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Speaker 1: Well came New Trillions. I'm Joel Webber and I'm Eric

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Speaker 1: bel Chionis. We're gonna do something difference this week. Eric,

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Speaker 1: we are. It's called mail Back. He's exciting. I love it.

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Speaker 1: So we get a lot of questions about ETFs in general,

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Speaker 1: and people reach out on Twitter, on Instagram, on email

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Speaker 1: via the terminal, and we want to take a moment

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Speaker 1: and just dedicate the rest of this show to a

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Speaker 1: bunch of questions that people have about E t S. Yeah,

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Speaker 1: we collected some of the questions. I sent a bigger

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Speaker 1: group of questions that I've gotten to Joel. He added some,

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Speaker 1: and Joel is essentially going to pick five or six

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Speaker 1: of the ones that he likes, and we're gonna try

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Speaker 1: to answer them to cover some areas that you're interested in.

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Speaker 1: This time on Trillions, we ran out of ideas. Great

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Speaker 1: question here from Kevin bomb at u s c F.

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Speaker 1: That's a school, No, it's actually an E T F company. Yeah,

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Speaker 1: so he's in the industry. I was going to say

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Speaker 1: University of Southern California, Florida. Okay, there you go. It

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Speaker 1: sounds like a sixteen seed. So here's Kevin Baum. Have

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Speaker 1: you recently analyzed e t F launch size and the

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Speaker 1: subsequent flows. That's a good question and very specific. There

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Speaker 1: really isn't much connection. There are e t fs that open,

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Speaker 1: they come out with a couple hundred million dollars. We

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Speaker 1: call those big number. That's huge, right, that's bespoke. It's

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Speaker 1: because issuers more and more want to line up like

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Speaker 1: an anchor tenant in that ETF. So there's a few examples,

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Speaker 1: like the United Nations seeded the low carbon ETF with

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Speaker 1: about a hundred and fifty million dollars, just literally like here,

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Speaker 1: we want this to work. Here's some opening money. Correct,

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Speaker 1: and it has barely more than that four years later.

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Speaker 1: So while it's profitable on that one anchor tenant, it

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Speaker 1: doesn't necessarily mean it's gonna work later. She is another

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Speaker 1: one member the globe. The Diversity e t F Gender

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Speaker 1: Diversity ETF has three two million. Almost all of that

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Speaker 1: was seed from calisters on the flip side. That's um, yeah,

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Speaker 1: pension money that're looking to do that, and they didn't

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Speaker 1: really you know, beef up more after that. But having

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Speaker 1: that money in there, you'd think might attract other people.

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Speaker 1: In that case, it did not. So organic flows usually

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Speaker 1: it doesn't matter. Usually what determines whether an ETF gets

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Speaker 1: assets is whether it just starts to crush the index,

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Speaker 1: like it just shoots right up and just it becomes

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Speaker 1: too big to ignore. The out performance, Yeah, the outperformance.

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Speaker 1: The other thing that can attract people is if it

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Speaker 1: comes in dirt cheap um. When something is so cheap,

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Speaker 1: it just excites people. A good example is the Goldman

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Speaker 1: sachs Um Multi Factory t f G s LC. That's

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Speaker 1: not a great ticker. The the strategy is not that

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Speaker 1: easy to understand, but it charges point oh nine percent.

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Speaker 1: So for for a smart beta type strategy that was

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Speaker 1: like hugely cheap at the time, and that thing has

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Speaker 1: a couple of billion dollars. And what's interesting about both

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Speaker 1: of these though, the from flows perspective is like it's

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Speaker 1: sticky money, right, It's all this money has come in

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Speaker 1: and it's stuck around. When e t f s are cheap,

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Speaker 1: the money's tends to be more sticky. When the ones

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Speaker 1: that they get money because they're high flyers and they

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Speaker 1: have a good run, like the Robotics CTF, when when

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Speaker 1: that event when they inevitably clucked crash and they will

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Speaker 1: there'll be a time when they really underperformed the indexes.

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Speaker 1: They're probably going to see some outflows, but not all,

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Speaker 1: so that money is less sticky, but not entirely not sticky.

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Speaker 1: I'd say half is sticky. Some people I think forget

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Speaker 1: they bought it, or they really believe in the idea.

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Speaker 1: Kevin Bomb at usc F, thanks for the question. Okay,

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Speaker 1: nothing matters more to me than my retirement money. But

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Speaker 1: one thing I know about my four ohhen K is

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Speaker 1: that it doesn't hold e t s. Why is that good?

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Speaker 1: I get this question a lot, and the reason e

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Speaker 1: t s aren't four when K plans is because a

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Speaker 1: lot of the advantages that we all know about them

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Speaker 1: don't really matter there. Right, So I'll go over a

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Speaker 1: couple here. Um, the tax efficiency, that doesn't matter because

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Speaker 1: you're already buying its pre tax. It's pre tax, right. Um.

