1 00:00:06,120 --> 00:00:12,200 Speaker 1: Welcot Chillians. I'm Joel Webber and I'm Eric bell Tunis. Eric. 2 00:00:12,440 --> 00:00:15,120 Speaker 1: Sometimes we've talked about a certain type of E t 3 00:00:15,280 --> 00:00:18,520 Speaker 1: F that are that is rated are, and that is 4 00:00:18,600 --> 00:00:21,720 Speaker 1: a term or a category that that you've actually come 5 00:00:21,800 --> 00:00:24,120 Speaker 1: up with, And we're gonna spend some time on this 6 00:00:24,160 --> 00:00:28,120 Speaker 1: episode talking only about that that category, if you will. Yeah, 7 00:00:28,160 --> 00:00:30,600 Speaker 1: So these are the we we call them rated are 8 00:00:30,760 --> 00:00:35,720 Speaker 1: or the exotic or the power tools of the Yeah, 9 00:00:36,200 --> 00:00:39,720 Speaker 1: because in the right hands they can work wonders and 10 00:00:39,760 --> 00:00:41,680 Speaker 1: really get the job done. But in the wrong hands, 11 00:00:41,680 --> 00:00:43,760 Speaker 1: they can actually cut your hand off right like a 12 00:00:43,840 --> 00:00:47,199 Speaker 1: chainsaw or worse or worse right, So we want to 13 00:00:47,280 --> 00:00:50,720 Speaker 1: demystify these products. Um, you know, to me, they're demonized 14 00:00:50,760 --> 00:00:53,920 Speaker 1: a little bit. But I get why they're demonized. I think, 15 00:00:54,320 --> 00:00:56,280 Speaker 1: you know. The reason rated R to me is a 16 00:00:56,280 --> 00:01:01,560 Speaker 1: good metaphor is because I believe that in our classification system, 17 00:01:01,640 --> 00:01:04,120 Speaker 1: we give them a red light just to say, hey, look, 18 00:01:04,120 --> 00:01:06,319 Speaker 1: there's some some stuff you need to know about these 19 00:01:06,319 --> 00:01:09,279 Speaker 1: So let's pause. But like in the movies, just because 20 00:01:09,280 --> 00:01:12,000 Speaker 1: ten year olds exist doesn't mean Quentin Tarantino should have 21 00:01:12,040 --> 00:01:16,040 Speaker 1: to stop making movies. So we were okay, with leverage, ETFs, 22 00:01:16,160 --> 00:01:19,600 Speaker 1: vix ETPs. These these products that are for professionals, we 23 00:01:19,720 --> 00:01:21,720 Speaker 1: just think they need a rating like a movie. So 24 00:01:21,840 --> 00:01:24,000 Speaker 1: again we've got green yellow red because we can't use 25 00:01:24,040 --> 00:01:27,040 Speaker 1: the movie ratings because it's like a copyright unfortunately, so 26 00:01:27,080 --> 00:01:29,840 Speaker 1: we use green yellow red power. These E T F 27 00:01:29,959 --> 00:01:33,600 Speaker 1: s UM are basically all instant red lights except for 28 00:01:33,640 --> 00:01:37,320 Speaker 1: the why. The reason is because their triple leveraged or 29 00:01:37,360 --> 00:01:40,560 Speaker 1: double leveraged, and that means that they'll move twice as 30 00:01:40,640 --> 00:01:43,000 Speaker 1: much as the index in a day, but they only 31 00:01:43,000 --> 00:01:45,080 Speaker 1: promise it per day. The way their structure, which we'll 32 00:01:45,080 --> 00:01:47,600 Speaker 1: get into, you don't actually get that two or three 33 00:01:47,600 --> 00:01:50,400 Speaker 1: times over the long haul. Like there's a corrosion element 34 00:01:50,800 --> 00:01:52,960 Speaker 1: that's like a ticking time bomb. So the longer you 35 00:01:53,000 --> 00:01:55,520 Speaker 1: hold it, the more you could just lose money because 36 00:01:55,560 --> 00:01:59,080 Speaker 1: of this sort of um the math of rebalancing every 37 00:01:59,160 --> 00:02:03,000 Speaker 1: day and sometimes most of the time all the time. 38 00:02:03,200 --> 00:02:06,120 Speaker 1: These products come with xs, and that's one way that 39 00:02:06,160 --> 00:02:09,840 Speaker 1: you can know that you're playing with Yeah, they had 40 00:02:09,919 --> 00:02:12,800 Speaker 1: they literally say two x or three x UM. They 41 00:02:12,840 --> 00:02:14,480 Speaker 1: even have the word daily in them to like sort 42 00:02:14,480 --> 00:02:17,040 Speaker 1: of accentuate that you need to use these for the 43 00:02:17,040 --> 00:02:20,240 Speaker 1: short term. And who's going to help us understand this world? Um, 44 00:02:20,240 --> 00:02:24,240 Speaker 1: Sylvia Jablonski. She is from Direction, which makes the most 45 00:02:24,360 --> 00:02:26,840 Speaker 1: chainsaw of the chainsaws, the three X. So there's like 46 00:02:26,840 --> 00:02:30,119 Speaker 1: the big chainsaw. Well there was, Look, there was there 47 00:02:30,160 --> 00:02:32,519 Speaker 1: was the regular like the little tiny electric chainsaw, and 48 00:02:32,520 --> 00:02:35,520 Speaker 1: then there's the big big chainsaw. Then pro Shares came 49 00:02:35,560 --> 00:02:38,520 Speaker 1: out with two X, and then Directions says, oh yeah, 50 00:02:38,840 --> 00:02:42,720 Speaker 1: three X. Just you know, if you're really feeling lucky today, okay, 51 00:02:45,639 --> 00:02:50,840 Speaker 1: on this episode of Trillians playing with power tools. Okay, Sylvia, 52 00:02:50,880 --> 00:02:53,040 Speaker 1: welcome to trillions, Thanks for joining, Thanks so much for 53 00:02:53,040 --> 00:02:56,920 Speaker 1: having me. So you're the head of capital markets at Direction. L. E. 54 00:02:57,040 --> 00:03:01,200 Speaker 1: T s. Yes, okay, So why I do these products exist? 55 00:03:01,680 --> 00:03:04,640 Speaker 1: So the quick answer is that we would like to 56 00:03:04,680 --> 00:03:08,920 Speaker 1: democratize leverage. How does that sound? I mean, I don't 57 00:03:08,960 --> 00:03:12,240 Speaker 1: know what that means. So what is that? Yeah? Exactly? So, 58 00:03:12,440 --> 00:03:14,560 Speaker 1: um so there there are three beta products, as you 59 00:03:14,560 --> 00:03:17,120 Speaker 1: guys were discussing. So for every hundred dollars you invest, 60 00:03:17,160 --> 00:03:20,640 Speaker 1: you get three hundreds of exposure to the underlying index 61 00:03:20,720 --> 00:03:24,120 Speaker 1: for a one day period. So why is that interesting? Well, 62 00:03:24,160 --> 00:03:27,840 Speaker 1: clients can use these to express high conviction on short 63 00:03:27,960 --> 00:03:31,320 Speaker 1: term tactical opportunities. So, for example, if you think that 64 00:03:31,600 --> 00:03:33,960 Speaker 1: you know semi conductors are gonna get crushed for the 65 00:03:33,960 --> 00:03:35,800 Speaker 1: next three days or so, you might look at a 66 00:03:35,800 --> 00:03:38,840 Speaker 1: three x bear fund and express the view that you 67 00:03:38,880 --> 00:03:42,640 Speaker 1: think semi conductors will be both low vaulatile downward trending 68 00:03:43,360 --> 00:03:45,920 Speaker 1: and have high performance in that day period, and generates 69 00:03:45,920 --> 00:03:50,240 Speaker 1: some MALFA from that trade. So leverage effectively amplifies my 70 00:03:52,200 --> 00:03:55,360 Speaker 1: it amplifies your view for the day, and not only that, 71 00:03:55,480 --> 00:03:58,880 Speaker 1: it allows you to allocate capital efficiently. So you put 72 00:03:58,880 --> 00:04:01,080 Speaker 1: down a hundred dollars and you get three hundred dollars 73 00:04:01,080 --> 00:04:03,120 Speaker 1: of exposure. Maybe I'll walk you through an example just 74 00:04:03,160 --> 00:04:06,200 Speaker 1: to give you a sense of real world what actually happens. 75 00:04:06,680 --> 00:04:11,120 Speaker 1: So let's say um SMH is down, semiconductor et F 76 00:04:11,200 --> 00:04:13,720 Speaker 1: is down five percent in a day, So we have 77 00:04:13,760 --> 00:04:16,719 Speaker 1: a bear fund. It's called s o x s now. 78 00:04:16,920 --> 00:04:19,320 Speaker 1: If the underlying e t F that we track is 79 00:04:19,360 --> 00:04:21,360 Speaker 1: down five percent in a day, you have a hundred 80 00:04:21,400 --> 00:04:25,400 Speaker 1: dollars three hundred of exposure five percent move three beta fund, 81 00:04:25,520 --> 00:04:28,200 Speaker 1: so you earn fifteen percent as that e t F 82 00:04:28,640 --> 00:04:31,479 Speaker 1: or index goes down five percent in a day. Now 83 00:04:31,520 --> 00:04:34,560 Speaker 1: on day two, if you have another move downward of five, 84 00:04:35,320 --> 00:04:37,600 Speaker 1: you make seventeen point to five. And this is what 85 00:04:37,720 --> 00:04:39,679 Speaker 1: Eric was referring to. This is sort of the positive 86 00:04:39,720 --> 00:04:42,200 Speaker 1: side of it, where the compounding and the rebalance work 87 00:04:42,240 --> 00:04:45,120 Speaker 1: in your favor. So the market has been trending downward, 88 00:04:45,520 --> 00:04:48,480 Speaker 1: you got the direction right. Five percent in two days 89 00:04:48,560 --> 00:04:50,680 Speaker 1: gives you thirty two point to five over a two 90 00:04:50,720 --> 00:04:52,840 Speaker 1: day period because of the three x and because of 91 00:04:52,839 --> 00:04:56,359 Speaker 1: the rebalance. Now the other side of that, or where 92 00:04:56,560 --> 00:05:00,200 Speaker 1: you don't do quite as well is if semiconductor is 93 00:05:00,279 --> 00:05:02,559 Speaker 1: down five percent on day one and up five percent 94 00:05:02,600 --> 00:05:04,680 Speaker 1: on day two, you're not flat. So it's not like 95 00:05:04,720 --> 00:05:07,159 Speaker 1: buying and selling apple apples up five, down