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Speaker 1: Welcome to trillions. I'm Joel Webber and I'm Eric Beltrn. Eric.

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Speaker 1: What is it Week six? From work at home? How

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Speaker 1: you holding up good? Um? I shaved my beard. Um.

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Speaker 1: I think I'm meeting me too. Actually, yeah, I can

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Speaker 1: see that you look good. How long did it take?

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Speaker 1: You took me like forty five minutes to get that

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Speaker 1: thing off. Yeah. I had to cut it down first,

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Speaker 1: you know, like hack hack it away, and then come

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Speaker 1: in with the razor blande. Yeah, it was like weed

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Speaker 1: whacking one of those like industrial parks. Back back when

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Speaker 1: I landscaped, I'd have to just take the weed whacker

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Speaker 1: out sometimes and just mow down a bunch of like

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Speaker 1: large weeds. It was similar to that, except a razor.

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Speaker 1: The haircut is the thing I can't wait for. Uh,

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Speaker 1: truly will like basking the best haircut of my life

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Speaker 1: when I once I get out of my house, it's

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Speaker 1: gonna feel good. I think barbers are going to get

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Speaker 1: really good tips. Uh. It's like a one year It's

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Speaker 1: a one year subscription. I'm going every two weeks. Uh.

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Speaker 1: Put enough about haircuts, Eric, last week saw some crazy stuff,

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Speaker 1: specifically in the oil market. Speaking of haircuts, Yeah, speaking

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Speaker 1: of haircuts and e t f s were all wrapped

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Speaker 1: up in it. What happened, Uh, just the real brief

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Speaker 1: story is with the lockdown, nobody's moving, and when nobody moves,

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Speaker 1: nobody demands oil. So oil the whole oil sector has

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Speaker 1: major problems. Right, there's a supply glut, and at one

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Speaker 1: point the May contract went negative. I think these negative right,

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Speaker 1: so negative oil became a big, big talking point. This

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Speaker 1: is about a week ago and an e t F.

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Speaker 1: USO has been really in the center of this whole

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Speaker 1: oil debacle and USO for a long time track the

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Speaker 1: front month oil future. But it rolls out of it, uh,

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Speaker 1: a couple of weeks before it expires, so it was

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Speaker 1: already out of the May contract during that week. However,

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Speaker 1: it then turned to June and there was a huge

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Speaker 1: question on whether June would go negative because again nobody

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Speaker 1: wants oil. People are almost willing to pay you to

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Speaker 1: take it. And then USO abandoned its basically it's philosophy

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Speaker 1: or its rules of what it was going to track,

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Speaker 1: and it started moving down the curve said we're not

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Speaker 1: going to be all in June. Now, we're gonna move

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Speaker 1: to July a little oh, no, no no, we're gonna move

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Speaker 1: to August two, now September, now October, and then at

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Speaker 1: the last time I checked, it's actually holding June contract,

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Speaker 1: so it's done everything to get away from the sort

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Speaker 1: of front month contract that is going through hell right now.

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Speaker 1: So this was something we want to debate with with

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Speaker 1: our guests. Who is Peter Schure. He's the head of

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Speaker 1: macro strategy at Academy Securities, which is a broker dealer.

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Speaker 1: He invests in stocks and et fs on behalf of

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Speaker 1: individuals and companies. So we're gonna kind of dive into

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Speaker 1: this topic a little bit with him and just try

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Speaker 1: to make some sense of it because it is obviously

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Speaker 1: highly technical. It's a commodity, which is a thing that

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Speaker 1: we've talked about before on Trillions, and a lot of

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Speaker 1: people are just left scratching their heads about like what

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Speaker 1: just happened and could it maybe happen again? Even I

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Speaker 1: like to look at news mentions and Twitter, you know,

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Speaker 1: uh a sentiment and USO was tweeted about more last

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Speaker 1: week than x I V was when it imploded. So

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Speaker 1: this has become a huge issue, and I think part

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Speaker 1: of it is is the u s O has attracted

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Speaker 1: some retail investors, and some people argue, and I agree

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Speaker 1: to the to the to an extent, that it's kind

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Speaker 1: of a wolf in sheep's clothing. It's way more complex

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Speaker 1: than than retails should be messing with. And should you

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Speaker 1: have democratized oil futures is a whole another debate that

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Speaker 1: could have been going on for the last fourteen years,

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Speaker 1: but it's brought it to light now because of what's

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Speaker 1: happened this time. I'm trillion, w T F w T I, Peter,

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Speaker 1: Welcome to trillions. Thanks. I love that. WTF about w

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Speaker 1: T I. I have to say that I'm very jealous

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Speaker 1: of you not needing a haircut. I've actually been doing

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Speaker 1: my own haircut. I invested in one of those wall

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Speaker 1: things a long time ago, so usually only use it

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Speaker 1: in emergencies, and it's been an emergency even by my standards.

