Speaker 1: What can a chins, I'm Chuil Webber and Americ Belcunas
Speaker 1: Eric anything of note been happening in markets of late
Speaker 1: What a year?
Speaker 2: What a year this day has been but whiplash, Yeah yeah,
Speaker 2: COVID like whiplash.
Speaker 1: You know.
Speaker 2: The whole year it was sell America, the sell America trade,
Speaker 2: uron stocks, Europe is the place to be and uh
Speaker 2: well that didn't turn out to be true. The us
Speaker 2: rallied back. Now it's positive on the year. I'd say
Speaker 2: even that just blew away much of the negativity and
Speaker 2: expert analysis out there. It's a little I think it's
Speaker 2: one of those moments that's baffling for a lot of people.
Speaker 2: But so instead of you know, selling America, everybody bought it,
Speaker 2: and here we are back in what feels like twenty
Speaker 2: twenty four again, it feels like we're kind of like
Speaker 2: back to normal, which is sort of like, as somebody
Speaker 2: on this podcast is going to say, is comfortably bullish,
Speaker 2: comfortably bolish.
Speaker 1: Okay, Well, to help us walk through some of those
Speaker 1: headlines and what's happening in markets and bonds, we're gonna
Speaker 1: be joined by Isabelle Lee Process, a reporter with Bloomberg
Speaker 1: News as well as Athanasios, Sarah Vegas ETF analyst with
Speaker 1: Boomberg Controjans Beast time on Trillions. Bye bye America, Athanasios,
Speaker 1: welcome back to Trillions, Isabelle, thanks for being here. See
Speaker 1: what I did there? Good bye bye.
Speaker 3: I heard it.
Speaker 1: It was good. So let's I want to set this
Speaker 1: up with you because you've been writing some interesting notes
Speaker 1: right now. What have you been seeing on sort of
Speaker 1: like just a metal level of how things have transpired.
Speaker 4: Yeah, well, Eric kind of alluded to it, but it's
Speaker 4: the bounce back in the US market, And looked at
Speaker 4: what happened in the beginning of April. It was a
Speaker 4: lot of negative sentiment. It was the US acceptavision is
Speaker 4: over time to rotate into Europe, move away out of it.
Speaker 2: Uh.
Speaker 4: But one thing that was interesting with THETF flows, they
Speaker 4: never really fully bought into the Europe story, right, so
Speaker 4: you heard everyone coming up with, well, it's time to
Speaker 4: rotate into Europe. The flows didn't really bite. They were
Speaker 4: still sort of buying the US even during that dip
Speaker 4: in the beginning of April. They continued to buy. And
Speaker 4: now that's paid off because the market's bounced back so far.
Speaker 4: So maybe across the world. Yeah, Europe was a little
Speaker 4: bit more negative on the US, but if we didn't
Speaker 4: look in like Asia, they were actually buying US stocks
Speaker 4: like pretty aggressively. So you know, you if you weren't buying,
Speaker 4: you missed out on this massive, really rapid rebound, I.
Speaker 2: Mean, one of the phenomenons. And you know we saw
Speaker 2: this during Trump one point zero two. There does seem
Speaker 2: to be like a little bit of a wider gap
Speaker 2: between negativity and the headlines and like the reality in
Speaker 2: the market. And I know that probably because you know,
Speaker 2: the president can be polarizing, and I think sometimes that
Speaker 2: gap is almos.
Speaker 1: Remember I had that guy on here.
Speaker 2: I know, I'm trying to make a metric out of
Speaker 2: it between the flows and the price and then the headlines,
Speaker 2: and it's almost like a factor where there's some kind
Speaker 2: of a gap there. It reminds me of that guy
Speaker 2: we had on who talked about intangible value of a stock,
Speaker 2: where it's like dark matter. You can't quite see it
Speaker 2: or measure it, but you know it's there. And I
Speaker 2: think it's something people have to be careful of. But
Speaker 2: it seems to me the money doesn't care what the
Speaker 2: headlines are they're just simply buying.
Speaker 1: They wants more money.
Speaker 2: Money wants more money, and that's kind of cool that
Speaker 2: in all this, like, you know, all this political warfare
Speaker 2: and headlines going back and forth on both sides, that
Speaker 2: you know, money just wants to make money. And I
Speaker 2: think when it saw some pullback on the tariffs, it
Speaker 2: was immediately in because it generally has real faith in
Speaker 2: US stocks, likes to be in US stocks, doesn't want
Speaker 2: to not be in there. And I think that was
Speaker 2: something we saw this year and something will probably continue
Speaker 2: to see. So I think in a way sometimes the
Speaker 2: headlines need a little bit of an adjustment factor, you know,
Speaker 2: for the next three years.
