WEBVTT - What the Actual ETF Is Going on Right Now 0:00:06.440 --> 0:00:12.880 Welcome to Trillions. I'm Joel Webber and I'm Eric bel Tunis. Eric. 0:00:12.920 --> 0:00:16.520 I'm recording from my closet for this special Corona virus 0:00:17.120 --> 0:00:20.320 episode of Trillions. How about you? Uh, ditto. My wife 0:00:20.320 --> 0:00:23.000 and two kids are downstairs. My son is doing like 0:00:23.280 --> 0:00:26.560 through the internet classes for the next two weeks. So 0:00:26.560 --> 0:00:29.440 it's noisy down there and a little quieter and here, 0:00:29.480 --> 0:00:32.440 and I see that I have to do some cleaning here. 0:00:32.479 --> 0:00:35.120 I'm real up close to all the mess in this closet, 0:00:35.200 --> 0:00:38.680 so uh, there's that too, But yeah, it's quieter. How 0:00:38.680 --> 0:00:42.040 are you managing otherwise? Day three of the quarantine. And 0:00:42.080 --> 0:00:43.800 when you have two little kids around, I think it 0:00:44.080 --> 0:00:47.479 makes it a little more cabin feverish sometimes, But at 0:00:47.520 --> 0:00:49.280 the same time, it's kind of nice having them home. 0:00:49.320 --> 0:00:51.559 And I work from home two days a week anyway, 0:00:51.640 --> 0:00:53.800 so it's not that big of a stretch. So what 0:00:53.920 --> 0:00:59.800 is your best work from home tip? Um? Basically, for 0:01:00.240 --> 0:01:02.360 I write a lot, and I just roll out of 0:01:02.360 --> 0:01:05.520 bed pretty much, start drinking coffee and get writing. I 0:01:05.560 --> 0:01:08.200 find that early in the morning you are most inspired, 0:01:08.280 --> 0:01:11.200 you have the greatest natural energy, so I just don't 0:01:11.200 --> 0:01:14.040 waste time in the morning. I roll rate until ten 0:01:14.080 --> 0:01:16.880 and I'm highly productive. The afternoon is tougher. That's a 0:01:16.880 --> 0:01:20.600 pro tip there. Okay, So this episode of Trillions, we 0:01:20.760 --> 0:01:23.920 felt like we needed to take stock of the reality 0:01:24.040 --> 0:01:26.399 right now, which is not kind. There's a lot of 0:01:26.400 --> 0:01:28.960 red in the world. Where do you think we should start? 0:01:29.680 --> 0:01:32.360 I mean, look, I think the SMP five is something 0:01:32.400 --> 0:01:34.800 almost everybody at this point owns, whether it's through an 0:01:34.800 --> 0:01:38.840 active mutual fund or individual stocks or more increasingly passive 0:01:39.160 --> 0:01:40.600 in e t F like s p Y or I 0:01:40.680 --> 0:01:43.640 V v or OO. And last time I checked, I mean, 0:01:43.959 --> 0:01:47.400 it's going up eight percent, down nine percent. It's I 0:01:47.400 --> 0:01:50.360 equate it to being in a little rowboat and there's 0:01:50.440 --> 0:01:52.200 just in the middle of the ocean and there's a 0:01:52.240 --> 0:01:54.400 storm and the waves are just massive, and you're hoping 0:01:54.840 --> 0:01:56.840 that when you slide down the one wave there's another 0:01:56.840 --> 0:01:59.360 one to catch you. And it's just it's really um 0:01:59.440 --> 0:02:04.080 chaotic and discombobulating, a little scary. I'm getting kind of 0:02:04.120 --> 0:02:06.200 tired of it, and I think other people are. I've 0:02:06.200 --> 0:02:08.560 talked to market makers all week and they're telling me 0:02:08.600 --> 0:02:12.000 they're exhausted. So for this episode, we wanted to talk 0:02:12.040 --> 0:02:15.440 about sort of the some five observations are the biggest 0:02:15.480 --> 0:02:18.480 themes that are relating to e t s right now. 0:02:18.560 --> 0:02:20.960 We're also going to have Katie Greyfield come on, who's 0:02:21.000 --> 0:02:27.320 covering ets for Bloomberg News amidst all this chaos, this 0:02:27.400 --> 0:02:33.200 time on Trilliance Carnage. Katie, Welcome back to Trillians. Thanks 0:02:33.200 --> 0:02:34.920 for having me. What do you guys think is the 0:02:35.040 --> 0:02:37.799 number one thing people should just know about how e 0:02:37.880 --> 0:02:40.760 t s are performing right now? Um? You know, for me, 0:02:41.160 --> 0:02:45.079 I look at two things, volume and the e t 0:02:45.240 --> 0:02:47.959 F price versus its net asset value, and those two 0:02:48.000 --> 0:02:50.480 things are like thermometers to me. E t F s 0:02:50.520 --> 0:02:54.240 are all seeing heightened volume three or four times their average. 