Ed Egilinsky, head of alternative investments at Direxion, discusses the top innovators in the technology space, as well as how precious metals stacks up with other commodities in the current economic environment.
what are some unconventional ways to make money? Well, that is the theme of our discussion with ed ed. Golinski head of alternative investments at direction, and it's been so long. We've had you on Kitco. We're going to have a very interesting discussion today about how to make money in ways that maybe some people haven't thought of yet.
Welcome back. That'd be, that'd be great. Sounds good. I'm glad to be. Back is an asset manager of alternative alternative investments. We're going to be talking about what that means and some of the unique funds that you have, I'm going to get straight to the chase. Now, ed, our viewers watch our show to make money.
It doesn't matter if it's gold, silver stocks, Bitcoin, people want to just make money. So what's hot right now. How can people make money? Well, it w we have, uh, leverage and inverse ETFs that are designed for short term active traders. And this year right now, uh, there's been some big moves in the energy complex.
Uh, we have two times leverage bull products that give you that give you exposure to different types of baskets of energy stocks through indices. And one of those is gush, G U S H. Uh, and the other is ER X also with rates rising a little bit this year. Uh, we have a triple leverage financials, FAS, uh, that has done very well.
Uh, in addition to that, uh, but one of the things to note with any of our leverage and inverse products, again, they're designed for sophisticated active traders, uh, as short term trading vehicles, whether your opinion is the market's rising or falling. Uh, we have different types of products for you now on the non leveraged ETFs or a thematic ETFs, which have become very popular.
We have a number of ones that are gaining a lot of traction. One is the acronym work from home. Uh, those mostly consists of different types of technology stocks that can benefit from the remote work. Uh, the remote work. A craze that's going on. And even despite thank God we have a vaccine, uh, that's imminent.
Uh, we believe that the work from home theme that a hybrid work model is here to stay. And there's a way to participate in that. We also have moonshots, M O O N. We've just launched it a couple of months ago. It already has a couple of hundred years billion in it. Uh, this is taking advantage of in our case, uh, small to mid cap stocks.
That are in different types of innovative type of companies. Uh, and that includes areas like, um, drones, uh, electric vehicles. Uh, alternative energy and, uh, those have really gravitated in the non leverage space. And lastly, uh, calm our ETF. I know we'll talk about this. A broad basket of commodities, commodities rallied as of late, uh, the reflation trade seems like it's here.
Interest rates rising. Uh, that's another area people can participate in. Okay. We're going to talk about moonshot and work from home in just a bit. They're very interesting as well as commodities, but yeah, the thing that you brought up very quickly that has outperformed the other things that you mentioned that I'm looking at at least is FAS the financials ETF.
It's the three times financials bull. And if we could just pull up a chart here, you will see that starting from the beginning of the year around January, it was around $60 a share. Now it's 97. So it's up more than 50%. Year to date. So, I mean, this is, this is a great performance from, from an ETF. Why have financials done so well?
Is it because of rising rates? Yeah, I think it's that simple. I think rates have started to rise. The narratives change banks tend to generate more revenue, uh, when you have the spreads to work with. Uh, so financials have been a big beneficiary of that. Uh, if you look at last year, they will. One of the under-performers that the sector, along with energy, they, this year, they've been one of the leaders, both of those sectors.
Okay. And I have a question about the structure of the ETF itself. Now it's packaged as a three times leveraged instrument. So, which means if let's say the underlying index goes up by 1%, your ETF and sh in theory should go up by 3%. Now, some traders are concerned about holding onto such levered products or leveraged projects, products for a, for a longer period of time due to the options to K um, of the product itself.
Uh, is that, can you address this concern? Yeah. There, there are no options with this vehicle. Uh, we get the, uh, leverage exposure through what's called the derivative called swaps. The important thing to note is what you said, uh, in terms of holding periods, these are designed to short term. Holding trading vehicles, uh, they reset on a daily basis.
So once you hold these past one day, there's going to be compounding that could be positive or negative for you. It really depends on the path of the underlying index. That'll determine whether that compounding will be a tailwind or headwind, regardless. These need to be monitored on an intraday and daily basis.
And again are designed for short-term trading activity. So these are not buying whole vehicles. These are things that need to be monitored on a regular basis every day. And the fact is if the trends, not your friend, uh, it's probably gonna result in excessive losses with the compounding. If it goes against you and vice versa, if that trends going with you.
Okay, let's talk about moonshots and not so much just the ETF itself. We can, we can touch on some of the components, but more of the theme of innovation, the more the Matic approach to investing in things that are disruptive to our existing ecosystem, our existing economy, what are some of these things that, that are just going to be, you know, completely changing revolutionary, revolutionizing our lives, so to speak well, you, you, you mentioned it, uh, you know, you have, uh, Uh, genetic engineering, drones, uh, electric vehicles, uh, autonomous driving, alternative energy.
Uh, these are all areas that continue to be innovative places to be and are disruptive in terms of what the status quo is at present. So we're looking for companies that spend a lot from an R and D perspective. And our pioneers or innovators in their respective areas. Now what differentiates us from other innovative ETFs in the marketplace is that we are rules-based in our approach and we cater more towards a micro, mid, and small cap stocks, stocks, not large cap stocks.
And also we don't have as much concentration risk. Because of the fact that we have a modified equal weight approach where no one individual company is going to be more than a four and a half percent waiting. So in regards to the moonshot ETF, now, ed, what are some of the sub-sectors that you're overweight in?
Well, right now there's a broad spectrum of sub sectors among the top ones are genetic engineering, uh, cybersecurity, clean energy, uh, Digital communities, drones, wearables. Uh, so it's really a plethora of different sub-industries that you get exposure to, uh, with this, uh, type of, uh, ETF. Uh, again, let me preface the fact that it's, rules-based it consists of 50 stocks.
