00:00It's an existential crisis after an existential crisis. When you see markets selling off because of the fear of war
00:06and oil prices moving higher, how do you react?
00:10Is it a dip you buy? Do you stay on the sidelines? What is sort of the gut punch reaction
00:15to markets over the past week and a half?
00:18I think the market has been giving you actually opportunities to react to it over the last week and that
00:22it was looking for buying the dip.
00:25And I'm not sure that it's the time to buy the dip right now. And I haven't felt like that.
00:31I think this I'm not a geopolitical expert, but this war is sort of a proxy for a number of
00:37things.
00:37Our differences with China, our reliance on petrodollars.
00:41So, you know, regardless of that, the thing I've been more worried about heading into this was the credit cycle
00:48that seems to be coming to a head now.
00:50I mean, it has been going on since 2010, like this build, and it didn't matter until rates started going
00:57higher.
00:58And now they are higher and we have inflation and it's probably not going to go down.
01:02So in Robinhood Strategies, we have actually been reducing equity exposure over the last month.
01:08And, you know, we're not going to be zero percent invested, but we have wanted to protect capital a bit.
01:15And I think there's going to be great opportunities on a single stock basis.
01:17How do you see, before we get to those opportunities, the knock-on effects of a private credit meltdown?
01:24I mean, if it does play out like 2008, you know, it's still only a $1.8 trillion industry, only
01:34in quotes, right?
01:35That's not enough to affect the entire U.S. equity market.
01:39Or is it? Because, you know, housing did it to us in the great financial crisis.
01:43We've talked through this on the team, and it's hard to know because it is private, right?
01:48And there are probably funds that were created for, you know, to get into other funds, to let a wider
01:55group of people in.
01:56And it probably affects, like, higher wealth people.
02:00And there is below that private credit equity in some places.
02:04And I think that's where the read-through is.
02:07So I don't think it will be, like, something that the banking system can't handle.
02:12I don't think it's something the financial markets can't get past.
02:14But I do think it's going to create an impact on sentiment that will last a bit longer than the
02:20true fundamentals.
02:21Matt has been pointing this out over the past week, which I think is really brilliant.
02:25If you pull up the level 2 S&P 500, which is SPX L2, and you look at the GRR
02:32screen and just pull it up month-to-date,
02:34the best-performing sector month-to-date is software and software services up 4.5%.
02:41What do you make of that?
02:42I just think it got very, very low, and people decided to rotate.
02:47You know, all the things that have worked, right?
02:49Like, the things over services were working, and other people call it the halo trade.
02:53I think that's, like, they were just looking for the next opportunity.
02:57Like, okay, let me take profits.
02:58And that's actually another kind of mantra we've had this year is, like, don't be greedy.
03:02Like, when you have a good profit, you know, because when it turns, it turns hard and fast.
03:07And so not saying that you can't hold things for the long term, but definitely, you know, trim your winners
03:12in this environment.
03:13I wonder about Robinhood investors, what they're doing right now.
03:18What are they buying in terms of asset classes, right?
03:22Are equities still the hottest thing going, or are they starting to look at prediction markets?
03:28It's a mix.
03:29I'd say equities are still, like, a more popular thing just because it's been around longer.
03:33And ETFs, I imagine.
03:34Yeah, and within the equity space, it's been, over the last week, we've seen them selling MAG7 and buying actually
03:42more broad-based equities.
03:43That's interesting.
03:44Over the last week, I would think that's a place to seek safety.
03:47But I think where they're seeking safety is actually buying in broad-based equities.
03:50Like, they have been still, the silver trade is still alive and well within them.
03:54They're buying just, like, S&P-based index funds.
03:58Tesla's actually also been on the buy list.
04:00And then I looked, one of the optical names, it's actually down a lot today, A-A-O-I, I
04:06think, is the ticker.
04:07And that is, there's a Citrini research report that came out that is impacting the value of that name.
04:14But Optics has been a place that they've been looking, too, because Lumentum was on the buy list last week
04:19amongst our customers.
04:21So they're definitely looking at this, like, halo trade, but they're also diversifying.
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