Speaker 1: Tis, I'm Joel Webber and I'm Eric Belchunis.
Speaker 2: What are we gonna talk about today?
Speaker 3: We wrote a note I think it was like two
Speaker 3: or three weeks ago, no industry for old analysts because
Speaker 3: the products that are coming out are getting crazier and
Speaker 3: crazier and more. They use a ton of derivatives. Now
Speaker 3: it is a very different industry in terms of new products.
Speaker 3: Now the flows still go to very vanilla, but a
Speaker 3: lot of the new stuff is getting pretty wild, and
Speaker 3: there's been some of the old dogs in the industry
Speaker 3: have been like, Hey, I don't really like this. I
Speaker 3: don't like where this is going. Athanasios on my team
Speaker 3: probably plays that role. And Dave Nadig, who I really
Speaker 3: was one of one of my biggest influences from the
Speaker 3: Index Universe days back in the back in like the
Speaker 3: two thousands, he wrote a substack called trust in a
Speaker 3: Black Hat World about this, and I thought we should
Speaker 3: really explore this idea of all of these new products
Speaker 3: being thrown at investors. I think I am more on
Speaker 3: the libertarian side here, but I also understand the arguments
Speaker 3: that some of these you know, products are not good
Speaker 3: for people, and so I thought we should mix that
Speaker 3: up right now and just get it all out in
Speaker 3: the open.
Speaker 4: So joining us on this episode Dave Nodding of Natti
Speaker 4: dot Com. He's taken to Substack. He's an ETF expert
Speaker 4: and veteran and also Wildona Hirich, processor reporter with Bloomberg News.
Speaker 2: This time on Trillions Trust. Dave Fildona, Welcome to Trillions.
Speaker 4: Thanks for having me, Thanks for having us, Uh, Dave,
Speaker 4: your paper Trust in a black hat world.
Speaker 2: Where did the idea come from?
Speaker 5: Well, look, I think it's very clear that the regulatory
Speaker 5: environment is going to be different going forward than it
Speaker 5: has been for the last at least oh, I don't know,
Speaker 5: forty years.
Speaker 2: It's saying more than regulatory, it's everything.
Speaker 5: Well, yeah, but I'm going to I'm trying to I'm
Speaker 5: trying to keep it narrow so that we don't get
Speaker 5: into a big discuss about lots of things. But just
Speaker 5: from the perspective of a financial advisor and investor buying
Speaker 5: products off the shelf, the world you're buying those products
Speaker 5: and is different. Right, We're clearly working towards a world
Speaker 5: that is more corporate friendly than it has been in
Speaker 5: the past, that is more deregulated than it has been
Speaker 5: in the past, and if we look at things like
Speaker 5: product launches and what's approved and how they're sold, the
Speaker 5: guardrails that have protected investors for a long time are
Speaker 5: being pulled down as we speak. We can argue about
Speaker 5: whether it's good or bad, and that's not really the conversation.
Speaker 5: I think that's important. The question is what do you
Speaker 5: do about it? And to me, the answer is you
Speaker 5: need to be much more careful about both what you're
Speaker 5: buying and who you're buying it from then we have
Speaker 5: been in the past. So it's not just that this
Speaker 5: kind of product or that kind of product is good
Speaker 5: or bad. It's can you trust these kinds of players
Speaker 5: to be on your side when something goes wrong, Like
Speaker 5: when the market's going up every year and everything's great,
Speaker 5: nobody cares. This is all about what happens when we
Speaker 5: have a down twenty percent day, or you have a
Speaker 5: broken trade, or something breaks in the derivatives markets.
Speaker 4: Everything that you've said is so saying, Eric, how could
Speaker 4: you take issue with any of that?
Speaker 1: Well, well, of course we got to break this down.
Speaker 2: Okay, when with the you like saw him tweet this.
Speaker 3: Well he's been ranting about it for a couple months
Speaker 3: on LinkedIn mostly and then the paper I think brought
Speaker 3: a lot of that together where I could read it
Speaker 3: all in one spot.
Speaker 1: Yeah, but he's on alone again.
Speaker 3: Athanastios is very similar, and I'm sure they represent a
Speaker 3: portion of people who all feel this way. So I
Speaker 3: think we just have to go through some of these
Speaker 3: new products. Let's start with the hot topic of today,
Speaker 3: which is putting private credit in private equity into ETFs.
