ETF Edge - Taxing ETFs & Navigating Inflation

Episode Date: September 27, 2021

CNBC's Bob Pisani spoke with Eric Pan, CEO of Investment Company Institute and Ed Rosenberg, Head of ETFs for American Century Investments – along with Tom Lydon, CEO of ETF Trends. They discussed budget battle and ETFs … what the Democrats’ new proposed tax law changes mean for ETF investors – plus, the search for yield in a lower-for-longer interest rate environment. In the 'Markets 102’ portion of the podcast, Bob continues the conversation with Tom Lydon from ETF Trends. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

The ETF Edge podcast is sponsored by InvescoQQQ, Supporting the Innovators Changing the World, Investco Distributors, Inc. Welcome to ETF Edge, the podcast. If you're looking to learn the latest insights on all things, exchange-traded funds, you are in the right place. Every week, we're bringing new interviews and market analysis, breaking down what it all means for investors. I'm your host, Bob Pazani. Today on the show, we'll talk budget battles and ETFs. What the Democrats' new proposal for tax law changes mean for investments. investors, bust the search for yield in a lower for longer interest rate environment.

Here's my conversation with Eric Pan, CEO of Investment Company Institute, and Ed Rosenberg, head of ETFs for American Century Investments, along with Tom Leiden, CEO of ETF trends. Eric, briefly, for those who are not familiar with all the advantages here of ETFs, what's an in-kind transaction, why did the Democrats want to tax it, and why is this a big concern for the ETF industry? Sure. So in-kind transactions are how ETS managed our portfolios. It means when you sell a stock and you get a stock back, that's not considered a taxable

debt. Not 1969, IRS came up with a rule that said we're not taxing that. And since then, we've been relying on that tax rule. Senator Wyden would like to now make it a taxable bet because he's trying to raise money. And the problem is he's punishing the investor. because what happens is when you and I buy an ETF and we hold, we buy, we hold, and we don't sell for years, we pay taxes only upon sale. Senator Wyden would make us face a tax bill every year, and that's not fair.

And that goes back to the point of it's bad policy because we're punishing long-term investors. We're making it more expensive for them. And this is dangerous. You know, today, a lot of people are interested in the markets. They're doing crypto. They're doing mean stocks. But we want people to invest for the long term because they've got retirement goals or they've got education they need to pay for it.

They want to buy a house one day. And so Senator White is actually, with his tax bill, is actually going to make it more expensive for these people to save for the long term. And that has real consequences. You know, Tom, I can't help but think this is only one to tax proposal that affects the financial businesses. There's plenty of other them out there. Biden also wants to boost the capital gains rate, now at a top rate of 20%. He's proposed boosting the top tax rate from 37 to 39.6%.

And also having that same 39.6% capital gains rate apply to households making at least a million dollars a year. How would that proposal affect ETFs as well? I can't help but think it's not good news. Well, it's not good news. It's not good news for Wall Street. But if you think about those that are making a million dollars or more a year, you know the government's coming after you. I think the key thing, though, is Biden has promised that if you make under $400,000 a year,

don't worry, your taxes aren't going to go up. And what we talked about earlier is 92% of households and there are 12 million households in the U.S. that own ETFs. They make less than $400,000 a year. Their medium income is $125,000, Bob. So they are surely in that camp. We're supposed to be protected. And if this goes through, they won't be.

You know, Ed, none of us want to see higher taxes. I certainly don't. But how bad would this really be for the ETF business? I mean, you still have low expense ratios, right? That's not going to change. Would this change the way managers really run their funds? What's really at risk here? I mean, it definitely is going to change the way managers run their funds.

They're going to take more losses throughout the year or throughout time periods when there isn't rebalancing, which is really going to increase trading costs in the portfolio, which can dampen performance for clients. It's also going to increase selling of individual securities throughout the year and put more pressure on the sell side. Now, in smaller funds, obviously, it's not that bad, but as you go to the larger funds and they're trying to manage their tax lots to keep gains at a minimum or at zero, there could be a lot more selling that goes on, especially in markets that have dropped or, you know, sideways markets like today where you see parts of the market up and down, you could see more selling on those securities that are already down to build up losses in the portfolio. And really what it does is it changes how a portfolio manager in the ETF space is going to have to manage ETFs going forward if something like this went through. You know, Tom, Tom, what is the rest of the ETF community doing about this? I mean, the big Kahuna here is BlackRock.

