Animal Spirits Podcast - Talk Your Book: Diversifying Away From the Magnificent 7

Episode Date: April 15, 2024

On today's show, we spoke with Ed Egilinsky, Managing Director, Head of Alternatives, and Head of Sales and Distribution at Direxion to discuss: flows into bullish and bearish levered funds, diversifying away from large-cap tech, utilizing the Nasdaq equal-weight ETF, the appropriate time period to hold leveraged products, and much more! Find complete show notes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.   Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Past performance is not indicative of future results. The material discussed has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Information obtained from third-party sources is believed to be reliable though its accuracy is not guaranteed.   Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Ben Carlson are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits Talk Your Book is bought to you by Direction. Go to Direction.com, that's Direction with an X, and check out their equal-weighted NASDAQ-100 ETF. A lot of people worried about market concentration. Equal-weighted fund, especially in tech, equal-weighted fund is a decent way to diversify that. Check that out, go to Direction.com. I'm not that worried, but I still am a big fan of diversification if you are worried. So go to Direction.com if you want to learn more. Welcome to Animal Spirits, a show about markets, life, and investing.

Join Michael Batnick and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Riddholt's wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Riddholt's wealth management may maintain positions in the securities discussed in this podcast. Welcome Animal Spirits with Michael and Ben. Michael, we've gotten a lot of questions over the years in our inbox. And we, I think we like to keep kind of a running tally. I wish I had one of those whiteboards.

You know, like in the sales organizations, they'll, like, stand up and do a little tally when they make a sale. You know? Yeah, sure. Tally, tally, tally. We could have like a tally list for the amount of questions we get on certain items. Paying off your mortgage is a big one. What are some other ones?

How do you guys find so much time to podcast and blog? That's a big one. I've got a 30-year time horizon. Why not just use leverage? Yep, leverage E-CF is a big one. Where does Michael get all of his Nick's shirts from? Amage. Answer is always Instagram.

But yeah, leverage one is a big one. And people say, listen, I know all those stuff you guys have said about leverage before. If I want to use a two or three times levered S&P 500 or NASDAQ 100 fund, I'm willing to sit through the 70 or 80% crashes when these things fall. and I'm going to be just fine. Just give me the green light to do it. And I don't think we've ever really given anyone the green light because that's, I think it's a risky proposition.

And we get into that today with Ed Aguilinski from Direction. And he kind of gives his thoughts about the difference between holding one of these two to three times levered funds for a day and holding them for the long term, what the difference is. Anyway, so I think hopefully we try to put this one to bed. And we talk about a bunch of other stuff with Ed to where the flow are going in some interesting stuff about flows in terms of bonds, the difference between people hedging and people putting their foot on a gas pedal. So here's our talk with Ed Aguilinski

from Direction. We're joined today by Ed Aguilinski. Ed is a manager director. He's the head of sales and distribution and the head of alternative investments from Direction. Ed, welcome back. Thanks for having me. Great to be back. I've mentioned this on the show several times. I don't know if I ever mentioned it to you. But when I started my let me use air quotes, trading career. This was about, this is as we're coming out of the financial crisis. So I was late to the, I was late to like the, I'm, the war that I'm thinking of is party, but I was late to the Doom Party, let's say, let's put it that way. And I was trading the three-time levered bare financials after they bought them, right? You were fighting the last war.

You know, as after a sector falls 19%, then you want to go short, right? Obviously. So it was FAS. That's still around, right? FAS is the bull, yes. FAS. Okay, my bad. I was FASZ. I was FASZ all the way.

And I thought that you guys were called direction. Not sure where I thought you guys held from, but it wasn't until much later that I realized, no, dumbass, it's direction. You know, French is good if you want. So, you know, we're definitely equal opportunity in terms of what you want to call us. But it is direction. It's just the play on words. So I'm curious thinking through all the different in various ways that you have to, through direction funds, to go super long, a market or hedge and go short. If you had to net things out, are more people this year hedging or are they putting their foot on the gas pedal if you had to give a general direction of flows?

Yeah, it's interesting. It's a mix. Our top 10 inflows this year, coincidentally, one of them is FAAZ. financials have done well this year, people a little bit contrarian with the triple leverage bear. Same thing with the Russell 2000, TZA, which is our triple leverage bear. But we're seeing some inflows into some of the bulls, particularly the single stock, Tesla two times, TSLL, and Nvidia two times as well. So it's been a mix, a little more of a bias when you look at the broader U.S. indices to the inverse. or bare products.

