WEBVTT - SCOTUS Gun Ruling, ETF Reshuffle 0:00:02.960 --> 0:00:10.840 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.880 --> 0:00:15.040 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:15.080 --> 0:00:18.040 Eastern on Apple Car playing Android Auto with the Bloomberg 0:00:18.120 --> 0:00:21.440 Business App. Listen on demand wherever you get your podcasts, 0:00:21.640 --> 0:00:24.040 or watch us live on YouTube. 0:00:25.040 --> 0:00:27.720 Alex Steel, Paul Sweeny. Here we do have some breaking 0:00:27.720 --> 0:00:31.520 news from the Supreme Court. The Supreme Court upholds US 0:00:31.680 --> 0:00:36.440 gun ban in domestic violence cases. Whether to strike down 0:00:36.520 --> 0:00:40.040 this federal gunban for people subject to domestic violence restraining 0:00:40.120 --> 0:00:43.559 orders was the point in question. Let's go right now 0:00:43.560 --> 0:00:46.519 to June Grasso, who covers everything law and legal for 0:00:46.640 --> 0:00:48.320 us for Bloomberg Television and Radio. 0:00:48.400 --> 0:00:50.040 June, can you walk us through this? Yeah? 0:00:50.080 --> 0:00:50.360 Sure. 0:00:50.520 --> 0:00:52.879 So this is a case where a man who was 0:00:52.920 --> 0:00:56.400 subject to a domestic violence order wanted to get a gun, 0:00:56.440 --> 0:00:58.680 and there is a federal ban on that. But the 0:00:58.720 --> 0:01:03.040 Fifth Circuit, which has been pushing the law farther to 0:01:03.160 --> 0:01:08.280 the right than even the Supreme Court likes, said that's unconstitutional. 0:01:08.600 --> 0:01:10.800 And during the oral arguments this is not so much 0:01:10.840 --> 0:01:14.480 of a surprise because during the oral arguments a majority 0:01:14.520 --> 0:01:18.240 of the justices seemed to think that it was this 0:01:18.360 --> 0:01:22.840 kind of restraint on owning a gun is logical. 0:01:22.880 --> 0:01:23.720 I mean, this is the guy. 0:01:23.840 --> 0:01:27.200 The case was really bad for the gun lobby because 0:01:27.280 --> 0:01:30.520 the guy had gun out into public and shot the 0:01:30.560 --> 0:01:34.720 gun off and there was this restraining order. So what 0:01:34.720 --> 0:01:39.360 they're saying is, in this case, you can stop someone 0:01:39.400 --> 0:01:42.640 from having a gun. Gun restrictions have been up in 0:01:42.680 --> 0:01:45.840 the air for years since the Bruin case, the New 0:01:45.880 --> 0:01:48.760 York case where the Supreme Court sort of toppled the 0:01:48.760 --> 0:01:53.080 way the courts analyzed gun restrictions and they base it 0:01:53.160 --> 0:01:56.960 on historical So you'll see gun cases where they're talking about, well, 0:01:57.400 --> 0:02:00.320 was there something like this in the eighteen hundred? You know, 0:02:00.440 --> 0:02:03.720 it's it's sort of a crazy way for me, it's 0:02:03.720 --> 0:02:04.760 a crazy way to do it. 0:02:04.800 --> 0:02:09.560 Does this open path for common sense gun legislation then, 0:02:09.600 --> 0:02:11.960 because you one could argue this seems like pretty good 0:02:12.000 --> 0:02:15.640 common sense. I would want someone who's convicted of domestic 0:02:15.680 --> 0:02:19.200 violence thing having a gun. So if that's okay, can't 0:02:19.200 --> 0:02:22.720 we also say someone who has I don't know, criminal rumstock. 0:02:22.800 --> 0:02:24.560 Maybe yes, I see, that's what I mean. 0:02:24.560 --> 0:02:27.280 I don't think I don't think it translates with this court. 0:02:27.600 --> 0:02:30.200 I think this is sort of an exceptional situation because 0:02:30.200 --> 0:02:33.040 we had that bump stock decision where they said where 0:02:33.040 --> 0:02:36.240 they said, even though it operates like a machine gun, 0:02:36.680 --> 0:02:38.680 the way it functions, you know, they use the term 0:02:38.720 --> 0:02:42.040 function and they use the dictionary to analyze what function meant. 