Speaker 1: Well kind of trainance. I'm Joel Webber and I'm Eric
Speaker 1: Beltis Eric. Some things are going a little crazy in
Speaker 1: the currency world, and cash is kind of an interesting
Speaker 1: story right now. It has not been interesting for a
Speaker 1: really long time, and now suddenly it's interesting. It's boring
Speaker 1: always to me, and this is a short term debt
Speaker 1: is probably one of the most boring areas of the
Speaker 1: E t F world to cover, But right now it's
Speaker 1: kind of sexy because it's sort of sometimes it is
Speaker 1: performance chasing to go to something so boring. Um, it
Speaker 1: also yields more so there's been thirty one billion dollars
Speaker 1: into ultra short debt ets, which to be one year
Speaker 1: or less maturity. Right, so everybody is just hiding out.
Speaker 1: They've just run into the cave the Fed. The Fed
Speaker 1: scared them away. Yeah, they're on the sidelines, whatever metaphor
Speaker 1: you want to use. They're totally scared. The Fed has
Speaker 1: just wreaked havoc on everybody's brains. And um, this is
Speaker 1: sort of the one eight they pulled on the market.
Speaker 1: So you know, as somebody in one of the articles
Speaker 1: on Bloomberg Today said, um, now is not a time
Speaker 1: to be a hero. Which I think really sums up
Speaker 1: this market. So we're seeing a lot of money to cash,
Speaker 1: but that would be a good idea to sort of
Speaker 1: break down what these E t F s are, what
Speaker 1: they do. They're not exactly cash, but they're really close
Speaker 1: to it. And this also relates to what's happening in
Speaker 1: currency because strength of the dollar globally is just on
Speaker 1: a tear and we're seeing things like the pound this
Speaker 1: week just get hammered. So I'm sure we'll talk about
Speaker 1: that a little bit here too. Joining us going to
Speaker 1: be Katie Grayfield from Bloomberg News and James Shapeer from
Speaker 1: Boomberg Intelligent. This time, I'm Trilliance. Cash is King, Katie, James,
Speaker 1: Welcome back to Trilliance. How are you guys? Thanks for
Speaker 1: having me. Okay, Katie, I want to start with you
Speaker 1: because you and I've been talking about cash as king
Speaker 1: for a second. Got you working on a Business week
Speaker 1: story to that effect. Talk to us. What do you see?
Speaker 1: I'm kind of obsessed with it at this moment. I
Speaker 1: know that Eric just absolutely ripped on it. I think
Speaker 1: it's actually pretty interesting area to cover right now. I mean,
Speaker 1: on our show E t F I Q for weeks
Speaker 1: you've been talking about the safety dance back into cash.
Speaker 1: Clearly a lot of investors agree with me. I do
Speaker 1: think we're at an interesting moment where cash always has
Speaker 1: this connotation of being kind of cowardly, kind of boring
Speaker 1: to Eric's point, but I mean, it yields so much
Speaker 1: right now, a six month treasury bill yields as much
Speaker 1: as a ten uere treasury note with like magnitudes less duration. Well, like,
Speaker 1: why would you not do that, right? Because duration is
Speaker 1: so important when inflations effector right, So, so what do
Speaker 1: you get in that six month uh that you know
Speaker 1: is safer than the tenure bet? Right? Well, you do
Speaker 1: get a place to hang out. You also get the
Speaker 1: peace of mind of knowing that you know, a single
Speaker 1: day's yield movements aren't gonna totally decimate your p ando.
Speaker 1: I mean, you're still on a real basis not keeping
Speaker 1: up with inflation, but you're probably doing a lot better
Speaker 1: than pretty much any other place, unless you're like all
Speaker 1: in on US dollars right now. Well, that's sort of
Speaker 1: my point with this is people must be really scared
Speaker 1: to go into this ultra short term debt because you're right,
Speaker 1: doesn't move as much off off of interest rates, but
Speaker 1: that is where the FED is hiking. They're hiking rate
Speaker 1: in your face, so like SHV and s h Y
Speaker 1: are down. So you could get that three or four
Speaker 1: percent deal, but you are going to lose from the
Speaker 1: price going down because the Fed just hiked again in
Speaker 1: your face. So it's not like a clean four percent,
Speaker 1: it's a risky four percent. But again it's better than
Speaker 1: the alternative. I guess, is this the new tina? Is
Speaker 1: this the new tina? I've heard so many tortured new
Speaker 1: acronyms for there is no alternative I've heard there are
Speaker 1: too many alternatives. Now I feel like that that one
Speaker 1: doesn't quite have a ring to it though. What about
Speaker 1: sell the rip is the new by the dip? I know?