0:02:55.000 --> 0:02:57.919 This is part of what they're they were designed for 0:02:58.440 --> 0:03:01.360 is to be a liquidity buffer release valve so that 0:03:01.440 --> 0:03:03.720 all the pressure wasn't on the stocks and bonds. And 0:03:04.160 --> 0:03:05.919 I think they do a great job of that, and 0:03:06.240 --> 0:03:08.960 sell off after sell off they seem to gain new 0:03:08.960 --> 0:03:10.400 fans along the way. I don't think this would be 0:03:10.400 --> 0:03:12.399 that much different. And I think you look at something 0:03:12.440 --> 0:03:16.480 like Spy that one traded a hundred and thirteen billion 0:03:16.639 --> 0:03:22.040 on February. No exchange traded listed equity or fund has 0:03:22.080 --> 0:03:26.040 ever traded over a hundred billion, and all told, in 0:03:26.040 --> 0:03:28.160 the past three weeks, it's traded about one point two 0:03:28.240 --> 0:03:31.919 trillion worth of shares. It normally does that in three months. 0:03:32.400 --> 0:03:35.880 So across the board, whether it's h Y, G or SPY, 0:03:36.000 --> 0:03:38.480 the volumes are very high. A lot of people are 0:03:38.520 --> 0:03:42.360 turning to E t F too quickly. Tweak portfolios make 0:03:42.440 --> 0:03:45.920 short positions, and I you know, the volume tells you 0:03:45.960 --> 0:03:48.400 people trust them, use them. There's been a couple of 0:03:48.440 --> 0:03:53.000 little hiccups, but nothing worse than that, and so I 0:03:53.040 --> 0:03:55.280 would give them a strong B plus or even an 0:03:55.280 --> 0:03:58.360 A UH for their performance in this sell off and 0:03:58.640 --> 0:04:01.920 handling what I think is the craziest market I've seen 0:04:01.960 --> 0:04:04.360 since two thousand eight, if not worse. The other thing 0:04:04.360 --> 0:04:07.240 that's happening right now is this dislocation with the nav 0:04:07.480 --> 0:04:10.720 right what is what is that about? Right? So um 0:04:10.840 --> 0:04:14.000 N A V s are UH the fair value of 0:04:14.040 --> 0:04:16.320 what the E t F holds of the basket, and 0:04:16.360 --> 0:04:18.040 the E t F trades in real time, and so 0:04:18.080 --> 0:04:20.400 it can sometimes move a little ahead or behind, or 0:04:20.440 --> 0:04:23.760 you know, above or below that fair value. And that's 0:04:23.760 --> 0:04:26.440 what people watch and what makes them nervous. And if 0:04:26.480 --> 0:04:28.680 you see a ton of stress, you will see the 0:04:28.680 --> 0:04:31.279 e t F price move a little bit, but largely 0:04:31.480 --> 0:04:34.640 the dislocations from NAV have been a little higher, uh 0:04:34.640 --> 0:04:37.279 than in than in normal times. Uh. There's a lot 0:04:37.320 --> 0:04:39.120 of arguments that the e t F is sort of 0:04:39.640 --> 0:04:43.039 the true market in real time. Generally speaking, the e 0:04:43.120 --> 0:04:45.720 t F price is kind of what you can, you know, 0:04:45.800 --> 0:04:48.760 sell the car for, and then the NAV is, you know, again, 0:04:49.000 --> 0:04:50.800 the best they can do. It's saying here's the fair 0:04:50.880 --> 0:04:53.080 value of it. And in normal times those things are 0:04:53.160 --> 0:04:55.919 right on top of each other, but in stressful situations 0:04:55.920 --> 0:04:58.280 the price can deviate a little bit from that NAV. 0:04:59.760 --> 0:05:02.800 And Katie, what are you hearing from you know, investors 0:05:02.839 --> 0:05:06.080 in in in the newsroom, in our reporting in terms 0:05:06.120 --> 0:05:08.480 of how e t F s are faring well, I've 0:05:08.480 --> 0:05:11.359 been all over that NAV discount that Eric was just 0:05:11.440 --> 0:05:14.719 talking about, specifically in the bond space, because that's where 0:05:14.720 --> 0:05:19.000 you're seeing the biggest dislocations, the weirdest sort of moves, 0:05:19.000 --> 0:05:21.680 whereas you know, equity e t F s aren't having 0:05:21.720 --> 0:05:25.600 those same problems, those same discounts. And what I've been 0:05:25.600 --> 0:05:29.599 talking a lot about with investors and advisors is you know, 0:05:29.680 --> 0:05:32.760 whether this is the start of the death spiral which 0:05:32.760 --> 0:05:36.080 we hear about with E t F sometimes, that you know, 0:05:36.160 --> 0:05:38.240 in times of sell off, when you are seeing the 0:05:38.279 --> 0:05:40.839 price of the E t F dip way below that 0:05:41.080 --> 0:05:45.040 n A V value, whether that will exacerbate a sell 0:05:45.080 --> 0:05:48.080 off in the underlying markets. But doesn't seem like we're 0:05:48.120 --> 0:05:51.400 seeing any signs of that so far, because the underlying 0:05:51.440 --> 0:05:55.080 bond markets just aren't trading. There's no liquidity there, whereas 0:05:55.120 --> 0:05:58.200 the E t F is actually the much more liquid 0:05:58.279 --> 0:06:02.960 tradeable vehicle. And I think um, when you think of 0:06:02.960 --> 0:06:05.640 the bond ETFs like l q D investment grade bonds, 0:06:05.760 --> 0:06:08.279 I think that's been stuck at about a two. So 0:06:08.360 --> 0:06:10.360 the price of l q D has been living at 0:06:10.360 --> 0:06:13.560 about two percent below the net asset value. T lts 0:06:13.600 --> 0:06:16.719 wavered between like three percent and you know, one percent. 0:06:17.240 --> 0:06:19.400 But even even plain vanilla stuff like b n D, 0:06:19.560 --> 0:06:22.520 the Vanguard Total bond has been um one night, I 0:06:22.520 --> 0:06:25.240 think it closed at five percent, but it's been hovering 0:06:25.240 --> 0:06:29.240 more about one five. But I think that tells you 0:06:29.279 --> 0:06:33.279 that at any time somebody market maker a P could 0:06:34.040 --> 0:06:36.200 sell the bonds and buy the E t F and 0:06:36.240 --> 0:06:39.200 pocket the difference as a risk free profit. But what 0:06:39.240 --> 0:06:41.040 it tells you is there is a lot of faith 0:06:41.080 --> 0:06:43.520 that you can sell those bonds, and so the e 0:06:43.680 --> 0:06:46.719 t F would be the place to go to a 0:06:46.800 --> 0:06:49.480 point and then someone would arbitrage it. So the lack 0:06:49.640 --> 0:06:51.359 we call that's why we call that discount or that 0:06:51.400 --> 0:06:55.400 dislocation the arbitrage band, and those stretching times of turmoil. 0:06:55.880 --> 0:06:58.640 But I you know, I think after last time in 0:06:58.680 --> 0:07:00.760 two eight, there was a lot of like go you know, 0:07:00.920 --> 0:07:03.080 h YG was trading a like seven percent discounts and 0:07:03.080 --> 0:07:05.640 people were like wondering if it was broken and that 0:07:05.720 --> 0:07:07.520 kind of thing. I think the tone shifted a lot 0:07:07.560 --> 0:07:11.480 this time. Especially. We've talked to Eric Kazotski, our MUNI analyst, 0:07:12.040 --> 0:07:15.880 and Damian are emerging markets analysts in b I and 0:07:16.520 --> 0:07:18.520 they look to E M B and H y D 0:07:18.840 --> 0:07:21.920 so to speak as where the bonds are probably going. 0:07:22.000 --> 0:07:24.760 So the E t F sort of like leading where 0:07:24.800 --> 0:07:27.480 the bonds will probably catch up to because they're less liquid. 0:07:28.080 --> 0:07:30.120 And so I think there's been a definitely a tone 0:07:30.200 --> 0:07:32.360 change in people maybe looking at the E t F 0:07:32.440 --> 0:07:36.480 is an indicator, a metric, and but I will say 0:07:36.560 --> 0:07:39.680 to Katie's point, the idea of getting out of an 0:07:39.680 --> 0:07:43.000 E T F. The middlemen in this world have to 0:07:43.040 --> 0:07:45.560 make a little money, So the price of the e 0:07:45.680 --> 0:07:49.400 t F does incorporate what those people need to make 0:07:49.440 --> 0:07:51.760 in that arbor. And so a fair way to put 0:07:51.800 --> 0:07:53.360 it is, maybe you