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The Return of the Trump Put · Trillions

• 0:05
  Speaker 1: Okna trillions.
• 0:06
  Speaker 2: I'm Joel Webber and I'm Eric belchernis Well, Eric, we
• 0:13
  Speaker 2: live in exciting times.
• 0:17
  Speaker 1: I think we've recorded a couple versions of this episode,
• 0:20
  Speaker 1: and here we are after the market's closed on Wednesday,
• 0:26
  Speaker 1: April ninth. What has happened?
• 0:31
  Speaker 3: I guess the Trump put is real. That's what we
• 0:34
  Speaker 3: found out today. So the Trump Put was this idea
• 0:37
  Speaker 3: that somewhere along the lines of these tariffs there was
• 0:41
  Speaker 3: going to be a point where.
• 0:44
  Speaker 4: The president would back off.
• 0:47
  Speaker 3: A little because he wants to see the stock market
• 0:49
  Speaker 3: do well, and he wouldn't let the whole stock market
• 0:52
  Speaker 3: go into the doghouse.
• 0:54
  Speaker 4: And people thought, well, maybe he will.
• 0:56
  Speaker 3: This is a new Trump, it's not the old one,
• 0:59
  Speaker 3: and people were kind of digging in, and even I was.
• 1:04
  Speaker 3: I had said early on, I just don't think he'll
• 1:06
  Speaker 3: let it get this far. I was wrong, But then
• 1:09
  Speaker 3: again I guess I was right eventually. But he came
• 1:12
  Speaker 3: in said there's a pause on the tariffs, and it's complicated.
• 1:16
  Speaker 3: They're not over, but just the word pause, and it
• 1:19
  Speaker 3: came from his mouth. It wasn't fake news. The markets
• 1:23
  Speaker 3: went absolutely bananas. The algos which were lying in wait
• 1:27
  Speaker 3: like salivating dogs were thrown big chunk of red meat
• 1:31
  Speaker 3: and basically like the QQQ went up twelve percent today, Joel,
• 1:35
  Speaker 3: that's the third best day ever, barely behind the second
• 1:40
  Speaker 3: best day, which was in two thousand and eight during
• 1:42
  Speaker 3: the Great Financial Crisis. And both of those are a
• 1:46
  Speaker 3: bit behind January third, two thousand and one. So this
• 1:51
  Speaker 3: is up there with those eras of those crazy times.
• 1:54
  Speaker 3: You know, there's two thousand and one, two thousand and eight,
• 1:56
  Speaker 3: and now this is going to be historic and memorable
• 1:59
  Speaker 3: for different reasons.
• 2:01
  Speaker 4: That's the kind of thing we just loved through.
• 2:03
  Speaker 1: So we have no guests for this episode. It's Eric
• 2:06
  Speaker 1: and me talking about what just happened and trying to
• 2:08
  Speaker 1: make sense of it and giving you some etf insights
• 2:11
  Speaker 1: in the process, this time on Trillions. What just happened? Eric,
• 2:20
  Speaker 1: welcome back to Trillions, see you and me.
• 2:22
  Speaker 3: Yeah, it's been you know, it's funny there somebody was
• 2:26
  Speaker 3: pointing out the Goldman Sachs had basically predicted a recession
• 2:29
  Speaker 3: at like noon and walked two hours later said, h
• 2:34
  Speaker 3: recession is off. So we did the same thing except podcasts.
• 2:41
  Speaker 1: So it has been a turbulent week. We saw market
• 2:47
  Speaker 1: go way down and and as you've u helped said
• 2:51
  Speaker 1: in the intro, things have come back. What are some
• 2:55
  Speaker 1: of the the stats that jump out at you, Well, just.
• 3:00
  Speaker 3: The inter day moves in some of these ETFs. You know,
• 3:03
  Speaker 3: we just went over the ques. I think that is
• 3:05
  Speaker 3: a massive number. Twelve percent. I mean that's one day now.
• 3:09
  Speaker 3: It's still not back up, you know, to where it
• 3:12
  Speaker 3: was before all this started, but it's went a long
• 3:14
  Speaker 3: way towards that. And but one of the ETFs that
• 3:17
  Speaker 3: stood out to me was SOXEL SOXL. This is the
• 3:21
  Speaker 3: three X semiconductors ETF, which I remember looking at it
• 3:26
  Speaker 3: all week and it just kept taking in tons of
• 3:27
  Speaker 3: money and I was like, man, these degens are crazy.
