Animal Spirits Podcast - Talk Your Book: Where Leverage Comes From

Episode Date: September 25, 2023

On today's show, we are joined by Ed Egilinsky, Managing Director and Head of Alternatives at Direxion to discuss: How leverage is created within leveraged ETFs, Why leveraged ETFs should not be held long-term, Investing in China, Using ETF flows as a trading signal, Direxions tactical commodity ETF, Diversifying Nasdaq exposure with equal weight ETFs, and much more! Learn More at: https://www.direxion.com/ 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. Wealthcast Media, 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 brought to you by Direction. To learn more about investing in directions products, go to Direction with an X.com. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik 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 Ridholt's wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Britholt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael a Ben. I've told this story

before a bit, but I want to take for granted that all of our listeners have been listening to everywhere that we've said. I started using Directions products in the early days, probably 2010. I used to think it was called Direction, because, you know, what did I know? You were going to adopter. What did I know? I remember I was a part-time worker. What's that called? I was a temp. Temporary employee. That's what stands for. I was a temp employee at... I was going to say it's called unemployed, but no. You actually did have a job. Okay. No, literally. I was a temporary employee at city. Not that you asked, but what did I do? I was watching like the training videos, like the harassment videos or this videos, the compliance videos, just to make sure that they did what they were. It was

horrendous. But, hey, those are tough days. You gave some notes to the people on the harassment videos? But, no, to the people making them, not to the people watching them. Anyhow, in order to, you know, to pass time and to tickle the itch that I had in the markets, I was trading directions products on my Blackberry from my desk, and it was great fun. The ones that I was training, I was late to the game, I was training the, the, now, mind of this 2010, you know, several months after the stock market bottomed, banks had a harassing.

gotten down 90% whatever it is. You know what this genius idea was? I'm going to short banks with leverage. So you were banking on the double-dip recession? I was an F-A-Z guy, which was the financial bear. And credit to me, I learned very early how these products work. These are training vehicles, as we'll get into the conversation with Ed. These are not to be bought and held. What are you laughing up, Ben? Nothing. Sorry. I could see you smirking. So direction has come a long Why, since the early days of when I first found them, they do a lot more than just leverage, although that is their bread and butter, and we have a lot of fun talking. 30 billion dollars in assets, which I'm sure there's a big fluctuation.

The most interesting thing about this conversation that we had with Ed Ed Galinsky, who've had him before, is you were kind of asking him, do you think most of the people who follow your products and use your products, because most of them are meant to be very short-term in nature, are trend followers? And he said, sure, there are some trend followers, but there's a lot of people who also try to like top, top tick or bottom tick these products, which I think is way, way harder, especially in the short term. If I'm a short term trader, trend is the only thing I care about. And it's funny that people still, I think it's just like you assume.

You're not a short term trader. Listen, speaking for the traders, speaking for the traders, we like to assume that there's extra points for difficulty, like as if you make more muddy catching a bottom or top. Oh, called it. Nailed that you do just making money just in the direction of the trend, which obviously is harder and dumber, but our brains are broken

and that's just the way it goes for some of us. It feels weird to say, I'm going to buy this thing that already went up a lot because I think it's going to go up a little more and you see this thing that went down a lot and you go, oh, it can't go down any further. And that's usually what happens, though.

They keep going in the trend. They're going at least real time. Watch it. Can't keep going. Yes, it can. But that was interesting to me that people try to do that because that's the opposite of what I would try as a strategy. That's what you think. If I ever did.

You don't know. Ben, get into the arena. Try some things. All right, here's our conversation with Ed Aguilinski. We're joined today by Ed Aguilinski. Ed is the manager-director and head of sales and distribution

and alternatives at Direction. Ed, welcome back. Thanks for having me back. When I think of direction, I think of the leveraged ETFs. I think that's where you made your bones. I don't know where that phrase came from, but I don't, you know, not from me.

I don't know where I came from. Remind the audience. I know you've been on before, but just bring us back up to speed. How do you all use leverage inside of the ETF? How does the actual sausage get made? Sure. On a bulfund, a leverage bull fund will look to either own a basket of the physical stock that the respective ETF index is tracking.