0:02:42.160 --> 0:02:43.480 Justice comments, So. 0:02:43.960 --> 0:02:46.520 You know, it would be nice to think that that 0:02:46.680 --> 0:02:49.239 was the way that we have common sense gun regulations, 0:02:49.600 --> 0:02:52.360 but I'm not sure that that's what this stands for. 0:02:52.560 --> 0:02:53.720 I mean, at the end of the day, it says 0:02:53.760 --> 0:02:56.440 that right the Second Amendment isn't so broad that it 0:02:56.480 --> 0:02:58.880 protects the gun rights of those found to be dangerous. 0:02:58.880 --> 0:03:00.480 So now are we going to get into his situation 0:03:00.520 --> 0:03:03.560 where we have to define dangerous and like what what 0:03:03.760 --> 0:03:05.400 constitutes a human being dangerous? 0:03:05.440 --> 0:03:06.720 Is that what is going to come up now? 0:03:06.800 --> 0:03:09.400 I mean, I have I really have no idea how 0:03:09.400 --> 0:03:12.280 this is going to play out, because you know, it's 0:03:12.280 --> 0:03:15.760 this it's a it's one case. It's a case where 0:03:15.800 --> 0:03:19.280 the Fifth Circuit went out on a limb, and there 0:03:19.280 --> 0:03:21.520 are set there are like more than ten cases. I 0:03:21.520 --> 0:03:23.440 think this term where the Fifth Circuit went on a 0:03:23.480 --> 0:03:26.040 limb and the Supreme Court almost has to take the case, 0:03:26.080 --> 0:03:28.359 even if they don't want to take the case because 0:03:28.400 --> 0:03:32.560 otherwise you have this you know, sort of abnormal law 0:03:33.000 --> 0:03:35.800 in place, so it's hard to say what the what 0:03:35.920 --> 0:03:38.440 the effect will be. I'm sure that that you know, 0:03:38.480 --> 0:03:42.480 in other gun restriction cases, they'll use this to try 0:03:42.520 --> 0:03:44.960 to show that there are, you know, there are ways 0:03:45.000 --> 0:03:46.960 to get around it. I'll have to read the decision 0:03:47.080 --> 0:03:51.320 to see to see exactly, you know, how it came down, 0:03:51.520 --> 0:03:54.400 and it's by the Chief Justice. So that's a sign 0:03:54.440 --> 0:03:57.800 that it's not going to be one of those you know, radical, 0:03:58.640 --> 0:04:02.960 hard to understand decisions by Clarence Thomas, or it's going 0:04:03.000 --> 0:04:04.920 to be sort of down as down the middle as 0:04:04.920 --> 0:04:07.440 you can get so because he writes. 0:04:07.160 --> 0:04:08.640 Sort of reasoned opinions. 0:04:09.280 --> 0:04:12.160 So I think that and I think that, you know, 0:04:12.240 --> 0:04:15.040 this is one that we expected, but still a big case. 0:04:15.040 --> 0:04:15.720 It's eight to one. 0:04:15.760 --> 0:04:19.440 I noticed Justice Thomas dissenting. There is not a gun 0:04:19.680 --> 0:04:23.839 law that Justice Thomas wants to see. No, really, he 0:04:24.000 --> 0:04:27.440 is consistently he's the one who wrote that opinion. As 0:04:27.480 --> 0:04:30.120 I mentioned on the Second Amendment that broadened the Second 0:04:30.120 --> 0:04:33.480 Amendment to you know, being able to carry handguns and 0:04:33.520 --> 0:04:35.920 the restrictions that New York put into place, throwing them 0:04:35.920 --> 0:04:37.919 out so I mean, he just there's just not a 0:04:37.960 --> 0:04:40.400 gun law that he will ever say, is all right. 0:04:40.400 --> 0:04:42.880 We should note that Michael Bloomberg, the founder and majority 0:04:42.880 --> 0:04:45.480 owner of Bloomberg LP, the parent company oft Bloomberg Radio, 0:04:45.720 --> 0:04:48.440 is a donor to groups that support gun control, including 0:04:48.520 --> 0:04:52.360 Every Town for Gun Safety. So, again, as you mentioned 0:04:52.400 --> 0:04:55.040 June eight to one ruling, does that surprise. 0:04:54.720 --> 0:04:57.039 You not really? 0:04:57.440 --> 0:05:00.640 I mean, the surprise that Thomas didn't he the surprise 0:05:00.720 --> 0:05:02.760 is that even in this situation where you have a 0:05:03.320 --> 0:05:07.200 guy with a domestic violence restraining order threatening people, even 0:05:07.240 --> 0:05:09.719 then he said that, you know, he doesn't want it restriction. 