Speaker 1: Wellco Natrolius.
Speaker 2: I'm Joel Webber and I'm Eric belchernas Eric.
Speaker 1: There is a company that I have been really fascinated
Speaker 1: in because of the suite of products they have. This
Speaker 1: is Granite Shares, and the thing that I've been looking
Speaker 1: at this year is like Nvidia mostly just goes up, up,
Speaker 1: up up, and Granite Shares as this ETF that is
Speaker 1: a two x in Vidia, which basically is like, not
Speaker 1: only is it a rocket ship, it's like a bigger
Speaker 1: rocket ship. And I'm really curious about who's behind all this.
Speaker 2: Yeah. I refer to this broader category as hot sauce
Speaker 2: because a lot of portfolios in the middle of the
Speaker 2: portfolio it's pretty dull. You buy and hold some low
Speaker 2: cost beta vanilla index funds and you have to wait
Speaker 2: thirty five years. So people like to have a little
Speaker 2: fun on the outside speculate, and so single stock ETFs
Speaker 2: are one of many varieties of hot sauce, and they're
Speaker 2: taking off. The assets in these have doubled this year.
Speaker 2: We're only halfway through and they've already doubled. Probably the
Speaker 2: big hit is NVDL, which is the Granite SHARE's two
Speaker 2: x long Navidia, which now has Joel four billion dollars
Speaker 2: in assets. That is big time money right there. And
Speaker 2: there's a you know, a lot of this is them
Speaker 2: trial and error that they launch different stocks and some
Speaker 2: take off, some don't. So not all these are a hit,
Speaker 2: but there's been a couple of breakouts that I think
Speaker 2: have shown people, hey, this is a category that is
Speaker 2: here to stay, and it's an interesting one. I think
Speaker 2: for people on the outsets somethings they scratch their heads
Speaker 2: like who needs that? But the people have spoken. There's
Speaker 2: definitely an audience for this.
Speaker 1: Joining us on this episode, Will Rhynd, CEO and founder
Speaker 1: of Granite Shares also worth mentioning. This episode was recorded
Speaker 1: on June twenty fourth, as Nvidia had kind of a
Speaker 1: down day, this time on trillions x single stock etf Well,
Speaker 1: welcome with jillions, Thank you. How is going to start gambling?
Speaker 3: Well, I think that, you know, with anything that's leveraged,
Speaker 3: there's an element clearly of speculation depending on who's using it.
Speaker 3: But underneath the leverage you're talking about real companies, and
Speaker 3: in the case of Nvidia, you know, this has become
Speaker 3: the most important stock in the market. You know, overtook
Speaker 3: Apple and Microsoft very recently to become the world's most
Speaker 3: valuable company. So, on the one hand, leverage is probably
Speaker 3: the oldest concept that we have in finance, you know,
Speaker 3: borrowing money to obtain more notional exposure. But this is
Speaker 3: done in a very sort of modern way by putting
Speaker 3: it in the ETF rapper, giving people institutionally priced you know, leverage.
Speaker 3: But with the access, the ease of access, the efficiency
Speaker 3: of the ETF rapper.
Speaker 1: How do you think Jack Bogel would feel about what
Speaker 1: you offer.
Speaker 3: I'm not sure he would be the biggest fan. But
Speaker 3: it's funny because well, I know if you're about to
Speaker 3: say this, Eric, but one of his big things from
Speaker 3: day one was he was bearish or he did not
Speaker 3: like ETF's period because of people's ability to trade them.
Speaker 3: And it's precisely that that this group of customers are
Speaker 3: our group of customers. It's precisely that element that they love.
Speaker 3: So it's you know, very perhaps contradictory or different to
Speaker 3: the buy and hold crowd. It's not something that they
Speaker 3: subscribe to. But there's a massive now amount of people
Speaker 3: and increasingly so that want to be self directed, who
Speaker 3: are self directed and you know, want to trade.
Speaker 1: Is there anything that Will make that is not rated
Speaker 1: R or red light.
Speaker 2: Sure they have like a gold ETF for example, that
Speaker 2: would be greenlight, okay to be honest. So I think
Speaker 2: some of the more recent ETFs that Will has put
Speaker 2: out have been these sort of more red light ETFs.
Speaker 2: But back to Bogel, I mean he had problems with
Speaker 2: like seventy percent of woo Vanguard offered. I mean, he
Speaker 2: was pretty brutal to everybody. But I think one of
Speaker 2: the things I try to explain to people about these
Speaker 2: is when I show my pie chart of like a
Speaker 2: modern portfolio eighty five percent cheap beta boring weight thirty
Speaker 2: five years and then like ten to fifteen percent hot sauce,
Speaker 2: is that the hot sauce can actually have a behavioral
Speaker 2: purpose to it if it keeps you from touching the
Speaker 2: eighty five percent, Right, So, because compounding returns or where
Speaker 2: it's at, that is the magic that we're all here for,
Speaker 2: but you can't touch it. So to give your idle
Speaker 2: hands something to do and speculate, sometimes you win, sometimes
Speaker 2: you lose. If that distracts you, that's a behavioral hack
Speaker 2: to me in a way. So I do think you
Speaker 2: could argue there's actually a bogulian purpose. He would say, well,
Speaker 2: why do you need to do that? But people are human,
Speaker 2: they like to speculate thematic ETFs I put in this category.
Speaker 2: Arc is a great example, So I'm fine with it.
Speaker 2: And I think you know, you can gamble on sports,
Speaker 2: you can gamble. Stock investing is kind of gambling, So
Speaker 2: I'm fine with it. I think it's you know, these
Speaker 2: things have a small percentage of the assets too. If
Speaker 2: they took over, it'd.
Speaker 1: Be kind of weird.
Speaker 2: But you have like your own little niche and you
Speaker 2: are in what is very valuable these days, which is
Speaker 2: a VFZ, a Vanguard free zone, so he never has
Speaker 2: to worry about Vanguard coming in like ruining life in
Speaker 2: that category. So that's got to be nice, right.
