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Speaker 2: All Right, I like it, I like it, I like it.
Speaker 2: The reign of Blackrock is coming to an end, at
Speaker 2: least in the seven point eight trillion dollar market for
Speaker 2: US exchange traded funds also known as et aps, which
Speaker 2: Blackrock has just dominated for decades. I know somebody who
Speaker 2: knows quite a bit about ETFs. That's none other than
Speaker 2: Bloomberg News senior markets reporter and BTV anchor Katie Graefeld.
Speaker 2: She writes all about Vanguard's rise for Bloomberg Business Week.
Speaker 2: It hits newsstands later this week, but you can read
Speaker 2: her story now in the Playomberg Terminal in at Bloomberg
Speaker 2: dot com slash BusinessWeek. Also here in our Bloomberg Interactive
Speaker 2: Broker's Studio, we got the editor of Bloomberg Business Week,
Speaker 2: Joel Weber. Joel this, I mean, come on, was this
Speaker 2: was bound to happen at some point?
Speaker 3: Yet Katie and I talk a lot about ETFs. I
Speaker 3: think from the get go, we'll just say, Larry think,
Speaker 3: if you're listening, you can reach Tim Stenovik at tst
Speaker 3: n O v ac one at Bloomberg dot That's right,
Speaker 3: this is not available yet.
Speaker 2: I'm available.
Speaker 3: But if you look at the trend line of how
Speaker 3: Vanguard has slowly, slowly, slowly risen and how black Rock
Speaker 3: has slowly slowly fallen, there will be an infection moment
Speaker 3: not too far away, right, Katie.
Speaker 4: We don't know when, we don't know what. It will
Speaker 4: probably happen, probably.
Speaker 5: In the next eighteen to twenty four months. There are
Speaker 5: some nuances there which I'm sure we'll get into. But
Speaker 5: I mean, like Joel said, this is something that the
Speaker 5: industry has been watching and waiting for for probably a decade.
Speaker 6: At this point. Take a look at the chart of.
Speaker 4: Market popcorn, A lot of popcorn, of popcorn.
Speaker 5: Yeah, we've been waiting for this one. But Vanguard has
Speaker 5: been increasing its share of the US ETF market for
Speaker 5: twenty one straight years. Just amazing growth coming out of
Speaker 5: Valley Forge, Pennsylvania and Blackrock sleepy there, sleepy yeah, a
Speaker 5: lot of trees. But Blackrock, I mean, Blackrock is still enormous.
Speaker 5: Let's just put that out there, two point five trillion
Speaker 5: dollars in US ETF assets. But their share has been
Speaker 5: dropping and dropping. Right now, it's at the lowest in
Speaker 5: at least twenty years, thirty two point five percent, Vanguard
Speaker 5: at twenty nine point five percent. That is the slimmest
Speaker 5: margin between these two.
Speaker 1: What's up with that?
Speaker 6: What's up with that?
Speaker 5: So there's a few things going on right now. Vanguard
Speaker 5: enjoys a very very loyal investor base. You think about
Speaker 5: who they appeal to, it's financial advisors, it's retail investors,
Speaker 5: not yolo retail investors.
Speaker 6: But actual mom and pop at.
Speaker 5: Bogo head, yes, exactly, and those are very sticky assets,
Speaker 5: and that type of investor base it tends to shovel
Speaker 5: in money to these funds in almost every market cycle.
Speaker 3: Actually, when things get worse, they pile in exactly, Oh,
Speaker 3: great buying opportunity, we're in.
Speaker 5: Exactly, So that's what they're going, that's what they're enjoying.
Speaker 5: They have a very loyal, sticky asset base. Whereas you
Speaker 5: think about these black rock funds, they're enormous, they're very liquid,
Speaker 5: and they're trading tools, I mean wall Street uses these
Speaker 5: and Wall Street those flows are more volatile.
Speaker 4: Well, I want to ask you about that, kittie. I too,
Speaker 4: hail from not far from Valley Forge, from Sleepy myself,
Speaker 4: so I can relate it. Always always been fascinated with
Speaker 4: Vanguard because the other reason is notoriously a cheapskate. You know,
Speaker 4: I do not want to spend more on something right, right,
Speaker 4: you can tell. But so I look at, okay, the
Speaker 4: flagshipt ETFs of both companies, you know, and Vanguard, you know,
Speaker 4: zero point three percent on the S and P five hundred.
Speaker 4: It's expense ratio point zero three right, zero, yeah, point
Speaker 4: zero three percent.
Speaker 6: Three basis points, three.
Speaker 4: Basis points for those following at home that speak on
Speaker 4: Wall Street language. So to me, it's amazing this hasn't
Speaker 4: Why has it taken so long?
Speaker 7: Like?
Speaker 4: What makes the Blackrock funds competitive at a higher management
Speaker 4: fee than Vanguard?
Speaker 5: Well, the thing is, I will say that Blackrock has
Speaker 5: been forced to sort of follow Vanguard's lead here. They've
Speaker 5: had to cut fees as well introduce their own very
Speaker 5: low fee products. You take a look at their S
Speaker 5: and P five hundred funds. The I shares one ticker
Speaker 5: IVV that also charges three basis points to match Vanguard's fee.
Speaker 6: But in terms of why, I mean.
Speaker 5: Blackrock has enjoyed this position at the top of the
Speaker 5: league table for so long, since two thousand and six.
Speaker 6: They were an early mover here.
Speaker 5: And that's really powerful in the ETF market. That first
Speaker 5: market advantage. You see it both on the issuer side
Speaker 5: and also when new product sets are introduced, when a
Speaker 5: new category is introduced, so that is in BlackRock's favor. Also,
Speaker 5: you think about some of their funds, I mean TLT,
Speaker 5: that is their long dated Treasury ETF.
Speaker 2: And you love TL. You love talking about TL.