five, you 96 00:05:07,200 --> 00:05:09,640 Speaker 1: make zero. In this case, you're actually down two point 97 00:05:09,720 --> 00:05:12,719 Speaker 1: to five because on day one we rebounds the fund. 98 00:05:12,839 --> 00:05:15,400 Speaker 1: So you had a hundred three hundred, you made fifteen, 99 00:05:15,480 --> 00:05:17,679 Speaker 1: you have one fifteen. We need to rebounce the fund 100 00:05:18,160 --> 00:05:21,080 Speaker 1: and buy an additional forty thirty dollars of exposure from 101 00:05:21,320 --> 00:05:23,440 Speaker 1: three or fifteen to five. So this is like you 102 00:05:23,480 --> 00:05:26,560 Speaker 1: go to home depot rents rent a power tool, but 103 00:05:26,640 --> 00:05:29,480 Speaker 1: it comes with like compounding problems that you might not 104 00:05:29,839 --> 00:05:34,160 Speaker 1: know about or compounding benefits and let me jump in 105 00:05:34,200 --> 00:05:38,400 Speaker 1: on the daily rebouncing. That is essentially what is makes 106 00:05:38,440 --> 00:05:42,160 Speaker 1: the screwy math. People assume you buy it and then oh, 107 00:05:42,240 --> 00:05:44,120 Speaker 1: a year later, why am I not up or down 108 00:05:44,160 --> 00:05:46,880 Speaker 1: three x? The reason it has to reset daily is 109 00:05:46,880 --> 00:05:48,720 Speaker 1: because people come in and out of it. Right. It's 110 00:05:48,760 --> 00:05:50,960 Speaker 1: not like you make it for one day and then 111 00:05:51,000 --> 00:05:52,600 Speaker 1: you close it up for a year. That would make 112 00:05:52,640 --> 00:05:55,000 Speaker 1: sense then, right to have it that long term, But 113 00:05:55,040 --> 00:05:57,480 Speaker 1: because it's a daily trading vehicle, you have to reset 114 00:05:57,560 --> 00:06:01,120 Speaker 1: every day because of people coming in for absolutely right, 115 00:06:01,160 --> 00:06:03,279 Speaker 1: and that's a good point. So there are actually monthly 116 00:06:03,279 --> 00:06:05,880 Speaker 1: rebounds mutual funds that are leveraged so you can hold 117 00:06:05,920 --> 00:06:08,640 Speaker 1: them for thirty days and on day thirty the funds 118 00:06:08,680 --> 00:06:11,479 Speaker 1: rebalanced and you get two times one month's performance of 119 00:06:11,520 --> 00:06:14,800 Speaker 1: whatever index you're tracking. With the daily funds, it is 120 00:06:14,839 --> 00:06:17,760 Speaker 1: rebalanced on a daily basis, so you know, for example, 121 00:06:18,000 --> 00:06:21,880 Speaker 1: if if you had the smp FI this year, it 122 00:06:21,880 --> 00:06:23,719 Speaker 1: doesn't mean that the bull fund is up thirty, and 123 00:06:23,760 --> 00:06:25,760 Speaker 1: it doesn't mean that the bare fund is down thirty. 124 00:06:25,920 --> 00:06:28,200 Speaker 1: It can be anything. It depends on the path that 125 00:06:28,200 --> 00:06:30,480 Speaker 1: it took to get there. So trend is your front. 126 00:06:30,600 --> 00:06:33,240 Speaker 1: If you look at the Obama bottom two thousand nine 127 00:06:33,279 --> 00:06:38,360 Speaker 1: Tech until today it's up two. I know you love 128 00:06:38,400 --> 00:06:40,359 Speaker 1: this e t F tech out. We've talked about it before. 129 00:06:40,640 --> 00:06:42,600 Speaker 1: But if you look at gold miners Techo. By the way, 130 00:06:42,640 --> 00:06:48,279 Speaker 1: techle is, I believe the goat performance wise because TECH 131 00:06:48,320 --> 00:06:50,760 Speaker 1: has done nothing but go up. So in this daily rebouncing, 132 00:06:50,800 --> 00:06:52,680 Speaker 1: as long as it keeps going up every day, you 133 00:06:52,720 --> 00:06:55,839 Speaker 1: actually compound that daily resetting that the daily resetting starts 134 00:06:55,839 --> 00:06:57,200 Speaker 1: to work in your favor, you can get four or 135 00:06:57,240 --> 00:07:00,800 Speaker 1: five times. It's the volatility that will USU up. That's 136 00:07:00,800 --> 00:07:03,920 Speaker 1: called volatility drag right exactly. So so trend is your 137 00:07:03,960 --> 00:07:06,479 Speaker 1: friend and range bound volatility is essentially the enemy of 138 00:07:06,520 --> 00:07:09,560 Speaker 1: Levern University tfs because what happens is during those periods 139 00:07:09,880 --> 00:07:11,560 Speaker 1: the e t F s de kay. So you have 140 00:07:11,720 --> 00:07:13,400 Speaker 1: the market going up for a couple of days, the 141 00:07:13,400 --> 00:07:16,360 Speaker 1: bull funds increased exposure, the bear funds reduce it, and 142 00:07:16,440 --> 00:07:17,800 Speaker 1: then all of a sudden you have a down day. 143 00:07:18,040 --> 00:07:20,000 Speaker 1: You have too much exposure in the bull, not enough 144 00:07:20,000 --> 00:07:22,120 Speaker 1: exposure in the bear, and it doesn't ever catch up. 145 00:07:22,160 --> 00:07:24,320 Speaker 1: So a lot of hedge funds, for example, have figured 146 00:07:24,360 --> 00:07:27,080 Speaker 1: out that during those periods, you know they'll shore both 147 00:07:27,080 --> 00:07:28,960 Speaker 1: the Bear and the bull fund because they know that 148 00:07:29,040 --> 00:07:31,720 Speaker 1: neither will do well in that market environment. So I 149 00:07:31,840 --> 00:07:34,280 Speaker 1: have to have low volatility and training markets. I want 150 00:07:34,280 --> 00:07:35,760 Speaker 1: to get to that trade. It's called the double short. 151 00:07:35,800 --> 00:07:37,880 Speaker 1: That's like some like hardcore stuff. But well, let's just 152 00:07:38,000 --> 00:07:41,160 Speaker 1: for one second go over tackle, because tackle, to me 153 00:07:41,400 --> 00:07:44,680 Speaker 1: is the ultimate um siren. I mean, you look at 154 00:07:44,680 --> 00:07:47,800 Speaker 1: the returns and it is seducing. So this is dale 155 00:07:47,880 --> 00:07:50,560 Speaker 1: this is the compounding effect in effect. So the ten 156 00:07:50,640 --> 00:07:55,320 Speaker 1: years tackle is up four thousand percent, but the index 157 00:07:55,400 --> 00:07:58,520 Speaker 1: that it tracks is only up fos so it returned 158 00:07:58,520 --> 00:08:01,800 Speaker 1: ten times. If you and in ten years ago, however, 159 00:08:01,840 --> 00:08:05,080 Speaker 1: if we found some volatile area, you may find the 160 00:08:05,120 --> 00:08:08,960 Speaker 1: index was up, but the three x CTF was down 161 00:08:09,600 --> 00:08:12,520 Speaker 1: because it was a volatile road. Tech just happens to 162 00:08:12,520 --> 00:08:15,760 Speaker 1: be a much more smooth path up. And I think 163 00:08:15,760 --> 00:08:18,720 Speaker 1: that's the big takeaway. Is it safe to say? The 164 00:08:18,720 --> 00:08:21,880 Speaker 1: compounding effect, which is you know, this is like a 165 00:08:21,920 --> 00:08:24,720 Speaker 1: full moon. It's beautiful when it happens, but it's not 166 00:08:24,760 --> 00:08:27,960 Speaker 1: the norm. It's well, it's been it's been the norm 167 00:08:28,000 --> 00:08:30,760 Speaker 1: for the last decade, right, it's no longer than yeah, 168 00:08:30,760 --> 00:08:32,640 Speaker 1: because of the FED and we didn't have Chinese trade wars. 169 00:08:32,720 --> 00:08:34,840 Speaker 1: But if you look, I just looked this up this morning. Actually, okay, 170 00:08:34,840 --> 00:08:37,560 Speaker 1: so a year to date tackle up fifty three, Bloomberg 171 00:08:37,559 --> 00:08:40,600 Speaker 1: told a return, but the month of May tech s 172 00:08:40,679 --> 00:08:44,320 Speaker 1: the bare fund up and Tech l down, so it 173 00:08:44,360 --> 00:08:47,960 Speaker 1: lost its year to date return because markets are volatile 174 00:08:48,280 --> 00:08:50,360 Speaker 1: and the index is moving down. So those two things 175 00:08:50,400 --> 00:08:53,800 Speaker 1: together have essentially created a perfect storm. And that's obviously 176 00:08:53,840 --> 00:08:56,800 Speaker 1: around the macro backdrop and China and Huawei and all that. 177 00:08:56,840 --> 00:08:58,840 Speaker 1: But so I used a word a few minutes ago, 178 00:08:58,920 --> 00:09:02,720 Speaker 1: I said bet, and you use the word view, yes, 179 00:09:02,800 --> 00:09:04,720 Speaker 1: And I'm interested in that because I think one of 180 00:09:04,720 --> 00:09:07,280 Speaker 1: the like a layman perspective on this, it really feels 181 00:09:07,280 --> 00:09:11,199 Speaker 1: like gambling, right, So so how is it not gambling? 