September 11, 2025 • 22 mins
Young people are looking for an easier way to accumulate wealth than working a 9-5 job for 40 years. This reluctance to follow the path of their elders has grown the appeal—and assets—of income-generating exchange-traded funds, which can generate anywhere between 2% and 200% yields, sometimes using complex derivatives.
This universe of ETFs has exploded in popularity, with the assets ballooning to $750 billion. And while regular payouts may sound alluring, investors might be prioritizing short-term action over long-term gains.
On this episode of Trillions, Eric Balchunas and Joel Weber speak with Vildana Hajric, a cross-asset reporter with Bloomberg News, about how these income ETFs work, why they appeal to young investors and what to know about their risks.
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Speaker 1 (00:05):
Woken a Trillians.
Speaker 2 (00:06):
I'm Joel Webber and I'm Eric Balchuna's.
Speaker 3 (00:12):
Eric. There was a big take by our friends at
Bloomberg News recently that totally caught my attention. The headline
the new American hustle dividends over day jobs. You know,
part of that sounds pretty alluring, you know, like give
up the day job and you just have steady paycheck
coming to you from an investment. We dabbled on this before,
(00:34):
but the numbers are actually pretty insane, which is one
of the things we want to talk about on today's episode.
Speaker 2 (00:39):
Yeah, this part of the ATF market is getting huge,
and it's a spectrum. I mean, let's face it, older
people love their dividends too, but this is like dividends
on steroids. In fact, the names are even like they
remind me of that fate gatora company, Idiocracy, Brondo, the
Thirst Mutilator, it's like the income Mutilator, you know, it's
(01:00):
very I think one of them is called income Blast
income Boost with all caps. So this is selling. There's
a market for it, and I think people need to
just understand what they're buying. But I think it's again,
it's a spectrum and it's very hot area but interesting.
Just real quick on big Take, you should let's explain
(01:22):
this because how many reporters work at Bloomberg, like twenty
three hundred more, yeah, three thousand.
Speaker 1 (01:27):
Something like that with analysts, and only.
Speaker 2 (01:29):
One reporter gets there's one big take a day yep,
and this was that. So there's two hundred and fifty
big takes a year and this story got one of those.
Speaker 3 (01:39):
Yeah, totally, and as it should have because the little
corners of like what's happening in Reddit and stuff are
just endlessly fascinating. And you know, I mentioned the number,
not only the inflows or which we'll talk about.
Speaker 1 (01:52):
But the percent yields.
Speaker 3 (01:54):
We're talking like eight percent in some cases, or when
it's super charged like triple digit, like above one hundred.
Speaker 1 (02:01):
So this is going to be fascinating.
Speaker 3 (02:02):
We're going to be joined by Wildonna Hirich, regular on Trillions.
She's a cross asset reporter at Bloomberg News and she's
on the byline. Diniza Sikova is the other reporter, this
time on Trillions Dividends over Day Jobs fil Donna, welcome
back to Trillions.
Speaker 4 (02:20):
Thanks so much for having me.
Speaker 3 (02:21):
Okay, so dividends we've written about You've written about this before,
but the numbers really blew my mind. Walk us through
how big of a landscape this has become in ETFs, right.
Speaker 4 (02:34):
And maybe we should just categorize what it is. I
feel like there's two categories, which Eric already sort of
hinted at. One is the traditional dividend investing, so there's
an choke or.
Speaker 1 (02:44):
Right excellon or and there's.
Speaker 3 (02:46):
Companies that are famous for dividend payouts exactly.
Speaker 4 (02:48):
And there are ETFs that hold shares of companies that
are high dividend, so those are like your traditional dividend payers.
And then there's this new category where you're getting, like
you said, like super high yields, sometimes ninety percent or more.
And we have written about it before, but since then
(03:08):
it's only grown and you're just seeing billions and billions
of dollars going into these funds. It's a category altogether
that encompasses more than seven hundred billion dollars. But part
of the reason that they are growing so much is
that there's a whole cohort of influencers who post on
(03:29):
YouTube and read it and other places who love these
products and are almost like ambassadors for them.
Speaker 3 (03:36):
One out of every six dollars so far this year
have gone into this space. Eric, how does that compare
with other hot assets classes?
Speaker 1 (03:46):
In ETFs?
Speaker 2 (03:47):
They're punching way above their weight. So when you say
one of every six dollars, that would be ballpark of
you know, there's eight hundred billion into ETFs, it's one
every sick with one hundred and twenty billion. That's probably
a high percentage over their assets. So this is one
of the faster growing areas.
Speaker 1 (04:02):
I get it.
Speaker 2 (04:03):
I mean I know firsthand. This is really exciting stuff
because when I was at the Money Show, I was
doing a presentation in the booth area, which is sort
of like you're like a carnival barker. It's actually a
good practice for presenting because you're like have to like
real people in like, hey, step right up, it's the
whole thing. Anyway, I'm going through flavors of hot sauce
(04:24):
and I get to the yield max, which is like
income hot sauce, and I got like twelve people there.
But when I start showing these yields, they're like eighty
ninety one hundred percent. I don't even know if people
could see it. I think they just sensed it like
permones and that my crowd doubled and.
Speaker 4 (04:40):
It was I mean, I'm about to walk over to you.
You're like really enticing me.
Speaker 3 (04:45):
It was then that Carnival Barker future.
