WEBVTT - The Case for Europe 0:00:06.280 --> 0:00:06.920 Organize trains. 0:00:07.040 --> 0:00:10.520 I'm Joel Webber and I'm Eric Belchernes. 0:00:12.360 --> 0:00:15.560 So we spent last episode talking about why the US 0:00:15.680 --> 0:00:19.200 is so great? Yeah, is there a contrarian take that 0:00:19.239 --> 0:00:20.440 we should visit today? 0:00:21.079 --> 0:00:23.200 Yeah, so a couple things. 0:00:23.200 --> 0:00:26.320 First of all, yes, I still think the US has 0:00:26.480 --> 0:00:30.160 some elements that are special. But this year so far, Joel, Europe, 0:00:30.760 --> 0:00:33.760 which a lot of times gets dumped on narratively, it's, 0:00:33.880 --> 0:00:37.200 you know, been in the doghouse for years. It's basically 0:00:37.320 --> 0:00:39.360 tripling the S and P five hundred. This year it's 0:00:39.400 --> 0:00:42.040 up nine ten S and p's up two point four percent. 0:00:42.720 --> 0:00:44.559 You know, will it last or is another head fake? 0:00:44.960 --> 0:00:46.440 I think it's a good time to give Europe at 0:00:46.520 --> 0:00:48.800 least a strong case. You know, we were a little 0:00:48.840 --> 0:00:50.720 negative last time, and I thought, you know, it would 0:00:50.720 --> 0:00:52.800 be a good time to look at the other side 0:00:52.800 --> 0:00:54.920 of the story and maybe there is a reason to 0:00:55.240 --> 0:00:59.960 allocate there. We have on our team, in the broader 0:01:00.120 --> 0:01:05.000 strategy team, there has been some research and data that 0:01:05.080 --> 0:01:07.959 indicates it might actually be for real this time, and 0:01:08.000 --> 0:01:10.000 I thought we should share all that, get it on 0:01:10.000 --> 0:01:12.959 the table, and then the listener can can decide. 0:01:13.040 --> 0:01:14.080 We'll let them be the jury. 0:01:14.240 --> 0:01:17.000 Okay, so joining us, we're going to have your boss, 0:01:17.280 --> 0:01:21.000 Gina Martin Adams, who's the chief equity strategist at Bloomberger Intelligence, 0:01:21.480 --> 0:01:24.600 as well as Todd Son, who's the senior ETF and 0:01:24.640 --> 0:01:32.039 technical strategist at Stratigis Securities, this time on Trian's the 0:01:32.120 --> 0:01:37.399 case for Europe. Todd, Gina, welcome to Trillions. 0:01:37.600 --> 0:01:39.080 Thank you, thank you for having us. 0:01:39.120 --> 0:01:40.199 Great to be here with you guys. 0:01:40.840 --> 0:01:44.200 Quick note here, Todd is such a trooper that he 0:01:44.319 --> 0:01:48.640 is doing this from LaGuardia Airport in the pet relief Stagia. 0:01:49.400 --> 0:01:50.840 If that's the first, and that is a first. So 0:01:50.840 --> 0:01:53.400 if you hear any little background noise, that's why. And 0:01:53.480 --> 0:01:55.360 if a dog peas on his leg, we promised we'll 0:01:55.440 --> 0:01:57.960 let him re record that part. Okay, so just fy, 0:01:58.120 --> 0:02:02.280 Thank you Todd for being a so dedicated eric. 0:02:03.160 --> 0:02:06.320 I want to start with just what is the data 0:02:06.360 --> 0:02:08.280 when you guys are assessing something like this, What are 0:02:08.280 --> 0:02:12.120 you looking at beyond just indexes? 0:02:12.840 --> 0:02:16.200 Right? So, one of the things that has been apparent 0:02:16.200 --> 0:02:18.880 for a while is evaluations. Right in the US, the 0:02:19.480 --> 0:02:21.880 average price to earnings ratio is very high. 0:02:22.000 --> 0:02:23.000 In Europe it's lower. 0:02:23.280 --> 0:02:26.639 That gap is pretty much I think at historical records, right, 0:02:27.200 --> 0:02:29.200 So that's the data we would look at now. We 0:02:29.280 --> 0:02:32.200 only we don't maybe go more than a couple feet 0:02:32.240 --> 0:02:34.640 deep in the ETF world, but I work with people 0:02:34.639 --> 0:02:37.240 who go deep into the number. So Gina has put 0:02:37.240 --> 0:02:41.919 out some reports recently that talk about the weakness in 0:02:41.960 --> 0:02:45.840 the US and ipso facto a little strength in Europe. 