Speaker 1: Welcome shiness.
Speaker 2: I'm Joel Webber and I'm Eric Belchernis.
Speaker 1: Remember that time that ETF we had, We simply have
Speaker 1: bitcoin ETFs. What's the what the other side of that
Speaker 1: been like for you? Is it a big come down? Eric?
Speaker 2: A little. I've phased out slowly, Joel. I didn't want
Speaker 2: to go cold turkey, right, so I in fact, I
Speaker 2: was telling, uh, somebody somebody like, oh, what are the
Speaker 2: stats for day eleven? And I'm like, look, I'm phasing out.
Speaker 2: Now go track this other site. I'm going to point
Speaker 2: out things that are interesting, but I'm not doing like
Speaker 2: a daily look at the race every day.
Speaker 3: Uh.
Speaker 2: These ETFs are up and running. By all measures, it
Speaker 2: was a fantastic success, although it's been a little clouded.
Speaker 2: The GBTC outflows have kind of made this an interesting launch.
Speaker 2: It's not launch, it's just all volume is inflows here.
Speaker 2: You have this unlock of GBTC. So it's been a
Speaker 2: complicated launch with eleven of them, but largely I would
Speaker 2: say it's successful. Black Rock and Fidelity leading the way
Speaker 2: ark and bitwise having a lot of success. We're talking
Speaker 2: already in the billions of dollars after two weeks it's
Speaker 2: pretty good. So now I'm you know, I got to
Speaker 2: work on my Vanguard primer. I've got to do this
Speaker 2: ETF survey. We did, and we're starting to phase out
Speaker 2: a bit from it, but it's still going to be
Speaker 2: probably like one of the biggest stories of the year
Speaker 2: as we roll into you know, the spring and summer
Speaker 2: for sure.
Speaker 1: So one thing we haven't done is talk to a
Speaker 1: financial advisor about any of this. Who'd you bring today?
Speaker 2: Yeah, I thought we just all issuers. And I've been
Speaker 2: going out on media when this was coming up, and
Speaker 2: I've been saying that a target market of this launch
Speaker 2: is the advisor world and advisors that managed thirty trillion dollars.
Speaker 2: I mean, they control all of the boomer money in
Speaker 2: America pretty much, and that's largely who these ETFs are
Speaker 2: aimed at. And advisors love ETFs, they trust them, they
Speaker 2: like the low fees, and so we should talk to
Speaker 2: somebody who actually uses them or doesn't use them and
Speaker 2: has to sort through which one to pick. And the
Speaker 2: guy we have with this is Douglas Bonaparte, and he
Speaker 2: is a Twitter celebrity. I think an ex celebrity Twitter
Speaker 2: sounds better. Still, I got to be honest. Okay, he's
Speaker 2: a Twitter celebrity. If you haven't follow him his self
Speaker 2: deprecating tweets are really funny, like he's and he's just
Speaker 2: got he's a human on Twitter, you know, and it's nice.
Speaker 2: And he's a good advisor. He's part of what I
Speaker 2: would call the big long advisors. These are advisors who
Speaker 2: are the opposite the big short people. They don't see
Speaker 2: bubbles and everything, but rather they see the optimism in everything,
Speaker 2: and they're trying to get their clients just to hang
Speaker 2: in there, so the magic of compound and could kick in.
Speaker 2: So in my opinion, they're part of the sort of
Speaker 2: new generation of just just hang in there, keep costs low.
Speaker 2: Let the magic happened advisors.
Speaker 1: Okay, joining us this time Douglas Bonaparte. He's the president
Speaker 1: and founder of Bona Fide Wealth. This time on trillions,
Speaker 1: a little bitcoin in that portfolio. Douglas, welcome with trillions,
Speaker 1: Happy to be here. Okay, So I want to talk
Speaker 1: about how you speak with clients, but we want to
Speaker 1: start with this bitcoin thing, Like, at what point did
Speaker 1: you start telling folks now's the time to actually do this,
Speaker 1: and how is that conversation different today than it was
Speaker 1: a year ago.
Speaker 4: Oh, it's still happening, very very slowly, almost in real time.
Speaker 4: When those ETFs debuted, I was the first person to
Speaker 4: place a trade in my own account, just to see
Speaker 4: what this would be like, do we have discretionary on
Speaker 4: these you know, discretion on these trades? Do they need
Speaker 4: to be marked solicited? I noticed that I needed to
Speaker 4: mark my first trade as unsolicited, and that prompted a
Speaker 4: call like, hey, what can we do with this? And
Speaker 4: the answer was, we're having conversations around this. So take
Speaker 4: that for what it is. I mean, you have wirehouses,
Speaker 4: you have broker dealers, you have everybody starting to develop
Speaker 4: their policy around this, and I don't think anyone really
Speaker 4: did anything until it actually debuted the skepticism that was
Speaker 4: out there. You know, why why move resources around or
Speaker 4: have these conversations until we know we can actually put
Speaker 4: them inside a brokerage account.
Speaker 2: But just explain this solicit unsolicited, Just just break down
Speaker 2: what that means.
Speaker 4: Absolutely so in my world, if you're managing money on
Speaker 4: behalf of a client, you have three ways that you
Speaker 4: can go about placing orders. The first one, let's go
Speaker 4: with discretion. That means the advisor has the ability to place, buy,
Speaker 4: or sell orders.
Speaker 2: As they please.
Speaker 4: They don't need to call the client and say, hey,
Speaker 4: you know, this is what we're going to do. We
Speaker 4: have discretion makes sense if not, you have unsolicited versus solicited.
Speaker 4: Solicited means that the broker or in this case, advisor
Speaker 4: is going out to their clients to say, hey, I
Speaker 4: think this should be in your account. Can I place
Speaker 4: this trade? And they would say, yeah, I want that
Speaker 4: versus unsolicit. That's the other way around. Client calls you, hey,
Speaker 4: buy me one hundred schairs of Microsoft. That was an
Speaker 4: unsolicited So what they're saying, and for the longest time
Speaker 4: for broker dealers, that would allow there to be something,
Speaker 4: in this case gray Scale, that was one of the
Speaker 4: very few options that you would see allowed inside a
Speaker 4: brokerage account that was compatible. A lot of broker dealers
Speaker 4: would say, you can't go out to your client and say, hey,
Speaker 4: you know, I recommend that you put let's say gray
Speaker 4: Scale in your portfolio. They would have to call you
Speaker 4: and say I want exposure to bitcoin, and you would say, okay,
Speaker 4: the only option I have here are these tools, and
Speaker 4: then you would take that order, maybe even have to
Speaker 4: sign some paperwork or do a little bit of disclosure here.
