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Speaker 1: Well, can you trilliance? I'm Joe in America. Tunis Eric H.

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Speaker 1: We have a good, great guest today, Jim Bianco of

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Speaker 1: Bianco Research, and I have a few things that I

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Speaker 1: want to talk to him about. What do you want

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Speaker 1: to talk to him about? A couple of things. I mean,

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Speaker 1: one of the words that we're hearing more and more

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Speaker 1: is inflation. And we saw bond yields go up last week,

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Speaker 1: and we saw how how big time equities reacted off

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Speaker 1: of that, and you realize there's a fragility between bonds

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Speaker 1: and stocks. You had both bonds and stocks going down.

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Speaker 1: Inflations are inflation fears are getting stronger, and Jim tweets

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Speaker 1: about this quite a bit. And so this dynamic of

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Speaker 1: inflation and how it will affect people's portfolios is one thing.

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Speaker 1: And the other thing I think is ARC, and ARC

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Speaker 1: to me is probably the poster child of some of

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Speaker 1: these stocks that are counting on low rates right um

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Speaker 1: low rates there is good for these sort of high

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Speaker 1: valuation stocks. And also the fears around ark and concentration risks.

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Speaker 1: And I've seen him to be about this a lot

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Speaker 1: as well. And so these are two major stories that

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Speaker 1: are really dominating the past couple of weeks in my view,

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Speaker 1: And and he's somebody who thinks about this stuff constantly.

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Speaker 1: As long as we're gonna talk to him about inflation,

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Speaker 1: we gotta, I think, also ask him about bitcoin, because

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Speaker 1: that's the thing a lot of people think is a

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Speaker 1: hedge to inflation, and there's all this chatter around bitcoin ETFs. Yeah,

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Speaker 1: and I can tell you from from following him that

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Speaker 1: he's thinking about that a lot. And what I like

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Speaker 1: about Jim is he's, um not dismissive. You know, there's

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Speaker 1: people who just dismiss bitcoin, They dismiss arc, they dismiss

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Speaker 1: they're just very dismissive. Um, he's not. He kind of

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Speaker 1: tries to figure it out, understand where it's coming from.

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Speaker 1: And I think that that's an asset as an analyst

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Speaker 1: this time on trillions, how to think about inflation, I mean,

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Speaker 1: other things with Jim Bianco. Jim, welcome at Trilliance. Hey,

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Speaker 1: thanks for having me. So Jim, I gonna ask you,

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Speaker 1: what what what do you do? What's the you know,

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Speaker 1: your your president of Bianco Research, obviously doing a lot

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Speaker 1: of analysis, but like break it down for us, what's

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Speaker 1: your job? Whatever? I wanted to be. Uh, That's why

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Speaker 1: I like it. But seriously, I'm a macro researcher and

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Speaker 1: I'm an independent person. So I tend to look at

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Speaker 1: the macro space by saying, Okay, what isn't being emphasized enough?

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Speaker 1: What do I think people have wrong that I should explain?

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Speaker 1: What do I think they have right that I think

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Speaker 1: needs to be amplified, And so in within the macro realm,

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Speaker 1: I tend to kind of find those topics, uh and uh,

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Speaker 1: you know, choose which one I want, and I can

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Speaker 1: be very colectic, you know. In the fall, Uh, there

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Speaker 1: was I was doing a lot with polls on the

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Speaker 1: election and about how I thought that the election was

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Speaker 1: going to be far closer than people thought it was

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Speaker 1: going to be um you know, and my big whipping

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Speaker 1: boy back then was Nate Silver, who was giving um

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Speaker 1: Trump something like a nine percent chance of winning the election.

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Speaker 1: I still thought it was gonna lose, but I thought

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Speaker 1: it was more like a race than it was a

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Speaker 1: nine race. Uh as as well too. I my Bailey

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Speaker 1: Wick has always been the bond market, and it's all

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Speaker 1: I always kind of start there because it's kind of

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Speaker 1: the most natural market for a macro researcher because it

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Speaker 1: brings in policy and it brings in economics, which I

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Speaker 1: spend a lot of time doing as well too. What

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Speaker 1: I don't do a lot of as a macro researcher

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Speaker 1: is individual securities. So if you're looking for que SIPs

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Speaker 1: or tickers, I might not be your guy. I've got some,

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Speaker 1: but not really as as my big Bailey Wick And

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Speaker 1: who are your clients? Institutional investors around the world. I

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Speaker 1: am affiliated with a brokerage firm called Arbor Research and

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Speaker 1: Trading out of Chicago here and they've got offices you know,

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Speaker 1: in Chicago and New York and in London and salesman

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Speaker 1: in Chicago, New York, in London, and so we have

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Speaker 1: clients all over the all over the world. Uh. And

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Speaker 1: we also sell our research as part of a research

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Speaker 1: subscription basis if you don't want to subscribe to it

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Speaker 1: as a or you don't want to do brokerage business

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Speaker 1: as an institutional UM manager And so, Jim, I see

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Speaker 1: you tweeting about et s now and then they seem

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Speaker 1: to be worked into your workflow. Um, how are they

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Speaker 1: related to you? Are you? Are they a natural investment

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Speaker 1: tool for the people you're writing research for or are

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Speaker 1: you more looking at them as ways to read sentiment

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Speaker 1: and get intel from the market and investors both. I

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Speaker 1: think that there's a number of institutional investors and we

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Speaker 1: have a number of wealth managers. I like, I love

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Speaker 1: to tell this story. We have a number of wealth

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Speaker 1: managers as clients. And I was talking to a wealth

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Speaker 1: manager on the West Coast. This is, you know, four

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Speaker 1: or five years ago, and he was saying to me, uh, yeah,

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Speaker 1: I like high yield and I've instructed my desk to

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Speaker 1: buy high yield. I was like, really, you've got a desk.

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Speaker 1: You're a wealth manager, got a desk. And he goes, well,

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Speaker 1: it's kind of my wife on a PC and I

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Speaker 1: told her to buy me some h y G you know.

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Speaker 1: So that's kind of there's a lot of there's a

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Speaker 1: lot of institutional managers that when they say that they're

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Speaker 1: long a particular sector, short of particular sector, they're talking

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Speaker 1: about the e T s that they've bought or sold

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Speaker 1: as well too. And they provide a tremendous resource into

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Speaker 1: sentiment by looking at the creation and deletion of shares

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Speaker 1: and looking at the n A V premiums and discounts

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Speaker 1: as well too, you can get a lot of glean

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Speaker 1: a lot of information about the psyche of the market

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Speaker 1: as well. So they work for me on both ends

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Speaker 1: in that respect. So let's talk about ARC, which is

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Speaker 1: the E t F topic of the moment. You've been

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Speaker 1: following ARC. I have, we all have. I mean, you

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Speaker 1: can't take your eyes off of it. When you see

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Speaker 1: a company go from three billion to fifty billion in

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Speaker 1: a year, it's a amenon. You know, are craze. We

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Speaker 1: have many terms for it, but I just want to

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Speaker 1: get your just first overall. Take I think right now

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Speaker 1: the big debate is, Okay, this company has killed it,

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Speaker 1: They've grown fast, and now you've got this sort of

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Speaker 1: a bunch of warriors, not totally clear their motive, but

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Speaker 1: people are talking about, oh, there's concentration risk. Some of

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Speaker 1: the stocks that the funds own, they own, you know,

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Speaker 1: more than twenty of the SHARE's outstanding, could be a

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Speaker 1: dozen of those roughly, and so they're worried, well, what

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Speaker 1: if there's outblows, there's gonna be a liquidity issue and potentially,

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Speaker 1: and I heard one guy today was like, ARC is

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Speaker 1: gonna is the new long term capital management, which so

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Speaker 1: you're really seeing a lot of hyperbole as well. What's

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Speaker 1: your take on it right now? Well, first of all,

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Speaker 1: at the top, let me disclose that I own all

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Speaker 1: five of the ARC funds, so I am a big

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Speaker 1: fan of Cathy Wood and the structure of ARC. So

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Speaker 1: keep in minding my comments come from an admirer of

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Speaker 1: the fund. Now that I've said that, I think there's

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Speaker 1: a lot of people that are very they're very jealous.

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Speaker 1: They're jealous of the performance of of ARC. Might be

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Speaker 1: jealous of of Cathy as well too. Um, I won't

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Speaker 1: say that they're sexism, but I just did as well too.

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Speaker 1: But but let me let me be, let me be

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Speaker 1: a specific. Yeah, they've got an issue with with the concentration.

