WEBVTT - Five Things to Watch in ETFs During the Second Half 0:00:05.720 --> 0:00:07.560 Welcome a trillions. I'm Joel Webber and. 0:00:07.520 --> 0:00:09.600 I'm Eric Belchunis. 0:00:11.320 --> 0:00:14.319 Okay, Eric, A lot of things have happened so far 0:00:14.400 --> 0:00:19.080 this year or didn't happen. I should say that now 0:00:19.120 --> 0:00:20.520 that we're in the second half of the year, it 0:00:20.560 --> 0:00:23.160 felt like I wanted to huddle with you and get 0:00:23.200 --> 0:00:26.800 a better sense of what could happen in the second 0:00:26.840 --> 0:00:30.160 half of the year, because look like there's a nineteen 0:00:30.280 --> 0:00:33.120 percent up year to date in the S and P 0:00:33.280 --> 0:00:36.120 five hundred. That's crazy. Nobody expected that We're supposed to 0:00:36.159 --> 0:00:40.160 be like mired in a recession that has yet to happen, right. 0:00:40.520 --> 0:00:41.720 Yeah, it's been a wild year. 0:00:41.720 --> 0:00:44.840 And you know, a few episodes back, we had Athanasios 0:00:44.960 --> 0:00:47.880 on my team on to talk about the Fomo drought. 0:00:47.960 --> 0:00:50.360 You know, all these the cues and spy were up 0:00:50.360 --> 0:00:51.239 a lot, but nobody. 0:00:51.080 --> 0:00:52.680 Was buying, and that that kind of ended. 0:00:52.680 --> 0:00:55.480 The flows are back, so that's one sort of baby 0:00:55.480 --> 0:00:57.840 that's been put to bed. Is the flows now matched 0:00:57.880 --> 0:01:01.720 the performance. But yeah, there's you know a lot of 0:01:01.920 --> 0:01:05.240 excess return right now. I'm always nervous when when the 0:01:05.319 --> 0:01:07.320 ques are of thirty six percent in like the first 0:01:07.360 --> 0:01:09.919 half of the year, I'm like, all right, when's when's 0:01:09.959 --> 0:01:10.840 the shoe gonna drop? 0:01:11.080 --> 0:01:12.759 What's gonna happen to pull us back? 0:01:13.120 --> 0:01:15.400 Maybe there'll be an inflation print, although there hasn't been, 0:01:15.840 --> 0:01:19.639 but yeah, it's unexpected and all of a sudden, growth 0:01:19.640 --> 0:01:21.479 and tech are back, and that's the sort of thing 0:01:21.560 --> 0:01:25.000 just like seven stocks leading everything, and it kind of 0:01:25.000 --> 0:01:27.959 feels like twenty and twenty one again, like twenty twenty 0:01:27.959 --> 0:01:28.760 two never happens. 0:01:28.800 --> 0:01:30.600 So that's the macro scene. 0:01:31.560 --> 0:01:35.040 But certainly there's other things in the ETF world I 0:01:35.080 --> 0:01:38.080 think that are really interesting that I don't know, get 0:01:38.160 --> 0:01:39.720 me out of bed in the morning, jowl. There's a 0:01:39.760 --> 0:01:42.120 lot of interesting stuff that we're looking for in the 0:01:42.120 --> 0:01:44.119 second half that really could make news. 0:01:44.240 --> 0:01:48.400 Okay, So for your summer listening, we're gonna go back 0:01:48.440 --> 0:01:52.400 to Athanasio, Sarah Vegas of Bloomberg Intelligence and Analysts with 0:01:52.560 --> 0:01:55.160 Eric and talk through a few of the things to 0:01:55.200 --> 0:01:59.640 look out for between now and the end. This time, 0:01:59.680 --> 0:02:02.600 I'm trying five things to watch in the second half 0:02:03.880 --> 0:02:05.480 at the Nacios. Welcome back to trillions. 0:02:05.600 --> 0:02:06.520 Yeah, glad to be back. 0:02:06.560 --> 0:02:08.880 Okay, what's the number one thing that you guys are 0:02:09.000 --> 0:02:12.360 like as the analyst the ETF analyst at Bloomberger Intelligence. 0:02:12.360 --> 0:02:15.560 You're like rolling out of bed, fired up to watch 0:02:15.600 --> 0:02:16.360 in the second half. 0:02:17.880 --> 0:02:19.640 Should I pass this one to Eric on bitcoin? Do 0:02:19.639 --> 0:02:21.760 we want to start there? I don't want to start there, 0:02:21.760 --> 0:02:25.079 but he already did. I let's go. 0:02:26.880 --> 0:02:27.480 We have to. 0:02:28.000 --> 0:02:31.120 Now this is a it's an interesting dynamic on our team. 0:02:31.800 --> 0:02:34.400 James and I are like losing our minds about the 0:02:34.400 --> 0:02:37.440 bitcoin ETF race, along with nature Racy at ETF store. 