Speaker 5: I'm talking about TLT so much because it has been insane,
Speaker 5: the volume and the fund this year has been incredible.
Speaker 5: People are shoveling so much money into this ETF this
Speaker 5: year even though I is TLT. Kind of it kind
Speaker 5: of is like these these funds that are these funds
Speaker 5: that Blackrock have a lot of them, are just capital
Speaker 5: market instruments, and that's really powerful. That's why I SPY,
Speaker 5: which charges nine basis points UH, which is the S
Speaker 5: and P five hundred tracking fund UH introduced by State Street.
Speaker 5: It's the oldest, it's the biggest, it's relatively expensive, but
Speaker 5: it's just been around for so long that's what people use.
Speaker 4: Yeah, still bigger than Vanguard's fund at more than three
Speaker 4: times the granted both are pretty cheap in the.
Speaker 5: Grand scheme of life, but I mean this is a
Speaker 5: market that's measured in basis points, so it's pretty expensive.
Speaker 3: You know, one thing that Blackrock has that Vanguard does
Speaker 3: not have. Tell me is a filing for a bitcoin ETF.
Speaker 6: I was wondering when we would get that.
Speaker 3: Well, we're here now. Everyone's favorite thing to talk about
Speaker 3: in the people's favorite thing to talk about it in
Speaker 3: this room. So if you haven't been following closely, there
Speaker 3: is no spot bitcoin ETF. But there's something like what
Speaker 3: thirteen filings something like that something I lost track. Vanguard
Speaker 3: is not one of them. So what's gonna happen if
Speaker 3: Blackrock has a moment here where they get to have
Speaker 3: a bitcoin ETF and Vanguard doesn't have one?
Speaker 5: This is so fun. I'm so glad we're talking about
Speaker 5: this because it sort of gets into the spiritual differences
Speaker 5: between Blackrock and Vanguard. Blackrock has over four hundred ETFs.
Speaker 5: That is a lot of utfs, virtually every single asset,
Speaker 5: more than anybody else pretty much. Take a look at Vanguard.
Speaker 5: Even though there's only two hundred three hundred billion dollars
Speaker 5: that separates them in AUM, Vanguard only has eighty three funds.
Speaker 5: Vanguard is not They don't even have a commodities ETF.
Speaker 5: So they're very plain vanilla.
Speaker 1: By plain vanilla.
Speaker 3: It's like hold the vanilla bean, just like straight vanilla.
Speaker 6: Yeah, exactly, exactly.
Speaker 5: And I asked Vanguard, h will you ever file for
Speaker 5: a spot bitcoin ETF? And usually it's hard to get
Speaker 5: Vanguard to say anything too fired up. They said absolutely,
Speaker 5: they have no intent to do this. The case for
Speaker 5: cryptocurrency is very weak, ki volatility, et cetera. Whereas Blackrock
Speaker 5: they are leading the charge here. A lot of people
Speaker 5: watching January to see if that spot bitcoin ETF gets approved,
Speaker 5: and if it does, that can give them a leg up.
Speaker 5: Especially if Blackrock puts their their spot pitcoin ETF into
Speaker 5: some of their model portfolios. That could be a game
Speaker 5: changer here and buy them a little bit of time.
Speaker 4: Except when Joel used to send me down to Vanguard
Speaker 4: to interview Jack Bogel, so probably ten years ago at
Speaker 4: this point, Yeah, talk about he was happy to shake
Speaker 4: things up. He would spit fire.
Speaker 3: He'd have a few things to say about the point
Speaker 3: you think, that's no intent with like the g version
Speaker 3: of what you'd get from Jack exactly.
Speaker 4: But you know, uh, Bogel never wanted to have an
Speaker 4: ETF in the first place. You know, you'd ask, you'd
Speaker 4: ask him about ETFs, and the the argument was, well,
Speaker 4: you can trade it all day, and he'd be like,
Speaker 4: why the heck would you want to do that? So exactly,
Speaker 4: So I wonder is it sort of the ghost of
Speaker 4: Bogel that's influencing Vanguard, or is it more to do
Speaker 4: with just the structure. You know, black Rock is a
Speaker 4: for profit company. It has its own stock, it has
Speaker 4: its own shareholders to answer to. Vanguard is a completely
Speaker 4: different business model. So when you talk to us about
Speaker 4: that and and does that play a role in their
Speaker 4: decisions on things like this?
Speaker 6: I think it is partly the Bogel effect.
Speaker 5: Here to name.
Speaker 8: Check a book by book called Yeah, I don't know
Speaker 8: if you know him, we can host a podcast together.
Speaker 2: He's he's not quoted in this story though erics.
Speaker 5: I mean that would be too do that, But yeah,
Speaker 5: I mean you think about again Bogel's choice words to
Speaker 5: your point. Vanguard doesn't say anything too. It's hard to
Speaker 5: rile them up. Bogel definitely was more outspoken, but yeah,
Speaker 5: he didn't have a lot of.
Speaker 6: Love for commodities.
Speaker 5: It makes sense that Vanguard doesn't have a lot of
Speaker 5: love for crypto. Again, to go back to the quote
Speaker 5: that they gave me, they say that most crypto assets
Speaker 5: they lack intrinsic economic value. They generate no cash flows.
Speaker 5: That is a biggie for Vanguard. It's the same thing
Speaker 5: with commodities not generating any cash flows. Just it's totally
Speaker 5: out of their profile that they would even venture into crypto.
Speaker 3: It seems like Blackrock might be worried about this, like
Speaker 3: you've seen this lead continue to sort of slip away.
Speaker 3: It goes back to obviously Blackrock acquired Eye Shares and
Speaker 3: that was like this amazing acquisition. Do you get a
Speaker 3: sense that BlackRock's nervous about this, about the moment that
Speaker 3: they become sort of like the number two in the
Speaker 3: ETF game.