Speaker 2 (04:47):
And these are older people. So I think everybody loves
income and yield. I think the psychological feeling is you're
getting a paid like a check sent to you, and
it feels good. It's like, now it's complicated because in
some cases that's extra on top of what the market does,
like your S and P. It's a you know, income
is like dividends on top of your return. But in
(05:10):
some cases it's like you're giving up all your return
to give that yield. So it's almost like you're just
designed to pay yourself in yield or income instead of
just cashing out after ten years in total return. So
it's psychological I think in a way when it comes
to those really high yield ones.
Speaker 3 (05:28):
Okay, so wait, let's just pause and break down what
the playbook for these ETFs in the sort of the
kool aid that the thin influencer crowd is using.
Speaker 1 (05:40):
What does that playbook look like?
Speaker 4 (05:41):
Yeah, so it generally looks something like this, where you're
investing your money into these ETFs, whether it's a variety
of them or specifically yield max is one issue that
has the most popular products or some of the most
popular products. Maybe you invest a bunch of your money
into a couple of their each, But then you're getting
(06:01):
those payouts. The issuers are making them have been making
them more frequent. So there are some where you can
get weekly payouts, but let's say you're getting them monthly.
And so we spoke with a number of people who
get anywhere from five hundred dollars a month in these
payouts to somebody who's looking to get nine thousand dollars
(06:22):
a month and then using them to pay for all
of their bills basically, so they're paying for gas, electricity,
like it's coming out of those accounts. One guy we
spoke with got a new use car as I called it,
and like the car payments are being made thanks to
or via these I should say, via these dividend payouts. Yeah, exactly, mortgages,
(06:47):
you know. So they're sort of it's like a they've
built a life around, like their life revolves around these payouts.
Speaker 3 (06:55):
And when you talk to them, were they taking like
money that was would otherwise be like retired or are
they taking like whatever their paychecks look like and shoveling
into this Just to supersize, this is.
Speaker 4 (07:06):
A really good question because that guy, he actually he
told us he cashed out his wife's retirement account.
Speaker 1 (07:14):
Does she know that? She does know that?
Speaker 4 (07:15):
I asked. I asked him the same question, I said,
don't make me call her? Is she aware that she owns?
Because then he used that money to buy some of
these some yield max CTFs. Actually, but he has a
day job also, and he has a regular retirement account
on the side, So it's it's a mixture. I think
it just it depends on the person and their risk tolerance.
(07:38):
The nine thousand dollars figure I mentioned is somebody we
spoke with who recently moved across the country and was
having a hard time finding a job and then sort
of like Eric described, became enticed by these high payouts
and decided to you know, he's I think he sold
some of his cars in his house and he put
that money towards some of these. So it's really interesting.
(08:03):
It's sort of astounding what they've been able to build
and how they've built their lives, like their daily functioning around.
Speaker 3 (08:12):
Pctf total change in terms of like cash flow and
how probably Normanies might think.
Speaker 1 (08:17):
About cash flow.
Speaker 3 (08:18):
Eric to get these returns eight seventy ninety one hundred
percent returns, what is different about how how these products
are actually functioning.
Speaker 2 (08:29):
West to put it, it's a spectrum. But generally speaking,
they're writing call options just outside of the money. So
let's say Tesla's one hundred dollars, they're writing a call
option at like one hundred and one or one hundred
and two dollars. You pay a lot for that, So
I'm getting a lot of money from you to buy that,
because that means if Tessa goes up even a little
(08:50):
or a lot, you can call it and you instantly
book a profit. That means if Tesla does go up,
the call option gets exercised and you get none of
Tessa's upside, but you get premium from the person who
you sold the option to. So you essentially writing off
your entire future of return to get income. Now that's
really what it is. Somebody who owns Tesla and didn't
(09:12):
do any of this would just reimagine the total return
they got just say well, if that was income, I
would have gotten the same thing. So again, this is
somewhat psychological. Some people just like to see it as income.
The guy we spoke to a couple like two years ago,
maybe we had one of these twenty somethings on to
talk about this, he said he used that income to
get a mortgage, like it was part of his income.
Speaker 1 (09:33):
So I get it.
Speaker 2 (09:34):
I think Also one of the lines in here that
I thought was really great was I've always had what
they call the shiny object syndrome, so shiny objects hot sauce.
It's a very viable area of the ETF world. At
least he's honest with himself. And I got to give
you credit for finding these people, because a lot of
times these articles are written from Ivory Tower folks and
(09:55):
they're like, look at all these degens, these idiots. They
don't know. I'm a real street guy, know everything. These
are idiots, And like you never get to hear from
the actual people trading them, and you hear from them,
You're like, Okay, these guys they know more about this
than you think they or they know the risks and
they're deciding to take it anyway. I really appreciate you
(10:17):
getting them in the article. So how did you get
a twenty seven year old like YouTube income addict to
talk to you?
Speaker 4 (10:33):
So, yield Max actually the issue behind some of the
most popular products. As I mentioned, they actually had an
event at NAZAC where they invited a bunch of these
influencers and Deniza and I attended it and it was
a closing bell ringing and we talked to so many
(10:54):
people who love these funds. Eli actually he does not
invest in yield mass. He takes a more traditional route.
