December 5, 2024 • 36 mins
US large cap stocks have had an unbelievable run, and this year has been no exception. But how much longer can this Magnificent 7-driven winning streak really last? What kind of moves should investors consider making? And which products should they use? ETF strategists ponder questions just like this, and they're experts at figuring out how to meet the moment — or realize an idea — with the right product.
On this episode of Trillions, Joel and Eric speak with John Davi, CEO of Astoria Portfolio Advisors, about his Top 10 — or maybe it's 14? — ETFs that he likes in 2025. These ETFs include small caps, commodities, mortgage-backed bonds, IPOs and financial stocks. They also discuss his overall view of the market as well as the ETF industry.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:05):
Welcome to Chillions.
Speaker 2 (00:06):
I'm Joel Webber and I am Eric belchernas Eric almost
twenty twenty five here.
Speaker 3 (00:12):
Yeah, I know it. I get to write my outlook.
We've got reviews coming up.
Speaker 2 (00:17):
Oh those were due already. All of that was due already.
Speaker 1 (00:20):
The good news here.
Speaker 3 (00:21):
No, no, dude, not the numbers, not the written part. Yeah,
the number that's the important stuff.
Speaker 2 (00:26):
Though, the good thing is we're gonna have some help
today about how to think about what's gonna be coming
at us next year.
Speaker 3 (00:35):
Yeah. So even though I have an outlook, our outlooks,
we can't really talk about like tickers that much. We
can't give investment advice. But there are people who look
at ETFs by ETFs. We're calling them ETF strategists.
Speaker 1 (00:47):
Yeah, what do they do?
Speaker 3 (00:48):
They are again, we had a side show called ETF
master Chefs. To me, they are chefs that make portfolios
of using ETF ingredients. So they are, in my opinion,
the best shoppers of ETFs out there. So when they
have a list, it's usually not the most obvious ETFs
in Maybe another metaphor that I like to use for
(01:10):
these and what we're going to talk about today is
remember the video stores in the nineties and eighties, when
you'd go and there'd be like a wall saying employee picks.
Speaker 2 (01:18):
Yeah, and they'd have those little like coin things that
you would like take off the hook, yes, tick to
the counter.
Speaker 3 (01:23):
And a lot of the movies were not obvious, right,
That's where you'd find like some like you know, foreign
movie or something from the seventies that was gritty. And
I learned to really trust the employee picks. And they're
the people who were at the counter and would love
to have a conversation about movies. This is old school
video stores. That is what ETF strategists are to me
(01:43):
for ETFs. They are nerds at the highest level. And
when they have ETFs, not only it's interesting to pick out,
like what ETF did you pick? But why'd you pick it?
Because they have a they have to put a portfolio together,
they have to like work the macro theme into so
it's kind of a two for interview when you talk
to them.
Speaker 2 (02:00):
So joining us on this episode, John Dobby of Astoria
Portfolio Advisors, this time on Trillions as story is ten
ETFs for twenty twenty five.
Speaker 1 (02:12):
John, Welcome back to Trillions.
Speaker 4 (02:13):
Great to be here.
Speaker 2 (02:14):
You've been on trillions before, you've been on the Master
Chef episodes that Eric referred to. I was kind of
taken aback by how good of performance twenty twenty four
was when you did your your ten picks. So you
just copy and paste right twenty twenty four into twenty
(02:36):
twenty five and repeat a.
Speaker 4 (02:39):
Little different, little different. Yeah, we were last year. We're
pretty bold up. You know, we thought the FED was
going to cut We had an Ernin's recovery here in
the US, and you know, the average stock valuations were
is not that expensive, so we thought it was kind
of made a lot of sense to own a lot
of equity picks last.
Speaker 1 (02:54):
Year, and how good were your picks last year?
Speaker 4 (02:57):
So last year's and I would just question people to say, like,
you know, we've got GIBS compliant sma's fact sheets on
our websites. We have ETFs that you could look at
the more star rankings, but inevitably people always ask me,
you know, how did last year's you know, let's do so.
Speaker 1 (03:11):
Yeah, I was just going to get out of the
way by donut first.
Speaker 4 (03:13):
Equate to basket was up twenty one percent last year.
You know, we have global macro ideas as international does
fixed income, there's alternative. So you know, the the equo
ait SMP was up twenty six percent. You know since
our publication, our equated basket was up twenty one percent,
So you know, I was pretty happy with it. You know,
one hundred percent of the ideas were in the money.
(03:34):
Let's say usually about seventy eighty percent of the ideas
are like positive returns. So I think it was, you know,
in retrospect, this year I think was a fairly easy call,
but very different from next year.
Speaker 2 (03:45):
So so nothing from last year's list can be on
this year's list.
Speaker 4 (03:49):
I you know, Eric, you know this. But if I
put spy img you know GLD in the list every year,
like no one's going to read it, right, So the
idea is to give kind of unique, you know, actionable
investment ideas. So I do like to kind of change
it up. There could be a theme like small caps,
which is repeated, but we would want to change the ticker.
Speaker 3 (04:07):
Let's say, let's talk about that top of the list
is small caps. Somebody I kimera where I read it,
Maybe it was you said that small caps are potentially
the opportunity of a lifetime right now. Unlike international, they've
got you know, potential. You have two small cap ETFs
on here. I'll read them off, Joel. You told me
if you've heard of it, either of these Wisdom Tree
(04:27):
US Small Cap Quality Divoting Growth Fund and the alps
oh Shares US Small Cap Quality divin ETF.
Speaker 1 (04:34):
Those tickers are dg RS and o U S m
over two.
Speaker 3 (04:40):
Yeah, so let's first talk small caps. I feel like
small caps. We've seen this movie before. It's always supposed
to be the year of small caps. They have a
nice little month or two and then bam, large cap
Q typestocks take over. And I've seen it happen over
and over and over, you know, like that Marshall Lynch video.
(05:00):
You just got to run through a guy's face over
and over and that was his key to like being
a good running back. The cues to me is Marshaun Lynch,
and the defender is the small caps. They just can't
ever get going, let alone a regime change. You think
this is the year.
Speaker 4 (05:15):
I think so. I mean I think as a prudent
investor that is trying to buy low and sell high.
You know, cues are pretty expensive right now. They did
that big rebounds last year where they modified the weights
and you know they lowered some of the MACS seven exposure.
So it's not as egregious, let's say, as like let's
say in the S and P five hundred. But I mean,
you know, we had an epic rally right last two
years in the SMP. It's almost six percent between last
(05:38):
year and this year. So it's just harfed me with
a straight face to talk to an advisor and say, look,
we're going to just be overweight US large cap, but
I just think you've got to play that margin of
safety and small caps. You know, they're cheaper in the
products that we use. You know, there's some underlying alpha signals,
but you know, no doubt the call is that, like
you know, we're going to have like a positive economic
(05:58):
drop backdrop. You know you've got like the red sweep.
You know, there is like a trump put is what
we're saying. So like, do you still want to be
overweight you know ques and spies or do you want
to like take a little bit off and put it
into like small caps And we would say use some
small caps.
Speaker 1 (06:13):
And why these two Well.
Speaker 4 (06:15):
I mean, so you know, last year, let's say, we
would have used the S and P six hundred, you know,
the SPSM, which is just like the benchmark. But you know,
in small caps, you know, there is some underlying alpha
signals that you can gather. And I think these two products,
you know, not only have they performed better then let's say,
like the small cap index, but it's really kind of
(06:37):
what we would do, Like we run SMAs and like
so the ousm uh, you know has one hundred stocks,
let's say, right, which is kind of what we would do.
And we've got a couple of vtfs which we have
like very concentrated portfolios. So I think that you know,
if you look at let's say the medium multiple for
small caps, they trade the thirty fifth percentile. Large caps
are in the top percent ale. And here here's one
(06:58):
stat and I want to get two monkey with stats.
But like, you know, the main point that we've been
arguing is that there are other growth opportunities besides the
MAG seven. Right, So if you just look at the
S and P five hundred and four hundred, there's two
hundred and forty stocks that have had Earnin's growth of
more than twenty five percent over the last twelve months.
That's a lot of stocks. There's forty one that have
(07:20):
grown their earnings fasted in the video, fifty nine that
have grown their earnings fasted in Amazon, ninety two grown
faster in Meta, and one hundred and seventy fast in Google.
So you know you can stay long queues or you
know the MAG seventy TF. But you know, I look
at like sentiment it is so stretched, right. You know
that MAG seventy TIF from Roundhills gained like a billion
(07:42):
dollars like in the last year. I'm a tremendous job,
but I'm like, there's so many late cycle indicators I
see out there, and you know, at the end of
the day, we're supposed to be buying low and selling high, right,
that's what advisors want us to do. So that's the
kind of restaurant for small ceps.
Speaker 3 (07:56):
What you're talking about, This idea that okay, the MAG
seven it can go any further the evaluations, I feel
like it points to this like possible existential crisis. Like
someone like yourself who's very educated, you've had mentors, you've
seen markets before. It just seems like this market sometimes
goes against everything that people have been taught and because
(08:17):
I agree with you, it all makes sense. Like it's
their due, right, That's how they're due to like have
a bad year, but they were due like one hundred
percent ago. Like that's the problem. They're always due and
they just keep like I said, Marshawn lynching everybody.
