Speaker 1: Hello, and welcome to What Goes Up, a Bloomberg Weekly
Speaker 1: Markets podcast. I'm Sara Panzek, a reporter on the Cross
Speaker 1: Asset team, and I'm Mike Reagan, a senior editor on
Speaker 1: the Markets team. This week on the show, data show
Speaker 1: that retail investors are getting in on the rally, with
Speaker 1: new accounts surging at some popular brokerages. We talked to
Speaker 1: the head of investment strategy at one of the leading
Speaker 1: et F providers about how their products are being used
Speaker 1: to play the market. Plus, there have been some major
Speaker 1: moves in the FX markets, particularly as dollary and breaks
Speaker 1: out of a multi year trend. And sorry, I've been
Speaker 1: meaning to ask you, do you think we should once
Speaker 1: again do the craziest thing I saw in markets At
Speaker 1: the end of the show, I do think we should
Speaker 1: do it. At the end of the show. Why why
Speaker 1: all of a sudden change I feel good about. I
Speaker 1: just want to make sure you're on board with it.
Speaker 1: You know, I scared you have kind of a losing
Speaker 1: streek going. And okay, first of all, I don't have
Speaker 1: a losing street going. I would even say that I
Speaker 1: came prepared. We had a couple of listeners who really
Speaker 1: came out of the woods in this last week to
Speaker 1: really hit on Mike. For one, we had a comment
Speaker 1: from Corman one three four who said, like the Yankees,
Speaker 1: I'm always rooting against Mike. So Mike, not everyone's on
Speaker 1: your side, particularly not me and not Corman one three four,
Speaker 1: Corman one one three four, whoever you are. I am
Speaker 1: like the Yankees of the craziest thing. But as you know,
Speaker 1: the crazy things in markets are one of my passions.
Speaker 1: And as you also know, another very big interest in
Speaker 1: mine is leveraged e t s. We've talked about this before. UM,
Speaker 1: I'm fascinated by them. So we have a great guest
Speaker 1: this week to discuss them with us. His name is
Speaker 1: Simeon Hyman. He's the head of investment strategy at pro Shares. Simeon,
Speaker 1: welcome to the show. Thanks for having me and also
Speaker 1: joining this uh this week first time on the show
Speaker 1: is Bloomberg's own uh Rachel Evans. She's a managing editor
Speaker 1: covered ets for a long time now shifting focus a
Speaker 1: little bit to bonds and FX, but still one of
Speaker 1: our in house et F gurus who we're happy to
Speaker 1: have on the show. Good to be here, all right,
Speaker 1: uh Sammy, let's start with you. I do want to
Speaker 1: get into sort of what's going on in the leveraged
Speaker 1: et F space. But one of my favorite pro shares
Speaker 1: E t F s has got to be Pause P
Speaker 1: A w Z. And this is from the owner of
Speaker 1: a Golden Doodle. You know, a neighbor of ours. Gotta
Speaker 1: go golden doodle in my touch and New Jersey. Then
Speaker 1: we got one and then next thing you know, they're
Speaker 1: all over, all over with touch and fifteen years ago
Speaker 1: he's well, he's fifteen years old. Now he's still hanging
Speaker 1: in there. We were before you wait wait ahead of me,
Speaker 1: of course, But Sammy, and talk to us about the
Speaker 1: pause ETF, just the rationale behind it. I know, uh,
Speaker 1: you know it buys pet store companies, pet medicine companies.
Speaker 1: I'm fascinated by this ETF. Talk to us a little
Speaker 1: bit about how it came about and sort of what
Speaker 1: the reaction has been. Sure the tickers P A w Z.
Speaker 1: And yes, we do pride ourselves on clever, clever tickers,
Speaker 1: so this one counts as a clever ticker. But look,
Speaker 1: we we look at themes all the time, and I
Speaker 1: think the challenge when you look for themes is you
Speaker 1: got to find where money is really being made. Um,
Speaker 1: So here there's real money being made. And anybody who
Speaker 1: has had to take care of their dog or even
Speaker 1: you know, God forbid, have to actually have serious health
Speaker 1: issues with their dogs, know how expensive it can be.
Speaker 1: And also the trends towards premiumization and humanization. I mean,
Speaker 1: right now, there are more households in the US with
Speaker 1: pets than there are uh than there are children. And
Speaker 1: the spending has been incredibly robust. And of course, as
Speaker 1: you it wouldn't surprise you to hear that the spending
Speaker 1: actually increased during the Great Recession. But there's also money
Speaker 1: to be made. You know, around half the t F
Speaker 1: is animal healthcare. And one of the ways I sort
Speaker 1: of think about the spaces, uh, fresh off of the
Speaker 1: the debates and all the political stuff that's going on,
Speaker 1: I note the following there's no medicaid for dogs. You
Speaker 1: gotta pay for that. There's some emerging insurance companies. But
Speaker 1: it's a place where there there are margin, there's money
Speaker 1: to be made. So, um, we thought the opportunity was there. Uh.
