Speaker 1: Oakner chains.
Speaker 2: I'm Joel Webber and I'm Eric Belchernas.
Speaker 3: Okay, so I'm running through things that are at all
Speaker 3: time highs. Stock market, US, stock market, zitcoin, gold, everything
Speaker 3: just keep going up. What are people supposed to do
Speaker 3: when things only go up?
Speaker 2: Eric, Well, first of all, just appreciate it. There's so
Speaker 2: much angst out there, these columnists and the economists, and
Speaker 2: everyone's like trying to be like, well, it's just something's wrong.
Speaker 2: And I'm like, everything is going pretty good and enjoy
Speaker 2: while lasts. But this is probably as good as it gets.
Speaker 2: It can't last forever. It never does. So the question
Speaker 2: is what will derail this? The higher the markets go,
Speaker 2: the less it takes right because there's a lot of
Speaker 2: people with itchy trigger fingers, like, well, if this little
Speaker 2: thing happens, they're more likely to take some profits quickly
Speaker 2: then rather wait. So we'll see what that is. But
Speaker 2: I think the more things go to all time highs,
Speaker 2: and the more everything is at all time highs, this
Speaker 2: is interesting. Gold and stocks rarely are going up together.
Speaker 2: I think that really makes people nervous. But at the
Speaker 2: same time, I am pretty happy. My four one k
Speaker 2: is loving this.
Speaker 1: So really though, how are people supposed to navigate this?
Speaker 2: That's the thing like as the markets go up, more
Speaker 2: and more people are starting to think, Okay, what can
Speaker 2: I use as a little bit of insurance just in
Speaker 2: case things go south quickly? And there are various vehicles
Speaker 2: need to have market that are really good for this.
Speaker 2: The problem is a lot of them come with like
Speaker 2: it's like you got to read the owner's manual on these.
Speaker 2: So there's a lot of options, but some are really powerful,
Speaker 2: but they need explaining. And I think it's a good
Speaker 2: time to go through these things because you just sense
Speaker 2: something that's going to happen soon, and instead of talking
Speaker 2: about these things after it happens, we should talk about
Speaker 2: them right now.
Speaker 1: All right.
Speaker 3: Well, to help us our inks, we're going to be
Speaker 3: joined by Bernard Goiter, who's an options reporter with Bloomberg News,
Speaker 3: as well as Suzanne Woolley, who's personal finance reporter with
Speaker 3: Blimberg News.
Speaker 1: This time on train's protecting your Portfolio with ETFs. Bernard Susanne,
Speaker 1: Welcome to Trillians.
Speaker 4: Thank you, good to be here.
Speaker 3: Bernard. I want to start with you because you just
Speaker 3: published a story recently investors pile into funds betting on
Speaker 3: elusive market volatility. Volatility has There was a little bit
Speaker 3: of that in April, I think when Trump unveiled some
Speaker 3: tariffs or talk of tariffs. Since then kind of disappeared.
Speaker 3: So so what are we starting to see show up
Speaker 3: in markets now?
Speaker 4: Yeah, well, people are basically trying to allocate to what
Speaker 4: happens if volatility comes back. There's another April situation where
Speaker 4: there's suddenly a big spike in volatility. And I kind
Speaker 4: of think of volatility in quiet binary wand markets like
Speaker 4: it's either kind of everything's very very quiet or everything's extreme.
Speaker 4: And part of this is going back to this idea
Speaker 4: about how easy is it to trade? And in periods
Speaker 4: when everything's fine, kind of like it is now and
Speaker 4: the VIX, which is one of the indicators of polatility,
Speaker 4: is below about twenty, it's really easy to trade. There's
Speaker 4: a lot of liquidity everywhere, and then when stuff gets choppy,
Speaker 4: sometimes that liquidity pulls back. It's harder to trade, it's
Speaker 4: more expensive to hedge, and yeah, the VIX goes up,
Speaker 4: and in those situations that that's when, Yeah, that's when
Speaker 4: it kind of gets exciting, right in terms of being
Speaker 4: a volatives reporter. So at the moment, things are kind
Speaker 4: of quiet and it's a little little dull, but back
Speaker 4: in April, like things get really exciting.
Speaker 2: Dull, you also get a lot more clicks. Yeah, it's
Speaker 2: like the weather channel, you know, you only tune in
Speaker 2: when there's a hurricane. It's like dead for us too.
Speaker 3: Okay, So what's going on beneath the surface and where
Speaker 3: our investors? And these aren't retail investors so much as
Speaker 3: professional ones where they turned to allocate.