Speaker 4 (08:35):
Yeah, well I the analogy I would say is that,
like we have these conversations with advises, like, Okay, let's
let's first of all, we're not saying to sell all
your spies and your cures. We're saying, like, take a
portion of it, take a third of it. Right, So
here's the options that we go through advisors. Okay, you know,
do you want to buy value? And they're like, all right,
that's it. Value works like one or twice every ten years. Right,
(08:56):
So like we're not gonna like play that game international, right.
You know you have your Europe versus US tweet that's
been going viral. I mean that's just like nobody wants
to buy international, right, So sell your spies and ques
to buy something that rarely ever works. So that's out
of the option. Then we get into this conversation equal weight,
which they're more receptive to. Right, So rsp is taken
in like thirteen billion year you know, INFLOS year to date,
(09:19):
and it's up to like sixty five billions. So it
is like a big reputable product. We think there's flaws
with like you know, equal weight indices. Small caps is
something that like, you know, I think is more realistic
that people would till to so they're like, all right,
we'll give that a shot. Like we're not going to
buy value, We're not going to buy international, you know.
So we're just trying to like tell people like, look,
let's look for a margin to say to be you're
(09:41):
right or to the point that it's like a low train,
local automotive that just keep powering through. But you know,
the the economic history would say, like if you've got
a supportive backdrop for risk and you've got this you know,
trump put and a pro red sweep, you know that
would better for small caps.
Speaker 2 (10:02):
Okay, John, I'm gonna keep going down the list, but
I gotta ask you there were two ETFs for small
cap there, and there's ten overall.
Speaker 1 (10:11):
Can you count?
Speaker 4 (10:13):
You know, you know, here's the backdrop with that is
that I so the history of this report was that
I was on the cell side as like a content
you know, ETF content producer, and I did want to
go to the buy side.
Speaker 1 (10:26):
I wanted to join.
Speaker 4 (10:26):
So I'd go on these interviews and be like, you know,
I want to you know, manage money, and they would
be like, well, you've got no track record, you can't
get a job here. So that had to put together
a report to kind of get a track record. And
then I started doing that and I had good performance,
and they're like, well, you actually don't like track you know,
any kind of real money. Long story short, you know,
the list used to have just ten, but over the
(10:48):
last few years, as we are like so far deep
in this economic recovery, S and P has been on
this bull market for you know, thirteen years, we added
some other tickers you know, for that theme, but it's
usually like ten themes.
Speaker 2 (11:01):
Yeah, fourteen, yeah, alright, alright, just checking, Okay, so what's
your next theme?
Speaker 4 (11:06):
Well, I mean, to Eric's point, you know, I do
think that the mag seven is you know, a theme
that you should tilt away from. And we firmly believe
that we run SMAs, you know, quantitative stock SMAs. We've
been doing it for you know, the last seven years
at Astoria We've always equally weighted. You know, back in
Maryland's research in the late nineties early two thousands, when
we put together like these quant baskets, we used to
(11:28):
always equal weight. So, you know, about a year ago,
so we launched ROE, which is an equally weighted quality
TF and because we were worried about the mag seven.
So that fun launched in August first of twenty twenty three,
and it takes you know, four or five months to
launch it. So we were thinking about equal weight, like
very very far a long time ago. So the problem
that we find when when you use the equal weight
(11:50):
Russell one index or the S and P five hundred
equate index, you get this like concentration in like small value,
and your tech exposure goes from let's say thirty percent
spot I to like fifteen percent. And you know, one
thing I'll agree with Eric is that like I just
I don't want ever want to be on the way tech.
I think tech is just like a power train locomotive.
(12:10):
You want to stay along it. So if you sell
your spy to buy you know RSP or you know
there's Russell one thousand equate ETFs, you know you're going
from like large growth, large blend to small value and
not just you know, not something that we wanted to do.
So for are we What we wanted to do is
basically take the SMP sector weights and kind of match it.
So we've had good performance. You know, we've beaten the
(12:32):
SMP equate in Next by like six hundred and fifty
basis points since we launched. And it's one hundred eight
one hundred stocks equally weighted, so each stock is one
percent weight whereas in the S and P five hundred
equated NEXT each stock is twenty BIPs. So you know
you're really not going to get like that marginal contribution
to return if like let's say in the video, goes
up two hundred percent a year, So that that's something
(12:54):
that's kind of near and dear at our heart.
Speaker 3 (13:03):
Let me talk about this one here. This is one
of my most underrated ETFs, which is the first trust
Us Equity Opportunity TF. It used to be called the
I P O E t F. It is an IPO
et F. It's IPOs and SPINOFS. Why that that is
an interesting pick? I like it?
Speaker 4 (13:21):
Okay, So one thing we wrote about in our report
is that you know, we have to go into far
corners of the market to try and find you know,
attractive you know returns. Let's say, just because we think,
you know, the sp and the queues are kind of
expensive and crowded, you know, so something like FPX is
kind of eediosyncratic, like you know, yes, like the regulatory
(13:42):
backdrop is improvement, but whether the FED cuts you know
or raises, I don't know if it's going to necessarily
drive the IPO spinoff you know kind of market. So, uh,
you know, I've been following this thing for a while.
I think the underlying provider Josef I can't remember, I
can't pronounce his last name, but you know, he's been
in this space. He's like the one guy that does
(14:03):
this index, and like he's been doing it for like
as long as I've been working actually, which is like
over twenty years. So last year it's actually had good returns.
You know, it's up like forty seven percent of the
last one year, spies up thirty four percent. It's got
almost a billion dollars as one hundred stocks. You know,
they capped, you know, the stocks, you know, ten percent
on the upside. So but it is like, you know,
(14:25):
the largest one hundred most liquid companies that are either
gone public, whether they're an IPO or spin off. And
then there's also some acquiers of recent IPOs that included
in it.
Speaker 1 (14:35):
So does it really only work though, if there's a
lot of IPOs.
Speaker 4 (14:40):
Good point. I mean, I wouldn't say the you know,
the IPO calend that was as robust last year as
what we think will be in the next you know,
you like, the one thing about like, you know, Trump's
presidency I would say is that, you know, I think
if you look at like who he's picking it in
his cabinet, I think they're going to deregulate the heck
out of the financial industry, which I think is a
good thing. And just the people I know that work
(15:02):
at banks to like there's no Christmas, there's no Thanksgiving,
we're doing deals or IPO, and like with M and A,
like nobody's taken a holiday. So I think that, you know,
the next few years is going to be a very
different mark if IPOs and M and A.
Speaker 3 (15:16):
It's interesting David Cohne, who has this podcast called Inside Active,
he was interviewing the guy from oh I can't remember,
an asset manager, but it was a mutual fund manager.
He interviews active managers, and he was saying the same
thing that M and A. He was really into as it,
and he liked the small caps for that. It's interesting.
I bet we'll hear more about that. You're you said
(15:38):
everything I would say about it. The only thing is
the FPX jeal to me is like catch and release.
You know, you take in these i pos right when
they hit the market. I think it's like within a month,
and then you release them. I think it's up to
four years. So the problem is a lot of these
big indexes like Spy and even the Russell, they're pretty
(15:59):
concerned a stock has to jump through a bunch of
hoops before it can even make it in there. So
like if you think about investing in the equity markets,
and a lot of IPOs go public when they're large,
you kind of miss them in that sort of toddler
phase before they become teenagers and in the index, and
then when they get the index, they got a small waiting.
So this et, after all, I wouldn't back one year
and looked, it's beating the S and P since it
(16:21):
came out, And the reason is there's so many dogs
a lot of dog IPOs, but there's a couple Blockbusters,
Facebook now Meta Tesla, and this thing had it when
it was doing the hot hockey stick, So you only
need a couple Grand Slam home runs to totally offset
the dogs. And I just like it because it's like
a portfolio completion. You aren't getting a lot of these
(16:42):
stocks in your broad based indexes. So that'd be my
case for FPX.
Speaker 4 (16:46):
Yeah, and twenty five years ago, when I first started working,
like Russell would only add IPOs at the end of
the year, you know, at the June rebalance. Then they
changed it to like I think monthly or quarterly. So
you agree, And I don't think it's as like hot
sauce ish, like like you can kind of like keep
this mild, yeah, mild.
Speaker 3 (17:03):
It's like the blue cheese they give with the wings.
I mean, it's not like your main course, right, but
it's not Yeah, no, this is going to be moderate
blue cheese.
Speaker 1 (17:12):
I mean, does make wings taste better, that's for sure.
Speaker 3 (17:15):
Okay, So so essentially after the hot sauce chel, this
is where they're just kidding.
Speaker 2 (17:19):
This is where a little bit of crypto. And I
think this is interesting because we've talked about this before
Bitcoin ran away with the year.
Speaker 3 (17:27):
We've talked about vicoin on this listen. This was the
year of bitcoin.
Speaker 1 (17:31):
It was the year of Bitcoin.
Speaker 2 (17:32):
Yeah, we've talked a little bit about ethereum a little
and how you've been kind of anti Eric.
Speaker 3 (17:38):
Well, I've just said etherym ETFs coming out after Bitcoin.
ETFs is like the headliner coming on after the main
main band. Like it'd be like Sister Hazel coming on
after Nirvana. Who in the hell would stay for that?
Speaker 1 (17:50):
Right?
Speaker 3 (17:51):
And I was right. These things have not taken in
that much money. I think they'll succeed over time, but
Bitcoin is the main event, and it felt a little
like a get this man.
Speaker 1 (18:01):
John Dobby says, twenty twenty five is the year of
e theory.