Speaker 1: We think this is you know, a long term you
Speaker 1: know opportunity. We think we did this right. In other words,
Speaker 1: we we appropriately I found companies that were, if you will,
Speaker 1: the pure plays, real pet care companies. You know, sometimes
Speaker 1: you see these themes, like you know, a blockchain idea
Speaker 1: and it ends up being a bunch of financial services company,
Speaker 1: or like do I really get blockchain and I get
Speaker 1: something else. We think we really did it right. We
Speaker 1: think the the opportunities for the firms are there, the
Speaker 1: right companies are in the e t F. And you
Speaker 1: know what, it's conversational alpha. You know, if you're talking
Speaker 1: if you're a financial advisor and you're talking to your clients,
Speaker 1: it resonates because their pets are near and dear to
Speaker 1: their heart, and they're spending so much running out of them.
Speaker 1: Would be nice for them to make a little money.
Speaker 1: Well for the pet care industry as well. I love
Speaker 1: this idea of conversational alpha. This is something that the
Speaker 1: Global X has talked about a little bit on the
Speaker 1: Trillions podcast that that covers a t F and it's
Speaker 1: this kind of idea that you've got something to go
Speaker 1: to your clients and talk about. It goes beyond the returns,
Speaker 1: so you're not just thinking about the return side of things.
Speaker 1: You're not just thinking about the strategy, but you're able
Speaker 1: to say, well, look, you know you own a dog,
Speaker 1: you own a labradoodle or retrieve and it's something that
Speaker 1: people can really identify with and they can think about
Speaker 1: that in terms of how it might boost their portfolio.
Speaker 1: For me, and you said, there's money to be me.
Speaker 1: This is a long term opportunity. But if I look
Speaker 1: at the market cap of the fund right now, it's
Speaker 1: roughly fifty six million dollars. I mean, how do you
Speaker 1: get over this hurdle? What is the conversation with investors
Speaker 1: to actually get people to want to come and invest
Speaker 1: in a product of this sort rather than just going
Speaker 1: to a broad market fund um and have them zeroing
Speaker 1: in on one thematics but also thematics surrounding the pet
Speaker 1: care space. Yeah, a couple of thoughts on that. So, first,
Speaker 1: fifty six is uh A a nice viable size for
Speaker 1: any TF So you know, we launched this a little
Speaker 1: bit over a year ago, so it's going in the
Speaker 1: right direction. But absolutely these are you know that satellites
Speaker 1: to a to a core UH to a core investment portfolio.
Speaker 1: So you know, if one were to have an appropriately
Speaker 1: structured long term investment portfolio. You would indeed have this
Speaker 1: as an addition to to a core holding. So nobody
Speaker 1: would be suggesting that you're you're the core of your
Speaker 1: retirement from should be in a pet care ETF. But UH,
Speaker 1: it's going to It really has the opportunity to add alpha,
Speaker 1: to add diversification, UH and to add a little bit
Speaker 1: of extra juice to UH to a core portfolio. And
Speaker 1: those are the of the conversations that we're having, and
Speaker 1: we think they're going pretty well. We're certainly looking to
Speaker 1: grow it, but it's been moving in the right direction
Speaker 1: since it's launched. You know, Simon Simeon as Uh Sarah
Speaker 1: will tell you if the way I think about it,
Speaker 1: if if I'm pulish on pets, I want to go
Speaker 1: triple levered Paul, triple triple ever, triple levered everything. But
Speaker 1: I do want to sort of segue into that discussion
Speaker 1: because I know there's been UH some backlash obviously two
Speaker 1: leveraged e t F s UH. The f sec UM
Speaker 1: wants to sort of implement a system where brokerages have
Speaker 1: to sort of quiz clients on whether they're sophisticated enough
Speaker 1: to to understand what's going on in leveraged and and
Speaker 1: I suppose inverse ETFs as well. Could you sort of
Speaker 1: get us up to date on where that UM debate
Speaker 1: stands right now? I know the SEC is still accepting
Speaker 1: comments about this, Is that right? Yeah? I'm not actually
Speaker 1: not really the right person at the firm to to
Speaker 1: talk about the current proposals. You know. What I can tell,
Speaker 1: of course, is that leverage and reverse ETFs have been
Speaker 1: around for quite a while and have been valuable tools
Speaker 1: for investors for UM both hedging positions in their portfolio
Speaker 1: looking for opportunities where they have particular points of views
Speaker 1: have been valuable tools. But unfortunately I'm not the right
Speaker 1: person at the firm to be talking about the updates
Speaker 1: on on what's going on with the proposal. I can
Speaker 1: type it that. So this is something that we've been
Speaker 1: following quite closely for actually for a couple of years.
Speaker 1: This is kind of part of this long thought out
Speaker 1: derivatives proposal that the SEC has been mulling over for
Speaker 1: a while, and they finally came out towards the end
Speaker 1: of last year with some proposals and a sort of
Speaker 1: carve out provision from the Derivative's rule that would apply
Speaker 1: to to leverage funds. And what they've kind of suggested
Speaker 1: is this kind of give with one hand, take with
Speaker 1: the other kind of approach in that they are proposing
Speaker 1: lifting what has essentially been a moratorium on new issuers
Speaker 1: of leverage products. So prohas, for example and its competitive direction,
Speaker 1: have been able to sell a leverage products, but we
Speaker 1: haven't seen any new issues being able to come into
Speaker 1: the space for since I think around. So they're proposing
Speaker 1: lifting that moratorium. But the downside is that they do
Speaker 1: want these From an issue perspective, the downside is that
Speaker 1: they do want these greater controls at the point of sale.