Speaker 3: You bring up XOVR, which is an ETF that recently
Speaker 3: changed strategies to include some private equity and it added SpaceX,
Speaker 3: and SpaceX I think is a ten percent holding. Kathy
Speaker 3: Wood has an Interval Fund, which people say is a
Speaker 3: better form, for a better format to deliver private equity
Speaker 3: in where you can only get out once in a while,
Speaker 3: but nobody cares. I mean that fund has almost nothing
Speaker 3: and it's Kathy Wood. Here comes this new fund, XOVR,
Speaker 3: and people as soon as it puts SpaceX, the flows came.
Speaker 3: And it just seems to me the market wants private
Speaker 3: equity in the ETF, even if it's not the perfect
Speaker 3: way and comes with a bunch of public equities. And
Speaker 3: again it's pretty small. But what's the problem here?
Speaker 5: Essentially, So, the problem with XOVR is not that it's
Speaker 5: doing something wrong right, it's using the same fifteen percent
Speaker 5: the liquid bucket that every fund gets a chance to
Speaker 5: own the problem is that putting SpaceX in as the
Speaker 5: point to own the fund is both disingenuous. The most
Speaker 5: you're gonna get is ten percent exposure, and that exposure
Speaker 5: could go down significantly if you're part of a big
Speaker 5: rash of money coming in. So you're selling a fund
Speaker 5: based on maybe ten percent of its exposure, and then
Speaker 5: the very thing that you're investing in is problematic to price.
Speaker 5: They price this at one eighty five in December, it's
Speaker 5: still priced at one eighty five today. You can go
Speaker 5: on Forge or any number of these sort of alternative
Speaker 5: platforms like Karta where you could trade SpaceX stock as
Speaker 5: an individual investor, and it's trading anywhere from one hundred
Speaker 5: and forty to two hundred and forty. So there's an
Speaker 5: enormous band around what the SpaceX position is actually worth.
Speaker 5: I think there's real transparency issues, among other things. These
Speaker 5: aren't even indirectly investing in SpaceX, they're investing in another
Speaker 5: vehicle called an SPV, which or may or may not
Speaker 5: have fees on it. They will not tell us whether
Speaker 5: or not that position is being eroded by a continuous
Speaker 5: feed drain. So that lack of transparency and the lack
Speaker 5: of ability to price it accurately means that there's perverse incentives.
Speaker 5: They're only ever gonna mark this up because they get
Speaker 5: paid more when they mark it up.
Speaker 2: I'm with Dave here, this is like a game of
Speaker 2: telephone that's gotten really distorted with Bildana. What do you think?
Speaker 6: I think what we're all getting at is this good
Speaker 6: for the investor?
Speaker 7: Right?
Speaker 6: So that's like the crux of the question is a
Speaker 6: good or bad I've spoken with a number of issuers
Speaker 6: recently who have, for example, single stock levered products, and
Speaker 6: I asked them, like, what if in a year you
Speaker 6: look back and one of your products has just done
Speaker 6: just really terribly and people are like retail investors are
Speaker 6: calling you and complaining or have lost tremendous amounts of money, Like,
Speaker 6: do you have a sense of guilt or I don't know,
Speaker 6: some sort of sense that maybe things should have been
Speaker 6: clearer for the end investor on how risky some of
Speaker 6: these things are and all of them to a t said,
Speaker 6: this is America, Like people are free to buy what
Speaker 6: they want and if it means losing money, sometimes that's
Speaker 6: just what happens. That's the market called risk.
Speaker 3: Your point isn't the illiquidity, it's more of what's it
Speaker 3: being priced at every day, almost like there's some you know,
Speaker 3: there's been some mets back in the day that held
Speaker 3: stuff that didn't trade, and even bond ETFs in a crisis.
Speaker 3: Sometimes those bonds are stale, they don't have pricing. So
Speaker 3: what if they marked it more often? Would that solve
Speaker 3: your problem?
