Gen-Z Is Looking To Juice Gains With Stocks, Options Trading

go again because it's sort of fascinating. Has it taken away investors from e t s? From run of the mills sort of vanilla e t F And some of them aren't that vanilla either. Yeah. You know, when et s were introduced back in the nineties, it was like, hey, you know, you can now trade a whole basket like it were a stock. So you get to the benefit of the liquidity of the stock, but it's a diversified basket, so your risk is a little lower. That used to be a feature. They see it as a bug. That's too.

It's not enough jus for them, and so that's why we are seeing they might start with e t s, but they will end up at stocks and options, the e T s or the gateway. Yes, uh we We interviewed two actual gen Z traders on our podcast and both of them had the same kind of experience. Maybe you know, started off slow, but they always end up at stocks and options. If they do use e t s, they tend to like leverage gtfs like t q q Q and s q q Q, which is a way

to sort of bet on the queues movement um. But look, I think they are a legitimate force in the market. But if you look at the assets, robin Hood might have what fifty sixty billion in terms of all of their accounts. Now Vanguard takes that in about two months. So I think at the end of the day, the real retail investor army is still the buy and hold advisor world. That is really big money that's day, but they don't trade a lot. So I do think when you get to mid and small stocks, robin Hood can

move the market and retail investors can move it. They make of about eighteen percent of the trading according to my colleague Larry tab which has some great data. That's up from fifteen percent last year. And ten percent ten years ago. So this has been on the rise for a while, and so has high frequency trading. So it's a lot of retail and al goes out there right

now moving the market, especially for the smaller stocks. So Eric, as you look across your E t F universe, and I know you've been doing it for years, so you see everything. Where's the money flowing? When you take a look at Vanguard flows and the black Rock flows, are there certain E t F sectors or areas that are more popular. Yeah, fixed income is just ruling the year. I mean, this is the fed trade and gold those I put under just fed induced money. That's basically been

the story. The only it's it's interesting. There's been definitely some money into equities, but not a lot, not as much as you think because the equity markets up what since some kitchen sink day at the end of March, and there hasn't been much flows into equities because most people wanted to front run the ad over in the corporate bond area. So when you look at black Rock in particular, all of their fifty two billion flows are fixed income um. Every last dime that's weird um. And

equities have been a little left behind. And what's interesting is small caps had their best quarter in I think thirty years, same with mid caps, and they're both saw outflows in e t s. It's interesting there's been a lot of areas left behind. Emerging markets saw outflows and they just had a best quarter in a decade. That's how it's a it's an embarrassment of riches I think for investors, and where they see it right now is gold, corporate bonds and the queues. That is the one area

of equities people are piling into. So I suppose you're getting some kind of yielding corporate bonds, but you're not getting a huge yield. Eric are people that's scared about the economy that they're they're going for sort of the very safest asset. Well, the corporate bonds is just because

you know the Fed's coming. So for the past three months, the set says, hey, we're gonna buy lq D. So everybody, the smart money just piled into l q D. L q D took in more flows in the second quarter than it ever has in a year because people are just like, don't fight the Fed. I'll get right in

front of the sid started buying LQD. So I try to basically contextualize this by saying the FED owns about eight billion of corporate bond ETFs, but the whole area took in about sixt so most of the money was made in front running. I think what you're going to see now, though, is people moving out of it. I think they're gonna go, Okay, the FED has kind of tapped out on their corporate bond ETF buying, let me

move to something else. So I think we're going to see a swing into small cap, midcab emerging markets and some of those areas that we're a little left behind in the first half. So Eric just real quickly twenty seconds or so overall give us a sense of kind of the funds flows into ETS in general. Well, they're on pace to have a record year. Uh so there's still that sort of shift from high costs to low cost.