Speaker 1: You like that one. That one's just really hard to
Speaker 1: say on the fly. You have to think about the world. Know.
Speaker 1: I screwed that up on air on TV. I I
Speaker 1: got all jumbled in my head right when I was
Speaker 1: about to say it in rehearsal, and then in the
Speaker 1: thing I was like, way is it by the rips?
Speaker 1: I was like, head game, you can't, you can't peek
Speaker 1: and rehearsal I did Okay, so cash is cash as
Speaker 1: an asset class, Katie walk us through the options, because
Speaker 1: sure you can take that six month, but even like
Speaker 1: a savings gount in your bank, looks pretty good right now. Absolutely,
Speaker 1: Let's talk about one of the more interesting funds I
Speaker 1: think is b I L that's one to three month
Speaker 1: Treasury bills, right, and I wrote this story a few
Speaker 1: months ago, but they're actually paying out monthly dividends again,
Speaker 1: and for a lot of investors that's basically the core
Speaker 1: investing thesis. I'm gonna put my money here, I'm going
Speaker 1: to get a reliable fixed income payment. It all starts
Speaker 1: to make sense. For a long time, these weren't paying
Speaker 1: out anything. That all but totally stopped during the pandemic
Speaker 1: when the federal took rates to zero. And again to
Speaker 1: Eric's point, you can still lose out on the price,
Speaker 1: but you are getting pennies again. It was pennies in July.
Speaker 1: That's been steadily increasing. Is the FETE has just been
Speaker 1: absolutely relentless. It's I think it's pretty damgn close. I mean,
Speaker 1: there was a lot a long time where some of
Speaker 1: the haters on Twitter be like the Fed is killing savers,
Speaker 1: Like post world War two, you could always get a
Speaker 1: good yield on your on your like your aunt would
Speaker 1: give you a savings bond. And now they destroyed that. Well,
Speaker 1: now it's back. The problem is the markets are all crushed. Uh,
Speaker 1: this was the cost of doing it. I guess, James,
Speaker 1: what's your take when you think of ultra short term
Speaker 1: debt e T s? Like, what do you think? What
Speaker 1: are you looking for? Think they're boring? Well, I do
Speaker 1: think they're boring. Eric, We'll we'll see these filings. So,
Speaker 1: as you know, we tracked filings for new ets that
Speaker 1: come out, and every like every issue where has a
Speaker 1: short term dead e t F. It's act summer actively manage.
Speaker 1: Many are and he just sends like he'll send a
Speaker 1: link with the filing and just put like a bunch
Speaker 1: of z s nothing else. Um, every single legacy mutual
Speaker 1: fund company that comes to the T space has to
Speaker 1: file an ultra short term dead ETF and then an
Speaker 1: income ETF and G E S G And I'm just like,
Speaker 1: oh my god, I need more espresso too, because I'm
Speaker 1: getting drowsy reading the other side of this is that
Speaker 1: I think rebalancing is another key factor here. So if
Speaker 1: we keep talking on the FED hiking rates, you're crushing
Speaker 1: fixed income. So if you have a sixty forty portfolio
Speaker 1: and your fixed income is going down or whatever whatever
Speaker 1: mix you have in your portfolio, you probably need to
Speaker 1: buy more to maintain that allocations. So rather than going
Speaker 1: into corporates or longer dated things, they're choosing to go
Speaker 1: limited duration, limited credit risk. They're going to these ultra
Speaker 1: short things. They're going to treasuries. So there's all these
Speaker 1: different things that are going they're forcing people into treasuries
Speaker 1: and short term treasury specifically. So what are some tickers
Speaker 1: that are of interest to you? James, Uh, Well, we
Speaker 1: shy Bill sh V. I mean, they're they're pretty standard.