I'm curious on the Tesla one since that stock has been getting hammered lately, are people being bearish on it? Are they stepping in to try to catch the other way? I think they are stepping in. We've seen flows in both, but the bigger preponderance has been on the leverage long side, buying on the dip here. I should say trading on the dip because these are trading vehicles and should be monitored on a day-to-day basis.

But you're also seeing some strong inflows in Nvidia. and, you know, up until recently, it was at all-time highs, probably in the beginning to middle of March. I'm looking, I've got wide charts pulled up, but what's the tick on your NVIDIA one? NV-U. N-V-D-U. What does the U stand for? Where's that from?

Oh, God, I'm a dope. In-video. Okay, of course, of course. So that's interesting to hear that people are going into the short products in a bull market. Some of them. Well, you know, like gold miners, too, like we have dust and nugget. A lot of your, you know, reviewers might be familiar with that. So you've had a rip in gold miners recently, the stocks on the stocks.

Forget gold, the physical. There's, of course, a difference there. So these are vehicles, the ones I mentioned, bear vehicles 2X on gold miners and junior gold miners. So we're seeing some activity there. And what's interesting also is our triple leverage China, Futsi's. China 50, Yin and Yang, we're seeing net inflows. They've been some of the top inflows in both year to date because there's been such volatility, both opportunity to trade short term on the bull side and bear side.

This is unbelievable. So, Yin, I'm looking, has give or take, it fluctuates, but around a billion dollars in assets. And as you mentioned, Ed, it's not exactly like China's on fire, although it does seem to be perhaps. I want to say, I'm going to use the word bottoming. What I should say more accurately is it stopped going down. I don't know if this is the bottom. But Chinese stock to have stopped going down, which is about as nice as thing you could say about China stocks.

Yeah, I mean, listen, of course, relative to the U.S. from a longer term perspective, it's been in a downward trend. For short-term traders, like what we have, you know, January was a good month for the bears. February was a very good month for the Bulls. So these are timing vehicles and should be monitored day to day. And I think Jersey Yin and Yang this year, both are down for the year. So when you get a lot of volatility up and down, that's where some of the compounding could come in in terms of negative compounding as a result of the underlying index that you're trading if it doesn't stay a step up or down and is more volatile and choppy in both directions. I got to imagine that's the case with especially the single stock ETFs that you have, that volatility decay or whatever you call it can be even greater since those individual stocks are so much more. volatile than the market. Well, there's more concentration risk, but let's look at the single

stocks we have are on the Mag 7 excluding meta. So you have some of the most widely traded stocks on a daily basis. Some of those might have a higher beta. Some of them might have a lower beta. For example, like Microsoft, for example, Amazon, Google may not be as, or Apple may not be as volatile as a Tesla or, for example, in Nvidia. So it really depends. They are 2x bull product, so you should monitor them day to day. But it is interesting if you have a bullish or short-term bearish view, the single stocks are starting to pick up interest in a number of different ways that you could trade them, whether it's the fact that you want to have a short-term bullish view on the long side or on the bare side. We have non-leverage inverse. So there are a number

ways people are using that to take an outright short position without as much decay because it's a non-leverage inverse. You still need to monitor them day to day or hedge gains, especially in taxable accounts. A lot of these magnificent seven have had some outsized gains for sure. And then we see financial professionals use it to maybe reduce beta, especially in the case of a broad index like the S&P 500, we have a non-leverage inverse bear there, or recently we launched the concentrated cues on the Mag 7, a non-leveraged inverse in that regard as well. So we're seeing used in a number of different ways, especially the non-leverage inverse, where it's not a two or three-X, where you really have to monitor those intraday or daily.

The non-leverage inverse at least gives you a little more runway, but you still should monitor them day to day. So, sorry, that's a one-to-one then on those. Correct. That's just the opposite on a daily basis of what the underlying stock or, in this case, index in some. Okay, so you mentioned that one of your newer products is the mag seven. So you can get exposure to betting against the mag seven. So let's say you were really worried about concentration. You could go into some sort of equal weight or small cap or mid-cap or whatever it is and hedge with the mag seven one times bare, and that would be your way of sort of playing a long short that way, correct? Yeah, you could. It's QQQD. It's a concentrated QS. It is the MAG 7 equal weight.

