Speaker 1: Welcome to Chillions.
Speaker 2: I'm Joel Webber and I am Eric belchernas Eric almost
Speaker 2: twenty twenty five here.
Speaker 3: Yeah, I know it. I get to write my outlook.
Speaker 3: We've got reviews coming up.
Speaker 2: Oh those were due already. All of that was due already.
Speaker 1: The good news here.
Speaker 3: No, no, dude, not the numbers, not the written part. Yeah,
Speaker 3: the number that's the important stuff.
Speaker 2: Though, the good thing is we're gonna have some help
Speaker 2: today about how to think about what's gonna be coming
Speaker 2: at us next year.
Speaker 3: Yeah. So even though I have an outlook, our outlooks,
Speaker 3: we can't really talk about like tickers that much. We
Speaker 3: can't give investment advice. But there are people who look
Speaker 3: at ETFs by ETFs. We're calling them ETF strategists.
Speaker 1: Yeah, what do they do?
Speaker 3: They are again, we had a side show called ETF
Speaker 3: master Chefs. To me, they are chefs that make portfolios
Speaker 3: of using ETF ingredients. So they are, in my opinion,
Speaker 3: the best shoppers of ETFs out there. So when they
Speaker 3: have a list, it's usually not the most obvious ETFs
Speaker 3: in Maybe another metaphor that I like to use for
Speaker 3: these and what we're going to talk about today is
Speaker 3: remember the video stores in the nineties and eighties, when
Speaker 3: you'd go and there'd be like a wall saying employee picks.
Speaker 2: Yeah, and they'd have those little like coin things that
Speaker 2: you would like take off the hook, yes, tick to
Speaker 2: the counter.
Speaker 3: And a lot of the movies were not obvious, right,
Speaker 3: That's where you'd find like some like you know, foreign
Speaker 3: movie or something from the seventies that was gritty. And
Speaker 3: I learned to really trust the employee picks. And they're
Speaker 3: the people who were at the counter and would love
Speaker 3: to have a conversation about movies. This is old school
Speaker 3: video stores. That is what ETF strategists are to me
Speaker 3: for ETFs. They are nerds at the highest level. And
Speaker 3: when they have ETFs, not only it's interesting to pick out,
Speaker 3: like what ETF did you pick? But why'd you pick it?
Speaker 3: Because they have a they have to put a portfolio together,
Speaker 3: they have to like work the macro theme into so
Speaker 3: it's kind of a two for interview when you talk
Speaker 3: to them.
Speaker 2: So joining us on this episode, John Dobby of Astoria
Speaker 2: Portfolio Advisors, this time on Trillions as story is ten
Speaker 2: ETFs for twenty twenty five.
Speaker 1: John, Welcome back to Trillions.
Speaker 4: Great to be here.
Speaker 2: You've been on trillions before, you've been on the Master
Speaker 2: Chef episodes that Eric referred to. I was kind of
Speaker 2: taken aback by how good of performance twenty twenty four
Speaker 2: was when you did your your ten picks. So you
Speaker 2: just copy and paste right twenty twenty four into twenty
Speaker 2: twenty five and repeat a.
Speaker 4: Little different, little different. Yeah, we were last year. We're
Speaker 4: pretty bold up. You know, we thought the FED was
Speaker 4: going to cut We had an Ernin's recovery here in
Speaker 4: the US, and you know, the average stock valuations were
Speaker 4: is not that expensive, so we thought it was kind
Speaker 4: of made a lot of sense to own a lot
Speaker 4: of equity picks last.
Speaker 1: Year, and how good were your picks last year?
Speaker 4: So last year's and I would just question people to say, like,
Speaker 4: you know, we've got GIBS compliant sma's fact sheets on
Speaker 4: our websites. We have ETFs that you could look at
Speaker 4: the more star rankings, but inevitably people always ask me,
Speaker 4: you know, how did last year's you know, let's do so.
Speaker 1: Yeah, I was just going to get out of the
Speaker 1: way by donut first.
Speaker 4: Equate to basket was up twenty one percent last year.
Speaker 4: You know, we have global macro ideas as international does
Speaker 4: fixed income, there's alternative. So you know, the the equo
Speaker 4: ait SMP was up twenty six percent. You know since
Speaker 4: our publication, our equated basket was up twenty one percent,
Speaker 4: So you know, I was pretty happy with it. You know,
Speaker 4: one hundred percent of the ideas were in the money.
Speaker 4: Let's say usually about seventy eighty percent of the ideas
Speaker 4: are like positive returns. So I think it was, you know,
Speaker 4: in retrospect, this year I think was a fairly easy call,
Speaker 4: but very different from next year.
Speaker 2: So so nothing from last year's list can be on
Speaker 2: this year's list.
Speaker 4: I you know, Eric, you know this. But if I
Speaker 4: put spy img you know GLD in the list every year,
Speaker 4: like no one's going to read it, right, So the
Speaker 4: idea is to give kind of unique, you know, actionable
Speaker 4: investment ideas. So I do like to kind of change
Speaker 4: it up. There could be a theme like small caps,
Speaker 4: which is repeated, but we would want to change the ticker.
Speaker 3: Let's say, let's talk about that top of the list
Speaker 3: is small caps. Somebody I kimera where I read it,
Speaker 3: Maybe it was you said that small caps are potentially
Speaker 3: the opportunity of a lifetime right now. Unlike international, they've
Speaker 3: got you know, potential. You have two small cap ETFs
Speaker 3: on here. I'll read them off, Joel. You told me
Speaker 3: if you've heard of it, either of these Wisdom Tree
Speaker 3: US Small Cap Quality Divoting Growth Fund and the alps
Speaker 3: oh Shares US Small Cap Quality divin ETF.
Speaker 1: Those tickers are dg RS and o U S m
Speaker 1: over two.