Speaker 3: Well, I mean it's something, as you know, an independent
Speaker 3: issuer that clearly you need to be able to provide
Speaker 3: products that frankly the larger companies like Bangard don't because
Speaker 3: when you're an independent it's the sort of boutique argument
Speaker 3: versus the big box store. So if you're trying to
Speaker 3: be a big box store but on a boutique budget,
Speaker 3: it's not going to work. So you have to be
Speaker 3: offering something different and you know, ideally something that you
Speaker 3: just can't get from those big players. And that's where
Speaker 3: companies like us come into play, that we offer things
Speaker 3: that are unique and with something like leverage single stocks.
Speaker 3: I mean, this is a new category that we pioneered,
Speaker 3: and you know, leverage on single companies, in my opinion,
Speaker 3: is more intuitive than some of the other applications. But
Speaker 3: leveraged dtfs have been around for a long time. You know,
Speaker 3: you've been able to trade leveraged ETFs on broad equity benchmarks,
Speaker 3: fixed income benchmarks, commodity benchmarks, even individual commodities. So this
Speaker 3: is really just an extension of that trend.
Speaker 1: You've like thirteen now of these single stock leverage gtfs.
Speaker 1: Where did it all start? What was the one that
Speaker 1: you were like, oh my god, we have to do this.
Speaker 3: So we got to rewind a little bit because we
Speaker 3: actually started this in Europe in twenty nineteen. And the
Speaker 3: reason we did that was that when I started Grantwitch
Speaker 3: Shas seven years ago in the US, there were only
Speaker 3: two companies that could do leverage dtfs period in the
Speaker 3: United States. So we couldn't do leverage dtfs even if
Speaker 3: we wanted to at that time. That was a weird
Speaker 3: sort of government exemption that existed at that time. It
Speaker 3: no longer does.
Speaker 1: So there was an a sec thing, correct.
Speaker 3: That was when the old sort of era was under
Speaker 3: exemptive relief. That was a thing called exemptive relief and
Speaker 3: exemption that was given to two companies and then not
Speaker 3: given to anybody else.
Speaker 2: Pro shows and direction.
Speaker 3: Yeah, there you go. And then fast forward a few years.
Speaker 3: We thought the idea was really good, but we couldn't
Speaker 3: do it in the US, so we started in Europe.
Speaker 3: And we have a platform in Europe where we offer
Speaker 3: over one hundred products on different exchanges in every major country,
Speaker 3: so we started doing it there. In that time, the
Speaker 3: regulation here changed and this exemptive relief or this exemptive
Speaker 3: regime went away and was replaced by a generic rule
Speaker 3: update that everybody nicknames the ETF rule. And what that
Speaker 3: effectively allowed is any company to do leverage dtfs. Obviously,
Speaker 3: with some caveats, two x is the maximum amount of
Speaker 3: leverage that you can do. But that opened the door
Speaker 3: for US to then bring leverage single stocks, which had
Speaker 3: been doing in Europe.
Speaker 2: Here in the US and in Europe, Joel, they've got
Speaker 2: three x Navidia, they really party over.
Speaker 1: There, which we'll come back to.
Speaker 2: But Eighthan on my team sometimes we joke about that
Speaker 2: because they've got like five x the Queues two three
Speaker 2: x Navidia, five x AI and we feel like it's
Speaker 2: kind of wasted on that crowd, Like it's the American
Speaker 2: gambling degenerate mindset that would really have fun with those products.
Speaker 2: Maybe that's why the SEC limits it to two x,
Speaker 2: because they know that these would probably fly off the shelves.
Speaker 2: But still, you know, when you just design these products,
Speaker 2: you put them out there, it looks to me like
Speaker 2: the ones that sell are the ones connected to stocks
Speaker 2: that are like see the most trading Navidia, Tesla. We
Speaker 2: ran a study. It looked like they're like maybe eighty
Speaker 2: percent of the market share of all single stock ETFs,
Speaker 2: even though they probably cover for fifty stocks. But those
Speaker 2: two companies are like the majority of them. Is that
Speaker 2: just because people just love trading those two names, and
Speaker 2: if you can make putting on a different trade around
Speaker 2: them easier to me sort of like a parlay, I'm
Speaker 2: going to trade that, whereas Microsoft, Eh, I'm not that
Speaker 2: interested in that stock. It's not that volatile it's not
Speaker 2: that hot. Is Is that why those sell?
Speaker 3: In a way I think I would I would add
Speaker 3: them one more thing to that, which is less quantitative,
Speaker 3: more qualitative, I'd say, it's about the enthusiasm for the
Speaker 3: stock at the given time. An enthusiasm is a concept
Speaker 3: that you know, you can't really sort of measure as such.
Speaker 3: But my example is NVIDIAs the stock today that has
Speaker 3: all the enthusiasm, and Tesla, which you mentioned, is the
Speaker 3: second most popular. However, if we are talking about, oh,
Speaker 3: we're having this conversation three years ago, I would argue
Speaker 3: that we'd be talking about Tesla being the most popular
Speaker 3: because there was the most enthusiasm at that time for
Speaker 3: that stock. In Europe, we've seen where we have a
Speaker 3: lot more of these products, you know, We've seen huge
Speaker 3: amount of enthusiasm for companies like Neo for example, which
Speaker 3: is another EV car manufacturer from China. Less so these days,
Speaker 3: of course, as that has moved on into AI and
Speaker 3: so I think.
Speaker 1: It's matured slightly and there's more competition for Neo etc.
Speaker 3: Exactly. I think it reflects, you know, the two biggest
Speaker 3: trends in my mind of this year have been AI
Speaker 3: and cryptocurrency, So naturally in our product offering, the two
Speaker 3: biggest products and the most of activity enthusiasm we've seen
Speaker 3: are for Nvidia and we have coinbase two x Coinbase,
Speaker 3: So that's kind of where we've seen that enthusiasm. And
Speaker 3: to Eric's point, you know that it hasn't been necessarily
Speaker 3: for companies like Microsoft because arguably that was you know,
Speaker 3: maybe sort of twelve to eighteen months ago when that
Speaker 3: stock's kind of made a big move. But you know, again,
Speaker 3: I think it's it's really down to what investors care
Speaker 3: about at that time.