0:05:09.880 --> 0:05:10.880 That's the only surprise. 0:05:11.240 --> 0:05:14.120 Otherwise, from the oral arguments, it seemed pretty clear that 0:05:14.279 --> 0:05:16.719 there were a majority of the justices that were going to, 0:05:16.960 --> 0:05:19.320 you know, allow this particular ban. 0:05:19.680 --> 0:05:21.640 And we've been talking to June Grasso right now about 0:05:21.640 --> 0:05:24.880 the Supreme Court upholding the US gun ban on domestic 0:05:25.000 --> 0:05:27.240 violent cases. It's an eight one ruling, as Paul was 0:05:27.279 --> 0:05:30.480 just mentioning, the Justice is saying the constitutional Second Amendment 0:05:30.520 --> 0:05:32.440 isn't so broad that it protects the gun rights of 0:05:32.480 --> 0:05:35.839 those found to be dangerous. Just as Clarence Thomas was 0:05:35.960 --> 0:05:39.240 the lone dissenter. Okay, Jun, what do we learn anything 0:05:39.240 --> 0:05:41.320 else today from the Supreme Court? They're like time five 0:05:41.360 --> 0:05:41.960 days in taking. 0:05:42.880 --> 0:05:45.080 When we were talking before, I said, there are nineteen 0:05:45.160 --> 0:05:50.400 cases and basically fourteen of them are the controversial, and 0:05:50.480 --> 0:05:53.279 so today they came out with five decisions, four of 0:05:53.320 --> 0:05:57.239 which were not controversial at all that we're really not tracking. 0:05:57.279 --> 0:05:58.599 I mean, some of them are interesting. 0:05:59.120 --> 0:06:03.200 One was about whether a US citizen has a constitutional 0:06:03.279 --> 0:06:05.480 right to have her spouse. 0:06:05.520 --> 0:06:07.160 You know, declared a citizen. 0:06:07.520 --> 0:06:09.880 So that that's an interesting case, particularly in light of 0:06:09.880 --> 0:06:15.320 what Joe Biden did this week relating to allowing spouses 0:06:15.400 --> 0:06:18.400 who are married to US citizens who came to this 0:06:18.440 --> 0:06:21.520 country illegally to stay in the country while they go 0:06:21.600 --> 0:06:23.640 through the process. Normally they'd have to go back to 0:06:23.640 --> 0:06:26.919 their home country, which is really risky. So it's interesting. 0:06:26.960 --> 0:06:29.640 But still, so we have one week left so far, 0:06:29.760 --> 0:06:32.440 one decision day on Wednesday. I'm sure they'll have more 0:06:32.560 --> 0:06:35.360 coming up, they'll set more, but so we have all 0:06:35.400 --> 0:06:40.320 the cases left. Presidential immunity, the January obstruction charges, the 0:06:40.600 --> 0:06:48.880 Idaho abortion ban, the homelessness issue, Chevron case, which you 0:06:48.960 --> 0:06:51.599 mentioned before, the case is on social media, the case 0:06:51.640 --> 0:06:54.239 on Purdue Pharma air Pollution sec. 0:06:55.160 --> 0:06:57.599 Why are they waiting? Do you think is typical? 0:06:57.800 --> 0:07:00.520 All right, so it is typical. But so talking to 0:07:00.560 --> 0:07:04.600 a professor yesterday, because I was questioning why they're all 0:07:04.640 --> 0:07:07.040 and I always feel like they're waiting until the end 0:07:07.440 --> 0:07:09.600 and they get them all out at once, and it 0:07:09.600 --> 0:07:12.520 gets lost in the ether. You can't cover everything at once. 0:07:13.920 --> 0:07:18.280 But what people say is that, well, the more complicated 0:07:18.400 --> 0:07:21.520 cases with like six to three, they'll be dissents, there'll 0:07:21.520 --> 0:07:24.119 be concurrences, and then they have to pass those around 0:07:24.160 --> 0:07:26.760 the justices and so it takes longer. 0:07:27.160 --> 0:07:29.080 But this professor I was talking to, Harold. 0:07:28.840 --> 0:07:31.680 Krantz, said, you know, he thinks that the chief is 0:07:31.720 --> 0:07:36.760 holding them. And because if you notice yesterday there were 0:07:36.840 --> 0:07:40.880 four cases, three of them were about criminal procedure, they 0:07:40.920 --> 0:07:44.720 were grouped together. So's it's odd to me that this 0:07:44.880 --> 0:07:49.320 is just haphazard random they all come out. And the 0:07:49.400 --> 0:07:52.320 Raheemi case, the case that we had heard today, was 0:07:52.440 --> 0:07:54.680 one of the oldest cases. It was heard in November, 0:07:55.240 --> 0:07:58.080 and usually you can tell how the cases come by 0:07:58.120 --> 0:07:58.760 when they're heard. 