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Speaker 1: So you did not take a haircut on this USO

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Speaker 1: business because you are really just not a fan of

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Speaker 1: this instrument, are you. No, I've had a lot of

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Speaker 1: difficulty with it over the past, you know, recent times.

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Speaker 1: You go back and I think, as Eric talked about,

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Speaker 1: we talked about vix ets being able to blow up

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Speaker 1: and they've done a lot of work on that, and

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Speaker 1: they ultimately did blow up. And I think there was

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Speaker 1: some similar flaws on the vix et F that are

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Speaker 1: maybe in some USO. It didn't get to track the

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Speaker 1: attention because I think vix was such a fast money

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Speaker 1: trading vehicle. Plus Vix no one really care about fixed.

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Speaker 1: Now these problems have moved into the oil and everyone

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Speaker 1: cares about oil. Everyone looks at oil um. So one

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Speaker 1: of the big problems that I think is just starting

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Speaker 1: to be addressed is this product has done phenomenally well.

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Speaker 1: So I from about a billion and a half of

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Speaker 1: a u M for most of the past year to

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Speaker 1: skyrocking over four billion, so all of a sudden, it

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Speaker 1: has a much bigger impact on the market than it

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Speaker 1: used to. And that's also when oil was down around

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Speaker 1: fifteen to twenty instead of thirty five to forty five,

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Speaker 1: So it wound up holding anywhere from t to more

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Speaker 1: of individual futures contracts. And if you think about commodities trading,

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Speaker 1: any trading on stock side, right if you own more

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Speaker 1: than five percent, you have to make disclosures. I think

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Speaker 1: the Hunt Brothers got shut down for cornering a commodity

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Speaker 1: at so they became to a large degree the tail

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Speaker 1: wagging the dog in this space, and right now I'm

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Speaker 1: not sure what to do with it. Eric, how much

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Speaker 1: of the carnage that we witnessed was really because of

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Speaker 1: the USO as an as a trading vehicle. Yeah, so

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Speaker 1: it's all mixed together. It's hard to piece out how

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Speaker 1: much is USO versus how much is people just hating oil.

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Speaker 1: I think those two things would be created like a

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Speaker 1: downward spiral. This is a once in a lifetime earthquake

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Speaker 1: in oil. I mean, the whole economy shut down, right

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Speaker 1: the the literal oil that oils our economy is oil,

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Speaker 1: and nobody wants it right now because nobody's moving. So

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Speaker 1: that's what's going on in you know. Just that's something

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Speaker 1: I think on the positive side that I think it's

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Speaker 1: lost in a bit of these headlines. As one, USO

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Speaker 1: was not in that May contract, so they've already been

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Speaker 1: out of it, so that wasn't directly at their function.

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Speaker 1: And only about seven thousand contracts traded at a negative price.

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Speaker 1: So there's these great headlines of how it went to

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Speaker 1: minus thirty seven, But the v whop or the average

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Speaker 1: weighted price on that Monday, I think was still ten dollars.

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Speaker 1: So there are a lot of weird things going on

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Speaker 1: that day that had enough to do with USO. But

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Speaker 1: what we're seeing is that it's now translated into everyone

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Speaker 1: who speculates an oil traditionally speculated in that front contract,

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Speaker 1: and now that's almost a no no. I think another

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Speaker 1: issue to understand here is that USO is fourteen years old,

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Speaker 1: and I've been tracking it for about the whole time.

