1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:33,959 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Well, 7 00:00:33,960 --> 00:00:35,519 Speaker 1: there have been a number of reports PAIM that have 8 00:00:35,560 --> 00:00:38,120 Speaker 1: come out recently about commercial real estate in the US 9 00:00:37,880 --> 00:00:42,159 Speaker 1: that I have found really interesting. Goldman Sachs, for example, 10 00:00:42,280 --> 00:00:45,240 Speaker 1: came out saying that Siri is probably overvalued, with commercial 11 00:00:45,320 --> 00:00:50,440 Speaker 1: real estate prices ten to sixteen above fair value. Joining 12 00:00:50,520 --> 00:00:53,480 Speaker 1: us now is Police Marand's she is a Bloomberg News 13 00:00:53,600 --> 00:00:58,120 Speaker 1: reporter covering equities and as well as commercial real estate. Police. 14 00:00:58,120 --> 00:01:00,120 Speaker 1: Thank you so much for being here. I found this 15 00:01:00,400 --> 00:01:03,760 Speaker 1: really interesting. You sort of you looked at a roundup 16 00:01:03,920 --> 00:01:07,319 Speaker 1: of analysts talking about being concerned about commercial real estate. 17 00:01:07,480 --> 00:01:10,119 Speaker 1: Can you lay out what it is specifically that has 18 00:01:10,160 --> 00:01:14,160 Speaker 1: them so concerned? Well, the big thing is, uh, the 19 00:01:14,240 --> 00:01:18,200 Speaker 1: trend towards higher interest rates. Uh. And that's followed by 20 00:01:18,319 --> 00:01:21,880 Speaker 1: what's being labeled the Amazon effect that Amazon is driving 21 00:01:21,920 --> 00:01:25,360 Speaker 1: retail vacancies. So it's pretty easy to paint a narrative 22 00:01:25,400 --> 00:01:29,040 Speaker 1: about why there might be some concern in commercial real estate. 23 00:01:29,600 --> 00:01:32,240 Speaker 1: At the same time, uh, you know, there's always the 24 00:01:32,240 --> 00:01:34,280 Speaker 1: other hand, And that other hand is that we're not 25 00:01:34,360 --> 00:01:39,120 Speaker 1: actually seeing any losses at the moment. Okay, no losses 26 00:01:39,160 --> 00:01:42,640 Speaker 1: at the moment, but as you said, weakening fundamentals and 27 00:01:42,840 --> 00:01:48,120 Speaker 1: specifically this combination of increased the debt costs as well 28 00:01:48,120 --> 00:01:51,560 Speaker 1: as certain you know, debt service burdens plus higher vacancies. 29 00:01:51,840 --> 00:01:56,559 Speaker 1: According to noted Bernstein, this is something that's pretty easy 30 00:01:56,600 --> 00:02:01,120 Speaker 1: to tell. Yes, indeed, that that kind of narrative is 31 00:02:01,160 --> 00:02:04,320 Speaker 1: it is easy to tell. And I think that people 32 00:02:04,320 --> 00:02:07,000 Speaker 1: are always looking for the next thing to worry about, 33 00:02:07,560 --> 00:02:09,840 Speaker 1: and as long as there are the so called brown 34 00:02:10,040 --> 00:02:13,840 Speaker 1: shoots as opposed to green shoots, which is how Baird 35 00:02:14,000 --> 00:02:16,799 Speaker 1: had characterized the situation, people are going to be looking 36 00:02:16,880 --> 00:02:19,440 Speaker 1: at that and trying to figure out what's going on. Well, 37 00:02:19,760 --> 00:02:22,359 Speaker 1: you know, please, One thing that I find interesting is 38 00:02:22,480 --> 00:02:25,520 Speaker 1: that a lot of investors around the world sort of 39 00:02:25,560 --> 00:02:29,920 Speaker 1: flocked to you as commercial real estate as a bond substitute, 40 00:02:29,960 --> 00:02:34,320 Speaker 1: since you get study income from renters, leasers, etcetera. UM, 41 00:02:34,400 --> 00:02:37,400 Speaker 1: and that was sort of driving a lot of Chinese money, 42 00:02:37,520 --> 00:02:40,120 Speaker 1: Asian money, as well