People came. You know, ETS went through a lot, but liquidity, low cost and tax efficiency kind of trumps all any you know, everything right now, and you continue to see money flows a two d and twelve billion so far year day, so we expect to see more. But I do think we're going to see some of those left behind sectors see some blows interesting. Eric Balchinis, thanks for joining us always the expert Vannie on all things ETF. Are fortunate have his ear. Eric's a senior et F

ANALYSTO Bloomberg Intelligence joining us on the phone. So, Fannie, it's just interesting that you know, I've been in this business a long time and this E t F phenomena has just been amazing, and it's really been i think, so widely embraced by many investors exactly, and you see some of the same debates going on in the E t F world as you do in other words, like the fee war for example, you know, the the chasing the fees to zero if you like, is flowing into

quantity TF since long and even the discount brokers, I mean, you know, you see the Charles Schwab going to zero trading commission. So just again it's a boon for the consumer and for the investor well as we all know it has been. Why they reported Congress is in the midst of negotiating a fourth round of fiscal stimulus in time. Certainly of the essence as many of the programs from that from the third round that nearly three trillion dollars of stimulus in the third round. Those are set to

expire in the coming weeks and months. Of time is certainly of the essence to get an update on how that is all playing out. We welcome Lauren Davidson, Congressional tax reporter for Bloomberg News. Laura, what's the latest on this next round of fiscal stimulus, because again, some of these existing programs are about to expire. Well, the latest is that they're still really far apart from having a deal. Even Republicans in the Senate and and the White House

are not on the same page. Just yesterday, uh, you know, President Trump said it would be a red line if the bill did not include a payroll tax cut, which is something that Republicans in the Senate are not all excited about. But meanwhile, there's a lot of deadlines that are pressing down on lawmakers kind of the most important one being the end of the six dollar a week federal uninsurance uh sorry, unemployment insurance benefit that expires at the end of the month. And and that's going to

be a problem for from millions of people. Uh if if Congress lets that lapse without you know, filling something to to replace it. So the extra six dollar part would laps the unemployment insurance sort of ability to collect, wouldn't right, lor would there be anything on top of the of the of the minimum, Well, they would have their their state benefit you know, which varies by state,

but it's about a couple hundred dollars. Uh. The but the idea is from that the federal government was to sort of backstop that and make sure that people basically had enough to to pay their rent and and pay pay all their bills while uh, you know, they were basically shut out of their jobs. Will the economy were shut down. Uh, you know, when this was set back in late March, they thought, oh, this will be plenty of time. But you know, both sides thought, you know,

this will this little good plenty of runaway. You know, now that we're you know, several months down the line, and you know, we're seeing states like California shut back down again, the virus is spreading even faster than it was um several months ago. That there's a lot of concerns. There are a lot of people who you know, suddenly will be able to pay their mortgages, hey, their rent bills, uh, you know, and and that's going to cause wider ripples

throughout the economy. Yeah, Laura, I know some of the debate within Congress about that six d a week supplemental payment is that perhaps, uh, it's such a it's it's an amount that you know, disincentivizes people to go back to work. Is there any sense that they're coming to a resolution on that fundamental disconnect? What care? What they're looking at is they're looking at sort of two things

up kind of two sides of the scale. One is that they're going to have some sort of federal benefit, probably not as high as six hundred dollars, but some amount below that. And then what Republicans want is they want some sort of back to work bonus. You know that there's one idea out there that would be a four hundred and fifty dollar a week back to work bonus for several weeks to encourage people who may have uh, you know, been making more from unemployment, to encourage them

back to work. Uh. You know, we'll see exactly where those land and if they're you know, if they're able to to reach a deal in the next couple of weeks on that. What about the other parts of it. So does you know all sorts of state and local government relief packages as part of this as well? What will wigons allow and what do they want to what do they want to cut back on. Republicans really don't want much at all for state and local local governments

in that package. Um. You know. Of course Democrats that's one of their top priorities. So there will likely be some sort of money in there. But the big overall question here is how much is this bill going to pass? You know, several months ago we saw the House passed the Heroes Bill that had three point five trillion in UH in new stimulus spending. UH. Mitch McConnell for the Republicans and said they want something no more than one trillion. So there's a there's a vast difference in where the