0:07:59.320 --> 0:08:02.760 So think about the Trump case. It took about. 0:08:02.480 --> 0:08:04.800 Twenty days on the less Trump case. 0:08:04.640 --> 0:08:05.680 Having to do with the ballot. 0:08:05.920 --> 0:08:08.800 We're up to like forty something now on the Trump case, 0:08:09.120 --> 0:08:11.120 it's so it's it's. 0:08:10.960 --> 0:08:12.520 A we'll be stretched next week. 0:08:12.560 --> 0:08:15.280 Okay, oh we'll be here, we'll be here. Well, you're 0:08:15.320 --> 0:08:16.520 off Friday, off Friday. 0:08:16.960 --> 0:08:18.800 Oh, that's going to be a big day. 0:08:18.800 --> 0:08:22.040 Maybe you don't want to take prep now, I got 0:08:22.040 --> 0:08:24.560 a double prep now, all right, Dune, thanks a lot, 0:08:24.640 --> 0:08:26.840 June Grass joining us to help break it down. Just 0:08:26.880 --> 0:08:29.880 to reiterate the Supreme Court upholds the US gun ban 0:08:30.000 --> 0:08:32.280 and domestic violence cases. I should point out Smith and 0:08:32.280 --> 0:08:34.880 Western shares are sliding over twelve percent, but that's also 0:08:34.920 --> 0:08:37.760 because they said sales in the first quarter would be 0:08:37.800 --> 0:08:41.120 ten percent lower a year on year than originally thought. 0:08:41.160 --> 0:08:42.880 So if you're just looking at the market for that 0:08:43.000 --> 0:08:45.200 kind of reaction, all right, let's get more on this 0:08:45.280 --> 0:08:50.320 with Andrew Willinger. He's executive director Duke Center for Firearms Law. Andrew, 0:08:50.400 --> 0:08:52.320 thank you for joining us. We appreciate it. Can we 0:08:52.360 --> 0:08:54.640 get your reaction to this ruling? 0:08:56.200 --> 0:08:56.800 Absolutely? 0:08:57.000 --> 0:08:59.960 Yeah, So I think you know the big takeaway, of course, 0:09:00.160 --> 0:09:04.280 is that the court here upholds a federal law that 0:09:04.520 --> 0:09:08.760 restricts people who are under domestic violence restraining orders from 0:09:08.840 --> 0:09:12.240 possessing firearms. It's an eight to one decision, so you 0:09:12.240 --> 0:09:16.079 have eight justices in favor of that outcome. Justice Thomas 0:09:16.200 --> 0:09:20.720 is the sole the center. And I think, you know, 0:09:20.800 --> 0:09:23.080 what we were watching for, at least what I was 0:09:23.120 --> 0:09:26.080 watching for with this case is sort of how broad 0:09:26.200 --> 0:09:30.360 the decision would be. And the Court seems to settle 0:09:30.440 --> 0:09:35.520 on something akin to a dangerousness principle, where they, you know, 0:09:35.559 --> 0:09:40.440 the majority basically says that when there's some evidence that 0:09:40.679 --> 0:09:43.160 a person poses a threat of harm to another person, 0:09:43.720 --> 0:09:48.080 then that individual can be barred from possessing guns, consistent 0:09:48.120 --> 0:09:48.720 with history. 0:09:49.600 --> 0:09:54.400 Andrew, is there any reason for any gun protection advocates 0:09:54.400 --> 0:09:57.400 to maybe read into this that, hey, this may create 0:09:57.440 --> 0:10:02.280 an opening for you know, more common sense gun legislation. 0:10:04.600 --> 0:10:08.240 So I think, having just had a chance to briefly 0:10:08.280 --> 0:10:12.360 skim the decision, my read is that it's somewhat narrow 0:10:12.480 --> 0:10:17.320 and that the court doesn't squarely confront you know, even 0:10:17.520 --> 0:10:23.280 other related issues like banning convicted felons from possessing guns, 0:10:23.280 --> 0:10:27.280 for example, you know, those convicted of non violent felonies, 0:10:28.080 --> 0:10:30.920 and and sort of leaves those for another day. I'll 0:10:30.920 --> 0:10:33.920 have to dig a little bit more into the various opinions, 0:10:33.920 --> 0:10:37.240 because there are some concurrences as well that might shed 0:10:37.320 --> 0:10:40.160 light on where some of the specific justices are. Well, I. 0:10:42.000 --> 0:10:44.640 Think it just raises the question, then then what is dangerous? 