All three major indexes (^DJI,^GSPC, ^IXIC) have reached record highs this year as the tech sector continues to make major gains as the AI race heats up. But is the market able to keep up the momentum? And how does inflation factor in?
Defiance ETF Chief Executive Officer and Chief Investment Officer Sylvia Jablonski joins Yahoo Finance’s Jared Blikre for the latest episode of Stocks in Translation to discuss how the market will play out in the roaring 2020s and share her top tips for beginner investors. She believes that the current market is strong, saying, “I do see some volatility around news bits, whether it’s geopolitical issues, a change shift in inflation, but overall, inflation is coming down, corporate earnings are strong. Corporate America has held up, we’re still spending money.” She calls Nvidia (NVDA) “the best thing since sliced bread,” as it has been a major market mover that continues on an exponential growth trajectory. However, she encourages early investors to go after ETFs — both in tech and in commodities — instead of purchasing stock, as it is often more affordable and a better move to maintain a diversified portfolio.
For more Stocks in Translation, watch here: https://finance.yahoo.com/videos/series/stocks-in-translation/
Welcome to stocks in translation, our essential conversation cutting through the market, mayhem, the noisy numbers and hyperbole to give you the information you need for your portfolio today.
I am excited to be joined by Sylvia Jablonski.
She is a defiance ETF chief executive officer and the Chief investment Officer.
Thank you.
And also Sydney, our intrepid producer who is going to be chiming in with some very prescient and uh questions.
And our theme for the today, uh If you can have a theme that’s based on a theme, it is thematic investing in the roaring 20 twenties is that’s what we’re in right now.
Perfect topic for a CEO.
It would be Sylvia who heads a thematic investing ETF business.
Is it really one of the all time greatest risks in investing?
Keep an open mind.
And this episode is brought, brought to you by the number seven trillion 284 billion $319 million.
That is the size of the Federal Reserve’s balance sheet.
Why this matters to you and Sylvia Sydney first, let’s talk about our theme of the week thematic, investing in the roaring 2020.
Just want to get your overview on the market.
Major averages, the dow, the NASDAQ near highs, near record highs.
But we’ve seen a lot of defensive things kind of creep into the market recently.
How are you seeing things?
Yeah, I mean, it has been a very interesting market this year and in 2022 I was sort of looking forward to this.
I think everybody was forward to what would happen in 23 and 24.
And I look back at that market and you thought about like, just how, you know, sour everyone was on everything, particularly tech and look how that turned out.
But, you know, I think that overall the market is strong, you know, there are certainly some risks in the market.
We have the highest levels of, of debt that we’ve ever had.
But if we just take a step back into the near term, people have jobs, they’ve had wages increasing.
This stuff is slowing down, but they still have, you know, strong pricing purchasing power.
Um, the consumer in good shape, corporate earnings have just been great.
You know, we’re expecting 14% growth in earnings next year.
That tells me that that’s a very good thing coupled with potentially a fed that’s going to cut.
So, in the near term.
I do see, you know, some volatility around news bits, whether it’s geopolitical issues, a change shift in inflation.
But overall, you know, inflation is coming down, corporate earnings are strong.
A I the biggest one it’s been expressed through NVIDIA, the Poster child.
And we’ll, we can talk about NVIDIA, but it’s broadened out because now we’re talking about power, electricity, you know, kind of the nuts and bolts to make A I happen.
What do you, what is your thinking of managing an ETF or managing a suite of ETF S that’s kind of in this business?
It’s, it’s the best thing since sliced bread this year because it’s up so much because it’s so much, right?
We love it.
But so interestingly enough, we started our company in, in 2018 around the idea of, you know, there’s $7 trillion of wealth that’s going to trickle down from baby boomers to younger people, right?
And, and younger people, you know, kind of being anyone who’s like tech savvy and believes in something beyond the old classic traditional computers and stuff like that.
So we thought a I is gonna be the next big thing for, you know, for sure.
And we were a little bit early and, and that chat G BT moment is really what kind of, you know, spiced up our ETF S and our asset flow and things like that.
But we thought when we constructed the ETF S, it was like, let’s think of a theme that captures all of A I.
So there’s a I semiconductors, there’s, you know, quantum computing supercomputing, there’s data, there’s there’s you know telecon connectivity and things like that.
So we had a five G ETF which is the A I, you know tech connectivity.