Speaker 3: Yeah, so let's first talk small caps. I feel like
Speaker 3: small caps. We've seen this movie before. It's always supposed
Speaker 3: to be the year of small caps. They have a
Speaker 3: nice little month or two and then bam, large cap
Speaker 3: Q typestocks take over. And I've seen it happen over
Speaker 3: and over and over, you know, like that Marshall Lynch video.
Speaker 3: You just got to run through a guy's face over
Speaker 3: and over and that was his key to like being
Speaker 3: a good running back. The cues to me is Marshaun Lynch,
Speaker 3: and the defender is the small caps. They just can't
Speaker 3: ever get going, let alone a regime change. You think
Speaker 3: this is the year.
Speaker 4: I think so. I mean I think as a prudent
Speaker 4: investor that is trying to buy low and sell high.
Speaker 4: You know, cues are pretty expensive right now. They did
Speaker 4: that big rebounds last year where they modified the weights
Speaker 4: and you know they lowered some of the MACS seven exposure.
Speaker 4: So it's not as egregious, let's say, as like let's
Speaker 4: say in the S and P five hundred. But I mean,
Speaker 4: you know, we had an epic rally right last two
Speaker 4: years in the SMP. It's almost six percent between last
Speaker 4: year and this year. So it's just harfed me with
Speaker 4: a straight face to talk to an advisor and say, look,
Speaker 4: we're going to just be overweight US large cap, but
Speaker 4: I just think you've got to play that margin of
Speaker 4: safety and small caps. You know, they're cheaper in the
Speaker 4: products that we use. You know, there's some underlying alpha signals,
Speaker 4: but you know, no doubt the call is that, like
Speaker 4: you know, we're going to have like a positive economic
Speaker 4: drop backdrop. You know you've got like the red sweep.
Speaker 4: You know, there is like a trump put is what
Speaker 4: we're saying. So like, do you still want to be
Speaker 4: overweight you know ques and spies or do you want
Speaker 4: to like take a little bit off and put it
Speaker 4: into like small caps And we would say use some
Speaker 4: small caps.
Speaker 1: And why these two Well.
Speaker 4: I mean, so you know, last year, let's say, we
Speaker 4: would have used the S and P six hundred, you know,
Speaker 4: the SPSM, which is just like the benchmark. But you know,
Speaker 4: in small caps, you know, there is some underlying alpha
Speaker 4: signals that you can gather. And I think these two products,
Speaker 4: you know, not only have they performed better then let's say,
Speaker 4: like the small cap index, but it's really kind of
Speaker 4: what we would do, Like we run SMAs and like
Speaker 4: so the ousm uh, you know has one hundred stocks,
Speaker 4: let's say, right, which is kind of what we would do.
Speaker 4: And we've got a couple of vtfs which we have
Speaker 4: like very concentrated portfolios. So I think that you know,
Speaker 4: if you look at let's say the medium multiple for
Speaker 4: small caps, they trade the thirty fifth percentile. Large caps
Speaker 4: are in the top percent ale. And here here's one
Speaker 4: stat and I want to get two monkey with stats.
Speaker 4: But like, you know, the main point that we've been
Speaker 4: arguing is that there are other growth opportunities besides the
Speaker 4: MAG seven. Right, So if you just look at the
Speaker 4: S and P five hundred and four hundred, there's two
Speaker 4: hundred and forty stocks that have had Earnin's growth of
Speaker 4: more than twenty five percent over the last twelve months.
Speaker 4: That's a lot of stocks. There's forty one that have
Speaker 4: grown their earnings fasted in the video, fifty nine that
Speaker 4: have grown their earnings fasted in Amazon, ninety two grown
Speaker 4: faster in Meta, and one hundred and seventy fast in Google.
Speaker 4: So you know you can stay long queues or you
Speaker 4: know the MAG seventy TF. But you know, I look
Speaker 4: at like sentiment it is so stretched, right. You know
Speaker 4: that MAG seventy TIF from Roundhills gained like a billion
Speaker 4: dollars like in the last year. I'm a tremendous job,
Speaker 4: but I'm like, there's so many late cycle indicators I
Speaker 4: see out there, and you know, at the end of
Speaker 4: the day, we're supposed to be buying low and selling high, right,
Speaker 4: that's what advisors want us to do. So that's the
Speaker 4: kind of restaurant for small ceps.
Speaker 3: What you're talking about, This idea that okay, the MAG
Speaker 3: seven it can go any further the evaluations, I feel
Speaker 3: like it points to this like possible existential crisis. Like
Speaker 3: someone like yourself who's very educated, you've had mentors, you've
Speaker 3: seen markets before. It just seems like this market sometimes
Speaker 3: goes against everything that people have been taught and because
Speaker 3: I agree with you, it all makes sense. Like it's
Speaker 3: their due, right, That's how they're due to like have
Speaker 3: a bad year, but they were due like one hundred
Speaker 3: percent ago. Like that's the problem. They're always due and
Speaker 3: they just keep like I said, Marshawn lynching everybody.
Speaker 4: Yeah, well I the analogy I would say is that,
Speaker 4: like we have these conversations with advises, like, Okay, let's
Speaker 4: let's first of all, we're not saying to sell all
Speaker 4: your spies and your cures. We're saying, like, take a
Speaker 4: portion of it, take a third of it. Right, So
Speaker 4: here's the options that we go through advisors. Okay, you know,
Speaker 4: do you want to buy value? And they're like, all right,
Speaker 4: that's it. Value works like one or twice every ten years. Right,
Speaker 4: So like we're not gonna like play that game international, right.