It would reduce beta. Don't forget, the NASDAQ 100 is roughly 40% right now, the MAG 7. The S&P 500, it's about 30%. Most of the people listening have exposure to maybe the cues or SPY or some derivation of that. And they're very concentrated in the Mag 7. So here's a way to hedge out some of that risk and or maybe you look at an equal weight approach. We have a, this is more non-leveraged strategic allocation, an equal weight NASDAQ 100. We're seeing tremendous interest there where, of course, Apple have the same weighting as serious holdings, which is the 100 stock in the NASDAQ 100. So that broadens out your exposure instead of the concentration risk that you have, for example, in the NASDAQ 100.

And it's also less reliant on tech because when you look at the market cap weight of the NASDAQ 100, of course, tech is about 60%. So this broadens out the sector exposure and equal weights the impact of the MAG 7 along with the other 93 stocks within the NASDAQ 100. And that's been a top 10 inflow the whole year for us. and we're seeing a lot of financial professionals diversify their large cap equity exposure by adding that equal weight. So if you've, if you've ridden the mega cap tech bull market and it's a taxable account and you don't necessarily want to sell for and pay taxes, maybe you would look to something like this where if the market goes south, you could sort of hedge it a little bit.

But is that the thinking behind it? Yeah, I think that's one way that you could look at it. Or don't forget, the Mag 7, I think five of the seven have earnings this month. And we see a lot of volume pre and post earnings in both directions. So if somebody wants to take an outright short position thinks maybe the valuations are a little lofty, here's a way to trade that pre or post earnings with a non-leveraged inverse approach to the Mag 7 or the broader S&P, SPDN, that we have as well. And I was looking at your equal weight NASDAQ fund today.

And I know some people think that it's all the big stocks that are carrying today. And they certainly have done better. But if you look, last year, it was up, what, almost 34%. The NASDAQ 100 was up 54. So it trailed. But it's not like it wasn't going up at all. And I think that is an interesting way to play. If you're saying, listen, I want to get stay long tech, but I'm just worried about the

concentration risk. I do think that's an interesting way to play, especially if you're having trouble picking who or the winners are going to be in like AI or something like that. It makes a lot sense. And this actually from a total return basis hit a new all-time high this year, right? So it's not like it's still lagging. No, it definitely. I mean, it's lagged the market cap weighted version the last couple of years. But when you look at it relative to the S&P 500 equal weight of the S&P, it's outperformed the QQQQE. I look at it. I look at it. at this as diversification to spread out the risk and to also spread out your sector exposure within the NASDAQ 100. Anything that you guys are doing product-wise in the AI trade,

or is it just too narrow in terms of the number of potential options? Well, all the single stocks, of course, are tied to AI in some way, all the magnificent seven. And we got exposure to six of the seven, excluding meta. That's the only pair that we don't have. have at present. You can make the case that, you know, the semis, the triple leverage semis or tech, they do have some of that exposure there to AI. And we also have a Moonshots ETF that's non-leverage, that's more early stage growth companies, more smaller cap-oriented stocks that could give you that innovative themes that include AI as some of those sub-themes within it. But that's more of a satellite holding. It's going to have high-risk reward.

It is a non-leverage vehicle, but it's aptly named moonshots. And that's a way people can participate. And especially if they own some of the other well-known innovative theme ETFs, including ARC, there's very little overlap with our moon strategy, because, as you know, ARC's more actively managed and could have some concentration risk. And it's a lot of the larger cap names where Moon is not. And it seems like that's like the one space in tech for the past, I don't know, I'll call it 18 to 24 months. It hasn't really kept pace that innovation bucket.

Is that the same thing with Moon as it is for ARC? Yeah, definitely. And especially even more the case of us because it's more small cap oriented. And with interest rates rising, I don't have to tell either of you that that has definitely hampered some of the small cap. stocks in general, nevertheless, in the innovative space or the AI space. It's interesting. We act as if interest rates might not be having as large of an impact just because they're

not really slowing down the mega cap names, but to your point, Ed, it's taken a baseball bat to the kneecaps of these non-profitable smaller tech names. Like, there is just very little appetite out there for these stocks. Yeah. And I mean, and maybe that narrative's changing. I mean, it's interesting, and you two discuss this all day. You know, everybody has an opinion on what the Fed's going to do. And at the beginning of the year, it was probably seven cuts.

