August 18, 2023 • 46 mins
Crypto fanatics have been pining for a Bitcoin exchange-traded fund for a decade now. But as the applications piled up, US regulators repeatedly declined to approve one, citing the risk of fraud and market manipulation in cryptocurrency markets.
But with the entrance of BlackRock Inc. into the race, many market watchers are hopeful that one or more spot-Bitcoin ETFs will finally get the go-ahead. After all, the world’s largest asset manager has a strong track record of getting funds past regulatory roadblocks. On this week’s episode of the What Goes Up podcast, Eric Balchunas and James Seyffart from Bloomberg Intelligence join to discuss how BlackRock’s application dramatically changes the outlook for Bitcoin ETFs.
“When they filed, it was a whole different ballgame in my opinion,” says Balchunas. “The fact is they generally like to bring a gun to a knife fight. This is a firm who doesn’t like to lose, who knows what they're doing, and they must see something.”
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:14):
Hello, and welcome to What Goes Up, a weekly markets podcast.
My name is Mike Reagan. I'm a senior editor at Bloomberg.
Speaker 2 (00:19):
And I'm Moldona Hired, a cross asset reporter with Bloomberg.
Speaker 1 (00:23):
And this week on the show, Well, cryptocurrency officionados have
been pining for a bitcoin ETF for a long time now,
but as application after application was filed with US regulators, well,
the regulators have refused to give the green light amid
worries about fraud and market manipulation and really all the
(00:43):
other things that come up when you talk about the
thorny subject of cryptocurrencies. But then Blackrock dropped their application,
and many think that's the game changer, since, after all,
this is the biggest ETF issue we're in the world.
So are we finally going to see a bitcoin ETF?
Get into it with two expert guests. But first then
(01:03):
I would remark, this is also our latest crossover episode.
Speaker 3 (01:07):
It is this is like.
Speaker 2 (01:08):
The last one was a great success?
Speaker 4 (01:11):
Was it?
Speaker 2 (01:11):
I think so? You don't think so, I'm going to
tell Joan Tracy why you said that.
Speaker 4 (01:16):
I thought it was a great success.
Speaker 3 (01:17):
It was great.
Speaker 4 (01:17):
This will be an even greater successor.
Speaker 2 (01:20):
Well, the two guests we have on this week, they're
from Bloomberg Intelligence. We know both of them really well,
and I told them you and I are going to
basically drill them. This is going to be a tough
episode for them. Oh yeah, no fun, no jokes, like
very serious, no jokes.
Speaker 3 (01:37):
All right, Well, we do got to get a cheese
steak recommendation because we have a Philly guy guy.
Speaker 2 (01:42):
And another New Jersey guy.
Speaker 4 (01:43):
Yeah, that's a lot of Jersey in that.
Speaker 2 (01:45):
Oh my gosh, it's so great. Well, we should probably
introduce we.
Speaker 4 (01:47):
Get a quorkcroll recommendation to them.
Speaker 2 (01:49):
Well, don't offend some people. Taylorham. Some people say Tailorham. Yeah,
I think it's poor.
Speaker 3 (01:55):
It's this is good.
Speaker 2 (01:57):
We're already starting conspiracy or controversy. Yeah, yeah, but I
want to I want to introduce our guests. It's Eric
Belchunas from Bloomberg Intelligence and James Seifert, also from Bloomberg Intelligence.
There are great, great ETF experts. I've known them for
years and thank you guys for joining us.
Speaker 5 (02:13):
Yeah, thanks for having me. I'm happy to be here,
great to be here, big fan. I love the Tracy
and Joe on Lot's Crossover. And I also like, was
driving to Philly one night when I was listening to
your episode with Katie and she said she's never had
chees snakes.
Speaker 3 (02:26):
I almost had to pull over. I was like, I
don't understand.
Speaker 5 (02:29):
Now, somebody could go to school Katie Grayfield's never see
that never.
Speaker 1 (02:33):
But all right, So first things first, Eric, what's your
what's your cheese steak recommendation in Philly?
Speaker 5 (02:38):
So I'm not a Philly native, right, so I don't
really care that much about cheeseteakes. But I'll take somebody
to Gino's or Pats. They're equally good to me. I
just don't I'm not a connoisseur. I don't know which
ones are. They're all pretty good. John's is the one
a lot of people will I'm sorry, is it Jim's
or John's on South Street?
Speaker 4 (02:59):
The purse Roast pork emploria.
Speaker 5 (03:02):
This is like a New york Er not knowing like
the Broadway show to go to Okay, but the gym's
has a line usually going around the ye. But I'm
not waiting in the line for a cheese steak.
Speaker 3 (03:11):
And you know.
Speaker 4 (03:12):
Exactly the thing is, you are a true Philly guy.
Speaker 5 (03:15):
Then I have this other thing, which is like, I
have a limited amount of calories. As I get older,
my metabolism is lower, and I don't know if I
want to spend that big of a calorie and take
on a cheese steak. Sometimes I'd rather have like Mexican food,
or I go to Chick fil A a lot with my kids.
Like I just I don't know. Cheese steaks never really
come up that much for me.
Speaker 2 (03:34):
That's not the answer I expected.
Speaker 4 (03:36):
That's fair. You've expected more enthusiasm.
Speaker 2 (03:39):
Yeah, how long have you been living in Philly, Oh,
eighteen years?
Speaker 5 (03:42):
Yeah, come on, I mean I eat them like I
went to the Eagles game the practice they had at
the Link last Sunday, and I went to get food
and I got a cheese steak and it was delicious.
I think it was from Chicken and Pizza and it
was good. And I wasn't like, oh, this is only
like an eight at ten and the one at Gym's,
I don't do that.
Speaker 3 (04:01):
They're all pretty good.
Speaker 4 (04:02):
All right.
Speaker 1 (04:03):
We got a transition to the subject to the subject
that will get Eric excited here, bitcoin ETFs, bitcoin ETFs.
So I guess my first question is Blackrock files their application,
everyone assumes they know something.
Speaker 3 (04:20):
Is that?
Speaker 4 (04:21):
Is that fair?
Speaker 5 (04:22):
Maybe they know something, but you know, Blackrock is the
biggest asset manager in the world. Larry Fink is very
well connected. A lot of people who work in the
government now work there and vice versa. They helped the
fed by ETFs in twenty twenty when the market needed liquidity.
So Blackrock has more of a reputation than just being
like an etfshore right, So when they filed, it was
(04:42):
a whole different ballgame in my opinion, because it's even
if they don't know anything or don't have any like
I don't know, wink nod from the SEC that's going
to happen. The fact is they are generally like to
bring a gun to a knife fight. This is a
firm who doesn't like to lose, who knows what they're doing,
and they must see something. Yeah, they have to have
had I'm sure they had multiple meetings. They went over
(05:04):
all the stuff that we know, which is Genzer said no, this,
that and the other fraud manipulation, and they said to themselves, Nope,
this makes sense. That is what is the difference maker.
Speaker 4 (05:15):
Could part of it.
Speaker 1 (05:16):
Be that all this enforcement action we've seen this year
has not been targeted at bitcoin. You know, it seems
like the SEC is kind of letting Bitcoin do its thing.
Do you think that plays into the rationale?
Speaker 3 (05:30):
So that's part of our argument for OI.
Speaker 5 (05:32):
We've publicly stated we thought there was a sixty five
percent chance that these spot bitcoin ets are going to
get approved. The SEC is going after everything else. They're
going after all the alt coins, these weird institutional sales,
the icos, these different things. They're not really doing anything
with bitcoin. If you look at Gary Gensler, any of
his speeches that he's given testimonies in front of Congress,
he says, the only thing I will say that's not
(05:53):
a security publicly or the one l name is bitcoin, right,
So he puts it on a pedestal on its own.
And there's some recent inclinations that we're getting that they
might be kind of like bitcoin obviously tier one on
its own, not a security. It seems like there might
be pushing ethereum a little bit closer to that than
we initially thought. But everything else, for the most part,
based on the lawsuits against coin base itself, Finance, all
(06:14):
these other things, they are not done going after those things,
but there might be kind of a bit of a
changing of the guard as far as bitcoin goes, and
maybe a little bit of ethereum too.
Speaker 2 (06:23):
Okay, James, can we just take a step back and
maybe you can lay out the field, Like what does
the actual race and the competition look like. We have
a ton of issuers applying for spot bitcoin ETFs. Who
who is part of this race? And like, how did
we see all of this play out of the last
two months or so?
Speaker 5 (06:41):
If we start, we have to go back to ARC
Kathy Wood's ARC in twenty one shares, which is an
ETF issue in Europe that has launched a bunch of
crypto ets. They refiled for their spot bitcoin ETF application
back in April.
Speaker 3 (06:54):
Yeah, April of this year.
Speaker 2 (06:55):
I think it was April twenty fifth.
Speaker 3 (06:57):
Yeah, that's pretty good. You've been covering this pretty well.
Speaker 5 (07:00):
They were the only one that was active when Blackrock
dropped their filing on June fifteenth, and they were almost
certainly active because another player that is tech well technically
they don't have a nineteen before a filed, which is
what you file for a rule change in this case,
the rule change to launch a bitcoin ETF is Grayscale.
Greyscale launched and owns GBTC, which is the Greyscale Bitcoin Trust,
(07:22):
billions of dollars in there. It's not an ETF, it
doesn't trade like an ETF. There are a lot of
inefficiencies there. They are suing the SEC trying to convert
GBTC to an ETF. That decision is due sometime in
the next couple weeks, potentially months, but it should be
in the next few weeks that we should get a
decision like grey Skill ruling. So Grayscale is the other
key player here. Then you have Blackrock entering. Then we
(07:42):
have Bitwise, van Neck, Wisdom Tree in Vesco, who's partnered
with Galaxy. Galaxy is Mike Novogratz is crypto company. Then
you have Fidelity, Valkyrie, and global X all that have
applied for spot Bitcoin ETF. So there's those are all
like huge names in the ETF space, asset management space.
This is not like nobody's trying to launch these things.
Speaker 4 (08:01):
So what is that eight or nine total?
Speaker 5 (08:03):
It's ten total. Ten global Age just filed last week, actually.
Speaker 1 (08:06):
So is there enough demand to rationalize ten bitcoin ETFs?
Are some of these you think they'll pull their plans
if Blackrock gets approved, Like, how do you see it
shaken out?
Speaker 5 (08:18):
Well, let's assume they all get out around the same day.
Speaker 3 (08:22):
They'll all try.
Speaker 5 (08:23):
This is where I just sort of note saying that
if they approve and are let out multiple ones on
the same day, we're going to see ETF marketing like
you've never seen before, because they all do the same thing.
So marketing is going to be a massive variable here.
Blackrock has a big advantage because of their name and
their distribution, but you know, like ARC and twenty one
(08:43):
Shares are known a little more within the crypto community.
Speaker 3 (08:46):
That could help.
Speaker 5 (08:47):
So same with Novagrats and Galaxy, with Invesco SO and
Global Act. They all have their customers and clients. So
I think though it's a winner take most market, one
of them is going to be the GLD. Let's just
say Black rocks out in the same day, and it
becomes like the GLD.
Speaker 1 (09:02):
GLD is the gold the prominent gold ETF for those
who don't know.
Speaker 3 (09:05):
Yeah, and GLD.
Speaker 5 (09:06):
Even though there's been cheaper ones and much cheaper ones,
actually GLD still commands a lot of assets and a
lot of volume, and there's a lot of eat traders
and institutions who will look over a more expensive ETF
because of the liquidity. So if you're the most liquid one,
it's perfect because you have pricing power. You know, if
(09:26):
the worry about getting sort of undercut on fees, it's
the next one is probably going to be the cheap
one and they're going to maybe get their assets from advisors.
Then there'll be ones that might I don't know, write
options on top of it. There might be one that
comes out and adds ether into it. There'll be a
whole set of creative products that try to do something different.
But for the nine or ten that come out that
(09:47):
are just bitcoin, I would say, to get James's take too,
I would say one will be the superstar, and they'll
be like two or three other ones that are able
to carve out enough of a niche to make it
onto like you know, the next couple of years.
Speaker 4 (09:58):
Yeah.
Speaker 5 (09:58):
Some of the niches I'm thinking about is like one
of some of them are going to say we will
absolutely not lend out your bitcoin, but other one will
be like, we'll lend out your bitcoin and give you
dividends and returns, which will scare plenty of people away,
but other people will like, oh, if they're doing it smartly,
I would love to get that additional return you can
like there's there's ETFs out there where you can deliver
gold to your doorstep if you have enough ETF shares.
It's a lot easier to deliver bitcoin to somebody's bitcoin
(10:19):
while than it's gold, So I think they'll figure that
out too. So there'll be different ways that people try
to differentiate. But I'm with Eric, it's going to be
one at the top and then a handful of others.