Speaker 4: You know you have your Europe versus US tweet that's
Speaker 4: been going viral. I mean that's just like nobody wants
Speaker 4: to buy international, right, So sell your spies and ques
Speaker 4: to buy something that rarely ever works. So that's out
Speaker 4: of the option. Then we get into this conversation equal weight,
Speaker 4: which they're more receptive to. Right, So rsp is taken
Speaker 4: in like thirteen billion year you know, INFLOS year to date,
Speaker 4: and it's up to like sixty five billions. So it
Speaker 4: is like a big reputable product. We think there's flaws
Speaker 4: with like you know, equal weight indices. Small caps is
Speaker 4: something that like, you know, I think is more realistic
Speaker 4: that people would till to so they're like, all right,
Speaker 4: we'll give that a shot. Like we're not going to
Speaker 4: buy value, We're not going to buy international, you know.
Speaker 4: So we're just trying to like tell people like, look,
Speaker 4: let's look for a margin to say to be you're
Speaker 4: right or to the point that it's like a low train,
Speaker 4: local automotive that just keep powering through. But you know,
Speaker 4: the the economic history would say, like if you've got
Speaker 4: a supportive backdrop for risk and you've got this you know,
Speaker 4: trump put and a pro red sweep, you know that
Speaker 4: would better for small caps.
Speaker 2: Okay, John, I'm gonna keep going down the list, but
Speaker 2: I gotta ask you there were two ETFs for small
Speaker 2: cap there, and there's ten overall.
Speaker 1: Can you count?
Speaker 4: You know, you know, here's the backdrop with that is
Speaker 4: that I so the history of this report was that
Speaker 4: I was on the cell side as like a content
Speaker 4: you know, ETF content producer, and I did want to
Speaker 4: go to the buy side.
Speaker 1: I wanted to join.
Speaker 4: So I'd go on these interviews and be like, you know,
Speaker 4: I want to you know, manage money, and they would
Speaker 4: be like, well, you've got no track record, you can't
Speaker 4: get a job here. So that had to put together
Speaker 4: a report to kind of get a track record. And
Speaker 4: then I started doing that and I had good performance,
Speaker 4: and they're like, well, you actually don't like track you know,
Speaker 4: any kind of real money. Long story short, you know,
Speaker 4: the list used to have just ten, but over the
Speaker 4: last few years, as we are like so far deep
Speaker 4: in this economic recovery, S and P has been on
Speaker 4: this bull market for you know, thirteen years, we added
Speaker 4: some other tickers you know, for that theme, but it's
Speaker 4: usually like ten themes.
Speaker 2: Yeah, fourteen, yeah, alright, alright, just checking, Okay, so what's
Speaker 2: your next theme?
Speaker 4: Well, I mean, to Eric's point, you know, I do
Speaker 4: think that the mag seven is you know, a theme
Speaker 4: that you should tilt away from. And we firmly believe
Speaker 4: that we run SMAs, you know, quantitative stock SMAs. We've
Speaker 4: been doing it for you know, the last seven years
Speaker 4: at Astoria We've always equally weighted. You know, back in
Speaker 4: Maryland's research in the late nineties early two thousands, when
Speaker 4: we put together like these quant baskets, we used to
Speaker 4: always equal weight. So, you know, about a year ago,
Speaker 4: so we launched ROE, which is an equally weighted quality
Speaker 4: TF and because we were worried about the mag seven.
Speaker 4: So that fun launched in August first of twenty twenty three,
Speaker 4: and it takes you know, four or five months to
Speaker 4: launch it. So we were thinking about equal weight, like
Speaker 4: very very far a long time ago. So the problem
Speaker 4: that we find when when you use the equal weight
Speaker 4: Russell one index or the S and P five hundred
Speaker 4: equate index, you get this like concentration in like small value,
Speaker 4: and your tech exposure goes from let's say thirty percent
Speaker 4: spot I to like fifteen percent. And you know, one
Speaker 4: thing I'll agree with Eric is that like I just
Speaker 4: I don't want ever want to be on the way tech.
Speaker 4: I think tech is just like a power train locomotive.
Speaker 4: You want to stay along it. So if you sell
Speaker 4: your spy to buy you know RSP or you know
Speaker 4: there's Russell one thousand equate ETFs, you know you're going
Speaker 4: from like large growth, large blend to small value and
Speaker 4: not just you know, not something that we wanted to do.
Speaker 4: So for are we What we wanted to do is
Speaker 4: basically take the SMP sector weights and kind of match it.
Speaker 4: So we've had good performance. You know, we've beaten the
Speaker 4: SMP equate in Next by like six hundred and fifty
Speaker 4: basis points since we launched. And it's one hundred eight
Speaker 4: one hundred stocks equally weighted, so each stock is one
Speaker 4: percent weight whereas in the S and P five hundred
Speaker 4: equated NEXT each stock is twenty BIPs. So you know
Speaker 4: you're really not going to get like that marginal contribution
Speaker 4: to return if like let's say in the video, goes
Speaker 4: up two hundred percent a year, So that that's something
Speaker 4: that's kind of near and dear at our heart.
Speaker 3: Let me talk about this one here. This is one
Speaker 3: of my most underrated ETFs, which is the first trust
Speaker 3: Us Equity Opportunity TF. It used to be called the
Speaker 3: I P O E t F. It is an IPO
Speaker 3: et F. It's IPOs and SPINOFS. Why that that is
Speaker 3: an interesting pick? I like it?
Speaker 4: Okay, So one thing we wrote about in our report
Speaker 4: is that you know, we have to go into far
Speaker 4: corners of the market to try and find you know,
Speaker 4: attractive you know returns. Let's say, just because we think,
Speaker 4: you know, the sp and the queues are kind of
Speaker 4: expensive and crowded, you know, so something like FPX is
Speaker 4: kind of eediosyncratic, like you know, yes, like the regulatory
Speaker 4: backdrop is improvement, but whether the FED cuts you know
Speaker 4: or raises, I don't know if it's going to necessarily
Speaker 4: drive the IPO spinoff you know kind of market. So, uh,
Speaker 4: you know, I've been following this thing for a while.