both sides are. Uh. You know, again, this is a compromise between Pelosi, the White House and and McConnell's. So will probably see something above one trillion, but not as high as three point five trillion. And and it's really just about making the money work once you look at unemployment money for state and local there's also concern about more money for for a vaccine and for PPE and

for the health issues. Is that continues to be an ongoing problem plus other things, you know, like another round of stimulus checks or or more money for us for small businesses. Mark, give us a sense of timing here about when Congress leaves for their summer vacation. What are the odds of getting something done before that recess? Well, the goodness is the summer vacation is a is a very a good incentive for for lawmakers to to get things done in Congress typically doesn't act until it has to,

and we're rapidly approaching that point. So about the House and the Senate will be back next week. They basically have two weeks before they're they're scheduled to leave on their break. Uh. You know, these things could spill over a couple of days into August. But I think there is um growing optimism that there will be a deal, uh, you know, within the next two or three weeks. What happens then, I mean, will the will will whatever is decided upon, will it last for? I mean, how do

they decide how long this lasts? Four? I mean, nobody knows when a vaccine is going to be available. You know, most businesses that are you know, not able to reopen. I'm thinking of even you know, arts organizations like Carnegie Hold and Concenter and so on. They're talking about after Christmas, Broadways, after the new year. I mean, we're really stretching into

next year. So anything that gets decided upon on do we know how long it will last for we don't know exactly, And part of that will be determined by

the cost. And also it's a political calculation both. You know, remember there's an election in November, and if you know, especially for Democrats, they think they have a chance of winning back the Senate, they may want to just negotiate a deal that just goes you know, into the fall for a little lies, a little while, and then if they were to have control of both the House and the Senate, you know, they could pick up a new bill in January and hadn't have basically more favorable negotiating

partners on the other side of the building. So, Laura, is the expectation that no matter what Congress delivers to the President, that he will sign it. Given that we are so close to a presidential election, there is no certainty there. Um, you know, there was some concern in the Senate yesterday with U with the White House coming out and saying that payroll tax cut would be a red line. Um, that's something that the Republicans and Senate

don't really want. It's expensive, it doesn't help people that are necessarily not working, so that that's a that's a concern though, you know, some some aids have indicated to me that this is the demand that the White House has made before UH and and the President has caved on it. Also. You know, we've seen in previous negotiations over over government funding UH demands about money for the

border wall of Mexico. President has also caved there. So I think there's some expectation that there's you know, a redline may not be a firm, bright redline. Laura Davison, thanks so much for joining us. We appreciate that. Laura Davison, Congressional tax reporter for Bloomberg News and Vanni. I think this is going to be, UH, a pretty contentious negotiation, as Laura was suggesting, coming you know, right down to the wire, probably right and today we actually have Manation

testifying as well before Congress. There there will be a lot of information, but will there be enough information Paul. I mean, we don't really know yet how many businesses were able to get their hands on money to stay open. We don't know how many of their employees will actually have been uh you know, kept on the pay rolls and how money won't So we don't really know how much suffering is out there. But one thing's for sure.

You know, Republicans do not wanted to be as generous as the first time out, and it won't be I think that's something we can definitely say. Sure, yeah, I think you're right. That three trillion we had in the third round, that was you know, really a major major statement there right at the beginning of the pandemic. But you know, we see these states around the country having

you know, seeing surges. Well it just kind of goes to the issue when can we get this thing kind of get a handle on it um And it doesn't really bode well right now. The data no, a record number of cases in the United States. Now this after already having seen you know, what we thought was the record a couple of months ago. Well, I'm looking at gold here up about twenty percent year the date, a

real rise here. We had a big dip in March along with pretty much everything else when the COVID hit, but since then been marching ever higher to get a sense of what the outlook is for the precious metal. We welcome Everett Millman's precious metal specialist for Gainesville Coins every Thanks so much for joining us here. Again, I'm a little surprised here the golds performed so well, but it's just been a stalwart here. What's your view going

forward for this precious metal? Yeah, thanks for having me on UM. As we've seen basically the entire way up of these past twelve months, there's been a pretty reliably strong bid that comes in any time the gold price dips significantly UM, and that durable base of support appears to be forming at the eight hundred pounds level right now.

