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Speaker 1: Tis, I'm Joel Webber and I'm Eric Belchunis.

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Speaker 2: What are we gonna talk about today?

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Speaker 3: We wrote a note I think it was like two

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Speaker 3: or three weeks ago, no industry for old analysts because

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Speaker 3: the products that are coming out are getting crazier and

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Speaker 3: crazier and more. They use a ton of derivatives. Now

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Speaker 3: it is a very different industry in terms of new products.

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Speaker 3: Now the flows still go to very vanilla, but a

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Speaker 3: lot of the new stuff is getting pretty wild, and

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Speaker 3: there's been some of the old dogs in the industry

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Speaker 3: have been like, Hey, I don't really like this. I

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Speaker 3: don't like where this is going. Athanasios on my team

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Speaker 3: probably plays that role. And Dave Nadig, who I really

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Speaker 3: was one of one of my biggest influences from the

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Speaker 3: Index Universe days back in the back in like the

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Speaker 3: two thousands, he wrote a substack called trust in a

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Speaker 3: Black Hat World about this, and I thought we should

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Speaker 3: really explore this idea of all of these new products

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Speaker 3: being thrown at investors. I think I am more on

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Speaker 3: the libertarian side here, but I also understand the arguments

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Speaker 3: that some of these you know, products are not good

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Speaker 3: for people, and so I thought we should mix that

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Speaker 3: up right now and just get it all out in

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Speaker 3: the open.

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Speaker 4: So joining us on this episode Dave Nodding of Natti

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Speaker 4: dot Com. He's taken to Substack. He's an ETF expert

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Speaker 4: and veteran and also Wildona Hirich, processor reporter with Bloomberg News.

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Speaker 2: This time on Trillions Trust. Dave Fildona, Welcome to Trillions.

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Speaker 4: Thanks for having me, Thanks for having us, Uh, Dave,

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Speaker 4: your paper Trust in a black hat world.

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Speaker 2: Where did the idea come from?

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Speaker 5: Well, look, I think it's very clear that the regulatory

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Speaker 5: environment is going to be different going forward than it

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Speaker 5: has been for the last at least oh, I don't know,

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Speaker 5: forty years.

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Speaker 2: It's saying more than regulatory, it's everything.

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Speaker 5: Well, yeah, but I'm going to I'm trying to I'm

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Speaker 5: trying to keep it narrow so that we don't get

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Speaker 5: into a big discuss about lots of things. But just

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Speaker 5: from the perspective of a financial advisor and investor buying

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Speaker 5: products off the shelf, the world you're buying those products

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Speaker 5: and is different. Right, We're clearly working towards a world

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Speaker 5: that is more corporate friendly than it has been in

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Speaker 5: the past, that is more deregulated than it has been

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Speaker 5: in the past, and if we look at things like

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Speaker 5: product launches and what's approved and how they're sold, the

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Speaker 5: guardrails that have protected investors for a long time are

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Speaker 5: being pulled down as we speak. We can argue about

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Speaker 5: whether it's good or bad, and that's not really the conversation.

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Speaker 5: I think that's important. The question is what do you

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Speaker 5: do about it? And to me, the answer is you

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Speaker 5: need to be much more careful about both what you're

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Speaker 5: buying and who you're buying it from then we have

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Speaker 5: been in the past. So it's not just that this

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Speaker 5: kind of product or that kind of product is good

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Speaker 5: or bad. It's can you trust these kinds of players

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Speaker 5: to be on your side when something goes wrong, Like

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Speaker 5: when the market's going up every year and everything's great,

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Speaker 5: nobody cares. This is all about what happens when we

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Speaker 5: have a down twenty percent day, or you have a

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Speaker 5: broken trade, or something breaks in the derivatives markets.

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Speaker 4: Everything that you've said is so saying, Eric, how could

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Speaker 4: you take issue with any of that?

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Speaker 1: Well, well, of course we got to break this down.

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Speaker 2: Okay, when with the you like saw him tweet this.

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Speaker 3: Well he's been ranting about it for a couple months

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Speaker 3: on LinkedIn mostly and then the paper I think brought

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Speaker 3: a lot of that together where I could read it

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Speaker 3: all in one spot.

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Speaker 1: Yeah, but he's on alone again.

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Speaker 3: Athanastios is very similar, and I'm sure they represent a

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Speaker 3: portion of people who all feel this way. So I

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Speaker 3: think we just have to go through some of these

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Speaker 3: new products. Let's start with the hot topic of today,

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Speaker 3: which is putting private credit in private equity into ETFs.

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Speaker 3: You bring up XOVR, which is an ETF that recently

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Speaker 3: changed strategies to include some private equity and it added SpaceX,

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Speaker 3: and SpaceX I think is a ten percent holding. Kathy

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Speaker 3: Wood has an Interval Fund, which people say is a

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Speaker 3: better form, for a better format to deliver private equity

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Speaker 3: in where you can only get out once in a while,

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Speaker 3: but nobody cares. I mean that fund has almost nothing

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Speaker 3: and it's Kathy Wood. Here comes this new fund, XOVR,

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Speaker 3: and people as soon as it puts SpaceX, the flows came.

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Speaker 3: And it just seems to me the market wants private

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Speaker 3: equity in the ETF, even if it's not the perfect

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Speaker 3: way and comes with a bunch of public equities. And

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Speaker 3: again it's pretty small. But what's the problem here?