pay up a little bit to 0:07:53.400 --> 0:07:55.760 get out in these crazy times. It's not like it's 0:07:55.880 --> 0:07:57.520 the e t F is perfect. I just think it's 0:07:57.560 --> 0:08:00.560 a measure of the bond liquidity us the cost of 0:08:00.640 --> 0:08:05.160 arbitrage um. But I think for people who are retail investors, 0:08:05.920 --> 0:08:08.720 two takeaways here. If you don't need to trade in 0:08:08.760 --> 0:08:11.440 these times, don't I think you know, somebody referred to 0:08:11.520 --> 0:08:14.200 it as adult swim. You know, just stay home because 0:08:14.520 --> 0:08:17.720 none of these dislocations matter long term. Your total return 0:08:17.720 --> 0:08:19.840 of the e t F will match the index give 0:08:19.920 --> 0:08:22.240 or take the tracking, or they won't show up in 0:08:22.280 --> 0:08:24.600 the long term return. So that's one thing. The second 0:08:24.640 --> 0:08:26.640 thing is if you do need a trade, I would 0:08:26.800 --> 0:08:29.240 use limit orders in times like this, and I would 0:08:29.280 --> 0:08:31.480 stay away from the market opener clothes because things get 0:08:31.520 --> 0:08:34.480 really crazy as market makers are figuring out what's going 0:08:34.480 --> 0:08:37.200 on that day, So the middle of the day limit orders. 0:08:37.240 --> 0:08:39.320 I think those are two good tools to navigate this. 0:08:40.600 --> 0:08:44.000 Speaking of retail um I'm wondering what's been happening with 0:08:44.120 --> 0:08:46.319 flows and what you guys have been watching on that front. 0:08:47.880 --> 0:08:52.000 Something good's been catching my eyes. Flows into spy Um Eric. 0:08:52.040 --> 0:08:55.079 I know that's more of the trader type e t F, 0:08:55.320 --> 0:09:00.320 but prior to Wednesday it had been just on a tear. 0:09:00.400 --> 0:09:04.520 It received nine billion and inflows last week, an additional 0:09:04.679 --> 0:09:08.320 seven point five billion on Monday, and uh, you know 0:09:08.520 --> 0:09:11.400 that kind of caused people to scratch their heads because 0:09:11.920 --> 0:09:14.319 anyone who's been paying attention knows that the stock market 0:09:14.360 --> 0:09:17.920 has just been doing terribly. But you know, JP Morgan 0:09:17.960 --> 0:09:21.120 has a theory that this is just create to lend activity, 0:09:21.120 --> 0:09:24.640 where these aren't actual inflows, it's not a good measure 0:09:24.640 --> 0:09:28.240 of investor sentiment. But basically, these new shares are being 0:09:28.280 --> 0:09:31.800 created in order for investors to basically short the e 0:09:31.920 --> 0:09:34.640 t F. So that was a little bit interesting. Another 0:09:34.679 --> 0:09:39.120 thing is that ultra short bond funds have received a 0:09:39.160 --> 0:09:41.880 lot of interest in this sell off. It it feels 0:09:41.880 --> 0:09:43.960 like they're the only section of the e t F 0:09:44.040 --> 0:09:47.800 market that hasn't seen outflows of some magnitude, which I 0:09:47.880 --> 0:09:50.280 think just speaks to how desperate people are for cash 0:09:50.360 --> 0:09:54.840 right now, especially as liquidity drives up in most markets. Yeah, 0:09:54.840 --> 0:09:57.360 and to riff off that, people sometimes equate e t 0:09:57.520 --> 0:10:00.960 f s with equities or risk on. They forget that 0:10:01.000 --> 0:10:03.000 they are e t s for things that you run 0:10:03.040 --> 0:10:05.320 to when this guy is falling. And I think those 0:10:05.320 --> 0:10:07.760 short duration e t f s, it's amazing how much 0:10:07.760 --> 0:10:11.280 they've taken in because it was a year where only 0:10:11.360 --> 0:10:15.120 cash worked. It seemed like everything was negative except for cash. 0:10:15.160 --> 0:10:18.120 And they've in the month of March. Those ultra short 0:10:18.160 --> 0:10:23.120 bondy tfs have superseded any month and the month isn't 0:10:23.120 --> 0:10:25.959 even over, So that tells you how cash is king 0:10:26.040 --> 0:10:28.719 right now in this market. I also think in the 0:10:28.760 --> 0:10:33.280 flow category spy I w M, the cues those flows 0:10:33.320 --> 0:10:35.200 to me move a lot like the waves I was 0:10:35.240 --> 0:10:38.400 talking about in the rowboat. You know, five billion in 0:10:38.400 --> 0:10:40.559 one day, two billion out the next. It's very hard 0:10:40.600 --> 0:10:42.480 to read what what's going on because those things are 0:10:42.600 --> 0:10:46.040 used as derivatives by some investors, so they could be shorting, 0:10:46.080 --> 0:10:48.360 they could be hedging. You just it's hard to tell. 0:10:49.040 --> 0:10:52.840 The retail type flows though, um are pretty strong, which 0:10:52.880 --> 0:10:54.960 is good. It shows you there's a base bid out there. 0:10:55.440 --> 0:10:59.520 Vanguard in particular, the Vanguard f who has taken in 0:10:59.559 --> 0:11:02.480 cash every single day during this sell off, and and 0:11:02.559 --> 0:11:05.000 a lot like a half a billion, a billion even 0:11:05.000 --> 0:11:07.880 took in money when the market was down twelve It's 0:11:07.920 --> 0:11:11.960 pretty uh, pretty miraculous. And other Vanguard ETFs have also 0:11:12.000 --> 0:11:14.640 do the same, although not surprising. We look at Vanguard 0:11:14.640 --> 0:11:16.560 and past sell offs and in two thousand and eight 0:11:16.600 --> 0:11:18.520 they took in money every month. They're just kind of 0:11:18.520 --> 0:11:22.319 a machine. Their investors are just pretty unshakable. And I 0:11:22.400 --> 0:11:28.120 do see some sentiment on Twitter with advisors who are 0:11:28.280 --> 0:11:31.480 just not selling. They're just they're just going to coach 0:11:31.480 --> 0:11:35.080 their clients into hanging in there, because I think over 0:11:35.120 --> 0:11:38.520 time a lot of people have just been enlightened with 0:11:38.559 --> 0:11:40.520 the fact that it's very hard to to time these 0:11:40.559 --> 0:11:42.840 things and when do you go in, when do you 0:11:42.880 --> 0:11:44.319 take out? Well, you know, and I think a lot 0:11:44.320 --> 0:11:45.959 of people are just like, look, I'm just gonna continue 0:11:45.960 --> 0:11:48.880 my sort of drip drip drip inflows into the market. 0:11:48.960 --> 0:11:51.720 And we've done polls and the flows show that for 0:11:51.760 --> 0:11:55.560 the most part, the retail investor base in ETFs is 0:11:55.640 --> 0:11:58.720 hanging in there. And you know, we watch those flows 0:11:58.720 --> 0:12:00.719 because if those starts to turn negative, we're in a 0:12:00.760 --> 0:12:03.720 whole different ball game, but so far they've held strong 0:12:03.800 --> 0:12:06.840 and that's arguably a good sign. So one takeaway and 0:12:06.840 --> 0:12:10.640 all this is that perhaps retail investors have more of 0:12:10.640 --> 0:12:16.520 a stomach and especially bogol heads, uh than professionals. Yeah, 0:12:16.720 --> 0:12:19.600 that's probably a takeaway. Yeah, or institutional maybe. Yeah. There's 0:12:19.600 --> 0:12:22.400 also um the Internet has allowed the spread of information. 0:12:22.440 --> 0:12:25.080 I think people are more enlightened to the difficulty of trading. 0:12:25.559 --> 0:12:27.319 I also think though, that there's been a shift in 0:12:27.360 --> 0:12:30.480 the advisor business from the broker commission model where a 0:12:30.520 --> 0:12:32.840 mutual fund pays the broker to put the client in it. 0:12:33.720 --> 0:12:36.400 Those tend to be more churning type brokers where they 0:12:36.440 --> 0:12:39.760 churn your account. The new model is fiduciary, where the 0:12:39.800 --> 0:12:43.600 advisor gets a percentage of the client's assets. And in 0:12:43.679 --> 0:12:47.640 that model, the advisors shoulders shoulder with the clients, so 0:12:48.200 --> 0:12:50.199 their knowledge kicks in and they're like, look, I've seen 0:12:50.240 --> 0:12:53.120 this happen, just hang in there. In addition, advisors get, 0:12:53.200 --> 0:12:55.080 you know, good fees compared to the fun world. They 0:12:55.120 --> 0:12:58.160 get like points to one