Speaker 4: That's and that's a function of the compliance offices who
Speaker 4: are naturally skittish around cryptocurrencies.
Speaker 1: What about having conversations with your clients and you know,
Speaker 1: this looks like a pretty risky assetah with no real
Speaker 1: meaningful applications. Yet how do you balance that as somebody
Speaker 1: who's got the you know, fiduciary responsibilities that you do.
Speaker 4: So I think you have a fiduciary responsibility to educate
Speaker 4: your clients if they're asking about this, and unless you
Speaker 4: are living under a rock over the last let's say
Speaker 4: five to seven years and your I don't know how
Speaker 4: your clients weren't asking about crypto or bitcoin, and I
Speaker 4: think it's our job to educate them. And most compliance
Speaker 4: offices again are like, hey, don't touch this with a
Speaker 4: ten foot poll. I mean, that's a tough spot to
Speaker 4: be in, right. So here I am wanting to educate,
Speaker 4: but you might be told, hey, don't talk about this.
Speaker 4: That's number one now comes the product, right And I
Speaker 4: think banks and institutions are still trying to figure that out.
Speaker 4: I'm not going to put myself in the position that
Speaker 4: I was like, hey, I can't wait for this to
Speaker 4: come out so we can just.
Speaker 2: Start to load portfolios with it.
Speaker 4: It's probably more the stance of all right, when this
Speaker 4: is kosher right, and we get approval to do what
Speaker 4: we want to do, Let's say, have discretion. How can
Speaker 4: we build models or integrate this into our risk adjusted
Speaker 4: portfolio so that we could offer clients, Hey, are you
Speaker 4: educated on this?
Speaker 2: This this something you want?
Speaker 4: We're now offering portfolios that maybe have a five percent allocation.
Speaker 2: That data is out there.
Speaker 4: I mean, we've got ten plus years of data on
Speaker 4: bitcoin to see and almost like any brochure from I
Speaker 4: remember Gray Scale having one, what would happen if you
Speaker 4: added one too? Up to five percent of bitcoin on
Speaker 4: an eighty twenty or sixty forty portfolio. Those results were
Speaker 4: pretty compelling. I mean there wasn't a single time like wow,
Speaker 4: non correlated generated alpha. That's because bitcoin has had a
Speaker 4: magnificent ten years. So you have the public, you know,
Speaker 4: from not knowing a thing about it twenty thirteen fourteen
Speaker 4: all the way to everyone and their grandmother knowing about
Speaker 4: it twenty Thanksgiving twenty seventeen, twenty thousand dollars, and then
Speaker 4: you know from there on, here we go. We got
Speaker 4: a lot of rides in there, so everybody knows what
Speaker 4: this is now, and we're just seeing the you know,
Speaker 4: broker dealer, investment advisory world get this new shiny object
Speaker 4: and we're going to figure out what they're going to
Speaker 4: do with it. I'm still figuring out what, you know,
Speaker 4: we can do, how to roll it out, how to
Speaker 4: package that with a maybe handful of clients that are
Speaker 4: like all right, it's go time, and there's a reason
Speaker 4: for that.
Speaker 2: Let's talk about the client. So of all your clients,
Speaker 2: what percent do you think would be interested or are
Speaker 2: you planning to maybe allocate one of these bitcoin ETFs
Speaker 2: into their portfolio?
Speaker 1: And give us a little bit of a primer on
Speaker 1: like how many clients you have, how much money are overseeing?
Speaker 2: Yeah, we got over one hundred and fifty households.
Speaker 4: We're seeing close to ninety two one hundred million dollars
Speaker 4: in assets and under management. But the thing you need
Speaker 4: to know about my practice is how young it's skews.
Speaker 4: I'm thirty nine, and I would say the average age
Speaker 4: of our client is mid.
Speaker 2: To late thirties.
Speaker 4: And you know, you said in the beginning, like boomers
Speaker 4: love eat you know, boomers would love this, and I
Speaker 4: agree with that because five years ago, the number of
Speaker 4: clients that would have a question, want exposure or think
Speaker 4: about having exposure was relatively low. And four years from that,
Speaker 4: you know, I would say one in four clients would
Speaker 4: want to know more about it. I mean, it just
Speaker 4: ballooned the interest in this. My point being here, My
Speaker 4: clients that have exposure don't don't need an ETF, all right,
Speaker 4: they've already figured out how to use coinbase or have
Speaker 4: already been indoctrinated in how crypto works. But for the
Speaker 4: clients that do skew older, Yeah, there's been some inbound
Speaker 4: calls to say, hey, this is out, can we do
Speaker 4: something with this.
Speaker 1: How do you use ETFs in general in your portfolios?
Speaker 4: Yeah, I mean we use ETFs primarily in our portfolios.
Speaker 4: Our core risk adjusted model is maybe six ETFs from
Speaker 4: large cap all the way down to you know, emerging
Speaker 4: markets and bond funds. We do like to use some
Speaker 4: active strategies for a fixed income.
Speaker 2: So let's talk about the older clients who have some
Speaker 2: inbound calls. I had my mom over last Sunday, Joel,
Speaker 2: and she saw me talking about biccoin ETFs on etfiq
Speaker 2: for like three weeks straight, and she's like, you know,
Speaker 2: someone needs to do a show for me and my
Speaker 2: friends and talk to us like we're second graders. What
Speaker 2: this all means to me? It all just seems like
Speaker 2: funny money in space. That was her but Space money. Yeah,
Speaker 2: he's closed. But she said I wouldn't have looked at
Speaker 2: it before because the SEC said it was bad. Now
Speaker 2: that these are out, I you know, i'd consider it
Speaker 2: that alone.
Speaker 1: Did you tell her to read Chairman's Leonard?
Speaker 2: I don't recommend. The only thing I recommend to my
Speaker 2: mom is just trying to keep cost slow. I don't
Speaker 2: really I don't want to get involved with like pushing
Speaker 2: my mom my family members. I don't want. Yeah, I
Speaker 2: told her what I think, you know, I you know.
Speaker 2: To me, I'm it's a little like, you know, religion.
