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Speaker 1: Oakner chains.

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Speaker 2: I'm Joel Webber and I'm Eric Belchernas.

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Speaker 3: Okay, so I'm running through things that are at all

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Speaker 3: time highs. Stock market, US, stock market, zitcoin, gold, everything

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Speaker 3: just keep going up. What are people supposed to do

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Speaker 3: when things only go up?

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Speaker 2: Eric, Well, first of all, just appreciate it. There's so

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Speaker 2: much angst out there, these columnists and the economists, and

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Speaker 2: everyone's like trying to be like, well, it's just something's wrong.

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Speaker 2: And I'm like, everything is going pretty good and enjoy

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Speaker 2: while lasts. But this is probably as good as it gets.

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Speaker 2: It can't last forever. It never does. So the question

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Speaker 2: is what will derail this? The higher the markets go,

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Speaker 2: the less it takes right because there's a lot of

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Speaker 2: people with itchy trigger fingers, like, well, if this little

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Speaker 2: thing happens, they're more likely to take some profits quickly

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Speaker 2: then rather wait. So we'll see what that is. But

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Speaker 2: I think the more things go to all time highs,

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Speaker 2: and the more everything is at all time highs, this

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Speaker 2: is interesting. Gold and stocks rarely are going up together.

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Speaker 2: I think that really makes people nervous. But at the

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Speaker 2: same time, I am pretty happy. My four one k

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Speaker 2: is loving this.

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Speaker 1: So really though, how are people supposed to navigate this?

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Speaker 2: That's the thing like as the markets go up, more

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Speaker 2: and more people are starting to think, Okay, what can

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Speaker 2: I use as a little bit of insurance just in

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Speaker 2: case things go south quickly? And there are various vehicles

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Speaker 2: need to have market that are really good for this.

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Speaker 2: The problem is a lot of them come with like

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Speaker 2: it's like you got to read the owner's manual on these.

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Speaker 2: So there's a lot of options, but some are really powerful,

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Speaker 2: but they need explaining. And I think it's a good

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Speaker 2: time to go through these things because you just sense

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Speaker 2: something that's going to happen soon, and instead of talking

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Speaker 2: about these things after it happens, we should talk about

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Speaker 2: them right now.

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Speaker 1: All right.

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Speaker 3: Well, to help us our inks, we're going to be

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Speaker 3: joined by Bernard Goiter, who's an options reporter with Bloomberg News,

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Speaker 3: as well as Suzanne Woolley, who's personal finance reporter with

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Speaker 3: Blimberg News.

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Speaker 1: This time on train's protecting your Portfolio with ETFs. Bernard Susanne,

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Speaker 1: Welcome to Trillians.

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Speaker 4: Thank you, good to be here.

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Speaker 3: Bernard. I want to start with you because you just

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Speaker 3: published a story recently investors pile into funds betting on

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Speaker 3: elusive market volatility. Volatility has There was a little bit

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Speaker 3: of that in April, I think when Trump unveiled some

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Speaker 3: tariffs or talk of tariffs. Since then kind of disappeared.

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Speaker 3: So so what are we starting to see show up

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Speaker 3: in markets now?

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Speaker 4: Yeah, well, people are basically trying to allocate to what

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Speaker 4: happens if volatility comes back. There's another April situation where

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Speaker 4: there's suddenly a big spike in volatility. And I kind

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Speaker 4: of think of volatility in quiet binary wand markets like

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Speaker 4: it's either kind of everything's very very quiet or everything's extreme.

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Speaker 4: And part of this is going back to this idea

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Speaker 4: about how easy is it to trade? And in periods

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Speaker 4: when everything's fine, kind of like it is now and

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Speaker 4: the VIX, which is one of the indicators of polatility,

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Speaker 4: is below about twenty, it's really easy to trade. There's

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Speaker 4: a lot of liquidity everywhere, and then when stuff gets choppy,

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Speaker 4: sometimes that liquidity pulls back. It's harder to trade, it's

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Speaker 4: more expensive to hedge, and yeah, the VIX goes up,

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Speaker 4: and in those situations that that's when, Yeah, that's when

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Speaker 4: it kind of gets exciting, right in terms of being

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Speaker 4: a volatives reporter. So at the moment, things are kind

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Speaker 4: of quiet and it's a little little dull, but back

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Speaker 4: in April, like things get really exciting.

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Speaker 2: Dull, you also get a lot more clicks. Yeah, it's

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Speaker 2: like the weather channel, you know, you only tune in

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Speaker 2: when there's a hurricane. It's like dead for us too.

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Speaker 3: Okay, So what's going on beneath the surface and where

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Speaker 3: our investors? And these aren't retail investors so much as

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Speaker 3: professional ones where they turned to allocate.

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Speaker 4: I'd say that some of these probably are. There's probably

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Speaker 4: some retail guys involved in because the real professionals will

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Speaker 4: be directly using futures and options and all that kind

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Speaker 4: of stuff. So those investors are generally kind of they

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Speaker 4: spent post a prop kind of worried about this return

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Speaker 4: of fear. And I think now we're in the greed stage,

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Speaker 4: so people are allocating to like upside, that's become the

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Speaker 4: big thing. That's why volatility isn't really here, because everyone's

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Speaker 4: just like getting greedy and being like, okay, but what

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Speaker 4: happens if the SMB goes to seven thousand and eight thousand,

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Speaker 4: what happens next? Kind of thing? And this is why

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Speaker 4: people have been talking about this hated rally because they

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Speaker 4: hadn't really allocated to it, but the rally happened anyway,

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Speaker 4: and a lot of people missed out, so they're like, Okay,

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Speaker 4: let's let's go all in. So that's why you see

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Speaker 4: stuff like lever dcfs where you're kind of doubling up.

