00:00Joining us now is Bob Sloan, who tirelessly looks through the data, S3 Partners founder
00:04and managing partner. Bob, it feels more important than ever on a day like today where you just have
00:09these weird phenomenons of we're up and we're down and we're up again. Where does positioning
00:14land us at the moment, especially in these very like AI-centric trades? Well, what does positioning
00:20really mean? So one of the things I love about June in New York City, we have the World Cup,
00:25I'm wearing my still blue and orange tie for the Knicks. Very nice. And very celebratory time.
00:30And you see a lot of people looking at buildings, they're looking at the facades, right? If you
00:34imagine that being the stock market, what do we do all day long? The facade is the price.
00:38What you really want to know is what's going inside the building. And that's what positioning
00:44actually tells you. It tells you what's going inside the dynamics of the marketplace. So you have
00:51narrative and news that says, wow, the stock is ripping, you know, micron's up 256%.
00:55But the internal dynamics are telling a completely different story.
01:00By the way, I'm wondering that every morning, too. That's why I look at the,
01:04you know, the price earnings ratio is now below nine again for micron. And I'm thinking to myself,
01:10I know the denominator is rising. Obviously, earnings are ripping. But isn't everyone looking
01:15at that number and saying, I'm a buyer, too?
01:17Well, it depends who is the buyer. So if you look at micron in particular, 30% of the stock
01:25is owned
01:25by passive investors. The amount of active investors that own a stock is actually a five-year
01:31low at 16%. That's amazing.
01:34So what's happening is you have the unlevered dollar, the indexer, the momentum chaser increasing
01:40because they have to. The flow of fund is coming into the index. But the active investor is actually
01:45the levered investor. The hedge fund investor is actually selling into that flow. So behind the
01:51scenes, what you're seeing is a trade where active investors are skeptical. Index investors have to
02:00invest. One is de-risking. One is chasing momentum.
02:04What difference does it make this time around all these leveraged ETFs? There's the three times
02:09leveraged one on the Philly semiconductor index. There's micron specific ones. And there's been
02:13all this chatter that because of the wild price swings, they're having a hard time getting banks
02:18to take counterparty risk on them. And maybe they go to more options. What does that in turn do
02:22to the underlying stock itself to have these very popular leveraged ETFs tracking it?
02:27Just look at the COPSE in South Korea, right? So what happened to the MAG-7?
02:33It became the MAG-10. So Hinex, Samsung, SpaceX, that's the MAG-10. It's the stocks that are over
02:40a trillion-dollar market cap. If you look at some of the single stock ETFs in Korea, which they've just
02:45regulated, which I think is a very good instructive analog to what you're talking about, it took a year
02:53for the BlackRock Bitcoin ETF to get to, what, like $10 billion. It took seven weeks to get to $10
03:00billion in South Korea. Two stocks are the entire index, Samsung and Hinex. And you see this battle
03:10going on between short interest and long interest in that particular, I think, metaphor for the AI
03:16phenomenon. And the rate at which long interest is actually rising has outpaced short interest.
03:23But you have high conviction, high intensity expressed in overheating in single stock ETF.
03:28It's interesting, though, if you have a three times leverage single stock ETF and the ETF manager is
03:36trying to get stock to match the positioning at the end of each day, get options, get some kind of
03:41derivatives that will amount to three times leverage and they can't do it. I mean, is that happening?
03:48Well, we'll see. You know, I mean, there's clearly a phenomenon going on. So one of the things that we
03:54like to talk about and we noticed is that in the middle of SpaceX and it going to almost two
04:00trillion dollars and backing off quite a bit, the fall in the market cap of SpaceX is equal to Tencent.
04:07Think about that for a second. The fall of SpaceX is equal to the largest market cap Chinese company.
04:15What does that say about our system? What does it say about our capital markets? I think it says a
04:19lot.
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