WEBVTT - Tour de Headlines: A Roundtable About Recent ETF Stories of Note 0:00:05.600 --> 0:00:06.360 Bulcan Intrilliance. 0:00:06.360 --> 0:00:11.520 I'm Joel Webber and I'm Eric Belchunas. 0:00:11.680 --> 0:00:16.400 So, Eric, it's August. We've been desperate to find guests 0:00:16.440 --> 0:00:20.600 to uh to join us on the podcast, and then 0:00:20.720 --> 0:00:23.520 somebody got a new job, Dave Nadig, and we were like, 0:00:23.520 --> 0:00:25.960 you know what, he's gonna go to ETF dot com. 0:00:26.000 --> 0:00:28.880 We should bring the competition on the podcast. Let him 0:00:29.000 --> 0:00:32.560 promote himself a little bit, kick some themes around. Also, 0:00:32.640 --> 0:00:36.360 get somebody who works for you who can't say no, Athanasia, 0:00:36.479 --> 0:00:39.720 Sarah Fagas, and and basically we'll run through some headlines. 0:00:39.880 --> 0:00:40.720 How does that sound? 0:00:41.159 --> 0:00:42.040 That sounds good to me? 0:00:42.240 --> 0:00:45.440 Okay, so I gave it all away already, but we're 0:00:45.479 --> 0:00:50.600 gonna have Athanasio, Sarah Fegas of Bloomberg Intelligence, and Dave Nadik, 0:00:50.640 --> 0:00:53.720 who's now the president and director of research of ETF 0:00:53.760 --> 0:00:56.600 dot com, a site that no doubt he's gonna tell 0:00:56.680 --> 0:01:00.880 us all about because he's been there for multiple jobs 0:01:00.920 --> 0:01:03.880 through the years. But Eric, the biggest thing is that 0:01:03.920 --> 0:01:06.400 there's been a ton of the interesting headlines about ETFs 0:01:06.400 --> 0:01:06.720 su late. 0:01:07.720 --> 0:01:11.080 Yeah, Bloomberg News has been on fire. And not to 0:01:11.080 --> 0:01:13.959 pat ourselves on the back, but so is bi and 0:01:14.080 --> 0:01:16.600 there's a lot of things to just go through. So 0:01:16.840 --> 0:01:19.360 we had all these ideas for topics, but there's no 0:01:19.440 --> 0:01:22.039 way they would take three months to do separately. So 0:01:22.040 --> 0:01:24.920 we're gonna cram a lot of the recent news activity 0:01:24.920 --> 0:01:27.959 into sort of one of our McLachlin group type episodes 0:01:27.959 --> 0:01:30.880 where we or maybe a ESPN first take would be 0:01:30.880 --> 0:01:33.280 a more modern example, but where we just roundtable these 0:01:33.319 --> 0:01:36.840 things and just real quick. Jow, I go, I gotta 0:01:36.880 --> 0:01:38.319 say something. I think we've been doing this for like 0:01:38.360 --> 0:01:41.920 ten years. ETFs this year are on pace to take 0:01:41.959 --> 0:01:44.520 into trillion dollars for the second year in a row. 0:01:45.319 --> 0:01:48.360 And I put out on X earlier that the name 0:01:48.440 --> 0:01:51.800 of this podcast has aged very well, so good job 0:01:51.840 --> 0:01:54.440 you picked it. I wanted to call it data mail line, 0:01:54.840 --> 0:01:57.480 and I'm glad we want with trillions. 0:01:57.560 --> 0:02:04.360 YEP, I will take credit for that. It's time on 0:02:04.400 --> 0:02:10.720 Trillions Roundtable. Athanasios, Dave, welcome back to Trillions. 0:02:11.160 --> 0:02:11.920 Thanks for having me. 0:02:12.240 --> 0:02:14.320 Thanks, even though I couldn't say no, glad to be back, 0:02:16.480 --> 0:02:17.160 that's true, h. 0:02:18.080 --> 0:02:19.480 Dave, congrats on the new role. 0:02:19.800 --> 0:02:21.480 Thank you very much. It does feel a little bit 0:02:21.600 --> 0:02:23.800 like a like a return. I left as CEO and 0:02:23.800 --> 0:02:27.160 I'm back as president. So you know, nothing nothing changes 0:02:27.200 --> 0:02:28.000 but stays the same. 0:02:28.520 --> 0:02:31.480 Is that is that better or different or what? Yeah? 0:02:31.600 --> 0:02:34.960 Like, what's better is that? The better is that the 0:02:35.000 --> 0:02:37.079 new CEO is Matt Middleton, who you may know from 0:02:37.120 --> 0:02:40.320 running the future Proof conference series, who really knows what 0:02:40.360 --> 0:02:42.720 he's doing when it comes to