0:02:45.919 --> 0:02:49.160 And then Todd put out a note that I read about, 0:02:49.200 --> 0:02:52.120 I don't know three months ago where he said, I 0:02:52.160 --> 0:02:55.600 think he called the case for Europe, but his thesis 0:02:55.680 --> 0:02:58.280 was it can't get worse, which I thought, what an 0:02:58.360 --> 0:03:01.639 investment thesis is, Hey, come invest here, it can't get 0:03:01.720 --> 0:03:04.440 much worse. Anyway, that's sort of the state of Europe. 0:03:04.480 --> 0:03:08.000 So I think we start with Geno with just you know, 0:03:08.120 --> 0:03:12.040 the US weakness maybe and how that relates to Europe 0:03:12.080 --> 0:03:13.960 maybe having some good signs. 0:03:14.160 --> 0:03:18.600 Yeah, and it's very much the same the same case, 0:03:18.720 --> 0:03:20.760 just in the polar opposite that you just made, where 0:03:20.919 --> 0:03:24.040 Europe by November of last year was training at an 0:03:24.080 --> 0:03:26.919 all time historic discount relative to the rest of the world. 0:03:27.440 --> 0:03:30.560 The US was training at its PreK peak relative to 0:03:30.560 --> 0:03:33.800 the rest of the world valuation premium. So the US 0:03:33.919 --> 0:03:37.800 case the anti US case is really the opposite of 0:03:37.800 --> 0:03:40.160 the pro Europe case when it comes to valuations. At 0:03:40.200 --> 0:03:43.120 the same time, you have to work through the mental 0:03:43.120 --> 0:03:45.400 gymnastics of what that really means, and what that really 0:03:45.440 --> 0:03:49.400 means is expectations for the US going into twenty twenty 0:03:49.440 --> 0:03:54.360 five were extremely high, whereas expectations for Europe are extremely low, 0:03:54.520 --> 0:03:58.640 and momentum shifts in global stocks oftentimes occur because of 0:03:58.680 --> 0:04:03.840 expectation extremes. There's almost no chance that the expectations embedded 0:04:03.840 --> 0:04:06.440 in US stock prices can be met by US companies, 0:04:06.840 --> 0:04:08.280 at least in the short term, and you have that 0:04:08.360 --> 0:04:10.920 adjustment process that emerges, and we've seen that play out 0:04:10.960 --> 0:04:14.200 real time through earning season, in particular with tech, where 0:04:14.200 --> 0:04:18.080 suddenly we have competitives, competitors in the tech space that 0:04:18.200 --> 0:04:21.240 no one thought it would exist three months ago. That 0:04:21.279 --> 0:04:23.880 creates a very different environment for tech and for the US, 0:04:24.240 --> 0:04:27.880 whereas for Europe there was no expectation for growth and 0:04:27.960 --> 0:04:31.720 suddenly earnings estimate stopped falling. So it wasn't a fantastic 0:04:31.880 --> 0:04:35.720 evolution of great news for Europe, but expectations were solow 0:04:35.720 --> 0:04:39.120 they couldn't get much worse. And then we have decent 0:04:39.200 --> 0:04:42.360 earnings come through, You've got the Central Bank still easying, 0:04:42.400 --> 0:04:44.919 You've got some relief in terms of political pressure that 0:04:44.920 --> 0:04:47.880 has emerged over the weekend with Germany, and that's been 0:04:48.000 --> 0:04:50.599 enough to get a little bit of momentum moving in 0:04:50.600 --> 0:04:51.400 the favor of Europe. 0:04:51.600 --> 0:04:54.839 Can I say this differently and see how you react 0:04:54.880 --> 0:04:57.720 to it? Is the US the ultimate growth story and 0:04:58.040 --> 0:04:59.800 Europe is the ultimate value story? 0:05:00.880 --> 0:05:03.760 Yes, I think that's a lot of what we're seeing 0:05:04.040 --> 0:05:09.120 is also the US is the ultimate tech story and 0:05:09.279 --> 0:05:12.560 Europe is in some cases the ultimate financial story. So 0:05:13.240 --> 0:05:19.440 it's a growth value expectations dichotomy and sector performance diconomy 0:05:19.839 --> 0:05:23.279 that creates an opportunity for Europe and probably puts the 0:05:23.400 --> 0:05:26.479 US behind rest of the world at least in the short. 0:05:26.360 --> 0:05:28.240 Rund Let's go ahead and bring you in. 0:05:28.360 --> 0:05:31.440 What did you see as you were working on on 0:05:31.520 --> 0:05:33.480 your thesis? 