scarlet: i am scarlet fu, this is "etf iq." we focus on the assets, risks and rewards offered by exchange traded funds. ♪ scarlet: freedom and markets, there is a common effect relationship, which is why her etf excludes china and saudi arabia. getting no respect. the videogame industry makes more money than robotics and cybersecurity, but it's etf attracts fewer assets. what is behind the gap? and tit for tat, trying to -- china gets ready to weaponize the supply of rare-earth metals as the trade war deepens.

there is an etf is tracking the critical minerals. whether you embrace or reject etf's, they are an early indicator for bigger shifts in market sentiment. let's get the latest from eric. one week later, things have changed completely. eric: thank you. i call it what a difference the fed makes. we look at one week flows, and it paints a really dreary picture. we have been talking about how retail investors have mostly held strong and not taken the bait, in terms of selling out. the last couple of days, they have rushed into safe haven etf's. look at the amount of treasury etf's here in all durations. 8 out of the 10 were treasury etf's. gold was in there. let's see how that compares to the past 50 weeks or so. q4 was crazy, we are getting to that point. a lot of it is treasuries again. a little gold here. this is only two days. if the fed had not stepped in

and reassured markets, we could be up at q4 levels, but they did, and all is well at least for now. that is the scene in the u.s. the fed saved the day. internationally, not so good. we have tariff threats going on and we have china, mexico, and india all being threatened with tariffs. here is emerging market etf's, now seeing outflows to the tune of $2.5 billion. the white bar is china etf's. another $2 billion out of those, that is $4.5 billion and china, they are bearing the brunt of tariffs. india now seeing inflows, and that is because of good news for multi-. mexico, kind of a wash. scarlet, the u.s. looks like it will be back in action at least on the fed. internationally, a whole different scene. scarlet: let's bring in perth tolle and bloomberg's rachel evans. eric just showed us the impact of the trade war and tariffs and what they are doing to flows. we are seeing china get the

worst of it. you watch e.m. as an asset class. what do you see? perth: as far as trade, the way that we evaluate our index is that trade is good for our country. if anything impedes trade, that is bad for the future economy -- the market of that country. if we are to impose tariffs, bad for us, it does not affect them. if they retaliate and impose back on us, that is bad for them. scarlet: what is interesting as -- what is interesting here is there is a new etf inspired by the trade war. it is t-war. a little bit coincidence of, in terms of timing. >> it is pretty catchy. coming up with that ticket right now. obviously when it comes to the etf and development, it takes about nine months to go from idea to hitting the market, but given that the trade war has been percolating through the consciousness for over a year, it kind of makes sense that we

are starting to see that come to the market. it is taking an interesting approach to actually how it tackles the trade war. often you see people recommending playing the trade war but betting against technology or china revenue. this one is trying to find winners by identifying those companies that have contracts with the government. they are trying to pick out companies that may receive some implicit or explicit state support that could help avoid -- a bully them three trade war. this is what the etf is trying to do. eric: the trade war in china hurting from that could be good timing for your etf which has no china. this is emerging markets based on freedom scores. this is a big gap. why is china excluded from your fund, and how does the process work for the screening? perth: our fund is screened by freedom only on the country level. we isolate the freedom factor on the country level, and our country is based solely on

freedom scores. we get our freedom scores on the country level from the fraser institute, and two other organizations. we have been partners with them for a while to develop this. they do not imply any kind of recommendation to any investment products, but we do work with them on this particular index. the three categories that we use are life, liberty, property. things like terrorism, trafficking, torture. liberty is like rule of law. due process, freedom of speech, assembly, and so forth. and economic freedoms, property rights, taxation, free trade, business regulation, sound monetary policy, and so forth. scarlet: that sounds pretty comprehensive. a lot of people will question how you can judge freedom objectively. the philippines has a 6% rating

in frdm, and a lot of people would not consider the philippines a free country or economy. perth: we get that a lot about the philippines. a lot of these emerging markets are still coming up out of seeing autocracies, some are still autocracies. so you will not get 100% freedom in any country. our methodology is just take the freer countries based on the relative freedom to their peers. as long as the philippines is freer then china, saudi arabia, and brazil now, they have a higher rating. we use objective quantitative freedom metrics. eric: in your fund, taiwan gets a big rating. rachel, you have done a lot of reporting on the taiwan etf and its interconnectivity to the u.s. and tech. can you talk about that? rachel: this is something the team picks up when we see something like apple earnings , which are really going to move tech investors one way.