Speaker 2: To me, it's like I'm gonna believe in the mystery
Speaker 2: a little bit here. I'm not negative, but I'm not
Speaker 2: all in. But I'm like, I try. I respect it
Speaker 2: because of how relentless it is and how creative and
Speaker 2: intelligent some of the people in the space are. That
Speaker 2: that is what I think. You're kind of betting on.
Speaker 2: But the older people when they call you a was
Speaker 2: the sec approval and you know Larry Fink on Fox
Speaker 2: talking about it, was that sort of what made them
Speaker 2: feel comfortable. And when they ask you about it, are
Speaker 2: they interested in like a little hot sauce or do
Speaker 2: they think it's like an alternative to you? Or are
Speaker 2: any of them really into this like Mad Max potential
Speaker 2: world where all the societies break down and bitcoin is
Speaker 2: the currency that everybody.
Speaker 1: Uses, like in a gold kind of way.
Speaker 4: Right, Yeah, see there's the word. You just said it,
Speaker 4: But no they don't, So I'm glad you said gold.
Speaker 4: They don't think the Mad Max, you know, got to
Speaker 4: build a bomb shelter, you know, doom shelter in the
Speaker 4: backyard type scenario. I think a few things. I think, Look,
Speaker 4: there's bias that I have. I've been involved in bitcoin
Speaker 4: and you know and having mind it back in twenty fourteen.
Speaker 4: I've written articles about this. I've shared my thoughts and
Speaker 4: feelings around this and clients who've been with me for
Speaker 4: a while. No, no, my story. So on one hand,
Speaker 4: they might think like, oh, Doug, Doug likes this, has
Speaker 4: been doing this and has been successful in this, should
Speaker 4: I follow suit with him, and I urge caution there.
Speaker 4: You know, just because I've had success in this and
Speaker 4: took the risk you know, long ago, doesn't mean you should,
Speaker 4: you know, do that. Just don't don't you know, monkey
Speaker 4: see monkey do kind of thing. But you mentioned gold, right,
Speaker 4: and I think this is the best way. Now. I
Speaker 4: keep it very simple. I believe that there's room for
Speaker 4: digital gold, an asset that's an asset class that's digital
Speaker 4: store of value. Let's just stop right there, right, I
Speaker 4: think there's space for that. Do you think bitcoins half
Speaker 4: as good as good, a quarter is good, double as
Speaker 4: good as gold? Then you can kind of get an
Speaker 4: idea if now what, depending on what your belief is,
Speaker 4: you get idea of where you think it's gonna go.
Speaker 4: All right, I know gold can be turned into jewelry, right,
Speaker 4: but when you're fleeing a country you want to Yeah,
Speaker 4: you're gonna interrupt me.
Speaker 2: I am because if you charted bitcoin and gold, bitcoin
Speaker 2: makes gold look like a money market fundah in terms
Speaker 2: of the chart. So I thought that bitcoin for even
Speaker 2: boomers would be used as a Foamo cure. Like Look, Doug,
Speaker 2: I don't really care about this, Douglas Douglas. Sorry, we're
Speaker 2: good gonna happen. This might have taken me a couple
Speaker 2: of tries, Joel. I just know you as Doug. I
Speaker 2: don't know why, and we don't even know each other
Speaker 2: that well, but you're Doug to me, Doug. Okay, Douglas,
Speaker 2: it's my fault, Okay, I made this. Sorry, all right,
Speaker 2: So Douglas, listen. I I just don't want to kick
Speaker 2: myself in ten years, and let's just put two percent.
Speaker 2: Don't mess with my sixty forty. I like that. That's
Speaker 2: how I think they think. Yep. But the right the
Speaker 2: gold argument to me is a little more like, hey, Doug,
Speaker 2: put some gold in the fund, just because I want
Speaker 2: something that's non correlated, possible hedge. It's not always a hedge, no,
Speaker 2: but gold to me is much more stable.
Speaker 1: Yeah.
Speaker 2: It just seems like gold is an alternative and bitcoin's
Speaker 2: hot sauce and fomo cure.
Speaker 4: Well, two things can be true, right, They can cure
Speaker 4: their fomo and get access to an alternative aset class
Speaker 4: that's non correlated. I just compare it to gold because
Speaker 4: it's the best comp that I got. You know, sure,
Speaker 4: you're right, you know, look at those look at those
Speaker 4: performance charts. Then again, Bitcoin's only been around ten years,
Speaker 4: so comparing a ten year timeline to gold's ever existence,
Speaker 4: you know, is kind of a tough comparison. You've got
Speaker 4: technology imbued in this thing, the blockchain, you know, you
Speaker 4: got a lot. Yo is Saitochi Nakamoto hiding in a
Speaker 4: bush around the corner, and he's just gonna pop out
Speaker 4: and be like gotcha, and you know, boom, everyone's everyone's
Speaker 4: been suckered, Like it's in the back.
Speaker 2: Of everyone's mind. Let's not kid ourselves.
Speaker 4: But no, you know, I don't. I don't think that's
Speaker 4: the case here. But I think both of those things
Speaker 4: can be true. I think we can view it as
Speaker 4: a digital form of store of value. Yeah, that's the joke,
Speaker 4: like store of value, Like, look at that chart. How
Speaker 4: many eighty percent draw downs have I lived through all
Speaker 4: of it?
Speaker 2: Like all of them?
Speaker 4: Like, I think three at this point, if not more,
Speaker 4: you know, and then fifty or twenty percentowns unlimited? Is
Speaker 4: that something you know people look to when they say
Speaker 4: store of value And the answer is probably no. But
Speaker 4: do we get to something that's more steady state after
Speaker 4: we get to indoctrinating or a mass adoption. I don't
Speaker 4: think we've adopted, you know, to the degree that you know,
Speaker 4: gold or you know, your main stay asset classes have
Speaker 4: not even close to it.
Speaker 1: So now that we actually have legit products that you
Speaker 1: can you know, trade on on exchanges, how do you
Speaker 1: go about evaluating those options?
Speaker 2: Like which of those eleven we're going to do well
Speaker 2: in our portfolio?
Speaker 4: As we lean heavy on black Rock? Shout out, guys,
Speaker 4: I share it, and I'm agnostic, Like, if my client
Speaker 4: wants Vanguard over you know, black Rock.
Speaker 2: Well work in the scenario.
Speaker 4: No, but it would not, you know, apparently it's not
Speaker 4: mature of enough of an asset here.