Speaker 4: I think the underlying provider Josef I can't remember, I
Speaker 4: can't pronounce his last name, but you know, he's been
Speaker 4: in this space. He's like the one guy that does
Speaker 4: this index, and like he's been doing it for like
Speaker 4: as long as I've been working actually, which is like
Speaker 4: over twenty years. So last year it's actually had good returns.
Speaker 4: You know, it's up like forty seven percent of the
Speaker 4: last one year, spies up thirty four percent. It's got
Speaker 4: almost a billion dollars as one hundred stocks. You know,
Speaker 4: they capped, you know, the stocks, you know, ten percent
Speaker 4: on the upside. So but it is like, you know,
Speaker 4: the largest one hundred most liquid companies that are either
Speaker 4: gone public, whether they're an IPO or spin off. And
Speaker 4: then there's also some acquiers of recent IPOs that included
Speaker 4: in it.
Speaker 1: So does it really only work though, if there's a
Speaker 1: lot of IPOs.
Speaker 4: Good point. I mean, I wouldn't say the you know,
Speaker 4: the IPO calend that was as robust last year as
Speaker 4: what we think will be in the next you know,
Speaker 4: you like, the one thing about like, you know, Trump's
Speaker 4: presidency I would say is that, you know, I think
Speaker 4: if you look at like who he's picking it in
Speaker 4: his cabinet, I think they're going to deregulate the heck
Speaker 4: out of the financial industry, which I think is a
Speaker 4: good thing. And just the people I know that work
Speaker 4: at banks to like there's no Christmas, there's no Thanksgiving,
Speaker 4: we're doing deals or IPO, and like with M and A,
Speaker 4: like nobody's taken a holiday. So I think that, you know,
Speaker 4: the next few years is going to be a very
Speaker 4: different mark if IPOs and M and A.
Speaker 3: It's interesting David Cohne, who has this podcast called Inside Active,
Speaker 3: he was interviewing the guy from oh I can't remember,
Speaker 3: an asset manager, but it was a mutual fund manager.
Speaker 3: He interviews active managers, and he was saying the same
Speaker 3: thing that M and A. He was really into as it,
Speaker 3: and he liked the small caps for that. It's interesting.
Speaker 3: I bet we'll hear more about that. You're you said
Speaker 3: everything I would say about it. The only thing is
Speaker 3: the FPX jeal to me is like catch and release.
Speaker 3: You know, you take in these i pos right when
Speaker 3: they hit the market. I think it's like within a month,
Speaker 3: and then you release them. I think it's up to
Speaker 3: four years. So the problem is a lot of these
Speaker 3: big indexes like Spy and even the Russell, they're pretty
Speaker 3: concerned a stock has to jump through a bunch of
Speaker 3: hoops before it can even make it in there. So
Speaker 3: like if you think about investing in the equity markets,
Speaker 3: and a lot of IPOs go public when they're large,
Speaker 3: you kind of miss them in that sort of toddler
Speaker 3: phase before they become teenagers and in the index, and
Speaker 3: then when they get the index, they got a small waiting.
Speaker 3: So this et, after all, I wouldn't back one year
Speaker 3: and looked, it's beating the S and P since it
Speaker 3: came out, And the reason is there's so many dogs
Speaker 3: a lot of dog IPOs, but there's a couple Blockbusters,
Speaker 3: Facebook now Meta Tesla, and this thing had it when
Speaker 3: it was doing the hot hockey stick, So you only
Speaker 3: need a couple Grand Slam home runs to totally offset
Speaker 3: the dogs. And I just like it because it's like
Speaker 3: a portfolio completion. You aren't getting a lot of these
Speaker 3: stocks in your broad based indexes. So that'd be my
Speaker 3: case for FPX.
Speaker 4: Yeah, and twenty five years ago, when I first started working,
Speaker 4: like Russell would only add IPOs at the end of
Speaker 4: the year, you know, at the June rebalance. Then they
Speaker 4: changed it to like I think monthly or quarterly. So
Speaker 4: you agree, And I don't think it's as like hot
Speaker 4: sauce ish, like like you can kind of like keep
Speaker 4: this mild, yeah, mild.
Speaker 3: It's like the blue cheese they give with the wings.
Speaker 3: I mean, it's not like your main course, right, but
Speaker 3: it's not Yeah, no, this is going to be moderate
Speaker 3: blue cheese.
Speaker 1: I mean, does make wings taste better, that's for sure.
Speaker 3: Okay, So so essentially after the hot sauce chel, this
Speaker 3: is where they're just kidding.
Speaker 2: This is where a little bit of crypto. And I
Speaker 2: think this is interesting because we've talked about this before
Speaker 2: Bitcoin ran away with the year.
Speaker 3: We've talked about vicoin on this listen. This was the
Speaker 3: year of bitcoin.
Speaker 1: It was the year of Bitcoin.
Speaker 2: Yeah, we've talked a little bit about ethereum a little
Speaker 2: and how you've been kind of anti Eric.
Speaker 3: Well, I've just said etherym ETFs coming out after Bitcoin.
Speaker 3: ETFs is like the headliner coming on after the main
Speaker 3: main band. Like it'd be like Sister Hazel coming on
Speaker 3: after Nirvana. Who in the hell would stay for that?
Speaker 1: Right?
Speaker 3: And I was right. These things have not taken in
Speaker 3: that much money. I think they'll succeed over time, but
Speaker 3: Bitcoin is the main event, and it felt a little
Speaker 3: like a get this man.
Speaker 1: John Dobby says, twenty twenty five is the year of
Speaker 1: e theory.
Speaker 3: That's why. Yeah, that's interesting. I like it. Well, I
Speaker 3: mean the ether people are gonna love this. They're looking
Speaker 3: for anything.
