00:00Photonics. Eric and I have been going on and on about photonics.
00:03You said a few days. Try a few minutes.
00:05Excuse me. I looked it up a couple of weeks ago.
00:08Tell us about it. And is this the new theme?
00:10I mean, is this a sign that the AI trade is really broadening?
00:13I mean, we're going into photonics.
00:16Well, as you guys might know, I work with a primarily institutional audience.
00:19So when we're looking at thematic ETFs, it's always from a little bit of a different lens.
00:24I'll start with light because it did just come out.
00:26And I think with the institutional client base, name goes for a lot.
00:31And knowing that Roundhill also launched DRAM,
00:34they were very excited about this potential new AI second derivative ETF launching.
00:39So we started getting inbound questions about light, what it represents.
00:43Will it create increased liquidity in the names that kind of track the space?
00:47But, you know, zooming out from May until now,
00:50there's been four other ETFs that have launched within the photonics category.
00:54So the interesting part there is that it's such a niche category
00:58that a lot of these names are overlapping across these funds.
01:00If you're looking at all these ETFs,
01:03you're going to see coherent, momentum, and Sienna across all of these funds.
01:07So that's a lot of concentration in these names.
01:09And on top of that, light bringing this extra attention to the category,
01:13we look to see if there's this uptick in AUM and flow,
01:16which August 7th was pretty good for laser specifically.
01:20But it's just a new center for them to focus in on.
01:24And now it just goes to show that there's new thematic niches
01:27that are arriving across the board.
01:28Oh, my God.
01:29Yeah, they're coming out like crazy.
01:31By the way, you know who has another photonics ETF,
01:34our favorite issuer, Corgi?
01:35Oh, really?
01:36That's their big hit is the EUV,
01:38is the lithography and semiconductor photonics.
01:40They also have a 2x1, too, in the photonics already.
01:44And Roundhill just launched the 2x on themselves, too.
01:46It's just getting so meta, isn't it?
01:49Let's go, if somebody's hearing this,
01:51and I've had people say this,
01:52like, I'm so over all this.
01:53This is all going to blow up.
01:54It's an AI bubble.
01:55So we actually looked at, like,
01:57which stocks or asset classes would be a good hedge
02:00if AI just goes away.
02:01So I focused on DRAM.
02:03And if you look,
02:04the two companies that have the most inverse correlation
02:08are the garbage companies,
02:09Waste Management and Republic,
02:11which kind of makes sense, right?
02:12Your AI is like a dream.
02:13And then you still got to pick up the trash.
02:15Okay, that's like the reality opposite.
02:17Yeah.
02:18AI still can't pick up the trash.
02:20Maybe a robot one day, but...
02:22Maybe someday.
02:22But for now, it's more inversely correlated.
02:25Look at this.
02:26Then VIX and also bonds.
02:30So what do you think of that?
02:32Do you have advisors at Raymond James
02:34who are like, I need to hedge this
02:35because this is going to get ugly?
02:37Yeah, so we've definitely had,
02:39some attention around waste management
02:40and garbage companies previously,
02:43not necessarily people looking at it
02:45in correlation to DRAM.
02:46But I'd say the space is just so small
02:49when it comes to ETF optionality there.
02:52EVX is the only one you would probably hedge towards
02:54if you wanted a pure play exposure.
02:57And so naturally, what happens, unfortunately,
02:58with a lot of our institutional clients
03:00is that they'll go to the next best thing
03:02that has high liquidity in AUM.
03:04So they'll go to an XLI, an industrial's name,
03:07and they'll hope that that gives you
03:08some level of hedge against it.
03:10But they're not going to put their money
03:12into an ETF that's getting virtually no inflows,
03:14even if it does target such an interesting
03:17and unique space.
03:18All of this we're talking about.
03:19How much of this is real fundamental demand
03:21versus investors just simply looking
03:23for the next AI trade?
03:24And is valuation getting ahead of itself?
03:26Like, is photonics going to be a thing to say?
03:28Are Eric and I still going to be talking
03:30about photonics next year?
03:32So this, when it comes to the institutional client,
03:35this begins with, are they looking at it
03:37from the company to the ETF,
03:39or are they looking at it from the ETF
03:40down to the companies?
03:41If they have high conviction in some of the companies
03:44that even represent the space,
03:45they don't necessarily need high conviction
03:47in photonics.
03:49They just need to believe in the company
03:50and hope that this extra attention
03:52does something that's great for them,
03:55specifically if they just hold coherent, for example.
03:57But if they care about photonics specifically,
04:00I think they're always looking ahead
04:01to see what's the next one.
04:02So I can get ahead of the game
04:04and join in when the space is so new
04:06and you're gaining a lot of,
04:07especially retail investor attention.
04:0920 seconds.
04:10Do you go into the equal weighted
04:12or do you stick to market cap weighted VU?
04:15I saw that in your notes.
04:17What's the move?
04:18I would say that if you're looking at RSP,
04:21for example, the go-to equal weighted fund,
04:23and you juxtapose that with the MAGS,
04:26the Magnificent 7 ETF,
04:28you're seeing 10 percentage points
04:29of outperformance from RSP this year.
04:32But I think what's been interesting
04:33is from the advent of big tech earnings
04:35and also just the earnings season in general,
04:37you've seen this contrasting flow behavior
04:40between RSP and MAGS.
04:41And for some time,
04:42you were seeing MAGS was just lagging.
04:43But now it's gone to MAGS has,
04:45August, I think,
04:46about 400 and something million in AUM inflows.
04:50And on the flip side,
04:51RSP has seen the same number in outflows.
04:53So it's always looking to see
04:55if we're seeing this reallocation
04:57and a tactical trade into big tech
04:58or if it's just this temporary normalization
05:01and it goes back to RSP.
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