Like you said, winner take most. It's is the way
it's going to play out, will Don.
Speaker 1 (10:30):
I would make sure I was at home if they
delivered gold in I really hope you don't want to.
Speaker 2 (10:38):
The ups guy doesn't want you gold anyway. He makes
a lot of money to see.
Speaker 5 (10:42):
I mean, honestly, I've had like really low budget random
stuff stolen off my doorstep from people in the Amazon
delivery gold would be the best. These guys would be like,
oh my god, you'd hit the jacket. I thought I
was going to get a toothbrush or something. I got gold.
Speaker 2 (10:58):
Okay, James, can we talk about what actually might happen
with the approval process, because there's a lot of I
guess questions around this, like is it the case that
we would see all of them go at the same time,
is that something the SEC would want or is there
an advantage to having filed earlier than the rest.
Speaker 5 (11:18):
Historically the way it works is if you file first,
you go out first, right, That's the way it has
worked historically. If you look at Biddo, which is the
bitcoin futures etf that launched, that is a slightly different
process than the nineteen before that we're doing talking about
the spot bitcoin ETFs, but it launched first a couple
days early because they filed first, and it commands the market.
It's ninety eight ninety nine percent of the volume, ninety
(11:39):
five ninety six percent of the assets, and the SEC
got a lot of flak for basically being a king maker.
So we've got from conversations we're hearing with other people
that are having with the SEC, they don't they probably
don't want to be a king maker. There's been a
lot of firms that spend a ton of money on
legal and all these different things filing for the CTFs.
I mean, the Winklevalls filed for this thing for the
first time ten years ago at this point, so there's
(12:02):
been a lot of people putting a lot of time, money,
and effort. Maybe they shouldn't take that into account, but
I mean, really, the cleanest way to do this would
be to allow all of them to go to the
same time. Theoretically, we do really do think if they approve,
it's going to be multiple at least, if not all
at the same time.
Speaker 3 (12:16):
So there's good thesis to that that's what they'll do.
Speaker 5 (12:20):
Theoretically, though, the way it should work is there's all
these approvals in delay or deny deadlines, and usually they
just wait till two hundred and forty days and then
they approve or deny. Right, the average time is like
two hundred and twenty twenty something days, So for the
most part, they take the full time and then they approve.
But as Eric has said, and he can get into
a little bit more, this is like a completely different situation.
We have the Gray Scale lawsuit against the SEC, which
(12:41):
we're expecting a decision on, so we're waiting for that decision.
If obviously, if Gray scill loses, it changes our odds
all of a sudden. We're probably not at sixty five percent,
but we think grey Skill is likely to win this right, So.
Speaker 3 (12:52):
The timeline is weird.
Speaker 5 (12:54):
Is there going to be some day after that decision
comes down where they just the SEC says, all right,
they have forty five d to do what's called an
no bond hearing, which basically just means they'll rather than
panel three judges in the Grayscale, they'll include all sixteen
or seventeen judges on the DC Circuit Court of Appeals
and they all come back and be like, did these
judges do this right? Essentially, so it would be a
(13:15):
little bit more time. But assuming the SEC doesn't do that,
there's going to be some language in the opinion that
says what the SEC needs to do, and there'll be
some time where the SEC either needs to deny Grayscale
again for different reasons or approve it. And this brings
up this sort of thesis and it's not been confirmed
at all, but this is many people of coimped with
this possible thesis, which is why Blackrock filed. Somehow Blackrock thought, okay,
(13:40):
we're going to file, and what they did that was
novel is they included a surveillance sharing agreement with Coinbase.
Not even ARC had that, so this was a novel situation.
And NAS that too wasn't involved, so there was some
novelty to their filing. The thesis is that well, Blackrock
filed because then if the SEC loses to Grayscale, the
SEC can save face by saying, well, we were waiting
(14:01):
for an SSA with Coinbase Blackrock provided that. Therefore, we're
going to let them out. That's why we didn't let
you out. And they let Blackrock out first and just
sort of maybe delay in court with Grayscale to not
let them convert, just to sort of screw them over
for suing them. So you save face and sort of
get back at this company that sued you. This is
(14:22):
one of the thesises on why Blackrock filed. Then Gensler
gets to say, not only did I do that, but I,
as I look at regulating crypto, I'm getting no help
from Congress. So at least I got Coinbase to clean
up in order to meet a say s to this,
and I left it with the adults Blackrock. He can
almost turn that into a win regulatory wise. So you
(14:44):
could see this is again all thesis, but you could
see how that kind of makes political and practical sense
and explains why Blackrock would have filed.
Speaker 4 (14:52):
Thesis are a little bit of conspiracy theory.
Speaker 3 (14:55):
Oh yeah, no, I told James all the time, thesis
we'll call it.
Speaker 5 (14:59):
You ever seen the movie JFK. Yeah, I feel like
Jim Garrison. It's easy to say they're not going to
prove it. That's Lee Harvey Oswold act alone. But then
you start to see all this stuff and you're like,
what's real? What's a red hiring? The circumstantial evidence that
he didn't is so compelling and interesting, and that's sort
of what this is like.
Speaker 2 (15:23):
But talk about the surveillance sharing agreement and how important
it was, because then all of the issuers that had
also filed for US popaquinitif had to go in and
add surveilance sharing agreements.
Speaker 3 (15:35):
Right.
Speaker 5 (15:36):
Yeah, So all the denials I said, the wink of
all supplied ten years ago, right, and every denial has
basically said they want it. And I'm going to say,
in putting quotes, a surveillance sharing agreement with a market
of significant size. So the question is what is a
regulated market? Which isn't it sounds like, yeah, I know
what it is, But there's no The SEC has refused
to exactly define what that is because they like to
(15:56):
have a little wigger room, and they also haven't defined
what a market of significant sizes right, So they will
do things to back into whatever decision is made from above.
So if Gary Gensler and the politicians that he worked
with in reports to decide they want to improve this,
they'll figure out a way to do it and meet
those requirements. So if we look at the bitcoin futuresztfs
that went through this nineteen be four process, the SEC
(16:17):
approved it by saying it met those metrics because the
CMME Bitcoin Futures market was the only market for the
CMME Bitcoin Futures ETFs. So therefore it's a regulated market
of significant size, which is just like weird to back into.
Speaker 4 (16:30):
Right.
Speaker 5 (16:31):
So the argument here for Coinbase is are they a
market of significant size? If you just look at bitcoin
trading volume, they probably aren't be because binance makes up
sixty percent of the global trading volume. But if you
look at just US trading, Coinbase is a dominant player.
And if you look at US dollar trading specifically, they
are by far and away the dominant player because all
of Binance's stuff is with stable coins and all these
(16:52):
other things. So the SSA, the question is, is the
SSA a market of significant size? I think I could
easily make the argument that it is a specific for
US dollars, but it's not a regulated market under what
you would normally consider to be a regulated market. But again,
bitcoin isn't a security, so it's not going to trade
on a regulated SEC exchange. Yeah, and a lot of
this wasn't really put on gold when it launched. Gold
(17:14):
is the same thing. It's like a commodity. This is
an unusually high bar in my opinion, versus when gold
came out. And that's what a lot of people are arguing.
And this leads me to this whole idea of just
like he's just not that into you. You know that
that movie Kencer just doesn't like crypto, and that's just
the way it is. And so we also, in our
calculus factor in the political angle and will this become
(17:37):
politically untenable for Gensler because there are some Democratic congressmen
who are actually moving over and sort of becoming more
pro crypto, and if he sort of feels it from them,
and now he's gonna if he loses grayscale, it's more
egg on the face because they just lost another lawsuit
on these spikes futures things. It's possible he's in a
position where it's the politically right move and then they're
(17:58):
going to make up whatever legal language to fit that
they want. Anyway, So our thesis is that the language
they use is you can change it.
Speaker 3 (18:06):
Yeah, they'll just make it work if they want to
do it.
Speaker 4 (18:09):
But didn't.
Speaker 1 (18:10):
He made some comment on Bloomberg TV to the point of, hey,
I'm only one vote on the commission that that.
Speaker 3 (18:16):
Yeah, little on me. I'm just yeah. We thought that
was interesting. He never spoke like that before.
Speaker 5 (18:20):
He said, I'm just one of five commissioners when Kaylee
asked him about the bitcoins etf And that's interesting because
when the last one was denied, three said denial, but
two dissented and said you should have approved it.
Speaker 3 (18:34):
So it's three two. So if one.
Speaker 5 (18:36):
Defects, he's in trouble.
Speaker 3 (18:38):
Now.
Speaker 5 (18:39):
We again, we hear from our legal analysts and regulatory
analysts that that just wouldn't happen because that would be
like defecting from your own party. But again, as I
said before, there's democratic congressmen who are moving.
Speaker 4 (18:50):
Oh yeah, that the political line.
Speaker 1 (18:51):
Yeah, it's not clear, you know, but let me I
got to play the role here of the cranky old
traditional finance guy would come boomer, which, let's be honest,
it's not a stretch for me, right.
Speaker 3 (19:03):
Uh.
Speaker 1 (19:04):
But you know, well, Don and I we talked to
a lot of fund you know, traditional asset fund managers rias,
you know, the old school, the old guard I don't
see a lot of them pounding their fists on the
table saying I'm dying to get my customers, my clients
into bitcoin, but only if there were an ETF, you know.
To me, it's like, okay, I get the whole notion that, okay,
(19:28):
people with clients like that are going to be more
comfortable on a regulated exchange with a regulated product. But
when you boil it down to I don't want you
putting your money into coinbase, put it into this ETF
where the bitcoin is custodied by Coinbase, I don't know,
like how big is the demand there?
Speaker 4 (19:45):
How big?
Speaker 1 (19:46):
Like how much in assets are we talking about that
we expect to go into these ETFs should they be approved?
Speaker 3 (19:53):
All right, let me take first swing at that games
can clean up anything. I miss.
Speaker 5 (19:56):
The financial advisors in America have about thirty trillion an
hours sets. It's a big amount. So even if like
zero point four percent of all of those portfolios or
a portion of them go into this, that's one hundred
one hundred and fifty billion dollars. That's how much gold
ETFs have. So that's kind of where we're at. Zero
point five percent. Some will never use it, but there
could be some that use two three four percent. The
(20:18):
other thing you have to know is advisors are scared
about this transfer of wealth from the boomers who are
eighty ninety years old almost, and they're going to transfer
it down to their millennials, gen xers like me and
even the generation below, and the boomers are going to
want to I mean, the advisors are going to want
to look hip and cool to what the younger people want.
And I believe some of those young people are going
(20:38):
to want exposure to this in terms of just as
a fomo trade or a store of value. So we
do think there's probably gonna be some market for it.
When you look at other countries like in Canada, that
percentages are about the same. So I think a bitcoin
ETF again won't it won't be that big of a deal.
But if we're talking one hundred and fifty billion, that's
(20:59):
a pretty big of what total bitcoin market cap is.
So it will be a bridge though, to all of
the boomer money, and they have all the money.
Speaker 1 (21:08):
Yeah, so you think even an advisor who's maybe skeptical
personally about crypto will have to react to the client
demands and say, look, if you're gonna do it, i'd
prefer you to be in an ETF then a separate crypt.
Speaker 5 (21:23):
There's two things here, right, So I've talked to plenty
of advisors who have clients that they don't offer their
their advisors. They don't really offer crypto specifically. So for
years there's been platforms where like, we'll tie into your platform,
you can pay an enterprise license and we'll get you
access to coin based custody. But really, like for the
most part, advisors don't want to deal with that. I'm
sure you've met plenty of advisors. They are more like salespeople,
(21:43):
many of them. So what they would prefer is for
those assets to be under their umbrella. Right, they charge
one percent on their assets or whatever what have you.
So if a client comes with them and says, I
want crypto in my portfolio or I want bitcoin. Figure
out how much I should have. Maybe it's one, two three.
There's plenty of studies that show out there that will
increase your sharp ratio, helps returns, that decreases volatility. Ironically,
so there's different reasons why you would hold it. But
(22:05):
telling them to hold it on coin Base on their
own account, that's not under my one percent fee. Right,
If I'm an advisor, I can the ETF is click
and buy, I can hold it. I don't have to
worry about custody, I don't have to set up other pipes,
and I get it under my umbrella.
Speaker 3 (22:17):
I get the greed motivation more than the other explanation.
Speaker 2 (22:20):
You're turning Mike into a believer.
Speaker 5 (22:22):
One other thing, if you're trading on coin Base, you
get charged not nothing. I mean, I know we debate
this all the time, but you can charge as much
as one hundred and fifty basis points for trade three
percent three percent A bitcoin ETF will be one basis point, right,
Really we all ETFs like if you take trading, he's
still in trading expense ratio, bitass spread.
Speaker 3 (22:44):
What kind of expense ratio, would you think.
