WEBVTT - Should I Just 'VTI and Chill'? Your ETF Questions Answered 0:00:06.840 --> 0:00:07.680 We could are trillions. 0:00:07.720 --> 0:00:10.480 I'm Joel Weber and I'm Eric Belchernas. 0:00:11.720 --> 0:00:14.159 Eric, you know what we haven't done forever is a 0:00:14.160 --> 0:00:17.560 mail bag episode where people ask us questions about things 0:00:17.560 --> 0:00:21.200 like ETFs or whatever else I guess, but probably ETFs. 0:00:22.360 --> 0:00:24.360 Yeah, it's good to get back to the basics. I 0:00:24.400 --> 0:00:28.160 felt when we started this podcast. A big part of 0:00:28.200 --> 0:00:32.600 our mission was education and just trying to educate people 0:00:32.720 --> 0:00:36.480 on what ETFs are, how to use them due diligence, 0:00:37.080 --> 0:00:40.800 and so it's interesting to ask people and to solicit 0:00:40.800 --> 0:00:43.280 them for their questions now and also just see where 0:00:43.280 --> 0:00:45.040 they're at, what are they curious about. I do this 0:00:45.080 --> 0:00:47.479 one show called The Money Show, which is a conference 0:00:47.520 --> 0:00:49.880 that you deal directly with retail investors, and it's a 0:00:49.920 --> 0:00:53.400 similar situation. It's nice to talk directly to the people 0:00:53.440 --> 0:00:56.120 because a lot of times we're working with advisors or 0:00:56.160 --> 0:00:59.600 the ETF industry itself, who's like talking shop constantly. But 0:01:00.080 --> 0:01:01.800 BA is a good time to go back to, like 0:01:02.240 --> 0:01:04.839 the basics, get the temperature of what people are thinking about, 0:01:04.880 --> 0:01:07.600 and you know what they don't know and are asking about. 0:01:07.640 --> 0:01:11.440 So I basically polled or solicited both LinkedIn and Twitter. 0:01:11.959 --> 0:01:15.120 Interesting the contrast on the types of questions on each 0:01:15.160 --> 0:01:19.720 site LinkedIn a little more longer and professional sounding as 0:01:19.720 --> 0:01:22.920 you might imagine Twitter, a little more quick, some trolling, 0:01:23.640 --> 0:01:27.400 and even some weird questions in there, but all pretty good. 0:01:27.400 --> 0:01:28.880 I thought. I thought there a lot of them are 0:01:28.880 --> 0:01:31.520 pretty solid questions, so looking forward to answering them best 0:01:31.520 --> 0:01:31.760 I can. 0:01:32.000 --> 0:01:34.399 Okay, well, here we go. We're gonna dive into a 0:01:34.440 --> 0:01:37.360 bunch of questions, maybe an abbreviated version of it if 0:01:37.360 --> 0:01:40.280 it's a little long, and we'll do our best to 0:01:40.319 --> 0:01:45.920 answer all of them. This time on trillions mail bag, 0:01:48.040 --> 0:01:50.600 I'm gonna start with a guy named Chuck Rose. He says, 0:01:50.840 --> 0:01:53.600 ETFs seem to have escaped the muddy waters of mutual 0:01:53.680 --> 0:01:59.440 fund share classes. But now you have SPY or SPLG 0:02:00.880 --> 0:02:08.120 or another example, QQQ or QQQM, same issuers, same index, 0:02:08.280 --> 0:02:11.720 but different expenses, different spreads. What's going on? 0:02:12.840 --> 0:02:15.880 Yeah, So I would call this trend the minime trend, 0:02:16.639 --> 0:02:19.040 because every one of those is a minime of the 0:02:19.080 --> 0:02:20.880 bigger original one. 0:02:20.960 --> 0:02:23.000 So like spy is the big dog, why are they 0:02:23.000 --> 0:02:23.400 doing that? 0:02:24.560 --> 0:02:27.760 It's a business decision on their part. So for example, 0:02:27.840 --> 0:02:30.360 let's say you're a state street and you have spy 0:02:30.480 --> 0:02:33.560 and you charge nine basis points and the liquidity is 0:02:33.600 --> 0:02:35.960 so good that you have a good audience. That said, 0:02:36.120 --> 0:02:39.000 Vanguard and I Shares came out with similar products at 0:02:39.000 --> 0:02:41.960 three basis points. So you start to lose money to 0:02:42.040 --> 0:02:46.800 the longer term investors, and in order to deal with 0:02:46.840 --> 0:02:51.000 this situation of losing some assets to these new competitors, 0:02:51.400 --> 