trump Put was this idea

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<v Speaker 3>that somewhere along the lines of these tariffs there was

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<v Speaker 3>going to be a point where.

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<v Speaker 4>The president would back off.

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<v Speaker 3>A little because he wants to see the stock market

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<v Speaker 3>do well, and he wouldn't let the whole stock market

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<v Speaker 3>go into the doghouse.

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<v Speaker 4>And people thought, well, maybe he will.

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<v Speaker 3>This is a new Trump, it's not the old one,

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<v Speaker 3>and people were kind of digging in, and even I was.

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<v Speaker 3>I had said early on, I just don't think he'll

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<v Speaker 3>let it get this far. I was wrong, But then

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<v Speaker 3>again I guess I was right eventually. But he came

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<v Speaker 3>in said there's a pause on the tariffs, and it's complicated.

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<v Speaker 3>They're not over, but just the word pause, and it

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<v Speaker 3>came from his mouth. It wasn't fake news. The markets

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<v Speaker 3>went absolutely bananas. The algos which were lying in wait

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<v Speaker 3>like salivating dogs were thrown big chunk of red meat

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<v Speaker 3>and basically like the QQQ went up twelve percent today, Joel,

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<v Speaker 3>that's the third best day ever, barely behind the second

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<v Speaker 3>best day, which was in two thousand and eight during

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<v Speaker 3>the Great Financial Crisis. And both of those are a

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<v Speaker 3>bit behind January third, two thousand and one. So this

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<v Speaker 3>is up there with those eras of those crazy times.

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<v Speaker 3>You know, there's two thousand and one, two thousand and eight,

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<v Speaker 3>and now this is going to be historic and memorable

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<v Speaker 3>for different reasons.

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<v Speaker 4>That's the kind of thing we just loved through.

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<v Speaker 1>So we have no guests for this episode. It's Eric

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<v Speaker 1>and me talking about what just happened and trying to

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<v Speaker 1>make sense of it and giving you some etf insights

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<v Speaker 1>in the process, this time on Trillions. What just happened? Eric,

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<v Speaker 1>welcome back to Trillions, see you and me.

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<v Speaker 3>Yeah, it's been you know, it's funny there somebody was

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<v Speaker 3>pointing out the Goldman Sachs had basically predicted a recession

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<v Speaker 3>at like noon and walked two hours later said, h

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<v Speaker 3>recession is off. So we did the same thing except podcasts.

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<v Speaker 1>So it has been a turbulent week. We saw market

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<v Speaker 1>go way down and and as you've u helped said

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<v Speaker 1>in the intro, things have come back. What are some

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<v Speaker 1>of the the stats that jump out at you, Well, just.

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<v Speaker 3>The inter day moves in some of these ETFs. You know,

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<v Speaker 3>we just went over the ques. I think that is

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<v Speaker 3>a massive number. Twelve percent. I mean that's one day now.

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<v Speaker 3>It's still not back up, you know, to where it

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<v Speaker 3>was before all this started, but it's went a long

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<v Speaker 3>way towards that. And but one of the ETFs that

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<v Speaker 3>stood out to me was SOXEL SOXL. This is the

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<v Speaker 3>three X semiconductors ETF, which I remember looking at it

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<v Speaker 3>all week and it just kept taking in tons of

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<v Speaker 3>money and I was like, man, these degens are crazy.

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<v Speaker 3>This is like they were just throwing money into this

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<v Speaker 3>thing was going down and down and down, and honestly,

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<v Speaker 3>they're looking good today. It went up over fifty percent

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<v Speaker 3>in one day. Fifty five percent, right, this is the

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<v Speaker 3>best return it's ever had. It's like fifteen years old.

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<v Speaker 4>And my god.

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<v Speaker 3>So if you know, we had looked over the past

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<v Speaker 3>couple of weeks and we were like, there's really only

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<v Speaker 3>two people that seems like they're buying this market.

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<v Speaker 4>The Vanguardians. They always buy the market.

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<v Speaker 3>But the degens, they were really hanging tough, and I thought,

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<v Speaker 3>how long can they tell?

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<v Speaker 4>How much can they take?

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<v Speaker 3>This is going to embolden them forever. I mean, they're

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<v Speaker 3>never not going to buy the dip anymore. And this,

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<v Speaker 3>I got to be honest, is why I have a

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<v Speaker 3>hard time being anything other than a vanguardian investor myself personally,

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<v Speaker 3>because market timing is so hard, especially in a world

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<v Speaker 3>where the Fed or the President can control the market

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<v Speaker 3>with like one word.

