WEBVTT - Four ETF Nerds Debate 20 Topics 0:00:06.240 --> 0:00:12.480 Welcome to trillions. I'm Joel Webber and I'm Eric Dallieres. Eric. 0:00:12.560 --> 0:00:16.759 I grew up watching PBS, right, and there's a show 0:00:16.760 --> 0:00:22.080 on PBS, really famous group. Yes, I love that show. 0:00:22.360 --> 0:00:24.159 SNL did a lot of good send ups of it, 0:00:24.200 --> 0:00:28.200 and like day as as John McLaughlin. And what what 0:00:28.320 --> 0:00:31.640 made it funny is John McLaughlin had like no patience 0:00:32.320 --> 0:00:34.320 and and it was at a time where people were 0:00:34.360 --> 0:00:37.080 kind of you know, used to TV and give it 0:00:37.080 --> 0:00:39.040 getting a d D. And so it was a show 0:00:39.040 --> 0:00:42.880 of pundits and political uh talk talking about the news 0:00:42.880 --> 0:00:45.760 of the day. Yeah, and he really would hardly let 0:00:45.760 --> 0:00:49.199 anybody finish. He would just go around quickly and he 0:00:49.440 --> 0:00:52.280 was like sort of a yeah. He was like no, 0:00:52.360 --> 0:00:54.720 no, no no, no, And and it was fun to watch. 0:00:54.760 --> 0:00:57.360 It was a spectacle and it was for our A 0:00:57.440 --> 0:00:59.960 d D minds. This is you know, young gen x 0:01:00.080 --> 0:01:02.000 or I really liked it. I felt I got a 0:01:02.040 --> 0:01:03.880 lot out of it. It was slightly entertaining, and you 0:01:03.880 --> 0:01:08.160 don't see that token Republicans. Everybody's thrown in together, right, 0:01:08.720 --> 0:01:11.280 So we're gonna do our own version of it. We 0:01:11.319 --> 0:01:13.839 are We're joined by a few e t F nerds 0:01:13.959 --> 0:01:16.720 and we're gonna talk about the E t F topics 0:01:16.720 --> 0:01:20.000 of the day. Yeah, and yes they're nerds, but they're pundits. 0:01:20.080 --> 0:01:22.840 So when the McLaughlin group had these political pundits on, 0:01:23.280 --> 0:01:26.920 these are the E t F equivalent of those pundits. 0:01:26.920 --> 0:01:28.600 They're just E t F pundits. In fact, when I 0:01:28.640 --> 0:01:32.080 do conferences, I'll frequently be on a panel called the pundits, 0:01:32.120 --> 0:01:34.520 and it's with these people. These are also the people 0:01:34.560 --> 0:01:38.280 that you know me from being on that competition. We're 0:01:38.319 --> 0:01:41.320 always coming third or fourth place, which disappoints you, and 0:01:41.360 --> 0:01:44.360 I'm sorry, but it's these are the pundits that I 0:01:44.360 --> 0:01:46.680 see in the circuit and who are usually the ones 0:01:46.720 --> 0:01:49.880 you see quoted, and they're really lively and become friends 0:01:49.880 --> 0:01:51.880 with them, and it should because we're gonna talk about 0:01:51.920 --> 0:01:54.640 new regulations and we won't let them blather on and on. 0:01:54.640 --> 0:01:56.960 I'm gonna I'm gonna sort of you're gonna McLaughlin a 0:01:57.000 --> 0:01:58.800 little bit here. Yeah, we're gonna keep this quick and 0:01:58.880 --> 0:02:00.800 rapid fire and get this. I'm gonna see if from 0:02:00.880 --> 0:02:10.799 get through twenty questions. This week on Trilliance Nerds, we're 0:02:10.840 --> 0:02:13.359 gonna launch right into introductions. Let's start off Dave, Dave 0:02:13.400 --> 0:02:16.480 not Egg, Managing director et F dot Com, Tom tom Lyden, 0:02:16.639 --> 0:02:19.680 editor of ETF Trends, Todd Todd Rosenblute, Director of et 0:02:19.840 --> 0:02:22.480 F and Mutual Fund Research at CFR A alright, question 0:02:22.560 --> 0:02:25.000 number one, Todd, is too much attention paid to the 0:02:25.040 --> 0:02:27.800 expense ratio? Most definitely, so we've seen a race to 0:02:27.840 --> 0:02:30.320 the bottom. But there are products that compete with one 0:02:30.320 --> 0:02:32.840 another where the exposure is quite different from one another. 