Speaker 1: I don't think we were rewound the clock all the
Speaker 1: way there. What was the what was the one that
Speaker 1: made you go we got to do this.
Speaker 3: I don't know if it was one per se. I
Speaker 3: think it was more the learnings from what we'd been
Speaker 3: doing in Europe, where we have more of a platform
Speaker 3: based approach, and I think kind of what we're all
Speaker 3: dancing around as this concept of okay, tech works. That's
Speaker 3: something that people like. There's a lot of enthusiasm for
Speaker 3: certain tech companies, and so when we launched here, we
Speaker 3: launched with a lot of the large tech names, but
Speaker 3: we did try and do some things that were different.
Speaker 3: So at the time, the reason why we did a
Speaker 3: two x coinbase was because there was no crypto. I mean,
Speaker 3: I should be a specific no spot Bitcoin tea, which
Speaker 3: was a huge, huge thing that you know Eric's covered
Speaker 3: for he knows all too well exactly. But you know,
Speaker 3: that was kind of a way to bring exposure to
Speaker 3: to bitcoin slash cryptocurrency, but also with leverage because there
Speaker 3: was no way to obtain leverage on that. So Ali
Speaker 3: Baba is another one that we have where again it
Speaker 3: wasn't necessarily that there was the most enthusiasm for Ali
Speaker 3: Baba as a stock, but it was a way to
Speaker 3: give people exposure to Chinese tech, you know, a very
Speaker 3: concentrated way that didn't exist.
Speaker 2: And so let's go over how this happens because you
Speaker 2: use swap contracts, right, yes, And let me just for
Speaker 2: anybody listening, do you remember the scene in The Big
Speaker 2: Short when Michael Burry wants to bet against the housing market. Yes,
Speaker 2: he can't.
Speaker 1: He can't figure it out.
Speaker 2: So you go to Goldman and they make you it's
Speaker 2: like a bar bet, but more formal. This is all
Speaker 2: you're doing, right, You're basically being Michael Burry. You're going
Speaker 2: to these big banks and you're making these daily bar bets,
Speaker 2: and that's the leg work you're doing that somebody at
Speaker 2: home can hit by and all of a sudden they
Speaker 2: now have this swap contract bet. Is that about right?
Speaker 1: Yeah?
Speaker 3: I mean that's the instrument itself, But it's actually a
Speaker 3: kind of a much simpler concept, which is it's just financing.
Speaker 3: So it's using the balance sheet of a big bank
Speaker 3: to effectively lend the fund money to take an increased
Speaker 3: exposure on a particular stock. And in order to do that,
Speaker 3: you need to have a bank that has a balance
Speaker 3: sheet and is in a position to be able to
Speaker 3: make that financing or lend that money.
Speaker 2: So to me, this is in a weird way. You know,
Speaker 2: we talk about ETFs democratizing investing, in a way that's
Speaker 2: democratizing that Michael Burry move. Most people do not get
Speaker 2: access to JP Morgan's like swap desk. So exactly this
Speaker 2: is all part of the same theme, which is you
Speaker 2: click a button and things happen, and in this case
Speaker 2: it's this swap contract.
Speaker 1: Yeah.
Speaker 3: And I think it's even perhaps even more fundamental than that,
Speaker 3: which is it's democratizing access to margin and institutional price leverage.
Speaker 3: So the same price of leverage that we are getting
Speaker 3: via and delivering via the ETF is not the same
Speaker 3: price that you're getting at your you know, in your
Speaker 3: margin account at a Fidelity or Schwab, et cetera. And
Speaker 3: so again it's a classic case of the ETF disrupting
Speaker 3: and existing mechanism that's been used by the banks and
Speaker 3: broco dealers you know, for many, many years, but making
Speaker 3: the whole process a lot more efficient, a lot more cheaper.
Speaker 1: Because you have a platform, I'm curious that allows you
Speaker 1: to basically see who's using these perhaps more than other people.
Speaker 1: Is this I mean like it clearly has an audience
Speaker 1: for traders, professional ones, institutional ones, but obviously there's because
Speaker 1: of the popularity and enthusiasm for these company like the
Speaker 1: retail crowd and the editors of the world would feast
Speaker 1: on this. Can you tell who's using it?
Speaker 3: To certain extent? So I think, like any ETF manager,
Speaker 3: we're disintermediated always by two entities, which is the stock
Speaker 3: exchange one hand, and the brokerage that ultimately has the
Speaker 3: transaction or handles the transaction for the customer. There's something
Speaker 3: called the thirteen F report, which is a regulatory report
Speaker 3: that we can look at that gives some analysis or
Speaker 3: some look through into the shareholder base. It's not perfect,
Speaker 3: and it's a once a quarter snapshot, but what I
Speaker 3: can tell you is that I think, like any successful etf,
Speaker 3: it's always a spectrum. So you have retail investors clearly
Speaker 3: on one hand or the barbell, and then you have
Speaker 3: some of the world's most sophisticated hedge funds and proprietary
Speaker 3: trading firms on the other hand, and probably everybody in between.
Speaker 3: So the other interesting aspect to this is that when
Speaker 3: you have a company like in VideA, in Vidia has
Speaker 3: not just appeal with Reddit retail investors, right, this is
Speaker 3: a company and this is why I say so repe
Speaker 3: this has become the world's most important company. This has
Speaker 3: true global appeal. So if you're in Japan, or if
Speaker 3: you're in career, or if you're in South America somewhere
Speaker 3: and you want exposure to that company, you can only
Speaker 3: get that in the US stock market. And therefore you
Speaker 3: can only get the leveraged version of Nvidia through our
Speaker 3: product NVDL here in the US. So providing a broker
Speaker 3: has access, then you access to the market and increasingly.
Speaker 3: We're also seeing this trend as well, whereby markets around
Speaker 3: the world are becoming more connected. Individuals are becoming more
Speaker 3: interconnected through technology. The first market they look to outside
Speaker 3: of their home market, and typically the home market may
Speaker 3: or may not be that developed, is the US market.