Speaker 1: There's there's some there's some I shares ones out there
Speaker 1: to jeff and then Jeffy, which is another one that
Speaker 1: there's a lot of things. Jeffy is the income right there.
Speaker 1: You think at jpst O JPSD is what I'm thinking.
Speaker 1: So let's let's take a second to divide the difference
Speaker 1: between Bill, s h V and s h Y, which
Speaker 1: are pure treasuries. Those are probably the closest thing to
Speaker 1: Bill is the only one that I think is that's
Speaker 1: really short y is one one to three year UM.
Speaker 1: So you take a little more risk, you a little
Speaker 1: more yield. Now explain jps T, which is the JP Morgan.
Speaker 1: It's not treasury. I mean this is a little more risky, right. Yeah,
Speaker 1: it's actively managed and they don't just hold treasuries. But
Speaker 1: it's also short term. But JP Morgan is selling it
Speaker 1: pretty well. I mean it's taking in money hand to
Speaker 1: or fist pretty much every day. What are the influs,
Speaker 1: like one billion in a year. So the record I
Speaker 1: believe is around thirty eight billion. We're probably gonna pass it.
Speaker 1: And that was set in two thousand eight, which you
Speaker 1: know was a really rough year, Volmageddon and all that,
Speaker 1: so people ran into cash. So we have probably break
Speaker 1: the record for all time flows here um on JPST
Speaker 1: and MINT. Those are two funds. This is an interesting
Speaker 1: niche that active is found. Actually, you know, past has
Speaker 1: been like ruling the land for a while. People do
Speaker 1: like giving their money to Pimco or JP Morgan and saying, look,
Speaker 1: keep me short duration. So there's no interest, right risk,
Speaker 1: but take little bets. Maybe buy an international bond or
Speaker 1: corporate bond. Try to give me a little more um
Speaker 1: return or yield. Uh so, I almost like their money
Speaker 1: market funds with like a little hot sauce in there.
Speaker 1: But as we know in two they're not cash because
Speaker 1: they did go down quickly. Unlike a money market fund
Speaker 1: where you might have a lot more stability, the can
Speaker 1: go down well. To your point that this has been
Speaker 1: an interesting niche for active to proliferate. I think it's
Speaker 1: a really interesting sign of the sign of the times
Speaker 1: that for much of the last two years, it's starting
Speaker 1: in the pandemic, it was ARC that was the biggest
Speaker 1: active manager. R K was the biggest actively managed fund.
Speaker 1: Now it's jps T I believe, which is again one
Speaker 1: of these short duration boring bond ETFs. Just really sort
Speaker 1: of paints the mood of the market. You're right, that
Speaker 1: is a symbolic move, similar to how the innovation theme
Speaker 1: was the top one now natural resources. Yeah, so, yeah,
Speaker 1: the times are a change until quickly, quickly and all
Speaker 1: took with j PAL making some moves well in inflation,
Speaker 1: prey and inflation. We keep talking about this money markets.
Speaker 1: We brought them up, but they're they're paying almost three percent,
Speaker 1: they're well over two percent. Now. Savings accounts, if you
Speaker 1: have an online savings account they're yielding over two percent.
Speaker 1: They're probably gonna be near three within the next month
Speaker 1: or two. We could be over four percent or near
Speaker 1: four percent in savings accounts by the end of the
Speaker 1: But what's your that's the problem, correct, But I'm saying
Speaker 1: the savings accounts and the money market accounts aren't as
Speaker 1: subject to the risk as some of these other things.
Speaker 1: So I'm kind of surprised so much money is going
Speaker 1: to these e t f s when theoretically, if you're
Speaker 1: I mean, if you're at a brokerage account, you you
Speaker 1: have access to a money market fund, whether it's Vanguard
Speaker 1: or whatever it may be, it's going to be paying
Speaker 1: higher interest rates and obviously going to have a lower
Speaker 1: duration risk. But then obviously the Fed does cut rates,
Speaker 1: you don't get the same upward potential. That sounds like
Speaker 1: you're in cash though, I mean, I don't know, I
Speaker 1: personally don't own any short term treasury e t s. No,
Speaker 1: I do not. I'm going to write that down. There's
Speaker 1: also the option of going with the floating rate notes.