making big events that 0:02:43.200 --> 0:02:45.120 move the needle. And that's what we're gonna do. We're 0:02:45.160 --> 0:02:47.440 gonna do a lot of multimedia content. We're gonna build 0:02:47.919 --> 0:02:50.880 content around ETFs people can trust, like some people may 0:02:50.880 --> 0:02:53.359 be around this table, and we're gonna put on a 0:02:53.360 --> 0:02:55.519 big event. That's what we're gonna do. It's gonna be fun. 0:02:55.960 --> 0:02:59.040 Yeah, Joel, let me just chime in here, because you know, 0:02:59.200 --> 0:03:01.040 one of the reasons I got excited about ATS was 0:03:01.120 --> 0:03:04.520 Dave Nating and Matt Hogan had a podcast when they 0:03:04.520 --> 0:03:07.119 were on Index when they called it Index Universe, which 0:03:07.200 --> 0:03:11.720 was later named ETF dot com. So Dave, honestly like 0:03:12.280 --> 0:03:15.760 this is like twenty years ago, founded this website and 0:03:15.800 --> 0:03:19.640 then they went to ETF dot com. And then people 0:03:19.680 --> 0:03:22.919 started to slowly like disperse, you know, and they went 0:03:22.960 --> 0:03:26.960 to ETF, Isshoers, other media companies, Crypto, you name it, 0:03:27.600 --> 0:03:31.320 and ETF dot com you know, carried on, but you know, 0:03:31.400 --> 0:03:33.760 and there's some good stories now and then, but it's 0:03:34.000 --> 0:03:37.080 it's not nearly the magnet it was. And so to me, 0:03:37.200 --> 0:03:40.280 this is like Steve Jobs returning to Apple, maybe on 0:03:40.320 --> 0:03:44.880 a smaller scale, but similar situation here. So the pressure 0:03:44.920 --> 0:03:48.640 is on Dave to come up with the iPod, the iPhone. 0:03:48.920 --> 0:03:50.240 His third act better be good. 0:03:51.360 --> 0:03:53.640 I'll be sure. I'll do my best. But look, the 0:03:53.640 --> 0:03:56.800 ETF industry has changed. I think the the url that 0:03:56.920 --> 0:04:00.160 is etf dot com can mean something different now than 0:04:00.160 --> 0:04:02.080 it did twenty years ago, right, I think. I think 0:04:02.160 --> 0:04:04.000 we've got and we're going to talk about it. We've 0:04:04.040 --> 0:04:07.280 got over forty six hundred ETFs now, back then we 0:04:07.320 --> 0:04:09.680 had four hundred and fifty. It's a different world, so 0:04:09.720 --> 0:04:12.400 we'll make a different website, all right. 0:04:12.440 --> 0:04:14.160 So we've got a handful of themes that we're going 0:04:14.240 --> 0:04:16.680 to talk about. The first one that I want to 0:04:16.680 --> 0:04:21.320 start with is a headline from Vildanna Hirich that really 0:04:21.560 --> 0:04:25.400 made me sit up new this week. There are now 0:04:25.640 --> 0:04:30.880 more ETFs in the United States than there are individual stocks. 0:04:31.360 --> 0:04:33.440 So the number that she has in the story, there 0:04:33.440 --> 0:04:38.000 are forty three hundred exchange traded funds versus forty two 0:04:38.160 --> 0:04:44.400 hundred stocks. Ethan, Yeah, I mean, I guess what do 0:04:44.440 --> 0:04:45.560 you what do you think of that? 0:04:45.920 --> 0:04:49.000 It's yeah, definitely mind blowing, but I guess it was 0:04:49.400 --> 0:04:51.279 if you just kind of look at the nature of 0:04:51.360 --> 0:04:53.760 the stuff that's being brought out now, so like it's 0:04:53.760 --> 0:04:56.320 a lot of single stock stuff. So you have like Tesla, 0:04:56.640 --> 0:04:59.920 then you have so many ETFs like long own like 0:05:00.080 --> 0:05:02.960 long Tesla, then short Tesla, then option income Tesla, so 0:05:03.160 --> 0:05:06.200 on one ticker you have like twenty ETFs that are 0:05:06.200 --> 0:05:10.200 being launched. So I guess it's not it probably would 0:05:10.200 --> 0:05:12.960 have happened eventually, but it's definitely a really surprising stat 0:05:12.960 --> 0:05:16.320 that there are more ETFs than stocks. And maybe the 0:05:16.320 --> 0:05:18.800 bigger problem is we just don't have enough stocks, right, 0:05:18.800 --> 0:05:20.960 