And then what's called a swap on that index or ETF to provide. the leverage. So that's just a derivative we use with a lot of the major banks to provide that daily leverage exposure. And then we have some cash on hand as well because of the margin to equity, not requiring 100 cents on the dollar to get 300 cents of exposure, for example, on a 3x product. So there'll be some cash as well. On the short side or the bare side, we don't hold any physical. We just hold a swap on that respective index, providing that leverage point, and there's also cash on hand as well. How does the interest rate environment impact the cost of that leverage?

Because if you have a margin account somewhere, you're probably paying, I don't know, eight or nine percent right now to borrow against your portfolio and put it into something else. Do those higher rates trickle down into the swap rates and the options? How does that work? Yeah, I mean, without getting into the minutia, certainly the swap rates in terms of the borrow will be a little higher when interest rates are higher, but also the collateral will be receiving more as well for the cash on hand. So when you look at using these products, first of all, they're for short-term active traders, as we all know. And for most clients, if they want to get

leveraged, they're going to have to utilize margin. With this type of structure as an ETF, you're getting that magnified exposure through the ETF wrapper. So I would say on average, it's probably more cost efficient to do it through a packaged ETF, even with a little bit of the higher cost for the swap because you're getting a higher yield on the collateral or cash portion. And also, you don't have the unlimited liability in a packaged ETF. Your liability is limited to your initial investment. So for a lot of investors out there might be difficult to get margin. Also, the rates might be much higher at this point.

Here's a way to get that leverage experience. in a packaged ETF, albeit they should know the risks associated with it. And on the short side, guys, it's even harder. You know, try to borrow stock or borrow a basket of stocks to short in terms of a lot of trading platforms may not even let you do that because of the unlimited liability. So here's a way to take a bearish leverage position or non-leverage bearish position again with your liability being limited to the initial investment. At leverage can be used responsibly, but it could also be dangerous in the hands of people that don't know much about it. So let's not assume that listeners are well-versed in these

products. I'm sure a lot of people that are listening right now have traded them and understand that these are not to be bought and held. But assume you're talking to a new listener, somebody that's new and would like to use leverage and likes the structure and ease of getting in and out of these products. Can you talk about why these things should not necessarily be bought and held, why these are more active vehicles as opposed to buying and hold vehicles? Sure. First off, of course, the leverage. magnifies the risk, whether you're taking a bullish or bearish position. So this is definitely for people that are not risk adverse, that want to take on risk. In terms of the trading vehicle

and how it works, the timing matters when trading leverage and inverse. You need to know how the mechanisms of these work and the daily reset of leverage, which I think is key, because when you hold these for one day, it should track that underlying index with whatever leverage point for that given day. But after one day, there's going to be what's called compounding. That could work for or against you. And these are path dependent. So the timing and the trend matters when you hold these. So these are important for the clients to know that these are timing vehicles and your timing matters. Let me just give you a quick example. Let's say you have a triple leverage bull product. and you have $100 to start, and the first day your underlying index is up 5%.

So that means you made 15% the first day, so your $100 goes to $115. But unfortunately, on the second day, that same index is down 5%, the underlying index. So you lost 15% the second day. You're below $100 after two days. So that's a simple two-day example of compounding. You can't just add up the two days. I'm up 15% one day. I'm down 15% the next. I'm back to 100. Because of compounding, you're actually down after two

days. So you really need to know how these work before you should consider trading these. And the most important thing is the daily reset of leverage and when you own these beyond one day and the timing and the path of that underlying index is imperative to whether or not that leverage could work for you or against you. I'm curious how much of a trend do you see in the products obviously, there's times when certain things are hitting in times when they're not. In 2022, a year when bonds and stocks both got crushed, did you see a huge inflow into all the bear's products? Well, it's interesting. We saw a lot of inflows in bears, but we also saw some inflows in the bulls as well because of the fact that people were buying on the dip. Unfortunately, if you were

trading for the most of the year, that buying on the dip mentality, depending on what we're talking about, didn't work. Now, as we move into 2023, we're seeing a lot of continued interest in the bare funds and some profit taking on the bull funds. But with that said, there's still some bull funds that have gotten a significant amount of inflows this year. So it really depends on the time period that you're referring to and where it's trending during that period of time to determine what our inflows or outflows would be. But just to give you an example of how these are being used is all you have to do is look at the trading volume of our leverage and inverse ETFs on a given day.

