Whether you embrace or reject etfs, they are here to tay. Their flows often signal Broader Market trends. Our own etf expert Eric Balchunas is here to walk us through what he is seeing. Eric thank you, scarlet. If you saw the show last week, you know that yours predicted we would see a lot of risk on in the flows and i was right. After the fed came and saved the day, people are back into equities. You see spy at the top. You got a little iwm, lqd, ifa. What you dont see here is shortterm and ultra shortterm debt etfs. They ruled only two weeks ago. That is how fast things can change on a dovish fed. Lets look at the outflows to see what is coming out of etfs, and again, build shortterm treasury, there is another shortterm treasury. Efa, i think some of that went to ifa. That was a move to cheaper pastures. But ultimately, 25 billion has gone into u. S. Equity etfs this month and 44 billion into etfs overall in june. Lets look at traders versus allocators to see if the hot money has come back and you can see it, clear as day. This was may, right . Etfs used by traders saw tons of outflows and the allocators hung in there, but look at traders came right back and allocators doing their thing. Both of them are rarely together. Scarlet, this is like having everybody at the party. At least for now. Scarlet at least for now, everyone in sync. Lets bring in david martin. He is founding ceo of mcam. Best known of late for its launch of the trade war etf twar. Also with us is elena popina. Alayna, i want to start with you, because you wrote a story this week about the level of angst in the markets right now. Investors are obsessed with threats to the bull market, whether it is slowing economic earnings growth, trade war, inverted yield curve, it is always something. The only irritant that seems to have been removed is rising rates. Elena for all of the risks this year brought to us, it took away just one factor, rising rates. If you look at where investors are positioning their hedge funds, it is so underweight stocks right now. There is a concern about the yield curve that is here, also here. One investor told me it is a socalled paid trade because those stocks are points away from a record high. Yet there is quite a bit of uncertainty going on. Scarlet a lot of uncertainty a lot of that is due to the trade war. You got this etf twar, which got a ton of attention, both negative and positive attention. Some critics say it is gimmicky and opportunistic. How do you respond . David very simply, the only people who have that response are people who never built an etf. It would be nice if we could wave a magic wand and get an etf just kind of as you go, made to order, but in fact, it takes a long time to build a quantitative strategy that understands the dynamic of trade war. Trade war began its roots back in 2003, when we started to see the accession into the wto of a number of countries and companies, which started having very interesting favorable positions or unfavorable positions with the governments they worked with. So we knew china was going to be, and mexico was going to be, and russia was going to be a theme. And so we started building a strategy a very long time ago. The fact is i am not going to, at all, diminish the fact that if you have a twitter feed coming out of the white house, and every time the twitter feed comes out, theres something about trade war. It is not a bad time to hit the market. Eric just explain how it is designed. We just showed the top five stocks. Explain it is not maybe what people would think. What is the criteria to get into it . David great question, and it also goes to the duration of how people should think about it. So it is a great question. What we are doing is looking at companies who, for whatever reason, have decided to build relationships with foreign governments where they have some form of patronage. That may be a longterm acquisition relationships, it may be partnerships on technology development. That is the kind of thing where even when a trade war or a tariff or Something Else hits the market, these companies are going to have the likely protection of that counterparty country, not because the market does not have an effect, but it is because they have a favored position with the countries involved. Scarlet so they have a consistent revenue stream that s not at threat. Elena, twar is the only pure play trade war etf out there, but there are other ways the investors can play the trade war using etfs. Elena a few ideas come to mind. You can look at the market cap and small cap that comes to mind. The iwm, the ishares. Small caps are in domestic play. They are not that much involved in International Trade tensions. Then there is exposure. You can look at the amca, the ishares u. S. Fewer revenue etfs, so the point about this etf is that about a third of this sectors constituents are domestic companies. So if you want to be protected from the developments in the u. S. China trade relations, take a look at this etf. Not a lot of assets, about 20 million or so, but still an interesting place. Eric david, you launched another one that got less fanfare, inau. I love your ambition with this. You want this to be the new version of beta. You want to shove aside the dow jones and the s p and have this be what beta is. But honestly, it has got 73 active share to the s p, looks more like smart beta. David it is an interesting problem. F we go back 120 years to when the dow was created, the dow was actually set in motion to sell newspapers. And we started counting things that actually didnt have a fundamental measure behind it. That is how the dow