But as you pointed out, it's interesting that we've seen prices recover pretty handsomely in the equity market without much of an impact on risk off assets like gold and longer data treasuries UM. In fact, both of those have continued to rally right alongside starts, right alongside the stock market. So even as pockets of the world economy open up, UM as economic activity gradually recovers in the second half

of the year, eighteen hundred dollar gold maybe the new normal. UM. On the other hand, if we see some exceedingly good developments on the economic reopening or on the trade front, for instance, that would relieve a considerable portion of the pent up safe haven pressure that's been buoying the gold price. So although those kinds of positive developments appear rather unlikely today, there is some degree of downside risk for gold UM.

It could swiftly fall back below six d announces if indeed the economy or the financial system looks drastically more stable by the third or fourth quarter of this year. So I remember speaking with Paul Tutor Jones. Now it is probably more than a year ago at this point, but he was calling for gold to go higher at the time and said that if it hit eighteen hundred, you know it would it would it would go beyond

two thousand dollars nounce. But that didn't happen. We are still above eighteen hundred, but we're not moving higher from here ever, at what is the reason for that? So that is a very interesting development, And what I would point to is that investment demand for gold has been hitting all time highs, but it's had to make up for the near eradication of physical demand for gold jewelry in places like India and other key jewelry districts in

the Middle East and East Asia. So to me, that points to the importance of some of the institutional trends we're seeing that institutional buyers, hedge funds, central banks, that's who's buying gold right now. But if some of the assumptions of the gold bears were correct, then losing a huge chunk of the biggest source of demand for the gold sector. More than fifty of demand for gold is

made up by the jewelry industry. The fact that that market has been significantly impaired for months should have dragged prices much lower. Instead, we have seen that face have and demand predominantly from Western institutions, has more than compensated for that lack of wholesale and retail activity and gold jewelry. So let's go to the other side of the equation. Ever, the supply side gives a sense of kind of the supply dynamics we're seeing in the global gold market here right.

That is definitely an interesting one to look at because COVID has sort of thrown everything into the wind. UM, it's very uncertain whether minds are going to be able to open at full capacity UM, certainly with the other precious metals. In the silver market, we have seen that Latin America has been hit pretty hard by COVID and

that is causing some tighter supply dynamics. So I think that that is also adding some positive pressure underneath the gold price, and we don't expect that to clear up any time in the next few months, so into the second half of it could even spill over into early We should expect some tighter supply not only in gold, but also in silver and the other metals, and that is positive for price action. What about jewelry demand, Everett, has it gone away completely? Not completely, but as I said,

it is significantly impaired. UM. Much of the world's jewelry demand comes from East Asia and from India, and those regions have simply had to shut down a lot of their jewelry businesses UM. The same is true in China. Even though the Chinese economy obviously bounced back pretty strongly in the second quarter, copper demand in China rebounded, we haven't seen the same in gold, gold, jewelry has seen

very low volumes as sales in China. In fact um on the Shanghai Gold Exchange, where a lot of that jewelry is traded, we've seen the lowest volumes since two thousands thirteen. So it is actually rather impressive that the gold price has held around eighteen hundred announced because we've lost so much of that main source of demand for gold under normal circumstances. Every other than gold, what else are you looking at in the precious of metal space

right now? That has your attention? So I'm looking for silver to kind of finally play catch up to gold. At this point in the bowl market. Um, we've seen the gold silver ratio has finally corrected back below one to one. That's a pretty significant move, and out of all the precious metals, I believe that silver has the greatest upside potential and the greatest downside potential. Unfortunately it has these very symmetric risks to both sides. Right now,

the technicals for silver look pretty bullish. UM, we're above all of our short term moving averages, and we continue to test our two thousand nineteen high around nineteen. But unfortunately all of that could reverse quickly. UM in terms of behaving like a Saife Haven investment. Silver doesn't tend to engender the same level of trust and stability as gold.

