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Speaker 1: Welcome to Trilliance. I'm Joel Weber and I'm Eric bell Chnus. Eric.

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Speaker 1: Later this month nine, technically the e t F first

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Speaker 1: started trading, and the history of the e t F

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Speaker 1: is actually something that you and I know a little

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Speaker 1: bit about. The first et F out of the gate

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Speaker 1: was Spider sp Y, and we've talked to a lot

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Speaker 1: of people about the history of the e t F,

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Speaker 1: but there was one person that we actually haven't had

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Speaker 1: a chance to ever talk to, and we got him

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Speaker 1: for today's episode. Who is he? Jay Baker Um and

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Speaker 1: Jay Baker And he can correct me if I'm wrong,

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Speaker 1: but I would call him a founding father of the

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Speaker 1: e t F world. He worked with Nate Most and

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Speaker 1: Steve Bloom who were at the American Stock Exchange and

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Speaker 1: that's where the that's where the idea was formed. And

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Speaker 1: it's a fascinating story because m X was the third

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Speaker 1: place behind Nastacin and Nicey, and they were looking for

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Speaker 1: something to get volume, and so they were like the

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Speaker 1: story of UM, this sort of down and out exchange

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Speaker 1: looking to get something going and UM they weren't getting

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Speaker 1: good listings and so they side just create their own thing,

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Speaker 1: you know how necessity is the mother of innovation. Uh,

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Speaker 1: this is a great case of that, and so J

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Speaker 1: I believe, was that am X and was tasked with

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Speaker 1: coming up with a marketing plan for this new thing.

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Speaker 1: UM called SPIDER, which stands for S ANDP Depository receipts

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Speaker 1: and today SPY. Just to bring you up to date,

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Speaker 1: is three seventy two billion dollars. That's the biggest et

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Speaker 1: F in the world. It also trades the most of

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Speaker 1: any E t F. UM usually trades more than the

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Speaker 1: next two or three stocks combined. So it is a monster.

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Speaker 1: It's like a It's created a whole ecosystem around it.

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Speaker 1: Can't say enough, can't really overstate how big of a

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Speaker 1: success and hit this one E t F was. And

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Speaker 1: as was said in a book, I wrote that they

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Speaker 1: started out making a product but ended up creating an industry.

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Speaker 1: And so Jay was right there in the early days.

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Speaker 1: It's gonna be fascinating to hear him kind of go

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Speaker 1: through some of those, uh early memories and moments. Also

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Speaker 1: joining us for this episode Katie Greifield, reporter with Bloomberg

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Speaker 1: News and a frequent guest on Trillions, as well as

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Speaker 1: of course Jay Baker, who's the founding member of Exchange

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Speaker 1: Treated Concepts, and he's also a founding father of the

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Speaker 1: e t F. And we should also just mention that

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Speaker 1: we're going to re release something that Eric and I

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Speaker 1: made a number of years ago called the e t

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Speaker 1: F Story, which will probably come up during the conversation today,

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Speaker 1: but it has a number of really interesting interviews with

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Speaker 1: key people who helped create the e t F, that

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Speaker 1: first e t F Spider Spy, as well as the

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Speaker 1: industry that came about afterwards. This time on Trillions founding

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Speaker 1: father J Baker, J. Katie, Welcome to Trillions, Thank you

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Speaker 1: very much. Okay, Jay, let's Red and the Clock. You

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Speaker 1: were at the American Stock Exchange in the late eighties

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Speaker 1: for students of history about the E t F. The

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Speaker 1: e t F was basically incepted in a white paper

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Speaker 1: about Black Monday that the SEC put together. UM and

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Speaker 1: there were two characters that UM Eric mentioned there, Nate

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Speaker 1: Most and Stephen Bloom, who basically read that report, found

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Speaker 1: a passage in it and almost reversed engineered something that

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Speaker 1: was requested by the SEC. So when did you first

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Speaker 1: hear about what they were working on? Okay, so let

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Speaker 1: me start with you had portfolio insurance that didn't work

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Speaker 1: well on on that particular day. And what that led

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Speaker 1: to next that the American Stock Exchange there was a

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Speaker 1: filing in for IPS Equity Index participations, and believe it

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Speaker 1: or not, this product was actually launched. It was basically

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Speaker 1: like the Spider, but it was based on cash. That

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Speaker 1: product did gain some attention. There were people trading it,

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Speaker 1: and the Chicago Mercantile sued the AMAS and they said,

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Speaker 1: it's a futures contract. Now there were differences in this product.

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Speaker 1: First of all, it's traded on a stock exchange. Futures

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Speaker 1: have a duration. The IPS Equity inex participations did not.

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Speaker 1: You could buy it on UH margin and the margins

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Speaker 1: and futures are much less. So nonetheless, the Chicago Marks

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Speaker 1: sued and they won the lawsuit. So next thing you know,

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Speaker 1: I was calling up firms and saying, look, the IPS

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Speaker 1: are going to stop trading on such and such a

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Speaker 1: day after that, and once again Nate Nate, Nate Most

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Speaker 1: and Steve Bloom were involved with that. But it's exactly

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Speaker 1: what you mentioned before, Eric, that the American Stock Exchange

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Speaker 1: would try to get the large listening. Starbucks and IBM

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Speaker 1: went to the New York very very difficult Washington posters

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Speaker 1: at the m X. There a bunch of oil and

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Speaker 1: gas companies, but difficult to get listenings at them. So

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Speaker 1: this really the IPPs part of this. But Spider, Steve

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Speaker 1: Bloom and they Most got together and we're trying to

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Speaker 1: figure out how you could create a product that was

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Speaker 1: physically backed. Couldn't do it uncashed were sued that was

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Speaker 1: backed by the actual securities. So Nate Most had a

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Speaker 1: background in commodity, so he was used to golden silver

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Speaker 1: and the commodities being weared house in in a warehouse.

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Speaker 1: So he's trying to figure out how do you wear

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Speaker 1: house five hundred stocks. So they got together with State

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Speaker 1: Street Bank with s l K, which was a lead

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Speaker 1: market maker. UH. Katherine Moriority was part of the legal

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Speaker 1: team and the all brainstorm. And when I talked about

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Speaker 1: some of the people that were involved as in Nate Most,

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Speaker 1: it was Steve Bloom, no doubt about it, Jim Ross,

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Speaker 1: Kathy Cucolo, Glenn Francis, all involved with the plumbing of

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Speaker 1: the Spider. UH. There was a guy named Gary Eisenrachet

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Speaker 1: spear leads and Kellogg. He was very instrumental and in

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Speaker 1: helping out and getting the trading going. And Kathleen Moriarity

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Speaker 1: seemed to be most of the time the key lawyer

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Speaker 1: uh for the Spider. Now, remember it was a unit

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Speaker 1: investment trust, so it was it had no board. One

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Speaker 1: of the reasons it was a unit investment trust is

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Speaker 1: you have no board. If the product had failed, you

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Speaker 1: didn't have to continue to pay several board members. The

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Speaker 1: disadvantage of a uni investment trust is you cannot loan

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Speaker 1: out any of the securities for stock loan. It's actually

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Speaker 1: a more conservative structure. But that was one of the

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Speaker 1: motivations for keeping it as a unit investment trust, which

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Speaker 1: it still is uh uh to this day. So the

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Speaker 1: product um also was helped a lot by State Street

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Speaker 1: Bank being involved with it. There was tremendous credibility because

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Speaker 1: State Street decided to be the custodian. The amics spoke

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Speaker 1: with a couple of large firms and and State Street

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Speaker 1: was the one that really wanted to be the custodian

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Speaker 1: for this product. So the product started trading. And I'll

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Speaker 1: bring up a story where uh one of my colleagues

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Speaker 1: called a block trader at a firm and said hey, listen,

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Speaker 1: if you trade a bunch of spiders, I'll give you

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Speaker 1: a spiders hat. And on day one, if you notice,

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Speaker 1: there was a million shairs traded, So there were a

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Speaker 1: couple of prints of five hundred thousand chairs UM that

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Speaker 1: were done because somebody was getting a spider hat. So

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Speaker 1: after that day one was a tremendous you know, there

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Speaker 1: there was there was a lot of trading on the product,

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Speaker 1: but as time went on, the trading sort of got

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Speaker 1: much lower and and by March April May there was

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Speaker 1: one particular day where it traded seventeen thousand, five hundred shairs.