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Speaker 1: You also don't need to interdate trade your fourwind K plan,

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Speaker 1: so the trading please don't do that. Yeah, the liquidity

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Speaker 1: kind of doesn't matter. And then you also have the

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Speaker 1: cost issue. Right. E t f s are dirt cheap. However,

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Speaker 1: in a four one K plan like say Bloomberg, we

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Speaker 1: pull all our money together, we can afford the institutional

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Speaker 1: class of mutual fund and the eye class as almost

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Speaker 1: as cheap as an E t F. Correct E t

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Speaker 1: F s ultimately are kind of priced at the institutional

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Speaker 1: class level, where the four one k market where you're

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Speaker 1: going to see the shift is you're going to see

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Speaker 1: index funds take over. And then the other thing is

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Speaker 1: there's some technical accounting issues with buying fractional shares. I

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Speaker 1: won't get to the weeds, but the idea that if

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Speaker 1: you put money in all the time, when when you

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Speaker 1: go to buy a mutual fund, there is no bid

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Speaker 1: ask spread, whereas E t F you have to buy

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Speaker 1: it that spreads. You could argue that dripping and dripping

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Speaker 1: and dripping money into an e t F could cost

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Speaker 1: you more than on the mutual fund side. But on

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Speaker 1: outside of a four wing k plan, an e t

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Speaker 1: F will blow away a mutual fund. But that's why

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Speaker 1: the four one k plan is essentially the mutual funds

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Speaker 1: Alamo because they're protected there. Right. E t f s

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Speaker 1: can't really get in there trapped. You know, they're they're

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Speaker 1: fighting for their life there. I love the Alamo metaphor.

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Speaker 1: That was a good one. Have you been It's quite

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Speaker 1: small it's funny. I grew up in Texas, but I

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Speaker 1: never went. Also, that Alamo story didn't work out so

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Speaker 1: well in the end. That's why I use the metaphor. Okay,

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Speaker 1: came up just a couple of seconds ago. You said

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Speaker 1: something that I want to ask you about bid ask spread.

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Speaker 1: I don't think we've actually really addressed that one. What

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Speaker 1: is bidass spread? Bidass spread is essentially the round trip

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Speaker 1: toll for trading in ETF, the difference between what you

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Speaker 1: can what they'll sell and buy because they're making a market.

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Speaker 1: And usually for most TTF there's a penny difference, right,

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Speaker 1: So if you bought like say spy, you buy it

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Speaker 1: at say a hundred dollars and one cent, but when

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Speaker 1: you go to sell it, you have to sell it

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Speaker 1: for a hundred dollars even you're losing a penny and

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Speaker 1: that is what the middlemen make for making the market.

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Speaker 1: So it's very tiny. And if you take that penny

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Speaker 1: and divide by the price of the e t F,

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Speaker 1: you're talking about point oh one in cost. But that's important.

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Speaker 1: But if you do that all the time and you're

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Speaker 1: trading all the time, it can add up. And if

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Speaker 1: you go to less liquid ETFs you may trade and

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Speaker 1: may maybe four or five basis points'll have a bigger

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Speaker 1: bit ass bread, right, Yes, so just look at the

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Speaker 1: bit asks a spread as the tiny, tiny little cut

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Speaker 1: that the middleman get for making a market in in

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Speaker 1: the stocks and ETFs. Here's a great question, super meta,

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Speaker 1: what's the best performing e t F of all time?

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Speaker 1: So we actually just looked at this. Uh, it's interesting

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Speaker 1: if there's two categories. There's including leverage thetfs, right, and

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Speaker 1: there's ones without. So we'll start with the whole enchilada rights,

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Speaker 1: what's the best performing e t F of all time?

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Speaker 1: We did, Yeah, and the answer to that question is

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Speaker 1: T E C L what T It's nearly five thousand

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Speaker 1: percent since it came out. It's the triple leveraged Tech.

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Speaker 1: Triple leverage TECH of course. And the thing with leverages,

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Speaker 1: if something goes up in a nice steady pattern, the

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Speaker 1: daily leverage, when it resets every day, it compounds. So

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Speaker 1: that's why leverage ETFs are path dependent. If it were volatile,

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Speaker 1: you wouldn't see that. But Tech has had a nice

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Speaker 1: nice run since this came out. Was that it came

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Speaker 1: out in two thousand eight, so it came out right

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Speaker 1: at the bottom. Over ten years, it's up five thou percent. Yes,

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Speaker 1: that blows away everybody. So that's number one. If you

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Speaker 1: take away leverage, which is sort of like you know, steroids,

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Speaker 1: you know, and just going with like clean play, the

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Speaker 1: best performing e t F is m d Y, which

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Speaker 1: is the spider MidCap um. And what's interesting about m

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Speaker 1: d Y it has a big head start. It came

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Speaker 1: out a second e t F launched, But m d

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Speaker 1: Y is midcaps, and you know, we talked about them

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Speaker 1: being the g and Brady of the of the stock

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Speaker 1: market because they're overlooked. M d Y since it launched

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Speaker 1: is up. Now. If you take the large caps during

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Speaker 1: that same time period, they're up seve If you take

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Speaker 1: small caps there are up seven. In other words, mid

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Speaker 1: caps almost doubled. That is a crazy stat to me.

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Speaker 1: I was shocked by that. Something to consider when you're

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Speaker 1: investing in the stock market. A lot of people like

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Speaker 1: broad market strategies which include mid caps, but if you

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Speaker 1: go just large, you know, kind of missing out on that.