Speaker 5 (22:46):
So, I think they're probably gonna This is my I
think seventy seventy five will be the opening bid by
the black Rocks and Arcs. But then someone's going to
Vanguard the category with like a thirty basis point.
Speaker 3 (22:56):
But not Vanguard, Not Vanguard. No.
Speaker 5 (22:59):
I Well, I wrote a note saying that the endgame
here is a fifteen basis point Vanguard multi crypto basket
ETF in ten years. Vanguard laughed at me, said that'll
never happen. But if they're saying even Vanguard is starting
an advisory they started one. They're have an advisory platform.
They manage people's wealth. That got them into private equity.
That's a very unbogulian area too. If you're managing somebody's assets,
(23:22):
you kind of have to have access to everything. So
I think Vanguard could be pushed to do it themselves
if they don't like anything on the market. It's a
long shot, but I think black Rock and some of
the other firms are also going to just like Vanguard
the category. Even without Vanguard, they've got the scale to
totally And you're the ETF has a long tradition of
when they bust down a new asset class. You know,
the products come in at a fee like you know,
(23:42):
maybe fifty to sixty, but within five years, you know,
usually there's a super liquid one that's affordable.
Speaker 3 (23:48):
So think about it.
Speaker 5 (23:49):
If you're an advisor, ETF has all the plumbing that
works for you, and it's going to charge you, say,
fifty BIPs, and it charges one basis point to trade.
The one basis point to trade is also going to
attract initutions. Some institutions really like GLD because they is
someone to deal with gold. Nobodyans to deal with coinbase.
So I think if the liquid ETF here will also
attract pensions, endowments, foundations, traders.
Speaker 3 (24:12):
Maybe not again to.
Speaker 5 (24:13):
This mass, it's not gonna a mass like surge, but
on the edges, some of these bigger fish are going
to appreciate anonymously trading whenever they want go long short
this one basis point traded exposure to bitcoin.
Speaker 1 (24:28):
I wonder, you know, so bitcoin's spent stuck in a
price range a little above thirty thousand, little below it
for a few months now. It did get a pop
when Blackrock filed. Are these approvals in the price do
you think.
Speaker 5 (24:41):
I think the pot so I would you would be
dumb to argue that the potential approval is not in
the price. You can go back to the Blackrock filing,
all those things. It was part of the reason why
the price ran up. I don't so, I think, no
matter how you look at it, right, if we get
to January, So that we were talking about deadlines, right,
so I said some deadline after the Greyscale decision. We
could see some approvals happening, but ultimately we're going to
(25:03):
see full denials at least by January tenth. If that's
what's happening, we don't see some of these other ones.
The SEC denying ARCS and then approving black Rock in March.
It's possible, but I think it's somewhat unlikely. So we
get to March and they're not approved, that's definitively bad
for demand and price. But approval, I would, it's hard
to say. Right, So we talk about Grayscale. They have
(25:24):
six hundred and thirty three thousand bitcoin something like that.
They have over three percent of the supply, So all
of a sudden, GBC can convert to an ETF. It's
trading at a massive discount. Twenty five percent is right now,
all of a sudden, that bitcoin is open to go
on the market. Right now, it's been locked up. No
one can touch that bitcoin. So it's not as clean
as all of a sudden. Etf launches and billions of
billions are gonna run in and the price is gonna
(25:45):
go up. There's a lot of other things that are
gonna happen. If you look at Bitcoin futures ETFs when
they launch and just futures themselves. Futures in the CME
for Bitcoin launched at the end of twenty seventeen, early
twenty eighteen, and that was the beginning of the end
for that first bitcoin bull market. Bitcoin Futures ETFs launched
in late October of twenty twenty one, again right at
the peak of the bitcoin bull market in twenty twenty one.
(26:06):
So it's not It also opens new avenues for shorting
and all these other things. It's not just as clean
as all of a sudden. The herd is coming and
hundreds of billions of dollars are going to buy bitcoin.
Speaker 3 (26:15):
The markets were designed to surprise you, and yeah.
Speaker 5 (26:18):
Is that classics buy the room or sell the news.
That's what's going on. In my opinion, and we got
to be careful because we were asked on these some
week on these crypto spaces and podcasts.
Speaker 3 (26:28):
We like go downtown a lot, God bless you. Yeah,
and we'll be asked like is the price going to
go up?
Speaker 5 (26:34):
They just want they want hopium so bad, and we
can't give investment device or even make calls about prices,
so we're like, look, I mean, biddoh, that was a
peak that went down. After that, we don't know, and
there's many variables in crypto. There could be another SBF situation.
Crypto is famous for having these scandals.
Speaker 3 (26:50):
I don't know.
Speaker 5 (26:51):
All I know is that over time an ETF would
be a legit bridge from all of the boomer money
in America to Bitcoin, and noverybody's not gonna flood over.
But that bridge can't hurt, and over time probably will
h will probably result in a good amount of bid orders.
Speaker 4 (27:11):
Yeah.
Speaker 5 (27:11):
The one thing I would say is he mentioned we
go on in a lot of these crypto spaces, like
with you, I'm like arguing, like why it's more likely
than you you initially thought it was.
Speaker 3 (27:20):
With them, it's like the exact opposite. I find I
played the opposite.
Speaker 5 (27:23):
I'm like, look, we are at this sixty five percent odds,
but there's thirty five percent chance in those odds that
it's not gonna happen. By the way, one more thing.
They sometimes they're so into hopium that they'll take something
and just completely contort it. So remember I said, advisers
have thirty trillion, and I was on a podcast and
I explained that a tiny portion of that money will
probably be in play, maybe point five percent. That's still
(27:44):
one hundred and two hundred billion whatever. But the one
place came out the headline saying Bloomberg analyst says thirty
trillion dollars in demand is coming to I was like, whoa, whoa,
there's a lot more words in my answer there. I mean,
come on, that's crazy, it's it's a trick, it's a
whole ris make.
Speaker 3 (28:01):
That our headline says thirty tillion, thirty trillion.
Speaker 2 (28:05):
But speaking of those infamous crypto scandals, can you talk
about some of the risks that potentially would be inherent
to such a product, or even just some of the
risks that the SEC has cited in the past.
Speaker 5 (28:16):
Sure, So I wrote a couple notes saying, after SBF
and FTX. I said an ETF is SBF proof because
let's say an ETF existed, right. Market makers are very smart.
These are the ones who are going to go between
crypto and the end client. They probably would have smelled
SBF as a fraud earlier, maybe even and if they
(28:39):
did use other crypto exchanges to make a market in crypto.
We know this because there were spot bitcoin ETFs in
Canada and in Australia and other countries, and they traded fine.
Speaker 3 (28:49):
Like the NAV.
Speaker 5 (28:50):
The price didn't really deviate too much from the NAV,
meaning ARB was possible, whereas if you were in FTX,
you basically had your money frozen. So even if the
ETF issue were I don't know, let's say it's a
small one, like let's say Kathy would I'm let's say
she just goes crazy takes and just runs off of
the Bahamas. You still have the crypto with the custodian
(29:10):
And that's why ETFs are so I think prevalent is
that they're they're as liquid as derivatives, but they actually
are physically backed, so I don't think there's much of
a risk. There's a risk of the price going up
and down, it can be volatile, but people are okay
with that GiB The problem with GBTC is that it
doesn't match the price of bitcoin. All people want is
(29:31):
for this thing to give you the price. They're okay
if it goes down. I think the fraud of manipulation
is definitely something that can happen, But in the as
crypto's matured, I think once you get all these market
makers who are not messing around, these are people, they're
very sophisticated traders. They're not gonna deal with shady characters.
So naturally the shady characters will be isolated, and maybe
(29:54):
they'll even get unshady so they can participate in this
bitcoin ETF. So I think the SEC was kind of
I don't know, simple minded in not approving it in
that if they did, I think it would help their
actual regulatory goals of cleaning up crypto. So, but would
I recommend a bitcoin ETF to my mom? I mean,
I would say, Look, it's volatile, but I don't I
(30:15):
don't not trust it. You're not gonna, like, it's not
gonna get frozen. You're not gonna like lose all your money.
But if bitcoin go was down, you are gonna lose
that money, So that'd be my answer to that. Yeah,
I would also say, like the SEC a bit here
has kind of like lost the force for the trees.
Like GBDC already exists, people are getting access to this
in coinbase. This isn't twenty six micro strategy micro There's
(30:36):
all these way less efficient ways, and I understand they're
trying to protect investors, but at the end of the day,
like anyone buying a bitcoin ETF at this point, like
they know what bitcoin is.
Speaker 3 (30:44):
This isn't twenty sixteen.
Speaker 5 (30:46):
Like I understand denying the Wink of loss for all
the reasons they denied them plenty of the other ones,
but like we're at a point where like people know
what they're buying. It's not like they're they're buying this
thing and like expecting like that it's not going to
be risky or the vast majority of people will and
there'll be a lot of disclosures in there. So there's
a whole other avenue that you can make the argument here.
But obviously the SEC is fixated on a few things,
and the issuers applying for this have to argue with
(31:07):
the SEC on those issues. Yeah, and We have a
traffic light rating system for all ETFs green, yellow, red,
and it just basically gauges the nasty surprise potential, like
what potential do you have to be surprised? So voo green,
no dings like it's you know, you'll never get surprised
at Vanguard.
Speaker 3 (31:25):
Yeah, and IVV same deal.
Speaker 5 (31:26):
GLD actually gets a one and a green light from
us because it's because its tax is collectible, so it's
got a little bit of a surprising tax thing going
on there.
Speaker 3 (31:34):
But it's still green.
Speaker 5 (31:35):
Now, the SEC has approved a two x bitcoin futures
ETF that would be hardcore red light.
Speaker 4 (31:40):
Yeah.
Speaker 5 (31:41):
And then GBTC, if it were an ETF, would be
hardcore red light because it deviates from the NAV so
much and has awful tracking. So it's ironic that there's
all these red light ways to get it. Yet if
a spot bitcoin ETF is approved, we would give it
a green light based on our system. That's just ironic
and frustrating.
Speaker 1 (31:58):
I wonder, you know, okay, say coins trading at thirty thousand,
I wonder how the pricing of the ETFs would reflect that.
Would it be like a similar to the spy where
I don't know bitcoins at thirty thousand, is the ETF
at thirty bucks three hundred? You know, would it try
to track it with a shift of decimal point like that?
Speaker 5 (32:18):
So there is like evidence that like lower handles like
do better specifically with ETF. So, like, honestly, I wouldn't
be surprised if they did that, But for the most part,
I don't think it matters. People are like, even if
there's one that tracks, they tend to started like ten dollars,
twenty dollars, twenty five dollars, So starting at thirty or
whatever it is, I assume that might be something they
try to do, But I mean time will tell some
(32:38):
ETFs purposely lower the price so get more retail investors
in some though, it like GLD likes a higher price
because if they're a big trader and you get charged,
you actually get charged less if the price is higher.
So basically I think they'll probably start at forty bucks.
Most start at forty or twenty five, and then from
there it will track the price of bitcoin. But we
(32:59):
could see again, once there's one or two popular ones,
you're gonna see everybody throws spaghetti at the wall to
try to like go oh, this is bitcoin with a
low handle, this bitcoin with the high handle, this bitcoin
that goes short goal long bitcoin, this goes long tesla
short bitcoin. They're gonna try all kinds of stuff, and
that's fine. Most that stuff will be fringe, but there'll
be one or two mainstream ones that make it in
(33:19):
or are used by mainstream America.
Speaker 2 (33:36):
But you mentioned b t X, which is the two
x bitcoin features et F and launch in June, and
I think a lot of people at first were like, no,
there's no way this is going to launch. I think
you were one of the only ones who was like, no,
this is launching on Twitter, and a lot of people
are potentially seeing that as the SEC may be warming
up to crypto bit more, is that one of like
(33:58):
is like a step forward?
Speaker 3 (34:00):
Yeah, I think so.
Speaker 5 (34:01):
I get back channel information and some of it's very valuable,
and that's why we are at sixty five. We've we've
we don't just get public things. We get things that
are a little sort of you know, in the back alleys.
Speaker 2 (34:12):
Sent your brag about it.
Speaker 3 (34:14):
Some of that stuff is nonsense valleys. You get a
lot of nonsense in the bad alleys. The key I
get it.
Speaker 5 (34:22):
But behind Jim's behind Jims a lot of information back there,
but this was an ETF bid X two x futures
when it came out, and then uh, I don't know.
Three weeks later, that same firm filed for an ether
futures ETF which had been withdrawn, filed and withdrawn maybe
three or four times historically, and in May, and just
in May.
Speaker 2 (34:41):
Had been withdrawn in May by a bunch of issuers.
Speaker 5 (34:44):
They file, and then like another ten people file, and
then I hear back channel the SEC is actually okay
with these, and so we are we handedicaped it seventy
of our percent just in case that information was bad.