0:02:32.880 --> 0:02:35.280 You have V W O and I E MG hundred 0:02:35.280 --> 0:02:38.720 basis point difference this year and performance the exact same fee. 0:02:38.760 --> 0:02:40.960 We've got dividend products that are the same thing. If 0:02:41.000 --> 0:02:43.520 you're buying market cap weighted products, it may not matter 0:02:43.720 --> 0:02:45.680 if you're doing anything else. You really got to look 0:02:45.720 --> 0:02:48.960 under the hood. Dave, it always matters because uh, fees 0:02:49.040 --> 0:02:51.160 are important. But I think what Todd was trying to 0:02:51.160 --> 0:02:54.040 say but stumbled over his own tongue is exposure matters 0:02:54.120 --> 0:02:56.760 way more than fees, and that's the number one thing 0:02:56.800 --> 0:03:01.440 that determines your performance. But Tom, isn't there a backlash 0:03:01.480 --> 0:03:03.400 against paying too much in the past? Then? Is it 0:03:03.560 --> 0:03:07.000 understandable that people want their investments for absolute dirt. Cheap 0:03:07.280 --> 0:03:10.640 price is important? But major market indicators. If you're paying 0:03:10.639 --> 0:03:14.880 four basis points, great, But as we see thematic factor 0:03:15.040 --> 0:03:17.200 multi factor, you're gonna pay up a little bit more 0:03:17.240 --> 0:03:20.680 for it. Compare that to mutual fund expense ratios. It's crazy. 0:03:20.919 --> 0:03:25.880 Tom's like the smooth jazz station. He is the top 0:03:25.919 --> 0:03:27.800 of his head. Yeah, he is the smoothest of us. 0:03:27.800 --> 0:03:30.320 All all right, um, and my two cents, I think 0:03:30.320 --> 0:03:33.240 plain vanilla, you know, expense ratio should rule. I think 0:03:33.240 --> 0:03:35.280 when you get to more exotic areas, you should pay 0:03:35.320 --> 0:03:37.400 a little bit. People do need to make a living here. Okay. 0:03:37.600 --> 0:03:40.840 Number two, how will a bear market affect et s? Dave? Uh, 0:03:40.880 --> 0:03:42.560 it's going to be great for e t f s 0:03:42.600 --> 0:03:45.640 because it's gonna flush out a lot of overpriced, underperforming, 0:03:45.720 --> 0:03:48.720 low active share active managers. All that money comes into 0:03:48.720 --> 0:03:50.720 the et F industry. We've seen it over and over again. 0:03:50.760 --> 0:03:52.320 We see it when we have a one month downturn. 0:03:52.400 --> 0:03:55.240 We see it we have a one year downturn. Tom, Well, 0:03:55.720 --> 0:03:57.600 we haven't talked about this before, but a lot of 0:03:57.640 --> 0:04:02.320 money is going to go into mutual funds, money market funds, UH, 0:04:02.520 --> 0:04:07.000 short term fixed income. The industry is gonna be hurt. Todd, Yeah, 0:04:07.040 --> 0:04:09.240 I think people don't want to pay much when they're 0:04:09.280 --> 0:04:11.160 losing money, so that the less that they can pay 0:04:11.400 --> 0:04:14.440 through through E t F s h through both fixed 0:04:14.480 --> 0:04:17.520 income and equity products, I think is gonna garner more interest. 0:04:17.760 --> 0:04:20.960 I agree. Um, Look, the bull market has actually been 0:04:20.960 --> 0:04:23.320 way better for active than most people think. Assets have 0:04:23.360 --> 0:04:25.960 increased in active funds by seven trillion. That's more than 0:04:26.000 --> 0:04:27.920 all of passive a bear market we've had, not only 0:04:27.960 --> 0:04:30.920 for flows, but just for their sort of asset growth. 0:04:31.279 --> 0:04:35.000 How responsible for the epic bull market that we've been in, 0:04:35.120 --> 0:04:38.200 which also happens to be an insanely boring bull market? 0:04:38.640 --> 0:04:41.440 How responsible for that are E t F s not? 0:04:41.960 --> 0:04:43.719 I would say E t f s are a symptom 0:04:43.760 --> 0:04:46.080 of that, not a cause. Yeah, it's just the rapper. 0:04:46.200 --> 0:04:48.919 So if the stocks inside are going up, then the 0:04:48.920 --> 0:04:51.359 E t F is gonna go up. But there's so 0:04:51.480 --> 0:04:54.280 much more money that's in active management, either in the 0:04:54.360 --> 0:04:58.279 mutual fund wrapper or individual stocks then or separate accounts 0:04:58.640 --> 0:05:00.719 than it is the t F. The TF is riding 0:05:00.760 --> 0:05:02.520 in the back stew to the car, not driving. Yeah, 0:05:02.520 --> 0:05:04.360 that's it. They've just been along for the ride. Yeah, 0:05:04.360 --> 0:05:06.520 I mean, look, one direction has a lot of sales. 