Speaker 1: It seems that every year a different investment theme bubbles
Speaker 1: to the surface. This year it's artificial intelligence. Last year
Speaker 1: it was the metaverse. Before that, it was fracking in oil, gold, bitcoin.
Speaker 1: Work your way back through history. Every now and again,
Speaker 1: a different idea catches investors intention because of the performance
Speaker 1: of the underlying stocks. I'm Barry Ridolts, and on today's
Speaker 1: edition of At the Money, we're going to discuss how
Speaker 1: to engage with thematic investing to help us unpack all
Speaker 1: of this and what it means for your portfolio. Let's
Speaker 1: bring in Yon van k He is the CEO of
Speaker 1: van X Funds, which manages about one hundred billion dollars
Speaker 1: in client assets. So let's start out with the basics.
Speaker 1: What is thematic investing?
Speaker 2: I would say, it's really a specialized part of the market.
Speaker 3: Right.
Speaker 2: It could be a group of stocks, it could be
Speaker 2: a group of it could be a country, it could
Speaker 2: be an industry, a very very focused part of the market.
Speaker 1: So let me give you a great example of thematic investing.
Speaker 1: Back in nineteen sixty eight, your dad began one of
Speaker 1: the very first gold funds in the United States. Right
Speaker 1: before that nineteen seventies boom, tell us a little bit
Speaker 1: about gold as a thematic investment.
Speaker 2: Yeah, I mean, listen, we call ourselves macro investors because
Speaker 2: we like to look outside of the context of the
Speaker 2: financial markets, look at politics, economics, and technology and say, okay,
Speaker 2: what's the opportunity that's going to come along that might
Speaker 2: not be priced in or the risk. So, yes, the
Speaker 2: emblematic thing for our firm was the starting of a
Speaker 2: gold fund. Even though gold had been fixed against the
Speaker 2: dollar for the entirety of US history.
Speaker 1: You were guaranteed until the decoupling that your return was
Speaker 1: going to be exactly.
Speaker 3: Zero, exactly zero, right, no upside.
Speaker 1: So your father obviously was anticipating Nixon eventually going off
Speaker 1: the gold standard and severing that fixed rate.
Speaker 2: For gold, just like maybe spending today. Back then, spending
Speaker 2: on social programs, the war, the Vietnam War.
Speaker 1: You had the War on Poverty, the Great Program under Johnson,
Speaker 1: and then Vietnam spending was pretty substantial.
Speaker 3: Yeah, exactly.
Speaker 2: And so the idea is, all, right, what's again a
Speaker 2: multi year theme?
Speaker 3: Right?
Speaker 2: It's think its very hard to pick quarter to quarter, right,
Speaker 2: that is in there if you look at the bigger world,
Speaker 2: but it's not priced into the financial markets, and you said, listen,
Speaker 2: in history, gold has been the hedge, it's been the
Speaker 2: way to play inflation. So if I'm right, and it's
Speaker 2: you never know what the future is, but you picked
Speaker 2: your scenarios and.
Speaker 3: That's the way to go.
Speaker 2: And the beauty of that, you know that it's hard
Speaker 2: to forget. But in the seventies, gold shares gold companies
Speaker 2: went up like bitcoin does today because the costs of production.
Speaker 3: Didn't go up in the seventies.
Speaker 2: For oil, metals and gold, so that was and those
Speaker 2: stocks were like options.
Speaker 1: So the theme in the seventies was the decoupling, going
Speaker 1: off the gold standard and all the sexcess spending for gold.
Speaker 1: What is the theme in the twenty twenties for gold.
Speaker 2: Well, I think it's a question of the route are
Speaker 2: we returned to irresponsible government policies. And there's also another
Speaker 2: overlay barry, which is it was really big for the
Speaker 2: United States to seize Russian reserves after their invasion of Ukraine,
Speaker 2: because what you the reaction has been other countries are
Speaker 2: worried that the United States does the same thing, so
Speaker 2: they've been buying gold in their foreign cent banks at
Speaker 2: a rate that you really haven't seen for decades, So
Speaker 2: this is I.
Speaker 1: Know China has been a huge buyer of gold recently.
Speaker 3: It's across the table.
Speaker 1: Is China anticipating the US seizing their assets? That would
Speaker 1: be an active war.
Speaker 3: Yeah, but I mean if they invade Taiwan? Gotcha?
Speaker 2: So, I mean they've stopped buying government bonds and they've
Speaker 2: been increased.
Speaker 3: They haven't been.
Speaker 2: Sort of the biggest buyers, but who hasn't you know?
Speaker 2: You have countries. India has been the consistent buyer. A
Speaker 2: lot of central banks, like Eastern European banks. So it's
Speaker 2: a little bit of a mishmash. But the point is,
Speaker 2: you know your question, is gold sort of something that
Speaker 2: you want to have as a thematic investment today?
Speaker 3: I would say absolutely yes.
Speaker 2: Because of the US government spending at seven percent of GDP.
Speaker 2: If we inflate our way out of it, right, if
Speaker 2: we buy all that debt right, then people are not
Speaker 2: going to like the dollar and gold's going to go up.
Speaker 3: Got it?
Speaker 1: You mentioned bitcoin. Let's talk about cryptocurrencies and DeFi as
Speaker 1: a theme. With bitcoin at fifty sixty thousand dollars, how
Speaker 1: much upside is in bitcoin and what other aspects of
Speaker 1: crypto are or are not appealing.