Maybe that's a whole other debate, but like we're just 0:05:21.240 --> 0:05:23.880 there's so few stocks and so many products being launched 0:05:23.920 --> 0:05:26.279 off of like a very you know, tight list. 0:05:26.600 --> 0:05:28.719 Just real quick on that you had to piece out 0:05:29.440 --> 0:05:33.680 a note about ETFs being the new IPO and the 0:05:33.720 --> 0:05:36.120 exchange is really just trying to get ETFs now more 0:05:36.160 --> 0:05:37.080 than companies to list. 0:05:37.440 --> 0:05:40.120 Yeah, we looked at that, and I think you know, 0:05:40.160 --> 0:05:42.200 if you look, there's not a lot of IPOs anymore, right, 0:05:42.520 --> 0:05:45.000 and you look at something like I hate to admit it, 0:05:45.000 --> 0:05:47.800 but like I bit right, that is worth more to 0:05:47.880 --> 0:05:50.120 NASAC than like an IPO trades more than a lot 0:05:50.120 --> 0:05:54.480 of new IPOs. So I get why the exchanges they're 0:05:54.600 --> 0:05:58.640 they're backing, like the share class ruling and things like that, 0:05:58.920 --> 0:06:02.000 Like if there's not IPO's coming, they ETFs are just 0:06:02.040 --> 0:06:05.000 as good. So and just given how much you know, 0:06:05.200 --> 0:06:08.599 the percentage of trading that's going up in ETFs, I 0:06:08.680 --> 0:06:11.159 get that they want to really lean into this and 0:06:11.200 --> 0:06:13.480 sort of fill that gap for the drought and IPOs. 0:06:14.760 --> 0:06:17.480 Yeah, I'd add a couple of things there. One, You're right, 0:06:17.560 --> 0:06:20.160 they're not enough companies ipoing. So that's a that's a 0:06:20.200 --> 0:06:22.800 whole problem by itself that has nothing to do with ETFs. 0:06:22.800 --> 0:06:25.080 That's just how we structure the capital markets right now, 0:06:25.120 --> 0:06:28.800 So all the interesting capital formation actually happens privately, and 0:06:28.839 --> 0:06:32.600 then when things are big enough, they ipo straight into indexes. Right, 0:06:32.720 --> 0:06:35.000 That's that's the pattern that we've seen over and over. 0:06:35.360 --> 0:06:37.159 But you know, I'm not sure that I'd be a 0:06:37.160 --> 0:06:39.120 lot of hand wavy about the fact that they're now 0:06:39.160 --> 0:06:41.880 more ETFs, Like I think samro made the comment this 0:06:41.920 --> 0:06:45.080 morning on Twitter, they're also more recipes than there are ingredients, 0:06:45.080 --> 0:06:47.560 and I think that's also true. I mean, look, we 0:06:47.640 --> 0:06:50.719 have one hundred and fifty thousand indexes tracked by the 0:06:50.760 --> 0:06:54.599 Index Industry Association. Obviously that's insane. But you can just 0:06:54.640 --> 0:06:56.280 add one stock, get rid of another, and now you 0:06:56.360 --> 0:06:58.400 have a brand new index, right, So of course we're 0:06:58.400 --> 0:07:00.680 going to end up with that proliferation. And I think 0:07:00.720 --> 0:07:03.640 they're issues, right. It makes figuring out what ETF to 0:07:03.680 --> 0:07:05.960 buy a lot harder than it was twenty years ago. 0:07:06.000 --> 0:07:09.039 As we were saying, yeah, actually, I find that I 0:07:09.120 --> 0:07:12.280 find that to be like this prevailing problem just in 0:07:12.320 --> 0:07:14.400 my life in general, Like I call it the bread 0:07:14.400 --> 0:07:17.200 ale as my wife loot tests like you get in 0:07:17.200 --> 0:07:18.920 the bread ale, and it's like, how am I supposed 0:07:18.960 --> 0:07:21.000 to make a decision? All of these things are basically 0:07:21.040 --> 0:07:21.440 the same. 0:07:22.600 --> 0:07:27.720 Yeah, isn't that the paradox of choice? I think that's 0:07:27.760 --> 0:07:31.640 the term for it. So I agree, it's just the 0:07:31.680 --> 0:07:35.840 way it goes when something's successful, and especially in asset management, 0:07:35.840 --> 0:07:38.200 if the fish are biting in a certain you know, lake, 0:07:38.800 --> 0:07:41.000 they're going to launch products to try to get bites. 