Speaker 5: I mean I suggested that they go interact with these
Speaker 5: platforms on like say a weekly basis like put yourself
Speaker 5: out there that you'll trade ten basis points of your
Speaker 5: SpaceX position in or out. Once a week you'll set
Speaker 5: a new mark that's based on live trading. That would
Speaker 5: be great, that would be transparency, that would be an
Speaker 5: actual value add to the market. This is the opposite
Speaker 5: of that. Not only are they not doing that, they're
Speaker 5: obscuring the very way they're acquiring these shares. That's the issue.
Speaker 5: It's not that these securities can't and shouldn't be held
Speaker 5: by anybody I'm not against SpaceX, I'm against the way
Speaker 5: this is.
Speaker 3: Yeah, you know what, I agree with him on that detail.
Speaker 3: I think XOVR should just market. And this is what
Speaker 3: Cliff Asten is brought up actually with the State Street one,
Speaker 3: which is going to hold private credit, which is if
Speaker 3: they start marking it, this could get interesting because a
Speaker 3: lot of people buy privates in the institutional world because
Speaker 3: they don't move. They like that NAB never moving because
Speaker 3: it lowers volatility. They call it volatility laundering, or at
Speaker 3: least Cliff Astnest does so. In essence, by not marking it,
Speaker 3: you're kind of getting that institutional lowvall. But I think
Speaker 3: they should market, and why not. You're right, these other
Speaker 3: platforms have. Okay, so I'm half with Dave there.
Speaker 4: Well you're being a purist here too, Dave, Right, Like,
Speaker 4: you have this thing called it an ETF. It's got
Speaker 4: this rapper that has superpowers. One of those things that
Speaker 4: investors that come to expect has been transparency. And if
Speaker 4: you're not being fully transparent in that rapper, it's like, well,
Speaker 4: you're doing something that's against the will of the ETF.
Speaker 5: Right, And I'm not arguing that these products should be
Speaker 5: all shut down. What I'm saying is that the ETF
Speaker 5: market historically has had the characteristic of being a white hat,
Speaker 5: generally being on investor's side, and you had to be
Speaker 5: said to do your due diligence, but you could count
Speaker 5: on the fact that as an industry, ETFs were largely
Speaker 5: on investor's side. With the current raft of ETFs, I
Speaker 5: don't think you can make that claim. I think XOVR
Speaker 5: is on er share side and will always be on
Speaker 5: er share side.
Speaker 2: Well, you you already did one thing, which is you
Speaker 2: changed Eric's mind slightly.
Speaker 4: So that's a win. Yeah, you eat out a win already.
Speaker 4: So you want to keep going? Do you want to
Speaker 4: keep playing this game?
Speaker 3: Yeah? So let's look at the private credit ETF, the
Speaker 3: Share Street Apollo private product credit ETF that I won't
Speaker 3: go into the sec versus State Street shenanigans.
Speaker 1: That happened, but that's a little wonky.
Speaker 3: But this market, this product is out and according to
Speaker 3: State Street, they hold twenty one percent in privates, which
Speaker 3: goes above that fifteen percent threshold.
Speaker 1: Do you have issues with that?
Speaker 3: And State Treat obviously launched the ETF industry, and are
Speaker 3: we like, how do you deal with something like that.
Speaker 3: If you think that product is black hat but the
Speaker 3: issuer's white like, what's your take on?
Speaker 5: So again, I think there are good ways to do this,
Speaker 5: and they are bad ways to do this. As structured,
Speaker 5: I think this Apollo State Street product is problematic. The
Speaker 5: only they what they hold right now is irrelevant by prospectives.
Speaker 5: They could have thirty five percent in the Polo bonds
Speaker 5: and another fifteen percent in other liquid stuff, so half
Speaker 5: of this fund could be in what we would all
Speaker 5: rationally call illiquid private credit. That thirty five percent bucket
Speaker 5: that Apollo is going to be responsible for. The only
Speaker 5: reason we know anything about how that's going to work
Speaker 5: is because the SEC forced their hand on a bunch
Speaker 5: of disclosure they chose to leave out of their formal documents.
Speaker 5: So they're not in the SAI, they're not in the prospectus,
Speaker 5: and they're critical right, So what are they on the
Speaker 5: hook for providing a bid every fifteen minutes for up
Speaker 5: to twenty five percent of the portfolio on a given day. Now,
Speaker 5: maybe that's the right number, maybe it's not, but we
Speaker 5: have no way of knowing because they didn't show us
Speaker 5: a liquidity study. It's not like what Bitwise did with bitcoin,
Speaker 5: where they published acres of research to get everybody comfortable.