Speaker 3 (18:03):
That's why. Yeah, that's interesting. I like it. Well, I
mean the ether people are gonna love this. They're looking
for anything.
Speaker 4 (18:10):
I mean Bitcoin. First of all, it was like a
lot of front running for you know, before these ETFs launch,
and you know, I know you've covered this extensively, Eric,
but I mean it's hard with a stray face to
buy an asset that's been up so much in the
last year, right, And like you know, there's levels I
think you should think about, Like you know, Bitcoin that
one hundred thousand. You know, I kind of stalled, But
(18:31):
you know, Ethereum is you know down, it's like down
thirty five percent from US all time highs. I personally
would rather buy a basket, Like I'm interested in the
b tw like the bit wise OTC product that's like
the kind of the index approach, just because I think
it's a little bit safer. But that is OTC, and
you know it is ten ets for twenty twenty five
(18:52):
when it's going to move to the NYC pretty soon.
But you know, ethereum, I think is just something that's cheap.
Speaker 1 (18:59):
You know.
Speaker 4 (18:59):
Look, I don't think cryptos and acid to ignore.
Speaker 1 (19:02):
Uh.
Speaker 4 (19:03):
You know these big institutions putting their names behind it,
you know, black Rock, Fidelity, and you know these firms
like they go out and they meet with like central banks,
you know, presidents of countries. So I think you want
to own crypto, but I think you have to be tactically.
You have to wait for a better entry point for
a bitcoin.
Speaker 2 (19:18):
And that looks like if you're I just want to
call out though this lot your logic there sounds a
lot like the mag seven logic, which is this thing
number go up and and John Dobby says, maybe maybe
don't keep going up.
Speaker 3 (19:30):
Were you trained as a value investor? Like did you
mentor under a valuables in.
Speaker 4 (19:34):
Ninety nine when I started, like, momentum was not a
big factor.
Speaker 3 (19:37):
It was not like you know, it wasn't the way
you started ninety nine. So you saw the Internet bubble
burst like two years into your job, and you're like, okay,
well I get it. That probably shaped your whole world
views absolutely.
Speaker 4 (19:49):
I mean, I think depending on when anyone enters industry,
they're going to have like these preconceived you know biases.
Speaker 3 (19:54):
For sure, Well the FED let this part of the
issue is well, the Fed let that happen again.
Speaker 4 (19:59):
So I don't know, but like the FED at like
you know, the FED funds is like four seven five
four five. So I mean, the one thing about Trump,
and you know, I'm not a big political guy. I
have to be moderate by general because I have clients
on both sides. Zdel I would say, you know, he's
been a fixture in New York City in New Jersey
for a while, and you know I'm from Queens, he's
from queens like he is a you know, do whatever
(20:22):
it takes, right, So I think that he will keep
the economy floating. I do think that he keeps crypto floating.
Two because he's kind of pretty out loud with it.
I just went by Bitcoin up, you know, whatever it is,
you're to date one hundred two hundred percent.
Speaker 3 (20:35):
Yeah, it's up a lot. Yeah, it's it makes sense.
We'll see if you're right. I guess let's talk a
little bit about the mortgage ETFs D MBS, double line
mortgage ETF and Spider portfolio back bond ETF S p MB.
You know, remember when I pitched the I pitched well,
I pitched it. It was a Muni show. I pitched him
(20:56):
and he was started falling asleep. Mortgage just a little
more interest.
Speaker 2 (21:00):
THU, Yeah, my pulse is still pretty low.
Speaker 3 (21:03):
Yeah, make this interesting.
Speaker 4 (21:06):
Well, I would say that like two three years ago,
we had a lot of BONDI tifts in the list.
We didn't have as much equities because that was kind
of like our outlook. I would still rather own equities,
you know, next year, than I would bonds. In general,
most credit spreads are very very tight, whether it's you know,
traditional high quality corporate HYO UH spreads, mortgage backed securities,
(21:27):
you know, they're not as tight, so there is some
you know, kind of intrinsic value there. So that's really
the story. We don't have to go deep into it.
But I I don't love fixed income in general with
you know, higher inflation. And I think you know the
average stock you know, equal weight, you know value KBWB KRE,
there's much more upside relative than on you know, corporate
(21:48):
creditor HYO bonds.
Speaker 2 (21:50):
Okay, alternative equity, you got merger arbitrage a RB great ticker.
What what are you seeing in UH in that space
that makes you makes you want to get in there?
Speaker 4 (22:02):
So you know, and like we don't own ARB, we
don't own FPX. The idea of again for this report
is like get the thought out there that you've got
to look somewhere else besides US large cap equities to
find attractive risk returns. And but yes, it is part
of like the whole dear you know regulation theme. You
know it's low standar aviation. The RBTF has got like
(22:24):
a three stand aviation. If you look at like let's
say AQUI, it's like fifteen percent. So it's max straw down,
you know, since inception is like three percent. So it's
a low volve strategy and it's meant to play the
kind of you know M and A theam let's say, so.
Speaker 3 (22:37):
You know it's interesting, so let's go over M and A.
This is merger R right, So you're looking at okay,
there's an announced merger, because if you can't get ahead
of that, that's illegal. Just FYI. That's why I kind
of like theme ets so that equal weight because if
you equal way to theme, that's hot. Like AI. Sometimes
the smaller companies are the ones that get bought. That's
(22:58):
the only way to get ahead of true merger mergers
and arbitrage. But okay, so it's announced, but there's always
a small chance the deal falls through, and so there's
this premium between the price now and the price that
closes at This is trying to capture that correct correct okay,
And that's why the volatilities look because that use short
beta to do that.
Speaker 1 (23:16):
Okay.
Speaker 3 (23:16):
So it's a true alt these true altstroll. It's really
a great concept. Hedge funds love it, institutions love it.
They are a tougher sell with the general advisor they need.
I just think either it's too complicated, doesn't move enough
hard to explain to the client. The clients say it's
only a three percent, but you're like, well on a
sharp ratio is high? Is?
Speaker 1 (23:34):
I don't care.
Speaker 3 (23:35):
I think that's the problem because these alts that do
it the real way have have struggled to get going
even though an institution would like this, although an institution
would go and get it directly from a hedge fund offline.
Speaker 4 (23:47):
And that's what the concept that we're trying to deliver is. Like,
you know, if you're a four billion dollar family office,
like you know, we want you to, like now think
about merger ARB as like a way to kind of
get unique stress of risk and return, but do it
as an SMA with a specialized manager.
Speaker 3 (24:07):
All Right, you have another one on here which looks
like it has a story in the name, which I
don't mind a little self plugging here. It looks like
you have two one here that are your own. That's
that's okay, We'll let us slide. I mean, if you're
not gonna eat your own cooking, who else should? Well,
the funny thing.
Speaker 4 (24:19):
Is if you if you look at like so last
year is because I don't like to repeat tickers, Joel,
like it was, he's just.
Speaker 1 (24:25):
Showing his cell side roots, so they won't.
Speaker 4 (24:27):
Be on next year's list because I don't like to
repeat it. So, yes, we do have some of our
own ETFs. You know, if you look at like the
Baron's round table, you're ahead report. You know, some of
the portfolio managers do have their own mutual funds in there.
So you know, we like to eat our own cooking,
let's say. And if it fits the theme, and if
it's not a repeat from last year, then we'll go
ahead with it.
Speaker 3 (24:47):
This is called the AXS. The Story of Real Assets
ETF Now tickers PPI, PPI. You got good tickers here, Joel. I.
When I wrote the first book on ETF Toolbox, I
interviewed institutions and they love the real assets, which means
the Yell model. This guy, David Swinson wrote this book
(25:07):
bragging about how great Yell did by not using public
equities but by buying like timber timber, and like hedge
funds and private equity and alts and real stuff like
that you can touch and hold, and so these real
assets you can't get in an ETF. However, you can
get real assets that are like equitized like reets and stuff.
So I guess that's my question to you, how much
(25:29):
of this is really achievable in the ETF rapper to
get real assets which is largely used as an inflation
head or a way to incorporate the Yale model, versus
doing it the way that an institution would where they
literally buy timber.
Speaker 4 (25:43):
Yeah, so we definitely can't buy you know, physical timber
or you know, I think one time Yell bought like
a bunch of you know woods, you know, timber and
actual real woods. Our point here is that like these
stocks are pretty cheap, like whether it's material stocks, energy stocks, industrials, reads,
I mean, there's utility stocks that you know, kind of
(26:04):
play into the TAM So if you look at PPI,
it's actually like you know, thirteen pe ratio, and you know,
this fits our whole, like you know, Trump's pro growth,
pro policy, terrorists protectionism leading too higher inflation. So and
this is more in like the you know, four or
five percent allocation just to kind of offset the risk
on the other side of the portfolio. And you know,
(26:25):
the funny thing is like when we launched PPI, people
were like, oh, it's thematic, it's you know. And since
we launched the PPI has beaten the S and P
by three inchred basis points. And it's coming up on
a three year anniversary. And if you told me back
then that we beat the S and P. So it
kind of shows me that, you know, a there is
some like intrinsic value in these stocks, these you know,
energy industrial material stocks, and then it is value. And
(26:47):
I do think that value works like to this concept
of like is value investment dead? So our point is like,
you know, use that to kind of in your old bucket.
Speaker 1 (26:55):
How much timber do you own in that?
Speaker 4 (26:57):
No timber?
Speaker 3 (26:57):
No timber there are didn't you pick the timber ETF
is your favorite ticker? One year in our one of
our games.