0:05:34.120 --> 0:05:38.400 So I agree with Gina about low expectations, and to me, 0:05:38.440 --> 0:05:41.560 it's all about sentiment as well. And one of the 0:05:41.640 --> 0:05:45.000 funny ways I think I can sum up European ETFs 0:05:45.000 --> 0:05:50.599 listening in the US is there's fifty ETFs, both combined 0:05:50.640 --> 0:05:53.480 of the region as well as single country, and they 0:05:53.480 --> 0:05:55.560 have about fifty seven billion assets, and keep in mind 0:05:55.600 --> 0:05:57.520 the who've been around for about twenty five years or so. 0:05:59.040 --> 0:06:00.400 Take that in comparison. 0:06:00.160 --> 0:06:02.440 Relative to the ey Shares Bitcoin ETF, which has only 0:06:02.480 --> 0:06:04.039 been around for about thirteen months, and that has the 0:06:04.080 --> 0:06:07.240 same amount of assets. So along with the lines, if 0:06:07.240 --> 0:06:09.080 it can't get any worse, we're talking about a newer 0:06:09.080 --> 0:06:11.760 aspect class. It's the same amount of assets as what 0:06:11.920 --> 0:06:16.000 is a cornerstone of investor portfolios for international and I 0:06:16.000 --> 0:06:20.080 think along with just assets under management, you look at 0:06:20.320 --> 0:06:23.599 product launches, issuers have given up on the space. There's 0:06:23.600 --> 0:06:27.520 only been two European ETFs launched over the last six years, 0:06:27.560 --> 0:06:31.000 and they're both very thematic, focused on luxury goods and 0:06:31.080 --> 0:06:33.680 aerospace and defense. So I like that there's this apathy 0:06:33.720 --> 0:06:35.880 from issuers. They're not really focusing on the region. I 0:06:35.880 --> 0:06:39.640 think that's really interesting from an expectations and sentiment standpoint. 0:06:47.040 --> 0:06:49.160 So Europe is having this nice pop, I'll call it 0:06:49.240 --> 0:06:51.720 right up ten percent. That's a lot for Europe, but 0:06:51.760 --> 0:06:54.279 the flows are not there. Normally, you know, you have 0:06:54.320 --> 0:06:56.400 a little run, the flows will follow, at least some 0:06:56.440 --> 0:06:59.000 models will go in. But there's there's been about just 0:06:59.000 --> 0:07:01.720 shy of a billion dollars into European ETFs from US 0:07:01.760 --> 0:07:04.880 investors this year. Now that compares to about eighty billion 0:07:05.000 --> 0:07:09.440 that have just pumped into US equities as usual. My 0:07:09.640 --> 0:07:12.440 thesis is that it would take six to nine months 0:07:12.920 --> 0:07:18.200 to kind of overcome the feeling that we've seen this 0:07:18.280 --> 0:07:20.520 movie before, or I call it a short film, where 0:07:20.680 --> 0:07:23.560 it's two months of Europe and then all of a sudden, 0:07:23.600 --> 0:07:26.960 the cues like a runaway bus just like runs over 0:07:27.000 --> 0:07:30.120 Europe once again. And that's happened like ten times, and 0:07:30.160 --> 0:07:32.760 so I understand the Pavlovian response to like not do 0:07:32.840 --> 0:07:35.000 anything and just wait for the cues to come back. 0:07:35.840 --> 0:07:38.080 Do you think this has legs basically? And do you 0:07:38.080 --> 0:07:40.280 think that's when investors might actually turn around? 0:07:40.400 --> 0:07:42.760 I love comparing this to short films, which is like 0:07:42.840 --> 0:07:45.000 its own category in the Oscars, but like, did you 0:07:45.040 --> 0:07:45.400 watch it? 0:07:45.520 --> 0:07:45.600 Not? 0:07:45.680 --> 0:07:45.920 Really? 0:07:46.000 --> 0:07:50.120 I think that's the best picture, right, Yes, But I 0:07:50.160 --> 0:07:53.920 think we need to think about how we measure the legs. Right, 0:07:54.080 --> 0:07:58.040 there's a very distinct possibility that Europe gathers legs without 0:07:58.160 --> 0:08:02.160 the ETF universe recognizing it. Because the biggest investor in 0:08:02.200 --> 0:08:05.320 Europe is the European investor, and that's where you saw 0:08:05.360 --> 0:08:08.800 the biggest flight from Europe occur is Europe. For Europe 0:08:08.840 --> 0:08:11.560 was no longer a thing by twenty twenty four. So 0:08:11.680 --> 0:08:15.120 I think first you probably get direct investments from Europe 0:08:15.160 --> 0:08:19.360 in Europe. Some of that is a real nationalistic sentiment 0:08:19.440 --> 0:08:22.040 that could emerge as a result of the political environment. 