Speaker 3: And the reason why the US market is because the
Speaker 3: US market has performed very well. Why because of some
Speaker 3: of these stocks like Nvideo.
Speaker 2: I know they're hot stocks. Navidia is now trading four
Speaker 2: times any other stock speaking of trading, listen to this statroll.
Speaker 2: So even an NVDL is probably at four billion, maybe
Speaker 2: right around the top in the top two hundred and
Speaker 2: fifty ets by assets. It's in the top ten regularly
Speaker 2: in trading. So today it's already traded one point five
Speaker 2: billion as of whatever time it is two thirty pm today.
Speaker 2: That's more than ready General Motors, Berkshire, Dell Computer. Right,
Speaker 2: these are massive names.
Speaker 1: How does it compair with Spy, which would be day
Speaker 1: and day out number one.
Speaker 2: Yeah, So as of right now, Spy has traded thirteen
Speaker 2: billion and his is one point five billion. Now that
Speaker 2: is a pretty big gap, but everything's a big gap
Speaker 2: from Spy in the queues. But one point five billion
Speaker 2: puts you ninth. That's above HyG, above XLF. These are
Speaker 2: some big legendary names that.
Speaker 3: But also Eric on Spy. Remember that NVDL is, like
Speaker 3: I said, it's four billion dollars. Spy is over half
Speaker 3: a trillion. Yeah, yeah, right, I mean the difference in size, yeah,
Speaker 3: is monumental.
Speaker 2: Just getting yourself like you know, Ibit is in the
Speaker 2: top twenty two and that's obviously very impressive. It's hard
Speaker 2: to get on this leaderboard. You know, ARC did it
Speaker 2: for a couple couple of years there. So anytime an
Speaker 2: outsider can come in on the volume list and be
Speaker 2: like right there with those legendary spider sectors and it's
Speaker 2: it's a major feat. And when you have volume, then
Speaker 2: you get bigger fish volumes like chumming the water for
Speaker 2: big fish.
Speaker 1: So it's a very interesting business model. And it's like
Speaker 1: feels like you found a corner of the ETF universe
Speaker 1: that was more or less kind of open, open enough
Speaker 1: that you could come in and make a name for yourself.
Speaker 1: I'm curious, though, what are the limitations? Can you go
Speaker 1: to black Rock and say I'm going to take ibit
Speaker 1: and to exit.
Speaker 3: Well, this is actually a really good question. So in theory, yes,
Speaker 3: you can. Again, remember the concept of leverage is the
Speaker 3: most basic concept in finance. It's just borrowing money to
Speaker 3: get an increased exposure to a given security. So in
Speaker 3: theory you can leverage anything. What we have to be
Speaker 3: careful of or mindful of is that with an etfor
Speaker 3: it's open ended and therefore there has to be a
Speaker 3: scale aspect to it, and part of that means that counterparties,
Speaker 3: spot counterparties, investment banks have to be able to continuously
Speaker 3: finance and provide more exposure to it. So a better
Speaker 3: example might be something like a game star or or
Speaker 3: an AMC, where as you may or may not imagine,
Speaker 3: we get a lot of requests for these on a daily,
Speaker 3: if not intra day basis. Now the problem is in.
Speaker 1: Theory from roaring kidding or other people.
Speaker 3: That's from all sorts of people. That's from all sorts
Speaker 3: of people. On the one hand, yes, it's it's easy
Speaker 3: to provide some leverage against that. The harder aspect is
Speaker 3: how much and for how long? And so that kind
Speaker 3: of is really at the core of, you know, how
Speaker 3: we think about building these products for the longer term
Speaker 3: and not just you know, flash in the pan whereby
Speaker 3: you know, we might be able to provide twenty million
Speaker 3: dollars a capacity, but if somebody wants a hundred then
Speaker 3: we have no way to deliver on that.
Speaker 1: But that would be one that you know, back to
Speaker 1: your enthusiasm, like there's enthusiasm.
Speaker 3: For it, correct, and so providing that we could provide
Speaker 3: or get leverage against that, then yes, you could provide it.
Speaker 3: Just a question of how much we'd be able to
Speaker 3: get would really be the key question.
Speaker 2: Joel, Ready for some trivia. There's thirteen I found like you're.
Speaker 1: Going to give it to me no matter what. But yes, okay,
Speaker 1: now I'm ready.
Speaker 2: I'm sorry. There's eleven thousand, seven hundred ETFs in the world. Okay,
Speaker 2: the world, the world?
Speaker 1: What is it? Does that include exchange traded products?
Speaker 2: Yes? Okay, yes? What is the top performer year to date?
Speaker 2: I'll give you a hint. It came up.
Speaker 1: Already in video two x three x three x three x.
Speaker 2: Guess how much it's up here to date?
Speaker 1: Well, like five hundred percent, double double one thousand, You're
Speaker 1: up one thousand percent.
Speaker 2: It's not even June thirtieth. Yeah, that's pretty crazy. Now,
Speaker 2: guess what the worst performing ETF is year to date.
Speaker 1: Uh Tesla short?
Speaker 2: Actually no, no video the video, so.
Speaker 1: There is a negative, yes, which that was gonna mean.
Speaker 1: My next question is when you bring one of these
Speaker 1: into the world, do you have to think about let's
Speaker 1: call that the yen. Do you have to think about
Speaker 1: the yang simultaneously, because for every bowl there's going to
Speaker 1: be somebody who's like, I'll take the other side of that.
Speaker 3: Bet we do. Now, it doesn't exactly the US we
Speaker 3: do for some now. Part of the reason is, first
Speaker 3: of all, launching ETFs and maintaining them is very expensive,
Speaker 3: so that's really the main reason. So you have to
Speaker 3: be conscious of the fact that at the end of
Speaker 3: the day, for us, it's an asset management vehicle, meaning
Speaker 3: we don't get paid or compensated for the turnover, for
Speaker 3: the volume, anything like that. It's purely on the management fee.