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Speaker 5: Essentially, So, the problem with XOVR is not that it's

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Speaker 5: doing something wrong right, it's using the same fifteen percent

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Speaker 5: the liquid bucket that every fund gets a chance to

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Speaker 5: own the problem is that putting SpaceX in as the

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Speaker 5: point to own the fund is both disingenuous. The most

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Speaker 5: you're gonna get is ten percent exposure, and that exposure

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Speaker 5: could go down significantly if you're part of a big

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Speaker 5: rash of money coming in. So you're selling a fund

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Speaker 5: based on maybe ten percent of its exposure, and then

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Speaker 5: the very thing that you're investing in is problematic to price.

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Speaker 5: They price this at one eighty five in December, it's

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Speaker 5: still priced at one eighty five today. You can go

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Speaker 5: on Forge or any number of these sort of alternative

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Speaker 5: platforms like Karta where you could trade SpaceX stock as

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Speaker 5: an individual investor, and it's trading anywhere from one hundred

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Speaker 5: and forty to two hundred and forty. So there's an

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Speaker 5: enormous band around what the SpaceX position is actually worth.

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Speaker 5: I think there's real transparency issues, among other things. These

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Speaker 5: aren't even indirectly investing in SpaceX, they're investing in another

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Speaker 5: vehicle called an SPV, which or may or may not

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Speaker 5: have fees on it. They will not tell us whether

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Speaker 5: or not that position is being eroded by a continuous

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Speaker 5: feed drain. So that lack of transparency and the lack

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Speaker 5: of ability to price it accurately means that there's perverse incentives.

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Speaker 5: They're only ever gonna mark this up because they get

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Speaker 5: paid more when they mark it up.

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Speaker 2: I'm with Dave here, this is like a game of

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Speaker 2: telephone that's gotten really distorted with Bildana. What do you think?

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Speaker 6: I think what we're all getting at is this good

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Speaker 6: for the investor?

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Speaker 7: Right?

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Speaker 6: So that's like the crux of the question is a

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Speaker 6: good or bad I've spoken with a number of issuers

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Speaker 6: recently who have, for example, single stock levered products, and

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Speaker 6: I asked them, like, what if in a year you

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Speaker 6: look back and one of your products has just done

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Speaker 6: just really terribly and people are like retail investors are

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Speaker 6: calling you and complaining or have lost tremendous amounts of money, Like,

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Speaker 6: do you have a sense of guilt or I don't know,

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Speaker 6: some sort of sense that maybe things should have been

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Speaker 6: clearer for the end investor on how risky some of

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Speaker 6: these things are and all of them to a t said,

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Speaker 6: this is America, Like people are free to buy what

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Speaker 6: they want and if it means losing money, sometimes that's

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Speaker 6: just what happens. That's the market called risk.

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Speaker 3: Your point isn't the illiquidity, it's more of what's it

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Speaker 3: being priced at every day, almost like there's some you know,

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Speaker 3: there's been some mets back in the day that held

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Speaker 3: stuff that didn't trade, and even bond ETFs in a crisis.

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Speaker 3: Sometimes those bonds are stale, they don't have pricing. So

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Speaker 3: what if they marked it more often? Would that solve

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Speaker 3: your problem?

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Speaker 5: I mean I suggested that they go interact with these

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Speaker 5: platforms on like say a weekly basis like put yourself

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Speaker 5: out there that you'll trade ten basis points of your

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Speaker 5: SpaceX position in or out. Once a week you'll set

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Speaker 5: a new mark that's based on live trading. That would

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Speaker 5: be great, that would be transparency, that would be an

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Speaker 5: actual value add to the market. This is the opposite

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Speaker 5: of that. Not only are they not doing that, they're

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Speaker 5: obscuring the very way they're acquiring these shares. That's the issue.

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Speaker 5: It's not that these securities can't and shouldn't be held

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Speaker 5: by anybody I'm not against SpaceX, I'm against the way

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Speaker 5: this is.

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Speaker 3: Yeah, you know what, I agree with him on that detail.

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Speaker 3: I think XOVR should just market. And this is what

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Speaker 3: Cliff Asten is brought up actually with the State Street one,

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Speaker 3: which is going to hold private credit, which is if

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Speaker 3: they start marking it, this could get interesting because a

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Speaker 3: lot of people buy privates in the institutional world because

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Speaker 3: they don't move. They like that NAB never moving because

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Speaker 3: it lowers volatility. They call it volatility laundering, or at

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Speaker 3: least Cliff Astnest does so. In essence, by not marking it,

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Speaker 3: you're kind of getting that institutional lowvall. But I think

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Speaker 3: they should market, and why not. You're right, these other

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Speaker 3: platforms have. Okay, so I'm half with Dave there.

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Speaker 4: Well you're being a purist here too, Dave, Right, Like,

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Speaker 4: you have this thing called it an ETF. It's got

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Speaker 4: this rapper that has superpowers. One of those things that

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Speaker 4: investors that come to expect has been transparency. And if

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Speaker 4: you're not being fully transparent in that rapper, it's like, well,

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Speaker 4: you're doing something that's against the will of the ETF.

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Speaker 5: Right, And I'm not arguing that these products should be

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Speaker 5: all shut down. What I'm saying is that the ETF

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Speaker 5: market historically has had the characteristic of being a white hat,

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Speaker 5: generally being on investor's side, and you had to be

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Speaker 5: said to do your due diligence, but you could count

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Speaker 5: on the fact that as an industry, ETFs were largely

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Speaker 5: on investor's side. With the current raft of ETFs, I

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Speaker 5: don't think you can make that claim. I think XOVR

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Speaker 5: is on er share side and will always be on

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Speaker 5: er share side.