But now we're we're in like two weeks since the
first filing, and most of the withdrawals happened within six days,
so we're well being the normal time they withdraw. So
it looks like they're gonna let ether futures come out,
(35:05):
which again, if they let bitcoin futures, it almost it's
a it's one step, in my opinion, on to the spot.
But it does show the SEC can have policy changes
because we also argue with these people on who are
like anonymous on Twitter, who are like ex regulatory guys,
and they'll like, they'll say they're never gonna do this.
They're always I don't know, they lean negative. I think
they just hate crypto, but they were. They said they'll
(35:26):
never do the futures, and they did it. And some
of these people said they never do the bitcoin futures
now ether So some of the people who are like
come out and like this won't happen a lot of
times you gott ask them, did you say the futures
wouldn't happen either? I guess my point is things change,
Policies can change, and it might not be because anything
legally changed. Their brains just changed or the politics changed
(35:47):
it all. It's a lot political and it's also legal.
Speaker 3 (35:50):
Right.
Speaker 5 (35:50):
So one of my arguments for why so they the
bid X the Bitcoin futures ETFs launched. I mean theoretically,
the way that process works is you file and after
seventy five days you can list and for bid X.
They filed and it wasn't withdrawn, and but really the
way it usually works is the SEC just back channels
to the asset manager that applied, right and says, hey,
can you withdraw this? If somebody decides like what these
(36:11):
ethereum futures ETFs or that bitcoin two x futures CTF.
It's like, no, you got to send me, like the
equivalent of a season desist. You got it, you gotta stop,
And they're like that issuer is willing to go to
court the way Greyscale was, based on what the SEC
has seed in court. In the Gray Scale case, if
you look at those oral arguments, I am guessing that
the SEC was like, all right, if somebody really wants
to push us on this two x bitcoin futures ETF
(36:33):
and on this these ethereum futures ETFs, we're likely to
lose in court the same way we're gonna lose in Greyscale.
And except if we lose in court on that front,
we don't have a way to argue against it.
Speaker 3 (36:43):
Right for Bitcoin.
Speaker 5 (36:44):
Our thesis initially for Gray Scale was they would the
SEC would lose in court and then they would basically
all it does is vacates the denial letter. And before
Blackrock filed, we're like, the SEC is just gonna find
another reason to deny this thing. They'll lean on. There's
no custodians we trust. There's other reasons they could say
why they deny you don't have any of any reasons
really on Ethereum futures or two ex Bitcoin futures DF.
(37:06):
And just to get into the whole how Cannonball run.
This whole thing is this reminds me of Cannonball Run.
Speaker 3 (37:11):
Everybody.
Speaker 1 (37:12):
I'm the only one, yeah in the room old enough
to get that reference, Matt, and I thank you for that.
Speaker 4 (37:17):
Burt Reynolds over here.
Speaker 5 (37:19):
Remember Sammy Davis Junior and d Martin dressed up as priests.
The whole the movie was about who can get from
New York to La the fastest. But you obviously if
you get busted by a cop, it's going to slow
you down. So some people tried to pretend they were
an ambulance. Some people drove a Lamborghini. They all tried
these interesting ways. Whoever gets to La gets a million dollars.
It reminds me of this. And so in the ether Futures,
(37:39):
what we've already found is that somebody said, oh, we're
going to change the name and a strategy for current
etf and that process is a little shorter. So we're
going to see if the SEC allows a name change
to cut the line to come out before the regular
filer so there's all of this. Yeah, there's all this
jockeying because again, if you get out first, you have
such a massive advantage. To James's point, there has been
(38:02):
some of a history of better to ask for forgiveness
than permission with the SEC and to just push them
and push them and sometimes override them. It. People have
had some success, namely the Latin America Real Estate ETF
that converted to a pot ETF before the SEC was
comfortable and the SE just sort of like fine whatever.
The SEC did come out after that was like, don't
do this again. But Valkyrie is the company that filed
(38:22):
for their name change. They have a Bitcoin Futures ETF.
They launched it and I mentioned biddoh has ninety eight
percent of the asset, so BTF it doesn't really have
much in the way of assets, right, so they were
just like we're going to go this way. They jump
in front of volatility shares about a week. Yeah, and
Bitwise sees that Valkyrie does that, and Bitwise also jumps.
They're changing their Bitcoin futures ETFs the whole bitcoin and ethereum,
so they're also jumping in front of the Volatility shares,
(38:44):
which was the one that was the first to launch.
They served and this is just the undercard. This is
just the undercard race to the real race. So there's
two races going on constantly. James and I were frazzled.
Every day there's something new, and it's just I tell people,
this is the most one of the most fascinating stories
because it's issue with the spot pit Quinny. It's the
largest asset manager, the highest rungs of finance, government, and
(39:06):
and it's in the bridge to this crazy underworld. All
these elements, and there's a clock and it's a race.
So it's hard not to be completely compelled and just
sort of, you know, uh, fascinated by this, although not
everybody on our team is as into it as we are.
I told the Athanasias like, look, if they take you
guys to the psych ward, I'll be here for the team.
Speaker 4 (39:27):
You come back well.
Speaker 1 (39:30):
And the sort of blurred political lines make it more
fascinating you there's so many issues in modern life for
left and right. You know, there's there's no crossing in
the middle, but the blurry political lines that I find fascinating.
But I think what I've learned today is I should
file for a single stock, micro strategy ETF and beat everyone.
Speaker 3 (39:50):
What do you think like a leveraged one leverage and
you might do well?
Speaker 1 (39:55):
Two x Eric and James such a tree to catch
up with you guys and hear all about the beat
Bitcoin eat. If we can't let you go just yet,
we're gonna do our craziest thing. But I feel like
it's finally time for me to reveal my favorite cheese steak.
I'm a heretic.
Speaker 4 (40:14):
As well.
Speaker 3 (40:14):
I know it's sorry you think you would catch the
bait on that you know that catch the hints.
Speaker 4 (40:19):
I'm a bit of a heretic.
Speaker 1 (40:20):
The best Philly cheese steak is actually in Atlantic City,
white House Subs in Atlantic City. I'm just gonna throw
that out there and now we can get to our
craziest you're.
Speaker 5 (40:30):
The on what makes it so good? Just to take
this extra something? Or do they use cheese whizz?
Speaker 1 (40:36):
I no, I think I think it's either prevalent or American.
It's the bread. So nine percent of your Philly cheese
steaks are on the Amoroso Bakeries roll, which is a
fine classic cheese steak roll. White House, I think they
bake their own bread.
Speaker 4 (40:53):
And it's delicious. It's absolutely great.
Speaker 1 (40:54):
So all right, time for our craziest thing. I don't
know if they warned you guys about our gimmick. Care
of the craziest thing we've in markets this week.
Speaker 2 (41:01):
So I want to get a started, right, Okay, mine
is about Taylor Swift.
Speaker 3 (41:05):
Oh, okay, shockingly who is not in the market.
Speaker 2 (41:09):
But she's not in the market, but listen to this.
This is from a New York Times story. A research
shop estimates that her concert could generate four point six
billion in economic activity in North America alone. That's stadium capacity,
people's spending plans.
Speaker 4 (41:25):
Like I believe that.
Speaker 2 (41:26):
This story said, like people are spending money on costumes
and getting their nails done.
Speaker 3 (41:30):
And I believe it like that.
Speaker 2 (41:32):
That's on par with the revenues from the Beijing Olympics
in two thousand and eight, after adjusting for inflation.
Speaker 4 (41:40):
That's pretty good.
Speaker 1 (41:40):
I've heard some speculate that she we avoided recession because
of I don't know if that's believable.
Speaker 2 (41:47):
But well, people spend like, I don't know, two thousand
bucks or something, just not just on the tickets, but
buying costumes and.
Speaker 1 (41:53):
All right, good stuff. I think I might give you
the win for that, thank you. But mine mine's pretty good.
Mine's your favorite sub jack LDNA. No bond maths, Oh no,
we're all gonna. I'm asking you all to do some
bond math here. Country Garden. You've ever heard of Country Garden.
It's the struggling property developer in China. It's kind of
(42:14):
teetering on the verge of bankruptcy. Default actually suspended this
week trading of its bonds. We are recording on Monday,
so keep that in mind. This these numbers may move,
but I want you, all three of you in our
game show.
Speaker 4 (42:28):
The price is precise.
Speaker 1 (42:30):
Need you to guess the highest yield that Country Gardens
bond maturing in January of twenty four, twenty twenty four.
So in a few months, what do you think the
highest yield this thing offered in the past week offered? Right, So,
as you know very well, and when the price of
(42:52):
a bond goes down yield.
Speaker 3 (42:55):
What's what's wrong with this company?
Speaker 1 (42:57):
They're they're basically teetering on the brink of bankrupt China distressed.
Speaker 4 (43:01):
Yeah, China real Estate. All open.
Speaker 5 (43:04):
I'll open with twenty eight percent forty four.
Speaker 1 (43:08):
All right, you're all your answers are in. Would it
help if I gave you the price of the bond? No,
it traded below nine cents on the dollar. You want
to change your answer?
Speaker 3 (43:18):
So it's hired than fifty percent? I win, I win.
Speaker 4 (43:22):
James was closest to the tea.
Speaker 1 (43:24):
Two thousand, nine hundred and seventy eight percent was the
yield on off for for a country.
Speaker 5 (43:29):
This is why I should have done forty one percent.
Like prices right now.
Speaker 4 (43:32):
You always gotta go. Yeah, but you went.
Speaker 3 (43:34):
First, so true.
Speaker 5 (43:35):
Yeah, I'm gonna change my my pick though. That is
a crazy stet.
Speaker 4 (43:39):
Congratulations James.
Speaker 3 (43:41):
Nice job, James, Thank you for having me. Wanted to play?
The price is precise?
Speaker 1 (43:45):
Yeah, everyone's dream, James.
Speaker 3 (43:51):
Craziest thing in markets.
Speaker 2 (43:53):
Yeah.
Speaker 5 (43:53):
Obviously the fire that happened to Maui is devastating, but
there looks like people are starting to blame Hawaii Electric
and they're down forty percent, thirty five percent today, forty
percent today. Yeah, so that stock is taking a creator
right now.
Speaker 4 (44:06):
Yeah.
Speaker 3 (44:06):
You don't want to own a you totally stock when
a wildfire breaks out there?
Speaker 4 (44:09):
Yeah? How about you? Eric? You got anything crazy for us?
Speaker 5 (44:13):
I mean, I don't know something I just keep thinking
about is the returns of the cues this year. And
we have this debate in our team because we have
a lot of international.
Speaker 3 (44:20):
People on the Team's just.
Speaker 5 (44:22):
Something about America and that index. Man, there's something that
you don't get in other countries in the queues of
thirty seven percent. That is just an astonishing hall, especially
when we're not even sure the Fed's done hiking completely.
But that index, it's just really really powerful and compared
to the rest of the world. International has these like
six month runs and it's like back to the cues
(44:42):
and these like really innovative companies in that index. So
that's something that I'm thinking about that we're actually going
to do something on.
Speaker 3 (44:48):
And we talk about a lot.
Speaker 5 (44:49):
I don't know, that's not financial news, but today on
IQ we are talking about the thirty seven percent return
of the queues this year. To me, that's just we
take it for granted almost. It's almost like Jordan's scoring
like fifty five points out whatever.
Speaker 4 (44:59):
It is pretty wild.
Speaker 1 (45:00):
What if all mutual funds changed their benchmark to the
Nasdaq one hundred.
Speaker 4 (45:04):
How do you think you think that would fly?
Speaker 5 (45:06):
Morning started a study and over the past fifteen years,
not one growth manager was able to beat the cues.
Speaker 1 (45:11):
Really, yeah for that for the fifteen year per Yeah. Now,
and there's that's a good crazy status, isn't it.
Speaker 3 (45:16):
Yeah, there's a couple.
Speaker 5 (45:17):
There's a couple of funds we found over the past
five to ten years that have beat it. But the
only way to beat the cues is to forget everything
you learned in your CFA and just go hog wild
on a couple stocks like a Tesla. This one fund owns,
like has ninety one percent exposure to Saint Joe's, which
owns a bunch of land in Florida. Like, you've got
to be really, really crazy and out there to beat
(45:38):
the cues. I think if you have a CFA mentality,
you're naturally going to shift to stocks that haven't done
as well and you will lose.
Speaker 1 (45:45):
Yeah, diversified holding yourself's a massive conundrum for active managers.
Speaker 4 (45:49):
Yeah, that's that's that's a great point.
Speaker 1 (45:52):
Eric Palcunas and James Seaffert of Bloomberg Intelligence, thanks so
much for your time.
Speaker 3 (45:56):
Thanks for having us, great to be here.
Speaker 4 (46:07):
What goes up?