So I'm very keyed in on watching what silver does in the short term because I think that will tell us uh much about where the future trend is moving. All right, we will keep an eye on silver if you say so. Everett, thank you for that little tour around the precious metals space. Everett Millman is precious metals specialist at Gainesville Coins in Gainesville. It is time checking out on Bloomberg Opinion, and today we'll speak with Boomberg

Opinion columnist Tara la Chapelle on Netflix. A little softer outlook than people were expecting, and the stalk is down seven percent today. But let's remember this was being closely watched because it's how to run up of more than fifty percent so far this year. It is a stay at home stock, and it's adding subscribers, even if not at the pace that Old Street was expecting. So Tara,

thanks for joining. How should we think about Netflix? It did add two and a half million subscribers, and by most stretches of the imagination, that's a phenomenal number of new subscribers. Can Netflix keep it up? So I think Netflix warned last quarter that you know, they can't keep

this growth up. And that's because a lot of the uh, the users who joined the last quarter and in the first quarter, where people that probably would have joined you know, down the road later this year, let's say, so that that big growth number takes away from subsequent quarters. So that's what we saw again happen where they added almost sixteen million subscribers in the first quarter, they added almost ten million in the second quarter, but now they're forecasting

just two and a half million. It's still an incredible growth rate. They're still growing more than every quarter year on year. But I think that you know, investors and analyst got a little bit ahead of themselves, let themselves up for disappointment, didn't really listen to those guidance that Netflix is giving. And so the stock price is taking you know, it deserved breather. It trades it a very

rich multiple. It doesn't really say much about the outlook for Netflix, the product and the successes having, but it does say that the stock valuation was probably a little bit inflated. So Tara, I know, this is a stock that's really driven by the momentum of the subscriber gains um.

And I guess the big question for a lot of investors now is, you know, as I think about that softer than expected third quarter guidance for subscriber net adds, how much of that was the pull ahead effect of the first half versus just a more competitive environment out there. Now we've got almost every major media coman just got a streaming product in the marketplace. Did the company talk about that, Yeah, I mean, and it's a really good point.

The company did talk a little bit more about the competition they're seeing, But as Real Tasting said was, you know, their subscribers, even when they turn out, even when they cancel, they expect a lot of them to come back, which I do think is a fair statement with Netflix. I think Netflix has kind of established itself as it this base subscription that a lot of people need, and then everything else you kind of tested out and have as

an add on service. And that's why I've been writing that a lot of these other services they're they're good, but they're not good enough to replace cable or to replace Netflix, So they're really just competing for second place at this point. Of course, that could change at any point if Netflix suddenly doesn't have enough good content, which is very possible the longer that this pandemic stretches on

and they're unable to add new material. But right now, I think, you know, Netflix really has the deepest library. They had a lot of their stuff for twenty already completed and ready to go, so they're not really as affected right now, whereas if you have Disney Plus or HBO Max, you're really feeling that programming drought at the moment you're looking and you're running out of new things to watch. And so I think that's how Netflix has really kind of established itself with the mode that these

other companies haven't quite gotten yet. Yes, I mean production is resuming and else in Germany, France, Spain, Portugal, Italy and the UK, so that should deliver something for the consumer by the end of this year. And then Netflix has new titles one, so it's really getting around restrictions with production and sort of the the need for new material,

isn't it. Yeah, So they said, you know, next year, probably the second half of is when you'll see a lot more of their newer stuff because they are you know, eventually they'll start to feel the effects of the pandemic not having everything completed in time. But even with that said, Netflix still has sort of the deepest library, the most new material. They've been doing a lot with reality TV,