Speaker 3: So it has to be something that we can generate
Speaker 3: management fees from over time. The market is naturally long.
Speaker 1: An example of that from what I'm seeing is you
Speaker 1: can go long Amazon, long Microsoft, but you're not going
Speaker 1: to short those.
Speaker 3: We haven't bought a short version of that to market,
Speaker 3: and there's not really a sort of a great reason
Speaker 3: for that. But we have MVD, which is our two
Speaker 3: x short in video, and you know that's traded fifty
Speaker 3: three million shares today already, which is you know, a
Speaker 3: huge amount of volume for a stock that again has
Speaker 3: performed very poorly up until the last few days where
Speaker 3: a video has gone through a bit of a correction.
Speaker 3: So again typically we we try and bring a short
Speaker 3: if we think it makes sense in the context of
Speaker 3: these stocks. We have a Tesla short as well as
Speaker 3: a Tesla long. That was not always the case.
Speaker 1: That one makes sense to me because there's been so
Speaker 1: many Tesla haters Elon Hayters through the years. It's like
Speaker 1: you can give the people who are the fans something
Speaker 1: to trade, but you can also give the haters. But
Speaker 1: like there's just not that much palpable hatred for Microsoft
Speaker 1: really in the same way.
Speaker 3: That's right. Yeah, it was always as Eric knows, you know,
Speaker 3: we have a goldietf and I've been involved in in
Speaker 3: the gold market for many, many years, and it was
Speaker 3: always a saying, you know, in the gold market that
Speaker 3: you know, people would be bearish on gold, but they
Speaker 3: were never prepared to short gold, and so it was
Speaker 3: sort of this idea that you could be, you know,
Speaker 3: very sort of openly skeptical, but you were never that
Speaker 3: skeptical where you actually put your own money, you know,
Speaker 3: to try and take the other side of it and
Speaker 3: short and I think there's a little bit of that
Speaker 3: in some of these stocks as well.
Speaker 2: So you've got this line of single stock ets. Now
Speaker 2: you filed, and you can't talk about filing. So I'll
Speaker 2: explain as much as I can in the question. You
Speaker 2: filed for what you call yield boost, and the boost
Speaker 2: is all caps, by the way, that matters. Yield boost.
Speaker 2: Now this is a new form of hot sauce about income.
Speaker 2: Joel So, yield max is the current issuer. Will is
Speaker 2: now yield boost up. In Canada they got yield Maximizer, which,
Speaker 2: by the way, just recently changed their name from yield
Speaker 2: Maximizer where there's lowercase to everything's uppercase. I've never seen that.
Speaker 1: It reminds me of maximize.
Speaker 2: Their punctuation, remember Idiocracy, Brondoye, the thirst Mutilator. It just
Speaker 2: it has some similar vibes.
Speaker 1: But so this is like you can capture their attention better. Yeah,
Speaker 1: you're yelling when it's all caps.
Speaker 2: So anyway, these are giving you massive annual yields, like
Speaker 2: over one hundred percent. So a Treasury's five percent, this
Speaker 2: would be one hundred percent. So what you're doing is
Speaker 2: you're taking highly volatile ETFs like like Bitcoin, like volatility itself,
Speaker 2: like the cues, and then you write call options just
Speaker 2: out of the money, which people will pay a lot
Speaker 2: more for premium for because it's more likely to come
Speaker 2: do so as an investor, you give up almost all
Speaker 2: your upside, but you get this massive influx of income.
Speaker 2: Is that the idea? And who are these four?
Speaker 1: So?
Speaker 3: I think first of all, you know the reason why
Speaker 3: this is this is something that we think is relevant
Speaker 3: or or is it good? Idea is combining the two
Speaker 3: hottest trends really of this year, which is leverage and income,
Speaker 3: but income particularly through options, and you'll boost first and foremost.
Speaker 3: These are not leveraged products. And that's important to say
Speaker 3: because I think there'll be some confusion potentially around because
Speaker 3: the security that the option is written on as leverage
Speaker 3: that people say, oh, it's leveraged, it's not. So it's
Speaker 3: not a leverage strategy. But the idea here is to
Speaker 3: be able to generate higher levels of income options based
Speaker 3: income that you can generate from clearly a non leveraged strategy,
Speaker 3: again in a market that doesn't exist today.
Speaker 2: So Yield Max every single one of their funds has inflows.
Speaker 2: And this is a company that came from the outside,
Speaker 2: and the fees are not cheap, So that tells you
Speaker 2: there is definitely some demand for this. But some people
Speaker 2: would push back and go, well, fine, I get like
Speaker 2: a yield Max Tesla or yield Booze Tesla, and I
Speaker 2: get all this income like eighty percent, but I'm still
Speaker 2: down even with the yield factored in because Tesla's down.
Speaker 2: I guess what's the point or how much do you
Speaker 2: have to be sure or care that the stock goes
Speaker 2: up or down because it does the yield matter if
Speaker 2: you're still down on a total return basis.
Speaker 3: I think it will depend on the investor. But again
Speaker 3: you're you're basically skirting on a very interesting now concept,
Speaker 3: which is how important are the different elements of a return?
Speaker 3: And should we always or do we always need to
Speaker 3: think about total return as a construct that is based
Speaker 3: upon income and capital appreciation And in other words, if
Speaker 3: we just rely on income alone, is that or can
Speaker 3: that be even a better way to go. And so
Speaker 3: an example would be take something like an annuity. Right,
Speaker 3: if the whole concept of an annuity is you give
Speaker 3: up one hundred percent of your principle day one, and
Speaker 3: you receive a stream of cash flows for the rest
Speaker 3: of your life, hopefully, now apply that to something like this,
Speaker 3: where you may not give up or you're not giving
Speaker 3: up your principal day one. You're investing in something. You're
Speaker 3: getting income stream of monthly cash flows typically, and those
Speaker 3: cash flows can be pretty significant. The price of the
Speaker 3: underlying or the nav can go down, can go up,
Speaker 3: but it's not necessarily the concept or it's not necessarily
Speaker 3: the case that it's you know, designed to generate a
Speaker 3: certain level of capital appreciation in the same way as
Speaker 3: it's designed to manufacture income. And I think that's the
Speaker 3: sort of the fundamental difference. And you know, again, we
Speaker 3: have another ETF, nothing to do with leverage or options,
Speaker 3: but it's a classical income one where it's called hips.