182 00:09:11,920 --> 00:09:14,400 Speaker 1: So I would I'd throw the question you, how is 183 00:09:14,520 --> 00:09:18,319 Speaker 1: investing not gambling? You know, if you view buying IBM 184 00:09:18,480 --> 00:09:21,160 Speaker 1: or Apple, you know, a hundred percent risk concentration in 185 00:09:21,200 --> 00:09:24,640 Speaker 1: one name, as an investment or a gamble, then I 186 00:09:24,640 --> 00:09:27,000 Speaker 1: would say your definition is fair either way. You know, 187 00:09:27,040 --> 00:09:29,319 Speaker 1: they work just like stocks, do. I think because they 188 00:09:29,360 --> 00:09:32,760 Speaker 1: have amplified exposure, there's this sense that the risk is 189 00:09:32,760 --> 00:09:35,600 Speaker 1: certainly a lot higher and people might equate that risk 190 00:09:35,679 --> 00:09:38,560 Speaker 1: to say, a gambling risk. But these are you know, 191 00:09:38,920 --> 00:09:43,440 Speaker 1: investment tools. They're they're very you know, strategic portfolio allocation 192 00:09:43,480 --> 00:09:45,800 Speaker 1: tools for short term tactical traders. You know, I think 193 00:09:45,840 --> 00:09:48,040 Speaker 1: a lot of them use a whole lot of math 194 00:09:48,080 --> 00:09:50,520 Speaker 1: and signals to make their decisions on short term trends, 195 00:09:50,520 --> 00:09:52,960 Speaker 1: long term trends, you know, hedging over the long term, 196 00:09:52,960 --> 00:09:55,160 Speaker 1: things like that. So I would consider it as much 197 00:09:55,200 --> 00:09:58,679 Speaker 1: of a trade as buying buying a tech soccer or 198 00:09:58,679 --> 00:10:01,840 Speaker 1: a high beta stock in a volatile market. But the 199 00:10:01,960 --> 00:10:04,600 Speaker 1: key word is that they are trading tools, and to 200 00:10:04,679 --> 00:10:08,640 Speaker 1: that end, who's using them. So the mix of individuals 201 00:10:08,760 --> 00:10:10,960 Speaker 1: using them is across the board. So you have the 202 00:10:11,000 --> 00:10:14,520 Speaker 1: retail community, you have hedge funds, you have are a s, 203 00:10:14,720 --> 00:10:18,679 Speaker 1: you have large asset managers. So it's everyone from you know, 204 00:10:18,760 --> 00:10:21,960 Speaker 1: my mom to x y z hedge fund to x 205 00:10:22,080 --> 00:10:24,360 Speaker 1: y z R market making shop. What is your mom 206 00:10:24,440 --> 00:10:27,120 Speaker 1: say when when when you talk to her about my 207 00:10:27,120 --> 00:10:32,200 Speaker 1: mom loves leverage, loves direction, loves tech trading. Now but 208 00:10:32,480 --> 00:10:34,960 Speaker 1: three X China, Yeah, of course, of course, you know 209 00:10:35,000 --> 00:10:36,760 Speaker 1: we wouldn't be related if she wasn't trading that. No, 210 00:10:36,880 --> 00:10:39,719 Speaker 1: But you know, so, actually it's a fair question. But 211 00:10:39,800 --> 00:10:41,719 Speaker 1: you know, so, my mom is not a short term 212 00:10:41,720 --> 00:10:44,839 Speaker 1: tactical investor, right, She's probably saving for entirement and she's 213 00:10:44,920 --> 00:10:47,440 Speaker 1: you know, a long term buy and whole investor. So 214 00:10:47,920 --> 00:10:50,800 Speaker 1: for her, she would have to have a short term conviction. 215 00:10:50,840 --> 00:10:52,720 Speaker 1: She would have to be an active day trader looking 216 00:10:52,720 --> 00:10:55,160 Speaker 1: at her account all day long to use these funds. 217 00:10:55,160 --> 00:10:57,680 Speaker 1: That's who we say is sort of the safe person, 218 00:10:57,800 --> 00:10:59,839 Speaker 1: you know, the person who stops at the red light 219 00:11:00,040 --> 00:11:02,679 Speaker 1: knows it's going to turn green, but sitting there watching it. Right, 220 00:11:02,960 --> 00:11:05,160 Speaker 1: It's it's not somebody who's gonna, you know, put in 221 00:11:05,200 --> 00:11:07,440 Speaker 1: a trade and then go golf or play tennis for 222 00:11:07,440 --> 00:11:09,600 Speaker 1: a month or two. That's not not the to that. 223 00:11:09,640 --> 00:11:12,800 Speaker 1: And like what what is um if not your mom, 224 00:11:12,920 --> 00:11:15,640 Speaker 1: maybe my mom? Like what what does she need to 225 00:11:15,679 --> 00:11:18,200 Speaker 1: know before she were to ever touch something like this? 226 00:11:18,600 --> 00:11:20,640 Speaker 1: So she needs to know the basis of how the 227 00:11:20,640 --> 00:11:23,200 Speaker 1: products work, which we talked about that trend is your friend. 228 00:11:23,480 --> 00:11:28,360 Speaker 1: Low trending, low volatility trending markets are the best environment 229 00:11:28,400 --> 00:11:29,920 Speaker 1: for these e t f s to be held longer 230 00:11:29,920 --> 00:11:33,839 Speaker 1: than a day. Volatility means trade very actively. But either way, 231 00:11:33,880 --> 00:11:36,360 Speaker 1: she needs to know that she has to actively monitor 232 00:11:36,400 --> 00:11:40,440 Speaker 1: her position rebounds frequency or frequently, and she needs to 233 00:11:40,480 --> 00:11:43,000 Speaker 1: have essentially a very high risk tolerance. She has to 234 00:11:43,080 --> 00:11:45,920 Speaker 1: understand that the losses could be magnified as well as 235 00:11:45,920 --> 00:11:47,560 Speaker 1: the games. For the record, I don't think my mom 236 00:11:47,600 --> 00:11:50,800 Speaker 1: is ready for an um um. Let me just give 237 00:11:50,840 --> 00:11:52,840 Speaker 1: one example here by the way Yin and Yang, which 238 00:11:52,840 --> 00:11:55,320 Speaker 1: I mentioned earlier, there's the three X long and short 239 00:11:55,440 --> 00:11:59,000 Speaker 1: China there. Over the past ten years, they're both down. 240 00:11:59,280 --> 00:12:03,800 Speaker 1: Yan is down, Yang is down, and f x I, 241 00:12:04,520 --> 00:12:06,760 Speaker 1: the big China et F is up. So I think 242 00:12:06,840 --> 00:12:09,600 Speaker 1: that's an example because China has been volatile. Absolutely, So 243 00:12:09,640 --> 00:12:12,640 Speaker 1: that's the sort of major warning. That's the hand getting 244 00:12:12,640 --> 00:12:15,080 Speaker 1: cut off. If you went in there, you were probably 245 00:12:15,120 --> 00:12:18,240 Speaker 1: unhappy after a couple of years, whereas Teckle you looked 246 00:12:18,240 --> 00:12:20,960 Speaker 1: out because it went up nicely. Absolutely. And if you 247 00:12:21,000 --> 00:12:22,680 Speaker 1: look at the if you look at Yin and Yang 248 00:12:22,679 --> 00:12:26,320 Speaker 1: and the China products year to date prior to UH 249 00:12:26,480 --> 00:12:28,439 Speaker 1: that late day in April, ware Trump came out and 250 00:12:28,480 --> 00:12:31,559 Speaker 1: said no deal. Those ETFs were actually we saw a 251 00:12:31,640 --> 00:12:35,920 Speaker 1: volume increase twenty day average daily volume increased by plus 252 00:12:35,920 --> 00:12:39,000 Speaker 1: and those products the performance was or more. In the 253 00:12:39,000 --> 00:12:41,720 Speaker 1: Bull Fund and it completely switched on to your point, 254 00:12:41,920 --> 00:12:44,120 Speaker 1: there was this macro event and there was volatility. So 255 00:12:44,160 --> 00:12:48,000 Speaker 1: now both funds have essentially over the long term experienced losses. 256 00:12:48,240 --> 00:12:50,280 Speaker 1: And Nugget and Dust are another good example. You know, 257 00:12:50,320 --> 00:12:52,960 Speaker 1: those are the most volatile et F s and they're 258 00:12:53,080 --> 00:12:55,800 Speaker 1: very much for a term trading tools. So there are 259 00:12:55,840 --> 00:12:58,960 Speaker 1: three X gold miners, bowl and bear et F products 260 00:12:58,960 --> 00:13:01,319 Speaker 1: and for those, you know, they were definitely one day 261 00:13:01,360 --> 00:13:03,839 Speaker 1: hold periods, you know, intra day trades. If they were 262 00:13:03,840 --> 00:13:05,400 Speaker 1: held for the long term, you would have lost on 263 00:13:05,440 --> 00:13:07,440 Speaker 1: both the bull and the bare product. But if you 264 00:13:07,480 --> 00:13:09,960 Speaker 1: were looking at sectors like SMP five hundred and tech 265 00:13:10,160 --> 00:13:12,640 Speaker 1: L three x tech for the last decade when it's 266 00:13:12,640 --> 00:13:15,160 Speaker 1: been low, volatile and trending, those trades have really paid off. 267 00:13:15,800 --> 00:13:18,920 Speaker 1: Speaking of Nugget and Dust there those are tracking gold 268 00:13:18,960 --> 00:13:22,280 Speaker 1: miners stocks. There's great great tickets. By the way, well 269 00:13:22,640 --> 00:13:25,880 Speaker 1: there's jay nug which tracks junior gold miners, which we 270 00:13:26,000 --> 00:13:29,559 Speaker 1: all call like the ultimate like that is like the 271 00:13:29,559 --> 00:13:33,400 Speaker 1: hardest of the hardcore. At one point in the first 272 00:13:33,400 --> 00:13:36,000 Speaker 1: half of the year it was up six and the 273 00:13:36,080 --> 00:13:39,520 Speaker 1: volatility on this thing sometimes gets to fifteen times the 274 00:13:39,640 --> 00:13:42,559 Speaker 1: SMP five hundred I mean this thing should they you 275 00:13:42,559 --> 00:13:45,760 Speaker 1: should ship as an X with the by order when 276 00:13:45,800 --> 00:13:48,080 Speaker 1: you you know what I mean, you need so you know, 277 00:13:48,080 --> 00:13:50,320 Speaker 1: you've got to really be able to handle a lot. 278 00:13:50,360 --> 00:13:52,760 Speaker 1: I mean, that's that's way more vaulatle than bitcoin even 279 00:13:52,800 --> 00:13:55,760 Speaker 1: at the time. Uh So some of these get into 280 00:13:55,800 --> 00:13:59,880 Speaker 1: some really even like the underlyings volatile, right right, so 281 00:14:00,080 --> 00:14:02,640 Speaker 1: more the more volatile the underlying is the more volatile. 