Now there's some people saying they may not cut at all based on the data that's been coming out. And inflation really has been persistent. So that might continue to curtail the small cap space. And that's why I think there's so much of an inflow continuously, particularly in the MAG 7, cash rich, R&D, they can continue to spend, and if they don't have the intellectual capital themselves, they could go out there and buy it. So do you see a lot of interest in that new fund for people wanting to? Because I'm curious to see if there are people who are playing the contrarian way or if people are still just on that train and thinking that's the only

game in town, I'm going to stick with it. Well, if you're referring to QQQQU and KQQD, which is the 2x bull and non-leverage inverse bear of the concentrated cues or the mag seven equal weight. It's really too early yet. It's been out basically a month. So we've seen some flows, but the jury's still out. I do think there'll be some interest there because a lot of people are trading leverage cues. And the majority of the return stream in 2003, particularly in NASDAQ 100, was really concentrated in those seven stocks. And even if you look at the second, that had performed the best last year, communication services, tech, consumer discretionary,

those seven stocks made up a portion of those individual sectors, some of those stocks within each of those three sectors. So a lot of people want that volatility or at least what's controlling the return stream, and that's why we wanted to launch the concentrated queues, the leverage 2x and non-leveraged inverse, because of where the return stream also is being generated within that index. Ed, you mentioned the word tool a few times.

And that's the way that I personally view these vehicles as they are trading tools, at least, I mean, certainly the ones with leverage, I guess to be specific. When you think about, you say these are trading vehicles, these are not buying hold because of the time decay and all the sort of things and volatility being a drag on returns. So what is the appropriate time period? Is it less than 30 days? Is it less than, is it a week? Like, how should people think about this before they dare press the buy order?

Well, first of all, they'll track for any given single day. But after one day, then there's going to be compounding what you're referencing. So tell me what the trend's going to be of that underlying index or single stock over the period of time you want to look at. And if it's stair stepping in your direction, that looks at. leverage could be a tailwind for you. But vice versa, if it's a choppy market or it's going against you, the leverage could definitely work against you. So you need, that's why I say you need to look at this day-to-day, monitored it on a daily basis because of the fact these are very path-dependent and the timing matters. So that's why there is no clear-cut answer. But I'd say this,

that there's short-term trading vehicles. They're not designed as buy-and-hold vehicles or holding for any indefinite period of time. You need to see what's going on with that underlying index or individual stock and what's happening right then and there. And is that trend going to continue, whether that's the next day or the day after? And that's why you really have to look at it on day by day basis. The only area where you probably could at least look at it maybe a little bit with a longer viewpoint is the non-leverage inverse, but you still need to look at them day to day because there'll be some level of decay if you're wrong, albeit not like a two or three X. And if you're using it to hedge out risk, you're going to need to rebalance every so

often. So you need to know what's going on so you can have that proper hedge in place of whatever percentage you're looking for, or if you're looking for it to reduce beta to keep that beta exposure at the level you're looking for. So that is why we say you should monitor these on a day-to-day basis because they're path-dependent and the timing matters. You know, a simple two-day example, most people feel that if an underlying index was up strongly one day, down strongly the next, and you're in a 3x product, let's see you're a 3x bull product, simplicity purposes, you have $100, and the underlying index is up

5% the first day. So that means you made 15%. so your $100 goes to $115, but unfortunately on day two, that underlying index is down 5%, so you lost 15% day 2, and you're losing it on $115. So you're below $100 after two days. That's a simple two-day example of compounding in terms of something up and down the same amount on a 3x products. You're right the first day, wrong equally the second day on a percentage basis, but because

of compounding, you're below your initial investment. That's just a simple example. to understand the mechanisms of how these work. I'm glad you gave that example because one of the questions that Michael and I have got from listeners, almost more than any other one over the past five years or so, is, listen, I get the decay thing, but I am young, I have time. I can sit through, I can sit in my hands through an 80% crash in one of these products because I've invested a crypto or whatever.