0:10:44.760 --> 0:10:48.560 So if you can't sell a firearm to someone who's dangerous, 0:10:48.600 --> 0:10:51.199 how are we going to be interpreting that through legislation 0:10:51.400 --> 0:10:53.000 and then through the courts? 0:10:54.920 --> 0:10:58.920 Yeah, and my my initial reaction to the decision is 0:10:58.960 --> 0:11:03.240 that again the court, the majority, sort of leaves that 0:11:03.320 --> 0:11:05.800 question a little bit open. You know, there was some 0:11:05.880 --> 0:11:11.360 discussion at the oral argument that this specific law doesn't 0:11:11.640 --> 0:11:15.280 really pose a difficult case because there has to be 0:11:15.320 --> 0:11:18.800 a finding by a state court judge that somebody is 0:11:19.679 --> 0:11:24.640 dangerous is likely to commit domestic violence. So, in other words, 0:11:24.640 --> 0:11:27.760 this would sort of be a case in the heartland 0:11:27.840 --> 0:11:28.880 of that principle. 0:11:29.240 --> 0:11:31.240 But there might be edge cases. 0:11:32.280 --> 0:11:35.320 With regard to other types of gun regulation that the 0:11:35.360 --> 0:11:39.200 court will have to confront. And one takeaway I think 0:11:39.720 --> 0:11:43.360 one initial takeaway from this decision is it wouldn't surprise 0:11:43.440 --> 0:11:46.040 me if in the coming terms, the court did confront 0:11:46.040 --> 0:11:48.560 some of those issues and decide those questions. 0:11:49.640 --> 0:11:52.760 Andrew, what is the Duke Center for Firearms Law? 0:11:55.440 --> 0:11:55.640 Yeah? 0:11:55.679 --> 0:11:58.920 Absolutely, The Duke Center for Firearms Law is an academic 0:11:59.080 --> 0:12:02.439 organization that how is that the law school here at Duke, 0:12:03.480 --> 0:12:07.440 and we seek to grow and build the scholarly field 0:12:07.440 --> 0:12:11.040 of firearms law in the legal academy. We also have 0:12:11.080 --> 0:12:16.000 a variety of resources on a Second Amendment cases and 0:12:16.080 --> 0:12:19.800 other issues related to gun regulation that we host through 0:12:19.800 --> 0:12:24.480 our website, blog, and database of historical gun laws for example. 0:12:26.440 --> 0:12:30.600 Go ahead, Andrew, I just with that background, and given 0:12:30.640 --> 0:12:32.920 what I know is you know, the majority of US 0:12:32.920 --> 0:12:37.240 citizen's favorite common sense gun law. I think that's a fact. 0:12:37.840 --> 0:12:40.959 What's from your perspective at the Duke Center for Firearms Law? 0:12:41.840 --> 0:12:45.240 Why can't more legislation common sense gun laws? Why can't 0:12:45.280 --> 0:12:47.360 they be enacted here in this country? 0:12:49.960 --> 0:12:50.240 Yeah? 0:12:50.280 --> 0:12:53.960 So, I mean, I think one one obstacle to to 0:12:54.040 --> 0:12:58.160 some of these laws has been the tests, the legal 0:12:58.240 --> 0:13:01.520 tests that the Supreme Court set for two years ago, 0:13:01.600 --> 0:13:06.400 almost to the day in a case called Bruin, which 0:13:06.480 --> 0:13:10.079 essentially says that the way courts are to evaluate Second 0:13:10.080 --> 0:13:14.640 Amendment challenges is by determining whether a law is consistent 0:13:14.679 --> 0:13:19.880 with historical tradition. And that you know that this case, 0:13:19.920 --> 0:13:24.280 this decision today is the first, the first we've heard 0:13:24.320 --> 0:13:26.920 from the Supreme Court since then on the Second Amendment, 0:13:26.960 --> 0:13:30.199 so their first sort of chance to clarify what that 0:13:30.320 --> 0:13:34.600 test should look like, and you have today a justice 0:13:34.640 --> 0:13:38.880 is saying pretty clearly that, you know, we're not requiring 0:13:39.800 --> 0:13:43.520 a twin, We're not requiring any kind of exact replica 0:13:43.640 --> 0:13:47.160 in the historical record to support a modern gun law. 0:13:47.920 --> 0:13:51.679 So I think that's important and consequential, and maybe maybe 0:13:51.720 --> 0:13:55.400 to some extent, the justices in the majority are are 0:13:55.440 --> 0:13:59.440 concerned that their their prior decision was interpreted by that 0:13:59.520 --> 0:14:02.280 way by at least some lower court judges. 