0:02:53.720 you come out with sort of like a minime clone 0:02:54.320 --> 0:02:57.239 at a lower fee. This way for the people who 0:02:57.240 --> 0:03:00.080 really need volume, like the professional traders and hedge funds 0:03:00.160 --> 0:03:02.720 who are going to use SPY regardless, you can still 0:03:02.760 --> 0:03:06.800 earn your nine basis points, but you then have a 0:03:06.960 --> 0:03:12.000 cheaper version to help keep flows in house and coming in. 0:03:12.360 --> 0:03:16.200 So SPLG would be Spies Mini me, and this charges 0:03:16.240 --> 0:03:19.320 three basis points and it's been doing really well, like 0:03:19.360 --> 0:03:22.639 it's got forty one billion dollars now, and this has 0:03:22.680 --> 0:03:24.680 been happening for a long time. I Shares kind of 0:03:24.720 --> 0:03:27.640 invented this trend when EEM was losing a lot of 0:03:27.680 --> 0:03:31.320 assets to Vanguard's VWO, so it came out with IMG, 0:03:31.480 --> 0:03:33.760 which was a mini me at about a fourth of 0:03:33.800 --> 0:03:36.480 the cost, and it did a good job. IMG is 0:03:36.520 --> 0:03:39.400 now I think around as big as VWO and so 0:03:39.840 --> 0:03:43.240 this minime move is a business decision from the issuer's 0:03:43.240 --> 0:03:47.560 point of view because they just you know, they're trying 0:03:47.600 --> 0:03:50.440 to appease everybody without hurting their revenue too bad. Like 0:03:50.760 --> 0:03:53.280 they could just cut SPI's feet to three basis points, 0:03:53.600 --> 0:03:56.080 but that would be instantly killing a lot of their 0:03:56.120 --> 0:03:59.280 revenue in one shot. Sometimes they do do that, but 0:03:59.600 --> 0:04:04.000 for these gigantic products that have so much liquidity, you 0:04:04.040 --> 0:04:06.360 do have some pricing power there, so there you can 0:04:06.440 --> 0:04:09.960 keep that cash cow alive and still serve the cheap 0:04:10.320 --> 0:04:13.320 obsessed investors who don't care about volume. That's that's why. 0:04:14.120 --> 0:04:19.159 All right, next question, Garrett O'Hara asks what future innovations 0:04:19.440 --> 0:04:22.520 should we expect in the bond ETF space. 0:04:23.240 --> 0:04:25.919 Oh, that's a good question. So fixed in come is 0:04:26.760 --> 0:04:30.120 an area that is not quite doesn't get as much attention, 0:04:30.200 --> 0:04:33.000 but it's been evolving a lot. Like one thing that 0:04:33.040 --> 0:04:36.800 really took off that's recent is clos collateralized loan obligations. 0:04:38.120 --> 0:04:41.240 Janis has one that's over ten billion dollars and I 0:04:41.240 --> 0:04:43.880 thought that was proof that you can even discover new 0:04:43.920 --> 0:04:46.520 areas of the bond market. And I think that's what 0:04:46.560 --> 0:04:49.080 we're going to see is more slicing and dicing. Bond 0:04:49.080 --> 0:04:53.440 blocks has gone out and sliced and diced the credit buckets, 0:04:53.440 --> 0:04:56.039 like now you can get just triple c's. You know, 0:04:56.040 --> 0:04:58.520 I Share already has a double B. So they're going 0:04:58.600 --> 0:04:59.920 to go out and I think they're probably going to 0:05:00.040 --> 0:05:03.279 are slicing up sectors and they might even like do 0:05:03.400 --> 0:05:06.400 interesting things like maybe in the muni space they just 0:05:06.400 --> 0:05:09.480 give you like hospitals and schools. What would call that 0:05:10.080 --> 0:05:14.599 niche bond investing because you know, when you buy the AG, 0:05:14.800 --> 0:05:16.560 you know, the AG is like huge, you get a 0:05:16.600 --> 0:05:19.160 bunch of bonds. But what people are doing a little 0:05:19.160 --> 0:05:20.880 more because the AG hasn't worked as well, is trying 0:05:20.920 --> 0:05:22.680 to find pockets of fixed income that can like have 0:05:22.760 --> 0:05:25.839 more juice in it. One filing we recently saw was 0:05:26.000 --> 0:05:28.640 for catastrophe bonds. I don't know if that'll go through 0:05:28.640 --> 0:05:32.240 the SEC, but that would be really interesting. But yeah, 