Speaker 1: We'll see.
Speaker 2: But that's something we've noticed and I think other peoples have.
Speaker 2: There just definitely was like a disconnect between flows and
Speaker 2: prices and the headline and the sort of vibe out
Speaker 2: there coming on every little thing that was going on.
Speaker 3: Macrowise, so said media here in New York Face. But
Speaker 3: I think the headline was an attack on us.
Speaker 1: No, it's true.
Speaker 3: I mean, the headline risk is real. I've actually we
Speaker 3: talked to money managers all the time and they also
Speaker 3: say that the concerns are there but most of them
Speaker 3: are actually staying put also because many reasons, long term
Speaker 3: investment strategies, or because they're just trying to write it out,
Speaker 3: because if you move, you move to what I mean,
Speaker 3: we were just talking about this earlier, Joel, that one
Speaker 3: tweet or one truth could change a lot of things,
Speaker 3: and it's hard to have conviction. That's what they tell me,
Speaker 3: because then if you have conviction on one tweet, what
Speaker 3: will happen to the others. The data that jumps out
Speaker 3: to me is that disparity between soft data and hard data.
Speaker 3: Back of America had this really interesting graph that showed
Speaker 3: that the gap between those two is that it's wide
Speaker 3: since at least twenty five years. So what do you
Speaker 3: look at these days? And then we have a lot
Speaker 3: of money managers looking at alternative data like cargo or
Speaker 3: like foot traffic to stores or pizza deliveries because they
Speaker 3: can't rely on our data anymore, the traditional one solely
Speaker 3: at least.
Speaker 1: So it's like anything that helps me feel like I
Speaker 1: can get a read on what's happening and gives.
Speaker 3: Me an advantage, yes, or even Uber deliveries. One person
Speaker 3: was telling me because he was like, you don't order
Speaker 3: out if you feel like there's a recession coming interesting.
Speaker 2: And Isabelle this is a great thing to riff off
Speaker 2: of for Athanasios, which is that where else can you go?
Speaker 2: I think this is something that's underrated. So this idea
Speaker 2: of American exceptionalism in markets, in markets, I do think
Speaker 2: it's stronger than it's given credit for, because you've found
Speaker 2: that the poll to invest here, even if you don't
Speaker 2: like what's going on. You look at the stocks in
Speaker 2: the Nasdaq one hundred or the S and P, and
Speaker 2: then you fire up the European ETF and you look
Speaker 2: at those stocks. I'm sorry, you're not leaving, You're you
Speaker 2: gonna stay in America.
Speaker 4: Yeah, I mean, I think it's right about what alternative
Speaker 4: there is, and it's really hard to give it up,
Speaker 4: you know, and with Trump and all that, like, I
Speaker 4: get it, Yeah, he's kind of messing with the markets now,
Speaker 4: But if you take all that out, we're still just
Speaker 4: these companies are really good at just making money right,
Speaker 4: way better than Europe, way better than some other kind.
Speaker 4: And so when you just look at what is the
Speaker 4: best alternative, I find it really hard to get money
Speaker 4: to pry away from the US and be like, Okay,
Speaker 4: I'm gonna go fully into Europe. I just feel like
Speaker 4: this might not age well. Not saying that they can't
Speaker 4: do well, but a lot of times when europe stocks
Speaker 4: do well, US is also doing really well too. I
Speaker 4: can't really see a scenario where we're doing really poorly
Speaker 4: and they're like crushing it. But you know, I think
Speaker 4: it's just And even if you look at Europe, most
Speaker 4: of their money is invested in the US, right, So
Speaker 4: I think almost in a way, like our greatest export
Speaker 4: here is like our returns, our market returns, because so
Speaker 4: much of the world has benefited off of like just
Speaker 4: the growth in the SP five hundred. It's not just US,
Speaker 4: it's like a global phenomenon.
Speaker 1: What else in the data have you been evaluating specifically
Speaker 1: around Europe?
Speaker 4: Could say two things, right, they'd say, there's US investors
Speaker 4: trying to buy European funds. Here there's there's barely any movement,
Speaker 4: right and even this is Europe doing really really well
Speaker 4: this year, they just haven't really allocated to it. Then
Speaker 4: there's the European investors investing in the US and then
Speaker 4: their local markets. So there you've seen that they definitely
Speaker 4: turned more bearish on the US in April. They were
Speaker 4: cutting down their allocations and were staying more domestic, but
Speaker 4: with that they missed this massive rebound. But if you
Speaker 4: still look at the way they're positioned, there's still mostly
Speaker 4: overweight the US. So they're invested more in the US,
Speaker 4: at least three tfs more in the US than they
Speaker 4: are even in their own local market. So I think
Speaker 4: they understand it too. It's like, yeah, I live here,
Speaker 4: Europe's a great place, but for investing in stocks, just
Speaker 4: the US just offers a way better alternative than some
Speaker 4: of the local ones that I'm getting.