• 3:30
  Speaker 3: This is like they were just throwing money into this
• 3:33
  Speaker 3: thing was going down and down and down, and honestly,
• 3:38
  Speaker 3: they're looking good today. It went up over fifty percent
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  Speaker 3: in one day. Fifty five percent, right, this is the
• 3:44
  Speaker 3: best return it's ever had. It's like fifteen years old.
• 3:48
  Speaker 4: And my god.
• 3:49
  Speaker 3: So if you know, we had looked over the past
• 3:53
  Speaker 3: couple of weeks and we were like, there's really only
• 3:56
  Speaker 3: two people that seems like they're buying this market.
• 3:58
  Speaker 4: The Vanguardians. They always buy the market.
• 4:01
  Speaker 3: But the degens, they were really hanging tough, and I thought,
• 4:04
  Speaker 3: how long can they tell?
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  Speaker 4: How much can they take?
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  Speaker 3: This is going to embolden them forever. I mean, they're
• 4:09
  Speaker 3: never not going to buy the dip anymore. And this,
• 4:12
  Speaker 3: I got to be honest, is why I have a
• 4:15
  Speaker 3: hard time being anything other than a vanguardian investor myself personally,
• 4:19
  Speaker 3: because market timing is so hard, especially in a world
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  Speaker 3: where the Fed or the President can control the market
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  Speaker 3: with like one word.
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  Speaker 4: You know who? Who could have called this right?
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  Speaker 3: All the evidence and data pointed to more pain and
• 4:36
  Speaker 3: just reminds me of COVID a little. Remember when the
• 4:40
  Speaker 3: FED stepped in to say they're buying bonds and the
• 4:42
  Speaker 3: market did the same thing. This is why it is
• 4:46
  Speaker 3: just as dangerous to go to cash sometimes, even if
• 4:50
  Speaker 3: everything seems like it going to hell. I imagine this
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  Speaker 3: is just going to live with people for a while.
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  Speaker 3: If anything, it could make people better disciplined. They might
• 4:59
  Speaker 3: just never mess with their portfolio again.
• 5:01
  Speaker 4: We why bother.
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  Speaker 1: So some cracks were forming earlier in the week. Where
• 5:07
  Speaker 1: were some of those cracks and are they still there
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  Speaker 1: or have they you know, been just kind of covered up?
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  Speaker 1: Up for the time being.
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  Speaker 3: The cracks are gone, basically. So one of the stories
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  Speaker 3: that Bloomberg News wrote was about the COLO ETF and
• 5:24
  Speaker 3: how it traded at a one percent discount.
• 5:27
  Speaker 1: And this was what's the ticket for this one?
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  Speaker 4: Jaws Yeah, jaaa yeah.
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  Speaker 3: So it's not a big discount. You know, we saw
• 5:35
  Speaker 3: discounts up to twenty nine percent during COVID in some ETFs.
• 5:38
  Speaker 3: But it was the first sign that there was maybe
• 5:42
  Speaker 3: some illiquidity forming in bonds. And some people even said
• 5:45
  Speaker 3: that the bond market was what pushed Trump to change.
• 5:48
  Speaker 3: I don't know if that's true or not, but the
• 5:50
  Speaker 3: bond market was starting to be.
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  Speaker 1: He said as much too, like he has said that now.
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  Speaker 3: Yeah, so to confirm then, So the bond market was
• 5:58
  Speaker 3: starting to show some ill liquidity. Treasuries were doing what
• 6:02
  Speaker 3: we didn't think they would do. They were going down
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  Speaker 3: even though the stocks were going down. That's a bad
• 6:07
  Speaker 3: sign anyway. There was just the very hint of cracks
• 6:11
  Speaker 3: or illiquidity forming in bonds, and a Jaw was one
• 6:14
  Speaker 3: of the early ones to show that. But it were
• 6:18
  Speaker 3: really light. I mean we're talking like a swell way
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  Speaker 3: out yonder you know, not even close to being anything
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  Speaker 3: big yet, But these cracks are going to be gone.
• 6:28
  Speaker 3: If anything, what we might see is the opposite role.
• 6:30
  Speaker 3: Instead of seeing discounts, you could see some premiums because
• 6:34
  Speaker 3: so much a wall of money just probably bought the
• 6:37
  Speaker 3: market all day that the you know, arbitragers are just
• 6:40
  Speaker 3: trying to keep up.
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  Speaker 4: Probably you could see some premiums.