Speaker 1 (46:08):
We'll be back next week. Until then, you can find
us on the Bloomberg Terminal, website and app, or wherever
you get your podcasts. We'd love it if you took
the time to rate and review the show on Apple Podcasts.
Some more listeners can find us, and you can find
us on Twitter. Follow me at rig Anonymous. Goldna Hirich
is at Goldna Hirich. You can also follow Bloomberg Podcasts
(46:29):
at podcasts. What Goes Up is produced by Stacey Wang.
Thanks for listening, See you next time.
Hello, and welcome to What Goes Up, a weekly markets podcast.
My name is Mike Reagan. I'm a senior editor at Bloomberg.
Speaker 2 (00:19):
And I'm Moldona Hired, a cross asset reporter with Bloomberg.
Speaker 1 (00:23):
And this week on the show, Well, cryptocurrency officionados have
been pining for a bitcoin ETF for a long time now,
but as application after application was filed with US regulators, well,
the regulators have refused to give the green light amid
worries about fraud and market manipulation and really all the
(00:43):
other things that come up when you talk about the
thorny subject of cryptocurrencies. But then Blackrock dropped their application,
and many think that's the game changer, since, after all,
this is the biggest ETF issue we're in the world.
So are we finally going to see a bitcoin ETF?
Get into it with two expert guests. But first then
(01:03):
I would remark, this is also our latest crossover episode.
Speaker 3 (01:07):
It is this is like.
Speaker 2 (01:08):
The last one was a great success?
Speaker 4 (01:11):
Was it?
Speaker 2 (01:11):
I think so? You don't think so, I'm going to
tell Joan Tracy why you said that.
Speaker 4 (01:16):
I thought it was a great success.
Speaker 3 (01:17):
It was great.
Speaker 4 (01:17):
This will be an even greater successor.
Speaker 2 (01:20):
Well, the two guests we have on this week, they're
from Bloomberg Intelligence. We know both of them really well,
and I told them you and I are going to
basically drill them. This is going to be a tough
episode for them. Oh yeah, no fun, no jokes, like
very serious, no jokes.
Speaker 3 (01:37):
All right, Well, we do got to get a cheese
steak recommendation because we have a Philly guy guy.
Speaker 2 (01:42):
And another New Jersey guy.
Speaker 4 (01:43):
Yeah, that's a lot of Jersey in that.
Speaker 2 (01:45):
Oh my gosh, it's so great. Well, we should probably
introduce we.
Speaker 4 (01:47):
Get a quorkcroll recommendation to them.
Speaker 2 (01:49):
Well, don't offend some people. Taylorham. Some people say Tailorham. Yeah,
I think it's poor.
Speaker 3 (01:55):
It's this is good.
Speaker 2 (01:57):
We're already starting conspiracy or controversy. Yeah, yeah, but I
want to I want to introduce our guests. It's Eric
Belchunas from Bloomberg Intelligence and James Seifert, also from Bloomberg Intelligence.
There are great, great ETF experts. I've known them for
years and thank you guys for joining us.
Speaker 5 (02:13):
Yeah, thanks for having me. I'm happy to be here,
great to be here, big fan. I love the Tracy
and Joe on Lot's Crossover. And I also like, was
driving to Philly one night when I was listening to
your episode with Katie and she said she's never had
chees snakes.
Speaker 3 (02:26):
I almost had to pull over. I was like, I
don't understand.
Speaker 5 (02:29):
Now, somebody could go to school Katie Grayfield's never see
that never.
Speaker 1 (02:33):
But all right, So first things first, Eric, what's your
what's your cheese steak recommendation in Philly?
Speaker 5 (02:38):
So I'm not a Philly native, right, so I don't
really care that much about cheeseteakes. But I'll take somebody
to Gino's or Pats. They're equally good to me. I
just don't I'm not a connoisseur. I don't know which
ones are. They're all pretty good. John's is the one
a lot of people will I'm sorry, is it Jim's
or John's on South Street?
Speaker 4 (02:59):
The purse Roast pork emploria.
Speaker 5 (03:02):
This is like a New york Er not knowing like
the Broadway show to go to Okay, but the gym's
has a line usually going around the ye. But I'm
not waiting in the line for a cheese steak.
Speaker 3 (03:11):
And you know.
Speaker 4 (03:12):
Exactly the thing is, you are a true Philly guy.
Speaker 5 (03:15):
Then I have this other thing, which is like, I
have a limited amount of calories. As I get older,
my metabolism is lower, and I don't know if I
want to spend that big of a calorie and take
on a cheese steak. Sometimes I'd rather have like Mexican food,
or I go to Chick fil A a lot with my kids.
Like I just I don't know. Cheese steaks never really
come up that much for me.
Speaker 2 (03:34):
That's not the answer I expected.
Speaker 4 (03:36):
That's fair. You've expected more enthusiasm.
Speaker 2 (03:39):
Yeah, how long have you been living in Philly, Oh,
eighteen years?
Speaker 5 (03:42):
Yeah, come on, I mean I eat them like I
went to the Eagles game the practice they had at
the Link last Sunday, and I went to get food
and I got a cheese steak and it was delicious.
I think it was from Chicken and Pizza and it
was good. And I wasn't like, oh, this is only
like an eight at ten and the one at Gym's,
I don't do that.
Speaker 3 (04:01):
They're all pretty good.
Speaker 4 (04:02):
All right.
Speaker 1 (04:03):
We got a transition to the subject to the subject
that will get Eric excited here, bitcoin ETFs, bitcoin ETFs.
So I guess my first question is Blackrock files their application,
everyone assumes they know something.
Speaker 3 (04:20):
Is that?
Speaker 4 (04:21):
Is that fair?
Speaker 5 (04:22):
Maybe they know something, but you know, Blackrock is the
biggest asset manager in the world. Larry Fink is very
well connected. A lot of people who work in the
government now work there and vice versa. They helped the
fed by ETFs in twenty twenty when the market needed liquidity.
So Blackrock has more of a reputation than just being
like an etfshore right, So when they filed, it was
(04:42):
a whole different ballgame in my opinion, because it's even
if they don't know anything or don't have any like
I don't know, wink nod from the SEC that's going
to happen. The fact is they are generally like to
bring a gun to a knife fight. This is a
firm who doesn't like to lose, who knows what they're doing,
and they must see something. Yeah, they have to have
had I'm sure they had multiple meetings. They went over
(05:04):
all the stuff that we know, which is Genzer said no, this,
that and the other fraud manipulation, and they said to themselves, Nope,
this makes sense. That is what is the difference maker.
Speaker 4 (05:15):
Could part of it.
Speaker 1 (05:16):
Be that all this enforcement action we've seen this year
has not been targeted at bitcoin. You know, it seems
like the SEC is kind of letting Bitcoin do its thing.
Do you think that plays into the rationale?
Speaker 3 (05:30):
So that's part of our argument for OI.
Speaker 5 (05:32):
We've publicly stated we thought there was a sixty five
percent chance that these spot bitcoin ets are going to
get approved. The SEC is going after everything else. They're
going after all the alt coins, these weird institutional sales,
the icos, these different things. They're not really doing anything
with bitcoin. If you look at Gary Gensler, any of
his speeches that he's given testimonies in front of Congress,
he says, the only thing I will say that's not
(05:53):
a security publicly or the one l name is bitcoin, right,
So he puts it on a pedestal on its own.
And there's some recent inclinations that we're getting that they
might be kind of like bitcoin obviously tier one on
its own, not a security. It seems like there might
be pushing ethereum a little bit closer to that than
we initially thought. But everything else, for the most part,
based on the lawsuits against coin base itself, Finance, all
(06:14):
these other things, they are not done going after those things,
but there might be kind of a bit of a
changing of the guard as far as bitcoin goes, and
maybe a little bit of ethereum too.
Speaker 2 (06:23):
Okay, James, can we just take a step back and
maybe you can lay out the field, Like what does
the actual race and the competition look like. We have
a ton of issuers applying for spot bitcoin ETFs. Who
who is part of this race? And like, how did
we see all of this play out of the last
two months or so?
Speaker 5 (06:41):
If we start, we have to go back to ARC
Kathy Wood's ARC in twenty one shares, which is an
ETF issue in Europe that has launched a bunch of
crypto ets. They refiled for their spot bitcoin ETF application
back in April.
Speaker 3 (06:54):
Yeah, April of this year.
Speaker 2 (06:55):
I think it was April twenty fifth.
Speaker 3 (06:57):
Yeah, that's pretty good. You've been covering this pretty well.
Speaker 5 (07:00):
They were the only one that was active when Blackrock
dropped their filing on June fifteenth, and they were almost
certainly active because another player that is tech well technically
they don't have a nineteen before a filed, which is
what you file for a rule change in this case,
the rule change to launch a bitcoin ETF is Grayscale.
Greyscale launched and owns GBTC, which is the Greyscale Bitcoin Trust,
(07:22):
billions of dollars in there. It's not an ETF, it
doesn't trade like an ETF. There are a lot of
inefficiencies there. They are suing the SEC trying to convert
GBTC to an ETF. That decision is due sometime in
the next couple weeks, potentially months, but it should be
in the next few weeks that we should get a
decision like grey Skill ruling. So Grayscale is the other
key player here. Then you have Blackrock entering. Then we
(07:42):
have Bitwise, van Neck, Wisdom Tree in Vesco, who's partnered
with Galaxy. Galaxy is Mike Novogratz is crypto company. Then
you have Fidelity, Valkyrie, and global X all that have
applied for spot Bitcoin ETF. So there's those are all
like huge names in the ETF space, asset management space.
This is not like nobody's trying to launch these things.
Speaker 4 (08:01):
So what is that eight or nine total?
Speaker 5 (08:03):
It's ten total. Ten global Age just filed last week, actually.
Speaker 1 (08:06):
So is there enough demand to rationalize ten bitcoin ETFs?
Are some of these you think they'll pull their plans
if Blackrock gets approved, Like, how do you see it
shaken out?
Speaker 5 (08:18):
Well, let's assume they all get out around the same day.
Speaker 3 (08:22):
They'll all try.
Speaker 5 (08:23):
This is where I just sort of note saying that
if they approve and are let out multiple ones on
the same day, we're going to see ETF marketing like
you've never seen before, because they all do the same thing.
So marketing is going to be a massive variable here.
Blackrock has a big advantage because of their name and
their distribution, but you know, like ARC and twenty one
(08:43):
Shares are known a little more within the crypto community.
Speaker 3 (08:46):
That could help.
Speaker 5 (08:47):
So same with Novagrats and Galaxy, with Invesco SO and
Global Act. They all have their customers and clients. So
I think though it's a winner take most market, one
of them is going to be the GLD. Let's just
say Black rocks out in the same day, and it
becomes like the GLD.
Speaker 1 (09:02):
GLD is the gold the prominent gold ETF for those
who don't know.
Speaker 3 (09:05):
Yeah, and GLD.
Speaker 5 (09:06):
Even though there's been cheaper ones and much cheaper ones,
actually GLD still commands a lot of assets and a
lot of volume, and there's a lot of eat traders
and institutions who will look over a more expensive ETF
because of the liquidity. So if you're the most liquid one,
it's perfect because you have pricing power. You know, if
(09:26):
the worry about getting sort of undercut on fees, it's
the next one is probably going to be the cheap
one and they're going to maybe get their assets from advisors.
Then there'll be ones that might I don't know, write
options on top of it. There might be one that
comes out and adds ether into it. There'll be a
whole set of creative products that try to do something different.
But for the nine or ten that come out that
(09:47):
are just bitcoin, I would say, to get James's take too,
I would say one will be the superstar, and they'll
be like two or three other ones that are able
to carve out enough of a niche to make it
onto like you know, the next couple of years.
Speaker 4 (09:58):
Yeah.
Speaker 5 (09:58):
Some of the niches I'm thinking about is like one
of some of them are going to say we will
absolutely not lend out your bitcoin, but other one will
be like, we'll lend out your bitcoin and give you
dividends and returns, which will scare plenty of people away,
but other people will like, oh, if they're doing it smartly,
I would love to get that additional return you can
like there's there's ETFs out there where you can deliver
gold to your doorstep if you have enough ETF shares.
It's a lot easier to deliver bitcoin to somebody's bitcoin
(10:19):
while than it's gold, So I think they'll figure that
out too. So there'll be different ways that people try
to differentiate. But I'm with Eric, it's going to be
one at the top and then a handful of others.
Like you said, winner take most. It's is the way
it's going to play out, will Don.
Speaker 1 (10:30):
I would make sure I was at home if they
delivered gold in I really hope you don't want to.
Speaker 2 (10:38):
The ups guy doesn't want you gold anyway. He makes
a lot of money to see.
Speaker 5 (10:42):
I mean, honestly, I've had like really low budget random
stuff stolen off my doorstep from people in the Amazon
delivery gold would be the best. These guys would be like,
oh my god, you'd hit the jacket. I thought I
was going to get a toothbrush or something. I got gold.