0:08:22.560 --> 0:08:24.760 Some of it is a currency play, some of it 0:08:24.840 --> 0:08:27.960 is a financial play as a result of the ECB. 0:08:28.120 --> 0:08:31.840 But we may not actually see US investors contribute to 0:08:32.040 --> 0:08:34.520 the European story in the form of flows in the 0:08:34.559 --> 0:08:38.520 ETF landscape, and that we could still see Europe outperform. 0:08:39.080 --> 0:08:42.160 I would agree to get the US investor interested in Europe. 0:08:42.160 --> 0:08:44.960 It is a much much bigger hurdle. The US investor 0:08:45.160 --> 0:08:49.240 is very isolated in their strategy. They think that all 0:08:49.280 --> 0:08:51.679 they need to own is the US. The US is 0:08:51.720 --> 0:08:54.000 the best way to invest in the globe. Is a 0:08:54.000 --> 0:08:55.760 lot of the rhetoric that you hear from the US 0:08:55.840 --> 0:09:00.360 investor base that theory will have to get dismantled through 0:09:01.200 --> 0:09:04.400 several months, if not several quarters, maybe even several years 0:09:04.400 --> 0:09:07.280 of evidence before the US investor capitulates and says I'm 0:09:07.280 --> 0:09:09.040 going to fly into Europe. I'm gonna buy a bunch 0:09:09.080 --> 0:09:13.560 of europe as an opportunity just is very unlikely it 0:09:13.600 --> 0:09:17.079 could emerge. This is something that's very unique to this situation. 0:09:17.240 --> 0:09:21.480 In a world where we have deglobalization as a centralized theme, 0:09:22.600 --> 0:09:26.319 US companies will potentially have less access to the rest 0:09:26.400 --> 0:09:30.280 of the world, will become much more isolated as inherent entities. 0:09:30.360 --> 0:09:33.680 And if that's the case, then suddenly this thesis that 0:09:33.720 --> 0:09:35.840 you can only invest in the US, you only need 0:09:35.880 --> 0:09:37.920 to invest in the US in order to access global 0:09:37.920 --> 0:09:40.280 markets really starts to go away. But that's a really 0:09:40.440 --> 0:09:44.480 long term, long tail, secular possibility. It's not likely to 0:09:44.520 --> 0:09:45.760 emerge in the next month or two. 0:09:46.200 --> 0:09:49.760 And just to give some data behind that, Athnoscios on 0:09:49.840 --> 0:09:53.240 my team Ransom numbers and the percent the last couple 0:09:53.240 --> 0:09:55.360 of years, a lot of people overseas have invested in 0:09:55.400 --> 0:09:59.800 the US. That's helped the markets. Europe, though the percentage 0:09:59.840 --> 0:10:01.960 in in the US has plummeted this year, so they 0:10:02.040 --> 0:10:05.080 are the ones driving this rally. But elsewhere in the 0:10:05.120 --> 0:10:08.840 world it's still gone up. People like Asia still buying 0:10:08.880 --> 0:10:11.880 the US, US still buy in the US. So it 0:10:12.000 --> 0:10:15.760 is interesting. I have this narrative thing that I think 0:10:15.800 --> 0:10:19.480 and narratives matter. I think they can change price can 0:10:19.559 --> 0:10:21.720 change narrative, so if it goes up enough, then narrative 0:10:21.720 --> 0:10:24.640 could be broken. But I think most people sit there 0:10:24.679 --> 0:10:27.440 and think, well, look, yeah, maybe there's a mean reversion 0:10:27.480 --> 0:10:31.200 trade here, but long term there's more growth in the US. 0:10:31.240 --> 0:10:33.959 People here work crazy hours. You know. I wrote a 0:10:34.040 --> 0:10:36.400 note about Jack Bogel, who said you don't need international 0:10:36.920 --> 0:10:38.920 and he got more savage as he got older, and 0:10:38.960 --> 0:10:40.840 here's what he's One of the lines he said was, 0:10:41.320 --> 0:10:43.599 you know, everyone says I'm wrong. I said, for a 0:10:43.640 --> 0:10:46.960 lot of reasons, you don't need an international and he 0:10:47.000 --> 0:10:51.240 says something here, the third largest country in IFA is France. 