0:05:06.520 --> 0:05:10.080 It's not really an MP three thing. Okay, number slap 0:05:10.080 --> 0:05:12.560 across the face, Okay, yeah you got you kind of 0:05:12.560 --> 0:05:15.719 got taken down there. Um, welcome to the club. Alright, 0:05:15.920 --> 0:05:18.360 Number three, which E T F provider is most likely 0:05:18.400 --> 0:05:21.840 to crack the top five? That isn't there? Now? Tom, 0:05:21.920 --> 0:05:24.440 I'm gonna say, Wisdom Tree. If you look at Wisdom 0:05:24.480 --> 0:05:27.719 Tree and there, did I take your? You take mine? Yeah? Well, 0:05:28.160 --> 0:05:31.160 the whole ideas they were built on the currency strategy, 0:05:31.160 --> 0:05:33.560 and when the dollar is strong, it's really really tough 0:05:33.600 --> 0:05:36.280 for them. But when you look at the way John O. 0:05:36.360 --> 0:05:40.560 Steinberg put the thing together, it's really well positioned that 0:05:40.640 --> 0:05:42.839 when things start to cool off here in the US 0:05:43.000 --> 0:05:46.360 and heat up overseas and especially in development countries, it's 0:05:46.360 --> 0:05:50.960 gonna be huge. So, as simple minds would say, don't 0:05:51.000 --> 0:05:56.360 you forget about me? Tom obviously listens to this podcast. 0:05:56.600 --> 0:05:58.440 I love it. Tom. We're gonna have like we should 0:05:58.440 --> 0:06:01.599 put together a Spotify playlist for this afterwards. Well we 0:06:01.640 --> 0:06:03.760 did to give request. Somebody has asked asked us like, 0:06:03.920 --> 0:06:06.160 can you list the tickers you cover? I've asked that 0:06:06.200 --> 0:06:09.840 about the TV show too. Um, now, Eric, how about 0:06:09.880 --> 0:06:12.560 this one? Would you make someone a mix tape of 0:06:12.600 --> 0:06:16.360 all the songs that come up on this episode. Oh? Absolutely, 0:06:16.360 --> 0:06:19.520 but I mean honestly, the more like is a is 0:06:19.520 --> 0:06:21.479 a list of mixed tape of the tickers we cover. 0:06:21.560 --> 0:06:25.400 I think that's the main goal. Anyway, Todd, we're back 0:06:25.440 --> 0:06:29.279 to the questions. You have to be ready, dude, I 0:06:29.320 --> 0:06:32.719 was so JP Morgan. So JP Morgan is crashing the 0:06:32.760 --> 0:06:34.839 et F party. They're about to hit the top ten 0:06:35.320 --> 0:06:37.720 with their Beta builder products being a driver and with 0:06:37.800 --> 0:06:40.440 active management and with multi factor. I really think they're 0:06:40.440 --> 0:06:43.080 going to put the resources behind growing in this space. 0:06:43.120 --> 0:06:44.799 They're not in it just to be on the outside. 0:06:44.800 --> 0:06:46.200 They're in it to be in the top five. I 0:06:46.480 --> 0:06:49.200 think the more interesting question is top four, because Charles 0:06:49.240 --> 0:06:51.679 Schwab is going to kick Investco power Shairs to the curb. 0:06:51.760 --> 0:06:54.599 On that front, Charles Schwab is rapidly headed towards the 0:06:54.640 --> 0:06:57.240 top three player. Right, but they're already five, right, No, 0:06:57.360 --> 0:06:59.720 I know I'm hijacking your questions, so we haven't talked. 0:06:59.720 --> 0:07:02.640 First is first trust in the game. See that was 0:07:02.680 --> 0:07:06.279 my pick. First trust to me is like the quiet baller. 0:07:07.040 --> 0:07:08.520 No matter what they put out, they come up with 0:07:08.520 --> 0:07:10.760 a billion dollars they have. Whenever I talk to people 0:07:10.760 --> 0:07:12.560 on the street, they say, nobody sales people is like 0:07:12.560 --> 0:07:14.680 first Trust, So I would go with First Trust. I 0:07:14.720 --> 0:07:17.400 think JP Morgan Goldman is a good sort of outside 0:07:17.400 --> 0:07:19.520 and I like all your answers, actually, but I would 0:07:19.560 --> 0:07:21.680 have to trust is too easy there. Number six right 0:07:25.240 --> 0:07:29.160 counts you know alright? Number four? Which et F category 0:07:29.160 --> 0:07:32.560 will see the most innovation in the next five years? Dave, uh, 0:07:32.640 --> 0:07:35.120 thematic ets. I think that's