Speaker 2: Let's focus on bitcoin. Like I said before, there's two
Speaker 2: technology trends of our lifetime, right, the Internet and AI.
Speaker 2: Internet finally came up with an asset. Right, it didn't
Speaker 2: have an asset. It didn't have its own gold. So
Speaker 2: I just look at bitcoin as its own gold. For
Speaker 2: the Internet gold, it's Internet gold. A question is is
Speaker 2: something else going to leap frog Bitcoin's popularity. I mean,
Speaker 2: it's extremely unlikely. Three hundred million people own it. About
Speaker 2: close to a million people use the bitcoin network every month,
Speaker 2: so I just don't see that happening. So if that's
Speaker 2: the case, I say, listen, in the long term, Bitcoin's
Speaker 2: going to be half the value of gold. I don't know.
Speaker 2: Young people like it, they buy it rather than gold.
Speaker 2: If you look at you know, activity and develop markets,
Speaker 2: it's bitcoin more than gold. Southeast Asia's more gold. So
Speaker 2: I just say, like we're in the middle of a
Speaker 2: multi year trend or this thing. At some point Bitcoin's
Speaker 2: going to be boring. I want like people to really
Speaker 2: understand that. Then in five years Bitcoin's going to be boring.
Speaker 2: It will have done its thing, it will have emerged
Speaker 2: as an alternative. It's kind of like silver. Today, it's
Speaker 2: an accompaniment to gold.
Speaker 1: There are literally thousands of other coins. To quote business
Speaker 1: Week rhymes with bitcoins. Of all the rest of the
Speaker 1: coins out there, are the only one that seemed to
Speaker 1: have had any real staying power as ethereum. How do
Speaker 1: you look at ether relative to Bitcoin? Is that a
Speaker 1: one two? Are those the two winners or what else
Speaker 1: should we be thinking about in the crypto space?
Speaker 2: Yeah, I mean I separate bitcoin as I said, the
Speaker 2: rest of this stuff is software investing. H I think
Speaker 2: it's you know, mystifying to call it, and all this
Speaker 2: other stuff it's software. And then the question is is
Speaker 2: any of this software, which is open source so you
Speaker 2: and I could copy it instantly, does any of it
Speaker 2: have any value? Are people paying to use this software?
Speaker 2: If you ask that question, there's only about thirty to
Speaker 2: fifty software protocols where people are actually paying. It's like
Speaker 2: a like you're saying, it's an digital assets exchange, or
Speaker 2: it's a social network, or a bunch of different things.
Speaker 2: For none of them is the usage above the ten
Speaker 2: million dollar, sorry, ten million person number. So it's it's
Speaker 2: a big option as to whether any of that stuff
Speaker 2: will be of value. So it's only grant.
Speaker 1: That it's a solution in search of a problem. But
Speaker 1: the upside is if a problem is identified that that
Speaker 1: crypto solves, it's potentially a multi trillion dollar sector of
Speaker 1: the economy.
Speaker 3: And have two things.
Speaker 2: Number one, last year was super important because the costs
Speaker 2: of using blockchains became predictable, Like you know how the
Speaker 2: bitcoin that became more and less expensive gas fees on
Speaker 2: a theory, that's like.
Speaker 3: The worst thing. That's like filling up your car.
Speaker 2: It costs fifty dollars a week and then you have
Speaker 2: to pay six hundred dollars, Like, I'm never going to
Speaker 2: use that. No real business is going to use that. Right,
Speaker 2: that was fixed in twenty twenty three, So you could
Speaker 2: either use.
Speaker 1: It the last coin being mined or something else.
Speaker 2: It's either Salona or an avalanche, which are fixed in
Speaker 2: terms of very low fees, or what they call layer
Speaker 2: two is don't worry about the technology. But the point
Speaker 2: is this database software solution now became price predictable. And
Speaker 2: the second point I would make to investors that may
Speaker 2: be skeptical, there's something called stable coins, which right these
Speaker 2: are tokens attract the value of the dollar, the velocity
Speaker 2: of trading of stable coins last year was ten trillion dollars,
Speaker 2: the same as the Visa network.
Speaker 3: Wow, now that's a curiosity. But I asked you to think,
Speaker 3: what if that goes up five x? Right?
Speaker 2: What if people constantly now on your phone start using
Speaker 2: stable coins as opposed to dollars. It's potential, it does.
Speaker 2: It may not matter to most people, but I'm just
Speaker 2: saying if you follow that space, that is a reasonable
Speaker 2: scenario for twenty four and twenty five.
Speaker 1: And I know a number of people have said, why
Speaker 1: are you paying fees to master Cardavisa? This will eventually
Speaker 1: and my answer is because if it gets stolen, they
Speaker 1: cover me for everything over fifty bucks. I don't have
Speaker 1: to worry about my password being hacked to my bitcoin.
Speaker 1: So there's still some growing pains on the crypto side,
Speaker 1: but eventually disintermediating the big banks and the big financial players,
Speaker 1: that's the potential upside for crypto and DeFi.
Speaker 2: One hundred percent a multi year thematic, if you will,
Speaker 2: kind of development.
Speaker 1: So to sum up, look to add themes that are
Speaker 1: complementary to your core portfolio. You can consider AI or
Speaker 1: India or gold or even bitcoin as an add on
Speaker 1: to your long term investment. I'm Barry Rudolts. You've been
Speaker 1: listening to Bloomberg's At the Money