I think he invests a lot of his money in
the big Schwab dividend ETF, which is like the biggest,
one of the most established, like old school dividend ETFs.
(11:15):
But yeah, it ran the gamut and some people really
like the super high yielding stuff, the ninety plus percent
or eighty plus percent. But we met a lot of
them at that event. And then the other thing is,
I mean they're online, so you can find their YouTube videos.
Speaker 2 (11:32):
By the way, let me just readolf. I'm going to go.
Here's yield Max's product line. First of all, yield max
has seventeen billion. That's a lot for an indie issuer.
They only had one or two billion to start the year,
and that's how fast they've grown.
Speaker 1 (11:46):
So they're here.
Speaker 2 (11:48):
I'm gonna sort by yield two hundred and fifteen percent,
one hundred and nineteen percent, one hundred and seventy three percent.
I mean, these are outrageous.
Speaker 1 (11:56):
I mean.
Speaker 2 (11:57):
And a lot of these products, like MSTY which is
the micro strategy that's taken five billion this year and
it yields one hundred and sixty six percent, but it's
your date return is thirteen percent. I imagine that's lagging
micro strategy by a ton.
Speaker 4 (12:11):
Well, to be fair to the issuers, what they'll tell
you is they will They are not claiming that they're
going to help you beat the market or you know,
stay on par with the market. There if they say
to you, if you want to do that, don't buy
yield Max products. Don't buy these are not meant for that.
These are meant for those payouts, and some people just
want the payouts.
Speaker 2 (12:32):
So walk us through if you're But by the way,
can I just say something So there's these things called
strips that were made up back in the day by
Wall Street guys where they would strip out the coupon
payment from the bond, and so if you want to
just the bond and the principle, it jacks up your
interest rate duration. And if you want the strips, it
just gives you the cash flow. And there's a lot
(12:54):
of institutions that might just want the dividends from the
S and P versus the return, some for tax reasons.
In other words, if you haven't, there's totally an institutional
investor who might do this, and it all it sounds
so like, oh, that's great, that's serious. But just because
a twenty seven year old does it, and it's in
the ETF world, I feel like sometimes it gets overly slammed.
Speaker 1 (13:13):
But it's not.
Speaker 2 (13:14):
Wallstreet's been doing this forever. They take this out of this,
put this in this. It's just it's just it's like,
cook's all stuff up.
Speaker 1 (13:22):
That's what they do.
Speaker 3 (13:22):
The difference is to have retail being able to do
this on their own with their own portfolios.
Speaker 2 (13:28):
Agree, which is why we have the equivalent of a
movie rating system for ETFs. These would probably be PG thirteen,
I imagine I'd have to look at our system or
maybe even are based on the like.
Speaker 1 (13:37):
Complications NC seventeen rating In there, we do the.
Speaker 2 (13:40):
That's reserved for like triple leveraged ETFs that are that
are etns and role future.
Speaker 1 (13:46):
Could you leverage dividends like this?
Speaker 2 (13:48):
Sure?
Speaker 1 (13:51):
Three x that one? Five? Okay, Phil Donald?
Speaker 4 (13:54):
If I can add one thing just in terms of
the flows and how much money is coming in, because
Eric mentioned how much yield Max has now after that event,
I think what happened is a lot of the influencers
went home and made videos about the event, and yield
Max got over five billion dollars.
Speaker 1 (14:09):
Wow.
Speaker 2 (14:10):
So that's also a whole influencer thing. By the way,
And I was just in Brazil and somebody was telling
me there that like the whole market there is run
by influencers. Like I think we we're in the we're
in the legacy media, i'd call us. Maybe we're a
little more advanced. But the amount of like views and
stuff going on, Like I see a YouTube channel, I'm like,
oh my god, that's that's more than like CNN gets
(14:33):
for some of their shows, Like it's really pervasive.
Speaker 3 (14:37):
Build What other ETFs we mentioned the Shop one and
and Misty which is strategy centric. What other ETFs does
the crowd?
Speaker 1 (14:48):
Uh?
Speaker 3 (14:49):
Adore you do you do?
Speaker 4 (14:52):
You want me to talk about jetpy here. Sure, is
that what you're trying to get?
Speaker 1 (14:55):
We can do jefpy.
Speaker 3 (14:56):
I know there's a couple other ones, but were you
thinking of one other one? What the pantheon of dividend
ETFs and what are what's everyone's favorites?
Speaker 4 (15:05):
Well, Jefpi is a product from JP Morgan launched a
couple of years ago that when the market sold off
in twenty twenty two, jefpy actually did better. It's than
the market. The market lost like twenty percent that year,
and it has a maybe what we might call a
(15:25):
more conservative payout of around eight percent. But it is
but if we want to sort of contextualize it within
this conversation, it also if you look overall, it's lagging
the market by a lot. So if you had been
invested in the market, you maybe you know your returns
would be looking better. But again, the people who are
(15:45):
running jefpy, they'll tell you it it's not meant to
be beating the market.
Speaker 2 (15:50):
That analysis I just did on where the call option
is written, I think jefpy they're writing that call option
way more out of the money. So in that example
of Tesla, it would have to go up a lot
before the call got exercised. So it's where in the
money you write the option you able to sort of
fine tune whether you want in come a little a
(16:10):
little more or like steroids. And that's really that's why
it is a spectrum. And you can look if I'm
actually sorted all ETFs by yield, and it really it
cascades down from two hundred percent to zero pretty nicely,
so you can really just find like where your right
yield is for how much upside you want to give up.