Speaker 2: But we're hold on just quick background. So what we're
Speaker 2: referring to is Vanguard has a brokerage platform and they
Speaker 2: basically said we will not let the bitcoin ETFs trade
Speaker 2: on here, even though they do allow golditfs roll. Obviously,
Speaker 2: Vanguard doesn't love commodities in general because they don't have
Speaker 2: any actual like intrinsic value, But when it comes to gold,
Speaker 2: at least there's a use. They say, so Vanguard really
Speaker 2: and all the crypto people are triggered. They want to
Speaker 2: take their like, boycott Vanguard is trending, and I'm like, listen,
Speaker 2: you are not going to take down Vanguard. They get
Speaker 2: so crazy. But I don't, you know, I don't know
Speaker 2: why Vanguard. In my opinion, Vanguard's just trust their clients
Speaker 2: a little more sure. But they don't allow leverage either,
Speaker 2: so it's somewhat on brand. Vanguard's like a family friendly
Speaker 2: audience kind of thing.
Speaker 4: But I mean I made a joke at their expense
Speaker 4: because everybody was let's be honest, they got memed by me.
Speaker 4: But you know that that is the point, like at
Speaker 4: least they don't offer those triple leverage you know, or
Speaker 4: triple long, triple short or whatever, you know, typer whisky stuff,
Speaker 4: so that remains on brand for them. I could it,
Speaker 4: and you know, and the Bitcoin iss would be like
Speaker 4: long term, this is a terrible move. You know, well
Speaker 4: if their clients aren't demanding it, first of all, like
Speaker 4: their clients can you know, buy this in another brokerage account.
Speaker 4: I mean, the sensitivity around you know, Bitcoin Maximalist is
Speaker 4: super high, and I don't fancy much.
Speaker 2: It's also isn't there some irony in them getting pissed
Speaker 2: off about Vanguard? Because hey, we're supposed to be outside
Speaker 2: of the system. It's a currency outside of the system.
Speaker 2: And now we're pissed off that someone like the literally
Speaker 2: the largest asset manager in the United States won't accept us.
Speaker 2: Isn't that kind of Isn't there a a inconsistency there?
Speaker 4: Well, there's irony that black Rock has the biggest one,
Speaker 4: you know, and then the second biggest you know, or
Speaker 4: first because you know the day of the week. It
Speaker 4: just shows you how new this all is and how
Speaker 4: people are figuring it all out.
Speaker 2: I'm not sure there's a lot of.
Speaker 4: Smart minds at these institutions. But the thing about bitcoin
Speaker 4: and crypto is you said it, how many smart minds
Speaker 4: are now existing outside of this. If you're a bitcoin maximalist,
Speaker 4: you're probably pissed off and etf exists in the first place.
Speaker 4: Like that is not the spirit of what a decentralized
Speaker 4: currency called bitcoin is supposed to be.
Speaker 2: I mean, it.
Speaker 4: Literally was forged in the Occupy Wall Street days, like
Speaker 4: fight the banks.
Speaker 2: Yeah, it seems like like when I'm uh like like back,
Speaker 2: like you know, twenty years ago when rock band started
Speaker 2: selling their songs to commercials, like you saw like a
Speaker 2: led Zeppelin song on a four truck and it pissed
Speaker 2: people off. Yeah, it's the same vibe, you know. It's like,
Speaker 2: but I think you know, there's also the number go up.
Speaker 2: It's helpful for that so I can Sometimes there's there's
Speaker 2: pure number go up people, but then there's more like
Speaker 2: I'm in it for the religion and I can see
Speaker 2: and then some people have both inside of them and
Speaker 2: there's they're so tribal.
Speaker 4: We're so tribal in everything now, Like you either are
Speaker 4: a maximalist or you're a Wall Street suit. And I'm
Speaker 4: wearing a suit today and I'm an og bitcoin guy. Yeah,
Speaker 4: but not a max.
Speaker 2: They call me a suit and a boomer and I'm
Speaker 2: gen X and I rarely wear suits only on the
Speaker 2: TV show and it's our gray hair. They're calling me
Speaker 2: a boomer. Now, well, my kid calls anybody over the
Speaker 2: age of like seventeen boomer one hundred percent.
Speaker 1: Yeah, So back to nuts and bolts of like how
Speaker 1: you actually bring this into a portfolio for clients, Like
Speaker 1: what is this displacing in your client's portfolio?
Speaker 4: It's replacing large cap equities and developed international. So if
Speaker 4: you wanted a five percent allocation. The first trade we
Speaker 4: made unsolicited boomer client calling up, I want five percent
Speaker 4: exposure in my sixty to forty portfolio.
Speaker 2: Literally that so that happened. That happened. Nice that happened.
Speaker 2: And I saw that. Did theave request the actual tick
Speaker 2: or two or just you pick it.
Speaker 4: I guided them through like what we're thinking, and bit
Speaker 4: Wise was a firm that you know, it actually broke
Speaker 4: away from our bias towards I shares. I like what
Speaker 4: Bitwise was doing. I think their CEO is fantastic, you know.
Speaker 4: I think they're competing very nicely on fees, and I
Speaker 4: love the fact that they're giving money to developers as well.
Speaker 2: Great story there, h And that.
Speaker 4: Was the trade and we put that in the portfolio.
Speaker 4: Three percent came out of IVV and two percent came
Speaker 4: out of EFA.
Speaker 2: Wow, that is dude, this is win fascinating.
Speaker 1: Stuff went from like super safe to just like full on.
Speaker 4: Yeah, but five percent you know, yeah, alt also in
Speaker 4: a portfolio that doesn't have alts. I mean, really, is
Speaker 4: that is that big?
Speaker 2: Is that a big deal? Two things on this adding
Speaker 2: a couple things sixty forty. Everybody loves it, love it.
Speaker 2: That said, I have to explain to crypto people why
Speaker 2: people love it. They're like, why would you even use
Speaker 2: thocks and bonds? I'm like, are you kidding me? Anyway,
Speaker 2: they're all in. They can't even understand a sixty forty.
Speaker 2: But for a normal person, yeah, a sixty forty, low
Speaker 2: cost Vanguardian style portfolio, in my opinion, is actually super
Speaker 2: beneficial for the behavioral stomach you need for a product
Speaker 2: like this. Because Bitcoin goes up down a lot. Let's
Speaker 2: say it goes down fifty percent in a year, you
Speaker 2: don't need to panic that much because it's not your core.