Speaker 4: I'd say that some of these probably are. There's probably
Speaker 4: some retail guys involved in because the real professionals will
Speaker 4: be directly using futures and options and all that kind
Speaker 4: of stuff. So those investors are generally kind of they
Speaker 4: spent post a prop kind of worried about this return
Speaker 4: of fear. And I think now we're in the greed stage,
Speaker 4: so people are allocating to like upside, that's become the
Speaker 4: big thing. That's why volatility isn't really here, because everyone's
Speaker 4: just like getting greedy and being like, okay, but what
Speaker 4: happens if the SMB goes to seven thousand and eight thousand,
Speaker 4: what happens next? Kind of thing? And this is why
Speaker 4: people have been talking about this hated rally because they
Speaker 4: hadn't really allocated to it, but the rally happened anyway,
Speaker 4: and a lot of people missed out, so they're like, Okay,
Speaker 4: let's let's go all in. So that's why you see
Speaker 4: stuff like lever dcfs where you're kind of doubling up.
Speaker 4: That those kind of things become popular. And there's also
Speaker 4: September was the biggest ever month for options in history basically,
Speaker 4: like that that was and that was a quiet, relatively
Speaker 4: quiet month from a volatility point of view, but the
Speaker 4: number of options it was over I think over sixty
Speaker 4: million options contracts traded in the US market. It's been
Speaker 4: a really kind of busy time eruptions. But people aren't
Speaker 4: necessarily that they're hedging, but they're also betting things are
Speaker 4: going to keep getting better. So there's a bit of
Speaker 4: a balance between those two forces.
Speaker 2: And I want to go over the vix ETFs and
Speaker 2: their flows, which I think is what caught your attention
Speaker 2: in the past month, Like basically all of them have
Speaker 2: taken in a good amount of money, They've they've grown
Speaker 2: their assets by about twenty percent in the past month
Speaker 2: and year to date, they've grown their assets by fifty percent. Now,
Speaker 2: a lot of these ETFs are a lot like buying insurance.
Speaker 2: You're kind of expecting the money to just go away
Speaker 2: unless the hurricane comes, and so the total assets in
Speaker 2: these is always deterior's like a melting ice cube. But anyway,
Speaker 2: two billion and uri date flows for these vixytps, especially
Speaker 2: after all that's happened, and you know, they went through
Speaker 2: a lot of bad press over the years. The reason
Speaker 2: they're the reason they're complicated as a hedge is that
Speaker 2: they don't track the vix directly. Nothing can at tracks
Speaker 2: futures and you have to roll those, and the cost
Speaker 2: to roll can be really high, like up to forty
Speaker 2: fifty percent a year, sometimes more. And so people buy these,
Speaker 2: I think as a hedge and then they get out
Speaker 2: of them if it didn't come. But to me, it's
Speaker 2: I guess very akin to buying insurance that will pay
Speaker 2: off big time.
Speaker 3: And when you think about how to rate stuff like
Speaker 3: this for the for the movies, right, our traffic.
Speaker 1: Lights system, yeah, traffic light system.
Speaker 2: Yeah, these are all red lights hardcore. Anything that rolls
Speaker 2: futures is a red light, automatically red light. There is well,
Speaker 2: we were going to have a skull and crossbones, yeah,
Speaker 2: which would be the equivalent of like an NC seventeen
Speaker 2: movie ETF style. There was a two X VIX would
Speaker 2: be one of the very few ETFs that would be
Speaker 2: double crossbones. And the reason for that is not it's
Speaker 2: leveraged and it rolls futures. So all of these vixytps,
Speaker 2: if you look at their like lifetime return, they're all down.
Speaker 1: Nine nine persaw on a Swiss ball.
Speaker 2: Yeah, I mean it. The look just rolling futures, whether
Speaker 2: it's Oil or VIX, is just something not many people
Speaker 2: are aware of. And in VIX it's the roll costs
Speaker 2: are so high that you just hate someone to go
Speaker 2: in thinking that, oh, I'm buying the VIX. You're not,
Speaker 2: You're buying VIX futures ETFs that roll them. And then
Speaker 2: on top of that, there was one that was an
Speaker 2: ETN which automatically gets two points two leverage. TVX was
Speaker 2: the ultimate highest score in our system. We got seventeen dings.
Speaker 2: That's the most you can get. Basically anything over five
Speaker 2: is right it r. So if we got seventeen, I
Speaker 2: mean it's literally like remember Faces a Death, that movie
Speaker 2: like from the eighties. I think you couldn't get in the.
Speaker 1: Video store, no, because I never found it.