282 00:14:02,640 --> 00:14:05,200 Speaker 1: Obviously the three x CTF will be um. And what 283 00:14:05,240 --> 00:14:07,080 Speaker 1: I would say about that though, is what's really sort 284 00:14:07,120 --> 00:14:09,320 Speaker 1: of good is that it's evolved over time and that 285 00:14:09,400 --> 00:14:12,160 Speaker 1: the holding periods for J nugg and J dust and 286 00:14:12,240 --> 00:14:15,240 Speaker 1: nugget and dust are a day or less, whereas the 287 00:14:15,240 --> 00:14:18,400 Speaker 1: holding periods for three x SMP could be a couple 288 00:14:18,400 --> 00:14:20,320 Speaker 1: of days to a week. So the average holing periods 289 00:14:20,320 --> 00:14:22,560 Speaker 1: in general for leberty tfs have come in a lot, 290 00:14:22,640 --> 00:14:24,960 Speaker 1: which is great. People are trading them and not you know, 291 00:14:25,120 --> 00:14:27,200 Speaker 1: kind of blindly buying them and hoping for the best. 292 00:14:27,680 --> 00:14:29,480 Speaker 1: And that's what we look for. We want to make 293 00:14:29,480 --> 00:14:31,960 Speaker 1: sure there's a lot of turnover, and if so, we're like, okay, 294 00:14:31,960 --> 00:14:34,760 Speaker 1: the people are probably using those correctly. There's examples of 295 00:14:34,800 --> 00:14:37,080 Speaker 1: ones that should be traded that aren't um like USO 296 00:14:37,200 --> 00:14:40,320 Speaker 1: is a good example, but leverage mostly I think the 297 00:14:40,320 --> 00:14:42,040 Speaker 1: shares trade every day, so that means the average holding 298 00:14:42,040 --> 00:14:44,480 Speaker 1: periods a day or two to that point. Just to 299 00:14:44,520 --> 00:14:47,360 Speaker 1: give some wide numbers here, there's two D and thirty 300 00:14:47,520 --> 00:14:51,120 Speaker 1: leverage inverse ETFs, but the only account for fifty billion dollars, 301 00:14:51,120 --> 00:14:53,480 Speaker 1: which is one point five percent of all e t 302 00:14:53,640 --> 00:14:57,840 Speaker 1: F sets. However, they make up probably eight nine of 303 00:14:57,880 --> 00:15:01,280 Speaker 1: all e t F trading, right, so again they're people 304 00:15:01,280 --> 00:15:03,480 Speaker 1: trade the crap out of them, which is what you 305 00:15:04,120 --> 00:15:07,600 Speaker 1: that's being used correctly for the most part. Yeah, absolutely, 306 00:15:07,600 --> 00:15:09,240 Speaker 1: that's what we want to see. And if you look 307 00:15:09,280 --> 00:15:11,080 Speaker 1: at the last couple of weeks when we've seen all 308 00:15:11,120 --> 00:15:13,800 Speaker 1: come back into the market, we've traded about a third 309 00:15:13,800 --> 00:15:16,720 Speaker 1: of our assets under management almost on a daily basis. 310 00:15:16,760 --> 00:15:20,080 Speaker 1: So people are definitely investors are definitely trading and turning 311 00:15:20,120 --> 00:15:22,320 Speaker 1: these over in the last few days when volatility is there, 312 00:15:22,320 --> 00:15:24,240 Speaker 1: which is great because again I've been doing this for 313 00:15:24,320 --> 00:15:26,280 Speaker 1: I've been with Direction for about a decade now. When 314 00:15:26,280 --> 00:15:29,320 Speaker 1: I first started, I think that the concern around education 315 00:15:29,360 --> 00:15:31,480 Speaker 1: and how to use them was, you know, less than 316 00:15:31,520 --> 00:15:33,440 Speaker 1: it is now. People are definitely trading now and the 317 00:15:33,440 --> 00:15:36,480 Speaker 1: holding periods have come in, which is and most ets 318 00:15:36,520 --> 00:15:41,200 Speaker 1: hold stocks, bonds or futures. Um, these don't these hold swaps. 319 00:15:41,240 --> 00:15:43,600 Speaker 1: Can you explain what a swap is and who it's 320 00:15:43,640 --> 00:15:46,400 Speaker 1: with and whatnot, Like what's in the fund? Sure, So 321 00:15:46,880 --> 00:15:48,440 Speaker 1: we have bull funds and bear funds. So in the 322 00:15:48,440 --> 00:15:52,239 Speaker 1: bull funds it's about two hundred and fifty percent swap. 323 00:15:52,280 --> 00:15:54,600 Speaker 1: And then the remainder of the position is a basket 324 00:15:54,600 --> 00:15:56,400 Speaker 1: of stocks or a very liquid one day to e 325 00:15:56,480 --> 00:15:59,600 Speaker 1: t F So for example, SMP five hundred basket might 326 00:15:59,600 --> 00:16:04,080 Speaker 1: be or spy might and the rest is a swap 327 00:16:04,120 --> 00:16:07,680 Speaker 1: on spy. In the bare fund, it's essentially one or 328 00:16:07,720 --> 00:16:11,000 Speaker 1: three percent exposure via swap. So the way that swaps 329 00:16:11,040 --> 00:16:13,960 Speaker 1: work is on the long side we essentially received performance 330 00:16:14,000 --> 00:16:16,360 Speaker 1: on the index. On the short side, we owe performance 331 00:16:16,360 --> 00:16:20,040 Speaker 1: on the index. Two banks. So we have seven counterparties 332 00:16:20,120 --> 00:16:23,880 Speaker 1: right now, um, and you know our competitor has the 333 00:16:24,080 --> 00:16:28,400 Speaker 1: similar group of counterparties as well. So this is like yes, 334 00:16:29,240 --> 00:16:33,720 Speaker 1: Golman Credit Suites, UM BMP Party, Boss City Group, UM, 335 00:16:33,720 --> 00:16:36,560 Speaker 1: Morgan's you know, Morgan Stanley, BAM, l U b S. 336 00:16:36,600 --> 00:16:39,480 Speaker 1: Those are some of our some of our counterparties UM, 337 00:16:39,560 --> 00:16:41,640 Speaker 1: and what we do on a daily basis is we 338 00:16:41,720 --> 00:16:43,800 Speaker 1: look at what's going on with the underlying index. So 339 00:16:43,880 --> 00:16:48,520 Speaker 1: let's say SMPS rallying today, UM, and you have two factors, 340 00:16:48,560 --> 00:16:51,200 Speaker 1: the primary market in the secondary market, so secondary is 341 00:16:51,320 --> 00:16:54,880 Speaker 1: the index itself and primary is creation and redemption activity. 342 00:16:54,920 --> 00:16:59,040 Speaker 1: So that's authorized participants essentially creating or redeeming shares. And 343 00:16:59,120 --> 00:17:00,720 Speaker 1: we have a number at the to the day. So 344 00:17:00,840 --> 00:17:03,640 Speaker 1: if let's say the SMPS up and there are a 345 00:17:03,640 --> 00:17:07,639 Speaker 1: lot of creates, we go to whichever bank City Ubs 346 00:17:07,800 --> 00:17:10,480 Speaker 1: Meryl credits with and we say we need to buy 347 00:17:10,560 --> 00:17:13,320 Speaker 1: fifty million of exposure and swap to SMP. If there 348 00:17:13,320 --> 00:17:16,119 Speaker 1: are redemptions, that number could be you know, five million, 349 00:17:16,160 --> 00:17:18,480 Speaker 1: whatever it is. UM. We're buying and selling swap on 350 00:17:18,560 --> 00:17:20,679 Speaker 1: a daily basis and managing the fund that way, so 351 00:17:20,720 --> 00:17:30,840 Speaker 1: the bank does the trading. That's the important thing. We 352 00:17:30,960 --> 00:17:36,679 Speaker 1: touched on gold China Tech. What isn't leverage used for 353 00:17:37,400 --> 00:17:40,840 Speaker 1: So the issue or something that would hold us back 354 00:17:40,840 --> 00:17:43,159 Speaker 1: from launching a new fund would be liquidity in the 355 00:17:43,240 --> 00:17:46,240 Speaker 1: underlying and options for us to create the fund. So, 356 00:17:46,280 --> 00:17:48,560 Speaker 1: for example, one of the most top popular topics out 357 00:17:48,600 --> 00:17:52,200 Speaker 1: there has been bitcoin related products or marijuana related ETFs. 358 00:17:52,480 --> 00:17:55,760 Speaker 1: You know, the liquidity and the availability of underlyings is 359 00:17:55,800 --> 00:17:59,160 Speaker 1: just not there to support a three beta fund, So 360 00:17:59,359 --> 00:18:01,400 Speaker 1: you know, things like that we tend to stay away from. 361 00:18:01,400 --> 00:18:03,920 Speaker 1: You know, direction is kind of risk averse in terms of, 362 00:18:04,359 --> 00:18:06,320 Speaker 1: you know, we don't want to launch a product that 363 00:18:06,480 --> 00:18:09,359 Speaker 1: if there was an underlying move of we couldn't rebounce 364 00:18:09,400 --> 00:18:11,280 Speaker 1: on Daihi basis. So, for example, we stay away from 365 00:18:11,359 --> 00:18:14,280 Speaker 1: vix because we just worry about what would happen with 366 00:18:14,640 --> 00:18:16,640 Speaker 1: the futures market and we kind of saw that blow 367 00:18:16,720 --> 00:18:19,280 Speaker 1: up UM a couple of times in history here, So 368 00:18:19,320 --> 00:18:22,480 Speaker 1: we tend to stick to very liquid. They can be volatile, 369 00:18:22,520 --> 00:18:23,879 Speaker 1: but they have to be liquid and there has to 370 00:18:23,920 --> 00:18:26,120 Speaker 1: be a lot of options to build e TF. That's 371 00:18:26,119 --> 00:18:28,280 Speaker 1: how crazy the VIX area is. But the three X 372 00:18:28,320 --> 00:18:32,280 Speaker 1: people will they're like, we're not, we don't go there. Yeah, 373 00:18:32,400 --> 00:18:34,320 Speaker 1: that we gotta have Velocity shares in here. I mean 374 00:18:34,359 --> 00:18:39,600 Speaker 1: that's like that's NC seventeen territory. Yeah. And how lucrative 375 00:18:40,560 --> 00:18:44,720 Speaker 1: is the leverage space. Well, the management fee on the 376 00:18:44,760 --> 00:18:47,720 Speaker 1: majority of three beta et F products, and we have 377 00:18:47,760 --> 00:18:50,480 Speaker 1: about thirteen billion a u M. Most of that is 378 00:18:50,880 --> 00:18:53,160 Speaker 1: in three x CTF. So that gives you a sense 379 00:18:53,200 --> 00:18:55,359 Speaker 1: of you know, the profit on on the e t 380 00:18:55,480 --> 00:18:57,680 Speaker 1: f s. Of course they're financing expenses and things like that. 381 00:18:57,720 --> 00:18:59,840 Speaker 1: But um, you know, when we we look at the 382 00:19:00,000 --> 00:19:01,520 Speaker 1: revenue of the E t F industry, it's something we 383 00:19:01,560 --> 00:19:03,400 Speaker 1: do every year we called welcome to the jungle because 384 00:19:03,400 --> 00:19:05,520 Speaker 1: there's just not a lot of revenue, so be warned. 