Speaker 3: We pay a monthly the monthly yield, and in that
Speaker 3: particular fund, we've paid the same monthly distribution cash distribution
Speaker 3: for now over six years and it's a ten percent
Speaker 3: plus you know, yielding product. The reason or the way
Speaker 3: we get there is because the underlying are things like
Speaker 3: MLPs so pipeline infrastructure. They're REITs business development companies. And
Speaker 3: although the clearly has potential for capital appreciation, and MLP
Speaker 3: is not a growth company, so it's just a fundamentally
Speaker 3: different asset, the main reason is all tax related. Right,
Speaker 3: you get a huge amount of income at favorable tax rates.
Speaker 3: That's really the reason for buying an MLP. So for
Speaker 3: somebody that can lock in a ten percent income, they
Speaker 3: might think, well, that trade off is actually really good
Speaker 3: for me because I can then get ten percent per
Speaker 3: annum And although my underlying the value of my portfolio
Speaker 3: can go down, value can go up. As long as
Speaker 3: I have my ten percent income and that's locked in,
Speaker 3: I know that I have something at the end. And
Speaker 3: I think that again is sort of part of this
Speaker 3: concept that is increasingly I think going to be more
Speaker 3: popular with people where the income is prioritized more than
Speaker 3: the capital appreciation.
Speaker 1: It's interesting that's reflective about the high rate world that
Speaker 1: we live in exactly, so as long as rates stay
Speaker 1: where or elevated compared to where they've been like, that
Speaker 1: strategy totally works.
Speaker 3: Yeah, and I think again, part of the reason I
Speaker 3: think that a lot of these strategies took off in
Speaker 3: the first place was because on the converse, when you're
Speaker 3: in a very low interest rate environment, your traditional fixed income,
Speaker 3: you know, it doesn't work from an income perspective. And
Speaker 3: the way that people were generating money from fixed income,
Speaker 3: you know, since the rate rises, you know in early
Speaker 3: twenty twenty two, was through capital gains, so it was
Speaker 3: selling the underlying as opposed to income.
Speaker 2: Yeah, it's interesting. We've also noticed like this is an
Speaker 2: area where there's a lot of closures. It seems like
Speaker 2: because you're not the only one. Leverage Shares has some
Speaker 2: they're launching their first over their big in Europe. T
Speaker 2: Rex is another one, Rex Shares. There's probably a direction
Speaker 2: has their own line. Of these, I mean, there's probably
Speaker 2: well over one hundred and fifty, but like ten percent
Speaker 2: of them catch, you know, and then maybe forty percent
Speaker 2: of them, like you want to they're doing enough that
Speaker 2: you keep them alive. But this is gonna be a
Speaker 2: high turnover area, probably because we have noticed that a
Speaker 2: lot of the closed ETFs this year are ones that
Speaker 2: are young, and it seems like we're getting into a
Speaker 2: period where, especially in the hot sauce lane, people are like, look,
Speaker 2: we'll just we'll try all this stuff if some of
Speaker 2: the sticks will keep it and then the rest will
Speaker 2: shut down. But that cycle might be getting shorter. I'm
Speaker 2: not saying this is good or bad. It's just the
Speaker 2: reality of the situation and the reality of how the
Speaker 2: core of the portfolio is pretty much taken over by
Speaker 2: Vanguard and black Rock, and so you're going to find
Speaker 2: a lot of experimentation, and so that's going to mean
Speaker 2: some some you know, some broken eggs where you just
Speaker 2: throw in the towel, close it up, look for something else.
Speaker 3: Yeah, I mean it goes back to on the one
Speaker 3: howd it goes back to comment and made earlier, which
Speaker 3: is launching ETFs and managing ETFs is really expensive. Now
Speaker 3: leaving that aside, base economic sort of quest is that
Speaker 3: I think we're at a position now where there's no
Speaker 3: taboo about closing funds. And to your point that the
Speaker 3: core of the portfolio is heavily dominated by you know,
Speaker 3: let's call them traditional or core based ETFs. So therefore
Speaker 3: the more innovation that you're going to see, people are
Speaker 3: going to try new things. But if they don't work out.
Speaker 3: I think there's just no no taboo now about closing
Speaker 3: down products that don't work, and that's one that's healthy
Speaker 3: for Everybody's healthy for the market, for the ecosystem, and
Speaker 3: clearly it allows people to innovate more to be able
Speaker 3: to bring things out that do work.
Speaker 1: We've also talked to people on the podcast who have
Speaker 1: had the right idea at the wrong time.
Speaker 3: Yeah, that happens too, and you know that's yeah, it's
Speaker 3: amazing when you look back in terms of some of
Speaker 3: the most successful ETFs, how they've sort of either traded
Speaker 3: hands a few times before really hitting or or the
Speaker 3: concept is closed down. I mean, I mean a version
Speaker 3: of what we're talking about today, which is options based income.
Speaker 3: One of my portfolio managers was working on, you know,
Speaker 3: going back sort of fifteen plus years, probably the first
Speaker 3: it was actually the first strategy that was in registration
Speaker 3: for doing this precise thing in the US market just
Speaker 3: couldn't get I think it was six or seven years
Speaker 3: with the SEC just couldn't get it done. And you know,
Speaker 3: the regulator wasn't ready at that time for it. And
Speaker 3: there was a classic example of where you're you're way early.
Speaker 3: You know on a great idea.
Speaker 1: Okay, as long as we're talking about regulators. When you
Speaker 1: talked to the SEC about a three x or five
Speaker 1: X ETF, which right now they capped it to, what
Speaker 1: did they.
Speaker 3: Say, Well, we don't.
Speaker 1: I was trying.