Speaker 2: It's like that TVX was that movie and TVX was
Speaker 2: rolled futures leverage and an ETN that said it blew up,
Speaker 2: it went away. A lot of these come and gone now,
Speaker 2: but they've they're ba they're reincarnating some of these ETFs.
Speaker 2: So now we do have another two xvix and the
Speaker 2: whole fan is there. But again it's a very small market.
Speaker 2: This is for a niche audience, but they still are
Speaker 2: very active.
Speaker 4: Well, what's interesting, So to quantify that kind of skull
Speaker 4: and crossbones, you vixsy todate performance down seventy percent minus seventy.
Speaker 1: That's where the volatility is.
Speaker 4: Exactly, but if it could go up hundred to two
Speaker 4: hundred percent in a week, so it's it's pure. This
Speaker 4: is kind of pure, pure gambling stuff.
Speaker 2: Yeah, let me jump in real quick here to just
Speaker 2: just finish this off, because people need to know this.
Speaker 2: Why would you buy something that rolls futures and loses
Speaker 2: seventy eighty percent a year and doesn't do anything. Well,
Speaker 2: here's why. When the market drops and there's a bad day.
Speaker 2: So let's look at April second to the fourth, that's
Speaker 2: when the tariff tantrum was in the most palpable. Palpable
Speaker 2: market's down ten percent in two days. The negative three
Speaker 2: XS and P is up thirty percent. Makes sense, right?
Speaker 2: The VIX just one time, VIX is up fifty percent.
Speaker 2: The two X VIX is up one hundred and seven
Speaker 2: percent in two days. So when it works, it works.
Speaker 2: I call it the jackpot mode, and that's why people
Speaker 2: keep using them.
Speaker 3: Suzanne, how do you feel about all of this as
Speaker 3: a personal finance reporter?
Speaker 5: Well, my first thought is does the world understand the
Speaker 5: term role? We're throwing around role? And I know that
Speaker 5: Bernard defined it really well in his recent peace, But
Speaker 5: is that a term that we think everyone is familiar with.
Speaker 1: Let's let's break it down. Yeah.
Speaker 4: So basically what we're talking about here is the VIX
Speaker 4: is a projection about what the market thinks is going
Speaker 4: to happen in one month's time. So you're constantly pushing
Speaker 4: that out one month. And the way that these ETFs
Speaker 4: use use futures is that constantly it's like a seesaw,
Speaker 4: and you have you start with one future on the
Speaker 4: xpree and as you get nearer, you have to buy
Speaker 4: one and sell the other to keep that kind of
Speaker 4: seesaw balanced. And what's really ironic about these products in
Speaker 4: particular is that they're kind of doing this in kind
Speaker 4: of a funky small futures market. And futures are not
Speaker 4: like ETFs. They're not based on like what the actual
Speaker 4: value of that thing is. It's purely based on the
Speaker 4: supply and demand from the market for that financial contract.
Speaker 4: So if you have a ton of money flowing into
Speaker 4: these products, that makes the cost of doing that stuff
Speaker 4: more expensive because because the market's like, oh, people want
Speaker 4: to buy. People are scared, like volatinity is gonna go up,
Speaker 4: so we're going to make it more expensive to sell them,
Speaker 4: like that insurance. So the more the more demand there
Speaker 4: is for insurance, the more expensive that insurance gets. So
Speaker 4: these roll costs are getting worse and worse and worse
Speaker 4: the more money that goes into these particular products. Now,
Speaker 4: I don't think that happens as badly in other in
Speaker 4: other examples of these these kind of eats. The other
Speaker 4: one was bitcoin. You remember before the before you had
Speaker 4: like spot bitcoin ETFs, you had futures eats that were
Speaker 4: based on the futures market, but again they had very
Speaker 4: very similar structural problems where you have the fees, but
Speaker 4: you also have these roll costs and they're not really
Speaker 4: disclosed very well in the in the paperwork around around
Speaker 4: the ETFs.
Speaker 5: It's a big price for popularity.
Speaker 2: But you know the term role. I would just picture
Speaker 2: you're buying this future which is due. Let's say what
Speaker 2: month is now October. It's due in November. Now as
Speaker 2: October ends in November comes, people don't want to take delivery,
Speaker 2: whether it's oil or vix, whatever it is, nobody wants
Speaker 2: because they're just the in it for the investment. They
Speaker 2: don't want to get delivered anything. So they sell the
Speaker 2: future rate towards the end of the month and buy
Speaker 2: the next one, and sometimes they buy two months out. Well,
Speaker 2: the curve is always shaped where it's pricing a little
Speaker 2: more because there's more chance of volatility as you go
Speaker 2: further out, so you pay up every time you go
Speaker 2: from near month to the next month, unless there's a
Speaker 2: spike in volve, which then it goes in the opposite direction.
