WEBVTT - Gen-Z Is Looking To Juice Gains With Stocks, Options Trading 0:00:01.360 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Along 0:00:04.120 --> 0:00:06.200 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:10.360 we bring you interviews from CEO, market pros and Bloomberg experts, 0:00:10.400 --> 0:00:13.600 along with essential market moving news. Find the Bloomberg Markets 0:00:13.600 --> 0:00:17.000 Podcast on Apple Podcasts or wherever you listen to podcasts, 0:00:17.000 --> 0:00:21.599 and on Bloomberg dot com. Eric weltunas e t F 0:00:21.680 --> 0:00:24.279 specialists here at Bloomberg, joins us now for our next 0:00:24.280 --> 0:00:28.440 segment and Eric, welcome, has Robin Hood and here we 0:00:28.480 --> 0:00:30.920 go again because it's sort of fascinating. Has it taken 0:00:30.920 --> 0:00:34.360 away investors from e t s? From run of the 0:00:34.360 --> 0:00:37.199 mills sort of vanilla e t F And some of 0:00:37.200 --> 0:00:40.760 them aren't that vanilla either. Yeah. You know, when et 0:00:41.000 --> 0:00:44.160 s were introduced back in the nineties, it was like, hey, 0:00:44.240 --> 0:00:46.839 you know, you can now trade a whole basket like 0:00:46.920 --> 0:00:49.199 it were a stock. So you get to the benefit 0:00:49.240 --> 0:00:51.960 of the liquidity of the stock, but it's a diversified basket, 0:00:52.040 --> 0:00:54.880 so your risk is a little lower. That used to 0:00:54.880 --> 0:00:58.120 be a feature. They see it as a bug. That's too. 0:00:58.200 --> 0:01:01.880 It's not enough jus for them, and so that's why 0:01:02.120 --> 0:01:04.320 we are seeing they might start with e t s, 0:01:04.720 --> 0:01:07.400 but they will end up at stocks and options, the 0:01:07.520 --> 0:01:13.200 e T s or the gateway. Yes, uh we We 0:01:13.240 --> 0:01:18.160 interviewed two actual gen Z traders on our podcast and 0:01:18.240 --> 0:01:20.680 both of them had the same kind of experience. Maybe 0:01:20.720 --> 0:01:23.280 you know, started off slow, but they always end up 0:01:23.280 --> 0:01:25.280 at stocks and options. If they do use e t s, 0:01:25.319 --> 0:01:27.960 they tend to like leverage gtfs like t q q 0:01:28.200 --> 0:01:30.319 Q and s q q Q, which is a way 0:01:30.319 --> 0:01:33.399 to sort of bet on the queues movement um. But look, 0:01:33.440 --> 0:01:35.919 I think they are a legitimate force in the market. 0:01:36.319 --> 0:01:38.440 But if you look at the assets, robin Hood might 0:01:38.440 --> 0:01:41.160 have what fifty sixty billion in terms of all of 0:01:41.160 --> 0:01:43.720 their accounts. Now Vanguard takes that in about two months. 0:01:44.200 --> 0:01:45.800 So I think at the end of the day, the 0:01:45.880 --> 0:01:49.279 real retail investor army is still the buy and hold 0:01:49.920 --> 0:01:53.120 advisor world. That is really big money that's day, but 0:01:53.560 --> 0:01:55.400 they don't trade a lot. So I do think when 0:01:55.400 --> 0:01:57.800 you get to mid and small stocks, robin Hood can 0:01:57.840 --> 0:02:00.280 move the market and retail investors can move it. They 0:02:00.320 --> 0:02:03.520 make of about eighteen percent of the trading according to 0:02:04.200 --> 0:02:06.480 my colleague Larry tab which has some great data. That's 0:02:06.560 --> 0:02:08.880 up from fifteen percent last year. And ten percent ten 0:02:08.960 --> 0:02:10.920 years ago. So this has been on the rise for 0:02:10.960 --> 0:02:13.880 a while, and so has high frequency trading. So it's 0:02:13.880 --> 0:02:16.320 a lot of retail and al goes out there right 0:02:16.320 --> 0:02:19.959 now moving the market, especially for the smaller stocks. So Eric, 0:02:19.960 --> 0:02:22.079 as you look across your E t F universe, and 0:02:22.120 --> 0:02:23.760 I know you've been doing it for years, so you 0:02:23.800 --> 0:02:26.600 see everything. Where's the money flowing? When you take a 0:02:26.600 --> 0:02:29.000 look at Vanguard flows and the black Rock flows, are 0:02:29.000 --> 0:02:31.960 there certain E t F sectors or areas that are 0:02:32.520 --> 0:02:36.959 more popular. Yeah, fixed income is just ruling