0:07:41.760 --> 0:07:44.400 So it's a natural part of capitalism. I did look 0:07:45.080 --> 0:07:48.160 and there are almost six thousand mutual funds, so there's 0:07:48.160 --> 0:07:52.360 been more mutual funds than stocks for thirty years. The 0:07:52.360 --> 0:07:55.160 ETFs of the four thousand and whatever five hundred, there are, 0:07:55.760 --> 0:07:59.040 half of them are below one hundred million dollars. So 0:07:59.600 --> 0:08:02.920 most of these live in oblivion, and only a couple 0:08:03.000 --> 0:08:06.560 really catch on. And so the UH I think in 0:08:06.640 --> 0:08:11.000 my first book, I've used the metaphor of there are 0:08:12.080 --> 0:08:14.560 I forget how many notes. There are like seven notes, 0:08:15.760 --> 0:08:18.280 and then there's a you know, maybe a couple hundred chords, 0:08:18.760 --> 0:08:22.640 but there's like one hundred million songs right right, or 0:08:22.920 --> 0:08:25.880 as met Favor puts it, there's definitely more words than letters. 0:08:26.480 --> 0:08:29.679 So I don't care. I think it's just a sign 0:08:29.720 --> 0:08:32.320 of the industry growing. But I agree it is harder 0:08:32.360 --> 0:08:33.920 and hard to make a choice. I think that gives 0:08:34.000 --> 0:08:36.240 all of us here some job security, which is good. 0:08:36.280 --> 0:08:38.760 It's going to get so much worse too. Between the 0:08:38.880 --> 0:08:41.640 single stockraft that you were pointing out, you know, there's 0:08:41.679 --> 0:08:44.600 going to be seven to twenty ETFs for every single 0:08:44.679 --> 0:08:47.280 ticker at some point, and we've got the share class 0:08:47.280 --> 0:08:49.640 conversions coming down the pipe, which could be anywhere from 0:08:50.320 --> 0:08:53.120 zero to a couple thousand new ETFs, depending on how 0:08:53.120 --> 0:08:54.719 aggressive that industry wants to get. 0:08:55.360 --> 0:08:57.840 Yeah, I mean, Dave Nadig, where do you think we 0:08:58.000 --> 0:09:00.520 end up? Like, if you had to pick a plateau number, 0:09:01.280 --> 0:09:02.080 what would you pick? 0:09:04.160 --> 0:09:05.079 Eight thousand? 0:09:05.360 --> 0:09:06.400 Okay? How about you? 0:09:06.720 --> 0:09:09.160 I mean, if if you figure every stock in the 0:09:09.240 --> 0:09:11.480 S and P five hundred is going to have a 0:09:11.600 --> 0:09:14.560 few varieties, right, at least a leveraged, at least a 0:09:14.600 --> 0:09:18.760 covered call strategy, probably a short So there's probably two 0:09:18.760 --> 0:09:22.480 to three thousand ETFs just on the Stingle stock you know, 0:09:22.600 --> 0:09:26.720 Djen Shenanigan side, and then the four thousand we've already gotten, 0:09:27.040 --> 0:09:28.520 not one thousand or two that are going to showup 0:09:28.559 --> 0:09:30.439 because people want to, you know, do the share class 0:09:30.440 --> 0:09:32.560 spoking end thing? Eight thousand? 0:09:33.440 --> 0:09:35.800 I'm you know we last time we had Joe on 0:09:36.040 --> 0:09:38.040 we had that note that we wrote earlier in the year. 0:09:38.240 --> 0:09:42.320 No no industry for old analysts, because Dave, you and 0:09:42.360 --> 0:09:44.959 Ethan are very similar that when there's one of these 0:09:45.000 --> 0:09:49.079 crazy like you know, single stock covered call yield max 0:09:49.160 --> 0:09:51.560 that launches, especially if they combined two or three things 0:09:51.920 --> 0:09:54.640 like now there's a two x buffer. 0:09:55.040 --> 0:10:00.640 Stock and withering idiots with drool running out of our mouths. 0:10:00.679 --> 0:10:04.280 I understand Ethan puts the picture of Tommy Lee Jones 0:10:04.280 --> 0:10:06.480 looking over the paper in No Country for old men, 0:10:06.559 --> 0:10:12.200 Like what? Anyway, I get it. I'm probably the most 0:10:12.200 --> 0:10:16.200 liberal of you guys because I just find the trading 0:10:16.280 --> 0:10:20.199 wing of the ETF tent okay, given that there are 0:10:20.240 --> 0:10:23.400 plenty of ways to gamble. This is America, it's a 0:10:23.840 --> 0:10:26.520 you know, it's just I think I just look at 0:10:26.520 --> 0:10:29.720 the ETF as a technology, not as an index fund, 0:10:29.720 --> 0:10:32.440 and I think that's where I might be more liberal. 