Speaker 2 (27:04):
Uh, it was for the purposes of episode and cute
would would cut?
Speaker 1 (27:08):
I think was the one that outperformed.
Speaker 3 (27:10):
Would right, Yeah, wouldn't cut. They're like the Timber twins. Yeah, yeah,
I'm around for a long time. Why don't hey, let's
play a little ETF game. How much assets do you
think wood has? It's the I shares Global Timber and
Forestry ETF let's see, let's test your ETF skills. This
is serious NERD levels question here.
Speaker 4 (27:29):
I would say three hundred million.
Speaker 3 (27:31):
Pretty close, one seventy five. You were within cut. What
guess cut? This is from Guggenheim Investco formerly Guggenheim.
Speaker 4 (27:40):
That bonus.
Speaker 1 (27:41):
I'm gonna say, over under you can do. You can
do the over.
Speaker 4 (27:45):
Under two Well, I would I would say lower than
Cora Rocks because it's you know, Blackrock wressm Vesco. I
would say probably on the one hundred million, eighty five.
Speaker 3 (27:53):
Fifty five pretty good. Yeah, performance, uh, performance between the two.
Let's see Cut is up. Yeah, I'm curious how like
we're gonna go since inception? Yeah, okay, these things came
out a long time ago, twenty sixteen and Wood, so
this is about ten years and we've got a Wood
(28:13):
seriously beating it with one hundred and twelve percent versus
eighty seven percent for Cut. But like the market was
up quite a bit more during that time frame two
forty six So honestly, this is not a bad if
you'd like your value, I get why you like this.
This beat up has a chance to run.
Speaker 1 (28:31):
But there's no Wood in the portfolio.
Speaker 3 (28:33):
I know, going down. Well, you may want everything.
Speaker 2 (28:35):
Now now this has been a grand tangent, just a
branch off to the side.
Speaker 1 (28:40):
We'll bring it back to the truck.
Speaker 3 (28:41):
These are like these are exit ramps.
Speaker 1 (28:43):
Yeah.
Speaker 3 (28:43):
But as I tell people when I'm cheating, you know,
doing presentae, get back on the highway, quickly, back on
the higay. I don't want to end up in a lake,
you know what I mean, like trapped in your car.
Speaker 2 (28:53):
Roll the window down ever so slightly. John, Let's talk
about commodities. You've got a broad basket or c E
R Y that's despite our Bloomberg Enhanced roll yield commodity
strategy number K one E t F as names go.
Speaker 1 (29:09):
That's a mouthful. Why why this particular?
Speaker 4 (29:12):
So you know there there's physical commodities that we think
we should own to kind of play higher inflation. And
then it's like, you know, the real assets where it's
are of like you know, commodity equities.
Speaker 1 (29:20):
Let's say it's so similar to to the PPI.
Speaker 4 (29:23):
Yeah, similar to the theme. I think you know it
makes sense to kind of split your exposures. Yeah, some
like commodities. I think you have to be active. I
think in realize you have to be active. So CRVY
is just going to try and optimize you know, the
roll yield, pick different points in a curve, and you know,
trade these futures. So I think, you know things makes
a lot of sense. And you know our point is
like with these things, like you know, two to five
(29:44):
percent of your portfolio in case inflation is going to
be stickier and higher for longer, and that's what's proven
to be the case.
Speaker 3 (29:51):
Have you ever filled out a K one form?
Speaker 4 (29:53):
I've definitely gotten it. It's annoying.
Speaker 3 (29:55):
Yeah, so isn't it weird no K one in the title.
It'd be like it'd be like a business going because
it's not the end of the world, but it's you know,
someone in my book referred to it as like a
paper cut. But I'm thinking it'd be like a convenience
store like wua wah saying no paper straws, or like,
you know, we only do plastic, and I there's some
(30:18):
people who'd be like, yeah, I'm I'm I hate paper straws,
Like not the end of the world, but when in doubt,
I'm going to pick the paper the plastic straw store
all l sequel. I think a K was that a
fair comparison to the K I think so.
Speaker 1 (30:31):
Yeah.
Speaker 4 (30:31):
I mean it comes so late in the tax season
it just kind of ruins you because, like you taxes,
and all of a sudden in April after the date,
you know, the April fifteenthdate, you get this K one.
Speaker 3 (30:40):
Oh yeah, let me do it. Yeah, people hate that
for man.
Speaker 4 (30:44):
So here's some trivia. Who came up with the no
K one?
Speaker 3 (30:48):
Uh? No K one?
Speaker 4 (30:50):
Oh that was gonna be I'm gonna say, will Rhyme Yeah.
Speaker 3 (30:54):
I think will Rhyme probably started with it in the
label in the l and then everybody copied him. Usually
an Indie is the one on whose spearhead something like that.
But I do remember there back in the day. I
think there was a couple that didn't have a K
one first trust, I think had that Caman thing where
that you register in the Cayman would get around the
K one R with FTCG and I think that was
the first one to do it. But I don't think
(31:15):
they said no K one. But I think an Indie
put no K one in the actual name. People are like, well,
screw it. I guess we should do that too, just
to let people know what they're buying and up for
what does it achieve here?
Speaker 4 (31:28):
Then no K one just it doesn't have that additional
tax filing that is required from you know other ETFs
that have K one's.
Speaker 5 (31:38):
Let's say, sorry, bring it home, all right, last one,
last one, but not least oh quality growth droll.
Speaker 3 (31:48):
I mean, as far as equities goes, this is about
as boring as it gets. Well maybe not so Ethan
on my team Athanasios and Todd Rosenbluth, these guys love
the garb growth reasonable price. You know, this seems like
garbish astoria US quality growth kings. So it's like, oh,
you know, we want the growth, but Joel, we don't
(32:10):
want to get too crazy. You know, we want the
responsible growth companies. And this is I get it. It's
sort of like the Goldilocks way to do growth, am
I right?
Speaker 4 (32:19):
In essence? Yeah, okay, And we are capping the weights
on the upside. But some of the other garb ETFs
I would say, have like a two percent, two percent,
three percent allocation to like whatever growth you know stocks
they have. You know, we'll go up to like five
six percent. So we do own some of these mag
seven stocks. Like that's the thing that we're saying out
a story is like don't under you know, don't fade
mag seven because they are such a big part of
(32:40):
the stock market. But you know, cap your upside.
Speaker 3 (32:43):
Let's say, so this ticker is g qqqq. Are you
saying that you start with the qes in this and
then you sort of trim it from there. Is that's
that one hundred your base index.
Speaker 4 (32:52):
Before this we start with a broad universe of growth stocks.
Speaker 3 (32:56):
For sure, it looks qish. I mean, Navidia, Apple, Microsoft
are the top three holdings, but their waitings are a
little smaller than the regular cues. But like Oracle's definitely
got a higher waiting than it does in the cues
and Broadcom it's pretty close though. Yeah, I get it.
It's like dietques.
Speaker 4 (33:14):
Yeah, I think you've said that before, like tempered cues.
So we are trying to kind of combine, you know,
growth investing with quality mess. One thing I'll say about
the Nasdaq, you know ETF, is that this is like
no inclusion criteria outside of you just being listed on
the Nasdaq and being you know, the top one hundred
company and non financials like that to me is like
a maybe this is why it's so successful because it's
(33:36):
like literally no one thinking about like the portfolio construction.
Least in the S and P. You have to have
four quarters of net positive urnings. So like, you know,
you've got to have some type of heartbeat as a
company to including S and P.
Speaker 3 (33:47):
The cues is unbridled, unbridled American capitalism.
Speaker 1 (33:50):
Until you put the G in front of it, and
then it tempers it a little bit.
Speaker 3 (33:53):
I know, it's like, all right, let's sober up, everybody.
This is getting too crazy to check. There you go.
Now that's good sentiment. All this is very logical.
Speaker 4 (34:01):
But if you have to like say, okay, like what's
going to be part of your portfolio that you can
kind of comfortably kind of reside on, you know, what
we find is that like values tough equal weight. You know,
we have to like you know, thread that needle with advisors,
but like no one's going to push back on on
growth or quality stocks.
Speaker 2 (34:17):
So of the ten ETFs here and by ten, I
mean fourteen, three of which are your own, how how
are people supposed to put together a portfolio of this?
Are you is the idea that they're only going to
cook with this or or do you want them to
add this in little doses throughout the portfolio.
Speaker 4 (34:38):
I think the so we're talking about like the chef
episode of Trillions, I think we're you know, small caps
should be part of the main ingredients. I think things
like ARB, things like you know, ce R y PPI
should be like the side dish, you know, kind of
like the hot sauce type ish are we I think
could be in the main g Triple Q could be
in the main I think the theoreum has to be
(34:59):
you know, on the you know, on the hot sauce bucket.
But it is a micro chasm of how we want
people to think about investing, which is like combining different
asca classes, different factors in a portfolio. It's not meant
to be like, you know, the only way you put
all your money into UH into an investment account.
Speaker 2 (35:17):
All right, we'll be we'll be keeping an eye on
this in twenty twenty five, John, John dove You've got
some interesting ideas here, John Dovey, thanks for joining us
on this episode of Trillions.
Speaker 6 (35:28):
Thank you, thanks for listening to Trillions. Until next time.
Speaker 2 (35:37):
You can find us on the Bloomberg Terminal, Bloomberg dot com,
Apple Podcasts, Spotify.