• 6:43
  Speaker 1: Okay, So what about flows? What how crazy did they
• 6:48
  Speaker 1: look before? And what happened in the afternoon.
• 6:53
  Speaker 4: I gotta be honest.
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  Speaker 3: I've always said ETF holders are more diamond hands than
• 6:58
  Speaker 3: people give them credit for. But this year they really
• 7:00
  Speaker 3: showed diamond hands. ETF took in three hundred and three
• 7:04
  Speaker 3: billion through the year, and the last couple of weeks
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  Speaker 3: were really good. They were averaging like four or five
• 7:09
  Speaker 3: billion a day. Mostly vous you know again, it was
• 7:12
  Speaker 3: the vanguardians and the degens, and there were some people
• 7:16
  Speaker 3: doing opportunistic buying like there were definitely a lot of
• 7:18
  Speaker 3: flows into cash like ETFs. But the equity ETFs did fine.
• 7:22
  Speaker 3: They had their best quarter in Q one, and you
• 7:25
  Speaker 3: know again, they're reaping the benefits today, at least for today.
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  Speaker 3: We'll see where it plays out from here, but they
• 7:33
  Speaker 3: look good. I'd imagine we'll see another pickup and flows,
• 7:37
  Speaker 3: you know, even another little boost. A lot of times
• 7:40
  Speaker 3: you have the trading crowd and the retail crowd. The
• 7:42
  Speaker 3: retail crowd had been buying the whole time. The traders
• 7:45
  Speaker 3: were kind of coming in and out. Normally they're just
• 7:48
  Speaker 3: running for the hills during something like this, but they
• 7:50
  Speaker 3: were kind of in and out. They weren't totally committed
• 7:52
  Speaker 3: to being in or out. And the neutralness let the
• 7:56
  Speaker 3: vanguard flows really power through.
• 8:04
  Speaker 1: So there's flows. What about volume volume?
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  Speaker 4: It was fascinating.
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  Speaker 3: I always bring up those two scientists in Silence of
• 8:15
  Speaker 3: the Lambs troll who they brought the butterfly thing to
• 8:18
  Speaker 3: the bugs. Those guys are the thick glasses who are like, oh,
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  Speaker 3: this is so interesting. This is what the last three
• 8:24
  Speaker 3: days were like for us. The volume was crazy. On Monday,
• 8:30
  Speaker 3: the spy tradered one hundred and twenty seven billion. That
• 8:33
  Speaker 3: was the biggest day ever on record. A lot of
• 8:36
  Speaker 3: times there's volume explosions in around a capitulation moment, so
• 8:41
  Speaker 3: we were wondering, okay, is this it now? We thought
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  Speaker 3: that even before the news, But the volume today was
• 8:49
  Speaker 3: almost as much. And I think a lot of the
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  Speaker 3: volume today was buying volume. So I think we're going
• 8:53
  Speaker 3: to see when you look at the month of April,
• 8:57
  Speaker 3: it is going to blow away other month on record
• 9:01
  Speaker 3: for ETFs, most likely at least this week. So a
• 9:04
  Speaker 3: lot of people leaned on ETFs who are traders and
• 9:08
  Speaker 3: everything you know, worked fine, but the volume showed a
• 9:10
  Speaker 3: lot of fear and just craziness in the market.
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  Speaker 1: And I know that Athanasios Sera Fegas on your team
• 9:19
  Speaker 1: at Bloomberg Intelligence did a little study. What did he
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  Speaker 1: find in that study?
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  Speaker 3: He looked at times where the spy volume is over
• 9:27
  Speaker 3: sixty billion. You know, I've always called sixty billion. The
• 9:29
  Speaker 3: freak out zone spy average is twenty five billion.
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  Speaker 1: So anything beyond that.
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  Speaker 4: Yeah, anything beyond sixty to me.
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  Speaker 3: Here's why, because spy is used by so many people
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  Speaker 3: on the outskirts of their portfolio, almost like a liquidity sleeve.
• 9:43
  Speaker 3: So if they're like especially bigger investors, if they want
• 9:46
  Speaker 3: to tweak their investments for something bad, they might add
• 9:50
  Speaker 3: a put option from their spy account, which would end
• 9:54
  Speaker 3: up creating volume for spy, or they might just short spy,
• 9:57
  Speaker 3: or they might buy extra spy.
• 9:59
  Speaker 4: The spy is where they move.