I'm just going to put 10 or 20% of my portfolio in a two or three times S&P or NASDAQ, and I'm going to hold it for the long term, and I think it's going to work in my favor. What do you say to people who look at it in that way, and they are kind of looking at it in the more buy-and-hold kind of framework? What do you say to them, someone who wants to use these products in that way? I wouldn't recommend it because you just can't times over time whatever leverage point you're using by two or three

relative to the underlying index and think that's going to be your return. That is a false narrative. The odds are, the longer you hold these, there's going to be some level of decay. There will be periods of time where if something stairs steps up, maybe you get more the magnitude of that leverage point when you times it by whatever the case may be. But more often than not, the longer you hold these, unless something goes straight up or down for an infinite period of time, most markets don't work like that. So at some point, you're going to have some reversals. and as a result of that, that compounding could be adverse to you.

So that's why I don't recommend these and shouldn't be looked at from a long-term basis. They've got to be viewed day-to-day. Market trends change. And if you're not a trader or you're not an active trader, these are not the appropriate vehicles for you. But it's worse than that. So I'm looking at over the last five years, SPXL, which is the three-time bowl versus is SPY. So SPY is up 94% or 95% total return. So it times two. So that's 190%. SPXL is up 170%. So it's not even up twice as much as...

Well, that's where the compounding comes in. And so you're taking the risk of a 3x product. You're holding it, which I wouldn't recommend for that type of timeframe. And you're even fortunate in that case to get almost 2x. You're just not going to get the leverage. point of what you're looking for beyond the short-term way it should be used when you're holding these things or considering them longer term. So my point, my point, Ed, is that not only you're not getting 3x upside, whatever, 2x upside is still, I guess, good. However, you are getting, you are getting 3x downside or maybe not exactly one for one,

but you're getting these things are just too volatile. I don't care if you're young and whatever. Like, if you want leverage for the long term, there's probably better ways to do it. Well, listen, I'm not going to pass merit on it. You want to buy options. They expire. You know what you're lost. You have a limit of Yeah, do what you want. There's time decay. You want to do those type of things. You know, but when you look at this, these are for short-term active trading tools. Bottom line should never be used as something set and forget it, as I like to say. Use spy or IWM or, you know, semiconductors or whatever the case may be. That'll give you enough volatility in its own. right, it won't have the leverage to it, but you won't have the level of compounding. You'll still have compounding, but not to the extent of a two or three X product, for example.

Most people don't realize you're down 50% on something, and that could happen quickly in a two and three X product. If you're wrong, you got to make back 100%. You know, so that numbers game is going to be against you when you're holding something like this for any length of time. You just can't do it. So I'm curious because a lot of your different funds, not all of them, But a lot of them, you have a bull and a bear option, right?

It could be a two times or three times upside and then a one times downside. And I'm curious of the psychology behind having those offsetting, right, a hedge versus, like I said, gas pedal earlier. Is there a general direction if you had to look at the bulls versus bears on those same products? And again, you have a lot of different options. You have single stocks. You have sectors. Then you have total market indexes and that sort of thing. So there's a lot of different ways to play it.

But is there a lean one way or another where just most of these will be more bullish than bearish? Or is it really dependent on the product? It depends on the product and what's going on with the underlying index or stock. But I will say this, on average, our flows, or at least our asset base, is more biased to the bullside. People tend to trade more with a bullish slant than a bearish slant. And that's the way our asset base tends to be. Are there time periods where that shifts? Yes.

But for the most part, I think there's a bias to the bullish side of our products on average. Which makes sense. Historically, stocks go up. Ed, last year, maybe not last year. It could have been 2022. Started into 2023, there was this unusual dynamic at play with an ETF that was, the TLT, which is 20-year-plus bond exposure, and there was a ton of flows coming into that vehicle, even as returns were getting decimated, which is not, usually don't see investors

running into the fire. What have flows been like on the fixed income side with the direction suite? Yeah, I mean, I can't speak for TLT. I mean, that's a non-leverage 20-plus year treasury. We have the triple leverage on the TLT, the 20-plus-year Treasury, basically, and what's called the swap on that to get the leverage on the ETF. The flows have been overwhelmingly to TMF, which is our triple leverage bull fund, which is interesting. But we've seen massive flows in there for a good period of time. You've had some start and stops, but for the most part, you've had significant flows in

TMF and TMV, which is the flip side of it, we've, we've had some bearish views and looking for rates to go up on the 20 plus year treasury. But you can see the, the differential in the asset base between the two products and the biases continue to be on the triple leverage bull side. This is unbelievable. Ben, pull up, pull up TMF. I was just looking at these assets. To your point earlier, it's what, 4.5 billion in the bull in like 240 million. But no, but But prior to the rate increase, this thing wasn't even at, I mean, it's still a lot of money, but it was barely at $500 million. And all of the sudden, it was poured in recently.