Speaker 2: And everybody it's like when the guys are selling umbrellas
Speaker 2: outside of Penn Station when it's raining all of a sudden,
Speaker 2: everybody wants then it's cheaper going out and you actually
Speaker 2: get paid to roll. But that's a very rare occasion.
Speaker 2: And the first thing is called a state of contango,
Speaker 2: and the second thing is called a state of backwardation.
Speaker 2: But I don't even want to introduce that.
Speaker 5: I have written stories in my past life where I've
Speaker 5: had to try and explain contango and backwardation, and I
Speaker 5: would like you to know that unwordle the New York
Speaker 5: Times game Contango. When I tried to use it in
Speaker 5: the game, it was not accepted.
Speaker 2: That's why they're all rated R instantly, because I mean,
Speaker 2: who even knows what that means. It's backwardation sounds like
Speaker 2: you know what after you taco bell.
Speaker 4: A contango is like it's a dance thing, but you
Speaker 4: it's a contango. It's not a real tango.
Speaker 1: Oh I love it.
Speaker 2: So yeah. These are the terms that when you learn
Speaker 2: it it makes total sense and you but it takes
Speaker 2: a while. It'd be like sometimes when my auto mechanic
Speaker 2: explains stuff to me, I'm like, dude, fine, just spend
Speaker 2: the eight hundred bucks. This is what that sounds like.
Speaker 3: Sen Real people are still trying to forget to talk
Speaker 3: about reference. I know, so Suzanne come into this as
Speaker 3: the personal finance brain.
Speaker 5: Well, you know, I'm a big believer in personal finance
Speaker 5: of keeping it simple and so this kind of product
Speaker 5: I'm sure makes sense for a lot of people, but
Speaker 5: I just sort of feel like to be like the boring,
Speaker 5: sensible person. You know, there are a lot of actions
Speaker 5: you can take on your portfolio before you need to
Speaker 5: get involved in something like this that is very expensive,
Speaker 5: really hard to understand. Obviously appealing right now because people
Speaker 5: are leery of getting into equities, you know, but they still,
Speaker 5: you know, want to have some participation. And this is
Speaker 5: the word. The ability to sort of hedge your portfolio
Speaker 5: is a great way an advisor or broker or something
Speaker 5: can like hook you in to a product. But I
Speaker 5: just feel that there are a lot of basic things
Speaker 5: people can do, like boring old rebalancing, you know, maybe
Speaker 5: dollar cost averaging out of like mag seven and adding
Speaker 5: a little international and value to your portfolio, keeping a
Speaker 5: cast cushion so you don't have to sell into a downturn.
Speaker 5: I mean, I'm sure everyone's like fog asleep by now.
Speaker 3: Eric jesus Ann's point where we've been talking about our
Speaker 3: maybe NC seventeen stuff. What are some more PG options?
Speaker 2: Most people would use treasury bonds or a little bit
Speaker 2: of cash. I think money market funds are great because
Speaker 2: they're just not going to move, but some people do
Speaker 2: want things that will go up when the stocks go down,
Speaker 2: and long dated treasuries are usually pretty good. They went
Speaker 2: up thirty seven percent in two thousand and eight, but
Speaker 2: in twenty twenty two they went down with stocks, so
Speaker 2: they're they're probably the best organic hedge that's like PG.
Speaker 2: Gold is interesting, but that's zero correlated. Sometimes gold will
Speaker 2: go up with stocks like it is now. That's the
Speaker 2: thing about gold. People are buying it as a way
Speaker 2: to maybe hedge stocks and the basement as stocks keep
Speaker 2: going up. But if it's interesting that it's working as
Speaker 2: a high beta play right now because it's going up
Speaker 2: with stocks. But gold can sometimes go down with stocks.
Speaker 2: It's not totally reliable. It's more like a rebel. It
Speaker 2: just does whatever the hell it wants, which is kind
Speaker 2: of cool for a portfolio because you get diversified. And
Speaker 2: bitcoin is probably in between stocks and gold. It's definitely
Speaker 2: more risky, but it's come down a little some days
Speaker 2: it'll go up when stocks are down. So I just
Speaker 2: think that's why people are out there examining all this stuff,
Speaker 2: because they do want to have diversification, which I do
Speaker 2: believe is the only free lunch. That said, I think
Speaker 2: where the chainsaws and the NC seventeen stuff can come
Speaker 2: in handy is if you have a feeling that in
Speaker 2: the next week something real big is going to happen,
Speaker 2: then you would just put a little bit of Vicks
Speaker 2: in your portfolio. And you only need a little because
Speaker 2: it will go up like five eight times the market
Speaker 2: going down and hedge everything, but you got to sell
Speaker 2: it after the time comes up, whether that thing happened
Speaker 2: or it didn't. My dad had this fame experience famously.