Speaker 2: It's not what your whole thing is on. Yeah, that
Speaker 2: was two and a half percent drag right there. Whereas
Speaker 2: back in the day you would buy a hot portfolio
Speaker 2: manager and then when they started going down, you panic
Speaker 2: because that's your kid college money, and you'd jump into
Speaker 2: the next one and the behavior will be awful. Now,
Speaker 2: I think Vanguard really helps solve behavior, not only for
Speaker 2: the sixty forty because they never leave there, but for
Speaker 2: the hot sauce too. It's way easier to behave when
Speaker 2: you've got that really good deal and you're secure in it,
Speaker 2: So in a way, I think the sixty forty helps
Speaker 2: hang in there for an older investor. These crypto people
Speaker 2: they're gonna hang in regardless, But for the older people
Speaker 2: just seems like the sixty forty well helps. You're taking it.
Speaker 4: Out of equities, not their fixed incomposition. So you could
Speaker 4: have been more extreme. I guess with your five percent
Speaker 4: take into a bitcoin ETF, you could have taken out
Speaker 4: of intermediate or long duration ponds and then like, hey,
Speaker 4: we're going going from the soft stuff to the hard
Speaker 4: stuff real quick here, right, But like you know, your
Speaker 4: two biggest positions on the equity side in a sixty
Speaker 4: forty or eighty twenty is the international piece and most
Speaker 4: most of all the large cap equity piece.
Speaker 1: But is that a conversation that the the fact that
Speaker 1: these are now ETFs enabled, right, because you wouldn't have
Speaker 1: had this same conversation with this investor if they if.
Speaker 4: You hold the phone, there's a thin line there, right,
Speaker 4: Like again stressing the word education, right, So I fortunately
Speaker 4: had the knowledge base and the experience in my own
Speaker 4: dealings with bitcoin and being an early adopter to provide
Speaker 4: a level of education to my clients. You have, in
Speaker 4: my mind that duty to explain how if client calls
Speaker 4: you up and wants to know about something that you
Speaker 4: know about. You know, you're not out there saying yeah, yeah, yeah,
Speaker 4: you gotta sell ten percent of your portfolio right now
Speaker 4: and open a coin base account, get that money over
Speaker 4: there and buy some bitcoin. I mean, that's not a
Speaker 4: good day from a compliance standpoint. That that puts you
Speaker 4: in hot water. But when clients are saying, how do
Speaker 4: I do this? I'm going to do this and I
Speaker 4: don't want to mess it up, and you have the
Speaker 4: ability to educate them on how to do it, you
Speaker 4: do it that. That's your job. You build value that way,
Speaker 4: even if it comes at the expense of your own
Speaker 4: portfolios that you're managing for your client. So that interesting
Speaker 4: line of oh man, I love bitcoin, let's get the
Speaker 4: clients in it too. Let me make sure you know
Speaker 4: what you're doing. Let me make sure you understand everything
Speaker 4: there is to know about this and the risk you're taking.
Speaker 4: We can go deeper than that. Let's understand what this
Speaker 4: risk means to your financial planning. Because I'm not sitting
Speaker 4: here as an investment advisor extraordinaire. I'm sitting here as
Speaker 4: a financial planner extraordinaire. We lead all our relationships and
Speaker 4: conversations with financial planning, not the investment management piece. This
Speaker 4: almost comes last.
Speaker 2: Now in terms of advisors, I know there's sensitivity to
Speaker 2: not wanting to have a nasty phone call from a
Speaker 2: client down the road. So I think, you know, we
Speaker 2: used to have this phrase like I shares and Vanguard
Speaker 2: ETFs are like the new IBM. You can't be funny.
Speaker 2: You can't get fired for buying IBM. This is in
Speaker 2: the eighties. You can't really get fired for buying a
Speaker 2: Vanguard and black Rock ETF. I guess I am a
Speaker 2: boomer for now, but that but that generally applied to
Speaker 2: stocks and bonds right and low cost is do you
Speaker 2: worry at all that let's say there's some I don't know,
Speaker 2: a black swan event with crypto another FTX it goes down.
Speaker 2: How worried are you that you're going to get the
Speaker 2: angry phone call? Or do you have that deep of
Speaker 2: a conversation with beforehand that you almost eliminate that.
Speaker 4: Twofold You have that conversation, I think you make it
Speaker 4: very clear what those drawdowns have looked like. And I
Speaker 4: bring my own experience into that. You know, mining bitcoin
Speaker 4: when it was four hundred, seeing it go to twenty
Speaker 4: thousand down to three up to fifty nine, sixty nine
Speaker 4: thousand down to twenty or seventeen and now or what
Speaker 4: forty two today? Oh my god, I mean I'm playing
Speaker 4: with Yeah, I'm playing with house money.
Speaker 2: Hold on, No in your portfolio though, I'm assuming you
Speaker 2: have a sixty forty base something like that.
Speaker 4: For me, it's eighty twenty. So for the younger clients,
Speaker 4: just crank up that sixty forty to eighty one.
Speaker 2: Let me ask you this. Let's say you were all
Speaker 2: in on crypto. Could you have stomached that?
Speaker 4: No?
Speaker 2: Okay, so do you sort of explain to them, Look,
Speaker 2: we're only going to put a little in here, like, yeah,
Speaker 2: you'll live.
Speaker 4: I don't believe in concentratet Yeah, outside of your main
Speaker 4: state ETFs like IVV or SMP five hundred, and you
Speaker 4: know what's part of the portfolios. We have conversations around
Speaker 4: clients like what do you do with concentration risk of
Speaker 4: your own company stock? Clients that work at Netflix or
Speaker 4: Amazon or your fangs or Fancy seven whatever, Magnificent seven whatever, Fancy.
Speaker 2: Seven, Fancy five. So I like super seven. He likes
Speaker 2: Magnificent seven. I don't like any of it.
Speaker 4: Okay, but what do you do for you know, your
Speaker 4: Roku client, you know, got a grant and forty percent
Speaker 4: of their net worth is made up of you know
Speaker 4: RSUs that invested. You know, I'm not a fan of that.
Speaker 4: I kind of draw a hard line at twenty percent.
Speaker 4: I don't like seeing more than twenty percent of any
Speaker 4: asset outside of your home, you know, being in your portfolio,
Speaker 4: unless it's the S and P five hundred or you know,
Speaker 4: your your international develops core fund.