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Speaker 1: So did Warren Buffett in the nineteen eighties. He was

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Speaker 1: as concentrated as she was by having a you know,

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Speaker 1: a handful of of companies that he owned that he

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Speaker 1: was He sat on the board of most of them

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Speaker 1: as well too, So we've not this is not new,

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Speaker 1: And yes it does pose a risk, and no less

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Speaker 1: than ARC and WOULD themselves are regularly putting out YouTube

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Speaker 1: videos in research explaining that risk. And yes they do

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Speaker 1: disclose every day what they're doing in their fun they

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Speaker 1: have to buy law because they're an e t F

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Speaker 1: and they go the extra mile by emailing out all

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Speaker 1: of their trading every day as well too, So it's

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Speaker 1: a very very transparent fund. Uh. As far as the

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Speaker 1: idea that it's going to get so bad and that

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Speaker 1: the outflows out of ARC are gonna get so bad,

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Speaker 1: and that there's a bunch of people that are gonna

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Speaker 1: say I told you so, I got news for you.

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Speaker 1: If it gets that bad, it's gonna get that bad

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Speaker 1: for you too. It's not. ARC is not gonna blow

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Speaker 1: up and the SMP is gonna just sit there and

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Speaker 1: go sideways while that's happening. If you're talking about ARC

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Speaker 1: being in a long term capital type of problem, the

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Speaker 1: SMP is gonna look a lot like last March as

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Speaker 1: far as what it will be doing at the same time.

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Speaker 1: So I I don't understand this this hatred. Yeah, you

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Speaker 1: could make the case if you want, that this the

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Speaker 1: sector that she's playing in, is overdone. There might be

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Speaker 1: a stiff pullback there was last week as we are

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Speaker 1: talking about, and there might be further downside. That's one story.

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Speaker 1: But to say that they're going to come on glued

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Speaker 1: is essentially in my mind saying the whole market's gonna

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Speaker 1: come on glued because there is a strong correlation between

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Speaker 1: those stocks and the rest of the market. They're not

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Speaker 1: going to go down and fall apart while everything else

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Speaker 1: you're just gonna sit there and do nothing. Yeah, Jim,

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Speaker 1: I completely agree with you. I just want to had

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Speaker 1: a couple of little tidbits here. One is that ARC

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Speaker 1: also owns some pretty big names. They're able to sort

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Speaker 1: of manage liquidity, and they've only seen a week of

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Speaker 1: outflows and those outflows were one point five percent of

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Speaker 1: the assets. And like you said, when if if she

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Speaker 1: if her and her phone went down last week, well,

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Speaker 1: a lot of things were down last week. And this

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Speaker 1: reminds me of a lot of ETF issues where you

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Speaker 1: can create these scenarios on paper and they really end

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Speaker 1: up with you have to be able to you might

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Speaker 1: have like a World War three scenario before that plays out. Uh.

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Speaker 1: And I think people do try to isolate it instead

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Speaker 1: of just sort of considering it is one thing in

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Speaker 1: a bigger picture, because also fifty billion isn't that big um.

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Speaker 1: But we have looked also at e t F s

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Speaker 1: that have really risen up this quickly, and typically outflows

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Speaker 1: do not come out as fast as they went in

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Speaker 1: because there's people who are waiting to buy the dip.

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Speaker 1: You know, she got a big core fan base, so

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Speaker 1: there could be a tug of war, there could be

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Speaker 1: a rebound, and there are also could people who just

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Speaker 1: forget they bought it or are just in for the

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Speaker 1: long term. So I think this scenario that all of

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Speaker 1: a sudden, there's going to be a run on her

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Speaker 1: e t F and the flows are gonna be so

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Speaker 1: bad she gets stuck in a liquidity issue and you

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Speaker 1: know the and somebody even said she's gonna have to

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Speaker 1: be bailed out. I mean, this is getting pretty ridiculous.

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Speaker 1: I think it's the worst case scenario. If everything's going

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Speaker 1: to hell. It's possible she could have a little trouble

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Speaker 1: with a couple of stocks and it could trade at

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Speaker 1: it's like discount, if there's a pull on the e

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Speaker 1: t F to get out, But I don't know, I

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Speaker 1: just don't see anything worse than that. What it would

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Speaker 1: be your worst case scenario, Jim, You know, looking at

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Speaker 1: some of the e t f s in the in

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Speaker 1: the credit space, especially h y G. Let's talk worse

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Speaker 1: case you remember there's payment in kind. If things get

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Speaker 1: bad enough, you could just hand that you just in redemption,

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Speaker 1: you can just hand them the shares, is what you

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Speaker 1: could do. You don't have to liquidate the shares and

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Speaker 1: hand them and hand them cash. That's if you get

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Speaker 1: into the worst case scenario. So there is not necessarily

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Speaker 1: that case. We've seen that with UM, Like I said,

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Speaker 1: in is a matter of fact. With h y G

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Speaker 1: they high yield e t F. That's an actual strategy

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Speaker 1: as far as uh UM. You know, payment and kind

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Speaker 1: in for in terms of handing shares and receiving shares

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Speaker 1: as part of the trading strategy of that fund as

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Speaker 1: well too. So that would be you know, I think

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Speaker 1: under the worst case scenario. But let's also remember I

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Speaker 1: know she was much smaller, but one year ago, one

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Speaker 1: year ago, her strategy was she was buying a lot

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Speaker 1: of big liquid names, you know, the Microsoft's, the Apples

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Speaker 1: of the World and stuff, and then in the sell

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Speaker 1: off in March, liquidated those names to pick up a

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Speaker 1: lot of the lesser liquid, higher flyer names as well too.

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Speaker 1: And I've seen some of her research thing that's the

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Speaker 1: strategy I want to employ in the next downturn. And

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Speaker 1: then finally, I'll say one other thing too. In the

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Speaker 1: last two weeks, she's come out repeatedly and said she

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Speaker 1: expects a stiff correction in the market. So I think

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Speaker 1: part of the thing about them getting in trouble is

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Speaker 1: they're caught flat footed and something they don't anticipate. Well,

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Speaker 1: she's been anticipating a correction in the market, so I

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Speaker 1: have to believe that. You know, she's been strong positioned

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Speaker 1: for it, been ready for it. It's not shocking her.

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Speaker 1: She's not staring at the ceiling at night wondering what's

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Speaker 1: going on because our funds are are are selling off.

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Speaker 1: Is bad because it was literally two weeks ago she

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Speaker 1: said she was ready for something like this. So, Jim,

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Speaker 1: I want to actually take a moment and like talk

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Speaker 1: about the fixed income world, since that's something that you're

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Speaker 1: you're deeply rooted in as well. How existential of a

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Speaker 1: moment is this for for fixed income and bonds. I

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Speaker 1: think it is fairly existential because my view, and it's

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Speaker 1: becoming more of a view in the mark it is

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Speaker 1: we're about to turn tact here and start to see

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Speaker 1: something we haven't seen in maybe thirty years and that

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Speaker 1: is inflation. We're now really openly looking at that idea.

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Speaker 1: Over the last twenty five or thirty years, we there,

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Speaker 1: we've had bouts where people have talked about inflation, but

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Speaker 1: it really hasn't materialized to any great degree. And in fairness,

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Speaker 1: as of right now, it hasn't materialized. But I think

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Speaker 1: the evidence is the strongest that's ever been that we're

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Speaker 1: going to see inflation, and that is going to be

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Speaker 1: a big game changer. I think in the fixed income

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Speaker 1: space that a lot of people are not ready for it.

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Speaker 1: For instance, inflation is historically not good for equities. I

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Speaker 1: don't everybody says it is good for equities. They said

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Speaker 1: that in the early seventies when we first got inflation

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Speaker 1: to the best hedge for inflation was equities. By the

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Speaker 1: late seventies, we realized it was one of the worst

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Speaker 1: and hedges company can't raise prices as fast as their

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Speaker 1: input costs, and their margins get squeezed. That's what typically

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Speaker 1: happens in terms of inflation. And the other big one

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Speaker 1: for inflation is the sixty forty portfolio, the bedrock of

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Speaker 1: the wealth management business. And why you see these really,

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Speaker 1: I believe why you see these relentless inflows into fixed

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Speaker 1: income ETFs is based on the idea that you don't

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Speaker 1: have inflation because they tend, stocks and bond prices tend

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Speaker 1: to move opposite each other in the lack of inflation,

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Speaker 1: you know, or yields and stocks moved together. I'm saying

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Speaker 1: the same thing again, and we've we've even coined a

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Speaker 1: phrase for risk on, risk off. Well, in an inflationary environment,

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Speaker 1: you have not a sixty forty portfolio, but you have

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Speaker 1: a hundred zero portfolio. Either both stocks and bonds are

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Speaker 1: going up together or both of them are going down together.

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Speaker 1: And we started to see the beginnings of that happening,

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Speaker 1: especially last week. Both stocks and bonds went down together

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Speaker 1: last week as well too. If this inflationary environment comes,

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Speaker 1: then the whole basis of a lot of wealth management

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Speaker 1: strategies has to be rethought because that forty leg stops

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Speaker 1: working and then they're gonna have to figure it out.