Speaker 1: He thought did a whole episode about this.
Speaker 2: He thought Hillary Clinton was going to win in twenty sixteen,
Speaker 2: and he thought the market was going to go tank,
Speaker 2: and he goes, how can I play this. I'm sure
Speaker 2: of it. My dad's like a huge college football gambler.
Speaker 2: So I said, okay, well, look, if you believe this,
Speaker 2: it's going to put in t vix. TVIX will pay
Speaker 2: off big if you're right. Trump won and the market
Speaker 2: went up, and he forgot to sell it. So all
Speaker 2: three things went wrong, and then he called me every
Speaker 2: like six months and said, what is this thing that
Speaker 2: like loses fifty percent every month? And I'm like, I
Speaker 2: told you to sell it. So, if you're the kind
Speaker 2: of person here doesn't pay attention to your portfolio, don't
Speaker 2: use any of those things. Just use the PG. But
Speaker 2: if you are a trader, they again that jackpot mode
Speaker 2: will go really far in hedging your portfolio, and that's
Speaker 2: why the pros do like to use it.
Speaker 3: All right, So the thing that we haven't talked about
Speaker 3: yet buffers. What's the state of play on buffers?
Speaker 1: What's their rating? Where inflows look like?
Speaker 2: Yeah, so these would be PG PG thirteen. We debate
Speaker 2: that on the team a lot, but let's just say
Speaker 2: they're PG thirteen because they use derivatives and they're a
Speaker 2: little complicated and you have.
Speaker 1: To do they do.
Speaker 2: They basically use options to target an outcome. So like
Speaker 2: if you have to buy in on when the buffer
Speaker 2: comes out, so the ETF comes out October first, you
Speaker 2: buy it on October first, and it basically says something
Speaker 2: like this, if the market goes down five percent, that's
Speaker 2: on you. If it goes down further, the buffer will
Speaker 2: cover it. Other times it'll say we'll take the first
Speaker 2: five percent, you eat everything after. And in order to
Speaker 2: arrange these downsides, you have to give up some upside.
Speaker 2: So the more downside protection you get, the more upside
Speaker 2: you give up. And a lot of older investors, that's
Speaker 2: what we call these boomer candy. They love this stuff
Speaker 2: because they're willing to give up some of that upside
Speaker 2: to sleep at night with the downside these would be.
Speaker 2: These are popular because they guaranteed, as I just said,
Speaker 2: even treasuries don't guarantee a hedge. These lock it in.
Speaker 2: The problem is they do they're pricey. You know, a
Speaker 2: lot of them are not over ninety basis points. You
Speaker 2: don't get the dividend as part of the buffer, so
Speaker 2: you do give up some things. But I think peace
Speaker 2: of mind is something people are really willing to pay
Speaker 2: up for, and that's why they're a huge hit.
Speaker 5: And I think that should be marketed as boomer candy
Speaker 5: because I think that's kind of brilliant.
Speaker 2: It has stuck. I introduced this. I I'd say one
Speaker 2: of every ten phrases I try out actually works, and
Speaker 2: that was one of them. JP Morgan. I think even
Speaker 2: made T shirts with it for one conference. Yeah, and
Speaker 2: then todd Son made me a boomer candy m and
Speaker 2: ms where he brought a jar of M and ms
Speaker 2: he put like dividend income premium income buffer and so
Speaker 2: he made literal boomer candy. It's a whole thing.
Speaker 4: Yeah, Yeah, you had them on the show.
Speaker 2: I know, we don't hang out as much as we
Speaker 2: used to for her all the time, and she would
Speaker 2: you'd get a kick out of all he wrote. She
Speaker 2: was the editor of the radio how to invest based
Speaker 2: on radiohead lyrics.
Speaker 3: Yes, that was awesome, true, Bernard, are you seeing buffers
Speaker 3: show up in any of your data yet or is
Speaker 3: it more like the vix is so different and odd
Speaker 3: that people are like, that's the thing that so just
Speaker 3: like real boom boomer can.
Speaker 1: Just so it's like boomer crack.
Speaker 4: Because I know you we talked a lot about like
Speaker 4: can I just get really nerdy abountions for a second.