Speaker 1: So for the brokerages that maybe selling these leverage products,
Speaker 1: they would have to ensure that they're the client has
Speaker 1: a certain degree of sophistication, that they have a certain
Speaker 1: number of assets that they have a certain level of
Speaker 1: understanding before they are able to it's green lighter a
Speaker 1: sale of that of those products. So the SEC has
Speaker 1: been collecting comments on this process has been quite interesting
Speaker 1: in this space, and that they did come out and
Speaker 1: encourage their shareholders to actually respond to the SEC and
Speaker 1: to give their thoughts on this process. But it's still
Speaker 1: something that's kind of um your ongoing and the SEC
Speaker 1: has yet come out with a final proposal. You know
Speaker 1: what I find interesting, Rachel's if I want to so
Speaker 1: the way I envisioned this is if I lag onto
Speaker 1: my E trade or my uh, you know, a marriage
Speaker 1: trade account, and I try to buy a levered e
Speaker 1: t F, I'll get some sort of pop up saying
Speaker 1: you have to answer these questions. I don't correct me
Speaker 1: if I'm wrong, but I don't think the same is
Speaker 1: true if say I want to open a margin account
Speaker 1: or want to start short selling stocks over the same platform. Um,
Speaker 1: So I wonder if would that be a next step.
Speaker 1: Do you think that that they would sort of start
Speaker 1: cracking down on that as well. So there's an interesting
Speaker 1: thing we've kind of purchasing leverage products already and that
Speaker 1: you do times have a few boxes to go through
Speaker 1: already without having these extra kind of provisions that the
Speaker 1: SEC is contemplating in place. Um. You know, some people
Speaker 1: will have a box that you kind of have to tick,
Speaker 1: but there isn't for an options based contract. You would
Speaker 1: have to actually get documents through the mail, sign them,
Speaker 1: film all in, send them back. There's no kind of
Speaker 1: um level UM like that that applies for leverage products,
Speaker 1: and the argument goes that, you know, if you have
Speaker 1: products that have options embedded or other derivatives embedded, maybe
Speaker 1: there should be kind of a similar sort of process
Speaker 1: to ensure that you understand in the same way that
Speaker 1: there is for the more complex, um, you know, purchases
Speaker 1: of derivatives. UM. So I think it's going to be
Speaker 1: interesting to see, um, you know, kind of like how
Speaker 1: the SEC sort of goes from here, whether this is
Speaker 1: sort of the further edge of their kind of policy making.
Speaker 1: Because let's remember this is a proposal, this is not
Speaker 1: kind of written in stone and these things. Looking at
Speaker 1: what the different commissioners from the SEC have come out
Speaker 1: and said on this, there is clearly some division between
Speaker 1: the sort of republican and democratly and in commissioners, and
Speaker 1: this is a bit of a dialogue. Here's a little
Speaker 1: bit of a given take here. So I think it's
Speaker 1: hard to say at this stage whether things veer towards
Speaker 1: the you know, increasing kind of client checks and that
Speaker 1: becoming more and more something we see expanded to other markets,
Speaker 1: whether actually it kind of reigns back and they find
Speaker 1: a middle ground where maybe we see it a little
Speaker 1: bit more required, but not quite what's being contemplated at
Speaker 1: the moment, so simeon regardless of what's going on in
Speaker 1: the regulatory arena. Some of the leverage for leveraged funds
Speaker 1: that you guys are well known for our the pro
Speaker 1: shairs aultopro triple q c q q Q. Then there's
Speaker 1: the short version s q q Q. Can you walk
Speaker 1: us through maybe how you typically see investors actually utilizing
Speaker 1: your products? And then from your perspective as the head
Speaker 1: of investment strategy, how do you actually go about having
Speaker 1: conversations with investors as well about the right way to
Speaker 1: actually put them to use. Yeah, I'll answer them in
Speaker 1: two parts, because one with regards to the lever gtfs
Speaker 1: and the leverage diniversity TFS. We have a ton of
Speaker 1: education on our website to help people think about how
Speaker 1: they can express different views and create portfolio constructions that
Speaker 1: make sense and use them in a way that will
Speaker 1: help them meet their objectives. UM but actually UM myself
Speaker 1: and my team we spend most of our time talking
Speaker 1: about um our our sort of for us traditional buying
Speaker 1: whole strategies. In fact, our biggest et f UH today
Speaker 1: over seven billion dollars has took your n O b
Speaker 1: L which is the S and P five Dividend Aristocrats
Speaker 1: e t f UM. So we talk about our suite
Speaker 1: of a dividend growth ETFs UM more than just about
Speaker 1: anything else on the platform these days. And in fact
Speaker 1: it's very applicable to the current environment because companies that
Speaker 1: consistently grow their dividends have you know, been a really
Speaker 1: nice way to be able to UH participate reasonably well
Speaker 1: when markets go up. But when you have a bad
Speaker 1: quarter like we had in twenty eighteen, the down capture
Speaker 1: the defensiveness has has worked very well as well. So
Speaker 1: that's been a really UH core part of our conversations
Speaker 1: with UH. With Financial Advisor is another clients for a
Speaker 1: little while. Now I love the name of that, the Aristocrats.