Speaker 3: Because the rule is the rule is two x.
Speaker 1: So is there any chance of challenging that?
Speaker 2: Well, can't you do it in ETN because like Reckshares
Speaker 2: has three X but no singles. I think they're all
Speaker 2: three X like oil miners and stuff like. But there
Speaker 2: are three X etns.
Speaker 3: Yes, So so etn's obviously come under a totally different
Speaker 3: setula because we can't issue etns. Only banks can issue
Speaker 3: etns in the US, So the ETF is the fund world,
Speaker 3: and under the fund world that's limited to two X.
Speaker 3: Banks can issue etns because etns are not technically funds,
Speaker 3: they're debt security is issued by a bank, and therefore
Speaker 3: when investor buys, they bear the full credit risk, the
Speaker 3: good faith and credit of whatever bank is issuing them.
Speaker 3: And obviously if the bank goes bust, you're an unsecured
Speaker 3: creditor of that bank, as opposed to when you're an ETF.
Speaker 3: That pool of assets which is in the ETF is
Speaker 3: actually a segregated, you know, bankruptcy remote pool of assets,
Speaker 3: so etns we can't do unfortunately, right, But.
Speaker 1: How would you go about challenging the two.
Speaker 3: X we we certainly, honestly speaking, we haven't thought about it.
Speaker 3: I think, you know, it's potentially something that evolves over time,
Speaker 3: although again I don't know. I just it's not something
Speaker 3: that we've specifically had a conversation about. Although, like all
Speaker 3: these things, you know, potentially that evolves over time.
Speaker 2: And speaking of an idea that didn't work back, but
Speaker 2: I almost feel like I could maybe try it again.
Speaker 2: Is the the two way trades like like two x
Speaker 2: Navidia plus or like you know long Navidia short Tesla
Speaker 2: or long gold short bitcoin and two x that, and
Speaker 2: you could even two exit. I don't know any thought
Speaker 2: of because we call these packaged trades where you hit
Speaker 2: by and then you put this trade on. And just
Speaker 2: seems like there's some things that go against each other
Speaker 2: nicely that you could do. They try them back in
Speaker 2: the day, maybe two different phases, but this was before
Speaker 2: we had this sort of like hot sauce boom.
Speaker 3: I think, look, I think that's example of exactly what
Speaker 3: you were just talking about, which is this is where
Speaker 3: you're gonna at innovation in the space, and people will
Speaker 3: bring out strategies like that and if some which I think, look,
Speaker 3: the key is a lot of these are performance based.
Speaker 3: So if the performance is there, I think you'll be
Speaker 3: able to attract assets, and if that performance stays consistent,
Speaker 3: you'll attract even more assets. But it won't be the
Speaker 3: case for every strategy, and so there'll be one or
Speaker 3: two that will perform really well, they'll attract a lot
Speaker 3: of assets, and then there'll be others that don't perform.
Speaker 1: Well, what about something like QQQ Right, so we've been
Speaker 1: talking all about single stocks, but like, could you look at,
Speaker 1: you know, something that historically has performed just sensationally well
Speaker 1: the cues and think about bringing leverage to that.
Speaker 3: We definitely could. The challenge there is that you remember
Speaker 3: I said that there were two companies that were allowed
Speaker 3: to do leverage and so effectively had the market themselves
Speaker 3: for a long long time. So think about a world
Speaker 3: where they kind of covered most of the bases with
Speaker 3: levered products u x three x ques by major bench
Speaker 3: mod so.
Speaker 1: They got to get their first exactly Yeah, agree, qq
Speaker 1: guess so much as this has.
Speaker 2: This is a triple leveraged ques. Guess the assets his
Speaker 2: has four twenty Yeah, good job man, Look, yeah, I've
Speaker 2: I hadn't looked your ETF sixth sense is getting better.
Speaker 2: It's twenty three billion. That's that's an enormous amount and
Speaker 2: they charge eighty eight basis points on that. That is
Speaker 2: we always say that those two leverage companies got a
Speaker 2: good little gig and they're protected from Vanguard.
Speaker 1: But they're there, and you can look at them and
Speaker 1: be like, is that something that I want to like?
Speaker 1: Are they So? Yeah, they have that such a lockdown
Speaker 1: that it's not worth your strategy.
Speaker 3: So into the it again, you're you're you're kind of
Speaker 3: entering into a really interesting area of the ETF world
Speaker 3: because it's not just about product development, it's about index
Speaker 3: licensing and access to intellectual property. So I think that
Speaker 3: before even answered that question, we wouldn't even be able
Speaker 3: to get the license for those indexes, let alone to
Speaker 3: be able to launch the strategies. So again, that's a
Speaker 3: very interesting area of the ETF world where a lot
Speaker 3: of it comes down to who owns what properties and
Speaker 3: what intellectual property and is able to sort of build
Speaker 3: a moat through access to certain benchmarks. But leaving that aside,
Speaker 3: I think it would be difficult for us to compete
Speaker 3: on a like for like basis because we would be
Speaker 3: adding no value effectively other than maybe doing it for
Speaker 3: slightly less fees or something like that, which I don't
Speaker 3: think would be enough of a draw to get people in.
Speaker 3: I think that's why we're doing the approach we're doing,
Speaker 3: which is we're innovating in new categories like every single
Speaker 3: stocks or your boost, where we're able to bring completely
Speaker 3: new concepts to market, and we would prefer to own
Speaker 3: the new concepts then rather trying to compete with existing
Speaker 3: one where it's you know, it's not it's not likely
Speaker 3: that that we are going to have much success.
Speaker 1: Totally makes sense.
Speaker 2: So your second biggest ETF sort of sticks out now
Speaker 2: in this two x world you've created as bar to
Speaker 2: gold ETF. I remember interviewing you my first book, The
Speaker 2: Institutional ETF Toolbox, available on Amazon at the World Gold Council.