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Speaker 4: That those kind of things become popular. And there's also

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Speaker 4: September was the biggest ever month for options in history basically,

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Speaker 4: like that that was and that was a quiet, relatively

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Speaker 4: quiet month from a volatility point of view, but the

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Speaker 4: number of options it was over I think over sixty

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Speaker 4: million options contracts traded in the US market. It's been

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Speaker 4: a really kind of busy time eruptions. But people aren't

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Speaker 4: necessarily that they're hedging, but they're also betting things are

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Speaker 4: going to keep getting better. So there's a bit of

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Speaker 4: a balance between those two forces.

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Speaker 2: And I want to go over the vix ETFs and

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Speaker 2: their flows, which I think is what caught your attention

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Speaker 2: in the past month, Like basically all of them have

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Speaker 2: taken in a good amount of money, They've they've grown

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Speaker 2: their assets by about twenty percent in the past month

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Speaker 2: and year to date, they've grown their assets by fifty percent. Now,

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Speaker 2: a lot of these ETFs are a lot like buying insurance.

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Speaker 2: You're kind of expecting the money to just go away

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Speaker 2: unless the hurricane comes, and so the total assets in

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Speaker 2: these is always deterior's like a melting ice cube. But anyway,

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Speaker 2: two billion and uri date flows for these vixytps, especially

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Speaker 2: after all that's happened, and you know, they went through

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Speaker 2: a lot of bad press over the years. The reason

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Speaker 2: they're the reason they're complicated as a hedge is that

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Speaker 2: they don't track the vix directly. Nothing can at tracks

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Speaker 2: futures and you have to roll those, and the cost

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Speaker 2: to roll can be really high, like up to forty

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Speaker 2: fifty percent a year, sometimes more. And so people buy these,

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Speaker 2: I think as a hedge and then they get out

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Speaker 2: of them if it didn't come. But to me, it's

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Speaker 2: I guess very akin to buying insurance that will pay

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Speaker 2: off big time.

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Speaker 3: And when you think about how to rate stuff like

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Speaker 3: this for the for the movies, right, our traffic.

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Speaker 1: Lights system, yeah, traffic light system.

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Speaker 2: Yeah, these are all red lights hardcore. Anything that rolls

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Speaker 2: futures is a red light, automatically red light. There is well,

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Speaker 2: we were going to have a skull and crossbones, yeah,

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Speaker 2: which would be the equivalent of like an NC seventeen

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Speaker 2: movie ETF style. There was a two X VIX would

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Speaker 2: be one of the very few ETFs that would be

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Speaker 2: double crossbones. And the reason for that is not it's

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Speaker 2: leveraged and it rolls futures. So all of these vixytps,

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Speaker 2: if you look at their like lifetime return, they're all down.

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Speaker 1: Nine nine persaw on a Swiss ball.

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Speaker 2: Yeah, I mean it. The look just rolling futures, whether

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Speaker 2: it's Oil or VIX, is just something not many people

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Speaker 2: are aware of. And in VIX it's the roll costs

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Speaker 2: are so high that you just hate someone to go

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Speaker 2: in thinking that, oh, I'm buying the VIX. You're not,

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Speaker 2: You're buying VIX futures ETFs that roll them. And then

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Speaker 2: on top of that, there was one that was an

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Speaker 2: ETN which automatically gets two points two leverage. TVX was

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Speaker 2: the ultimate highest score in our system. We got seventeen dings.

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Speaker 2: That's the most you can get. Basically anything over five

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Speaker 2: is right it r. So if we got seventeen, I

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Speaker 2: mean it's literally like remember Faces a Death, that movie

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Speaker 2: like from the eighties. I think you couldn't get in the.

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Speaker 1: Video store, no, because I never found it.

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Speaker 2: It's like that TVX was that movie and TVX was

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Speaker 2: rolled futures leverage and an ETN that said it blew up,

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Speaker 2: it went away. A lot of these come and gone now,

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Speaker 2: but they've they're ba they're reincarnating some of these ETFs.

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Speaker 2: So now we do have another two xvix and the

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Speaker 2: whole fan is there. But again it's a very small market.

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Speaker 2: This is for a niche audience, but they still are

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Speaker 2: very active.

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Speaker 4: Well, what's interesting, So to quantify that kind of skull

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Speaker 4: and crossbones, you vixsy todate performance down seventy percent minus seventy.

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Speaker 1: That's where the volatility is.

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Speaker 4: Exactly, but if it could go up hundred to two

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Speaker 4: hundred percent in a week, so it's it's pure. This

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Speaker 4: is kind of pure, pure gambling stuff.

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Speaker 2: Yeah, let me jump in real quick here to just

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Speaker 2: just finish this off, because people need to know this.

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Speaker 2: Why would you buy something that rolls futures and loses

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Speaker 2: seventy eighty percent a year and doesn't do anything. Well,

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Speaker 2: here's why. When the market drops and there's a bad day.

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Speaker 2: So let's look at April second to the fourth, that's

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Speaker 2: when the tariff tantrum was in the most palpable. Palpable

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Speaker 2: market's down ten percent in two days. The negative three

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Speaker 2: XS and P is up thirty percent. Makes sense, right?

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Speaker 2: The VIX just one time, VIX is up fifty percent.

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Speaker 2: The two X VIX is up one hundred and seven

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Speaker 2: percent in two days. So when it works, it works.

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Speaker 2: I call it the jackpot mode, and that's why people

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Speaker 2: keep using them.

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Speaker 3: Suzanne, how do you feel about all of this as

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Speaker 3: a personal finance reporter?

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Speaker 5: Well, my first thought is does the world understand the

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Speaker 5: term role? We're throwing around role? And I know that

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Speaker 5: Bernard defined it really well in his recent peace, But

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Speaker 5: is that a term that we think everyone is familiar with.

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Speaker 1: Let's let's break it down. Yeah.

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Speaker 4: So basically what we're talking about here is the VIX

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Speaker 4: is a projection about what the market thinks is going

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Speaker 4: to happen in one month's time. So you're constantly pushing

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Speaker 4: that out one month. And the way that these ETFs

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Speaker 4: use use futures is that constantly it's like a seesaw,

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Speaker 4: and you have you start with one future on the

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Speaker 4: xpree and as you get nearer, you have to buy

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Speaker 4: one and sell the other to keep that kind of

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Speaker 4: seesaw balanced. And what's really ironic about these products in

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Speaker 4: particular is that they're kind of doing this in kind

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Speaker 4: of a funky small futures market. And futures are not

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Speaker 4: like ETFs. They're not based on like what the actual

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Speaker 4: value of that thing is. It's purely based on the

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Speaker 4: supply and demand from the market for that financial contract.