Speaker 1: What is it you have to have UH grown your
Speaker 1: dividend for Is it twenty years going or something twenty
Speaker 1: five for the large cap And we think we also
Speaker 1: have ticker R e g L which is the SMP
Speaker 1: four Aristocrats and SMDV the small cap And there's almost
Speaker 1: a little bit of an interesting I don't want to
Speaker 1: say more per se, but certainly an interesting opportunity with
Speaker 1: mid and small caps because as we know, large caps
Speaker 1: have run this market for a while, but it's perhaps
Speaker 1: even a bigger has been a bigger impacted people. Note
Speaker 1: over the last decade, on a price to book basis,
Speaker 1: mid and small cap stocks have gone from parity to
Speaker 1: the SMP five hundred to trading at a discount sixty
Speaker 1: cents on the dollar. Now, the problem is there's a
Speaker 1: lot of junk when you get down there, but you
Speaker 1: resolve the junk problem if you invest in the dividend growers.
Speaker 1: The consistent dividend growers and been small So uh, you know,
Speaker 1: we've been talking not just about the flagship and O
Speaker 1: b L, but also R E, g L and mid
Speaker 1: cap and and SMGV and small, which resonates with folks.
Speaker 1: You know, you're looking at the tape and wondering, things
Speaker 1: keep going up, but I'm a little nervous night and
Speaker 1: a nice alternative for that, things keep going up, but
Speaker 1: I'm a little nervous state of mind. But but at
Speaker 1: the same time, I want to ask because I feel
Speaker 1: like we've almost been in the state of mind for
Speaker 1: quite a while now, this idea that things keep going up,
Speaker 1: but I'm pretty nervous. And with that We've heard multiple strategists,
Speaker 1: portfolio managers, many people I've spoken to saying, all right,
Speaker 1: so that means look at small caps, look at emerging markets,
Speaker 1: look elsewhere, don't look at US large caps. But that's
Speaker 1: just continues to be what keeps going up, and you
Speaker 1: would imagine maybe making people more nervous. I mean, is
Speaker 1: a solution really to keep going elsewhere even though it's
Speaker 1: been roughly I guess a year now over that since
Speaker 1: we had that correction in in which we did see
Speaker 1: this performance continue. Yeah, So first, I'm kind of a
Speaker 1: classic acid allocation. So yeah, somewhere between forty and of
Speaker 1: your portfolio probably should be. US large caps are for
Speaker 1: US investor, And if you love it, you have a
Speaker 1: little more. If you hate, if you had at less.
Speaker 1: And to put that in perspective, if you think about
Speaker 1: the valuations of large caps, I don't get two worked
Speaker 1: up because and you've you've all heard this many times before,
Speaker 1: because how low interest rates are? You know, if you
Speaker 1: plot the p the SMP five D guess interest rates
Speaker 1: at a two percent ten yere you get a twenty
Speaker 1: multiple and we're now one and a half times and
Speaker 1: we're at somewhere around the twenty multiple. And by the way,
Speaker 1: we're starting to have a little bit of earnings growth.
Speaker 1: In Q four we had about one percent earnings growth
Speaker 1: for the SMP five hundred, but if you take out energy,
Speaker 1: you had actually over a four percent increase in earnings.
Speaker 1: That's the first time in four quarters, and I would
Speaker 1: argue it's it's a little bit of kind of this.
Speaker 1: You have to follow the bouncing ball, but it's an
Speaker 1: artifact of the corporate tax cut. The corporate tax cut
Speaker 1: temporarily boosted margins in AN eighteen, but then for the
Speaker 1: large part of twenty nineteen that started to be eroded
Speaker 1: in price. Just like we learned in Freshman economics, the
Speaker 1: tax cut went through price for a lot of companies
Speaker 1: that are are price competitive where you don't have the
Speaker 1: anniversary it anymore, using old retail speak. And in Q
Speaker 1: four he started to see some earnings growth. So if
Speaker 1: you put that together, it's not a terribly bearish story
Speaker 1: for large caps, particularly when we're in this almost goldilocks
Speaker 1: of two GDP growth. We have two percent GDP growth
Speaker 1: because we have a very strong consumer in a middling
Speaker 1: manufacturing sector, and that means the FED can't do anything
Speaker 1: but we're growing just enough, so I don't want to
Speaker 1: be I'm not I'm not a particular pessimist, such a
Speaker 1: pessimist on large cap that you should dump all your
Speaker 1: large cap and going to mid small emerging markets. But
Speaker 1: it would absolutely agree with the notion that, as I mentioned,
Speaker 1: there's a relative valuation opportunity in mid and small And
Speaker 1: I'll pile onto the e M a little bit too.
Speaker 1: One of the things that people I think, uh don't
Speaker 1: are aren't as familiar with with regards to emerging markets box.
Speaker 1: And by the way, we have ticker e M d V,
Speaker 1: which is our dividend grower and e M as I
Speaker 1: do a ticker check because that's part of my job.