taiwan is interesting because it is a backdoor way to get the semiconductor and other supplies of these big u.s. and other international tech companies. if you look at it like ewt, for example, roughly half of those holdings have exposure to apple, or it is a customer of those firms. it is an interesting way to look at some of these sector specific or country specific bets. it gives you a different insight into a bigger trend that may be out there. scarlet: you can say that taiwan is a backdoor bet on apple's supply chain, but taiwan has the biggest ranking in your fund, could you make the argument that taiwan's companies and fortunes are directly connected to chinese economy? since the 90's, 1200 taiwan listed companies have invested $87 billion into the mainland. >> a lot of these taiwanese companies do have their factories and manufacturing in china because that benefits their shareholders and the cost.

so freer countries do have the ability to work with other countries, we do not penalize freer countries that trade with unfree countries. chile is also a very free country and they trade with china, but we do not penalize them for the free trade. if they want to move the factories out of china anytime, they could. if those benefits for them go away for their shareholders, they could easily move that part of their business somewhere else. scarlet: and they are talking about doing a little bit of that , as well? eric: and some of the other countries not in it, russia, brazil, and saudi arabia. can you talk about why saudi arabia did not make it? perth: saudi arabia is being added right now to the msci emerging markets index, so that is a differentiator in why we are providing a different exposure than the other market cap-weighted indices out there. because of saudi arabia's scores, they are excluded from the index. their life and liberty scores. and their property scores are

not bad, but the life and liberty scores is why. scarlet: perth tolle and rachel evans, thank you. coming up, we talk with the founder of the acquirers fund. we discuss the risk and reward of being a deep value investor after a 10 year bull market. one etf that caught our attention this week, the high yield corporate bond fund the -- fund it had a hectic , week. on monday, it posted the third largest outflow ever, but after a potential rate cut, we saw a record for inflows. you can find all of our charts on the bloomberg at gtv . this is "etf iq." ♪

scarlet: i am scarlet fu. this is "etf iq." it is time for the etf lifecycle, where we take you

through them -- the three main stages of etf's. step one, always a filing. the first trust carbon etf. looking to reduce the carbon and greenhouse gas emissions. step two, the launch. it is a timely one. the innovation output trade war etf begins trading this week. a joint effort between u.s. bank and an can international. the fund will trade under the ticker t-war. it will rank companies based on their intellectual property and rick companies based on their ability to outperform rivals during a global trade war. and for some, the final stage is liquidation. columbia thread needle closing down four funds. the emerging markets quality dividend, india infrastructure and india small caps. this comes after each failed to attract new assets in the past year. let's get passive aggressive and track the tensions in the battle between active and passive investing. the 10 year bull market has been a boon for passive funds, but the increased volatility makes

-- may give stock tickers, especially those that meet to value, their moment to shine. tobias carlyle says you can get the same benefits as active by using the approach. we welcome them now. good to see you. >> thank you. scarlet: you wrote a couple of books on value investing, you turned the ideas into a fund and now you are getting into etf's. talk us through it. >> the approach has always been a deep value approach. we look for cash rich balance sheets, strong businesses throwing off cash flow, buying back stock, very traditional long cipher value, and we do the -- alongside value, and we do the same thing on the short side for companies heavily indebted. statistical fraud, statistical earnings, issuing stock, issuing debt to stay alive, and no momentum. the market may be getting tired of the story. scarlet: you mentioned cash a couple of times. let's focus in on your etf. every value investor has a preferred metric.