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Speaker 1: One last thing, I remember why a person goes to

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Speaker 1: a wealth manager. If you're bullish, you just go buy

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Speaker 1: ARC or you buy the SMP. You don't need to

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Speaker 1: go see a wealth manager. You go see a wealth

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Speaker 1: manager because you you want to participate in the market,

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Speaker 1: but you're afraid, so they're they're ready made answer, and

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Speaker 1: it's not been a wrong answer has been the sixty

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Speaker 1: forty portfolio or some variation on that. Well, if that

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Speaker 1: stops working, then all of these clients that wealth managers

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Speaker 1: have are going to start asking questions, why is my

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Speaker 1: portfolio falling as fast as the market if both stocks

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Speaker 1: and bonds are falling. I thought that forty leg was

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Speaker 1: supposed to protect me, because it certainly didn't help me

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Speaker 1: when the market was going up. I always left behind

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Speaker 1: the big rally in stocks. So I think that there

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Speaker 1: there is going to potentially be an existential point with

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Speaker 1: the bond market if we were to see this inflation

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Speaker 1: materialized like I think we are. Let me be Devil's

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Speaker 1: advocate here, and you know there's that You ever heard

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Speaker 1: that Rolling Stone song? It's just your nineteeh nervous breakdown, sure,

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Speaker 1: sort of making fun of, Oh, here's here you come

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Speaker 1: again with another nervous breakdown. I feel like I've seen

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Speaker 1: this movie nineteen times. Before rates start going up, how

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Speaker 1: to prepare for rising rates, rising rates, rising rates, and

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Speaker 1: then stocks start to go down a little bit. Everybody

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Speaker 1: freaks out and the FED comes in and says something

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Speaker 1: that just makes it all good. Rates decline, stocks go

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Speaker 1: back up. We're partying again. And what what makes you

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Speaker 1: think we're not going to go back to that again?

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Speaker 1: And this is a new paradigm. You're right, this is

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Speaker 1: this is a story that we've heard in the past. Now,

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Speaker 1: in defense of me, I only became an inflation east

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Speaker 1: last summer, so I'm fair lead new to this. I

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Speaker 1: was a big bond bollum until last summer as well too.

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Speaker 1: But what I think is changing now is the perception

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Speaker 1: of inflation itself, modern monetary theory, universal basic income. We're

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Speaker 1: mailing people money as well. We're talking about checks and

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Speaker 1: an extra three hundred dollars of unemployment insurance going out.

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Speaker 1: And by the way, I understand completely why we're doing it.

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Speaker 1: But what I've often argued is if there is no

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Speaker 1: consequence to us mailing out all of this money, that

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Speaker 1: we pass the stimulus package and the poor get some help,

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Speaker 1: and the unemployed get some assistance to their next job,

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Speaker 1: and the rich to find the rich. As anybody owns

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Speaker 1: equities or assets, if you want to even draw broader,

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Speaker 1: see the value of their portfolio go up. Everybody wins,

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Speaker 1: so let's do another one, and let's do another one.

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Speaker 1: Why wouldn't you do another one. If you pass a

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Speaker 1: big stimulus package and you mail checks and everybody wins,

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Speaker 1: then do another one and you you you enter kind

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Speaker 1: of a U B I m MT world. And that's

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Speaker 1: where I think you get the stimulus for inflation. So

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Speaker 1: that's been my argument. Now I've also argued you don't

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Speaker 1: have inflation. Now, it is a bet that it's coming

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Speaker 1: immediately ahead of us in the next sixty days. Is

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Speaker 1: what economists called the base effect. In April and May

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Speaker 1: of last year, when the shutdowns happened, the prices of

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Speaker 1: everything plummeted because everything was closed, and then everybody had

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Speaker 1: supply and there was no customers, so they were cutting

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Speaker 1: prices to move inventory. That rolls off in the next

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Speaker 1: one or two inflation reports. So the year over year

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Speaker 1: change of inflation is going to jump dramatically. Everybody knows it.

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Speaker 1: Chairman Paul has said it a million times. It's going

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Speaker 1: to happen. Be don't be surprised. So you've got your

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Speaker 1: ready made excuse for higher inflation over the next sixty days.

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Speaker 1: My bet is that in the second half of the year,

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Speaker 1: we're gonna start looking around and going, well, that base

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Speaker 1: effect didn't go away, and maybe it didn't go away

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Speaker 1: because we've got all of this stimulus that we've put

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Speaker 1: into the economy. One last off for you. A lot

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Speaker 1: of economis say you can't have inflation without wage inflation,

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Speaker 1: and there isn't really much in the form of wage inflation.

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Speaker 1: Well that's true for now, But what I've argued is

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Speaker 1: you have personal income inflation. Astounding number is personal income

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Speaker 1: is a total income you make. Wages is a big

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Speaker 1: part of it. You know, unrealized gains on your securities

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Speaker 1: is a big part of it. Twenty five of that

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Speaker 1: number comes from government transfers. That is, stimulus checks, unemployment,

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Speaker 1: social Security, disability, veterans benefits, whatever else the government mails.

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Speaker 1: It's an astounding number. Used to be pre pandemic, around

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Speaker 1: eight or nine percent a quarter of the income of

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Speaker 1: the United States is mailed to them from the government

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Speaker 1: right now, and the savings rate is tremendously high, well

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Speaker 1: over right now. So that's given everybody a ton of money.

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Speaker 1: So that as soon as they get their vaccine and

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Speaker 1: as soon as they feel a little bit better, and

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Speaker 1: everybody says we're gonna come roaring back. They've got money

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Speaker 1: to burn, and I think it will show up in

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Speaker 1: the form of inflation, and if it doesn't, then the

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Speaker 1: argument will be, we'll send some more money out. It

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Speaker 1: was all good. We sent them all money out, and

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Speaker 1: only good things happen and no bad things happen. So

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Speaker 1: we'll just keep going until we eventually get there. That's

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Speaker 1: the basis of my inflation argument now. And you're right,

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Speaker 1: there is various variations of this. There was a variation

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Speaker 1: of this and O eight when we said with que

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Speaker 1: there was a famous letter that was signed by about

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Speaker 1: sixty people on Wall Street that Jeremy Bernaki, you're creating

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Speaker 1: hyper inflation with all this qui and it never happened.

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Speaker 1: And so I get it that there there is that

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Speaker 1: skepticism and it could be wrong again too. Uh. So

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Speaker 1: we'll see how this plays out for the second half

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Speaker 1: of the year. When you think about um uh, this

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Speaker 1: inflation talk, Jim, I mean, it's it's very easy to

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Speaker 1: picture it as this boogeyman like like we had in

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Speaker 1: the seventies, right, But it's also part of what you're

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Speaker 1: saying here is like we we don't necessarily know how

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Speaker 1: big of a boogeyman this could be too, right, Like,

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Speaker 1: it could be a little bitty version of of that boogeyman.

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Speaker 1: But because we haven't had it for so long and

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Speaker 1: we have no sense of how this whole thing could

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Speaker 1: get metered, we don't know how big this of a phenomenon,

398
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Speaker 1: this inflation talk could turn into. You're exactly right. So one,

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Speaker 1: when I say I'm an inflation east there's two thoughts

400
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Speaker 1: that come through people's minds. If you're a little bit younger,

401
00:21:40,320 --> 00:21:43,679
Speaker 1: you say, okay um Zimbabwe or Venezuela, so we're going

402
00:21:43,720 --> 00:21:46,120
Speaker 1: to one million percent on inflation or something like that.

403
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Speaker 1: Or if you're a little bit older, you think the seventies,

404
00:21:48,960 --> 00:21:51,960
Speaker 1: we're going to double digit inflation. And I'll then turn

405
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Speaker 1: around and say, no, I actually might target on inflation

406
00:21:54,320 --> 00:21:57,960
Speaker 1: core PC. A FED favorite is two point six per cent.