The assets went parabolic, but in a bare market, this is really kind of interesting. Well, you see a lot of contrarian play when something, you know, you tend to see, which you hope that when the markets are running up and somebody's in a bull fund that they may take some profits and may want to look for that to reverse. and vice avert. Sorry, Ed, to cut you off. So this thing is doubled in assets in the last six months, basically. Well, it's doubled in assets. Yeah, we have some institutional, you know, money that's going in there as well. But the returns have been terrible. Well, the returns have been banned because it's the underline is TLT leverage. Well, actually, actually, you know,

in fact, okay, I guess from, I don't know, I'm just eyeballing it from November, November, November, December, through the end of December. Yeah, November and December were very good. I mean, that's from the Fed pivot. But it looks, but to your point, it looks like is there, is that, is that trap money that's either doubling down or? You know, I think it's just the investors that are traders that think that the narrative is going to change and that rates are going to start to fall. And everything you've heard seems to point to that, but it hasn't materialized.

You know, it is, it's fascinating to look at the AUM of the different products just to get a sort of sentiment check or investor proxy. But I wonder if that's dangerous because how much of this could be potentially, you know, two family offices or whatever or a hedge fund making an outsized bed? Or would they not necessarily have a big position like that in one of these products? What are your thoughts on that? I'd have to believe that the head funds are turning it over, especially two and three X products pretty rapidly.

No disrespect, but this has to be probably DIY. This has to be self-directed money, wouldn't you think? Well, you have a combination of what I hope is sophisticated retail investors. That's why education's first and foremost, regardless financial professional or retail, you certainly have retail trading interest rates too, like to trade off of the Fed Minutes, CPI, PPI coming out this week. All those type of headlines or data, traders have an opinion on. And that's what these tools are for. So, you know, we continue to look at these as short-term trading vehicles. Are people, you know, sometimes going into these things thinking that rates are going to go down

and they're trading it and then they're wrong and they trade it again? Yeah, that could take place. And that's what's taking place now, except for November and December. If you timed it, right, that's why these are timing vehicles. Depends when you get in. The narrative's different depending when you get in. You really can't look at these holding these a year or two. That's not what they're designed for.

I would say looking at it day to day and holding it for a couple of days, that's what you have to look at it for. And if you get lucky enough to get a trend that lasts a month or two, like what happened to, you know, TLT in November and December, then you can take advantage of that. You know, if that trend continues to remain consistent in one given direction. I did want to add one thing on when you look at the leverage products in general or the inverse products, especially with interest rates rising, for a sophisticated. retail investor, or even in some cases of financial professional, here's a way to get leverage exposure through a packaged ETF and through 95 basis points for the most part. Some of our products are cheaper. So I think this is a cost-efficient way to get exposure without the use of margin. And then on the short side, again, a packaged ETF where you probably aren't going

to borrow with the costs associated with that, the unlimited liability. potentially, of course, when you short. So here's a way to at least to take an inverse or bearish position in a packaged ETF as well. So I think there's some structural advantages to this with the caveat that these are still designed to short-term trading vehicles, their timing vehicles, and the path of the underlying index during the time you own it or stock matters. Are there any other funds, Michael and I were kind of surprised by the amount of money in that levered bond fund? Are there any of funds that come to mind that, have a ton of money and assets that would be surprising to us that you can think of off

top of your head. You know, I think it's, when you look at it, like SPXL is our triple leverage S&P and the Russell 2000, I mean, semiconductors the last few years, both U.S. and internationally, high beta type of underlying indices like Sox L, which is the NISI-Semiconductor index, has had a lot of interest and continues to. That's our biggest fund. Oh, really? The leverage semiconductors is your biggest fund.

Yes. That's Sox L, you said? Sox L. Sox L. This year there's been probably, you know, outflows in that until recently. But you can see the growth of that. Now, some of that's performance and some of that just flows, people trading it. Very active.