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<v Speaker 4>You know who? Who could have called this right?

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<v Speaker 3>All the evidence and data pointed to more pain and

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<v Speaker 3>just reminds me of COVID a little. Remember when the

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<v Speaker 3>FED stepped in to say they're buying bonds and the

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<v Speaker 3>market did the same thing. This is why it is

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<v Speaker 3>just as dangerous to go to cash sometimes, even if

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<v Speaker 3>everything seems like it going to hell. I imagine this

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<v Speaker 3>is just going to live with people for a while.

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<v Speaker 3>If anything, it could make people better disciplined. They might

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<v Speaker 3>just never mess with their portfolio again.

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<v Speaker 4>We why bother.

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<v Speaker 1>So some cracks were forming earlier in the week. Where

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<v Speaker 1>were some of those cracks and are they still there

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<v Speaker 1>or have they you know, been just kind of covered up?

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<v Speaker 1>Up for the time being.

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<v Speaker 3>The cracks are gone, basically. So one of the stories

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<v Speaker 3>that Bloomberg News wrote was about the COLO ETF and

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<v Speaker 3>how it traded at a one percent discount.

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<v Speaker 1>And this was what's the ticket for this one?

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<v Speaker 4>Jaws Yeah, jaaa yeah.

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<v Speaker 3>So it's not a big discount. You know, we saw

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<v Speaker 3>discounts up to twenty nine percent during COVID in some ETFs.

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<v Speaker 3>But it was the first sign that there was maybe

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<v Speaker 3>some illiquidity forming in bonds. And some people even said

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<v Speaker 3>that the bond market was what pushed Trump to change.

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<v Speaker 3>I don't know if that's true or not, but the

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<v Speaker 3>bond market was starting to be.

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<v Speaker 1>He said as much too, like he has said that now.

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<v Speaker 3>Yeah, so to confirm then, So the bond market was

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<v Speaker 3>starting to show some ill liquidity. Treasuries were doing what

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<v Speaker 3>we didn't think they would do. They were going down

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<v Speaker 3>even though the stocks were going down. That's a bad

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<v Speaker 3>sign anyway. There was just the very hint of cracks

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<v Speaker 3>or illiquidity forming in bonds, and a Jaw was one

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<v Speaker 3>of the early ones to show that. But it were

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<v Speaker 3>really light. I mean we're talking like a swell way

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<v Speaker 3>out yonder you know, not even close to being anything

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<v Speaker 3>big yet, But these cracks are going to be gone.

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<v Speaker 3>If anything, what we might see is the opposite role.

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<v Speaker 3>Instead of seeing discounts, you could see some premiums because

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<v Speaker 3>so much a wall of money just probably bought the

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<v Speaker 3>market all day that the you know, arbitragers are just

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<v Speaker 3>trying to keep up.

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<v Speaker 4>Probably you could see some premiums.

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<v Speaker 1>Okay, So what about flows? What how crazy did they

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<v Speaker 1>look before? And what happened in the afternoon.

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<v Speaker 4>I gotta be honest.

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<v Speaker 3>I've always said ETF holders are more diamond hands than

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<v Speaker 3>people give them credit for. But this year they really

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<v Speaker 3>showed diamond hands. ETF took in three hundred and three

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<v Speaker 3>billion through the year, and the last couple of weeks

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<v Speaker 3>were really good. They were averaging like four or five

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<v Speaker 3>billion a day. Mostly vous you know again, it was

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<v Speaker 3>the vanguardians and the degens, and there were some people

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<v Speaker 3>doing opportunistic buying like there were definitely a lot of

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<v Speaker 3>flows into cash like ETFs. But the equity ETFs did fine.

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<v Speaker 3>They had their best quarter in Q one, and you

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<v Speaker 3>know again, they're reaping the benefits today, at least for today.

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<v Speaker 3>We'll see where it plays out from here, but they

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<v Speaker 3>look good. I'd imagine we'll see another pickup and flows,

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<v Speaker 3>you know, even another little boost. A lot of times

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<v Speaker 3>you have the trading crowd and the retail crowd. The

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<v Speaker 3>retail crowd had been buying the whole time. The traders

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<v Speaker 3>were kind of coming in and out. Normally they're just

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<v Speaker 3>running for the hills during something like this, but they

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<v Speaker 3>were kind of in and out. They weren't totally committed

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<v Speaker 3>to being in or out. And the neutralness let the

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<v Speaker 3>vanguard flows really power through.