407
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Speaker 1: That's not inflation. That's what the FED wants. And I've

408
00:22:01,480 --> 00:22:04,880
Speaker 1: said no, Wait, two point six percent is a twenty

409
00:22:05,000 --> 00:22:08,520
Speaker 1: eight year high in the inflation rate. So let's start

410
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Speaker 1: with a sustained two point six percent inflation rate. What

411
00:22:13,080 --> 00:22:15,119
Speaker 1: I mean body sustained is you'll probably get there in

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Speaker 1: the next two months off the base effects. But then

413
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Speaker 1: will you stay at somewhere near that level after that

414
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Speaker 1: as well? And if you do get to two six

415
00:22:24,080 --> 00:22:26,560
Speaker 1: and the market starts to think, wow, this is kind

416
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Speaker 1: of like the new new level for inflation, and we

417
00:22:29,880 --> 00:22:32,560
Speaker 1: start getting positive real rates, you have a three percent

418
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Speaker 1: thirty year three percent excise the tenure UH probably pushing

419
00:22:36,000 --> 00:22:39,280
Speaker 1: a four percent thirty year in the bond market. With

420
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Speaker 1: all the leverage that's in the bond market. That is

421
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Speaker 1: a very painful move for the bond market. Look at

422
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Speaker 1: the way that the market wobbled over the bond marketing

423
00:22:47,760 --> 00:22:51,200
Speaker 1: one point five percent last week. You double that over

424
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Speaker 1: the next several months or year or so, and I

425
00:22:54,480 --> 00:22:57,359
Speaker 1: think that that could be very painful wall streets, Right,

426
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Speaker 1: it's not the surprise. It's the surprise is not that

427
00:23:01,720 --> 00:23:04,120
Speaker 1: rates are going up. It's the speed at which rates

428
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Speaker 1: are going up. But that's what's got me worried, is

429
00:23:06,720 --> 00:23:08,679
Speaker 1: that I think that the only way rates go up

430
00:23:09,040 --> 00:23:11,760
Speaker 1: is with a quick speed, because it is a realization

431
00:23:11,800 --> 00:23:14,639
Speaker 1: that we've got inflation coupled with a very lever bond market,

432
00:23:15,119 --> 00:23:19,080
Speaker 1: and that will put the whole fixed income market, you know,

433
00:23:19,320 --> 00:23:21,760
Speaker 1: in a bad place and If the bond markets in

434
00:23:21,760 --> 00:23:24,800
Speaker 1: a bad place, all markets are in a bad place.

435
00:23:24,920 --> 00:23:27,720
Speaker 1: So that's the risk that I see in the market

436
00:23:27,800 --> 00:23:30,400
Speaker 1: right now. So what's an investor supposed to do? I've

437
00:23:30,400 --> 00:23:34,159
Speaker 1: got that breakdown? What am I supposed to do with

438
00:23:34,200 --> 00:23:37,280
Speaker 1: that forty? Call your call your wealthare manager and ask

439
00:23:37,520 --> 00:23:39,560
Speaker 1: what you're supposed to what you're supposed to do with it?

440
00:23:39,600 --> 00:23:41,480
Speaker 1: I guess what you need to what you need to

441
00:23:41,560 --> 00:23:44,880
Speaker 1: do with the forty is start to ask yourself what

442
00:23:45,200 --> 00:23:49,240
Speaker 1: is a natural hedge to the stock market? See, the

443
00:23:49,680 --> 00:23:52,280
Speaker 1: great thing about the forty used to be the bond

444
00:23:52,320 --> 00:23:55,800
Speaker 1: part is that bonding stock prices moved opposite each other,

445
00:23:56,320 --> 00:23:59,320
Speaker 1: so yet SI equities And when it went up, you

446
00:23:59,400 --> 00:24:01,520
Speaker 1: made some you know, you participated. You wind up, not

447
00:24:01,560 --> 00:24:04,360
Speaker 1: as much as if you're a pent, but you wind up.

448
00:24:04,800 --> 00:24:07,359
Speaker 1: But when the market fell apart, bonds were supposed to

449
00:24:07,440 --> 00:24:11,000
Speaker 1: rally to cushion the downside. That hasn't happened. So what's

450
00:24:11,040 --> 00:24:14,200
Speaker 1: the investors supposed to do? Here's the hard part. What's

451
00:24:14,200 --> 00:24:18,199
Speaker 1: not corel what's negatively correlated to stocks? If we get inflation?

452
00:24:18,720 --> 00:24:21,399
Speaker 1: And the answer is not much at all. In terms

453
00:24:21,400 --> 00:24:23,200
Speaker 1: of where we are. You're in some kind of a

454
00:24:23,280 --> 00:24:28,280
Speaker 1: hundred zero environment, you might think about, you know, reducing

455
00:24:28,320 --> 00:24:32,800
Speaker 1: your risk, maybe running an eighty percent portfolio with twenty

456
00:24:32,840 --> 00:24:36,240
Speaker 1: in cash. Um, you know, just running higher cash levels

457
00:24:36,359 --> 00:24:38,520
Speaker 1: because you know you're mark you'll go up and down

458
00:24:38,520 --> 00:24:41,240
Speaker 1: with the market, as opposed to a sixty forty with

459
00:24:41,359 --> 00:24:45,440
Speaker 1: zero cash, sixties equities forty bonds. That might be one

460
00:24:45,440 --> 00:24:47,680
Speaker 1: way to look at it, or another one is is

461
00:24:47,800 --> 00:24:52,680
Speaker 1: maybe something that is negatively correlated will emerge, But right

462
00:24:52,720 --> 00:24:55,200
Speaker 1: now everything is said in such a state of flux.

463
00:24:55,240 --> 00:24:57,960
Speaker 1: I'm not sure that there is anything that is negatively

464
00:24:58,000 --> 00:25:01,160
Speaker 1: correlated to equities like bonds and been for the last

465
00:25:01,200 --> 00:25:04,560
Speaker 1: twenty years. So um. You know, this is where I

466
00:25:04,600 --> 00:25:08,040
Speaker 1: think alts have a time to shine, because we have

467
00:25:08,119 --> 00:25:09,760
Speaker 1: seen all e t f c s or e t

468
00:25:09,880 --> 00:25:12,199
Speaker 1: f that do something market neutral where they have a

469
00:25:12,280 --> 00:25:15,920
Speaker 1: short side to them. Those are have been completely ignored.

470
00:25:16,119 --> 00:25:17,760
Speaker 1: And even in the hedge fund space, if you're like

471
00:25:17,760 --> 00:25:20,399
Speaker 1: a true alt, you tend to not see any flows.

472
00:25:20,480 --> 00:25:24,680
Speaker 1: Only the ones that lean towards stocks or beta tend

473
00:25:24,720 --> 00:25:27,320
Speaker 1: to get flows. So there's this sort of beta vortex

474
00:25:27,400 --> 00:25:30,440
Speaker 1: forming no matter what the strategy is. But the people

475
00:25:30,440 --> 00:25:32,879
Speaker 1: who do the pure things like a deep value or

476
00:25:32,960 --> 00:25:35,359
Speaker 1: an all E t F that have been totally ignored

477
00:25:35,359 --> 00:25:38,480
Speaker 1: and live outside of the beta vortex. Does it make

478
00:25:38,560 --> 00:25:43,159
Speaker 1: sense to think about those as a portfolio diversifier now

479
00:25:43,240 --> 00:25:47,320
Speaker 1: before it starts raining, so to speak. Absolutely, And I'd

480
00:25:47,359 --> 00:25:50,000
Speaker 1: also throw into that mixed the smart betas as well too.

481
00:25:50,040 --> 00:25:53,120
Speaker 1: I'm a big fan of the smart beta concept as well.

482
00:25:53,160 --> 00:25:56,000
Speaker 1: And I know it's gotten in a bad rap because

483
00:25:56,600 --> 00:25:59,320
Speaker 1: the smart betas you know, they've they've lagged the market.

484
00:25:59,359 --> 00:26:01,639
Speaker 1: But there are men has always been that over a

485
00:26:01,680 --> 00:26:04,960
Speaker 1: complete cycle that they'll they'll do better for you. It

486
00:26:05,080 --> 00:26:07,800
Speaker 1: smart beat. Again. It's still the same five hundred stocks

487
00:26:07,800 --> 00:26:10,119
Speaker 1: in the SMP, but instead of waiting it by market

488
00:26:10,160 --> 00:26:13,880
Speaker 1: cap or price, you waited by some fundamental measure like

489
00:26:14,200 --> 00:26:16,679
Speaker 1: price to earnings ratio or price to book value or

490
00:26:16,720 --> 00:26:20,920
Speaker 1: cash flow, so that the companies with the better valuations

491
00:26:20,920 --> 00:26:23,639
Speaker 1: get bigger waitings. You just don't always have Apple as

492
00:26:23,680 --> 00:26:27,200
Speaker 1: your biggest waiting because it's the largest company as well. Too.

493
00:26:27,600 --> 00:26:29,960
Speaker 1: They're not doing as well in the up because all

494
00:26:30,000 --> 00:26:32,919
Speaker 1: the racy stocks go up, but they do better in

495
00:26:32,960 --> 00:26:34,960
Speaker 1: the down. So that's another one. But yeah, I think

496
00:26:35,000 --> 00:26:39,119
Speaker 1: that those types of strategies might be better strategies for

497
00:26:39,160 --> 00:26:42,919
Speaker 1: people that are worried about risk, are worried about corrections

498
00:26:42,920 --> 00:26:46,720
Speaker 1: in the marketplace. If indeed, as we continue to move

499
00:26:46,760 --> 00:26:50,439
Speaker 1: forward from here, the bond market does not exhibit that

500
00:26:50,520 --> 00:26:53,639
Speaker 1: negative correlation that we all wanted to to make it

501
00:26:53,720 --> 00:26:57,199
Speaker 1: the natural heads for the stock market. Now there was

502
00:26:57,480 --> 00:27:00,240
Speaker 1: you had quote tweeted Cathy coming full circle here, and

503
00:27:00,320 --> 00:27:03,040
Speaker 1: she had said something like, bonds are are pretty much

504
00:27:03,119 --> 00:27:06,840
Speaker 1: over the new forty Is bitcoin or crypto? Um? You

505
00:27:06,960 --> 00:27:09,360
Speaker 1: quote tweeted that, And I want to get your take

506
00:27:09,440 --> 00:27:12,959
Speaker 1: on that position, because I think it seems to me

507
00:27:13,040 --> 00:27:15,400
Speaker 1: and proved maybe I'm wrong. This is my gut instinct.