as European money into the US. 43 00:02:40,280 --> 00:02:43,480 Speaker 1: Has anyone talked about sort of a shift in foreign 44 00:02:43,639 --> 00:02:45,600 Speaker 1: money and that kind of leading to some of the 45 00:02:45,639 --> 00:02:50,320 Speaker 1: worries here too. I think that people are questioning whether 46 00:02:50,360 --> 00:02:53,320 Speaker 1: there's going to be a shift. I haven't really seen 47 00:02:53,360 --> 00:02:58,120 Speaker 1: any evidence that there is in fact shift underway. One 48 00:02:58,160 --> 00:03:01,440 Speaker 1: of the comments from US Bank are chief executive on 49 00:03:01,480 --> 00:03:04,320 Speaker 1: the conference call recently this goes back, I guess to 50 00:03:04,400 --> 00:03:09,079 Speaker 1: December said that they haven't been growing their commercial real 51 00:03:09,240 --> 00:03:12,960 Speaker 1: estate loan book because they see some competition for things 52 00:03:13,000 --> 00:03:15,720 Speaker 1: that they would choose not to do. What kind of 53 00:03:15,760 --> 00:03:18,600 Speaker 1: things do you believe they are? Well, I was wondering 54 00:03:18,639 --> 00:03:22,080 Speaker 1: that myself and other analysts have noted that there are 55 00:03:22,120 --> 00:03:26,079 Speaker 1: some loosening standards UM, certainly at banks. Now it's easier 56 00:03:26,120 --> 00:03:29,640 Speaker 1: to track standards at banks because the FED surveys that, uh, 57 00:03:29,840 --> 00:03:33,320 Speaker 1: you know, I would wonder what other things are happening 58 00:03:33,360 --> 00:03:36,760 Speaker 1: and in a less regulated or less monitored corner of 59 00:03:36,760 --> 00:03:39,840 Speaker 1: the market. Well, and this is actually really important because 60 00:03:39,840 --> 00:03:42,720 Speaker 1: if you have you know, US Bank, Corps, Wells, Fargo, 61 00:03:42,880 --> 00:03:47,440 Speaker 1: Goldman Sachs warning about commercial commercial real estate valuations. You 62 00:03:47,480 --> 00:03:51,560 Speaker 1: have to wonder perhaps they're seeing loosening standards and they're 63 00:03:51,600 --> 00:03:54,960 Speaker 1: seeing something that perhaps haven't materialized yet, but that could 64 00:03:55,080 --> 00:03:59,680 Speaker 1: kind of filter in more rapidly than than people expect. Well, 65 00:03:59,720 --> 00:04:03,600 Speaker 1: you have Morgan Stanley pointing out that core commercial lending 66 00:04:03,640 --> 00:04:06,760 Speaker 1: standards loosened in the first quarter for the first time 67 00:04:06,800 --> 00:04:11,520 Speaker 1: since the third quarter of but at the same time 68 00:04:11,560 --> 00:04:15,640 Speaker 1: demand continued to decline. Richard hill Over at Morgan Stanley 69 00:04:15,680 --> 00:04:19,840 Speaker 1: called that a peculiar relationship, since demand usually increases when 70 00:04:19,880 --> 00:04:23,080 Speaker 1: you have let loosening standards. And does this have to 71 00:04:23,160 --> 00:04:25,039 Speaker 1: do when you talk about commercial real estate? Is this 72 00:04:25,080 --> 00:04:27,440 Speaker 1: all about new build or is this because you're seeing 73 00:04:27,440 --> 00:04:30,760 Speaker 1: a shift in what it is that the businesses want 74 00:04:30,800 --> 00:04:34,039 Speaker 1: at a real estate That's a great question, and it 75 00:04:34,160 --> 00:04:38,080 Speaker 1: really is very very broad, I think. Unlike the housing market, 76 00:04:38,600 --> 00:04:41,159 Speaker 1: which is also complicated for reasons of its own, the 77 00:04:41,279 --> 00:04:47,360 Speaker 1: commercial real estate market covers everything from apartments to warehouses. Um. 78 00:04:47,400 --> 00:04:49,400 Speaker 1: You know, if you look at the Bloomberg Reed Index, 79 00:04:49,560 --> 00:04:52,039 Speaker 1: you can see that that's down about five percent year 80 00:04:52,080 --> 00:04:56,080 Speaker 1: to date, and that's probably correlated with rising interest rates. However, 81 00:04:56,160 --> 00:04:59,080 Speaker 1: you can see that warehouses, which are known as industrials 82 00:04:59,120 --> 00:05:03,240 Speaker 1: in uh reed parlance, are actually rising, so you do 83 00:05:03,320 --> 00:05:06,360 Speaker 1: have a big variety of their construction loans. Um, it's 84 00:05:06,360 --> 00:05:09,760 Speaker 1: a very kind of complicated and varied sector. I want 85 00:05:09,760 --> 00:05:11,520 Speaker 1: to thank you very much for coming in and sharing 86 00:05:11,520 --> 00:05:15,280 Speaker 1: this information with us. Uh police morants of Bloomberg News 87 00:05:15,480 --> 00:05:18,800 Speaker 1: talking about commercial real estate, and I guess it's also 88 00:05:18,800 --> 00:05:21,680 Speaker 1: worth noting that commercial real estate, just like residential real estate, 89 00:05:22,080 --> 00:05:42,200 Speaker 1: is a geographical uh indicated we say bam And Joe Maisak, 90 00:05:42,480 --> 00:05:45,800 Speaker 1: editor for the Bloomberg brief on municipals appears in our 91 00:05:46,040 --> 00:05:51,120 Speaker 1: studio magically, Joe Mysak, Um, you might be uh sort 92 00:05:51,120 --> 00:05:54,680 Speaker 1: of if you're hunting for municipal bonds this summer, are 93 00:05:54,720 --> 00:05:56,840 Speaker 1: you are people going to come up short? Because I 94 00:05:56,880 --> 00:06:00,799 Speaker 1: was reading a story about how muni negative nets supply 95 00:06:01,279 --> 00:06:07,440 Speaker 1: it's nearly nineteen billion dollars. Oh yeah, Well, see the 96 00:06:07,520 --> 00:06:13,520 Speaker 1: municipal market is um. Municipalities are rewarded for their very 97 00:06:13,520 --> 00:06:19,960 Speaker 1: conservative bond issuance tradition of selling mostly serial bonds which 98 00:06:20,000 --> 00:06:24,080 Speaker 1: mature every year. So you have maturing bonds being taken 99 00:06:24,080 --> 00:06:26,840 Speaker 1: away all the time in the municipal market, and you 100 00:06:26,880 --> 00:06:30,400 Speaker 1: have the ten year call. So every ten years you 101 00:06:30,480 --> 00:06:33,920 Speaker 1: have bonds being taken away total. This year I think 102 00:06:33,920 --> 00:06:37,839 Speaker 1: it was over four hundred billions were being taken away. 103 00:06:37,880 --> 00:06:41,440 Speaker 1: Now if if you consider that we're going to maybe 104 00:06:41,680 --> 00:06:44,960 Speaker 1: have three hundred three fifty billion dollars in issuance total 105 00:06:45,000 --> 00:06:48,680 Speaker 1: for the year, well you could see the problem. So 106 00:06:49,080 --> 00:06:51,800 Speaker 1: basically we're looking at means of a bond issuance that 107 00:06:51,960 --> 00:06:55,800 Speaker 1: is down and it seems down for the year. Which 108 00:06:56,120 --> 00:06:59,480 Speaker 1: what you're raising your eyebrows, it's you know it's down, yes, 109 00:06:59,680 --> 00:07:04,560 Speaker 1: but there's some wait refinances right, Well, yes, but no, 110 00:07:05,120 --> 00:07:07,200 Speaker 1: the thing that was done away over the last year 111 00:07:07,680 --> 00:07:11,880 Speaker 1: was the twenty of the market is advance of fundings 112 00:07:11,920 --> 00:07:15,160 Speaker 1: in any given year, and Congress took those away last year, 113 00:07:15,280 --> 00:07:19,880 Speaker 1: or the Republicans did, and uh so that's why we're 114 00:07:19,880 --> 00:07:25,920 Speaker 1: seeing over all volume down this year. But in I 115 00:07:25,960 --> 00:07:28,320 Speaker 1: took a look at this earlier this year and I said, 116 