385 00:19:05,800 --> 00:19:08,640 Speaker 1: But the leverage providers do the best. Uh, they punch 386 00:19:08,680 --> 00:19:11,600 Speaker 1: way above their weight. They might rank eleventh and twelfth 387 00:19:11,640 --> 00:19:14,359 Speaker 1: asset wise, but they probably rank fifth and sixth revenue wise, 388 00:19:14,400 --> 00:19:17,239 Speaker 1: because that when you trade, traders don't really care what 389 00:19:17,280 --> 00:19:19,600 Speaker 1: the fees are. That's why black Rock still makes the 390 00:19:19,640 --> 00:19:21,679 Speaker 1: most money from e M even though most people are 391 00:19:21,680 --> 00:19:24,440 Speaker 1: going to i MG, because the traders that they don't 392 00:19:24,440 --> 00:19:27,480 Speaker 1: really care that it costs whatever seventy basis points. So 393 00:19:27,720 --> 00:19:30,000 Speaker 1: I think you guys are a good takeover target. Frankly 394 00:19:30,119 --> 00:19:33,000 Speaker 1: for a company looking to get a foothold into e 395 00:19:33,040 --> 00:19:37,359 Speaker 1: t f s steady ready revenue stream. Janice bought Velocity Shares, 396 00:19:37,680 --> 00:19:41,760 Speaker 1: which was a wild head scratching acquisition, but it honestly, 397 00:19:41,760 --> 00:19:46,080 Speaker 1: those Velocity shares are contribute like the revenue of janiss 398 00:19:46,119 --> 00:19:48,000 Speaker 1: et F line. So what's the player? Are you guys 399 00:19:48,040 --> 00:19:51,399 Speaker 1: gonna are you looking for for bigger fish or or 400 00:19:51,440 --> 00:19:53,880 Speaker 1: are you happy where you are? We are the big 401 00:19:53,880 --> 00:19:59,800 Speaker 1: fish right now, there you go. I definitely tell you right, 402 00:20:00,040 --> 00:20:02,760 Speaker 1: yeah you should. Here's some inside information and I am 403 00:20:02,800 --> 00:20:07,639 Speaker 1: now fired. Um just quickly before we go onto some 404 00:20:07,680 --> 00:20:10,080 Speaker 1: other topics. The double short, yes, Now, this is a 405 00:20:10,080 --> 00:20:12,359 Speaker 1: trade that hedge funds love to do, where they short 406 00:20:12,440 --> 00:20:14,640 Speaker 1: both the three X long and the short. Basically, it's 407 00:20:14,640 --> 00:20:18,639 Speaker 1: a bet on volatility. What percentage of your three x 408 00:20:18,720 --> 00:20:23,000 Speaker 1: et F family volume is the double short versus regular use? 409 00:20:23,359 --> 00:20:26,520 Speaker 1: I would say it's about and in a way it's 410 00:20:26,520 --> 00:20:29,879 Speaker 1: probably shrinking, which sort of seems counterintuitive because that trade 411 00:20:29,920 --> 00:20:32,520 Speaker 1: is now working. So a lot of hedge funds have 412 00:20:32,560 --> 00:20:34,520 Speaker 1: been doing that trade for many years, but as we said, 413 00:20:34,560 --> 00:20:37,000 Speaker 1: the market has been low, volatile and trending. So the 414 00:20:37,040 --> 00:20:40,800 Speaker 1: problem that they face now is that you know, the 415 00:20:40,800 --> 00:20:43,800 Speaker 1: trade definitely works if you have volatile markets and you 416 00:20:43,840 --> 00:20:46,080 Speaker 1: have say a three x gold miners bull fund and 417 00:20:46,240 --> 00:20:49,240 Speaker 1: goal miners bear fund. They're both decaying, so if you're 418 00:20:49,280 --> 00:20:52,480 Speaker 1: sure both of them, in theory will generate alpha. The trick, though, 419 00:20:52,600 --> 00:20:56,040 Speaker 1: is the borrow, and as we have more volatility, the 420 00:20:56,119 --> 00:20:58,800 Speaker 1: cost of the borrow for the hedge funds to employ 421 00:20:58,920 --> 00:21:01,560 Speaker 1: that trade goes up. So you need some serious returns 422 00:21:01,640 --> 00:21:03,840 Speaker 1: to make up for what they're charging you to short 423 00:21:03,880 --> 00:21:06,840 Speaker 1: the products. But you know that being said, the biggest 424 00:21:06,840 --> 00:21:10,399 Speaker 1: double short trades are still in you know, tax semiconductors, 425 00:21:10,400 --> 00:21:14,399 Speaker 1: emerging markets, China, and it's probably about ten of the 426 00:21:14,440 --> 00:21:15,760 Speaker 1: e T F A U. I'm out there. So the 427 00:21:15,800 --> 00:21:18,240 Speaker 1: way that we you know, people always say, why do 428 00:21:18,240 --> 00:21:20,240 Speaker 1: you talk about the double shore you work for the company. 429 00:21:20,320 --> 00:21:22,879 Speaker 1: Isn't that an opinion that it's it's bad. It's absolutely not. 430 00:21:22,960 --> 00:21:25,880 Speaker 1: The products are tactical trading tools. If you shore both 431 00:21:25,880 --> 00:21:28,440 Speaker 1: of them, it's a way to generate alpha. And for us, 432 00:21:28,840 --> 00:21:31,960 Speaker 1: you know, when when you go to or a client 433 00:21:32,040 --> 00:21:34,760 Speaker 1: goes short nugget or dust or whatever it might be, 434 00:21:35,000 --> 00:21:37,879 Speaker 1: someone behind the scenes has to create those shares so 435 00:21:37,960 --> 00:21:42,119 Speaker 1: it doesn't hurt our A U M. Actually like I'm 436 00:21:42,160 --> 00:21:45,000 Speaker 1: I'm really intrigued by the idea. It's I love that 437 00:21:45,080 --> 00:21:47,359 Speaker 1: has a name totally and that you can do it, 438 00:21:47,520 --> 00:21:53,160 Speaker 1: you know, in multiple different uh, with multiple different funds. Uh. 439 00:21:53,520 --> 00:21:55,480 Speaker 1: It takes Cojones. I think that well, I think it 440 00:21:55,600 --> 00:21:57,240 Speaker 1: was a credit space or somebody just study on the 441 00:21:57,240 --> 00:21:58,960 Speaker 1: double short and they found that it does work most 442 00:21:58,960 --> 00:22:01,159 Speaker 1: of the time. But when it does work, when that 443 00:22:01,240 --> 00:22:04,760 Speaker 1: compounding effect kicks in and you start to that starts 444 00:22:04,760 --> 00:22:07,600 Speaker 1: to kick in and your short, you know, that downside 445 00:22:07,600 --> 00:22:09,920 Speaker 1: is unlimited, right, and that's when it's not one hand 446 00:22:10,000 --> 00:22:13,040 Speaker 1: is two hands. Yeah, it's exactly right. The tail risk 447 00:22:13,359 --> 00:22:16,080 Speaker 1: on the double short is is scary. Yeah. So the 448 00:22:16,240 --> 00:22:18,679 Speaker 1: two big risks for the trade are basically a trend 449 00:22:18,880 --> 00:22:20,720 Speaker 1: that you catch a trend on one side or the other. 450 00:22:21,000 --> 00:22:24,320 Speaker 1: And the second thing is is borrow risk. So recall 451 00:22:24,480 --> 00:22:27,640 Speaker 1: risk and rewrate risk. And you know, we we saw 452 00:22:27,720 --> 00:22:31,320 Speaker 1: that this trade. You know, the borrow was very um efficient. 453 00:22:31,359 --> 00:22:34,359 Speaker 1: It was cheap, i would say, for you know, prior 454 00:22:34,400 --> 00:22:36,199 Speaker 1: to this year, in the last decade or so. But 455 00:22:36,320 --> 00:22:39,399 Speaker 1: that's changing. It's becoming more expensive to finance these trades, 456 00:22:39,480 --> 00:22:43,040 Speaker 1: so that increases your risk too. Um. So, you know, 457 00:22:43,480 --> 00:22:45,960 Speaker 1: unless you're in a position where you're a huge hedge 458 00:22:46,000 --> 00:22:49,080 Speaker 1: fund and you have awesome borrow, it's it's it's not 459 00:22:49,119 --> 00:22:51,240 Speaker 1: an everyday trade, right, It's it's definitely more of a 460 00:22:51,320 --> 00:22:56,040 Speaker 1: sophisticated um you know, hedge fun type of trade. UM. 461 00:22:56,200 --> 00:22:59,800 Speaker 1: So one question on some concerns about leverage besides the 462 00:23:00,040 --> 00:23:03,240 Speaker 1: usage which we just went over. UM. The Boston Fed 463 00:23:03,280 --> 00:23:05,080 Speaker 1: did a study but I've seen this before, which is 464 00:23:05,119 --> 00:23:07,640 Speaker 1: basically they looked at different ways et f s could 465 00:23:07,640 --> 00:23:10,600 Speaker 1: actually increase structural risk to the market. And one of 466 00:23:10,640 --> 00:23:12,800 Speaker 1: the ways they did they said that there could be 467 00:23:12,840 --> 00:23:16,679 Speaker 1: some extra risk is the amplifying of volatility by leverage 468 00:23:16,680 --> 00:23:19,760 Speaker 1: ets because here's the quote. Basically, at the end of 469 00:23:19,760 --> 00:23:21,800 Speaker 1: the day, you rebalance and both must trade in the 470 00:23:21,840 --> 00:23:24,520 Speaker 1: same direction as the market moves earlier that day. So 471 00:23:24,560 --> 00:23:28,119 Speaker 1: that provides a little amplification of what just happened. And 472 00:23:28,160 --> 00:23:29,879 Speaker 1: I think it's that daily rebalancing at the end of 473 00:23:29,880 --> 00:23:32,560 Speaker 1: the day that some people have concerned about. I know 474 00:23:32,600 --> 00:23:35,240 Speaker 1: there's a lot of maybe histrionics around it. Can you 475 00:23:35,280 --> 00:23:37,359 Speaker 1: just set a straight about what's going on and whether 476 00:23:37,400 --> 00:23:39,720 Speaker 1: there is some extra risk there? Sure? So there there 477 00:23:39,760 --> 00:23:42,800 Speaker 1: are three factors. One is that you have both funds 478 00:23:42,800 --> 00:23:44,520 Speaker 1: and bare funds, so the trade at the end of 479 00:23:44,520 --> 00:23:46,720 Speaker 1: the day on either side is not as big as 480 00:23:46,720 --> 00:23:49,040 Speaker 1: you think because you have to rebalance both funds, right, 481 00:23:49,080 --> 00:23:51,520 Speaker 1: so there's a net position there. The second thing is 482 00:23:51,560 --> 00:23:55,480 Speaker 1: that there are often contrarian trades. If everything is sort 483 00:23:55,480 --> 00:23:58,960 Speaker 1: of down today, let's say tech semiconductors SMPR downstay we 484 00:23:59,080 --> 00:24:02,679 Speaker 1: often see creates come in, so people are taking a 485 00:24:02,680 --> 00:24:05,239 Speaker 1: contrarian view, or else they're unwinding a hedge, so that 486 00:24:05,320 --> 00:24:09,040 Speaker 1: reduces the buy into the end of the day trading. Um, 487 00:24:09,080 --> 00:24:10,879 Speaker 1: it's a lot less than you would think. So I 488 00:24:10,920 --> 00:24:14,440 Speaker 1: looked back at this and on our most volatile day, 489 00:24:14,520 --> 00:24:18,600 Speaker 1: we were one half of one percent of the close activity. 