Um And then we had quantum which is super computing semiconductors companies like ion Q that are, you know, going to process data in in multidimensional ways that I’m not familiar with the company, but it sounds intimidating.
Yeah, it sounds intimidating.
But I guess that’s kind of the point of thematic investing, right?
So you want your NVIDIA, you want your Microsoft like the the companies with a strong balance sheets that hold up the portfolio.
But once NVIDIA has run up and you’re not in it and this trend is still going and growing, it’s going to start filtering into these other areas and having an ETF that gives you exposure to the small caps, mid caps, large caps, you get the balance of the safety from the large caps.
But then you get those maybe 10 beggar if some of these small caps, the small ones that become large caps.
I think ETF S really matter in these types of sectors.
So Sylvia, let me ask you a question because you mentioned a little bit the great wealth transfer.
So I’m going to ask you about the early investor.
Should a first time or early investor, someone in their twenties maybe is the way in through to A I through ETF S or should someone just own?
NVIDIA, should people own the stock straight out or is it just a little bit easier to go in through the ETF?
Si think if you’re 20 you know, unless you’re super wealthy and you can drop, you know, what, where is it at?
Like 1200 bucks or something like that today, it’s almost, it’s expensive today to buy.
So I think you can ETF S tend to be, it’s a little bit lower, the management fee is lower.
And then again, like you get this broad diversified portfolio.
So for example, we’ve got an ETF or quantum ETF.
It has NVIDIA A MD in it, but also has Microsoft Apple, you know, Hewlett Packard, you know, so, so I think that if you’re gonna hold something forever, it’s not a bad idea to have a diversified ETF, but the answer is, you know, I don’t want to just like Toot my own horn because I think it’s perfectly fine to buy a stock that you, I believe in that stock is about to have a split.
So, you know, go on and get on in.
Maybe I have to wait for that because I’m not showing out 1000 bucks a share.
Wait for that.
You’re probably more likely to, you know, buy a couple of shares at 100 bucks than you are at, you know, where it’s at now.
So, so what about some of these other themes?
Uh maybe not so A I intensive but still important on people’s radar and disrupting an industry.
Yeah.
So I think again, like if I just, if I think about um A I like and, and I, and I like bleed it down, I mean, you can think about the commodities, right?
Uranium, you know, these things are in high demand, there’s low supply, there’s geopolitical issues impacting this, you know, in, in the case of uranium, we want to be carbon neutral by 2050.
We’re having a lot of global government investment in that space.
So you look at, you know, products centered around uranium or the commodity itself.
Copper, you know, um just, just basically like hydrogen, like some of these alternative power sources I think are super interesting and the biggest theme.
Um and, and you know, it’s, it’s really playing out now like the roaring 2020 is the biggest growth in new product launches that we’ve seen come out and filings that are with the SEC now are for income generating products.
So all of these cover called ETF, you know, zero DTE put ETF products, you have exposure to an index and you generate income helps that interest rates are up.
Generally does because what happens with that money is when you’re selling options, selling the money option or, you know, slightly the money puts or you’re, you’re using covered call strategies that money sits in treasuries.
And like at baseline, you’re getting 5% before you employ your strategy.
So it helps, but there’s so much income that is coming from, you know, selling these short term options that settle to cash that even if rates fall, even if you know, inflation shrinks and the fed cuts, it’s, it’s de minimis in terms of the actual return of, of income for these funds, like options generate so much premium, twofold, twofold.
Question here back to the early investor in terms of commodities.
Again, are we going to go ETF S or how are we getting in there?
So, I I mean, I personally go into E into ETF S for commodities and it’s, and, and I am a stock picker.
So again, I’m not showing my biases towards being an ETF person just because I think that, you know, several commodities right now have supply demand constraints and are, are, you know, poised to grow and, and it’s, you know, kind of um cheaper functions.
Well, in an ETF product, I’m not trading features day to day and you know, it’s, it’s easier in the ETF wrapper.
And so my background was in lever number ETF So, so I used to just spend my time talking to like really technical model based traders that are looking for short term.
So, so lever for CTFS are just that they’re short term trading opportunities, why they’re risky is, you know, if you have, if you have an upward market, it’s co compounding on top of compounding great returns over time.
Um If, if you run the performance of some of the three times levered tech ETF si mean, they’re up over 15,000% in the last decade or so.