0:10:51.880 --> 0:10:54.360 The soul of hard work. He can't see. 0:10:54.600 --> 0:10:56.600 I can't see that I'd make more money in Britain 0:10:57.000 --> 0:11:00.120 or Japan, YadA YadA, or France where they could and 0:11:00.160 --> 0:11:01.840 pass the law saying you had to work thirty five 0:11:01.840 --> 0:11:05.280 hours a week. And I think generally Americans are like 0:11:05.720 --> 0:11:08.800 in Europe, everyone's at the cafe at three o'clock. Yeah, 0:11:08.920 --> 0:11:11.880 the companies actually run, but it's just just to get 0:11:12.000 --> 0:11:15.000 enough done to not like go to hell. And I 0:11:15.040 --> 0:11:18.479 think in the US it's everyone is in such fierce competition, 0:11:18.520 --> 0:11:21.280 you get all this, all these flowers blossom in the 0:11:21.360 --> 0:11:25.440 forms of new companies and growth and opportunity. How true 0:11:25.480 --> 0:11:27.080 is that narrative and how hard will that be to 0:11:27.120 --> 0:11:27.480 a race? 0:11:28.200 --> 0:11:29.880 I think it's pretty true. 0:11:30.000 --> 0:11:32.680 Frankly, though, I go back to my thesis that a 0:11:32.679 --> 0:11:37.200 lot of that narrative also is about globalization. In the 0:11:37.240 --> 0:11:40.439 era of globalization, where the US was becoming this global hegemon, 0:11:40.480 --> 0:11:43.680 where the US was driving activity, where US corporates were 0:11:43.720 --> 0:11:49.280 constantly seeking international locations for the destination of their products, 0:11:49.320 --> 0:11:54.080 where they had a tremendous global dominance. Of course, the 0:11:54.160 --> 0:11:57.240 US companies were more productive. At the same time, You're 0:11:57.320 --> 0:12:02.559 absolutely right, the ructural landscape, the policy landscape in Europe 0:12:02.600 --> 0:12:07.200 became less and less productive, more and more government interventionist. 0:12:07.480 --> 0:12:09.960 I think you're at a moment now where Europe is 0:12:09.960 --> 0:12:13.640 starting to recognize that, in particular in Germany. We saw 0:12:13.679 --> 0:12:16.280 it very, very profoundly over the course of the last 0:12:16.360 --> 0:12:20.000 year in Germany. The Germans themselves are recognizing that they're 0:12:20.080 --> 0:12:22.920 taking a back seat economically and financially to the rest 0:12:22.920 --> 0:12:24.880 of the world, and there's a lot of frustration there. 0:12:25.480 --> 0:12:28.720 So I think there's a potential rallying moment for Europe 0:12:29.160 --> 0:12:33.640 to think about privatization, think about ways to enhance productivity, 0:12:34.600 --> 0:12:37.800 think frankly about how to form global relationships outside of 0:12:37.800 --> 0:12:41.840 their relationship with the US. So you could make a 0:12:41.920 --> 0:12:45.640 case that as Germany becomes tighter with China, for example, 0:12:45.679 --> 0:12:50.400 as Germany seeks other markets to enhance his productivity and 0:12:50.520 --> 0:12:54.880 global presence, you could see some pretty big sea changes 0:12:55.120 --> 0:12:57.040 in Europe. The other thing that I would say that's 0:12:57.040 --> 0:12:59.840 so fascinating to me with respect to Europe right now 0:13:00.160 --> 0:13:04.920 is the countries in Europe that went through a reckoning 0:13:04.960 --> 0:13:07.160 moment in the European debt crisis. Now, I know that 0:13:07.200 --> 0:13:08.839 this is a long time ago. Not a lot of 0:13:08.920 --> 0:13:11.080 us remember twenty eleven, but it was a big moment 0:13:11.679 --> 0:13:15.440 in time for Europe, but only for the debt laden 0:13:16.000 --> 0:13:19.840 what we called at the time pigs economies Portugal, Ireland, Italy, 0:13:20.040 --> 0:13:25.320 Greece and Spain. Those economies have transitioned remarkably over the 0:13:25.320 --> 0:13:28.040 course of the last decade in change. Those are the 0:13:28.200 --> 0:13:31.439 areas of Europe that are starting to outperform most profoundly. 