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Speaker 1: I think I started covering e t f s raight

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Speaker 1: on after the time it launched. And every four or

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Speaker 1: five years, oil goes so low that it makes like

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Speaker 1: the CBS Nightly News, and then people like my dad

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Speaker 1: and my you know, college roommate, they email or text

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Speaker 1: me and say, hey, I'm thinking of buying this u

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Speaker 1: S so I know oil can't go any lower, and

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Speaker 1: so it attracts these tourists. We called a tourist trap,

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Speaker 1: and that's what X I V was. Also, I think

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Speaker 1: there's certain e t f s that, as Joel Unit,

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Speaker 1: We've talked about this all time, they are rated R

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Speaker 1: where they should be labeled rated R, that they should

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Speaker 1: be for hedge funds and traders who do like the

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Speaker 1: fact that you can trade oil futures like equities. These

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Speaker 1: are what we call the exotic rated R areas where

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Speaker 1: two people who know what they're doing it's fine. Uh,

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Speaker 1: it's when they attract tourists and become a bigger fish

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Speaker 1: in a small upon which they swim in and we

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Speaker 1: really get these problems. And USO is per case in

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Speaker 1: point of that. So again, I've always called for this

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Speaker 1: movie like rating system, which probably could have kept some

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Speaker 1: of these people out of USO if they knew, oh,

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Speaker 1: it's rated R, it's got a red light. I also

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Speaker 1: think that there was multiple leveraged oil et s that

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Speaker 1: shut down about a month ago in the first round

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Speaker 1: of this crisis, and they they're gone, right, So a

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Speaker 1: lot of the adrenaline junkies and hardcore types have probably

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Speaker 1: moved over to u s O too, So USO probably,

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Speaker 1: if I'm guessing the people who run it are probably like, look,

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Speaker 1: we we wanted to get big, but not this big.

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Speaker 1: That makes a ton of sense. I like your idea.

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Speaker 1: I think we've talked in the past having that sort

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Speaker 1: of you know, warning label on some et f where

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Speaker 1: people realize it. And I think the other thing was that,

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Speaker 1: you know, we've always been more probably concerned about leveraged

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Speaker 1: ETFs and when something can go negative and all of

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Speaker 1: a sudden becomes leverage, and that's something I don't think

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Speaker 1: anyone was expecting on something like these futures contracts where

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Speaker 1: if you the stock the worst I can go to zero.

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Speaker 1: The ETFs protected because it has one to one and

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Speaker 1: unlike those leverage ETFs, all of a sudden, if you

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Speaker 1: can go negative, you're not protected here. So I think

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Speaker 1: that's a reshift in how we can think about these

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Speaker 1: commodity based or sorry, these futures based ETFs. And Peter,

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Speaker 1: can I ask you one question. So we've debated that.

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Speaker 1: Peter ibs me a lot on ETF issues, and we

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Speaker 1: have a we have nice debates. The most recent one

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Speaker 1: was he was like, this thing doesn't really track what

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Speaker 1: it's supposed to track anymore. It's supposed to track the

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Speaker 1: front month oil futures. Right that way, when oil goes up,

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Speaker 1: it has a good, a good pop to it. It's

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Speaker 1: very correlated to spot. But now that it's tracking like

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Speaker 1: all these months down the curve, it's less correlated. So

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Speaker 1: it's become like almost like a water down Front Month

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Speaker 1: Oil Future e t F. But I I guess I

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Speaker 1: would ask you, Peter Um, what should have happened? Because

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Speaker 1: if it just held June, it was being told by

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Speaker 1: people that this could go negative and you could end

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Speaker 1: up owing money and the investors in the fund could

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Speaker 1: owe money. It could be a real train wreck. Do

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Speaker 1: you don't you think they took the lesser of two

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Speaker 1: evils road? And what would you have done? You know,

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Speaker 1: I think that's a really really hard question because silly

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Speaker 1: in hindsight. Now, had they just stayed in June, June rebounded,

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Speaker 1: they look like they would have been fine. Had they

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Speaker 1: stayed in June, we don't know what would have happened. Again,

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Speaker 1: that's to me, that's the one issue. I do think

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Speaker 1: we're supposed to look at finding ways to curb how

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Speaker 1: big these products can be, because when you're of a position,

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Speaker 1: you're unwinding now affects that price, especially in this algo

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Speaker 1: driven sort of day where the algos are done nothing.

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Speaker 1: But you know, I hate to use the word train

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Speaker 1: but that's really what the algos are. There is someone

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Speaker 1: continues to sell no matter how much I lower my bid,

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Speaker 1: and someone considers to buy, so they pushed the markets

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Speaker 1: against themselves. So I think a lot of this would

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Speaker 1: have gone away or not been as much of an

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Speaker 1: issue had they remained smaller. I understand why they got bigger.