0:02:38.120 --> 0:02:40.679 Every every like ten minutes on Twitter, there's some new 0:02:40.800 --> 0:02:44.400 document or amendment and we're we're analyzing it. I feel 0:02:44.440 --> 0:02:48.240 like Jim Garrison in the movie JFK, just basically all 0:02:48.280 --> 0:02:50.800 this circumstantial evidence coming at me left and right that 0:02:50.919 --> 0:02:53.000 Lee Harvey Oswell did not act alone, right. 0:02:53.480 --> 0:02:54.800 And that's a lot what it feels like. 0:02:54.880 --> 0:02:58.760 I'm not sure what is going to in retrospect be 0:02:58.919 --> 0:03:02.760 the right clue whether the SEC will approve the first 0:03:02.760 --> 0:03:06.160 ever spot BITCOINYTF. But where we stand now is that 0:03:06.440 --> 0:03:09.640 the SEC has really recently acknowledged all the filings. 0:03:09.880 --> 0:03:10.440 That's good. 0:03:10.919 --> 0:03:13.680 Now, in a couple of days they'll hit the public 0:03:14.080 --> 0:03:18.160 Registry and from there a clock starts, and so we're 0:03:18.200 --> 0:03:21.040 going to have the next deadline date be August thirteenth 0:03:21.040 --> 0:03:24.800 for ARC and then sometime in September for the rest, 0:03:25.040 --> 0:03:27.800 but the SEC could punt, so the first final final 0:03:27.840 --> 0:03:31.480 deadline will be January next year. So the question is, well, 0:03:31.520 --> 0:03:35.440 the SEC approven before then, will they deny them again 0:03:35.520 --> 0:03:39.040 just as usual? This everything has been changed because Blackrock 0:03:39.960 --> 0:03:42.560 filed and the black rocks Blackrock, and so that's really 0:03:42.680 --> 0:03:45.880 changed the game. And there's been other things that have 0:03:46.120 --> 0:03:50.720 happened in terms of coinbase, you know, maturing, and maybe 0:03:50.720 --> 0:03:52.320 maybe they're the kind of company that would have a 0:03:52.360 --> 0:03:55.840 surveillance sharing agreement with NASDAC and the SEC would be 0:03:55.840 --> 0:03:58.880 okay with that, even though they weren't in the past. Again, 0:03:58.960 --> 0:04:01.120 there's a lot of very but this is a story 0:04:01.120 --> 0:04:01.840 that's massive. 0:04:02.080 --> 0:04:04.320 Why if they approve. 0:04:04.040 --> 0:04:08.560 One, there's thirty trillion dollars plus that is just more 0:04:08.600 --> 0:04:11.720 comfortable using an ETF and those would be advisors, and 0:04:11.800 --> 0:04:14.520 so you kind of unlock at least a portion of 0:04:14.520 --> 0:04:17.480 that money to be in play for this ETF. They 0:04:17.560 --> 0:04:20.760 love ETF, They trust ETFs, especially once from like Blackrock, 0:04:21.360 --> 0:04:24.200 and so this would be like a bridge from the 0:04:24.360 --> 0:04:27.680 boomer advisor all the wealth in America world to the 0:04:27.720 --> 0:04:30.600 sort of crypto underworld. And that's why this is a 0:04:30.640 --> 0:04:34.000 massive story. It involves the biggest asset manager, the highest 0:04:34.080 --> 0:04:34.920 rugs of government. 0:04:35.440 --> 0:04:36.719 I mean, it's it's all the. 0:04:36.720 --> 0:04:40.919 Airtrol okay, Athanasios. If you're the SEC, why wouldn't you 0:04:41.040 --> 0:04:44.320 just let the shot clock run out on this calendar year? 0:04:45.360 --> 0:04:47.520 Uh? Yeah, I mean and maybe they might. I think 0:04:47.600 --> 0:04:50.560 we're going to get right to I think with a 0:04:50.600 --> 0:04:52.920 timeline it might actually push it into next year. And 0:04:52.960 --> 0:04:55.200 I don't know if it's just a game of waiting 0:04:55.240 --> 0:04:58.679 out Gensler or whatnot, But well, I don't share Eric's 0:04:58.760 --> 0:05:01.320 enthusiasm for it. I think it's time. I think the 0:05:01.360 --> 0:05:04.240 market can handle it, right, the black Rock is now involved, 0:05:04.240 --> 0:05:07.240 these products exists in other markets in Canada and Europe. 