508
00:27:15,960 --> 00:27:19,399
Speaker 1: Bitcoin is a plaything of a bull market, in other words,

509
00:27:19,760 --> 00:27:22,479
Speaker 1: and we saw this last week when the candidate bitcoin

510
00:27:22,520 --> 00:27:25,879
Speaker 1: ETF launched up there. It traded like crazy is seeing

511
00:27:25,880 --> 00:27:28,320
Speaker 1: like two fifty million dollars of flows the first couple

512
00:27:28,359 --> 00:27:31,240
Speaker 1: of days. Then Bitcoin got smacked and the equity market

513
00:27:31,240 --> 00:27:34,120
Speaker 1: declined at the same time, and then it went down

514
00:27:34,200 --> 00:27:39,119
Speaker 1: to volume. Because when when it starts raining, people they

515
00:27:39,160 --> 00:27:40,920
Speaker 1: don't think about that stuff. They go to the core.

516
00:27:41,080 --> 00:27:43,920
Speaker 1: They think of their equity and bond positions, and it

517
00:27:44,240 --> 00:27:47,560
Speaker 1: almost seems like bitcoin will just go down with a

518
00:27:47,680 --> 00:27:51,159
Speaker 1: risk off sell off and provide no hedge. Am I wrong? No,

519
00:27:51,280 --> 00:27:55,080
Speaker 1: you're right. Um, the concept that Cathy said that maybe

520
00:27:55,080 --> 00:27:59,920
Speaker 1: bitcoin is the forty I'm with her on that idea

521
00:28:00,040 --> 00:28:03,240
Speaker 1: up but we're not there now. The problem is bitcoin

522
00:28:03,320 --> 00:28:06,680
Speaker 1: is still positively correlated with equities. You know, so if

523
00:28:06,760 --> 00:28:10,240
Speaker 1: you if you open a coin based account and buy

524
00:28:10,280 --> 00:28:14,080
Speaker 1: some cryptos or bitcoin in particular, Uh, it's going to

525
00:28:14,160 --> 00:28:16,520
Speaker 1: go down when the stock market goes down like last week,

526
00:28:17,040 --> 00:28:20,880
Speaker 1: and it will rally back when the stock marker rallies back.

527
00:28:21,040 --> 00:28:25,760
Speaker 1: So it's not providing that negative correlation that people think

528
00:28:25,800 --> 00:28:28,840
Speaker 1: that it would provide, or you know, it does its

529
00:28:28,880 --> 00:28:31,720
Speaker 1: own thing to help give you some kind of a diversification. Now,

530
00:28:31,800 --> 00:28:36,119
Speaker 1: maybe over time, if it becomes more accepted as a

531
00:28:36,280 --> 00:28:39,560
Speaker 1: legitimate asset class instead of a speculation that it would

532
00:28:39,600 --> 00:28:42,680
Speaker 1: be an asset class, it could evolve into that. That's

533
00:28:42,680 --> 00:28:46,160
Speaker 1: where I think then makes case. But I think it's

534
00:28:46,200 --> 00:28:50,360
Speaker 1: too early right now to put it into that category. Uh,

535
00:28:50,440 --> 00:28:55,520
Speaker 1: that it is a natural fit for a portfolio diversifier.

536
00:28:55,760 --> 00:28:59,520
Speaker 1: It's a speculation. I own some cryptos. I don't own

537
00:28:59,560 --> 00:29:02,160
Speaker 1: bitcoin at the moment, but I own some others and

538
00:29:02,280 --> 00:29:05,040
Speaker 1: but very very tiny amounts that if I lost all

539
00:29:05,080 --> 00:29:07,880
Speaker 1: my money, it wouldn't change anything UM for me. And

540
00:29:07,920 --> 00:29:10,000
Speaker 1: I'm doing it to more learn about the space than

541
00:29:10,040 --> 00:29:13,040
Speaker 1: anything else, and I understand what's going on in the space,

542
00:29:13,040 --> 00:29:15,360
Speaker 1: but it's still too early to start thinking about that

543
00:29:15,440 --> 00:29:20,120
Speaker 1: space as another asset class to compete with stocks and bonds.

544
00:29:20,120 --> 00:29:22,720
Speaker 1: So it does seem like just of late, it's really

545
00:29:22,760 --> 00:29:26,680
Speaker 1: turned a corner Bitcoin specifically in terms of just having

546
00:29:26,920 --> 00:29:31,320
Speaker 1: a certain zeitgeist among institutional investors. And I'm I'm curious,

547
00:29:31,320 --> 00:29:34,840
Speaker 1: ay what you what you hear from your clients regarding

548
00:29:34,880 --> 00:29:37,840
Speaker 1: bitcoin and then sort of like what your what the

549
00:29:38,200 --> 00:29:41,000
Speaker 1: your your long term view on where you think it

550
00:29:41,040 --> 00:29:44,560
Speaker 1: could go? So um, You're right, it has seemed to

551
00:29:44,640 --> 00:29:47,880
Speaker 1: turn a corner. And I've referred to this as the

552
00:29:47,920 --> 00:29:50,880
Speaker 1: adoption rally because what you're starting to see not only

553
00:29:50,880 --> 00:29:55,160
Speaker 1: with Tesla and micro strategies UH and the new um

554
00:29:55,520 --> 00:29:58,880
Speaker 1: Pulsey tf in in Canada, but you're seeing companies now

555
00:29:59,320 --> 00:30:02,240
Speaker 1: embrace a squares as square as another one as well

556
00:30:02,280 --> 00:30:04,640
Speaker 1: too that is starting to embrace and starting to look

557
00:30:05,200 --> 00:30:09,880
Speaker 1: at these as a potential UH corporate strategy to own

558
00:30:09,960 --> 00:30:14,200
Speaker 1: some kind of a cryptocurrency as well. My clients, there's

559
00:30:14,240 --> 00:30:18,320
Speaker 1: still somewhat mixed. Um, there's a fair number of them

560
00:30:18,320 --> 00:30:21,200
Speaker 1: that screened tulips and that we've lost our mind and

561
00:30:21,240 --> 00:30:23,600
Speaker 1: what are we doing trading a bunch of bits and

562
00:30:23,640 --> 00:30:25,920
Speaker 1: bites that have no value in pretending that they do.

563
00:30:26,440 --> 00:30:29,040
Speaker 1: And then there's others and I kind of put myself

564
00:30:29,040 --> 00:30:31,480
Speaker 1: into this camp too. Oh No, this is the leading

565
00:30:31,600 --> 00:30:34,680
Speaker 1: edge of a huge financial disruption. Now, this disruption is

566
00:30:34,720 --> 00:30:37,800
Speaker 1: not happening this year, next year, but it's coming, and

567
00:30:37,920 --> 00:30:41,600
Speaker 1: especially in the space of centralized financeer defy. I think

568
00:30:41,680 --> 00:30:44,720
Speaker 1: that it is a big deal. What is coming down

569
00:30:44,760 --> 00:30:48,000
Speaker 1: the line, and what we're seeing is version one point

570
00:30:48,000 --> 00:30:52,800
Speaker 1: oh of that change. Yeah, it's the buggy version that

571
00:30:53,000 --> 00:30:55,320
Speaker 1: has problems. But there will be a two hour and

572
00:30:55,400 --> 00:30:57,000
Speaker 1: a three oh, and it will get better and it

573
00:30:57,040 --> 00:30:59,280
Speaker 1: will get better and then it will come more into

574
00:30:59,320 --> 00:31:03,240
Speaker 1: focus that it will compete with what the crypto space

575
00:31:03,320 --> 00:31:05,840
Speaker 1: called ci FI centralized finance, which is what we have

576
00:31:06,040 --> 00:31:09,320
Speaker 1: right now as well, that it will become a new

577
00:31:09,400 --> 00:31:12,360
Speaker 1: era for us. So it's risky, and the biggest risk

578
00:31:12,480 --> 00:31:14,959
Speaker 1: you have. I've I've said to people, I personally believe

579
00:31:15,400 --> 00:31:18,520
Speaker 1: that this is going to be a big disruptor and

580
00:31:18,560 --> 00:31:21,719
Speaker 1: game changer. But there's so many protocols and there's so

581
00:31:21,760 --> 00:31:24,000
Speaker 1: many coins that are competing to be the winner in

582
00:31:24,040 --> 00:31:27,520
Speaker 1: that space that I don't know which one will win.