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Speaker 1: I understand the appeal, and now you look at it,

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Speaker 1: I like oil here, I'm not sure the best way

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Speaker 1: to play it. I look at the energy stocks. The

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Speaker 1: energy stocks didn't fall as much. So how do you

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Speaker 1: play this? I don't know the right answer. Peter. When

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Speaker 1: you think about us SO, and we talked about the

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Speaker 1: VIX and the XIV stuff earlier, do you think there's

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Speaker 1: other problems lurking that investors might not be aware of

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Speaker 1: in some other products that could rear their ugly heads

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Speaker 1: some day. You know. One area that bothers me from

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Speaker 1: time to time is I see a lot of r

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Speaker 1: A s. They do a portfolio analysis and figure out

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Speaker 1: where they want to be, and that's based on certain

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Speaker 1: indices or something, and then they go and pick the

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Speaker 1: e t F that seems to match that with the

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Speaker 1: closest and near and new year to my heart, tends

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Speaker 1: to be the high yield market where you see a

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Speaker 1: lot of analysis done, and yet the e t F

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Speaker 1: s are very much based on the liquid part of

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Speaker 1: the high yield component, and yet a lot of the

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Speaker 1: index turns tend to be driven by that less liquid component.

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Speaker 1: There also tends to be in the bond market, much

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Speaker 1: more efficiency around managed product and a huge part of

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Speaker 1: that is the new issue game, and to some extent

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Speaker 1: it is a new game is a game because new issues,

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Speaker 1: just like in the equity markets, tend to do very

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Speaker 1: well when they price and trade. But unlike the equity markets,

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Speaker 1: there's one or two new issues every single day, so

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Speaker 1: managers can manage their portfolios very well. So I think

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Speaker 1: that's one area that's people should revisit. I think there's

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Speaker 1: a lot of good to be said on the fixed

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Speaker 1: income ETFs. I think we had some crazy discounts to

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Speaker 1: nav but I think people do have to take a

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Speaker 1: little bit of care, particularly the high yield, and say

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Speaker 1: what am I really getting? And maybe it's as overall,

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Speaker 1: coming back Deeric's point about maybe additional warning signs like

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Speaker 1: the stated costs might not be the only cost that

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Speaker 1: you have to look at, and I think that's something

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Speaker 1: maybe um I think ETFs have done a great job

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Speaker 1: fitting into people's portfolils and maybe that's the next step

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Speaker 1: of the evolution is being slightly smarter of when the

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Speaker 1: E t F really fits or when you're kind of,

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Speaker 1: you know, forcing it. So the two things that jump

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Speaker 1: out to me and what you just said. First of all,

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Speaker 1: HyG tracking the most liquid component of the high yield market.

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Speaker 1: I think that's ultimately part of the reason it never

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Speaker 1: you know, freezes. It just seems to move on and

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Speaker 1: survive these crisis That's good, And I've had some really

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Speaker 1: smart people on Twitter say the problem with h y

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Speaker 1: G isn't it's going to blow up, it's it's so

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Speaker 1: easy to beat. If you're active, you can just h

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Speaker 1: y G. I think of active managers beat h y

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Speaker 1: G who are in the high yield space. Now, Peter,

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Speaker 1: I will turn this around because AGG is also easy

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Speaker 1: to beat, and I think like six of managers beat

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Speaker 1: the egg way more than the equity side. But in

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Speaker 1: the crisis, those numbers went completely backwards because you are

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Speaker 1: in the maybe the less liquid bonds, the junk of

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Speaker 1: your stuff, the higher credit risk. The FED came in

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Speaker 1: and obviously bailed out the whole situation. But um, what

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Speaker 1: do you think of that notion where there is a

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Speaker 1: downside to going away from h y G or away

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Speaker 1: from the agg in more risky areas, UM can that

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Speaker 1: blow up if there were no FED. So to me,

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Speaker 1: I view the e t F at least in the

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Speaker 1: fixed income I tend to focus on l q D.

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Speaker 1: On the investment grade, I tend to think about it

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Speaker 1: with a rate hedge. I look at a lot at

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Speaker 1: h Y G G N K, I look a lot

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Speaker 1: at b K l N. I don't look at aggs

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Speaker 1: so much because that's kind of a boring product. But

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Speaker 1: I think when you step those away, I really view

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Speaker 1: the e t F and fixed income is great trading vehicles.

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Speaker 1: So if you want to capture short term move or

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Speaker 1: you're nervous, they are a great way to express that.