Speaker 5: This is completely just trust us. We believe twenty five
Speaker 5: percent is enough. We believe these every fifteen minute bids
Speaker 5: are enough, and that's what you have to count on.
Speaker 5: And if the fund goes from one hundred billion dollars
Speaker 5: to fifty billion dollars in one day and they have
Speaker 5: to unload half the portfolio, oh well, well it seems
Speaker 5: like this is setting us up to be right back
Speaker 5: in third avenue.
Speaker 2: Yeah.
Speaker 1: Well, hold on a second, though. But here's the thing
Speaker 1: about ETFs.
Speaker 3: Even if we had that worst case scenario and only
Speaker 3: twenty five percent of the private credit, which again is
Speaker 3: only thirty five percent of the portfolio at max, so
Speaker 3: you're looking at maybe a slice of the portfolio is illiquid, frozen,
Speaker 3: the market makers of this world will still make a
Speaker 3: market in it. They'll just stretch out the arbitrage band,
Speaker 3: so it'll trade at a premium or discount, probably a discount.
Speaker 3: And you know J ANDK traded a discount at eight
Speaker 3: percent during the financial crisis for the same reason. So
Speaker 3: I just think that investors would rather have all that
Speaker 3: jazz and have the ETF turn into a semi closed
Speaker 3: end fund in those situations, then have it in a
Speaker 3: more proper wrapper like an interval fund or e a
Speaker 3: mutual fund or a hedge fund which they have no
Speaker 3: trust in.
Speaker 5: But do you know that these funds are just going
Speaker 5: to be sold on yield?
Speaker 2: Right?
Speaker 5: That's the only way this fund is being sold is hey,
Speaker 5: mister financial advisor, buy our private credit ETF because you'll
Speaker 5: get better yields for the same credit quality as you
Speaker 5: will get somewhere else. Nobody is saying we want privates
Speaker 5: because it's structurally different. They just want the better yield.
Speaker 5: So they're not buying this as a long term speculative play.
Speaker 5: They're buying yield. And when that yield locks up, as
Speaker 5: you said, I think that's going to be a problem. Again,
Speaker 5: not saying the products should go away, I'm saying advisors
Speaker 5: need to ask themselves. Do you trust Apollo to be
Speaker 5: on your side when we have a credit crisis?
Speaker 1: I don't.
Speaker 5: They're going to be very much on one side.
Speaker 3: Well follows, But do you trust State Street? State Street?
Speaker 3: Now this is an active fund. If it was passive,
Speaker 3: I would agree with you. But State Street has PMS
Speaker 3: and I talk to them. They're like, we're out there
Speaker 3: trying to find good deals, and they in the perspectives
Speaker 3: they can go beyond Apollo if they need to.
Speaker 1: So I think, in in.
Speaker 3: As essence, you are giving your trust to stay streat
Speaker 3: as an active manager to work all this out. And
Speaker 3: I think, I don't know, maybe it's a good guinea pig,
Speaker 3: like we'll see how this works.
Speaker 1: It's only a portion of privates. I don't know. I
Speaker 1: this time, I'm not convinced by Dave.
Speaker 5: Here's the positive coming back. I think it's going to
Speaker 5: be great that we get to see how they're marking
Speaker 5: these bonds every day. It's too bad that you have
Speaker 5: to have like a pH d in Excel to actually
Speaker 5: track it day to day. But we are getting I mean,
Speaker 5: already we're getting interesting pricing on private credit by digging
Speaker 5: into the fund, but you're gonna have to track it
Speaker 5: by hand because half the stuff doesn't have an icon.
Speaker 2: Bill Donald, let's send these guys back to the corners.
Speaker 2: Get some water.
Speaker 6: I have to say, this is so fun to just
Speaker 6: sit here and listen.
Speaker 2: I'm glad that we could join.
Speaker 6: Can we do this every week?
Speaker 1: Are you ready for Round three?
Speaker 2: Glad that we could join.