And you could have a situation where over the course of a couple of days, you could trade the assets of that ETF. And that's how they're designed for, for highly active trading and to monitor these on a day-to-day basis. Do you think that you would have any, let's say that there was a really sophisticated AI model that was built around the flows coming into. to and out of your products. Do you think based on that alone, there would be any predictive ability on what the market might do in the short term? Or is this just a reflection of how the market

performed over the last seven days, seven to ten days based on the underlying instruments? It's a good question. Some people look at the contrarian indicators. But when you look at our flows, for example, and our assets, on average, it's still a high propensity towards both funds. I think people have less of a propensity to short by nature. As a result of that, we're always skewed towards the bull side in terms of when you look at our total assets. But with that said, there are periods of time where we see significant inflows in bear funds either to protect short term gains or an outright short that they want to initiate. For example, invidia this month, yeah, we just launched the one and a half times bull non-leverage inverse bear on invidia. Now, it's up 200% roughly for the year, give or take what's happening today.

Yet this month, Nvidia is down 12%. So the timing matters. So you could have a one and a half times bold. That's really worked out well for you in Nvidia. But at the same time, if you timed it properly this month, you know, if you were short, Nvidia, non-leverage inverse short, you made money. So it really depends. But I think the best example of showing why these are not long-term holds is you look at

Yin and Yang this year, for example, that's the triple leverage. Some people might be familiar with the China Futsi 50 or FXI, which is the non-leverage version. We have a triple leverage bull and bear, yin and yang on that China footsy 50. Both the bull and bear are down this year. Why? Because there's been volatility in both directions. And there tends to be decay when that happens. If you hold the leverage products for long periods of time, if there's a lot of volatility, and no directional or discernible one-way movement. So you could have got that, you could have nailed the macro on this and said, we think Chinese stocks are still going to get crushed because of all the stuff that they're going through. But if you put this trade on, this bear times three, the Yang fund and held on to it, you'd have lost money.

Correct. It's a great lesson. Yeah. I mean, same thing with regional banks. That's another one. We have a triple leverage bull on the regional banks, DPST. If you timed it right and owned it in the month of March, you would have got crushed.

You would have lost over 60% in DPST because the regional banks, which attracts, had a horrific downward month and some unfortunate bankruptcies there. But if you look at July and time to probably the month of July, regional banks really had a strong month. And DPST, which is the triple leverage, was up over 60%. So when I mentioned the timing matters, these are timing vehicles. They're not to be held indefinitely. Ben, this isn't for you.

It's for people like me. It's for people like me. My follow up here is we get questions all the time from people who say, listen, I'm in my 20s or 30s. I have 30 or 40 years ahead of me to save. Why couldn't I just put my money? And I understand the volatility is going to be way higher. Why couldn't I just put my money into two times S&P 500 and then I'll be fine?

Are any of these products to be buying holds? Ben goes two times. You need five times. But are there any of them that can be okay to buy and hold? Are they all just because of the reset and the volatility, you're really saying. setting yourself up for danger potentially? Well, certainly two and three X for sure. We have the one and a half on the single stocks.

So if you were going to use it like some financial professionals do as what's called portable alpha, what does that mean in English? Basically, using the leverage to free up capital within the portfolio and putting in other asset classes, like non-correlated asset classes. So for example, if you have a one and a half times product like on Nvidia and you want to not put a hundred cents on the dollar in Nvidia, you could take two-thirds. to get 100 cents on the dollar, and take that other third and put it in other types of investments to diversify the portfolio.

The one caveat there is you have to rebalance to keep that ratio intact, but you've got to monitor that still day-to-day week-to-week on that. But the lower the leverage point, there's going to be less of the compounding impact, so you could make the case of maybe holding it, but you still got to monitor it day-to-day, and there's going to be compounding regardless of the leverage point. Now, a non-leveraged inverse, like our SPDN, we have a lot of individuals that are holding that longer, knowing that the K is going to be nominal because it's a non-leverage inverse on the S&P 500. Still have to monitor it day to day, but some individuals are using that in the portfolio as maybe a hedge

or to reduce their large-cap beta in the U.S., so it's a way to reduce beta or to take it outright short trade. And if you're wrong, you could be less wrong. So the financial professionals, though, are going in and out of these two and three X products. The same way as sophisticated retail. These are trading vehicles. And if you're hedging with two and three X, you've got to realize that these are short-term ways to hedge. Ed, what's the ticker for the two-time levered industrial ETF? We don't have it two times.