0:05:32.279 --> 0:05:34.840 I think that's what we're going to see is just 0:05:34.880 --> 0:05:37.839 more slicing and dicing as well as more active. But 0:05:38.200 --> 0:05:40.360 they people already do active, but there will be new 0:05:40.360 --> 0:05:45.200 managers coming in for sure, So I think that's probably 0:05:45.240 --> 0:05:46.160 what we can look forward to. 0:05:46.720 --> 0:05:51.960 Okay, Brian Williams asks, do you expect to see ETFs 0:05:52.160 --> 0:05:56.160 ever gain meaningful market share in the retirement planned world, 0:05:56.600 --> 0:05:59.880 stuff like four one k's, four O three b's, et cetera. 0:06:01.000 --> 0:06:05.000 Not really, as we discussed on a podcast back in 0:06:05.000 --> 0:06:09.040 the day, Camera which one, But ETFs it's like Superman 0:06:09.120 --> 0:06:12.680 two when he has to give up his superpowers to 0:06:12.680 --> 0:06:14.520 be with Lois Lane. So he goes in this box 0:06:14.960 --> 0:06:17.120 and when he's in the box, that's the box sort 0:06:17.120 --> 0:06:19.480 of like takes away his ability to fly and dodge 0:06:19.560 --> 0:06:22.760 bullets and all that stuff, and when he comes out 0:06:22.760 --> 0:06:25.720 of the box, he's a human again. That is just 0:06:25.760 --> 0:06:28.360 what ETFs and four to one K plans are. In 0:06:28.400 --> 0:06:29.839 a four to one K plan, you don't need to 0:06:29.839 --> 0:06:33.719 trade your fund, so the intrade liquidity goes away. In 0:06:33.760 --> 0:06:36.080 a four one K plan, you typically get the institutional 0:06:36.120 --> 0:06:39.279 share class of a mutual fund, which is the lower 0:06:39.320 --> 0:06:42.200 fee class because you're pulling all your money together with 0:06:42.200 --> 0:06:46.440 other colleagues, and so the cost goes away that advantage, 0:06:47.000 --> 0:06:50.200 and then the tax efficiency of ETFs goes away because 0:06:50.200 --> 0:06:54.039 it's a tax deferred plan, right, so you lose basically 0:06:54.120 --> 0:06:57.080 the three main superpowers of ETFs. In a four to 0:06:57.120 --> 0:06:59.320 one K plan. So what people do in four one 0:06:59.400 --> 0:07:01.359 K plans is if they want low cost pass that 0:07:01.440 --> 0:07:05.080 they just buy like any black Rock, State Street, Vanguard. 0:07:05.120 --> 0:07:08.320 They all have index mutual funds that are dirt cheap 0:07:08.680 --> 0:07:12.000 and the same thing you'd get from like vou or spy. 0:07:12.160 --> 0:07:14.760 You just buy the mutual fund version. So people are 0:07:14.800 --> 0:07:17.040 satisfied with that, again because they don't need to trade it. 0:07:17.080 --> 0:07:19.760 The tax efficiency is not there. So I just am 0:07:19.760 --> 0:07:22.800 a big fan of the marketplace needing it and it 0:07:22.800 --> 0:07:25.040 doesn't need it here. So even though I think ETFs 0:07:25.040 --> 0:07:26.560 are great, I think you know, they solve a lot 0:07:26.560 --> 0:07:29.720 of problems. The only caveat to that is if you 0:07:29.760 --> 0:07:32.560 have a small business and you can't afford the institutional 0:07:32.600 --> 0:07:35.120 class like this. It's like I don't know a dozen 0:07:35.160 --> 0:07:37.960 employees and collectively you don't have enough minimum investment to 0:07:37.960 --> 0:07:41.120 get the E class pricing, that might make sense for 0:07:41.160 --> 0:07:44.720 an ETF. The other situation would be to get really 0:07:44.760 --> 0:07:47.400 like unique new stuff, like there's no way you can 0:07:47.440 --> 0:07:49.280 get a bitcoin mutual fund, right, but if you wanted 0:07:49.280 --> 0:07:51.480 a bitcoin ETF, they're available now. So a lot of 0:07:51.520 --> 0:07:53.480 mutual funds will have a brokerage window where you can 0:07:53.520 --> 0:07:55.560 go out and like add to your mutual funds with 0:07:55.600 --> 0:07:58.640 some ETF and I think that's probably the perfect solution. 