Speaker 4: What's fascinating about these buffers is they've started to kind
Speaker 4: of show up in the big options market. So you
Speaker 4: get a ton of like people who are trading options
Speaker 4: talking about.
Speaker 2: The JP Morgan roll.
Speaker 4: Is this really exciting? Event where because this these things
Speaker 4: kind of target what's going to happen in the market
Speaker 4: in three months time, and what ends up happening is
Speaker 4: the market kind of like looks at this as a
Speaker 4: bit of a target kind of what's going to happen,
Speaker 4: and they and they and they kind of all the
Speaker 4: all the Wall Street banks and market makers are kind
Speaker 4: of positioning around these these flows. The other thing is
Speaker 4: that there's a there's kind of a sense of like
Speaker 4: there's that these guys might be getting the BUFFERYTF providers
Speaker 4: because they've told the world when they're going to trade.
Speaker 4: There's a bit of a bit of an adverse selection
Speaker 4: issue because if you've told everyone on this particular date,
Speaker 4: we're going to do this massive, multi billion, multimillion dollar trade.
Speaker 4: I think it was like twenty million net premium for
Speaker 4: the last one they did, but there was hundreds of
Speaker 4: millions of dollars of options premiums and different directions, and
Speaker 4: this is like a huge, huge thing for the rest
Speaker 4: of Wall Street. Unfortunately, JP Morgan's investment bank doesn't get
Speaker 4: to cash in on it because they don't trade themselves, right,
Speaker 4: But all the other banks, it's like it's a massive,
Speaker 4: massive deal these buffers like rolling over and all that
Speaker 4: kind of stuff like it it's hard to Yeah, yeah,
Speaker 4: it is like a really kind of important thing for
Speaker 4: the rest of the market. So that popularity in the
Speaker 4: buffertf space is actually caused like kind of has a.
Speaker 2: Direct effect on Wall Street.
Speaker 4: It's given its scale.
Speaker 3: What are the buffer tickers that are the ones that
Speaker 3: people are most interacting with.
Speaker 2: The biggest then, first ever is bolt b a LT
Speaker 2: one point eight billion. It might not be the biggest,
Speaker 2: but it was the first. And you know what the
Speaker 2: tickers for bond alternative, which is interesting because, as I
Speaker 2: said earlier, in twenty twenty two, stocks and bonds went
Speaker 2: down together and this freaked the boomers out because they
Speaker 2: were told the bonds would cover the stocks and they
Speaker 2: all went down and it was like whoa. So they
Speaker 2: cracked their pants. And that's when buffer's got huge, because
Speaker 2: they come in they say, your bond. You know, as
Speaker 2: we say in the team, the bonds don't work. And
Speaker 2: so that's why these are mostly alternatives for bonds, although
Speaker 2: the bonds will you know, come back and say, well,
Speaker 2: since then they've gone up. The reason the bonds and
Speaker 2: the stocks are a weird thing now is because if
Speaker 2: the fed's lowering rates, that tends to be good for
Speaker 2: both stocks and bonds, right, we all know this, So
Speaker 2: when they raise rates, it's bad for both stocks and bonds.
Speaker 2: And so that's why the FED kind of like warped
Speaker 2: what would normally happen and bond safe haven stocks risk.
Speaker 2: So the FED and their influence on the market actually
Speaker 2: changed the dynamics. So buffer ETFs are pretty well timed.
Speaker 2: And the guy who invented them is a smart guy
Speaker 2: who created power shares and he really helped put smart
Speaker 2: beta on the map, Bruce Bond. And it's interesting. And
Speaker 2: now all the issuers have them, including black Rock and
Speaker 2: Fidelity and JP Morgan. So you have all these big
Speaker 2: issues now riding the buffer train. And because the demand
Speaker 2: is there and most of the money in America is
Speaker 2: held by the boomers. If you look at the who
Speaker 2: owns the stock market, seventy percent of it is owned
Speaker 2: by people over the age of like sixty five, and
Speaker 2: so servicing them with things that help them sleep at
Speaker 2: night is why we have this other theme about how
Speaker 2: ETFs are almost in the role of the pharmaceutical companies.
Speaker 2: This is a drug to help you cure your anxiety
Speaker 2: and sleep at night.
Speaker 5: How expensive is this drug? And can I find a
Speaker 5: cheaper generic version of this?
Speaker 2: There are a lot of competitors, So like Blackrock came
Speaker 2: in with HIDJ and I was about half the cost
Speaker 2: of First Trust and Innovator, which are the two big brands.