Speaker 5: I will say that Blackrock is pretty competitive in spirit,
Speaker 5: and I think it's also to point out here even
Speaker 5: though their share is slipping, it's a case of the
Speaker 5: pie is just getting bigger.
Speaker 3: The Pie is getting much bigger, right, much bigger. He's
Speaker 3: the podcast named Trillions Trillion grows a lot.
Speaker 5: Yeah, we're up to seven point eight trillion dollars in
Speaker 5: US ETF assets, about ten trillion dollars globally. You take
Speaker 5: a look at Blackrocks US ETF assets, they're at two
Speaker 5: point five trillion dollars. That's an all time high. So
Speaker 5: it's not like blackrock is shrinking here.
Speaker 6: It's just that you have this just very.
Speaker 5: Formidable challenger in Vanguard, and also you have all of
Speaker 5: the others. I mean, you take a look at the
Speaker 5: percent of flows that are going to people outside of Blackrock,
Speaker 5: outside of Vanguard, and it's at a record high.
Speaker 2: So it's not just that people want the boring stuff that,
Speaker 2: you know, boring low fee stuff that Vanguard has. So
Speaker 2: Joel asked about the competitiveness of blackrock and if they're
Speaker 2: watching this closely, what about Vanguard does do they care
Speaker 2: if they're number one?
Speaker 5: No that I mean again, I always, as someone who's
Speaker 5: been covering this for a few years, I just love
Speaker 5: the spiritual differences between blackrock and Vanguard. Where blackrock is
Speaker 5: competitive and you know, wants to be number one, Vanguard
Speaker 5: does not care.
Speaker 6: The exact quote.
Speaker 5: That I got from them is Vanguard isn't focused on
Speaker 5: who's at top of the ETF league tables, and I
Speaker 5: believe them. So it's pretty interesting.
Speaker 1: Like league what.
Speaker 6: You watch that it has come to us.
Speaker 3: I also the spiritual difference there is, like you know,
Speaker 3: the Financial Advisor, I think is a set that really
Speaker 3: gravitates to Vanguard, whereas like more of like I probably
Speaker 3: like the trader is who I think you said earlier,
Speaker 3: yeah right, yeah, yeah.
Speaker 5: And I mean that's something that I make sure to
Speaker 5: put in every story cause it's very real. I mean,
Speaker 5: even though their share is going down, their importance on
Speaker 5: Wall Street Traders is only going up. A lot of
Speaker 5: people are using these as liquidity sleeves, et cetera, a
Speaker 5: way to get quick exposure these blackrock products because a
Speaker 5: lot of them just trade like water.
Speaker 4: Well okay, no, no, well I was gonna ask Katie.
Speaker 4: You know there's also I mean, typically traditionally when you
Speaker 4: hear ETF, you think of a passive index tracking product
Speaker 4: until the names like Kathy would come up and others
Speaker 4: who are actually running actively managed ETFs.
Speaker 7: Which has been a theme this year.
Speaker 3: Yeah, active management has had that has been one of
Speaker 3: the big takeaways of the year.
Speaker 4: Yeah. Yeah, So where do we stand with that? Are
Speaker 4: they are both of these companies losing share to providers
Speaker 4: that have more active ETFs.
Speaker 6: That's where the others come in.
Speaker 5: Can you take a look at the percent of share
Speaker 5: of flows that are going to outside of the big
Speaker 5: two and a lot of that is going to these
Speaker 5: actively managed ETFs. And I gotta say it's really interesting.
Speaker 5: Even though Blackrock likes to be number one in most things,
Speaker 5: they aren't a really huge player in the active ETF space.
Speaker 5: You take a look at their lineup again, they have
Speaker 5: over four hundred US ETFs, only thirty eight of them
Speaker 5: are actively managed, and they have launched a few rick
Speaker 5: reader for example. They're big fixed income guy, I forget
Speaker 5: his exact title, but he's very important. He launched his
Speaker 5: first ETF this year. So they're bringing out some of
Speaker 5: their star players in the ETF rapper as an active strategy.
Speaker 5: But again, these these fun these issuers, they're not known
Speaker 5: for being active managers, even though they are so huge.
Speaker 3: What do you think that it would be in the
Speaker 3: inside the tim centevik rapper, Oh god, I would.
Speaker 9: Love to know.
Speaker 2: You have aute to think about.
Speaker 5: I feel like you would be extremely sensible, and then
Speaker 5: there would be like one to five percent of your
Speaker 5: portfolio that would be absolutely bananas.
Speaker 8: Is that that Eric Baltus calls that the hot sauce?
Speaker 8: Yeah exactly. I just put a little bit of hot sauce. Yeah,
Speaker 8: you know, maybe a little bit more than you.
Speaker 2: I would love a burrito right now. Why did you
Speaker 2: bring that up?
Speaker 1: Sounds great?
Speaker 3: All right, great rat anything you know, talk about around
Speaker 3: the corner.
Speaker 2: Yeah, so this is a good piece, Katie. I didn't
Speaker 2: know we could actually talk for fourteen minutes about vanes then,
Speaker 2: but then I saw you come in the studio, and
Speaker 2: then I knew we could.
Speaker 4: I was going to ask Katie to name all four
Speaker 4: hundred black rockets go at this point.
Speaker 6: At this point, I could probably get at least one
Speaker 6: hundred of them.
Speaker 2: Hey, check out this story. It's in the upcoming issue
Speaker 2: of Bloomberg and Business Week magazine. It's available on newsstands,
Speaker 2: online and on the Bloomberg Terminal later this week, but
Speaker 2: right now you can read the story on the Bloomberg
Speaker 2: Terminal and of course at Bloomberg dot com. It's about
Speaker 2: the seven point eight trillion dollar market for US traded ets,
Speaker 2: which black Rock has dominated four decades. A big thank
Speaker 2: you to Bloomberg News senior markets recorder and BTV anchor
Speaker 2: Katie Greifeld, who writes all about it in the upcoming
Speaker 2: issue of Bloomberg Business Week. Also the editor of Bloomberg BusinessWeek,
Speaker 2: Joel Webber. Everyone here at a nice little roundtable in
Speaker 2: our Bloomberg Interactive Brokers studios. You're watching and listening to
Speaker 2: Bloomberg BusinessWeek.