0:05:07.320 --> 0:05:09.280 Like the market can handle it. I think it's about 0:05:09.320 --> 0:05:11.840 time that actually just approved like a two x bitcoin 0:05:11.920 --> 0:05:14.440 future is etf too, like ahead of this, so that 0:05:14.520 --> 0:05:16.360 kind of seemed a little odd, but I think it's 0:05:16.400 --> 0:05:18.680 I think it's about time move forward with this. 0:05:19.200 --> 0:05:19.400 Eric. 0:05:19.520 --> 0:05:22.000 Are you confident it happens this year or do you 0:05:22.040 --> 0:05:26.200 think it happens next year or or just you know, 0:05:26.480 --> 0:05:28.920 we don't know and it just punts keeps punting. 0:05:29.600 --> 0:05:33.480 So James and I are collectively giving our team's odds, 0:05:33.880 --> 0:05:36.880 and we've come up with fifty percent, which we're getting 0:05:36.920 --> 0:05:41.000 like getting like mocked on Twitter because like, oh, fifty percent. 0:05:41.040 --> 0:05:41.680 Whoa way to. 0:05:41.680 --> 0:05:45.000 Take a stand there, But I'm like, listen, stop. Forty percent. 0:05:45.400 --> 0:05:47.599 That's the cop out number. That's what the sell side 0:05:47.600 --> 0:05:50.120 always does. There's a forty percent chance of it raining, 0:05:50.120 --> 0:05:51.560 there's a forty percent chance of the. 0:05:51.520 --> 0:05:52.240 Market going up. 0:05:52.520 --> 0:05:55.880 That's the cop out. Fifty percent is actually aggressive, and 0:05:56.520 --> 0:05:59.880 it's relative to our etf peers. You look at Vetify, 0:06:00.080 --> 0:06:03.120 morning Star and others, I think we're mostly aggressive. Fifty 0:06:03.160 --> 0:06:05.039 percent would be higher, I think than they would do. 0:06:05.520 --> 0:06:07.920 And I even have another steak dinner bet on this 0:06:08.000 --> 0:06:11.719 with Todd Rosenblooth of Edify, one of our friends. I'm 0:06:11.760 --> 0:06:13.640 still three and two on these and so I don't 0:06:13.640 --> 0:06:16.000 want to go five hundred. So I'm really hoping if 0:06:16.000 --> 0:06:18.480 anybody from the SEC is listening, just to prove the 0:06:18.560 --> 0:06:19.799 damn thing it's time. 0:06:19.920 --> 0:06:23.200 As Ethan said, let me have my steak dinner. I will. 0:06:24.160 --> 0:06:28.200 It'll be glorious because he's so such a downer about it, 0:06:28.400 --> 0:06:31.800 and I just think that Blackrock would not have done 0:06:31.800 --> 0:06:33.919 this if they didn't think they had somewhat of a 0:06:33.920 --> 0:06:34.440 winning hand. 0:06:34.960 --> 0:06:35.560 I kind of knew. 0:06:35.600 --> 0:06:37.160 I had a hunch that you were going to say 0:06:37.160 --> 0:06:38.720 bitcoin was the number one thing I was going to 0:06:38.800 --> 0:06:40.479 be watching for by the end of the air. So 0:06:40.520 --> 0:06:41.800 it surprised me with number two. 0:06:42.080 --> 0:06:44.240 Okay, So now let's let's get into some of the 0:06:44.360 --> 0:06:47.080 ETF weeds and a big thing the share is going 0:06:47.160 --> 0:06:51.520 to be the Vanguard ETF share class patent and actually 0:06:51.560 --> 0:06:55.640 what okay, so what yeah, let's talk about what that is. Actually, 0:06:56.760 --> 0:06:59.960 So Vanguard has this unique advantage that no one else 0:07:00.160 --> 0:07:03.000 has here that their ETFs are share class of their 0:07:03.080 --> 0:07:05.560 mutual fund. And they had a patent on this actually 0:07:05.600 --> 0:07:08.640 and it expired this year, and now this is up 0:07:08.680 --> 0:07:12.360 for review and other issuers might try to copy this 0:07:12.400 --> 0:07:16.240 patent or you know, get access to it. And one 0:07:16.240 --> 0:07:18.400 thing that also happened last