Speaker 1: So like UM, Wisdom Tree, USFAR and T Flow have
Speaker 1: also taken in a ton of money. UM again boring
Speaker 1: but they would float with the interest rates, and so
Speaker 1: that's been a popular trade and senior loans are like
Speaker 1: a high yield version of that. So if we think
Speaker 1: about this being this flight to safety and just like
Speaker 1: chill on the sidelines, how long do you think this
Speaker 1: sticks around? For what what our investor is going to
Speaker 1: be looking forward before they go from from these moves elsewhere.
Speaker 1: So so I sit next to Ira Jersey, who has
Speaker 1: a rate strategist. He's been on the podcast before. So
Speaker 1: right now, the market is pricing for the FED to
Speaker 1: hike basically seventy five basis points, then fifty in December November,
Speaker 1: fifty in December, and a little bit more through March,
Speaker 1: and then the market is basically pricing for them to
Speaker 1: start cutting rates pretty quickly in the spring. Ira, the
Speaker 1: fed um our economist team believe that we're going to
Speaker 1: stay flat at that higher plateau for much longer than
Speaker 1: the market is pricing. Obviously, the market can change things.
Speaker 1: I mean, if you talk to anyone, if they asked you,
Speaker 1: wherefore we thought we were gonna be a three or
Speaker 1: four percent by the fall. Uh, No one would have
Speaker 1: said that. But basically, our Bloomberg intelligence team thinks that
Speaker 1: we're going to get above that four percent level and
Speaker 1: sit there for a good chunk of and that will
Speaker 1: impact everything. Well, that theoretically bodes well for cash. If
Speaker 1: the FED sits at terminal for a while and rates
Speaker 1: just sort of stay at this very relatively very high plateau,
Speaker 1: that would mean your T bills continue to pay out
Speaker 1: pretty lofty yields. Yeah, which means maybe this wasn't the
Speaker 1: place to be a year ago as race went up.
Speaker 1: But if this is where rates stay, then being there
Speaker 1: now could be good for a while, especially if inflation
Speaker 1: does especially if the FED does get inflation under control.
Speaker 1: That's I would agree. Here's the thing with the inflation number,
Speaker 1: which is confusing, and I've worked this out with us
Speaker 1: a little bit. The month over month has been pretty
Speaker 1: nice for the past couple of months. It's hasn't like
Speaker 1: shown a huge move, but again year over year still
Speaker 1: like eight percent, right, eight nine? Well, the year over
Speaker 1: year was I think the first jump was what six
Speaker 1: seven months ago? Was that when the first print hit.
Speaker 1: Don't we have to go twelve months to go back
Speaker 1: to where the high water mark is now? Where then
Speaker 1: it's under two percent, So it would seem to me,
Speaker 1: nothing will get resolved until a whole year passes from
Speaker 1: that shock print. So you're asking me to do some
Speaker 1: math right here, we're talking about you. Yeah, she messed
Speaker 1: with the dot plot. The dot plot crowd, they were
Speaker 1: not happy, but some people were on your side. Some
Speaker 1: people enjoy it was a joke. I said that the
Speaker 1: dot plot is a meaningless image. It's so silly. And
Speaker 1: someone said, you're a financial journalist, how did this mean
Speaker 1: nothing to you? Okay, but the best comment that someone
Speaker 1: gave to me was a line is a dot that
Speaker 1: went for a walk. M h spoken like an artist.