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<v Speaker 1>So there's flows. What about volume volume?

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<v Speaker 4>It was fascinating.

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<v Speaker 3>I always bring up those two scientists in Silence of

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<v Speaker 3>the Lambs troll who they brought the butterfly thing to

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<v Speaker 3>the bugs. Those guys are the thick glasses who are like, oh,

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<v Speaker 3>this is so interesting. This is what the last three

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<v Speaker 3>days were like for us. The volume was crazy. On Monday,

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<v Speaker 3>the spy tradered one hundred and twenty seven billion. That

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<v Speaker 3>was the biggest day ever on record. A lot of

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<v Speaker 3>times there's volume explosions in around a capitulation moment, so

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<v Speaker 3>we were wondering, okay, is this it now? We thought

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<v Speaker 3>that even before the news, But the volume today was

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<v Speaker 3>almost as much. And I think a lot of the

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<v Speaker 3>volume today was buying volume. So I think we're going

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<v Speaker 3>to see when you look at the month of April,

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<v Speaker 3>it is going to blow away other month on record

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<v Speaker 3>for ETFs, most likely at least this week. So a

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<v Speaker 3>lot of people leaned on ETFs who are traders and

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<v Speaker 3>everything you know, worked fine, but the volume showed a

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<v Speaker 3>lot of fear and just craziness in the market.

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<v Speaker 1>And I know that Athanasios Sera Fegas on your team

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<v Speaker 1>at Bloomberg Intelligence did a little study. What did he

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<v Speaker 1>find in that study?

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<v Speaker 3>He looked at times where the spy volume is over

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<v Speaker 3>sixty billion. You know, I've always called sixty billion. The

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<v Speaker 3>freak out zone spy average is twenty five billion.

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<v Speaker 1>So anything beyond that.

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<v Speaker 4>Yeah, anything beyond sixty to me.

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<v Speaker 3>Here's why, because spy is used by so many people

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<v Speaker 3>on the outskirts of their portfolio, almost like a liquidity sleeve.

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<v Speaker 3>So if they're like especially bigger investors, if they want

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<v Speaker 3>to tweak their investments for something bad, they might add

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<v Speaker 3>a put option from their spy account, which would end

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<v Speaker 3>up creating volume for spy, or they might just short spy,

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<v Speaker 3>or they might buy extra spy.

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<v Speaker 4>The spy is where they move.

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<v Speaker 3>The knobs on the outside of their portfolio to get

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<v Speaker 3>the system just right, because they don't want to mess

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<v Speaker 3>with their picks in the middle. People like to keep

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<v Speaker 3>the rest, you know, as it is. So spy is

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<v Speaker 3>an adjustment mechanism. So when people are adjusting, the volume

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<v Speaker 3>goes up. And he looked at those days over sixty

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<v Speaker 3>billion and found that in the next month there's a

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<v Speaker 3>two thirds chance that the market will be positive and

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<v Speaker 3>the medium return was about one point two percent, so

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<v Speaker 3>not gangbusters, but positive. And so again this is because

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<v Speaker 3>a lot of times there's these freakouts where spy volume

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<v Speaker 3>goes up, VIX goes up, and it is in a

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<v Speaker 3>way an explosion of negativity, almost like a real explosion,

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<v Speaker 3>and then the dust kind of settles and people that

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<v Speaker 3>start looking for some opportunity in the rubble. And I

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<v Speaker 3>think that's sort of what happened here. It's just that

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<v Speaker 3>seemingly that rebound got sped up, you know, eight hundred

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<v Speaker 3>times it was put condensed into about an hour instead

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<v Speaker 3>of a month.

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<v Speaker 1>What are you, as an ETF vanalyist watching out for next?

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<v Speaker 3>Yeah, So one thing we're looking at David Cohne, who

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<v Speaker 3>covers active funds.

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<v Speaker 4>Is how active managers dealt with this?

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<v Speaker 3>You know, did they go to conservative Well, we found

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<v Speaker 3>but this is before the bounce back. We did find

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<v Speaker 3>that active equity managers normally only beat the market, like

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<v Speaker 3>only thirty three percent of them typically beat the market

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<v Speaker 3>in any given year. Over half were beating the market

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<v Speaker 3>in the past week. In other words, they had done

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<v Speaker 3>they were tilted a little more towards value stocks and

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<v Speaker 3>fundamental less mag seven, they were positioned pretty well. But

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<v Speaker 3>this rebound, how will this affect that? On the flip side,

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<v Speaker 3>bond managers did very poorly. They are a benchmark against

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<v Speaker 3>the AG, and the AAG is full of treasuries and

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<v Speaker 3>a lot of them they take extra risk, so a

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<v Speaker 3>lot of them when there's a huge sell off in bonds,

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<v Speaker 3>they get caught a little naked, and so a very small.