where you're seeing most of 0:07:35.120 --> 0:07:37.600 the interesting stuff happen right now. You're going to see 0:07:37.600 --> 0:07:40.360 more active product there, and I think that's where you're 0:07:40.360 --> 0:07:42.560 going to see most of the headline stories. It won't 0:07:42.560 --> 0:07:44.080 be where all the assets are. That will still be 0:07:44.080 --> 0:07:46.000 low cost beta, but I think the stories are all 0:07:46.040 --> 0:07:48.440 gonna be thematic. Todd, Yeah, I think fixed income is 0:07:48.440 --> 0:07:50.240 where we're gonna start to see this. We've started to 0:07:50.240 --> 0:07:53.840 see ascid growth and is mostly in the broadly diversified products. 0:07:54.000 --> 0:07:55.640 But I think there's a lot you can do from 0:07:55.640 --> 0:07:58.160 an active perspective and an index rapper or an et 0:07:58.280 --> 0:08:01.080 F rapper, and a lot of very smart people who 0:08:01.160 --> 0:08:03.440 work at asset management companies who are gonna be looking 0:08:03.480 --> 0:08:05.680 for new roles. Creating an index is going to be 0:08:05.760 --> 0:08:08.760 very important. I think at active equity we get a 0:08:08.800 --> 0:08:12.000 bear market in stocks, there are a couple et fs 0:08:12.000 --> 0:08:14.600 that are poised to go all cash, and if they 0:08:14.760 --> 0:08:17.560 catch it on the downside and sidestep it and then 0:08:17.600 --> 0:08:21.640 get in on the upside, here's a situation where E 0:08:21.760 --> 0:08:25.120 T F company can set themselves apart performance wise, show 0:08:25.200 --> 0:08:28.320 that alpha and they're billions that come in there. I 0:08:28.320 --> 0:08:30.600 I don't I don't buy that these cash flippers that 0:08:30.600 --> 0:08:32.080 that go in and out of the market are going 0:08:32.120 --> 0:08:33.640 to be the thing. Yeah, one of them will catch 0:08:33.720 --> 0:08:35.760 lightning in a bottle, but I don't think investors buy 0:08:35.800 --> 0:08:38.720 that that's a repeatable thing. Okay, so they'll be late 0:08:38.760 --> 0:08:41.280 because they'll buy it after the fact, for sure. But 0:08:41.559 --> 0:08:44.959 med Faber wrote this trend following white paper in two 0:08:45.000 --> 0:08:47.480 thousand and seven. Nobody read it. Nobody at all read 0:08:47.520 --> 0:08:51.599 it after the fact after the bear market. Hundred thousand downloads, 0:08:51.600 --> 0:08:54.800 So it's crazy. Unfortunately, investors are late, But from a 0:08:54.840 --> 0:08:58.120 performance standpoint, somebody's going to be in the position to 0:08:58.160 --> 0:09:01.040 get it. So I'll riff off of Tom and say alternatives. 0:09:01.320 --> 0:09:03.640 And the reason I say that is because if you 0:09:03.679 --> 0:09:06.480 don't have this sort of easy market uh, and there 0:09:06.559 --> 0:09:08.719 is some some down or volatility or a couple of 0:09:08.800 --> 0:09:11.880 years that are negative. Anything that shorting is gonna look 0:09:11.920 --> 0:09:13.640 really good. And I think then you'll see a lot 0:09:13.720 --> 0:09:15.800 of uh some flows, and of course you'll see the 0:09:15.800 --> 0:09:18.079 innovation on top of that. There's been a lot of innovation, 0:09:18.080 --> 0:09:20.800 but I think there'll be more. Alright. Number five, what's 0:09:20.840 --> 0:09:22.800 the problem with E S G t F s? How 0:09:22.880 --> 0:09:26.000 come no one is buying them? Todd? I just think 0:09:26.280 --> 0:09:30.800 people wanna buy simple things from an et F rapper, 0:09:30.880 --> 0:09:32.720 so far and so and the other part of it. 0:09:32.840 --> 0:09:35.520 The problem is is that the money that's in these 0:09:35.600 --> 0:09:38.520 mutual funds is sticky. People are not performance chasing when 0:09:38.520 --> 0:09:41.800 they're buying based on what matters to them from a 0:09:41.800 --> 0:09:45.760 social responsibility, from a government perspective, and environmental perspective. So yeah, 0:09:45.760 --> 0:09:48.640 I just butchered. I made it seg on that. It's 0:09:48.679 --> 0:09:51.120 also complicated for people. So I think the money isn't 