0:14:03.360 --> 0:14:06.800 How do you how do you think gun laws or 0:14:06.840 --> 0:14:11.640 the reaction to them evolve as it continues to seem 0:14:11.920 --> 0:14:14.320 more politicized. And I know that's even crazier to say, 0:14:14.320 --> 0:14:17.120 because it was already so politicized, but so many more 0:14:17.160 --> 0:14:19.280 of the issues are now politicized. How do you think 0:14:19.320 --> 0:14:22.160 this evolves in this country? 0:14:22.960 --> 0:14:23.200 Yeah? 0:14:23.240 --> 0:14:26.040 Absolutely, you know, again to take it back to the 0:14:26.200 --> 0:14:31.200 to the Raheemi decision, I actually think this, this is uh, 0:14:31.240 --> 0:14:35.600 this sort of illustrates maybe less of an ideological or 0:14:35.600 --> 0:14:39.560 political divide as to certain types of gun laws. You know, 0:14:39.600 --> 0:14:41.920 this is this is UH made maybe a law that 0:14:42.000 --> 0:14:45.120 has you know, we know it has very broad public 0:14:45.240 --> 0:14:51.000 support based on polling that that restrictions on domestic violence offenders. 0:14:52.080 --> 0:14:54.440 Most the vast majority of people in the country support 0:14:54.480 --> 0:14:57.480 those types of laws. And so today we have a 0:14:57.520 --> 0:15:01.280 decision upholding that that regular at the federal level. 0:15:02.320 --> 0:15:04.160 And so, you know, I think there will certainly be. 0:15:05.760 --> 0:15:08.480 Other cases down the road that will be more of 0:15:08.560 --> 0:15:10.280 a stark, you. 0:15:10.240 --> 0:15:12.000 Know, ideological divide. 0:15:12.240 --> 0:15:16.280 If you think about something like a restriction on semi 0:15:16.280 --> 0:15:20.120 automatic rifles, so called assault weapons, that would be an 0:15:20.120 --> 0:15:23.160 example where I would expect the court to really fracture 0:15:23.200 --> 0:15:24.800 along ideological lines. 0:15:25.440 --> 0:15:26.880 But that wasn't the case today. 0:15:27.480 --> 0:15:30.760 When I was getting my MBA at Duke Alex, I 0:15:30.800 --> 0:15:34.520 took one class at the Duke Law School. Big mistake, 0:15:34.760 --> 0:15:38.320 do you run away? The kids work super super hard 0:15:38.680 --> 0:15:40.760 like I had to work. In that case. My little 0:15:40.760 --> 0:15:43.120 study group wouldn't let me just skate by. They weren't 0:15:43.120 --> 0:15:45.560 like the business school. We were just punching our ticket 0:15:45.560 --> 0:15:47.760 to go back to Wall Street. That's amazing. These kids 0:15:47.760 --> 0:15:50.480 were like serious. So anyway, appreciate that. 0:15:50.480 --> 0:15:52.240 S thanks for that and see you guys later. 0:15:52.440 --> 0:15:54.280 Yeah, exactly, all right, Andrew, thank you so much for 0:15:54.360 --> 0:15:57.080 joining us. Andrew Willinger, He's executive director of the Duke 0:15:57.200 --> 0:15:59.160 Center for Firearms a lot. 0:16:01.000 --> 0:16:04.880 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:16:04.960 --> 0:16:08.000 weekdays at ten am Eastern on Apple car Play and 0:16:08.000 --> 0:16:10.960 Android Auto with the Bloomberg Business app. You can also 0:16:11.000 --> 0:16:14.520 listen live on Amazon Alexa from our flagship New York station. 0:16:14.880 --> 0:16:18.600 Just say Alexa Play Bloomberg eleven thirty. 0:16:19.520 --> 0:16:21.840 Okay, So I was mentioning that we have the whole 0:16:22.000 --> 0:16:25.120 triple witching Vin Signerella Poop poove that, so did Paul Sweeney. 