But just know, at the end of the day, whether
(16:32):
it's a Wall Street institution or these people, there is
no free lunch. You're probably going to give up something
to get something that's really cool looking.
Speaker 3 (16:38):
Well, just to break that down and be really simple
about it, what else are you giving up?
Speaker 2 (16:46):
You're giving up upside plus the cost of the ETF. Right,
if you did this on your own, you want to
pay the expense ratio. But really it's in these steroid ones.
It's all the upside. And the with that is the
total return of a stock. It's unlimited. I mean not
that they go up forever, but they could go up
(17:06):
a lot, and you've just given up all of that
for a payout. So I think in many cases people
if you if if you just imagined the total return
of a stock and then like in your mind you said, okay,
well if I if I did get this into into
like four payouts, it would be x, and then just
(17:27):
imagine you got the money but you didn't that that's
the same thing. I mean, you could just it's look,
there's there's a return in the market. It's like, how
do you want that delivered to you? Do you want
to just get it all one lump sum when you
are done? Most people like that because they'd rather, you know,
use their paycheck to like make their day to day
stuff and then like, oh, I have this whole return
(17:47):
waiting for me when I retire. That's generally what people do.
This is a new way. And this is another quote
I found really good in your article, which is the
guy said, my granddad worked in a factory.
Speaker 1 (17:59):
His whole life.
Speaker 2 (18:00):
I don't want to lock away that capitol until I'm
sixty five. So there's a little Henry Hill Goodfella's situation
going on here, which is, if you remember the Goodfellas,
He's like, look at all those suckers going to work
in their nine to five job. The mob was at
a better, easier way to make a living, and that
was the choice he made. At the beginning of the movie,
(18:22):
that seems to be what's happening here. Like, that's why
I say like this, this granddad guy that gets kind
of like slammed at the early I bet he was
probably pretty happy and he certainly didn't have any you know,
how do you live your life? Like, if you look
live your life looking for shortcuts, sometimes you're gonna get
burned or regret or haunted. And that's why I gotta
be careful with this stuff. The granddad who worked in
(18:44):
a factory and then got a big payday when he retired.
Speaker 1 (18:50):
Again, that's it.
Speaker 2 (18:50):
I'm not I don't I wouldn't be too judgmental of
that life.
Speaker 3 (18:54):
Yeah, we need Eric needs a like a rocking chair
and a porch, that'd be like and then he can,
you know, do his carnival carnival routine from.
Speaker 4 (19:02):
Them by misty and then used the payouts to get
your right up. But I think this is really important
because the economic factors, you know, the post pandemic world inflation,
people having a really a lot of a lot of
these people are really young. Not to say that they're
the ones we quoted are having hard time finding jobs,
(19:22):
but in general, there's a lot of young people struggling
to find entry level positions. I mean, we all know,
you know, what's what's going on, and I think it's
important to think about some of those factors that might
drive people towards these.
Speaker 3 (19:36):
Where they're basically just looking at the system and being like,
the system is not working for me to find a
way to make it work.
Speaker 4 (19:41):
Or your employer calling you back to the office five
days a week when you know you because one of
the people we did interviews said, you know, they called
me back and I knew I could do it from home.
I want more flexibility. I want to be able to
go see my baby next you know, next to my office.
I want to be able to go to all ask
if I want to, you know, tomorrow, for example. And
(20:04):
then they'll come back and be self employed, because a
lot of people are thinking of it, as you know,
being self employed.
Speaker 2 (20:10):
So real quick on this issue of young people feeling
like the system doesn't work for them, especially trying to
get a house. That's a real biggie. It's really hard
to get a house. People are in the thirties are
even struggling. This is a big theme in the crypto
book I'm Working Control, which is it's really helped me
come around and really understand crypto. It's the same appeal
because in this case it's inflation and you can't really
(20:33):
catch inflation. They say it's two percent, but it feels
like more. And the idea of what you used to
be able to get for working a regular nine to
five job, it's not the same. And so I think
crypto and bitcoin have appealed to that generation for the
same reason. So there's a lot going on here. I
think there'd be a pretty good ven diagram of like
(20:53):
the catalyst for this and the catalyst for crypto, which
is something that is that feeling. There's Henry Hill one,
which is I just rather have a life of crime.
That's you could probably be like, well that's probably not
a good idea, but then there's the.
Speaker 1 (21:06):
Whole probably probably.
Speaker 2 (21:12):
I mean, in the end, he did fine, he did
go in the witness protection program. Paulie went to jail, though.
I think so moral of the story is be a
guy in the bottom, don't be the main guy anyway.
Speaker 3 (21:23):
You're dead if you're at the bottom, man, I think
we can leave that comparisons.
Speaker 2 (21:29):
But the legitimacy of not feeling like you're able to
get the same deal American dream style that your parents
and grandparents got, that's real and I think that is
part of this silent tax of inflation. That it's hard
to put your finger on it, but if you're a
young person, you feel it all right.
Speaker 1 (21:48):
Ho Dona, thanks so much for joining us on Trillions.
Speaker 4 (21:50):
Thanks so much for having me.