Speaker 1: That's where I'm an e t F. I gotta I
Speaker 1: gotta put tickers out there. That's what we do. So
Speaker 1: in emerging markets the quality is actually higher than in
Speaker 1: developed markets. So in other words, margins and returns on
Speaker 1: assets and equities are actually higher in e M. We
Speaker 1: know that the virus isn't overhanging e M. We also
Speaker 1: suspect there's stimulus coming along the way, not just from China,
Speaker 1: but look, we even might get cut in the US
Speaker 1: and that's always good for EM. And I think if
Speaker 1: we see some stability and commodity prices, I know that's
Speaker 1: a big if people looking at oil, copper and all that. Um,
Speaker 1: there's an opportunity there. So I am. I am on
Speaker 1: board with the notion that there's some relative value opportunities
Speaker 1: in things like mid small and EM. But I don't
Speaker 1: think valuations are that scary in in in core US
Speaker 1: large cap pequitis either. Now, Ray sure Simeon sounds fairly optimistic, um,
Speaker 1: but I know you were looking at some of the
Speaker 1: flows into the pro shaares funds year to date. I'm
Speaker 1: got to say that the money coming into the pro
Speaker 1: shairs is does not look very optimistic. Tell us a
Speaker 1: little bit about what the flows look like to you, Yeah,
Speaker 1: I mean, it's all you always have to be a
Speaker 1: little bit careful when you look at leverage funds and
Speaker 1: flows because you do see a lot of people kind
Speaker 1: of using these very much as getting get out kind
Speaker 1: of trading vehicles. But there is a sign here. When
Speaker 1: you see a flow, it means that people need more shares. Therefore,
Speaker 1: more shares have been created because people want to use
Speaker 1: that fund. And we've been seeing a lot of that
Speaker 1: in s q q Q and in s H which
Speaker 1: are two short funds, one against kind of the nasdack
Speaker 1: and one against um that the SMP five hundred, And
Speaker 1: that suggests to me that the people are hedging themselves
Speaker 1: or betting against the current highs that we're seeing in
Speaker 1: the SMP five and the NAZAC. We are starting to
Speaker 1: see a little bit of signs that maybe we could
Speaker 1: see a slight pullback in stocks. Been a couple of
Speaker 1: wobbles this week, so I think it'll be kind of
Speaker 1: interesting to see sort of whether those flows continue, whether
Speaker 1: we see a little bit of reversal, if some of
Speaker 1: the kind of froth is taken out of the market. Look,
Speaker 1: I mean, people when the virus is creating volatility, and
Speaker 1: you know, people always look for hedges and times of volatility.
Speaker 1: It's not it's quite well known that after just about
Speaker 1: every one of these UH pandemics epidemics viruses, you look
Speaker 1: six to twelve months out the markets up. But in
Speaker 1: the short run things can happen, uh you know, outside
Speaker 1: of the of the opportunities that you discussed with with
Speaker 1: our vehicles. I also point out a classic old school hedge,
Speaker 1: you know, zero coupon bonds are up thirteen percent year
Speaker 1: to date. The problem is with duration. All we need
Speaker 1: is just to calm down and the ten year goes
Speaker 1: back to two percent and you lost twelve So um
Speaker 1: that but that's but that's something that that that's old
Speaker 1: school heage right there, because you have the if the
Speaker 1: virus um you know, really kicks in for all we know,
Speaker 1: you could see a further rally and treasuries from our
Speaker 1: perspective of we think in the medium term, you know,
Speaker 1: the the odds of anything or a little bit of
Speaker 1: uh you think of two percent on the tenure is
Speaker 1: a normalization, but I guess it would be directionally normalization.
Speaker 1: At this point. We've actually got a couple of interest
Speaker 1: rate hedged um corporate bond e t f I G
Speaker 1: h G is the it's our investment grade flavor and
Speaker 1: h Y s G is high yield um and as
Speaker 1: we had a little bit of movement out and spreads
Speaker 1: if you want to take advantage of that, but hedge
Speaker 1: out the treasury rate risk and just have the corporate piece.
Speaker 1: That's it's almost like credit ARB light in uh IN
Speaker 1: or a credit AR strategy and an index form that's
Speaker 1: been something that put people have been talking about. So
Speaker 1: mean to get back to that idea of asset allocation.
Speaker 1: I think you said, what forty you'd be fort yous
Speaker 1: large caps. What does the rest of your portfolio look like? Yeah,
Speaker 1: so then you have your ear slug of midden small
Speaker 1: on the order of you know, another ten or fifteen
Speaker 1: and small. If I don't add up because I'm not
Speaker 1: writing this down, don't hold it against me. Another ten
Speaker 1: per sentence in uh in, five or ten percent in
Speaker 1: small cap, and then something on the order of twenty
Speaker 1: odd percent in developed international and another five decent percent
Speaker 1: in emerging markets. From a baseline standpoint, So the way
Speaker 1: the logic works, about half the world's equities are outside
Speaker 1: the US. But if you're a US liability person, then
Speaker 1: you should probably have about the US dollar liability person
Speaker 1: who's have about six US broken out pro rata by
Speaker 1: market cap, and then the international stuff about two thirds developed,
Speaker 1: one third, one third emerging. Hey, we're journalists. You don't
Speaker 1: have to worry about us doing math. We're not going
Speaker 1: to check your math. You could take Yeah, I want to.
Speaker 1: There's one of their opportunity that we've seen is sort
Speaker 1: of a quasi sector opportunity that we've been talking a
Speaker 1: lot about that UH, and that's in the infrastructure space.
Speaker 1: I'll have to do another ticker because that's my job.