0:07:58.800 --> 0:08:01.760 So they'll have a tiny little role, but I don't 0:08:01.760 --> 0:08:04.760 think they'll ever like push out mutual funds. Four one 0:08:04.840 --> 0:08:08.640 K plans are sort of going to be filled with 0:08:08.720 --> 0:08:10.680 mutual funds for a long time. There is one other 0:08:10.680 --> 0:08:15.080 thing is mutual funds are actually also offering CIS. I 0:08:15.120 --> 0:08:17.160 won't go into that, but it's a customized mutual fund 0:08:17.560 --> 0:08:21.040 and those are actually getting traction inside plans too because 0:08:21.080 --> 0:08:23.000 people want to like negotiate the fee a little bit. 0:08:23.520 --> 0:08:26.000 But yeah, so I'll leave it there, but I don't 0:08:26.000 --> 0:08:27.120 really see much movement there. 0:08:34.480 --> 0:08:39.800 Randall Moore asks what are your thoughts on return stacking 0:08:40.280 --> 0:08:44.760 that is now available in an ETF wrapper going forward? 0:08:44.960 --> 0:08:48.440 Would will this be a viable strategy to add into 0:08:48.520 --> 0:08:51.599 an alt bucket in a retirees portfolio. 0:08:53.600 --> 0:08:57.520 Yeah, so this is a new area. Again, that's it's small, 0:08:57.520 --> 0:09:01.199 but it's growing quickly. An example is our sst the 0:09:01.280 --> 0:09:05.439 return stack US stocks and managed futures ETF. To keep 0:09:05.480 --> 0:09:09.840 it simple, these have different arrangements, but basically this is 0:09:09.840 --> 0:09:13.000 a strategy that gives you one hundred percent exposure to 0:09:13.080 --> 0:09:16.920 US stocks and one hundred percent exposure to a managed 0:09:16.960 --> 0:09:20.880 future's strategy. Because the futures you don't actually have to 0:09:21.360 --> 0:09:23.800 buy the futures, you can borrow them. You're able to 0:09:24.880 --> 0:09:28.319 have two hundred percent exposure essentially. So I think in 0:09:28.360 --> 0:09:31.240 the institution world they call this portable alpha, and so 0:09:31.400 --> 0:09:34.240 in a way you're able to sort of like have 0:09:34.280 --> 0:09:37.880 two things at once using leverage. Now, of course, if 0:09:37.920 --> 0:09:40.319 both of those things go down, you can get hit 0:09:40.400 --> 0:09:43.040 with a double whammy. But the idea here is just 0:09:43.080 --> 0:09:46.920 getting more bang for your buck, and I get it. 0:09:47.000 --> 0:09:50.240 I think you know, some of them are like ninety sixty. 0:09:50.920 --> 0:09:54.120 They have different varieties, as every ETF category does, but 0:09:54.760 --> 0:09:56.600 you know, I'm okay with them. I think, like I said, 0:09:57.320 --> 0:10:00.600 this is something that an institution would do normally regularly, 0:10:00.600 --> 0:10:03.200 and people are trying to again try to democratize this 0:10:03.320 --> 0:10:06.680 for regular investors. Just obviously, you know, make sure that 0:10:06.720 --> 0:10:10.000 you understand the category and that anything that has leverage 0:10:10.679 --> 0:10:13.440 does have that. You ask yourself, Okay, what's the environment 0:10:13.480 --> 0:10:15.199 where both things go down? And I think you have 0:10:15.280 --> 0:10:16.560 we make sure you're ready for that. 0:10:17.559 --> 0:10:22.480 And Rita Nanda Kumar asks, what is the ETF product 0:10:22.520 --> 0:10:26.040 innovation over the last few years that you are most 0:10:26.200 --> 0:10:29.720 impressed by. I love that question. 0:10:30.240 --> 0:10:33.880 Yeah, I got to go with the buffers. This which 0:10:33.920 --> 0:10:37.680 is also called targeted outcome. Bruce Bond used to run 0:10:37.720 --> 0:10:42.400 power Shares. Great guy and he left power Shares. Bruce 0:10:42.440 --> 0:10:45.760 Bond basically started smart Beta in my opinion, and themes 0:10:45.800 --> 0:10:47.920 he launched the first two and those are massive categories. 0:10:47.960 --> 0:10:50.800 This guy's like a he's a very entrepreneurial dude in 0:10:50.840 --> 0:10:53.320 the ETF space, and so he went I was looking 0:10:53.320 --> 0:10:55.959 for something to do and found this idea of targeted outcome. 