Speaker 3 (21:57):
Thanks for listening to Trillions and telling that next time
you can find us on the Bloomberg terminal, Bloomberg dot com,
Apple Podcasts, Spotify, or wherever else you'd like to listen.
I'd love to hear from you. Hit us up on
social I'm at Joe Weber Show, He's at Eric Balcinus.
Trillions is produced by Magnus Hendrickson. Sage Baumans is the
head of Bloomberg Podcasts.
Woken a Trillians.
Speaker 2 (00:06):
I'm Joel Webber and I'm Eric Balchuna's.
Speaker 3 (00:12):
Eric. There was a big take by our friends at
Bloomberg News recently that totally caught my attention. The headline
the new American hustle dividends over day jobs. You know,
part of that sounds pretty alluring, you know, like give
up the day job and you just have steady paycheck
coming to you from an investment. We dabbled on this before,
(00:34):
but the numbers are actually pretty insane, which is one
of the things we want to talk about on today's episode.
Speaker 2 (00:39):
Yeah, this part of the ATF market is getting huge,
and it's a spectrum. I mean, let's face it, older
people love their dividends too, but this is like dividends
on steroids. In fact, the names are even like they
remind me of that fate gatora company, Idiocracy, Brondo, the
Thirst Mutilator, it's like the income Mutilator, you know, it's
(01:00):
very I think one of them is called income Blast
income Boost with all caps. So this is selling. There's
a market for it, and I think people need to
just understand what they're buying. But I think it's again,
it's a spectrum and it's very hot area but interesting.
Just real quick on big Take, you should let's explain
(01:22):
this because how many reporters work at Bloomberg, like twenty
three hundred more, yeah, three thousand.
Speaker 1 (01:27):
Something like that with analysts, and only.
Speaker 2 (01:29):
One reporter gets there's one big take a day yep,
and this was that. So there's two hundred and fifty
big takes a year and this story got one of those.
Speaker 3 (01:39):
Yeah, totally, and as it should have because the little
corners of like what's happening in Reddit and stuff are
just endlessly fascinating. And you know, I mentioned the number,
not only the inflows or which we'll talk about.
Speaker 1 (01:52):
But the percent yields.
Speaker 3 (01:54):
We're talking like eight percent in some cases, or when
it's super charged like triple digit, like above one hundred.
Speaker 1 (02:01):
So this is going to be fascinating.
Speaker 3 (02:02):
We're going to be joined by Wildonna Hirich, regular on Trillions.
She's a cross asset reporter at Bloomberg News and she's
on the byline. Diniza Sikova is the other reporter, this
time on Trillions Dividends over Day Jobs fil Donna, welcome
back to Trillions.
Speaker 4 (02:20):
Thanks so much for having me.
Speaker 3 (02:21):
Okay, so dividends we've written about You've written about this before,
but the numbers really blew my mind. Walk us through
how big of a landscape this has become in ETFs, right.
Speaker 4 (02:34):
And maybe we should just categorize what it is. I
feel like there's two categories, which Eric already sort of
hinted at. One is the traditional dividend investing, so there's
an choke or.
Speaker 1 (02:44):
Right excellon or and there's.
Speaker 3 (02:46):
Companies that are famous for dividend payouts exactly.
Speaker 4 (02:48):
And there are ETFs that hold shares of companies that
are high dividend, so those are like your traditional dividend payers.
And then there's this new category where you're getting, like
you said, like super high yields, sometimes ninety percent or more.
And we have written about it before, but since then
(03:08):
it's only grown and you're just seeing billions and billions
of dollars going into these funds. It's a category altogether
that encompasses more than seven hundred billion dollars. But part
of the reason that they are growing so much is
that there's a whole cohort of influencers who post on
(03:29):
YouTube and read it and other places who love these
products and are almost like ambassadors for them.
Speaker 3 (03:36):
One out of every six dollars so far this year
have gone into this space. Eric, how does that compare
with other hot assets classes?
Speaker 1 (03:46):
In ETFs?
Speaker 2 (03:47):
They're punching way above their weight. So when you say
one of every six dollars, that would be ballpark of
you know, there's eight hundred billion into ETFs, it's one
every sick with one hundred and twenty billion. That's probably
a high percentage over their assets. So this is one
of the faster growing areas.
Speaker 1 (04:02):
I get it.
Speaker 2 (04:03):
I mean I know firsthand. This is really exciting stuff
because when I was at the Money Show, I was
doing a presentation in the booth area, which is sort
of like you're like a carnival barker. It's actually a
good practice for presenting because you're like have to like
real people in like, hey, step right up, it's the
whole thing. Anyway, I'm going through flavors of hot sauce
(04:24):
and I get to the yield max, which is like
income hot sauce, and I got like twelve people there.
But when I start showing these yields, they're like eighty
ninety one hundred percent. I don't even know if people
could see it. I think they just sensed it like
permones and that my crowd doubled and.
Speaker 4 (04:40):
It was I mean, I'm about to walk over to you.
You're like really enticing me.
Speaker 3 (04:45):
It was then that Carnival Barker future.
Speaker 2 (04:47):
And these are older people. So I think everybody loves
income and yield. I think the psychological feeling is you're
getting a paid like a check sent to you, and
it feels good. It's like, now it's complicated because in
some cases that's extra on top of what the market does,
like your S and P. It's a you know, income
is like dividends on top of your return. But in
(05:10):
some cases it's like you're giving up all your return
to give that yield. So it's almost like you're just
designed to pay yourself in yield or income instead of
just cashing out after ten years in total return. So
it's psychological I think in a way when it comes
to those really high yield ones.