0:09:51.120 --> 0:09:53.240 flowing from mutual funds to et F the way it 0:09:53.320 --> 0:09:56.880 is for traditional active management. Maybe at some point it will, Dave, 0:09:56.960 --> 0:09:59.280 I know, yeah, you're an area I think, well, I 0:09:59.280 --> 0:10:01.040 think that money is going to come. I think it's 0:10:01.040 --> 0:10:03.199 a long, slow trickle. We have a thirty trillion dollar 0:10:03.840 --> 0:10:06.880 generational wealth transfer that's happening. That money will hit E 0:10:07.080 --> 0:10:09.560 s G as that money changes hands, but it's just 0:10:09.600 --> 0:10:11.720 gonna take time. That money is gonna be very sticky 0:10:11.760 --> 0:10:13.800 and it's never gonna leave. Once that money is in 0:10:13.840 --> 0:10:15.760 an E s G fund, it's stuck. But will the 0:10:15.800 --> 0:10:18.360 firms survive? Will the will the products stay out there 0:10:18.400 --> 0:10:21.840 long enough? Will the firms be patient enough products to 0:10:21.840 --> 0:10:23.600 be able to do that? We see products closed after 0:10:23.640 --> 0:10:25.360 a few years when they can't get The big thing 0:10:25.400 --> 0:10:27.640 is can they hang with the major market index is 0:10:27.720 --> 0:10:30.320 number one? And can some in fact provide alpha? All 0:10:30.360 --> 0:10:32.760 the back testing shows that there is some alpha to 0:10:32.760 --> 0:10:34.920 be gained there. That's the question. And well, let me 0:10:34.920 --> 0:10:38.160 flip that around on you dave this. Everybody says millennials 0:10:38.160 --> 0:10:40.200 are going to be the E S G um, the 0:10:40.240 --> 0:10:42.800 people who buy s G. But look, let's face it, 0:10:42.920 --> 0:10:45.319 you just said boomers are going to transfer. Boomers were 0:10:45.320 --> 0:10:48.560 the biggest hippies of all generations. How is why is 0:10:48.600 --> 0:10:51.640 nobody selling to them? Why are they why think they were? 0:10:51.760 --> 0:10:53.840 That's where all these guys in Portland, Maine came from 0:10:53.920 --> 0:10:56.400 that started the E s G revolution, But that's not 0:10:56.480 --> 0:10:58.720 where this transfer is coming from. This is coming from 0:10:59.240 --> 0:11:02.240 very high net worth baby boomers who are managing multimillion 0:11:02.280 --> 0:11:05.840 dollar portfolios, but they're seventy years old. Those folks are 0:11:05.840 --> 0:11:08.559 handing that money down. All the surveys suggests that E 0:11:08.760 --> 0:11:11.160 s G concerns are going to be a major factor 0:11:11.360 --> 0:11:13.960 in that wealth transfer. But is there pressure from institutions 0:11:14.000 --> 0:11:17.200 and foundations to actually allocate in that area as well? Well, yeah, 0:11:17.240 --> 0:11:19.400 that's what's building these products. You look at what's come 0:11:19.440 --> 0:11:22.400 out in the s G already, it's been driven by institutions, 0:11:22.520 --> 0:11:25.440 the wealth transfers. What follows, right, But my point is, 0:11:25.600 --> 0:11:27.839 doesn't every generation have sort of the E s G 0:11:28.000 --> 0:11:30.560 thing going on until they get kids, responsibilities and money, 0:11:30.600 --> 0:11:33.280 and then they forget it's too busy. Yeah, that it's 0:11:33.320 --> 0:11:35.880 easy to say that, but we've never seen the kind 0:11:35.920 --> 0:11:38.320 of response we've seen to investor surveys that we see 0:11:38.440 --> 0:11:41.240 right now. Right when when forty five year olds walk 0:11:41.320 --> 0:11:44.760 in with their parents they talk about this with financial advisors, 0:11:44.920 --> 0:11:48.080 it's showing up as the number one concern ahead of performance. Now, 0:11:48.080 --> 0:11:50.960 I don't believe that performance always wins, but it's definitely 0:11:51.040 --> 0:11:55.520 number two. Um, okay, number six. Will there be a 0:11:55.520 --> 0:11:59.240 bitcoin or crypto et F by the end of todd No, 0:12:00.000 --> 0:12:02.240 I see we moved the or maybe we haven't moved 0:12:02.240 --> 0:12:04.080 the goal post a little bit on this, But no, 0:12:04.240 --> 0:12:06.880 I don't think there is. The