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Speaker 4: So if you have a ton of money flowing into

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Speaker 4: these products, that makes the cost of doing that stuff

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Speaker 4: more expensive because because the market's like, oh, people want

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Speaker 4: to buy. People are scared, like volatinity is gonna go up,

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Speaker 4: so we're going to make it more expensive to sell them,

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Speaker 4: like that insurance. So the more the more demand there

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Speaker 4: is for insurance, the more expensive that insurance gets. So

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Speaker 4: these roll costs are getting worse and worse and worse

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Speaker 4: the more money that goes into these particular products. Now,

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Speaker 4: I don't think that happens as badly in other in

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Speaker 4: other examples of these these kind of eats. The other

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Speaker 4: one was bitcoin. You remember before the before you had

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Speaker 4: like spot bitcoin ETFs, you had futures eats that were

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Speaker 4: based on the futures market, but again they had very

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Speaker 4: very similar structural problems where you have the fees, but

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Speaker 4: you also have these roll costs and they're not really

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Speaker 4: disclosed very well in the in the paperwork around around

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Speaker 4: the ETFs.

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Speaker 5: It's a big price for popularity.

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Speaker 2: But you know the term role. I would just picture

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Speaker 2: you're buying this future which is due. Let's say what

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Speaker 2: month is now October. It's due in November. Now as

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Speaker 2: October ends in November comes, people don't want to take delivery,

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Speaker 2: whether it's oil or vix, whatever it is, nobody wants

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Speaker 2: because they're just the in it for the investment. They

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Speaker 2: don't want to get delivered anything. So they sell the

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Speaker 2: future rate towards the end of the month and buy

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Speaker 2: the next one, and sometimes they buy two months out. Well,

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Speaker 2: the curve is always shaped where it's pricing a little

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Speaker 2: more because there's more chance of volatility as you go

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Speaker 2: further out, so you pay up every time you go

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Speaker 2: from near month to the next month, unless there's a

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Speaker 2: spike in volve, which then it goes in the opposite direction.

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Speaker 2: And everybody it's like when the guys are selling umbrellas

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Speaker 2: outside of Penn Station when it's raining all of a sudden,

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Speaker 2: everybody wants then it's cheaper going out and you actually

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Speaker 2: get paid to roll. But that's a very rare occasion.

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Speaker 2: And the first thing is called a state of contango,

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Speaker 2: and the second thing is called a state of backwardation.

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Speaker 2: But I don't even want to introduce that.

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Speaker 5: I have written stories in my past life where I've

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Speaker 5: had to try and explain contango and backwardation, and I

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Speaker 5: would like you to know that unwordle the New York

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Speaker 5: Times game Contango. When I tried to use it in

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Speaker 5: the game, it was not accepted.

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Speaker 2: That's why they're all rated R instantly, because I mean,

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Speaker 2: who even knows what that means. It's backwardation sounds like

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Speaker 2: you know what after you taco bell.

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Speaker 4: A contango is like it's a dance thing, but you

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Speaker 4: it's a contango. It's not a real tango.

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Speaker 1: Oh I love it.

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Speaker 2: So yeah. These are the terms that when you learn

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Speaker 2: it it makes total sense and you but it takes

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Speaker 2: a while. It'd be like sometimes when my auto mechanic

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Speaker 2: explains stuff to me, I'm like, dude, fine, just spend

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Speaker 2: the eight hundred bucks. This is what that sounds like.

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Speaker 3: Sen Real people are still trying to forget to talk

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Speaker 3: about reference. I know, so Suzanne come into this as

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Speaker 3: the personal finance brain.

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Speaker 5: Well, you know, I'm a big believer in personal finance

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Speaker 5: of keeping it simple and so this kind of product

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Speaker 5: I'm sure makes sense for a lot of people, but

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Speaker 5: I just sort of feel like to be like the boring,

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Speaker 5: sensible person. You know, there are a lot of actions

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Speaker 5: you can take on your portfolio before you need to

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Speaker 5: get involved in something like this that is very expensive,

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Speaker 5: really hard to understand. Obviously appealing right now because people

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Speaker 5: are leery of getting into equities, you know, but they still,

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Speaker 5: you know, want to have some participation. And this is

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Speaker 5: the word. The ability to sort of hedge your portfolio

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Speaker 5: is a great way an advisor or broker or something

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Speaker 5: can like hook you in to a product. But I

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Speaker 5: just feel that there are a lot of basic things

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Speaker 5: people can do, like boring old rebalancing, you know, maybe

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Speaker 5: dollar cost averaging out of like mag seven and adding

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Speaker 5: a little international and value to your portfolio, keeping a

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Speaker 5: cast cushion so you don't have to sell into a downturn.

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Speaker 5: I mean, I'm sure everyone's like fog asleep by now.

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Speaker 3: Eric jesus Ann's point where we've been talking about our

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Speaker 3: maybe NC seventeen stuff. What are some more PG options?

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Speaker 2: Most people would use treasury bonds or a little bit

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Speaker 2: of cash. I think money market funds are great because

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Speaker 2: they're just not going to move, but some people do

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Speaker 2: want things that will go up when the stocks go down,

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Speaker 2: and long dated treasuries are usually pretty good. They went

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Speaker 2: up thirty seven percent in two thousand and eight, but

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Speaker 2: in twenty twenty two they went down with stocks, so

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Speaker 2: they're they're probably the best organic hedge that's like PG.