Speaker 4: I mean Bitcoin. First of all, it was like a
Speaker 4: lot of front running for you know, before these ETFs launch,
Speaker 4: and you know, I know you've covered this extensively, Eric,
Speaker 4: but I mean it's hard with a stray face to
Speaker 4: buy an asset that's been up so much in the
Speaker 4: last year, right, And like you know, there's levels I
Speaker 4: think you should think about, Like you know, Bitcoin that
Speaker 4: one hundred thousand. You know, I kind of stalled, But
Speaker 4: you know, Ethereum is you know down, it's like down
Speaker 4: thirty five percent from US all time highs. I personally
Speaker 4: would rather buy a basket, Like I'm interested in the
Speaker 4: b tw like the bit wise OTC product that's like
Speaker 4: the kind of the index approach, just because I think
Speaker 4: it's a little bit safer. But that is OTC, and
Speaker 4: you know it is ten ets for twenty twenty five
Speaker 4: when it's going to move to the NYC pretty soon.
Speaker 4: But you know, ethereum, I think is just something that's cheap.
Speaker 1: You know.
Speaker 4: Look, I don't think cryptos and acid to ignore.
Speaker 1: Uh.
Speaker 4: You know these big institutions putting their names behind it,
Speaker 4: you know, black Rock, Fidelity, and you know these firms
Speaker 4: like they go out and they meet with like central banks,
Speaker 4: you know, presidents of countries. So I think you want
Speaker 4: to own crypto, but I think you have to be tactically.
Speaker 4: You have to wait for a better entry point for
Speaker 4: a bitcoin.
Speaker 2: And that looks like if you're I just want to
Speaker 2: call out though this lot your logic there sounds a
Speaker 2: lot like the mag seven logic, which is this thing
Speaker 2: number go up and and John Dobby says, maybe maybe
Speaker 2: don't keep going up.
Speaker 3: Were you trained as a value investor? Like did you
Speaker 3: mentor under a valuables in.
Speaker 4: Ninety nine when I started, like, momentum was not a
Speaker 4: big factor.
Speaker 3: It was not like you know, it wasn't the way
Speaker 3: you started ninety nine. So you saw the Internet bubble
Speaker 3: burst like two years into your job, and you're like, okay,
Speaker 3: well I get it. That probably shaped your whole world
Speaker 3: views absolutely.
Speaker 4: I mean, I think depending on when anyone enters industry,
Speaker 4: they're going to have like these preconceived you know biases.
Speaker 3: For sure, Well the FED let this part of the
Speaker 3: issue is well, the Fed let that happen again.
Speaker 4: So I don't know, but like the FED at like
Speaker 4: you know, the FED funds is like four seven five
Speaker 4: four five. So I mean, the one thing about Trump,
Speaker 4: and you know, I'm not a big political guy. I
Speaker 4: have to be moderate by general because I have clients
Speaker 4: on both sides. Zdel I would say, you know, he's
Speaker 4: been a fixture in New York City in New Jersey
Speaker 4: for a while, and you know I'm from Queens, he's
Speaker 4: from queens like he is a you know, do whatever
Speaker 4: it takes, right, So I think that he will keep
Speaker 4: the economy floating. I do think that he keeps crypto floating.
Speaker 4: Two because he's kind of pretty out loud with it.
Speaker 4: I just went by Bitcoin up, you know, whatever it is,
Speaker 4: you're to date one hundred two hundred percent.
Speaker 3: Yeah, it's up a lot. Yeah, it's it makes sense.
Speaker 3: We'll see if you're right. I guess let's talk a
Speaker 3: little bit about the mortgage ETFs D MBS, double line
Speaker 3: mortgage ETF and Spider portfolio back bond ETF S p MB.
Speaker 3: You know, remember when I pitched the I pitched well,
Speaker 3: I pitched it. It was a Muni show. I pitched him
Speaker 3: and he was started falling asleep. Mortgage just a little
Speaker 3: more interest.
Speaker 2: THU, Yeah, my pulse is still pretty low.
Speaker 3: Yeah, make this interesting.
Speaker 4: Well, I would say that like two three years ago,
Speaker 4: we had a lot of BONDI tifts in the list.
Speaker 4: We didn't have as much equities because that was kind
Speaker 4: of like our outlook. I would still rather own equities,
Speaker 4: you know, next year, than I would bonds. In general,
Speaker 4: most credit spreads are very very tight, whether it's you know,
Speaker 4: traditional high quality corporate HYO UH spreads, mortgage backed securities,
Speaker 4: you know, they're not as tight, so there is some
Speaker 4: you know, kind of intrinsic value there. So that's really
Speaker 4: the story. We don't have to go deep into it.
Speaker 4: But I I don't love fixed income in general with
Speaker 4: you know, higher inflation. And I think you know the
Speaker 4: average stock you know, equal weight, you know value KBWB KRE,
Speaker 4: there's much more upside relative than on you know, corporate
Speaker 4: creditor HYO bonds.
Speaker 2: Okay, alternative equity, you got merger arbitrage a RB great ticker.
Speaker 2: What what are you seeing in UH in that space
Speaker 2: that makes you makes you want to get in there?
Speaker 4: So you know, and like we don't own ARB, we
Speaker 4: don't own FPX. The idea of again for this report
Speaker 4: is like get the thought out there that you've got
Speaker 4: to look somewhere else besides US large cap equities to
Speaker 4: find attractive risk returns. And but yes, it is part
Speaker 4: of like the whole dear you know regulation theme. You
Speaker 4: know it's low standar aviation. The RBTF has got like
Speaker 4: a three stand aviation. If you look at like let's
Speaker 4: say AQUI, it's like fifteen percent. So it's max straw down,
Speaker 4: you know, since inception is like three percent. So it's
Speaker 4: a low volve strategy and it's meant to play the
Speaker 4: kind of you know M and A theam let's say, so.