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Speaker 1: So I kind of what I what I like about

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Speaker 1: this though, too, is that the leverage speaks to like

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Speaker 1: the steroid era of baseball. Yeah, it's Barry Bonds, bonds

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Speaker 1: like Mike Trout. Well, I would go with Roger Marris

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Speaker 1: A right, Roger Marris. There you can have your contemporary,

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Speaker 1: you can have your class there you go. So erk.

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Speaker 1: One thing that people always ask about is um public companies, right,

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Speaker 1: because the needs you have basically you're only investing in

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Speaker 1: public market. But if you look at the data over

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Speaker 1: the past, you know, fifteen years or whatever, A, there's

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Speaker 1: fewer public companies overall, and b there's fewer and fewer

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Speaker 1: companies actually going public. So is there an option for

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Speaker 1: investors to actually engage it in private markets via E

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Speaker 1: t f s? Not directly, No is the answer, and

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Speaker 1: this is probably why I think, you know, hedge funds

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Speaker 1: and other parts of finance are always going to have

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Speaker 1: a home because ETFs can only track what's publicly available. However,

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Speaker 1: with that said, I've heard a few arguments recently and

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Speaker 1: I'll throw out some options. Surrogates. Microcap stocks have been

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Speaker 1: argued as a close thing to private equity because these

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Speaker 1: are companies that are smaller, no analysts coverage, they don't

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Speaker 1: their financial strength is lower. How small are we talking

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Speaker 1: with the microcap These are companies with market cap of

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Speaker 1: fifty million, two about million. And what's interesting about microcaps

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Speaker 1: is there's like, there's a couple of microcap ets. IWC

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Speaker 1: for my Shares is the biggest one. It holds a

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Speaker 1: thousand stocks. And I looked if you take the broad

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Speaker 1: market e t F like v t I, which holds

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Speaker 1: you know, three thousand large, mid, small, the market cap,

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Speaker 1: it barely has any microcaps. So there's a thousand stocks

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Speaker 1: out there that are not even in the broad ones.

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Speaker 1: The thing is, those thousand stocks together only equal one

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Speaker 1: too of the entire market. That said, nobody is really

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Speaker 1: buying or getting exposure to these thousand stocks. I think

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Speaker 1: that's just interesting alone that there's a thousand companies that

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Speaker 1: almost nobody owns because microcap ETFs have I don't know,

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Speaker 1: around a billion maybe less um. So that's one option

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Speaker 1: for people who might want to just get to companies

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Speaker 1: that are closer to the private stage. Another option is

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Speaker 1: there's an e t F called b U Y. This

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Speaker 1: is an et F that's uh synthetically trying to get

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Speaker 1: you private equity returns by looking for companies that have

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Speaker 1: those attributes. So it's sort of like the microcap model,

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Speaker 1: except it's going out for mid small and just looking

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Speaker 1: at companies that have similar attributes and trying to basically

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Speaker 1: replicate the private equity through public equity. Interesting. One caveat

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Speaker 1: that one's pretty expensive, just be careful, doesn't trade a lot,

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Speaker 1: it's very new. Just a caveat on buy. Where's the

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Speaker 1: microcap ETFs have a long track. I think it's all

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Speaker 1: about ten years old um, and they're a little more

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Speaker 1: liquid in terms of trading volume. UM. The third way

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Speaker 1: is there's a private equity et f. The tracks private

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Speaker 1: equity companies that are publicly listed in other words like KKR.

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Speaker 1: These are companies that, yeah, they manage private equity funds.

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Speaker 1: This is a way to invest in them. However, you're

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Speaker 1: gonna get a lot more exposure to things that are

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Speaker 1: not private equity, like just general macro movements, the FED,

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Speaker 1: those kind of things will push around these big stocks

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Speaker 1: just as much as their revenues. So it's it's almost

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Speaker 1: like playing equity our energy stocks through xl E when

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Speaker 1: you want oil. I think there's some disconnect there. So

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Speaker 1: it's these are all imperfect ways, but they're just some

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Speaker 1: options out there. I think if people are really on

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Speaker 1: the hunt for something that's private equity esque. So Eric,

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Speaker 1: there's this plan. It's called marijuana. I've heard of it.

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Speaker 1: It's kind of popular in some places. It's even becoming legal.

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Speaker 1: You know. There's medical marijuana, there's recreational marijuana, which more

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Speaker 1: and more stamps are adopting. And then there's an entire

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Speaker 1: country just to the north called Canada. Canada is in

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Speaker 1: the process of legalizing recreational marijuana. So what's going to

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Speaker 1: happen with e t f s and marijuana? Popular question?

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Speaker 1: In fact, I don't just get this on Twitter, but

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Speaker 1: when I traveled around, people would ask me. People internal

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Speaker 1: here who just have jobs doing whatever have said, hey, here,

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Speaker 1: potty TF. I think they sense that they want to

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Speaker 1: get in on this early, and they want an e

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Speaker 1: t F because it diversifies, because they don't want to

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Speaker 1: go around trying to pick one of these pot stocks.