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Speaker 2: Gold is interesting, but that's zero correlated. Sometimes gold will

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Speaker 2: go up with stocks like it is now. That's the

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Speaker 2: thing about gold. People are buying it as a way

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Speaker 2: to maybe hedge stocks and the basement as stocks keep

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Speaker 2: going up. But if it's interesting that it's working as

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Speaker 2: a high beta play right now because it's going up

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Speaker 2: with stocks. But gold can sometimes go down with stocks.

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Speaker 2: It's not totally reliable. It's more like a rebel. It

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Speaker 2: just does whatever the hell it wants, which is kind

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Speaker 2: of cool for a portfolio because you get diversified. And

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Speaker 2: bitcoin is probably in between stocks and gold. It's definitely

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Speaker 2: more risky, but it's come down a little some days

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Speaker 2: it'll go up when stocks are down. So I just

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Speaker 2: think that's why people are out there examining all this stuff,

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Speaker 2: because they do want to have diversification, which I do

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Speaker 2: believe is the only free lunch. That said, I think

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Speaker 2: where the chainsaws and the NC seventeen stuff can come

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Speaker 2: in handy is if you have a feeling that in

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Speaker 2: the next week something real big is going to happen,

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Speaker 2: then you would just put a little bit of Vicks

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Speaker 2: in your portfolio. And you only need a little because

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Speaker 2: it will go up like five eight times the market

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Speaker 2: going down and hedge everything, but you got to sell

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Speaker 2: it after the time comes up, whether that thing happened

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Speaker 2: or it didn't. My dad had this fame experience famously.

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Speaker 1: He thought did a whole episode about this.

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Speaker 2: He thought Hillary Clinton was going to win in twenty sixteen,

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Speaker 2: and he thought the market was going to go tank,

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Speaker 2: and he goes, how can I play this. I'm sure

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Speaker 2: of it. My dad's like a huge college football gambler.

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Speaker 2: So I said, okay, well, look, if you believe this,

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Speaker 2: it's going to put in t vix. TVIX will pay

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Speaker 2: off big if you're right. Trump won and the market

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Speaker 2: went up, and he forgot to sell it. So all

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Speaker 2: three things went wrong, and then he called me every

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Speaker 2: like six months and said, what is this thing that

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Speaker 2: like loses fifty percent every month? And I'm like, I

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Speaker 2: told you to sell it. So, if you're the kind

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Speaker 2: of person here doesn't pay attention to your portfolio, don't

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Speaker 2: use any of those things. Just use the PG. But

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Speaker 2: if you are a trader, they again that jackpot mode

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Speaker 2: will go really far in hedging your portfolio, and that's

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Speaker 2: why the pros do like to use it.

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Speaker 3: All right, So the thing that we haven't talked about

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Speaker 3: yet buffers. What's the state of play on buffers?

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Speaker 1: What's their rating? Where inflows look like?

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Speaker 2: Yeah, so these would be PG PG thirteen. We debate

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Speaker 2: that on the team a lot, but let's just say

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Speaker 2: they're PG thirteen because they use derivatives and they're a

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Speaker 2: little complicated and you have.

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Speaker 1: To do they do.

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Speaker 2: They basically use options to target an outcome. So like

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Speaker 2: if you have to buy in on when the buffer

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Speaker 2: comes out, so the ETF comes out October first, you

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Speaker 2: buy it on October first, and it basically says something

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Speaker 2: like this, if the market goes down five percent, that's

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Speaker 2: on you. If it goes down further, the buffer will

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Speaker 2: cover it. Other times it'll say we'll take the first

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Speaker 2: five percent, you eat everything after. And in order to

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Speaker 2: arrange these downsides, you have to give up some upside.

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Speaker 2: So the more downside protection you get, the more upside

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Speaker 2: you give up. And a lot of older investors, that's

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Speaker 2: what we call these boomer candy. They love this stuff

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Speaker 2: because they're willing to give up some of that upside

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Speaker 2: to sleep at night with the downside these would be.

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Speaker 2: These are popular because they guaranteed, as I just said,

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Speaker 2: even treasuries don't guarantee a hedge. These lock it in.

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Speaker 2: The problem is they do they're pricey. You know, a

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Speaker 2: lot of them are not over ninety basis points. You

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Speaker 2: don't get the dividend as part of the buffer, so

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Speaker 2: you do give up some things. But I think peace

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Speaker 2: of mind is something people are really willing to pay

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Speaker 2: up for, and that's why they're a huge hit.

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Speaker 5: And I think that should be marketed as boomer candy

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Speaker 5: because I think that's kind of brilliant.

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Speaker 2: It has stuck. I introduced this. I I'd say one

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Speaker 2: of every ten phrases I try out actually works, and

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Speaker 2: that was one of them. JP Morgan. I think even

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Speaker 2: made T shirts with it for one conference. Yeah, and

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Speaker 2: then todd Son made me a boomer candy m and

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Speaker 2: ms where he brought a jar of M and ms

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Speaker 2: he put like dividend income premium income buffer and so

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Speaker 2: he made literal boomer candy. It's a whole thing.

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Speaker 4: Yeah, Yeah, you had them on the show.

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Speaker 2: I know, we don't hang out as much as we

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Speaker 2: used to for her all the time, and she would

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Speaker 2: you'd get a kick out of all he wrote. She

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Speaker 2: was the editor of the radio how to invest based

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Speaker 2: on radiohead lyrics.

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Speaker 3: Yes, that was awesome, true, Bernard, are you seeing buffers

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Speaker 3: show up in any of your data yet or is

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Speaker 3: it more like the vix is so different and odd

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Speaker 3: that people are like, that's the thing that so just

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Speaker 3: like real boom boomer can.

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Speaker 1: Just so it's like boomer crack.

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Speaker 4: Because I know you we talked a lot about like

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Speaker 4: can I just get really nerdy abountions for a second.

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Speaker 4: What's fascinating about these buffers is they've started to kind

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Speaker 4: of show up in the big options market. So you

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Speaker 4: get a ton of like people who are trading options

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Speaker 4: talking about.

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Speaker 2: The JP Morgan roll.