Speaker 2 (10:58):
Okay, James, can we talk about what actually might happen
with the approval process, because there's a lot of I
guess questions around this, like is it the case that
we would see all of them go at the same time,
is that something the SEC would want or is there
an advantage to having filed earlier than the rest.
Speaker 5 (11:18):
Historically the way it works is if you file first,
you go out first, right, That's the way it has
worked historically. If you look at Biddo, which is the
bitcoin futures etf that launched, that is a slightly different
process than the nineteen before that we're doing talking about
the spot bitcoin ETFs, but it launched first a couple
days early because they filed first, and it commands the market.
It's ninety eight ninety nine percent of the volume, ninety
(11:39):
five ninety six percent of the assets, and the SEC
got a lot of flak for basically being a king maker.
So we've got from conversations we're hearing with other people
that are having with the SEC, they don't they probably
don't want to be a king maker. There's been a
lot of firms that spend a ton of money on
legal and all these different things filing for the CTFs.
I mean, the Winklevalls filed for this thing for the
first time ten years ago at this point, so there's
(12:02):
been a lot of people putting a lot of time, money,
and effort. Maybe they shouldn't take that into account, but
I mean, really, the cleanest way to do this would
be to allow all of them to go to the
same time. Theoretically, we do really do think if they approve,
it's going to be multiple at least, if not all
at the same time.
Speaker 3 (12:16):
So there's good thesis to that that's what they'll do.
Speaker 5 (12:20):
Theoretically, though, the way it should work is there's all
these approvals in delay or deny deadlines, and usually they
just wait till two hundred and forty days and then
they approve or deny. Right, the average time is like
two hundred and twenty twenty something days, So for the
most part, they take the full time and then they approve.
But as Eric has said, and he can get into
a little bit more, this is like a completely different situation.
We have the Gray Scale lawsuit against the SEC, which
(12:41):
we're expecting a decision on, so we're waiting for that decision.
If obviously, if Gray scill loses, it changes our odds
all of a sudden. We're probably not at sixty five percent,
but we think grey Skill is likely to win this right, So.
Speaker 3 (12:52):
The timeline is weird.
Speaker 5 (12:54):
Is there going to be some day after that decision
comes down where they just the SEC says, all right,
they have forty five d to do what's called an
no bond hearing, which basically just means they'll rather than
panel three judges in the Grayscale, they'll include all sixteen
or seventeen judges on the DC Circuit Court of Appeals
and they all come back and be like, did these
judges do this right? Essentially, so it would be a
(13:15):
little bit more time. But assuming the SEC doesn't do that,
there's going to be some language in the opinion that
says what the SEC needs to do, and there'll be
some time where the SEC either needs to deny Grayscale
again for different reasons or approve it. And this brings
up this sort of thesis and it's not been confirmed
at all, but this is many people of coimped with
this possible thesis, which is why Blackrock filed. Somehow Blackrock thought, okay,
(13:40):
we're going to file, and what they did that was
novel is they included a surveillance sharing agreement with Coinbase.
Not even ARC had that, so this was a novel situation.
And NAS that too wasn't involved, so there was some
novelty to their filing. The thesis is that well, Blackrock
filed because then if the SEC loses to Grayscale, the
SEC can save face by saying, well, we were waiting
(14:01):
for an SSA with Coinbase Blackrock provided that. Therefore, we're
going to let them out. That's why we didn't let
you out. And they let Blackrock out first and just
sort of maybe delay in court with Grayscale to not
let them convert, just to sort of screw them over
for suing them. So you save face and sort of
get back at this company that sued you. This is
(14:22):
one of the thesises on why Blackrock filed. Then Gensler
gets to say, not only did I do that, but I,
as I look at regulating crypto, I'm getting no help
from Congress. So at least I got Coinbase to clean
up in order to meet a say s to this,
and I left it with the adults Blackrock. He can
almost turn that into a win regulatory wise. So you
(14:44):
could see this is again all thesis, but you could
see how that kind of makes political and practical sense
and explains why Blackrock would have filed.
Speaker 4 (14:52):
Thesis are a little bit of conspiracy theory.
Speaker 3 (14:55):
Oh yeah, no, I told James all the time, thesis
we'll call it.
Speaker 5 (14:59):
You ever seen the movie JFK. Yeah, I feel like
Jim Garrison. It's easy to say they're not going to
prove it. That's Lee Harvey Oswold act alone. But then
you start to see all this stuff and you're like,
what's real? What's a red hiring? The circumstantial evidence that
he didn't is so compelling and interesting, and that's sort
of what this is like.
Speaker 2 (15:23):
But talk about the surveillance sharing agreement and how important
it was, because then all of the issuers that had
also filed for US popaquinitif had to go in and
add surveilance sharing agreements.
Speaker 3 (15:35):
Right.
Speaker 5 (15:36):
Yeah, So all the denials I said, the wink of
all supplied ten years ago, right, and every denial has
basically said they want it. And I'm going to say,
in putting quotes, a surveillance sharing agreement with a market
of significant size. So the question is what is a
regulated market? Which isn't it sounds like, yeah, I know
what it is, But there's no The SEC has refused
to exactly define what that is because they like to
(15:56):
have a little wigger room, and they also haven't defined
what a market of significant sizes right, So they will
do things to back into whatever decision is made from above.
So if Gary Gensler and the politicians that he worked
with in reports to decide they want to improve this,
they'll figure out a way to do it and meet
those requirements. So if we look at the bitcoin futuresztfs
that went through this nineteen be four process, the SEC
(16:17):
approved it by saying it met those metrics because the
CMME Bitcoin Futures market was the only market for the
CMME Bitcoin Futures ETFs. So therefore it's a regulated market
of significant size, which is just like weird to back into.
Speaker 4 (16:30):
Right.
Speaker 5 (16:31):
So the argument here for Coinbase is are they a
market of significant size? If you just look at bitcoin
trading volume, they probably aren't be because binance makes up
sixty percent of the global trading volume. But if you
look at just US trading, Coinbase is a dominant player.
And if you look at US dollar trading specifically, they
are by far and away the dominant player because all
of Binance's stuff is with stable coins and all these
(16:52):
other things. So the SSA, the question is, is the
SSA a market of significant size? I think I could
easily make the argument that it is a specific for
US dollars, but it's not a regulated market under what
you would normally consider to be a regulated market. But again,
bitcoin isn't a security, so it's not going to trade
on a regulated SEC exchange. Yeah, and a lot of
this wasn't really put on gold when it launched. Gold
(17:14):
is the same thing. It's like a commodity. This is
an unusually high bar in my opinion, versus when gold
came out. And that's what a lot of people are arguing.
And this leads me to this whole idea of just
like he's just not that into you. You know that
that movie Kencer just doesn't like crypto, and that's just
the way it is. And so we also, in our
calculus factor in the political angle and will this become
(17:37):
politically untenable for Gensler because there are some Democratic congressmen
who are actually moving over and sort of becoming more
pro crypto, and if he sort of feels it from them,
and now he's gonna if he loses grayscale, it's more
egg on the face because they just lost another lawsuit
on these spikes futures things. It's possible he's in a
position where it's the politically right move and then they're
(17:58):
going to make up whatever legal language to fit that
they want. Anyway, So our thesis is that the language
they use is you can change it.
Speaker 3 (18:06):
Yeah, they'll just make it work if they want to
do it.
Speaker 4 (18:09):
But didn't.
Speaker 1 (18:10):
He made some comment on Bloomberg TV to the point of, hey,
I'm only one vote on the commission that that.
Speaker 3 (18:16):
Yeah, little on me. I'm just yeah. We thought that
was interesting. He never spoke like that before.
Speaker 5 (18:20):
He said, I'm just one of five commissioners when Kaylee
asked him about the bitcoins etf And that's interesting because
when the last one was denied, three said denial, but
two dissented and said you should have approved it.
Speaker 3 (18:34):
So it's three two. So if one.
Speaker 5 (18:36):
Defects, he's in trouble.
Speaker 3 (18:38):
Now.
Speaker 5 (18:39):
We again, we hear from our legal analysts and regulatory
analysts that that just wouldn't happen because that would be
like defecting from your own party. But again, as I
said before, there's democratic congressmen who are moving.
Speaker 4 (18:50):
Oh yeah, that the political line.
Speaker 1 (18:51):
Yeah, it's not clear, you know, but let me I
got to play the role here of the cranky old
traditional finance guy would come boomer, which, let's be honest,
it's not a stretch for me, right.
Speaker 3 (19:03):
Uh.
Speaker 1 (19:04):
But you know, well, Don and I we talked to
a lot of fund you know, traditional asset fund managers rias,
you know, the old school, the old guard I don't
see a lot of them pounding their fists on the
table saying I'm dying to get my customers, my clients
into bitcoin, but only if there were an ETF, you know.
To me, it's like, okay, I get the whole notion that, okay,
(19:28):
people with clients like that are going to be more
comfortable on a regulated exchange with a regulated product. But
when you boil it down to I don't want you
putting your money into coinbase, put it into this ETF
where the bitcoin is custodied by Coinbase, I don't know,
like how big is the demand there?
Speaker 4 (19:45):
How big?
Speaker 1 (19:46):
Like how much in assets are we talking about that
we expect to go into these ETFs should they be approved?
Speaker 3 (19:53):
All right, let me take first swing at that games
can clean up anything. I miss.
Speaker 5 (19:56):
The financial advisors in America have about thirty trillion an
hours sets. It's a big amount. So even if like
zero point four percent of all of those portfolios or
a portion of them go into this, that's one hundred
one hundred and fifty billion dollars. That's how much gold
ETFs have. So that's kind of where we're at. Zero
point five percent. Some will never use it, but there
could be some that use two three four percent. The
(20:18):
other thing you have to know is advisors are scared
about this transfer of wealth from the boomers who are
eighty ninety years old almost, and they're going to transfer
it down to their millennials, gen xers like me and
even the generation below, and the boomers are going to
want to I mean, the advisors are going to want
to look hip and cool to what the younger people want.
And I believe some of those young people are going
(20:38):
to want exposure to this in terms of just as
a fomo trade or a store of value. So we
do think there's probably gonna be some market for it.
When you look at other countries like in Canada, that
percentages are about the same. So I think a bitcoin
ETF again won't it won't be that big of a deal.
But if we're talking one hundred and fifty billion, that's
(20:59):
a pretty big of what total bitcoin market cap is.
So it will be a bridge though, to all of
the boomer money, and they have all the money.
Speaker 1 (21:08):
Yeah, so you think even an advisor who's maybe skeptical
personally about crypto will have to react to the client
demands and say, look, if you're gonna do it, i'd
prefer you to be in an ETF then a separate crypt.
Speaker 5 (21:23):
There's two things here, right, So I've talked to plenty
of advisors who have clients that they don't offer their
their advisors. They don't really offer crypto specifically. So for
years there's been platforms where like, we'll tie into your platform,
you can pay an enterprise license and we'll get you
access to coin based custody. But really, like for the
most part, advisors don't want to deal with that. I'm
sure you've met plenty of advisors. They are more like salespeople,
(21:43):
many of them. So what they would prefer is for
those assets to be under their umbrella. Right, they charge
one percent on their assets or whatever what have you.
So if a client comes with them and says, I
want crypto in my portfolio or I want bitcoin. Figure
out how much I should have. Maybe it's one, two three.
There's plenty of studies that show out there that will
increase your sharp ratio, helps returns, that decreases volatility. Ironically,
so there's different reasons why you would hold it. But
(22:05):
telling them to hold it on coin Base on their
own account, that's not under my one percent fee. Right,
If I'm an advisor, I can the ETF is click
and buy, I can hold it. I don't have to
worry about custody, I don't have to set up other pipes,
and I get it under my umbrella.
Speaker 3 (22:17):
I get the greed motivation more than the other explanation.
Speaker 2 (22:20):
You're turning Mike into a believer.
Speaker 5 (22:22):
One other thing, if you're trading on coin Base, you
get charged not nothing. I mean, I know we debate
this all the time, but you can charge as much
as one hundred and fifty basis points for trade three
percent three percent A bitcoin ETF will be one basis point, right,
Really we all ETFs like if you take trading, he's
still in trading expense ratio, bitass spread.
Speaker 3 (22:44):
What kind of expense ratio, would you think.
Speaker 5 (22:46):
So, I think they're probably gonna This is my I
think seventy seventy five will be the opening bid by
the black Rocks and Arcs. But then someone's going to
Vanguard the category with like a thirty basis point.
Speaker 3 (22:56):
But not Vanguard, Not Vanguard. No.
Speaker 5 (22:59):
I Well, I wrote a note saying that the endgame
here is a fifteen basis point Vanguard multi crypto basket
ETF in ten years. Vanguard laughed at me, said that'll
never happen. But if they're saying even Vanguard is starting
an advisory they started one. They're have an advisory platform.