583
00:31:27,720 --> 00:31:30,080
Speaker 1: So I've said, it's like you've stumbled on a racetrack

584
00:31:30,640 --> 00:31:33,120
Speaker 1: and you know there's a horse and there are a

585
00:31:33,160 --> 00:31:35,440
Speaker 1: bunch of horses at that racetrack that can win you money,

586
00:31:36,000 --> 00:31:38,080
Speaker 1: and quit talking about whether or not they're going to

587
00:31:38,120 --> 00:31:40,800
Speaker 1: close the racetrack down and try and learn about what

588
00:31:40,840 --> 00:31:42,680
Speaker 1: the horses are doing and try and figure out which

589
00:31:42,720 --> 00:31:45,160
Speaker 1: horses are gonna win. And so that's kind of where

590
00:31:45,160 --> 00:31:46,680
Speaker 1: my clients are. Some of them think we've got to

591
00:31:46,680 --> 00:31:49,440
Speaker 1: close the race track down, and the other ones are saying, well,

592
00:31:49,440 --> 00:31:51,560
Speaker 1: which horses do you think might might emerge? Is the

593
00:31:51,560 --> 00:31:54,480
Speaker 1: winners out of this big race that we're having right

594
00:31:54,480 --> 00:32:02,960
Speaker 1: now that speaking of horses and horse race, you know,

595
00:32:03,000 --> 00:32:04,440
Speaker 1: one of the big debates in the e t F

596
00:32:04,520 --> 00:32:07,280
Speaker 1: NERD community is whether they're going to approve a bitcoin

597
00:32:07,320 --> 00:32:09,560
Speaker 1: ETF and I guess I want to get your take

598
00:32:09,600 --> 00:32:11,720
Speaker 1: on the odds of that, whether it's a good thing,

599
00:32:11,800 --> 00:32:14,440
Speaker 1: and then finally, what do you think the SEC should do?

600
00:32:14,520 --> 00:32:18,440
Speaker 1: Because if they approve one, they just they're kingmakers. They're

601
00:32:18,440 --> 00:32:20,880
Speaker 1: gonna make those people rich instantly. We now know there's

602
00:32:20,880 --> 00:32:23,880
Speaker 1: probably gonna be about ten to fifteen billion in in

603
00:32:23,960 --> 00:32:26,320
Speaker 1: like a couple of weeks into whatever one's out first,

604
00:32:26,720 --> 00:32:29,320
Speaker 1: or should they approve you know, five six seven at

605
00:32:29,360 --> 00:32:32,160
Speaker 1: once to give a level playing field. Well, the big

606
00:32:32,160 --> 00:32:35,920
Speaker 1: game changer there is Gary Gensler. So Gary Gensler is

607
00:32:36,000 --> 00:32:41,640
Speaker 1: the UH Biden administration's appointee to be SEC chairman. UH.

608
00:32:41,680 --> 00:32:44,920
Speaker 1: He is a big crypto advocate. He was a professor

609
00:32:44,960 --> 00:32:47,680
Speaker 1: in m I T and taught a class on blockchain

610
00:32:47,760 --> 00:32:53,280
Speaker 1: in cryptocurrencies as well to the head of the crypto

611
00:32:53,400 --> 00:32:56,040
Speaker 1: area of the SMP, the I can't remember name, but

612
00:32:56,080 --> 00:32:58,920
Speaker 1: the woman who um you know investigates crypto and behalf

613
00:32:58,920 --> 00:33:01,800
Speaker 1: of the SEP now will report directly to the chairman.

614
00:33:01,880 --> 00:33:04,680
Speaker 1: So this has got the hype going that we got

615
00:33:04,720 --> 00:33:08,120
Speaker 1: the guy in place that will approve it. If anybody's

616
00:33:08,160 --> 00:33:10,760
Speaker 1: gonna give it its blessing, it's gonna be Gary Gensler.

617
00:33:11,080 --> 00:33:13,800
Speaker 1: And he hasn't been approved yet, but he should be shortly,

618
00:33:14,160 --> 00:33:17,880
Speaker 1: and once he is, then you know, start the countdown

619
00:33:17,920 --> 00:33:21,160
Speaker 1: clock until we start to see some um, crypto et

620
00:33:21,360 --> 00:33:24,520
Speaker 1: s and nine answers. Sure, why not. We've got we've

621
00:33:24,560 --> 00:33:28,120
Speaker 1: got volatility e t f s, we've got inverse levity

622
00:33:28,200 --> 00:33:32,440
Speaker 1: t ffs. As long it is it is disclosed as

623
00:33:32,480 --> 00:33:35,600
Speaker 1: to what you own and what you don't own, I

624
00:33:35,920 --> 00:33:38,760
Speaker 1: don't see a problem with with any of that, as

625
00:33:38,800 --> 00:33:41,160
Speaker 1: long as you don't pull a tether. And what I

626
00:33:41,160 --> 00:33:44,120
Speaker 1: mean by pull a tether, that's the cryptocurrency that's supposed

627
00:33:44,120 --> 00:33:46,240
Speaker 1: to be a stable coin tied to the dollar, and

628
00:33:46,240 --> 00:33:49,040
Speaker 1: they were supposed to have a trust. So for every

629
00:33:49,240 --> 00:33:53,040
Speaker 1: uh cryptocurrency that was out there with one dollar, there

630
00:33:53,080 --> 00:33:55,000
Speaker 1: was one dollar in a bank account. There was no

631
00:33:55,080 --> 00:33:57,120
Speaker 1: money in a bank account. Uh. So as long as

632
00:33:57,120 --> 00:33:59,760
Speaker 1: you don't pull something like that, yeah, I think it

633
00:33:59,760 --> 00:34:02,160
Speaker 1: would be it would be perfectly fine, and that people

634
00:34:02,160 --> 00:34:06,520
Speaker 1: will understand and um, you know, embrace what they're what

635
00:34:06,560 --> 00:34:08,960
Speaker 1: they're gonna do. And you're right, there's there's all kinds

636
00:34:08,960 --> 00:34:11,719
Speaker 1: of people on the runway that are ready to do it.

637
00:34:11,840 --> 00:34:14,959
Speaker 1: And I understand why too, because you want to own

638
00:34:15,040 --> 00:34:17,719
Speaker 1: it in a regulated account, because you've got some of

639
00:34:17,719 --> 00:34:21,239
Speaker 1: the protections that people are comfortable with in the in

640
00:34:21,280 --> 00:34:23,680
Speaker 1: the crypto space. I don't know if you guys have

641
00:34:23,719 --> 00:34:25,839
Speaker 1: a crypto account, and if you've if you've got more

642
00:34:25,840 --> 00:34:28,279
Speaker 1: than one crypto account, I've always loved this. If you've

643
00:34:28,320 --> 00:34:30,680
Speaker 1: got one one crypto account and you try to transfer

644
00:34:30,760 --> 00:34:33,040
Speaker 1: money between one account and the other, you've got to

645
00:34:33,040 --> 00:34:34,719
Speaker 1: make sure you're on the right network, you've got the

646
00:34:34,719 --> 00:34:39,560
Speaker 1: addresses right, and they give you literally quizzes and about

647
00:34:39,560 --> 00:34:43,520
Speaker 1: eight warnings if you don't do this right and you mix,

648
00:34:43,760 --> 00:34:46,120
Speaker 1: you know, mix or get the addresses wrong, or mix

649
00:34:46,200 --> 00:34:48,360
Speaker 1: the networks you're sending from one to the other, that

650
00:34:48,440 --> 00:34:51,239
Speaker 1: you can't do. As soon as you hit send, your

651
00:34:51,239 --> 00:34:55,279
Speaker 1: money vaporizes. It's just gone, and don't call us up

652
00:34:55,360 --> 00:34:58,080
Speaker 1: whining that you lost your money. And so that scares

653
00:34:58,160 --> 00:35:00,160
Speaker 1: the hell out of a lot of people that they

654
00:35:00,200 --> 00:35:02,560
Speaker 1: want to go into that space and deal with that

655
00:35:02,680 --> 00:35:06,319
Speaker 1: potential mistake. As I once was joking with my wife

656
00:35:06,360 --> 00:35:08,480
Speaker 1: when I was trying to transfer money. The cat jumped

657
00:35:08,560 --> 00:35:10,480
Speaker 1: up on my desk, I says, she steps on the keyboard,

658
00:35:10,520 --> 00:35:14,680
Speaker 1: my money disappears forever and stuff. So yeah, I'd like

659
00:35:14,760 --> 00:35:17,040
Speaker 1: to keep it in my regulated securities account. So if

660
00:35:17,040 --> 00:35:20,239
Speaker 1: the cat steps on the keyboard, my money doesn't disappear.

661
00:35:20,280 --> 00:35:23,320
Speaker 1: So that's the allure of the bitcoin et F and

662
00:35:23,440 --> 00:35:25,839
Speaker 1: why so many are so lined up and everybody wants

663
00:35:25,880 --> 00:35:28,719
Speaker 1: to jump into him. I think that should be the commercial.