0:16:25.280 --> 0:16:29.320 We have another thing today, and that is ETF a rebalancing. 0:16:29.440 --> 0:16:32.480 So here's like the broad Strokes, the State Street Global 0:16:32.520 --> 0:16:36.680 Advisors Tech. ETF has to rebalance. It has about seventy 0:16:36.720 --> 0:16:39.680 one billion dollars in that and the idea is that 0:16:39.720 --> 0:16:41.600 you're going to have to buy some Nvidia and sell 0:16:41.640 --> 0:16:44.800 Apple and it could kind of move individual stocks around. 0:16:44.800 --> 0:16:46.880 So we wanted to see if this was actually a 0:16:46.880 --> 0:16:50.320 big deal, not like the triple Witching thing. James Seffert 0:16:50.320 --> 0:16:54.040 is Bloomberg Intelligence ETF research analyst and he joins us, Now, okay, 0:16:54.200 --> 0:16:55.720 is it a big deal that's rebalancing? 0:16:57.080 --> 0:17:00.000 I mean, I think it's a big deal. It showed 0:17:00.160 --> 0:17:03.840 some of the issues with passive indexing. And there's a 0:17:03.840 --> 0:17:06.119 lot of things that people like to complain about with 0:17:06.200 --> 0:17:09.679 passive investing and passive indexing and things like that, and 0:17:10.000 --> 0:17:12.160 we spend a lot of our time pushing back saying 0:17:12.200 --> 0:17:13.719 it's not as big of a deal as people are 0:17:13.720 --> 0:17:16.679 making it out to be. That said, I like to 0:17:16.720 --> 0:17:19.520 go back and kind of point out times where sometimes 0:17:19.600 --> 0:17:22.640 rules can be a little dumb and situations happen, where 0:17:22.680 --> 0:17:25.119 wonky things happen in the markets, and I think this 0:17:25.240 --> 0:17:28.600 is one of them. I mean, the after market closed today, 0:17:28.640 --> 0:17:32.080 our estimates are somewhere around that this XLK ETF is 0:17:32.080 --> 0:17:35.560 going to have to sell are almost thirteen billion dollars 0:17:35.600 --> 0:17:40.719 worth of Apple and buy about eleven billion dollars of Nvidia. So, 0:17:41.040 --> 0:17:43.200 I mean, that's just wonky in itself, I guess I 0:17:43.200 --> 0:17:44.840 would say, but I'll stop there. 0:17:45.400 --> 0:17:48.600 So, James, how do we get to this position? Doesn't 0:17:48.920 --> 0:17:52.880 XLK this this ETF? Doesn't it do this stuff every day? 0:17:53.040 --> 0:17:55.760 Like if in Vidia is going up, don't they buy 0:17:56.160 --> 0:17:58.240 more in Vidia? I don't know how that works. 0:17:59.040 --> 0:18:01.960 Yeah, So say most of these passive industries work is 0:18:01.960 --> 0:18:04.520 they just hold these stocks in proportion to their market cap, 0:18:04.840 --> 0:18:07.400 so the size of the company, that's how much they hold. 0:18:07.440 --> 0:18:09.920 It's actually we can get into the wonky parts of 0:18:09.960 --> 0:18:11.479 this a little bit too, but it's more about free 0:18:11.520 --> 0:18:13.280 float market cap, which we can get into in a bit. 0:18:13.320 --> 0:18:16.879 But essentially, theoretically, as the prices of these the values 0:18:16.880 --> 0:18:18.560 of these stocks go up, the waiting in the hall 0:18:18.640 --> 0:18:20.359 in the fund will go up. But there's things that 0:18:20.880 --> 0:18:23.240 happen where you have to rebalance, so they rebalance quarterly. 0:18:23.680 --> 0:18:26.320 Different stocks get moved from different sectors, so they'll come 0:18:26.359 --> 0:18:28.920 out of the sector ETF. But theoretically, the way XOLK 0:18:29.040 --> 0:18:30.480 works is it takes all the S and P five 0:18:30.560 --> 0:18:32.480 hundred stocks that are in the tech sector and should 0:18:32.560 --> 0:18:33.480 market cap weight them. 0:18:33.840 --> 0:18:34.840 But there's these. 