0:10:33.080 --> 0:10:35.079 I think you and I agree more than we disagree 0:10:35.080 --> 0:10:38.319 on this. I'm not anti people trading these vehicles to 0:10:38.920 --> 0:10:41.040 run their cowboy accounts or hedge funds using them to 0:10:41.120 --> 0:10:43.880 run their exposures. But they're good and bad ones of 0:10:43.920 --> 0:10:46.880 those two rights. That's really I think the key thing 0:10:47.000 --> 0:10:50.120 is that there are good single stock leverage funds and 0:10:50.160 --> 0:10:52.600 there are bad single stock leverage funds. And it tends 0:10:52.600 --> 0:10:54.840 to have to do with things like how much got 0:10:54.880 --> 0:10:57.240 buried in the swap contract. You're not paying attention to 0:10:57.600 --> 0:10:59.880 how much do these things actually cost? Do they trade it? 0:11:00.040 --> 0:11:02.720 Two percent spreads on high vol days, like there are 0:11:02.760 --> 0:11:05.440 good and bad ones even in the hottest of hot sauce. 0:11:05.960 --> 0:11:07.720 And I would argue there are good of bad ones, 0:11:07.760 --> 0:11:10.439 even the most in the most vanilla areas. 0:11:10.880 --> 0:11:13.400 Yeah, yeah, there's the wrong s and P five hundred 0:11:13.440 --> 0:11:17.240 ETF to buy. Which one is that, Dave? The one 0:11:17.240 --> 0:11:19.719 that costs too much? Probably Shi, I. 0:11:19.640 --> 0:11:24.440 Will say it's Hi. Yeah, it probably is. Spy. In 0:11:24.520 --> 0:11:27.560 the mutual fund world, the second ever index mutual fund 0:11:27.559 --> 0:11:30.000 as well as Fargo, and that still charges like thirty 0:11:30.000 --> 0:11:30.800 five to forty BIPs. 0:11:31.320 --> 0:11:33.839 There's there's still a two percent SMP mutual fund trading. 0:11:33.880 --> 0:11:35.800 It's got hundreds of millions of dollars in it, like 0:11:35.880 --> 0:11:39.160 it should be illegal by design. I don't know, Okay. 0:11:39.440 --> 0:11:40.240 Topic number two. 0:11:40.720 --> 0:11:45.079 This is a headline a note from James uh A 0:11:45.240 --> 0:11:50.000 Safer at Bloomberg Intelligence headline, Passive ownership is rising and 0:11:50.120 --> 0:11:54.360 more complex than meets the eye, Dave, Is that true? 0:11:54.640 --> 0:11:57.040 Yes? Both of those things are true. You guys track 0:11:57.120 --> 0:11:58.839 the passive stuff better than most people. I mean, what 0:11:58.920 --> 0:12:02.000 are you got thirty five percent measurable, fifty percent probable 0:12:02.080 --> 0:12:02.720 something like that? 0:12:02.880 --> 0:12:05.720 Well, well it's a lot. Let's just define passive. In 0:12:05.840 --> 0:12:09.559 James's note, it's he says the average stock has twenty 0:12:09.559 --> 0:12:12.720 percent of its shares owned by passive, which is defined 0:12:12.800 --> 0:12:15.680 by the way as index something ETF or mutual fund, 0:12:16.000 --> 0:12:19.120 which can include smart beta. So it's a pretty wide array. 0:12:19.240 --> 0:12:24.440 Yeah, but that misses the problem with that institutional separate recounts. 0:12:24.520 --> 0:12:26.440 So where should we go twenty to what thirty? 0:12:26.880 --> 0:12:28.560 I would say, thirty five, thirty five? 0:12:28.600 --> 0:12:29.880 Okay, let's say it's thirty five. 0:12:30.280 --> 0:12:32.960 The academic research points okay, the thirty five to forty range. 0:12:33.160 --> 0:12:36.160 So your take is should we worry? 0:12:36.200 --> 0:12:38.960 So my take is, yes, it matters, but not for 0:12:39.000 --> 0:12:41.720 the reasons everybody thinks it does. It's too complicated to 0:12:41.760 --> 0:12:45.240 be a blanket good or bad. What really matters is 0:12:45.320 --> 0:12:48.280 the flow in and out of these big block products. 