490 00:24:18,800 --> 00:24:21,840 Speaker 1: On an average day where one tenth of one percent 491 00:24:22,320 --> 00:24:24,960 Speaker 1: of the end of day activity. So we basically are 492 00:24:25,640 --> 00:24:28,520 Speaker 1: an absolute blip on the radar. This is for e 493 00:24:28,600 --> 00:24:30,240 Speaker 1: t fs in general when you look at them. I 494 00:24:30,240 --> 00:24:34,000 Speaker 1: mean even all ETFs combined only own maybe eight percent 495 00:24:34,080 --> 00:24:36,680 Speaker 1: of the stock market, and if leveraged is one point 496 00:24:36,720 --> 00:24:39,440 Speaker 1: five percent of that eight percent, and you're down to 497 00:24:39,520 --> 00:24:42,960 Speaker 1: some pretty small numbers. Usually context calms people down with 498 00:24:43,080 --> 00:24:44,840 Speaker 1: e t F worries. When you start to show the 499 00:24:44,880 --> 00:24:48,880 Speaker 1: whole big picture, they're like, okay, um, but that's something 500 00:24:48,920 --> 00:24:50,840 Speaker 1: that comes up repeatedly. I'm sure you get questions on 501 00:24:50,880 --> 00:24:53,280 Speaker 1: this a lot. Yeah. I think I think that you 502 00:24:53,320 --> 00:24:55,040 Speaker 1: know when you see big moves in the market and 503 00:24:55,119 --> 00:24:57,280 Speaker 1: you think of three beta funds or any kind of 504 00:24:57,640 --> 00:25:01,200 Speaker 1: product that has a tendency to have high volatility and 505 00:25:01,320 --> 00:25:03,960 Speaker 1: needs to buy or sell in the market, and especially 506 00:25:04,000 --> 00:25:06,720 Speaker 1: at the end of the day. There's this general thesis that, oh, well, 507 00:25:06,760 --> 00:25:09,120 Speaker 1: it must impact the clothes. But the truth is, again, 508 00:25:09,200 --> 00:25:12,159 Speaker 1: on the most volatile day, we were one half of 509 00:25:12,280 --> 00:25:15,760 Speaker 1: one percent, So that's a two thousand and eight end 510 00:25:15,800 --> 00:25:18,280 Speaker 1: of day trade. So what when you talk to your 511 00:25:18,320 --> 00:25:23,320 Speaker 1: power users, what do they want that they can't get yet? 512 00:25:24,400 --> 00:25:27,440 Speaker 1: So well, a lot of people want, you know, three 513 00:25:27,720 --> 00:25:31,040 Speaker 1: x anything tacky like three x five G, three x POD, 514 00:25:31,160 --> 00:25:33,960 Speaker 1: three x bitcoin. Um. But there have been you know, 515 00:25:34,160 --> 00:25:36,200 Speaker 1: we're always getting good ideas. We have a lot of 516 00:25:36,240 --> 00:25:38,760 Speaker 1: traders that trade internationally and they would like to see, 517 00:25:39,200 --> 00:25:41,639 Speaker 1: you know, more bowl and bear funds on single country 518 00:25:41,680 --> 00:25:44,639 Speaker 1: They would like to see, um, you know, more bone 519 00:25:44,720 --> 00:25:48,520 Speaker 1: bear funds on specific regions that might be impacted by say, 520 00:25:48,880 --> 00:25:51,399 Speaker 1: you know, European politics, Brexit, things like that. So there 521 00:25:51,440 --> 00:25:54,879 Speaker 1: are symptomatic ideas. UM. We were actually pushed to use 522 00:25:54,960 --> 00:25:56,879 Speaker 1: leverage in different ways for buy and hold clients. So 523 00:25:56,960 --> 00:25:59,800 Speaker 1: we have light leverage to so one point to five 524 00:25:59,840 --> 00:26:02,040 Speaker 1: for traders who don't trade, but want a little bit. 525 00:26:02,200 --> 00:26:07,560 Speaker 1: So is that single x it's one five x exactly. Yeah, 526 00:26:07,600 --> 00:26:10,200 Speaker 1: so you're getting a little bit of enhancement over the 527 00:26:10,280 --> 00:26:12,320 Speaker 1: long run. And that's that's just you know, a lot 528 00:26:12,359 --> 00:26:15,240 Speaker 1: of clients said, Hey, I just think that I'd like 529 00:26:15,320 --> 00:26:17,080 Speaker 1: to be invested in the SMP five hundred for the 530 00:26:17,200 --> 00:26:20,240 Speaker 1: next hundred years because it's twelve annulyzed return no matter 531 00:26:20,320 --> 00:26:21,800 Speaker 1: what happens in between. But I don't know if I 532 00:26:21,840 --> 00:26:23,879 Speaker 1: want to amplify it. I don't want to three x, 533 00:26:24,000 --> 00:26:26,760 Speaker 1: but two point t five extra makes sense to me. 534 00:26:27,040 --> 00:26:31,280 Speaker 1: The amount of momb taking on diet Coke, Yeah, diet Coke, Yeah, 535 00:26:31,840 --> 00:26:36,800 Speaker 1: you know, both both leverage companies. UM. I frequently compared 536 00:26:36,800 --> 00:26:39,880 Speaker 1: to the Godfather and Godfather too when he's like, we're 537 00:26:39,920 --> 00:26:42,000 Speaker 1: trying to take the family legit, you know, that's his 538 00:26:42,080 --> 00:26:45,280 Speaker 1: big thing. They both came out with the line of 539 00:26:45,320 --> 00:26:48,840 Speaker 1: plain vanilla E T F direction has some some somewhat 540 00:26:48,840 --> 00:26:52,200 Speaker 1: successful ones that are just normal, right, Like you have 541 00:26:52,359 --> 00:26:54,600 Speaker 1: q q QI, which is the equal weighted cues, which 542 00:26:54,640 --> 00:26:57,359 Speaker 1: we just analyzed a couple of weeks ago in the show. Um, 543 00:26:57,680 --> 00:27:01,080 Speaker 1: what's behind that? Why not just be like that leverage provider? 544 00:27:01,119 --> 00:27:03,920 Speaker 1: Why do those other ones. It's like a little off 545 00:27:03,960 --> 00:27:06,560 Speaker 1: brand because I think that I think we've done really 546 00:27:06,600 --> 00:27:08,720 Speaker 1: well with the tactical clients. So there's three types of 547 00:27:08,760 --> 00:27:11,560 Speaker 1: clients I think out there. One is tactical, their short 548 00:27:11,680 --> 00:27:15,480 Speaker 1: term traders. They love us, they know us, they're comfortable 549 00:27:15,560 --> 00:27:18,080 Speaker 1: with three X. Then you have thematic and strategic. So 550 00:27:18,240 --> 00:27:20,960 Speaker 1: thematic are the six to twelve month guys, and they're 551 00:27:21,000 --> 00:27:24,920 Speaker 1: not necessarily using leverage. They're more less looking to express 552 00:27:24,960 --> 00:27:28,119 Speaker 1: thematic views or macro views, and they might do something like, 553 00:27:28,359 --> 00:27:30,040 Speaker 1: you know, we launch relative way e t F there 554 00:27:30,080 --> 00:27:32,879 Speaker 1: one fifty fifty, so they're looking to you know, express 555 00:27:32,880 --> 00:27:34,560 Speaker 1: a view that they like value over growth for the 556 00:27:34,680 --> 00:27:37,840 Speaker 1: next six months and they'd like to you know, get 557 00:27:37,880 --> 00:27:40,320 Speaker 1: the benefit of value performing and then the spread between 558 00:27:40,359 --> 00:27:42,760 Speaker 1: value and growth performing and one product. So that's a 559 00:27:42,800 --> 00:27:46,600 Speaker 1: thematic you know, not high leverage products. Standard deviation is 560 00:27:46,680 --> 00:27:49,200 Speaker 1: similar to the underlying one beta product. It can be 561 00:27:49,280 --> 00:27:51,520 Speaker 1: bought and hold for long periods of time. And then 562 00:27:51,560 --> 00:27:54,240 Speaker 1: there's the strategic client, which is Eric, you know, the 563 00:27:54,880 --> 00:27:56,560 Speaker 1: guy or girl who uses q k q E, which 564 00:27:56,600 --> 00:27:59,040 Speaker 1: is crushing it right now because fang is getting crushed 565 00:27:59,160 --> 00:28:02,240 Speaker 1: right now. So that's you know, a Nazaki product and 566 00:28:02,640 --> 00:28:05,000 Speaker 1: and that's really you know, the long and I would 567 00:28:05,000 --> 00:28:07,640 Speaker 1: consider portfolio plus in that group too. It's the long 568 00:28:07,800 --> 00:28:11,440 Speaker 1: term strategic asset allocator, you know, holding periods of years. 