year is all these different 0:07:18.480 --> 0:07:20.640 estimatgers are coming to the market. So deciding how do 0:07:20.680 --> 0:07:21.720 we want to do this. Do we want to just 0:07:21.800 --> 0:07:24.920 launch ETFs, do we want to convert ETFs, or do 0:07:24.960 --> 0:07:27.360 we wait for the share class patent to come up. 0:07:27.920 --> 0:07:32.400 So now with this being available to them, we're trying 0:07:32.400 --> 0:07:34.880 to figure out can they actually get this done. Everyone's 0:07:34.880 --> 0:07:37.560 trying to petition for it. We've heard mixed results. The 0:07:37.640 --> 0:07:40.560 SEC is saying, well, we're not very comfortable with letting 0:07:40.920 --> 0:07:44.400 everyone else use this. Other issuers are pretty bullish on it. 0:07:45.240 --> 0:07:48.080 I'm on the team. We're pretty split. I'm very bullish 0:07:48.160 --> 0:07:50.040 on this. I like the ETF share class. I think 0:07:50.040 --> 0:07:51.800 it makes a lot of sense compared to some of 0:07:51.840 --> 0:07:54.880 the other routes that issuers are taking. Eric is very 0:07:54.880 --> 0:07:58.480 bullish on conversions, and the reason why I feel more 0:07:58.480 --> 0:08:02.080 confident into this, you know, talking about this last week DFA, 0:08:02.240 --> 0:08:06.240 who was like really came in really strong with conversions. 0:08:06.800 --> 0:08:11.080 They actually now file that they want to adopt the 0:08:11.120 --> 0:08:13.280 share class, which I thought was really interesting that, you know, 0:08:13.320 --> 0:08:15.360 sort of like the babies of conversions are like when 0:08:15.320 --> 0:08:17.480 I wouldn't want to do conversions anymore, we want to 0:08:17.800 --> 0:08:20.560 start pursuing the share class. So I think this is 0:08:20.600 --> 0:08:22.320 going to be I think if they do approve it, 0:08:22.360 --> 0:08:24.160 we're going to see I think we can see a 0:08:24.160 --> 0:08:27.320 lot of issuers or other asset managers start to convert 0:08:27.360 --> 0:08:29.800 their et or tack the sounds of their mutual funds. 0:08:30.000 --> 0:08:32.280 Eric how big of a game, ginger would this be 0:08:32.360 --> 0:08:35.120 if Vanguard is no longer the only one. 0:08:37.280 --> 0:08:41.160 This is this is very huge. Again, if for anybody 0:08:41.160 --> 0:08:46.320 who's still awake after hearing Vanguard's share class structure, I 0:08:46.360 --> 0:08:50.320 know that's very boring, but it's major because there's twenty 0:08:50.360 --> 0:08:53.000 six trillion dollars in mutual funds, not all of it, 0:08:53.080 --> 0:08:56.600 but a good chunk of that for a variety of reasons, 0:08:57.120 --> 0:08:59.720 is having trouble getting into the ETF world. This would 0:08:59.720 --> 0:09:02.200 actually give them a bridge over. They would just launch 0:09:02.240 --> 0:09:04.320 an ETF share class with their mutual fund. And they're 0:09:04.360 --> 0:09:10.520 really gnawing to do this because the ETF access something 0:09:10.559 --> 0:09:14.199 of a dialysis machine for taxes. It's a way to 0:09:14.240 --> 0:09:16.400 get rid of capital gains in your mutual fund and 0:09:16.440 --> 0:09:18.880 make the mutual fund more tax efficient. This is what 0:09:19.000 --> 0:09:21.839 Vanguard has done with their index mutual funds and their 0:09:21.840 --> 0:09:25.880 share class. So now, to be sure, it's not a 0:09:25.920 --> 0:09:28.520 home it's not like a slam dunk because even if 0:09:28.559 --> 0:09:31.400 the sec allows it, which is a big if, if 0:09:31.679 --> 0:09:35.720 your mutual funds the outflows, it can be harder to 0:09:35.880 --> 0:09:38.800 do this correctly because if you have to sell securities 0:09:38.800 --> 0:09:42.040 to meet the outflows it's possible the ETF takes a 0:09:42.080 --> 0:09:45.800 capital gains hit that ETF investors are not used to getting. 