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Speaker 1: And what happened was myself, UM and Steve Bloom were

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Speaker 1: called to Ivers Riley. Ivers Riley was the senior executive

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Speaker 1: vice president at the American Stock Exchange. He mysteriously called

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Speaker 1: us up to his office and he brought brought us

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Speaker 1: in and he said, listen, I want you too to

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Speaker 1: get together come up with an institutional marketing plan for

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Speaker 1: the Spider, and I want you to get two million

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Speaker 1: dollars in the Spider by the end of the year.

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Speaker 1: This was probably in I don't know, May, late April

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Speaker 1: something like that, And he said, you're gonna have a

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Speaker 1: report directly to me. I want I want you guys

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Speaker 1: to come in every two weeks and uh um speak

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Speaker 1: to me about about the progress that you're making. So

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Speaker 1: Steve and I basically got in touch with all the

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Speaker 1: block trading desks on Wall Street, Goldman, Sachs, Deutsche Bank,

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Speaker 1: I think Kid or Peabody might have been around back then,

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Speaker 1: City Bank. And we went to all these firms and

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Speaker 1: spoke to them, and you know, there was interest. There

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Speaker 1: was interest, but it was a little bit of a

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Speaker 1: shrug of the shoulders. So we kept on pursuing, going

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Speaker 1: to a lot of these large UH trading firms. And

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Speaker 1: at one point I called a the head the West

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Speaker 1: Coast senior mutual fund sales manager about the spider and

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Speaker 1: I said, uh, listen, have you heard about the spy. Later,

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Speaker 1: and we had to make these calls at the American

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Speaker 1: Stocks Change. Every time there's a new option, you had

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Speaker 1: to call the different broker dealers. They all shrugged their shoulders,

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Speaker 1: said thanks. So I made a call this senior person

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Speaker 1: at a large broker dealer and they said, look, I'm

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Speaker 1: calling him about the spider. And he goes, hold on,

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Speaker 1: he goes, I love the spider. I owned the spider

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Speaker 1: and you were never ever, ever going to get in

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Speaker 1: our office again. And by the way, I hope you failed.

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Speaker 1: Huge slap in the face. This this was the Will

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Speaker 1: Smith Chris Rock point in my life, you know. Just

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Speaker 1: I was like, whoa, I mean, um, I've made a

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Speaker 1: lot of calls on behalf of the ammys and nobody

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Speaker 1: had ever had, you know, such a violent reaction. But

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Speaker 1: the fact of the matter is this particular firm had

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Speaker 1: an SMP UH product that was eighty or ninety basis

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Speaker 1: points set up as a mutual fund. So that was

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Speaker 1: the day as far as I'm concerned. That was the

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Speaker 1: turning point, the hostility of that phone call. I turned

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Speaker 1: to Steve and I said, this isn't be successful because

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Speaker 1: we never get a reaction like that. It was a

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Speaker 1: threatening product because many many different firms at SMP five

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Speaker 1: funds internal that were much more than nine and a

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Speaker 1: half basis points uh, which was where the spider was at. So,

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Speaker 1: believe it or not, even though it was a slap

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Speaker 1: in the face, it was a great slap in the

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Speaker 1: face to me. It gave me confidence that this product

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Speaker 1: was gonna uh do do well. So then what we

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Speaker 1: did was we continued going to these different firms and

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Speaker 1: one of them we went to his die with Securities

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Speaker 1: and the individual that we were speaking to his name

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Speaker 1: Jim Phillips, and he ran a group of maybe six

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Speaker 1: or seven program traders Index arbitrjurs and he was interested

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Speaker 1: in in the Spider. Now, I'm I don't want to

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Speaker 1: make this more complex than it should be, but there

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Speaker 1: was another product out at this point. It was called

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Speaker 1: the super Trust. So the MX as super Trust had

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Speaker 1: six for parts to it money market SMP with a

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Speaker 1: put option covered call. But the one they did have

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Speaker 1: one piece that was similar to the Spider, I would

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Speaker 1: say almost identical. The price I think was much higher.

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Speaker 1: It was a little bit clunky because I think to

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Speaker 1: buy ten shares that was around lot. But what was

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Speaker 1: happening with super Trust was the other pieces weren't going particular,

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Speaker 1: weren't trading a lot, but that piece was trading well.

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Speaker 1: So as I was talking, when we spoke with Jim

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Speaker 1: Phillips at DIIWA, he had a million questions for us.

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Speaker 1: So Steve and I were answering all these questions about

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Speaker 1: the creation, redemption process, the flow process, and at one

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Speaker 1: point and the super trust UH product launched in November.

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Speaker 1: The Spider launched in late January, so they had a

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Speaker 1: three month head start. They had a billion dollars going

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Speaker 1: into it, and subscriptions not in that product, but I

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Speaker 1: think all the products, and of course the Spider. You know,

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Speaker 1: the Spider came out at party five. Because yes, the

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Speaker 1: the SMP was at four fifty. The average price of

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Speaker 1: a stock in the New York stock exchanged around forty dollars.

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Speaker 1: They use a devisor of ten to get it to

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Speaker 1: open at forty five. When the Spiders started trading on

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Speaker 1: January twenty nine, there were three creation units. The creation

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Speaker 1: units were fifty thousand shares and hundred and fifty thousand

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Speaker 1: shairs who were created times a price of forty five.

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Speaker 1: That's six point seven million dollars was in the Spider

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Speaker 1: on day one. And now you have three hundred seventy

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Speaker 1: billion in the Spiders, so many creations since then. But

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Speaker 1: what happened was we kept on badgering Diwa, We kept

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Speaker 1: on going back and answering questions and answering questions, and

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Speaker 1: one day was and this is while the volume was

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Speaker 1: somewhat tepid. Remember the opening day trade was just a trade,

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Speaker 1: five hundred thousand, five hundred thousands, No creations, right, you

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Speaker 1: didn't see any creations. So uh so we kept going

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Speaker 1: back to Diawa, and finally one day, after we had

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Speaker 1: address their questions, that two things happened. Um they mentioned

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Speaker 1: to me, he mentioned that Supertrust had been in there,

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Speaker 1: and then he said just very casually, you know, they

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Speaker 1: couldn't answer a lot of questions, and I was like,

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Speaker 1: I almost fell over. Didn't say anything, just said nothing,

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Speaker 1: just nodded. So what what? What? What they did at

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Speaker 1: Die with that day? They literally put in a creation

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Speaker 1: for I think about a hundred million that day, I

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Speaker 1: mean went through the process of doing it, and then

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Speaker 1: I think they created another hundred millions, So the Spider

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Speaker 1: Trust jumped up a couple of hundred million. Then from

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Speaker 1: that day on or shortly there after, Spider really never

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Speaker 1: traded less than a hundred thousand shares a day. In

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Speaker 1: I think the whole year they traded a hundred million shares,

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Speaker 1: which is four hundred thousand shares a day. Now, the

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Speaker 1: interesting thing was why did he do this? Nobody else

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Speaker 1: was seemed to be particularly interested. The reason that Die

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Speaker 1: with Securities created a couple of hundred million dollars of

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Speaker 1: the spiders. Is there were people that wanted to short

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Speaker 1: the spider. There weren't enough spiders around to borrow them

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Speaker 1: to short it. So what they did is we called

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Speaker 1: it create to loan. They created two hundred million in

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Speaker 1: a couple of tranches of the spider. And meanwhile, remember

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Speaker 1: their shorting SMP futures against this position. So they're long

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Speaker 1: two hundred million dollars of the spider, their short two

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Speaker 1: million dollars of the futures. So whether the market went