Oh, $10 billion in Sox, I want. I'm going to throw an idea at you. Feel free to throw it back if you don't like it. On the website, I'm not the direction. website, looking at all the ETFs, it would be nice if there was a way to sort by total AUM. So if someone wants to see what's hot, what are other people getting into, that would be a good way for them to sort. What do you think? Selfishly, we would just like that tool as well, just the two of us. Yeah, if you're doing a podcast and the host wants to know what the assets are,

boom, it's right there. We're always open to suggestions. We've done some tweaks to the website to make it hopefully more user-friendly. We have to... We have a top 10 video of movers and shakers that shows some of the biggest moves in some of the underlying ETFs and also volume moves in terms of some of the highest volume traded in a given period of time. And then we have the education section. I'd recommend that for everybody before they even consider it. We have great videos that talk about a lot of the topics that we discuss today and go through

some easy, digestible videos so you can see the mechanisms of how leverage and inverse ETFs work and the compounding and the path dependency, et cetera, that's laid out for any potential trader. I'm a little bit surprised. Where did this one go? I'm looking at the energy two-time bull ETF, ERX, 439 million dollars in assets, certainly nothing to sneeze at. but well off the highs.

I'm talking about the assets are well off the highs. The sector is at an all-time high. Is it not? Oh, no, not quite. Not quite an ultimat. It was. It was. I think X-L-E, yep, the other day, X-L-E, I think, did hit a high.

Not quite, but we're splitting hairs. It's right there. Yeah. And so that's the 2-X on, you know, that index, the Energy Select sector index, ERX. You know, you've had a tremendous move at times. times we'll see contrarian plays, people taking profits like they should. What's the bear, what's the bear, what's the bear cumber for that? ERY.

E.R. Y. Let's see if people are having fun on the bear side. Not really. Not really. Huh. Interesting. And then gush and drip is our other one. That, that is 2x on the S&P oil and gas exploration and production index. Yeah, same thing. I mean, they're, they're there, but still half of the assets as it wasn't in the previous run. Interesting. I'm not quite sure what to make that. Maybe, who knows, who knows? Ed, what else is exciting? What else do we not get to? I think, you know, certainly commodities and inflation. You know, that's been top of mind to a lot of financial professionals for a while. Commodities were the broad commodities were somewhat

in the doldrums, but gold at all-time highs right now when you look at it, look at the energy complex. You have the geopolitical risk right now. You know, when you look at what's happening in the Middle East, unfortunately, God forbid, is that going to expand? What's going on also in the Russia, Ukraine? With those being big ports and the refineries there, and now Baltimore, unfortunately, that accident that happened. And that's a major port as well for a lot of goods and services. So, you know, we're seeing a lot of interest in the commodity markets. And it's certainly being talked about a lot. And all you have to do is go to the supermarket, some of my favorite things like chocolate,

look where cocoa prices are, for example, and coffee, they definitely are costing much more than they did, maybe even six to 12 months ago. So that's one area that's been of interest. And then the QQQQE, as I mentioned, the diversification aspect of it, advisors and just clients overall wanting to spread out the risk more. We're seeing more of that now as well. Ed, what are the total assets of direction these days? 40 billion.

It depends on the given day, but right around 40 billion. So I love that you and the company are so intentional about the purpose of these products. I don't think you could say any more emphatically. These are tools designed for a specific purpose. They are not to be bought and held. I don't care how young you are. we've we've said this e-bill so many times and it just seems to it just seems to be a whack-a-mole people

especially in bull markets they seem to be drawn to these things for the long term so credit to you and the team for doing your part in terms of educating the potential users of these products that here's what they do here's what they don't do so I don't know how to wrap this up other than just say good job appreciate that always good to have the platform like yourself to educate you know your your viewers and to at least get them focused properly on what these should be used for. And not when we get an email like this, we'll send them this episode.

And where do we send people the list of all the ETS? Where do we send them if they want to check out more, learn more about direction? Definitely, direction.com, D-I-R-E-X-I-O-N. Hence the confusion. Yes. And if they could go also and we have info at direction.com, please. you can send us emails as well and we'll have people respond to it. Terrific. Thanks. I appreciate the time.

All right. Have a good week, guys. Okay, thanks to Ed. Remember, go to Direction.com to learn more. Send us an email Animal Spirits at thecompoundNews.com. We'll see you next time.