Speaker 3 (05:28):
Okay, so wait, let's just pause and break down what
the playbook for these ETFs in the sort of the
kool aid that the thin influencer crowd is using.
Speaker 1 (05:40):
What does that playbook look like?
Speaker 4 (05:41):
Yeah, so it generally looks something like this, where you're
investing your money into these ETFs, whether it's a variety
of them or specifically yield max is one issue that
has the most popular products or some of the most
popular products. Maybe you invest a bunch of your money
into a couple of their each, But then you're getting
(06:01):
those payouts. The issuers are making them have been making
them more frequent. So there are some where you can
get weekly payouts, but let's say you're getting them monthly.
And so we spoke with a number of people who
get anywhere from five hundred dollars a month in these
payouts to somebody who's looking to get nine thousand dollars
(06:22):
a month and then using them to pay for all
of their bills basically, so they're paying for gas, electricity,
like it's coming out of those accounts. One guy we
spoke with got a new use car as I called it,
and like the car payments are being made thanks to
or via these I should say, via these dividend payouts. Yeah, exactly, mortgages,
(06:47):
you know. So they're sort of it's like a they've
built a life around, like their life revolves around these payouts.
Speaker 3 (06:55):
And when you talk to them, were they taking like
money that was would otherwise be like retired or are
they taking like whatever their paychecks look like and shoveling
into this Just to supersize, this is.
Speaker 4 (07:06):
A really good question because that guy, he actually he
told us he cashed out his wife's retirement account.
Speaker 1 (07:14):
Does she know that? She does know that?
Speaker 4 (07:15):
I asked. I asked him the same question, I said,
don't make me call her? Is she aware that she owns?
Because then he used that money to buy some of
these some yield max CTFs. Actually, but he has a
day job also, and he has a regular retirement account
on the side, So it's it's a mixture. I think
it just it depends on the person and their risk tolerance.
(07:38):
The nine thousand dollars figure I mentioned is somebody we
spoke with who recently moved across the country and was
having a hard time finding a job and then sort
of like Eric described, became enticed by these high payouts
and decided to you know, he's I think he sold
some of his cars in his house and he put
that money towards some of these. So it's really interesting.
(08:03):
It's sort of astounding what they've been able to build
and how they've built their lives, like their daily functioning around.
Speaker 3 (08:12):
Pctf total change in terms of like cash flow and
how probably Normanies might think.
Speaker 1 (08:17):
About cash flow.
Speaker 3 (08:18):
Eric to get these returns eight seventy ninety one hundred
percent returns, what is different about how how these products
are actually functioning.
Speaker 2 (08:29):
West to put it, it's a spectrum. But generally speaking,
they're writing call options just outside of the money. So
let's say Tesla's one hundred dollars, they're writing a call
option at like one hundred and one or one hundred
and two dollars. You pay a lot for that, So
I'm getting a lot of money from you to buy that,
because that means if Tessa goes up even a little
(08:50):
or a lot, you can call it and you instantly
book a profit. That means if Tesla does go up,
the call option gets exercised and you get none of
Tessa's upside, but you get premium from the person who
you sold the option to. So you essentially writing off
your entire future of return to get income. Now that's
really what it is. Somebody who owns Tesla and didn't
(09:12):
do any of this would just reimagine the total return
they got just say well, if that was income, I
would have gotten the same thing. So again, this is
somewhat psychological. Some people just like to see it as income.
The guy we spoke to a couple like two years ago,
maybe we had one of these twenty somethings on to
talk about this, he said he used that income to
get a mortgage, like it was part of his income.
Speaker 1 (09:33):
So I get it.
Speaker 2 (09:34):
I think Also one of the lines in here that
I thought was really great was I've always had what
they call the shiny object syndrome, so shiny objects hot sauce.
It's a very viable area of the ETF world. At
least he's honest with himself. And I got to give
you credit for finding these people, because a lot of
times these articles are written from Ivory Tower folks and
(09:55):
they're like, look at all these degens, these idiots. They
don't know. I'm a real street guy, know everything. These
are idiots, And like you never get to hear from
the actual people trading them, and you hear from them,
You're like, Okay, these guys they know more about this
than you think they or they know the risks and
they're deciding to take it anyway. I really appreciate you
(10:17):
getting them in the article. So how did you get
a twenty seven year old like YouTube income addict to
talk to you?
Speaker 4 (10:33):
So, yield Max actually the issue behind some of the
most popular products. As I mentioned, they actually had an
event at NAZAC where they invited a bunch of these
influencers and Deniza and I attended it and it was
a closing bell ringing and we talked to so many
(10:54):
people who love these funds. Eli actually he does not
invest in yield mass. He takes a more traditional route.
I think he invests a lot of his money in
the big Schwab dividend ETF, which is like the biggest,
one of the most established, like old school dividend ETFs.
(11:15):
But yeah, it ran the gamut and some people really
like the super high yielding stuff, the ninety plus percent
or eighty plus percent. But we met a lot of
them at that event. And then the other thing is,
I mean they're online, so you can find their YouTube videos.
Speaker 2 (11:32):
By the way, let me just readolf. I'm going to go.