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Speaker 1: up four hundred points or dropped five d their risk

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Speaker 1: was ameliorated. And they kept that position on for probably

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Speaker 1: nine months to ten months, and they were earning a

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Speaker 1: return on it back then short term rates I think

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Speaker 1: one year treasuries, two year, three something like that. So

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Speaker 1: that to me was a huge turning point. So finally

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Speaker 1: I'll mention this as well that when those trades were done,

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Speaker 1: what you saw was the trades were printing away from

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Speaker 1: the exchange. So what people were seeing was and when

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Speaker 1: I say people Morgan Stanley, JP, Morgan Goldman sects are

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Speaker 1: seeing a million, then a couple of days later a million,

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Speaker 1: And what happens when they see that, oh gosh, that's

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Speaker 1: that's that's forty million dollars? Who is it? Do we

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Speaker 1: get the call? What's going on? What's and then they

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Speaker 1: saw the creation. So what you all of suddenly was

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Speaker 1: not only was somebody trading that that share amount, but

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Speaker 1: you're seeing assets going into the fund. So it alerted people, hey,

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Speaker 1: there's something going on. Look we have a product right

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Speaker 1: now at etc. That when they come in they trade

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Speaker 1: millions of shares. All of the big block traders are

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Speaker 1: aware of it. All of them are interested in that

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Speaker 1: type of flower. That's great. That's the whole story. And

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Speaker 1: die way, I think is is fascinating that sometimes you

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Speaker 1: just need someone to believe in you, you know when

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Speaker 1: when early believer, early adopter. What you're talking about reminds

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Speaker 1: me of when any new E t F launches. Sometimes,

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Speaker 1: like an E t F, like jets, kind of hung

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Speaker 1: in oblivion for a couple of years and then it

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Speaker 1: got a couple of trades, had a nice little run

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Speaker 1: in performance, and then boom, it starts trading a hundred

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Speaker 1: million dollars a day, and then all of a sudden

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Speaker 1: people are curious about it. So it's it's interesting that

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Speaker 1: set a tone for how every launch I think goes

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Speaker 1: after that. I think also what you brought up that

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Speaker 1: was interesting was the fee. I was just exploring the

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Speaker 1: whole world of Vanguard in a book, and the idea

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Speaker 1: of the fee being used to match Vanguards five hundred

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Speaker 1: funds that way you could compete head to head with

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Speaker 1: Vanguard turned out to be crucial because then obviously retail

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Speaker 1: investors could use this, but at ninety bits it might

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Speaker 1: not take over in the retail market. Did you, when

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Speaker 1: you were selling it think of it more as a

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Speaker 1: mutual fund that happens to trade, or a futures contract.

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Speaker 1: It's actually physically back with the thocks behind. No, no, no, no,

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Speaker 1: we didn't sell it ever as a futures contract. As

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Speaker 1: a matter of fact, Um, well, once again I'm not

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Speaker 1: using names. One of my friends was telling somebody there

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Speaker 1: were country baskets. I think they had some thing that

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Speaker 1: was similar to an SMP five fund. It wasn't exactly,

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Speaker 1: but that this individual was telling people it was a

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Speaker 1: futures contract, and that was a no no. I called

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Speaker 1: him up and and had some choice words with him.

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Speaker 1: Don't start this. It's not a future sy it's backed

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Speaker 1: by physical stock. We always pushed the fact that it

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Speaker 1: was back I love I love the futures. They it

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Speaker 1: was think about this product. You had futures that traded actively,

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Speaker 1: you had options on futures, and now you had this

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Speaker 1: security back by the SMP five funder. They all together

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Speaker 1: two plus two equal to AID. So yeah, now what

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Speaker 1: you're getting at here is this is was registered and

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Speaker 1: Spy took like four years to get through the SEC.

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Speaker 1: So it stat with the SEC for like four years,

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Speaker 1: which is a long time. Yes, And I think that

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Speaker 1: to your point, that's why I would also be like, no,

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Speaker 1: this is not a derivative. This is an actual mutual

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Speaker 1: fund that passed the same regulation UM as A as

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Speaker 1: A as A, I don't know a t real price

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Speaker 1: or a fidelity mutual fund um. And then this brings

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Speaker 1: up another question. While Spy is sitting in regulatory uh

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Speaker 1: with the SEC, Canada comes out and launches the TIPS.

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Speaker 1: But according to my interview with Bloom, he says that

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Speaker 1: the Toronto people came down and just Nate most was

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Speaker 1: just cool and shared information with them. They took the

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Speaker 1: idea to Canada and just got through the regulation quicker.

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Speaker 1: And now Canada goes around saying they were out first.

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Speaker 1: I try to put this other side to this story

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Speaker 1: out there. But what's your take on that whole thing

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Speaker 1: with Canada and the US. Oh? Boy, um, I'm not

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Speaker 1: I don't. I don't think I was involved with those conversations,

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Speaker 1: So I can't. I can't actually say that that that's

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Speaker 1: what happened. That's a little bit unclear to me because

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Speaker 1: I have heard for years that the Canadians said that,

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Speaker 1: uh uh, you know that they actually came out with

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Speaker 1: the idea first. And I think you're right. It was

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Speaker 1: called tips um. But what I will say is one

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Speaker 1: of the and I think Kathleen Moriarty one of the

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Speaker 1: things she mentioned about Spider, Remember this is the first

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Speaker 1: time something like this was done. It was sort of

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Speaker 1: a closed end fund, open ended fund, right, So I

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Speaker 1: remember she was saying that when it went to the SEC,

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Speaker 1: it it went to almost every division of the FCC,

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Speaker 1: investment management, trading and markets, economic and risk analysis, and

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Speaker 1: who knows, it might have even gone to enforcement. I

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Speaker 1: don't know, but that was one of the reasons that

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Speaker 1: it took so long. Clearly that was another reason why

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Speaker 1: it took Supertrust two years to get their exemptive relief

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Speaker 1: because there's was a more complicated structure. Jay, I want

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Speaker 1: to go back to your slap in the face moment

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Speaker 1: that uh what is it? Will Smith Chris Rock moment,

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Speaker 1: because this is something I wonder about, especially with like

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Speaker 1: very popular songs like did the band did the artists

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Speaker 1: know that it was going to be such a hit?

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Speaker 1: And you said that you knew that it was going

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Speaker 1: to be successful. But I mean when when in those

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Speaker 1: four years when you when Spy was still in development,

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Speaker 1: I mean, did you have any inkling that you know,

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Speaker 1: e t f s were really going to take off

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Speaker 1: to the extent that they have that you know one

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Speaker 1: day this would be in almost four hundred billion dollar product. Yeah, No,

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Speaker 1: I don't. I don't think I had that. I I

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Speaker 1: what I did know partially the reason I brought up

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Speaker 1: the apps was people like the apps, and I thought,

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Speaker 1: this is interesting. They like the apps. They've got a

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Speaker 1: love of the spider that's actually backed by by the

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Speaker 1: physical And I thought, look, we were we were told

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Speaker 1: we were ordered to get two hundred million dollars in

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Speaker 1: that product. We didn't do a lot of thinking about.