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Speaker 2: Well, you you already did one thing, which is you

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Speaker 2: changed Eric's mind slightly.

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Speaker 4: So that's a win. Yeah, you eat out a win already.

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Speaker 4: So you want to keep going? Do you want to

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Speaker 4: keep playing this game?

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Speaker 3: Yeah? So let's look at the private credit ETF, the

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Speaker 3: Share Street Apollo private product credit ETF that I won't

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Speaker 3: go into the sec versus State Street shenanigans.

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Speaker 1: That happened, but that's a little wonky.

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Speaker 3: But this market, this product is out and according to

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Speaker 3: State Street, they hold twenty one percent in privates, which

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Speaker 3: goes above that fifteen percent threshold.

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Speaker 1: Do you have issues with that?

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Speaker 3: And State Treat obviously launched the ETF industry, and are

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Speaker 3: we like, how do you deal with something like that.

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Speaker 3: If you think that product is black hat but the

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Speaker 3: issuer's white like, what's your take on?

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Speaker 5: So again, I think there are good ways to do this,

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Speaker 5: and they are bad ways to do this. As structured,

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Speaker 5: I think this Apollo State Street product is problematic. The

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Speaker 5: only they what they hold right now is irrelevant by prospectives.

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Speaker 5: They could have thirty five percent in the Polo bonds

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Speaker 5: and another fifteen percent in other liquid stuff, so half

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Speaker 5: of this fund could be in what we would all

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Speaker 5: rationally call illiquid private credit. That thirty five percent bucket

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Speaker 5: that Apollo is going to be responsible for. The only

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Speaker 5: reason we know anything about how that's going to work

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Speaker 5: is because the SEC forced their hand on a bunch

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Speaker 5: of disclosure they chose to leave out of their formal documents.

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Speaker 5: So they're not in the SAI, they're not in the prospectus,

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Speaker 5: and they're critical right, So what are they on the

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Speaker 5: hook for providing a bid every fifteen minutes for up

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Speaker 5: to twenty five percent of the portfolio on a given day. Now,

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Speaker 5: maybe that's the right number, maybe it's not, but we

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Speaker 5: have no way of knowing because they didn't show us

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Speaker 5: a liquidity study. It's not like what Bitwise did with bitcoin,

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Speaker 5: where they published acres of research to get everybody comfortable.

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Speaker 5: This is completely just trust us. We believe twenty five

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Speaker 5: percent is enough. We believe these every fifteen minute bids

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Speaker 5: are enough, and that's what you have to count on.

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Speaker 5: And if the fund goes from one hundred billion dollars

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Speaker 5: to fifty billion dollars in one day and they have

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Speaker 5: to unload half the portfolio, oh well, well it seems

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Speaker 5: like this is setting us up to be right back

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Speaker 5: in third avenue.

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Speaker 2: Yeah.

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Speaker 1: Well, hold on a second, though. But here's the thing

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Speaker 1: about ETFs.

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Speaker 3: Even if we had that worst case scenario and only

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Speaker 3: twenty five percent of the private credit, which again is

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Speaker 3: only thirty five percent of the portfolio at max, so

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Speaker 3: you're looking at maybe a slice of the portfolio is illiquid, frozen,

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Speaker 3: the market makers of this world will still make a

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Speaker 3: market in it. They'll just stretch out the arbitrage band,

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Speaker 3: so it'll trade at a premium or discount, probably a discount.

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Speaker 3: And you know J ANDK traded a discount at eight

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Speaker 3: percent during the financial crisis for the same reason. So

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Speaker 3: I just think that investors would rather have all that

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Speaker 3: jazz and have the ETF turn into a semi closed

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Speaker 3: end fund in those situations, then have it in a

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Speaker 3: more proper wrapper like an interval fund or e a

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Speaker 3: mutual fund or a hedge fund which they have no

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Speaker 3: trust in.

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Speaker 5: But do you know that these funds are just going

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Speaker 5: to be sold on yield?

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Speaker 2: Right?

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Speaker 5: That's the only way this fund is being sold is hey,

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Speaker 5: mister financial advisor, buy our private credit ETF because you'll

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Speaker 5: get better yields for the same credit quality as you

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Speaker 5: will get somewhere else. Nobody is saying we want privates

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Speaker 5: because it's structurally different. They just want the better yield.

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Speaker 5: So they're not buying this as a long term speculative play.

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Speaker 5: They're buying yield. And when that yield locks up, as

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Speaker 5: you said, I think that's going to be a problem. Again,

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Speaker 5: not saying the products should go away, I'm saying advisors

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Speaker 5: need to ask themselves. Do you trust Apollo to be

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Speaker 5: on your side when we have a credit crisis?

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Speaker 1: I don't.

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Speaker 5: They're going to be very much on one side.

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Speaker 3: Well follows, But do you trust State Street? State Street?

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Speaker 3: Now this is an active fund. If it was passive,

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Speaker 3: I would agree with you. But State Street has PMS

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Speaker 3: and I talk to them. They're like, we're out there

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Speaker 3: trying to find good deals, and they in the perspectives

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Speaker 3: they can go beyond Apollo if they need to.

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Speaker 1: So I think, in in.

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Speaker 3: As essence, you are giving your trust to stay streat

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Speaker 3: as an active manager to work all this out. And

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Speaker 3: I think, I don't know, maybe it's a good guinea pig,

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Speaker 3: like we'll see how this works.

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Speaker 1: It's only a portion of privates. I don't know. I

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Speaker 1: this time, I'm not convinced by Dave.