I mean, they managed what, $9 trillion? They're a big ICI members. I can't help but think behind the scenes. They're pointing out what damages would be to even average Americans, as you pointed out, not people make them more than a million dollars a year, but just people making $125,000 a year. Yeah, well, a lot of people listen to people like Larry Fink for sure. I mean, what he's done for ESG has been really admirable,

but we need him now. And I think Eric has a lot of the heads of these fund companies and ETF issuers together right there in Washington, D.C., probably doing what they need to do, which is rally around the tax safety of ETFs. I mean, we all know, Bob, we've been looking at mutual funds for a long period of time. And there's been periods when the market's underperformed. Your mutual fund is underperformed. but because your fund manager had to sell low-cost basis stock, you've been gifted this great distribution at the end of the year in the form of a taxable gain when, in fact, the funds gone down.

ETFs haven't had to deal with that. And the great thing about it, when I look at Eric's organization, they see the benefits of ETFs, the industry's coming together. It would be a travesty if something like this went through. Go ahead, Eric. So this is not about Black Rock, right? This is about retail investors, millions of Americans who own ETS. And they own it through BlackRock, but they also own it through many, many different companies.

And the fact is, why is this tax being added on them? Because they're the ones who ultimately are going to have to pay for it. Is this what we want? Is this really the objective? I get that they want to raise revenue. And raising revenue is important piece. The taxes also affect the agent. It's about policy, whether or not we want Americans to invest.

And that's why it's dangerous. You know, but we know why this is happening, because $3.5 trillion is an awful lot of money, and you've got to go very deep to get that. I mean, realistically, have you run numbers, Eric? How much money would this actually raise here? Your point is they're going after the wrong tax brace, but you've got to go pretty deep down to raise the kind of money they're going to need. Right?

Well, so I haven't done the calculation, and I believe the Congressional Budget Office is going to score this quite soon. But there are many ways of raising taxes, and the question is who's paying these taxes? 12 million American families earning $125,000 a year, they're the ones paying these taxes, right? We look at young Americans. 33% of millennials have ETS as part of their investment portfolio. We talk about Gen Ziers, 29% of them on ETS. So these are the youngest Americans who are just starting to save today. They're the ones who are going to be paying these taxes. So is it going to raise money?

Sure, it'll raise money. So we'll be raising money this way? No. So you're the lobbyist, Derek. Handicapped the chances this could pass. Look, Senator Wyden is the chair of his committee. There's a possibility of could. I wouldn't be speaking to you today if I thought that this wasn't a proposal that had a chance.

But I do have faith in our system that our policymakers want to do what's best for the country, and I'm hoping they're going to listen to the arguments, look at the merits, and realize this is a bad way to go. Ed, for people who aren't aware of how the in-kind transaction works, give us a simple example of how, like, an authorized participant creates and redeems shares in these ETFs and how that does not create a taxable event. I want to make sure people just understand how this works because this gets into the plumbing of ETS, but it's always important for people to understand how important the in-kind creation, in-kind transactions are. Yeah, Bob, it's pretty simple.

So just use an example of somebody buying 100,000 shares. They put that trade in through their broker. That broker puts the order into the market. If the market doesn't have enough shares, it ends up on the desk of an authorized participant. that is the firm that is able to create or redeem an ETF shares. So they will gather the underlying securities that make up the unit of that ETF and exchange those for ETF shares.

And when they do that, you know, using us individual security, let's just say it's Apple and it's $150 a share, the fund takes the cost basis the moment it comes in at $150 a share. And so that's when it comes in. And then ultimately that once all those shares come in, the underlying securities, the shares are released. is the shares are released and end up back in the client's account.

If you do it the opposite way when there's a redemption, and the fund takes, what happens is the fund will then take all the underlying securities that make up that basket and move those out to the authorized participant. So in this case, I mentioned Apple was $150 a share. Let's say the fund paid $130 for that. It moves it out, and there's no gain on that sell. So somebody had sold enough shares, 100,000 shares,

to cause a redemption and that $20 gain in that security goes, no one pays that. So it goes from the fund to the authorized participant. The difference here though is this is not just an ETF rule. Mutual funds can do in-kind redemptions and in-kind money coming in. But also what you've done is because the person who sold and caused that redemption isn't impacting all the other shareholders that own it, he or she is choosing when to take that capital gain by selling the ETF itself, as opposed to burdening the capital gain with all the underlying shareholders at a time they did not choose to sell.