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Speaker 1: I mean, we came up with a marketing plan and

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Speaker 1: ended up executing. When the volume let's say, averaging whatever,

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Speaker 1: four dred thousand shares a day, it was crystal clear

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Speaker 1: this was going to be a multibillion dollar product. How

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Speaker 1: many billions, I don't know. And look, when you think

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Speaker 1: about the American Stock Exchange, they created this product. It

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Speaker 1: wasn't nastic and it wasn't the New York uh State Street,

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Speaker 1: of course, is the trust they want. They were on

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Speaker 1: the trust. But PDR Services is a sponsor, and the

381
00:21:07,880 --> 00:21:10,919
Speaker 1: AMEX was PDR Services. They were sort of the steward

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Speaker 1: of the product that had the ability to hire and

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Speaker 1: fire a custodian right or a distributor. So and then

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Speaker 1: it passed on to the New York Stock Exchange. You

385
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Speaker 1: can look it up. What I think about is um

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Speaker 1: the American Stock Exchange situation that as the years went

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Speaker 1: by and as it was trading more and more, the

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Speaker 1: AMEX market share of the volume at one point towards

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Speaker 1: the end was less than one percent. You get a

390
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Speaker 1: hundred million shares traded, they're not trading a million, they're

391
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Speaker 1: trading four dred thousand shares. All it was trading on

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Speaker 1: the different exchanges. So one of the things that I'm

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Speaker 1: not we weren't. You've got to realize with the exchange,

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Speaker 1: you're thinking about trading and exchange fees. But I was

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Speaker 1: speaking with somebody this morning, and what would have been

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Speaker 1: interesting is if the m X could have gotten two

397
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Speaker 1: basis points in the spider two basis points on billion

398
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Speaker 1: dollars is seventy five million dollars based on the assets

399
00:22:05,520 --> 00:22:08,160
Speaker 1: that they have. Could that have been done? How could

400
00:22:08,240 --> 00:22:11,479
Speaker 1: you do it? The exchanges are self regulated, the the

401
00:22:11,480 --> 00:22:14,000
Speaker 1: the the SEC. I don't think one of the American

402
00:22:14,080 --> 00:22:17,359
Speaker 1: stock exchanged to be uh, they weren't really an advisor.

403
00:22:17,680 --> 00:22:21,119
Speaker 1: Could the AMEX have created a broker dealer? Could a

404
00:22:21,160 --> 00:22:24,440
Speaker 1: clever of attorney come up and create a broker dealer?

405
00:22:24,520 --> 00:22:27,040
Speaker 1: Maybe the AMEX is the distributor taking the creations of

406
00:22:27,080 --> 00:22:30,679
Speaker 1: redemptions getting one or two basis points. And remember another thing,

407
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Speaker 1: if you could get a couple of basis points in

408
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Speaker 1: the Spider, maybe the other people that launched the vanguards

409
00:22:35,880 --> 00:22:37,720
Speaker 1: the eye shares, maybe they would have been willing to.

410
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Speaker 1: But um, that's not how it worked out. And in

411
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Speaker 1: the end, the AMEX was trading I'll say it again,

412
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Speaker 1: less than one percent of the total volume of a

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00:22:46,400 --> 00:22:50,359
Speaker 1: superior product that they created. That that really is um

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Speaker 1: fascinating and just a little tragic. I mean it's almost like, yeah, yeah,

415
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Speaker 1: I never thought of it that way. Here's here's another thing.

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Speaker 1: I'm just praying up a couple. I know you're probably

417
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Speaker 1: aware of this, but when the when the Union Investment

418
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Speaker 1: Trust has a lifespan of it's either twenty or forty years.

419
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Speaker 1: I think it's twenty years. So what people were worried

420
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Speaker 1: about the American Stock Exchange was in twenty years, you

421
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Speaker 1: have to roll it over to another one huge capital

422
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Speaker 1: gain if if the SMP was out and the SMP

423
00:23:20,359 --> 00:23:23,640
Speaker 1: of course was up. Remember Spider was at forty five

424
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Speaker 1: dollars in uh January and now it's almost four hundred.

425
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Speaker 1: So there were huge concerns about a rollover. So what

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Speaker 1: they did was they ended up and this had been

427
00:23:35,520 --> 00:23:39,840
Speaker 1: done before. What they ended up doing was getting eleven kids.

428
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Speaker 1: I think you've probably heard this basically, we've we've written

429
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Speaker 1: that story. Yeah, the trust, you wrote the whole start. Well, yeah,

430
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Speaker 1: so you know they got eleven kids under two years old.

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Speaker 1: And somebody came in my office one day and said,

432
00:23:52,200 --> 00:23:53,920
Speaker 1: you know, how how old is your daughter? I said,

433
00:23:54,040 --> 00:23:56,879
Speaker 1: she's nine months old. Okay, she's gonna we'd like her

434
00:23:56,880 --> 00:23:58,800
Speaker 1: to be in the Spider Trust. So she was born

435
00:23:58,840 --> 00:24:03,840
Speaker 1: on May seventh, nine two, so she she's a Spider baby.

436
00:24:03,920 --> 00:24:06,080
Speaker 1: So her name is in the legal docs. And then

437
00:24:06,119 --> 00:24:10,680
Speaker 1: Cliff Webber's daughter is in there, and Claire McGrath, who

438
00:24:10,680 --> 00:24:13,120
Speaker 1: was an attorney at damics her son. So that's sort

439
00:24:13,160 --> 00:24:16,800
Speaker 1: of just an interesting tidbit. By the way, when when

440
00:24:16,880 --> 00:24:20,280
Speaker 1: when when Bloomberg got in touch with me, they mentioned

441
00:24:20,320 --> 00:24:23,879
Speaker 1: that I had totally forgotten that I signed signed my

442
00:24:24,160 --> 00:24:27,080
Speaker 1: daughter's life away on this thing. And then then the

443
00:24:27,320 --> 00:24:30,320
Speaker 1: reporter came back and said, Jay, you weren't totally being upfront.

444
00:24:30,359 --> 00:24:32,680
Speaker 1: What do you mean is your daughter named Julia? And

445
00:24:32,760 --> 00:24:35,240
Speaker 1: I went, oh, my god, okay, she was one of

446
00:24:35,320 --> 00:24:38,680
Speaker 1: the Spider babies, but I did not remembered at that time.

447
00:24:38,880 --> 00:24:41,800
Speaker 1: What I'm thinking about now is is there any way

448
00:24:41,840 --> 00:24:44,040
Speaker 1: that I can hire some clever lawyers and maybe get

449
00:24:44,080 --> 00:24:47,600
Speaker 1: my daughter a basis point on the Spider Spider Baby.

450
00:24:48,080 --> 00:24:55,400
Speaker 1: Hopefully they're listening right theoretically, yeah, I know the Spy kids.

451
00:24:55,440 --> 00:24:58,879
Speaker 1: I mean just to recab um really quickly. So originally

452
00:24:58,920 --> 00:25:02,359
Speaker 1: Spy was going to what expire in twenty five years.

453
00:25:02,359 --> 00:25:05,800
Speaker 1: But now it's when the last Spy kid perishes. Yeah,

454
00:25:05,920 --> 00:25:09,240
Speaker 1: basically it is. I think it had ten or eleven kids,

455
00:25:09,280 --> 00:25:14,000
Speaker 1: and it expires twenty years after the death sort of

456
00:25:14,480 --> 00:25:18,440
Speaker 1: ghoulish after the death of the last Spider baby, which

457
00:25:18,520 --> 00:25:21,120
Speaker 1: in statistically means about a hundred and ten years. That's

458
00:25:21,160 --> 00:25:23,760
Speaker 1: what it meant statistically. And by the way, according to

459
00:25:23,800 --> 00:25:26,320
Speaker 1: a friend recently, they said, you could do you could

460
00:25:26,320 --> 00:25:29,760
Speaker 1: get another set of kids and that is ten years

461
00:25:29,800 --> 00:25:34,200
Speaker 1: do the same thing. Yeah, the second generation Spy kids.

462
00:25:34,200 --> 00:25:36,119
Speaker 1: It's a little bit, it's a little bit googlish to

463
00:25:36,200 --> 00:25:38,840
Speaker 1: that point. I wanted to sort of goalish thinking about it,

464
00:25:38,880 --> 00:25:40,960
Speaker 1: because the tyranny of time, it's going to happen, the

465
00:25:41,040 --> 00:25:43,800
Speaker 1: tyranny of year around and I'm going to write that town.

466
00:25:43,840 --> 00:25:46,840
Speaker 1: I want to talk about sort of the next thirty years.