0:10:56.679 --> 0:10:59.640 This is an ETF that uses flexible options, which are 0:10:59.640 --> 0:11:04.240 just ctimize options that the issuer negotiates and so they 0:11:04.280 --> 0:11:07.679 come up with these customize options that limit your downside. 0:11:08.000 --> 0:11:12.000 So they'll be something like, okay, for the next two years, 0:11:12.600 --> 0:11:14.640 we will give you up to ten percent of the 0:11:14.679 --> 0:11:17.680 returns of the S and P, but on the downside, 0:11:18.440 --> 0:11:21.560 you will only have to eat five percent. The rest 0:11:21.679 --> 0:11:24.440 the options will cover, and so you give up some 0:11:24.559 --> 0:11:30.880 of the upside. Usually it's the big upside for downside protection. 0:11:31.440 --> 0:11:33.400 And many older investors, this is why we call them 0:11:33.400 --> 0:11:36.920 boomer candy. Many older investors are very happy to make 0:11:36.960 --> 0:11:40.000 that trade off because they want to be in the market. 0:11:40.040 --> 0:11:44.000 They like the market, but they want protection. They want 0:11:44.000 --> 0:11:46.120 to sleep at night. Reminds me of the biotech industry 0:11:46.600 --> 0:11:49.560 making drugs for boomers to live longer and sleep better 0:11:49.559 --> 0:11:51.920 and all that, Like, this is the same thing. These 0:11:51.920 --> 0:11:55.880 are etfishoers trying to make boomers feel better and manage 0:11:55.920 --> 0:11:58.520 their nerves. And honestly, when they first came out, I 0:11:58.520 --> 0:12:00.439 didn't see it that way. I thought these are just 0:12:00.480 --> 0:12:04.000 too complicated, but they sold them, and I'd heard of 0:12:04.040 --> 0:12:07.080 advisers who were like, nah, I'd rather just stay diversified 0:12:07.960 --> 0:12:11.520 with stocks and bonds. These aren't really worth it, because remember, 0:12:11.559 --> 0:12:13.160 you can buy a money market fund now and get 0:12:13.160 --> 0:12:15.520 five percent a year locked in no risk. So a 0:12:15.520 --> 0:12:16.880 lot of of I was like, why don't I just 0:12:16.920 --> 0:12:19.320 do that? Then I can almost replicate the buffers with 0:12:19.400 --> 0:12:23.280 the regular portfolio. But the clients were like, no, I 0:12:23.320 --> 0:12:25.280 want these, Like they were like chomping at the bit 0:12:25.679 --> 0:12:29.040 to get these products. So these were a grassroots hit, 0:12:29.360 --> 0:12:31.560 and I think the door on these opened big time 0:12:32.040 --> 0:12:36.280 in twenty twenty two when the bark the aggregate bond INDECKS, 0:12:36.760 --> 0:12:40.080 which is agg went down thirteen percent. So stocks were 0:12:40.080 --> 0:12:43.600 down nineteen percent, but your AG was down thirteen percent. 0:12:43.600 --> 0:12:45.640 In other words, your sixty was down and your forty 0:12:45.679 --> 0:12:49.079 was down. Normally, boomers in particular are so used to 0:12:49.080 --> 0:12:52.480 as bonds going up when stocks go down. So when 0:12:52.480 --> 0:12:54.640 the AG went down with the stocks, they're like, wait, well, 0:12:54.640 --> 0:12:57.280 where's my protection now? And they got all this nest 0:12:57.280 --> 0:13:00.600 egg and they're like, I'm scared now. And so also, 0:13:00.640 --> 0:13:03.240 the AGG hasn't kept up with inflation at all, and 0:13:03.280 --> 0:13:06.880 so I think this opened the door to something more crafty, 0:13:07.000 --> 0:13:09.040 some kind of a solution, and these are you know, 0:13:09.120 --> 0:13:11.360 essentially structure products, and so I think we're going to 0:13:11.360 --> 0:13:13.600 see a huge boom in these. You've now got black 0:13:13.679 --> 0:13:15.920 Rock getting into this game, a lot of other big 0:13:15.920 --> 0:13:18.880 firms have jumped in, so so I think we'll continue 0:13:18.880 --> 0:13:20.920 to see more and more firms get get involved here 0:13:20.920 --> 0:13:22.600 and you can make more money. The fees are higher, 0:13:22.880 --> 0:13:26.200 so we call these vanguard free zones. So issuers love vfzs, 0:13:26.520 --> 0:13:27.920 So you know we're going to see a lot of 0:13:27.920 --> 0:13:28.400 action here. 0:13:29.200 --> 0:13:33.160 William Donnie Hugh asks do you consider direct indexing to 0:13:33.200 --> 0:13:37.040 be competition for ETFs or more like the buffalo bills 0:13:37.160 --> 0:13:38.640 of investment products. 