WEBVTT - Your ETF Guide to the Trade War 0:00:05.760 --> 0:00:11.480 Welcome to Trillions. I'm Joel Webber and I'm Eric Bell Chierness, Eric, 0:00:11.480 --> 0:00:15.080 come on vacation. I can tell you sound far away. 0:00:15.240 --> 0:00:17.639 It sounds like I'm at the beach. Trade. Yeah, my 0:00:17.680 --> 0:00:20.160 toes are in the sand. You're dedicated. How's it going? 0:00:20.680 --> 0:00:23.279 You know? I had to talk to you, and that's 0:00:23.280 --> 0:00:25.000 why I wanted to join, because did you know that 0:00:25.040 --> 0:00:27.640 we're in the midst of a trade war? I did. 0:00:27.760 --> 0:00:30.280 I noticed that. Yeah, you can't look at Twitter or 0:00:30.440 --> 0:00:33.479 read the newspaper. Been making headlines. Yeah, it's making headlines 0:00:33.520 --> 0:00:36.279 to say the least. So trade wars. Don't rest for 0:00:36.320 --> 0:00:39.239 your vacation. I guess no, I have to. I have 0:00:39.320 --> 0:00:42.080 to call to talk to you about how investors are 0:00:42.120 --> 0:00:44.600 dealing with this trade war. It's become the theme of 0:00:44.600 --> 0:00:47.559 the year. Yeah, that rising rates. Although rates have kind 0:00:47.560 --> 0:00:50.560 of flat flatlined a little bit. Um rates are boring 0:00:50.760 --> 0:00:54.280 compared to trade wars. They are, and that's why. But 0:00:54.480 --> 0:00:56.440 they have moved a lot of flows. But I will say, 0:00:56.480 --> 0:00:59.880 if there's one sort of macro event, it's it's trade wars, 0:01:00.000 --> 0:01:04.360 trade tensions. Although let's face it, some of it's probably 0:01:04.400 --> 0:01:07.040 an overreaction in the headlines and from the media, and 0:01:07.080 --> 0:01:09.960 I think this is a great opportunity to not only 0:01:10.640 --> 0:01:13.440 look at something that's happening in real life, talk about 0:01:13.480 --> 0:01:16.479 how investors are reacting to it or how they should 0:01:16.520 --> 0:01:18.800 or should not react, and trying to parse out what 0:01:18.959 --> 0:01:23.600 really matters versus what's sort of like the crazy outrage 0:01:23.600 --> 0:01:25.840 of the week. And there's no better time to do 0:01:25.920 --> 0:01:29.399 this because obviously things have shifted from being rhetoric to 0:01:29.959 --> 0:01:33.280 reality now and we're looking at full on tariffs. So 0:01:33.640 --> 0:01:36.120 to help us understand the trade war, we're joined by 0:01:36.120 --> 0:01:39.800 two guests, Sarah Ponzick, who's on the Cross Asset team 0:01:39.840 --> 0:01:43.640 here at Bloomberg News, and also John Davy, who's a 0:01:43.720 --> 0:01:47.640 portfolio advisor at Astoria. They're both going to give us 0:01:48.080 --> 0:01:51.960 different views on what's happening and also sort of like 0:01:52.000 --> 0:01:54.920 how investors are dealing with it. Yeah, I mean I 0:01:54.960 --> 0:01:58.360 suggest that both of them, because Sarah wrote this article 0:01:58.960 --> 0:02:02.200 basically your eid to playing the trade war, and it 0:02:02.200 --> 0:02:04.160 goes over a couple of different things that she's seeing. 0:02:04.440 --> 0:02:08.040 Sarah talks to people, she looks at the data, and 0:02:08.120 --> 0:02:10.120 she writes about it. She can tell us what she's 0:02:10.440 --> 0:02:14.639 seeing and hearing. John literally is putting people's money to 0:02:14.720 --> 0:02:16.960 work using e t f s, and he has to 0:02:17.000 --> 0:02:19.920 read what Sarah writes and other people and look at 0:02:19.919 --> 0:02:22.119 the news and the twitters and and everything and take 0:02:22.120 --> 0:02:24.480 it all into and decide what to do with real 0:02:24.520 --> 0:02:26.760 money on the line. John has skin in the game, 0:02:26.840 --> 0:02:28.120 so we have the best of both worlds in my 0:02:30.240 --> 0:02:37.680 on this episode of Trilliance, Your Guide to the Trade War, Sarah, John, 0:02:37.919 --> 0:02:40.760 Welcome to Trilliance. Thanks for joining us, Thanks for having me, 0:02:40.919 --> 0:02:43.960 Thanks for having us. Uh Sarah, you wrote this article 0:02:44.000 --> 0:02:46.639 that was really really great and Investor's guide to managing 0:02:46.760 --> 0:02:51.519 escalating global trade tensions, so it's a great Bloomberg News 0:02:51.600 --> 0:02:54.160 headline too. Can you give us a sense of of 0:02:54.200 --> 0:02:57.120 what you've been covering and what you've been watching unfold. 