467
00:25:46,840 --> 00:25:48,600
Speaker 1: This is something Eric and I were actually chatting about

468
00:25:48,680 --> 00:25:52,520
Speaker 1: this morning because in thinking about Spies thirtieth birthday, obviously

469
00:25:52,600 --> 00:25:56,560
Speaker 1: it's range supreme for thirty years. What it has what

470
00:25:56,800 --> 00:26:00,800
Speaker 1: over three hundred seventy billion dollars in assets, Uh so,

471
00:26:01,200 --> 00:26:03,600
Speaker 1: by far and away, it's it's dominant, especially when you

472
00:26:03,600 --> 00:26:06,400
Speaker 1: think about the liquidity. But the question I want to ask,

473
00:26:06,400 --> 00:26:10,920
Speaker 1: because I'm a Debbie Downer, is who takes the crown away?

474
00:26:11,200 --> 00:26:14,800
Speaker 1: You know what, how long can Spy remain on top

475
00:26:15,040 --> 00:26:18,239
Speaker 1: at nine basis points right now? When you have you know,

476
00:26:18,640 --> 00:26:23,520
Speaker 1: competing products from black Rock, from Vanguard at three basis points.

477
00:26:23,520 --> 00:26:25,520
Speaker 1: I would love to hear your thoughts on that. My

478
00:26:25,640 --> 00:26:29,680
Speaker 1: thoughts are that price makes a difference, and I think

479
00:26:29,720 --> 00:26:32,240
Speaker 1: at some point one of those funds could overtake it.

480
00:26:32,800 --> 00:26:36,720
Speaker 1: I'm not sure that they'll overtake the trading volume because

481
00:26:36,720 --> 00:26:38,440
Speaker 1: if you look at the trading volument and there's they're

482
00:26:38,440 --> 00:26:41,840
Speaker 1: both millions of shares right there. There's still millions and

483
00:26:41,880 --> 00:26:44,439
Speaker 1: millions of shares. But the fact is they're both at

484
00:26:44,520 --> 00:26:47,040
Speaker 1: three basis points. You've got a competing product in nine

485
00:26:47,040 --> 00:26:50,600
Speaker 1: and a half basis points. Nobody should be concerned about

486
00:26:50,640 --> 00:26:54,480
Speaker 1: the liquidity of the Vanguard or Ice shares. Uh Core, Yeah,

487
00:26:54,920 --> 00:26:58,360
Speaker 1: you know SMP funds. So it could happen, And if

488
00:26:58,359 --> 00:27:00,679
Speaker 1: you look at it, they're getting closer. I mean, I

489
00:27:00,720 --> 00:27:03,399
Speaker 1: think both those products are in the one of them

490
00:27:03,480 --> 00:27:05,840
Speaker 1: I think is around two billion. I don't I don't

491
00:27:05,880 --> 00:27:09,439
Speaker 1: have it in front of me, but um, it's not

492
00:27:09,480 --> 00:27:13,920
Speaker 1: gonna happen on my watch. I just real quick interesting

493
00:27:13,920 --> 00:27:17,480
Speaker 1: fun facts. Spy actually was the biggest ETF the whole time,

494
00:27:17,520 --> 00:27:20,960
Speaker 1: except for one day. I think in August. G l

495
00:27:21,000 --> 00:27:23,879
Speaker 1: D was bigger for one day, but then it changed

496
00:27:23,880 --> 00:27:26,680
Speaker 1: and SPY took over one day. So I just want

497
00:27:26,680 --> 00:27:31,520
Speaker 1: to talk about the folks who created the product. Jay,

498
00:27:31,960 --> 00:27:34,120
Speaker 1: you know, Nate Most, Stephen Bloom being probably the most

499
00:27:34,160 --> 00:27:37,439
Speaker 1: instrumental architects, and and I'm curious, I mean, since you

500
00:27:37,520 --> 00:27:42,760
Speaker 1: knew them. Um, you know, Eric's interviewed Bloom before. Um,

501
00:27:42,800 --> 00:27:46,639
Speaker 1: he's pretty quiet these days. Nate Most, obviously it passed

502
00:27:46,680 --> 00:27:49,480
Speaker 1: away years ago. He was pretty old when he actually

503
00:27:49,840 --> 00:27:52,440
Speaker 1: helped create it, right, So I'm curious, what did it,

504
00:27:52,520 --> 00:27:55,400
Speaker 1: what did it take? What was it about? Uh, those

505
00:27:55,400 --> 00:27:58,000
Speaker 1: two guys and the people around them that led to

506
00:27:58,040 --> 00:28:04,720
Speaker 1: this financial innovation, Well, you know they were um so Nate.

507
00:28:05,000 --> 00:28:07,080
Speaker 1: I think Nate Most got his job at the NAMES

508
00:28:07,080 --> 00:28:09,800
Speaker 1: when he was seventy. You know, Nate Most, I had,

509
00:28:10,840 --> 00:28:13,480
Speaker 1: I got along with him. He spoke his mind. He

510
00:28:13,800 --> 00:28:17,280
Speaker 1: seventy years old, seventy one, seventy three. He did not

511
00:28:17,320 --> 00:28:20,399
Speaker 1: pull punches. I wouldn't. I don't think he was particularly

512
00:28:21,400 --> 00:28:26,320
Speaker 1: I don't think he was particularly political, and he spoke up.

513
00:28:26,600 --> 00:28:28,119
Speaker 1: And the other thing is, and I am friendly with

514
00:28:28,160 --> 00:28:32,399
Speaker 1: Steve Blohm and and he's yeah, he's um, he's still working,

515
00:28:32,440 --> 00:28:35,840
Speaker 1: but not not in the securities business. And uh, Steve Bull,

516
00:28:36,119 --> 00:28:38,760
Speaker 1: Steve Bloom was a bull. He was a PhD from Harvard,

517
00:28:39,240 --> 00:28:42,120
Speaker 1: and they got it in in his mind to get

518
00:28:42,160 --> 00:28:44,000
Speaker 1: this thing done. And he was one of the individuals

519
00:28:44,040 --> 00:28:46,920
Speaker 1: that really pushed push this thing through the sec And

520
00:28:46,960 --> 00:28:49,480
Speaker 1: don't get me wrong, you know Jim Ross and Glenn Francis,

521
00:28:49,520 --> 00:28:52,920
Speaker 1: Cath Cathy Cucolo, But I'm talking about those two individuals

522
00:28:52,920 --> 00:28:56,080
Speaker 1: at the amics. The the idea originated at the MS

523
00:28:56,440 --> 00:28:59,000
Speaker 1: and as I said, PDR was a steward of the

524
00:28:59,000 --> 00:29:03,440
Speaker 1: product and was involved with getting the different service providers.

525
00:29:03,480 --> 00:29:06,840
Speaker 1: But um, look, they had a dynamic chemistry. And I

526
00:29:06,880 --> 00:29:09,840
Speaker 1: would say it was dynamic. It was not. Were they

527
00:29:10,120 --> 00:29:12,880
Speaker 1: all huggy wuggy? I wouldn't. I wouldn't say that. I

528
00:29:12,880 --> 00:29:17,360
Speaker 1: would say that they they they they were both very Uh,

529
00:29:17,680 --> 00:29:21,640
Speaker 1: both of them were strong willed people. Well think I

530
00:29:21,680 --> 00:29:24,880
Speaker 1: think it's just two plus two equaled eight and getting

531
00:29:24,880 --> 00:29:27,880
Speaker 1: things done. The other thing that about those two that

532
00:29:27,960 --> 00:29:30,520
Speaker 1: I found interesting was as you said, most might have

533
00:29:30,560 --> 00:29:35,600
Speaker 1: been seventy three ish and Bloom was twenty seven. You

534
00:29:35,720 --> 00:29:39,560
Speaker 1: rarely have two people working together with that massive of

535
00:29:39,600 --> 00:29:42,800
Speaker 1: an age gap, and I have to think that played

536
00:29:42,840 --> 00:29:46,240
Speaker 1: a part in that. I guess Bloom Moore book smart

537
00:29:46,240 --> 00:29:48,760
Speaker 1: at that point, and but most had a lot of

538
00:29:48,800 --> 00:29:52,680
Speaker 1: life experienced worked on submarines, I mean, worked at the

539
00:29:52,680 --> 00:29:57,000
Speaker 1: Pacific all that. I feel as though when someone has

540
00:29:57,040 --> 00:29:59,840
Speaker 1: that much experience, they're able to like pull from that

541
00:30:00,080 --> 00:30:04,120
Speaker 1: and use and find templates. And then Bloom probably had

542
00:30:04,480 --> 00:30:08,000
Speaker 1: some of the um I guess the youth that's like

543
00:30:08,080 --> 00:30:10,040
Speaker 1: we can do this, like he doesn't know what can't

544
00:30:10,040 --> 00:30:12,720
Speaker 1: be done. And I think that age gap is really

545
00:30:12,760 --> 00:30:16,040
Speaker 1: just unusual. That is unusual. And what I would say

546
00:30:16,040 --> 00:30:19,240
Speaker 1: about Bloom is he's an executioner. He knows how to execute.