came into being. Then we decided to start counting things based on their size. There is not a good or bad decision about that, but at the end of the day, we live in a world now where information, asymmetries, new pieces of data that are not just macro descriptors of companies but actually get into the guts of what a company is really about actually now play a role. Now that we have the ability to integrate that kind of convergence of big data and other forms, we now have the ability to actually measure real quality, real performance, and we can actually show a different style of corporate review. Scarlet quickly, talk about the fees for this, because it is not cheap, either. If you want it to be a replacement for beta, it should be. David when we talked to the New York Stock Exchange about launching this, we had a conversation about this notion of where we go with fees. We have been a Hedge Fund Manager a long time, so we are comfortable at two and 20. For us, etfs are crazy. This notion that you race to the bottom makes no sense. We actually think there is a market opening for what i call intelligent alpha, and that is what we talked about when we actually rolled this out. This is a market that says performance matters, exposure is not the only game in town. There is an opportunity for real managed performance. Scarlet david martin of mcam, thank you so much for joining us today, as well as bloombergs elena popina. Coming up, ross gerber of gerber kawasaki. He prefers owning stocks to an all etf portfolio, but he does have some notable etf holdings. And one fund that caught our attention, the ishares core u. S. Growth etf. One day last week, they saw the most inflows since april 17. It was among microsofts top holding. A reminder that you can find that chart and all the others we feature on the bloomberg at gtv. This is etf iq. Scarlet i am scarlet fu. This is etf iq. It is time now for the etf life cycle, where we take you through the three main stages of etfs, and we always begin with a filing. Innovator funds registering for the september series of their innovator buffer etf. The firm looks to offer defined outcome funds for each month of the year, with varying degrees of Downside Protection but capped upside potential. By the way, you can now monitor the filings yourself as they come across the fccs desk. Step two is the launch. The ishares cybersecurity at tech etf began trading under the ticker ihak. It is part of blackrocks attempt to expand its offerings of thematic etfs, which demands investor interest and higher fees. And for some, the final stage is liquidation. A pair of etfs from pro share is the ultra short gold liner fund will start creating in august, offering two times daily leverage on the arco gold iners index. Time to get passive aggressive, where we track the tensions between active and passive investing. Ross gerber is not shy about sharing his views, whether on building a portfolio or defending tesla. He got our attention when he sounded off on etfs, tweeting, by the way, owning stocks is clearly superior to an alletf portfolio. Etf robos are basically tricycles, poorly built tricycles. Lets welcome ross. He is president and ceo of gerber kawasaki and joins us from los angeles. Great to see you. You are an Investment Advisor who goes beyond traditional duties because you do pick individual stocks. Looking at your recent filings, it shows you have got about 50 etf, 50 individual stocks. Thats a pretty big dose of etfs. Is this your usual allocation . Ross yeah, i mean, we have always kept a pretty decent amount of etfs, especially the sector etfs, which is what we mainly focus on. Just to create diversification in our portfolios, because we specialize in areas like technology, entertainment, and communications companies, so we want to offset what we are really good at with the etfs in areas that we dont have the same level of expertise research. Scarlet is there anything etfs allow you to do that individual stocks cant or wont . Ross yeah, i think one of the greatest things about etfs is actually its ability to be in a sector you want to be in without having to pick stocks. For example, we were looking at the solar etf t. A. N. , and i love a lot of the holdings. We looked at each individual holding and we were going to maybe invest in solar edge, the company i like the most out of them, but it was hard to call with the volatility. So we prefer an etf in this case, and the etf has performed very well because we like the sector. Scarlet one of your top holdings, as we just showed, is xlk, and with the gix rebalancing, the Infotech Group saw some of its top names migrate over to xlc. You were not a fan of this rebalancing. Why . Ross well, it was mostly a Portfolio Managers nightmare in that we consider google like a tech stock, for example, and by switching these companies around, it really made us have to rebalance our portfolios to better align with so we dont have too much concentration in our individual stock picks, like we own google ndividually. So you know, it was really just a lot of moving around, and i dont know how much it actually helped anything. But, you know, that is s p. Scarlet thats s p. You also hold usnv, the ishares minimum volatility etf, and low vol funds really having a oment. Huge year with 11 billion in inflows. Explain the attraction here and why it is better to use an etf to achieve this rather than individual stocks. Ross well, one of the things we constantly are learning in our portfolio management, you know, it is not a static process. One of the things we learned last year was being heavily weighted in Technology Creates a