0:02:57.440 --> 0:02:59.959 Of course, it's kind of been an evolution in a way, 0:03:00.080 --> 0:03:02.960 as you were just discussing. At first it seemed it 0:03:03.000 --> 0:03:06.280 was just rhetoric, but now we're actually getting these tariffs, 0:03:06.280 --> 0:03:09.359 so day by day, week by week, it's really starting 0:03:09.400 --> 0:03:12.120 to feel a bit more real. So I have been 0:03:12.160 --> 0:03:15.600 talking with money managers for the past couple of months 0:03:15.639 --> 0:03:19.280 as this really has been developing, to see what they're 0:03:19.320 --> 0:03:23.520 doing if they're concerned if they're actually moving money around. 0:03:23.720 --> 0:03:26.800 And for a while, that answer was always no. The 0:03:26.840 --> 0:03:29.480 answer was always no, we're going to reach a negotiation, 0:03:29.680 --> 0:03:32.120 we're going to get a deal. We're standing pat We're 0:03:32.160 --> 0:03:34.720 really not doing anything differently right now. But as the 0:03:34.760 --> 0:03:38.480 weeks went on, as as we got further down the timeline, 0:03:38.520 --> 0:03:42.800 all of a sudden, concern started to seep into their 0:03:42.840 --> 0:03:46.960 tones of voices, and all of a sudden they started advising, Okay, well, 0:03:46.960 --> 0:03:48.760 if it gets a little further, this is what you 0:03:48.760 --> 0:03:50.400 should do. This is what you should do. And then 0:03:50.440 --> 0:03:54.280 we actually started to see some movement within the flows 0:03:54.320 --> 0:03:57.320 and some people actually telling me that they're moving money around. 0:03:57.320 --> 0:03:58.880 So I would say it started off when I would 0:03:58.880 --> 0:04:01.000 ask them, all right, if this actually develops, if this 0:04:01.040 --> 0:04:03.360 actually gets pretty bad, what are you gonna do? But 0:04:03.480 --> 0:04:05.880 classic answer was always all right, go to small cap 0:04:05.880 --> 0:04:09.000 stocks because they're more domestically oriented. For in a trade war, 0:04:09.080 --> 0:04:11.800 the U s stands to benefit, so you're better off 0:04:11.840 --> 0:04:14.280 if you're in the US. So make America grade again. 0:04:14.560 --> 0:04:17.880 What does that look like from a flow perspective and 0:04:17.920 --> 0:04:20.680 a return perspective? So far this year, so from a 0:04:20.920 --> 0:04:24.599 flow perspective, it's actually interesting because one of the largest 0:04:25.000 --> 0:04:27.279 small kept et s. I know. Bloomberg Intelligence had a 0:04:27.279 --> 0:04:30.400 great deck out recently about this, saying that there were 0:04:30.440 --> 0:04:34.960 actually outflows from small caps e T s UH in 0:04:35.040 --> 0:04:38.240 the past week or so. However, it was still a 0:04:38.279 --> 0:04:41.039 lot less than US equities at large. And if you 0:04:41.040 --> 0:04:42.679 look at the Russell two thousand, I mean, the Russell 0:04:42.680 --> 0:04:44.320 two thousand has just been on a tear this year. 0:04:44.560 --> 0:04:47.599 It's really been outperforming the SMP five hundred and broader 0:04:47.640 --> 0:04:51.240 equity markets at large. So we are seeing that, I mean, 0:04:51.240 --> 0:04:54.240 we're seeing small caps outperformed, and we are seeing a 0:04:54.240 --> 0:04:57.560 little boost there being a little better uh than larger 0:04:58.200 --> 0:05:02.040 US equity flows. The rustles like an eight percent return 0:05:02.160 --> 0:05:04.520 so far this year versus the SMP, which is at 0:05:04.560 --> 0:05:08.480 about two exactly smps like muddling around, moving sideways around 0:05:08.520 --> 0:05:11.480 that number. And then Russell two thousands up eight percent, 0:05:11.880 --> 0:05:15.160 So really seeing some strength there relatively. So that's where 0:05:15.160 --> 0:05:17.719 they're going. Eric. When you look at the small cap stuff, 0:05:17.800 --> 0:05:21.040 how are you saying? What are you saying? Ironically, small 0:05:21.080 --> 0:05:24.240 caps appear somewhat like a safe move normally they're the 0:05:24.320 --> 0:05:26.839 jumpier ones. But what I will say is in the 0:05:26.920 --> 0:05:29.920 second quarter it was unusual that small caps took in 0:05:30.000 --> 0:05:32.520 thirteen billion, that was more than double any other cap size. 0:05:33.480 --> 0:05:36.240 And the note that Sarah's referring to was that for 0:05:36.279 --> 0:05:37.640 the first time in a long time, they saw a 0:05:37.640 --> 0:05:41.920 week of outflows. And so the question remains is if 0:05:41.960 --> 0:05:46.200 small caps are If small caps stopped getting investors interest 0:05:46.279 --> 0:05:49.880 and attention, it's not good. That's an overall bad sign 0:05:49.880 --> 0:05:52.960 because they've been the one sort of equity area to 0:05:53.279 --> 0:05:56.120 a be bullish, but be also play that protect from 0:05:56.160 --> 0:05:58.839 the trade war quote unquote. UM So let's bring in 0:05:58.920 --> 0:06:01.800 John on this talking small caps. Let's say you're out there, 0:06:01.839 --> 0:06:03.800 you own a small cap eat after you're thinking about 0:06:03.800 --> 0:06:06.400 going into it, how would you look at this area 0:06:06.440 --> 0:06:09.520 going forward? Well, I think so if you own small caps, 0:06:09.560 --> 0:06:11.600 I think that's a pretty good place, you know, for 0:06:11.640 --> 0:06:13.800 the time being. Um but I'm going to take the 0:06:13.800 --> 0:06:16.520 other side of that trade about how trade wars is 0:06:16.560 --> 0:06:19.480 the reason why the market's hell him off. Trade wars 0:06:19.560 --> 0:06:21.880 is not what's driving the market that. That's my point, 0:06:21.880 --> 0:06:24.000 and that's what we've been arguing, is that you've got 0:06:24.040 --> 0:06:25.920 things like you know, the ft ist hiking rates, You've 0:06:25.960 --> 0:06:28.760 got you know, no more qui in the US, uh 0:06:28.800 --> 0:06:32.719 and soon to be stopping in Europe. You've got global growth, 0:06:32.720 --> 0:06:34.400 that's the couple in right. US is up, you know, 0:06:34.440 --> 0:06:37.320 as you said Russell two thousands up eight percent. You've 0:06:37.320 --> 0:06:40.799 got China that's down e M that's you know down, 0:06:40.880 --> 0:06:43.719 you know, fourteen percent year to date. So I think, 0:06:43.760 --> 0:06:45.839 you know, like if you watch the news, you're always 0:06:45.839 --> 0:06:47.680 going to be scared, You're never gonna want to invest. 0:06:47.800 --> 0:06:49.840 I think small caps is a good place to kind of, 0:06:50.240 --> 0:06:52.760 you know, park your money just because you know, I 0:06:52.760 --> 0:06:56.320 think a lot of Trump's policies is beneficial for domestic 0:06:56.320 --> 0:06:59.720 orienting companies. But for us at Astoria, we've been the 0:07:00.000 --> 0:07:03.360 pensively positioned in the portfolio for most of this year. 0:07:03.480 --> 0:07:05.320 This was a big call that we made earlier in 0:07:05.360 --> 0:07:07.520 the year, uh well at the start of the year. 0:07:08.000 --> 0:07:10.080 So our premise was that, you know, we expected this 0:07:10.160 --> 0:07:12.800 year to have a lot more volatility. We thought that, 0:07:13.160 --> 0:07:14.880 you know, there was a lot more uncertanty this year 0:07:14.920 --> 0:07:16.960 with what the Fed is going to do, so we've 0:07:17.000 --> 0:07:20.200 been more defensive in general. So if you own small caps, 0:07:20.200 --> 0:07:22.160 I think that's a good trade for you. I think 0:07:22.160 --> 0:07:23.840 it's been a good investment, and I would I would 0:07:23.840 --> 0:07:26.080 probably hold on to them. And let me jump in 0:07:26.120 --> 0:07:29.240 here back to Sarah. In terms of the small cap btfs, 0:07:29.480 --> 0:07:32.000 if you noticed I j r Is in the top ten, 0:07:32.080 --> 0:07:34.680 that's most people know small caps I w M which 0:07:34.720 --> 0:07:37.240 is the I shares the most traded one, or VB 0:07:37.520 --> 0:07:39.760 which is Vanguard, but I j r Is number nine. 0:07:39.800 --> 0:07:42.400 To talk about within the small cap space, what what 0:07:42.520 --> 0:07:46.120 kind of ets are seeing the action? So the e 0:07:46.200 --> 0:07:49.080 t s that are seeing the action are the ones 0:07:49.120 --> 0:07:51.880 that are actually being used as more sort of a 0:07:51.920 --> 0:07:56.480 trading vehicle. So if you want to get into the action, 0:07:56.560 --> 0:07:58.960 I mean, we're seeing heavy trading falling. We're seeing people 0:07:59.160 --> 0:08:02.080 wanting to get in and get out, maybe make some 0:08:02.080 --> 0:08:04.600 some quick moves using these e t s. And that's 0:08:04.600 --> 0:08:06.200 really how we're saying it play out there. So I 0:08:06.440 --> 0:08:09.160 w M clearly takes the monster of the flow volatility, 0:08:09.240 --> 0:08:11.600 that's the one that's been around forever. But it's the 0:08:11.600 --> 0:08:14.280 fee is I believe twenty basis points I'll find out 0:08:14.320 --> 0:08:17.239 in two seconds here. But John, in terms of picking 0:08:17.240 --> 0:08:19.280 a small cap ETF, if you're out there listening like 0:08:19.320 --> 0:08:21.800 how do you actually do this? I w MS twenty 0:08:21.840 --> 0:08:23.720 bits and then you've got ones that are ten and 0:08:23.760 --> 0:08:26.840 even a little less. Do you prefer going to the 0:08:26.880 --> 0:08:30.040 sort of cheap, low cost Vanguard or I shares Core series, 0:08:30.720 --> 0:08:33.880 or do you like the liquidity of an I w M. 0:08:34.000 --> 0:08:36.520 We I would prefer something like in E E S 0:08:36.679 --> 0:08:40.080 or in I j R. So those are more Yes. 0:08:40.080 --> 0:08:42.680 This is why. Look these E t F strategists, they 0:08:42.720 --> 0:08:44.720 sniff through the whole toolback. That's that's why we have 0:08:44.800 --> 0:08:47.319 them on. I don't even know what E S is. 0:08:48.040 --> 0:08:52.040 That's the Wisdentry earnings weighted e t F. So basically, 0:08:52.559 --> 0:08:54.960 first of all, they take like a quality filter, so 0:08:55.000 --> 0:08:57.880 you have to have like four quarters of like positive earnings, 0:08:58.559 --> 0:09:01.200 and then they wait the stock in the index based 0:09:01.200 --> 0:09:04.120 on its earnings. So the more earnings you produce as 0:09:04.160 --> 0:09:06.360 a company, the higher the weight. So it's like a 0:09:06.440 --> 0:09:09.520 super higher quality e t F. If you go back, 0:09:09.679 --> 0:09:11.600 you you probably have a terminal up. But if you 0:09:11.679 --> 0:09:15.440 go back E S has completely killed I w M 0:09:15.600 --> 0:09:18.560 since its inception. And you know my point is like, okay, 0:09:18.559 --> 0:09:20.880 E yes, may coos to your thirty five basis points. 0:09:21.160 --> 0:09:24.000 I w M is maybe you know fifteen, but I'm 0:09:24.040 --> 0:09:27.360 sure if you look, I don't know what this is. Yeah, 0:09:27.559 --> 0:09:31.480 E S is up two to I w M sixty four. 0:09:31.520 --> 0:09:34.960 That's seventy eight percentage points difference. It is a little pricier, 0:09:35.440 --> 0:09:37.520 but it's not bad, especially when you're comparing to an 0:09:37.520 --> 0:09:40.439 active fund. It's thirty eight basis points. But you're right, 0:09:40.480 --> 0:09:42.840 it's small caps, but with a little of the edge 0:09:42.880 --> 0:09:45.600 taken off and a little tilt towards that's like a 0:09:45.600 --> 0:09:51.360 toy at the bottom of the cereal box, cracker jack box. 0:09:51.480 --> 0:09:57.040 Are we that old that we remember that I do it? Okay, okay, okay, good, 0:09:57.080 --> 0:10:03.200 all right. Quality usually works over time as like you know, 0:10:03.240 --> 0:10:04.800 as a factor, and we don't have to go into 0:10:04.800 --> 0:10:07.400 like a factor based discussion. But I think people get 0:10:07.480 --> 0:10:09.880 enamored about low costs, and you know, they want to 0:10:09.920 --> 0:10:12.240 buy the cheapest product out there. And I think you 0:10:12.280 --> 0:10:13.839 got to look underneath the hut a little bit when 0:10:13.840 --> 0:10:15.920 it comes eat just because there's so many products out there. 