Speaker 2: And sorry, and the older investors who come to you
Speaker 2: and want this exposure, how do they hear about it?
Speaker 2: Was it reading about the bigcoin ETF launch? Was it
Speaker 2: knowing about it from maybe their kids? Or like what
Speaker 2: than that they should like maybe now call you all
Speaker 2: of the above.
Speaker 4: I mean again, if you've been a client of mine
Speaker 4: for a long time, you know my story with it.
Speaker 4: I've written about it. You know my experience, my journey,
Speaker 4: what it means. I mean, I remember in twenty seventeen
Speaker 4: writing a piece for mainstream financial media titled one Bit
Speaker 4: one in Financial Advisor's Bitcoin Journey. I mean, I didn't
Speaker 4: know of any other financial advisors who you know, bought
Speaker 4: a bitcoin minor with their buddy in twenty thirteen did
Speaker 4: this and had held the entire time like I forgot
Speaker 4: about it. And then twenty yeah, I remember friends calling
Speaker 4: me up and be like, hey, don't you have this
Speaker 4: stuff like congratulating me. I was like, it's weird, Like should.
Speaker 2: I get them? Like I can't talk about that, you know,
Speaker 2: not enough to retire, but you know, and you brought
Speaker 2: up an interesting point all that, you know, how do
Speaker 2: I deal with it?
Speaker 4: This is an outsized position, you know. And I'll get
Speaker 4: a little personal here, like we got lucky. You know,
Speaker 4: my wife and I made a really interesting decision back
Speaker 4: when we had no money to go on a little
Speaker 4: adventure with a friend, paid three thousand dollars for a
Speaker 4: Bitcoin minor uh to get some get some of the
Speaker 4: space money out of the internet, Internet space, internet space,
Speaker 4: funny money in space. So you know, I won't reveal
Speaker 4: how much that is obviously, but it turns into you know,
Speaker 4: something that will compare that to like our four you know,
Speaker 4: our four one k or like you know, retirement savior.
Speaker 4: I mean, how do you how do you think about
Speaker 4: that as an interesting well.
Speaker 2: How much of the performance made you a believer versus
Speaker 2: the story well, that's a great question. I mean, seeing
Speaker 2: that I've.
Speaker 4: Held with it, you know, going from multiple six figures
Speaker 4: back down to five figures, if not lower. I believe
Speaker 4: in it. I can tell you that with that, there's conviction. Okay,
Speaker 4: I have conviction more than I am.
Speaker 2: Price go up. This is great for my pocket. But
Speaker 2: you'd be.
Speaker 4: Crazy to think that, Like I'm gonna sit here before
Speaker 4: you and not say yay, price go up, which which
Speaker 4: is kind of the interesting position I find myself in.
Speaker 4: Like we talked about tribes, you're either you know, Bitcoin
Speaker 4: maximalist or Wall Street you know shark, you know fat cat.
Speaker 2: Soon Yeah, I'm both. I'm both.
Speaker 4: Like I want price up, Like, let's get that. Let's
Speaker 4: get the ETF, Let's get the have an ing, Let's
Speaker 4: get this, you know, supply shock. Let's get this demand
Speaker 4: from the ETF. Let's watch number go up. You know,
Speaker 4: I'd like to retire, you know earlier you're kidding yourself.
Speaker 4: But at the same time, you go back, take a
Speaker 4: look at the technology and what this can provide people.
Speaker 4: You know, I take a page from the maximalist playbook.
Speaker 4: You love to see it, you do love to see it.
Speaker 4: Two things gonna I don't think DeFi.
Speaker 2: Can exist without traditional finance.
Speaker 4: I think it's a symbiotic relationship. So if you're trying
Speaker 4: to like go one or the other, oh, you want
Speaker 4: the the people calling for the end of traditional finance
Speaker 4: and the fat and then like, what are you gonna
Speaker 4: do climb to the top of garbage Mountain to get
Speaker 4: a cell phone signal so you can like send someone bitcoin.
Speaker 4: It doesn't work like that. You can have the end
Speaker 4: of the world end bitcoin.
Speaker 2: Okay. So you're out there looking at the Internet, you're
Speaker 2: watching stuff, and you've got Jamie Diamond on one hand, yeah,
Speaker 2: pet Rock. Then you got Larry Fink out there literally
Speaker 2: telling a reporter, well, you know, if you don't trust
Speaker 2: your government, and that's sort of him like totally orange pilled,
Speaker 2: explaining it from the mindset of a total maximalist, and
Speaker 2: it's like making heads explode on both sides. My head's
Speaker 2: explodes hearing these guys. These are very influential people to
Speaker 2: advisors and boomers. Of course, how do you square that?
Speaker 2: Like do they ever come to you and say, like,
Speaker 2: is Jamie Diamond more right than Larry Fink? What's going
Speaker 2: on here?
Speaker 4: I don't know if my clients are getting into you know, CEO,
Speaker 4: institutional financial institution CEO, you know, battles and what they're
Speaker 4: saying there I few and far between. I guess my
Speaker 4: clients you work in finance, you know, can have an
Speaker 4: intelligent conversation with me or bring it.
Speaker 2: Up, but I'll agree with you.
Speaker 4: That's pretty wild to see the dichotomy between Larry and Jamie.
Speaker 4: You know, what are their incentives is the first question
Speaker 4: that I have. Well, Larry has an ETF, you know,
Speaker 4: and the more flows into that bad boy, the better
Speaker 4: for black Rock. I mean, it's pretty simple.
Speaker 2: I get that that part. I get.
Speaker 4: Like Larry's easy to understand going out there and saying
Speaker 4: if you don't trust your government, I mean it's factual.
Speaker 2: If you don't trust your government, by.
Speaker 4: The way, then you want to go buy bitcoin itself
Speaker 4: and stick it on the Ledger, right you don't.
Speaker 2: Like Yeah, Larry like it. It's fascinating. Yeah, Like Larry, we.
Speaker 4: Had to take a page out of the Maximalist or
Speaker 4: the Real Bitcoin or playbook here, but it's not going
Speaker 4: to be in your product if that's the case.
Speaker 2: One question I get a lot from the crypto people
Speaker 2: on Twitter is why just not have your own walth.
Speaker 2: So as an advisor, can you explain why not just
Speaker 2: do your own col Yes?