Speaker 3: You know it's interesting, so let's go over M and A.
Speaker 3: This is merger R right, So you're looking at okay,
Speaker 3: there's an announced merger, because if you can't get ahead
Speaker 3: of that, that's illegal. Just FYI. That's why I kind
Speaker 3: of like theme ets so that equal weight because if
Speaker 3: you equal way to theme, that's hot. Like AI. Sometimes
Speaker 3: the smaller companies are the ones that get bought. That's
Speaker 3: the only way to get ahead of true merger mergers
Speaker 3: and arbitrage. But okay, so it's announced, but there's always
Speaker 3: a small chance the deal falls through, and so there's
Speaker 3: this premium between the price now and the price that
Speaker 3: closes at This is trying to capture that correct correct okay,
Speaker 3: And that's why the volatilities look because that use short
Speaker 3: beta to do that.
Speaker 1: Okay.
Speaker 3: So it's a true alt these true altstroll. It's really
Speaker 3: a great concept. Hedge funds love it, institutions love it.
Speaker 3: They are a tougher sell with the general advisor they need.
Speaker 3: I just think either it's too complicated, doesn't move enough
Speaker 3: hard to explain to the client. The clients say it's
Speaker 3: only a three percent, but you're like, well on a
Speaker 3: sharp ratio is high? Is?
Speaker 1: I don't care.
Speaker 3: I think that's the problem because these alts that do
Speaker 3: it the real way have have struggled to get going
Speaker 3: even though an institution would like this, although an institution
Speaker 3: would go and get it directly from a hedge fund offline.
Speaker 4: And that's what the concept that we're trying to deliver is. Like,
Speaker 4: you know, if you're a four billion dollar family office,
Speaker 4: like you know, we want you to, like now think
Speaker 4: about merger ARB as like a way to kind of
Speaker 4: get unique stress of risk and return, but do it
Speaker 4: as an SMA with a specialized manager.
Speaker 3: All Right, you have another one on here which looks
Speaker 3: like it has a story in the name, which I
Speaker 3: don't mind a little self plugging here. It looks like
Speaker 3: you have two one here that are your own. That's
Speaker 3: that's okay, We'll let us slide. I mean, if you're
Speaker 3: not gonna eat your own cooking, who else should? Well,
Speaker 3: the funny thing.
Speaker 4: Is if you if you look at like so last
Speaker 4: year is because I don't like to repeat tickers, Joel,
Speaker 4: like it was, he's just.
Speaker 1: Showing his cell side roots, so they won't.
Speaker 4: Be on next year's list because I don't like to
Speaker 4: repeat it. So, yes, we do have some of our
Speaker 4: own ETFs. You know, if you look at like the
Speaker 4: Baron's round table, you're ahead report. You know, some of
Speaker 4: the portfolio managers do have their own mutual funds in there.
Speaker 4: So you know, we like to eat our own cooking,
Speaker 4: let's say. And if it fits the theme, and if
Speaker 4: it's not a repeat from last year, then we'll go
Speaker 4: ahead with it.
Speaker 3: This is called the AXS. The Story of Real Assets
Speaker 3: ETF Now tickers PPI, PPI. You got good tickers here, Joel. I.
Speaker 3: When I wrote the first book on ETF Toolbox, I
Speaker 3: interviewed institutions and they love the real assets, which means
Speaker 3: the Yell model. This guy, David Swinson wrote this book
Speaker 3: bragging about how great Yell did by not using public
Speaker 3: equities but by buying like timber timber, and like hedge
Speaker 3: funds and private equity and alts and real stuff like
Speaker 3: that you can touch and hold, and so these real
Speaker 3: assets you can't get in an ETF. However, you can
Speaker 3: get real assets that are like equitized like reets and stuff.
Speaker 3: So I guess that's my question to you, how much
Speaker 3: of this is really achievable in the ETF rapper to
Speaker 3: get real assets which is largely used as an inflation
Speaker 3: head or a way to incorporate the Yale model, versus
Speaker 3: doing it the way that an institution would where they
Speaker 3: literally buy timber.
Speaker 4: Yeah, so we definitely can't buy you know, physical timber
Speaker 4: or you know, I think one time Yell bought like
Speaker 4: a bunch of you know woods, you know, timber and
Speaker 4: actual real woods. Our point here is that like these
Speaker 4: stocks are pretty cheap, like whether it's material stocks, energy stocks, industrials, reads,
Speaker 4: I mean, there's utility stocks that you know, kind of
Speaker 4: play into the TAM So if you look at PPI,
Speaker 4: it's actually like you know, thirteen pe ratio, and you know,
Speaker 4: this fits our whole, like you know, Trump's pro growth,
Speaker 4: pro policy, terrorists protectionism leading too higher inflation. So and
Speaker 4: this is more in like the you know, four or
Speaker 4: five percent allocation just to kind of offset the risk
Speaker 4: on the other side of the portfolio. And you know,
Speaker 4: the funny thing is like when we launched PPI, people
Speaker 4: were like, oh, it's thematic, it's you know. And since
Speaker 4: we launched the PPI has beaten the S and P
Speaker 4: by three inchred basis points. And it's coming up on
Speaker 4: a three year anniversary. And if you told me back
Speaker 4: then that we beat the S and P. So it
Speaker 4: kind of shows me that, you know, a there is
Speaker 4: some like intrinsic value in these stocks, these you know,
Speaker 4: energy industrial material stocks, and then it is value. And
Speaker 4: I do think that value works like to this concept
Speaker 4: of like is value investment dead? So our point is like,
Speaker 4: you know, use that to kind of in your old bucket.
Speaker 1: How much timber do you own in that?