lot more volatility for our clients, and in the case of especially in the trump administration, with so much volatility in the market, we wanted to dampen the volatility without per se reducing returns. So the usnv etf fits the mold for us. Being something we basically dont own any positions in usnv, so it gave us more diversification, as well as performed well. It lowered our risk, but it did not actually take away from any of our outflow returns. That is an example of the way we use certain etfs to offset the volatility inherent in our stock portfolios. Scarlet got it. Speaking of volatility, you know i have to ask about tesla. You are an outspoken tesla bull. Which has not exactly been the easiest thing to be lately. Sentiment on the stock has gotten a lot more negative, a 21 ratio of negative tweets to positive tweets. One of our frequent guests has, like you, gotten attacked for being bullish on tesla. What is your take on the vitriol out there in social media . Why do you think people get so worked up about you buying the stock and being bullish about it . It is not like you are talking it up and not owning it. You are putting your money where your mouth is. Ross you know, tesla has struck a nerve in the Investment Community that i actually have not seen in my whole career, where a company has disrupted or potentially is disrupting so many major industries, that many of these industries are not going down lightly. They are using some of the same playbooks that donald trump used to win the election by manipulating the internet, manipulating the media, and doing whatever they can to help their short positions. Currently there is over 10 billion short tesla. Investment firms like Morgan Stanley are working hard to make their money on shorted interest and supporting these shortsellers, so you have wall street, you have got the oil industry, the auto industry, you have got a lot of industries that are going to see severe pain because of Companies Like tesla, so they are working really hard to hurt the company. So on the other side, im a big believer that Climate Change is the Biggest Issue that humans face over the next decade for basically our survival, so Companies Like tesla are systemically important to our longterm survival as humans in a lot of ways. So that is one of the reasons why we are big supporters of tesla as a company, but also as an investment. We think over the longterm, the company is a leader in technology in many spaces ev, autonomous driving, and such. Scarlet let me just get this straight. Very quickly, do you think there is a conspiracy on those bullish against tesla . Ross i dont know if it is a conspiracy like all the separate players are working together. But i think there is a very, very welloiled machine working very, very hard. Look at what is happening in oil today. Prices are slumping, there is so much extra supply. They have resorted to blowing up tankers in the gulf to try to keep prices high. The truth of the matter is tesla is enormously disruptive. I mean, uber disrupted cabs, but tesla is disrupting like five industries. Scarlet in other words, there is a lot of vested interest in preserving the status quo. Ross for sure. Scarlet ross gerber of gerber kawasaki in l. A. , thank you so much. Coming up, the protests in hong kong drawing attention to the region. Next, we drill down into an etf that is reliant on listings in hong kong to see if there is any fallout. And for a drill down into all of bloombergs etf content, check out bloomberg. Com markets etf. This is etf iq. Scarlet i am scarlet fu. This is etf iq. For every etf that offers exposure to a sector or country, others are quick to follow. The u. S. China trade war leading beijing to accelerate innovation across the economy. Brad loncar is ceo of loncar investments, which sees Growth Opportunities in chinese biotech. Before we talk to him, Eric Balchunas will give us the drilldown into loncars chna funds. Eric you will be hardpressed to find a more specific etf out there that tracks biotech and pharma in china. Here, you have got it is very small, 3 million. So if you trade it, use a limit order. Expense ratio is 79, a little high, but this is highly exotic exposure. Look at the holdings. Yours truly, i dont recognize any of the companies here. I spoke with one of our analysts in b. I. , they say it checks out, but this is very specific stuff. A lot of biotech and pharma. As the name presents itself. Also, all hong kong listed. Lets compare it to chih, the only other health care china etf, to get an idea of the difference. You can see here, it is about the same fee and return. But look at this, not that many large caps. That means you will get more volatility in this one versus the other one. Youve got to keep in mind about that. And also the allocation, 30 biotech to 8 . Look at the active share to fxi. You literally are not getting any of these stocks in eem or fxi, so the exposure is there but you want to go longterm in order to stomach the volatility that this will throw at you. Scarlet absolutely. Still with us is brad loncar. Ceo of loncar investments. This is niche with a capital n. You are providing investors to access to a corner of the Chinese Market that has not been accessible. Who is this designed for . Brad a lot of people outside of biotech do not know about this yet, but they will because there is a true biotech boom that is being born there today. The analogy i use is the u. S. Biotech sector. Our Biotech Sector started in the 1980s and 1990s. That is exactly what is going on there. So i tell investors, there is an engine there, there is a sell gene there, and they are Small Companies that are ipoing and they will play an Important Role globally one day. There is a handful of Important Companies that are making this happen. The Chinese Government is standing behind this. They want to have a worldclass Biotech Sector. There are entrepreneurs returning home and starting companies that are conducting worldclass science. Their version of the fda, the National Medical products administration, has also gone through important reforms. Scarlet you bring up a lot of interesting points. Doesnt that make biotech ripe for u. S. Pushback, whether it is restrictions, sanctions, tariffs, in the trade war between president xi and president trump, at least in their negotiations . Brad the trade war itself as you classically think of it should not affect these companies. There are no material tariffs on medicines because, if you think about it, that would raise drug prices, and neither country wants that. But nonetheless, it is such an important story that it is affecting Asset Classes everywhere. There was some good news about that yesterday. The two president s are going to meet. That has brought up a lot of chinese stocks. We hope that will get resolved soon. Eric your original etf is the cancer immunotherapy etf. Again, specific. It had some decent pops. It might lead for a quarter, but overall it has lagged. What is going on . Brad immunotherapy is harnessing the immune system to treat cancer. One thing thats important to know about it is it is not one thing. There are many different approaches. The thing that has been impacting the performance over the last year is the Clinical Trials are one of those approaches, combining two immunotherapy drugs together in what we call checkpoint combinations, have been very disappointing. We have been working hard to lower our exposure to that. We just did our last rebalance last night, and only one out of 25 companies is levered to that space, so im glad we are out of the woods. The future for immunotherapy is very bright. The scientific director of our Charitable Partner won the nobel prize this year, and these companies are doing a lot of great work. So im excited about the future. Scarlet brad, very quickly, one of the reasons why chna looks promising is because hong kong has a new rule allowing Biotech Companies to list in the city despite not having earnings. Do the protests that we have seen in hong kong change the willingness of companies to list there, or the reception they might get from International Investors . Brad thats exactly right. Thats actually one of the primary reasons we created this. Because for the first time ever, Biotech Companies can list there. It used to be if you didnt have revenue, they would not let you list, and they created an exception for Biotech Companies. Hong kong is the window to china. What happens there, of course, is very important. To be honest, im more focused on the u. S. Political situation. The administration and a lot of politicians are sending signals to a lot of these companies that their business might not be welcome here. They are choosing between nasdaq and hong kong, and i think most of them will lean toward hong kong. Scarlet brad loncar of loncar investments, thank you. No matter if you are bullish or bearish on u. S. Big tech, the etf industry has you covered. Check out this weeks there is an etf for that. Scarlet investors who have a view on fang names are spoiled for choice. That is because rex shares, through its micro sectors products, offers Exchange Traded notes that covered the spectrum of exposure to the nyse fang plus index. There are leverage notes that are long, as well as inversely tied to the 10 companies in the index. Youve got the original fang names, facebook, amazon, netflix and alphabet, plus six other wellknown tech companies, twitter, apple, alibaba, nvidia, tesla, and baidu. We are focusing on the three times in verse leveraged etf, lso known as fang. As its name implies, fang uses derivatives to achieve three times the opposite of the fang plus index. Performance wise, fang trailed the index since launching in january 2018, but be warned that this family of etfs are not buy and hold investments. Fang has roughly 25 million in assets and is equally weighted with a rebalance every quarter. It comes with a high Expense Ratio of 95 basis points, but that really shouldnt be an issue for shortterm positions. Bloomberg intelligence gives fang a red light in its traffic light system due to heavy leverage, daily resetting, and credit risk. Scarlet it is like a hightech etf video with a 1980s twist. Eric it makes me want to go clubbing in miami, for some reason. Scarlet we will see eric there. That does it for bloombergs etf iq. See you next week. At comcast, we didnt build the nations largest gigspeed network just to make businesses run faster. We built it to help them go beyond. Because beyond risk. Welcome to the neighborhood, guys. There is reward. Beyond work and life. Who else could he be . There is the moment. Beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. Take your business beyond. Jonathan from new york city for our audience worldwide, i am jonathan ferro. Bloomberg real yield starts right now. Oming up, global Central Banks gearing up to deliver more stimulus, taking the poll of negative yielding assets through 13 trillion and driving highyield credit spreads to the lows of 2019. So lets begin with the big issue. Who wants to fight the fed . It is certainly not something you want to fight in the shortterm. Dont fight the fed. The market likes the fact the fed is saying they are dovish. In the near term, i think we are going