i am guessing that yours is cash flow. why pick this one? tobias: my preferred metric is the inquirer's multiple, which is a metric i created. proprietary metric, and the focus of it is it is the front run activist and private equity firm. it is agnostic to capital structure, looks at strong operating income, and we did some other steps to make sure they are matching cash flow. scarlet: let's talk about the holdings inside your etf. right now, it holds a lot of insurance companies, 41% worth. banks are second, 17%. walk us through it, is it by accident, do you see this changing up in the near term? tobias: no, we are largely agnostic. we are bottom up in value investors. we do not look for any particular industry. i think the 10 year, the recollection of the event 10 years ago is still very fresh.

i think they are cheap. scarlet: they could be a value trap for years. tobias: right, but they are buying back stock. that is often a good sign. they are generating free cash flow. that's also a very good sign. the fact that the market hasn't done anything for some time does not concern us. we are looking for undervaluation. scarlet: you bring up a good point, but it has been a pretty rough 10 years for value investors and value stocks. i have lost count of the number of times people say value will make a comeback because it kind of does, but nothing lasts. the question is can value make a sustained comeback when the fed is so committed to stepping in when needed? tobias: you are right, it has been a nuclear winter for value investors particularly the last five years. spreads between the most overvalued and undervalued stocks are at a historical width and that has typically lead to very good performance in value.

the only caution i would put to that is the undervalued stocks are a little bit rich, but the overvalued stocks are multiple to where they have been in the past. you need to be a long-short to catch the spread. scarlet: your fund is hard-core because it is an enormous active share which can really pay off in times like 2008, 2009 when value etf's started to return at almost 100%. you saw the pure value do a lot better. isn't pure value a tougher sale to advisors? they face some career risk, because it is a straight line up, but you are not going to see the payoff. tobias: we say that the fund's capital efficient in the sense that it does not require a great deal of capital, so you can construct a portfolio by having a vt or something else like it, and we will give you the very concentrated value performance with earning a small portion of capital. scarlet: how receptive are

institutional measures to your etf? eric has a theory. they are not too big on etf's because it is a public pool, as opposed to something exclusive. tobias: there has been resistance to it which has surprised me a little. if we structure it as a lp, more attractive, but it is one of those things that there is no reason to do it that way. it should be in a liquid fund low fee. , athey should be able to invest in it. scarlet: there are a lot of should in that sentence. thank you for joining us, tobias carlisle. now coming up, rare earth metals. chatter has not been rare. we discussed the elements and its etf has been caught in the trade war. and this is just the tip of the iceberg. for a drove down of the etf -- for a drill down of the etf content, you want to check out bloomberg.com. this is "etf iq." ♪

scarlet: i am scarlet fu. this is "etf iq." for every etf that offers exposure to a theme, it is not long before others promise a -- promised the same. videogames is big business but they cannot seem to get investors respect. launching the third video game etf in the market, but before we talk to our guest, eric balchunas is going to give us the drill down. eric: the round who bit craft

e-sports and digital entertainment etf, a lot of people call it nerd because it is a mouthful. two things that stick out, it does not use videogames in the name, we will talk about why that may be key. digital entertainment is what they are going for. and look at the price, 25 basis points is cheap, but that is only guaranteed for a year, they have the option to go to 50 basis points. they may or may not. that is very cheap. let's look at the holdings. a little bit more of a targeted fund. there are smaller companies in here. this is a streaming video service. this is a live event, like tencent. this is a gaming operator, activision. modern times, live events, e-sports. so a lot of the stuff is beyond what people know and that is the point of this. we are going to the smaller companies that are pure. it brings me to a tale of the tape. the somatic capture score, the share to xl c or x ok, and also how much revenue is gotten from videogames. this one scores the highest but