Speaker 2: And we looked HIDJ did a good job. It launched
Speaker 2: ight before a downturn, and it covered. It did not
Speaker 2: go down with the stocks. So I think ultimately that
Speaker 2: guarantee that comes with the options activity is very powerful.
Speaker 2: I would just say this though, I wouldn't drop everything
Speaker 2: and buy buffers. I would maybe, you know, experiment with
Speaker 2: a little bit. I just really a believer of a
Speaker 2: well balanced portfolio. I think Buffet Bogel, all the heavyweights
Speaker 2: would advise the same.
Speaker 3: Which is ninety percent equity, ten percent the buffet model.
Speaker 2: Well, the buffet portfolio is ninety percent SMP five hundred
Speaker 2: and ten percent short term treasuries like a money market fund.
Speaker 2: That's what he is going to put his whole trust
Speaker 2: into when he passes away. And that's a pretty good portfolio, honestly.
Speaker 2: But that little bit of good for a sixty year old,
Speaker 2: that's the thing. And you know, the boomers made so
Speaker 2: much money. That's what the crypto people are like. They
Speaker 2: when you bring up Buffet with crypto people, they're like, oh,
Speaker 2: try finding a Warren buffet in Nigeria or Argentina. There
Speaker 2: are none.
Speaker 1: Look.
Speaker 2: In other words, Buffett only exists because the US stock
Speaker 2: market is so badass. He just happens. They have been
Speaker 2: ride that whole, like fifty year bull market. There's a
Speaker 2: point there. But Buffett still is smart guy. And I
Speaker 2: would just say that I would take heed to what
Speaker 2: he says for sure, but I don't know. I think
Speaker 2: a little gold if you like it is pretty good
Speaker 2: little treasuries. If you want to try a little buffer out,
Speaker 2: go ahead gold.
Speaker 5: You can get a cheaper version of that too. You've
Speaker 5: got GLD, which all the treats is right, but can't
Speaker 5: get the gold the mini the.
Speaker 2: G oh yeah, they got mini me's all over the
Speaker 2: place in the gold area. G L with the Hell's
Speaker 2: DM GLDM is way cheaper. So shop around is probably
Speaker 2: the more expensive gold ETFs. But yeah, this idea of
Speaker 2: how to protect your portfolio is big, and that's why,
Speaker 2: as you said, the options market is very popular. It's
Speaker 2: not all people losing their mind. A lot of times
Speaker 2: you just buy a put option for a little while. Yeah,
Speaker 2: and that's a sleep at night drug if you will
Speaker 2: as well.
Speaker 4: Yeah, Or you could sell calls as well. You could
Speaker 4: do coal overwriting, and there's a bunch of funds that
Speaker 4: do that. But basically, you can earn premium on your
Speaker 4: if you if you own a big stock, you can
Speaker 4: you can say, right, I'm prepared to above, I don't
Speaker 4: mind selling this if it goes up twenty percent, like
Speaker 4: I'm happy with that. And if it goes up twenty
Speaker 4: five percent, you sell it. But you've earned a premium
Speaker 4: from that activity. And that kind of that's how a
Speaker 4: lot of these a lot of these buffers and other
Speaker 4: ones kind of there's a whole.
Speaker 2: Well, now you're getting into premium income, which is JEPPI,
Speaker 2: which all it does is what he just said. It
Speaker 2: sells call options a little bit out of the money.
Speaker 2: So if the stock goes up, you get a little
Speaker 2: bit of it. But at some point the call option
Speaker 2: gets hit in the money and people want to exercise it.
Speaker 2: At that point you lose your upside. But the whole
Speaker 2: time you're getting income from the option, from the premium,
Speaker 2: which gives you an income of nine ten percent depending
Speaker 2: on the index. That also is boomer candy. But the
Speaker 2: buffers are even more powerful because they lock it in.
Speaker 2: It's like locked in because of the options. The guarantee
Speaker 2: is what is so powerful. And guess who just launched
Speaker 2: buffers ARC Wow, and yours truly influenced. Their name Isabelle
Speaker 2: called me, or was Emily, I can't remember, and they
Speaker 2: said what do you think of these? And I said,
Speaker 2: this is like diet arc and so they call them
Speaker 2: diet ARC. This ran with it, Joel, how do you
Speaker 2: like that?
Speaker 1: I mean, I knew you were an influencer, but I
Speaker 1: didn't know like that.