547
00:30:19,240 --> 00:30:21,280
Speaker 1: When he gets in his mind he's going to execute,

548
00:30:21,720 --> 00:30:24,760
Speaker 1: he's he is not going to give up. He's an executioner.

549
00:30:34,400 --> 00:30:36,440
Speaker 1: What do you think the e t F has yet

550
00:30:36,480 --> 00:30:40,040
Speaker 1: to accomplish that? It still needs to So I think

551
00:30:40,120 --> 00:30:45,040
Speaker 1: last year there was six and seven billion dollars that

552
00:30:45,240 --> 00:30:47,440
Speaker 1: came in slightly lower than the year before. I think

553
00:30:47,440 --> 00:30:51,760
Speaker 1: it was it was seven hundred fifty billion. So what

554
00:30:51,800 --> 00:30:56,440
Speaker 1: we're saying is um at a t s. We're saying

555
00:30:56,840 --> 00:30:59,720
Speaker 1: a lot of interest from mutual funds that want to

556
00:30:59,720 --> 00:31:04,680
Speaker 1: do versions right for for tax efficiency. And it's tricky

557
00:31:04,720 --> 00:31:06,720
Speaker 1: because if you think about the mutual funds. One of

558
00:31:06,760 --> 00:31:11,280
Speaker 1: my friends was telling me, one of the reasons that clients,

559
00:31:11,560 --> 00:31:14,239
Speaker 1: you know, stay in mutual funds is and and and

560
00:31:14,320 --> 00:31:16,840
Speaker 1: not get out and just you know, by by a

561
00:31:16,880 --> 00:31:20,240
Speaker 1: spider or something like that is huge capital gains they've

562
00:31:20,280 --> 00:31:23,160
Speaker 1: they've they've had, you know, they've owned the mutual fund forever.

563
00:31:23,240 --> 00:31:26,440
Speaker 1: So if you can convert a mutual fund in a

564
00:31:26,520 --> 00:31:29,280
Speaker 1: tax free manner, you still have your low cost basis,

565
00:31:29,320 --> 00:31:32,480
Speaker 1: but you're not getting hit with a sale. I think

566
00:31:32,480 --> 00:31:36,360
Speaker 1: that's a huge, huge advantage. And we're seeing more mutual

567
00:31:36,400 --> 00:31:39,160
Speaker 1: funds doing this the same thing with separately managed accounts.

568
00:31:39,600 --> 00:31:42,600
Speaker 1: Their firms out there with large and small separately managed

569
00:31:42,640 --> 00:31:47,040
Speaker 1: accounts that have started to convert their separately managed accounts

570
00:31:47,040 --> 00:31:48,920
Speaker 1: into e t f because the t f is is

571
00:31:48,920 --> 00:31:52,239
Speaker 1: a more tax efficient structure. I think we're at just

572
00:31:52,360 --> 00:31:56,160
Speaker 1: the beginning of that, and this could be billions and

573
00:31:56,240 --> 00:31:58,840
Speaker 1: billions of dollars because generally, if you think about the

574
00:31:58,920 --> 00:32:01,680
Speaker 1: mutual funds are to do it. They're probably larger ones,

575
00:32:02,280 --> 00:32:04,280
Speaker 1: you know, mutual funds that have you know, hundreds of

576
00:32:04,320 --> 00:32:06,040
Speaker 1: millions of dollars. You could do it for a small

577
00:32:06,040 --> 00:32:09,080
Speaker 1: one as well. But we're getting the phone calls on this.

578
00:32:09,360 --> 00:32:11,520
Speaker 1: Lots of people are getting the phone calls and were

579
00:32:11,560 --> 00:32:15,000
Speaker 1: ready to do it, and um, I think that that's

580
00:32:15,000 --> 00:32:18,320
Speaker 1: gonna be a huge part of the growth. What I

581
00:32:18,360 --> 00:32:21,200
Speaker 1: will say is it's harder to do the thematic. When

582
00:32:21,280 --> 00:32:23,160
Speaker 1: you look at the thematic products, a lot of them

583
00:32:23,160 --> 00:32:26,400
Speaker 1: went up, they went down. It's harder to do with thematic.

584
00:32:26,480 --> 00:32:29,680
Speaker 1: You have to have something very very interesting and unusual.

585
00:32:30,160 --> 00:32:32,840
Speaker 1: And one of my favorite et F and Eric you

586
00:32:32,920 --> 00:32:35,719
Speaker 1: brought up was the jets. I've been watching that for

587
00:32:35,840 --> 00:32:38,400
Speaker 1: years and uh, quite frankly, he's the only one that

588
00:32:38,480 --> 00:32:40,560
Speaker 1: has it. It's was sort of dormant for six or

589
00:32:40,560 --> 00:32:43,880
Speaker 1: seven years, and exactly what you said, pandemic came. The

590
00:32:43,920 --> 00:32:47,280
Speaker 1: airlines were super volatile. That thing started. That thing had

591
00:32:47,320 --> 00:32:49,840
Speaker 1: forty million and popped up to six billion with millions

592
00:32:49,880 --> 00:32:52,680
Speaker 1: of shares traded. But not every E t F does

593
00:32:52,720 --> 00:32:55,760
Speaker 1: it that that. Luckily for the individual running he kept

594
00:32:55,760 --> 00:32:58,480
Speaker 1: it open and for eight years, it didn't do a lot,

595
00:32:58,680 --> 00:33:02,160
Speaker 1: got up to a hundred, dropped to forty. But um,

596
00:33:02,240 --> 00:33:05,320
Speaker 1: the pandemic ignited. That was that was like a stick

597
00:33:05,320 --> 00:33:09,080
Speaker 1: of dynamite for for the airline, that air airline et

598
00:33:09,280 --> 00:33:13,239
Speaker 1: F well, another stick of dining in my I'm not

599
00:33:13,280 --> 00:33:16,160
Speaker 1: sure how exactly I want to phrase the metaphor here,

600
00:33:16,520 --> 00:33:18,240
Speaker 1: but when you think about the pandemic and what it

601
00:33:18,280 --> 00:33:20,040
Speaker 1: meant for e t f s, I mean it's hard

602
00:33:20,080 --> 00:33:22,840
Speaker 1: not to have a conversation about fixed income e t

603
00:33:23,000 --> 00:33:25,680
Speaker 1: f s for example, like the FED actually stepping in

604
00:33:26,280 --> 00:33:28,400
Speaker 1: buying credit e t f s. I feel like that

605
00:33:28,480 --> 00:33:32,240
Speaker 1: was a big, um, you know, point of legitimization. Is

606
00:33:32,240 --> 00:33:35,800
Speaker 1: that a word, jol, You're you're the you're the editor here, Um,

607
00:33:35,840 --> 00:33:38,080
Speaker 1: but I kind of and I mean we're talking about

608
00:33:38,080 --> 00:33:40,640
Speaker 1: sector e t f s. We talked just brought up

609
00:33:40,640 --> 00:33:42,560
Speaker 1: fixed income et fs. Do I want to get your