Speaker 4: Yes, hold on, well, just on the private credit stuff
Speaker 4: like what if anything jumps out at you and begs
Speaker 4: for a little bit more finessing.
Speaker 6: So it's early days still, but like super early days launch.
Speaker 6: But one way to maybe track the appetite from people
Speaker 6: for this is obviously via flows, and they are not
Speaker 6: there are no, they're non existent. Yeah so far unless
Speaker 6: there's some huge delay in the data coming out, but
Speaker 6: there hasn't been much going on.
Speaker 1: The volume's ok, eight million the first year. It's not bad.
Speaker 3: It's pretty good actually, and then the assets were fifty
Speaker 3: so they had seed.
Speaker 1: But yeah, you're right. Also it's credit.
Speaker 3: I just think xov are getting private equity would be
Speaker 3: a bigger rockstar launch. This is still bonds and it's
Speaker 3: still more boring and slow moving.
Speaker 2: Hey, do you need a pep tacotol?
Speaker 1: No, I'm good, I'm ready to go.
Speaker 2: Yeah, take the towel off. You're going back in.
Speaker 1: I'm like Matt Foley.
Speaker 3: I've been down the basement eating no dos for the
Speaker 3: past five hours.
Speaker 2: Okay, get back in there.
Speaker 3: You don't take any ribshots, okay, okay, okay, ready. So
Speaker 3: here you have this thing called leverage ets for chaos goblins.
Speaker 3: So what's a chaos goblin. Yeah, that's a great visual.
Speaker 3: By the way, that sounds like a good band name.
Speaker 3: I thought pretty much.
Speaker 5: Jim Kramer. Jim Kramer is the ultimate chaos goblin. Right,
Speaker 5: He's just gonna say whatever he's gonna say. The more
Speaker 5: chaotic it is, the better. And look, a lot of
Speaker 5: a lot of Wall Street finance, a lot of Wall
Speaker 5: Street medias are just chaos goblins. And that's largely what
Speaker 5: a lot of these sort of crazy like ninety percent
Speaker 5: yield on bitcoin type products are. Four They're not actually
Speaker 5: particularly useful. They are headline grabbing, hoping to catch people
Speaker 5: unawares so that they can, you know, in the case
Speaker 5: of like the yield Max stuff, just get all their
Speaker 5: money back and wash it through their return of capital
Speaker 5: gains situation.
Speaker 3: Okay, well there's two things. There's leverage ETFs and there's
Speaker 3: yield max. Let's go yield max first, since you brought
Speaker 3: it up. Okay, yield max is basically like I was
Speaker 3: the Money Show, which is all retail like a lot
Speaker 3: of like older investors, and I spoke at the inside
Speaker 3: the booth room, which is like I feel like a
Speaker 3: carnival barkroom up there, trying to get people attracted to
Speaker 3: my whole thing.
Speaker 1: It's good practice ground to speaking honestly.
Speaker 3: So I'm going over like a presentation called etf Hot
Speaker 3: Sauce the pros and cons, and people are like, there's
Speaker 3: like twelve people there. I start going over yield Max
Speaker 3: and I show these yields and it's like ninety eighty
Speaker 3: one hundred percent, and like the people start coming over.
Speaker 3: I can see jewel. My audience doubled. It was like
Speaker 3: Pavlovian dogs. I was like ringing some bell and I
Speaker 3: was like wow, And I said, wait, guys, all you're
Speaker 3: really doing is giving your total return and taking it
Speaker 3: back in the form of yield. It's you're almost like
Speaker 3: taking from one hand and giving it to the other.
Speaker 3: I don't think they care. I think I just think,
Speaker 3: you know we have this, you know that Journey song.
Speaker 3: Anyway you want it. They some corporations have taken on
Speaker 3: that as a commercial. Any way you want it, that's
Speaker 3: the way we'll get it. I think, if if you
Speaker 3: want your return in the form of yield through these
Speaker 3: right out of the money options writing strategies, well we'll
Speaker 3: give it to you that way, If that makes you
Speaker 3: feel good, you get to all in the income. I
Speaker 3: don't know that's how I see it. I agree with you.
Speaker 3: I wouldn't tell my mom to invest in these. But
Speaker 3: if somebody was just love seeing that income versus going
Speaker 3: and seeing total return, is that Is there any harm
Speaker 3: in that?