the year. 0:02:37.000 --> 0:02:39.600 I mean, this is the fed trade and gold those 0:02:39.680 --> 0:02:43.280 I put under just fed induced money. That's basically been 0:02:43.320 --> 0:02:46.720 the story. The only it's it's interesting. There's been definitely 0:02:46.840 --> 0:02:49.760 some money into equities, but not a lot, not as 0:02:49.840 --> 0:02:52.440 much as you think because the equity markets up what 0:02:53.639 --> 0:02:55.679 since some kitchen sink day at the end of March, 0:02:56.160 --> 0:02:58.760 and there hasn't been much flows into equities because most 0:02:58.800 --> 0:03:00.480 people wanted to front run the ad over in the 0:03:00.520 --> 0:03:02.799 corporate bond area. So when you look at black Rock 0:03:02.840 --> 0:03:05.880 in particular, all of their fifty two billion flows are 0:03:05.919 --> 0:03:09.520 fixed income um. Every last dime that's weird um. And 0:03:09.600 --> 0:03:12.160 equities have been a little left behind. And what's interesting 0:03:12.240 --> 0:03:15.679 is small caps had their best quarter in I think 0:03:15.760 --> 0:03:18.880 thirty years, same with mid caps, and they're both saw 0:03:18.919 --> 0:03:21.160 outflows in e t s. It's interesting there's been a 0:03:21.200 --> 0:03:24.079 lot of areas left behind. Emerging markets saw outflows and 0:03:24.120 --> 0:03:27.000 they just had a best quarter in a decade. That's 0:03:27.000 --> 0:03:29.560 how it's a it's an embarrassment of riches I think 0:03:29.600 --> 0:03:32.520 for investors, and where they see it right now is gold, 0:03:32.680 --> 0:03:35.360 corporate bonds and the queues. That is the one area 0:03:35.360 --> 0:03:37.920 of equities people are piling into. So I suppose you're 0:03:37.960 --> 0:03:40.480 getting some kind of yielding corporate bonds, but you're not 0:03:40.480 --> 0:03:43.920 getting a huge yield. Eric are people that's scared about 0:03:43.920 --> 0:03:45.960 the economy that they're they're going for sort of the 0:03:46.720 --> 0:03:50.800 very safest asset. Well, the corporate bonds is just because 0:03:50.840 --> 0:03:53.080 you know the Fed's coming. So for the past three months, 0:03:53.080 --> 0:03:56.000 the set says, hey, we're gonna buy lq D. So everybody, 0:03:56.240 --> 0:03:59.080 the smart money just piled into l q D. L 0:03:59.120 --> 0:04:01.200 q D took in more flows in the second quarter 0:04:01.640 --> 0:04:05.040 than it ever has in a year because people are 0:04:05.040 --> 0:04:06.960 just like, don't fight the Fed. I'll get right in 0:04:06.960 --> 0:04:09.200 front of the sid started buying LQD. So I try 0:04:09.240 --> 0:04:13.280 to basically contextualize this by saying the FED owns about 0:04:13.320 --> 0:04:16.359 eight billion of corporate bond ETFs, but the whole area 0:04:16.400 --> 0:04:19.440 took in about sixt so most of the money was 0:04:19.480 --> 0:04:21.440 made in front running. I think what you're going to 0:04:21.480 --> 0:04:23.599 see now, though, is people moving out of it. I 0:04:23.600 --> 0:04:25.960 think they're gonna go, Okay, the FED has kind of 0:04:26.040 --> 0:04:28.400 tapped out on their corporate bond ETF buying, let me 0:04:28.440 --> 0:04:30.080 move to something else. So I think we're going to 0:04:30.160 --> 0:04:32.680 see a swing into small cap, midcab emerging markets and 0:04:32.720 --> 0:04:35.359 some of those areas that we're a little left behind 0:04:35.400 --> 0:04:38.239 in the first half. So Eric just real quickly twenty 0:04:38.240 --> 0:04:40.440 seconds or so overall give us a sense of kind 0:04:40.440 --> 0:04:44.800 of the funds flows into ETS in general. Well, they're 0:04:44.839 --> 0:04:47.160 on pace to have a record year. Uh so there's 0:04:47.160 --> 0:04:50.000 still that sort of shift from high costs to low cost. 0:04:50.360 --> 0:04:53.760 People came. You know, ETS went through a lot, but liquidity, 0:04:53.880 --> 0:04:57.159 low cost and tax efficiency kind of trumps all any 0:04:57.200 --> 0:04:59.520 you know, everything right now, and you continue to see 0:04:59.520 --> 0:05:01.520 money flows a two d and twelve billion so far 