Speaker 2: But you also looked at the times when Europe outperforms
Speaker 2: the US. It's like a rower band, right, Yeah, and
Speaker 2: it got to its like sort of widest length that
Speaker 2: it ever gets to, which is what like seventeen eighteen percent?
Speaker 2: And what happens next?
Speaker 4: Yeah, and things mean revert, right, So you know, Europe
Speaker 4: was outperforming the US quite a bit this year, and
Speaker 4: mean mean reverted in April. Then the other thing we
Speaker 4: always kind of joke about European summers and how Europe
Speaker 4: like takes off the entire summer summer is actually a
Speaker 4: bad time to rotate into Europe. On a relative basis,
Speaker 4: US usually always does better over the summer than Europe.
Speaker 4: But you know, it's probably to say that maybe the
Speaker 4: ourperformance is a little bit stretched from European over the US,
Speaker 4: so that just tends the meaner vert a little bit.
Speaker 4: So I think there's a lot of all like narratives
Speaker 4: now to support a little bit of rotation back into
Speaker 4: the US. I bet you we could see European investors
Speaker 4: rotate back into the US even locally.
Speaker 1: Okay, another thing that's been wiplash inducing has been the
Speaker 1: bond market. Is well, you wrote about that recently. What
Speaker 1: is that story about.
Speaker 3: It's about TLT. So it's I shares twenty plus year
Speaker 3: bond ETF. It's the biggest long bond ETF, and it's
Speaker 3: known as a widow maker. So widow maker in market
Speaker 3: terms means that it's a trade that could lead to
Speaker 3: potentially catastrophic losses. And I must credit Athanasius here because
Speaker 3: he did write a note about TLT that made me
Speaker 3: realize that, you know what it did actually see in
Speaker 3: a one week time horizon, the most inflows over one
Speaker 3: week out of all the more than six hundred ETFs
Speaker 3: fixed income ETFs that Bloomberg track. So you follow the flow,
Speaker 3: at least for us, because price tells you a different thing.
Speaker 3: But flows show conviction. And then it's interesting because people
Speaker 3: have really been piling into this trade even if but.
Speaker 1: You got to get the timing right otherwise it'syeah, widow.
Speaker 3: Maker, yes, and it hasn't been right for them until
Speaker 3: one day when we saw really the bonds rallied and
Speaker 3: so that was a rare payday for those investors. And
Speaker 3: so for that time, at least for this brief moment,
Speaker 3: TLT wasn't a widow maker those.
Speaker 1: Long dated bonds at the Nastia's like, what else have
Speaker 1: you all been watching on that front?
Speaker 4: The thing that I find really interesting with TLT, I
Speaker 4: feel like it's a very institutional vehicle. So I don't
Speaker 4: know if it's just this mindset of like trying to
Speaker 4: fight the FED and like outsmart the FED and there's
Speaker 4: like something about that.
Speaker 1: But there is.
Speaker 4: Fifty billion or so in the CTF and it's done
Speaker 4: nothing for like three years.
Speaker 1: It's just sort of treaded water.
Speaker 4: So you have like fifty billions sitting in the CTF
Speaker 4: that hasn't really moved a lot.
Speaker 1: But it's one of those things.
Speaker 4: I think people want to get it right, and this
Speaker 4: is why they've literally been trying for three years. And
Speaker 4: most of the flows have come in the last three years.
Speaker 4: It was only about fifteen billion or so in twenty
Speaker 4: twenty two, and now it's fifty, like I mentioned. But
Speaker 4: I think it's even just a bigger story about bonds
Speaker 4: and like what they've sort of done for you in
Speaker 4: the last couple of years. Nothing, yeah, nothing, yeah? And
Speaker 4: does it make sense to keep allocating to them?
Speaker 1: Right?
Speaker 4: We always talk about sixty forty and whatnot, and you're
Speaker 4: earning the same yield as you would in like a bill,
Speaker 4: which is really short term treasury ETF. Obviously you're not
Speaker 4: getting the price movement if the FED cuts or whatnot.
Speaker 4: But I think it just opens up a much bigger
Speaker 4: question about what, you know, what a bonds do for you.