We have it three times. What's the ticker? DUSL. I was just testing you. Man, you're good. How many tickers do you have in your brief? brain. A lot. I've been here 12 years, so I can rattle them off all day, but nobody wants to hear that. Are you ready for industrial trade, Michael? No, I was just, I was just testing.

You're testing him? Credit to add. All right. So, so I would guess, I would guess that people that are using leverage are more likely to be trend followers than they are trying to catch the bottom. In other words, if the stock market's going up, they're more likely to buy leverage on the bowl as opposed to say, no, no, no, no, this is the top. I'm going to, I'm going to leverage the bear. Conversely, if the stock is going down, I'm guessing they're probably going to be shorting as opposed to catching the bottom and going the other way. Is that, I know there's probably exceptions all over the place. Would you say, is that generally true or do you not see it that way? No, we see a lot of contrarian flow in terms of when something is rallying, we tend to see

being used properly and selling on those rallies and possibly buying the bear funds. So it really depends. The technical trend follow the short-term trend follower may act in that regard because they're using technicals. But don't forget, a lot of people look at headlines and macro events, too, and trade off of that. So that's technicals as well. So when we look at a lot of money managers, hedge funds are utilizing our products within their strategies, but as short-term trading vehicles. I don't know if there even is like an average for an ETF, because obviously it all depends on how people use them. But how much more would you say that your funds turn over than the regular buy-and-hold ETF?

Well, let's put it this way. We could have a couple of billion-dollar fund, for example, that can turn over in three, four days or even sooner, depending on the index. So it's a lot different than owning socks versus socks L or SOXS, which are triple leverage bull and bear semiconductors. So they should be used differently, but let's not dilute ourselves. semiconductors has a high beta. There's risk to socks. It's just that that is a non-leverage vehicle and it's part of an overall diversification within the equity portfolio. And you might want to have something specific to semis in addition to the broad indices that provide that exposure to you as well. So if you see $3 billion in some double or triple bull or bear fund, that's not like static

$3 billion. That whole $3 billion could be bought and sold within a week or so. Yeah, but on average, you've got to look at the assets as a whole. And the assets are going to fluctuate in our broader suite of leverage and inverse different with our thematics. So we're used to that. And the underlying instruments we're using, we want to make sure that that market is orderly, that the spreads are tight and that people could trade in and out of these things freely. Keep in mind, everything we're doing in the leverage and inverse space is tracking either an equity index or a fixed income index like the 20 plus year. or seven to 10 year treasury or a single stock. So everything that we're trading is on an

underlying exchange. There is no derivative of a derivative. Let's say that. So there's no leverage on something that's not on the equity exchanges or a fixed income. I think something we've never asked you before. How big and nimble is your trading team? Because I imagine this, you have to be pretty versed in a lot of different markets and different strategies and securities because you could have a fund that has $10 million in it and something happens and blows up or goes crazy and you could have a billion dollars in a couple months in it. So how does the trading team handle stuff like that? Well, it's all about the underlying. As I mentioned in the beginning, it's what that underlying index is tracking, how we're getting exposure to it. So since

we're using equity benchmarks, fixed income benchmarks, it's really all about the underlying liquidity and making sure we can get that exposure on a day-to-day basis. So, that's the key. In terms of getting underlying exposure to most of these indices, they're very liquid. So either we'll use a physical ETF and a lot of our international leverage and inverse and a swap on that ETF or a basket of stocks and a swap on the index. So it's all about the underlying. And keep in mind also, the counterparties are providing that swap exposure. We just got to manage that exposure on a day-to-day basis. So we reset the leverage back to 3x every day. What about for something like commodities where it's not obviously a stock index?

Well, it's different. We don't have any leverage or inverse physical commodities. Everything that we do in the commodity space is commodity-related equities. So, for example, we have leverage and inverse exposure on the Energy Select Sector Index, which, of course, is a basket of stock. Chevron and Exxon lead the way there. And we also have it on the S&P oil, gas exploration, and production index. So those are all baskets of stocks. Same thing with the gold miners and junior gold miners, two ex bull and bears there. The only thing we have in the physical commodity space is non-leverage.