0:09:45.840 --> 0:09:49.560 Because of that, Ben Jonson calls it tax contagion, and 0:09:49.760 --> 0:09:50.800 I think that's a great term. 0:09:50.880 --> 0:09:53.360 So, and we know most mutual funds have outflows. 0:09:53.600 --> 0:09:56.400 That's the big kind of marketplace problem with that. And 0:09:56.400 --> 0:09:59.160 then there's a regulatory hurdle too. That's why I'm still 0:09:59.160 --> 0:10:02.000 more bullish on versions. A conversion, you come over to 0:10:02.000 --> 0:10:04.640 the ETF world, You leave the mutual fund world behind, 0:10:04.679 --> 0:10:06.960 bye bye. You come over with your share class. I 0:10:06.960 --> 0:10:10.640 mean your performance record, your assets, and your dignity. 0:10:10.760 --> 0:10:13.040 You all of a sudden a player. And I think 0:10:13.080 --> 0:10:14.679 this is what most people should just do. 0:10:15.000 --> 0:10:17.960 It might be a little cannibalization, but in the long run, 0:10:18.000 --> 0:10:20.960 it's worth it. And so I'm more bullish conversions. James 0:10:20.960 --> 0:10:23.400 and Ethan are a little more bullish on the share class. 0:10:23.640 --> 0:10:25.120 And this is, you know, one of the things that 0:10:25.240 --> 0:10:28.160 we fight about our debate rather on our persistent chat 0:10:28.160 --> 0:10:32.520 every day. 0:10:35.080 --> 0:10:37.520 Well, you went with the weeds there, Athanasias, and I'm 0:10:37.559 --> 0:10:40.280 curious you're going to go more weedy or less weedy 0:10:40.320 --> 0:10:42.839 with number three. Thing to watch between now and the 0:10:42.920 --> 0:10:43.360 end of the year. 0:10:43.559 --> 0:10:46.480 So this is a little bit more market related. And 0:10:46.520 --> 0:10:48.679 it was something that Eric alluded to in the beginning 0:10:48.720 --> 0:10:51.800 about the ending of the fomo drought, right, and what 0:10:51.960 --> 0:10:54.640 was causing the fomo drout, and one was that you 0:10:54.640 --> 0:10:57.880 were making decent yield on cash and money market funds. 0:10:58.720 --> 0:11:01.199 I actually think that we might have peaked there a 0:11:01.240 --> 0:11:04.200 little bit, and I think this is what has caused 0:11:04.200 --> 0:11:07.680 the fomo drought to end. And I didn't really realize 0:11:07.679 --> 0:11:11.079 this until recently. For the most part, over the last year, 0:11:11.160 --> 0:11:13.560 cash was beating pretty much everything. It was beating stocks, 0:11:13.559 --> 0:11:15.800 it was beating bonds. Now all of a sudden, because 0:11:15.800 --> 0:11:17.520 I think we were mentioning the cues are up like 0:11:17.559 --> 0:11:20.880 almost forty percent this year. Yeah, and now you're like, well, 0:11:20.920 --> 0:11:22.560 cash is great, but you know it's even better, like 0:11:22.600 --> 0:11:25.880 forty percent in the queues, and everyone's starting to tilt 0:11:25.960 --> 0:11:28.480 over to that now. So now we're seeing that most 0:11:28.720 --> 0:11:32.040 strategies are beating cash over the last year, and I 0:11:32.040 --> 0:11:34.600 think that's been enough to start enticing people back into 0:11:34.640 --> 0:11:35.600 the market. Right. 0:11:36.480 --> 0:11:39.800 So that makes me think that we could see inflows 0:11:39.840 --> 0:11:42.319 go dramatically up between now and the end of the year, 0:11:42.760 --> 0:11:46.360 just because everybody probably still has a tidy amount still. 0:11:46.160 --> 0:11:48.680 In cash, right, uh. Yeah, And you know there's still 0:11:48.920 --> 0:11:52.040 five trillion or so still money market funds, and I 0:11:52.040 --> 0:11:54.680 think if it's probably enough to say, you know what, 0:11:54.760 --> 0:11:57.240 I can leave some in cash, but I'm comfortable enough 0:11:57.240 --> 0:11:58.960 to be putting some money back to work in the 0:11:59.000 --> 0:12:02.400 market or not, it's too late, Like forty six months 0:12:02.480 --> 0:12:04.200 is a lot. It's an aggressive move. So I don't 0:12:04.200 --> 0:12:05.559 know what, you know, what the second half of the 0:12:05.640 --> 0:12:07.000 year is going to look like, but I think to 0:12:07.040 --> 0:12:09.080 your point, flows should pick up. Yeah. 0:12:09.800 --> 0:12:12.600 Yeah, just to add, flows into ETFs overall are two 0:12:12.720 --> 0:12:14.240 hundred and thirty three billion. 