And so it's really curating a different. I'm sorry. I know this gets a little wonky, but I want people to understand the difference between that and what happens in a mutual fund and how that can create a different situation. Yeah, so the mutual fund, you know, most people aren't buying in, you know, $5 million lots, which is the, you know, or 2 million or 1 million, which is the way ETFs work on the creation redemption, it might be $3,000, $5,000, $10,000. And when that happens, a portfolio manager may have cash on hand to meet that or may have

to sell to cover some of that. However, the nice thing with the mutual fund is this rule that Senator Wyden's going after applies to all registered investment companies, which is ETFs and mutual funds. So if there's a redemption large enough in a mutual fund of five or ten million, million dollars, the firm can choose to redeem those securities in kind and save the rest of the shareholders the tax burden that would be caused by someone selling that large amount. And that has happened in the past. Most mutual fund companies use that leverage or use that process when it's such a large redemption.

But mutual funds have much smaller transactions, and because of that, you can't use that in-kind process on a regular basis. And you have to think of it this way, Bob. percent of transactions that occur in ETF occur on the exchange. They do not cause a creation or redemption. It's usually just that other 20 percent. And that 20 percent can impact the shareholders of that fund dramatically if a rule like this was passed and everyone's taxed on every redemption. I want to move on to another subject that's a great interest to the listeners, and that's inflation and how to deal with it. And Ed, I'm going to turn to you again. I know you get a lot

questions on this topic at American Century. The two questions I get all the time now, the two biggest questions, it's not about stocks. It's one, how do you protect against inflation? And second, how do you get a higher yield with as little risk as possible? Tell me what you're telling clients about, let's just take the first topic, protecting against inflation. There's ETFs out there, Vanguard's got an inflation, protected securities, for example. How do you answer that particular question for clients? So there's a couple of ways, and I'll keep it short, but you can always go with shorter term inflation-protected securities, as an example. When you do that, you eliminate the potential credit risk that longer-term inflation-protected securities have.

They tend to focus more on yield than inflation. The other thing you can do is increase your yield in your portfolio. And I'll give you just a short example. On the growth side of the equation, right, instead of owning pure growth securities, you could look at it another way and own convertible securities. And when you own convertible securities, you get a little bit of a higher yield. Granted, it's not that high. And in addition, you also tend to get a little less volatility as rates start to rise or as inflation comes into play.

It's the same impact with when you look at fixed income, right? You want to go into if you're going to worry about inflation and you're in fixed income securities, you know rates are going to start to go up as an impact of that. And the markets are going to get volatile on the equity side. So you want to shorten the duration. And as you shorten the duration, that's one way you can do it because as rates rise, you'll get hurt less. The second aspect is the other thing we talk about is being active, looking for a portfolio where an active manager owns it and can run it. And that way, if an active manager is running it, he or she can turn the portfolio over faster to take advantage of things that come up in an inflation environment, where bonds may have fallen in value.

They can add it to the portfolio faster and create a higher yield within that portfolio over time. That's a very good example where I could see active management would have a real advantage over passive management. Tom, I want to move on to the second question. This is the other big question, getting a higher yield with as low risk as possible. Now, I know some people are interested in preferred securities. I get a lot of questions about this. Some of these preferred ETFs are getting 4%, even 5% I've seen or higher yield. Are preferred securities, preferred ETFs attractive now?

And what, if any, of the risks to owning those higher yielding? Yeah, Bob, I mean, after 30 years of declining rates, advisors, investors are having to act harder. They're having to work harder. Active, as Ed said, is where a lot of the money's going. Advisors are doing a couple of things. Either they're going to cash or they're looking for alternative strategies for income and preferred is a great way. I mean, you know in the financial markets there's a great advantage in rising interest rates. because banks tend to do better because they lend out money at higher rate, so it's more profitable.

So you're going to see more there. American Century's got an active strategy in QPFF. We know iShares has PFF, and then First Trust, also one of the big ones, FPE. They've done some great jobs there. But I would tell you what Ed is saying about active is really going to be key and critical. And since they're offering these types of strategies just recently, and they tend to be smaller. You're getting some of their best ideas.

We've had a lot of conversations with the folks at American Century and advisors are coming in as opposed to going with the major market indexes because not all constituents in these fixed income indexes are created equal. Yeah. And I just want to remind everybody.