00:07:28,520 --> 00:07:33,000 Speaker 1: you know, what we're seeing is new money issuance municipalities 117 00:07:33,040 --> 00:07:36,240 Speaker 1: out there selling bonds for projects is up. It's up 118 00:07:36,240 --> 00:07:39,960 Speaker 1: ten percent so far this year. So you know, people 119 00:07:40,080 --> 00:07:42,680 Speaker 1: lose sight of that fact. I mean, if you're an underwriter, 120 00:07:42,800 --> 00:07:45,600 Speaker 1: you just want you know, lots of value and you're saying, oh, 121 00:07:45,640 --> 00:07:48,960 Speaker 1: the volume is down by about you expected that. You 122 00:07:49,040 --> 00:07:51,840 Speaker 1: expected that because the advanture of fundings were taken away. 123 00:07:52,000 --> 00:07:57,760 Speaker 1: But with new money and and building things for projects, um, 124 00:07:57,800 --> 00:08:02,040 Speaker 1: that's up and ten percent is robut growth. So municipalities 125 00:08:02,160 --> 00:08:05,680 Speaker 1: haven't been sitting back and saying, well, but I'll hold 126 00:08:05,680 --> 00:08:08,760 Speaker 1: our fire now. No. Well, so, given the fact that 127 00:08:08,840 --> 00:08:12,480 Speaker 1: in the municipalities are borrowing money for their projects, can 128 00:08:12,520 --> 00:08:15,320 Speaker 1: we just take a moment to take a pulse of 129 00:08:15,400 --> 00:08:17,960 Speaker 1: the cities and counties and states I see you taking 130 00:08:18,000 --> 00:08:21,680 Speaker 1: the moment breathe deep, Uh, just to take take a 131 00:08:21,680 --> 00:08:24,760 Speaker 1: sort of a pulse of the health of these of 132 00:08:24,840 --> 00:08:28,920 Speaker 1: these regions in terms of, you know, their taxes, their 133 00:08:29,080 --> 00:08:33,920 Speaker 1: borrowings going up, their pensions getting more indebted. How are 134 00:08:33,920 --> 00:08:36,760 Speaker 1: we doing right now? Well, you know the thing you 135 00:08:36,800 --> 00:08:39,600 Speaker 1: mentioned you talk about regions, and it even goes further 136 00:08:39,679 --> 00:08:43,640 Speaker 1: than that, because the municipal market, as an investor pointed 137 00:08:43,679 --> 00:08:46,840 Speaker 1: out to me years and years ago, it's particular and 138 00:08:46,960 --> 00:08:50,840 Speaker 1: specific to a remarkable degree, or you could even say 139 00:08:50,880 --> 00:08:55,000 Speaker 1: an insane degree, because when you look at these states 140 00:08:55,040 --> 00:08:57,800 Speaker 1: and municipalities, you really have to go on a one 141 00:08:57,880 --> 00:09:01,120 Speaker 1: by one basis. Let's say, what's going on here? For example, 142 00:09:01,120 --> 00:09:04,600 Speaker 1: our Amanda Albright how a story this week about how 143 00:09:05,559 --> 00:09:13,240 Speaker 1: fort Worth, Texas. There you would expect right that fort 144 00:09:13,280 --> 00:09:16,800 Speaker 1: Worth would be booming. So why do they have such 145 00:09:16,800 --> 00:09:20,840 Speaker 1: a huge pension live just just let people do because 146 00:09:20,880 --> 00:09:23,040 Speaker 1: oil praises are up so much, so they should be 147 00:09:23,080 --> 00:09:25,640 Speaker 1: getting the revenues from that. It should be a great time. 148 00:09:25,880 --> 00:09:30,480 Speaker 1: Carry on, should be a great time. And the reason 149 00:09:31,120 --> 00:09:37,839 Speaker 1: is because fort Worth, believe it or not, was they 150 00:09:37,880 --> 00:09:44,559 Speaker 1: stinted on how much they put in their actuarial contribution 151 00:09:44,800 --> 00:09:47,920 Speaker 1: to the pension fund. So when you skip those payments, 152 00:09:48,280 --> 00:09:51,200 Speaker 1: or you trim those payments, or you don't put in 153 00:09:51,320 --> 00:09:54,000 Speaker 1: as much as you're