0:10:15.960 --> 0:10:18.240 So E S is one of those like hidden gems 0:10:18.280 --> 0:10:20.320 if you like small caps, and that's a good point. 0:10:20.320 --> 0:10:23.120 I mean thirty eight to twenty or ten, that's eighteen 0:10:23.120 --> 0:10:26.000 basis points. If you had picked E S, though, that's 0:10:26.000 --> 0:10:30.120 seventy seventy eight hundred basis points, So I agree with you. 0:10:30.520 --> 0:10:32.920 I think though, when you go pure, sort of plain 0:10:33.000 --> 0:10:35.680 vanilla like the smp F have injured, you really should 0:10:35.679 --> 0:10:37.960 look for the lowest cost. But when you go to 0:10:38.040 --> 0:10:41.560 these other areas, you can possibly do your homework a 0:10:41.559 --> 0:10:44.840 little and find a hidden gem. Absolutely, Okay, Sarah, what's 0:10:44.880 --> 0:10:49.079 the what's the number two thing that you um focused 0:10:49.120 --> 0:10:51.440 on in this article? So a lot of people started 0:10:51.480 --> 0:10:54.640 talking about if you're worried, get defensive, and John was 0:10:54.679 --> 0:10:56.920 talking about how maybe not even just because of trade, 0:10:56.920 --> 0:10:58.959 but they were starting to shift to a more defensive 0:10:58.960 --> 0:11:01.520 position at the are to the year for even other reasons. 0:11:01.760 --> 0:11:04.240 But when they talk about defensive equities, a lot of 0:11:04.240 --> 0:11:06.240 them say, all right, well you look for your toothpaste 0:11:06.240 --> 0:11:08.760 and your diaper companies because it's something bad, worred to happen. 0:11:08.800 --> 0:11:11.200 At least you know that people always need those types 0:11:11.240 --> 0:11:14.000 of products, so go to your consumer staples. And for me, 0:11:14.200 --> 0:11:17.040 I did. I. Well, I was curious because it seems 0:11:17.080 --> 0:11:19.080 like there was a shift in tone when we got 0:11:19.080 --> 0:11:21.520 to June, so I was really curious what the flows 0:11:21.559 --> 0:11:24.000 looked like in June versus the rest of the year, 0:11:24.040 --> 0:11:26.760 and we definitely saw a major shift. So if you 0:11:26.760 --> 0:11:31.760 look at XLP, which is State Streets Consumers Staples sector fund, 0:11:32.040 --> 0:11:37.600 so x LP actually had the most outflows from January 0:11:37.760 --> 0:11:40.160 to May this year. X l P, I mean consumer 0:11:40.200 --> 0:11:42.400 staples as a whole have really just been struggling. So 0:11:42.440 --> 0:11:46.240 they saw seven hundred seventy three million dollars in a 0:11:46.400 --> 0:11:50.240 loss from January to May. However, in June that completely flipped, 0:11:50.240 --> 0:11:52.240 and if you look at the entire suite of those 0:11:52.480 --> 0:11:56.000 sector funds, x LP actually took in the most money 0:11:56.320 --> 0:11:58.480 out of any of them. It saw five hundred eighty 0:11:58.480 --> 0:12:01.760 three million in inflows in June. So I was just curious. 0:12:01.960 --> 0:12:04.199 I was looking through the data, and it did take 0:12:04.240 --> 0:12:05.880 a bit of time, and I was worried maybe I 0:12:05.880 --> 0:12:08.240 would not find anything. But I thought it was really 0:12:08.280 --> 0:12:11.360 interesting that I had noticed that shift in tone from 0:12:11.360 --> 0:12:13.079 the rest of the year until June, and people were 0:12:13.080 --> 0:12:15.040 actually starting to say that they were concerned, maybe they 0:12:15.080 --> 0:12:17.520 were going to shift money around, And what do you know, 0:12:17.760 --> 0:12:20.839 XLP went from the worst to the best. Flos XLP, 0:12:21.040 --> 0:12:23.360 by the way, is it really is a boring e 0:12:23.440 --> 0:12:26.720 t F. I