0:18:34.760 --> 0:18:37.120 Rules from the SEC that have to do with registered 0:18:37.119 --> 0:18:39.960 investment companies, So all mutual funds ETFs for the most 0:18:39.960 --> 0:18:43.720 part fall under this registered investment company's ruling, and they 0:18:43.760 --> 0:18:46.560 have diversification requirements. The problem is, if you just allowed 0:18:46.560 --> 0:18:48.840 these things to be market cap weighted, you have the 0:18:48.880 --> 0:18:52.920 three largest companies in the world in Microsoft, Apple and Nvidia, 0:18:53.400 --> 0:18:57.400 all around three over three trillion dollars in market cap valuation, 0:18:58.000 --> 0:19:00.240 and you'd end up with this fund being sixty plus 0:19:00.320 --> 0:19:03.840 percent just in those three stocks, and the diversification rules 0:19:03.840 --> 0:19:06.400 and the index rules don't allow that. And the way 0:19:06.440 --> 0:19:08.840 they do that in this case is they just cap 0:19:09.000 --> 0:19:11.800 the smallest one. So if you're over a certain weight 0:19:11.880 --> 0:19:15.120 five percent ish and if all of those stocks over 0:19:15.160 --> 0:19:17.480 five percent add up to over fifty percent, you cut 0:19:17.520 --> 0:19:19.560 the bottom one to four and a half percent in 0:19:19.640 --> 0:19:22.719 the fund. So essentially that meant for the last six quarters, 0:19:22.720 --> 0:19:25.520 despite in Video should have had a significant weight, every 0:19:25.520 --> 0:19:28.200 time it rebalanced, it got sold because it got capped 0:19:28.240 --> 0:19:30.920 at four and a half percent. But last Friday, as 0:19:30.920 --> 0:19:32.840 of the market closed, which is when this fund looks 0:19:32.880 --> 0:19:35.639 at this on a free float adjusted basis, in Video 0:19:35.720 --> 0:19:38.040 was larger than Apple, So all of a sudden, now 0:19:38.080 --> 0:19:40.159 Apple is that smallest stock, so in Video is going 0:19:40.200 --> 0:19:41.920 to get a bunch of buys and Apple's going to 0:19:41.960 --> 0:19:44.800 get a bunch of sales. Ironically enough, today, with the 0:19:44.800 --> 0:19:46.920 way in Video is trading down over four percent, it's 0:19:46.960 --> 0:19:49.280 actually smaller than Apple. So if the date was today, 0:19:49.320 --> 0:19:50.720 we wouldn't be having this rebalance. 0:19:51.280 --> 0:19:55.159 So okay, I'm still confused it. 0:19:55.560 --> 0:19:58.400 So can we attribute any of the price action too 0:19:58.560 --> 0:20:01.200 of Apple and Nvidia in the past to this. 0:20:02.680 --> 0:20:05.439 So it's hard for me to know exactly what's going on. Right, 0:20:05.520 --> 0:20:07.639 So there was a massive inflow that went into this 0:20:07.680 --> 0:20:11.520 fund that's in. There's rebalance flows. Money comes in and 0:20:11.520 --> 0:20:14.280 goes out, and there's It's kind of happens over days 0:20:14.400 --> 0:20:17.080 as far as the rebouance goes. So when you it's 0:20:17.119 --> 0:20:19.000 called a reference date, that's the date. We're going to 0:20:19.080 --> 0:20:20.920 look at all the information from this date and we're 0:20:20.920 --> 0:20:23.320 going to use that information to do the rebalance. So 0:20:23.359 --> 0:20:26.040 in that case, it was last Friday, June fourteenth. The 0:20:26.080 --> 0:20:28.680 actual rebalance is going to happen today after market close. 0:20:29.119 --> 0:20:31.679 But the people making markets like, no, this is going 0:20:31.760 --> 0:20:33.879 to happen, right, It's not like this stuff happened and 0:20:33.920 --> 0:20:36.520 it closed on Friday last Friday, and then no one's 0:20:36.520 --> 0:20:38.760 paying attention to this or trading around. What's going to 0:20:38.800 --> 0:20:41.000 happen with these tens of billions of dollars being traded 0:20:41.400 --> 0:20:44.480 like things were happening Friday last week and all along 0:20:44.520 --> 0:20:47.520 this week they were preparing for these trades. So it's 0:20:47.800 --> 0:20:51.280 most likely that like Spider and anyone else that's tracking 0:20:51.280 --> 0:20:53.560 this index has the trade set up and lined up 0:20:53.760 --> 0:20:56.119 so they can match the underlying index. That's the ultimate 0:20:56.200 --> 0:20:57.840 goal of these passive funds. They want to track the 0:20:57.920 --> 0:21:01.400