Speaker 2: You were you were mister g LD. Then you launched
Speaker 2: a lower fee version of gold called Bar and you
Speaker 2: even call your company Great Inshore. So you're like a
Speaker 2: gold guy, I think a core bitcoin comes along. What's
Speaker 2: your take on that, Like, if you were talking to
Speaker 2: I don't know, your uncle who was like, hey, what
Speaker 2: should I do? I do want something that protects me
Speaker 2: from the devaluation of currencies. Should I go into gold
Speaker 2: or bitcoin? What would you tell them?
Speaker 3: Well, I think that, you know. One thing to also
Speaker 3: point out is that, you know, we were one of
Speaker 3: the first people to register for a bitcoin ETF, and
Speaker 3: it's an entrepreneurial story rather than a technical story. But
Speaker 3: when we were in the first thing of twenty eighteen,
Speaker 3: the SEC came round and said, Nope, sorry, not going
Speaker 3: to happen. Because of, you know, the ETF experience that
Speaker 3: I had by being in the market for a long
Speaker 3: long time, I knew that, hey, this could go on
Speaker 3: for a number of years, you know, almost certainly going
Speaker 3: to cost a huge amount of money, and as a
Speaker 3: startup company at the time, just didn't have the resources
Speaker 3: to fight, you know, the battle on that. So I
Speaker 3: think from my perspective, I've always kind of viewed our
Speaker 3: job as we're somewhat agnostic to the underlying assets that
Speaker 3: were invested in. It's our job is to give people
Speaker 3: or provide products that people love, and you know, if
Speaker 3: people want access to bitcoin, it's our job to do that.
Speaker 3: If you want access to gold, it's our job to
Speaker 3: do that. So I personally don't own any bitcoin. I
Speaker 3: don't have anything against it. It's just I think for me,
Speaker 3: I've always sort of struggled with the fact that you know,
Speaker 3: inherently there's no intrinsic value, and it's different fundamentally from gold.
Speaker 3: And so coming from the gold background, I you know,
Speaker 3: feel like, Okay, there's there's a cost, you clearly of
Speaker 3: owning gold. There is a cost of mining it, there's
Speaker 3: a cost of storing it, there's a cost of ensuring it,
Speaker 3: there's a cost of transporting it. And I think that
Speaker 3: with bitcoin. The the thing that I always struggle with
Speaker 3: is that once you've made up your mind you when
Speaker 3: you take something, any asset that has zero intrinsic value,
Speaker 3: once you make up your mind that the value is
Speaker 3: not zero, then it can be anything. So when I
Speaker 3: look at the price, it's like, Okay, it's sixty thousand dollars,
Speaker 3: all right, it could be one dollar, sixty thousand, five
Speaker 3: hundred thousand, It's whatever I can.
Speaker 1: Sell it for exactly way.
Speaker 2: And he saything about bar or gold Well, just because
Speaker 2: some people were its jewelry, is that the argument?
Speaker 3: No, I mean, it's a real thing that you know,
Speaker 3: costs a lot of money to mine, to produce, to
Speaker 3: get the permitting, you know, so you know that there's
Speaker 3: a real kind of fundamental economic one oh one principle
Speaker 3: around any kind of hard asset and has been, you know,
Speaker 3: for thousands of years. And again people will of course
Speaker 3: go on about the amount of electricity costs and things
Speaker 3: to mind bitcoin and the cost of the technology to
Speaker 3: do it, and I hear all of that. I think
Speaker 3: it's just that basic concept of Okay, if the intrinsic
Speaker 3: value of zero, once you've made up your mind that
Speaker 3: it's something other than zero, it can be anything.
Speaker 1: Final question, favorite ETF ticker other than any of your own?
Speaker 3: That is a great question. I know this is this
Speaker 3: is not necessarily the most in a you know, the
Speaker 3: most sort of unique or give us something good here.
Speaker 1: I can tell it's.
Speaker 3: Kind of a tie, but I think it the Q, Q,
Speaker 3: qu Q and spy one of the three letter three
Speaker 3: letter tickers are now kind of very rare. They denote
Speaker 3: something that's a lot older. But I think that while
Speaker 3: there's not necessarily anything clever about the symbols themselves, what's
Speaker 3: good about them is they've represented or become to be
Speaker 3: like sort of like Coca Cola of BTFS for that
Speaker 3: particular category, and that's cool, you know. I think when
Speaker 3: that was the test of a great ETF is when
Speaker 3: people know the ticker more than they know the actual strategy.
Speaker 3: And so I've heard stories, just one one particular one
Speaker 3: that made me laugh. And why I thought of the cues.
Speaker 3: I was recently in Japan, just a few weeks ago,
Speaker 3: and I was talking to do some investors there and
Speaker 3: including somebody from Invesco. And Invesco, of course, is the
Speaker 3: the issuer of the cues. And they said that, well,
Speaker 3: we have a lot of you know, issues with brand
Speaker 3: recognition in Asia because no one knows Invesco.
Speaker 1: Any other cues.
Speaker 3: And they said that, yeah, you go to a meeting
Speaker 3: and you know, the client will say, oh, you know Invesco,
Speaker 3: Yeah we don't, we don't know who you are. And
Speaker 3: they said, oh, okay, well we've got the cues. Said oh,
Speaker 3: I know the cues. And so they know the cues
Speaker 3: but have no idea the company that represents it. I
Speaker 3: think that's a sign of you know when you made
Speaker 3: it as a ticker, if you're a ticket symbol that
Speaker 3: is looking for when you've made it, and we just
Speaker 3: know you're a product exactly all right.
Speaker 1: Well, Ryan, thanks for joining us on Trillions.
Speaker 3: Thank you so much, absolute pleasure.
Speaker 4: Thanks for listening to Trillions until next time. You can
Speaker 4: find us on the Bloomberg Terminal, Bloomberg dot com, Apple Podcasts, Spotify.
Speaker 1: Or wherever else you'd like to listen.
Speaker 4: We'd love to hear from you. We're on Twitter, I'm
Speaker 4: at Joel Webbers Show. He's at Eric Balchuna's. This episode
Speaker 4: of Trillions was produced by Magnus and it's bye.
Speaker 1: Mm hmmm mmmmm mm hmmm