0:12:48.320 --> 0:12:50.800 It actually doesn't matter whether they're quote unquote index. But 0:12:51.160 --> 0:12:53.880 if you build a giant block trade based on cap weighting, 0:12:54.400 --> 0:12:58.079 that has real impacts on price discovery because the elasticity 0:12:58.120 --> 0:13:01.880 of big stocks is different than elasticity of small stocks. 0:13:01.920 --> 0:13:04.160 So you end up with this kind of runaway winner, 0:13:04.520 --> 0:13:07.000 runaway loser problem at the top of the cap table, 0:13:07.040 --> 0:13:09.680 which we see every week when we get allocations into 0:13:09.679 --> 0:13:12.719 TDFs and the four andin K money flowing in, all 0:13:12.760 --> 0:13:14.920 of which can turn around. Everybody could decide to pull 0:13:14.920 --> 0:13:16.440 all their money out of their target day funds and 0:13:16.440 --> 0:13:19.840 buy cash tomorrow. Right, So sentiment overrules all of this. 0:13:20.000 --> 0:13:23.840 But until you see some of those numbers change, the 0:13:24.000 --> 0:13:27.880 constant drumbeat of money flowing through passive into the market 0:13:28.440 --> 0:13:32.160 does disturb price discovery. And there's been some amazing deep 0:13:32.200 --> 0:13:35.400 academic research in the last eighteen months on this that's 0:13:35.600 --> 0:13:39.760 pretty difficult to argue with. I mean, it's not fufu ideas. 0:13:39.840 --> 0:13:42.480 It's like, no, we looked at millions of data points 0:13:42.520 --> 0:13:44.720 over twenty years, and you can kind of prove it. 0:13:45.080 --> 0:13:48.880 Things like bitcoin are great. Sort Petrie dishes for this 0:13:49.040 --> 0:13:51.920 because you know, absolutely limited supply flow is the only 0:13:51.960 --> 0:13:56.360 thing that changes price. It's kind of proved all our points. 0:13:56.720 --> 0:14:00.640 Well, I get that. And obviously a bunch of money 0:14:00.679 --> 0:14:02.800 is going in and buying vou and voo like products. 0:14:03.000 --> 0:14:05.320 It's going to push the prices up there, that's a fact. 0:14:05.679 --> 0:14:11.559 But the voo waitings are totally determined by active Because 0:14:12.320 --> 0:14:14.960 Athanasios I'll turn to you on this, he did a 0:14:15.000 --> 0:14:18.400 deep dive and found that, you know, when Tesla has 0:14:18.400 --> 0:14:21.920 a bad earnings, it sells off, its market cap goes down. 0:14:23.240 --> 0:14:25.600 Navidia was the one hundred and fiftieth stock in the 0:14:25.680 --> 0:14:28.480 S and P only like five years ago, and it's 0:14:28.600 --> 0:14:33.320 index didn't do that. Active likes Navidia and it hates Macy's, 0:14:33.360 --> 0:14:34.640 which got kicked out of the S and P. 0:14:34.840 --> 0:14:37.320 So for sure, but I'm not saying that that's the 0:14:37.360 --> 0:14:40.200 reason in Nvidia rockets to the top. I'm saying it's 0:14:40.240 --> 0:14:44.200 the reason that the market in general becomes slowly more 0:14:44.280 --> 0:14:47.840 top heavy because the incremental dollar goes into a stock 0:14:47.920 --> 0:14:53.360 like Nvidia, which is much less elastic than public storage ink. Right, 0:14:53.440 --> 0:14:55.680 So public storage inc. Anybody can swap that out for 0:14:55.680 --> 0:14:59.040 another industrial Nobody cares. If you don't have Nvidia in 0:14:59.080 --> 0:15:02.480 your portfolio, have a problem as an active manager. So 0:15:02.520 --> 0:15:05.760 that for that reason, a dollar going into Invidia moves 0:15:05.800 --> 0:15:08.080 in video more than a dollar going into a company 0:15:08.080 --> 0:15:10.280 at the bottom of the cap table. And that's math. 0:15:10.320 --> 0:15:14.160 We can prove that that's just actually what's happened. So yes, 0:15:14.560 --> 0:15:17.680 price discovery still happens, but it actually happens violently with 0:15:17.760 --> 0:15:21.560 a smaller number of players, which rockets things either up 0:15:21.600 --> 0:15:23.960 or down, and then the next thing that comes in 0:15:24.120 --> 0:15:26.560 reinforces that either up or down. 0:15:27.040 --> 0:15:28.920 I think you brought up a good point, and honestly, 0:15:29.040 --> 0:15:31.200 I don't want to cop out. I don't think anyone knows. 