supposed to, as for example New 154 00:09:54,040 --> 00:09:57,560 Speaker 1: York always does, uh, you run into a problem. And 155 00:09:58,000 --> 00:10:02,240 Speaker 1: people can't believe it. Texas for worked Texas, any Texas city, 156 00:10:02,440 --> 00:10:06,400 Speaker 1: And yet it's true. A second, the point being here 157 00:10:06,760 --> 00:10:08,480 Speaker 1: that now they have to pay the bill and they 158 00:10:08,520 --> 00:10:11,080 Speaker 1: have to divert money away from other things to put 159 00:10:11,120 --> 00:10:14,160 Speaker 1: into their pensions to make up for those payments, and 160 00:10:14,240 --> 00:10:16,880 Speaker 1: possibly even more because they could have been impluing interest. 161 00:10:17,360 --> 00:10:19,920 Speaker 1: Is that what's going on here, That's what's going on. 162 00:10:20,240 --> 00:10:25,040 Speaker 1: But also after the financial crisis. Okay, when when a 163 00:10:25,120 --> 00:10:28,640 Speaker 1: lot of these big public pension funds and small public 164 00:10:28,679 --> 00:10:31,960 Speaker 1: pension funds for that matter, took a hit, a lot 165 00:10:32,000 --> 00:10:37,680 Speaker 1: of these places decided to to go very conservadi very safe, 166 00:10:38,000 --> 00:10:40,800 Speaker 1: so they missed out on the stock market run up. 167 00:10:41,280 --> 00:10:45,880 Speaker 1: You know, you're around the turn of the century, two thousands. 168 00:10:46,559 --> 00:10:51,199 Speaker 1: Most public pensions, believe it or not, were over funded. 169 00:10:52,280 --> 00:10:53,880 Speaker 1: So can you give us a sense of what other 170 00:10:53,960 --> 00:10:57,080 Speaker 1: areas just really quickly also are suffering from a similar 171 00:10:57,080 --> 00:10:58,960 Speaker 1: type of thing where they've been skipping payments and are 172 00:10:58,960 --> 00:11:01,160 Speaker 1: going to face the reckoning. It's some point. Oh you know, 173 00:11:01,240 --> 00:11:05,400 Speaker 1: it's a lot of your usual suspects. If you think 174 00:11:05,400 --> 00:11:14,040 Speaker 1: about State of Illinois, Chicago, State of Connecticut, Pennsylvania, Kentucky. Uh, 175 00:11:14,080 --> 00:11:16,640 Speaker 1: you know it's not every place, but there are like 176 00:11:16,679 --> 00:11:19,520 Speaker 1: you know, as I say, the uh, the outliers in 177 00:11:19,559 --> 00:11:23,079 Speaker 1: the municipal market that are in some trouble. So California, 178 00:11:23,160 --> 00:11:27,240 Speaker 1: to believe it or not, a lot of the smaller municipalities, 179 00:11:27,280 --> 00:11:32,400 Speaker 1: they're uh short cheated the bed. All right, Joe Meisak, 180 00:11:32,640 --> 00:11:34,920 Speaker 1: thank you so much as always for joining us and 181 00:11:35,000 --> 00:11:38,319 Speaker 1: to discuss short cheating the bed. Joe Meisac is the 182 00:11:38,440 --> 00:11:41,800 Speaker 1: editor for the Bloomberg Brief focused on the municipal bond market. 183 00:11:56,920 --> 00:12:00,760 Speaker 1: There's a lot of movement today, particularly in the European markets, 184 00:12:00,800 --> 00:12:03,040 Speaker 1: and there's a big question on days like this, which 185 00:12:03,080 --> 00:12:06,920 Speaker 1: is how much leveraged money is there at play, how 186 00:12:06,960 --> 00:12:10,800 Speaker 1: many traders are making bets that are short term versus 187 00:12:10,840 --> 00:12:15,440 Speaker 1: investors making a big and longer term allocation shifts. Here 188 00:12:15,480 --> 00:12:17,840 Speaker 1: to give us some kind of insight into some of 189 00:12:17,880 --> 00:12:21,199 Speaker 1: these issues is Sylvia Jablonski. She's managing director of Capital 190 00:12:21,200 --> 00:12:26,280 Speaker 1: Markets and Institutional