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Speaker 1: So I think you have to be very careful. And

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Speaker 1: so when if I'm thinking about my portfolio and say

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Speaker 1: I want to move from high yield, say a ten

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Speaker 1: percent allocation to fIF but I think it's temporary, I

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Speaker 1: probably want to put that additional exposure into an e

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Speaker 1: t F where I can control it. Whereas if I

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Speaker 1: really think, okay, for the next fifteen years, this is

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Speaker 1: where I want to be, you can give it to

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Speaker 1: our asset managers. So to me, I really think about

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Speaker 1: both in conjunction and how to play one off the

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Speaker 1: other because the liquidity is there in high yield um

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Speaker 1: on the e t F s. And I think one

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Speaker 1: thing that we saw this time around, which is actually

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Speaker 1: a problem for mutual funds was I was looking at

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Speaker 1: some of the shorter dated ones, so SP S B

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Speaker 1: which is a one to three year and v C

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Speaker 1: s H which is a one to five year. They

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Speaker 1: both traded I believe at four to five discounts and

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Speaker 1: NAV which was unheard of. Let's go into that. It's

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Speaker 1: an issue which we talked with Katie. Eric was just

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Speaker 1: like waiting for this. Sorry, so he's been he's been

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Speaker 1: waking up in the middle of the night just being like,

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Speaker 1: can we talk about this on trillions again again? Can

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Speaker 1: we talk about NAV calculations? It just gets me going, yeah, perfect,

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Speaker 1: So these discounts right, how I mean, we've seen that

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Speaker 1: the N A V s are possibly wrong. Um, you know,

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Speaker 1: whether you're looking at the NAV that the e t

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Speaker 1: F is using or the mutual fund navs that were

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Speaker 1: put out. We just saw another case in India where

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Speaker 1: a debt fund in India had a NAV between twelve

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Speaker 1: and eleven during the whole crisis and then boom, it's

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Speaker 1: got to close up shop because it cannot sell the buns.

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Speaker 1: You're telling me you're you're that all liquid and your

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Speaker 1: NAV barely budgets because they're using Dale prices. So how

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Speaker 1: much of the E t F discount, in your opinion,

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Speaker 1: is uh just the uh fake? How much is the

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Speaker 1: e t F telling the truth versus the NAV line?

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Speaker 1: So I tend to go a lot more with the

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Speaker 1: e t F So when I look at things. I

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Speaker 1: talked to a lot of people about mark to market

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Speaker 1: and of how they're trying to model something and how

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Speaker 1: they're trying to calculate NAV. I tell people, if you

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Speaker 1: run your model and you can predict the closing price

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Speaker 1: of the E t F, that's probably a better thing

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Speaker 1: than trying to actually tie out to people's NAV, because

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Speaker 1: I think there's more rational thought into where that E

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Speaker 1: t F traded. So when we see these four percent discounts,

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Speaker 1: I would assume at least that is going to be

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Speaker 1: fake where that NAV is miss marked. And what that

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Speaker 1: became a real problem for is I think this is

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Speaker 1: very strange. We're gonna have to deal with this is

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Speaker 1: if you are a mutual fund manager, and you allow

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Speaker 1: people to get out at n a V and that

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Speaker 1: n a V is two to three pc wrong. All

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Speaker 1: you're doing is hurting the remaining holders by effectively giving

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Speaker 1: that person a windfall. And the quote unquote smart trade.

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Speaker 1: It sounds awful, but the smart trade was if you

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Speaker 1: owned a one to five year et F sorry mutual fund,

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Speaker 1: you sell that at NAV and then you buy a

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Speaker 1: similar product in the ETF space at a four percent

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Speaker 1: discount and NAV. So I think this has to attract

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Speaker 1: attention to how are we calculating NAV on these fixed

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Speaker 1: income funds, in particular, what is the right one? What

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Speaker 1: are mutual funds supposed to do? And it's a huge,

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Speaker 1: glaring problem. I think it first came up with Third

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Speaker 1: Avenue a few years ago. I don't know that. I

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Speaker 1: had nothing to do with e T s at the time.

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Speaker 1: It was a very distressed fund that kind of got

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Speaker 1: in trouble. Um. My understanding is mutual funds have some

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Speaker 1: ability not to let people out at NAV, but I

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Speaker 1: think traditionally they do, so I would I'm kind of

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Speaker 1: with you, especially on fixed income. That difference to NAV

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Speaker 1: is not all garbage. A part of that is the

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Speaker 1: garbage of NAV calculation, right, And the SEC just announced

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Speaker 1: last week they're gonna propose a rule two help to

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Speaker 1: make for better calculations. So it caught their radar as well.