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Speaker 1: They're very small, they could blow up. There's a a

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Speaker 1: lot of risk volatil yes, and so a pot e

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Speaker 1: t F basically cuts that risk in half. So the

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Speaker 1: there's a couple of marijuana eat in half. So it

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Speaker 1: takes basically, if you take the volatility of the average

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Speaker 1: stock in say the Canadian Party t F or the

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Speaker 1: one in the US. The E t F has half

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Speaker 1: the VALL as the of the average stock, which makes sense,

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Speaker 1: right because you're sort of through that diversification. You do

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Speaker 1: cut your single stock VALL in half, and people like

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Speaker 1: that is a way to play that because believe me,

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Speaker 1: it's volatile enough. The potty t F is about five

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Speaker 1: times the volatile of the SMP, so you can imagine

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Speaker 1: one of these stocks could be ten times. So these

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Speaker 1: ETFs already exists. What are the tickers? The one in

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Speaker 1: Canada that came out first. Canada leads the US a

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Speaker 1: lot in new E t F launches. Their regulators are

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Speaker 1: very liberal. H M m J is the ticker in Canada,

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Speaker 1: m m J. The tickers aren't that great. You think

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Speaker 1: they're better. I think though. I think issuers didn't want

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Speaker 1: to like do a touchdown dance after they got approval

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Speaker 1: and like rub it in or make it more um

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Speaker 1: because I think the regulators are a little like, uh

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Speaker 1: not thrilled with letting E t F s out like this,

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Speaker 1: either in Canada or the US with the U S ticker.

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Speaker 1: The U S ticker is m J, M and J,

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Speaker 1: which is a little more obvious. I think yeah totally. Um,

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Speaker 1: I think of Michael Jordan and Michael Jackson, you can

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Speaker 1: think that way and the guy who created it differently.

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Speaker 1: But there is one in registration with the ticker TOKE,

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Speaker 1: which is pretty good. That's a verb. Tickers are the best,

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Speaker 1: and that one is a good one. So MJ is

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Speaker 1: the one in the US. Now there's a big difference.

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Speaker 1: The US one holds more US stocks and has a

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Speaker 1: little more filler. The one in Canada, I think, is

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Speaker 1: more of a pure play and holds Canadian stocks. The

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Speaker 1: Canadian pot companies are the ones that have done way

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Speaker 1: better because it's it's pushing, it's moving along faster there

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Speaker 1: and Ken Shay of Bloomberg Intelligence gave me some really

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Speaker 1: compelling numbers on the marijuana industry. If you look the

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Speaker 1: sales last year in Canada were six million dollars, but

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Speaker 1: they're projected to go in a year and a half

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Speaker 1: to five billions. Does yes, half medicinal, half recu national,

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Speaker 1: So it's the recreational market that's the big driver. And

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Speaker 1: that's five billion that I mentioned in Canada that other

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Speaker 1: companies predict a little higher, like Dewitch Bank. I believe

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Speaker 1: this is a seven billion. Globally it's twenty billion. And

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Speaker 1: recently I was in Canada at the inside et F

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Speaker 1: S Canada conference and one of the panels they do,

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Speaker 1: which I'm involved with, is six or seven E t

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Speaker 1: F Ana. Let's get up on stage and they all

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Speaker 1: have to argue for what the best new launch was.

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Speaker 1: It's sort of a rat battle for E t F

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Speaker 1: analysts and the one that you were involved in a

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Speaker 1: rat battle, I was, except that's et F analysis that

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Speaker 1: I'm throwing down, you know, and then the audience votes no,

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Speaker 1: there's no beat. But I have power points lives. So

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Speaker 1: what I showed was I showed what do you think

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Speaker 1: of when I say, Mara want. I showed pictures of

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Speaker 1: you know, um Grateful Day Concert, Pineapple Express, Cheech and Chong,

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Speaker 1: and I said, this is what most people think of.

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Speaker 1: But then I showed the bar chart of the growth.

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Speaker 1: This could be what you should think of when you

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Speaker 1: think of this industry. The question is how much more

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Speaker 1: can it go? Up? Right? H MMJ is a hundred

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Speaker 1: and six in the past twelve months. The argument back

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Speaker 1: after I laid down my case for it, The argument back,

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Speaker 1: because you've got to rebuttal they came back was, well,

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Speaker 1: a lot of people this isn't new. People know this

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Speaker 1: is growing. The price to earnings ratio are extremely high.

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Speaker 1: It's like sort of the same argument for like internet

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Speaker 1: stocks in the late nineties. One it could all go

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Speaker 1: up and smoke. That's pretty good, obvious but good. So

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Speaker 1: I didn't win. I came in I think second, but

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Speaker 1: third based on the audience um sort of applause meter.

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Speaker 1: I feel I feel like this is a consistent thing,

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Speaker 1: Like you end up in these show downs and you

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Speaker 1: don't take calm the gold. Yeah, but last the one

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Speaker 1: I did before, I was sixth, so I'm moving up.

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Speaker 1: I think I'm gonna take it next time around. Yes,

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Speaker 1: because I realized it's not really the ticker or the

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Speaker 1: validity of the e t F. It's the show. Whoever

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Speaker 1: just puts on the best show. And so I've raised

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Speaker 1: my performance this time and got higher on the ladder.