percent to advise you on 0:12:58.200 --> 0:13:00.960 your wealth. And one of the biggest value propositions now 0:13:01.080 --> 0:13:04.640 is behavioral coaching and so they're going to really hit 0:13:04.720 --> 0:13:07.720 that hard and so I think that's another buffer. So 0:13:07.760 --> 0:13:10.240 I think you've got vanguard people, You've got this these 0:13:10.280 --> 0:13:12.960 new school advisors who are more about the big long 0:13:13.040 --> 0:13:15.680 than the big short. And I think you've just got 0:13:15.679 --> 0:13:18.560 the spread of information and past sell offs. If anybody's 0:13:18.600 --> 0:13:22.360 gen X or above, they know that two eight was rough, 0:13:22.440 --> 0:13:31.520 but the next ten years were amazing. So Katie, I 0:13:31.559 --> 0:13:33.520 know that you haven't interest in what's happening in the 0:13:33.559 --> 0:13:37.000 bond world, and that's one that I know. UH investors 0:13:37.000 --> 0:13:40.720 have have have long expressed concerns about what are you 0:13:41.160 --> 0:13:44.160 seeing on the stuff that you're reporting? Something that I 0:13:44.240 --> 0:13:46.760 found really interesting over the past week, and I don't 0:13:46.760 --> 0:13:49.840 have a good explanation for why it's happening, so please 0:13:49.920 --> 0:13:54.439 enlighten me. But it's it's really the high quality tickers 0:13:54.480 --> 0:13:58.000 that you're seeing have these big discounts. You know t 0:13:58.240 --> 0:14:00.960 LT that's a Treasury E, T S, b N D 0:14:01.640 --> 0:14:04.439 l q D. Those are all in gressive investment grade 0:14:04.480 --> 0:14:07.800 products mostly whereas it's the risky names like J and 0:14:07.880 --> 0:14:10.800 K and H y G that are actually trading at 0:14:10.840 --> 0:14:14.640 small premiums, and those were the names that people are 0:14:14.640 --> 0:14:17.160 really focused on it was you know, all of those 0:14:17.200 --> 0:14:21.200 concerns were really centered on junk debt, but those ones 0:14:21.240 --> 0:14:24.640 are actually pretty well behaved, whereas it's the higher quality 0:14:24.720 --> 0:14:27.920 stuff that is that has these big discounts. And I 0:14:28.000 --> 0:14:30.480 don't really know why that's happening, and I haven't heard 0:14:30.480 --> 0:14:33.640 a good answer yet. I agree with you. I think 0:14:33.800 --> 0:14:38.000 h y G has superseded anybody's expectations in this sell off. 0:14:38.520 --> 0:14:39.960 But I think l q D and t l T 0:14:40.520 --> 0:14:43.560 might have underwhelmed in terms of their ability to track 0:14:43.560 --> 0:14:45.680 in these times. And we do have a theory and 0:14:45.760 --> 0:14:48.800 b I my colleague in London, Tom, who's been looking 0:14:48.800 --> 0:14:51.600 at discounts. One thing he noticed is he looked at 0:14:51.600 --> 0:14:55.240 the discount in the bonds by maturity, and you can 0:14:55.280 --> 0:14:58.520 see a direct correlation to the higher the maturity, the 0:14:58.560 --> 0:15:02.560 longer the maturity, a deeper the discount. And so h 0:15:02.680 --> 0:15:04.520 y G, a lot of people don't realize, has a 0:15:04.600 --> 0:15:07.840 duration of only three years. It's not it doesn't have 0:15:07.880 --> 0:15:10.600 a lot of long dated stuff in there, whereas l 0:15:10.680 --> 0:15:13.080 q D the duration is nine years and t l 0:15:13.120 --> 0:15:15.480 T is twenty. And I talked to some market makers 0:15:15.640 --> 0:15:18.080 that they'll say things like yeah, long dated off the 0:15:18.160 --> 0:15:20.720 run treasuries, no bid, you know, stuff like that, and 0:15:21.120 --> 0:15:24.680 the word long seems to be in their dialogue a lot. So, Uh, 0:15:24.800 --> 0:15:26.560 the long end of the curve, I think is where 0:15:26.600 --> 0:15:28.200 the bids have dried up the most, and I think 0:15:28.320 --> 0:15:32.040 h y G avoids that to a degree. But junk 0:15:32.160 --> 0:15:35.040 has been sold off violently a couple of days, and 0:15:36.080 --> 0:15:38.360 that's good. I mean, h y G has has really 