664
00:35:28,960 --> 00:35:31,719
Speaker 1: That should be their commercial. The super Bowl ad is

665
00:35:31,760 --> 00:35:34,480
Speaker 1: the cat jumping on the keyboard and it's all gone,

666
00:35:34,840 --> 00:35:38,360
Speaker 1: and it just says like Bitcoin E t F the cat.

667
00:35:38,360 --> 00:35:42,040
Speaker 1: My bitcoin is definitely going to be a meme. Speaking

668
00:35:42,080 --> 00:35:44,839
Speaker 1: of means just lastly to have a little fun here

669
00:35:44,880 --> 00:35:48,000
Speaker 1: and to talk about something that is wildly entertaining, but

670
00:35:48,400 --> 00:35:51,400
Speaker 1: hard to see how much consequence the meme stocks right

671
00:35:51,600 --> 00:35:54,480
Speaker 1: game stopped early this summer, and I also saw you

672
00:35:54,520 --> 00:35:57,320
Speaker 1: were all over Dave Portnoy. He was able to sometimes

673
00:35:57,360 --> 00:36:00,120
Speaker 1: move some of these smaller names like cruise ships and not.

674
00:36:00,880 --> 00:36:05,880
Speaker 1: What's your take on this sort of populism, democratization, commission

675
00:36:05,920 --> 00:36:09,120
Speaker 1: free trading movement where retail investors seemingly are able to

676
00:36:09,239 --> 00:36:12,800
Speaker 1: unite a little bit, develop cult followings and push stock

677
00:36:12,840 --> 00:36:15,400
Speaker 1: prices around. Um, do you think this is here to

678
00:36:15,440 --> 00:36:18,480
Speaker 1: stay or just the pandemic phenomenon and a bullmarket phenomenon

679
00:36:18,520 --> 00:36:20,919
Speaker 1: that will go away when people start getting out more

680
00:36:21,080 --> 00:36:23,439
Speaker 1: or there's a correction. No, it's here to stay. It's

681
00:36:23,480 --> 00:36:27,120
Speaker 1: definitely here to stay. Now you're right. Once once the

682
00:36:27,200 --> 00:36:30,600
Speaker 1: weather warms up and we're allowed to go back out

683
00:36:30,800 --> 00:36:35,120
Speaker 1: again and um, you know, commune with other people. There

684
00:36:35,160 --> 00:36:37,920
Speaker 1: might be a little bit of that backing off, but

685
00:36:38,000 --> 00:36:41,600
Speaker 1: it's not it's not going to go away. Means, you know,

686
00:36:41,680 --> 00:36:44,160
Speaker 1: let's be honest. Memes kind of drive the world. Narratives

687
00:36:44,239 --> 00:36:46,600
Speaker 1: drive the world right now, and the way that people

688
00:36:47,560 --> 00:36:50,879
Speaker 1: live their lives and now they invest. And I think

689
00:36:50,920 --> 00:36:54,480
Speaker 1: that a lot of other people in the traditional financial

690
00:36:54,480 --> 00:36:57,880
Speaker 1: markets are also a little slow to understand the powerful

691
00:36:57,960 --> 00:37:02,120
Speaker 1: network effects that things social media have. You know, Wall

692
00:37:02,120 --> 00:37:04,360
Speaker 1: Street Bets is the top of the list now that

693
00:37:04,400 --> 00:37:07,840
Speaker 1: everybody's looking at. Uh you know that. I've I've heard people,

694
00:37:08,040 --> 00:37:10,840
Speaker 1: you know, traditional financial people say, yeah, well, there's a

695
00:37:10,880 --> 00:37:13,759
Speaker 1: bunch of influencers to use a modern term for that

696
00:37:13,840 --> 00:37:16,000
Speaker 1: what they were saying about them, that are suggesting on

697
00:37:16,080 --> 00:37:17,600
Speaker 1: Wall Street Bets, we should do this or that, and

698
00:37:17,600 --> 00:37:19,279
Speaker 1: then there's a bunch of sheep that just do what

699
00:37:19,320 --> 00:37:21,640
Speaker 1: they say, maybe because they've had a hard hand. I

700
00:37:21,719 --> 00:37:24,400
Speaker 1: was like, isn't that kind of what professionals do on

701
00:37:24,440 --> 00:37:26,640
Speaker 1: Wall Street too. There's a couple of you know, well

702
00:37:26,680 --> 00:37:29,120
Speaker 1: known hedge fund managers that come out or Warren Buffett,

703
00:37:29,120 --> 00:37:31,080
Speaker 1: and they wagged their tongue that they like this or that,

704
00:37:31,560 --> 00:37:34,279
Speaker 1: and then all of these highly paid professionals run into

705
00:37:34,320 --> 00:37:37,000
Speaker 1: the same idea as well. Why is that any different

706
00:37:37,640 --> 00:37:40,680
Speaker 1: than what we're seeing on social media? Oh but there's

707
00:37:40,719 --> 00:37:43,200
Speaker 1: only these people only have five dollars in their account. Yeah,

708
00:37:43,239 --> 00:37:46,880
Speaker 1: but multiplied by millions and throwing options trading, and the

709
00:37:47,000 --> 00:37:53,160
Speaker 1: network effect is tremendously large on this, and the benefit,

710
00:37:53,200 --> 00:37:56,719
Speaker 1: the economic benefits are there. They've got zero commissions, they've

711
00:37:56,719 --> 00:38:00,239
Speaker 1: got fractional shares uh as well too, So they're no,

712
00:38:00,920 --> 00:38:05,319
Speaker 1: there's no disadvantage to being small. There's no disadvantage, you know,

713
00:38:05,520 --> 00:38:09,040
Speaker 1: don't worry. If if Amazon's you could buy a tenth

714
00:38:09,040 --> 00:38:11,080
Speaker 1: of it for three bucks, and you could do it

715
00:38:11,280 --> 00:38:14,280
Speaker 1: on zero commissions. And if you if you're really bullish

716
00:38:14,280 --> 00:38:16,400
Speaker 1: on it, you could buy one option on it for

717
00:38:16,480 --> 00:38:20,200
Speaker 1: zero commissions as well too. In this whole community is

718
00:38:20,239 --> 00:38:22,520
Speaker 1: out there um to help you. So I think this

719
00:38:22,600 --> 00:38:25,560
Speaker 1: is the new way. And we've got the internet so

720
00:38:25,600 --> 00:38:28,319
Speaker 1: that you know, take your pick of your favorite most

721
00:38:28,320 --> 00:38:32,160
Speaker 1: sophisticated hedge fund manager. He doesn't have any more information

722
00:38:32,160 --> 00:38:34,000
Speaker 1: than you or I or anybody else, does he? Might

723
00:38:34,040 --> 00:38:36,920
Speaker 1: have more knowledge and how to use that information, but

724
00:38:37,000 --> 00:38:40,279
Speaker 1: we all have the same information um right now, so

725
00:38:40,360 --> 00:38:43,920
Speaker 1: I think that this is transforming the way that investment

726
00:38:44,000 --> 00:38:46,960
Speaker 1: is going. And then throw in one other thing too.

727
00:38:47,400 --> 00:38:51,600
Speaker 1: These tend to be younger millennials or maybe even gen

728
00:38:51,719 --> 00:38:54,440
Speaker 1: wise or maybe even thirteen year old kids for all

729
00:38:54,480 --> 00:38:56,240
Speaker 1: we know that are doing a lot of this stuff.

730
00:38:57,000 --> 00:39:00,200
Speaker 1: And what do they want to invest in? They to

731
00:39:00,320 --> 00:39:04,560
Speaker 1: invest in what ARC is investing in. Um. You know,

732
00:39:04,640 --> 00:39:07,040
Speaker 1: they call it Kathy Bay for a reason, Bay B, B,

733
00:39:07,239 --> 00:39:09,719
Speaker 1: A E before anybody else, you know, is what the

734
00:39:09,960 --> 00:39:13,120
Speaker 1: BAY stands for as well. So they want to invest

735
00:39:13,160 --> 00:39:16,680
Speaker 1: in the next generation. Well, a stay in money manager

736
00:39:16,719 --> 00:39:19,680
Speaker 1: who's got an office in Boston, he's not investing in

737
00:39:19,719 --> 00:39:22,280
Speaker 1: a lot of those stocks if he's an active manager.