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Speaker 1: But anyway, I will so you can invest in pottytfs

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Speaker 1: MJ's won the U s h MMJ is the one

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Speaker 1: of what's the US one whole It's it's a mixture

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Speaker 1: of Canada and US stocks. It's got mid and small caps. Again,

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Speaker 1: I asked ken Sha to look at the holdings. He said,

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Speaker 1: well about it is sort of directly linked to cannabis sales,

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Speaker 1: but like one company in there. I think Scott's Miracle

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Speaker 1: Grow is in the e t F. That clearly pot

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Speaker 1: is not a huge but it you know they are

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Speaker 1: working in the industry. The question is as the industry

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Speaker 1: gets a little more, get bigger, they will give more

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Speaker 1: weight to the pure play companies. But when a new

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Speaker 1: industry or THEMTF starts, they kind of have to fill

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Speaker 1: it out with some bigger, liquid names to make the

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Speaker 1: basket actually liquid. For a little shake in your dubie.

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Speaker 1: Everybody hates paying taxes, and we know that ETFs have

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Speaker 1: some tax benefits. Joe Panino at Panin ll C, ask,

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Speaker 1: can you do it? An analysty the tax efficiency of

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Speaker 1: e t F s versus mutual funds versus hedge funds. Right,

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Speaker 1: The data is is tough to crunch on this, but

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Speaker 1: morning Star actually did an analysis. I'll give them credit

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Speaker 1: for this. If you look at the e t F

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Speaker 1: capital gains distributions over time, it's almost the perfect record.

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Speaker 1: It almost looks like a picture. No hits, no runs, no,

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Speaker 1: you just look almost a perfect game. There's occasions where

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Speaker 1: they will distribute to capital gains, but it's so rare

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Speaker 1: um and that's what people like about e t s.

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Speaker 1: It's a big I put A top five attribute is

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Speaker 1: the fact that you don't get tax for doing for

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Speaker 1: just sitting there and a mutual fund. You can if

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Speaker 1: a big investor were to leave the mutual fund, the

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Speaker 1: manager has to cash them out. How do they do that?

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Speaker 1: They sell some of the stocks. That's a taxable event,

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Speaker 1: and you sit there in the fund. You get a distribution,

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Speaker 1: and e t F do not have that. You still

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Speaker 1: get tax when you sell it, but you don't get

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Speaker 1: taxed just for doing, like a by standard kind of tax.

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Speaker 1: Huge deal. E t f s almost no capital gains

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Speaker 1: distributions across their life. Mutual funds big problem. And he

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Speaker 1: also asked about hedge funds, So how to hedge fund

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Speaker 1: stack up? Same deal with the mutual funds. The thing

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Speaker 1: is a lot of people who are in hedge funds

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Speaker 1: are endowments, pensions who are going pre tax. All of

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Speaker 1: what I just said only involves in after tax money,

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Speaker 1: which brings us back to this idea that if you

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Speaker 1: put an e t F, a mutual fund, a hedge

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Speaker 1: fund in a level playing field after tax e t

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Speaker 1: F almost always going to win that battle. Oh, I

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Speaker 1: like this one from at stand the m F man.

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Speaker 1: It's a great hand no no comment. Yes, I don't

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Speaker 1: think it's mutual fund man. No comment. Uh, here's what

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Speaker 1: he asked. What are your thoughts on index provider selection

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Speaker 1: like M s C I versus foot c F t S.

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Speaker 1: This is a great question and it's huge. You really

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Speaker 1: should look at the index. The index is the thing.

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Speaker 1: Most people just look at the issue or now and

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Speaker 1: the costs and the exposure. You know, A MSCI versus

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Speaker 1: Footsie is a great example. People usually bring up the

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Speaker 1: emerging markets. M s C I has South Korean there

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Speaker 1: at about a fift weight foot see doesn't they consider

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Speaker 1: South Korea developed market? So if you were going and

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Speaker 1: using m s C I, which is the I Shares

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Speaker 1: version for your international you should use them as a

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Speaker 1: set at least because the developed and emerging will be

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Speaker 1: in line. If you used one or the other, you

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Speaker 1: might have extra or no South Korea. So you really

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Speaker 1: should think about that, and that's why some people do

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Speaker 1: like to use indexes sort of together for their broad exposure.

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Speaker 1: I do think that looking at the index though, ultimately

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Speaker 1: comes leads back to looking at the holdings the waitings,

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Speaker 1: which we always talk about how is it weighted, So

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Speaker 1: it's not that indifferent than looking at the exposure. But

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Speaker 1: it is important. But this is you know, it's really

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Speaker 1: important because uh, it's about what you're gonna buy, right,

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Speaker 1: And like say, China is an interesting one. There's been

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Speaker 1: a lot of conversation about when China is in an index,

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Speaker 1: when it isn't an in an index. For instance, there's

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Speaker 1: UM E t F E M M right which noticed

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Speaker 1: it was created by a guy who basically was like,

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Speaker 1: I want China exposure and I'm not getting it anywhere

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Speaker 1: else because of the way the indexes are structured, right,

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Speaker 1: which brings us to the fact that there's a lot

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Speaker 1: of new formed independent indexes and what's called self indexing

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Speaker 1: because when you have an E t F, you have

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Speaker 1: to pay ms C I and foot see if you

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Speaker 1: want to license, and it goes into your basis points.

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Speaker 1: So what you're going to find more and more is

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Speaker 1: self indexing. Even the big guys, I think are going

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Speaker 1: to start to wean off of the big brand names

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Speaker 1: and just do it themselves. I think there's a couple exceptions,

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Speaker 1: S and P five hundred ms c I emerging markets.