610
00:33:42,680 --> 00:33:46,760
Speaker 1: thoughts on whether we're like reaching the existential limits of

611
00:33:46,960 --> 00:33:49,080
Speaker 1: what an e t F is because one of the

612
00:33:49,240 --> 00:33:53,280
Speaker 1: big innovations in two was single stock e t f

613
00:33:53,400 --> 00:33:57,080
Speaker 1: s for example. So again, just in reflecting on the

614
00:33:57,160 --> 00:34:00,800
Speaker 1: past thirty years, going from just a passive UH index

615
00:34:00,880 --> 00:34:06,120
Speaker 1: tracking exchange traded fund, which was extremely revolutionary. Here we are, uh,

616
00:34:06,320 --> 00:34:09,480
Speaker 1: you know, talking about single stock ETFs, all flavors of

617
00:34:09,600 --> 00:34:12,200
Speaker 1: leverage gtfs. We still don't have a bitcoin ETF, but

618
00:34:13,120 --> 00:34:17,239
Speaker 1: what more white spaces there? Yeah, So what I think is,

619
00:34:17,400 --> 00:34:19,960
Speaker 1: I I still think that there's a lot of room

620
00:34:20,160 --> 00:34:23,440
Speaker 1: for fixed income ETFs. And there are a couple of

621
00:34:23,520 --> 00:34:26,800
Speaker 1: new companies there that have launched, like twenty five Bond

622
00:34:26,840 --> 00:34:28,560
Speaker 1: Blocks is one, and I think they've got a lot

623
00:34:28,640 --> 00:34:31,359
Speaker 1: of people there, They've got a good infrastructure. I think

624
00:34:31,400 --> 00:34:35,000
Speaker 1: they're they're gonna get there. Look, the single stock ETFs,

625
00:34:35,080 --> 00:34:37,800
Speaker 1: the only one that's got any assets is really the Tesla.

626
00:34:38,080 --> 00:34:39,680
Speaker 1: I think it's up to a hundred million. The rest

627
00:34:39,719 --> 00:34:43,640
Speaker 1: of them really haven't done well. Uh you're gonna You're

628
00:34:43,719 --> 00:34:46,040
Speaker 1: always gonna have and I'm not I'm not against this,

629
00:34:46,360 --> 00:34:49,720
Speaker 1: you know, but I never really thought that the single

630
00:34:49,840 --> 00:34:54,560
Speaker 1: stock ETFs would do that well. Um, I understand people

631
00:34:55,080 --> 00:35:00,640
Speaker 1: you know, trying to you know, you know, strike eening again,

632
00:35:01,360 --> 00:35:03,719
Speaker 1: but um, you know, the markets sort of said that

633
00:35:03,920 --> 00:35:07,120
Speaker 1: there's not that much interest in those particular products. Yet

634
00:35:07,160 --> 00:35:10,120
Speaker 1: I would say, you know, a set of twenty five new,

635
00:35:10,640 --> 00:35:14,719
Speaker 1: very low priced, different fixed income products. I think I

636
00:35:14,800 --> 00:35:17,760
Speaker 1: think that will work. I think that there will continue

637
00:35:17,840 --> 00:35:20,000
Speaker 1: to be new and clever e t F s. The

638
00:35:20,120 --> 00:35:24,400
Speaker 1: single stock. I shrugged my shoulders about not against them

639
00:35:24,480 --> 00:35:28,320
Speaker 1: if they take off, go go go. But yeah, you know,

640
00:35:28,360 --> 00:35:31,520
Speaker 1: a lot of the remember interviewing some other of the

641
00:35:31,560 --> 00:35:33,319
Speaker 1: founding father types, and I think a lot of them

642
00:35:33,360 --> 00:35:36,319
Speaker 1: were just like, it's hard to believe what they've put

643
00:35:36,360 --> 00:35:40,080
Speaker 1: into et s over the years, but they were just

644
00:35:40,160 --> 00:35:42,680
Speaker 1: thinking of equities at the time. But yeah, it's a

645
00:35:42,719 --> 00:35:45,600
Speaker 1: great technology. Um. I compare it to the MP three

646
00:35:46,239 --> 00:35:49,880
Speaker 1: in that it's it's something. It's not an asset class,

647
00:35:49,880 --> 00:35:52,879
Speaker 1: it's not a sector, it's a vehicle. It is something

648
00:35:52,920 --> 00:35:56,960
Speaker 1: that has made the consumption or the people getting exposure cheaper, easier,

649
00:35:57,040 --> 00:35:59,360
Speaker 1: more flexible, more liquid. So you're gonna see a lot

650
00:35:59,400 --> 00:36:01,239
Speaker 1: of people try lot of stuff, I think in the

651
00:36:01,280 --> 00:36:03,520
Speaker 1: E t F rapper over the years, but most of

652
00:36:03,520 --> 00:36:05,160
Speaker 1: the flows are probably are going to go to play

653
00:36:05,239 --> 00:36:09,640
Speaker 1: vanilla stuff. And the conversions are interesting because that's instant flow.

654
00:36:09,719 --> 00:36:11,960
Speaker 1: I mean, that's that's probably money that would eventually have

655
00:36:12,160 --> 00:36:14,319
Speaker 1: left the mutual fund structure and gone to the et

656
00:36:14,440 --> 00:36:17,680
Speaker 1: F anyway slowly in a migration. So the fund company

657
00:36:17,760 --> 00:36:19,680
Speaker 1: is smart, in my opinion, just to move them right

658
00:36:19,760 --> 00:36:22,200
Speaker 1: over and not lose those people. I think that makes

659
00:36:22,200 --> 00:36:24,360
Speaker 1: a lot of sense. And so we're very bullish conversions

660
00:36:24,560 --> 00:36:26,840
Speaker 1: as you are. And yeah, I think right now E

661
00:36:26,920 --> 00:36:30,239
Speaker 1: T s account for the assets mutual funds have, but

662
00:36:30,360 --> 00:36:34,160
Speaker 1: I do see that number eclipsing maybe even over the

663
00:36:34,239 --> 00:36:37,640
Speaker 1: next thirty years. Um, I think mutual funds in four

664
00:36:37,719 --> 00:36:40,680
Speaker 1: one ks probably are gonna that's their alamo. I don't.

665
00:36:40,719 --> 00:36:42,440
Speaker 1: I think they'll be there a long time. E T

666
00:36:42,640 --> 00:36:45,440
Speaker 1: f s don't really they don't like have a lot

667
00:36:45,520 --> 00:36:48,160
Speaker 1: of advantages inside of four one K versus outside. They

668
00:36:48,239 --> 00:36:50,480
Speaker 1: really do. So I agree with all this. I think

669
00:36:50,520 --> 00:36:52,480
Speaker 1: it's just it's fascinating that you that you're still in

670
00:36:52,520 --> 00:36:56,520
Speaker 1: the industry and that you're like helping future spies if

671
00:36:56,560 --> 00:36:59,600
Speaker 1: you will launch every day. There's only a few of you,

672
00:37:00,160 --> 00:37:02,279
Speaker 1: probably kind of on one hand, that have been there

673
00:37:02,320 --> 00:37:05,040
Speaker 1: since basically day one and are still doing their thing

674
00:37:05,080 --> 00:37:07,759
Speaker 1: in the industry. Yeah. No, I don't know that's good

675
00:37:07,880 --> 00:37:11,800
Speaker 1: or bad, but no, I I still I still enjoy it.

676
00:37:12,000 --> 00:37:15,040
Speaker 1: And uh, you know, I'm still with with E T C.

677
00:37:15,280 --> 00:37:16,920
Speaker 1: I mean we're up to you know. I don't know,

678
00:37:17,080 --> 00:37:18,800
Speaker 1: five and a half billion, So we do hear a

679
00:37:18,880 --> 00:37:21,880
Speaker 1: lot of interesting ideas. And remember another thing, the marketplace

680
00:37:21,960 --> 00:37:25,640
Speaker 1: sorts out these products too. Somebody comes up with something

681
00:37:25,719 --> 00:37:29,920
Speaker 1: that that's clever and and good, it will draw assets.