It's good, Tom, to remind everybody exactly what goes on in preferred. Number one, generally higher yield than common. Number two, no voting rights. important feature there, and that's a very important feature. And number three, they have a preference in the queue over common shares in terms of, if the company goes bankrupt, preferred shares will get paid out before the common shares are ahead of the queue. And those are some of the obvious advantages right now, Tom. Now, Ed, then there are

those, I don't know what you call them. I think Core Plus ETFs is what you said in the past. I think that's probably the right way to describe them. They add a bit of high yield to a simple core bond fund like AGG, the big bond fund. They had bank loans. They are mortgages. I know American Century just started a multi-sector income ETF. MUSI is the symbol for that. Tell us about it.

Yeah, so Tom, it's designed to move with the markets in a sense. So it's searching for a higher yield. So you're going to invest in investment grade, high yield, as well as bank loans, potentially. you know, even emerging market debt where the portfolio manager sees they can add value to the portfolio, keep the duration. In this case, we try to keep it a little bit shorter right now because obviously we've been in this lower for longer environment potentially going up. In addition, it offers a bit of a higher yield because of this. And so people have gravitated towards that because of the higher yield. You know, it's grown a little bit, so the dividend has been muted to a

degree. It's been around 3 percent, but usually it's a little bit closer and a little bit higher than that. But in this type of environment, gravitating towards yield has been what clients are looking for. And the way this product can move around or any of the core plus products, truthfully, is because a lot of them are active, they can shift and move to where there's more yield. And they can also be a little bit shorter in duration. And by doing that, it covers sort of both topics in the search for yield. And also, if you're worried about inflation, you're keeping that shorter duration. And you're taking advantage of both. Plus, it's what we mentioned earlier on the active side. We have somebody who's very highly invested in this, watching it from the portfolio manager every day, and they're actively looking for advantages in that. And I think in that

space overall, Bob, it really can be advantageous to have it in the portfolio, especially as we've been in, you know, as Tom said, rates have been falling forever, basically, it feels like. Yeah, and yet, Tom, we know there's risks here, right? I mean, remember, we had money market funds that tried to add a little juice in in 2006 and seven. No, you're right. It's through some short-term corporates. So, you know, it's nice to say, oh, yeah, I want a little more yield over here. But you are taking risk, right?

You're taking, you're absolutely taking risk. And we're seeing more and more advisors, Bob. You know, we survey them all the time that are moving away from 60-40 because they don't feel like they're going to get that true return in the 40, and they're moving to 70-30 and even 80-20. And when you do that and you actually have more. exposure on the equity side, even though you're chasing yield, but boy, we haven't had a major correction in a long period of time, aside from the blip that we had last March, these are one

of those things to consider. I think other strategies that we're seeing in ETFs, these covered call strategies that are providing some great yield, ETFs like JEPI, GEPI, and NUSI and QILD, a 7 plus percent yield where you're also getting a equity exposure. This is something that can replace current equity as exposure and also give you that yield you're looking for as well. So the ETF industry continues to expand and provide more options as people are chasing yield these days. And, Ed, remember, I'd be remiss if I didn't mention the Big Kahuna in this space, the Act We Managed Bond Fund, Jeff Gunluck's Fund, T-O-T-L. He's doing very well. I think he's pulling north of 2% yields right now, right?

Yeah, he is. And that's, again, that goes back to that core plus view or anything. You know, if you, if you alter just the basic ag, right, which has a lot of treasury exposure, which isn't paying much, and you can shift that around without adding much risk to the portfolio, or really if they're taking risk, getting rewarded for it with a higher yield, it really makes sense in the fixed income space. Because if, you know, thinking on what Tom said, advisor shifting away from that, the 60-40 to go 80-20, or even abandoning fixed income altogether, which some have told me,

create significantly more risk in a market that hasn't seen a significant pullback that's extended. We had one last March, but it didn't extend for a long period of time. And is it better to get some yield out of fixed income if you can search for that yield, whether it's the product you mentioned or some of the others we've talked about, or preferreds or even some of the covered call, and really get some fixed income exposure back in there that can really offer a benefit to a portfolio, especially if we pull back. Yeah, this is really where the active management, I think, really pays for itself at this point.