Speaker 3: I think TLT fell around forty in the past five years,
Speaker 3: but it gathered like fifty billion of endflows.
Speaker 2: This to me, this ETF is for people who like
Speaker 2: to overthink things, like you're playing forty chess with the Fed.
Speaker 2: You're like, no, but then we're gonna get an economic number.
Speaker 2: It's gonna say this the Fed will have to blink.
Speaker 2: Rates will go down, TLT goes up. And it's like
Speaker 2: that meme with Zach gal Galfanakis with all the formulas.
Speaker 2: To me, that's who buys TLT. Okay, it's not regular people.
Speaker 2: Regular people are buying es GOV, which is so much
Speaker 2: more of a no brainer, basically, no duration risks. You're
Speaker 2: at one one to three month treasuries yields the same almost,
Speaker 2: so you must We'll clip that coupon with no duration risk.
Speaker 2: But that's again the TLT people are playing like a
Speaker 2: whole game. It's like a risk or something on it
Speaker 2: thing going on over there. It's like the further out
Speaker 2: on the curve you go the bigger brain that.
Speaker 3: People get nice image. But to your point, bond investors
Speaker 3: have actually been demanding extra compensation for the risk of
Speaker 3: holding long duration bonds. I think Bloomberg usually refers to
Speaker 3: the US ten year term premium, so an inch closer
Speaker 3: to one percent. That's the highest level in at least
Speaker 3: a decade.
Speaker 1: And the issuance of those long dated bonds have been
Speaker 1: falling off too. Haven't been seeing that.
Speaker 2: But again, this is another thing where again I feel
Speaker 2: like the media kinda was like Oh my god, Moody's
Speaker 2: downgraded the US. It's all over, see what's happening? And
Speaker 2: like honestly, yields when up for a minute like and
Speaker 2: that then they fell again, like they've been around five
Speaker 2: percent four percent for like a long time. Nothing, there's
Speaker 2: nothing really going on.
Speaker 3: The media is just here, Eric, I know, well I was.
Speaker 2: I was talking to other colleagues earlier. I used to
Speaker 2: work at a derivatives monitor my first job out of school,
Speaker 2: and I remember the guy'd be like, I had to
Speaker 2: call traders and like's find out what happened that day.
Speaker 2: And I'd be like, okay, like the something move like
Speaker 2: twenty basis points and he's like, well why, and I'm
Speaker 2: like they don't know, and he's like, you, there has
Speaker 2: to be a reason. So there's like this pressure to
Speaker 2: like come up with a reason for everything, and you know,
Speaker 2: you gotta get the clicks. I get it.
Speaker 1: But if you can tell the story of the market
Speaker 1: through one etf right now, what do you think it is?
Speaker 2: Vou sixty four billion dollars year to date, it's kind
Speaker 2: of that's the influence. Yeah, Because I do find this
Speaker 2: juxtabsition interesting and I've always found it interesting. And this
Speaker 2: is well beyond Trump or the president, but just in general,
Speaker 2: when something bad happens and there's like this, because again,
Speaker 2: let's face it, when there's negative news, you get more
Speaker 2: clicks on your stuff. It's just like, it's just the fact.
Speaker 2: It's like the Weather Channel when there's a hurricane. You
Speaker 2: know how they pump up hurricanes.
Speaker 1: Hurricane seasons basically upon us.
Speaker 2: Yeah, but I get it. I do it too. I'm
Speaker 2: guilty as well. But at the same time, the VU
Speaker 2: investor doesn't care. And it's interesting to see this immovable
Speaker 2: object against this big force of the headlines, and they're
Speaker 2: just like, you cannot shake these VU investors. And this
Speaker 2: year VU is on track to break the old record
Speaker 2: by fifty percent, which is set last year. So VU
Speaker 2: being this steamroller of like I don't really care what
Speaker 2: you're saying, or what anybody's saying, even the President. I'm
Speaker 2: just gonna buy us thoughts like nothing can scare me,
Speaker 2: is fascinating to me. That's a big story. Not every
Speaker 2: single thing on earth bought like VOO did, but VU
Speaker 2: is symbolic. I thought of this idea of I think
Speaker 2: a lot of investors would come up with a couple
Speaker 2: truths that they just truly believe in. Number One, they
Speaker 2: think they can't time the market. They've tried and they failed,
Speaker 2: and they're like, I can't do it. No one can,
Speaker 2: even the experts fail, So I'm not gonna do it.