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Speaker 2: Well, maybe if you've been traveling internationally, you've seen these
Speaker 2: ads in airports or maybe in some international cities you've
Speaker 2: been going around in. The campaign features some of the
Speaker 2: most well known French athletes, chefs, scientists, designers and more.
Speaker 2: They chose France and they're telling you to do the same.
Speaker 2: It's all part of an international marketing effort aimed at
Speaker 2: attracting interest in and investment to France. Of course, the
Speaker 2: seventh largest economy in the world, and one that right
Speaker 2: now is trying to distinguish itself from its European peers.
Speaker 2: Olivier Besch is the Minister Delegate for Foreign Trade, Economic
Speaker 2: Attractiveness and French Nationals Abroad. It's quite the title you
Speaker 2: have there, and that's not even your full title, I
Speaker 2: should say. He joins us here in the Bloomberg Interactive
Speaker 2: Brokers studio. Olivier, how are you?
Speaker 10: Yeah, fine, good afternoon everybody.
Speaker 2: Yeah, it's good to have you with us. Why is
Speaker 2: now the right place time to launch less such a launch,
Speaker 2: launch such a big campaign internationally?
Speaker 10: Well, first of all because we had a very proper
Speaker 10: business agenda with President micro Goverdance since six years. And
Speaker 10: then we are the most attractive country in Europe for
Speaker 10: foreign investments for four years in a row. And I said,
Speaker 10: it's a party, really good time, just after the World
Speaker 10: Rudby Cup and just before the Olympics next year in Paris,
Speaker 10: to make this nation branding campaign for choosing France and
Speaker 10: say it too or investors around the world that they
Speaker 10: are pretty really welcome here in France. I think it's
Speaker 10: time to face tremendous challenges in it in Spain, in
Speaker 10: health and France is a very good place to do it.
Speaker 4: You know, Olivia, when you talk about tracking investment capital
Speaker 4: and businesses to France, sort of prioritize for us. What's
Speaker 4: at the top of that list. What would you really
Speaker 4: love to see come into France as far as investment flows.
Speaker 10: Well, we don't have really priorities. I think we have
Speaker 10: a friend's twenty thirty investment plan for innovation. The first
Speaker 10: priority in this plan is to govermnize industry, but we
Speaker 10: also have priorities in artificial intelligence, in quantum, in biotechs,
Speaker 10: to invent together twenty new biomedicines to twenty thirty, yeah,
Speaker 10: and ten to twenty twenty five. We already have four.
Speaker 10: We wanted to invest also in new energies like solar protunts,
Speaker 10: like windforms like hydrogen, and we wanted to use the
Speaker 10: new energies in mobilities to invent together the new plane
Speaker 10: maybe tomorrow hydrogen plane, electric plane, or with other proputions
Speaker 10: sustainable elevation fuel. So I think there is a lot
Speaker 10: of money in this plane to help businesses to invest
Speaker 10: in and we will be very happy if new American
Speaker 10: companies will be part of this venture.
Speaker 2: What would you say to somebody who says, you know,
Speaker 2: it would be great for us to be investors in France,
Speaker 2: but were intimidated by the regulatory environment, not just by
Speaker 2: the regulatory environment of the EU, but also of the
Speaker 2: French government. And then also, let's be frank, the labor laws.
Speaker 2: I will say no.
Speaker 10: I will tell to this person that they miss something.
Speaker 10: During the six last year, we really transform Friends. We
Speaker 10: reduce the tax burden. For instance, for twelve parate taxes,
Speaker 10: it was a thirty three point five percent, it's now
Speaker 10: twenty five percent. We cut ten maybe fifteen billion euro
Speaker 10: on tax production. We reform the labor law. It's more
Speaker 10: flexible now it's very secret, especially for job and I
Speaker 10: think we also reduce all the complexity. We simplify the
Speaker 10: administrative procedures. We have key turn sites to implant a factory. Yeah,
Speaker 10: in nine months now in France. So I think that
Speaker 10: to France in twenty fifteen, it's not Friends in twenty
Speaker 10: twenty three, so it's really time for choosing France.
Speaker 4: Well, and twenty twenty three kind of a strange year.
Speaker 4: I mean, I feel like we've had a few very
Speaker 4: strange years when it comes to global trade, geopolitics. I mean,
Speaker 4: starting with, you know, the trade wars with the US
Speaker 4: and China under the Trump administration, then the invasion of
Speaker 4: Ukraine now Israel, and I think you know, from where
Speaker 4: we're sitting, I think the assumption is that all of
Speaker 4: this has perhaps brought the US and Europe in France
Speaker 4: closer together, tightened their bonds. But I'm curious how you
Speaker 4: see it. How does France and trade and investment in
Speaker 4: France fit into this really dramatic shift in geopolitics that
Speaker 4: we've seen over the last few years. Are there opportunities
Speaker 4: more problems than opportunities, and you know, how do you
Speaker 4: navigate all of these shifting.
Speaker 10: I think you're right living in a time of shocks,
Speaker 10: sanitary shocks with COVID nineteen, then the invasion war in
Speaker 10: Ukraine from Russia now in the Middle East, and also
Speaker 10: climate chocks and maybe technologic shocks. But in this time
Speaker 10: of chocks, I think it's good first to restore the
Speaker 10: multi la terrorism and I think we have a real issue.