682
00:37:30,000 --> 00:37:32,200
Speaker 1: And you know, on the flip side, I still think

683
00:37:32,239 --> 00:37:34,480
Speaker 1: you need a lot of marketing when when when you're

684
00:37:34,520 --> 00:37:37,200
Speaker 1: launching these problems. Well just real quick on this. This

685
00:37:37,320 --> 00:37:38,880
Speaker 1: is something people missed it like, oh, et F so

686
00:37:38,960 --> 00:37:41,160
Speaker 1: much marketing, and that was both one of Bogel's complaints.

687
00:37:41,200 --> 00:37:45,280
Speaker 1: I get it. But here's the thing. Mutual funds literally

688
00:37:45,400 --> 00:37:48,799
Speaker 1: paid off a broker, and the broker would put the client.

689
00:37:49,120 --> 00:37:51,160
Speaker 1: By the way, the payoff came from the end client.

690
00:37:51,719 --> 00:37:54,560
Speaker 1: So the whole mutual fund industry was largely built on kickbacks,

691
00:37:55,360 --> 00:37:58,120
Speaker 1: and so E T s or a meritocracy. Well, when

692
00:37:58,160 --> 00:38:00,200
Speaker 1: you have a meritocracy, you gotta market more. You've got

693
00:38:00,280 --> 00:38:01,680
Speaker 1: to try to get your voice out there because you

694
00:38:01,760 --> 00:38:04,839
Speaker 1: can't pay someone off. So I think the marketing isn't

695
00:38:05,080 --> 00:38:08,920
Speaker 1: is a is a way to kind of replace the kickbacks.

696
00:38:09,000 --> 00:38:11,000
Speaker 1: And so I understand why there's marketing and there and

697
00:38:11,040 --> 00:38:12,480
Speaker 1: there should be I don't I don't find it to

698
00:38:12,560 --> 00:38:15,080
Speaker 1: be I'm not I don't demonize it as much because

699
00:38:15,560 --> 00:38:17,719
Speaker 1: to me, it's better to have more marketing than a

700
00:38:17,800 --> 00:38:20,760
Speaker 1: system of kickbacks where you're putting where you're consciously putting

701
00:38:21,320 --> 00:38:25,439
Speaker 1: a retail investor money in something you know. Isn't that good? Yeah?

702
00:38:25,560 --> 00:38:28,160
Speaker 1: What I You know, it's interesting because we've got UM

703
00:38:28,360 --> 00:38:31,279
Speaker 1: a couple of our clients, Robo and E m q Q.

704
00:38:31,840 --> 00:38:33,200
Speaker 1: One of the things that they do and I think

705
00:38:33,200 --> 00:38:35,560
Speaker 1: they've done this successfully. You need to tell a story,

706
00:38:36,200 --> 00:38:39,080
Speaker 1: as one of them says. But what they do is

707
00:38:39,280 --> 00:38:42,640
Speaker 1: UM they do webinars, but they do them themselves. So

708
00:38:42,960 --> 00:38:46,520
Speaker 1: if they're let's say, uh in a big broker dealer,

709
00:38:47,000 --> 00:38:51,080
Speaker 1: they'll send out an invitation to the broker's financial consultants

710
00:38:51,120 --> 00:38:55,080
Speaker 1: that are in Florida thirty minute webinar and remember, if

711
00:38:55,160 --> 00:38:58,320
Speaker 1: they can speak to one law one one financial consultant

712
00:38:58,320 --> 00:38:59,920
Speaker 1: for an hour, they will do that. If they get

713
00:39:00,080 --> 00:39:03,560
Speaker 1: thirty financial consultants, people say that's terrible. It's not terrible

714
00:39:03,880 --> 00:39:06,840
Speaker 1: because there's no continuing in the way these individuals do it.

715
00:39:07,160 --> 00:39:10,080
Speaker 1: And you've got thirty people speak with one of them

716
00:39:10,160 --> 00:39:12,520
Speaker 1: for an hour, to speak with thirty for an hour,

717
00:39:12,560 --> 00:39:14,359
Speaker 1: and it cost you five or six hundred dollars well

718
00:39:14,440 --> 00:39:17,399
Speaker 1: worth it. Both of those firms employ that, and both

719
00:39:17,480 --> 00:39:20,040
Speaker 1: of them I think that's helped get the mass US.

720
00:39:20,080 --> 00:39:22,560
Speaker 1: Now once again, you have to have something interesting, you

721
00:39:22,600 --> 00:39:24,800
Speaker 1: have to know how to tell a story, and you

722
00:39:24,920 --> 00:39:27,400
Speaker 1: have to keep their their interests. But but I do

723
00:39:27,640 --> 00:39:30,719
Speaker 1: think that is important and it's hard work. You know.

724
00:39:30,840 --> 00:39:32,520
Speaker 1: I call it the E t F terror Dome for

725
00:39:32,560 --> 00:39:34,600
Speaker 1: a reason. A lot of the people who use the

726
00:39:34,719 --> 00:39:37,200
Speaker 1: E t f s are smart. It's after tax money.

727
00:39:37,320 --> 00:39:40,680
Speaker 1: It's picky, and they got Vanguard in there, and they're

728
00:39:40,800 --> 00:39:43,759
Speaker 1: they're they're spoiled. These investors are spoiled, so you really

729
00:39:43,840 --> 00:39:47,000
Speaker 1: have to find something of value for them. And the

730
00:39:47,080 --> 00:39:52,719
Speaker 1: good news is I think all the investors demand creates

731
00:39:53,640 --> 00:39:56,280
Speaker 1: an industry that has really had to hustle. Not everybody

732
00:39:56,360 --> 00:40:00,239
Speaker 1: makes it, but anybody can make it. Okay, j Last

733
00:40:00,320 --> 00:40:02,879
Speaker 1: question I gotta ask you. You've been around, You've seen

734
00:40:02,920 --> 00:40:07,160
Speaker 1: a few tickers. What is your favorite ticker other than

735
00:40:07,520 --> 00:40:13,960
Speaker 1: any that you've helped launch? Uh Um, you know, I

736
00:40:14,480 --> 00:40:19,680
Speaker 1: I am. I am fond of jets. I will say that. Okay, good, simple,

737
00:40:20,760 --> 00:40:24,560
Speaker 1: but I I think about it more than I should. Yeah, okay, God,

738
00:40:25,719 --> 00:40:29,040
Speaker 1: I mean you guys launched robo. I think that's what's

739
00:40:29,080 --> 00:40:32,279
Speaker 1: a top twentier. But uh yeah, jets is right up there, Virgin,

740
00:40:32,400 --> 00:40:35,560
Speaker 1: Now listen. Of course I would have mentioned our own products,

741
00:40:35,640 --> 00:40:37,920
Speaker 1: but I helped launch that. Yeah, right, that, That's what

742
00:40:37,960 --> 00:40:40,080
Speaker 1: I'm saying. So, but I don't I think robot was

743
00:40:40,160 --> 00:40:43,200
Speaker 1: brought up once as a favorite ticker. J Baker, thanks

744
00:40:43,239 --> 00:40:51,880
Speaker 1: for joining us on Trillions. All right, Thanks for listening

745
00:40:51,920 --> 00:40:54,040
Speaker 1: to Trillions until next time. You can find us on

746
00:40:54,040 --> 00:40:58,279
Speaker 1: the Bloomberg Terminal, Bloomberg dot com, Apple Podcast, Spotify, and

747
00:40:58,360 --> 00:41:00,640
Speaker 1: wherever else you like to listen. We'd love to hear

748
00:41:00,680 --> 00:41:04,040
Speaker 1: from you. We're on Twitter. I'm at Joel webbershow he's

749
00:41:04,160 --> 00:41:08,000
Speaker 1: at Eric Faltinus. This episode of Trillions was produced by

750
00:41:08,040 --> 00:41:09,719
Speaker 1: Magnet Henderson, but