Here's yield Max's product line. First of all, yield max
has seventeen billion. That's a lot for an indie issuer.
They only had one or two billion to start the year,
and that's how fast they've grown.
Speaker 1 (11:46):
So they're here.
Speaker 2 (11:48):
I'm gonna sort by yield two hundred and fifteen percent,
one hundred and nineteen percent, one hundred and seventy three percent.
I mean, these are outrageous.
Speaker 1 (11:56):
I mean.
Speaker 2 (11:57):
And a lot of these products, like MSTY which is
the micro strategy that's taken five billion this year and
it yields one hundred and sixty six percent, but it's
your date return is thirteen percent. I imagine that's lagging
micro strategy by a ton.
Speaker 4 (12:11):
Well, to be fair to the issuers, what they'll tell
you is they will They are not claiming that they're
going to help you beat the market or you know,
stay on par with the market. There if they say
to you, if you want to do that, don't buy
yield Max products. Don't buy these are not meant for that.
These are meant for those payouts, and some people just
want the payouts.
Speaker 2 (12:32):
So walk us through if you're But by the way,
can I just say something So there's these things called
strips that were made up back in the day by
Wall Street guys where they would strip out the coupon
payment from the bond, and so if you want to
just the bond and the principle, it jacks up your
interest rate duration. And if you want the strips, it
just gives you the cash flow. And there's a lot
(12:54):
of institutions that might just want the dividends from the
S and P versus the return, some for tax reasons.
In other words, if you haven't, there's totally an institutional
investor who might do this, and it all it sounds
so like, oh, that's great, that's serious. But just because
a twenty seven year old does it, and it's in
the ETF world, I feel like sometimes it gets overly slammed.
Speaker 1 (13:13):
But it's not.
Speaker 2 (13:14):
Wallstreet's been doing this forever. They take this out of this,
put this in this. It's just it's just it's like,
cook's all stuff up.
Speaker 1 (13:22):
That's what they do.
Speaker 3 (13:22):
The difference is to have retail being able to do
this on their own with their own portfolios.
Speaker 2 (13:28):
Agree, which is why we have the equivalent of a
movie rating system for ETFs. These would probably be PG thirteen,
I imagine I'd have to look at our system or
maybe even are based on the like.
Speaker 1 (13:37):
Complications NC seventeen rating In there, we do the.
Speaker 2 (13:40):
That's reserved for like triple leveraged ETFs that are that
are etns and role future.
Speaker 1 (13:46):
Could you leverage dividends like this?
Speaker 2 (13:48):
Sure?
Speaker 1 (13:51):
Three x that one? Five? Okay, Phil Donald?
Speaker 4 (13:54):
If I can add one thing just in terms of
the flows and how much money is coming in, because
Eric mentioned how much yield Max has now after that event,
I think what happened is a lot of the influencers
went home and made videos about the event, and yield
Max got over five billion dollars.
Speaker 1 (14:09):
Wow.
Speaker 2 (14:10):
So that's also a whole influencer thing. By the way,
And I was just in Brazil and somebody was telling
me there that like the whole market there is run
by influencers. Like I think we we're in the we're
in the legacy media, i'd call us. Maybe we're a
little more advanced. But the amount of like views and
stuff going on, Like I see a YouTube channel, I'm like,
oh my god, that's that's more than like CNN gets
(14:33):
for some of their shows, Like it's really pervasive.
Speaker 3 (14:37):
Build What other ETFs we mentioned the Shop one and
and Misty which is strategy centric. What other ETFs does
the crowd?
Speaker 1 (14:48):
Uh?
Speaker 3 (14:49):
Adore you do you do?
Speaker 4 (14:52):
You want me to talk about jetpy here. Sure, is
that what you're trying to get?
Speaker 1 (14:55):
We can do jefpy.
Speaker 3 (14:56):
I know there's a couple other ones, but were you
thinking of one other one? What the pantheon of dividend
ETFs and what are what's everyone's favorites?
Speaker 4 (15:05):
Well, Jefpi is a product from JP Morgan launched a
couple of years ago that when the market sold off
in twenty twenty two, jefpy actually did better. It's than
the market. The market lost like twenty percent that year,
and it has a maybe what we might call a
(15:25):
more conservative payout of around eight percent. But it is
but if we want to sort of contextualize it within
this conversation, it also if you look overall, it's lagging
the market by a lot. So if you had been
invested in the market, you maybe you know your returns
would be looking better. But again, the people who are
(15:45):
running jefpy, they'll tell you it it's not meant to
be beating the market.
Speaker 2 (15:50):
That analysis I just did on where the call option
is written, I think jefpy they're writing that call option
way more out of the money. So in that example
of Tesla, it would have to go up a lot
before the call got exercised. So it's where in the
money you write the option you able to sort of
fine tune whether you want in come a little a
(16:10):
little more or like steroids. And that's really that's why
it is a spectrum. And you can look if I'm
actually sorted all ETFs by yield, and it really it
cascades down from two hundred percent to zero pretty nicely,
so you can really just find like where your right
yield is for how much upside you want to give up.
But just know, at the end of the day, whether
(16:32):
it's a Wall Street institution or these people, there is
no free lunch. You're probably going to give up something
to get something that's really cool looking.