Speaker 1: But our ticker is t O l Z, another clever
Speaker 1: ticker because it's tolls like a toll taker. UM. The
Speaker 1: UH the the infrastructure sector, and we follow the Brookfield
Speaker 1: Index of owners and operators of the infrastructure assets. So
Speaker 1: in other words, not the sort of construction company and
Speaker 1: the and the drillers. These are the people who own
Speaker 1: the assets, for example, cell phone towers and airports and
Speaker 1: things like that. You're currently getting in that space two
Speaker 1: times the yield of the SMP five hundred at only
Speaker 1: two thirds the price to book, and you're actually getting
Speaker 1: a hundred basis points more yield than utilities, which you know,
Speaker 1: if if dawns go up at well, you really got
Speaker 1: a problem there. So we think this is a clever
Speaker 1: space because you own the assets, you're making money even
Speaker 1: if there isn't the the long awaited infrastructure bill, and
Speaker 1: if there was one, you have a little bit of
Speaker 1: ticket to upside to UH. And a lot of people
Speaker 1: have been talking to us about that sort of quasi
Speaker 1: sector opportunity and infrastructure. UH is looking to get four
Speaker 1: yield in this environment. Is it's hard to do even
Speaker 1: in bonds right, A lot of politics talk, but it
Speaker 1: will be very interesting over the next couple of years
Speaker 1: if we do see both sides of the table to
Speaker 1: come together for some type of infrastructure bill. But Mike,
Speaker 1: before we get to the craziest thing, Rachel, let's move
Speaker 1: into your new world of the currency space, because we
Speaker 1: have seen some crazy moves there. The dollar just continuing
Speaker 1: to outperform. It's pretty unbelievable. I'm pretty sure. In the
Speaker 1: latest Bank of America fund managers survey they said and
Speaker 1: at of those surveys said that the dollar is overvalued.
Speaker 1: I think many people have said this for quite a
Speaker 1: while now, but that's the second highest level since two
Speaker 1: thousand and two, and at that we've also seen just
Speaker 1: a complete breakdown in the end against the US dollar,
Speaker 1: and this even as people are moving to safe havens
Speaker 1: the like of gold elsewhere too. What is it about
Speaker 1: this move and dollar yen that that's so different and
Speaker 1: interesting right now? Yeah, this is huge irony is that
Speaker 1: we've put this massive of risk off sentiment and yet
Speaker 1: the end is not doing what we would expect the
Speaker 1: END to do it as kind of a traditional safe haven,
Speaker 1: and I think there's kind of like a number of
Speaker 1: different factors that are are really playing into to to
Speaker 1: the end's weakness there. You know, we've seen obviously, as
Speaker 1: you mentioned, kind of this big dollar strength, and that's
Speaker 1: kind of a move that's been fairly sort of broad based.
Speaker 1: If you look at some of the dollar indexes, they're
Speaker 1: pushing up on kind of significant levels, and one of
Speaker 1: the dollar indexes is looking kind the hundred handle, which
Speaker 1: is kind of as seen as a sort of yeah,
Speaker 1: we love round numbers on the side of the table,
Speaker 1: but yeah, I think that that is kind of an
Speaker 1: interesting level that people are watching. So there is this
Speaker 1: broad kind of strength. But I think when it comes
Speaker 1: to Japan, there is both fears that kind of some
Speaker 1: of the handling of the coronavirus, that the quarantining of
Speaker 1: that cruise ship there, and kind of whether there could
Speaker 1: be more of an outbreak um sort of within Japan proper,
Speaker 1: whether that could kind of start to sort of pop
Speaker 1: up in the news over the next few days. There
Speaker 1: are signs of course there that the economy and growth
Speaker 1: is not going to be um, you know, sort of
Speaker 1: heading in the right direction, and that seems to be
Speaker 1: another kind of thing that that's weighing on Japan sentiment
Speaker 1: and UM. And then we are moving towards the end
Speaker 1: of the fiscal year over there as well, so there's
Speaker 1: a sense of reallocating sort of assets out out of
Speaker 1: the year and into other attic into other currencies like
Speaker 1: the dollar for example. UM, you actually do see this
Speaker 1: crossing over into et F LAN just to bring to
Speaker 1: bring it full circle, because we have seen there's a
Speaker 1: JP Morgan fund. I'm out there b b JP, I
Speaker 1: can play tickets to UM that that kind of has
Speaker 1: been seeing big outfit somebody else's I'm sorry, I have
Speaker 1: to have a broaden out but no, but we've seen big,
Speaker 1: big outflows from there over the last um, you know,
Speaker 1: a couple of days, a few weeks. Really that money
Speaker 1: seems to be potentially moving into a European focus ETF.
Speaker 1: When you look at kind of the holders of both
Speaker 1: of those products, and there's one big goliath in the room.
Speaker 1: JP Morgan itself is a very large holder of these
Speaker 1: and we do see kind of these sorts of products
Speaker 1: used by model portfolio it's and used to reallocate kind
Speaker 1: of money at home. But I think it's interesting that
Speaker 1: that this is kind of a not just a sort
Speaker 1: of yen situation, but it's a kind of Japan situation
Speaker 1: of just community. To see how that kind of plays
Speaker 1: out over the next few days, particularly as we do
Speaker 1: see kind of, you know, this move into other types
Speaker 1: of havens. You know, we are seeing kind of the
Speaker 1: movement to the dollar that seems to be a favorite
Speaker 1: place gold, as you mentioned um and treasuries. You see
Speaker 1: that in the et F space to g l D
Speaker 1: I do very well. T LT, which is a longer
Speaker 1: term treasury, is also getting influence. Yeah, I thought it was.