0:05:01.600 --> 0:05:03.720 year day, so we expect to see more. But I 0:05:03.760 --> 0:05:05.080 do think we're going to see some of those left 0:05:05.080 --> 0:05:08.280 behind sectors see some blows interesting. Eric Balchinis, thanks for 0:05:08.360 --> 0:05:11.599 joining us always the expert Vannie on all things ETF. 0:05:11.680 --> 0:05:14.880 Are fortunate have his ear. Eric's a senior et F 0:05:14.880 --> 0:05:18.080 ANALYSTO Bloomberg Intelligence joining us on the phone. So, Fannie, 0:05:18.120 --> 0:05:19.919 it's just interesting that you know, I've been in this 0:05:19.960 --> 0:05:22.200 business a long time and this E t F phenomena 0:05:22.240 --> 0:05:24.440 has just been amazing, and it's really been i think, 0:05:24.680 --> 0:05:28.000 so widely embraced by many investors exactly, and you see 0:05:28.040 --> 0:05:29.320 some of the same debates going on in the E 0:05:29.400 --> 0:05:31.160 t F world as you do in other words, like 0:05:31.240 --> 0:05:37.920 the fee war for example, you know, the the chasing 0:05:37.960 --> 0:05:40.720 the fees to zero if you like, is flowing into 0:05:40.800 --> 0:05:44.040 quantity TF since long and even the discount brokers, I mean, 0:05:44.080 --> 0:05:45.799 you know, you see the Charles Schwab going to zero 0:05:46.360 --> 0:05:49.520 trading commission. So just again it's a boon for the 0:05:49.600 --> 0:05:54.040 consumer and for the investor well as we all know 0:05:54.080 --> 0:05:56.520 it has been. Why they reported Congress is in the 0:05:56.520 --> 0:06:00.600 midst of negotiating a fourth round of fiscal stimulus in time. 0:06:00.720 --> 0:06:03.800 Certainly of the essence as many of the programs from 0:06:03.839 --> 0:06:07.000 that from the third round that nearly three trillion dollars 0:06:07.000 --> 0:06:08.960 of stimulus in the third round. Those are set to 0:06:09.040 --> 0:06:11.479 expire in the coming weeks and months. Of time is 0:06:11.480 --> 0:06:14.200 certainly of the essence to get an update on how 0:06:14.240 --> 0:06:17.080 that is all playing out. We welcome Lauren Davidson, Congressional 0:06:17.080 --> 0:06:21.320 tax reporter for Bloomberg News. Laura, what's the latest on 0:06:21.640 --> 0:06:24.600 this next round of fiscal stimulus, because again, some of 0:06:24.640 --> 0:06:28.159 these existing programs are about to expire. Well, the latest 0:06:28.279 --> 0:06:30.760 is that they're still really far apart from having a deal. 0:06:30.839 --> 0:06:33.920 Even Republicans in the Senate and and the White House 0:06:33.960 --> 0:06:37.440 are not on the same page. Just yesterday, uh, you know, 0:06:37.560 --> 0:06:39.480 President Trump said it would be a red line if 0:06:39.480 --> 0:06:41.800 the bill did not include a payroll tax cut, which 0:06:41.839 --> 0:06:44.320 is something that Republicans in the Senate are not all 0:06:44.320 --> 0:06:47.400 excited about. But meanwhile, there's a lot of deadlines that 0:06:47.440 --> 0:06:49.880 are pressing down on lawmakers kind of the most important 0:06:49.880 --> 0:06:52.760 one being the end of the six dollar a week 0:06:53.200 --> 0:06:57.919 federal uninsurance uh sorry, unemployment insurance benefit that expires at 0:06:57.960 --> 0:06:59.120 the end of the month. And and that's going to 0:06:59.160 --> 0:07:01.480 be a problem for from millions of people. Uh if 0:07:01.640 --> 0:07:04.240 if Congress lets that lapse without you know, filling something 0:07:04.279 --> 0:07:07.159 to to replace it. So the extra six dollar part 0:07:07.200 --> 0:07:12.600 would laps the unemployment insurance sort of ability to collect, 0:07:12.760 --> 0:07:14.880 wouldn't right, lor would there be anything on top of 0:07:14.920 --> 0:07:17.840 the of the of the minimum, Well, they would have 0:07:17.880 --> 0:07:20.080 their their state benefit you know, which varies by state, 0:07:20.120 --> 0:07:22.760 but it's about a couple hundred dollars. Uh. The but 0:07:22.880 --> 0:07:24.960 the idea is from that the federal government was to 0:07:25.000 --> 0:07:27.880 sort of backstop that and make sure that people basically 0:07:27.880 --> 0:07:30.120 had enough to to pay their rent and and pay 0:07:30.360 --> 0:07:32.520 pay all their bills while uh, you know, they were 0:07:32.520 --> 0:07:34.720 basically shut out of their jobs. Will the economy were 0:07:34.720 --> 0:07:36.680 shut down. Uh, you know, when this was set back 0:07:36.680 --> 0:07:38.640 in late March, they thought, oh, this will be plenty 0:07:38.640 --> 0:07:40.280 of time. But you know, both sides thought, you know, 0:07:40.320 --> 0:07:42.400 this will this little good plenty of runaway. You know, 0:07:42.440 --> 0:07:44.480 now that we're you know, several months down the line, 0:07:44.560 --> 0:07:46.960 and you know, we're seeing states like California shut back 0:07:46.960 --> 0:07:49.240 down again, the virus is spreading even faster than it 0:07:49.440 --> 0:07:52.560 was um several months ago. That there's a lot of concerns. 0:07:52.560 --> 0:07:53.960 There are a lot of people who you know, suddenly 0:07:53.960 --> 0:07:56.640 will be able to pay their mortgages, hey, their rent bills, uh, 0:07:56.720 --> 0:07:59.000 you know, and and that's going to cause wider ripples 0:07:59.000 --> 0:08:01.520 throughout the economy. Yeah, Laura, I know some of the 0:08:01.560 --> 0:08:05.040 debate within Congress about that six d a week supplemental 0:08:05.120 --> 0:08:08.360 payment is that perhaps, uh, it's such a it's it's 0:08:08.400 --> 0:08:12.520 an amount that you know, disincentivizes people to go back 0:08:12.600 --> 0:08:14.760 to work. Is there any sense that they're coming to 0:08:14.800 --> 0:08:19.240 a resolution on that fundamental disconnect? What care? What they're 0:08:19.280 --> 0:08:21.160 looking at is they're looking at sort of two things 0:08:21.240 --> 0:08:23.200 up kind of two sides of the scale. One is 0:08:23.200 --> 0:08:25.240 that they're going to have some sort of federal benefit, 0:08:25.320 --> 0:08:27.520 probably not as high as six hundred dollars, but some 0:08:27.640 --> 0:08:30.240 amount below that. And then what Republicans want is they 0:08:30.240 --> 0:08:32.280 want some sort of back to work bonus. You know 0:08:32.280 --> 0:08:33.719 that there's one idea out there that would be a 0:08:33.720 --> 0:08:35.880 four hundred and fifty dollar a week back to work 0:08:35.920 --> 0:08:39.120 bonus for several weeks to encourage people who may have uh, 0:08:39.160 --> 0:08:41.679 you know, been making more from unemployment, to encourage them 0:08:41.760 --> 0:08:44.080 back to work. Uh. You know, we'll see exactly where 0:08:44.120 --> 0:08:45.960 those land and if they're you know, if they're able 0:08:46.000 --> 0:08:48.040 to to reach a deal in the next couple of 0:08:48.040 --> 0:08:51.360 weeks on that. What about the other parts of it. 0:08:51.720 --> 0:08:56.440 So does you know all sorts of state and local 0:08:56.480 --> 0:08:59.400 government relief packages as part of this as well? What 0:08:59.520 --> 0:09:02.520 will wigons allow and what do they want to what 0:09:02.600 --> 0:09:05.480 do they want to cut back on. Republicans really don't 0:09:05.520 --> 0:09:08.120 want much at all for state and local local governments 0:09:08.120 --> 0:09:10.199 in that package. Um. You know. Of course Democrats that's 0:09:10.200 --> 0:09:12.800 one of their top priorities. So there will likely be 0:09:12.920 --> 0:09:16.400 some sort of money in there. But the big overall 0:09:16.480 --> 0:09:18.560 question here is how much is this bill going to pass? 0:09:18.640 --> 0:09:20.600 You know, several months ago we saw the House passed 0:09:20.600 --> 0:09:23.320 the Heroes Bill that had three point five trillion in 0:09:23.520 --> 0:09:26.719 UH in new stimulus spending. UH. Mitch McConnell for the 0:09:26.760 --> 0:09:29.200 Republicans and said they want something no more than one trillion. 