Now it's time to round out the conversation with some analysis, a perspective to help you better understand ETFs. This is the Market's 102 portion of the podcast today, continuing our conversation with Tom Liden from ETF trends. Tom, thanks for sticking around. You had brought up something at the very end of the show about the death of the 6040 fund or the death of the 6040 fund or the death of the 60, percent stocks, 40 percent bond concept that's been so popular for the last, oh, gosh, 30 years or so. Explain why you think that no longer works and what are you telling your investors they should do otherwise? Well, Bob, you and I have been around for the 30 years of declining interest rates, and we've enjoyed it. Advisors and investors have enjoyed it too. But we know the basics that when

interest rates go up, the value of the bonds that you're holding currently go down in value. So now we're in that situation as we're seeing inflation kind of peak its head up. We're starting to see tapering come to come to fruition. We may have hit the lows in the 10-year Treasury, and advisors believe that, and they're voting with their feet. So many have moved from 60-40 allocations to more of a 70-30 or even in 80-20 with the belief that in the next five years, even though it's important to keep that fixed income portion of the portfolio safe. It's not necessarily going to keep it safe if rates are going to go up, number one, and inflation's going up to, two. Real returns will be negative. They feel that it's much easier to diversify over on the

equity side and find yield in other places like dividends, like preferreds and alternative income opportunities. Yeah, it's not that the real returns will be negative. Real returns are negative. I mean, this is kind of stuff you can explain to your mother who doesn't know a lot about finance. You know, you're getting one and a quarter percent on a 10-year, and the inflation rate is 2 percent. And so you're effectively have a negative, you know, real return of holding treasury bonds, 10-year

treasury bonds at this point, for several years now. That's a very simple thing to understand. That kind of math. It's no wonder people are... The most common question I get is how long can I hold on to my high yield before I'm going to have a problem. When we know high yield funds, Tom, tend to act like stock funds a lot. They do.

Well, they're exposed to the economy. They're exposed to interest rates. They're particularly exposed to recessions. But, you know, people say to me, so, Bob, is the Federal Reserve really backstopping the economy? If they are backstopping the economy, maybe it's a lot safer to stay at it. high yield than it used to be. And I'm not a financial advisor, but so far that has not been a stupid observation. No, no, it hasn't, but frankly, advisors haven't believed the Fed, and they've moved over towards alternative yield opportunities. Bob, I'll tell you, when you look at the average

retiree that may have retired in 65 or 70, they've got, you know, 15, 20, 25 more years to live. longer. Healthcare benefits and medical technology has gotten better. And if you were to bet what would do better in the next 10 or 20 years, stocks or bonds, probably guess stocks and advisors are having these discussions with their clients. One of the crazy things, you look at target date mutual funds, they are almost 80% fixed income that are target date of 2030. That's crazy that you might be 65 years old, have your 401k in a target date, and most of it's in bonds. So we have to go through this education that we really haven't had to go through for 30 years and do some real serious work.

Yeah. You know, Jack Bogle, the man who probably had the biggest influence of my life on me in terms of the way I look at the markets, actually did preach, put your age in bonds. I mean, when he was 80 years old, he revealed that he had about 80% of his assets in bonds. And it was a lot of Vanguard total bond market and a couple other Vanguard bond funds. Yeah. And God bless him. Like he was there for that period of time, those meaningful years for him, he enjoyed declining rates.

I worry about today's retirees and what might be happening in the coming years. And the fact that we do have to get a little bit creative. We have to think out of the box a bit. You know, we mentioned earlier, these covered call strategies where you can actually replicate your equity allocation but get a 7% yield. A little of that goes a long way to get your overall income a bit of a boost.

And I caught you this forward. Go ahead. What do you say to the people who say, you know, Bob, it's not necessarily about me outperforming treasury bonds. It's just about, you know, I've got pick a number, $2 million, exposed to the same thing,

stock market and I'm 80 years old, pick a number, and I'm going to live another 10 years, but I have to provide a little protection against the down draft because that's a problem. If I have 40 years, I don't care, but if I only have 10 years or less, then I'm concerned. They do have a point about that, maybe not at 65, but if you're, you know, there's a reason why you need that stability. There absolutely is, and if you're 80 years old and you've got $2 million and you're living solely off the income, you know, I think you're probably going to make it. And we know that retirees are going to have to dig into principle or dig into some of the growth that they've made on the

equity side in order to meet their expenses. And that's really key and critical. You know, a couple other areas to diversify that are really lining up well. I heard you on CNBC talking about energy and gas prices and oil prices that were going to hit some short-term new high. And areas like AMLPs that are giving a 8% yield right now, there's a way where if we're going to see inflation, we're going to see higher oil prices, putting a smaller portion there while getting the yield is great. And then other things in the inflationary area, we've seen a lot of money going to commodity ETFs, the biggest one, the Investco optimum yield, PDBC, it's diversified into 15 different commodities. Again, futures base. So you've got to look under the hood and understand how it's doing. But that's up 30% year today.