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Speaker 4: Is this really exciting? Event where because this these things

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Speaker 4: kind of target what's going to happen in the market

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Speaker 4: in three months time, and what ends up happening is

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Speaker 4: the market kind of like looks at this as a

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Speaker 4: bit of a target kind of what's going to happen,

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Speaker 4: and they and they and they kind of all the

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Speaker 4: all the Wall Street banks and market makers are kind

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Speaker 4: of positioning around these these flows. The other thing is

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Speaker 4: that there's a there's kind of a sense of like

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00:19:59,560 --> 00:20:04,920
Speaker 4: there's that these guys might be getting the BUFFERYTF providers

401
00:20:05,119 --> 00:20:07,320
Speaker 4: because they've told the world when they're going to trade.

402
00:20:07,680 --> 00:20:09,960
Speaker 4: There's a bit of a bit of an adverse selection

403
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Speaker 4: issue because if you've told everyone on this particular date,

404
00:20:13,000 --> 00:20:16,440
Speaker 4: we're going to do this massive, multi billion, multimillion dollar trade.

405
00:20:17,280 --> 00:20:19,320
Speaker 4: I think it was like twenty million net premium for

406
00:20:19,359 --> 00:20:22,480
Speaker 4: the last one they did, but there was hundreds of

407
00:20:22,520 --> 00:20:25,800
Speaker 4: millions of dollars of options premiums and different directions, and

408
00:20:25,920 --> 00:20:28,680
Speaker 4: this is like a huge, huge thing for the rest

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Speaker 4: of Wall Street. Unfortunately, JP Morgan's investment bank doesn't get

410
00:20:31,200 --> 00:20:33,760
Speaker 4: to cash in on it because they don't trade themselves, right,

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Speaker 4: But all the other banks, it's like it's a massive,

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Speaker 4: massive deal these buffers like rolling over and all that

413
00:20:38,960 --> 00:20:41,320
Speaker 4: kind of stuff like it it's hard to Yeah, yeah,

414
00:20:41,680 --> 00:20:43,159
Speaker 4: it is like a really kind of important thing for

415
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Speaker 4: the rest of the market. So that popularity in the

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00:20:44,800 --> 00:20:48,560
Speaker 4: buffertf space is actually caused like kind of has a.

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Speaker 2: Direct effect on Wall Street.

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Speaker 4: It's given its scale.

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Speaker 3: What are the buffer tickers that are the ones that

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Speaker 3: people are most interacting with.

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00:21:00,240 --> 00:21:04,080
Speaker 2: The biggest then, first ever is bolt b a LT

422
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Speaker 2: one point eight billion. It might not be the biggest,

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00:21:07,280 --> 00:21:08,960
Speaker 2: but it was the first. And you know what the

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00:21:09,000 --> 00:21:13,359
Speaker 2: tickers for bond alternative, which is interesting because, as I

425
00:21:13,400 --> 00:21:17,360
Speaker 2: said earlier, in twenty twenty two, stocks and bonds went

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Speaker 2: down together and this freaked the boomers out because they

427
00:21:20,000 --> 00:21:22,960
Speaker 2: were told the bonds would cover the stocks and they

428
00:21:22,960 --> 00:21:25,600
Speaker 2: all went down and it was like whoa. So they

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00:21:25,640 --> 00:21:28,720
Speaker 2: cracked their pants. And that's when buffer's got huge, because

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00:21:28,840 --> 00:21:31,440
Speaker 2: they come in they say, your bond. You know, as

431
00:21:31,480 --> 00:21:34,840
Speaker 2: we say in the team, the bonds don't work. And

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00:21:34,880 --> 00:21:38,960
Speaker 2: so that's why these are mostly alternatives for bonds, although

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00:21:38,960 --> 00:21:41,160
Speaker 2: the bonds will you know, come back and say, well,

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Speaker 2: since then they've gone up. The reason the bonds and

435
00:21:43,840 --> 00:21:46,320
Speaker 2: the stocks are a weird thing now is because if

436
00:21:46,320 --> 00:21:49,119
Speaker 2: the fed's lowering rates, that tends to be good for

437
00:21:49,119 --> 00:21:51,359
Speaker 2: both stocks and bonds, right, we all know this, So

438
00:21:51,400 --> 00:21:55,000
Speaker 2: when they raise rates, it's bad for both stocks and bonds.

439
00:21:55,560 --> 00:21:58,480
Speaker 2: And so that's why the FED kind of like warped

440
00:21:58,920 --> 00:22:02,359
Speaker 2: what would normally happen and bond safe haven stocks risk.

441
00:22:03,040 --> 00:22:06,080
Speaker 2: So the FED and their influence on the market actually

442
00:22:06,200 --> 00:22:10,720
Speaker 2: changed the dynamics. So buffer ETFs are pretty well timed.

443
00:22:10,800 --> 00:22:14,000
Speaker 2: And the guy who invented them is a smart guy

444
00:22:14,000 --> 00:22:16,760
Speaker 2: who created power shares and he really helped put smart

445
00:22:16,760 --> 00:22:21,840
Speaker 2: beta on the map, Bruce Bond. And it's interesting. And

446
00:22:21,840 --> 00:22:24,520
Speaker 2: now all the issuers have them, including black Rock and

447
00:22:24,560 --> 00:22:26,760
Speaker 2: Fidelity and JP Morgan. So you have all these big

448
00:22:26,800 --> 00:22:30,040
Speaker 2: issues now riding the buffer train. And because the demand

449
00:22:30,119 --> 00:22:33,879
Speaker 2: is there and most of the money in America is

450
00:22:33,920 --> 00:22:36,080
Speaker 2: held by the boomers. If you look at the who

451
00:22:36,119 --> 00:22:38,480
Speaker 2: owns the stock market, seventy percent of it is owned

452
00:22:38,480 --> 00:22:41,520
Speaker 2: by people over the age of like sixty five, and

453
00:22:41,600 --> 00:22:43,960
Speaker 2: so servicing them with things that help them sleep at

454
00:22:44,040 --> 00:22:47,240
Speaker 2: night is why we have this other theme about how

455
00:22:47,359 --> 00:22:50,960
Speaker 2: ETFs are almost in the role of the pharmaceutical companies.