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Speaker 1: And you know, I think it caught the Treasury Department

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Speaker 1: and Fed's radar because if you go back to the

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Speaker 1: secondary market corporate credit facility that was launched, they specifically

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Speaker 1: allow the asset managers gonna be black Rock to buy

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Speaker 1: e t F s. I'm willing to bet a big

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Speaker 1: part of that as they want to control that discount

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Speaker 1: to NAV because it created so many problems. Is that

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Speaker 1: fishes through the system. Um, So I think there's a

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Speaker 1: lot going on with that. And people understand a the

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Speaker 1: NAV calculation is bad, but having E t F treated

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Speaker 1: a significant discount to NAV creates its own set of problems.

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Speaker 1: And this is a stop gap solution until we can

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Speaker 1: figure out better ones. And so, Peter, you know, we

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Speaker 1: have this debate on our team of whether the FED

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Speaker 1: even needed to say they were going to buy e

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Speaker 1: t F s because if the Fed's gonna go out

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Speaker 1: and buy all these bonds, that makes arbitrage easier, and

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Speaker 1: you would think that that discount would collapse naturally because

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Speaker 1: somebody could then um sell the bonds by the E

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Speaker 1: t F and pocket the difference. What's your take on

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Speaker 1: on that, like, were the e t F s really necessary?

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Speaker 1: And then the second thing is, I guess did the

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Speaker 1: FED go too far in your opinion or did they

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Speaker 1: do just the right amount of uh you know, uh

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Speaker 1: kitchen sinking. So for me, depending on how they ultimately

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Speaker 1: use the E t F s, I like it a

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Speaker 1: lot because it actually takes time to build up a

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Speaker 1: diversified bond portfolio. So if you're gonna invest two fifty

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Speaker 1: billion into the corporate market, um, you need to figure

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Speaker 1: out how to do that. And I think E t

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Speaker 1: f s are a good starting point. You get a

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Speaker 1: nice diversified portfolio and it can let you move around that.

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Speaker 1: I think it lets them more quickly move to fix things.

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Speaker 1: And again, they really talked about on the bond side

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Speaker 1: only buying one to five year bonds and the E

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Speaker 1: t F side is much more expanded. Did they go

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Speaker 1: too far? You know? Possibly? I would have liked see

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Speaker 1: them focus on fixing the front end of the corporate market,

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Speaker 1: so one to three years, the money market, commercial paper,

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Speaker 1: because that really is the lifeblood of corporations and it

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Speaker 1: would have left more trading losses. I think once you've

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Speaker 1: gone down this path, it gets harder and harder to

403
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Speaker 1: pull back. That's my concern. And somebody, you know, do

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Speaker 1: you think this is good or bad for active managers,

405
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Speaker 1: because you know some people are complaining that, like you know,

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Speaker 1: price discoveries gone, all the rules are gone, your cf

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Speaker 1: A studies are gone. I mean, nothing matters anymore. I

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Speaker 1: mean what do you think of that sort of bleak

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Speaker 1: outlook of like all the studies of investing. I think

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Speaker 1: it's overstated. Partly where they've really stepped in is the

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Speaker 1: short data investment grade, which if you look at it

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Speaker 1: short DADA investment grade, there tends to be very little

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Speaker 1: divergence in returns if you buy and hold, so I

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Speaker 1: haven't given up on that. I think it makes it

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Speaker 1: a little bit more difficult. Um if they continue this,

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Speaker 1: it's bad now. How being said all this right, so

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Speaker 1: far they have not bought a single bond. The vehicle

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Speaker 1: to set up the bon by the bonds and ETFs

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Speaker 1: isn't even up and running. So I think they took

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Speaker 1: a little bit out of drug ease old you know,

421
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Speaker 1: whatever it takes playbook where he did nothing for six months.

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Speaker 1: It's that mere threat because I think you know, and

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Speaker 1: to me, this is one thing that ties in really importantly.

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Speaker 1: When the FED does things, I view them that they

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Speaker 1: can either fix a liquidity problem or a risk problem.