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Speaker 1: These are rock stars. They're almost bigger than the e

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Speaker 1: t F. But outside of a couple of rock star indexes,

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Speaker 1: a lot of the indexes are not that big of adeal.

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Speaker 1: I've seen an index get switched by an issuer and

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Speaker 1: the flows don't change. Because there's surveys that show advisors

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Speaker 1: and retail in particular really are looking. They think the

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Speaker 1: brand name of the issuer is more important in the

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Speaker 1: brand name of the index, and they trust the you

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Speaker 1: know those names more, which is that's a really phenomenal shift,

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Speaker 1: totally right, because those the indexes have been forever the hemos.

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Speaker 1: Institutional money typically is more focused on the index they

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00:22:14,880 --> 00:22:17,080
Speaker 1: are benchmark to the ms I, and they they're way

427
00:22:17,119 --> 00:22:20,040
Speaker 1: more into that. That's why it's important on institutional for

428
00:22:20,119 --> 00:22:22,360
Speaker 1: institutional clients to have that m c I or foot see.

429
00:22:22,680 --> 00:22:25,000
Speaker 1: But for retail, I think more and more they just

430
00:22:25,080 --> 00:22:26,800
Speaker 1: don't care. They'll just look to the issuer. Oh it's

431
00:22:26,800 --> 00:22:28,960
Speaker 1: Black Rocket, Stage Trade, it's Vanguard. I you know, I

432
00:22:29,200 --> 00:22:30,880
Speaker 1: trust the name. I don't really, they don't even look.

433
00:22:30,960 --> 00:22:33,080
Speaker 1: What's an example of somebody who's been self indexing lately.

434
00:22:33,440 --> 00:22:35,800
Speaker 1: Wisdom Tree started it. They only they make their own

435
00:22:35,800 --> 00:22:38,119
Speaker 1: indexes and then track them. But black Rock for the

436
00:22:38,200 --> 00:22:40,639
Speaker 1: first time ever self index two bond E t F s,

437
00:22:41,000 --> 00:22:42,840
Speaker 1: and I would look, that's major to me because they've

438
00:22:42,920 --> 00:22:45,439
Speaker 1: never done that before and they're major um. And then

439
00:22:45,480 --> 00:22:47,760
Speaker 1: you have other companies that have started to come out

440
00:22:47,800 --> 00:22:49,560
Speaker 1: with a Goldman sex the e T E t F

441
00:22:49,640 --> 00:22:52,680
Speaker 1: we mentioned earlier, GSLC. Goldman made that index and I

442
00:22:52,840 --> 00:22:55,359
Speaker 1: was tracking it, and that's ultimately what you'll find more

443
00:22:55,359 --> 00:22:58,080
Speaker 1: and more with big active mutual fund companies. They're going

444
00:22:58,160 --> 00:23:00,800
Speaker 1: to take their active secret sauce, turn it into an

445
00:23:00,840 --> 00:23:02,840
Speaker 1: index that's their own index, and then have an E

446
00:23:02,880 --> 00:23:11,400
Speaker 1: t F tracking it. Okay, So here's probably the most

447
00:23:11,520 --> 00:23:17,560
Speaker 1: basic question that a listener could ask, and I love it,

448
00:23:17,840 --> 00:23:20,879
Speaker 1: which is what's the best E t F for the

449
00:23:20,960 --> 00:23:25,080
Speaker 1: long term? Oh, that is a tough question. And I

450
00:23:25,119 --> 00:23:27,880
Speaker 1: do get asked this here and there, and I can't

451
00:23:27,880 --> 00:23:30,520
Speaker 1: give investment advice like that's that's against the rules for me.

452
00:23:30,640 --> 00:23:33,000
Speaker 1: But what I can do is I can point you

453
00:23:33,080 --> 00:23:35,320
Speaker 1: to an article I wrote in something I captured in

454
00:23:35,359 --> 00:23:37,680
Speaker 1: my book, and it's not one E t F but

455
00:23:37,760 --> 00:23:39,080
Speaker 1: it's two E t F and I call it the

456
00:23:39,080 --> 00:23:43,080
Speaker 1: Buffet Special. Warren Buffett, in one of his letters to investors,

457
00:23:43,119 --> 00:23:45,440
Speaker 1: his famous letters, said one of the investors asked him

458
00:23:45,640 --> 00:23:48,359
Speaker 1: what should I invest in? So he basically pointed to

459
00:23:48,480 --> 00:23:49,800
Speaker 1: his will and what he's going to do with his

460
00:23:49,920 --> 00:23:52,840
Speaker 1: fortune after he passed his way, and he said to

461
00:23:52,960 --> 00:23:57,640
Speaker 1: his wife, take my fortune, put it into an sp

462
00:23:58,320 --> 00:24:00,959
Speaker 1: index fund, preferably from Vanguard, and then take the other

463
00:24:01,080 --> 00:24:03,160
Speaker 1: ten percent and put it into short term treasury bills.