Speaker 1 (35:43):
Or wherever else you'd like to listen.
Speaker 6 (35:45):
We'd love to hear from you.
Speaker 1 (35:46):
We're on Twitter. I'm at Joel Webber Show. He's at
Eric Baultness.
Speaker 6 (35:52):
This episode of Trillions was produced by Magnus Hendrickson. Bye
Welcome to Chillions.
Speaker 2 (00:06):
I'm Joel Webber and I am Eric belchernas Eric almost
twenty twenty five here.
Speaker 3 (00:12):
Yeah, I know it. I get to write my outlook.
We've got reviews coming up.
Speaker 2 (00:17):
Oh those were due already. All of that was due already.
Speaker 1 (00:20):
The good news here.
Speaker 3 (00:21):
No, no, dude, not the numbers, not the written part. Yeah,
the number that's the important stuff.
Speaker 2 (00:26):
Though, the good thing is we're gonna have some help
today about how to think about what's gonna be coming
at us next year.
Speaker 3 (00:35):
Yeah. So even though I have an outlook, our outlooks,
we can't really talk about like tickers that much. We
can't give investment advice. But there are people who look
at ETFs by ETFs. We're calling them ETF strategists.
Speaker 1 (00:47):
Yeah, what do they do?
Speaker 3 (00:48):
They are again, we had a side show called ETF
master Chefs. To me, they are chefs that make portfolios
of using ETF ingredients. So they are, in my opinion,
the best shoppers of ETFs out there. So when they
have a list, it's usually not the most obvious ETFs
in Maybe another metaphor that I like to use for
(01:10):
these and what we're going to talk about today is
remember the video stores in the nineties and eighties, when
you'd go and there'd be like a wall saying employee picks.
Speaker 2 (01:18):
Yeah, and they'd have those little like coin things that
you would like take off the hook, yes, tick to
the counter.
Speaker 3 (01:23):
And a lot of the movies were not obvious, right,
That's where you'd find like some like you know, foreign
movie or something from the seventies that was gritty. And
I learned to really trust the employee picks. And they're
the people who were at the counter and would love
to have a conversation about movies. This is old school
video stores. That is what ETF strategists are to me
(01:43):
for ETFs. They are nerds at the highest level. And
when they have ETFs, not only it's interesting to pick out,
like what ETF did you pick? But why'd you pick it?
Because they have a they have to put a portfolio together,
they have to like work the macro theme into so
it's kind of a two for interview when you talk
to them.
Speaker 2 (02:00):
So joining us on this episode, John Dobby of Astoria
Portfolio Advisors, this time on Trillions as story is ten
ETFs for twenty twenty five.
Speaker 1 (02:12):
John, Welcome back to Trillions.
Speaker 4 (02:13):
Great to be here.
Speaker 2 (02:14):
You've been on trillions before, you've been on the Master
Chef episodes that Eric referred to. I was kind of
taken aback by how good of performance twenty twenty four
was when you did your your ten picks. So you
just copy and paste right twenty twenty four into twenty
(02:36):
twenty five and repeat a.
Speaker 4 (02:39):
Little different, little different. Yeah, we were last year. We're
pretty bold up. You know, we thought the FED was
going to cut We had an Ernin's recovery here in
the US, and you know, the average stock valuations were
is not that expensive, so we thought it was kind
of made a lot of sense to own a lot
of equity picks last.
Speaker 1 (02:54):
Year, and how good were your picks last year?
Speaker 4 (02:57):
So last year's and I would just question people to say, like,
you know, we've got GIBS compliant sma's fact sheets on
our websites. We have ETFs that you could look at
the more star rankings, but inevitably people always ask me,
you know, how did last year's you know, let's do so.
Speaker 1 (03:11):
Yeah, I was just going to get out of the
way by donut first.
Speaker 4 (03:13):
Equate to basket was up twenty one percent last year.
You know, we have global macro ideas as international does
fixed income, there's alternative. So you know, the the equo
ait SMP was up twenty six percent. You know since
our publication, our equated basket was up twenty one percent,
So you know, I was pretty happy with it. You know,
one hundred percent of the ideas were in the money.
(03:34):
Let's say usually about seventy eighty percent of the ideas
are like positive returns. So I think it was, you know,
in retrospect, this year I think was a fairly easy call,
but very different from next year.
Speaker 2 (03:45):
So so nothing from last year's list can be on
this year's list.
Speaker 4 (03:49):
I you know, Eric, you know this. But if I
put spy img you know GLD in the list every year,
like no one's going to read it, right, So the
idea is to give kind of unique, you know, actionable
investment ideas. So I do like to kind of change
it up. There could be a theme like small caps,
which is repeated, but we would want to change the ticker.
Speaker 3 (04:07):
Let's say, let's talk about that top of the list
is small caps. Somebody I kimera where I read it,
Maybe it was you said that small caps are potentially
the opportunity of a lifetime right now. Unlike international, they've
got you know, potential. You have two small cap ETFs
on here. I'll read them off, Joel. You told me
if you've heard of it, either of these Wisdom Tree
(04:27):
US Small Cap Quality Divoting Growth Fund and the alps
oh Shares US Small Cap Quality divin ETF.
Speaker 1 (04:34):
Those tickers are dg RS and o U S m
over two.
Speaker 3 (04:40):
Yeah, so let's first talk small caps. I feel like
small caps. We've seen this movie before. It's always supposed
to be the year of small caps. They have a
nice little month or two and then bam, large cap
Q typestocks take over. And I've seen it happen over
and over and over, you know, like that Marshall Lynch video.
(05:00):
You just got to run through a guy's face over
and over and that was his key to like being
a good running back. The cues to me is Marshaun Lynch,
and the defender is the small caps. They just can't
ever get going, let alone a regime change. You think
this is the year.
Speaker 4 (05:15):
I think so. I mean I think as a prudent
investor that is trying to buy low and sell high.
You know, cues are pretty expensive right now. They did
that big rebounds last year where they modified the weights
and you know they lowered some of the MACS seven exposure.
So it's not as egregious, let's say, as like let's
say in the S and P five hundred. But I mean,
you know, we had an epic rally right last two
years in the SMP. It's almost six percent between last
(05:38):
year and this year. So it's just harfed me with
a straight face to talk to an advisor and say, look,
we're going to just be overweight US large cap, but
I just think you've got to play that margin of
safety and small caps. You know, they're cheaper in the
products that we use. You know, there's some underlying alpha signals,
but you know, no doubt the call is that, like
you know, we're going to have like a positive economic
(05:58):
drop backdrop. You know you've got like the red sweep.
You know, there is like a trump put is what
we're saying. So like, do you still want to be
overweight you know ques and spies or do you want
to like take a little bit off and put it
into like small caps And we would say use some
small caps.
Speaker 1 (06:13):
And why these two Well.
Speaker 4 (06:15):
I mean, so you know, last year, let's say, we
would have used the S and P six hundred, you know,
the SPSM, which is just like the benchmark. But you know,
in small caps, you know, there is some underlying alpha
signals that you can gather. And I think these two products,
you know, not only have they performed better then let's say,
like the small cap index, but it's really kind of
(06:37):
what we would do, Like we run SMAs and like
so the ousm uh, you know has one hundred stocks,
let's say, right, which is kind of what we would do.
And we've got a couple of vtfs which we have
like very concentrated portfolios. So I think that you know,
if you look at let's say the medium multiple for
small caps, they trade the thirty fifth percentile. Large caps
are in the top percent ale. And here here's one
(06:58):
stat and I want to get two monkey with stats.
But like, you know, the main point that we've been
arguing is that there are other growth opportunities besides the
MAG seven. Right, So if you just look at the
S and P five hundred and four hundred, there's two
hundred and forty stocks that have had Earnin's growth of
more than twenty five percent over the last twelve months.
That's a lot of stocks. There's forty one that have
(07:20):
grown their earnings fasted in the video, fifty nine that
have grown their earnings fasted in Amazon, ninety two grown
faster in Meta, and one hundred and seventy fast in Google.
So you know you can stay long queues or you
know the MAG seventy TF. But you know, I look
at like sentiment it is so stretched, right. You know
that MAG seventy TIF from Roundhills gained like a billion
(07:42):
dollars like in the last year. I'm a tremendous job,
but I'm like, there's so many late cycle indicators I
see out there, and you know, at the end of
the day, we're supposed to be buying low and selling high, right,
that's what advisors want us to do. So that's the
kind of restaurant for small ceps.
Speaker 3 (07:56):
What you're talking about, This idea that okay, the MAG
seven it can go any further the evaluations, I feel
like it points to this like possible existential crisis. Like
someone like yourself who's very educated, you've had mentors, you've
seen markets before. It just seems like this market sometimes
goes against everything that people have been taught and because
(08:17):
I agree with you, it all makes sense. Like it's
their due, right, That's how they're due to like have
a bad year, but they were due like one hundred
percent ago. Like that's the problem. They're always due and
they just keep like I said, Marshawn lynching everybody.
Speaker 4 (08:35):
Yeah, well I the analogy I would say is that,
like we have these conversations with advises, like, Okay, let's
let's first of all, we're not saying to sell all
your spies and your cures. We're saying, like, take a
portion of it, take a third of it. Right, So
here's the options that we go through advisors. Okay, you know,
do you want to buy value? And they're like, all right,
that's it. Value works like one or twice every ten years. Right,
(08:56):
So like we're not gonna like play that game international, right.