0:13:31.480 --> 0:13:35.640 The best performing markets in Europe this year are Spain, Italy, Switzerland, 0:13:35.760 --> 0:13:38.840 to a lesser degree. Germany certainly is participating, but where 0:13:38.840 --> 0:13:41.240 did Spain and Italy come from? That comes from a 0:13:41.320 --> 0:13:44.360 legacy of change, right, And in the European debt crisis, 0:13:44.800 --> 0:13:47.040 they had a moment of reckoning, they had to write 0:13:47.040 --> 0:13:51.520 size spending, they had to think about structural changes. Many 0:13:51.559 --> 0:13:53.760 of those appear to have been enacted, and the economic 0:13:53.760 --> 0:13:57.960 optimism in those peripheral economies is significantly greater than some 0:13:58.040 --> 0:14:00.720 of the other legacy economies, like you is the example 0:14:00.760 --> 0:14:04.120 of France or even Germany. So I think that, you know, 0:14:04.200 --> 0:14:07.680 Europe is a conglomeration of countries and that's something that 0:14:07.679 --> 0:14:09.480 we need to keep in mind as well. Europe has 0:14:09.520 --> 0:14:13.040 one big entity, maybe not as investible as some of 0:14:13.040 --> 0:14:16.520 these other smaller country markets that have been doing very 0:14:16.520 --> 0:14:18.960 well over the course of the last year or so. 0:14:19.400 --> 0:14:22.680 But to Ton's point earlier, there's like a dearth of products, 0:14:22.920 --> 0:14:26.160 Like Todd, is there a big opportunity here to like 0:14:26.240 --> 0:14:29.440 actually bring you know, some innovation and ETFs to this space. 0:14:30.200 --> 0:14:32.920 So I totally agree with what Gene is saying about 0:14:33.680 --> 0:14:37.680 the countries are changing, right how they function, and I 0:14:37.720 --> 0:14:41.240 think this is where there is opportunity for active managers, right, 0:14:41.240 --> 0:14:46.320 It's nearly impossible based on data to outperform US large 0:14:46.320 --> 0:14:49.560 cap growth, but because Europe has struggled in terms of 0:14:49.600 --> 0:14:54.120 performance for so long, I wonder if you're you have 0:14:54.160 --> 0:14:57.920 an opportunity for active Europe. Not just active developed markets 0:14:57.920 --> 0:15:00.080 because those are already just out there, but the there 0:15:00.120 --> 0:15:05.480 are no active, straightforward European products, and I think those 0:15:05.480 --> 0:15:09.800 managers can find, you know, the winners of this change 0:15:09.840 --> 0:15:11.920 that's going on there. I do think it's really interesting 0:15:12.320 --> 0:15:17.600 the constituency of Europe and ETFs are changing. They were 0:15:17.600 --> 0:15:20.960 typically very financials heavy and that's still true, but consumer 0:15:21.080 --> 0:15:24.880 staples influence in the Europe and ETFs has really dropped. 0:15:24.560 --> 0:15:27.600 Over the last few years, and now you're seeing more. 0:15:27.400 --> 0:15:31.479 Industrials take control and as well as technology, and SAP. 0:15:32.720 --> 0:15:34.440 On a given day is the largest weight in Europe. 0:15:34.480 --> 0:15:35.720 I'm not sure how many people know that. 0:15:35.760 --> 0:15:37.600 If you put fifty people in a room, they might 0:15:37.600 --> 0:15:41.440 guess it's a financial or a healthcare type of company, 0:15:41.440 --> 0:15:43.160 but it's SAP and then there's ASML. 0:15:43.280 --> 0:15:45.800 So I like that there's this change. 