They manage people's wealth. That got them into private equity.
That's a very unbogulian area too. If you're managing somebody's assets,
(23:22):
you kind of have to have access to everything. So
I think Vanguard could be pushed to do it themselves
if they don't like anything on the market. It's a
long shot, but I think black Rock and some of
the other firms are also going to just like Vanguard
the category. Even without Vanguard, they've got the scale to
totally And you're the ETF has a long tradition of
when they bust down a new asset class. You know,
the products come in at a fee like you know,
(23:42):
maybe fifty to sixty, but within five years, you know,
usually there's a super liquid one that's affordable.
Speaker 3 (23:48):
So think about it.
Speaker 5 (23:49):
If you're an advisor, ETF has all the plumbing that
works for you, and it's going to charge you, say,
fifty BIPs, and it charges one basis point to trade.
The one basis point to trade is also going to
attract initutions. Some institutions really like GLD because they is
someone to deal with gold. Nobodyans to deal with coinbase.
So I think if the liquid ETF here will also
attract pensions, endowments, foundations, traders.
Speaker 3 (24:12):
Maybe not again to.
Speaker 5 (24:13):
This mass, it's not gonna a mass like surge, but
on the edges, some of these bigger fish are going
to appreciate anonymously trading whenever they want go long short
this one basis point traded exposure to bitcoin.
Speaker 1 (24:28):
I wonder, you know, so bitcoin's spent stuck in a
price range a little above thirty thousand, little below it
for a few months now. It did get a pop
when Blackrock filed. Are these approvals in the price do
you think.
Speaker 5 (24:41):
I think the pot so I would you would be
dumb to argue that the potential approval is not in
the price. You can go back to the Blackrock filing,
all those things. It was part of the reason why
the price ran up. I don't so, I think, no
matter how you look at it, right, if we get
to January, So that we were talking about deadlines, right,
so I said some deadline after the Greyscale decision. We
could see some approvals happening, but ultimately we're going to
(25:03):
see full denials at least by January tenth. If that's
what's happening, we don't see some of these other ones.
The SEC denying ARCS and then approving black Rock in March.
It's possible, but I think it's somewhat unlikely. So we
get to March and they're not approved, that's definitively bad
for demand and price. But approval, I would, it's hard
to say. Right, So we talk about Grayscale. They have
(25:24):
six hundred and thirty three thousand bitcoin something like that.
They have over three percent of the supply, So all
of a sudden, GBC can convert to an ETF. It's
trading at a massive discount. Twenty five percent is right now,
all of a sudden, that bitcoin is open to go
on the market. Right now, it's been locked up. No
one can touch that bitcoin. So it's not as clean
as all of a sudden. Etf launches and billions of
billions are gonna run in and the price is gonna
(25:45):
go up. There's a lot of other things that are
gonna happen. If you look at Bitcoin futures ETFs when
they launch and just futures themselves. Futures in the CME
for Bitcoin launched at the end of twenty seventeen, early
twenty eighteen, and that was the beginning of the end
for that first bitcoin bull market. Bitcoin Futures ETFs launched
in late October of twenty twenty one, again right at
the peak of the bitcoin bull market in twenty twenty one.
(26:06):
So it's not It also opens new avenues for shorting
and all these other things. It's not just as clean
as all of a sudden. The herd is coming and
hundreds of billions of dollars are going to buy bitcoin.
Speaker 3 (26:15):
The markets were designed to surprise you, and yeah.
Speaker 5 (26:18):
Is that classics buy the room or sell the news.
That's what's going on. In my opinion, and we got
to be careful because we were asked on these some
week on these crypto spaces and podcasts.
Speaker 3 (26:28):
We like go downtown a lot, God bless you. Yeah,
and we'll be asked like is the price going to
go up?
Speaker 5 (26:34):
They just want they want hopium so bad, and we
can't give investment device or even make calls about prices,
so we're like, look, I mean, biddoh, that was a
peak that went down. After that, we don't know, and
there's many variables in crypto. There could be another SBF situation.
Crypto is famous for having these scandals.
Speaker 3 (26:50):
I don't know.
Speaker 5 (26:51):
All I know is that over time an ETF would
be a legit bridge from all of the boomer money
in America to Bitcoin, and noverybody's not gonna flood over.
But that bridge can't hurt, and over time probably will
h will probably result in a good amount of bid orders.
Speaker 4 (27:11):
Yeah.
Speaker 5 (27:11):
The one thing I would say is he mentioned we
go on in a lot of these crypto spaces, like
with you, I'm like arguing, like why it's more likely
than you you initially thought it was.
Speaker 3 (27:20):
With them, it's like the exact opposite. I find I
played the opposite.
Speaker 5 (27:23):
I'm like, look, we are at this sixty five percent odds,
but there's thirty five percent chance in those odds that
it's not gonna happen. By the way, one more thing.
They sometimes they're so into hopium that they'll take something
and just completely contort it. So remember I said, advisers
have thirty trillion, and I was on a podcast and
I explained that a tiny portion of that money will
probably be in play, maybe point five percent. That's still
(27:44):
one hundred and two hundred billion whatever. But the one
place came out the headline saying Bloomberg analyst says thirty
trillion dollars in demand is coming to I was like, whoa, whoa,
there's a lot more words in my answer there. I mean,
come on, that's crazy, it's it's a trick, it's a
whole ris make.
Speaker 3 (28:01):
That our headline says thirty tillion, thirty trillion.
Speaker 2 (28:05):
But speaking of those infamous crypto scandals, can you talk
about some of the risks that potentially would be inherent
to such a product, or even just some of the
risks that the SEC has cited in the past.
Speaker 5 (28:16):
Sure, So I wrote a couple notes saying, after SBF
and FTX. I said an ETF is SBF proof because
let's say an ETF existed, right. Market makers are very smart.
These are the ones who are going to go between
crypto and the end client. They probably would have smelled
SBF as a fraud earlier, maybe even and if they
(28:39):
did use other crypto exchanges to make a market in crypto.
We know this because there were spot bitcoin ETFs in
Canada and in Australia and other countries, and they traded fine.
Speaker 3 (28:49):
Like the NAV.
Speaker 5 (28:50):
The price didn't really deviate too much from the NAV,
meaning ARB was possible, whereas if you were in FTX,
you basically had your money frozen. So even if the
ETF issue were I don't know, let's say it's a
small one, like let's say Kathy would I'm let's say
she just goes crazy takes and just runs off of
the Bahamas. You still have the crypto with the custodian
(29:10):
And that's why ETFs are so I think prevalent is
that they're they're as liquid as derivatives, but they actually
are physically backed, so I don't think there's much of
a risk. There's a risk of the price going up
and down, it can be volatile, but people are okay
with that GiB The problem with GBTC is that it
doesn't match the price of bitcoin. All people want is
(29:31):
for this thing to give you the price. They're okay
if it goes down. I think the fraud of manipulation
is definitely something that can happen, But in the as
crypto's matured, I think once you get all these market
makers who are not messing around, these are people, they're
very sophisticated traders. They're not gonna deal with shady characters.
So naturally the shady characters will be isolated, and maybe
(29:54):
they'll even get unshady so they can participate in this
bitcoin ETF. So I think the SEC was kind of
I don't know, simple minded in not approving it in
that if they did, I think it would help their
actual regulatory goals of cleaning up crypto. So, but would
I recommend a bitcoin ETF to my mom? I mean,
I would say, Look, it's volatile, but I don't I
(30:15):
don't not trust it. You're not gonna, like, it's not
gonna get frozen. You're not gonna like lose all your money.
But if bitcoin go was down, you are gonna lose
that money, So that'd be my answer to that. Yeah,
I would also say, like the SEC a bit here
has kind of like lost the force for the trees.
Like GBDC already exists, people are getting access to this
in coinbase. This isn't twenty six micro strategy micro There's
(30:36):
all these way less efficient ways, and I understand they're
trying to protect investors, but at the end of the day,
like anyone buying a bitcoin ETF at this point, like
they know what bitcoin is.
Speaker 3 (30:44):
This isn't twenty sixteen.
Speaker 5 (30:46):
Like I understand denying the Wink of loss for all
the reasons they denied them plenty of the other ones,
but like we're at a point where like people know
what they're buying. It's not like they're they're buying this
thing and like expecting like that it's not going to
be risky or the vast majority of people will and
there'll be a lot of disclosures in there. So there's
a whole other avenue that you can make the argument here.
But obviously the SEC is fixated on a few things,
and the issuers applying for this have to argue with
(31:07):
the SEC on those issues. Yeah, and We have a
traffic light rating system for all ETFs green, yellow, red,
and it just basically gauges the nasty surprise potential, like
what potential do you have to be surprised? So voo green,
no dings like it's you know, you'll never get surprised
at Vanguard.
Speaker 3 (31:25):
Yeah, and IVV same deal.
Speaker 5 (31:26):
GLD actually gets a one and a green light from
us because it's because its tax is collectible, so it's
got a little bit of a surprising tax thing going
on there.
Speaker 3 (31:34):
But it's still green.
Speaker 5 (31:35):
Now, the SEC has approved a two x bitcoin futures
ETF that would be hardcore red light.
Speaker 4 (31:40):
Yeah.
Speaker 5 (31:41):
And then GBTC, if it were an ETF, would be
hardcore red light because it deviates from the NAV so
much and has awful tracking. So it's ironic that there's
all these red light ways to get it. Yet if
a spot bitcoin ETF is approved, we would give it
a green light based on our system. That's just ironic
and frustrating.
Speaker 1 (31:58):
I wonder, you know, okay, say coins trading at thirty thousand,
I wonder how the pricing of the ETFs would reflect that.
Would it be like a similar to the spy where
I don't know bitcoins at thirty thousand, is the ETF
at thirty bucks three hundred? You know, would it try
to track it with a shift of decimal point like that?
Speaker 5 (32:18):
So there is like evidence that like lower handles like
do better specifically with ETF. So, like, honestly, I wouldn't
be surprised if they did that, But for the most part,
I don't think it matters. People are like, even if
there's one that tracks, they tend to started like ten dollars,
twenty dollars, twenty five dollars, So starting at thirty or
whatever it is, I assume that might be something they
try to do, But I mean time will tell some
(32:38):
ETFs purposely lower the price so get more retail investors
in some though, it like GLD likes a higher price
because if they're a big trader and you get charged,
you actually get charged less if the price is higher.
So basically I think they'll probably start at forty bucks.
Most start at forty or twenty five, and then from
there it will track the price of bitcoin. But we
(32:59):
could see again, once there's one or two popular ones,
you're gonna see everybody throws spaghetti at the wall to
try to like go oh, this is bitcoin with a
low handle, this bitcoin with the high handle, this bitcoin
that goes short goal long bitcoin, this goes long tesla
short bitcoin. They're gonna try all kinds of stuff, and
that's fine. Most that stuff will be fringe, but there'll
be one or two mainstream ones that make it in
(33:19):
or are used by mainstream America.
Speaker 2 (33:36):
But you mentioned b t X, which is the two
x bitcoin features et F and launch in June, and
I think a lot of people at first were like, no,
there's no way this is going to launch. I think
you were one of the only ones who was like, no,
this is launching on Twitter, and a lot of people
are potentially seeing that as the SEC may be warming
up to crypto bit more, is that one of like
(33:58):
is like a step forward?
Speaker 3 (34:00):
Yeah, I think so.
Speaker 5 (34:01):
I get back channel information and some of it's very valuable,
and that's why we are at sixty five. We've we've
we don't just get public things. We get things that
are a little sort of you know, in the back alleys.
Speaker 2 (34:12):
Sent your brag about it.
Speaker 3 (34:14):
Some of that stuff is nonsense valleys. You get a
lot of nonsense in the bad alleys. The key I
get it.
Speaker 5 (34:22):
But behind Jim's behind Jims a lot of information back there,
but this was an ETF bid X two x futures
when it came out, and then uh, I don't know.
Three weeks later, that same firm filed for an ether
futures ETF which had been withdrawn, filed and withdrawn maybe
three or four times historically, and in May, and just
in May.
Speaker 2 (34:41):
Had been withdrawn in May by a bunch of issuers.
Speaker 5 (34:44):
They file, and then like another ten people file, and
then I hear back channel the SEC is actually okay
with these, and so we are we handedicaped it seventy
of our percent just in case that information was bad.
But now we're we're in like two weeks since the
first filing, and most of the withdrawals happened within six days,
so we're well being the normal time they withdraw. So
it looks like they're gonna let ether futures come out,
(35:05):
which again, if they let bitcoin futures, it almost it's
a it's one step, in my opinion, on to the spot.
But it does show the SEC can have policy changes
because we also argue with these people on who are
like anonymous on Twitter, who are like ex regulatory guys,
and they'll like, they'll say they're never gonna do this.