569 00:28:11,640 --> 00:28:14,400 Speaker 1: They might just want a little bit of additional exposure 570 00:28:14,440 --> 00:28:16,639 Speaker 1: to an index like one point to five, or they 571 00:28:16,760 --> 00:28:19,760 Speaker 1: might want you know, strategic beta like an insider et 572 00:28:19,920 --> 00:28:22,520 Speaker 1: f A Nazakia something like that. So we touched. We 573 00:28:22,600 --> 00:28:25,080 Speaker 1: we basically realized, you know, hey, we're really good at 574 00:28:25,119 --> 00:28:27,000 Speaker 1: doing this one thing for this one group of clients. 575 00:28:27,440 --> 00:28:30,280 Speaker 1: But that's there's other player types. There's other player types too, 576 00:28:30,320 --> 00:28:32,800 Speaker 1: and they're the you know, massive areas and asset managers 577 00:28:32,840 --> 00:28:35,520 Speaker 1: out there. So so because this is by and large 578 00:28:35,560 --> 00:28:39,600 Speaker 1: sort of a daily ritual with folks, and you describe 579 00:28:39,640 --> 00:28:42,240 Speaker 1: these different player types when you guys look at the 580 00:28:43,000 --> 00:28:45,880 Speaker 1: sort of the I guess the inflows and the trading patterns. 581 00:28:46,120 --> 00:28:50,320 Speaker 1: How big of of of views are people expressing? How 582 00:28:50,400 --> 00:28:53,000 Speaker 1: much are they putting in? There are some pretty big views. 583 00:28:53,240 --> 00:28:54,920 Speaker 1: There are some pretty big views. You know, we can 584 00:28:55,160 --> 00:28:58,200 Speaker 1: we have days of twenty million or forty million shares 585 00:28:58,240 --> 00:29:01,000 Speaker 1: traded in some of our top ets. Said lately, we've 586 00:29:01,080 --> 00:29:04,040 Speaker 1: seen you know, massive increases across the board and everything 587 00:29:04,120 --> 00:29:07,640 Speaker 1: that has to do with anything you know, growthy, high beta, 588 00:29:08,200 --> 00:29:11,840 Speaker 1: China trade terraff related. So um, the trades could be 589 00:29:12,040 --> 00:29:14,560 Speaker 1: you know, anywhere from a million to sixty million. They're 590 00:29:14,600 --> 00:29:17,800 Speaker 1: big tickets. They're definitely big tickets as compared to you know, 591 00:29:17,880 --> 00:29:20,400 Speaker 1: a newer product that we might launch where somebody puts 592 00:29:20,440 --> 00:29:23,120 Speaker 1: in fifty. These tend to be bigger trades. And what 593 00:29:23,160 --> 00:29:26,440 Speaker 1: do you attribute that increase in the size of the 594 00:29:26,520 --> 00:29:30,160 Speaker 1: trades to. I think opportunity. I think short term opportunity. 595 00:29:30,200 --> 00:29:32,920 Speaker 1: So we really see big bumps in an AUM and 596 00:29:32,960 --> 00:29:36,400 Speaker 1: trading around UM times like earnings for example, where people 597 00:29:36,440 --> 00:29:39,920 Speaker 1: have very strong conviction about certain names coming out, we'll 598 00:29:39,920 --> 00:29:41,360 Speaker 1: see a lot of flow and we'll also see a 599 00:29:41,400 --> 00:29:43,880 Speaker 1: lot of performance and then just big macro events that 600 00:29:43,960 --> 00:29:46,680 Speaker 1: move the market. You know, the tactical technical traders are, 601 00:29:47,160 --> 00:29:49,280 Speaker 1: you know, the people who understand the products and have 602 00:29:49,520 --> 00:29:51,480 Speaker 1: a strong opinion. It's a great way. You know, where 603 00:29:51,520 --> 00:29:53,120 Speaker 1: are you gonna make thirty three percent in a month 604 00:29:53,240 --> 00:29:56,160 Speaker 1: right now? Well? Semi conductor bare fund that trades not 605 00:29:56,320 --> 00:29:58,880 Speaker 1: for everyone, but for the sophisticated trader who has a 606 00:29:58,960 --> 00:30:01,280 Speaker 1: view on semi conductors. It plays out. It's it's a 607 00:30:01,360 --> 00:30:03,880 Speaker 1: great short term outh opportunity. Yeah, there's a hedge fund 608 00:30:03,880 --> 00:30:06,920 Speaker 1: I interviewed from my book UM Metropolitan Capital I believe 609 00:30:07,000 --> 00:30:09,760 Speaker 1: is the name, and Sharon Snow who was a great interview. 610 00:30:10,520 --> 00:30:14,080 Speaker 1: This hedge fund does nothing but leveraged ETFs, but they 611 00:30:14,160 --> 00:30:17,480 Speaker 1: only invest once in a while, like like eighteen different 612 00:30:17,520 --> 00:30:20,000 Speaker 1: metrics have to line up, and then they know they 613 00:30:20,200 --> 00:30:22,920 Speaker 1: want that. They they're so convicted they go all in 614 00:30:23,040 --> 00:30:25,640 Speaker 1: with the three x UM. So it's sort of like 615 00:30:25,720 --> 00:30:27,640 Speaker 1: they just wait and wait and wait, and they see 616 00:30:27,640 --> 00:30:29,760 Speaker 1: an opportunity and then they just use the leverage GTF 617 00:30:29,880 --> 00:30:32,360 Speaker 1: to make it. And it's a really interesting way of investing. 618 00:30:32,840 --> 00:30:35,760 Speaker 1: It takes a lot of discipline and patience, but when 619 00:30:35,800 --> 00:30:38,920 Speaker 1: you pounce, you pounce hard. Yeah. So I know Sharon 620 00:30:39,040 --> 00:30:41,200 Speaker 1: very well. They are very very disciplined in their views. 621 00:30:41,240 --> 00:30:44,000 Speaker 1: And as you said, they don't trade often, but when 622 00:30:44,040 --> 00:30:46,680 Speaker 1: they trade, they trade with high conviction, and they trade 623 00:30:46,720 --> 00:30:50,959 Speaker 1: in size, and they have mythical mathematical models which give 624 00:30:51,040 --> 00:30:53,760 Speaker 1: them a signal and you know, until they get to 625 00:30:54,000 --> 00:30:56,960 Speaker 1: a sweet spot, perfect environment to go longer short a 626 00:30:57,000 --> 00:30:59,440 Speaker 1: bull er bear ETF. You know, they're sort of hands 627 00:30:59,480 --> 00:31:02,080 Speaker 1: off and it's really worked out for them because they 628 00:31:02,200 --> 00:31:05,280 Speaker 1: have called a lot of the crack trends, so they've 629 00:31:05,320 --> 00:31:07,800 Speaker 1: they've been doing a great job. So now that we're 630 00:31:07,880 --> 00:31:09,640 Speaker 1: kind of closing here, let's have a little fun here. 631 00:31:09,680 --> 00:31:11,840 Speaker 1: One of the things with leverage ETFs that rules is 632 00:31:11,880 --> 00:31:14,760 Speaker 1: the tickers. I mean, every time they have a new one, 633 00:31:14,800 --> 00:31:17,120 Speaker 1: the tickers are amazing. I mean there are home runs 634 00:31:17,160 --> 00:31:20,960 Speaker 1: every time. So recently you had talk and mute t 635 00:31:21,200 --> 00:31:23,120 Speaker 1: A w K and mute. That's going to be three 636 00:31:23,240 --> 00:31:27,400 Speaker 1: x communications and three x bear communications. Want and need 637 00:31:27,480 --> 00:31:31,120 Speaker 1: are good, Ying and yang, dig and doug, drip and gush. 638 00:31:32,720 --> 00:31:35,080 Speaker 1: What's that one for? What are those four oil, chiff 639 00:31:35,080 --> 00:31:37,120 Speaker 1: and gush? Yeah, they're they're three x SMP oil and 640 00:31:37,240 --> 00:31:40,240 Speaker 1: energy ETF. There you go. Cure and sick is six 641 00:31:40,280 --> 00:31:45,720 Speaker 1: little round that close sick, sick up the flu. Only 642 00:31:45,840 --> 00:31:49,360 Speaker 1: cure survives. So good ticker. Great band reminds me of 643 00:31:49,720 --> 00:31:52,680 Speaker 1: the band the Cure. Yeah, actually a great trade now too? 644 00:31:52,880 --> 00:31:55,760 Speaker 1: How many how many of those tickers can you take 645 00:31:55,800 --> 00:32:00,920 Speaker 1: credit for? You know? I the tickers that I come 646 00:32:01,000 --> 00:32:03,400 Speaker 1: up with are terrible, So I can't really, guys can't. Really. 647 00:32:04,440 --> 00:32:07,360 Speaker 1: It's the staff. We we send emails around, we argue 648 00:32:07,400 --> 00:32:10,320 Speaker 1: about it. Really, Yeah, we we have different opinions on it, 649 00:32:10,400 --> 00:32:12,280 Speaker 1: but I have to say it's it's more or less 650 00:32:12,280 --> 00:32:14,560 Speaker 1: our trading desk that comes up with the great you know, 651 00:32:14,640 --> 00:32:16,719 Speaker 1: if there's ever a round table meeting that we can 652 00:32:16,760 --> 00:32:19,719 Speaker 1: be flies on the wall for. Yeah, well, are there 653 00:32:19,720 --> 00:32:22,000 Speaker 1: any tickers that were on the cutting room floor that 654 00:32:22,280 --> 00:32:24,960 Speaker 1: that are just interesting or should have made it? I 655 00:32:25,000 --> 00:32:26,800 Speaker 1: mean for the healthcare one of the one of the 656 00:32:26,920 --> 00:32:29,800 Speaker 1: names we have lab you and lab D that's three 657 00:32:29,960 --> 00:32:32,960 Speaker 1: X biotech and you know, rat and rats was on 658 00:32:33,080 --> 00:32:35,880 Speaker 1: the table for a while, but then we thought, you know, 659 00:32:36,000 --> 00:32:40,960 Speaker 1: that gets into some animal treatment issues and yeah, we 660 00:32:41,040 --> 00:32:44,320 Speaker 1: try to be careful. Sounds like because they're fun, but 661 00:32:44,400 --> 00:32:47,760 Speaker 1: they're not over the PC linel be careful. Yeah, Rat 662 00:32:47,800 --> 00:32:50,320 Speaker 1: would would definitely speak to that. I think. So how 663 00:32:50,440 --> 00:32:52,680 Speaker 1: often will you sit on a ticker that you like 664 00:32:53,080 --> 00:32:55,320 Speaker 1: even though