Chuck Jaffe: One fund. On point for today, the expert to talk about it, welcome to the ETF of the Week. Yes, it’s the ETF of the Week, where we examine trending, new and newsworthy, unique and intriguing exchange-traded funds with Tom Lydon, vice chairman at VettaFi. And the vettafi.com site has a suite of research and tools that’s going to make you a savvier, smarter, and better investor in exchange-traded funds. Tom Lydon, let’s get after it.
Tom Lydon: How are you, Chuck?
Chuck Jaffe: I am well, but I need to know. Your ETF of the week is…
Tom Lydon: The Amplify Online Retail ETF, ticker symbol I-B-U-Y.
Talking up IBUY
Chuck Jaffe: It’s the, IBUY, I-B-U-Y. It’s the Amplify Online Retail ETF. Now, you know, Tom, I don’t think about the online retailers that much in August, right? Other than tax-free weekend here in Massachusetts or what have you, I’m not thinking of this as shopping season. But that’s coming, so is this about what we’re going to see later in the year? Is this about the health of the consumer? What’s going on that makes IBUY the fund that you would buy now?
Tom Lydon: Chuck, you mean you didn’t buy a straw hat on Amazon? Or you didn’t get some sunscreen mailed to you via CVS or anything like that this summer?
Chuck Jaffe: Yeah. Tom, if I don’t go shopping, I would never leave my house. So just to be able to get out and stretch my legs, I actually shop in-person. I’m not the online buyer for a lot of things.
Tom Lydon: Okay. I will tell you this, and I don’t want to get derailed here, but my wife and I are thinking about going to Europe in the fall. We picked out a couple countries. I went online to Amazon at 11:00. By 2:00, Amazon had delivered two travel books that I ordered. It’s amazing. So look, online shopping is not getting less. We know it’s getting more. I know, especially with my wife and kids, we’ve got stuff arriving all the time. Stuff you would normally have to jump in the car and go and get, know that it can come directly to your house in so many different ways.
So look, online buying just a couple years ago was single-digits as far as overall retail sales. Now it’s approaching 20%. And obviously, COVID had a lot to do with that. We also have just heard last week a lot of retail sales numbers, Home Depot, Target, Walmart, all relatively really, really good. And the idea that, even though we’ve seen inflation, the Fed’s done a good job of fighting inflation with higher interest rates. Employment’s in good shape as well, so guess what? It’s been a pretty good summer for spending. And you can see that reflected in the companies that you see in IBUY.
Chuck Jaffe: Okay. But we also just got bad news on the consumer front if you consider that it was only a week, two weeks ago where the Fed came out and said that, for the first time ever, credit card debt in this country over a trillion dollars. And of course, rates higher than they’ve been in ages. I had one of my credit cards tell me if I carried a balance, which I never do, they would be charging me 28.74% this week. That’s just crazy. But as you look at this, that is a warning sign. And yes, the consumer has held up everything, but are you still feeling that confident in the consumer?
Tom Lydon: Well, when you look at consumers, it’s A Tale of Two Cities, unfortunately. You have the haves and the wish I haves. There are a lot of folks that are coming out of school, they’re getting into the workplace, they’re struggling in the areas that they normally would’ve been making money and they’re not. Look, I’m looking at those numbers too. As far as car loans and first time car buyers, the number of rejections now is into the double digits for the first time that we’ve seen in years. So there’s a segment of the marketplace, usually lower paid folks, that are struggling because, yes, inflation still hit them pretty hard, especially with rent and loans and mortgages. Because obviously higher prices, if they’re buying a new home, those payments are going to be greater.
However, the vast majority of Americans out there still with solid jobs and solid prospects and business and their income stream, they’re spending a lot more and making it up for the less end paid of the consumer segment. So look, I think this is something that we have to continue to watch. The other trend that we see in place is the stocks that had been beat up in this area for online shopping have had a pretty good recovery. Back above their 200-day average again when you look at that segment. Areas like Uber, for example, that stock’s up almost 75% year to date, meaning that more people are getting out, more people are spending. So it’s important to take into account it’s not just one brush that paints the whole consumer marketplace. There’s segments that are involved here.