0:09:29.280 --> 0:09:32.000 So there's a there's a vast difference in where the 0:09:32.040 --> 0:09:34.480 both sides are. Uh. You know, again, this is a 0:09:34.480 --> 0:09:37.199 compromise between Pelosi, the White House and and McConnell's. So 0:09:37.280 --> 0:09:40.080 will probably see something above one trillion, but not as 0:09:40.160 --> 0:09:42.240 high as three point five trillion. And and it's really 0:09:42.280 --> 0:09:44.000 just about making the money work once you look at 0:09:44.080 --> 0:09:47.080 unemployment money for state and local there's also concern about 0:09:47.080 --> 0:09:49.480 more money for for a vaccine and for PPE and 0:09:49.520 --> 0:09:51.800 for the health issues. Is that continues to be an 0:09:51.800 --> 0:09:54.360 ongoing problem plus other things, you know, like another round 0:09:54.360 --> 0:09:56.559 of stimulus checks or or more money for us for 0:09:56.640 --> 0:09:59.640 small businesses. Mark, give us a sense of timing here 0:09:59.679 --> 0:10:02.720 about when Congress leaves for their summer vacation. What are 0:10:02.720 --> 0:10:07.520 the odds of getting something done before that recess? Well, 0:10:07.559 --> 0:10:09.360 the goodness is the summer vacation is a is a 0:10:09.520 --> 0:10:12.280 very a good incentive for for lawmakers to to get 0:10:12.280 --> 0:10:14.959 things done in Congress typically doesn't act until it has to, 0:10:15.120 --> 0:10:17.880 and we're rapidly approaching that point. So about the House 0:10:17.920 --> 0:10:20.319 and the Senate will be back next week. They basically 0:10:20.320 --> 0:10:22.600 have two weeks before they're they're scheduled to leave on 0:10:22.640 --> 0:10:24.920 their break. Uh. You know, these things could spill over 0:10:24.960 --> 0:10:26.600 a couple of days into August. But I think there 0:10:26.679 --> 0:10:29.959 is um growing optimism that there will be a deal, uh, 0:10:30.000 --> 0:10:33.600 you know, within the next two or three weeks. What 0:10:33.760 --> 0:10:36.680 happens then, I mean, will the will will whatever is 0:10:36.720 --> 0:10:39.640 decided upon, will it last for? I mean, how do 0:10:39.720 --> 0:10:41.960 they decide how long this lasts? Four? I mean, nobody 0:10:41.960 --> 0:10:44.560 knows when a vaccine is going to be available. You know, 0:10:44.720 --> 0:10:48.960 most businesses that are you know, not able to reopen. 0:10:49.080 --> 0:10:51.720 I'm thinking of even you know, arts organizations like Carnegie 0:10:51.760 --> 0:10:54.840 Hold and Concenter and so on. They're talking about after Christmas, Broadways, 0:10:54.880 --> 0:10:57.800 after the new year. I mean, we're really stretching into 0:10:57.920 --> 0:11:00.440 next year. So anything that gets decided upon on do 0:11:00.480 --> 0:11:03.360 we know how long it will last for we don't 0:11:03.400 --> 0:11:05.360 know exactly, And part of that will be determined by 0:11:05.360 --> 0:11:08.840 the cost. And also it's a political calculation both. You know, 0:11:08.960 --> 0:11:11.520 remember there's an election in November, and if you know, 0:11:11.679 --> 0:11:13.760 especially for Democrats, they think they have a chance of 0:11:13.760 --> 0:11:16.240 winning back the Senate, they may want to just negotiate 0:11:16.280 --> 0:11:18.000 a deal that just goes you know, into the fall 0:11:18.080 --> 0:11:20.000 for a little lies, a little while, and then if 0:11:20.040 --> 0:11:23.200 they were to have control of both the House and 0:11:23.240 --> 0:11:24.959 the Senate, you know, they could pick up a new 0:11:25.000 --> 0:11:29.319 bill in January and hadn't have basically more favorable negotiating 0:11:29.320 --> 0:11:31.880 partners on the other side of the building. So, Laura, 0:11:31.920 --> 0:11:35.240 is the expectation that no matter what Congress delivers to 0:11:35.280 --> 0:11:37.560 the President, that he will sign it. Given that we 0:11:37.600 --> 0:11:41.760 are so close to a presidential election, there is no 0:11:41.840 --> 0:11:44.280 certainty there. Um, you know, there was some concern in 0:11:44.280 --> 0:11:46.600 the Senate yesterday with U with the White House coming 0:11:46.600 --> 0:11:48.559 out and saying that payroll tax cut would be a 0:11:48.920 --> 0:11:52.280 red line. Um, that's something that the Republicans and Senate 0:11:52.320 --> 0:11:54.839 don't really want. It's expensive, it doesn't help people that 