They're always I don't know, they lean negative. I think
they just hate crypto, but they were. They said they'll
(35:26):
never do the futures, and they did it. And some
of these people said they never do the bitcoin futures
now ether So some of the people who are like
come out and like this won't happen a lot of
times you gott ask them, did you say the futures
wouldn't happen either? I guess my point is things change,
Policies can change, and it might not be because anything
legally changed. Their brains just changed or the politics changed
(35:47):
it all. It's a lot political and it's also legal.
Speaker 3 (35:50):
Right.
Speaker 5 (35:50):
So one of my arguments for why so they the
bid X the Bitcoin futures ETFs launched. I mean theoretically,
the way that process works is you file and after
seventy five days you can list and for bid X.
They filed and it wasn't withdrawn, and but really the
way it usually works is the SEC just back channels
to the asset manager that applied, right and says, hey,
can you withdraw this? If somebody decides like what these
(36:11):
ethereum futures ETFs or that bitcoin two x futures CTF.
It's like, no, you got to send me, like the
equivalent of a season desist. You got it, you gotta stop,
And they're like that issuer is willing to go to
court the way Greyscale was, based on what the SEC
has seed in court. In the Gray Scale case, if
you look at those oral arguments, I am guessing that
the SEC was like, all right, if somebody really wants
to push us on this two x bitcoin futures ETF
(36:33):
and on this these ethereum futures ETFs, we're likely to
lose in court the same way we're gonna lose in Greyscale.
And except if we lose in court on that front,
we don't have a way to argue against it.
Speaker 3 (36:43):
Right for Bitcoin.
Speaker 5 (36:44):
Our thesis initially for Gray Scale was they would the
SEC would lose in court and then they would basically
all it does is vacates the denial letter. And before
Blackrock filed, we're like, the SEC is just gonna find
another reason to deny this thing. They'll lean on. There's
no custodians we trust. There's other reasons they could say
why they deny you don't have any of any reasons
really on Ethereum futures or two ex Bitcoin futures DF.
(37:06):
And just to get into the whole how Cannonball run.
This whole thing is this reminds me of Cannonball Run.
Speaker 3 (37:11):
Everybody.
Speaker 1 (37:12):
I'm the only one, yeah in the room old enough
to get that reference, Matt, and I thank you for that.
Speaker 4 (37:17):
Burt Reynolds over here.
Speaker 5 (37:19):
Remember Sammy Davis Junior and d Martin dressed up as priests.
The whole the movie was about who can get from
New York to La the fastest. But you obviously if
you get busted by a cop, it's going to slow
you down. So some people tried to pretend they were
an ambulance. Some people drove a Lamborghini. They all tried
these interesting ways. Whoever gets to La gets a million dollars.
It reminds me of this. And so in the ether Futures,
(37:39):
what we've already found is that somebody said, oh, we're
going to change the name and a strategy for current
etf and that process is a little shorter. So we're
going to see if the SEC allows a name change
to cut the line to come out before the regular
filer so there's all of this. Yeah, there's all this
jockeying because again, if you get out first, you have
such a massive advantage. To James's point, there has been
(38:02):
some of a history of better to ask for forgiveness
than permission with the SEC and to just push them
and push them and sometimes override them. It. People have
had some success, namely the Latin America Real Estate ETF
that converted to a pot ETF before the SEC was
comfortable and the SE just sort of like fine whatever.
The SEC did come out after that was like, don't
do this again. But Valkyrie is the company that filed
(38:22):
for their name change. They have a Bitcoin Futures ETF.
They launched it and I mentioned biddoh has ninety eight
percent of the asset, so BTF it doesn't really have
much in the way of assets, right, so they were
just like we're going to go this way. They jump
in front of volatility shares about a week. Yeah, and
Bitwise sees that Valkyrie does that, and Bitwise also jumps.
They're changing their Bitcoin futures ETFs the whole bitcoin and ethereum,
so they're also jumping in front of the Volatility shares,
(38:44):
which was the one that was the first to launch.
They served and this is just the undercard. This is
just the undercard race to the real race. So there's
two races going on constantly. James and I were frazzled.
Every day there's something new, and it's just I tell people,
this is the most one of the most fascinating stories
because it's issue with the spot pit Quinny. It's the
largest asset manager, the highest rungs of finance, government, and
(39:06):
and it's in the bridge to this crazy underworld. All
these elements, and there's a clock and it's a race.
So it's hard not to be completely compelled and just
sort of, you know, uh, fascinated by this, although not
everybody on our team is as into it as we are.
I told the Athanasias like, look, if they take you
guys to the psych ward, I'll be here for the team.
Speaker 4 (39:27):
You come back well.
Speaker 1 (39:30):
And the sort of blurred political lines make it more
fascinating you there's so many issues in modern life for
left and right. You know, there's there's no crossing in
the middle, but the blurry political lines that I find fascinating.
But I think what I've learned today is I should
file for a single stock, micro strategy ETF and beat everyone.
Speaker 3 (39:50):
What do you think like a leveraged one leverage and
you might do well?
Speaker 1 (39:55):
Two x Eric and James such a tree to catch
up with you guys and hear all about the beat
Bitcoin eat. If we can't let you go just yet,
we're gonna do our craziest thing. But I feel like
it's finally time for me to reveal my favorite cheese steak.
I'm a heretic.
Speaker 4 (40:14):
As well.
Speaker 3 (40:14):
I know it's sorry you think you would catch the
bait on that you know that catch the hints.
Speaker 4 (40:19):
I'm a bit of a heretic.
Speaker 1 (40:20):
The best Philly cheese steak is actually in Atlantic City,
white House Subs in Atlantic City. I'm just gonna throw
that out there and now we can get to our
craziest you're.
Speaker 5 (40:30):
The on what makes it so good? Just to take
this extra something? Or do they use cheese whizz?
Speaker 1 (40:36):
I no, I think I think it's either prevalent or American.
It's the bread. So nine percent of your Philly cheese
steaks are on the Amoroso Bakeries roll, which is a
fine classic cheese steak roll. White House, I think they
bake their own bread.
Speaker 4 (40:53):
And it's delicious. It's absolutely great.
Speaker 1 (40:54):
So all right, time for our craziest thing. I don't
know if they warned you guys about our gimmick. Care
of the craziest thing we've in markets this week.
Speaker 2 (41:01):
So I want to get a started, right, Okay, mine
is about Taylor Swift.
Speaker 3 (41:05):
Oh, okay, shockingly who is not in the market.
Speaker 2 (41:09):
But she's not in the market, but listen to this.
This is from a New York Times story. A research
shop estimates that her concert could generate four point six
billion in economic activity in North America alone. That's stadium capacity,
people's spending plans.
Speaker 4 (41:25):
Like I believe that.
Speaker 2 (41:26):
This story said, like people are spending money on costumes
and getting their nails done.
Speaker 3 (41:30):
And I believe it like that.
Speaker 2 (41:32):
That's on par with the revenues from the Beijing Olympics
in two thousand and eight, after adjusting for inflation.
Speaker 4 (41:40):
That's pretty good.
Speaker 1 (41:40):
I've heard some speculate that she we avoided recession because
of I don't know if that's believable.
Speaker 2 (41:47):
But well, people spend like, I don't know, two thousand
bucks or something, just not just on the tickets, but
buying costumes and.
Speaker 1 (41:53):
All right, good stuff. I think I might give you
the win for that, thank you. But mine mine's pretty good.
Mine's your favorite sub jack LDNA. No bond maths, Oh no,
we're all gonna. I'm asking you all to do some
bond math here. Country Garden. You've ever heard of Country Garden.
It's the struggling property developer in China. It's kind of
(42:14):
teetering on the verge of bankruptcy. Default actually suspended this
week trading of its bonds. We are recording on Monday,
so keep that in mind. This these numbers may move,
but I want you, all three of you in our
game show.
Speaker 4 (42:28):
The price is precise.
Speaker 1 (42:30):
Need you to guess the highest yield that Country Gardens
bond maturing in January of twenty four, twenty twenty four.
So in a few months, what do you think the
highest yield this thing offered in the past week offered? Right, So,
as you know very well, and when the price of
(42:52):
a bond goes down yield.
Speaker 3 (42:55):
What's what's wrong with this company?
Speaker 1 (42:57):
They're they're basically teetering on the brink of bankrupt China distressed.
Speaker 4 (43:01):
Yeah, China real Estate. All open.
Speaker 5 (43:04):
I'll open with twenty eight percent forty four.
Speaker 1 (43:08):
All right, you're all your answers are in. Would it
help if I gave you the price of the bond? No,
it traded below nine cents on the dollar. You want
to change your answer?
Speaker 3 (43:18):
So it's hired than fifty percent? I win, I win.
Speaker 4 (43:22):
James was closest to the tea.
Speaker 1 (43:24):
Two thousand, nine hundred and seventy eight percent was the
yield on off for for a country.
Speaker 5 (43:29):
This is why I should have done forty one percent.
Like prices right now.
Speaker 4 (43:32):
You always gotta go. Yeah, but you went.
Speaker 3 (43:34):
First, so true.
Speaker 5 (43:35):
Yeah, I'm gonna change my my pick though. That is
a crazy stet.
Speaker 4 (43:39):
Congratulations James.
Speaker 3 (43:41):
Nice job, James, Thank you for having me. Wanted to play?
The price is precise?
Speaker 1 (43:45):
Yeah, everyone's dream, James.
Speaker 3 (43:51):
Craziest thing in markets.
Speaker 2 (43:53):
Yeah.
Speaker 5 (43:53):
Obviously the fire that happened to Maui is devastating, but
there looks like people are starting to blame Hawaii Electric
and they're down forty percent, thirty five percent today, forty
percent today. Yeah, so that stock is taking a creator
right now.
Speaker 4 (44:06):
Yeah.
Speaker 3 (44:06):
You don't want to own a you totally stock when
a wildfire breaks out there?
Speaker 4 (44:09):
Yeah? How about you? Eric? You got anything crazy for us?
Speaker 5 (44:13):
I mean, I don't know something I just keep thinking
about is the returns of the cues this year. And
we have this debate in our team because we have
a lot of international.
Speaker 3 (44:20):
People on the Team's just.
Speaker 5 (44:22):
Something about America and that index. Man, there's something that
you don't get in other countries in the queues of
thirty seven percent. That is just an astonishing hall, especially
when we're not even sure the Fed's done hiking completely.
But that index, it's just really really powerful and compared
to the rest of the world. International has these like
six month runs and it's like back to the cues
(44:42):
and these like really innovative companies in that index. So
that's something that I'm thinking about that we're actually going
to do something on.
Speaker 3 (44:48):
And we talk about a lot.
Speaker 5 (44:49):
I don't know, that's not financial news, but today on
IQ we are talking about the thirty seven percent return
of the queues this year. To me, that's just we
take it for granted almost. It's almost like Jordan's scoring
like fifty five points out whatever.
Speaker 4 (44:59):
It is pretty wild.
Speaker 1 (45:00):
What if all mutual funds changed their benchmark to the
Nasdaq one hundred.
Speaker 4 (45:04):
How do you think you think that would fly?
Speaker 5 (45:06):
Morning started a study and over the past fifteen years,
not one growth manager was able to beat the cues.
Speaker 1 (45:11):
Really, yeah for that for the fifteen year per Yeah. Now,
and there's that's a good crazy status, isn't it.
Speaker 3 (45:16):
Yeah, there's a couple.
Speaker 5 (45:17):
There's a couple of funds we found over the past
five to ten years that have beat it. But the
only way to beat the cues is to forget everything
you learned in your CFA and just go hog wild
on a couple stocks like a Tesla. This one fund owns,
like has ninety one percent exposure to Saint Joe's, which
owns a bunch of land in Florida. Like, you've got
to be really, really crazy and out there to beat
(45:38):
the cues. I think if you have a CFA mentality,
you're naturally going to shift to stocks that haven't done
as well and you will lose.
Speaker 1 (45:45):
Yeah, diversified holding yourself's a massive conundrum for active managers.
Speaker 4 (45:49):
Yeah, that's that's that's a great point.
Speaker 1 (45:52):
Eric Palcunas and James Seaffert of Bloomberg Intelligence, thanks so
much for your time.
Speaker 3 (45:56):
Thanks for having us, great to be here.
Speaker 4 (46:07):
What goes up?
Speaker 1 (46:08):
We'll be back next week. Until then, you can find
us on the Bloomberg Terminal, website and app, or wherever
you get your podcasts. We'd love it if you took
the time to rate and review the show on Apple Podcasts.
Some more listeners can find us, and you can find
us on Twitter. Follow me at rig Anonymous. Goldna Hirich
is at Goldna Hirich. You can also follow Bloomberg Podcasts
(46:29):
at podcasts. What Goes Up is produced by Stacey Wang.
Thanks for listening, See you next time.
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