et F Strategist Direction Investments, which specializes 191 00:12:26,400 --> 00:12:29,160 Speaker 1: in leveraged e t F s. H Sylvia, thank you 192 00:12:29,200 --> 00:12:31,040 Speaker 1: so much for being with us. I'd love to get 193 00:12:31,080 --> 00:12:34,559 Speaker 1: your sense of, you know, really whether you're seeing increased 194 00:12:34,559 --> 00:12:37,800 Speaker 1: flows in some of these leveraged products on days like 195 00:12:37,880 --> 00:12:40,480 Speaker 1: today when you see the Italian bond yield surging to 196 00:12:40,840 --> 00:12:43,040 Speaker 1: h two three year highs. Yes, thanks so much for 197 00:12:43,080 --> 00:12:47,520 Speaker 1: having me. So the quick answer is yes. Um, you know, 198 00:12:47,960 --> 00:12:50,840 Speaker 1: any kind of market news or headline news tends to 199 00:12:51,240 --> 00:12:54,440 Speaker 1: result in flows in our funds, so i'd say energy 200 00:12:54,640 --> 00:12:57,960 Speaker 1: today was a good example of that. So month to date, 201 00:12:58,000 --> 00:12:59,920 Speaker 1: you know, there's been a lot of fear about inflation, 202 00:13:00,000 --> 00:13:02,520 Speaker 1: and uh, energy tends to be a late cycle performer. 203 00:13:02,600 --> 00:13:07,560 Speaker 1: You had Iran Venezuela sanctions uncertainty around that, and you 204 00:13:07,600 --> 00:13:10,680 Speaker 1: know a lot of investors started flocking to the energy 205 00:13:10,720 --> 00:13:14,040 Speaker 1: bull funds, so basically anything oil and gas related. So 206 00:13:14,040 --> 00:13:16,280 Speaker 1: we have an ETF called the gush UM which is 207 00:13:16,320 --> 00:13:19,160 Speaker 1: three beta oil and gas gas three beta natural gas, 208 00:13:19,240 --> 00:13:22,360 Speaker 1: and UM three beta energy saw huge inflows and also 209 00:13:22,440 --> 00:13:25,199 Speaker 1: performance a month to date. You know, prior to today 210 00:13:25,360 --> 00:13:30,079 Speaker 1: they were up pcent respectively. But then today you saw 211 00:13:30,120 --> 00:13:33,079 Speaker 1: the two percent pull back with the Saudi output boost, 212 00:13:33,200 --> 00:13:35,120 Speaker 1: and you know we sort of see short in the 213 00:13:35,160 --> 00:13:38,360 Speaker 1: short term traders looking to tactically take advantage of the 214 00:13:38,360 --> 00:13:41,200 Speaker 1: bare sides. It's really you know, your short term view 215 00:13:41,280 --> 00:13:44,880 Speaker 1: on the particular trader sector, and you know all market 216 00:13:44,920 --> 00:13:47,520 Speaker 1: news factors into that. Well, I was just looking at 217 00:13:47,520 --> 00:13:51,760 Speaker 1: the r X one of your direction of three times 218 00:13:51,960 --> 00:13:56,840 Speaker 1: leverage energy ETFs down nine and a quarter percent today, 219 00:13:57,280 --> 00:13:58,920 Speaker 1: But I thought it was interesting that one word you 220 00:13:58,960 --> 00:14:03,960 Speaker 1: mentioned was trader. Are these products typically used in conjunction 221 00:14:04,120 --> 00:14:08,440 Speaker 1: with something else by traders? Absolutely, so the three beta 222 00:14:08,520 --> 00:14:10,920 Speaker 1: products are meant to be traded and not held, so 223 00:14:11,040 --> 00:14:14,040 Speaker 1: they're tactical products that allow you to you know, if 224 00:14:14,080 --> 00:14:16,800 Speaker 1: you have a strong conviction, you usually have, you know, 225 00:14:16,920 --> 00:14:19,600 Speaker 1: some factor that compels you to enhance your exposure to 226 00:14:19,680 --> 00:14:21,680 Speaker 1: an index in the short term. You usually have a 227 00:14:21,760 --> 00:14:23,320 Speaker 1: view that is going to go up or down, and 228 00:14:23,400 --> 00:14:25,840 Speaker 1: you usually have a view that there will be you know, 229 00:14:25,960 --> 00:14:28,360 Speaker 1: little volatility for the time period that you're holding a 230 00:14:28,400 --> 00:14:30,160 Speaker 1: three betat et F and that could be a day, 231 00:14:30,200 --> 00:14:32,320 Speaker 1: it could be a week or a month, but you know, 232 00:14:32,400 --> 00:14:35,320 Speaker 1: your conviction should be volva below and it will trend 233 00:14:35,360 --> 00:14:38,240 Speaker 1: in the correct direction. You know, most of the clients 234 00:14:38,280 --> 00:14:40,120 Speaker 1: that we see using these products are using them for 235 00:14:40,280 --> 00:14:43,800 Speaker 1: alpha generation, to take advantage of short term market opportunities, 236 00:14:44,160 --> 00:14:46,680 Speaker 1: and for portable alpha. You know, this is sort of 237 00:14:46,800 --> 00:14:50,160 Speaker 1: behind the construct of a long term buy and hold portfolio. Okay, 238 00:14:50,360 --> 00:14:54,520 Speaker 1: so are these hedge funds. They are are as family 239 00:14:54,600 --> 00:14:59,200 Speaker 1: offices and hedge funds institutional clients and also sophisticated retail traders. 240 00:14:59,520 --> 00:15:02,880 Speaker 1: Are these people who don't want to register as a 241 00:15:03,040 --> 00:15:07,479 Speaker 1: counter party for a staff for a clearinghouse for derivatives 242 00:15:07,880 --> 00:15:10,880 Speaker 1: and are using e t F as a proxy for 243 00:15:11,560 --> 00:15:14,920 Speaker 1: just doing the derivative trades themselves directly. Yeah, you know, 244 00:15:15,040 --> 00:15:16,600 Speaker 1: that's a that's a great point. You know. One of 245 00:15:16,640 --> 00:15:18,480 Speaker 1: the things that we say is where we are trying 246 00:15:18,520 --> 00:15:20,600 Speaker 1: to democratize leverage here. So if you have an r 247 00:15:20,640 --> 00:15:23,600 Speaker 1: a A an individual with a strong conviction that would 248 00:15:23,640 --> 00:15:26,720 Speaker 1: like to enhance his exposure to an index, you know 249 00:15:27,360 --> 00:15:30,440 Speaker 1: that person doesn't have an agreement with seven different counterparties 250 00:15:30,480 --> 00:15:32,480 Speaker 1: on the street, They don't have swap agreements and what not, 251 00:15:32,600 --> 00:15:35,200 Speaker 1: so it allows them to access that index. How do 252 00:15:35,280 --> 00:15:39,200 Speaker 1: you make sure that people who aren't sophisticated stay out? 253 00:15:39,560 --> 00:15:42,200 Speaker 1: I mean, especially given the fact that it has I'm 254 00:15:42,200 --> 00:15:44,640 Speaker 1: looking at Gush for example, which has an expense ratio 255 00:15:44,680 --> 00:15:47,800 Speaker 1: of nearly one percent, and I'm wondering, you know, how 256 00:15:47,840 --> 00:15:51,680 Speaker 1: do you make sure that you know, marketer or doesn't 257 00:15:51,760 --> 00:15:54,600 Speaker 1: go to see a higher potential spread for themselves, a 258 00:15:54,680 --> 00:15:58,080 Speaker 1: higher commission and market that to uh, to an individual, 259 00:15:58,320 --> 00:16:00,840 Speaker 1: It's it's really all about education. And so you know, 260 00:16:00,920 --> 00:16:03,840 Speaker 1: there are again sophisticated traders that are the appropriate crowd 261 00:16:03,920 --> 00:16:06,000 Speaker 1: for these products. If you're trading it for two or 262 00:16:06,080 --> 00:16:08,040 Speaker 1: three days, you probably don't care too much that the 263 00:16:08,120 --> 00:16:10,280 Speaker 1: expense use ninety five basis points because you're not paying 264 00:16:10,280 --> 00:16:13,200 Speaker 1: a whole lot. But for the other crowd, the classic 265 00:16:13,320 --> 00:16:15,640 Speaker 1: long term assid