456
00:22:51,560 --> 00:22:54,960
Speaker 2: This is a drug to help you cure your anxiety

457
00:22:55,000 --> 00:22:55,760
Speaker 2: and sleep at night.

458
00:22:56,320 --> 00:22:58,480
Speaker 5: How expensive is this drug? And can I find a

459
00:22:58,560 --> 00:22:59,919
Speaker 5: cheaper generic version of this?

460
00:23:01,119 --> 00:23:03,680
Speaker 2: There are a lot of competitors, So like Blackrock came

461
00:23:03,720 --> 00:23:06,680
Speaker 2: in with HIDJ and I was about half the cost

462
00:23:06,760 --> 00:23:09,720
Speaker 2: of First Trust and Innovator, which are the two big brands.

463
00:23:10,040 --> 00:23:12,600
Speaker 2: And we looked HIDJ did a good job. It launched

464
00:23:12,640 --> 00:23:14,439
Speaker 2: ight before a downturn, and it covered. It did not

465
00:23:14,520 --> 00:23:17,720
Speaker 2: go down with the stocks. So I think ultimately that

466
00:23:17,840 --> 00:23:21,680
Speaker 2: guarantee that comes with the options activity is very powerful.

467
00:23:22,160 --> 00:23:25,280
Speaker 2: I would just say this though, I wouldn't drop everything

468
00:23:25,400 --> 00:23:29,919
Speaker 2: and buy buffers. I would maybe, you know, experiment with

469
00:23:30,040 --> 00:23:32,840
Speaker 2: a little bit. I just really a believer of a

470
00:23:32,880 --> 00:23:38,639
Speaker 2: well balanced portfolio. I think Buffet Bogel, all the heavyweights

471
00:23:38,640 --> 00:23:39,840
Speaker 2: would advise the same.

472
00:23:41,480 --> 00:23:45,640
Speaker 3: Which is ninety percent equity, ten percent the buffet model.

473
00:23:45,840 --> 00:23:50,200
Speaker 2: Well, the buffet portfolio is ninety percent SMP five hundred

474
00:23:50,200 --> 00:23:53,440
Speaker 2: and ten percent short term treasuries like a money market fund.

475
00:23:53,800 --> 00:23:56,320
Speaker 2: That's what he is going to put his whole trust

476
00:23:56,320 --> 00:24:01,280
Speaker 2: into when he passes away. And that's a pretty good portfolio, honestly.

477
00:24:01,800 --> 00:24:04,560
Speaker 2: But that little bit of good for a sixty year old,

478
00:24:04,880 --> 00:24:08,480
Speaker 2: that's the thing. And you know, the boomers made so

479
00:24:08,600 --> 00:24:11,639
Speaker 2: much money. That's what the crypto people are like. They

480
00:24:11,800 --> 00:24:13,960
Speaker 2: when you bring up Buffet with crypto people, they're like, oh,

481
00:24:14,600 --> 00:24:19,080
Speaker 2: try finding a Warren buffet in Nigeria or Argentina. There

482
00:24:19,119 --> 00:24:19,600
Speaker 2: are none.

483
00:24:19,720 --> 00:24:19,880
Speaker 1: Look.

484
00:24:19,880 --> 00:24:22,840
Speaker 2: In other words, Buffett only exists because the US stock

485
00:24:22,840 --> 00:24:25,480
Speaker 2: market is so badass. He just happens. They have been

486
00:24:25,560 --> 00:24:28,639
Speaker 2: ride that whole, like fifty year bull market. There's a

487
00:24:28,640 --> 00:24:32,159
Speaker 2: point there. But Buffett still is smart guy. And I

488
00:24:32,160 --> 00:24:34,280
Speaker 2: would just say that I would take heed to what

489
00:24:34,320 --> 00:24:37,560
Speaker 2: he says for sure, but I don't know. I think

490
00:24:37,800 --> 00:24:39,720
Speaker 2: a little gold if you like it is pretty good

491
00:24:40,240 --> 00:24:43,159
Speaker 2: little treasuries. If you want to try a little buffer out,

492
00:24:43,280 --> 00:24:44,520
Speaker 2: go ahead gold.

493
00:24:44,520 --> 00:24:46,520
Speaker 5: You can get a cheaper version of that too. You've

494
00:24:46,520 --> 00:24:48,760
Speaker 5: got GLD, which all the treats is right, but can't

495
00:24:48,880 --> 00:24:50,680
Speaker 5: get the gold the mini the.

496
00:24:50,680 --> 00:24:52,399
Speaker 2: G oh yeah, they got mini me's all over the

497
00:24:52,440 --> 00:24:55,280
Speaker 2: place in the gold area. G L with the Hell's

498
00:24:55,880 --> 00:25:00,720
Speaker 2: DM GLDM is way cheaper. So shop around is probably

499
00:25:00,720 --> 00:25:04,680
Speaker 2: the more expensive gold ETFs. But yeah, this idea of

500
00:25:04,720 --> 00:25:08,200
Speaker 2: how to protect your portfolio is big, and that's why,

501
00:25:08,240 --> 00:25:10,480
Speaker 2: as you said, the options market is very popular. It's

502
00:25:10,480 --> 00:25:12,600
Speaker 2: not all people losing their mind. A lot of times

503
00:25:12,640 --> 00:25:16,280
Speaker 2: you just buy a put option for a little while. Yeah,

504
00:25:16,359 --> 00:25:19,640
Speaker 2: and that's a sleep at night drug if you will

505
00:25:19,680 --> 00:25:20,119
Speaker 2: as well.