0:12:14.720 --> 0:12:15.480 That's not a lot. 0:12:15.520 --> 0:12:17.760 That's normally what ETFs do in like I don't know, 0:12:18.000 --> 0:12:20.720 four months and we're into July, so it's been a 0:12:20.720 --> 0:12:23.520 little but they've really picked up over the last I 0:12:23.520 --> 0:12:25.400 don't know, six weeks, the two months. They're having a 0:12:25.400 --> 0:12:28.200 good summer, let's just say. And equity is almost like 0:12:28.280 --> 0:12:29.480 eighty ninety percent of all the. 0:12:29.480 --> 0:12:30.200 Flows coming in. 0:12:30.240 --> 0:12:33.960 So equity is like, you know, like the player that 0:12:35.040 --> 0:12:37.080 you know is having a bad first half, like Tom 0:12:37.120 --> 0:12:39.240 Brady here, like he's not going to have a bad game, 0:12:39.360 --> 0:12:42.440 Like at some point equity is going to go full equity. 0:12:42.840 --> 0:12:45.200 It's the king of the hill, and especially US equity, 0:12:45.200 --> 0:12:48.439 and it has really turned the tide here and we're 0:12:48.440 --> 0:12:49.959 seeing the flows and I think we'll see a lot 0:12:50.000 --> 0:12:51.400 more at the end of the year. But to our 0:12:51.440 --> 0:12:54.079 point at the beginning, how much more can the queues 0:12:54.160 --> 0:12:55.520 run if you're up that much? 0:12:56.679 --> 0:12:57.320 So it could be. 0:12:57.360 --> 0:13:00.559 Interesting if the flows follow. If the mare it turns 0:13:00.600 --> 0:13:04.520 it downward, and I guess we'll say. And one other 0:13:04.600 --> 0:13:08.440 related chart that Athanasios has that I love is percent 0:13:08.480 --> 0:13:12.880 of active beating the market, and that has plummeted because 0:13:13.160 --> 0:13:16.480 when the six growth stocks are crushing everything, it's bad 0:13:16.559 --> 0:13:19.439 for active because they tend to be fundamentally weighted and 0:13:19.800 --> 0:13:22.520 value weighted and they just are like, there's no way 0:13:22.559 --> 0:13:24.120 I'm buying a stock with a P that hi, I 0:13:24.160 --> 0:13:25.280 don't care what company it is. 0:13:25.720 --> 0:13:28.200 So last year they really did well. So this has 0:13:28.240 --> 0:13:29.319 been bad for active. 0:13:29.400 --> 0:13:31.920 So even no money's coming back into the equity market, 0:13:32.000 --> 0:13:35.679 it's it's I think a lot of it is, you know, 0:13:35.720 --> 0:13:39.760 not great for active performance. But active ETF flows have 0:13:39.880 --> 0:13:43.080 been pretty good, which brings me to number four, which 0:13:43.120 --> 0:13:45.480 is the active ETF flows. So this would be the 0:13:45.520 --> 0:13:48.560 fourth thing on our list, and right now they've taken 0:13:48.600 --> 0:13:52.199 it about one quarter of the flows despite only thirty 0:13:52.240 --> 0:13:55.600 one percent of active discretion or ETFs outperforming the S 0:13:55.640 --> 0:13:59.400 and P why they got cheap. So the fact that 0:13:59.480 --> 0:14:04.000 active can taking money despite having a bad year is 0:14:04.040 --> 0:14:06.520 a very good sign. And it shows that once you 0:14:06.559 --> 0:14:10.880 get dirt cheap, your less performance sensitive advisors have a 0:14:10.880 --> 0:14:14.600 little more patience. If you're cheap, they have like they 0:14:14.600 --> 0:14:17.800 feel like they're gonna a better deal. They're not chasing performance, 0:14:17.840 --> 0:14:20.680 they're they're just looking for a good value and they 0:14:20.720 --> 0:14:24.200 want active price correctly. So active ETFs having a good 0:14:24.240 --> 0:14:26.120 year this year, I think is a great sign long 0:14:26.240 --> 0:14:27.440 term for them. 0:14:27.560 --> 0:14:28.520 Ethan probably agrees. 