Speaker 1: It was surprised me when the coronavirus started breaking out
Speaker 1: in the end was rallying on this haven deband when
Speaker 1: the main risk is right in Asia, you know, that's
Speaker 1: the time when the end stops working. And you look
Speaker 1: at the chart and the Asian financial crisis and it
Speaker 1: wasn't very strong than either. So in Japan has already
Speaker 1: been dealing with some of its own issues too at
Speaker 1: that and then you introduced the coronavirus. So I think
Speaker 1: this is just I'm amazed that people look to currencies
Speaker 1: to headge equity market exposure because it's there's so many
Speaker 1: moving parts, you know, the better answer is either an
Speaker 1: explicit explicit hedge or the zero coupon bonds. At least
Speaker 1: you know if that virus gets a heck of a
Speaker 1: lot worse, that there's going to be a treasury rail.
Speaker 1: The odds of that, I shouldn't say with certainty, but
Speaker 1: the odds of that are much much higher than trying
Speaker 1: to figure out if the end is gonna be too
Speaker 1: safe haven. But the virus is on its shore, and
Speaker 1: that to me, there's just too many moving parts there
Speaker 1: to use that as a as a as a hedge
Speaker 1: for other forms of risk in your portfolio. Okay, well, Simeon,
Speaker 1: there is no haven from the craziest thing we saw
Speaker 1: in markets. I don't know see what. I don't know
Speaker 1: if they warned you about this gimmick of ours, but uh,
Speaker 1: every week we we discussed the craziest things we've seen
Speaker 1: in markets. This week, oddly enough, I tend to see
Speaker 1: the craziest things. I'm just gonna go out and say that, Sarah.
Speaker 1: I know that upset you. Mike thinks he wins every week,
Speaker 1: sime In, but there are a very I would say
Speaker 1: large group of people who would very much disagree. Some
Speaker 1: haters coming out. But first I will say we we
Speaker 1: did have someone waiting on Twitter. Before we get to that,
Speaker 1: remember you can also give us a call at our
Speaker 1: very own Bloomberg Podcast hotline, leave us a message, ask
Speaker 1: us quite suestions, let us know about the craziest things
Speaker 1: that you guys have seen in markets, and we might
Speaker 1: even play your message on the show. So for that,
Speaker 1: the number is six four six three to four three
Speaker 1: four nine zero. But we did get a good way
Speaker 1: in on Twitter. This one came from at j y Squall.
Speaker 1: He said, when decentralized finance privacies defy discovers what flash
Speaker 1: loans are used for? Yeah, Sarah, I'm gonna try to
Speaker 1: explain this one, all right. This is this is kind
Speaker 1: of like when dad makes dinner, though, so I might
Speaker 1: I might burn this and you know, call the hotline
Speaker 1: if I got this wrong. But basically he's talking about
Speaker 1: this outfit b z X, which is sort of like
Speaker 1: a peer to peer type of lender, but with crypto
Speaker 1: and um what does all happens to pretty much every
Speaker 1: crypto exchange eventually they get hacked, and this one got
Speaker 1: hacked to the tune of six forty five thousand dollars,
Speaker 1: which I think, as far as crypto hacks go is
Speaker 1: is pretty much small potatoes, but still very interesting story.
Speaker 1: And we thank j Y Squal if that indeed is
Speaker 1: your real name, we thank you for the contribution. Have
Speaker 1: a feeling maybe it's not Rachel. Do you have any
Speaker 1: crazy observations? Well, my crazy observation is one that you
Speaker 1: could probably have done last week as well. But I
Speaker 1: mean watching Tesla, like because we saw that enormous, crazy, crazy,
Speaker 1: crazy spike, um, and then it kind of rained back in.
Speaker 1: Everyone was like, see told you it was a bubble,
Speaker 1: and it's just been creeping higher and higher. And yesterday
Speaker 1: kind of a week we went to a new kind
Speaker 1: of I don't think it was quite the high, but
Speaker 1: we were back around that kind of nine fifty level.
Speaker 1: So that to me is really fascinating. Um. I know,
Speaker 1: there was a lot of talk we initially saw that
Speaker 1: spike about whether you could overlay that the Tesla stock
Speaker 1: price with bitcoin, and there was a lot of like, no, no,
Speaker 1: these are very very different in this, but seriously, try
Speaker 1: it a little bit. Scary is a perennial favorite of
Speaker 1: the last couple of weeks price target this week of
Speaker 1: a share within minutes, essentially tesliterating above nine dollars a share.
Speaker 1: I'll share my crazy thing because it's very much a
Speaker 1: compliment to Tesla. I've been living in this space lately.
Speaker 1: I've actually been working Asia hours to help out throughout
Speaker 1: the coronavirus, so my US daylight hours to search for
Speaker 1: crazy things have been somewhat limited. But one that's been
Speaker 1: a clear favorite over the past week has been Virgin Galactic.
Speaker 1: Unbelievable similar space as Tesla the tickers SPC, but similar
Speaker 1: space when it comes to movements. I mean, this is
Speaker 1: a stock that's now up two your date up one
Speaker 1: in February alone. Uh So we're just seeing these odd, eccentric,
Speaker 1: crazy steep moves across the stock market in very weird
Speaker 1: and I'm not weird, but favorites that stocks going to
Speaker 1: the moon. So Penny Simeon, I know we we booked
Speaker 1: you last minute, but did you have a chance to
Speaker 1: I came up with one. So this is a little
Speaker 1: old school and you have to say yeah, you have
Speaker 1: to say it in measured tones because strategists always refer
Speaker 1: to this in measured tones. I've been watching the Baltic
Speaker 1: Dry in that you have to explain it in that
Speaker 1: voice the whole time. Yes, yes, yes, the Baltic Dry Index.