0:15:45.440 --> 0:15:47.360 Going on and the way we invest in Europe, and 0:15:47.400 --> 0:15:50.120 I do believe it also speaks to where actives should 0:15:50.120 --> 0:15:51.400 focus in terms of ETF. 0:15:51.080 --> 0:15:53.720 For Shures Todd, one more question for you is what 0:15:53.760 --> 0:15:55.960 I've found as an ETF anaist over the years is 0:15:56.160 --> 0:15:58.520 when it comes to emerging market countries and even developed 0:15:58.520 --> 0:16:01.640 market countries, a lot of the money that would go 0:16:01.720 --> 0:16:04.920 into say VGK, which is the larger Europe, is retail 0:16:05.280 --> 0:16:07.480 and that's the money that's not biting right now. However, 0:16:08.080 --> 0:16:11.440 if you take UK or France or Germany, there is 0:16:11.880 --> 0:16:13.960 you know, about a billion in each of these single 0:16:13.960 --> 0:16:16.800 country ETFs. But they tend to be used by traders 0:16:17.240 --> 0:16:20.360 who are usually betting ahead of an election, and so 0:16:20.560 --> 0:16:23.000 a lot of times, like the Brazil ETF comes to mind, 0:16:23.760 --> 0:16:26.400 if there's some kind of a big event coming up 0:16:26.440 --> 0:16:29.960 that's geopolitical, a lot of times you'll see flows Russian 0:16:30.040 --> 0:16:33.080 ahead of that and they'll kind of it's almost like 0:16:33.120 --> 0:16:36.320 a geopolitical sports book. They're like, I really think UK 0:16:36.440 --> 0:16:38.720 is going to bounce with this election or this situation. 0:16:40.320 --> 0:16:41.880 Do you think that is what we need to see 0:16:41.880 --> 0:16:44.840 first is a couple traders get excited with the single 0:16:44.880 --> 0:16:48.160 country ETFs, and then retail will follow with the sort 0:16:48.160 --> 0:16:49.440 of bigger, broader ones later. 0:16:51.280 --> 0:16:54.480 I think so that makes sense, and I'm not even 0:16:54.520 --> 0:16:57.280 sure about retail, but I'm more so looking at the 0:16:57.320 --> 0:17:01.360 model providers right so you can look at JP Morgan, 0:17:01.400 --> 0:17:02.920 you can look at State Street and see what their 0:17:02.920 --> 0:17:06.720 allocations are to Europe as well, and I don't see 0:17:06.800 --> 0:17:08.280 much going on there right now. 0:17:08.359 --> 0:17:11.040 So I think this is the great part about ETFs, 0:17:11.040 --> 0:17:11.760 as that was mentioned. 0:17:11.760 --> 0:17:15.640 You can place a bet on an event, outcome, election, 0:17:15.760 --> 0:17:20.320 whatever it might be. But I don't know if Europe, 0:17:20.440 --> 0:17:22.640 if retail, will follow along or not. It's just it's 0:17:22.680 --> 0:17:25.480 not sexy enough. It's not leverage, it's not a reconductor. 0:17:25.960 --> 0:17:28.400 I mean, what about two x pigs? Does that start 0:17:28.400 --> 0:17:30.119 to get who reason? Does that start to get spicy? 0:17:30.600 --> 0:17:31.960 And then Europe you can go through. 0:17:32.080 --> 0:17:34.000 Put two x on anything and you'll get a couple 0:17:34.040 --> 0:17:34.439 of bytes. 0:17:36.640 --> 0:17:39.399 I boil it down to Okay, we'll retail come back. 0:17:39.480 --> 0:17:39.840 I don't know. 0:17:39.880 --> 0:17:42.000 And then when do the models start coming back to 0:17:42.080 --> 0:17:44.920 overweight Europe? And I'm just not sure we're anywhere near 0:17:44.920 --> 0:17:47.600 there yet. It will take far more outperformance for that 0:17:47.680 --> 0:17:48.400 to continue. 0:17:49.840 --> 0:17:52.800 And I have a question for you, Gina, does Europe 0:17:52.800 --> 0:17:55.040 even have tech? I mean, you know, you think I 0:17:55.040 --> 0:17:57.919 looked at the best performers in Europe, the financials have 0:17:58.000 --> 0:18:00.639 driven it. They're up fourteen percent. But I'm looking at 0:18:00.640 --> 0:18:02.800 the performers. I don't really see any tech e. Is 0:18:02.840 --> 0:18:05.159 there even a europe Tech ETF. I mean not sure 0:18:05.200 --> 0:18:06.760 if one exists, Todd would know real quick. 0:18:07.359 --> 0:18:09.320 Uh it's almost like a. 0:18:14.400 --> 0:18:15.359 Military intelligence. 