738
00:39:22,680 --> 00:39:25,560
Speaker 1: SMP five hundred. What we just got Tesla into the

739
00:39:25,600 --> 00:39:28,520
Speaker 1: index right now, A lot of these stocks aren't in

740
00:39:28,560 --> 00:39:31,160
Speaker 1: the SMP five hundred. Oh maybe some of them are

741
00:39:31,160 --> 00:39:33,880
Speaker 1: in the in the triple queues, but that's dominated by

742
00:39:33,880 --> 00:39:37,120
Speaker 1: the big fang stocks anyway. So now they're saying, this

743
00:39:37,200 --> 00:39:39,880
Speaker 1: is what I want to invest in, the next generation,

744
00:39:39,960 --> 00:39:45,440
Speaker 1: the disruption. So, big Boston active manager, where's your disruption fund,

745
00:39:45,560 --> 00:39:48,719
Speaker 1: and you know their disruption fund is, well, let's buy

746
00:39:48,719 --> 00:39:51,640
Speaker 1: some Microsoft and Apple. And that's not what I'm looking for. Index.

747
00:39:51,840 --> 00:39:54,160
Speaker 1: Do you own this stuff? No, not really. I could

748
00:39:54,200 --> 00:39:56,360
Speaker 1: do it myself and I've got a community that i

749
00:39:56,400 --> 00:39:59,520
Speaker 1: could communicate with. In terms of social media, it's not

750
00:39:59,560 --> 00:40:04,360
Speaker 1: just read it. It's Twitter, it's stock twits, it's motley Full,

751
00:40:04,680 --> 00:40:07,760
Speaker 1: it's Seeking Alpha. There's a lot of places that people

752
00:40:07,800 --> 00:40:10,360
Speaker 1: can go to get this information. So you think it

753
00:40:10,480 --> 00:40:15,680
Speaker 1: is a big change, it is. It's it's fascinating. And uh,

754
00:40:15,760 --> 00:40:18,520
Speaker 1: I yeah, I just pretty much agree with everything you

755
00:40:18,560 --> 00:40:24,239
Speaker 1: said today. I think, Joel, how about you high I'm

756
00:40:24,239 --> 00:40:27,120
Speaker 1: not I'm not gonna I never tell a source you know,

757
00:40:28,160 --> 00:40:31,120
Speaker 1: uh that I'm all in on everything that he said.

758
00:40:31,200 --> 00:40:35,319
Speaker 1: But I do appreciate, um, your your assessments. Um, I

759
00:40:35,320 --> 00:40:39,680
Speaker 1: think they're they're they're definitely some of them are provocative

760
00:40:39,719 --> 00:40:42,280
Speaker 1: and and um a few of them are also grounded.

761
00:40:42,320 --> 00:40:45,799
Speaker 1: And I think, um some reality that it does when

762
00:40:45,840 --> 00:40:48,719
Speaker 1: you can do some attempts at analysis like you're paid

763
00:40:48,760 --> 00:40:50,520
Speaker 1: to do on be half of your clients, like it

764
00:40:50,520 --> 00:40:53,439
Speaker 1: all makes sort of rational sense. Jim. Also, the lack

765
00:40:53,480 --> 00:40:57,400
Speaker 1: of dismissiveness of the new. I think that's really important.

766
00:40:57,440 --> 00:41:00,680
Speaker 1: I think that's something that um, the old guard takes

767
00:41:00,680 --> 00:41:02,600
Speaker 1: a long time for them to adjust to this kind

768
00:41:02,640 --> 00:41:06,800
Speaker 1: of stuff. I can speak from experience. UM, but yeah,

769
00:41:06,800 --> 00:41:10,480
Speaker 1: other analysts are adapting way faster and give it more credibility.

770
00:41:10,800 --> 00:41:14,560
Speaker 1: There's a there's a meme that goes around, UM showing

771
00:41:14,640 --> 00:41:17,000
Speaker 1: an old Homer Simpson and it says, you know, old

772
00:41:17,000 --> 00:41:20,200
Speaker 1: man shakes fist at cloud. Uh, you know, because the

773
00:41:20,200 --> 00:41:22,919
Speaker 1: world is passing him by, and he gets angry. And

774
00:41:22,960 --> 00:41:24,880
Speaker 1: I like to say, look, we're all eventually gonna be

775
00:41:24,960 --> 00:41:26,839
Speaker 1: that old guy shaking our fist at the crowd at

776
00:41:26,880 --> 00:41:29,200
Speaker 1: the cloud. Let's just not get there right away. Let's

777
00:41:29,200 --> 00:41:30,800
Speaker 1: not be in a hurry to get there right away.

778
00:41:31,080 --> 00:41:33,240
Speaker 1: But you're right, this is this is as old as time.

779
00:41:33,280 --> 00:41:37,360
Speaker 1: That change comes in. The old guard, especially in the

780
00:41:37,400 --> 00:41:41,240
Speaker 1: financial sector, has evented vested interest in the status quo,

781
00:41:41,960 --> 00:41:44,360
Speaker 1: and when you start talking about things, especially in the

782
00:41:44,360 --> 00:41:47,040
Speaker 1: crypto space, that strikes right at their heart. Look, it's

783
00:41:47,080 --> 00:41:49,520
Speaker 1: one thing to kind of make them the argument that

784
00:41:49,760 --> 00:41:53,000
Speaker 1: Uber is going to disrupt the taxi industry in Manhattan.

785
00:41:53,040 --> 00:41:55,960
Speaker 1: We'll find I'm not a taxi driver. I don't own taxis.

786
00:41:56,120 --> 00:41:58,440
Speaker 1: It's interesting to watch. I'm find taking an uber. But

787
00:41:58,480 --> 00:42:00,680
Speaker 1: when you say to them, oh, deef, I is going

788
00:42:00,719 --> 00:42:03,839
Speaker 1: to change the basic structure of banking hold on time

789
00:42:03,880 --> 00:42:06,640
Speaker 1: out a minute here, that affects me directly. And then

790
00:42:06,640 --> 00:42:10,160
Speaker 1: they pushed back on that much harder as well too.

791
00:42:10,200 --> 00:42:12,480
Speaker 1: So that's what you're fighting against with a lot of

792
00:42:12,480 --> 00:42:16,799
Speaker 1: this change. Okay, Jim closing question, Uh, one that we

793
00:42:16,840 --> 00:42:19,640
Speaker 1: ask a lot of people. Favorite E T F ticker?

794
00:42:21,239 --> 00:42:24,480
Speaker 1: Oh probably UFO. I think that's just such a wonderful too.

795
00:42:24,640 --> 00:42:28,879
Speaker 1: There was not even a pause. Yeah, yeah, not only

796
00:42:29,120 --> 00:42:31,160
Speaker 1: not only UFO, but did you see what it did

797
00:42:31,200 --> 00:42:33,879
Speaker 1: too right after ARC announced that they might get into

798
00:42:33,920 --> 00:42:36,200
Speaker 1: space as well too? I mean what it became a

799
00:42:36,280 --> 00:42:40,120
Speaker 1: UFO right after Yeah, it grew fourfold. It went from

800
00:42:40,120 --> 00:42:42,160
Speaker 1: like forty million to a hundred and forty million just

801
00:42:42,200 --> 00:42:45,040
Speaker 1: on a filing. I've never seen that. Yeah, if I

802
00:42:45,080 --> 00:42:46,640
Speaker 1: had to pick, if I had to pick a silver

803
00:42:46,719 --> 00:42:48,799
Speaker 1: medal as she you know, the one that with all

804
00:42:48,840 --> 00:42:52,000
Speaker 1: women that Yeah, that's another that's another good one as

805
00:42:52,040 --> 00:42:54,680
Speaker 1: well too. See. And he said he wasn't good with tickers.

806
00:42:54,760 --> 00:42:59,359
Speaker 1: He knows his tickers, Yeah, I mean she is, uh,

807
00:42:59,440 --> 00:43:01,279
Speaker 1: and that one hasn't been sort of on the front

808
00:43:01,280 --> 00:43:03,879
Speaker 1: burner for about five years, so that's impressive. That's sort

809
00:43:03,880 --> 00:43:05,520
Speaker 1: of like a deep cut on an album that was

810
00:43:05,520 --> 00:43:12,680
Speaker 1: popular ten years ago. Yeah, very nice, jo all right,

811
00:43:12,760 --> 00:43:15,120
Speaker 1: Jim Bianco, thanks for joining us on Trillions. Thank you.

812
00:43:23,160 --> 00:43:25,920
Speaker 1: Thanks for listening to Trillions until next time. You can

813
00:43:25,920 --> 00:43:30,320
Speaker 1: find us on the Bloomberg terminal, Bloomberg dot com, Apple Podcasts, Spotify,

814
00:43:30,760 --> 00:43:32,880
Speaker 1: and wherever else you like to listen. We'd love to

815
00:43:32,880 --> 00:43:35,959
Speaker 1: hear from you. We're on Twitter, I'm at Joel Webber Show,

816
00:43:36,200 --> 00:43:39,719
Speaker 1: He's at Eric Baltunas, and you can find Jim at

817
00:43:39,840 --> 00:43:44,600
Speaker 1: Bianco Research. This episode of Trillions was produced by Magnus Hendrickson.

818
00:43:45,080 --> 00:43:48,640
Speaker 1: Francesca leap is the head of Bloomberg Podcast. Bye.