Speaker 1: That's the dry container shipping index. It's down eighty percent,
Speaker 1: eighty percent from hundred to five hundred. The the sort
Speaker 1: of what fived means, don't worry about it. But it's
Speaker 1: down eighty percent, and by the way, that is now
Speaker 1: the depths of the crisis level. So that's kind of nutty. Uh.
Speaker 1: Some people think it's a recession signal. It's obviously much
Speaker 1: more about the coronavirus and the immediate impact to uh
Speaker 1: some of the commodities markets. But that that's huge, a big,
Speaker 1: big move. So I don't know if that would win
Speaker 1: me any prize, but it caught my eyes. I'll tell
Speaker 1: you what I mean. I like the Baltic Dry a lot.
Speaker 1: The only reason I will not award you apprize to
Speaker 1: that is that I I that was one of my
Speaker 1: crazy things last week. I listened to a couple of them.
Speaker 1: Quick believe that I didn't catch that one. So it's okay. Alright, Well,
Speaker 1: Mike set him up pretty strong, and I want to
Speaker 1: say before you get started, because Andrea on LinkedIn reached
Speaker 1: out and he said, Sarah, please make sure Mike sticks
Speaker 1: to finance related topics when debating the craziest thing in markets.
Speaker 1: No more vintage bikes or like occurrences. So Mike, you
Speaker 1: better stay honest. Alright, alright, that's fair, that's a fair LinkedIn.
Speaker 1: All of a sudden, we're getting trolled on linked over.
Speaker 1: What is going on? Man? That that'll teach me to
Speaker 1: post on LinkedIn? I gotta say, But now I can
Speaker 1: reveal the winner of the craziest thing we saw markets
Speaker 1: this week, And sir, with all honestly, Rachel, if you
Speaker 1: disagree that this is not the craziest thing, please speak up.
Speaker 1: It's like handing Rachel attend bill. However, we've all heard
Speaker 1: of this company Facebook, right, uh sillion market cap and
Speaker 1: one of the most important companies out there. So there's
Speaker 1: a new book out called Facebook The Inside Story, written
Speaker 1: by a long time technology journalist named Stephen Leavy. There
Speaker 1: was a good review in it this week in Business Week,
Speaker 1: sie book on the history of Facebook. There's one line
Speaker 1: in this review, buried deep inside the review that has
Speaker 1: caught fire on social media in the press, even the
Speaker 1: New York post. You know, if it shows up in
Speaker 1: the New York Post, it's a crazy thing. And it
Speaker 1: is this. Apparently, Mark Zuckerberg suffers from severe perspiration when
Speaker 1: he speaks at public events. So to eliminate the I guess,
Speaker 1: to eliminate the threat of armpit stains, he has an executive,
Speaker 1: they say, an executive, not just some intern, an executive
Speaker 1: in the communications department at Facebook comes and blow dries
Speaker 1: his armpits before public speeches. Blow drives with heat. Wouldn't
Speaker 1: that make it worse? That's why. That's what I was wondering,
Speaker 1: because I sorry, I kind of live in a glass
Speaker 1: house when it comes to having perspiration, you know. I
Speaker 1: think this is why our producer toof are always seats
Speaker 1: the guests on the opposite side of the table. For me,
Speaker 1: I would assume that blow drying your pits would make
Speaker 1: it worse. Yeah, but I can maybe they put it
Speaker 1: on the cool settings. But I'm thinking I don't know
Speaker 1: how to be on the cool setting right, Um, But
Speaker 1: I just I guess I'll have to try it. I
Speaker 1: don't know. I might start blow drying my pits, but
Speaker 1: I don't think I can get an executive in the
Speaker 1: company to do it for me? I think Mark, come on, man,
Speaker 1: you gotta blow dry your own pits. I think that's
Speaker 1: illegal these days, right, right, exactly? I mean, how much
Speaker 1: do you have to get paid to blow dry another
Speaker 1: guy's arm pits if they're an executive? It's an important job,
Speaker 1: very important job, all right, the chief officer in charge
Speaker 1: of dry armpits? All right, Rachel does Mike win? I
Speaker 1: don't know, would we say that's markets? Facebook is one
Speaker 1: of the most important stars. But did anything happen with Facebook?
Speaker 1: Keep it on that that share price? All right? We will,
Speaker 1: and we'll blame We'll blame Spotty Pitts. Alright with that, Simeon,
Speaker 1: thank you so much for joining us, and Rachel thinks
Speaker 1: so much for coming on the show. Thank you. What
Speaker 1: goes up? We'll be back next week. Until then, you
Speaker 1: can find us on the Bloomberg Terminal website and app
Speaker 1: or wherever you get your podcasts. We'd love it if
Speaker 1: you took the time to rate and review the show
Speaker 1: on Apple podcast so more listeners can find us. And
Speaker 1: you can find us on Twitter, follow me at Sarah
Speaker 1: pon Seck. Mike is a reaganymous and Rachel Evans is
Speaker 1: at Rachel Evans Underscore and Why. You can also follow
Speaker 1: Bloomberg Podcasts at podcasts. What Goes Up is produced by
Speaker 1: Topur foreheads ahead of Bloomberg podcast is Francesco Levie. Thanks
Speaker 1: for listening, See you next time.