506
00:25:20,280 --> 00:25:22,160
Speaker 4: Yeah, Or you could sell calls as well. You could

507
00:25:22,160 --> 00:25:24,040
Speaker 4: do coal overwriting, and there's a bunch of funds that

508
00:25:24,080 --> 00:25:26,520
Speaker 4: do that. But basically, you can earn premium on your

509
00:25:26,640 --> 00:25:28,600
Speaker 4: if you if you own a big stock, you can

510
00:25:28,800 --> 00:25:31,240
Speaker 4: you can say, right, I'm prepared to above, I don't

511
00:25:31,240 --> 00:25:33,439
Speaker 4: mind selling this if it goes up twenty percent, like

512
00:25:33,520 --> 00:25:35,359
Speaker 4: I'm happy with that. And if it goes up twenty

513
00:25:35,359 --> 00:25:38,240
Speaker 4: five percent, you sell it. But you've earned a premium

514
00:25:37,960 --> 00:25:40,560
Speaker 4: from that activity. And that kind of that's how a

515
00:25:40,600 --> 00:25:43,080
Speaker 4: lot of these a lot of these buffers and other

516
00:25:43,080 --> 00:25:44,200
Speaker 4: ones kind of there's a whole.

517
00:25:44,200 --> 00:25:46,959
Speaker 2: Well, now you're getting into premium income, which is JEPPI,

518
00:25:47,400 --> 00:25:49,679
Speaker 2: which all it does is what he just said. It

519
00:25:49,800 --> 00:25:52,920
Speaker 2: sells call options a little bit out of the money.

520
00:25:53,000 --> 00:25:54,880
Speaker 2: So if the stock goes up, you get a little

521
00:25:54,920 --> 00:25:56,560
Speaker 2: bit of it. But at some point the call option

522
00:25:57,240 --> 00:26:00,800
Speaker 2: gets hit in the money and people want to exercise it.

523
00:26:01,320 --> 00:26:03,600
Speaker 2: At that point you lose your upside. But the whole

524
00:26:03,600 --> 00:26:06,720
Speaker 2: time you're getting income from the option, from the premium,

525
00:26:06,720 --> 00:26:08,800
Speaker 2: which gives you an income of nine ten percent depending

526
00:26:08,840 --> 00:26:12,280
Speaker 2: on the index. That also is boomer candy. But the

527
00:26:12,320 --> 00:26:15,480
Speaker 2: buffers are even more powerful because they lock it in.

528
00:26:16,320 --> 00:26:19,919
Speaker 2: It's like locked in because of the options. The guarantee

529
00:26:19,960 --> 00:26:21,639
Speaker 2: is what is so powerful. And guess who just launched

530
00:26:21,640 --> 00:26:27,960
Speaker 2: buffers ARC Wow, and yours truly influenced. Their name Isabelle

531
00:26:27,960 --> 00:26:30,000
Speaker 2: called me, or was Emily, I can't remember, and they

532
00:26:30,000 --> 00:26:31,560
Speaker 2: said what do you think of these? And I said,

533
00:26:31,680 --> 00:26:35,600
Speaker 2: this is like diet arc and so they call them

534
00:26:35,640 --> 00:26:38,119
Speaker 2: diet ARC. This ran with it, Joel, how do you

535
00:26:38,160 --> 00:26:38,399
Speaker 2: like that?

536
00:26:38,760 --> 00:26:40,960
Speaker 1: I mean, I knew you were an influencer, but I

537
00:26:40,960 --> 00:26:42,080
Speaker 1: didn't know like that.

538
00:26:42,480 --> 00:26:44,199
Speaker 2: But the arcs are a little different in that you

539
00:26:44,280 --> 00:26:46,919
Speaker 2: get only fifty percent of the downside, but on the

540
00:26:47,000 --> 00:26:50,400
Speaker 2: upside you get like fifty to eighty percent. So they

541
00:26:50,480 --> 00:26:53,280
Speaker 2: designed them differently. Pointing if you're going to even play

542
00:26:53,320 --> 00:26:56,520
Speaker 2: with buffery TIFs, I would almost consultant advisor or really

543
00:26:56,560 --> 00:26:58,640
Speaker 2: make sure you read up on what exactly they're doing

544
00:26:59,680 --> 00:27:01,639
Speaker 2: and by them on the day they come out. That

545
00:27:01,680 --> 00:27:03,720
Speaker 2: way you get the whole thing, because if as time

546
00:27:03,760 --> 00:27:07,760
Speaker 2: goes on, the numbers change on what's buffer because the market's.

547
00:27:07,440 --> 00:27:17,399
Speaker 6: Moved, She's closing thought, I don't know, Eric's making me

548
00:27:17,400 --> 00:27:20,000
Speaker 6: think I should go buy a buffer ETF and which

549
00:27:20,040 --> 00:27:22,720
Speaker 6: is very sort of anti me because.

550
00:27:23,400 --> 00:27:25,960
Speaker 1: I very much balanced financial advice.

551
00:27:27,480 --> 00:27:31,040
Speaker 3: I think, yeah, and anything else that where we we

552
00:27:31,119 --> 00:27:31,480
Speaker 3: missed that.

553
00:27:31,720 --> 00:27:33,159
Speaker 1: Yeah, I'm you're part of the options.

554
00:27:33,119 --> 00:27:35,560
Speaker 4: To bring up Jack Bogel because what I think is

555
00:27:35,600 --> 00:27:38,399
Speaker 4: fun about the fixed ETF stuff is it's the most

556
00:27:38,680 --> 00:27:41,560
Speaker 4: anti Bogel thing I think you could possibly ever do this,

557
00:27:41,760 --> 00:27:42,160
Speaker 4: which is.

558
00:27:42,280 --> 00:27:45,440
Speaker 3: Trying nutshell trying to talk about Bogel and the other side.

559
00:27:45,440 --> 00:27:47,600
Speaker 4: This is the antithesis. This is like the Yeah, it's

560
00:27:47,600 --> 00:27:50,480
Speaker 4: the the anti rolling over in his grave. Is just basically,

561
00:27:50,600 --> 00:27:53,160
Speaker 4: try and time the market. You are you you you are,

562
00:27:53,280 --> 00:27:55,200
Speaker 4: you are a genius and you can time the market.