allocators. You know, we talk to them, 266 00:16:15,840 --> 00:16:18,360 Speaker 1: we educate them about light leverage. So at one point 267 00:16:18,440 --> 00:16:21,320 Speaker 1: to five beta product, for example, which will you know, 268 00:16:21,760 --> 00:16:25,880 Speaker 1: lightly enhance their underlying exposure to an index and you know, 269 00:16:26,000 --> 00:16:28,480 Speaker 1: in periods of net positive compounding, they'll get a little 270 00:16:28,480 --> 00:16:30,760 Speaker 1: bit of enhancement, but not the level of drawn out 271 00:16:30,760 --> 00:16:33,920 Speaker 1: and volatility that's say an oil, gas or energy et 272 00:16:34,040 --> 00:16:35,800 Speaker 1: F would have in the short term. But there are 273 00:16:35,800 --> 00:16:39,240 Speaker 1: a lot of education, um, you know, efforts to make 274 00:16:39,240 --> 00:16:42,200 Speaker 1: sure that the right people are using the three X products. 275 00:16:42,480 --> 00:16:43,840 Speaker 1: I just want to give you a chance to talk 276 00:16:43,840 --> 00:16:47,600 Speaker 1: a little bit about you bought you b o T 277 00:16:48,840 --> 00:16:52,520 Speaker 1: because this is really about what many people are interested in. 278 00:16:53,000 --> 00:16:56,720 Speaker 1: This is artificial intelligence and robotics. Yes, um so, I 279 00:16:56,840 --> 00:16:58,800 Speaker 1: love the ETF. Actually, I think it's one of the 280 00:16:58,880 --> 00:17:01,400 Speaker 1: most innovative ones we've come out with. It's three beta robotics, 281 00:17:01,480 --> 00:17:05,760 Speaker 1: artificial intelligence, and automation. So it's basically the idea that 282 00:17:06,000 --> 00:17:08,600 Speaker 1: you know a lot of these companies are looking at ideas, 283 00:17:08,720 --> 00:17:13,840 Speaker 1: designs and ways to automate manufacturing, um medical fields, and 284 00:17:14,560 --> 00:17:17,720 Speaker 1: you know, even military. So they're looking to create robots 285 00:17:17,800 --> 00:17:21,440 Speaker 1: that can replace say the aging Japanese population, uh in 286 00:17:21,520 --> 00:17:24,720 Speaker 1: the future, to staff factories in America and China with 287 00:17:24,880 --> 00:17:28,600 Speaker 1: sensors and you know, non human manned machines basically so 288 00:17:28,960 --> 00:17:31,800 Speaker 1: so really robotics. And in the medical field, it's you know, 289 00:17:31,880 --> 00:17:36,240 Speaker 1: making invasive surgery more efficient with companies like Intuitive Surgical. 290 00:17:36,440 --> 00:17:39,119 Speaker 1: And I think for the average investor, a lot of 291 00:17:39,160 --> 00:17:42,720 Speaker 1: them haven't heard of Kiants and Phinuk and Cassawa and 292 00:17:43,080 --> 00:17:45,119 Speaker 1: you know, Intuitive Surgical probably they have heard of, but 293 00:17:45,200 --> 00:17:48,040 Speaker 1: I think it's a it's a diverse basket of access 294 00:17:48,080 --> 00:17:51,080 Speaker 1: to those different sectors. Thanks very much for being with 295 00:17:51,240 --> 00:17:56,160 Speaker 1: us at Jabonsky is Managing director, Capital Markets Institutional et 296 00:17:56,320 --> 00:18:04,160 Speaker 1: F Strategists. For direction, Thanks for listening to the Bloomberg 297 00:18:04,200 --> 00:18:06,840 Speaker 1: P and L podcast. You can subscribe and listen to 298 00:18:06,880 --> 00:18:11,399 Speaker 1: interviews at Apple Podcasts, SoundCloud or whatever podcast platform you prefer. 299 00:18:11,840 --> 00:18:15,400 Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm 300 00:18:15,440 --> 00:18:18,800 Speaker 1: on Twitter at Lisa abramoits one Before the podcast, you 301 00:18:18,840 --> 00:18:21,359 Speaker 1: can always catch us worldwide on Bloomberg Radio.