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Speaker 5: Here's the positive coming back. I think it's going to

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Speaker 5: be great that we get to see how they're marking

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Speaker 5: these bonds every day. It's too bad that you have

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Speaker 5: to have like a pH d in Excel to actually

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Speaker 5: track it day to day. But we are getting I mean,

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Speaker 5: already we're getting interesting pricing on private credit by digging

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Speaker 5: into the fund, but you're gonna have to track it

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Speaker 5: by hand because half the stuff doesn't have an icon.

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Speaker 2: Bill Donald, let's send these guys back to the corners.

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Speaker 2: Get some water.

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Speaker 6: I have to say, this is so fun to just

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Speaker 6: sit here and listen.

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Speaker 2: I'm glad that we could join.

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Speaker 6: Can we do this every week?

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Speaker 1: Are you ready for Round three?

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Speaker 2: Glad that we could join.

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Speaker 4: Yes, hold on, well, just on the private credit stuff

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Speaker 4: like what if anything jumps out at you and begs

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Speaker 4: for a little bit more finessing.

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Speaker 6: So it's early days still, but like super early days launch.

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Speaker 6: But one way to maybe track the appetite from people

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Speaker 6: for this is obviously via flows, and they are not

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Speaker 6: there are no, they're non existent. Yeah so far unless

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Speaker 6: there's some huge delay in the data coming out, but

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Speaker 6: there hasn't been much going on.

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Speaker 1: The volume's ok, eight million the first year. It's not bad.

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Speaker 3: It's pretty good actually, and then the assets were fifty

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Speaker 3: so they had seed.

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Speaker 1: But yeah, you're right. Also it's credit.

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Speaker 3: I just think xov are getting private equity would be

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Speaker 3: a bigger rockstar launch. This is still bonds and it's

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Speaker 3: still more boring and slow moving.

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Speaker 2: Hey, do you need a pep tacotol?

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Speaker 1: No, I'm good, I'm ready to go.

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Speaker 2: Yeah, take the towel off. You're going back in.

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Speaker 1: I'm like Matt Foley.

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Speaker 3: I've been down the basement eating no dos for the

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Speaker 3: past five hours.

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Speaker 2: Okay, get back in there.

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Speaker 3: You don't take any ribshots, okay, okay, okay, ready. So

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Speaker 3: here you have this thing called leverage ets for chaos goblins.

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Speaker 3: So what's a chaos goblin. Yeah, that's a great visual.

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Speaker 3: By the way, that sounds like a good band name.

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Speaker 3: I thought pretty much.

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Speaker 5: Jim Kramer. Jim Kramer is the ultimate chaos goblin. Right,

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Speaker 5: He's just gonna say whatever he's gonna say. The more

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Speaker 5: chaotic it is, the better. And look, a lot of

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Speaker 5: a lot of Wall Street finance, a lot of Wall

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Speaker 5: Street medias are just chaos goblins. And that's largely what

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Speaker 5: a lot of these sort of crazy like ninety percent

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Speaker 5: yield on bitcoin type products are. Four They're not actually

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Speaker 5: particularly useful. They are headline grabbing, hoping to catch people

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Speaker 5: unawares so that they can, you know, in the case

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Speaker 5: of like the yield Max stuff, just get all their

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Speaker 5: money back and wash it through their return of capital

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Speaker 5: gains situation.

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Speaker 3: Okay, well there's two things. There's leverage ETFs and there's

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Speaker 3: yield max. Let's go yield max first, since you brought

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Speaker 3: it up. Okay, yield max is basically like I was

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Speaker 3: the Money Show, which is all retail like a lot

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Speaker 3: of like older investors, and I spoke at the inside

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Speaker 3: the booth room, which is like I feel like a

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Speaker 3: carnival barkroom up there, trying to get people attracted to

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Speaker 3: my whole thing.

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Speaker 1: It's good practice ground to speaking honestly.

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Speaker 3: So I'm going over like a presentation called etf Hot

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Speaker 3: Sauce the pros and cons, and people are like, there's

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Speaker 3: like twelve people there. I start going over yield Max

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Speaker 3: and I show these yields and it's like ninety eighty

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Speaker 3: one hundred percent, and like the people start coming over.

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Speaker 3: I can see jewel. My audience doubled. It was like

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Speaker 3: Pavlovian dogs. I was like ringing some bell and I

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Speaker 3: was like wow, And I said, wait, guys, all you're

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Speaker 3: really doing is giving your total return and taking it

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Speaker 3: back in the form of yield. It's you're almost like

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Speaker 3: taking from one hand and giving it to the other.

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Speaker 3: I don't think they care. I think I just think,

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Speaker 3: you know we have this, you know that Journey song.

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Speaker 3: Anyway you want it. They some corporations have taken on

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Speaker 3: that as a commercial. Any way you want it, that's

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Speaker 3: the way we'll get it. I think, if if you

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Speaker 3: want your return in the form of yield through these

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Speaker 3: right out of the money options writing strategies, well we'll

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Speaker 3: give it to you that way, If that makes you

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Speaker 3: feel good, you get to all in the income. I

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Speaker 3: don't know that's how I see it. I agree with you.

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Speaker 3: I wouldn't tell my mom to invest in these. But

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Speaker 3: if somebody was just love seeing that income versus going

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Speaker 3: and seeing total return, is that Is there any harm

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Speaker 3: in that?

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Speaker 2: Also, Dave, did he just admit to being a chaos goblin?

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Speaker 5: I think so. Look the again, nobody's doing anything illegal here.