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<v Speaker 4>Amount of them outperformed during the sell off.

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<v Speaker 3>The you know, when the tariff was the worst. They're

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<v Speaker 3>probably happy because risk is back on. So it's interesting, how,

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<v Speaker 3>you know, what are you supposed to do as an

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<v Speaker 3>active manager? I mean, this is something we'll be exploring

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<v Speaker 3>for the next couple of days. We felt that people

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<v Speaker 3>had the same dilemma for the past two years. You're

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<v Speaker 3>an active manager, these mag seven stocks are like extremely

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<v Speaker 3>high valuations. What do you do do you do you

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<v Speaker 3>underweight them and miss out on the next leg up,

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<v Speaker 3>or do you overweight them or neutral weight them. It's

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<v Speaker 3>it's really hard right now to be an active manager,

0:12:32.160 --> 0:12:34.920
<v Speaker 3>and especially on the macro side, because these macro winds

0:12:35.000 --> 0:12:39.480
<v Speaker 3>can just decimate anything it had going. If anything, it

0:12:39.520 --> 0:12:42.880
<v Speaker 3>probably bodes well to just be a classic stockpicker because

0:12:43.200 --> 0:12:44.839
<v Speaker 3>these macrowinds come and go, but at the end of

0:12:44.880 --> 0:12:49.160
<v Speaker 3>the day, over time, the good companies rise to the top.

0:12:49.559 --> 0:12:55.120
<v Speaker 1>Okay, last question, Eric Trump paused many tariffs, but he's

0:12:55.240 --> 0:12:59.440
<v Speaker 1>holding firm on China. So what does the prospect look

0:12:59.520 --> 0:13:04.000
<v Speaker 1>for world X China and ETFs.

0:13:04.240 --> 0:13:06.880
<v Speaker 3>That had been a very popular trade for a little while.

0:13:07.000 --> 0:13:11.720
<v Speaker 3>And it's interesting since you know the TEARFF pause was announced,

0:13:11.760 --> 0:13:13.920
<v Speaker 3>China had a good day. I kind of thought it

0:13:13.920 --> 0:13:17.360
<v Speaker 3>would be a little worse for them. But right now,

0:13:17.440 --> 0:13:18.560
<v Speaker 3>like if you look at.

0:13:18.720 --> 0:13:20.920
<v Speaker 1>Year to date returns, what's the ticket for this.

0:13:21.600 --> 0:13:25.360
<v Speaker 3>Emx C is Emerging markets X China and FXI is China.

0:13:25.440 --> 0:13:29.240
<v Speaker 3>So EMXC was down nine percent year to date, FXI

0:13:29.320 --> 0:13:32.360
<v Speaker 3>only down two percent, So China had been outperforming its

0:13:32.400 --> 0:13:35.840
<v Speaker 3>emerging market peers, and if anything, this.

0:13:36.320 --> 0:13:37.480
<v Speaker 4>May reverse that a little.

0:13:38.160 --> 0:13:41.520
<v Speaker 3>Right, if China is sort of put into a special

0:13:41.520 --> 0:13:45.520
<v Speaker 3>place and trade is full of friction with the US,

0:13:46.120 --> 0:13:49.520
<v Speaker 3>it's possible that that goes the other way. So I

0:13:49.559 --> 0:13:52.200
<v Speaker 3>would look for EMXC to maybe have a good couple

0:13:52.360 --> 0:13:56.000
<v Speaker 3>days in lieu of you know, after this that said,

0:13:56.360 --> 0:13:59.160
<v Speaker 3>what we found in China, and Rebecca and Jack on

0:13:59.240 --> 0:14:02.520
<v Speaker 3>my team covered this is the national team bought ETFs

0:14:03.360 --> 0:14:05.240
<v Speaker 3>uh for the past couple of days. So just like

0:14:05.320 --> 0:14:08.640
<v Speaker 3>the FED bought bond ETFs in twenty twenty, China's national

0:14:08.679 --> 0:14:11.360
<v Speaker 3>team went in and bought equity ETFs and helped prop

0:14:11.400 --> 0:14:11.920
<v Speaker 3>the market up.

0:14:11.920 --> 0:14:14.840
<v Speaker 1>So almost like they knew the Trump was coming.