Speaker 4: No timber?
Speaker 3: No timber there are didn't you pick the timber ETF
Speaker 3: is your favorite ticker? One year in our one of
Speaker 3: our games.
Speaker 2: Uh, it was for the purposes of episode and cute
Speaker 2: would would cut?
Speaker 1: I think was the one that outperformed.
Speaker 3: Would right, Yeah, wouldn't cut. They're like the Timber twins. Yeah, yeah,
Speaker 3: I'm around for a long time. Why don't hey, let's
Speaker 3: play a little ETF game. How much assets do you
Speaker 3: think wood has? It's the I shares Global Timber and
Speaker 3: Forestry ETF let's see, let's test your ETF skills. This
Speaker 3: is serious NERD levels question here.
Speaker 4: I would say three hundred million.
Speaker 3: Pretty close, one seventy five. You were within cut. What
Speaker 3: guess cut? This is from Guggenheim Investco formerly Guggenheim.
Speaker 4: That bonus.
Speaker 1: I'm gonna say, over under you can do. You can
Speaker 1: do the over.
Speaker 4: Under two Well, I would I would say lower than
Speaker 4: Cora Rocks because it's you know, Blackrock wressm Vesco. I
Speaker 4: would say probably on the one hundred million, eighty five.
Speaker 3: Fifty five pretty good. Yeah, performance, uh, performance between the two.
Speaker 3: Let's see Cut is up. Yeah, I'm curious how like
Speaker 3: we're gonna go since inception? Yeah, okay, these things came
Speaker 3: out a long time ago, twenty sixteen and Wood, so
Speaker 3: this is about ten years and we've got a Wood
Speaker 3: seriously beating it with one hundred and twelve percent versus
Speaker 3: eighty seven percent for Cut. But like the market was
Speaker 3: up quite a bit more during that time frame two
Speaker 3: forty six So honestly, this is not a bad if
Speaker 3: you'd like your value, I get why you like this.
Speaker 3: This beat up has a chance to run.
Speaker 1: But there's no Wood in the portfolio.
Speaker 3: I know, going down. Well, you may want everything.
Speaker 2: Now now this has been a grand tangent, just a
Speaker 2: branch off to the side.
Speaker 1: We'll bring it back to the truck.
Speaker 3: These are like these are exit ramps.
Speaker 1: Yeah.
Speaker 3: But as I tell people when I'm cheating, you know,
Speaker 3: doing presentae, get back on the highway, quickly, back on
Speaker 3: the higay. I don't want to end up in a lake,
Speaker 3: you know what I mean, like trapped in your car.
Speaker 2: Roll the window down ever so slightly. John, Let's talk
Speaker 2: about commodities. You've got a broad basket or c E
Speaker 2: R Y that's despite our Bloomberg Enhanced roll yield commodity
Speaker 2: strategy number K one E t F as names go.
Speaker 1: That's a mouthful. Why why this particular?
Speaker 4: So you know there there's physical commodities that we think
Speaker 4: we should own to kind of play higher inflation. And
Speaker 4: then it's like, you know, the real assets where it's
Speaker 4: are of like you know, commodity equities.
Speaker 1: Let's say it's so similar to to the PPI.
Speaker 4: Yeah, similar to the theme. I think you know it
Speaker 4: makes sense to kind of split your exposures. Yeah, some
Speaker 4: like commodities. I think you have to be active. I
Speaker 4: think in realize you have to be active. So CRVY
Speaker 4: is just going to try and optimize you know, the
Speaker 4: roll yield, pick different points in a curve, and you know,
Speaker 4: trade these futures. So I think, you know things makes
Speaker 4: a lot of sense. And you know our point is
Speaker 4: like with these things, like you know, two to five
Speaker 4: percent of your portfolio in case inflation is going to
Speaker 4: be stickier and higher for longer, and that's what's proven
Speaker 4: to be the case.
Speaker 3: Have you ever filled out a K one form?
Speaker 4: I've definitely gotten it. It's annoying.
Speaker 3: Yeah, so isn't it weird no K one in the title.
Speaker 3: It'd be like it'd be like a business going because
Speaker 3: it's not the end of the world, but it's you know,
Speaker 3: someone in my book referred to it as like a
Speaker 3: paper cut. But I'm thinking it'd be like a convenience
Speaker 3: store like wua wah saying no paper straws, or like,
Speaker 3: you know, we only do plastic, and I there's some
Speaker 3: people who'd be like, yeah, I'm I'm I hate paper straws,
Speaker 3: Like not the end of the world, but when in doubt,
Speaker 3: I'm going to pick the paper the plastic straw store
Speaker 3: all l sequel. I think a K was that a
Speaker 3: fair comparison to the K I think so.
Speaker 1: Yeah.
Speaker 4: I mean it comes so late in the tax season
Speaker 4: it just kind of ruins you because, like you taxes,
Speaker 4: and all of a sudden in April after the date,
Speaker 4: you know, the April fifteenthdate, you get this K one.
Speaker 3: Oh yeah, let me do it. Yeah, people hate that
Speaker 3: for man.
Speaker 4: So here's some trivia. Who came up with the no
Speaker 4: K one?
Speaker 3: Uh? No K one?
Speaker 4: Oh that was gonna be I'm gonna say, will Rhyme Yeah.
Speaker 3: I think will Rhyme probably started with it in the
Speaker 3: label in the l and then everybody copied him. Usually
Speaker 3: an Indie is the one on whose spearhead something like that.
Speaker 3: But I do remember there back in the day. I
Speaker 3: think there was a couple that didn't have a K
Speaker 3: one first trust, I think had that Caman thing where
Speaker 3: that you register in the Cayman would get around the
Speaker 3: K one R with FTCG and I think that was
Speaker 3: the first one to do it. But I don't think
Speaker 3: they said no K one. But I think an Indie
Speaker 3: put no K one in the actual name. People are like, well,
Speaker 3: screw it. I guess we should do that too, just
Speaker 3: to let people know what they're buying and up for
Speaker 3: what does it achieve here?