SEC has concerns about it. 0:12:06.920 --> 0:12:08.920 There isn't the data to backup that this can be 0:12:08.960 --> 0:12:12.120 handled in a way without fraud. It's a hard thing 0:12:12.160 --> 0:12:14.760 to overcome proving that. And I think what we've seen 0:12:14.800 --> 0:12:18.040 recently is people have gotten hurt and in investing in it. 0:12:18.080 --> 0:12:20.520 And I don't think the SEC is making evaluation call 0:12:21.000 --> 0:12:23.800 as a result of this. But bad headlines saying people 0:12:23.840 --> 0:12:26.480 are are getting hurt with these products does not make 0:12:26.520 --> 0:12:29.679 it easier for these products to get approved. Tom Uh, 0:12:29.720 --> 0:12:32.920 they're getting hurt because the value of the cryptos going down. 0:12:33.360 --> 0:12:37.240 There really hasn't been anything that's been fishy underneath. SEC 0:12:37.440 --> 0:12:39.080 is looking at it for sure, they're trying to get 0:12:39.120 --> 0:12:41.440 their arms around it. It will happen by the end 0:12:41.480 --> 0:12:44.040 of two thousand and nineteen. Yeah, And with the caveat that. 0:12:44.040 --> 0:12:47.079 My parent companies Ceboglobal Markets, which lists bitcoin futures. I 0:12:47.120 --> 0:12:49.880 think futures based products are going to be where this happens. 0:12:50.120 --> 0:12:52.080 It's really hard for the SEC to say you can 0:12:52.080 --> 0:12:54.320 invest in oil futures and net gas futures, but you 0:12:54.320 --> 0:12:57.040 can't invest in crypto futures. They settled the same way, 0:12:57.040 --> 0:12:59.000 they trade the same way. I think it's just a 0:12:59.040 --> 0:13:02.040 matter of time. I think the time is. I agree 0:13:02.080 --> 0:13:03.720 with you. I do think it'll be a coin based 0:13:03.720 --> 0:13:05.800 one first, although, be given that you work at cbo E, 0:13:06.000 --> 0:13:08.160 I have to sort of defer that you probably are right. 0:13:08.200 --> 0:13:12.400 But I think a coin based fures you gotta roll them. 0:13:14.640 --> 0:13:16.840 You know, you gotta roll futures. That's troubled a lot 0:13:16.880 --> 0:13:18.600 of E T f s, And it's an extra layer 0:13:18.640 --> 0:13:20.400 of complication that I don't think you'd get from the 0:13:20.400 --> 0:13:22.880 physical How do you how do you get storage? Right? 0:13:23.080 --> 0:13:24.839 I know I would rather buy a physically back one 0:13:24.840 --> 0:13:26.680 then a future one if I had a choice. Yeah. 0:13:26.679 --> 0:13:29.160 But if he use an eighties reference from baseball, Jim 0:13:29.240 --> 0:13:30.720 Rice is in the Hall of Fame. I think if 0:13:30.720 --> 0:13:34.400 we go ten years forward, the most feared hitter in 0:13:34.440 --> 0:13:37.559 baseball from the eighties is not necessarily a mantra that's 0:13:37.559 --> 0:13:39.760 going to get you in the Statistics don't back up. 0:13:39.800 --> 0:13:41.440 He's going to be in there. The data doesn't back 0:13:41.520 --> 0:13:44.560 up to the SEC today. Maybe it will, but today 0:13:45.000 --> 0:13:48.360 it doesn't seem like they're comfortable with it. Okay. Number seven. 0:13:48.400 --> 0:13:51.000 Will there be a zero expense ratio et F in 0:13:51.000 --> 0:13:55.160 the next twelve months? Tom? Yes, absolutely, Todd Yeah, I 0:13:55.160 --> 0:13:59.040 think there will be swabbed. You guys have any other 0:13:59.120 --> 0:14:01.840 opinion on who it might be. So I do think 0:14:01.840 --> 0:14:04.080 it's gonna be swab I would have normally thought Fidelity 0:14:04.120 --> 0:14:06.080 except the partnership they have with I Shares. I don't 0:14:06.080 --> 0:14:08.320 think they're gonna want to compete with products like I 0:14:08.400 --> 0:14:10.040 T O T that are commissioned free on their on 0:14:10.080 --> 0:14:12.520 their platform, where Fidelity is playing in the mutual fund 0:14:12.559 --> 0:14:15.200 space there that doesn't compete. I think Schwab is pretty 0:14:15.200 --> 0:14:17.600 close to doing it. Uh, you know, from where they 0:14:17.640 --> 0:14:20.080 are from an expense ratio standpoint, it just makes sense 0:14:20.080 --> 0:14:22.480 to gather asset. But but I think Vanguard is not 0:14:22.520 --> 0:14:24.400 going to want to give up the low cost trophy. 