Speaker 1: I do think you know one thing I will say
Speaker 1: to your point, and I think ramp Capital was the
Speaker 1: one who said yes, because it's meaningless because these people
Speaker 1: don't really know what they're talking about. They're always wrong,
Speaker 1: um and they have missed a lot. Nobody called this,
Speaker 1: as James just pointed out. The other thing that kind
Speaker 1: of annoys me is the cell side research people who
Speaker 1: come out like it's like Goldman now has an S
Speaker 1: and P outlook and they just revised it down because
Speaker 1: the market had a rough week. I'm like, well, you
Speaker 1: can't do that. You pick it at the beginning of
Speaker 1: the year and stick to it, Like I don't understand
Speaker 1: that prediction based on what just happened. I get I
Speaker 1: get why they do it, but it just seems like,
Speaker 1: why am I going to listen at all? Then I'll
Speaker 1: just look at past performance and extrapolate that forward and
Speaker 1: go That's what the sull side thinks. Well, the FED,
Speaker 1: to their credit, I feel like they try to stress
Speaker 1: that these are not forecasts necessarily or this this is
Speaker 1: not like up set in stone policy. They're going to
Speaker 1: react where it happens. Yeah, they do try to get
Speaker 1: the message across, but everyone just takes it like their
Speaker 1: data dependent exactly. Well, Um, when I was lucky enough
Speaker 1: to guest host the Clothes, yeah, we had the White
Speaker 1: House person on, you know, the economic advisor, So I
Speaker 1: never get to ask these non et F questions, but
Speaker 1: I did, and I was sort of like talking about
Speaker 1: the election because inflation is by far the number one
Speaker 1: issue with voters. It took COVID's place. Voter say it's
Speaker 1: the number one issue. COVID is not one percent completely
Speaker 1: flop flip flopped, and so I think the FED has
Speaker 1: a political pressure as well because this is the biggest
Speaker 1: issue for the election. So I do wonder if we
Speaker 1: have this election, the mid terms, if there might be
Speaker 1: a little bit of the foot off the gas just
Speaker 1: because there's the political pressure might die down a little
Speaker 1: bit because there's no election coming up. I don't think
Speaker 1: it's political pressure. I think it's part of the mandate. Right,
Speaker 1: they have a mandate, and this is part of the mandate.
Speaker 1: But it's hard to untangle politics from the mandate in
Speaker 1: my opinion. But I suppose you're right. I just I
Speaker 1: don't know. I just can't see the FED is completely
Speaker 1: a political I just can't know. I'm with you, but
Speaker 1: that they do have a mandate. They're they're targeting a
Speaker 1: specific amount of inflation, and they've basically said they expect
Speaker 1: to hip. What's interesting into more higher unemployment. What's interesting
Speaker 1: me becomes if if they actually say two percent is
Speaker 1: unrealistic anymore and like become the new two percent. But
Speaker 1: we'll see where that ends up. It is amazing that
Speaker 1: they've stuck to it. But again, if if your goal
Speaker 1: is to go not over two percent from when like okay,
Speaker 1: jumped eight percent, so we'll call that the new normal,
Speaker 1: you're saying, no, two percent from where the new high
Speaker 1: water mark is so all they've actually accomplished that to
Speaker 1: a degree because the month over month hasn't gone up,
Speaker 1: so all they gotta do is wait a year. So
Speaker 1: I do sometimes wonder why they're continuing to hike given
Speaker 1: that all they gotta they're not trying to get the
Speaker 1: eight percent down back down to where it was. That
Speaker 1: chip has sailed. It's just a matter of keeping that
Speaker 1: eight percent year over year where it is, which they're
Speaker 1: doing right. Yeah, Well, for the most part of you
Speaker 1: can break out core CPI, we can get into the
Speaker 1: real details of inflation numbers. Um. But we can get
Speaker 1: into the details inflation, which I don't think we should
Speaker 1: really necessarily do in this podcast. But if you look
Speaker 1: at inflation, one of the things that's baked in is
Speaker 1: is rent and homeowner's equivalent rent, those things, it takes
Speaker 1: It's like a lagging indicator. So that's going to take
Speaker 1: time to filter through the inflation numbers. So we're basically