Speaker 10: Next February in the MC thirteen in Abuda by for
Speaker 10: the WTO we should restore the dispart settlement mechanism. It
Speaker 10: was one of the topics I spoke about with American
Speaker 10: officials yesterday in Washington. And we have also to reinforce
Speaker 10: the links between friends and United States. Europe and the
Speaker 10: United States. We should now have permanent agreement on our
Speaker 10: dispute on sustainable still and aluminium with herbus borrowing or
Speaker 10: so I think we we we really have to change
Speaker 10: our trade. We need more sustainable trade with new standards,
Speaker 10: and I think Wto is a good place to do it.
Speaker 10: But we must also reinforce the links between United States
Speaker 10: and Europe because it's not only trade, it's it's friends showing.
Speaker 10: It's also near showing. It's a place where we can
Speaker 10: bude together violo chain in the field we need for
Speaker 10: energy transition, for instance.
Speaker 2: After all, the US and France are very close allies. Hey,
Speaker 2: just in the last minute that we have with you,
Speaker 2: want to talk politics a little bit. You're here in
Speaker 2: the US. We're about to be in a presidential election year.
Speaker 4: Really next year?
Speaker 1: Next year?
Speaker 7: You haven't heard about that?
Speaker 2: Yeah, I heard about it. How are you and and
Speaker 2: your government watching what happens here next year? A potential
Speaker 2: try two point oh?
Speaker 10: Well, so you're right, friends in the United States, we
Speaker 10: are the oldest ally, we are friends you know, I'm
Speaker 10: coming from Alsast Regent and the border is friends and
Speaker 10: the border in Germany and Switzerland, and I personally know
Speaker 10: what we owned to the United States, just to our liberty. Yeah,
Speaker 10: my grandparents were lived two World wars, so we really
Speaker 10: have this link. And we don't forget, of course that
Speaker 10: Lafayette and the French troops participate to the War of
Speaker 10: Independence in Cheesypeak or in Yorktown. So I would say that,
Speaker 10: of course we are already working well today with Biden administration,
Speaker 10: but we respect as a foreign government, we respect the
Speaker 10: democratic decision of the American people, and we will work,
Speaker 10: of course with all the American governments. We just hope
Speaker 10: that we will remain open is an issue.
Speaker 9: It is not.
Speaker 10: For us a solution today to face a certain levita.
Speaker 2: I really appreciate you joining us. Olivia Besh, Minister Delegate
Speaker 2: for Foreign Trade, Economic Attractiveness and French Nationals Abroad.
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Speaker 2: Bitcoin has been on a tear this year, Mike Reagan,
Speaker 2: it really has. It's not in Nvidia or meta platforms,
Speaker 2: but it's still up close to one hundred and forty
Speaker 2: percent so far this year. And you're the crypto guy, now,
Speaker 2: what's going on?
Speaker 7: Well?
Speaker 4: And it's it's funny because we talked about everything else
Speaker 4: moving after the FED, but look at Bitcoin today, up
Speaker 4: another four percent, knocking on the door of forty three
Speaker 4: thousand dollars a token again.
Speaker 2: And I'm sorry, is it twenty twenty one to feel
Speaker 2: like it's trying to feel a little bit like it? Yeah,
Speaker 2: But you know, I think the.
Speaker 4: Main thing is, you know, anticipation of these ETFs being approved.
Speaker 4: There's other more technical things the having next year, and
Speaker 4: really the prospects for lower interest rates more liquidity from
Speaker 4: the FED I think is helping too. But don't take
Speaker 4: it for me, because we've got a much better expert
Speaker 4: on this topic to walk us through everything going on
Speaker 4: in the crypto market. His name is Jason Urban. He
Speaker 4: is the global head of trading at Galaxy Digital. He's
Speaker 4: joining us over zoom Zoom from New York City. Jason,
Speaker 4: thank you for joining the show.
Speaker 7: Thanks for having me.
Speaker 11: This is great and I'm glad I could be here
Speaker 11: on a day when when it's when it's good news
Speaker 11: and not bad news.
Speaker 4: And well, Jason, you know, we mentioned that ETF and
Speaker 4: I think, you know, it's pretty much the consensus that
Speaker 4: optimism about. Finally, what's it been over a decade since
Speaker 4: the first application for a bitcoin ETF. We're finally potentially
Speaker 4: near the finish line where the SEC might actually approve one.
Speaker 4: But I think a lot of question on people's minds is,
Speaker 4: you know, is that a sell the news event, is
Speaker 4: all the hype before the ETF is actually launched, or
Speaker 4: will we continue to see a bull market in bitcoin
Speaker 4: once we do get an ETF.
Speaker 11: I think it's going to continue to be a bull market,
Speaker 11: and it's structural at the end of the day. If
Speaker 11: you think about the crypto ecosystem, one of the things
Speaker 11: that we've been missing for a long time is a
Speaker 11: steady supply of assets and an actual pathway for money
Speaker 11: to get in. And you can see that in how
Speaker 11: the basis trades, especially when the markets are going higher.
Speaker 11: That just means that there's less dollars in the ecosystem.
Speaker 11: With an ETF, you're going to release that because people
Speaker 11: are going to be able to pledge it as margin,
Speaker 11: they're going to be able to buy it on margin,
Speaker 11: and so that is going to push it higher. It
Speaker 11: actually unleashes a lot of the value that has been
Speaker 11: very difficult, and I think we saw some of the
Speaker 11: darker days of crypto in twenty two when a lot
Speaker 11: of these lenders who had extended leverage in an irresponsible way,
Speaker 11: but that leverage what was fueling it. I know we
Speaker 11: kind of you joked on the onset that twenty one
Speaker 11: is this twenty twenty one again, Well, the ETF is
Speaker 11: going to do that, but it's going to be able
Speaker 11: to happen in a more responsible, appropriate way, and that's
Speaker 11: what's going to pull it up. I mean, we're here
Speaker 11: at Galaxy on the trade desk. We're seeing real, real
Speaker 11: buyers come in, people who are who are not fast money,
Speaker 11: but who are buy and hold, who are who believing
Speaker 11: in it, and they're not you know, the usual people
Speaker 11: that you would normally see. And quite frankly, frankly, it's
Speaker 11: really encouraging because when I will come on the desk
Speaker 11: and they say, x y Z just bought them, Like really,
Speaker 11: We've been talking to them for two years and finally,
Speaker 11: you know, they've decided to pull the trigger. And so
Speaker 11: I think the ETF only only one makes them more comfortable,
Speaker 11: and then two structurally allows more money to flow into
Speaker 11: the ecosystem.