Speaker 2: Also, Dave, did he just admit to being a chaos goblin?
Speaker 5: I think so. Look the again, nobody's doing anything illegal here.
Speaker 5: This to me is about as an advisor, where are
Speaker 5: you putting your trust relationships? As an investor, where you're
Speaker 5: putting your trust relationships. There is nothing wrong with taking
Speaker 5: a volatile asset like bitcoin and trying to turn it
Speaker 5: into yield. There are lots of people trying to do
Speaker 5: that all across the ETF industry. What's wrong, or what
Speaker 5: I have problems with, is that to find out the
Speaker 5: fact that your eighty four percent yield is actually showing
Speaker 5: up as return of your own capital every single time
Speaker 5: you have to go three pages deep and then open
Speaker 5: a PDF. They're not leading with the most critical feature
Speaker 5: of this product, which is it is a way to
Speaker 5: generate return of capital, not to generate actual meaningful income.
Speaker 5: So they're not on your side. They're trying to convince
Speaker 5: you that you're getting something that you're not actually getting.
Speaker 5: There are other ways to do that. I actually think
Speaker 5: our old friends like Direction and pro Shares and the
Speaker 5: leverage side, who now are in this game as well,
Speaker 5: are actually examples of doing this about as gray hat
Speaker 5: as you can. They're over disclosed. They're warning you against
Speaker 5: these things. They're putting the warts out front and then
Speaker 5: convincing you of the benefits of the products. They're much
Speaker 5: more on your side in this case.
Speaker 2: Who said, are you on bil Donna?
Speaker 6: I don't want to take sides here. I like both
Speaker 6: of you a lot.
Speaker 2: Okay, son right there?
Speaker 6: Yeah, exactly.
Speaker 3: Part two of this one is the double leverage stock
Speaker 3: ETFs okay, NVDL. The Donna's covered this, ye, And these
Speaker 3: have been surprise hits. Some are five six billions. I
Speaker 3: mean sometimes the team were like, dude, what are we
Speaker 3: doing here? We should just put We feel like we
Speaker 3: missed the easiest idea ever. Just slap leverage on a
Speaker 3: stock that's doing well and like and then you can
Speaker 3: just go buy an island.
Speaker 6: Okay, anyway, but there's even crazier stuff now. And I
Speaker 6: think we discussed one of them once the battle shares
Speaker 6: battle shares, yea, and now we're getting one hundred hundred like.
Speaker 3: Yeah, parlay shares, right exactly. So look, sports gambling is legal.
Speaker 3: This is a portion of that. And I'll go one further.
Speaker 1: I get it.
Speaker 3: These are not products that I would say you should
Speaker 3: buy and hold, but if you trade them, you know,
Speaker 3: I think these are for young people who are degenerates
Speaker 3: and just love gambling, and we'll learn the hard way
Speaker 3: and then become Vanguard investors in their thirties on that's
Speaker 3: one thing. Or they are hot sauce fun for board
Speaker 3: as hell Vanguard investors who are basically decided to marry
Speaker 3: Vanguard and wait thirty years for all the compounding and
Speaker 3: that magic to happen. But you know, I'm sorry, it's
Speaker 3: like watching paint dry. So they have ten percent to
Speaker 3: go hog wild, in which you could argue is a
Speaker 3: behavioral hack not to touch the other ninety percent. If
Speaker 3: that keeps them having a little fun and occupied with
Speaker 3: their speculative foem, well then maybe it's it's fine. And
Speaker 3: these products, again, they are one percent of all assets,
Speaker 3: but maybe seventy eight percent of the volume something like that.
Speaker 3: So I do see them as rated our products. I
Speaker 3: see them as dangerous, but I do see them as
Speaker 3: just like the same old story as the old days
Speaker 3: of ets with the triple leveraged index funds and people
Speaker 3: who like to have fun. And then there'll be a
Speaker 3: hard rain and it'll wash a lot of these products
Speaker 3: away and then we'll start over again.
Speaker 6: There's there's a list. I was looking at a list
Speaker 6: of upcoming ETFs like they're set to launch in the
Speaker 6: coming days, and there's some there's some really good ones.