Uh, no one stocks going to have over a four and a half percent weighting. So it's really a good way to get exposure to this innovative type of ETF. Uh, through a broad basket instead of owning just some individual stocks yourself. Okay, let's talk about commodities. Now you have a commodities ETF as well, and we can discuss the, uh, the metrics with which you pick the commodities.
But first, let's talk about the precious metals first. I know that's well, that has been a core component of your holdings offline. You're telling me you are no longer invested in this. You're sort of parked on the sidelines in terms of cash when it comes to gold and silver, is that true? Ed? Well, good question.
Let me just, uh, take a step back. Uh, we have a calm ETF com uh, it's been an existence. So over four years now, almost four years now, it gives you exposure to a broad basket of commodities anywhere from zero to 12 commodities and anywhere in between based on price trends. So if a commodity individual commodity showing it downward price trends, we will be in cash.
Right now, uh, two commodities are in cash. One of those is gold because of the fact. That is broken down from a price trend perspective. We look at breakouts to determine whether we're longer in cash with the commodity. Right now, those price trends have dictated in a downward direction. And we've been in cash with gold, uh, through really, uh, the first week of December.
Aye. All right. Well that was a good call because it, it continued to trend down. So it was mostly from a technical perspective. Let's talk about the fundamentals now. Yeah, purely technical. So that's our ETF, but that's why we're out of that position right now. The only rules based, but from a fundamental perspective, what's happening with gold right now, there are a number of things.
One is, it was coming off a pretty strong year, particularly in the first half of the year. Uh, the second half of the year into this year, there's been more of a risk on environment. Uh, the VIX right now hovering around 52 year lows of 52 week lows. Rather, uh, you also have a situation where interest rates are starting to rise.
So as a flight to safety, alternative, uh, treasuries might be getting a little more attractive right now, uh, after a period also of a weak dollar, you've had the dollar basing here. Uh, gold is probably more vulnerable, uh, to the dollar then most other commodities. There's our strong inverse relationship.
And also right now you have with the dissemination of the vaccine and the global economy potentially recovering that probably is not going to bode well for gold, relative to other commodities like industrials or energies or grains, where they have had a strong year. Uh, thus far in 2021, I just remember back in August.
Well, even in July, when prices were nearing back then all time highs were new, all time highs, all the analysts have had on the show. Well, not you, but all the other analysts have had their show showed very, very strong sentiment. Even at those levels and repeatedly I've been told, look, the fundamentals for gold are still strong.
We'll see more uptrend and look, I can't help, but wonder to myself. Were those fundamentals really strong because by definition, if they were strong, we would have seen an uptrend, not a bearish trend, which is what we got. So maybe they weren't that strong after all. What do people get wrong? Ed? Well, I, I don't, I don't know if they got it wrong.
Gold had a strong year, last year. It's best in 10 years. So gold has had a pullback a little bit. I think now it's, it needs to probably hold that 1700 level, uh, for now an area of support. Uh, I think if anything, from here, Gold's in more of a period of consolidation and maybe there's some other metals, particularly the industrial metals.
That have more, uh, daily usage to it. Uh, that may be a better alternative based on the reopening trade right now. Uh, but gold, certainly with the VIX at these levels right now, uh, as a flight to safety and inflation play from a longer term perspective, I think gold could be an area still to make money.
Okay. Let's talk about making money now let's tie everything together. Everything you worked on, everything you're looking at, let's say ed Golinski is going to put some money into the markets. What market would you put your money in right now? And listen. That's why we have a broad basket of commodities.
And that's why we have equity strategies in the thematic space, which do you like more? If you have to invest for yourself? If I had to invest for myself, I think you want to have commodities as a diversifier to equities. You can own both in conjunction because they have a low correlation to each other.
But the one important thing to note is this from a reversion to the mean standpoint, commodities right now, relative to the S and P 500 are still trading at multi-decade loads. And you're coming off a 10 year, really flat to bear market in commodities. So if you believe that. Commodities are undervalued right now, relative to let's say equities, you may want to consider overweighting to that area right now, relative to the stock market.
That's done exceedingly well over that comparable period of time. Are they just not two different things then? I mean, commodities may be a value play, but the equity is like the high growth equities that you mentioned. And let's say the moonshot ETF, for example, their growth momentum plays they're there they're different things, right?
Oh, yeah. Comparing value to momentum here. Yeah. Well, I think at the end of the day, commodities is a different asset class than equities. And then within the equity buckets, you have cheap beta as I like to call it. And then you have somatics that you could surround yourself with that are more satellite in nature, but congeners additional alpha or returns relative to those broad equity benchmarks that you have.
Uh, and then in a lot of cases, uh, in the larger cap space, Are mostly the bigger names, mega cap and large cap names in the NASDAQ 100 and the S and P 100 and the S and P 500 reps. Okay. So diversify get a basket of different things. That's, that's your approach. Yep. And, and own, uh, some thematic ETF, uh, as a satellite exposure within your equity.
Overall allocation work from home and moon are two ways to do that. Both are different plays. Uh, within the thematic space and both have different market cap concentrations work from home, uh, is predominantly mid and large cap. Uh, where is our Mooney ETF, uh, is predominantly made up of equities that are, uh, small and mid.
So there are different ways to play, uh, satellite sematic and are different return streams that are generated from that through our Mooney, TF and work from home. For example, Hmm. All right. Fantastic. Thank you so much for coming on the show today, ed. It was a pleasure. Thanks. Thank you for having me and thank you for watching Kitco news.
Don't forget to subscribe. I'm David Lynch. .