Speaker 7: So I think it really is a big positive.
Speaker 4: Oh, Jason, if only you could tell me who x
Speaker 4: y Z is. I have a feeling you won't, but.
Speaker 11: X y Z wouldn't be a client anymore if I exactly.
Speaker 4: But you know, Jason, obviously, if we do think back
Speaker 4: to twenty twenty one, it was such a different market
Speaker 4: than in that we weren't just talking about Bitcoin. We
Speaker 4: were talking about you know, doge coin and all these
Speaker 4: other fringe token salt coins. But really the other big
Speaker 4: story then was this lending crypto borrow and lending operations
Speaker 4: that really you know, some eye popping yields back in
Speaker 4: the days when there was no yield to be found anywhere.
Speaker 4: And of course it all it all sort of blew
Speaker 4: up spectacularly last year. But I can't help but wonder
Speaker 4: if that lending and borrowing market will have a rebirth
Speaker 4: given what crypto prices are doing now. You know, we
Speaker 4: saw some new Sam Altman, the open Ai co founder,
Speaker 4: starting a bitcoin private credit fund. Where where is that
Speaker 4: element of the market, the lending and borrowing and yield farming?
Speaker 4: Where is all that? Are we coming back in that
Speaker 4: space as well?
Speaker 11: Not as quickly as I think we'd like. I mean,
Speaker 11: here here, Galaxy, we have a lending business. Now, We've
Speaker 11: always lend oversecured and have been responsible with it. I
Speaker 11: think that what you're finding is that will come back,
Speaker 11: but you need to find the structure to allow that
Speaker 11: to come back because the days of you know, I
Speaker 11: think the true bitcoin is not your keys, not your coin.
Speaker 11: We're proven proven right in the aftermath of twenty one
Speaker 11: and so you know, as we look at our business
Speaker 11: and what what the inbound we're getting. People are looking
Speaker 11: for leverage and there aren't a lot of places that
Speaker 11: are that are that are equipped to give it one
Speaker 11: and two have a structure in place that allows for
Speaker 11: that to happen.
Speaker 7: Prime is prime is.
Speaker 11: A h A true prime or a real prime is
Speaker 11: something that the ecosystem generally needs. We have a product
Speaker 11: that we're rolling out g One that that hopefully addresses
Speaker 11: some of that, but really on a full scale. It's
Speaker 11: not there and we can't. We're not getting there yet
Speaker 11: as a as a community. And so that's why I
Speaker 11: think again back to the ETF, why that is important
Speaker 11: is because that is an equity that fits into a
Speaker 11: system that everyone is comfortable with and a lot of
Speaker 11: the traders and a lot of the trading desks that
Speaker 11: are in space, we'll just use that and.
Speaker 7: They'll do a delta replacement.
Speaker 11: They'll buy the ETF, they'll sell their bitcoin, release cash,
Speaker 11: use the cash to buy more bitcoin or some of
Speaker 11: these other coins that actually are very.
Speaker 7: That that serve a purpose, right.
Speaker 11: I think that when we looked at all coins and
Speaker 11: you know, some of the names on that, historically people
Speaker 11: forget that that's the technology. Hey, and there's a need
Speaker 11: for that.
Speaker 2: Hey, Jason, I got to ask you a more basic
Speaker 2: question here, and what's one that just comes down to
Speaker 2: sort of fundamentals and beliefs. Here, I got to get
Speaker 2: you to react to what Jamie Diamond said last week,
Speaker 2: and for those who don't know what he said, the
Speaker 2: only true use case for crypto is criminals, drug traffickers.
Speaker 2: He talked about tax avoidance, money laundering. He said, if
Speaker 2: I was the government, I'd close it down. We have
Speaker 2: a minute left you What did you make of that?
Speaker 11: Uh, he's talking his own book. I mean, if if
Speaker 11: I could, if I could look at how I would
Speaker 11: protect my brand or my ecosystem. Cryptos and blockchain is
Speaker 11: a disintermediating action, right, and so at the end of
Speaker 11: the day, of course he's going to say that dollars,
Speaker 11: physical dollars are used more for illicit activity than crypto.
Speaker 11: It can be traced everywhere, every it's immutable. The whole
Speaker 11: purpose of an immutable blockchain is that it can be
Speaker 11: tracked all the way back to its origin.
Speaker 7: So if you're a bad.
Speaker 11: Guy doing bad things, you're not using crypto, You're going
Speaker 11: to use other things that can't be tracked. And and
Speaker 11: so I think that he's just talking his own book,
Speaker 11: quite frankly.
Speaker 2: All right, very interesting, very interesting. It's it's the gift
Speaker 2: that keeps on giving Jamie Diamond when he talks about crypto,
Speaker 2: I have to.
Speaker 4: Say, yeah, yeah, they do have their own coining to it.
Speaker 2: Jason Irban, Global head of Trading a Galaxy Digital, the
Speaker 2: Michael Novograts founded and led crypto firm. Thanks so much
Speaker 2: for joining us. This is Bloomberg.
Speaker 1: I'm riding.
Speaker 2: The journal.
Speaker 9: Let me drive.
Speaker 6: Oh no, no, no, who's gone.
Speaker 2: Honey?
Speaker 4: Please gravels.
Speaker 1: I want to drive.
Speaker 8: It's a good question.
Speaker 1: This is the Drive to the Globes on Bloomberg Radio.