So if you wanted a pure commodity play that was more as a part of a diversification of an overall portfolio, we have our comm ETF that could be utilized more as strategic asset allocation for clients to diversify their equity and bond exposure. If they feel inflation is going to stay, you would want to own. a broad basket of commodities. The one distinction with our product versus maybe the Goldman Sachs Commodity Index, or the Bloomberg Commodity Index, which are good proxies for the broader commodity space, but they're static long only. And you really can't hold those indefinitely. You've got to be sort of tactical with it. Our strategy actually will be longer in cash based on price trends.

And it's completely rules-based. We licensed an index from a CTA, Commodity Trading Advisor, to auspice capital. It's been out there for many years, the index, the ETF's been over six years. But one of the distinctions is it won't be static 100% long. Right now, we're long six out of the 12 commodities. It's not because I woke up in the morning and, you know, decided to do it. It's because of price trends that were tracking that index. So we're long crude oil, heating oil, and gasoline. That wasn't the case at the beginning of the year. And as you guys know, there's been a tremendous rally in energy stocks in the third quarter and along with crude oil. And although they're not directly related, I'm sure the increase in crude oil prices

has definitely been a tailwind for energy stocks. And you're seeing that. Are those, is that an equal weighted index then with the commodities or are they they weighted close to some benchmark? It's equal weighted based on risk. So when the position's put on, it'll size the position based on its current volatility, but it equal weights on Vist. risk. So on average, a commodity will receive anywhere from 7 to 15% depending on that underlying commodity risk level when the position's put on. So it's sort of a risk parity in that regard. That's more of a buy and hold approach to commodity investing. It tries to capture the majority of the commodity upside, but also mitigate, try to mitigate the downside

risk that's often associated with broad commodity benchmarks because commodities are very volatile and can be, both to the up and downside. Now, I know direction. has a wide suite of products, but the market, I want to save the market, I'm talking about the S&P 500, has been fairly boring this year. The VIX has been sub-15 for a few days or weeks. Is there, do people overtrade in boring markets, or is there more likely to be activity in your leverage products when the VIX is say at 20 or 25? Well, I think, you know, volatility always helps. But also if you have low vol and a trending stair-stepping up market, which is for the most part

what we've had this year, that, that provides opportunity as well. So if it's volatility that is extreme and is fluctuating and doesn't have a discernible direction, that could be a difficult market for traders. But this year, even though the vols been low, you know, the market's mostly stair stepped up. But with that said, there are opportunities on the short side if you time it well also. Look at China this year. Underperform the U.S. market the last couple of years, very volatile this year. And you could have had opportunity to make money on the bull and bear side, but the trend for the most part's been down, but there have been very dramatic spikes to the upside with China during the course of

this year as well. Have you seen an increase in interest in the fixed income products? Because that's another one that's generally a boring market, but bonds have gotten killed, so have you seen people trying to time that market as well? Try asking any 60-40 manager or target date fund, how they feel about how boring fixed income was in 2022 and now in 2020. So you're right. The volatility, is picked up there with the Fed, and coincidentally, they're meeting today and making a decision. We're seeing a lot of volume on our TMF, TMV, which is the triple leverage bull and bear, respectively, on the 20 plus year treasury. We're also seeing trading on the 7th to 10 year.

But unlike for the balance of the year, the largest inflows of any of our ATFs this year has been TMF. So people have been bucking the trend. That's our triple leverage bull on the 20 plus year. outside the first quarter, it's been a challenge for the balance of the year when you're looking at U.S. interest rates, they've trended mostly higher. That's interesting. So the bull product for this has way more assets than the bear product by like a huge multiple. So you're right.

People are still trying to catch a fallen rates, it looks like. Yep. On the 20 plus year in particular, but we're seeing in the 7 to 10 year to a much smaller degree, I guess as the duration goes out, the volatility might increase. which it should ideally, but if you look at this year, for example, short-term rates have definitely been very volatile in their own right, and you have an inverted yield curve right now. But a lot of people like to trade off the headlines with treasuries, you know, CPI, PPI last week, for example, and then of course, it's not really what the Fed's going to do today