mean Coca Cola, Colgate, pal mall of 0:12:26.840 --> 0:12:30.600 walmart Um. In terms of the performance by the way, 0:12:30.640 --> 0:12:33.720 just so people know, in the past ten years since 0:12:33.760 --> 0:12:39.000 the financial crisis, basically x LPs trailing Tech or XLK 0:12:39.120 --> 0:12:43.520 by a hundred percentage points. Tech is over of the 0:12:43.600 --> 0:12:47.600 SMP five hundred Staples is a mere six eight percent. John, 0:12:47.679 --> 0:12:50.360 could we see a whole new regime where XLP becomes 0:12:50.360 --> 0:12:53.240 the stud and xl K lags All the holdens you 0:12:53.280 --> 0:12:55.480 mentioned just kind of remind me of Warren Buffett. Just 0:12:55.559 --> 0:12:58.240 as a total aside um, I think what you're gonna 0:12:58.240 --> 0:13:00.560 start to see is people kind of getting more defensive 0:13:00.559 --> 0:13:03.040 in their portfolio given what's going on with all the 0:13:03.120 --> 0:13:06.640 kind of macro news. So, um, here's the other thing, right, 0:13:06.679 --> 0:13:09.000 if you want to market cap weighted index, right or 0:13:09.000 --> 0:13:12.280 in E t F, you are indirectly you know, long tech, right, 0:13:12.320 --> 0:13:16.439 because tech is like of the SMP, and you may 0:13:16.440 --> 0:13:19.559 not know, but you are a tech kind of investor, right, 0:13:20.080 --> 0:13:23.040 And I think now, given everything that's going on the cycle, 0:13:23.120 --> 0:13:24.800 you know now is a decent time to kind of 0:13:24.840 --> 0:13:28.600 get more defensive in in general. As a total aside, 0:13:28.679 --> 0:13:31.040 you know, one E t F that we moved into 0:13:31.120 --> 0:13:34.040 this year is q e MM. So we owned I 0:13:34.200 --> 0:13:36.520 E m G last year. It's the emergent market ETF. 0:13:37.000 --> 0:13:40.199 Five stocks drove fifty of the returns, and I in 0:13:40.320 --> 0:13:44.040 I MG in And this year, you know, we just 0:13:44.160 --> 0:13:46.400 didn't want to make a big bet on five stocks, 0:13:46.640 --> 0:13:48.920 you know, five Chinese internet stocks. So this year Q 0:13:49.160 --> 0:13:51.600 E M M a little bit more defensive, and it's 0:13:51.640 --> 0:13:54.439 out performed I m G by like one. It doesn't 0:13:54.440 --> 0:13:56.079 sound like huge, but you know, you start to kind 0:13:56.080 --> 0:13:58.320 of get you know, a couple hundred basis points, and 0:13:58.320 --> 0:14:02.120 it's out performed on lower volatil lo of autility and 0:14:02.160 --> 0:14:05.640 what were the holdings that that you wanted to access there? 0:14:06.760 --> 0:14:09.800 The holdings are very similar to I MG just doesn't overwait. 0:14:09.880 --> 0:14:12.240 So Samsung may not be like five pcent like it 0:14:12.320 --> 0:14:14.400 is an I m G. You know, I may only 0:14:14.440 --> 0:14:17.120 have like a two percent weight. So it's a it's 0:14:17.120 --> 0:14:20.520 a little bit lower ball um, more defensive, you know, 0:14:20.560 --> 0:14:24.080 more value and quality stocks. So and John brings up 0:14:24.080 --> 0:14:26.760 a good point. This is sort of the same concept 0:14:26.840 --> 0:14:29.280 as E E S applied to emerging markets, in that 0:14:30.000 --> 0:14:32.760 when you go to emerging markets, most people use what's 0:14:32.760 --> 0:14:34.840 called the market cap weighted e t F. That's E 0:14:34.840 --> 0:14:37.640 E M, I MG, the ones you mentioned and a 0:14:37.640 --> 0:14:40.480 lot of times the top ten holdings can make up 0:14:40.520 --> 0:14:43.960 almost half of the portfolio. At least when I look 0:14:44.000 --> 0:14:46.320 at QWI E m M, the top ten holdings only 0:14:46.360 --> 0:14:50.120 make up six of the portfolio. That's an underrated field, 0:14:50.160 --> 0:14:53.160 isn't it percentage of top ten holdings? Yeah? And that 0:14:53.280 --> 0:14:55.800 also comes down to waiting, and when you look at 0:14:55.800 --> 0:14:57.960 it the alternative waiting. You could not go the other 0:14:58.000 --> 0:15:00.040 way though, and have an equal weighting, which gives a 0:15:00.040 --> 0:15:02.040 little more volve In this case, you have a quality 0:15:02.560 --> 0:15:06.520 screen on this um. Even though it's less concentrated. The 0:15:06.600 --> 0:15:09.200 quality screen takes that edge off, which doesn't make it 0:15:09.280 --> 0:15:12.720 extra have extra volatility. So it's an interesting pick qu 0:15:12.840 --> 0:15:14.920 e m M. It's the spider product. It's a multi 0:15:14.960 --> 0:15:24.600 factor approach to emerging markets. Okay, John, can we just 0:15:24.640 --> 0:15:27.040 go a little bit more meta about how you as 0:15:27.080 --> 0:15:30.120 an investor, how you've been dealing with the trade war 0:15:30.160 --> 0:15:34.240 as a transition from being rhetoric to reality. Sure, Um, 0:15:34.280 --> 0:15:37.320 you know, we're longer term investors, so I think you know, Look, 0:15:37.360 --> 0:15:40.760 Trump's approval ratings keep rallying and keep going up as 0:15:40.760 --> 0:15:43.560 his trade ruter kind of spikes up. So I don't 0:15:43.560 --> 0:15:46.520 think he's going to back down. Per Se, I'll caveat 0:15:46.560 --> 0:15:48.800 by saying, you know, we're not experts in trade wars, 0:15:48.800 --> 0:15:50.880 so you know, we tend to focus on like data 0:15:50.880 --> 0:15:52.960 and what's going on in economy, and I think there's 0:15:53.000 --> 0:15:55.800 some bigger picture issues that are driving the market. So 0:15:55.880 --> 0:15:59.320 one is, as I mentioned earlier, the FED is hiking rates. Two, 0:15:59.400 --> 0:16:01.600 you've had you know, the couple in you know, from 0:16:01.760 --> 0:16:03.280 US and the rest of the world in terms of 0:16:03.280 --> 0:16:06.960 global growth. I think inflation's rise in and you know, 0:16:07.000 --> 0:16:09.680 I think that's really what's driving the market. Like you know, yeah, 0:16:09.720 --> 0:16:12.800 the media is gonna talk about whatever is hot for 0:16:12.840 --> 0:16:15.680 that day, but you know there's other big and bigger 0:16:15.840 --> 0:16:19.560 driving forces that are impact and market. So to answer 0:16:19.600 --> 0:16:22.200 your point, Joel, you know we've been increasing cash. So 0:16:22.320 --> 0:16:25.560 cash I think is a really interesting alternative at this 0:16:25.600 --> 0:16:28.240 point in time. Right, the two years yielding like you know, 0:16:28.240 --> 0:16:31.840 two point five percent, so you take on no credit risk, no, 0:16:32.240 --> 0:16:34.960 you know, very little duration risk. So I would much 0:16:35.080 --> 0:16:37.600 rather own like a s h Y. Then let's say 0:16:37.600 --> 0:16:39.800 like an h y G, like why take on the 0:16:39.800 --> 0:16:42.080 extra credit risk and the extra duration risk for for 0:16:42.160 --> 0:16:45.120 HIO credit s h Y, which is an a propro 0:16:45.280 --> 0:16:47.560 ticker for something that holds one to three ye treasuries. 0:16:47.920 --> 0:16:49.640 It is shy. It's when you're feeling shy, you go 0:16:49.720 --> 0:16:52.760 into this thing and s h V. These are making 0:16:52.760 --> 0:16:56.520 the top ten top twenty flo lists and they're they're boring. Uh. 0:16:56.560 --> 0:16:59.120 These are ultra short term debt, which is used for cash. 0:16:59.120 --> 0:17:02.880 Talk about the amazing inflows into ultra short term debt 0:17:03.000 --> 0:17:05.680 this year. Look, you say they're boring, but the thing 0:17:05.800 --> 0:17:09.040 is they're safe. And if you are worried about anything, 0:17:09.080 --> 0:17:11.679 even if it's a trade war, if you're just worried 0:17:11.680 --> 0:17:14.160 about where we are in the cycle, maybe that's where 0:17:14.160 --> 0:17:15.920 you want to park your money. And that's what we're seeing. 0:17:15.960 --> 0:17:19.840 We are seeing some major flows into short term debt, 0:17:19.920 --> 0:17:22.480 and as well as short term debt, we're also seeing 0:17:22.920 --> 0:17:26.800 some huge inflows into the tenure treasury bond e t 0:17:27.040 --> 0:17:29.119 f s as well so g o VT, which is 0:17:29.200 --> 0:17:32.960 the I shares products. It's the largest US treasury bond 0:17:33.480 --> 0:17:37.520 tracking US treasuries. In June, it took the most cash 0:17:37.520 --> 0:17:39.920 on record, the most that's ever taken in a month. 