Speaker 6: There's Spcy Spicy and it's one hundred percent SMCI one
Speaker 6: hundred percent in the video for example. There you go,
Speaker 6: This is the type of thing that I think would
Speaker 6: fall on the discat.
Speaker 5: Yeah, and I'm sure it's free too, right.
Speaker 1: Yeah, they do all charge one percent.
Speaker 3: That's why it's Yeah, I mean, we're kind of like
Speaker 3: lottery tickets for the issuers in a way.
Speaker 1: So, but people hardly know.
Speaker 3: If you don't hold it a long time, the expense
Speaker 3: ratio isn't as meaningful versus a mutual fun one percent
Speaker 3: the whole long term.
Speaker 5: But that they still get paid, right, That's the problem
Speaker 5: is once they're trading, they get paid on the fact
Speaker 5: that there's now enough inventory out there because people are
Speaker 5: trading them like crazy. That's how you end up with
Speaker 5: five billion in there, not because people are holding five
Speaker 5: billion for six months.
Speaker 1: But is there anything wrong with being a degen as a.
Speaker 2: Young person only on the weekends?
Speaker 1: Yeah, or having ten percent to gen.
Speaker 5: Look, I'm not telling people they can't gamble, right, I'm
Speaker 5: not saying casino shouldn't exist. Again, My point here is
Speaker 5: these products are not on your side, and I also
Speaker 5: think that they hide real structural issues like the battle
Speaker 5: shares products. For example, two times Tesla minus one times Ford.
Speaker 5: That product, if you model it out, which I have,
Speaker 5: there is no world in which that looks like you
Speaker 5: think it looks.
Speaker 2: It is so.
Speaker 5: Wildly path dependent that if you hold it for more
Speaker 5: than a day or two, you're getting some strange pattern
Speaker 5: of returns, which is not Tesla winning and Ford losing.
Speaker 5: It's some it's it's just a weird pattern of returns.
Speaker 5: So these are going to be very unpredictable. People are
Speaker 5: buying them because they think they're going to get what
Speaker 5: they say on the on the hood. But you know
Speaker 5: your three x in video if you hold it for
Speaker 5: four days isn't gonna look like three X in video,
Speaker 5: because the more volatile the thing under the hood is,
Speaker 5: the less predictable the path dependency is.
Speaker 3: Now those are all like hot sauce. And I think
Speaker 3: this debate is going to go on for a long time.
Speaker 3: And thank you for giving us all your points, and
Speaker 3: you know.
Speaker 2: I agree says that.
Speaker 1: But one thing you brought up.
Speaker 3: We had a call earlier because I had so much
Speaker 3: to go over with him, and you said something like
Speaker 3: about Blackrock, and I thought that was interesting because all
Speaker 3: these are like smaller issuers.
Speaker 1: I get it.
Speaker 3: But you said Blackrock even caught your radar a little
Speaker 3: bit with their abandonment of ESG, and how maybe they
Speaker 3: have a little black hat in that case, and I
Speaker 3: wanted to explore that.
Speaker 5: Oh one hundred percent. So I look, whether you're I
Speaker 5: know you were, Eric, and you and I don't disagree.
Speaker 1: You don't.
Speaker 5: You and I don't agree on ESG very much. But
Speaker 5: my point is, if you're an institutional investor, and let's
Speaker 5: say you're on the committee for the Episcopal Church Endowment
Speaker 5: and you made a giant investment and a bunch of
Speaker 5: Blackrock funds because they met your stated mandate written into
Speaker 5: your rules about whether you can invest in oil, and
Speaker 5: now they've walked away from those very premises. They are
Speaker 5: not on your side. They have abandoned a mandate that
Speaker 5: you gave them money for. That is a black hat move.
Speaker 5: Now you can argue it's the right call, it's the
Speaker 5: right thing for the country. I'm not making any of
Speaker 5: those points. My point is if I've given money to
Speaker 5: somebody based on how they're going to run my money
Speaker 5: and they changed that and they don't immediately give me
Speaker 5: my money back, that is a black hat move. And
Speaker 5: I think it's also true that you're going to see
Speaker 5: firms like Blackrock launch whatever they need to launch to
Speaker 5: stay competitive. They've already doing it with buffered funds. You
Speaker 5: know they're going to say we'll never do single stock leverage,
Speaker 5: but I'm never going to say never.