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  Speaker 3: The knobs on the outside of their portfolio to get
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  Speaker 3: the system just right, because they don't want to mess
• 10:07
  Speaker 3: with their picks in the middle. People like to keep
• 10:08
  Speaker 3: the rest, you know, as it is. So spy is
• 10:11
  Speaker 3: an adjustment mechanism. So when people are adjusting, the volume
• 10:14
  Speaker 3: goes up. And he looked at those days over sixty
• 10:17
  Speaker 3: billion and found that in the next month there's a
• 10:19
  Speaker 3: two thirds chance that the market will be positive and
• 10:22
  Speaker 3: the medium return was about one point two percent, so
• 10:24
  Speaker 3: not gangbusters, but positive. And so again this is because
• 10:30
  Speaker 3: a lot of times there's these freakouts where spy volume
• 10:34
  Speaker 3: goes up, VIX goes up, and it is in a
• 10:37
  Speaker 3: way an explosion of negativity, almost like a real explosion,
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  Speaker 3: and then the dust kind of settles and people that
• 10:44
  Speaker 3: start looking for some opportunity in the rubble. And I
• 10:47
  Speaker 3: think that's sort of what happened here. It's just that
• 10:49
  Speaker 3: seemingly that rebound got sped up, you know, eight hundred
• 10:53
  Speaker 3: times it was put condensed into about an hour instead
• 10:57
  Speaker 3: of a month.
• 10:58
  Speaker 1: What are you, as an ETF vanalyist watching out for next?
• 11:02
  Speaker 3: Yeah, So one thing we're looking at David Cohne, who
• 11:07
  Speaker 3: covers active funds.
• 11:08
  Speaker 4: Is how active managers dealt with this?
• 11:10
  Speaker 3: You know, did they go to conservative Well, we found
• 11:14
  Speaker 3: but this is before the bounce back. We did find
• 11:17
  Speaker 3: that active equity managers normally only beat the market, like
• 11:21
  Speaker 3: only thirty three percent of them typically beat the market
• 11:23
  Speaker 3: in any given year. Over half were beating the market
• 11:27
  Speaker 3: in the past week. In other words, they had done
• 11:30
  Speaker 3: they were tilted a little more towards value stocks and
• 11:33
  Speaker 3: fundamental less mag seven, they were positioned pretty well. But
• 11:36
  Speaker 3: this rebound, how will this affect that? On the flip side,
• 11:40
  Speaker 3: bond managers did very poorly. They are a benchmark against
• 11:45
  Speaker 3: the AG, and the AAG is full of treasuries and
• 11:47
  Speaker 3: a lot of them they take extra risk, so a
• 11:49
  Speaker 3: lot of them when there's a huge sell off in bonds,
• 11:52
  Speaker 3: they get caught a little naked, and so a very small.
• 11:55
  Speaker 4: Amount of them outperformed during the sell off.
• 11:59
  Speaker 3: The you know, when the tariff was the worst. They're
• 12:02
  Speaker 3: probably happy because risk is back on. So it's interesting, how,
• 12:06
  Speaker 3: you know, what are you supposed to do as an
• 12:08
  Speaker 3: active manager? I mean, this is something we'll be exploring
• 12:10
  Speaker 3: for the next couple of days. We felt that people
• 12:13
  Speaker 3: had the same dilemma for the past two years. You're
• 12:15
  Speaker 3: an active manager, these mag seven stocks are like extremely
• 12:18
  Speaker 3: high valuations. What do you do do you do you
• 12:21
  Speaker 3: underweight them and miss out on the next leg up,
• 12:25
  Speaker 3: or do you overweight them or neutral weight them. It's
• 12:28
  Speaker 3: it's really hard right now to be an active manager,
• 12:32
  Speaker 3: and especially on the macro side, because these macro winds
• 12:35
  Speaker 3: can just decimate anything it had going. If anything, it
• 12:39
  Speaker 3: probably bodes well to just be a classic stockpicker because
• 12:43
  Speaker 3: these macrowinds come and go, but at the end of
• 12:44
  Speaker 3: the day, over time, the good companies rise to the top.
• 12:49
  Speaker 1: Okay, last question, Eric Trump paused many tariffs, but he's
• 12:55
  Speaker 1: holding firm on China. So what does the prospect look
• 12:59
  Speaker 1: for world X China and ETFs.
• 13:04
  Speaker 3: That had been a very popular trade for a little while.
• 13:07
  Speaker 3: And it's interesting since you know the TEARFF pause was announced,
• 13:11
  Speaker 3: China had a good day. I kind of thought it
• 13:13
  Speaker 3: would be a little worse for them. But right now,
• 13:17
  Speaker 3: like if you look at.