0:15:31.400 --> 0:15:35.680 I've seen good research on both sides. I get that 0:15:35.720 --> 0:15:37.920 the system is structurally set up that yet flows are 0:15:37.920 --> 0:15:39.240 going to come in. It's going to keep going to 0:15:39.280 --> 0:15:42.040 these stocks. I'm not fully convinced that it's like a 0:15:42.080 --> 0:15:44.840 problem yet. I think there's still too many like holes 0:15:44.880 --> 0:15:45.760 you can poke in it. 0:15:46.360 --> 0:15:48.440 Oh, I don't think anybody should do anything about it. 0:15:48.520 --> 0:15:50.800 Like I don't think the answer is don't buy passive. 0:15:50.920 --> 0:15:53.960 I think that this actually means, for the love of God, 0:15:54.280 --> 0:15:58.320 stay in cap weighted products and stay invested. Because these 0:15:58.320 --> 0:16:02.280 are tailwinds to the market. They can whipsaw. But I 0:16:02.360 --> 0:16:04.360 actually can't point to the thing that's going to make 0:16:04.400 --> 0:16:07.640 it whipsaw. It's not the it's not old people retiring 0:16:07.720 --> 0:16:09.240 that's not going to do it. That's actually going to 0:16:09.640 --> 0:16:11.800 help because all those young people who inherit it buy 0:16:11.880 --> 0:16:15.640 more right. So I don't think this means you do 0:16:15.720 --> 0:16:18.520 something different. I think it explains what we've been witnessing 0:16:18.600 --> 0:16:19.520 for the last ten years. 0:16:19.760 --> 0:16:22.720 Yeah, I would also just say that one thing that 0:16:23.280 --> 0:16:26.640 may change this, and probably it's also good for everybody, 0:16:26.680 --> 0:16:29.640 is that active is getting cheaper. And so the more 0:16:29.840 --> 0:16:34.080 that the capital groups and fidelities and trows lower their fees, 0:16:34.120 --> 0:16:36.440 the more they see organic flows. I think advisors do 0:16:36.480 --> 0:16:38.880 want active, they just want to pay us a lighter 0:16:38.880 --> 0:16:42.520 fee for it, and that would obviously introduce more price 0:16:42.720 --> 0:16:46.960 discovery based on fundamentals because those active funds do hold 0:16:47.000 --> 0:16:50.840 different stocks with different weightings. So in a way, and 0:16:50.880 --> 0:16:53.480 we debate this with Mike Green from Simplify all the time, 0:16:53.840 --> 0:16:56.560 one of the things that is just an inconvenient truth 0:16:56.600 --> 0:17:01.040 here is that active managers were caught in a very 0:17:01.040 --> 0:17:05.200 disruptible position charging one percent for mostly Beta and Vanguard 0:17:05.280 --> 0:17:07.959 disrupted the crap out of them. They never passed on 0:17:08.000 --> 0:17:10.159 economies of scale during the fifty years they had a 0:17:10.240 --> 0:17:13.560 chance to, and if they had, they'd have more upperformance, 0:17:13.840 --> 0:17:17.199 more customer goodwill. But because they didn't, I find that 0:17:17.320 --> 0:17:22.320 sin is still haunting them. But as they adapt, Yeah, 0:17:22.359 --> 0:17:25.440 it as they adapt, though, and money shifts back to active, 0:17:25.440 --> 0:17:27.440 because active's taken in twenty five percent of the flows 0:17:27.480 --> 0:17:30.719 this year, some of this will possibly be sorted out 0:17:30.760 --> 0:17:31.359 by the market. 0:17:32.080 --> 0:17:34.160 Yeah, and look, we've got folks like Baron coming in. 0:17:34.240 --> 0:17:36.199 I mean, the thing that's shocking to me is that 0:17:36.240 --> 0:17:39.640 we've got classes of active managers that have been crushing 0:17:39.680 --> 0:17:43.560 it for one, three, five, ten, twenty, like Barn like 0:17:43.640 --> 0:17:46.040 bridge Haven. Like there's a bunch of active managers you 0:17:46.080 --> 0:17:47.840 can look at and be like, no, they've done everything 0:17:47.880 --> 0:17:49.560 they said they were going to do and they're crushing 0:17:49.880 --> 0:17:53.320 and they all have outflows. Yeah, well, bananas. 