Speaker 1: I agree they are very opportunistic.
Speaker 3: But would you say this thing about Vanguard because Vanguard
Speaker 3: wasn't as pronounced about ESG. But they also they think
Speaker 3: they withdrew from the Climate Asset Managers thing. They did
Speaker 3: a little stepping back, but they were never that loud
Speaker 3: in the first place.
Speaker 5: Yeah, I think Vanguard is just gonna be Vanguard, and
Speaker 5: look the things Vanguard needs to be paying attention to,
Speaker 5: like say, fixing their website and updating their customer service plan,
Speaker 5: those they don't seem to be investing in those either.
Speaker 5: So it's they're clearly just going to continue to be
Speaker 5: cheap and plenty of people are gonna love that.
Speaker 2: Sing and real quick.
Speaker 3: I used to watch him and Matt Hogan go up
Speaker 3: on a stage and like I was like in the
Speaker 3: front row, and these guys gave one of the greatest
Speaker 3: presentations every year. Now Matt Hogan has gone full crypto,
Speaker 3: and I wanted to ask Dave just last about about that.
Speaker 3: You have crypto in here, your your little mix. You
Speaker 3: say it's not good for it's an anti American thing,
Speaker 3: but I know you love Matt, and I was curious
Speaker 3: of your how you've maybe.
Speaker 2: Worked out reconciled.
Speaker 3: Yeah, what about a US spot like a bit B.
Speaker 3: Let's talk BitB Matt versus. Let's just take all the
Speaker 3: crazy crypto stuff and the all coins off the table,
Speaker 3: just the straight spot bitcoin ETF thoughts.
Speaker 5: I think that there are black hat and white hat
Speaker 5: players in crypto, and I would put in not just
Speaker 5: because I love Matt. I would put bit wise very
Speaker 5: much in the white hat camp because they're the ones
Speaker 5: doing the research for the benefit of investors to get
Speaker 5: these products across the line with real information. There's a
Speaker 5: big difference between that and what we're seeing elsewhere in
Speaker 5: the crypto ecosystem. So my diss on crypto is that
Speaker 5: if you're putting all your money in crypto, you're effectively
Speaker 5: betting on the fact that America is in decline, right
Speaker 5: because you're counting on bitcoin going to five hundred thousand
Speaker 5: dollars per bitcoin. That is not good for the dollar. Like,
Speaker 5: I think we need to recognize that. I don't think
Speaker 5: all crypto is evil, and I don't think crypto shouldn't
Speaker 5: be in ets, but I do think there are good
Speaker 5: ways and bad ways.
Speaker 2: To do it.
Speaker 3: What if it's a bet against the US government not
Speaker 3: being fiscally responsible, not against the America itself, and it
Speaker 3: was invented in America, Well maybe.
Speaker 2: We don't know.
Speaker 1: Okay, No, No, I.
Speaker 5: Think I think it's a fair point. I will say
Speaker 5: that I think it is very true that if you're
Speaker 5: taking your shiny rocks out of the country and putting
Speaker 5: them on an island somewhere, you're not betting on America,
Speaker 5: You're betting on something else.
Speaker 6: But what if we have the strategic crypto Reserve?
Speaker 5: Oh god, dude, we have another hour?
Speaker 1: Yeah, I know, Damn is that an off ramp or what?
Speaker 1: I don't know. If we can do that, then we're
Speaker 1: going to go straight into the lake on that ran
Speaker 1: you know.
Speaker 2: I think that's what I've been on those. I think
Speaker 2: we call that a mic drop.
Speaker 4: It.
Speaker 2: Dave Nating, thanks for joining us on Trillions.
Speaker 6: Thanks for having us, Thanks for having me.
Speaker 7: Thanks for listening to Trillions until next time. You can
Speaker 7: find us on the Bloomberg Terminal, Bloomberg dot com, Apple Podcasts, Spotify,
Speaker 7: or wherever else.
Speaker 2: You'd like to listen. We'd love to hear from you.
Speaker 7: We're on Twitter, I'm at Joel Webber Show.
Speaker 2: He's at Airic Vultunas.
Speaker 7: This episode of Trillions was produced by Magnus Hendrickson. Bye