0:14:28.600 --> 0:14:31.480 So are you Are you surprised by that that they 0:14:31.520 --> 0:14:33.480 were willing to get dirt cheap or was that just 0:14:33.600 --> 0:14:36.320 the thunderdome which you have to do to survive. 0:14:36.680 --> 0:14:39.440 I'm not surprised. And this is a line that's Eric Sigin, 0:14:39.560 --> 0:14:41.960 but I think he nailed it. Is that you have 0:14:42.000 --> 0:14:44.320 to come onto the terms of the ETF industry. Right, 0:14:44.400 --> 0:14:45.600 you can come in and do you could come in 0:14:45.600 --> 0:14:48.640 and charge whatever you want, but ultimately the ETF industry 0:14:48.680 --> 0:14:51.640 will decide, and going cheap just seems like where it's going. 0:14:52.080 --> 0:14:55.200 But it's interesting because people are not anti active, right. 0:14:55.240 --> 0:14:57.480 Even Eric mentioned the rates are way down, but the 0:14:57.480 --> 0:14:59.400 flows are still there. And I think even in the 0:14:59.400 --> 0:15:01.080 second half of the year, if we think that the 0:15:01.120 --> 0:15:03.120 market has run up too much, you might want to 0:15:03.240 --> 0:15:05.520 go active here, right, you might not want to be overweight. 0:15:05.600 --> 0:15:09.040 Dan videos in these really high flying names in the cues, 0:15:09.240 --> 0:15:11.000 so it actually might make sense for the back half 0:15:11.000 --> 0:15:11.960 of the year for active. 0:15:12.360 --> 0:15:16.360 Interesting, let me build upon that, because active ETFs cheap 0:15:16.400 --> 0:15:20.880 ones in particular. What's interesting about that is Vanguard and 0:15:20.880 --> 0:15:23.560 Blackrock don't really have anything there. They don't really have 0:15:23.600 --> 0:15:27.680 an answer yet to cheap active. This is dfatis, JP Morgan. 0:15:27.800 --> 0:15:30.360 Those are the ones that are doing well. And this 0:15:30.440 --> 0:15:34.840 has made Blackrock and Vanguard taken much less. The big 0:15:34.880 --> 0:15:36.240 two is taken in much less than. 0:15:36.480 --> 0:15:37.120 They normally do. 0:15:38.080 --> 0:15:40.160 They are punching below their weight for the first time 0:15:40.160 --> 0:15:42.640 in a long time, and I think it's because they 0:15:42.640 --> 0:15:44.920 don't really have an answer for cheap active. I think 0:15:44.920 --> 0:15:47.920 they'll roll stuff out. I wrote a note saying Vanguard 0:15:48.000 --> 0:15:50.400 has really cheap active mutual funds already. They should just 0:15:50.480 --> 0:15:54.360 bring them over and Blackrock is I think of a 0:15:54.360 --> 0:15:56.560 little more opportunistic on that front, and I think they'll 0:15:56.600 --> 0:15:59.360 just see the flows and respond accordingly. But I think 0:15:59.480 --> 0:16:02.640 cheap active is going to be, you know, a really 0:16:02.640 --> 0:16:05.280 big area in the future. And the reason is because 0:16:05.680 --> 0:16:07.800 beta is free, so people just want to get charged 0:16:07.840 --> 0:16:09.720 for the active. So if you don't have a lot 0:16:09.760 --> 0:16:12.640 of high active share, you kind of have to adjust 0:16:12.680 --> 0:16:15.720 your fees accordingly so that you're just paying for that active. 0:16:15.760 --> 0:16:18.680 And so this is such a big trend. It's actually 0:16:19.320 --> 0:16:22.760 possibly not only going to curb the Big two's growth, 0:16:23.360 --> 0:16:25.440 but it's going to swing the pendulum a little bit. 0:16:25.480 --> 0:16:28.200 Because you know wory about the passive bubble, Well, if 0:16:28.280 --> 0:16:32.080 active finally starts getting flows, it should naturally stop those 0:16:32.120 --> 0:16:35.000 worries that passive is like eating the whole market up. 0:16:35.360 --> 0:16:37.480 And I think that's good. And again I call this 0:16:37.520 --> 0:16:40.960 all the great cost migration. Eventually, everybody's just got to 0:16:40.960 --> 0:16:43.440 get with the program here, and I think Active was 0:16:43.520 --> 0:16:46.080 just a little late to do it, but better late 0:16:46.120 --> 0:16:46.480 than never. 