Speaker 1: guaranteed to get higher inflation to some extent. It's so
Speaker 1: the problem is is the FED looking at leading indicators
Speaker 1: are lagging indicators, and that's what they're trying to wrestle
Speaker 1: with and so you have people on both sides arguing
Speaker 1: that the Fed's hiking too much now because most of
Speaker 1: the inflation is behind us, like you're kind of arguing, Eric,
Speaker 1: And then people are saying, well, they're still supply chain
Speaker 1: issues as other issues, So we need to make sure
Speaker 1: that we don't let it get out of control, because
Speaker 1: once inflation starts going, it'll keep going. I have a
Speaker 1: question about ETFs to bring it back to e t
Speaker 1: F So the Fed, Jerome Pal obviously has made it
Speaker 1: very clear that they're going to hike into inflation even
Speaker 1: if it tips the economy into session. And with that
Speaker 1: in mind, I think it's interesting. In addition to all
Speaker 1: of the short term flows we've seen into these cash
Speaker 1: like e t f s, you're also seeing t LT
Speaker 1: get a lot of love recently, a lot more love
Speaker 1: for duration. It feels like it's just the middle of
Speaker 1: the belly, if you will. That isn't seeing a lot
Speaker 1: of sparkle right now. I don't know what you guys
Speaker 1: think about that. Yes, So the way I look at it,
Speaker 1: there's like a whole bunch of reasons why Treasury e
Speaker 1: t F are getting because it's not even just t
Speaker 1: LT on the long end, those are twenty plus yours.
Speaker 1: It's it's the middle of the curve. Every all treasuries
Speaker 1: are taking in money. And if you talk to people,
Speaker 1: a lot of people think the Fed is going to
Speaker 1: hike us into our session and then they're going to
Speaker 1: get cold feet, and then a're gonna start cutting rates again.
Speaker 1: So if they start cutting rates and you're you're in
Speaker 1: these high duration treasuries, you're gonna shoot off like a
Speaker 1: rocket ship, like we saw t LT do numerous times
Speaker 1: when the FED starts cutting rates. I agree. I think
Speaker 1: t l T is a recession play. It's it's betting
Speaker 1: the Fed has gone too far, Whereas I think the
Speaker 1: cash is more of a hiding out. I think TLT
Speaker 1: is more of a bet. I would agree with James
Speaker 1: on that. Yes, that is not it's not a really
Speaker 1: safe place to be. TALT does do a good job
Speaker 1: buffering stocks typically, but not this time. I mean also,
Speaker 1: the duration, like we talked about, I don't know, fifteen
Speaker 1: minutes ago, you can get your face ripped off. Oh yeah,
Speaker 1: t l T s uh pretty pretty vaultlight, I think,
Speaker 1: you know. But you're to James's point. That's why I
Speaker 1: like I like geo vt This is the eye shares.
Speaker 1: It goes. It just buys the whole curve in one shot.
Speaker 1: So you own everything to get a little recession bed,
Speaker 1: a little cash, a little you know. Uh. And that
Speaker 1: one I think might be the top ten most successful
Speaker 1: et F s of the year, maybe top fifteen. Okay,
Speaker 1: so we've talked about cash, We've talked about some debt.
Speaker 1: Let's talk about what's happening in the currency e t
Speaker 1: s sticks out to you, I guess you up. That's
Speaker 1: Investco's Bullish Dollar fund. It's absolutely crushing it this year.
Speaker 1: It's up at a record high and then some. But
Speaker 1: I keep looking for a size and scope to write
Speaker 1: about beyond the fact that it's at a record high.
Speaker 1: But the flows just haven't really matched that performance. Yeah,
Speaker 1: and let's be clear, eight percent for a currency ETF
Speaker 1: is ridiculous. That that's not a lot for a growth
Speaker 1: fund or whatever, but for currency, that is an absurd
Speaker 1: amount of return. Um. What's interesting about currency ETF that
Speaker 1: just you know, straight bet on currencies. They've never really
Speaker 1: had a market in the e t F world. They've
Speaker 1: real small, they've never got gone mainstream. My theory is
Speaker 1: that people regular people just don't do currency betting. They
Speaker 1: just don't need it. There long the dollar plenty with
Speaker 1: all their other investments, there's no reason. So I think
Speaker 1: it appeals to a certain kind of trading crowd, maybe
Speaker 1: an institutional who wants to quickly put on this trade.