0:14:15.240 --> 0:14:18.400
<v Speaker 3>I know, right, it was a it was a good bet. Well,

0:14:18.600 --> 0:14:22.280
<v Speaker 3>let's say they are ostracized and they take a hit

0:14:22.320 --> 0:14:25.160
<v Speaker 3>from like the trade of the US. Just it's hard

0:14:25.200 --> 0:14:28.560
<v Speaker 3>to bet against a country where the government's going to.

0:14:28.560 --> 0:14:30.360
<v Speaker 4>Buy you know, ETFs or stocks.

0:14:30.400 --> 0:14:32.920
<v Speaker 3>I mean that's like again, don't fight the Fed, don't

0:14:32.920 --> 0:14:35.760
<v Speaker 3>fight the Central Bank. So the China versus em is

0:14:35.800 --> 0:14:38.200
<v Speaker 3>going to be tricky. There's I guess you could say

0:14:38.200 --> 0:14:40.680
<v Speaker 3>there's reasons to do or don't boo, do both. But

0:14:40.960 --> 0:14:43.600
<v Speaker 3>you know, I will say this, I think so many

0:14:43.640 --> 0:14:47.800
<v Speaker 3>people are just very happy that it's paused. I think

0:14:48.480 --> 0:14:51.560
<v Speaker 3>most investors really believe in the US. They wanted a

0:14:51.600 --> 0:14:53.800
<v Speaker 3>reason to believe. They didn't want to think it was

0:14:53.840 --> 0:14:56.120
<v Speaker 3>over a lot of investors here, I'll be honest. They

0:14:56.120 --> 0:14:58.240
<v Speaker 3>have a hard time buying European stocks. They have a

0:14:58.280 --> 0:15:01.000
<v Speaker 3>hard time buying China, like they don't think China numbers

0:15:01.000 --> 0:15:04.280
<v Speaker 3>are real. They think Europe isn't that motivated, the not

0:15:04.360 --> 0:15:07.360
<v Speaker 3>much innovation. They'd rather have their money put to work here.

0:15:07.400 --> 0:15:10.320
<v Speaker 3>So this past couple of weeks was just really painful

0:15:10.680 --> 0:15:14.640
<v Speaker 3>for most average investors, and so I think most people

0:15:15.160 --> 0:15:16.360
<v Speaker 3>are just so relieved.

0:15:16.840 --> 0:15:17.360
<v Speaker 4>What does the.

0:15:17.320 --> 0:15:19.440
<v Speaker 3>Future hold, I don't know, But what we do know

0:15:19.520 --> 0:15:23.560
<v Speaker 3>now is that if the tariffs kick in, or if

0:15:23.560 --> 0:15:26.440
<v Speaker 3>there's more tariff talk, we know they can be undone

0:15:26.880 --> 0:15:31.760
<v Speaker 3>with literally one word. And I'd imagine this makes other assets.

0:15:32.600 --> 0:15:36.400
<v Speaker 3>It makes it harder to attract assets because people know

0:15:36.520 --> 0:15:40.040
<v Speaker 3>that at some point, you know, the president might capitulate

0:15:40.640 --> 0:15:44.320
<v Speaker 3>if the market's that bad. So it's interesting spot we're

0:15:44.360 --> 0:15:46.640
<v Speaker 3>in now. It does feel like the Trump played the

0:15:46.680 --> 0:15:49.960
<v Speaker 3>role of the Fed in a way done Eric.

0:15:50.160 --> 0:15:51.840
<v Speaker 4>Always a pleasure, Always a pleasure.

0:15:51.880 --> 0:15:52.080
<v Speaker 1>Drop.

0:15:59.200 --> 0:16:02.160
<v Speaker 5>Thanks for listening to Trillions until next time. You can

0:16:02.200 --> 0:16:07.680
<v Speaker 5>find us on the Bloomberg Terminal, Bloomberg dot com, Apple Podcasts, Spotify.

0:16:07.680 --> 0:16:10.120
<v Speaker 1>Or wherever else you'd like to listen. We'd love to

0:16:10.160 --> 0:16:11.720
<v Speaker 1>hear from you. We're on Twitter.

0:16:12.000 --> 0:16:16.960
<v Speaker 5>I'm at Joel Webber Show. He's at Eric Valcunos. This

0:16:17.040 --> 0:16:19.600
<v Speaker 5>episode of Trillions was produced by Magnus Hendrickson.

0:16:20.440 --> 0:16:21.360
<v Speaker 1>Bye,