But um the risk of that is range bound volatility, right?
So every day you’re, you’re, you know, buying high, you’re, you’re kind of selling low over time.
Trend is your friend.
If you don’t have a trend, you tend to do worse than underlying it.
That’s a big risk.
I saw this early on when I was looking at leverage ETF S and it’s startling how if you have a market that’s going net up over time.
But in a very volatile way, you can actually lose money.
You have to trend is your friend.
You have to be, you know, short, um directionally short to win on, on the, you know, short funds and direction long to, to win on the long funds.
Anything in the middle can be tricky.
And then a lot of people have figured out that because of that another trade you can do is to short both the long and the short.
So you win Arbi in there with the range round volatility because they’re always catching up and read the perspective.
All right.
But time now for a word of the day, which is FOMO and if you thought it means fear of missing out, you’re right.
Um But more interestingly, we want to explore how this dynamic and it encapsulates both greed and envy as it works, its mind its way through the minds of investors and into prices.
So I, I think that III I it’s interesting because I’ve been thinking a lot about this word when I, I’ve been talking to you think graduates and interns and things like that.
I absolutely think you should have FOMO of not investing.
You should, you know, I think that investors should dollar cost average, forever build their portfolios.
Um You should have that fear of missing out like your, your cash should not send a bank account, like, so on a basic level.
But FOMO when a stock is at its all time high and you’re buying it that day at that print, are you looking at those 1000% returns in a week?
I couldn’t, and, and, and like, you know, just staying invested and kind of having that discipline and, you know, staying in the market buying along the way, you know, picking up your acorns that in my mind always seems to work for the average person.
And so that’s, that’s how I think about it.
So I don’t have FOMO if I ha if I’m not in a stock today that goes up 20%.
So, but, but Sylvia, so if someone did miss the boat, I mean, we can even use NVIDIA, let’s say there’s no stock split.
You’ve never missed, no, you’ve never missed the boat.
I think you can, and you can always, you can always stay invested in like the NAS AQ and the S and P 500 over time.
If you want to get into a specific stock like that, you know, wait till it pulls back or consider the ETF S that have the highest positions of that stock in it, but are, are priced at lower levels and have Intels AM DS, you know, other types of Taiwan Semiconductor, other types of companies that might also rally around that stock rally.
So you never really are at a loss.
If you didn’t catch the high, I got to pause right here.
We’re taking a short break but coming up, we’re taking a tape measure to the fed’s gargantuan balance sheet and we’ve been talking about FOMO and Sid, I could tell you had a burning question just before the break.
I just wanted to ask one more thing because I’m obsessed with the early, the early investor or the average investor.
Let’s, let’s use me, for example, if you had to ask me, tell me one thing in terms of investing and you’re talking to graduates, you’re talking to a lot of these people.
But if you’re young, don’t go out every night and spend all your money on food and drinks and stuff you want.
No, I want you to live but like, you know, but live in a way where maybe there’s one day a week that you can come back and put that, put that money to work for you so that you have, you know, financial freedom and financial independence.
When, you know, you’re, you’re a little bit older, you don’t have to give it all up.
But like, it’s, it’s so interesting.
II I have, you know, I have two kids and I have young women that are babysitters and they’re talking about like, I have to have c I have to take this credit card debt because I have to go to this wedding for a young and yeah, but like, you know, I have to, I have to buy this wedding dress.
I have to fly across the country and, and do this and this is gonna cost me $5000 and like I haven’t talked to this person in five years.
Don’t go to the wedding, take the $5000 put it in whatever you want.
S and P crypto.
You know, I mean, this is our word of the day FOMO though.
And that’s a lot of young people in terms of picking their vacation, their wedding, they feel like they have to go to these things.
It’s another version of FOMO in investing in your future, not going to these things, maybe all the time, but it’s not your best friend.
You haven’t talked to that person in years that $5000 if it compounds, you know what I mean?
Yeah, I, I like how we’re kind of talking about risk management.
And you were talking about your personal trading history, you’re not a market timer, but for a passive investor, somebody who can, who plays these markets, what is risk management look like?
Yeah, so risk management is having, I think exposure to.
So if you’re a novice, if you’re, if you’re not, you know, kind of like studying corporate earnings and, and, you know, dissecting every stock and, and this and that, I mean, I definitely make decisions based on the fact that I’ve been obsessed with the market every day for decades too, you know, but I would say that, you know, if you’re kind of like new to the markets and just want to invest, it’s perfectly fine to find a super cheap S and P 500 ETF.