Speaker 11: Hello.
Speaker 2: Hello, live from the Bloomberg INTERACTI Broker's studio. We're streaming
Speaker 2: on YouTube and a Bloomberg Originals. Wednesday, December thirteenth, twenty
Speaker 2: twenty three. A Happy FED Day to everyone and especially
Speaker 2: the Fed. Shair Jay Powell, who pretty much could have
Speaker 2: done a song and dance up there, seemed like he
Speaker 2: was pretty excited about the direction that things are moving.
Speaker 2: We're seeing uh stocks higher, We're seeing yields go down.
Speaker 2: That was certainly the FED meeting heard around the world.
Speaker 2: I'm Tim Stanebeck, along with my co host Bloomberg News
Speaker 2: is Mike Reagan, who's also now the leader of the
Speaker 2: Crypto team. Mike, what did you think of that?
Speaker 4: Well, you know, it's interesting, Tim, I mean a lot
Speaker 4: of times when the FED comes out with a statement
Speaker 4: that's interpreted one way by the market as dubbish, Powell
Speaker 4: sort of appear to intentionally talk the market out of
Speaker 4: that reaction.
Speaker 2: Didn't see that today.
Speaker 4: I did not see that today at all, SMP up
Speaker 4: more than one percent, all the major indexes up more
Speaker 4: than one percent. I mean, these moves after a FED
Speaker 4: press conference oftentime can be volatile and sort of not
Speaker 4: necessarily indicative of what to expect tomorrow and for the
Speaker 4: rest of the week. But boy, for the moment, everyone
Speaker 4: seems very happy with this statement in press conference.
Speaker 2: Yeah, they certainly do. It's a fascinating day, and I
Speaker 2: think everyone's going to remember who pays attention to this
Speaker 2: stuff where they were, because it does seem like that
Speaker 2: the FED has declared victory, although it kind of he
Speaker 2: came out and said we haven't yet declared victory. The
Speaker 2: market's saying that they've declared victory when it comes to
Speaker 2: the war on inflation.
Speaker 4: Right, and that FED dot plot is so important, really telegraphing,
Speaker 4: you know, the likelihood of three rate cuts of a
Speaker 4: quarter point next year, so much closer to what the
Speaker 4: interest rate market was expecting. So you know, it's off
Speaker 4: to the races in both and bond markets today. Pretty
Speaker 4: pretty remarkable move.
Speaker 2: Let's see what Sarah Ponsik has to say about all this.
Speaker 2: She's financial advisor UBS, a private wealth management She's somebody
Speaker 2: who our audience knows well and somebody who Mike you
Speaker 2: know pretty well because she was your co anchor of
Speaker 2: the What Goes Up podcast for so many years here
Speaker 2: at Bloomberg before she went over to ups, Sarah, good
Speaker 2: to have you with us.
Speaker 7: How are you?
Speaker 9: I'm great? And yeah, I was just about to say,
Speaker 9: Mike's come a really long way. How do the crypto teams?
Speaker 9: So it's the two of us hosted a podcast together.
Speaker 7: Things.
Speaker 4: Mike, you're gonna put all your clients in crypto? I
Speaker 4: assume I can't.
Speaker 9: I can't discuss that.
Speaker 4: Sarah.
Speaker 2: What do you make of what we just heard from
Speaker 2: FED share J Powell? I mean, market's certainly loving it.
Speaker 9: It really is remarkable. I mean the Fed essentially came
Speaker 9: to the table today. Powell came to the table and
Speaker 9: they patted themselves on the back saying that look, inflation
Speaker 9: has eased uh and economic growth has but you know,
Speaker 9: it's still looking pretty good. And it's really remarkable because
Speaker 9: the Fed had every option after this last month and
Speaker 9: a half to push back against the bond market. We
Speaker 9: had seen in November the best month, the largest rally
Speaker 9: for the agg the bond market benchmark since nineteen eighty five,
Speaker 9: and that had really undone a lot of the tightening
Speaker 9: that the Federal Reserve had done. They had even said previously, oh, well,
Speaker 9: the market's done some of our tightening work for us.
Speaker 9: So again, they had every option to push back against
Speaker 9: the bond rally and they didn't, which is.
Speaker 7: Really telling, really telling.
Speaker 9: The fact that you know, the median dot next year
Speaker 9: is now showing seventy five basis points of cuts. Sure,
Speaker 9: that's the median. Some expect more, some expect less. But
Speaker 9: just the fact that the Fed did not push back
Speaker 9: against the markets easing over the past month and a
Speaker 9: half is something that's big for the market. Is clearly
Speaker 9: we're seeing in the rally in both bonds and stocks today.
Speaker 4: You know, Sarah, I think one thing that has a
Speaker 4: lot of people nervous about a year like this is,
Speaker 4: at least for much of the year, it was such
Speaker 4: a top heavy rally. You know, those big famous tech stocks,
Speaker 4: the whether you call them the Magnificent seven or the Fangs, whatever,
Speaker 4: the latest whatever the kids are calling them these days,
Speaker 4: really drove the bus on this market rally this year.
Speaker 4: How are you thinking about that going forward and what
Speaker 4: are you telling your clients, I mean, is it time
Speaker 4: to maybe diversify into everything else? Does that make sense?
Speaker 7: At this point?
Speaker 9: It does make sense, and we've seen that trade work.