you don't have that product yet? So we 665 00:32:55,440 --> 00:32:57,800 Speaker 1: filed for a whole bunch of products, and you know, 666 00:32:57,880 --> 00:33:00,760 Speaker 1: we do reserve tickers along the way. So it's you know, 667 00:33:00,840 --> 00:33:03,000 Speaker 1: when we have an idea that we think is absolutely brilliant, 668 00:33:03,040 --> 00:33:05,160 Speaker 1: will do it. And a lot of et F providers 669 00:33:05,200 --> 00:33:08,080 Speaker 1: do that actually, so, yeah, there's a lot reserved. It's 670 00:33:08,080 --> 00:33:10,320 Speaker 1: the whole thing. I've heard that they trade tickers. Now 671 00:33:10,400 --> 00:33:12,440 Speaker 1: that you have on loan or that you've reserved, you 672 00:33:12,480 --> 00:33:14,320 Speaker 1: can actually like go find the person and make an 673 00:33:14,360 --> 00:33:16,600 Speaker 1: offer or something. Yeah, right right, And if you have 674 00:33:16,680 --> 00:33:19,280 Speaker 1: a product that another et F provider would like to 675 00:33:20,000 --> 00:33:22,800 Speaker 1: launch and use your product for an underlying you know, 676 00:33:22,880 --> 00:33:24,560 Speaker 1: they might kind of bait you with, hey, we have 677 00:33:24,680 --> 00:33:28,520 Speaker 1: this great idea. So and you know when you talk 678 00:33:28,520 --> 00:33:30,520 Speaker 1: about new launches, I do find sometimes, you know, when 679 00:33:30,560 --> 00:33:32,560 Speaker 1: e t F has arrived, when there's a three X version, 680 00:33:32,960 --> 00:33:35,240 Speaker 1: like I think cybersecurity. Do you have a three x 681 00:33:35,280 --> 00:33:37,840 Speaker 1: cybersecurity now? Yeah? But I'll give you an even better 682 00:33:37,920 --> 00:33:42,680 Speaker 1: example than that. We have, um you bought which exactly 683 00:33:42,920 --> 00:33:45,280 Speaker 1: and that e t F. It was sort of we 684 00:33:45,440 --> 00:33:47,720 Speaker 1: launched it. It was admittedly a bit sleepy, but I 685 00:33:47,840 --> 00:33:49,840 Speaker 1: just I absolutely love this idea. I think it's the 686 00:33:49,880 --> 00:33:52,960 Speaker 1: way of the future, right, Robotics and and AI and 687 00:33:53,280 --> 00:33:55,640 Speaker 1: you know, bots really started to crush it. And and 688 00:33:55,880 --> 00:33:57,640 Speaker 1: we had, you know, prior to all this China stuff 689 00:33:57,680 --> 00:33:59,400 Speaker 1: that e t F was up close to a and 690 00:33:59,480 --> 00:34:02,080 Speaker 1: still up about thirty year a date. But you Bought 691 00:34:02,200 --> 00:34:04,600 Speaker 1: has really picked up and steam with a UM and 692 00:34:04,680 --> 00:34:07,200 Speaker 1: trading and you know it's on the map because it's 693 00:34:07,360 --> 00:34:10,280 Speaker 1: it's popular and topical. But yeah, it hit its shride. 694 00:34:10,360 --> 00:34:12,040 Speaker 1: You know, we talked about ques being like the sun 695 00:34:12,160 --> 00:34:14,840 Speaker 1: in this sort of like mini solar system. That's the 696 00:34:15,040 --> 00:34:17,640 Speaker 1: three X leverage is like something that else would there 697 00:34:17,640 --> 00:34:20,399 Speaker 1: would orbit a hit E t F usually and then 698 00:34:20,680 --> 00:34:24,320 Speaker 1: you bought sends some volume assets and interest to the 699 00:34:24,400 --> 00:34:27,640 Speaker 1: underlying as well, so uh that it all feeds into 700 00:34:27,719 --> 00:34:30,440 Speaker 1: that main body. But first you've got to get the assets, 701 00:34:30,480 --> 00:34:33,000 Speaker 1: like I think robo and bots together hit five billion, 702 00:34:33,080 --> 00:34:35,400 Speaker 1: and then you start to see options on them, the 703 00:34:35,560 --> 00:34:38,719 Speaker 1: three x E t F s launching UM, et cetera, 704 00:34:38,760 --> 00:34:40,360 Speaker 1: and then copycats and then all of a sudden you 705 00:34:40,400 --> 00:34:43,239 Speaker 1: got a whole new category that just was born. Yeah, 706 00:34:43,280 --> 00:34:45,160 Speaker 1: and on the flip side, there's so many good ideas 707 00:34:45,200 --> 00:34:48,080 Speaker 1: out there right now, Like I'm a big enthusiast in 708 00:34:48,120 --> 00:34:49,719 Speaker 1: the office and we have to launch this. Look at 709 00:34:49,760 --> 00:34:51,640 Speaker 1: this idea. It's so cool and whatever. But you know, 710 00:34:51,760 --> 00:34:55,080 Speaker 1: there are some regulatory hurdles too. So within the case 711 00:34:55,160 --> 00:34:57,239 Speaker 1: of bots, we had to wait for it to get 712 00:34:57,280 --> 00:34:58,719 Speaker 1: big enough in order for us to be able to 713 00:34:58,800 --> 00:35:00,880 Speaker 1: launch the three x CTF prot but there are some 714 00:35:00,960 --> 00:35:03,719 Speaker 1: awesome ideas out there right now they're too small, not 715 00:35:03,840 --> 00:35:07,160 Speaker 1: liquid enough, but will someday be three extremes? And um, 716 00:35:07,320 --> 00:35:09,160 Speaker 1: you know, some people would ask me like, is there 717 00:35:09,160 --> 00:35:11,360 Speaker 1: ever going to be a four x E t F? 718 00:35:11,520 --> 00:35:14,000 Speaker 1: And there was a filing by a company called four Shares, 719 00:35:14,400 --> 00:35:16,840 Speaker 1: what a great name for four x and they filed 720 00:35:16,880 --> 00:35:19,200 Speaker 1: for four x S and P I believe, but the 721 00:35:19,400 --> 00:35:22,960 Speaker 1: SEC initially said okay, but then they rescinded. I think 722 00:35:23,000 --> 00:35:26,000 Speaker 1: there was a mini freak out in social media on it, 723 00:35:26,160 --> 00:35:28,160 Speaker 1: and uh, I don't think the s SEC one of 724 00:35:28,160 --> 00:35:30,560 Speaker 1: the pr issue around that. But do you know anything 725 00:35:30,600 --> 00:35:33,320 Speaker 1: about the four shares or four x or would you 726 00:35:33,400 --> 00:35:35,200 Speaker 1: ever do that if you could? Well, I look, there's 727 00:35:35,280 --> 00:35:37,920 Speaker 1: there's a lot of leverage in the environment, right features 728 00:35:38,040 --> 00:35:41,640 Speaker 1: or ten x mortgages on your house or are you know, 729 00:35:41,880 --> 00:35:44,360 Speaker 1: essentially leverage and it's more in its purest form, So 730 00:35:44,680 --> 00:35:48,120 Speaker 1: I think that leverage in the ecosystem is generally good. Um, 731 00:35:48,760 --> 00:35:50,919 Speaker 1: you know, the reason we stopped at three is because 732 00:35:51,000 --> 00:35:54,840 Speaker 1: we thought that it's probably not going to happen. But 733 00:35:55,000 --> 00:35:57,360 Speaker 1: if there was a thirty percent move in an underlying 734 00:35:57,440 --> 00:36:00,920 Speaker 1: index and you know it's stuck. It could wipe out 735 00:36:00,960 --> 00:36:04,319 Speaker 1: a fund. So when you talk about moving a day, 736 00:36:04,560 --> 00:36:07,680 Speaker 1: we started to worry that, okay, that could actually you know, 737 00:36:07,760 --> 00:36:10,719 Speaker 1: that could actually happen. So that would really be my 738 00:36:11,120 --> 00:36:14,000 Speaker 1: you know, my sort of reserve on launching four X 739 00:36:14,080 --> 00:36:16,480 Speaker 1: and and more. But I think, you know, for the regulators, 740 00:36:16,560 --> 00:36:19,360 Speaker 1: it's it's smart about product structure, you know, where they 741 00:36:19,360 --> 00:36:20,880 Speaker 1: want to kind of draw the lines, and you know, 742 00:36:20,920 --> 00:36:23,319 Speaker 1: I'm not sure what their final final thoughts on it are, 743 00:36:23,440 --> 00:36:25,840 Speaker 1: but it didn't launch though. Four X, S and P 744 00:36:26,160 --> 00:36:29,400 Speaker 1: wouldn't even rank in the top fifty of volatility though, 745 00:36:29,400 --> 00:36:31,799 Speaker 1: because the SMP probably would never go down of a day, 746 00:36:31,800 --> 00:36:34,520 Speaker 1: and if it did, society would have more problems than 747 00:36:34,600 --> 00:36:37,640 Speaker 1: the four shares. Yeah. Absolutely, but I think I think 748 00:36:37,719 --> 00:36:40,399 Speaker 1: it's let's start with SMP. Well, why don't we make 749 00:36:41,000 --> 00:36:44,840 Speaker 1: right you know, yeah, it's open. Yeah, absolutely, And also 750 00:36:45,000 --> 00:36:47,880 Speaker 1: again I think that there's just the PR worry. You know, 751 00:36:47,960 --> 00:36:50,920 Speaker 1: what's the sec level. You know, Sylvia, thanks for joining tricks, 752 00:36:51,000 --> 00:36:57,120 Speaker 1: Thank you for having me, Thanks for listening to trillions. 753 00:36:57,520 --> 00:36:59,560 Speaker 1: Until next time, you can find us on the Bloomberg terminal, 754 00:37:00,040 --> 00:37:03,680 Speaker 1: Umberg dot com, Apple podcasts, Spotify, and wherever else you 755 00:37:03,760 --> 00:37:06,200 Speaker 1: like to Elisa, we'd love to hear from you. We're 756 00:37:06,239 --> 00:37:10,520 Speaker 1: on Twitter, I'm at Joel Webber Show, He's at Eric Calltunist, 757 00:37:10,880 --> 00:37:15,279 Speaker 1: and you can find Sylvia and Direction at Direction L 758 00:37:15,480 --> 00:37:18,800 Speaker 1: E T S. That's Direction with an X trillions is 759 00:37:18,840 --> 00:37:22,279 Speaker 1: produced by Magnus Hendrickson. Francesca Levie is the head of 760 00:37:22,320 --> 00:37:24,120 Speaker 1: Bloomberg podcast. Bye.