0:13:40.240 --> 0:13:42.440 The bills have lost like force ruper bowls, I think, 0:13:42.840 --> 0:13:45.080 and they're always like missing field goals at the worst time. 0:13:45.120 --> 0:13:47.120 They're like a lot of hope and hype and then 0:13:47.120 --> 0:13:50.800 they always disappoint. Yeah, direct indexing is something like that 0:13:50.880 --> 0:13:54.400 for sure. My metaphor for direct indexing is the segue Joel, 0:13:54.400 --> 0:13:56.880 Remember that that thing that you stand on that was 0:13:56.920 --> 0:13:59.200 supposed to revolutionize transportation. 0:13:59.400 --> 0:14:01.960 Why at a convention when you can segue somewhere? 0:14:02.200 --> 0:14:04.520 Yeah, I mean I went back in Google, by the way, 0:14:04.520 --> 0:14:07.319 when I wrote my article on this, and they this 0:14:07.480 --> 0:14:10.120 was really heavily pitched like that. I believe Bill Gates 0:14:10.200 --> 0:14:12.800 might have been like one of the voices behind it. 0:14:12.840 --> 0:14:15.360 But everybody's like, these are going to take over the world, 0:14:16.000 --> 0:14:19.000 and they basically are used by mall cops and city 0:14:19.000 --> 0:14:22.720 tours and that's it. And I think direct indexing is 0:14:22.760 --> 0:14:25.400 the same thing, because direct indexing is essentially saying, hey, 0:14:25.520 --> 0:14:28.520 instead of buying a cheap etf and you know, let's 0:14:28.760 --> 0:14:31.840 sell that, give me your money and I'll buy I'll 0:14:31.880 --> 0:14:34.400 recreate the ats by buying all the stocks. But if 0:14:34.440 --> 0:14:35.960 you want, we can pick out a stock or two 0:14:36.000 --> 0:14:39.040 to customize it to your needs, and then we can 0:14:39.080 --> 0:14:41.080 do some tax loss harvesting maybe to give you some 0:14:41.360 --> 0:14:45.280 extra basis points of return. There. It's a pretty decent idea. 0:14:45.360 --> 0:14:48.560 I think for very wealthy people that tax benefit could 0:14:48.600 --> 0:14:52.040 be helpful, but arguably it charged it. They want to 0:14:52.120 --> 0:14:54.760 charge you like three or four times more than an ETF, 0:14:54.840 --> 0:14:57.680 even ten times more. I think schwabs and fidelities di 0:14:57.720 --> 0:15:00.360 I products are forty. But again, you can the whole 0:15:00.400 --> 0:15:03.640 market for four or three basis points. You also find 0:15:03.680 --> 0:15:05.960 that once you buy all these stocks and people start 0:15:06.000 --> 0:15:08.400 moving stuff around, you're you're kind of being active, and 0:15:08.440 --> 0:15:12.160 you can underperform, right, And I think people generally like 0:15:12.160 --> 0:15:15.120 an incomes like a statement with like six or seven tickers, 0:15:15.600 --> 0:15:18.640 not like thousands of stocks. And I think it can 0:15:18.680 --> 0:15:21.160 get confusing with di I. So d I to me 0:15:21.240 --> 0:15:25.880 tries to reverse three massive trends, simple, passive, and cheap, 0:15:26.320 --> 0:15:28.560 and I just think those trends are way too powerful, 0:15:28.680 --> 0:15:32.120 and so it'll be a niche vehicle at best. 0:15:33.040 --> 0:15:36.120 Eric, here's an interesting what you win US. Do you 0:15:36.120 --> 0:15:40.520 have data on how much US listed ETFs are owned 0:15:40.560 --> 0:15:42.600 by non US investors. 0:15:43.960 --> 0:15:46.920 Yeah, that's an interesting question. It depends on the ETF. 0:15:46.960 --> 0:15:49.680 But generally speaking, for like the big dogs like SPY 0:15:49.960 --> 0:15:53.760 vu IVV, you're looking at around fifteen percent would be 0:15:53.840 --> 0:15:57.960 foreign owned, and these would be like usually big institutions. 0:15:58.600 --> 0:16:01.120 What we have in the US that you really don't 0:16:01.120 --> 0:16:04.080 have anywhere else is like big boy liquidity. When you 0:16:04.120 --> 0:16:06.400 go to like I don't know, a country, like you know, 0:16:06.440 --> 0:16:08.880 I was in Mexico recently, I was in France recently. 