Speaker 4: Yes, yes, this I think is the biggest point of
Speaker 4: all of it and crazy that I didn't get here,
Speaker 4: and I'm glad you brought it up.
Speaker 2: People.
Speaker 4: I think bigcoiners and crypto fanboys and girls underestimate.
Speaker 2: How lazy people are.
Speaker 4: Sure, you know, guys, you know what did we learn at?
Speaker 4: I did the whole NFT thing as well, and let's
Speaker 4: go there for one quick second. I remember my wife
Speaker 4: was like, what are you doing. I'm like, oh, I'm
Speaker 4: checking out the hype around these NFTs. You know, you
Speaker 4: had to get money onto in exchange to buy ethereum
Speaker 4: and the we're moving away from bitcoin here to buy
Speaker 4: ethereum to get it to a MetaMask squallet to go
Speaker 4: buy a pixelated frog on you know, Open Sea to
Speaker 4: then you know, show it to your friends on your phone.
Speaker 4: I said, honey, let's see if you can figure this out,
Speaker 4: like I want you to go buy a boss beauty
Speaker 4: or whatever. She was into and you know, over her shoulder. Shit,
Speaker 4: she turned her after doing it all, she turned around
Speaker 4: and looked at me and said, there's not a single
Speaker 4: friend that I have that would ever in their mind
Speaker 4: do what I just did sure to make this happen.
Speaker 4: And that's probably the most complex like series of transactions. Now,
Speaker 4: like scale it down to just opening an account on coinbase,
Speaker 4: getting money from your bank account to coinbase, and placing
Speaker 4: an order for the first time on a trustless system.
Speaker 2: Guys, people don't want to do that. They just don't
Speaker 2: want to do that. Yeah, theyource it, Yeah they don't
Speaker 2: want to do it. What do they know?
Speaker 4: Like I love blockchain technology, I love web three. It
Speaker 4: is not easy to get involved unless you have a
Speaker 4: high degree of acumen when it comes to technology and
Speaker 4: these types of things. That's such a small piece, you know,
Speaker 4: of the population. But what can most people do? Log
Speaker 4: into their brokerage account and place a trade for an
Speaker 4: ETF super easy. People love that. They love that, and
Speaker 4: that's why this product exists, so people can do that
Speaker 4: and for institutions to make money.
Speaker 1: Are you are you ready for the moment that there's
Speaker 1: going to be potentially more ETFs and more crypto products
Speaker 1: on regular normal exchanges or are you gonna gonna kind
Speaker 1: of just draw the line at the bitcoin stuff, or
Speaker 1: are you gonna try and.
Speaker 2: This should be bitcoin in ethereum. I think you know
Speaker 2: you're two.
Speaker 1: And that's it.
Speaker 4: Yeah, yeah, I can't quite go that. I don't know
Speaker 4: enough about others. If you're like a cardono person or
Speaker 4: a ripple person, or like coins your thing, or you're like,
Speaker 4: can you imagine, Hey, honey, I bought some doge coin
Speaker 4: you know ETF today? Oh great, our allocation looks wonderful.
Speaker 4: I I don't know.
Speaker 2: I don't know. Love you dogecoin people. I hope everyone
Speaker 2: makes money. I truly do. I'm a I'm a good
Speaker 2: guy here. I don't know.
Speaker 4: It doesn't work like that, but yeah, I think you'll
Speaker 4: see ethereum next. I think there's some real use cases
Speaker 4: that will pop up there. I think, you know, NFTs,
Speaker 4: weren't it as far as showing the world that proof
Speaker 4: of work and you know, digital signatures on you know
Speaker 4: stuff is going to be very powerful.
Speaker 2: So we've got these newborn nine ETFs and GBTC. Gbtc's bleeding,
Speaker 2: the newborn nine taking in money. Let's just say over
Speaker 2: the next couple months they even out at about twenty
Speaker 2: five thirty billion. Now we'll call that the starting line,
Speaker 2: because all that unlock will be done and we'll be
Speaker 2: ready to start just inflows. Mostly where do you see
Speaker 2: this going?
Speaker 3: Like?
Speaker 2: How big does this get? Just for context, gold ETFs
Speaker 2: have one hundred billion dollars that's one percent of all
Speaker 2: ETF assets. So let's say we're at thirty billion in
Speaker 2: the summer. Yeah, where do you see this in five
Speaker 2: ten years? Like you think it'll bypass gold? Be about
Speaker 2: gold less than gold, slightly pass gold?
Speaker 4: Okay, I think my conservative case is it's as good
Speaker 4: as gold. My aggressive case is it's multiples better than gold,
Speaker 4: but not like a hundred times better than gold. Come on,
Speaker 4: let's be easy with that.
Speaker 2: So what's the market cap of gold?
Speaker 3: What?
Speaker 2: Ten trillion? So yeah, gold? But also interesting going outside
Speaker 2: the ETFs now, yeah, so if you go more than gold,
Speaker 2: we'll say one hundred and fifty billion, that would put
Speaker 2: it at two percent of all ETF assets, which is
Speaker 2: you know, again that's healthy.
Speaker 4: It's an aggressive that's my aggressive, more aggressive case.
Speaker 2: The also interesting thing is just one more future gold
Speaker 2: ETFs only own one point five percent of the gold
Speaker 2: above ground something like that. Yeah, gold ETF I mean
Speaker 2: bitcoin ETFs already own like four percent of bitcoin. If
Speaker 2: you go to Goldian levels, you get to ten, fifteen,
Speaker 2: twenty percent. How it's interesting what do you make of that? Like,
Speaker 2: is it possible the ETFs eat up the market a
Speaker 2: little too much and then there's like a lot more
Speaker 2: volatility because there's less actual traders.
Speaker 4: I mean, I'll put my you know, tinfoil hat on
Speaker 4: here and say, you know, you've got institutions getting involved.
Speaker 4: I mean they're they're gobbling you know, what was it
Speaker 4: this morning? How what does black Rock have in uh
Speaker 4: fifty thousand bitcoin supporting their ETF right now? I mean,
Speaker 4: you put enough bitcoin in the hands of institutions. I mean,
Speaker 4: take a look at the gold ETF and what happened,
Speaker 4: you know, in the year's leading of that. Can they manipulate?
Speaker 4: Can they move? Can they shift their weight around? Can
Speaker 4: they body some things? And I think the answer is yeah.