464
00:24:04,000 --> 00:24:06,240
Speaker 1: So you could do that with two E t F

465
00:24:06,320 --> 00:24:08,920
Speaker 1: s very easily and very cheaply. You can do it

466
00:24:09,000 --> 00:24:11,200
Speaker 1: with say VOO that's the Vanguard s and P five

467
00:24:11,280 --> 00:24:14,000
Speaker 1: hundred that's five basis points cost, or I VV the

468
00:24:14,080 --> 00:24:17,359
Speaker 1: I shares even cheaper at four. Then you can do there.

469
00:24:17,400 --> 00:24:19,639
Speaker 1: And then you could do ten percent into SHY or

470
00:24:19,840 --> 00:24:22,600
Speaker 1: s h V, which is just short term treasury builds,

471
00:24:22,960 --> 00:24:24,760
Speaker 1: and I think the expense ratio and that might be

472
00:24:24,920 --> 00:24:27,920
Speaker 1: ten or eleven basis points. So if you all in,

473
00:24:28,119 --> 00:24:30,639
Speaker 1: you're talking about five or six basis points for your

474
00:24:30,640 --> 00:24:34,879
Speaker 1: Buffet Special portfolio. And he claims that portfolio will outperform

475
00:24:35,000 --> 00:24:37,640
Speaker 1: all of the professionals, all of the institutions. I back

476
00:24:37,680 --> 00:24:39,760
Speaker 1: tested it, and it does. You look at the average

477
00:24:39,800 --> 00:24:42,720
Speaker 1: endowment versus that the buffet special does win. It'll obviously

478
00:24:42,760 --> 00:24:44,240
Speaker 1: have times when it might not be as well, but

479
00:24:44,359 --> 00:24:46,639
Speaker 1: over the long term, you know, it's hard to go

480
00:24:46,720 --> 00:24:49,280
Speaker 1: against warm buffet. So well, I can't recommend an e

481
00:24:49,320 --> 00:24:51,359
Speaker 1: T F. I can point you to what he said

482
00:24:51,600 --> 00:24:53,000
Speaker 1: and then fill in the two E T s to

483
00:24:53,080 --> 00:24:55,280
Speaker 1: sort of play out his recommendation. I think I'm gonna

484
00:24:55,440 --> 00:24:57,399
Speaker 1: walk over and figure out where I do this. But

485
00:24:57,760 --> 00:25:01,040
Speaker 1: put in a little holder for a buffet speci rolled ticker.

486
00:25:01,200 --> 00:25:04,080
Speaker 1: That sounds like a good idea. Yeah, using his name,

487
00:25:04,160 --> 00:25:11,920
Speaker 1: I think I'm not sure that one. I'm guessing. One

488
00:25:11,960 --> 00:25:14,119
Speaker 1: thing I'm really proud about with this podcast is we

489
00:25:14,200 --> 00:25:16,200
Speaker 1: have a great review and iTunes. Have you seen that,

490
00:25:16,320 --> 00:25:18,960
Speaker 1: Like it's like four and a half stars amazing. Yeah. No,

491
00:25:19,280 --> 00:25:22,520
Speaker 1: we're getting a lot of good, good star ratings and

492
00:25:22,600 --> 00:25:26,240
Speaker 1: mostly good comments. A couple other comments that we want

493
00:25:26,240 --> 00:25:28,639
Speaker 1: to talk about. Yeah, so the ones that are, hey,

494
00:25:28,720 --> 00:25:30,920
Speaker 1: you're doing a great job. Love the insight, you know

495
00:25:31,040 --> 00:25:33,680
Speaker 1: you love to hear that. Um, normally I don't even

496
00:25:33,720 --> 00:25:37,200
Speaker 1: re read reviews, but somebody you're like that, huh, yeah,

497
00:25:37,200 --> 00:25:38,720
Speaker 1: I don't because if you buy into the good ones,

498
00:25:38,720 --> 00:25:40,000
Speaker 1: you kind of have to buy into the bad ones.

499
00:25:40,080 --> 00:25:42,639
Speaker 1: And so I I did read them though, and I

500
00:25:42,680 --> 00:25:44,520
Speaker 1: want to address too, because I think other people may

501
00:25:44,560 --> 00:25:47,520
Speaker 1: feel this way. One guy says that I feel like

502
00:25:47,560 --> 00:25:51,720
Speaker 1: I'm getting sponsored content spoon fed to me. Um. I'm

503
00:25:51,720 --> 00:25:53,840
Speaker 1: a fan of ETFs. However, it's not all roses. There

504
00:25:53,840 --> 00:25:56,480
Speaker 1: are downside that need to be addressed. Right, So here's

505
00:25:56,520 --> 00:25:59,200
Speaker 1: the thing. Yes, it's it's sponsored, but you know everything

506
00:25:59,280 --> 00:26:02,480
Speaker 1: sponsored in the media. You first of all, we are

507
00:26:03,160 --> 00:26:05,760
Speaker 1: we are vetting et s properly here, and we did

508
00:26:05,800 --> 00:26:07,760
Speaker 1: a whole episode on the traffic light, I mean went

509
00:26:07,800 --> 00:26:10,840
Speaker 1: over ten things that could be nasty surprises and et

510
00:26:10,960 --> 00:26:12,600
Speaker 1: f s. We try to do the warts and all.

511
00:26:12,640 --> 00:26:15,360
Speaker 1: But here's the thing. E t s are really good.