0:11:54.880 --> 0:11:58.840 are necessarily not working, so that that's a that's a 0:11:58.880 --> 0:12:02.160 concern though, you know, some some aids have indicated to 0:12:02.200 --> 0:12:03.520 me that this is the demand that the White House 0:12:03.520 --> 0:12:06.320 has made before UH and and the President has caved 0:12:06.320 --> 0:12:08.360 on it. Also. You know, we've seen in previous negotiations 0:12:08.400 --> 0:12:12.040 over over government funding UH demands about money for the 0:12:12.080 --> 0:12:14.760 border wall of Mexico. President has also caved there. So 0:12:14.800 --> 0:12:17.440 I think there's some expectation that there's you know, a 0:12:17.480 --> 0:12:21.840 redline may not be a firm, bright redline. Laura Davison, 0:12:21.880 --> 0:12:24.480 thanks so much for joining us. We appreciate that. Laura Davison, 0:12:24.480 --> 0:12:27.240 Congressional tax reporter for Bloomberg News and Vanni. I think 0:12:27.240 --> 0:12:30.479 this is going to be, UH, a pretty contentious negotiation, 0:12:30.520 --> 0:12:32.840 as Laura was suggesting, coming you know, right down to 0:12:32.880 --> 0:12:36.160 the wire, probably right and today we actually have Manation 0:12:36.679 --> 0:12:39.920 testifying as well before Congress. There there will be a 0:12:39.920 --> 0:12:42.560 lot of information, but will there be enough information Paul. 0:12:42.559 --> 0:12:45.800 I mean, we don't really know yet how many businesses 0:12:45.800 --> 0:12:48.000 were able to get their hands on money to stay open. 0:12:48.040 --> 0:12:50.360 We don't know how many of their employees will actually 0:12:50.400 --> 0:12:53.480 have been uh you know, kept on the pay rolls 0:12:53.520 --> 0:12:55.520 and how money won't So we don't really know how 0:12:55.600 --> 0:12:57.640 much suffering is out there. But one thing's for sure. 0:12:58.679 --> 0:13:01.120 You know, Republicans do not wanted to be as generous 0:13:01.280 --> 0:13:04.600 as the first time out, and it won't be I 0:13:04.640 --> 0:13:06.880 think that's something we can definitely say. Sure, yeah, I 0:13:06.880 --> 0:13:08.560 think you're right. That three trillion we had in the 0:13:08.600 --> 0:13:12.240 third round, that was you know, really a major major 0:13:12.280 --> 0:13:14.400 statement there right at the beginning of the pandemic. But 0:13:14.679 --> 0:13:16.920 you know, we see these states around the country having 0:13:17.000 --> 0:13:19.400 you know, seeing surges. Well it just kind of goes 0:13:19.400 --> 0:13:21.400 to the issue when can we get this thing kind 0:13:21.400 --> 0:13:23.240 of get a handle on it um And it doesn't 0:13:23.280 --> 0:13:25.600 really bode well right now. The data no, a record 0:13:25.720 --> 0:13:27.680 number of cases in the United States. Now this after 0:13:27.760 --> 0:13:29.800 already having seen you know, what we thought was the 0:13:29.800 --> 0:13:34.600 record a couple of months ago. Well, I'm looking at 0:13:34.640 --> 0:13:37.720 gold here up about twenty percent year the date, a 0:13:37.840 --> 0:13:40.240 real rise here. We had a big dip in March 0:13:40.320 --> 0:13:43.439 along with pretty much everything else when the COVID hit, 0:13:43.520 --> 0:13:46.560 but since then been marching ever higher to get a 0:13:46.559 --> 0:13:48.760 sense of what the outlook is for the precious metal. 0:13:48.760 --> 0:13:53.080 We welcome Everett Millman's precious metal specialist for Gainesville Coins 0:13:53.120 --> 0:13:55.679 every Thanks so much for joining us here. Again, I'm 0:13:55.679 --> 0:13:58.920 a little surprised here the golds performed so well, but 0:13:58.960 --> 0:14:02.320 it's just been a stalwart here. What's your view going 0:14:02.360 --> 0:14:05.960 forward for this precious metal? Yeah, thanks for having me 0:14:06.040 --> 0:14:09.000 on UM. As we've seen basically the entire way up 0:14:09.040 --> 0:14:12.199 of these past twelve months, there's been a pretty reliably 0:14:12.240 --> 0:14:14.839 strong bid that comes in any time the gold price 0:14:14.920 --> 0:14:18.640 dips significantly UM, and that durable base of support appears 0:14:18.640 --> 0:14:21.680 to be forming at the eight hundred pounds level right now. 0:14:22.000 --> 0:14:24.600 But as you pointed out, it's interesting that we've seen 0:14:24.800 --> 0:14:28.760 prices recover pretty handsomely in the equity market without much 0:14:28.760 --> 0:14:31.920 of an impact on risk off assets like gold and 0:14:32.000 --> 0:14:34.840 longer data treasuries UM. In fact, both of those have 0:14:34.920 --> 0:14:38.680 continued to rally right alongside starts, right alongside the stock market. 