You know you have your Europe versus US tweet that's
been going viral. I mean that's just like nobody wants
to buy international, right, So sell your spies and ques
to buy something that rarely ever works. So that's out
of the option. Then we get into this conversation equal weight,
which they're more receptive to. Right, So rsp is taken
in like thirteen billion year you know, INFLOS year to date,
(09:19):
and it's up to like sixty five billions. So it
is like a big reputable product. We think there's flaws
with like you know, equal weight indices. Small caps is
something that like, you know, I think is more realistic
that people would till to so they're like, all right,
we'll give that a shot. Like we're not going to
buy value, We're not going to buy international, you know.
So we're just trying to like tell people like, look,
let's look for a margin to say to be you're
(09:41):
right or to the point that it's like a low train,
local automotive that just keep powering through. But you know,
the the economic history would say, like if you've got
a supportive backdrop for risk and you've got this you know,
trump put and a pro red sweep, you know that
would better for small caps.
Speaker 2 (10:02):
Okay, John, I'm gonna keep going down the list, but
I gotta ask you there were two ETFs for small
cap there, and there's ten overall.
Speaker 1 (10:11):
Can you count?
Speaker 4 (10:13):
You know, you know, here's the backdrop with that is
that I so the history of this report was that
I was on the cell side as like a content
you know, ETF content producer, and I did want to
go to the buy side.
Speaker 1 (10:26):
I wanted to join.
Speaker 4 (10:26):
So I'd go on these interviews and be like, you know,
I want to you know, manage money, and they would
be like, well, you've got no track record, you can't
get a job here. So that had to put together
a report to kind of get a track record. And
then I started doing that and I had good performance,
and they're like, well, you actually don't like track you know,
any kind of real money. Long story short, you know,
the list used to have just ten, but over the
(10:48):
last few years, as we are like so far deep
in this economic recovery, S and P has been on
this bull market for you know, thirteen years, we added
some other tickers you know, for that theme, but it's
usually like ten themes.
Speaker 2 (11:01):
Yeah, fourteen, yeah, alright, alright, just checking, Okay, so what's
your next theme?
Speaker 4 (11:06):
Well, I mean, to Eric's point, you know, I do
think that the mag seven is you know, a theme
that you should tilt away from. And we firmly believe
that we run SMAs, you know, quantitative stock SMAs. We've
been doing it for you know, the last seven years
at Astoria We've always equally weighted. You know, back in
Maryland's research in the late nineties early two thousands, when
we put together like these quant baskets, we used to
(11:28):
always equal weight. So, you know, about a year ago,
so we launched ROE, which is an equally weighted quality
TF and because we were worried about the mag seven.
So that fun launched in August first of twenty twenty three,
and it takes you know, four or five months to
launch it. So we were thinking about equal weight, like
very very far a long time ago. So the problem
that we find when when you use the equal weight
(11:50):
Russell one index or the S and P five hundred
equate index, you get this like concentration in like small value,
and your tech exposure goes from let's say thirty percent
spot I to like fifteen percent. And you know, one
thing I'll agree with Eric is that like I just
I don't want ever want to be on the way tech.
I think tech is just like a power train locomotive.
(12:10):
You want to stay along it. So if you sell
your spy to buy you know RSP or you know
there's Russell one thousand equate ETFs, you know you're going
from like large growth, large blend to small value and
not just you know, not something that we wanted to do.
So for are we What we wanted to do is
basically take the SMP sector weights and kind of match it.
So we've had good performance. You know, we've beaten the
(12:32):
SMP equate in Next by like six hundred and fifty
basis points since we launched. And it's one hundred eight
one hundred stocks equally weighted, so each stock is one
percent weight whereas in the S and P five hundred
equated NEXT each stock is twenty BIPs. So you know
you're really not going to get like that marginal contribution
to return if like let's say in the video, goes
up two hundred percent a year, So that that's something
(12:54):
that's kind of near and dear at our heart.
Speaker 3 (13:03):
Let me talk about this one here. This is one
of my most underrated ETFs, which is the first trust
Us Equity Opportunity TF. It used to be called the
I P O E t F. It is an IPO
et F. It's IPOs and SPINOFS. Why that that is
an interesting pick? I like it?
Speaker 4 (13:21):
Okay, So one thing we wrote about in our report
is that you know, we have to go into far
corners of the market to try and find you know,
attractive you know returns. Let's say, just because we think,
you know, the sp and the queues are kind of
expensive and crowded, you know, so something like FPX is
kind of eediosyncratic, like you know, yes, like the regulatory
(13:42):
backdrop is improvement, but whether the FED cuts you know
or raises, I don't know if it's going to necessarily
drive the IPO spinoff you know kind of market. So, uh,
you know, I've been following this thing for a while.
I think the underlying provider Josef I can't remember, I
can't pronounce his last name, but you know, he's been
in this space. He's like the one guy that does
(14:03):
this index, and like he's been doing it for like
as long as I've been working actually, which is like
over twenty years. So last year it's actually had good returns.
You know, it's up like forty seven percent of the
last one year, spies up thirty four percent. It's got
almost a billion dollars as one hundred stocks. You know,
they capped, you know, the stocks, you know, ten percent
on the upside. So but it is like, you know,
(14:25):
the largest one hundred most liquid companies that are either
gone public, whether they're an IPO or spin off. And
then there's also some acquiers of recent IPOs that included
in it.
Speaker 1 (14:35):
So does it really only work though, if there's a
lot of IPOs.
Speaker 4 (14:40):
Good point. I mean, I wouldn't say the you know,
the IPO calend that was as robust last year as
what we think will be in the next you know,
you like, the one thing about like, you know, Trump's
presidency I would say is that, you know, I think
if you look at like who he's picking it in
his cabinet, I think they're going to deregulate the heck
out of the financial industry, which I think is a
good thing. And just the people I know that work
(15:02):
at banks to like there's no Christmas, there's no Thanksgiving,
we're doing deals or IPO, and like with M and A,
like nobody's taken a holiday. So I think that, you know,
the next few years is going to be a very
different mark if IPOs and M and A.
Speaker 3 (15:16):
It's interesting David Cohne, who has this podcast called Inside Active,
he was interviewing the guy from oh I can't remember,
an asset manager, but it was a mutual fund manager.
He interviews active managers, and he was saying the same
thing that M and A. He was really into as it,
and he liked the small caps for that. It's interesting.
I bet we'll hear more about that. You're you said
(15:38):
everything I would say about it. The only thing is
the FPX jeal to me is like catch and release.
You know, you take in these i pos right when
they hit the market. I think it's like within a month,
and then you release them. I think it's up to
four years. So the problem is a lot of these
big indexes like Spy and even the Russell, they're pretty
(15:59):
concerned a stock has to jump through a bunch of
hoops before it can even make it in there. So
like if you think about investing in the equity markets,
and a lot of IPOs go public when they're large,
you kind of miss them in that sort of toddler
phase before they become teenagers and in the index, and
then when they get the index, they got a small waiting.
So this et, after all, I wouldn't back one year
and looked, it's beating the S and P since it
(16:21):
came out, And the reason is there's so many dogs
a lot of dog IPOs, but there's a couple Blockbusters,
Facebook now Meta Tesla, and this thing had it when
it was doing the hot hockey stick, So you only
need a couple Grand Slam home runs to totally offset
the dogs. And I just like it because it's like
a portfolio completion. You aren't getting a lot of these
(16:42):
stocks in your broad based indexes. So that'd be my
case for FPX.
Speaker 4 (16:46):
Yeah, and twenty five years ago, when I first started working,
like Russell would only add IPOs at the end of
the year, you know, at the June rebalance. Then they
changed it to like I think monthly or quarterly. So
you agree, And I don't think it's as like hot
sauce ish, like like you can kind of like keep
this mild, yeah, mild.
Speaker 3 (17:03):
It's like the blue cheese they give with the wings.
I mean, it's not like your main course, right, but
it's not Yeah, no, this is going to be moderate
blue cheese.
Speaker 1 (17:12):
I mean, does make wings taste better, that's for sure.
Speaker 3 (17:15):
Okay, So so essentially after the hot sauce chel, this
is where they're just kidding.
Speaker 2 (17:19):
This is where a little bit of crypto. And I
think this is interesting because we've talked about this before
Bitcoin ran away with the year.
Speaker 3 (17:27):
We've talked about vicoin on this listen. This was the
year of bitcoin.
Speaker 1 (17:31):
It was the year of Bitcoin.
Speaker 2 (17:32):
Yeah, we've talked a little bit about ethereum a little
and how you've been kind of anti Eric.
Speaker 3 (17:38):
Well, I've just said etherym ETFs coming out after Bitcoin.
ETFs is like the headliner coming on after the main
main band. Like it'd be like Sister Hazel coming on
after Nirvana. Who in the hell would stay for that?
Speaker 1 (17:50):
Right?
Speaker 3 (17:51):
And I was right. These things have not taken in
that much money. I think they'll succeed over time, but
Bitcoin is the main event, and it felt a little
like a get this man.
Speaker 1 (18:01):
John Dobby says, twenty twenty five is the year of
e theory.
Speaker 3 (18:03):
That's why. Yeah, that's interesting. I like it. Well, I
mean the ether people are gonna love this. They're looking
for anything.