Speaker 2: Number two, they're like, I can never get a better
Speaker 2: deal than VU three basis points for the entire US market,
Speaker 2: so I don't need to change funds, So I'm not
Speaker 2: getting out for that reason. And number three, the US
Speaker 2: stock market kicks ass. I'm not going to trade in Amazon, Apple,
Speaker 2: and Microsoft for like HSBC and Nesley, No thanks, And so.
Speaker 1: Those eslie chocolate does taste better? I agree with you.
Speaker 2: I think a lot of them have maybe ten percent
Speaker 2: in international, like they don't. They're not devoid international, But
Speaker 2: this idea of like selling America or the end of
Speaker 2: the exceptionalism, I just think that those three things I
Speaker 2: just said are truths that create the immovable object of
Speaker 2: those flows, and I think they're underrated by people who
Speaker 2: are trying to call the markets. And I think a
Speaker 2: lot of people have gotten to that point with their investing,
Speaker 2: and this year it's just going to embolden that because
Speaker 2: the rally back just reminded them I did the right
Speaker 2: thing by not panicking.
Speaker 3: Voo is hard to beat, actually, but I was a
Speaker 3: small part of me was preparing for you to say ibit,
Speaker 3: because not only do you tweet about it every day,
Speaker 3: but also I think the ibit is just indicative of
Speaker 3: the this staunchness or the conviction of traders to really
Speaker 3: just plow money into this new bitcoin fund or I
Speaker 3: guess it's not so new now anymore. And recently we
Speaker 3: saw everything whiplash, but Crypto was the adult in the room,
Speaker 3: so that was the story.
Speaker 2: We also wrote real quick on ibit. It is the
Speaker 2: second flow getting ETF in the past six weeks after
Speaker 2: Voo nine billion. It's on a crazy run. Interesting about ibit,
Speaker 2: in my opinion. I was on stage with Robbie Mitchnick
Speaker 2: from Blackrock in Dubai at a thing called Token twenty
Speaker 2: forty nine. Fifteen thousand people at this thing, average age
Speaker 2: Joal twenty eight. Like I was like the old grandpa
Speaker 2: the ors. My kid would say, unk, that's the new
Speaker 2: term for old head. Anyway, I'm unking out there and
Speaker 2: I'm on stage with other unks right with the trad
Speaker 2: five panel, and Robbie says that when bitcoin decoupled and
Speaker 2: went like a different direction than spy, he got incoming
Speaker 2: calls from big fish, big institutions. So I think bitcoin's
Speaker 2: in this nice place right now with regulatory headwinds gone,
Speaker 2: and as it starts the lower in volatility and get
Speaker 2: more less correlated than to the market, it will get
Speaker 2: bigger investors who are more stable, which will ultimately help
Speaker 2: it look more like gold too.
Speaker 1: He says.
Speaker 2: These giant investors are not interested in tech stock returns.
Speaker 2: They want like digital gold. So everybody's kind of waiting
Speaker 2: for bitcoin to kind of mature and act more like
Speaker 2: an adult and not like a teenager. And as it is,
Speaker 2: and you can see it in the ball coming down,
Speaker 2: they're going to get bigger investments. And IBIT, to me,
Speaker 2: is the one that bit the big fissues. So the
Speaker 2: fact that ibit has taken ninety percent of the hall
Speaker 2: of all the other bitcoin ETFs, normally it takes in
Speaker 2: two thirds tells me that the institutional incoming is pretty serious.
Speaker 2: Not to mention all the corporations you see adding it
Speaker 2: to the balance sheet, a couple governments, it could get
Speaker 2: pretty crazy. I think we're entering this like true financialization
Speaker 2: of Bitcoin. There will be a point where it peaks
Speaker 2: out and then maybe it goes down. I don't know what,
Speaker 2: but there feels like there's like three or four positive
Speaker 2: narratives and not a lot negative. And especially with the
Speaker 2: stock market being placid, it's hard to see much in
Speaker 2: the way. But we have a phrase on the team.
Speaker 2: I just don't see the bear case, which is like
Speaker 2: famous last words. So I say that knowing that that's
Speaker 2: probably a bad side.
Speaker 1: I think that's a fitting place to end. So, Isabelle,
Speaker 1: thanks for joining us at trillions.
Speaker 4: Yeah, thanks for having me on.
Speaker 3: Thank you that was really fun.
Speaker 1: Thanks for listening to Trillions until next time. You can
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Speaker 1: or wherever else you'd like to listen. We'd love to
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Speaker 1: Joel Weber Show, He's at Eric Pulcini's. Trillions is produced
Speaker 1: by Magnus Hendrickson. Brendan Newman is our executive producer. Sage
Speaker 1: Bauman is the head of Bloomberg Podcast