not by a lot. here are the other the costs are two. way lower here, but that is temporary. the median market cap, look at how small this is compared to those. that does mean you will have more volatility. this thing is either going to work really well or struggle , based on the targeted approach. scarlet: targeted, indeed. still with me is will hershey. i love the ticker, nerd, but videogames is a huge industry, bigger than the movie and music industry combined. that kind of surprised me. it is being disrupted. that's what we have seen from gamestop's recent earnings. explain to us where the growth will come from because although it is big, the growth is going to be jagged. will: i think gamestop is a really interesting example , because you can look at it as the blockbuster of gaming. that is the past, not the future. the future is digital, online, and streaming. in terms of where we see the growth coming from, it is all

driven by the underlying technology. people are far -- watching people play on platforms like twitch, molded devices. like china and india, it has democratized people's ability to play games. you do not have to go out and buy a $350 console, you can play on your phone and people can do so competitively. the last side is the e-sports concept, people going to stadium to watch other people play. eric: digital entertainment instead of videogames. how deliberate was that in the name? will: very much so. part of that is our marketing. the bigger side is it is bigger than just videogames. videogames are not just people sitting in their basements playing by themselves anymore. they are playing against one another online and they are taking over all entertainment. sports, media, stream. it's incredible. scarlet: there is a lot of engagement here, and speaking of engagement, you engage with social media as well. eric: there is a mystery to me why gamer had a 100% breakout

performance, but no one really bought it. i asked twitter why they think the videogame etf's have not gotten the assets, despite posting similar numbers. to frivolous was one. was one.ivolous talk about getting over the hump of advisors think think it is like a toy. will: they did not have the best ticker ever, that is part of it. [laughter] will: ultimately it resides in education and at the end of the day, the stats are going to back it up. that is what is going to get people interested. we have a $100 million prize , which isortnite being hosted in new york. we have 450 million people watching, and the stats do not lie. scarlet: let's go back to that expense ratio. 25 basis points is pretty attractive, but it is a temporary fee, a teaser rate for mortgages, right? will: i do not know if i would like to be considered a mortgage rate in any way, being

transparent, that is the case. we will be going up at the end of the year. scarlet: is that guaranteed? will: as guaranteed as i can say. scarlet: it sticks to the importance of gathering assets as early as you can, doesn't it? will: ultimately, we view the lower expense ratio for the first year really as an investment for the trade ability and the long-term feasibility of the products. it is making a better product for the investor at the end of the day. scarlet: love the ticker, nerd, and it is the round hill bit craft digital entertainment and e-sports etf. kids play their videogames on the phone, and we prefer the television. but none of the technology can happen without rare earth metals , and of course, there is an etf for that. trading under the ticker remx, the rare earth strategic metals etf tracks 20 companies involved with the production and refining

of rare earth metals. stuff you probably have not heard of since high school science, until the recent u.s./china trade work. many are using jet engines, smartphones, flatscreen televisions, and screen technology. china has accounted for 95% of global output. the u.s. relies on the asian country for 80% of its rare earth needs. china has disrupted the market for years which is largely holding back remx's performance. it follows that china has the single biggest country waiting in the front. australia and canada round out the top three. remx is twice as volatile as the s&p 500 because of its weighting. it has seen a pickup and trading volume and assets to roughly $250 million. as investors bet, china may weaponize these metals in retaliation for u.s. tariffs. the fund has an expense ratio of 61 basis points, and gets a

green light in the bloomberg intelligence traffic light system. that does it for bloomberg "etf iq." be sure to catch us each wednesday at 1:00 p.m. eastern time. this is bloomberg. ♪

alix: sell-off like it is 1990. oil prices crater as inventories surge. fears of growth demand ripple through the market. aluminum market manipulation. how premiums are set after they cost the company $40 million last year. we talked to the head of procurement. occidental, bigger and better. we speak to the ceo about how she will squeeze more oil out of shale using co2. hoping to help emissions and profit. ♪ alix: i'm alix steel. welcome