Speaker 2: But the arcs are a little different in that you
Speaker 2: get only fifty percent of the downside, but on the
Speaker 2: upside you get like fifty to eighty percent. So they
Speaker 2: designed them differently. Pointing if you're going to even play
Speaker 2: with buffery TIFs, I would almost consultant advisor or really
Speaker 2: make sure you read up on what exactly they're doing
Speaker 2: and by them on the day they come out. That
Speaker 2: way you get the whole thing, because if as time
Speaker 2: goes on, the numbers change on what's buffer because the market's.
Speaker 6: Moved, She's closing thought, I don't know, Eric's making me
Speaker 6: think I should go buy a buffer ETF and which
Speaker 6: is very sort of anti me because.
Speaker 1: I very much balanced financial advice.
Speaker 3: I think, yeah, and anything else that where we we
Speaker 3: missed that.
Speaker 1: Yeah, I'm you're part of the options.
Speaker 4: To bring up Jack Bogel because what I think is
Speaker 4: fun about the fixed ETF stuff is it's the most
Speaker 4: anti Bogel thing I think you could possibly ever do this,
Speaker 4: which is.
Speaker 3: Trying nutshell trying to talk about Bogel and the other side.
Speaker 4: This is the antithesis. This is like the Yeah, it's
Speaker 4: the the anti rolling over in his grave. Is just basically,
Speaker 4: try and time the market. You are you you you are,
Speaker 4: you are a genius and you can time the market.
Speaker 4: And if you buy one of these things, it doesn't
Speaker 4: matter that it's going to cost you loads of money,
Speaker 4: because you are going to make loads loads more money
Speaker 4: because of your because of your crystal ball that you're holding.
Speaker 4: And this is you know, this is this is what
Speaker 4: good financial advice is. It's this idea that you can
Speaker 4: you are smarter than everyone else in Wall Street, and
Speaker 4: Wall Street doesn't have tons of PhDs and rocket scientists
Speaker 4: who who built a system specifically to take your money.
Speaker 4: I remember I was chanting to a guy, a very
Speaker 4: large market maker in a senior role, and he said
Speaker 4: I was in an uber go to the airport, and
Speaker 4: the driver was explaining, I've had this conversation with with
Speaker 4: drivers as well. You know, I'm training these options and
Speaker 4: I'm doing so well, like and this guy's job is
Speaker 4: to take that options flow and basically buys it from
Speaker 4: the retail brokers and trades it. And he's just like, yeah,
Speaker 4: this is a bad idea.
Speaker 2: Well, I mean to be to be also with Bogle,
Speaker 2: what he would probably say is don't buy anything, just
Speaker 2: buy the S and P and use patience as your diversifier.
Speaker 2: But and he said, you don't need you don't even
Speaker 2: need international. But that takes a lot of intestinal fortitude
Speaker 2: to survive what seems like a ski couple weeks or
Speaker 2: a year. But that's what Bogol would recommend if you're younger.
Speaker 2: That's why I think low cost index funds are a
Speaker 2: godsend because a lot of people they buy them and
Speaker 2: they know they got the best deal and so they
Speaker 2: can survive the downturns easier, going Yeah, what am I
Speaker 2: gonna do try to trade around this. I'll just hold it.
Speaker 2: US stocks usually go up, and that's why the flows
Speaker 2: are so sticky. So patience is also a hedge and away, Joel,
Speaker 2: that's why. Yeah, I said, they've got to teach like
Speaker 2: meditation and Buddhism in the business schools or something, because
Speaker 2: just not trading. By the way, I pitched the show
Speaker 2: for Bloomberg TV called it was It was, It was.
Speaker 3: It was.
Speaker 2: You know, Seinfeld's a show about nothing. This is a
Speaker 2: show about doing nothing, and there's gonna have people come
Speaker 2: on and just talk about why they didn't trade that day.
Speaker 2: Hobbies they got.
Speaker 1: That because that's still waiting for a callback, aren't.
Speaker 2: Yeah, No, it didn't. Way too boring.
Speaker 3: I like how we started with vix and we ended
Speaker 3: up with patients, Like we've gone every possible place.
Speaker 1: So Bernard Suzanne, thanks for joining us on Trillions.
Speaker 3: Thanks you for having us, Thanks thanks for listening to
Speaker 3: Trillions until next time. You can find us on the
Speaker 3: Bloomberg terminal, Bloomberg dot com, Apple Podcasts, Spotify, or wherever
Speaker 3: else you'd.
Speaker 1: Like to listen. We'd love to hear from you.
Speaker 3: Hit us up on social I'm at Joel Weber Show,
Speaker 3: He's at Eric Balchina's Trillions is produced by Magnus Hendrickson.
Speaker 1: Sage Bauman is the head of Bloomberg Podcast