Um NASDAQ, ETF, put some money in there.
Um You ha you automatically have diversified exposure within those types of products and if you’re young, I mean, you don’t need the fixed income hedge you don’t need like the, the short vics or anything like that, you’re gonna ride things out over time.
But I think for most investors, it’s broad based index exposure, throw in some stocks that pay dividends, some commodities and alternative income that perform the opposite way of the market.
So if you get a crash, you know, it gets buffered over time.
So diversification.
So Sylvia, when you’re picking an ETF or, or any asset, really, people always say, like, do your homework, right?
But there’s all you breath, the perspective, breath the perspective.
These are long, no one does but no one does and professional investors do.
But yeah, exactly like what, what are you gonna do?
Sit there forever read a Google every word you don’t understand, which might be a lot on experts.
Why is this so complicated and, and how can we kind of fix that?
Yeah.
So I think, I think it’s actually become less complicated, right?
Because there’s so much um just media, social media explanations, you know, podcasts, like we’re doing that, talk about these different products and like what to be thinking about.
And so I, I think, you know, on a basic level, like just keep it simple, like look at, you know, the name of the ETF and, and look at the stocks inside of it and doesn’t seem to fit with what they’re saying, you know, look at the performance that they’ve, they’ve provided and know that that’s not a guarantee, but you get a sense and then look at the fee, you know, nothing has to be that expensive.
Um, these days in an ETF wrapper, that’s why mutual funds kind of started losing all of their assets.
Right?
People realize that you don’t have to pay 2% for, you know, something that costs two basis points for in an ETF effort.
So, but the other thing is call the ETF company, ask them questions, put them on the spot.
Sylvia, I get, I get, you know what I have, I get probably we probably get about 40 inquiries a day and I answer every single one of them.
I don’t do it in the same day, all of all of the time.
But like on the weekend, I’m might put you to the test trying to get back to everybody.
And we should, I, I appreciate that because almost famously to the detriment of retail traders, a lot of uh management companies don’t want the phone calls.
So, and it’s, it’s a great question actually because I’ll tell you what we have products where people, we have two products that are similar and do different things and people are in kind of the wrong product for what their goal is.
And I often tell them no, you should actually look at this one.
And then there are people in that one where I’m like, no, actually like your risk tolerance is more in line.
And these ETF most ETF companies have loads of employees that are willing to pick up the phone every day.
All right.
Uh This episode, if I didn’t say it before is brought to us by the number seven trillion, 284 billion, 319 million.
And that is the size of the fed’s balance sheet.
While that is a huge number, it’s down from nine trillion uh in 2021 in the wake of the pandemic stimulus.
So, are you leaning towards mission accomplished or we got a lot of work to do here?
I think we have a lot of work to do.
I mean, the, the, the size of it is um astounding and it’s, it’s kind of that, that thing that lingers in, in the back of my mind like this, this, this does have to get, you know, in control.
Um depending on kind of like what happens in the next election, what the spending is gonna look like?
Like, like I think this has to be very much a focus now.
Like we, we shouldn’t just run um at this level and just, just think it’s OK because it’s down from nine trillion.
Yeah, we drew, this is the second time we’ve had QT and they just didn’t get down that much before, before we had this incredible pandemic.
Um I do wanna get to our final segment and we’ll get into some personal stuff here if we have time, but this is who wore it better?
This is a modern take, financial take on a Hollywood staple.
And today we’re gonna be talking, we’re gonna be keeping the A I hype conversation going.
We’re gonna ask you to compare NVIDIA the undisputed poster child of A I to Amazon 2.5 decades ago at the height of the.com bubble.
So 1990 nine, a young Jeff Bezos had captured magazine covers and imaginations by selling books.
Remember it was just book books back then, but Amazon was such a hit that the stock was up 7000% in its first year and a half Bezos split the stock three times before the prior millennium wrapped.
And I think we all know the NVIDIA story.
So I’ll just ask you, is it NVIDIA or Amazon that was, that is riding the hype train better?
Oh man, I mean it’s such a, I think it’s actually a really hard question.
You know, one guy flies to space, we were talking about this off camera.
The other one is now signing autographs on T shirts and things like that.