512
00:26:15,400 --> 00:26:18,840
Speaker 1: They probably deserve more credit than critique, and that's why

513
00:26:18,920 --> 00:26:21,800
Speaker 1: the flows are so strong. Money goes where it's treated best.

514
00:26:22,320 --> 00:26:24,720
Speaker 1: If we were really gonna be spoon fetting or like

515
00:26:24,840 --> 00:26:27,160
Speaker 1: working for the man, we'd probably be trying to get

516
00:26:27,160 --> 00:26:29,560
Speaker 1: people to stay in active mutual funds because it makes

517
00:26:29,600 --> 00:26:32,440
Speaker 1: a ton more revenue. So I don't really agree with that,

518
00:26:32,600 --> 00:26:34,240
Speaker 1: but I understand kind of why he's saying it. But

519
00:26:34,480 --> 00:26:36,920
Speaker 1: you know we're not sponsored content, Like there's an advertisement

520
00:26:36,960 --> 00:26:39,080
Speaker 1: at the front of the show. That's that, right, What

521
00:26:39,520 --> 00:26:42,680
Speaker 1: you got one more that has been sticking with you

522
00:26:42,720 --> 00:26:44,600
Speaker 1: a little bit? We want to talk about it. Yeah,

523
00:26:44,760 --> 00:26:46,280
Speaker 1: this guy who, by the way I looked up he

524
00:26:46,400 --> 00:26:49,280
Speaker 1: hasn't written a positive view about anything on iTunes. Okay,

525
00:26:49,320 --> 00:26:51,000
Speaker 1: so he's kind of a nasty guy. But I hear

526
00:26:51,040 --> 00:26:53,600
Speaker 1: what he's saying, goes, Um, do you also do you

527
00:26:53,720 --> 00:26:56,800
Speaker 1: like pop culture references? We too love pop culture and

528
00:26:57,000 --> 00:26:59,840
Speaker 1: give you two minutes of filler for every actual minute

529
00:26:59,880 --> 00:27:03,680
Speaker 1: of E T F information. So I get that there's

530
00:27:03,680 --> 00:27:05,480
Speaker 1: been a couple episodes and guessing he does not like

531
00:27:05,560 --> 00:27:09,920
Speaker 1: the Squeaky Wheel yeah, or my police Academy reference. Afterwards.

532
00:27:10,480 --> 00:27:14,480
Speaker 1: Here's the thing, Um, I do a lot of premium

533
00:27:14,520 --> 00:27:16,399
Speaker 1: content on the terminal, and the TV show I do

534
00:27:16,520 --> 00:27:19,680
Speaker 1: is much more for it, you know, advisors and professionals.

535
00:27:20,160 --> 00:27:23,320
Speaker 1: This is purposely for people living outside of the financial bubble.

536
00:27:23,480 --> 00:27:26,320
Speaker 1: There are plenty of PhD type podcasts where they talk

537
00:27:26,400 --> 00:27:29,360
Speaker 1: to each other for each other. This isn't that we're

538
00:27:29,400 --> 00:27:33,840
Speaker 1: trying to We're trying to make it relaxing, fun, normal. Yeah,

539
00:27:33,880 --> 00:27:37,920
Speaker 1: and also give you the information in a way that

540
00:27:38,160 --> 00:27:41,040
Speaker 1: isn't like we're teaching a class, so it's by design.

541
00:27:41,160 --> 00:27:44,360
Speaker 1: I'm okay getting that, but alright, look, on occasion, maybe

542
00:27:44,359 --> 00:27:46,040
Speaker 1: we go a little too far down the eighties rabbit hole.

543
00:27:46,119 --> 00:27:49,040
Speaker 1: The best critique I got on that front was um

544
00:27:49,320 --> 00:27:52,960
Speaker 1: a listener who said, if I wanted Radiohead, I would

545
00:27:52,960 --> 00:27:56,240
Speaker 1: have had a Radiohead podcast. There really should be a

546
00:27:56,320 --> 00:27:59,760
Speaker 1: Radiohead podcast. I would. You know, we should know. We're

547
00:27:59,760 --> 00:28:02,680
Speaker 1: gonnavolunteer yourself. We can pitch it. I can hear the

548
00:28:02,720 --> 00:28:05,920
Speaker 1: response already. Yeah, the radio Head one was probably the

549
00:28:06,000 --> 00:28:07,879
Speaker 1: most far out we've gone. But look we're trying to

550
00:28:08,359 --> 00:28:10,920
Speaker 1: We're hanging out with you for twenty five minutes. It's

551
00:28:10,960 --> 00:28:15,160
Speaker 1: oddly intimate. It is. I enjoy being intimate with you. Eric.

552
00:28:19,040 --> 00:28:22,399
Speaker 1: Thanks for listening to Trillions until next time. You can

553
00:28:22,440 --> 00:28:26,520
Speaker 1: find us on the Bloomberg terminal, Bloomberg dot com, Apple Podcasts,

554
00:28:26,920 --> 00:28:31,000
Speaker 1: and wherever else you listen to podcasts. Trillions is produced

555
00:28:31,000 --> 00:28:34,879
Speaker 1: by Magnus Hendrickson. Francesco Levy is the head of Bloomberg

556
00:28:35,000 --> 00:28:36,440
Speaker 1: podcast Bye