00:00July was kind of a reset moment for those tech names, especially the semiconductors.
00:04And we have the S&P 500 now back near record highs in August after that tech stumble.
00:09You say when you look out into the rest of this year, one of the big risks for the fourth
00:13quarter is the resurgence in leverage ETFs. Explain what you mean by that.
00:17I think levered ETFs are a new form of measuring sentiment. It's always been investor surveys,
00:22the options market, the VIX curve. Well, now, what a better way than to play AI and
00:26semiconductors and then using exchange traded levered products. Right. And so the more
00:32these names rise, the more assets are going to go into these products and the more you're going to
00:37see people piling onto leverage. It becomes an enthusiasm barometer. It got a very skewed to
00:42the long side heading into July. We saw the Korean market tighten via regulators, the reset. So now
00:48I think if you're just looking for risks out into the rest of the first quarter next year, it's going
00:52to be how much higher does the AUM get? Do we get back to that high water market, 200 billion
00:56or
00:56do we settle in at 150 or so? We'll see. Yeah. I mean, when you look at that ratio of
01:00levered long
01:01ETF assets to short ETF assets, I was like, oh, it's finally correcting when we will settle in.
01:06It's already almost back near all time highs, which is fascinating. But we also see this
01:10exuberance in ETF filing. So Todd and I, there's a handful of people who are real ETF nerds,
01:14and we constantly talk about these filings. So he actually has an image where you can't,
01:18it's so big. There's so many filings here that are AI, semi tech. You're not even going to be able
01:23to
01:23see all of those things necessarily on one screen. But the point that, yeah, so basically what you
01:30want to say, what are you seeing here? Like, what do you think is happening? There's exuberance is
01:33happening. Leveraged ETFs end in these filings. What's your view? This is bull market behavior,
01:37first of all. But what it concerns me is there is a thematic tidal wave coming. And all these thematic
01:43funds are trying to chase what's hot. AI, semiconductors, robotics, call it everyone. Whenever I start to see
01:50the same filing pop up over and over again, right, the same flavor, I think it's a very consensus
01:55idea. It gets me very concerned. We saw this happen with space in the spring. The space ETFs and the
02:00names, yes, they might be recovering. They've been cut in half since then. So investors need to be very
02:04wary of the type of products they're going to get involved. And some of these are super niche. They might
02:08be
02:09weighed over by one or two different names. If those names stumble, maybe they miss their earnings
02:12expectations. It's going to be very painful. So great time for due diligence in ETFs. And just be mindful
02:18of chasing hot items. They rarely last through economic cycles. So one new market trend or idea
02:24sparks how many ETF issuances? I mean, is it like five? Is it 10? Probably double digits at least.
02:32I mean, in this case, I think it's gotten really extreme because of how pervasive AI is to the global
02:36economy. But the amount of semiconductor ETFs and related exposures is really flying high right now.
02:44I'm a little dubious of how this is going to go. Yeah, I mean, it's not just the issue.
02:48It's the filings, too. So we're seeing tons hit. They're throwing spaghetti at the wall,
02:51essentially. That's what that image shows. That's what the charts show. They're just
02:54throwing spaghetti at the wall. Is it a good business model? What are you seeing?
02:57Oh, I mean, of course, you can scale it up. Great. It's all going to be about distribution,
03:00right? There's going to be 10 different AI, whatever type ETFs out there. How strong is your
03:05brand? How loyal are your investors to your brand? And what is your distribution game? Do you get
03:09out there and go boots on the ground? Do you have great social media? That's what it's all about.
03:13Because when there's 10 different flavors of vanilla ETFs, you have to separate yourself right
03:19now. There's not enough money to go around to all these thematic funds. So the more that come out,
03:24the more they're going to end up closing whenever, if and when there is a bear market.
03:28OK, so things get very heavily tilted in certain ideas or certain themes. How do you balance your
03:33portfolio away from that concentration risk in tech, semiconductors, AI adjacent, that whole section?