Speaker 3 (16:38):
Well, just to break that down and be really simple
about it, what else are you giving up?
Speaker 2 (16:46):
You're giving up upside plus the cost of the ETF. Right,
if you did this on your own, you want to
pay the expense ratio. But really it's in these steroid ones.
It's all the upside. And the with that is the
total return of a stock. It's unlimited. I mean not
that they go up forever, but they could go up
(17:06):
a lot, and you've just given up all of that
for a payout. So I think in many cases people
if you if if you just imagined the total return
of a stock and then like in your mind you said, okay,
well if I if I did get this into into
like four payouts, it would be x, and then just
(17:27):
imagine you got the money but you didn't that that's
the same thing. I mean, you could just it's look,
there's there's a return in the market. It's like, how
do you want that delivered to you? Do you want
to just get it all one lump sum when you
are done? Most people like that because they'd rather, you know,
use their paycheck to like make their day to day
stuff and then like, oh, I have this whole return
(17:47):
waiting for me when I retire. That's generally what people do.
This is a new way. And this is another quote
I found really good in your article, which is the
guy said, my granddad worked in a factory.
Speaker 1 (17:59):
His whole life.
Speaker 2 (18:00):
I don't want to lock away that capitol until I'm
sixty five. So there's a little Henry Hill Goodfella's situation
going on here, which is, if you remember the Goodfellas,
He's like, look at all those suckers going to work
in their nine to five job. The mob was at
a better, easier way to make a living, and that
was the choice he made. At the beginning of the movie,
(18:22):
that seems to be what's happening here. Like, that's why
I say like this, this granddad guy that gets kind
of like slammed at the early I bet he was
probably pretty happy and he certainly didn't have any you know,
how do you live your life? Like, if you look
live your life looking for shortcuts, sometimes you're gonna get
burned or regret or haunted. And that's why I gotta
be careful with this stuff. The granddad who worked in
(18:44):
a factory and then got a big payday when he retired.
Speaker 1 (18:50):
Again, that's it.
Speaker 2 (18:50):
I'm not I don't I wouldn't be too judgmental of
that life.
Speaker 3 (18:54):
Yeah, we need Eric needs a like a rocking chair
and a porch, that'd be like and then he can,
you know, do his carnival carnival routine from.
Speaker 4 (19:02):
Them by misty and then used the payouts to get
your right up. But I think this is really important
because the economic factors, you know, the post pandemic world inflation,
people having a really a lot of a lot of
these people are really young. Not to say that they're
the ones we quoted are having hard time finding jobs,
(19:22):
but in general, there's a lot of young people struggling
to find entry level positions. I mean, we all know,
you know, what's what's going on, and I think it's
important to think about some of those factors that might
drive people towards these.
Speaker 3 (19:36):
Where they're basically just looking at the system and being like,
the system is not working for me to find a
way to make it work.
Speaker 4 (19:41):
Or your employer calling you back to the office five
days a week when you know you because one of
the people we did interviews said, you know, they called
me back and I knew I could do it from home.
I want more flexibility. I want to be able to
go see my baby next you know, next to my office.
I want to be able to go to all ask
if I want to, you know, tomorrow, for example. And
(20:04):
then they'll come back and be self employed, because a
lot of people are thinking of it, as you know,
being self employed.
Speaker 2 (20:10):
So real quick on this issue of young people feeling
like the system doesn't work for them, especially trying to
get a house. That's a real biggie. It's really hard
to get a house. People are in the thirties are
even struggling. This is a big theme in the crypto
book I'm Working Control, which is it's really helped me
come around and really understand crypto. It's the same appeal
because in this case it's inflation and you can't really
(20:33):
catch inflation. They say it's two percent, but it feels
like more. And the idea of what you used to
be able to get for working a regular nine to
five job, it's not the same. And so I think
crypto and bitcoin have appealed to that generation for the
same reason. So there's a lot going on here. I
think there'd be a pretty good ven diagram of like
(20:53):
the catalyst for this and the catalyst for crypto, which
is something that is that feeling. There's Henry Hill one,
which is I just rather have a life of crime.
That's you could probably be like, well that's probably not
a good idea, but then there's the.
Speaker 1 (21:06):
Whole probably probably.
Speaker 2 (21:12):
I mean, in the end, he did fine, he did
go in the witness protection program. Paulie went to jail, though.
I think so moral of the story is be a
guy in the bottom, don't be the main guy anyway.
Speaker 3 (21:23):
You're dead if you're at the bottom, man, I think
we can leave that comparisons.
Speaker 2 (21:29):
But the legitimacy of not feeling like you're able to
get the same deal American dream style that your parents
and grandparents got, that's real and I think that is
part of this silent tax of inflation. That it's hard
to put your finger on it, but if you're a
young person, you feel it all right.
Speaker 1 (21:48):
Ho Dona, thanks so much for joining us on Trillions.
Speaker 4 (21:50):
Thanks so much for having me.
Speaker 3 (21:57):
Thanks for listening to Trillions and telling that next time
you can find us on the Bloomberg terminal, Bloomberg dot com,
Apple Podcasts, Spotify, or wherever else you'd like to listen.
I'd love to hear from you. Hit us up on
social I'm at Joe Weber Show, He's at Eric Balcinus.
Trillions is produced by Magnus Hendrickson. Sage Baumans is the
head of Bloomberg Podcasts.
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