0:16:46.640 --> 0:16:50.920 This actually, to me speaks to maybe the influence of Kathy. 0:16:50.960 --> 0:16:55.080 Would like Kathy could come into ETFs prove that active 0:16:55.680 --> 0:16:58.640 could could work and get attention and like, you know, 0:16:59.360 --> 0:17:02.120 become a thing really And so this is everybody else 0:17:02.520 --> 0:17:05.040 realizing that they have to They could have a version 0:17:05.320 --> 0:17:07.240 of what Kathy can do, right, only they're going to 0:17:07.240 --> 0:17:07.879 be cheaper than her. 0:17:09.680 --> 0:17:12.560 So I think Kathy deserves a lot of credit for 0:17:12.680 --> 0:17:15.280 kicking down the doors that you can. Actually in some 0:17:15.359 --> 0:17:17.680 ways she became a little bit of a rock star manager. 0:17:17.720 --> 0:17:19.960 I thought that those days were over. She kind of 0:17:20.000 --> 0:17:23.560 proved me wrong. But her Active is a different brand. 0:17:23.600 --> 0:17:26.439 Her Active is shiny object active. It's hot sauce active, 0:17:26.960 --> 0:17:29.960 and so she charges over seventy basis points. So that 0:17:30.119 --> 0:17:32.439 is one thing I think Kathy showed that thematic and 0:17:32.560 --> 0:17:36.160 hot sauce can work. What happened recently though, is JP 0:17:36.240 --> 0:17:38.960 Morgan dfa capital group. They all came out with cheap active, 0:17:39.000 --> 0:17:42.679 in particular JEPI, the JP Morgan Equity Income ETF that 0:17:42.840 --> 0:17:46.359 I believe is thirty five basis points around there, and 0:17:46.400 --> 0:17:49.080 that has been the best selling active ETF of all time. 0:17:49.560 --> 0:17:51.960 So what we try to tell people again is it 0:17:52.000 --> 0:17:55.879 comes down if you're active or passive, you kind of 0:17:55.880 --> 0:17:58.199 need to be cheap or shiny. So I think Kathy 0:17:58.280 --> 0:18:01.560 broke down the shiny door. I think JP Morgan broke 0:18:01.640 --> 0:18:02.920 down the cheap active door. 0:18:10.400 --> 0:18:12.320 Okay, so let's do the last thing that we're all 0:18:12.359 --> 0:18:14.919 supposed to be watching for between now and the end 0:18:14.960 --> 0:18:17.879 of the year or else, Eric Buysi's all steak dinners. 0:18:18.520 --> 0:18:20.080 This one also involves a bet. 0:18:21.200 --> 0:18:24.000 This is a sushi bet between me and Athan and 0:18:24.119 --> 0:18:26.040 I made a call on a note that JP Morgan 0:18:26.359 --> 0:18:28.480 will pass First Trust in assets by the end of 0:18:28.520 --> 0:18:32.680 the year and overtake the sixth spot, which is kind 0:18:32.680 --> 0:18:36.520 of crazy because JP Morgan was out of the top 0:18:36.520 --> 0:18:39.680 ten just recently. I mean, they have made a actual 0:18:39.800 --> 0:18:43.400 parabolic move up the middle of the charts. So as 0:18:43.440 --> 0:18:46.080 we stand, and this is where my bet on Athanasio's 0:18:46.119 --> 0:18:49.760 hinges is, JP Morgan has one hundred and fifteen billion 0:18:49.800 --> 0:18:53.320 in assets. First Trust has one hundred and forty billion. 0:18:53.320 --> 0:18:54.760 That's a twenty five billion dollar gap. 0:18:54.960 --> 0:18:56.960 That seems pretty that seems pretty wide. 0:18:57.680 --> 0:18:59.960 It is, but JP Morgan has taken in twenty three 0:18:59.880 --> 0:19:02.879 billion and flows this year. First Trust is basically flat, 0:19:03.760 --> 0:19:07.240 so you get a little market help another twenty three billion, 0:19:07.520 --> 0:19:11.119 and JP Morgan is the ETF line is led by 0:19:11.119 --> 0:19:13.280