Speaker 4: Then no K one just it doesn't have that additional
Speaker 4: tax filing that is required from you know other ETFs
Speaker 4: that have K one's.
Speaker 5: Let's say, sorry, bring it home, all right, last one,
Speaker 5: last one, but not least oh quality growth droll.
Speaker 3: I mean, as far as equities goes, this is about
Speaker 3: as boring as it gets. Well maybe not so Ethan
Speaker 3: on my team Athanasios and Todd Rosenbluth, these guys love
Speaker 3: the garb growth reasonable price. You know, this seems like
Speaker 3: garbish astoria US quality growth kings. So it's like, oh,
Speaker 3: you know, we want the growth, but Joel, we don't
Speaker 3: want to get too crazy. You know, we want the
Speaker 3: responsible growth companies. And this is I get it. It's
Speaker 3: sort of like the Goldilocks way to do growth, am
Speaker 3: I right?
Speaker 4: In essence? Yeah, okay, And we are capping the weights
Speaker 4: on the upside. But some of the other garb ETFs
Speaker 4: I would say, have like a two percent, two percent,
Speaker 4: three percent allocation to like whatever growth you know stocks
Speaker 4: they have. You know, we'll go up to like five
Speaker 4: six percent. So we do own some of these mag
Speaker 4: seven stocks. Like that's the thing that we're saying out
Speaker 4: a story is like don't under you know, don't fade
Speaker 4: mag seven because they are such a big part of
Speaker 4: the stock market. But you know, cap your upside.
Speaker 3: Let's say, so this ticker is g qqqq. Are you
Speaker 3: saying that you start with the qes in this and
Speaker 3: then you sort of trim it from there. Is that's
Speaker 3: that one hundred your base index.
Speaker 4: Before this we start with a broad universe of growth stocks.
Speaker 3: For sure, it looks qish. I mean, Navidia, Apple, Microsoft
Speaker 3: are the top three holdings, but their waitings are a
Speaker 3: little smaller than the regular cues. But like Oracle's definitely
Speaker 3: got a higher waiting than it does in the cues
Speaker 3: and Broadcom it's pretty close though. Yeah, I get it.
Speaker 3: It's like dietques.
Speaker 4: Yeah, I think you've said that before, like tempered cues.
Speaker 4: So we are trying to kind of combine, you know,
Speaker 4: growth investing with quality mess. One thing I'll say about
Speaker 4: the Nasdaq, you know ETF, is that this is like
Speaker 4: no inclusion criteria outside of you just being listed on
Speaker 4: the Nasdaq and being you know, the top one hundred
Speaker 4: company and non financials like that to me is like
Speaker 4: a maybe this is why it's so successful because it's
Speaker 4: like literally no one thinking about like the portfolio construction.
Speaker 4: Least in the S and P. You have to have
Speaker 4: four quarters of net positive urnings. So like, you know,
Speaker 4: you've got to have some type of heartbeat as a
Speaker 4: company to including S and P.
Speaker 3: The cues is unbridled, unbridled American capitalism.
Speaker 1: Until you put the G in front of it, and
Speaker 1: then it tempers it a little bit.
Speaker 3: I know, it's like, all right, let's sober up, everybody.
Speaker 3: This is getting too crazy to check. There you go.
Speaker 3: Now that's good sentiment. All this is very logical.
Speaker 4: But if you have to like say, okay, like what's
Speaker 4: going to be part of your portfolio that you can
Speaker 4: kind of comfortably kind of reside on, you know, what
Speaker 4: we find is that like values tough equal weight. You know,
Speaker 4: we have to like you know, thread that needle with advisors,
Speaker 4: but like no one's going to push back on on
Speaker 4: growth or quality stocks.
Speaker 2: So of the ten ETFs here and by ten, I
Speaker 2: mean fourteen, three of which are your own, how how
Speaker 2: are people supposed to put together a portfolio of this?
Speaker 2: Are you is the idea that they're only going to
Speaker 2: cook with this or or do you want them to
Speaker 2: add this in little doses throughout the portfolio.
Speaker 4: I think the so we're talking about like the chef
Speaker 4: episode of Trillions, I think we're you know, small caps
Speaker 4: should be part of the main ingredients. I think things
Speaker 4: like ARB, things like you know, ce R y PPI
Speaker 4: should be like the side dish, you know, kind of
Speaker 4: like the hot sauce type ish are we I think
Speaker 4: could be in the main g Triple Q could be
Speaker 4: in the main I think the theoreum has to be
Speaker 4: you know, on the you know, on the hot sauce bucket.
Speaker 4: But it is a micro chasm of how we want
Speaker 4: people to think about investing, which is like combining different
Speaker 4: asca classes, different factors in a portfolio. It's not meant
Speaker 4: to be like, you know, the only way you put
Speaker 4: all your money into UH into an investment account.
Speaker 2: All right, we'll be we'll be keeping an eye on
Speaker 2: this in twenty twenty five, John, John dove You've got
Speaker 2: some interesting ideas here, John Dovey, thanks for joining us
Speaker 2: on this episode of Trillions.
Speaker 6: Thank you, thanks for listening to Trillions. Until next time.
Speaker 2: You can find us on the Bloomberg Terminal, Bloomberg dot com,
Speaker 2: Apple Podcasts, Spotify.
Speaker 1: Or wherever else you'd like to listen.
Speaker 6: We'd love to hear from you.
Speaker 1: We're on Twitter. I'm at Joel Webber Show. He's at
Speaker 1: Eric Baultness.
Speaker 6: This episode of Trillions was produced by Magnus Hendrickson. Bye