Speaker 1: I just think it's a niche area and it always
Speaker 1: will be um um. But James, let's tell people what
Speaker 1: does u P do? Like, how does it give you
Speaker 1: exposure to quote long the dollar? Yes, so it's it's
Speaker 1: kind of confusing because you think I'll just hold the dollar,
Speaker 1: but that's not going to give you this performance that
Speaker 1: we're seeing. So the way up does it? Or anyone
Speaker 1: hedges in the market. So in this case they go,
Speaker 1: they go long dollar futures and then they share at
Speaker 1: the euro the end, the Great British pound, the Canadian dollar,
Speaker 1: the Swedish corona, and the Swiss franc. So it's usually
Speaker 1: long whatever the current see as you're talking about and that,
Speaker 1: and then short of basket of other currency. It's literally
Speaker 1: like a long short fund. Yeah yeah, it's not just
Speaker 1: holding a dollar bill in a bank. Boy, that is
Speaker 1: the perfect strategy for this year. It is. But the
Speaker 1: other issuers have different takes on this trade, Like wisdom
Speaker 1: Tree has us DU. This one goes long the dollar,
Speaker 1: but then it shorts emerging market currencies as well as
Speaker 1: the developed international so you get a broader short. But
Speaker 1: the emerging market currencies haven't been as as bad. So
Speaker 1: UP is outperforming this year, but that could change. But
Speaker 1: I think there has been great innovation in this space,
Speaker 1: but again not a ton of buyers. Now. Where we
Speaker 1: have seen buyers over the years is currency hedgetts, which
Speaker 1: go long say Japanese stocks or developed international stocks, and
Speaker 1: then they neutralize the currency effect. Those e t f
Speaker 1: s had their day back in the day, but now
Speaker 1: they're coming back because the stronger the dollar is, the
Speaker 1: better the currency hedge gtfs are. But no one is
Speaker 1: buying them. It's like the second time around, no one cares.
Speaker 1: Why do you think that is? Yeah? So I think
Speaker 1: we we've we often debate this on our team multiple
Speaker 1: times because we thought this is going to be the
Speaker 1: year for erncy hedge gtfs with the dollar really does
Speaker 1: go strong, and I mean the performance has been incredible.
Speaker 1: I mean all of the currency edge versions, whether it's Europe,
Speaker 1: whether it's Global Japan, all of the above they've crushed
Speaker 1: their unhedged counterparts, and still they have taken in virtually
Speaker 1: no money. I mean it's not no money, but it's
Speaker 1: it's almost non existent compared to what it was. You
Speaker 1: look at a chart, it's just billions flowing out for years.
Speaker 1: The outflow has stopped and there's been a trickle of inflows,
Speaker 1: but there the fish just aren't biting. Here's my theory,
Speaker 1: jol and this at least, why is that? Because Eric,
Speaker 1: I actually remember this was like how you and I
Speaker 1: got to meet each other, was talking about the currency
Speaker 1: hedge GTF effect. It was like of this, you know,
Speaker 1: you would think this would be that moment for the strategy.