Chuck Jaffe: It’s true. And yet, at the same point, this is a really interesting thing. Tom, I’m not calling you old or any older than me, but the fact is that you and I both remember back to the age of the internet when the internet was dawning. And at that point, people would say, “Oh, we’ve got an internet fund.” And it was any store that had or any stock that had a website. So Barnes & Noble, because they had barnesandnoble.com, was considered an internet stock the same way that Amazon was, even though they most assuredly were not the same thing.
And in this case, you are looking at things like Home Depot and Target and Walmart. I don’t think that anybody looks at a Walmart or a Home Depot or a Target and says, “That’s online retail. Oh, I can go there to do online.” But the bigger question to me is, when we talk about these being online, I mean, who are we eliminating? Just the Bed Bath & Beyond, which was bricks and mortar and went bankrupt, but it had a website. So how much is this fund digging in and getting you that pure play that people used to talk about? How much of it is, yeah, it’s a retail ETF?
Tom Lydon: Yeah. Well, what’s surprising, I brought up those companies because they just reported earnings last week, and they were in general pretty good. But no, the majority is in-house shopping for sure. But you look at other companies, 1-800-Flowers, eBay, DoorDash, Carvana, where most of their income is online. And there are a lot of those companies that are out there. Wayfair, for example, Netflix, all of those, when I bring those names up, you probably think, “Yeah, home improvement, Wayfair. Yeah, Netflix. Am I watching more shows? I am. Am I buying more flowers? Am I shopping around on eBay for some more stuff?” It just seems that business in those areas are good.
During COVID, it was a little bit unsure, people held back. But today, they’re spending again. And with that, especially with some of those stocks that were down 60, 70, 80%, some almost 90%, you’re still in a position to maybe buy at lower levels, especially while the trend’s in place. But if you’re concerned about volatility, look at that 200-day average. Don’t put a lot of money in there, maybe three to 5%. And if it goes below its 200-day average, Chuck, you can pull the ripcord and sell and then put that money back in cash. But what we know is a lot of money is on the sidelines. A lot of people have money in cash right now.
Chuck Jaffe: Well, I’m glad you answered the 200-day moving average question before I talked about it, because even among the names that you’re talking about, yeah, Wayfair, interesting shopping site. Ooh, that’s a balance sheet that other guests that I talk with all the time on my show have been very negative on, and eve some of the other names. It’s retail. Retail, there’s not a lot of margin. So that’s the interesting side. But again, making it a 200-day moving average play makes a lot of sense. Where is the money coming from?
Tom Lydon: Chuck, what we’ve talked about is the money that’s on the sidelines. There’s $6.2 trillion on the sidelines. J.P. Morgan, they say 32% of all the money they manage is in cash right now. It’s amazing. Morgan Stanley, 28%. A lot of people have high cash positions just because there’s a little uncertainty in the marketplace, we still have higher inflation, and there’s still some concern about earnings going into next year, might we hit a recession, that type of thing. So pick your spots. Here’s a spot that’s trending upwards right now, and it had been crushed in the last couple of years. So you always want to look at those opportunities where you may be able to buy low, ride that trend for a while, and if it gives you some appreciation, great, grab it and put that money in your pocket.
Chuck Jaffe: It’s the IBUY, I-B-U-Y, the Amplify Online Retail ETF, the ETF of the week from Tom Lydon at VettaFi. Tom, great stuff. As always, look forward to the next one already.
Tom Lydon: Thanks, Chuck.
Chuck Jaffe: The ETF of the week is a joint production of VettaFi and Money Life with Chuck Jaffe. Yeah, that’s me. And you can learn all about my hour-long weekday podcast by going to moneylifeshow.com or by searching wherever you find your favorite podcasts. And if you’re searching for more information on exchange-traded funds, make sure you check out vettafi.com. They have a suite of tools there that is going to help you make you a better, savvier, smarter investor.
They’re on Twitter @Vetta_Fi. And Tom Lydon, their vice chairman and my guest, he’s on Twitter too. He is @TomLydon. The ETF of the Week is here for you every Thursday. Ensure you don’t miss any of our episodes by following along on your favorite podcast app. And we’d love to hear from you. If you’ve got questions and you want to submit them, send them to [email protected] and maybe they’ll show up in a future edition of the ETF of the Week. The next edition, that’s next Thursday. We’ll see you then. And until then, happy investing, everybody.
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