0:15:38.400 --> 0:15:39.880 I think hung in there. I think it might have 0:15:40.640 --> 0:15:42.720 closed it a discount of one percent one day, but 0:15:42.840 --> 0:15:45.480 it's been within one percent most of the time. And 0:15:45.560 --> 0:15:47.320 also it's seen a lot of outflows and they've been 0:15:47.320 --> 0:15:49.760 pretty orderly. Seems like people are getting in and out 0:15:50.160 --> 0:15:52.600 in an orderly fashion, which is I think more than 0:15:52.640 --> 0:15:55.640 people thought was gonna happen. Okay, so I want to 0:15:55.680 --> 0:15:59.120 talk about exotics and and the ETFs in that world, Katie, 0:15:59.120 --> 0:16:02.240 what are you seeing in that space? Well, it's feast 0:16:02.320 --> 0:16:06.040 and famine in the leveraged e t F world. Um, Eric, 0:16:06.120 --> 0:16:08.600 you and I were talking about t VIX yesterday, which 0:16:08.720 --> 0:16:11.640 is just I mean, over its lifetime it's down well 0:16:11.720 --> 0:16:14.560 over nine, but it is just on a tear, with 0:16:14.760 --> 0:16:19.040 the VIX obviously ripping higher this week as of rate. 0:16:19.160 --> 0:16:24.560 Now as of Wednesday, it's up over percent for the year, 0:16:25.080 --> 0:16:28.119 which is you know, it's by far the best performing 0:16:28.240 --> 0:16:32.200 exchange traded product. And uh that's two times levered. And 0:16:32.480 --> 0:16:35.320 again this this this e t N has had a 0:16:35.400 --> 0:16:38.560 really tough time of things, but it's clearly it's moment 0:16:38.680 --> 0:16:41.120 to shine. But you know, on the flip side of 0:16:41.160 --> 0:16:44.320 the coin, you've seen some of these levered oil e 0:16:44.440 --> 0:16:48.520 t f s have to be liquidated. Um pro shares 0:16:48.600 --> 0:16:51.520 had too, in particular this week oil you and oil 0:16:51.640 --> 0:16:54.760 D So you're seeing some shakeout, you know, obviously in 0:16:54.800 --> 0:16:58.400 the oil spaces, oil plunges. But t VIX again, it's 0:16:58.480 --> 0:17:01.680 just having a great time. And you know t VIX 0:17:02.360 --> 0:17:05.040 there it gets a red light in our traffic lights 0:17:05.080 --> 0:17:08.160 system obviously, and it gets the highest score of third 0:17:08.320 --> 0:17:11.480 getting it for thirteen reasons. I mean most stuff is 0:17:11.520 --> 0:17:14.080 like four or five tops. So t VIX is like 0:17:14.720 --> 0:17:18.280 highly dangerous, full of nasty surprises. But all the things 0:17:18.359 --> 0:17:21.080 that are nasty surprises in it are now helping it, 0:17:21.600 --> 0:17:25.840 whether that's daily resetting of leverage or the roll costs 0:17:25.880 --> 0:17:28.399 in the futures market which is now turning into roll yield. 0:17:29.040 --> 0:17:31.680 So all kinds of weird math that hurts t vix 0:17:31.800 --> 0:17:36.080 normally is actually kicking in. And you know the exotics 0:17:36.119 --> 0:17:39.160 are obviously highly dangerous, But there, I gotta be honest, 0:17:39.200 --> 0:17:42.560 fascinating because if you look at your to date returns 0:17:42.680 --> 0:17:46.920 of all e tps, you might see one you know 0:17:47.000 --> 0:17:49.480 that that's to be having a good year, and occasionally 0:17:49.480 --> 0:17:52.520 you've seen one almost get to within a calendar year. 0:17:52.920 --> 0:17:56.399 T vix is over a thousand percent in your date returns. 0:17:56.440 --> 0:17:59.440 That's never happened, a quadruple digit returns within a year, 0:18:00.000 --> 0:18:01.960 and it did it in a month. But you gotta 0:18:02.000 --> 0:18:05.800 be careful because this thing is still down what since 0:18:05.840 --> 0:18:08.680 it came out. And the other thing is I do 0:18:08.800 --> 0:18:10.520 see some retail usage of it. If you look at 0:18:10.520 --> 0:18:12.920 the Fidelity site, t vix is I think in their 0:18:12.960 --> 0:18:16.920 top twenty five most traded on the platform. So um, 0:18:17.119 --> 0:18:20.080 you know, I really hope retail investors aren't messing with it, 0:18:20.200 --> 0:18:21.720 or