Speaker 4 (18:10):
I mean Bitcoin. First of all, it was like a
lot of front running for you know, before these ETFs launch,
and you know, I know you've covered this extensively, Eric,
but I mean it's hard with a stray face to
buy an asset that's been up so much in the
last year, right, And like you know, there's levels I
think you should think about, Like you know, Bitcoin that
one hundred thousand. You know, I kind of stalled, But
(18:31):
you know, Ethereum is you know down, it's like down
thirty five percent from US all time highs. I personally
would rather buy a basket, Like I'm interested in the
b tw like the bit wise OTC product that's like
the kind of the index approach, just because I think
it's a little bit safer. But that is OTC, and
you know it is ten ets for twenty twenty five
(18:52):
when it's going to move to the NYC pretty soon.
But you know, ethereum, I think is just something that's cheap.
Speaker 1 (18:59):
You know.
Speaker 4 (18:59):
Look, I don't think cryptos and acid to ignore.
Speaker 1 (19:02):
Uh.
Speaker 4 (19:03):
You know these big institutions putting their names behind it,
you know, black Rock, Fidelity, and you know these firms
like they go out and they meet with like central banks,
you know, presidents of countries. So I think you want
to own crypto, but I think you have to be tactically.
You have to wait for a better entry point for
a bitcoin.
Speaker 2 (19:18):
And that looks like if you're I just want to
call out though this lot your logic there sounds a
lot like the mag seven logic, which is this thing
number go up and and John Dobby says, maybe maybe
don't keep going up.
Speaker 3 (19:30):
Were you trained as a value investor? Like did you
mentor under a valuables in.
Speaker 4 (19:34):
Ninety nine when I started, like, momentum was not a
big factor.
Speaker 3 (19:37):
It was not like you know, it wasn't the way
you started ninety nine. So you saw the Internet bubble
burst like two years into your job, and you're like, okay,
well I get it. That probably shaped your whole world
views absolutely.
Speaker 4 (19:49):
I mean, I think depending on when anyone enters industry,
they're going to have like these preconceived you know biases.
Speaker 3 (19:54):
For sure, Well the FED let this part of the
issue is well, the Fed let that happen again.
Speaker 4 (19:59):
So I don't know, but like the FED at like
you know, the FED funds is like four seven five
four five. So I mean, the one thing about Trump,
and you know, I'm not a big political guy. I
have to be moderate by general because I have clients
on both sides. Zdel I would say, you know, he's
been a fixture in New York City in New Jersey
for a while, and you know I'm from Queens, he's
from queens like he is a you know, do whatever
(20:22):
it takes, right, So I think that he will keep
the economy floating. I do think that he keeps crypto floating.
Two because he's kind of pretty out loud with it.
I just went by Bitcoin up, you know, whatever it is,
you're to date one hundred two hundred percent.
Speaker 3 (20:35):
Yeah, it's up a lot. Yeah, it's it makes sense.
We'll see if you're right. I guess let's talk a
little bit about the mortgage ETFs D MBS, double line
mortgage ETF and Spider portfolio back bond ETF S p MB.
You know, remember when I pitched the I pitched well,
I pitched it. It was a Muni show. I pitched him
(20:56):
and he was started falling asleep. Mortgage just a little
more interest.
Speaker 2 (21:00):
THU, Yeah, my pulse is still pretty low.
Speaker 3 (21:03):
Yeah, make this interesting.
Speaker 4 (21:06):
Well, I would say that like two three years ago,
we had a lot of BONDI tifts in the list.
We didn't have as much equities because that was kind
of like our outlook. I would still rather own equities,
you know, next year, than I would bonds. In general,
most credit spreads are very very tight, whether it's you know,
traditional high quality corporate HYO UH spreads, mortgage backed securities,
(21:27):
you know, they're not as tight, so there is some
you know, kind of intrinsic value there. So that's really
the story. We don't have to go deep into it.
But I I don't love fixed income in general with
you know, higher inflation. And I think you know the
average stock you know, equal weight, you know value KBWB KRE,
there's much more upside relative than on you know, corporate
(21:48):
creditor HYO bonds.
Speaker 2 (21:50):
Okay, alternative equity, you got merger arbitrage a RB great ticker.
What what are you seeing in UH in that space
that makes you makes you want to get in there?
Speaker 4 (22:02):
So you know, and like we don't own ARB, we
don't own FPX. The idea of again for this report
is like get the thought out there that you've got
to look somewhere else besides US large cap equities to
find attractive risk returns. And but yes, it is part
of like the whole dear you know regulation theme. You
know it's low standar aviation. The RBTF has got like
(22:24):
a three stand aviation. If you look at like let's
say AQUI, it's like fifteen percent. So it's max straw down,
you know, since inception is like three percent. So it's
a low volve strategy and it's meant to play the
kind of you know M and A theam let's say, so.
Speaker 3 (22:37):
You know it's interesting, so let's go over M and A.
This is merger R right, So you're looking at okay,
there's an announced merger, because if you can't get ahead
of that, that's illegal. Just FYI. That's why I kind
of like theme ets so that equal weight because if
you equal way to theme, that's hot. Like AI. Sometimes
the smaller companies are the ones that get bought. That's
(22:58):
the only way to get ahead of true merger mergers
and arbitrage. But okay, so it's announced, but there's always
a small chance the deal falls through, and so there's
this premium between the price now and the price that
closes at This is trying to capture that correct correct okay,
And that's why the volatilities look because that use short
beta to do that.
Speaker 1 (23:16):
Okay.
Speaker 3 (23:16):
So it's a true alt these true altstroll. It's really
a great concept. Hedge funds love it, institutions love it.
They are a tougher sell with the general advisor they need.
I just think either it's too complicated, doesn't move enough
hard to explain to the client. The clients say it's
only a three percent, but you're like, well on a
sharp ratio is high? Is?
Speaker 1 (23:34):
I don't care.
Speaker 3 (23:35):
I think that's the problem because these alts that do
it the real way have have struggled to get going
even though an institution would like this, although an institution
would go and get it directly from a hedge fund offline.
Speaker 4 (23:47):
And that's what the concept that we're trying to deliver is. Like,
you know, if you're a four billion dollar family office,
like you know, we want you to, like now think
about merger ARB as like a way to kind of
get unique stress of risk and return, but do it
as an SMA with a specialized manager.
Speaker 3 (24:07):
All Right, you have another one on here which looks
like it has a story in the name, which I
don't mind a little self plugging here. It looks like
you have two one here that are your own. That's
that's okay, We'll let us slide. I mean, if you're
not gonna eat your own cooking, who else should? Well,
the funny thing.
Speaker 4 (24:19):
Is if you if you look at like so last
year is because I don't like to repeat tickers, Joel,
like it was, he's just.
Speaker 1 (24:25):
Showing his cell side roots, so they won't.
Speaker 4 (24:27):
Be on next year's list because I don't like to
repeat it. So, yes, we do have some of our
own ETFs. You know, if you look at like the
Baron's round table, you're ahead report. You know, some of
the portfolio managers do have their own mutual funds in there.
So you know, we like to eat our own cooking,
let's say. And if it fits the theme, and if
it's not a repeat from last year, then we'll go
ahead with it.
Speaker 3 (24:47):
This is called the AXS. The Story of Real Assets
ETF Now tickers PPI, PPI. You got good tickers here, Joel. I.
When I wrote the first book on ETF Toolbox, I
interviewed institutions and they love the real assets, which means
the Yell model. This guy, David Swinson wrote this book
(25:07):
bragging about how great Yell did by not using public
equities but by buying like timber timber, and like hedge
funds and private equity and alts and real stuff like
that you can touch and hold, and so these real
assets you can't get in an ETF. However, you can
get real assets that are like equitized like reets and stuff.
So I guess that's my question to you, how much
(25:29):
of this is really achievable in the ETF rapper to
get real assets which is largely used as an inflation
head or a way to incorporate the Yale model, versus
doing it the way that an institution would where they
literally buy timber.
Speaker 4 (25:43):
Yeah, so we definitely can't buy you know, physical timber
or you know, I think one time Yell bought like
a bunch of you know woods, you know, timber and
actual real woods. Our point here is that like these
stocks are pretty cheap, like whether it's material stocks, energy stocks, industrials, reads,
I mean, there's utility stocks that you know, kind of
(26:04):
play into the TAM So if you look at PPI,
it's actually like you know, thirteen pe ratio, and you know,
this fits our whole, like you know, Trump's pro growth,
pro policy, terrorists protectionism leading too higher inflation. So and
this is more in like the you know, four or
five percent allocation just to kind of offset the risk
on the other side of the portfolio. And you know,
(26:25):
the funny thing is like when we launched PPI, people
were like, oh, it's thematic, it's you know. And since
we launched the PPI has beaten the S and P
by three inchred basis points. And it's coming up on
a three year anniversary. And if you told me back
then that we beat the S and P. So it
kind of shows me that, you know, a there is
some like intrinsic value in these stocks, these you know,
energy industrial material stocks, and then it is value. And
(26:47):
I do think that value works like to this concept
of like is value investment dead? So our point is like,
you know, use that to kind of in your old bucket.
Speaker 1 (26:55):
How much timber do you own in that?
Speaker 4 (26:57):
No timber?
Speaker 3 (26:57):
No timber there are didn't you pick the timber ETF
is your favorite ticker? One year in our one of
our games.
Speaker 2 (27:04):
Uh, it was for the purposes of episode and cute
would would cut?
Speaker 1 (27:08):
I think was the one that outperformed.