0:17:53.400 --> 0:17:56.199 The Barren guy coming into ETFs is capitulation. I bet 0:17:56.240 --> 0:18:00.000 he didn't want to. But Joel, this is the only 0:18:00.280 --> 0:18:02.879 in fifteen years to beat the cues. Beating the cues 0:18:03.000 --> 0:18:06.399 is like it's like beating Michael Jordan his prime, Like, 0:18:06.440 --> 0:18:09.840 how did you do that? Right? And uh, it brings me. 0:18:10.080 --> 0:18:12.280 I always think of that quote from the Tim Burton Batman. 0:18:12.800 --> 0:18:14.800 Remember when Michael Keaton's like, oh, you want to get nuts, 0:18:14.840 --> 0:18:15.680 let's get nuts. 0:18:16.000 --> 0:18:17.840 Yeah, let's go. 0:18:18.040 --> 0:18:20.880 You got to get more crazy than the cues And 0:18:20.960 --> 0:18:23.720 he did, Oh yes he did. It's like it's the half. 0:18:23.760 --> 0:18:27.600 The half the mutual fun is Elon Musk companies. It's 0:18:27.600 --> 0:18:31.359 like SpaceX and Tesla. So that's part of I think 0:18:31.880 --> 0:18:35.879 what worked is discarding the CFA brain and getting a 0:18:35.920 --> 0:18:39.280 little crazy and Baron did it. Now he's coming into ETFs, 0:18:39.720 --> 0:18:42.280 we'll see what happens. Like the timing is interesting. Would 0:18:42.320 --> 0:18:44.240 this be a signal that maybe now is the time 0:18:44.280 --> 0:18:48.040 that he underperforms? I don't know. But also he's coming 0:18:48.040 --> 0:18:50.320 in at one percent. I think that's a pretty hefty fee. 0:18:50.400 --> 0:18:52.360 Did we get it? Did we get an actual fee? 0:18:52.400 --> 0:18:53.000 I didn't see that. 0:18:53.000 --> 0:18:54.919 That's what Katie Greifeld reported. I think it was like 0:18:55.320 --> 0:18:57.320 one of them was seventy BIPs, one was one percent. 0:18:57.720 --> 0:19:00.159 Either way, those are all that said. If he has 0:19:00.240 --> 0:19:03.920 active share of like ninety five or percent of review, yeah, 0:19:04.119 --> 0:19:06.359 then it's in this sort of arch thematic bucket. People 0:19:06.359 --> 0:19:10.080 pay more, people have less price sensitivity for stuff that 0:19:10.119 --> 0:19:11.520 has a high active here. 0:19:11.480 --> 0:19:13.879 Even a one percent, it's a bargain compared to like 0:19:13.920 --> 0:19:16.280 the age some of his mutual fund shared classes are 0:19:16.320 --> 0:19:18.800 one point nine. Yeah, So like there's some real bang 0:19:18.880 --> 0:19:19.920 expensive stuff out there. 0:19:20.040 --> 0:19:22.440 Yeah. And like, by the way, Tom Lee also had 0:19:22.440 --> 0:19:25.400 great success with Granny the Granny shots ETF. Now he's 0:19:25.440 --> 0:19:27.760 launching two new ones. Dan ives have come in, so 0:19:28.119 --> 0:19:30.680 it's not just that big old school manager getting cheaper. 0:19:30.880 --> 0:19:33.160 You've got these stars, you know, I say, yeah, one 0:19:33.160 --> 0:19:35.520 of our themes is ETFs Go Hollywood. Some of these 0:19:35.520 --> 0:19:37.520 star managers are coming in. And I'm going to say 0:19:37.600 --> 0:19:40.040 right now in the show, I believe Bill Ackman will 0:19:40.080 --> 0:19:43.120 launch an ETF at some point. I don't think Buffett will. 0:19:43.160 --> 0:19:46.000 I think he's he Berkshire's kind of that for him. 0:19:46.440 --> 0:19:50.760 But I do think if you are in this industry 0:19:50.800 --> 0:19:53.040 and you want to be where the fisher biding, you 0:19:53.119 --> 0:19:55.400 kind of have to come into ETFs now, especially Tom 0:19:55.440 --> 0:19:57.640 Lee in particular, seeing the success he's had. Two billion 0:19:57.680 --> 0:19:59.919 in less than a year is pretty good, and his 0:20:00.080 --> 0:20:03.800 fee isn't cheap either, So that's a good sign I 0:20:03.840 --> 0:20:05.840 think for active and maybe the people who are worried 0:20:05.840 --> 0:20:07.040 about passive growing so much. 0:20:13.920 --> 0:20:17.800