0:14:24.440 --> 0:14:26.280 I think they're going to tell you know, everybody wants 0:14:26.280 --> 0:14:37.800 to rule the world right exactly. Continue. That's a good one. 0:14:39.560 --> 0:14:44.400 Number eight. What will be the biggest result of the 0:14:44.400 --> 0:14:46.760 new E T F rule the sec OF is implementing 0:14:46.800 --> 0:14:50.440 probably early next year. Dave, increased transparency. I think from 0:14:50.480 --> 0:14:52.880 an investor perspective, that's the part that really matters. All 0:14:52.920 --> 0:14:54.760 the other stuff is nerdy crap only I read what 0:14:54.760 --> 0:14:57.240 do you mean by that? Meaning that they're mandating full 0:14:57.280 --> 0:15:01.720 portfolio disclosure, display of maybe it some discounts, um putting 0:15:01.760 --> 0:15:04.000 all this stuff up on websites on a regular basis, 0:15:04.040 --> 0:15:06.360 in a in a format that people can actually process. 0:15:06.480 --> 0:15:08.240 I think that's going to be a big deal. Tom. 0:15:08.280 --> 0:15:10.960 If you're an advisor, maybe five million to a billion 0:15:10.960 --> 0:15:14.680 dollar advisor, you never before thought about launching your own ETF. 0:15:14.880 --> 0:15:17.480 Now you can do it. Todd, Yeah, I agree with Dave. 0:15:17.560 --> 0:15:20.320 I think the cost transparency is gonna be a big deal. 0:15:20.320 --> 0:15:22.320 People are gonna start to go a little bit beyond 0:15:22.320 --> 0:15:24.960 the expense ratio. Firms are gonna start to market not 0:15:25.120 --> 0:15:27.280 just on the expense ratio, since we've seen a race 0:15:27.320 --> 0:15:29.760 to the bottom there. I would also add that I 0:15:29.800 --> 0:15:33.000 do think you'll see unusual products launched because it'll be 0:15:33.080 --> 0:15:35.120 quicker and easier, and I think you could see a 0:15:35.120 --> 0:15:37.560 lot more um the stuff that people roll their eyes at. 0:15:37.800 --> 0:15:39.000 At the same time, I think you can see more 0:15:39.040 --> 0:15:41.880 active managers jumping in with products that are related to 0:15:41.920 --> 0:15:47.640 their strategies. UH number nine is smart beta a fad 0:15:47.880 --> 0:15:50.640 that will go away once this e t F rule 0:15:50.680 --> 0:15:54.920 gets implemented, and it's more likely to have more active launches. Tom. No, 0:15:55.240 --> 0:15:58.200 factor strategies are always going to be there. Single factor, 0:15:58.600 --> 0:16:01.800 multi factor. Anything it's not market cap weighted to a 0:16:01.800 --> 0:16:05.440 great degree is smart beta, and if it's indexed, it's 0:16:05.480 --> 0:16:08.800 not active. Dao. I was working at Wells Fargo Niko. 0:16:08.920 --> 0:16:11.040 We ran a strategy called Tilton timing. It was a 0:16:11.120 --> 0:16:14.560 multi factor strategy. It's never going away, Todd. I don't 0:16:14.600 --> 0:16:16.000 think there's any reason for it to go away. I 0:16:16.040 --> 0:16:18.400 think everybody in the industry hates the term and has 0:16:18.440 --> 0:16:21.160 their own version of the term. But yet when you 0:16:21.200 --> 0:16:24.400 see surveys out there, it's understood people at least realize 0:16:24.480 --> 0:16:27.400 this is a different approach then market cap weighted or 0:16:27.440 --> 0:16:30.520 not just the apples and ibm s of the world, 0:16:30.560 --> 0:16:32.520 that you are getting a different portfolio. I think this 0:16:32.560 --> 0:16:34.840 is here to stay, and for good reason. People are 0:16:34.880 --> 0:16:38.280 getting good products and they're getting a slightly twist on 0:16:38.800 --> 0:16:40.440 the market cap weight of the approach. And I also 0:16:40.480 --> 0:16:42.800 think there will be an evolution where it's just called 0:16:42.840 --> 0:16:45.800 active eventually. I mean, because smart beta is act, it's yeah, 0:16:45.800 --> 0:16:48.200 it's quant active, Which brings up another question, which is 0:16:48.360 --> 0:16:51.400 should the term be killed once