Speaker 9: If you look at the month of November, for example,
Speaker 9: the equal weight version of the S and P five hundred,
Speaker 9: which gives every single company in the index the same
Speaker 9: weight as those magnificent seven or like as you like
Speaker 9: you said, whatever the kids are calling calling them these days,
Speaker 9: same exact weight, the equal weight version actually outperformed. We
Speaker 9: saw small caps outperformed. We saw cyclical industries that had
Speaker 9: lagged all year long outperform. And what's interesting is if
Speaker 9: you look at the trade today, if you look at
Speaker 9: it by sector, look at your best performers. I'm looking
Speaker 9: at it right now. Your best industries are utilities up
Speaker 9: three point six percent, real estate up three and a half,
Speaker 9: Staples at one point seven, healthcare at one point six,
Speaker 9: and your worst sectors are tech and communication services. So
Speaker 9: we're seeing a complete flip of what we've become accustomed
Speaker 9: to throughout this year, where the best performers are now
Speaker 9: the laggers. Yes they're still lagrating. Everything is rallying today,
Speaker 9: but we're seeing the laggards from this year really start
Speaker 9: to lead the way.
Speaker 2: Anything make you nervous, Sarah.
Speaker 9: That is always something that makes me nervous.
Speaker 4: I've ever seen gets.
Speaker 1: Deep inside.
Speaker 9: Look, I mean, things are pretty good right now one
Speaker 9: on the bond side of the equation, and I would
Speaker 9: honestly say that one of the most difficult things for
Speaker 9: our clients over the past couple of years has been
Speaker 9: understanding that bonds can drop in value. You know, your
Speaker 9: bonds are still performing, they're still paying you income, but
Speaker 9: on paper are going to have losses because you know,
Speaker 9: rates are now higher than they were when you bought
Speaker 9: those bonds. So that was really difficult. And now something
Speaker 9: to be optimistic about is bond holdings and bond performance.
Speaker 9: As you know, we really saw takeoff in November, and
Speaker 9: it seems like it's continuing to and we do expect
Speaker 9: bond returns over the next year and going forwards to
Speaker 9: be pretty strong. Now when it comes to stocks, it's
Speaker 9: interesting because when you look at the fundamentals, there are
Speaker 9: reasons to be optimistic going into next year, one being
Speaker 9: corporate earnings. When you look at twenty twenty three, corporate
Speaker 9: earnings for the S and P five hundred were flat.
Speaker 9: We didn't see any growth, They didn't see any declines,
Speaker 9: but they didn't go anywhere. Now into twenty twenty four,
Speaker 9: our chief investment office is expecting that we should see
Speaker 9: about nine percent profit growth, which you know, stocks follow earnings,
Speaker 9: so that would goode well for the market. But at
Speaker 9: the same time, when the market is now pricing in
Speaker 9: as many cuts as they're pricing in twenty twenty four,
Speaker 9: usually when the Fed starts cutting, it's not a slow grind.
Speaker 9: They start cutting pretty quickly because something's gone wrong. Now
Speaker 9: that could bode well for the bond market, could be
Speaker 9: a rocky one for the stock market. So I'm always
Speaker 9: worried about something. But yeah, sometimes things just seem too
Speaker 9: good to be true. And even though you look, we're
Speaker 9: still projecting positive returns in the bond and stock market,
Speaker 9: you know, next year it's probably it could be a
Speaker 9: rocky ride. And the fact that everyone now seems to
Speaker 9: believe in this stock landing narrative, yet the Fed's going
Speaker 9: to potentially have to cut five times next year according
Speaker 9: to the market, something doesn't necessarily add.
Speaker 4: Up there, you know, Sarah, I remember a year or
Speaker 4: two ago, I feel like half of the stories that
Speaker 4: came out of markets. Coverage were about how sixty forty
Speaker 4: is dead. You know, bond yields are at rock bottom,
Speaker 4: interest rates, stock valuations are high. You really need to
Speaker 4: rethink that. I can't help but wonder though, now, is
Speaker 4: is it sixty forty? Are the kids in the sixty
Speaker 4: forty these days? Is it back?
Speaker 9: The kids that are into sixty forty these days? Sixty
Speaker 9: forties backs? At least for the month of November. What
Speaker 9: was it in the month of November? It was the
Speaker 9: best month for the sixty forty portfolios since the early nineties.
Speaker 9: So that just goes to show. But much of that
Speaker 9: is predicated upon the fact that the sixty forty portfolio
Speaker 9: was claimed to be dead. And don't get me wrong,
Speaker 9: the sixty forty portfolio has gone through many tribulations over
Speaker 9: the past couple of years because interest rates were at
Speaker 9: rock bottom. You know, you really couldn't get much income
Speaker 9: from the bond market. And with the rise in bond
Speaker 9: yields and the rise in interest rates, we were going
Speaker 9: to see negative returns, you know, a bear market in
Speaker 9: bonds when that day came, which we saw for the
Speaker 9: past couple of years. Now, you know, stock returns should
Speaker 9: continue to be pretty strong. And on the flip side
Speaker 9: of that, when you look at the forty percent side,
Speaker 9: the bond side, well, if you are locking in bond yields,
Speaker 9: then you should. If you're someone's still sitting in cash,
Speaker 9: you know, now's kind of the time the flag's been
Speaker 9: waived to go ahead and lock in yields. Further out
Speaker 9: on the curve, Well, now you can actually get income
Speaker 9: from that forty percent in bonds, and you can also
Speaker 9: potentially get capital appreciation what interest rates do come down
Speaker 9: over the next couple of years. So yes, Mike, I
Speaker 9: think the kids would say sixty forty's back. But I
Speaker 9: would also add to that, we do believe and for
Speaker 9: the majority of our clients, we typically take a portion
Speaker 9: of that forty or sixty, depending on you the client's
Speaker 9: time horizon restolerance, and we allocate that to private markets
Speaker 9: as well. So I wouldn't say just Vanilla sixty forty,
Speaker 9: but maybe spice it up and add in a little
Speaker 9: bit of alternative investments as well.
Speaker 2: All Sarah Ponsick, we love it when you join us.
Speaker 2: I think we'll have to do a remote down in
Speaker 2: book raton Florida and we can all hang out there
Speaker 2: this winter. Sarah Ponzick, financial advisor at UBS Private Wealth Management,
Speaker 2: joining us on a zoom from Florida.
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