0:14:39.320 --> 0:14:41.840 So even as pockets of the world economy open up, 0:14:42.360 --> 0:14:45.840 UM as economic activity gradually recovers in the second half 0:14:45.880 --> 0:14:50.040 of the year, eighteen hundred dollar gold maybe the new normal. UM. 0:14:50.080 --> 0:14:52.840 On the other hand, if we see some exceedingly good 0:14:52.840 --> 0:14:56.480 developments on the economic reopening or on the trade front, 0:14:56.600 --> 0:15:00.280 for instance, that would relieve a considerable portion of the 0:15:00.320 --> 0:15:03.680 pent up safe haven pressure that's been buoying the gold price. 0:15:04.080 --> 0:15:08.760 So although those kinds of positive developments appear rather unlikely today, 0:15:08.800 --> 0:15:11.880 there is some degree of downside risk for gold UM. 0:15:11.880 --> 0:15:14.920 It could swiftly fall back below six d announces if 0:15:14.960 --> 0:15:18.800 indeed the economy or the financial system looks drastically more 0:15:18.920 --> 0:15:21.440 stable by the third or fourth quarter of this year. 0:15:22.280 --> 0:15:24.160 So I remember speaking with Paul Tutor Jones. Now it 0:15:24.200 --> 0:15:25.960 is probably more than a year ago at this point, 0:15:26.000 --> 0:15:28.040 but he was calling for gold to go higher at 0:15:28.040 --> 0:15:29.800 the time and said that if it hit eighteen hundred, 0:15:30.240 --> 0:15:32.440 you know it would it would it would go beyond 0:15:32.760 --> 0:15:35.920 two thousand dollars nounce. But that didn't happen. We are 0:15:35.960 --> 0:15:39.240 still above eighteen hundred, but we're not moving higher from 0:15:39.280 --> 0:15:42.920 here ever, at what is the reason for that? So 0:15:42.960 --> 0:15:45.760 that is a very interesting development, And what I would 0:15:45.800 --> 0:15:49.160 point to is that investment demand for gold has been 0:15:49.240 --> 0:15:52.480 hitting all time highs, but it's had to make up 0:15:52.560 --> 0:15:56.160 for the near eradication of physical demand for gold jewelry 0:15:56.520 --> 0:15:59.880 in places like India and other key jewelry districts in 0:16:00.000 --> 0:16:02.400 the Middle East and East Asia. So to me, that 0:16:02.440 --> 0:16:05.680 points to the importance of some of the institutional trends 0:16:05.680 --> 0:16:10.280 we're seeing that institutional buyers, hedge funds, central banks, that's 0:16:10.320 --> 0:16:12.920 who's buying gold right now. But if some of the 0:16:12.960 --> 0:16:16.520 assumptions of the gold bears were correct, then losing a 0:16:16.600 --> 0:16:19.160 huge chunk of the biggest source of demand for the 0:16:19.160 --> 0:16:22.480 gold sector. More than fifty of demand for gold is 0:16:22.520 --> 0:16:25.000 made up by the jewelry industry. The fact that that 0:16:25.040 --> 0:16:28.880 market has been significantly impaired for months should have dragged 0:16:28.920 --> 0:16:31.880 prices much lower. Instead, we have seen that face have 0:16:32.040 --> 0:16:36.840 and demand predominantly from Western institutions, has more than compensated 0:16:36.880 --> 0:16:40.040 for that lack of wholesale and retail activity and gold jewelry. 0:16:41.080 --> 0:16:43.040 So let's go to the other side of the equation. Ever, 0:16:43.240 --> 0:16:46.320 the supply side gives a sense of kind of the 0:16:46.400 --> 0:16:51.480 supply dynamics we're seeing in the global gold market here right. 