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Speaker 5: This to me is about as an advisor, where are

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Speaker 5: you putting your trust relationships? As an investor, where you're

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Speaker 5: putting your trust relationships. There is nothing wrong with taking

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00:17:23,640 --> 00:17:26,359
Speaker 5: a volatile asset like bitcoin and trying to turn it

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Speaker 5: into yield. There are lots of people trying to do

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Speaker 5: that all across the ETF industry. What's wrong, or what

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00:17:32,000 --> 00:17:35,760
Speaker 5: I have problems with, is that to find out the

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Speaker 5: fact that your eighty four percent yield is actually showing

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Speaker 5: up as return of your own capital every single time

374
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Speaker 5: you have to go three pages deep and then open

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Speaker 5: a PDF. They're not leading with the most critical feature

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Speaker 5: of this product, which is it is a way to

377
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Speaker 5: generate return of capital, not to generate actual meaningful income.

378
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Speaker 5: So they're not on your side. They're trying to convince

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Speaker 5: you that you're getting something that you're not actually getting.

380
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Speaker 5: There are other ways to do that. I actually think

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Speaker 5: our old friends like Direction and pro Shares and the

382
00:18:05,200 --> 00:18:07,840
Speaker 5: leverage side, who now are in this game as well,

383
00:18:08,200 --> 00:18:10,880
Speaker 5: are actually examples of doing this about as gray hat

384
00:18:10,920 --> 00:18:14,120
Speaker 5: as you can. They're over disclosed. They're warning you against

385
00:18:14,160 --> 00:18:17,520
Speaker 5: these things. They're putting the warts out front and then

386
00:18:17,680 --> 00:18:20,800
Speaker 5: convincing you of the benefits of the products. They're much

387
00:18:20,840 --> 00:18:22,680
Speaker 5: more on your side in this case.

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Speaker 2: Who said, are you on bil Donna?

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Speaker 6: I don't want to take sides here. I like both

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00:18:29,160 --> 00:18:29,800
Speaker 6: of you a lot.

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00:18:32,359 --> 00:18:34,399
Speaker 2: Okay, son right there?

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00:18:34,760 --> 00:18:35,440
Speaker 6: Yeah, exactly.

393
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Speaker 3: Part two of this one is the double leverage stock

394
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Speaker 3: ETFs okay, NVDL. The Donna's covered this, ye, And these

395
00:18:47,400 --> 00:18:49,720
Speaker 3: have been surprise hits. Some are five six billions. I

396
00:18:49,760 --> 00:18:52,840
Speaker 3: mean sometimes the team were like, dude, what are we

397
00:18:52,920 --> 00:18:54,840
Speaker 3: doing here? We should just put We feel like we

398
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Speaker 3: missed the easiest idea ever. Just slap leverage on a

399
00:18:58,280 --> 00:19:00,400
Speaker 3: stock that's doing well and like and then you can

400
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Speaker 3: just go buy an island.

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Speaker 6: Okay, anyway, but there's even crazier stuff now. And I

402
00:19:04,760 --> 00:19:07,119
Speaker 6: think we discussed one of them once the battle shares

403
00:19:07,200 --> 00:19:10,240
Speaker 6: battle shares, yea, and now we're getting one hundred hundred like.

404
00:19:10,280 --> 00:19:14,720
Speaker 3: Yeah, parlay shares, right exactly. So look, sports gambling is legal.

405
00:19:15,280 --> 00:19:18,040
Speaker 3: This is a portion of that. And I'll go one further.

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Speaker 1: I get it.

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00:19:19,080 --> 00:19:20,960
Speaker 3: These are not products that I would say you should

408
00:19:20,960 --> 00:19:24,040
Speaker 3: buy and hold, but if you trade them, you know,

409
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Speaker 3: I think these are for young people who are degenerates

410
00:19:27,080 --> 00:19:29,120
Speaker 3: and just love gambling, and we'll learn the hard way

411
00:19:29,800 --> 00:19:32,359
Speaker 3: and then become Vanguard investors in their thirties on that's

412
00:19:32,400 --> 00:19:36,760
Speaker 3: one thing. Or they are hot sauce fun for board

413
00:19:36,880 --> 00:19:40,680
Speaker 3: as hell Vanguard investors who are basically decided to marry

414
00:19:40,720 --> 00:19:44,240
Speaker 3: Vanguard and wait thirty years for all the compounding and

415
00:19:44,280 --> 00:19:46,120
Speaker 3: that magic to happen. But you know, I'm sorry, it's

416
00:19:46,119 --> 00:19:48,520
Speaker 3: like watching paint dry. So they have ten percent to

417
00:19:48,560 --> 00:19:50,840
Speaker 3: go hog wild, in which you could argue is a

418
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Speaker 3: behavioral hack not to touch the other ninety percent. If

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00:19:56,119 --> 00:19:58,679
Speaker 3: that keeps them having a little fun and occupied with

420
00:19:58,720 --> 00:20:02,760
Speaker 3: their speculative foem, well then maybe it's it's fine. And

421
00:20:02,880 --> 00:20:05,800
Speaker 3: these products, again, they are one percent of all assets,

422
00:20:06,160 --> 00:20:08,480
Speaker 3: but maybe seventy eight percent of the volume something like that.

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00:20:08,800 --> 00:20:11,159
Speaker 3: So I do see them as rated our products. I

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Speaker 3: see them as dangerous, but I do see them as

425
00:20:15,040 --> 00:20:17,560
Speaker 3: just like the same old story as the old days

426
00:20:17,560 --> 00:20:20,639
Speaker 3: of ets with the triple leveraged index funds and people

427
00:20:20,640 --> 00:20:22,000
Speaker 3: who like to have fun. And then there'll be a

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00:20:22,040 --> 00:20:24,359
Speaker 3: hard rain and it'll wash a lot of these products

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Speaker 3: away and then we'll start over again.