563
00:27:55,480 --> 00:27:57,800
Speaker 4: And if you buy one of these things, it doesn't

564
00:27:57,800 --> 00:27:59,120
Speaker 4: matter that it's going to cost you loads of money,

565
00:27:59,119 --> 00:28:01,639
Speaker 4: because you are going to make loads loads more money

566
00:28:01,680 --> 00:28:04,359
Speaker 4: because of your because of your crystal ball that you're holding.

567
00:28:05,040 --> 00:28:06,560
Speaker 4: And this is you know, this is this is what

568
00:28:06,640 --> 00:28:08,720
Speaker 4: good financial advice is. It's this idea that you can

569
00:28:09,560 --> 00:28:11,960
Speaker 4: you are smarter than everyone else in Wall Street, and

570
00:28:12,119 --> 00:28:14,640
Speaker 4: Wall Street doesn't have tons of PhDs and rocket scientists

571
00:28:14,720 --> 00:28:19,080
Speaker 4: who who built a system specifically to take your money.

572
00:28:19,119 --> 00:28:21,520
Speaker 4: I remember I was chanting to a guy, a very

573
00:28:21,600 --> 00:28:23,920
Speaker 4: large market maker in a senior role, and he said

574
00:28:23,920 --> 00:28:25,760
Speaker 4: I was in an uber go to the airport, and

575
00:28:25,880 --> 00:28:28,359
Speaker 4: the driver was explaining, I've had this conversation with with

576
00:28:28,440 --> 00:28:30,320
Speaker 4: drivers as well. You know, I'm training these options and

577
00:28:30,320 --> 00:28:33,439
Speaker 4: I'm doing so well, like and this guy's job is

578
00:28:33,480 --> 00:28:36,880
Speaker 4: to take that options flow and basically buys it from

579
00:28:36,880 --> 00:28:39,920
Speaker 4: the retail brokers and trades it. And he's just like, yeah,

580
00:28:39,920 --> 00:28:41,600
Speaker 4: this is a bad idea.

581
00:28:42,120 --> 00:28:44,440
Speaker 2: Well, I mean to be to be also with Bogle,

582
00:28:44,560 --> 00:28:46,680
Speaker 2: what he would probably say is don't buy anything, just

583
00:28:46,680 --> 00:28:50,920
Speaker 2: buy the S and P and use patience as your diversifier.

584
00:28:50,960 --> 00:28:53,280
Speaker 2: But and he said, you don't need you don't even

585
00:28:53,320 --> 00:28:57,960
Speaker 2: need international. But that takes a lot of intestinal fortitude

586
00:28:57,960 --> 00:29:01,000
Speaker 2: to survive what seems like a ski couple weeks or

587
00:29:01,040 --> 00:29:05,000
Speaker 2: a year. But that's what Bogol would recommend if you're younger.

588
00:29:05,480 --> 00:29:08,160
Speaker 2: That's why I think low cost index funds are a

589
00:29:08,160 --> 00:29:10,320
Speaker 2: godsend because a lot of people they buy them and

590
00:29:10,360 --> 00:29:12,560
Speaker 2: they know they got the best deal and so they

591
00:29:12,560 --> 00:29:14,560
Speaker 2: can survive the downturns easier, going Yeah, what am I

592
00:29:14,560 --> 00:29:16,560
Speaker 2: gonna do try to trade around this. I'll just hold it.

593
00:29:16,840 --> 00:29:19,000
Speaker 2: US stocks usually go up, and that's why the flows

594
00:29:19,040 --> 00:29:23,400
Speaker 2: are so sticky. So patience is also a hedge and away, Joel,

595
00:29:24,040 --> 00:29:26,280
Speaker 2: that's why. Yeah, I said, they've got to teach like

596
00:29:26,360 --> 00:29:29,680
Speaker 2: meditation and Buddhism in the business schools or something, because

597
00:29:30,200 --> 00:29:32,680
Speaker 2: just not trading. By the way, I pitched the show

598
00:29:32,680 --> 00:29:36,600
Speaker 2: for Bloomberg TV called it was It was, It was.

599
00:29:36,680 --> 00:29:37,000
Speaker 3: It was.

600
00:29:37,200 --> 00:29:39,400
Speaker 2: You know, Seinfeld's a show about nothing. This is a

601
00:29:39,440 --> 00:29:41,760
Speaker 2: show about doing nothing, and there's gonna have people come

602
00:29:41,800 --> 00:29:44,240
Speaker 2: on and just talk about why they didn't trade that day.

603
00:29:44,880 --> 00:29:45,920
Speaker 2: Hobbies they got.

604
00:29:46,200 --> 00:29:48,360
Speaker 1: That because that's still waiting for a callback, aren't.

605
00:29:48,560 --> 00:29:51,880
Speaker 2: Yeah, No, it didn't. Way too boring.

606
00:29:52,000 --> 00:29:54,080
Speaker 3: I like how we started with vix and we ended

607
00:29:54,160 --> 00:29:57,200
Speaker 3: up with patients, Like we've gone every possible place.

608
00:29:57,240 --> 00:30:00,000
Speaker 1: So Bernard Suzanne, thanks for joining us on Trillions.

609
00:30:00,520 --> 00:30:13,880
Speaker 3: Thanks you for having us, Thanks thanks for listening to

610
00:30:13,920 --> 00:30:16,040
Speaker 3: Trillions until next time. You can find us on the

611
00:30:16,040 --> 00:30:20,960
Speaker 3: Bloomberg terminal, Bloomberg dot com, Apple Podcasts, Spotify, or wherever

612
00:30:21,000 --> 00:30:21,520
Speaker 3: else you'd.

613
00:30:21,440 --> 00:30:23,040
Speaker 1: Like to listen. We'd love to hear from you.

614
00:30:23,160 --> 00:30:25,560
Speaker 3: Hit us up on social I'm at Joel Weber Show,

615
00:30:25,680 --> 00:30:29,280
Speaker 3: He's at Eric Balchina's Trillions is produced by Magnus Hendrickson.

616
00:30:29,560 --> 00:30:31,760
Speaker 1: Sage Bauman is the head of Bloomberg Podcast