Speaker 1: And wisdom Tree, as I recall, was a big player
Speaker 1: and it's still still the big ones. Yeah, Wisdom Tree, UM, dws,
Speaker 1: and I shares are all the big ones. But here's
Speaker 1: my theory on this, which is that when currency ETFs
Speaker 1: happened back in was a craze. D x J was
Speaker 1: the number one inflow getter for a year. I think
Speaker 1: it's the personally time was in Vanguard black Rock. I
Speaker 1: mean that's insane. Um. I think people got on it
Speaker 1: like a ride at the amusement park surfboard with which
Speaker 1: the surfboard and then ran out. Yeah, and then they
Speaker 1: the dollar got weaker and the trades sort of didn't
Speaker 1: work as well, and people soured on it and said, oh,
Speaker 1: that wasn't as fun as I thought it was. They
Speaker 1: got out, and now that it's working, people are like,
Speaker 1: you know, what, been there, done that. I think I'll
Speaker 1: pass this time. I'll do the cash, sit in the
Speaker 1: cash and boring like. This is why I'm barish E
Speaker 1: s G versus the hype. I believe now this year
Speaker 1: that we're seeing E s G underperformed generally because oil
Speaker 1: is up and oil stocks are up. I think any
Speaker 1: tourists that come in and have that experience, they go
Speaker 1: in with a little too much like starry eyes, and
Speaker 1: they they're not really careful what they're doing. They just
Speaker 1: went bought it because it went up. They get that
Speaker 1: sort of feeling of like um seller's remorte buyer's remorse
Speaker 1: rather and they don't They will not take a second
Speaker 1: bite at that apple. So when E s G starts
Speaker 1: out performing next time tech is up, I don't. So
Speaker 1: that's why I think E s G is limited, and
Speaker 1: that's why and currency GTPs are having the problems they
Speaker 1: do um, which is simply because you know, people have
Speaker 1: been there, done that, and they're just not interested this time. Yeah,
Speaker 1: And I think like the round trip trade, so people
Speaker 1: went in and I think a lot of people just
Speaker 1: didn't take money out initially, Like you look at it.
Speaker 1: The performance went down really bad and money didn't really
Speaker 1: come out. They just kind of sat in there and
Speaker 1: it lost its value. It's lost its assets of your performance.
Speaker 1: So I think people just saw that in the round
Speaker 1: trip trade in staid if they had just stayed in
Speaker 1: the other thing for an extended period of time, they
Speaker 1: would have been the same. Because currencies just fluctuate, they
Speaker 1: go up and down specifically and equities it's not as critical.
Speaker 1: So if you're gonna currency hedge, it's more like you
Speaker 1: have to market time essentially. I think people a lot
Speaker 1: of people just give up on market timing. You know,
Speaker 1: the people who sell currency ig tips make a great
Speaker 1: case or like, look, everything you have is long the dollar,
Speaker 1: your house, everything you know, your bank account, all your funds,
Speaker 1: all your stocks. Why not hedge in this case to
Speaker 1: have something that isn't exposed to the dollar? Um. Now,
Speaker 1: someone like Bogel, they would argue you would you shouldn't
Speaker 1: do it because you should always belong the dollar. That's
Speaker 1: your whole lifestyle, so why bother with that? So I
Speaker 1: get both, But I think ms C I had a study.
Speaker 1: I'll probably get called out for this, but I think
Speaker 1: as my recollection, they did look at the heads then
Speaker 1: unheedged over like a long period and it wasn't that
Speaker 1: big of a difference. Um. But there are times when
Speaker 1: obviously one is going to be outperforming and then it
Speaker 1: will underperform. And this is sort of the problem with
Speaker 1: E T F that veer from a benchmark. You have
Speaker 1: your heyday and then you have your under performance. And
Speaker 1: the people who typically should go into the strategy of
Speaker 1: people who really understand what they're doing and can stomach
Speaker 1: that period of of drawdowns. So anybody listening, that's my
Speaker 1: advice for anybody on all of this, and especially E
Speaker 1: s G. I'm like, look, if you're hardcore and you
Speaker 1: live in E s G lifestyle and this is your thing,
Speaker 1: you're probably fine for E s G because you can
Speaker 1: stomach when it doesn't work. Um, But a tourist, I'd
Speaker 1: be very careful because sometimes people just don't like tunderperform,
Speaker 1: and they usually sell at the wrong time and by
Speaker 1: at the wrong time, and that's you know where bad
Speaker 1: behavior comes from. And for everybody else, there's cash. Yeah,
Speaker 1: back to cash, Katie James, thanks for joining in Centralia,
Speaker 1: Thank you for having me, Thanks for having to m H.
Speaker 1: Thanks for listening to Trillions. Until next time. You can
Speaker 1: find us on the Bloomberg Terminal, Bloomberg dot com, Apple podcast, Spotify,
Speaker 1: or wherever else you'd like to listen. We'd love to
Speaker 1: hear from you. We're on Twitter, I'm at Joel Webber's show.
Speaker 1: He's at Eric Baltunas. This episode of Trillions was produced
Speaker 1: by Magnus Hendrickson. Bye.