Yeah. Let me just move on and ask you about that we're approaching the end of the third quarter. In the first half of the year for the first six months, we saw massive inflows, even into equity funds, plain vanilla equity ETFs. I think we were looking at a record year for inflows. Now as we approach the end of the third quarter, how does that look? Is it still potentially a record year? We're still seeing inflows into equity funds. Give us a sense of the lay of the land where the money's going. Yeah, we're getting close to that $700 billion record, Bob. Big difference, though, of the $6.7 billion that we've got right now, I'm sorry, $6.7 trillion that we've got in assets. So far this year, we've seen $500, almost $600 billion go into extra. and only 126 go into fixed income. And last year, as you remember, more money went into fixed income than it went into equity.

So kind of the scenario that we're talking about, the fear of inflation, the fear of rising interest rates is really coming through the past. But also we've seen a bit of a spike in alternative areas and commodities, even though the biggest commodity ETF you know is GLD. that's lost $10 billion in redemption so far this year, and even though we've seen that replaced with other areas more broad-based commodities. But the general flows are in the areas that you and I would assume. The S&P 500 with VOO and VTI and core areas, but the big redemptions have been areas like corporate bond, LQD, HYG, and some factor strategies. So it's all lining up.

All of this makes some sense to me. It's not, you know, it's funny looking at bond flows. It's not like they're particularly prescient investors in terms of where they're putting their money. In a way, they're sort of a lagging indicator because the market will move first. But this makes absolute sense. With rates on the rise, bond funds would be less popular. We have a global economic recovery going on. So cyclical parts of the economy like commodities and getting flow.

in there make absolutely perfect sense and even plain vanilla equity ETFs make sense in an economic recovery goods you're gonna benefit no matter what from that so I yeah none of this is irrational to me I guess the problem I've always had with looking at fun flows is it it doesn't it doesn't particularly tell me anything that I already know because the market's already moved there is there some can we read the T Lee's looking at at fund flows and get a little more out of it other than that? Well, we're surveying advisors all the time, Bob,

and some of the things that we're seeing. And again, it's tough. You have to really dig down deep because we know most of the major market indicators, those biggest of big ETFs are going to continue to get their allocation. But the head scratcher for me has been globally. The valuation of developed markets and even emerging markets are half the price of what we're seeing in the U.S.,

but they're not getting the love. So eventually will that tide turn? I think so. The other thing is kind of like we were talking about before, active in the ETF space, is starting to put up some decent numbers. Yeah. Well, why shouldn't international underperform?

I mean, just look at this mess with China. The main, MCHI is the main China ETAF is down 15% this year. The S&P is up 15%. That's a 30-point difference, Tom. I mean, that's enormous. We're not talking about 5% like, oh, well, who cares? I mean, you've got several years to get that back again if you're doing that. There's very good reason for people to start questioning whether China is a separate asset class at this point at all.

Given that the regulatory and government risk seems a lot higher than was embedded in this asset class. to begin with. I'm talking about China. Yeah, so regulatory government risk is absolutely there. But also from a valuation standpoint, we're seeing things pretty cheap. Eventually, do you think we'll get that figured out? We'll always be doing business with China. So is it a buying opportunity, or could things continue to slip? I think we're going to see, you look at K-Web, there was money pouring into it while it was declining.

I don't know why I like that K-W. by the way is the internet, China internet shares that's run by crane shares, for those of you don't know. But the value guys don't give a damn about all these political discussions that we have. They'll buy China when it's 14 times forward earnings, and they'll sell it when it's 20 time. And you guys knock yourself out talking about the Chinese Communist Party. We're just buying on historical value trends. So, you know, in a way, Tom, they're like the technical analysts of the world out there. You know, the technical analysts aren't worried about what the fundamental guys are talking about,

pure technical analysts. No, no. So there's something beautiful and mechanical about it. Yeah. And just wait till next year, there'll be something else going on with China and the same thing will happen. Yeah. All right, everybody. Sorry to get a little wonky with Tom there, but he's an old friend and, you know,

we like to get wonky on some of these things. Tom Leiden, CEO of ETF Trends. Thanks very much for joining us. And everybody, thanks for listening to the ETF Hedge podcast. InvescoQQQ believes new innovations create new opportunities. Here's the greater possibilities together. Learn more at Invesco.com slash QQ, Invesco Distributors, Inc.