03:39Yes. So keep in mind, semis are 18 percent of the S&P 500. Yes, there's still 80 percent of
03:44the
03:44index left over, but it's rare for an industry group to maintain above 15 percent historically.
03:49We saw it with energy, software, tech in the tech bubble, hardware. And I think what's fascinating
03:54right now is that financials, energy and health care, their correlation, their betas, the S&P 500
03:59have absolutely collapsed. So they're becoming, in a sense, a hedge, especially in a world where
04:04long duration bonds don't work anymore, right? 10 to 20 year treasuries continue to decline.
04:09So I think you want to find the balance, add more energy, even though 3 percent of the S&P
04:12500,
04:12look to health care as a defensive balance, and then financials globally remain strong.
04:16So this is all about low tech, low correlation. Have a boring part of your portfolio than just
04:21loading up on semiconductors and AI. Yeah. So when you're talking about those
04:25names, industrials, materials too, they had their day in the sun in December, January, February this
04:30year. They were outperforming flows on every other metric. Tech was seeing outflows. The opposite
04:35could not be, that could not be further from the truth from right now. Tech is taking in tons of
04:38money. They are outstripping every other sector ETF. What do you view that again? That's more
04:43concentration risk. Like what are you seeing? I always look at flows like leverage as a
04:47enthusiasm barometer, right? There's not necessarily a signal there, but since the June 2nd
04:51NASDAQ 100 high, which we may take out later this week, who knows? The flows have been all in on
04:55tech still. 20, 30 billion dollars to tech ETFs, minimum amounts to every other sector ETF. So there is
05:01this pervasive buy the dip mentality for technology. And okay, yes, they have bounced. But don't lose
05:07sight that you cannot get too over your skis and concentrate on these types of funds. I think
05:12everything else is being ignored. I like that from a diversification standpoint.
05:16Okay. Speaking of things are being ignored, spot Bitcoin ETFs just saw the largest outflows in six
05:21weeks. The vibes in the crypto industry are decidedly not positive right now. I mean, people are in the
05:27industry are like, yeah, it's kind of dead. You're agnostic on crypto overall, but you do see some
05:33opportunity here as a contrarian play. Yeah. And I'm looking at James because he's kind of my crypto
05:37guide. It's a sad face. Crypto has been off the field. The news is awful. The flows peaked almost a
05:45year ago. I think October we were talking about. Flows peaked October. Volumes have really depressed.
05:49Everyone's moved on to AI and leverage. Including the companies themselves. Yeah, that too.
05:55So if you're looking to put on a contrarian hat and take a small bet,
05:59right, take a look at crypto. You're starting to see with gold too, right? Gold's kind of been
06:02forgotten about those last six months after Metal Mania. So use the options market if you want to
06:07buy crypto ETFs. I think you want to keep a leash tight if you do add. But again, if you're
06:13looking
06:13to put that contrarian hat on, crypto is worth a shot to us. Let's go back to filings. What is
06:19real
06:20quick like what some of the favorite filings you've seen or not so favorite filings you've seen in the
06:24last week? Last Friday got a little crazy. Sports NHL professional hockey teams, which I don't think
06:30they're going to go through. But now we're getting into the sports market tracking future. There's an NHL
06:34ETF. All 32 teams are going to have their own ETF. Yeah. I don't think it goes through. I have
06:40way too
06:40many questions. Yeah. We had AI secret ingredients. OK, sure. Jensen Huang interviews ETF. That's like
06:48I'd rather do the Scarlet Foo ETF. Human enhancement like the filings are getting silly, which again is a
06:55reflection of this how great this bull market has been. But it almost makes you want to see the reset
06:59happen cynically. But the sports thing is peculiar. I don't know how those would be arbitrage. I don't know
07:05how they would be hedged by market makers. There's a lot of questions about that. So the filings are
07:10getting real silly. But it's got us talking and maybe that's part of the goal. It's super interesting
07:15away from just boring core type exposures.
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