0:16:09.520 --> 0:16:11.920 The volume on these ETFs is just pretty low. So 0:16:12.000 --> 0:16:14.360 but a retail investor, no big deal. But if you're 0:16:14.400 --> 0:16:18.200 like a big institution, you want an ETF that trades 0:16:18.240 --> 0:16:19.760 over a billion dollars a day, so you can come 0:16:19.800 --> 0:16:23.160 in and out without anybody noticing. Low impact cost. Our 0:16:23.200 --> 0:16:25.720 ETFs also tend to be cheaper than elsewhere in the world, 0:16:25.720 --> 0:16:29.680 so you get lower expense ratios. That's an interesting question 0:16:29.880 --> 0:16:33.600 also this year because this year in particular and last year, 0:16:34.080 --> 0:16:37.760 we've actually seen more people using ETFs in their own 0:16:37.760 --> 0:16:41.040 countries to get into the US. Like in China, they're 0:16:41.160 --> 0:16:43.360 rushing to buy the NASAQ one hundred. That said, it's 0:16:43.360 --> 0:16:46.280 through an ETF there that invested in NASDAC. So I 0:16:46.320 --> 0:16:48.680 do think that the fifteen percent's probably got somewhat of 0:16:48.680 --> 0:16:51.760 a lid on it. It's just big institutions who need liquidity. 0:16:52.360 --> 0:16:55.680 But the money pouring into the into the US itself 0:16:56.200 --> 0:16:59.800 via local ETFs that invest in the US is going 0:16:59.880 --> 0:17:03.440 up quickly. And in Europe. Get this, there's more money 0:17:04.000 --> 0:17:07.280 the Europeans have in US stock ETFs than in their 0:17:07.320 --> 0:17:10.040 own local European stock ETFs. 0:17:10.160 --> 0:17:10.720 Fascinating. 0:17:11.240 --> 0:17:14.320 Yeah, I mean, you know, there's just nope, nothing like 0:17:14.320 --> 0:17:17.760 like the Magnificent Seven is like a US phenomenon. And 0:17:17.840 --> 0:17:21.680 so sometimes my first book I said that the US 0:17:21.800 --> 0:17:25.800 we export liquidity. That's how liquid some of these names are. 0:17:26.359 --> 0:17:29.600 Plus these ETFs again own the best companies in the 0:17:29.600 --> 0:17:31.800 world pretty much, or at least the best performing, and 0:17:31.880 --> 0:17:34.600 so it's a double magnet. Really. 0:17:35.320 --> 0:17:39.680 Next one from Mungo Park who asks I'd be interested 0:17:39.680 --> 0:17:44.280 in your take on alt meme style ETFs. There's INDIESH Kramer, 0:17:44.440 --> 0:17:48.959 Nancy Pelosi, Tracker Space, qqq fis AI, and other concept 0:17:49.000 --> 0:17:51.679 ETFs that almost seem to be a parody similar to 0:17:51.840 --> 0:17:56.440 doge or bonk. Does this cheapen finance or are these 0:17:56.520 --> 0:17:59.280 alt DeFi style ETFs important? 0:18:00.760 --> 0:18:03.679 Okay, first of all, all of them are in the 0:18:03.720 --> 0:18:06.080 same kind of like wacky bucket, but then he throws 0:18:06.119 --> 0:18:09.880 the cues in there. I would not call QQQ anything 0:18:10.400 --> 0:18:15.360 that is a powerhouse, locomotive stud ETF that is serious business. 0:18:15.400 --> 0:18:19.960 But removing that one. Yeah, Nancy Pelosi, Jim Kramer, the 0:18:20.040 --> 0:18:23.080 vice ETFs. Look, this is kind of like fun and games. 0:18:23.520 --> 0:18:25.000 But I'm fine with it, and I'll tell you why. 0:18:25.840 --> 0:18:29.119 Over the last thirty years, portfolios have changed and people 0:18:29.200 --> 0:18:32.840 have stopped. They used to date active managers. They'd go 0:18:32.880 --> 0:18:34.880 with the five star manager. When they went down, they'd 0:18:34.880 --> 0:18:38.040 go with the new five star manager, and they were 0:18:38.040 --> 0:18:40.760 trading their cores a lot. And then Vanguard came along 0:18:40.800 --> 0:18:45.080 made cheap index funds, and people got married. To be honest, 0:18:45.080 --> 0:18:48.639 they stopped dating active managers and got married to the 0:18:48.640 --> 0:18:52.960 index fund that said married life is a little boring, right, 0:18:53.040 --> 0:18:55.280 So you got to just wait thirty