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Speaker 6: There's there's a list. I was looking at a list

431
00:20:28,680 --> 00:20:31,119
Speaker 6: of upcoming ETFs like they're set to launch in the

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Speaker 6: coming days, and there's some there's some really good ones.

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Speaker 6: There's Spcy Spicy and it's one hundred percent SMCI one

434
00:20:39,080 --> 00:20:41,399
Speaker 6: hundred percent in the video for example. There you go,

435
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Speaker 6: This is the type of thing that I think would

436
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Speaker 6: fall on the discat.

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00:20:44,440 --> 00:20:46,760
Speaker 5: Yeah, and I'm sure it's free too, right.

438
00:20:47,160 --> 00:20:48,600
Speaker 1: Yeah, they do all charge one percent.

439
00:20:48,680 --> 00:20:50,960
Speaker 3: That's why it's Yeah, I mean, we're kind of like

440
00:20:51,000 --> 00:20:53,520
Speaker 3: lottery tickets for the issuers in a way.

441
00:20:53,600 --> 00:20:55,679
Speaker 1: So, but people hardly know.

442
00:20:55,920 --> 00:20:57,440
Speaker 3: If you don't hold it a long time, the expense

443
00:20:57,520 --> 00:21:00,000
Speaker 3: ratio isn't as meaningful versus a mutual fun one percent

444
00:21:00,240 --> 00:21:00,960
Speaker 3: the whole long term.

445
00:21:01,000 --> 00:21:03,879
Speaker 5: But that they still get paid, right, That's the problem

446
00:21:03,920 --> 00:21:06,000
Speaker 5: is once they're trading, they get paid on the fact

447
00:21:06,040 --> 00:21:08,960
Speaker 5: that there's now enough inventory out there because people are

448
00:21:08,960 --> 00:21:10,720
Speaker 5: trading them like crazy. That's how you end up with

449
00:21:10,760 --> 00:21:13,400
Speaker 5: five billion in there, not because people are holding five

450
00:21:13,440 --> 00:21:14,800
Speaker 5: billion for six months.

451
00:21:14,920 --> 00:21:18,280
Speaker 1: But is there anything wrong with being a degen as a.

452
00:21:18,200 --> 00:21:20,160
Speaker 2: Young person only on the weekends?

453
00:21:20,320 --> 00:21:22,360
Speaker 1: Yeah, or having ten percent to gen.

454
00:21:23,840 --> 00:21:27,560
Speaker 5: Look, I'm not telling people they can't gamble, right, I'm

455
00:21:27,600 --> 00:21:31,159
Speaker 5: not saying casino shouldn't exist. Again, My point here is

456
00:21:31,600 --> 00:21:34,359
Speaker 5: these products are not on your side, and I also

457
00:21:34,440 --> 00:21:37,879
Speaker 5: think that they hide real structural issues like the battle

458
00:21:37,880 --> 00:21:41,879
Speaker 5: shares products. For example, two times Tesla minus one times Ford.

459
00:21:42,440 --> 00:21:44,560
Speaker 5: That product, if you model it out, which I have,

460
00:21:45,119 --> 00:21:47,479
Speaker 5: there is no world in which that looks like you

461
00:21:47,520 --> 00:21:48,200
Speaker 5: think it looks.

462
00:21:48,520 --> 00:21:49,360
Speaker 2: It is so.

463
00:21:49,600 --> 00:21:52,440
Speaker 5: Wildly path dependent that if you hold it for more

464
00:21:52,520 --> 00:21:55,919
Speaker 5: than a day or two, you're getting some strange pattern

465
00:21:55,920 --> 00:21:58,959
Speaker 5: of returns, which is not Tesla winning and Ford losing.

466
00:21:59,320 --> 00:22:02,640
Speaker 5: It's some it's it's just a weird pattern of returns.

467
00:22:02,960 --> 00:22:05,440
Speaker 5: So these are going to be very unpredictable. People are

468
00:22:05,440 --> 00:22:07,240
Speaker 5: buying them because they think they're going to get what

469
00:22:07,280 --> 00:22:09,320
Speaker 5: they say on the on the hood. But you know

470
00:22:09,400 --> 00:22:11,560
Speaker 5: your three x in video if you hold it for

471
00:22:11,600 --> 00:22:14,200
Speaker 5: four days isn't gonna look like three X in video,

472
00:22:14,560 --> 00:22:17,080
Speaker 5: because the more volatile the thing under the hood is,

473
00:22:17,119 --> 00:22:19,359
Speaker 5: the less predictable the path dependency is.

474
00:22:20,000 --> 00:22:22,360
Speaker 3: Now those are all like hot sauce. And I think

475
00:22:22,400 --> 00:22:24,240
Speaker 3: this debate is going to go on for a long time.

476
00:22:25,320 --> 00:22:27,760
Speaker 3: And thank you for giving us all your points, and

477
00:22:28,359 --> 00:22:28,640
Speaker 3: you know.

478
00:22:28,680 --> 00:22:29,560
Speaker 2: I agree says that.

479
00:22:30,840 --> 00:22:32,160
Speaker 1: But one thing you brought up.

480
00:22:32,400 --> 00:22:34,600
Speaker 3: We had a call earlier because I had so much

481
00:22:34,640 --> 00:22:36,800
Speaker 3: to go over with him, and you said something like

482
00:22:37,400 --> 00:22:39,680
Speaker 3: about Blackrock, and I thought that was interesting because all

483
00:22:39,680 --> 00:22:41,080
Speaker 3: these are like smaller issuers.