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Speaker 1: And to me, a liquidity means there isn't enough money

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Speaker 1: for people to buy what they want. And I think

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Speaker 1: that's what happened in the repo market. There were so

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Speaker 1: many rules blah blah blah. When we looked at what

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Speaker 1: was going on here. People wanted to buy these bonds

431
00:21:34,400 --> 00:21:36,720
Speaker 1: at cents on the dollar, but they were scared the

432
00:21:36,760 --> 00:21:39,359
Speaker 1: next price is gonna be on the dollar, so no

433
00:21:39,440 --> 00:21:41,600
Speaker 1: one actually bought them. And then as soon as the

434
00:21:41,680 --> 00:21:44,040
Speaker 1: FED said, hey, we along with the Treasury Department are there,

435
00:21:44,600 --> 00:21:48,120
Speaker 1: they rallied immediately because I think they were miss priced. Okay,

436
00:21:48,160 --> 00:21:50,920
Speaker 1: So Peter, we talked about USO, we talked about the FED.

437
00:21:51,359 --> 00:21:54,159
Speaker 1: Let's talk about some sector outlook stuff. How are you

438
00:21:54,240 --> 00:21:56,879
Speaker 1: talking to clients about what kind of opportunities are out

439
00:21:56,880 --> 00:21:59,119
Speaker 1: there right now? So right now, my two favorite sectors

440
00:21:59,160 --> 00:22:02,760
Speaker 1: are financials and energy. Having said that, I prefer x

441
00:22:02,920 --> 00:22:05,360
Speaker 1: l E right now. Um x l P I think

442
00:22:05,400 --> 00:22:06,879
Speaker 1: has a little bit more bang for the buck. I

443
00:22:07,000 --> 00:22:09,760
Speaker 1: like x L E a little bit um, starting to

444
00:22:09,880 --> 00:22:13,200
Speaker 1: like high yield, so H Y, G J and K there.

445
00:22:13,240 --> 00:22:15,560
Speaker 1: I actually prefer some of the clothes and funds um

446
00:22:15,880 --> 00:22:18,800
Speaker 1: as we move um elsewhere. I think that also to

447
00:22:18,880 --> 00:22:21,640
Speaker 1: translate well into the Russell two thousands, so I'd start

448
00:22:21,680 --> 00:22:23,920
Speaker 1: overweighting I w M. I think we're gonna see a

449
00:22:24,040 --> 00:22:28,120
Speaker 1: faster recovery than people have been discussing. And more importantly,

450
00:22:28,119 --> 00:22:30,000
Speaker 1: I think we're gonna see a shift where we get

451
00:22:30,040 --> 00:22:34,520
Speaker 1: away from fixating on the virus to rebuilding our supply chains,

452
00:22:34,680 --> 00:22:36,600
Speaker 1: because I do think we are going to try and

453
00:22:36,680 --> 00:22:40,600
Speaker 1: pope production back from China and the infrastructure spending around that.

454
00:22:41,080 --> 00:22:44,000
Speaker 1: So anything that benefits from that, I would like to me.

455
00:22:44,240 --> 00:22:47,440
Speaker 1: The safest risk reward are, you know, financials who I

456
00:22:47,480 --> 00:22:49,560
Speaker 1: think have been overly punished. An XL E, which I

457
00:22:49,600 --> 00:22:51,240
Speaker 1: think has a big chance to pop, and I like

458
00:22:51,320 --> 00:22:53,480
Speaker 1: how it's been trading through this, and then beyond that,

459
00:22:53,560 --> 00:22:56,080
Speaker 1: I think we're gonna be sitting there and strategizing how

460
00:22:56,240 --> 00:22:59,000
Speaker 1: is the economy gonna look a year from now? And

461
00:22:59,160 --> 00:23:01,720
Speaker 1: I think even to the extent we recover back jobs,

462
00:23:02,080 --> 00:23:04,400
Speaker 1: those jobs are gonna look very different than the jobs

463
00:23:04,440 --> 00:23:07,000
Speaker 1: we had in January twenty twenty, and which companies win

464
00:23:07,080 --> 00:23:10,760
Speaker 1: and lose will determine a lot. And is your xl

465
00:23:10,800 --> 00:23:13,800
Speaker 1: E outlook based on just it's oversold it's going to

466
00:23:13,880 --> 00:23:16,240
Speaker 1: have a rebound pop or is it? Do you have

467
00:23:16,400 --> 00:23:20,040
Speaker 1: any broader sense because energy in a general sense has

468
00:23:20,080 --> 00:23:23,800
Speaker 1: been sort of, um, pretty defeated lately because of d