0:18:15.440 --> 0:18:15.640 Yeah. 0:18:15.720 --> 0:18:18.560 There was one play in Europe with a semiconductor wave 0:18:18.600 --> 0:18:23.320 and that was asml in uh U have SaaS out 0:18:23.320 --> 0:18:26.560 of Germany, but these are not This is a very 0:18:26.600 --> 0:18:30.000 small component of the European broader market and that's the 0:18:30.000 --> 0:18:33.080 biggest reason I would suggest why Europe underperformed the last 0:18:33.080 --> 0:18:35.720 two years is there just isn't a lot of tech, 0:18:35.800 --> 0:18:39.720 and tech was the area of growth opportunity. It was 0:18:39.760 --> 0:18:43.400 the area that led global indices, not just the US, 0:18:43.640 --> 0:18:47.280 but global markets with the most tech exposure outperformed. Aka 0:18:47.359 --> 0:18:52.919 Taiwan was a huge outperformer. So that legacy of limited 0:18:53.080 --> 0:18:55.920 tech is a big part of the story for why 0:18:55.960 --> 0:18:59.680 Europe was not performing. Now it's helping because tech dropped. 0:18:59.680 --> 0:19:01.320 It was the only sector in the US that dropped 0:19:01.320 --> 0:19:04.879 in January. You know, it's not been performing well so 0:19:05.000 --> 0:19:08.760 far this year as investors are rotating into other opportunities 0:19:08.800 --> 0:19:10.520 and tech has proven to be a bit of a laggard. 0:19:10.680 --> 0:19:12.800 This really does feel like to bring it back to 0:19:12.840 --> 0:19:16.520 that growth versus value thing, it's like growth will run 0:19:16.560 --> 0:19:18.720 away with everything and then every once in a while. 0:19:18.720 --> 0:19:21.640 Yeah, every decade, Yeah, value will show up and yeah. 0:19:21.920 --> 0:19:23.399 Well, if you look at the long term, when did 0:19:23.440 --> 0:19:26.359 Europe actually outperform for an enduring period of time. It 0:19:26.440 --> 0:19:28.040 was in the two thousand and one to two thousand 0:19:28.040 --> 0:19:30.879 and seven period when tech took a backseat to everything. 0:19:30.960 --> 0:19:34.000 Tech was kind of there, but not outperforming everything, not 0:19:34.160 --> 0:19:37.520 leading markets. We had a commodities boom, we had a 0:19:37.520 --> 0:19:40.359 financial sector boom through a lending cycle. Those are the 0:19:40.400 --> 0:19:42.960 type of that's the type of environment in which Europe 0:19:42.960 --> 0:19:47.320 will outperform inevitably because of constituent bias and concentration. 0:19:53.440 --> 0:19:55.879 One question, if you're somebody who has a large chunk 0:19:55.920 --> 0:20:01.680 of your equity allocation in US ETFs, would you would 0:20:01.720 --> 0:20:03.919 it make more sense just rotate to international and have 0:20:04.000 --> 0:20:06.600 some Asia in there, or maybe just do Asia. How 0:20:06.600 --> 0:20:10.920 does Europe compare to other regions relative to the US 0:20:10.960 --> 0:20:13.880 in terms of this like possibly having a moment coming up. 0:20:14.040 --> 0:20:19.200 Yeah, it's very interesting because China has actually performed very 0:20:19.320 --> 0:20:21.920 very well so far this year, But India has been 0:20:22.520 --> 0:20:25.520 officially in a bear market, so Asia is in the 0:20:25.560 --> 0:20:27.359 eye of the beholder. What do you mean by Asia? 0:20:27.400 --> 0:20:30.040 I have to say because if you think of Asia 0:20:30.080 --> 0:20:33.160 as China, then it does appear that opportunities are emerging 0:20:33.240 --> 0:20:35.840 in China, particularly now that we have tech plays emerging 0:20:35.880 --> 0:20:40.240 as a potential competitor to the US. But Asia is 0:20:40.280 --> 0:20:42.640 a very mixed bag because India is in a bear 0:20:42.680 --> 0:20:46.360 market now, and we have to acknowledge that India had 0:20:46.359 --> 0:20:50.240 some unique structural issues as well that elevated prices there 0:20:50.400 --> 0:20:53.000 even as much as they were elevated in the US, 0:20:53.200 --> 0:20:55.359 and now India is taking a back seat. So Asia's 0:20:55.359 --> 0:20:57.680 a bit of a mixed bag. When you look at 0:20:57.800 --> 0:21:00.960 Latin America, you also have a really mixed view between 0:21:01.000 --> 0:21:04.720 Brazil and Mexico. Emerging markets in the Middle East and 0:21:04.800 --> 0:21:09.040 Africa stand out for US as an opportunity, but the 0:21:09.040 --> 0:21:12.439 investibility of that region is hugely, hugely questionable. How do 0:21:12.480 --> 0:21:14.119