0:16:51.880 --> 0:16:54.400 That is definitely an interesting one to look at because 0:16:54.480 --> 0:16:58.280 COVID has sort of thrown everything into the wind. UM, 0:16:58.280 --> 0:17:01.720 it's very uncertain whether minds are going to be able 0:17:01.760 --> 0:17:05.520 to open at full capacity UM, certainly with the other 0:17:05.520 --> 0:17:08.320 precious metals. In the silver market, we have seen that 0:17:08.960 --> 0:17:12.240 Latin America has been hit pretty hard by COVID and 0:17:12.280 --> 0:17:15.560 that is causing some tighter supply dynamics. So I think 0:17:15.560 --> 0:17:19.119 that that is also adding some positive pressure underneath the 0:17:19.119 --> 0:17:21.720 gold price, and we don't expect that to clear up 0:17:21.760 --> 0:17:24.199 any time in the next few months, so into the 0:17:24.240 --> 0:17:27.680 second half of it could even spill over into early 0:17:28.960 --> 0:17:32.840 We should expect some tighter supply not only in gold, 0:17:32.880 --> 0:17:35.159 but also in silver and the other metals, and that 0:17:35.320 --> 0:17:39.120 is positive for price action. What about jewelry demand, Everett, 0:17:39.400 --> 0:17:43.760 has it gone away completely? Not completely, but as I said, 0:17:43.760 --> 0:17:47.960 it is significantly impaired. UM. Much of the world's jewelry 0:17:47.960 --> 0:17:51.680 demand comes from East Asia and from India, and those 0:17:51.720 --> 0:17:54.199 regions have simply had to shut down a lot of 0:17:54.200 --> 0:17:57.359 their jewelry businesses UM. The same is true in China. 0:17:57.480 --> 0:18:01.119 Even though the Chinese economy obviously bounced back pretty strongly 0:18:01.480 --> 0:18:05.280 in the second quarter, copper demand in China rebounded, we 0:18:05.359 --> 0:18:08.760 haven't seen the same in gold, gold, jewelry has seen 0:18:09.040 --> 0:18:12.280 very low volumes as sales in China. In fact um 0:18:12.320 --> 0:18:14.199 on the Shanghai Gold Exchange, where a lot of that 0:18:14.240 --> 0:18:16.800 jewelry is traded, we've seen the lowest volumes since two 0:18:16.840 --> 0:18:20.520 thousands thirteen. So it is actually rather impressive that the 0:18:20.520 --> 0:18:24.200 gold price has held around eighteen hundred announced because we've 0:18:24.240 --> 0:18:27.040 lost so much of that main source of demand for 0:18:27.080 --> 0:18:31.640 gold under normal circumstances. Every other than gold, what else 0:18:31.640 --> 0:18:33.120 are you looking at in the precious of metal space 0:18:33.160 --> 0:18:36.560 right now? That has your attention? So I'm looking for 0:18:36.640 --> 0:18:39.399 silver to kind of finally play catch up to gold. 0:18:39.480 --> 0:18:42.080 At this point in the bowl market. Um, we've seen 0:18:42.119 --> 0:18:45.840 the gold silver ratio has finally corrected back below one 0:18:46.280 --> 0:18:49.080 to one. That's a pretty significant move, and out of 0:18:49.080 --> 0:18:51.800 all the precious metals, I believe that silver has the 0:18:51.840 --> 0:18:57.119 greatest upside potential and the greatest downside potential. Unfortunately it 0:18:57.200 --> 0:19:00.960 has these very symmetric risks to both sides. Right now, 0:19:01.040 --> 0:19:04.480 the technicals for silver look pretty bullish. UM, we're above 0:19:04.520 --> 0:19:07.600 all of our short term moving averages, and we continue 0:19:07.640 --> 0:19:12.720 to test our two thousand nineteen high around nineteen. But 0:19:12.800 --> 0:19:16.000 unfortunately all of that could reverse quickly. UM in terms 0:19:16.040 --> 0:19:19.480 of behaving like a Saife Haven investment. Silver doesn't tend 0:19:19.560 --> 0:19:23.359 to engender the same level of trust and stability as gold. 0:19:23.720 --> 0:19:27.160 So I'm very keyed in on watching what silver does 0:19:27.200 --> 0:19:28.920 in the short term because I think that will tell 0:19:29.000 --> 0:19:32.639 us uh much about where the future trend is moving. 0:19:32.880 --> 0:19:34.679 All right, we will keep an eye on silver if 0:19:34.720 --> 0:19:37.240 you say so. Everett, thank you for that little tour 0:19:37.359 --> 0:19:41.000 around the precious metals space. Everett Millman is precious metals 0:19:41.080 --> 0:19:46.960 specialist at Gainesville Coins in Gainesville. It is time checking 0:19:46.960 --> 0:19:49.960