years for that 0:18:55.320 --> 0:18:57.800 index fund to compound. So they like to have a 0:18:57.840 --> 0:18:59.960 little fund. So there's a little portion of a portfolio 0:19:00.600 --> 0:19:03.439 for fun and games. We call it the hot sauce bucket, 0:19:03.800 --> 0:19:06.719 and there's a lot of product coming out. You can 0:19:06.760 --> 0:19:08.560 charge a little more there. People have a higher feed 0:19:08.600 --> 0:19:11.959 budget to spend there. So I'm okay with it. And 0:19:12.000 --> 0:19:15.000 if playing around and having fun and games and you know, 0:19:15.359 --> 0:19:18.359 having a little you know, scratching your speculative itch a 0:19:18.400 --> 0:19:22.280 little bit, if that keeps you from touching the core 0:19:22.400 --> 0:19:24.520 that has to comp that you know, has to grow 0:19:24.560 --> 0:19:28.160 for thirty years, it may even serve a behavioral purpose. 0:19:28.800 --> 0:19:31.040 So that's how I see it, and that's why I'm 0:19:31.080 --> 0:19:32.320 okay with the crazy stuff. 0:19:32.680 --> 0:19:38.040 Hernando Cortina asks, are actively managed ETFs taking market share 0:19:38.080 --> 0:19:40.240 from passive or from mutual funds? 0:19:40.960 --> 0:19:44.480 Almost all mutual fun I'm assuming they may active mutual funds. Yes, 0:19:44.760 --> 0:19:46.440 I think it's new money coming in and it's from 0:19:46.440 --> 0:19:50.480 active mutual funds. Passive is tough. The only situation with 0:19:50.560 --> 0:19:54.000 passive would be like in Vanguard's case, they're letting people 0:19:54.000 --> 0:19:56.400 move from the index mutual fund into the ETF. They're 0:19:56.440 --> 0:19:58.399 both doing the same thing and they can do that 0:19:58.480 --> 0:20:03.040 tax free, but removing that unique situation aside. I think 0:20:03.080 --> 0:20:06.960 in general, again, if you're in a fidelity index mutual 0:20:07.000 --> 0:20:10.080 fund that charges two basis points or VOO, which is 0:20:10.119 --> 0:20:13.360 a ETF that charges two basis points, no big difference. 0:20:14.200 --> 0:20:18.400 I think that it's harder, though, for an active manager 0:20:18.920 --> 0:20:22.160 to peel away money in passive because, like I said, 0:20:22.880 --> 0:20:26.560 most people who are impassive, especially you know, because they 0:20:26.600 --> 0:20:29.720 had to find it themselves. Passive doesn't pay any brokers 0:20:29.720 --> 0:20:31.399 to put people in it. So if you were in 0:20:31.440 --> 0:20:33.879 a passive fund, you had to find that thing, and 0:20:33.920 --> 0:20:36.400 then you're like, damn, this is a good deal. It's 0:20:36.440 --> 0:20:40.240 like getting married. And so an active manager promising like, 0:20:40.320 --> 0:20:42.359 oh I think I can beat the market is just 0:20:42.400 --> 0:20:43.760 not going to be enough to get someone out of 0:20:43.800 --> 0:20:47.320 a happy marriage. So all the money is going away 0:20:47.359 --> 0:20:50.679 from Active generally. That said, there are portions of the 0:20:50.680 --> 0:20:53.880 portfolio that people do available for Active, and one thing 0:20:53.880 --> 0:20:56.520 Active has done that's worked has gotten cheap. So now 0:20:56.560 --> 0:21:00.560 Active is getting like below twenty even ten base points 0:21:01.000 --> 0:21:03.360 and people are like, okay, well that's almost as cheap 0:21:03.359 --> 0:21:05.600 as the next one. And I know you're Active, so 0:21:05.840 --> 0:21:08.240 well you know, you're only charging me like ten basis 0:21:08.240 --> 0:21:10.760 points for the quote Active and they're getting a little more. 0:21:10.800 --> 0:21:13.760 It's more, a little more seducing droll. Low cost Active 0:21:13.800 --> 0:21:15.919 is probably pulling from high cost Active, to be honest, 0:21:16.240 --> 0:21:19.120 more than it is from passive. But you know, who knows. 0:21:19.160 --> 0:21:21.600 We'll see what happens. But right now, again, if you 0:21:21.640 --> 0:21:23.800 can get the whole market for like three basis points, 0:21:23.840 --> 0:21:25.760