because I think most pundits, they could be wrong, but most pundits feel that they're going to do nothing today. But certainly November, the next Fed meeting, the Fed Fund futures at about 30, 40 percent is telling you they may hype one more time again. So that could catch people by surprise. So the Fed commentary, forward-looking guidance is going to be key today. Where else are you seeing interest in terms of flows and the conversations that you're having with your clients? Well, we continue to see interest in some of the single stocks, particularly Tesla, TSL and TSLS. Predominantly, though, on the bull side, that crossed a billion dollars in assets and that's only been out a little over a year. Man. So, you know, Tesla has a

cult following all to its own. You know, it's had volume that's been greater than the spy at times in a given day. That's the Tesla. Tesla? Okay, got it got. Common stock. So, but just to give you an idea of how popular it is and it's really trades on its own merits, I think, and it's polarizing because you have Musk and headlines always there. So it's a perfect stock to trade because of the volatility. And most this year, it's been to the upside. Last year, of course, just the opposite. We have actually leverage one and a half times bull, non-leverage bear, on six of the seven magnificent seven. The only one we don't have it on is meta. And as I mentioned before, we just launched Nvidia a little over a week ago. So we're seeing some activity there.

So, you know, if you wanted to trade the magnificent seven, of course, the S&P leverage products, We have a fang plus that includes all seven amongst three other stocks within there. That's a two ex-bow. And for those that want to move away from the magnificent seven and the heavy concentration it has, not just in the S&P, but the NASDAQ 100, people could look at an equal-weight NASDAQ 100. We're seeing a lot of interest there, non-leveraged, more part of a diversifying their overall large-cap exposure, then want to move away from the heavy emphasis.

Sorry, what's the ticker on the equal-weighted NASDAQ? QQQE, thank you. Ed, you got, what about the un-magnificent 493? Well, you're getting definitely a lot more exposure with the equal weight when Apple has the same weighting as lucid, which I believe is the 100 stock and the NASDAQ 100. So certainly an equal-weight approach might make sense to a lot of your listeners if they want to diversify outside that magnificent 7 because it's a very heavy weight. Ben's getting excited. Now, this is interesting. So the equal weight NASDAQ 100 that you have is up 20% year today. I bet that would shock people because most people assume, well, it's just those big stocks that are carrying the day.

So other tech stocks are doing pretty well this year. Yeah, so, you know, it's interesting. You guys know better than I do. The NASDAQ 100 is only 60% tech. It is a high weighting attack. But there are other sectors in there, too, that are represented. And most people associate, of course, because of the Magnificent 7, that it's tech-heavy bias, which it is. But the equal weight, of course, you're going to have less emphasis on the tech sector and more emphasis on some of the other sectors. So, again, that's a little more balance. Now, the NASAC 100 is up 40%. So, you know, the equal weight's up about half that.

But still from a diversification standpoint, I think now more than ever it makes sense because you look at that magnificent seven, none of those seven stocks are cheap by any measure. You can make the case that some of them are still growing at a good rate. So maybe they justify that multiple, but certainly multiples are high on the magnificent seven in varying degrees. So why not spread the risk out and have an equal weight approach? On a relative basis, the equal weight outperformed the NASDAQ 100 last year, the market cap weighted by about 800 basis points. But it was on a relative basis.

Ed, where can you send people to learn more? Sure. You could go to our website at direction with an X.com. I would highly recommend our education center, particularly for leveraging inverse to learn more about the mechanisms on how they work, whether they're appropriate for you or not, because for the majority of your listeners, they're probably not going to be appropriate for unless they are active traders and are staring at their screen intraday and on a daily basis. If you're not going to monitor it on a daily basis, these are going to be the wrong vehicles for you. So certainly our website, cite the education, that's what I'd recommend. You know, Ed, I commend you for saying that. I don't think there's too many asset management here that would have come on and said, said what you just said, which is the truth.

These vehicles are not for everyone. Obviously, there for a lot of people considering how, can I ask, what are the assets at direction these days? Yeah, we're a little over $30 billion. Holy moly. We're in the top 20 of all ETF providers in the U.S. in terms of assets, although our assets might fluctuate a little more than some of those other. ETF sponsors that are non-leveraged, that are...

Well, clearly there is a strong demand for professionals and sophisticated retail investors for the stuff that you've built. So, congrats to you on that. And thank you very much for coming on. We appreciate the time. Not a problem. Always a pleasure. I'll try and get all 78 tickers next time.

I'm just kidding. We got close. Have a good week. Thank you.