484
00:22:41,080 --> 00:22:41,479
Speaker 1: I get it.

485
00:22:41,840 --> 00:22:45,400
Speaker 3: But you said Blackrock even caught your radar a little

486
00:22:45,440 --> 00:22:49,720
Speaker 3: bit with their abandonment of ESG, and how maybe they

487
00:22:49,760 --> 00:22:51,520
Speaker 3: have a little black hat in that case, and I

488
00:22:51,600 --> 00:22:52,600
Speaker 3: wanted to explore that.

489
00:22:52,800 --> 00:22:55,960
Speaker 5: Oh one hundred percent. So I look, whether you're I

490
00:22:56,240 --> 00:22:58,240
Speaker 5: know you were, Eric, and you and I don't disagree.

491
00:22:58,240 --> 00:22:58,480
Speaker 1: You don't.

492
00:22:58,520 --> 00:23:00,960
Speaker 5: You and I don't agree on ESG very much. But

493
00:23:01,000 --> 00:23:03,920
Speaker 5: my point is, if you're an institutional investor, and let's

494
00:23:03,960 --> 00:23:06,400
Speaker 5: say you're on the committee for the Episcopal Church Endowment

495
00:23:06,720 --> 00:23:08,679
Speaker 5: and you made a giant investment and a bunch of

496
00:23:08,680 --> 00:23:12,840
Speaker 5: Blackrock funds because they met your stated mandate written into

497
00:23:12,880 --> 00:23:16,280
Speaker 5: your rules about whether you can invest in oil, and

498
00:23:16,359 --> 00:23:19,480
Speaker 5: now they've walked away from those very premises. They are

499
00:23:19,520 --> 00:23:22,479
Speaker 5: not on your side. They have abandoned a mandate that

500
00:23:22,600 --> 00:23:25,840
Speaker 5: you gave them money for. That is a black hat move.

501
00:23:26,119 --> 00:23:27,920
Speaker 5: Now you can argue it's the right call, it's the

502
00:23:27,960 --> 00:23:29,720
Speaker 5: right thing for the country. I'm not making any of

503
00:23:29,720 --> 00:23:32,439
Speaker 5: those points. My point is if I've given money to

504
00:23:32,480 --> 00:23:34,679
Speaker 5: somebody based on how they're going to run my money

505
00:23:34,920 --> 00:23:37,560
Speaker 5: and they changed that and they don't immediately give me

506
00:23:37,600 --> 00:23:39,879
Speaker 5: my money back, that is a black hat move. And

507
00:23:39,960 --> 00:23:42,080
Speaker 5: I think it's also true that you're going to see

508
00:23:42,240 --> 00:23:45,280
Speaker 5: firms like Blackrock launch whatever they need to launch to

509
00:23:45,320 --> 00:23:48,199
Speaker 5: stay competitive. They've already doing it with buffered funds. You

510
00:23:48,240 --> 00:23:50,480
Speaker 5: know they're going to say we'll never do single stock leverage,

511
00:23:50,480 --> 00:23:51,880
Speaker 5: but I'm never going to say never.

512
00:23:52,600 --> 00:23:54,200
Speaker 1: I agree they are very opportunistic.

513
00:23:54,200 --> 00:23:56,200
Speaker 3: But would you say this thing about Vanguard because Vanguard

514
00:23:56,560 --> 00:23:59,520
Speaker 3: wasn't as pronounced about ESG. But they also they think

515
00:23:59,520 --> 00:24:02,639
Speaker 3: they withdrew from the Climate Asset Managers thing. They did

516
00:24:02,680 --> 00:24:05,159
Speaker 3: a little stepping back, but they were never that loud

517
00:24:05,280 --> 00:24:06,119
Speaker 3: in the first place.

518
00:24:07,280 --> 00:24:09,960
Speaker 5: Yeah, I think Vanguard is just gonna be Vanguard, and

519
00:24:10,080 --> 00:24:12,239
Speaker 5: look the things Vanguard needs to be paying attention to,

520
00:24:12,400 --> 00:24:15,160
Speaker 5: like say, fixing their website and updating their customer service plan,

521
00:24:15,880 --> 00:24:18,000
Speaker 5: those they don't seem to be investing in those either.

522
00:24:18,080 --> 00:24:20,600
Speaker 5: So it's they're clearly just going to continue to be

523
00:24:20,760 --> 00:24:22,679
Speaker 5: cheap and plenty of people are gonna love that.

524
00:24:23,320 --> 00:24:25,359
Speaker 2: Sing and real quick.

525
00:24:26,040 --> 00:24:28,959
Speaker 3: I used to watch him and Matt Hogan go up

526
00:24:28,960 --> 00:24:31,639
Speaker 3: on a stage and like I was like in the

527
00:24:31,680 --> 00:24:34,119
Speaker 3: front row, and these guys gave one of the greatest

528
00:24:34,359 --> 00:24:38,000
Speaker 3: presentations every year. Now Matt Hogan has gone full crypto,

529
00:24:38,840 --> 00:24:41,120
Speaker 3: and I wanted to ask Dave just last about about that.

530
00:24:41,560 --> 00:24:43,520
Speaker 3: You have crypto in here, your your little mix. You

531
00:24:43,520 --> 00:24:45,800
Speaker 3: say it's not good for it's an anti American thing,

532
00:24:46,240 --> 00:24:48,080
Speaker 3: but I know you love Matt, and I was curious

533
00:24:48,119 --> 00:24:50,720
Speaker 3: of your how you've maybe.