Speaker 4: But look at who's selling their bitcoin out of bitcoin holders.
Speaker 4: Guys like me are not you know, going to touch
Speaker 4: this forever, and that supply is going to be eventually,
Speaker 4: I think it's going to get hard to tap.
Speaker 1: We've managed to go almost full bitcoin in this segment,
Speaker 1: so I want to bring it back. Imagine a client
Speaker 1: comes to you and says do not use the word
Speaker 1: bitcoin or crypto in the conversation with me. What are
Speaker 1: you going to have? What kind of conversation you're going
Speaker 1: to have with them about what's happening in the world
Speaker 1: in markets and portfolio construction.
Speaker 2: And that's ninety nine percent of my conversations right now.
Speaker 2: It's like the cooin and crypto is not being used here.
Speaker 4: You know, again, it's a lot of self selection. You've
Speaker 4: got clients who have already come in. It's a younger base,
Speaker 4: they're informed. I don't have to you know, they've already
Speaker 4: educated themselves or we've had the conversation around what this
Speaker 4: is and what they should do.
Speaker 1: So your answer is go find a different financial advisor.
Speaker 4: No, if they don't want to talk about it, we're
Speaker 4: not going to talk about it. I'm not here to
Speaker 4: put any product down any client's throat at any time.
Speaker 4: I think if I start doing that, regardless of the product,
Speaker 4: I'm not doing my job.
Speaker 2: Do you get clients who get jealous of the cues
Speaker 2: unless say, the whole S and P five hundred and
Speaker 2: the cues are like double Do they ever go, hey,
Speaker 2: why aren't we buy that instead?
Speaker 4: No? That also doesn't come up The beautiful part of
Speaker 4: leading with financial planning is that you give people an
Speaker 4: understanding of how they get to their goals, what rates
Speaker 4: of return they need, the levels of risk that they're
Speaker 4: going to take to achieve those rates of return, and
Speaker 4: then they get back to their very busy lives. All right,
Speaker 4: we love talking about this. You know, go talk to
Speaker 4: your friends who don't work in finance, who have you know,
Speaker 4: a couple of kids, maybe three kids, and you go
Speaker 4: try and have the level of conversa even a fraction
Speaker 4: of the level of conversation not gonna happen. You're gonna
Speaker 4: talk about football, You're gonn talk about the kids and
Speaker 4: their school or whatever. It's just not gonna happen. Boomers, however,
Speaker 4: they get to read. They got a lot of time
Speaker 4: on their hands, especially if they're retired. Yeah, you know,
Speaker 4: so maybe you'll get a few more inquiries from them
Speaker 4: around this ETF. But for my clients, they know where
Speaker 4: I stand. They're pretty savvy. I think they've already you know,
Speaker 4: the ones I expect to have exposure already have exposure,
Speaker 4: which is interesting.
Speaker 1: Final question, what is your favorite ETF ticker?
Speaker 2: Oh? Right now, it's QQQ. Oh you mean like what's
Speaker 2: my favorite life for like a novelty ticker like forget investments. Yeah, yeah, yeah,
Speaker 2: I understood.
Speaker 1: That, but also tell I like the q's answered.
Speaker 2: Yeah, as far as like what's hot, yeah that, but
Speaker 2: as far as like what's my favorite people love ETF tickers,
Speaker 2: so we just try to end on a on a
Speaker 2: sort of god, I don't care it's but for a
Speaker 2: vanity plate. Wasn't there Nerd out there?
Speaker 3: Yeah?
Speaker 2: Yeah, that's good. That one that was one of the
Speaker 2: best answers. Yeah, that's a video game ETF toool that
Speaker 2: is now defunct. Yeah, I think that's.
Speaker 4: Whether it is or it Isn't you know that one
Speaker 4: was cast off some hats with Nerd on it.
Speaker 2: By the way, did you notice that there's only two
Speaker 2: ETFs and bitcoin ETFs that have like Q tickers total
Speaker 2: and b R r R. The rest I thought were
Speaker 2: sober on purpose because you could have fun with tickers here.
Speaker 2: But I thought they were sober fidelity black rock because
Speaker 2: they want to.
Speaker 4: Yeah that's a hedge against like this goes awry and
Speaker 4: like they even named it like hot.
Speaker 2: Or also the bitcoin's crazy enough, you don't need to
Speaker 2: add the ticker on top.
Speaker 4: I mean, have you have you met Black Rock's compliance department?
Speaker 4: How many lawyers are there?
Speaker 1: Yeah?
Speaker 2: Do you see there? The they the videos and like
Speaker 2: the way they're presenting it. It's so fascinating showing like
Speaker 2: Blackrock marketing to the crypto crowd. You know, they're like,
Speaker 2: oh my god, this makes one of fall asleep. But
Speaker 2: they're like, hey, wait, guys, this is how you talk
Speaker 2: to old people. And it's just funny them talking amongst
Speaker 2: themselves about these like older people like getting into their business,
Speaker 2: and it's such a clash of cultures. I find it
Speaker 2: endlessly fascinating. I went to a Black Rock influencer day.
Speaker 4: They got a bunch of you know, Twitter accounts and
Speaker 4: TikTok accounts, that's all together. They were debuting their lifestyle
Speaker 4: target date. ETFs invited us all down to the exchange
Speaker 4: to a bell ceremony, and I remember, I'm now in
Speaker 4: black rocks new headquarters and everybody that was I mean,
Speaker 4: we're weeks months out from this was maybe a couple
Speaker 4: months ago, and all I wanted to ask people was
Speaker 4: about the Bitcoin ETF. It was lock and key, like
Speaker 4: we cannot will not talk about it. Almost with like us,
Speaker 4: I could almost sense the smirk behind it, because they,
Speaker 4: like someone, knew it was coming, and it came.
Speaker 1: Doug let'spen a past. Thanks for joining us in.
Speaker 3: Trillions, Thank you for having me, Thanks for listening to
Speaker 3: Trillions until next time.
Speaker 1: You can find us on the Bloomberg Terminal, Bloomberg dot com,
Speaker 1: Apple Podcasts, Spotify, or wherever else you'd like to listen.
Speaker 1: We'd love to hear from you. We're on Twitter. I'm
Speaker 1: at Joel Webber Show. He's at Eric Baulchunis. This episode
Speaker 1: of Trillions was produced by Magnus Hendrickson. Bye