And he’s the man, you know, kind of the man of the market of the year in terms of the companies, I think, you know, in terms of like, if, you know, if I think about what Amazon started as it was a bookstore.
Right?
And now look right now it’s like a, a healthcare company.
They do a I, they do quantum computing, they do ecommerce, they do videos, they do all of these things.
And so I think just diversification off of a really basic idea is better, but the true A I leader might be selling pencils now, I mean, metaphorically, it’s kind of taking that to 100% right?
But I’m not, you know, I think it’s, I think it’s a close race and now, you know, I mean, the whole world wants to be invested in NVIDIA.
The whole world knows who, you know, Jensen Wong is, I don’t think anyone who knew who he was a couple of years ago even though NVIDIA did.
Like, you know, back then when it was up seven, when Amazon was up 7000% you would say Amazon really like today, maybe I’ll just say NVIDIA because it’s the, of the time.
Look, I think it’s the thing of, I think it’s def so for the next 5 to 10 years without a doubt, NVIDIA wins.
I, I just think that, you know, we’re not even getting started with A I, we haven’t heard yet how it’s impacting healthcare, aerospace and defense, military, you know, just, just every single sector out there, um, even sales force, like, their earnings were horrible.
And if you just think about, like, they’re not horrible but they just weren’t good.
Right.
Um, if you think about them actually implementing A, I, I’ve used that system, it’s so clunky.
If you get a, A I to work like that stock’s gonna take off and then NVIDIA takes off.
Right.
So I, I think it’s the next, next 5 to 10 years belong to NVIDIA.
I’ll tell you what sid I was just looking at the technicals on Amazon.
Um It has formed this multiyear cup and almost a handle here.
So back to the cup in hand, it hasn’t, it hasn’t quite really broken through its prior highs, but it looks like it wants to, I would say this is something that alphabet recently did and it’s flying higher.
Uh I think um maybe it was in video was the first to really uh put in a similar chart formation.
But it’s funny how a lot of these mag seven stocks have the same charts, but they’re just devolving on different time frames and kind of hitting it at different times.
Uh We got a few minutes here so maybe you can tell us about how you ended up starting your own shop here.
You were in the E ETF business for a while.
But I think you started in banking way back in the day I started in banking.
Yeah.
So II I did, you know, I did the like finance economics thing in college.
Um and, and grad school.
And so I always had an interest in this and I started out on an equity derivatives trading desk.
And so I used to do all of the kind of like swap options, synthetic forward trading for hedge funds and big ETF companies and things like that.
And at some point, um, my former employer direction had, you know, they, they were coming out with the three X long and, and short financial ETF, it was the heat of the financial crisis and they wanted somebody who knew about swaps and it was kind of start up by.
Yeah.
Well, I mean, like swaps and could, and, you know, wanted to try something new because at that point I had, I had been rebalancing all the trade.
So, like, I really knew there, we’re talking about lots and lots of money.
Yeah, lots and lots of money.
And at that point they were, they were a little less than a billion, you know, I stick around for 10 years and left when they were about 30 billion.
But while I worked there, um, I was at some point managing like capital market sales research and, and there was a guy who worked for me on the sales team, he was a senior sales guy.
We used to run around the country together trying to do education on levered ETF S and all this stuff.
And we’d always talk about like, how could we, we, we have to be able to do this, right.
Like there’s still room for something else out there and we would talk about how, you know, we’d go to like Boca and all of our grandparents would be giving their kids money and, and like, they didn’t care about the classic stock sector ETF S they wanted, you know, they wanted to invest in space shifts and things like that.
So we always, you know, thought about it.
So it’s actually um my colleague who, who, who founded the original company.
Um and then myself and two other people joined him and, and, you know, we’re now defying ctfs and, you know, cool story about our name, his um grandpa um and uncle are who the movie Defiance is, is based on.
Yeah, so his, his last name is Belsky and they’re, you know, the bipartisan heroes.
But um yeah, so, you know, we kind of went into this and, and you know, here we are, we’re about 1.5 billion in assets.
Now.
We’ve learned a lot, made a lot of mistakes, gotten a couple of things, right.
You know, hopefully get a little more right and good for you.
Like, like I genuinely love markets, fun construction ETF si I, I’m so into this.
Thank you again for gracing us with your presence and knowledge here today, Sylvia, may your powder be dry and your account balance be high.