if they do, they're the day trader types that 0:18:21.800 --> 0:18:23.760 know exactly how this thing works. If you want to 0:18:23.840 --> 0:18:26.480 learn more about leverage products, we have a great episode 0:18:26.600 --> 0:18:30.320 that specifically about that. Eric, you just kept talking about 0:18:30.359 --> 0:18:32.080 t VX there and the only thing I wanted to 0:18:32.160 --> 0:18:35.600 know was whether or not your dad Ken bell Junis 0:18:36.200 --> 0:18:39.240 which from another episode of Our Two Dads, we know 0:18:39.640 --> 0:18:42.440 Um has used t VX before. How's uh, how's old 0:18:42.520 --> 0:18:45.520 Ken doing with t VX right now? Yeah, he loves 0:18:45.560 --> 0:18:47.720 the reverse splits that it has, which a lot of 0:18:47.840 --> 0:18:49.439 leveraged e t P s are going through right now 0:18:49.520 --> 0:18:52.000 reverse splits, so to keep it from going to zero. 0:18:52.119 --> 0:18:55.440 But um, you know the problem with his t VX 0:18:55.520 --> 0:18:57.240 holding that he never sold, which I told him to, 0:18:57.359 --> 0:19:00.359 but he didn't, is that even if you autit like 0:19:00.440 --> 0:19:02.879 three or four years ago when he did, even with 0:19:03.040 --> 0:19:09.760 this thousand percent spike, you're still down. So it's you know, 0:19:10.200 --> 0:19:12.760 very that does very little to his holding. You have 0:19:12.840 --> 0:19:14.879 to time it perfectly to really benefit it from. So 0:19:15.520 --> 0:19:17.920 I told him to stick to betting on college football games, 0:19:19.200 --> 0:19:21.280 which aren't gonna be happening in the near term. I 0:19:21.359 --> 0:19:23.200 know he well, he had, well, he had his friend 0:19:23.280 --> 0:19:27.359 come in to watch the tournament, his friend Dennis, and 0:19:27.440 --> 0:19:29.399 they were just gonna, like, you know, drink beer and 0:19:29.440 --> 0:19:31.399 watch the tournament. I was almost gonna go join him, 0:19:31.440 --> 0:19:34.200 but I just couldn't. But and now the tournament's not 0:19:34.280 --> 0:19:35.639 going on, I'm like what are you guys gonna do 0:19:35.720 --> 0:19:38.840 with yourselves? So I guess they're gonna have to play 0:19:38.880 --> 0:19:42.400 board games. Okay, Katie, what's your clothing thought for this episode? 0:19:43.400 --> 0:19:45.720 I mean, I'm all about the fixed income right now, 0:19:45.880 --> 0:19:48.720 and I'm curious to see who wins this tug of war. 0:19:48.840 --> 0:19:51.800 You know, will the price of these bond ETFs rush 0:19:51.920 --> 0:19:55.280 up to meet the nava or you know, will those bonds, 0:19:55.359 --> 0:19:58.080 those underlying bonds fall to meet the price. I'm curious 0:19:58.119 --> 0:20:00.919 to see who wins. Yeah, totally. I think fixed income 0:20:01.160 --> 0:20:04.280 is where the most tension is right now. Um, even 0:20:04.320 --> 0:20:06.199 though equities are down big and they're the bigger part 0:20:06.200 --> 0:20:09.000 of your portfolio for most people. I know that's a hold, 0:20:09.160 --> 0:20:11.200 you know, that's a major scene. But the fixed income 0:20:11.680 --> 0:20:13.200 to me, within the e t F s is a 0:20:13.760 --> 0:20:18.160 much more dynamic place right now because of the way 0:20:18.240 --> 0:20:20.520 an e t F trades on exchange, but the bonds don't. 0:20:21.359 --> 0:20:23.520 And that tension is something we're gonna watch. And one 0:20:23.560 --> 0:20:26.760 thing to watch is this active bond mutual funds, which 0:20:26.800 --> 0:20:29.960 have avoided the sort of active to passive move because 0:20:30.000 --> 0:20:33.200 they've tended to outperform their benchmark. The aggregate bond indecks 0:20:33.720 --> 0:20:36.119 because they tilted to high yield a lot of them. 0:20:36.160 --> 0:20:38.120 That's biting back high yields down a lot, and they're 0:20:38.119 --> 0:20:40.560 now underperforming the agg down on the year. If they 0:20:40.640 --> 0:20:45.119 start to see outflows in any like significant way, that 0:20:45.200 --> 0:20:48.359