534
00:24:50,560 --> 00:24:51,840
Speaker 2: Worked out reconciled.

535
00:24:51,920 --> 00:24:54,080
Speaker 3: Yeah, what about a US spot like a bit B.

536
00:24:54,760 --> 00:25:00,159
Speaker 3: Let's talk BitB Matt versus. Let's just take all the

537
00:25:00,160 --> 00:25:02,639
Speaker 3: crazy crypto stuff and the all coins off the table,

538
00:25:03,040 --> 00:25:05,000
Speaker 3: just the straight spot bitcoin ETF thoughts.

539
00:25:06,520 --> 00:25:08,240
Speaker 5: I think that there are black hat and white hat

540
00:25:08,240 --> 00:25:10,480
Speaker 5: players in crypto, and I would put in not just

541
00:25:10,520 --> 00:25:12,399
Speaker 5: because I love Matt. I would put bit wise very

542
00:25:12,520 --> 00:25:16,200
Speaker 5: much in the white hat camp because they're the ones

543
00:25:16,240 --> 00:25:19,280
Speaker 5: doing the research for the benefit of investors to get

544
00:25:19,280 --> 00:25:22,520
Speaker 5: these products across the line with real information. There's a

545
00:25:22,520 --> 00:25:25,760
Speaker 5: big difference between that and what we're seeing elsewhere in

546
00:25:25,800 --> 00:25:29,879
Speaker 5: the crypto ecosystem. So my diss on crypto is that

547
00:25:29,960 --> 00:25:32,359
Speaker 5: if you're putting all your money in crypto, you're effectively

548
00:25:32,440 --> 00:25:34,879
Speaker 5: betting on the fact that America is in decline, right

549
00:25:34,920 --> 00:25:37,520
Speaker 5: because you're counting on bitcoin going to five hundred thousand

550
00:25:37,640 --> 00:25:41,399
Speaker 5: dollars per bitcoin. That is not good for the dollar. Like,

551
00:25:41,440 --> 00:25:44,000
Speaker 5: I think we need to recognize that. I don't think

552
00:25:44,040 --> 00:25:46,440
Speaker 5: all crypto is evil, and I don't think crypto shouldn't

553
00:25:46,480 --> 00:25:48,120
Speaker 5: be in ets, but I do think there are good

554
00:25:48,119 --> 00:25:49,160
Speaker 5: ways and bad ways.

555
00:25:48,960 --> 00:25:49,320
Speaker 2: To do it.

556
00:25:49,520 --> 00:25:52,359
Speaker 3: What if it's a bet against the US government not

557
00:25:52,560 --> 00:25:57,159
Speaker 3: being fiscally responsible, not against the America itself, and it

558
00:25:57,200 --> 00:26:02,080
Speaker 3: was invented in America, Well maybe.

559
00:26:02,560 --> 00:26:03,200
Speaker 2: We don't know.

560
00:26:03,480 --> 00:26:05,040
Speaker 1: Okay, No, No, I.

561
00:26:05,320 --> 00:26:08,640
Speaker 5: Think I think it's a fair point. I will say

562
00:26:08,680 --> 00:26:10,520
Speaker 5: that I think it is very true that if you're

563
00:26:10,520 --> 00:26:13,000
Speaker 5: taking your shiny rocks out of the country and putting

564
00:26:13,040 --> 00:26:15,640
Speaker 5: them on an island somewhere, you're not betting on America,

565
00:26:15,720 --> 00:26:17,119
Speaker 5: You're betting on something else.

566
00:26:17,600 --> 00:26:19,760
Speaker 6: But what if we have the strategic crypto Reserve?

567
00:26:20,600 --> 00:26:22,360
Speaker 5: Oh god, dude, we have another hour?

568
00:26:22,560 --> 00:26:26,040
Speaker 1: Yeah, I know, Damn is that an off ramp or what?

569
00:26:26,880 --> 00:26:28,080
Speaker 1: I don't know. If we can do that, then we're

570
00:26:28,080 --> 00:26:29,760
Speaker 1: going to go straight into the lake on that ran

571
00:26:30,680 --> 00:26:30,960
Speaker 1: you know.

572
00:26:31,040 --> 00:26:32,720
Speaker 2: I think that's what I've been on those. I think

573
00:26:32,720 --> 00:26:33,880
Speaker 2: we call that a mic drop.

574
00:26:35,240 --> 00:26:35,280
Speaker 4: It.

575
00:26:36,280 --> 00:26:38,520
Speaker 2: Dave Nating, thanks for joining us on Trillions.

576
00:26:38,160 --> 00:26:40,000
Speaker 6: Thanks for having us, Thanks for having me.

577
00:26:44,160 --> 00:26:47,080
Speaker 7: Thanks for listening to Trillions until next time. You can

578
00:26:47,160 --> 00:26:52,000
Speaker 7: find us on the Bloomberg Terminal, Bloomberg dot com, Apple Podcasts, Spotify,

579
00:26:52,640 --> 00:26:53,480
Speaker 7: or wherever else.

580
00:26:53,320 --> 00:26:55,560
Speaker 2: You'd like to listen. We'd love to hear from you.

581
00:26:55,960 --> 00:26:58,400
Speaker 7: We're on Twitter, I'm at Joel Webber Show.

582
00:26:58,840 --> 00:27:00,600
Speaker 2: He's at Airic Vultunas.

583
00:27:01,760 --> 00:27:07,520
Speaker 7: This episode of Trillions was produced by Magnus Hendrickson. Bye