and for all? Todd No, 0:16:51.600 --> 0:16:54.040 I think it's finally moved into the mainstream and people 0:16:54.120 --> 0:16:56.520 are comfortable with it, and it's like Kleenex. You know, 0:16:56.560 --> 0:16:58.640 you don't call a tissue even regardless of the brand 0:16:58.640 --> 0:17:01.040 to what it is. I think people are comfortable with it. 0:17:01.120 --> 0:17:04.119 Everybody that doesn't work in the industry realizes what it 0:17:04.160 --> 0:17:06.360 means to some extent. I think it's here to stay 0:17:06.359 --> 0:17:09.320 in for good reason. Tom, I think we should change 0:17:09.880 --> 0:17:14.240 E t f s the acronym. People still get it wrong, Tom, 0:17:14.920 --> 0:17:20.600 we should call them X funds. Don't fight a brand 0:17:20.680 --> 0:17:22.680 where you can't win. The ets are here to stay. 0:17:22.720 --> 0:17:27.000 Smart bit is here to stay. Number eleven. Where will 0:17:27.040 --> 0:17:30.280 E t F growth come from? The most Which sort 0:17:30.280 --> 0:17:33.919 of investor type? Institutions, advisors or do it yourself retail? 0:17:33.960 --> 0:17:36.320 This will be in the next five years, Todd. So institutions. 0:17:36.359 --> 0:17:38.880 I really think that in many cases they've been laid 0:17:38.920 --> 0:17:41.760 to the party. They the rules haven't been fair for them. 0:17:41.800 --> 0:17:46.080 Insurance companies have about one percent of their potential assets 0:17:46.119 --> 0:17:48.880 invested in fixed income et F. The rule is now 0:17:48.960 --> 0:17:50.800 just changed to make it so you can call fixed 0:17:50.800 --> 0:17:54.040 income ETFs fixed income. And I think we've started to 0:17:54.080 --> 0:17:57.320 see uh, the use of e t f s instead 0:17:57.320 --> 0:17:59.680 of other futures and forward contracts as well. I really 0:17:59.720 --> 0:18:02.360 think they're going to help to drive that and improve liquidity, 0:18:02.440 --> 0:18:06.119 which then helps everybody else. Add as well, Dave agree, 0:18:06.119 --> 0:18:09.399 advisors are pretty tap market six advisors. Now utt f 0:18:09.440 --> 0:18:11.680 s in some fashion or another. Retail will get there, 0:18:11.680 --> 0:18:13.800 but define contribution for owen K is not going to 0:18:13.920 --> 0:18:16.520 really drive anything because mutual funds make more sense. They're 0:18:16.840 --> 0:18:20.600 it's all coming from institutions. Tom, they got it, and 0:18:20.680 --> 0:18:23.000 I will add that institutions if you look at their 0:18:23.040 --> 0:18:26.119 seventy eight trillion in total assets, only about one is 0:18:26.160 --> 0:18:28.560 an et F, So I agree, I'd probably agree, although 0:18:28.600 --> 0:18:30.679 do it yourself retail. We had Fidelity Matt Goolay in 0:18:30.720 --> 0:18:32.399 here and we asked him what the white space and 0:18:32.440 --> 0:18:34.800 ETS was and he said, the retail investor, the direct 0:18:34.880 --> 0:18:37.680 retail because right now I think that percentage is ten 0:18:37.720 --> 0:18:41.920 percent maybe or less, and there's more education going on anyway. 0:18:42.040 --> 0:18:44.879 UM I put that second, and the commission free expansion 0:18:44.920 --> 0:18:47.480 and actually no commission products that Vanguard has had, and 0:18:47.520 --> 0:18:50.159 the broadening list. It's making it easier and easier to 0:18:50.280 --> 0:18:52.840 use ETFs across where it is. I think that's gonna grow. 0:18:52.920 --> 0:18:55.960 I just think there's the pike is potentially so much 0:18:55.960 --> 0:18:59.320 bigger from institutions if they if you make a five 0:18:59.760 --> 0:19:03.480 million dollar trade, much much easier than it is. If 0:19:03.640 --> 0:19:06.359 you know, I can't do that in percentage basis. Retail 0:19:06.359 --> 0:19:09.560 will grow faster on a dollar basis. It's institutions dwarf it. Like, 0:19:09.560 --> 0:19:11.480 how David did that better than I did? Dave? How 0:19:11.520 --> 0:19:13.280 big do you think that slice could get if it 0:19:13.359 --> 0:19:15.800 if they only have one invested right now? Where do 0:19:15.840 --> 0:19:20.520