Speaker 3 (27:10):
Would right, Yeah, wouldn't cut. They're like the Timber twins. Yeah, yeah,
I'm around for a long time. Why don't hey, let's
play a little ETF game. How much assets do you
think wood has? It's the I shares Global Timber and
Forestry ETF let's see, let's test your ETF skills. This
is serious NERD levels question here.
Speaker 4 (27:29):
I would say three hundred million.
Speaker 3 (27:31):
Pretty close, one seventy five. You were within cut. What
guess cut? This is from Guggenheim Investco formerly Guggenheim.
Speaker 4 (27:40):
That bonus.
Speaker 1 (27:41):
I'm gonna say, over under you can do. You can
do the over.
Speaker 4 (27:45):
Under two Well, I would I would say lower than
Cora Rocks because it's you know, Blackrock wressm Vesco. I
would say probably on the one hundred million, eighty five.
Speaker 3 (27:53):
Fifty five pretty good. Yeah, performance, uh, performance between the two.
Let's see Cut is up. Yeah, I'm curious how like
we're gonna go since inception? Yeah, okay, these things came
out a long time ago, twenty sixteen and Wood, so
this is about ten years and we've got a Wood
(28:13):
seriously beating it with one hundred and twelve percent versus
eighty seven percent for Cut. But like the market was
up quite a bit more during that time frame two
forty six So honestly, this is not a bad if
you'd like your value, I get why you like this.
This beat up has a chance to run.
Speaker 1 (28:31):
But there's no Wood in the portfolio.
Speaker 3 (28:33):
I know, going down. Well, you may want everything.
Speaker 2 (28:35):
Now now this has been a grand tangent, just a
branch off to the side.
Speaker 1 (28:40):
We'll bring it back to the truck.
Speaker 3 (28:41):
These are like these are exit ramps.
Speaker 1 (28:43):
Yeah.
Speaker 3 (28:43):
But as I tell people when I'm cheating, you know,
doing presentae, get back on the highway, quickly, back on
the higay. I don't want to end up in a lake,
you know what I mean, like trapped in your car.
Speaker 2 (28:53):
Roll the window down ever so slightly. John, Let's talk
about commodities. You've got a broad basket or c E
R Y that's despite our Bloomberg Enhanced roll yield commodity
strategy number K one E t F as names go.
Speaker 1 (29:09):
That's a mouthful. Why why this particular?
Speaker 4 (29:12):
So you know there there's physical commodities that we think
we should own to kind of play higher inflation. And
then it's like, you know, the real assets where it's
are of like you know, commodity equities.
Speaker 1 (29:20):
Let's say it's so similar to to the PPI.
Speaker 4 (29:23):
Yeah, similar to the theme. I think you know it
makes sense to kind of split your exposures. Yeah, some
like commodities. I think you have to be active. I
think in realize you have to be active. So CRVY
is just going to try and optimize you know, the
roll yield, pick different points in a curve, and you know,
trade these futures. So I think, you know things makes
a lot of sense. And you know our point is
like with these things, like you know, two to five
(29:44):
percent of your portfolio in case inflation is going to
be stickier and higher for longer, and that's what's proven
to be the case.
Speaker 3 (29:51):
Have you ever filled out a K one form?
Speaker 4 (29:53):
I've definitely gotten it. It's annoying.
Speaker 3 (29:55):
Yeah, so isn't it weird no K one in the title.
It'd be like it'd be like a business going because
it's not the end of the world, but it's you know,
someone in my book referred to it as like a
paper cut. But I'm thinking it'd be like a convenience
store like wua wah saying no paper straws, or like,
you know, we only do plastic, and I there's some
(30:18):
people who'd be like, yeah, I'm I'm I hate paper straws,
Like not the end of the world, but when in doubt,
I'm going to pick the paper the plastic straw store
all l sequel. I think a K was that a
fair comparison to the K I think so.
Speaker 1 (30:31):
Yeah.
Speaker 4 (30:31):
I mean it comes so late in the tax season
it just kind of ruins you because, like you taxes,
and all of a sudden in April after the date,
you know, the April fifteenthdate, you get this K one.
Speaker 3 (30:40):
Oh yeah, let me do it. Yeah, people hate that
for man.
Speaker 4 (30:44):
So here's some trivia. Who came up with the no
K one?
Speaker 3 (30:48):
Uh? No K one?
Speaker 4 (30:50):
Oh that was gonna be I'm gonna say, will Rhyme Yeah.
Speaker 3 (30:54):
I think will Rhyme probably started with it in the
label in the l and then everybody copied him. Usually
an Indie is the one on whose spearhead something like that.
But I do remember there back in the day. I
think there was a couple that didn't have a K
one first trust, I think had that Caman thing where
that you register in the Cayman would get around the
K one R with FTCG and I think that was
the first one to do it. But I don't think
(31:15):
they said no K one. But I think an Indie
put no K one in the actual name. People are like, well,
screw it. I guess we should do that too, just
to let people know what they're buying and up for
what does it achieve here?
Speaker 4 (31:28):
Then no K one just it doesn't have that additional
tax filing that is required from you know other ETFs
that have K one's.
Speaker 5 (31:38):
Let's say, sorry, bring it home, all right, last one,
last one, but not least oh quality growth droll.
Speaker 3 (31:48):
I mean, as far as equities goes, this is about
as boring as it gets. Well maybe not so Ethan
on my team Athanasios and Todd Rosenbluth, these guys love
the garb growth reasonable price. You know, this seems like
garbish astoria US quality growth kings. So it's like, oh,
you know, we want the growth, but Joel, we don't
(32:10):
want to get too crazy. You know, we want the
responsible growth companies. And this is I get it. It's
sort of like the Goldilocks way to do growth, am
I right?
Speaker 4 (32:19):
In essence? Yeah, okay, And we are capping the weights
on the upside. But some of the other garb ETFs
I would say, have like a two percent, two percent,
three percent allocation to like whatever growth you know stocks
they have. You know, we'll go up to like five
six percent. So we do own some of these mag
seven stocks. Like that's the thing that we're saying out
a story is like don't under you know, don't fade
mag seven because they are such a big part of
(32:40):
the stock market. But you know, cap your upside.
Speaker 3 (32:43):
Let's say, so this ticker is g qqqq. Are you
saying that you start with the qes in this and
then you sort of trim it from there. Is that's
that one hundred your base index.
Speaker 4 (32:52):
Before this we start with a broad universe of growth stocks.
Speaker 3 (32:56):
For sure, it looks qish. I mean, Navidia, Apple, Microsoft
are the top three holdings, but their waitings are a
little smaller than the regular cues. But like Oracle's definitely
got a higher waiting than it does in the cues
and Broadcom it's pretty close though. Yeah, I get it.
It's like dietques.
Speaker 4 (33:14):
Yeah, I think you've said that before, like tempered cues.
So we are trying to kind of combine, you know,
growth investing with quality mess. One thing I'll say about
the Nasdaq, you know ETF, is that this is like
no inclusion criteria outside of you just being listed on
the Nasdaq and being you know, the top one hundred
company and non financials like that to me is like
a maybe this is why it's so successful because it's
(33:36):
like literally no one thinking about like the portfolio construction.
Least in the S and P. You have to have
four quarters of net positive urnings. So like, you know,
you've got to have some type of heartbeat as a
company to including S and P.
Speaker 3 (33:47):
The cues is unbridled, unbridled American capitalism.
Speaker 1 (33:50):
Until you put the G in front of it, and
then it tempers it a little bit.
Speaker 3 (33:53):
I know, it's like, all right, let's sober up, everybody.
This is getting too crazy to check. There you go.
Now that's good sentiment. All this is very logical.
Speaker 4 (34:01):
But if you have to like say, okay, like what's
going to be part of your portfolio that you can
kind of comfortably kind of reside on, you know, what
we find is that like values tough equal weight. You know,
we have to like you know, thread that needle with advisors,
but like no one's going to push back on on
growth or quality stocks.
Speaker 2 (34:17):
So of the ten ETFs here and by ten, I
mean fourteen, three of which are your own, how how
are people supposed to put together a portfolio of this?
Are you is the idea that they're only going to
cook with this or or do you want them to
add this in little doses throughout the portfolio.
Speaker 4 (34:38):
I think the so we're talking about like the chef
episode of Trillions, I think we're you know, small caps
should be part of the main ingredients. I think things
like ARB, things like you know, ce R y PPI
should be like the side dish, you know, kind of
like the hot sauce type ish are we I think
could be in the main g Triple Q could be
in the main I think the theoreum has to be
(34:59):
you know, on the you know, on the hot sauce bucket.
But it is a micro chasm of how we want
people to think about investing, which is like combining different
asca classes, different factors in a portfolio. It's not meant
to be like, you know, the only way you put
all your money into UH into an investment account.
Speaker 2 (35:17):
All right, we'll be we'll be keeping an eye on
this in twenty twenty five, John, John dove You've got
some interesting ideas here, John Dovey, thanks for joining us
on this episode of Trillions.
Speaker 6 (35:28):
Thank you, thanks for listening to Trillions. Until next time.
Speaker 2 (35:37):
You can find us on the Bloomberg Terminal, Bloomberg dot com,
Apple Podcasts, Spotify.
Speaker 1 (35:43):
Or wherever else you'd like to listen.
Speaker 6 (35:45):
We'd love to hear from you.
Speaker 1 (35:46):
We're on Twitter. I'm at Joel Webber Show. He's at
Eric Baultness.
Speaker 6 (35:52):
This episode of Trillions was produced by Magnus Hendrickson. Bye
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