469
00:23:24,040 --> 00:23:27,840
Speaker 1: SG and climate change. In these longer term outlooks, yeah,

470
00:23:28,200 --> 00:23:30,600
Speaker 1: I think one we will get back to driving, we

471
00:23:30,640 --> 00:23:32,840
Speaker 1: will see people on the road, So the economic recovery

472
00:23:32,880 --> 00:23:35,440
Speaker 1: is gonna help boost there. I think people forget just

473
00:23:35,640 --> 00:23:39,800
Speaker 1: how quickly these energy companies, you know, pull back and

474
00:23:40,359 --> 00:23:42,719
Speaker 1: E s G. I think it's going to be there

475
00:23:42,760 --> 00:23:45,280
Speaker 1: as a real investing thesis. But on the other hand,

476
00:23:45,320 --> 00:23:48,760
Speaker 1: as an individual, you know, five dollars gasoline or four

477
00:23:48,800 --> 00:23:52,320
Speaker 1: dollars gasoline makes you know, electric look kind of interesting.

478
00:23:52,680 --> 00:23:55,560
Speaker 1: Two dollars or dollar fifty gasoline and you're like, you know,

479
00:23:56,280 --> 00:23:58,560
Speaker 1: maybe I'll wait five years before spending that extra eight

480
00:23:58,640 --> 00:24:02,240
Speaker 1: grand to get the vehicles. So I think the low

481
00:24:02,400 --> 00:24:05,000
Speaker 1: cost will change how some people think about it. And

482
00:24:05,080 --> 00:24:06,800
Speaker 1: I also think E s G investing is gonna get

483
00:24:06,800 --> 00:24:09,720
Speaker 1: a little bit more sophisticated. Um where I think it's

484
00:24:09,760 --> 00:24:12,880
Speaker 1: been very superficial to this stage. And that's also part

485
00:24:12,920 --> 00:24:16,040
Speaker 1: of my thesis on the supply chain repatriation. I think

486
00:24:16,080 --> 00:24:18,199
Speaker 1: E s G is gonna start saying the companies, hey,

487
00:24:18,400 --> 00:24:20,879
Speaker 1: if you produce everything in China or one country, we

488
00:24:21,000 --> 00:24:24,000
Speaker 1: might ding you because that's not good governance. And more importantly,

489
00:24:24,280 --> 00:24:27,560
Speaker 1: if you're using suppliers who have questionable practices, we're gonna

490
00:24:27,800 --> 00:24:31,120
Speaker 1: attach those questionable practices to you. So I think there's

491
00:24:31,119 --> 00:24:32,440
Speaker 1: gonna be a lot and I think E s G

492
00:24:32,600 --> 00:24:35,000
Speaker 1: is going to evolve into a more sophisticated and even

493
00:24:35,040 --> 00:24:37,879
Speaker 1: more thoughtful process. So it's not gone away, so no

494
00:24:37,920 --> 00:24:39,720
Speaker 1: one really talks about it for the last month or so,

495
00:24:40,119 --> 00:24:42,120
Speaker 1: but I think it's gonna come back and it's gonna

496
00:24:42,119 --> 00:24:44,240
Speaker 1: be a little bit more thoughtful, a little bit more interesting.

497
00:24:44,400 --> 00:24:47,080
Speaker 1: All right, Peter, thanks for joining us on trillions, Stay safeout,

498
00:24:47,080 --> 00:24:53,119
Speaker 1: thanks for having me, Thanks for listening to Trillions until

499
00:24:53,200 --> 00:24:54,960
Speaker 1: next time. You can find us on the Bloomberg terminal,

500
00:24:55,080 --> 00:24:59,119
Speaker 1: Bloomberg dot com, Apple Podcast, Spotify, and wherever else you'd

501
00:24:59,119 --> 00:25:01,320
Speaker 1: like to listen. We'd love to hear from you. We're

502
00:25:01,359 --> 00:25:05,159
Speaker 1: on Twitter, I'm at Joel Webber Show, He's at Eric Faltunus,

503
00:25:05,480 --> 00:25:08,680
Speaker 1: and you can find Peter at t F m k

504
00:25:09,280 --> 00:25:14,480
Speaker 1: t S. This episode of Trillions was produced by Magnus Hendrickson.

505
00:25:14,960 --> 00:25:18,399
Speaker 1: Francesca Leedy is the head of Bloomberg podcast ye