0:17:40.119 --> 0:17:42.800 It took in about eight hundred seventy million dollars. So 0:17:42.920 --> 0:17:45.560 we're seeing money into short term debt and then of 0:17:45.600 --> 0:17:48.360 course the ten uere as well as getting a lot 0:17:48.400 --> 0:17:51.240 of traction. John As that's g o v T is 0:17:51.560 --> 0:17:55.520 fifteen basis points. As as an investor, when you say cash, right, 0:17:55.520 --> 0:17:57.720 a lot of people think of money market fund. Can 0:17:57.760 --> 0:17:59.600 e t F s like this be used in place 0:18:00.119 --> 0:18:02.800 of a money market fund and like short ultra short 0:18:02.880 --> 0:18:05.440 term treasury et F? Are people starting to do that? 0:18:05.760 --> 0:18:07.240 I think? So? I mean I think if you look 0:18:07.280 --> 0:18:11.240 at g Bill, that's been another kind of big inflow um. 0:18:11.280 --> 0:18:13.800 You know, I think they got like seven million, you know, 0:18:13.880 --> 0:18:16.080 just in the last you know year. If you look 0:18:16.119 --> 0:18:20.520 at JP s T that's a short duration fund from J. P. Morgan, 0:18:20.560 --> 0:18:23.439 they've raised a lot of assets. So, I mean, you know, 0:18:23.480 --> 0:18:25.600 the thing when when you buy a money market fund 0:18:25.640 --> 0:18:27.040 is that you know you buy it at NAV. You 0:18:27.040 --> 0:18:30.320 don't pay bid offer, you don't pay commission cost um. 0:18:30.359 --> 0:18:32.520 You know there's no slippage right when you purchase that, 0:18:32.560 --> 0:18:33.960 Whereas you know when you buy an E t F 0:18:34.080 --> 0:18:36.679 you know there are extra costs, right. That's the thing 0:18:36.720 --> 0:18:38.400 that you know, most people don't realize. So in light 0:18:38.440 --> 0:18:41.280 of you know, the news about Vanguard cutting all e 0:18:41.440 --> 0:18:43.800 t F. You know the seven GTF. Most people don't 0:18:43.920 --> 0:18:46.800 aren't aware that, you know, there are extra costs when 0:18:46.800 --> 0:18:49.919 you purchase an e t F, as I mentioned bid offer, 0:18:50.440 --> 0:18:53.359 you know, there's market impact costs. So I think just 0:18:53.640 --> 0:18:56.640 because people love ets right there like a hot product, 0:18:56.680 --> 0:18:59.359 and you know, now like the end investors starting to 0:18:59.359 --> 0:19:02.800 see on TV that a t s are a good product. 0:19:02.880 --> 0:19:06.119 So I think advisors are increasingly using more things like 0:19:06.200 --> 0:19:09.280 jps T and g BILL or GOV in place of 0:19:09.359 --> 0:19:11.880 let's say a money market fund. And just to follow 0:19:11.920 --> 0:19:13.840 up on the ultra short term deadts, they've taken in 0:19:14.040 --> 0:19:19.080 eighteen billion this year. That's organic growth, and that puts 0:19:19.080 --> 0:19:21.919 them at almost ten percent of all netflows this year. 0:19:21.960 --> 0:19:24.080 They only make up one percent of the assets, So 0:19:24.160 --> 0:19:25.800 a huge year for those et f s. And I 0:19:25.840 --> 0:19:29.440 think going to cash and using a little cash, it's 0:19:29.480 --> 0:19:31.600 hard to argue with that these other ways of trying 0:19:31.600 --> 0:19:35.040 to outthink all this, But you know, cash, nothing wrong 0:19:35.080 --> 0:19:36.560 with that, and that's I think what a lot of 0:19:36.560 --> 0:19:40.520 people are coming to the conclusion of. That's the biggest argument. Well, 0:19:40.560 --> 0:19:42.879 one of the big arguments against equities right is that 0:19:42.920 --> 0:19:46.080 you know, a lot more volatility, extremely late cycle you've 0:19:46.080 --> 0:19:49.280 got trade wars fed hiking rates, and so you know, 0:19:49.480 --> 0:19:52.960 two percent it's not a bad investment anymore. And and John, 0:19:53.040 --> 0:19:56.760 what percentage have you sort of shifted into cash over 0:19:56.800 --> 0:20:00.280