• 13:18
  Speaker 1: Year to date returns, what's the ticket for this.
• 13:21
  Speaker 3: Emx C is Emerging markets X China and FXI is China.
• 13:25
  Speaker 3: So EMXC was down nine percent year to date, FXI
• 13:29
  Speaker 3: only down two percent, So China had been outperforming its
• 13:32
  Speaker 3: emerging market peers, and if anything, this.
• 13:36
  Speaker 4: May reverse that a little.
• 13:38
  Speaker 3: Right, if China is sort of put into a special
• 13:41
  Speaker 3: place and trade is full of friction with the US,
• 13:46
  Speaker 3: it's possible that that goes the other way. So I
• 13:49
  Speaker 3: would look for EMXC to maybe have a good couple
• 13:52
  Speaker 3: days in lieu of you know, after this that said,
• 13:56
  Speaker 3: what we found in China, and Rebecca and Jack on
• 13:59
  Speaker 3: my team covered this is the national team bought ETFs
• 14:03
  Speaker 3: uh for the past couple of days. So just like
• 14:05
  Speaker 3: the FED bought bond ETFs in twenty twenty, China's national
• 14:08
  Speaker 3: team went in and bought equity ETFs and helped prop
• 14:11
  Speaker 3: the market up.
• 14:11
  Speaker 1: So almost like they knew the Trump was coming.
• 14:15
  Speaker 3: I know, right, it was a it was a good bet. Well,
• 14:18
  Speaker 3: let's say they are ostracized and they take a hit
• 14:22
  Speaker 3: from like the trade of the US. Just it's hard
• 14:25
  Speaker 3: to bet against a country where the government's going to.
• 14:28
  Speaker 4: Buy you know, ETFs or stocks.
• 14:30
  Speaker 3: I mean that's like again, don't fight the Fed, don't
• 14:32
  Speaker 3: fight the Central Bank. So the China versus em is
• 14:35
  Speaker 3: going to be tricky. There's I guess you could say
• 14:38
  Speaker 3: there's reasons to do or don't boo, do both. But
• 14:40
  Speaker 3: you know, I will say this, I think so many
• 14:43
  Speaker 3: people are just very happy that it's paused. I think
• 14:48
  Speaker 3: most investors really believe in the US. They wanted a
• 14:51
  Speaker 3: reason to believe. They didn't want to think it was
• 14:53
  Speaker 3: over a lot of investors here, I'll be honest. They
• 14:56
  Speaker 3: have a hard time buying European stocks. They have a
• 14:58
  Speaker 3: hard time buying China, like they don't think China numbers
• 15:01
  Speaker 3: are real. They think Europe isn't that motivated, the not
• 15:04
  Speaker 3: much innovation. They'd rather have their money put to work here.
• 15:07
  Speaker 3: So this past couple of weeks was just really painful
• 15:10
  Speaker 3: for most average investors, and so I think most people
• 15:15
  Speaker 3: are just so relieved.
• 15:16
  Speaker 4: What does the.
• 15:17
  Speaker 3: Future hold, I don't know, But what we do know
• 15:19
  Speaker 3: now is that if the tariffs kick in, or if
• 15:23
  Speaker 3: there's more tariff talk, we know they can be undone
• 15:26
  Speaker 3: with literally one word. And I'd imagine this makes other assets.
• 15:32
  Speaker 3: It makes it harder to attract assets because people know
• 15:36
  Speaker 3: that at some point, you know, the president might capitulate
• 15:40
  Speaker 3: if the market's that bad. So it's interesting spot we're
• 15:44
  Speaker 3: in now. It does feel like the Trump played the
• 15:46
  Speaker 3: role of the Fed in a way done Eric.
• 15:50
  Speaker 4: Always a pleasure, Always a pleasure.
• 15:51
  Speaker 1: Drop.
• 15:59
  Speaker 5: Thanks for listening to Trillions until next time. You can
• 16:02
  Speaker 5: find us on the Bloomberg Terminal, Bloomberg dot com, Apple Podcasts, Spotify.
• 16:07
  Speaker 1: Or wherever else you'd like to listen. We'd love to
• 16:10
  Speaker 1: hear from you. We're on Twitter.
• 16:12
  Speaker 5: I'm at Joel Webber Show. He's at Eric Valcunos. This
• 16:17
  Speaker 5: episode of Trillions was produced by Magnus Hendrickson.
• 16:20
  Speaker 1: Bye,