which has worked really well for them. They had to hit shows too hot to handle Love his Mind, and I think that made them realize, you a, reality TV

is a really big part of this. It's easier to make remotely, it's cheaper to produce, and also they're experimenting more with animated which a lot of their UH employees can do remotely should they need to, so they're not having to do these big production sets necessarily where you have hundreds of people on set at a time, which is something that's going to be really hard for these Hollywood studios to work around and going forward, Hey, Tera,

what didn't you make of the announcement that they're naming Ted Surrandos is the longtime product person at the company and a senior executive as co CEO with Read Hastings. Kind Of an odd organizational setup, isn't it. Yeah, it is, you know, And a lot of writers have pointed out that those co CEO arrangements tend to spell trouble eventually. I think it's probably a little too early to say

that for Netflix. I mean, it's kind of been this informal arrangement for a while, which is what the company said in its letter last night, and I think that was a fair point that, you know, it has been Ted Surrandos and Read Hastings leading the company for many years, and they've worked together for about twenty years doing this, and Ted has been in charge of the content aspect

of it. So I think, you know, there's there's some things you can glean from it that Netflix is very much tied to Hollywood now to producing its own content, being a direct rival with these other via companies. At the same time, it doesn't seem to really change too much of the day to day of Netflix at this moment, and perhaps it just has investors look at it more through the lens as a media and entertainment company as

opposed to it's a purely tech company. Talk to us about CBS is new offering Peacock TV, a free streaming video app. Is it gaining subscribers? Will it provide something for Comcast down the road? Right? So Comcast launched Peacock in April just to their own Comcast customers, and so Comcast Internet subscribers get it for free or for no extra charge, I say, say, and so this week they've launched now to everybody. And I think that it's a it's a cool service, I think, especially if you're going

to use the free version. There's a five dollar a month version that people who don't have Comcasts can also get, has a fuller library. Again, I don't think it's going to replace Netflix or cable TV and its own there's just not enough on there, but it is something that

makes a good supplement to some to another service. So I think with your to see happen with a lot of these are people are going to start picking what combination of services do they need and fits their budget, And of course it's going to be a harder and harder decision the longer that this economic downturn goes on. But I think Comcast is doing something really interesting where instead of charging you know, a high price, they're they're keeping it cheap or even free in some cases, and

they're really relying on advertising. So they think the advertising market is going to come back for streaming audiences, and so I think they're looking at it as this is a way to drive loyalty to Comcast Internet services and really control the bundle as they did during the cable TV era and Tera. Thanks so much for that rundown, We really appreciated it. Some interesting numbers out of a Netflix.

Last night's stockdown about six point six percent, but, as Tara pointed out, had a big run so far this year. Tara la Chapelle Bloomberg Opinion, Media and Entertainment Calmness for Bloomberg Opinion. You can read her work and all of the fine work of Bloomberg Opinion writers at Bloomberg dot Com, Slash Opinion or O P. I N Go on the terminal. I guess, Vonnie. One of the questions remains is how many services do you and I and everybody else do

we want to pay for going forward? Well, I'm afraid to count the ones that I'm currently paying for her poll because even though I keep thinking I'll call the core, there's something about watching something that's actually on now. There's something that keeps you attached to the world. I think, at least, you know, for me, for the moment. I

know a lot of people don't feel that way. But I you know, I'd like to tune into things at a certain time sometimes, Yeah, exactly, And that we've seen courd cutting, you know, accelerate actually from the cable companies in the most recent quarter despite the pandemic, so people are really embracing streaming technologies and some of the skinny bundles out there. And again Netflix adding ten million subscribers in the second quarter, fifteen million in the first quarter.

They have close to two million subscribers worldwide. Thanks for listening to the Boomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Bonnie Quinn, I'm on Twitter app Quinn, and I'm Paul Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio.