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Five ETF Predictions for 2025 · Trillions

• 0:05
  Speaker 1: Well, CNA trillions.
• 0:06
  Speaker 2: I'm Joel Webber and I'm Eric Alchunas.
• 0:11
  Speaker 1: He sounds like you've maybe even a little sick. Something's
• 0:14
  Speaker 1: off in your voice.
• 0:15
  Speaker 2: Yeah, I got a I caught something probably from my youngest.
• 0:18
  Speaker 2: Who knows what these kids bring home. But I was
• 0:20
  Speaker 2: kind of down for the count for about forty eight hours.
• 0:22
  Speaker 2: And then I love that feeling when your immune system
• 0:25
  Speaker 2: starts to take the lead and you're like, oh, yeah, here, right,
• 0:28
  Speaker 2: here we come. And then I also had some antibiotics
• 0:33
  Speaker 2: left over from the dentist. It's like dropping bombs on
• 0:35
  Speaker 2: that thing.
• 0:36
  Speaker 1: Okay, well, welcome back in Happy twenty twenty five because
• 0:40
  Speaker 1: it's still new in the year and I know predictions
• 0:43
  Speaker 1: are a thing and the market has not been off
• 0:46
  Speaker 1: to a great start, but it felt like a good
• 0:48
  Speaker 1: moment to actually still talk about what might happen with
• 0:52
  Speaker 1: the little crystal ball.
• 0:54
  Speaker 2: Yeah, everybody has predictions in the cell sid It's like, oh,
• 0:58
  Speaker 2: the market has a forty per chance of going up,
• 0:59
  Speaker 2: and it's also opaque, and I don't know, it's like safe.
• 1:03
  Speaker 2: There's a couple of people out there that make very
• 1:05
  Speaker 2: specific predictions and they end up going back and like
• 1:08
  Speaker 2: saying was I right or wrong? I love that because
• 1:11
  Speaker 2: you don't get that a lot from a lot of
• 1:12
  Speaker 2: the prognosticators out there. This guy, Nate jerrasi from the
• 1:16
  Speaker 2: ETF Store, fellow ETF nerd veteran of the industry, has
• 1:19
  Speaker 2: five predictions every year, and he these are really interesting predictions.
• 1:24
  Speaker 2: I agree with three of the five, only Joel, but
• 1:27
  Speaker 2: I think it's gonna be fun to unpack these because
• 1:29
  Speaker 2: they all really tap into some huge themes that we're
• 1:31
  Speaker 2: probably gonna cover us of the year as well.
• 1:33
  Speaker 1: So joining us on this episode Nate Jersey, president of
• 1:37
  Speaker 1: the ETF Store. He's also the host of ETF Prime,
• 1:41
  Speaker 1: another ETF podcast, as well as Vildonna Hirich of Bloomberg News.
• 1:46
  Speaker 1: She's a crossasser reporter. This time on Trillions. Nate Jerrasey's
• 1:52
  Speaker 1: predictions for twenty twenty five. Nate, Vildona, Welcome to Trillions.
• 1:58
  Speaker 3: Thanks for having us, a pleasure to be here.
• 2:01
  Speaker 1: Okay, so, Nat, you've been doing predictions since twenty eighteen.
• 2:06
  Speaker 1: According to this little helpful memo, you started really strong,
• 2:10
  Speaker 1: you were like five for five, but then last year,
• 2:14
  Speaker 1: well ever since then, things have been kind of trending.
• 2:16
  Speaker 1: Downward and last year one for five. Why should we
• 2:20
  Speaker 1: listen to you in your predictions.
• 2:23
  Speaker 4: Well, first of all, I will say, from twenty eighteen
• 2:25
  Speaker 4: to twenty twenty two, I went nineteen for twenty four
• 2:28
  Speaker 4: or twenty five, which is pretty darn good. You're right.
• 2:31
  Speaker 4: The past two years have been brutal overall. Actually I've
• 2:35
  Speaker 4: gone two for ten though, I will say, and Eric
• 2:38
  Speaker 4: knows this, I did predict last year that spot Bitcoin
• 2:40
  Speaker 4: ETFs would obliterate every single ATF launch record, which I
• 2:44
  Speaker 4: clearly nailed out one that should be worth at least
• 2:46
  Speaker 4: an extra point or two. But Joel, I feel good
• 2:48
  Speaker 4: this year. I'm ready to get back on track.
• 2:50
  Speaker 1: Okay, Well, past performance not indicative of future performances. As
• 2:54
  Speaker 1: we know. Eric tell us about Nate because you go
• 2:57
  Speaker 1: on his podcast a lot, right, Like, what statue does
• 3:00
  Speaker 1: he have in the industry?
• 3:01
  Speaker 2: Well, I met him because I heard there was this
• 3:03
  Speaker 2: like radio show about ETFs that was delivered through ESPN
• 3:06
  Speaker 2: Radio or something, and this was back in like two
• 3:09
  Speaker 2: thousand and nine when it was very nascent industry, and
• 3:12
  Speaker 2: I listened to it and it opens with the who's
• 3:14
  Speaker 2: won't get fooled again? You know that it's a great intro,
• 3:18
  Speaker 2: and I was like, who are these guys? And they
• 3:20
  Speaker 2: they would they came in from like the Midwest, and
• 3:23
  Speaker 2: they would they would go back and forth about ETFs,
• 3:25
  Speaker 2: and I was like, Oh, this is great. But what
• 3:27
  Speaker 2: made them extra level was they are managing money.
• 3:30
  Speaker 5: They are advisors, so.
• 3:32
  Speaker 2: They have that interaction with the actual investor, which to
• 3:37
  Speaker 2: me helps their opinion of ETF's actually resonate more. And
• 3:41
  Speaker 2: so I think both of us, in separate places, me
• 3:45
  Speaker 2: and Philadelphia, him and Kansas City sort of like saw
• 3:48
  Speaker 2: the ETF as being a big deal, you know, early,
• 3:51
  Speaker 2: and so we had that sort of kindred spirit. And
• 3:54
  Speaker 2: then when I met him, it was obviously like you know,
• 3:56
  Speaker 2: mutual appreciation society.
• 3:58
  Speaker 1: All Right, Nate, you're gonna wan to drop your predictions
• 4:02
  Speaker 1: on us, and then we're gonna comment on them, and
• 4:05
  Speaker 1: we'll try and be friendly about it, but maybe critical too.
• 4:08
  Speaker 3: Uh.
• 4:08
  Speaker 1: Okay, let's hear your first prediction. Okay.
• 4:12
  Speaker 4: Prediction number one is that either the I Shares s
• 4:15
  Speaker 4: and P five hundred ETF TICK or IVV or the
• 4:18
  Speaker 4: Vanguard S and P five hundred ETF TICK or VO,
• 4:22
  Speaker 4: either one or both will chot fees this year in
• 4:26
  Speaker 4: an attempt to capture the ETF crown.
• 4:28
  Speaker 1: That ETF chrowme belongs to Spy.
• 4:32
  Speaker 4: The spider S and P five hundred ETF.
• 4:34
  Speaker 1: Okay, so within the S and P five hundred ETFs
• 4:37
  Speaker 1: you're predicting this is this is a year that it's
• 4:41
  Speaker 1: gonna get fierce, even fiercer.
• 4:45
  Speaker 4: Yeah. And look, people have predicted for several years, including myself,
• 4:49
  Speaker 4: that either IVV or VU would overtake SPY in assets.
• 4:53
  Speaker 4: But that's not my prediction here. I think that having
• 4:56
  Speaker 4: the largest ETF buy assets actually means something to these issuers.
• 5:01
  Speaker 4: And the way that I alloy out this prediction to
• 5:02
  Speaker 4: you is I spoke with Black Rocks Rachel Laguire back
• 5:05
  Speaker 4: in December and she told me that the I shares
• 5:08
  Speaker 4: Bitcoin ETF, which we can talk about crypto in a minute,
• 5:11
  Speaker 4: but she said that was attracting a lot of new
• 5:13
  Speaker 4: investors who were then actually looking at other I shares ETFs.
• 5:18
  Speaker 4: So in other words, the bitcoin ETF was serving as
• 5:21
  Speaker 4: like a magnet to bring in investors who then bought
• 5:24
  Speaker 4: other I shares ETFs. I think it's a similar situation
• 5:28
  Speaker 4: with these S and P five hundred ETFs. Right if
• 5:30
  Speaker 4: an investor chooses, say IVV, I think they're much more
• 5:34
  Speaker 4: likely to look at other I shares ETFs, and the
• 5:37
  Speaker 4: issuers know this, And since these ETFs all do the
• 5:40
  Speaker 4: same thing, they invest in the S and P five hundred.
• 5:43
  Speaker 4: I think it really comes down to fees, And so
• 5:45
  Speaker 4: I think one of these issuers is going to chop
• 5:47
  Speaker 4: fees because they want that ETF crowd but want.
• 5:50
  Speaker 1: These back already, like just like barely existent, like they're
• 5:54
  Speaker 1: so cheap to begin with.
• 5:55
  Speaker 2: Yeah, they're three basis points. I don't think investors really
• 5:58
  Speaker 2: trust zero or want zero, but two or one maybe.
• 6:01
  Speaker 2: I think it has to be Blackrock. Vanguard probably doesn't
• 6:04
  Speaker 2: need to do it, and I've actually advised them, instead
• 6:07
  Speaker 2: of cutting fees anymore, put that money towards customer service
• 6:10
  Speaker 2: next time you have that extra profit that you need
• 6:11
  Speaker 2: to spend. But I could see Blackrock doing it in
• 6:15
  Speaker 2: your I think, so I agree with this probably, I
• 6:19
  Speaker 2: definitely agree.
• 6:20
  Speaker 5: That VU will take over a spy this year.
• 6:23
  Speaker 2: Right now, WU is ninety five percent of the way
• 6:25
  Speaker 2: to spy at the beginning of the year. Last year
• 6:27
  Speaker 2: it was ninety percent. It makes up five percent every year,
• 6:30
  Speaker 2: So do the math. It's probably going to pass it
• 6:32
  Speaker 2: this year. IVV probably can't catch VU in this because
• 6:37
  Speaker 2: they don't take in as much flows. So they to
• 6:40
  Speaker 2: me if they cut the fee, and you know Blackrock
• 6:42
  Speaker 2: is very motivated by beating Vanguard. I could see IVV
• 6:47
  Speaker 2: cutting the fee, then then he may see Vanguard tie.
• 6:51
  Speaker 2: I could see it. So I'm eighty percent I agree
• 6:53
  Speaker 2: with the fee cut. I'm one hundred percent that I
• 6:56
  Speaker 2: think VU will pass Spy this year.
• 6:59
  Speaker 4: A wildcard that's out there is SPLG, which is a
• 7:02
  Speaker 4: spider portfolios and P five hundred ETF, so we call
• 7:04
  Speaker 4: this mini Spy and its expense ratio is only two
• 7:08
  Speaker 4: basis points, so it's actually cheaper than both IVV and VU,
• 7:12
  Speaker 4: and it finished in the top ten of ETF inflows
• 7:15
  Speaker 4: last year. I just don't think that I shares in
• 7:17
  Speaker 4: Vanguard like a competitor being out there who is lower cost.
• 7:22
  Speaker 4: The other thing I'll mention, I agree with you Eric
• 7:24
  Speaker 4: in terms of Vanguard allocating money towards technology and customer service.
• 7:28
  Speaker 4: But that Vanguard flywheel, it's like they can't help themselves.
• 7:31
  Speaker 1: Right.
• 7:31
  Speaker 4: We know that as their funds grow that allows them
• 7:34
  Speaker 4: to further leverage their back office economies of scale. That
• 7:37
  Speaker 4: allows them to run the fund even cheaper, and then
• 7:39
  Speaker 4: they pass those savings on to investors. With Vanguard's mutual
• 7:42
  Speaker 4: ownership structure. I just think you have to assume that
• 7:45
  Speaker 4: as VU grows, they're going to reach a point where
• 7:48
  Speaker 4: investors will get a fee cut. I think it's a
• 7:50
  Speaker 4: matter of time. So maybe I'm cheating a little bit
• 7:52
  Speaker 4: with this prediction because I just think that's going to happen.
• 7:55
  Speaker 2: My only counter to that is they're really pushing their
• 7:58
  Speaker 2: active move because they were late, and they may choose
• 8:00
  Speaker 2: to use that to cut the fees on those funds
• 8:03
  Speaker 2: to be the cheapest vandguard Vanguard. Yeah, but again we'll
• 8:07
  Speaker 2: see if black Rock cuts. I just I could see
• 8:10
  Speaker 2: Vanguard responding. But again, we're at three already, maybe two.
• 8:15
  Speaker 2: I think once you get to one or zero, it
• 8:16
  Speaker 2: starts to look like gimmicky, Like the customer's almost like,
• 8:19
  Speaker 2: you know, I don't want to have be like I
• 8:23
  Speaker 2: don't want to pay nothing, because then I got to
• 8:24
  Speaker 2: worry about how you're going to like screw me somewhere else.
• 8:26
  Speaker 1: Phil Donna, what do you think?
• 8:27
  Speaker 3: I have a couple thoughts. One is just conversationally based,
• 8:31
  Speaker 3: Like if I'm talking to non market civilians. Maybe we
• 8:35
  Speaker 3: can call it like my high school friends. If they're
• 8:37
  Speaker 3: talking about the market, they say I'm buying vou like
• 8:40
  Speaker 3: they don't. I never hear IVV in conversations. But the
• 8:45
  Speaker 3: other point that Nate makes and his predictions is that
• 8:48
  Speaker 3: even if they do cut, one way for them to
• 8:51
  Speaker 3: offset is through securities lending, which a bunch of these
• 8:55
  Speaker 3: issuers do, maybe almost all of the issuers do, so
• 8:59
  Speaker 3: that it's one way for them to make up for
• 9:03
  Speaker 3: cutting the fees, which is really interesting. It's an interesting trend.
• 9:06
  Speaker 3: But if SBOG already is at point two, you know,
• 9:11
  Speaker 3: it's been like that for a while, why if change
• 9:13
  Speaker 3: or if for IVV wanted to cut, why haven't they yet.
• 9:16
  Speaker 1: Yeah? Yeah, so take that, Nate, Take that, Nate, Okay,
• 9:20
  Speaker 1: we'll see what happens. Okay. Prediction number two, Nate, Okay.
• 9:32
  Speaker 4: Prediction number two is that this will be the year
• 9:34
  Speaker 4: of crypto ETFs. Notice I'm not saying spot bitcoin ETFs.
• 9:38
  Speaker 4: That was twenty twenty four. I think twenty twenty five
• 9:40
  Speaker 4: will be the year of crypto ETFs. And I have
• 9:44
  Speaker 4: ten predictions. I won't go through all of these, but
• 9:46
  Speaker 4: they range everything from spots Salona ETFs will be approved
• 9:52
  Speaker 4: to Vanguard, will allow clients Brokeragje access to Spot Bitcoin
• 9:56
  Speaker 4: and ethere ETFs. Spot ethere ETF staking is a proved
• 10:00
  Speaker 4: It's really a cornucopia of predictions here that I think
• 10:05
  Speaker 4: all tie into a huge tailwind behind crypto ETFs.
• 10:10
  Speaker 1: So do you think to kind of summarize, are these
• 10:14
  Speaker 1: going to be coin specific ETFs or are we going
• 10:17
  Speaker 1: to start to see the indexing of crypto into a product.
• 10:22
  Speaker 4: I think it will be both. So I think we
• 10:24
  Speaker 4: will see spot Salona ETF's Spot XRP ETFs, their filings
• 10:28
  Speaker 4: from both Grayscale and Bitcoin for index based ETFs. I
• 10:32
  Speaker 4: think we're going to see everything, and I'll just tell
• 10:34
  Speaker 4: you in a nutshell, really, this is all one huge
• 10:38
  Speaker 4: bet on the Trump administration that they're actually going to
• 10:41
  Speaker 4: deliver on their campaign promise or the innuendo that we
• 10:45
  Speaker 4: heard that they're going to be pro crypto, and if
• 10:47
  Speaker 4: you look right now, the early indications are that they will.
• 10:51
  Speaker 4: Right we have Paul Atkins set to succeed Gary Gensler's
• 10:54
  Speaker 4: SEC chair. He's clearly viewed as being pro crypto. David Sachs,
• 10:59
  Speaker 4: who he runs a VC fund he's sought to be
• 11:02
  Speaker 4: very tech savvy. He's filling this new crypto's our role.
• 11:06
  Speaker 4: There's also a Crypto Advisory Council being formed. The point
• 11:10
  Speaker 4: here is that it does look like the Trump administration
• 11:13
  Speaker 4: will be much more supportive of crypto. And if that's
• 11:16
  Speaker 4: the case, then I'm highly optimistic on all ten of
• 11:19
  Speaker 4: these crypto predictions, or I should say nine to ten.
• 11:22
  Speaker 4: The vanguard one we can talk about. Not quite as
• 11:24
  Speaker 4: confident there.
• 11:26
  Speaker 2: Yeah, I agree with that, he says, fifty launches. Yeah,
• 11:28
  Speaker 2: it's going to be like instead of the coin Tucky
• 11:31
  Speaker 2: Derby was just Bitcoin, it's gonna be like this all
• 11:35
  Speaker 2: out like Derby Derby. Yeah, universal alt coin Derby. It's
• 11:39
  Speaker 2: gonna get crazy.
• 11:40
  Speaker 3: Now.
• 11:40
  Speaker 2: A lot of this stuff is just going to get ignored.
• 11:41
  Speaker 2: I mean, you still think bitcoin ETFs take the lion's
• 11:44
  Speaker 2: share of this category. But you know, one of these
• 11:46
  Speaker 2: coins is going to have a nice run and gonna
• 11:48
  Speaker 2: be like the playful thing for a minute. But it's
• 11:51
  Speaker 2: still going to be prominently Bitcoin bringing in the big
• 11:53
  Speaker 2: boy flows.
• 11:54
  Speaker 1: So are you two for two with are you like
• 11:56
  Speaker 1: is it one and a half or no?
• 11:57
  Speaker 2: No, No, I'm gonna agree with this one. Too, except
• 11:59
  Speaker 2: number ten, So I guess I'm one tenth. This isd
• 12:02
  Speaker 2: Vanguard capitulation allows clients broker j access to spot bitcoin
• 12:06
  Speaker 2: and E three ETFs. I think it happens. I just
• 12:09
  Speaker 2: think you're early. I think it takes. It's gonna take
• 12:11
  Speaker 2: a littlehile because remember Vanguard's pretty proud and they came
• 12:14
  Speaker 2: out and said, we don't like this. It doesn't have
• 12:17
  Speaker 2: it can wreak havoc in portfolios, it has no real
• 12:19
  Speaker 2: world usage, and they let GLD trade. That's a total
• 12:23
  Speaker 2: slap in the face the bitcoin. The crypto people are
• 12:25
  Speaker 2: so pissed off by this, and I tell them, listen,
• 12:28
  Speaker 2: she's just not that into you, you know what I mean,
• 12:30
  Speaker 2: Like you got to get over it. Because they they're like, no,
• 12:33
  Speaker 2: Vanguard will bend the knee, and I'm like, Ben, what
• 12:36
  Speaker 2: are you talking about. Vanguard is doesn't need you.
• 12:39
  Speaker 3: So they guards not thinking about you.
• 12:41
  Speaker 5: They're not thinking about you yet.
• 12:42
  Speaker 2: It's like that meme, so Joel, I think in time,
• 12:46
  Speaker 2: Vanguard may relent simply because if bitcoin becomes a strategic
• 12:51
  Speaker 2: preserve for the US, if there's more advisory assets in
• 12:55
  Speaker 2: Vanguard that demand crypto is part of the portfolio. If
• 12:58
  Speaker 2: Selim Ramsey has more time to like grow his influence there.
• 13:02
  Speaker 2: I know he launched I a bit at black Rock,
• 13:04
  Speaker 2: so the new CEO there is clearly a fan. There's
• 13:06
  Speaker 2: a couple of things that will germinate. I just think
• 13:10
  Speaker 2: they take longer than the year, Nate.
• 13:11
  Speaker 1: Okay, Joe, Well, you should know.
• 13:14
  Speaker 4: Any time that I'm wrong on a prediction, I always
• 13:16
  Speaker 4: say I'm just too early. Eric knows that, and Eric
• 13:19
  Speaker 4: and I tend to be very early on a lot
• 13:21
  Speaker 4: of predictions.
• 13:22
  Speaker 2: Right on say I don't do these, but I do
• 13:24
  Speaker 2: bets with Todd Rosenblue. That's my version of the predictions.
• 13:27
  Speaker 2: And I'm early. I've never been wrong. I've just been early.
• 13:30
  Speaker 3: But Nate himself in his prediction sites Howard Mark saying
• 13:34
  Speaker 3: being too far ahead of your time is indistinguishable from
• 13:37
  Speaker 3: being wrong, So being too early could mean you're wrong.
• 13:41
  Speaker 1: Okay, yeah, so no rebuttal date that's what you get.
• 13:44
  Speaker 1: What do you think of more crypto ETFs?
• 13:46
  Speaker 3: I think I agree with Eric and Nate in that
• 13:50
  Speaker 3: we'll see, you know, like throw all the jargon words
• 13:52
  Speaker 3: in covered call zero DT, inverse leverage two x X,
• 13:59
  Speaker 3: all kinds of weird stuff. I don't know about the
• 14:01
  Speaker 3: Vanguard part. I mean, I'm gonna trust what Eric says here,
• 14:05
  Speaker 3: because he's like the Vanguard whisperer.
• 14:08
  Speaker 1: Okay, Nate, now go ahead, proceed with here Rebut.
• 14:10
  Speaker 4: Okay, so Eric said the magic words, which is Selim Ramji,
• 14:14
  Speaker 4: the new Vanguard CEO. So before he came over to Vanguard,
• 14:18
  Speaker 4: he was instrumental in moving the eyes Shares BITCOINYTF forward
• 14:21
  Speaker 4: while he was at Black Rock. And look, it's one
• 14:25
  Speaker 4: thing for Vanguard to not offer their own spot crypto ETFs.
• 14:29
  Speaker 4: That's perfectly fine, but it's another thing to treat clients
• 14:32
  Speaker 4: like their kids, like they can't have ice cream or whatever.
• 14:36
  Speaker 4: And I think Selim knows that he can't just withhold
• 14:40
  Speaker 4: access to these products. I think Vanguard will capitulate on
• 14:43
  Speaker 4: this decision to gate access to crypto ETFs. And the
• 14:46
  Speaker 4: other thing that I would say is, like myself, I
• 14:49
  Speaker 4: love Vanguard's investment approach. I personally invest in low cost
• 14:52
  Speaker 4: stock and bond funds, as do our clients, but I
• 14:56
  Speaker 4: also like a little crypto, a little hot sauces Eric call.
• 15:00
  Speaker 4: I don't think I'm alone. Yeah, well, I just think
• 15:03
  Speaker 4: Vanguard is actually alienating younger investors who view crypto as
• 15:08
  Speaker 4: a normal part of a portfolio, and at some point
• 15:11
  Speaker 4: I think that's going to impact their business. And I
• 15:13
  Speaker 4: think somebody like Salim's going to see the bigger picture.
• 15:16
  Speaker 1: Okay, all right, all right, speaking of bigger picture private markets,
• 15:19
  Speaker 1: what's your prediction? Your third prediction?
• 15:22
  Speaker 4: Yeah, So, private credit ETFs received a tremendous amount of
• 15:27
  Speaker 4: attention last year. There was this filing from State Street
• 15:30
  Speaker 4: for the Spider Apollo Public and Private Credit ETF, and
• 15:35
  Speaker 4: a lot of people in the industry are saying this
• 15:38
  Speaker 4: is going to be the next big thing. I just
• 15:40
  Speaker 4: can't get my head around this and how this will work.
• 15:43
  Speaker 4: And you know, very simply, what State Street is trying
• 15:46
  Speaker 4: to do is partner with Apolo, where Paula would be
• 15:50
  Speaker 4: the sole liquidity provider. In other words, they're going to
• 15:52
  Speaker 4: be both the buyer and the seller of the private
• 15:56
  Speaker 4: credit for this private credit ETF. They'd obviously determine the
• 15:59
  Speaker 4: value of this stuff as well. That seems like a
• 16:03
  Speaker 4: clear conflict of interest to me. Right, if they own
• 16:06
  Speaker 4: private credit that they believe, say is overvalued, how do
• 16:09
  Speaker 4: we know that's not what they're selling to State Street
• 16:11
  Speaker 4: or vice versa. If State Street needs to redeem shares.
• 16:14
  Speaker 4: How do we know Apollo isn't buying the most attractive
• 16:16
  Speaker 4: private credit out of the ETF, especially if you were
• 16:19
  Speaker 4: in a market where it's under duress. So I just
• 16:22
  Speaker 4: think this whole thing is simply a conflict. And I'm
• 16:25
  Speaker 4: telling you that the SEC hates conflicts of interest like this.
• 16:29
  Speaker 4: So even if we have a more lenient SEC under
• 16:31
  Speaker 4: the Trump administration, I just don't see them getting comfortable
• 16:35
  Speaker 4: with this. And then the other piece that I'll add
• 16:37
  Speaker 4: here is private credit is by definition private right because
• 16:41
  Speaker 4: it doesn't trade on a public exchange. It's essentially a
• 16:45
  Speaker 4: liquid whereas ETFs or daily liquidity vehicles, and so you
• 16:49
  Speaker 4: have a true mismatch here. I just don't see how
• 16:52
  Speaker 4: that can work where you put investor's best interest first.
• 16:57
  Speaker 3: We have to add. So Bloomberg reported a month ago
• 17:00
  Speaker 3: that Apollo is already the desk that they have set
• 17:03
  Speaker 3: up to try to facilitate the creation of the CTF.
• 17:07
  Speaker 3: It's already up and running. They're already trading this stuff.
• 17:10
  Speaker 2: I mean, I think Nate's point about being conflict of interests,
• 17:14
  Speaker 2: it's a good point. And there's been some people saying that,
• 17:16
  Speaker 2: like Apollo will be able to dump all the stuff
• 17:18
  Speaker 2: they don't want to actually own into the ETF. But
• 17:22
  Speaker 2: I would think that State Street, to me, is the
• 17:24
  Speaker 2: offset of that conflict of interest. That's who's on the label,
• 17:28
  Speaker 2: and State Street is going to make sure that their
• 17:30
  Speaker 2: investors don't get screwed.
• 17:32
  Speaker 5: So I trust State.
• 17:33
  Speaker 2: Street enough, and they're thirty two year history of running
• 17:36
  Speaker 2: ETFs well, and I just don't want my crap any
• 17:43
  Speaker 2: other way.
• 17:43
  Speaker 5: I want it in an ETF.
• 17:45
  Speaker 2: You may say that privates are better in an interval
• 17:47
  Speaker 2: fund or even a mutual fund or a hedge fund,
• 17:50
  Speaker 2: but I don't trust any of those. I'm not I
• 17:52
  Speaker 2: don't want to pay that money, and I'm right now
• 17:55
  Speaker 2: I'm in a character of all the investors.
• 17:57
  Speaker 5: I'm not actually me.
• 17:58
  Speaker 2: That's how investors have decided to like That's what they've
• 18:01
  Speaker 2: been showing with their feet. They just wanted an ETF
• 18:04
  Speaker 2: and Nate. There's plenty of ill liquid stuff in ETFs.
• 18:07
  Speaker 5: Currently.
• 18:08
  Speaker 2: There's times where stock markets close. In the ETF trades
• 18:12
  Speaker 2: HYD which is high yield muni's during COVID trade at
• 18:14
  Speaker 2: twenty nine percent discount. I think ETF investors would rather
• 18:18
  Speaker 2: have this in an imperfect way with discounts or stretched
• 18:22
  Speaker 2: arbitrage bands and even a potential for conflict of interest.
• 18:27
  Speaker 2: Then go to some interval fund and I will show
• 18:30
  Speaker 2: you proof. The XOVR, which is the private equity public
• 18:34
  Speaker 2: equity crossover fund that owns SpaceX, has ten percent SpaceX.
• 18:38
  Speaker 5: That has two hundred million already.
• 18:40
  Speaker 2: That's double Kathy Wood's Arc Venture Fund, which was launched
• 18:43
  Speaker 2: at the height of arcmania, and that has one hundred million.
• 18:46
  Speaker 5: But it's an interval fund.
• 18:48
  Speaker 2: That's like making a great album, but you're only putting
• 18:51
  Speaker 2: it on eight track cassette tapes.
• 18:53
  Speaker 5: Who's going to buy it?
• 18:54
  Speaker 3: So, but Nate isn't saying that this ETF will never come, right,
• 18:58
  Speaker 3: He's just saying it won't come in twenty twenty five.
• 19:01
  Speaker 2: Well, he's saying that this filing as it is. I
• 19:04
  Speaker 2: will okay, I mean, I'll bet you. I will bet
• 19:06
  Speaker 2: that the Apollo State Street ETF will launch this year.
• 19:11
  Speaker 5: You're betting, Nate, Yeah, steak dinner.
• 19:14
  Speaker 4: I will take that, okay, because I stand behind my
• 19:17
  Speaker 4: my predictions. Hey, here's here's my question, though, where do
• 19:20
  Speaker 4: we draw the line? Right? I think we would agree
• 19:23
  Speaker 4: private credit is a liquid So what else can we
• 19:26
  Speaker 4: put in an ETF wrapper? Is it art baseball cards?
• 19:30
  Speaker 5: Yes, wine, Yes, where do you draw the line?
• 19:33
  Speaker 2: So I just think ETF's sometimes trade like clothes unfunds
• 19:38
  Speaker 2: in crisis. I just think you're gonna see a situation
• 19:41
  Speaker 2: where ets become hybrid clothes und funds and they just
• 19:45
  Speaker 2: trade away from the NAV. But people are like, I'll
• 19:48
  Speaker 2: take that over getting screwed on these other kinds of vehicles.
• 19:53
  Speaker 1: Do we still think this is the next big thing, Nate?
• 19:56
  Speaker 4: I don't. And part of that is I'm not so
• 19:58
  Speaker 4: sure that the average invest really needs access to private credit.
• 20:03
  Speaker 4: I would make that argument right now that that's a
• 20:06
  Speaker 4: frothy area of the market in general. But even if
• 20:09
  Speaker 4: it wasn't, I don't know that the average sixty to
• 20:11
  Speaker 4: forty investor needs the ability to access private credit. I
• 20:16
  Speaker 4: don't know what this really adds to a portfolio other
• 20:18
  Speaker 4: than complexity.
• 20:20
  Speaker 3: That doesn't adding bitcoin to your portfolio also add complexity
• 20:24
  Speaker 3: or a ton of crypto.
• 20:26
  Speaker 4: That's a fair point, But I would say bitcoin is
• 20:29
  Speaker 4: a much more transparent market, okay, all right, a lot
• 20:34
  Speaker 4: more liquidity there paying.
• 20:36
  Speaker 1: It forward in some sort of prediction. Let's hear number
• 20:39
  Speaker 1: four Nate.
• 20:41
  Speaker 4: Okay, Prediction number four is that three point fifty one
• 20:43
  Speaker 4: exchanges go mainstream and this definitely gets on the weed.
• 20:46
  Speaker 1: So what that means.
• 20:49
  Speaker 4: Okay, So in December, an issuer by the name of
• 20:53
  Speaker 4: Cambria launched this Cambria Attacks Aware ETF and basically the
• 20:58
  Speaker 4: way that it takes it's a great ticker. The way
• 21:02
  Speaker 4: this worked was that investors of a certain size, so
• 21:04
  Speaker 4: they had to be a bit larger, they could contribute
• 21:07
  Speaker 4: their individual stock portfolio into the ETF. Okay, so they
• 21:12
  Speaker 4: provide their individual stocks to Cambria and in return, they
• 21:16
  Speaker 4: receive shares of the Cambria ETF. At a high level,
• 21:19
  Speaker 4: this is called a three p fifty one exchange. And
• 21:22
  Speaker 4: there are a lot of nuances to this because you're
• 21:24
  Speaker 4: dealing with a tax code. But as long as these
• 21:27
  Speaker 4: investors met certain criteria, this was not a taxable event.
• 21:32
  Speaker 4: And so let me just give you a real quick example.
• 21:34
  Speaker 4: So let's say an investor owned a portfolio of Tesla
• 21:38
  Speaker 4: and Nvidia and micro Strategy and some other stocks that
• 21:41
  Speaker 4: have gone up a lot and where maybe the valuations
• 21:45
  Speaker 4: are elevated. Well, that investor may want to reduce their
• 21:48
  Speaker 4: risk now, but the problem is if they own those
• 21:51
  Speaker 4: stocks in a taxable account, they obviously have to pay
• 21:54
  Speaker 4: taxes if they sell. So what this three to fifty
• 21:56
  Speaker 4: one exchange allows them to do is diversify into an
• 21:59
  Speaker 4: ETA and then they can defer taxes until when they
• 22:02
  Speaker 4: sell the ETF shares. Plus they get all the benefits
• 22:05
  Speaker 4: of the ETF rapper right that tax efficiency and low
• 22:08
  Speaker 4: cost and all of those things. So my prediction is
• 22:11
  Speaker 4: that we are going to see more issuers pursue this.
• 22:15
  Speaker 4: I think this is going to become pretty popular.
• 22:17
  Speaker 1: Huh So, and do you think it's more relevant for
• 22:21
  Speaker 1: people who have been acquiring shares of late or do
• 22:26
  Speaker 1: you think it could be more impactful for people who, say,
• 22:29
  Speaker 1: like have owned Microsoft since the nineties or Apple.
• 22:32
  Speaker 4: I think more impactful for people who have owned shares
• 22:35
  Speaker 4: for a while. But I think it just depends on
• 22:37
  Speaker 4: the composition of the portfolio. I also think this is
• 22:39
  Speaker 4: going to be more applicable to higher net worth investors. Right,
• 22:43
  Speaker 4: investors who have a higher net worth, they're probably in
• 22:46
  Speaker 4: a higher tax bracket, they have a larger portfolio. This
• 22:49
  Speaker 4: is going to make more sense. I also think this
• 22:51
  Speaker 4: could make sense for some advisors who are running separately
• 22:54
  Speaker 4: managed accounts.
• 22:56
  Speaker 5: Advisors will tell you.
• 22:59
  Speaker 2: I'm not sure if will agree, but I've heard that
• 23:02
  Speaker 2: real rich people hate paying taxes more than they actually
• 23:05
  Speaker 2: like getting like good returns, and so I think avoiding
• 23:09
  Speaker 2: taxes is going to is.
• 23:10
  Speaker 5: There's the demand there. And there's an ETF mouth.
• 23:12
  Speaker 2: Architect called Box, which does I won't go into it,
• 23:15
  Speaker 2: but it does a tax maneuver and I think it's
• 23:18
  Speaker 2: got four point seven billion, and that's from a small
• 23:21
  Speaker 2: indie issuer. There's going to be tax innovation in the ETFs,
• 23:26
  Speaker 2: and I agree with Nate on this one. I think
• 23:28
  Speaker 2: we'll see more of this.
• 23:30
  Speaker 3: Godana, I love this, I love tax I think this
• 23:34
  Speaker 3: is the big theme, the big story, the ways that
• 23:38
  Speaker 3: ETFs are being utilized to help offset your big tax bills.
• 23:43
  Speaker 3: The one caveat is that tax the ETF that Nate
• 23:47
  Speaker 3: was talking about it it has already launched, but it
• 23:49
  Speaker 3: only got thirty one million dollars, which isn't huge. It's
• 23:53
  Speaker 3: a it's a nice sum, but it's not huge. So
• 23:55
  Speaker 3: we'll see how that grows, if it grows. But the
• 23:59
  Speaker 3: guy behind mind all of these, including Box, the one
• 24:02
  Speaker 3: Eric just mentioned is Wes Gray, and he's really his
• 24:07
  Speaker 3: white label company ETF architect is really like coming up
• 24:13
  Speaker 3: with these ways or coming or innovating the way that
• 24:15
  Speaker 3: people are doing tax aware conversions. If we can call
• 24:20
  Speaker 3: them from SMAs or you know, family office stuff hedge
• 24:24
  Speaker 3: funds into ETFs. So I think it's very interesting. I
• 24:30
  Speaker 3: love it.
• 24:31
  Speaker 1: Are they going to bock at anything, Nate like if say,
• 24:34
  Speaker 1: like I bring them something from you know, somewhere in
• 24:37
  Speaker 1: my portfolio, like they don't have to take anything, right.
• 24:40
  Speaker 4: Yeah, there are some very specific rules and requirements in
• 24:43
  Speaker 4: terms of how you conduct these three fifty one exchanges,
• 24:47
  Speaker 4: So you can't just take any portfolio and do this
• 24:50
  Speaker 4: with and to what Viil Donna was saying with the
• 24:54
  Speaker 4: thirty million or so into the Cambria TAXIWARYTF, I think
• 24:58
  Speaker 4: a reason for that is and that's not bad, but
• 25:00
  Speaker 4: I think a reason it's not more is there is
• 25:02
  Speaker 4: a huge educational hurdle surrounding all of this. There's a
• 25:06
  Speaker 4: lot that investors and advisors have to get their head around.
• 25:08
  Speaker 1: So let's just try and make your prediction be a
• 25:11
  Speaker 1: little bit more specific, which is okay, you say the
• 25:16
  Speaker 1: three fifty one exchanges go mainstream, can you actually put
• 25:20
  Speaker 1: something quantifiable there for.
• 25:22
  Speaker 4: Us, I will say five ETF issuers who we all
• 25:28
  Speaker 4: know will pursue this approach. And as a matter of fact,
• 25:33
  Speaker 4: I saw last week Alpha Architects, so that's the ETF
• 25:36
  Speaker 4: side of ETF Architects white label. They're actually launching one
• 25:40
  Speaker 4: of these. So I'm cheating a little bit, So we'll
• 25:43
  Speaker 4: say four others. All right, four other issuers?
• 25:46
  Speaker 1: Eric, are you four for four right now? No?
• 25:49
  Speaker 2: I didn't agree with the him saying that Apollo we
• 25:51
  Speaker 2: already better staked dinner on it.
• 25:53
  Speaker 1: So three for four, three for four though, okay number five, Nick,
• 26:05
  Speaker 1: go ahead, Okay.
• 26:07
  Speaker 4: Last prediction is that a leverage single stock ETF implodes.
• 26:13
  Speaker 4: And what this comes down to is that issuers are
• 26:16
  Speaker 4: launching a boatload of leverage single stock ETFs on the
• 26:20
  Speaker 4: most popular companies, which, if you think about this, that
• 26:22
  Speaker 4: makes sense from the issuer's perspective, right, because they want
• 26:26
  Speaker 4: people to buy their ETF, they need interest, and so
• 26:29
  Speaker 4: of course they're going to pick the most popular stocks.
• 26:31
  Speaker 4: The problem is that a lot of these stocks are
• 26:34
  Speaker 4: also many of the high flyers. So again it's the
• 26:36
  Speaker 4: micro strategies and NVIDIAs Tesla's right, Paletaire and I'm not
• 26:41
  Speaker 4: here to make any investment calls. I'm trying to make
• 26:45
  Speaker 4: ETF predictions. But there is absolutely a case to be
• 26:48
  Speaker 4: made that some of these companies are significantly overvalued. And
• 26:52
  Speaker 4: even if we put that aside, So let's put the
• 26:54
  Speaker 4: valuations aside. These stocks are very volatile. If you look
• 26:58
  Speaker 4: at something like micro Strategy, this thing moves around a
• 27:01
  Speaker 4: tremendous amount, and so I just think it's a matter
• 27:03
  Speaker 4: of time before one or even more of these stocks
• 27:07
  Speaker 4: drops fifty sixty seventy percent over a few days or
• 27:10
  Speaker 4: a week. And if you just do the math on that,
• 27:13
  Speaker 4: that would be enough for one of these leveraged ETFs
• 27:15
  Speaker 4: to implode.
• 27:16
  Speaker 1: And your point is that there's going to be one,
• 27:20
  Speaker 1: at least one or one.
• 27:22
  Speaker 4: I'm saying one, but I wouldn't be surprised if we
• 27:25
  Speaker 4: see more than that.
• 27:28
  Speaker 2: So I disagree with this one, but not enough. I
• 27:30
  Speaker 2: don't feel strong enough to better steak dinner, but I
• 27:33
  Speaker 2: lightly disagree. I just think in this Trump era, especially
• 27:37
  Speaker 2: with limit up, limit down, a stock can go down
• 27:39
  Speaker 2: seven percent right then they halt it.
• 27:41
  Speaker 5: And I just see the.
• 27:43
  Speaker 2: Trump administration leaning on the FED and basically like coddling
• 27:46
  Speaker 2: the market. So I don't see a stock having fifty
• 27:49
  Speaker 2: percent draw down in like three days. If I'm wrong,
• 27:52
  Speaker 2: you're right, and that would be like a COVID type
• 27:55
  Speaker 2: sell off. It would take a black Swan event, in
• 27:56
  Speaker 2: my opinion, not a routine pullback. But I also think
• 28:01
  Speaker 2: that you know, if you look at MSTU and MSTZ,
• 28:04
  Speaker 2: these would be the canaries in the coal mine. I
• 28:05
  Speaker 2: think these are the most volatile ETFs on planet or
• 28:09
  Speaker 2: in the US, and they have twenty percent up twenty
• 28:13
  Speaker 2: percent down days, but not too much more than that.
• 28:16
  Speaker 2: So they can handle again, a couple serious pullbacks with
• 28:20
  Speaker 2: being fined. They couldn't handle COVID right, and we saw
• 28:24
  Speaker 2: a bunch of leverge gtfs blow up in COVID. So
• 28:26
  Speaker 2: I just don't think we get another COVID with Trump.
• 28:29
  Speaker 2: Is he's just too into the stock market.
• 28:32
  Speaker 1: Final word, I don't want.
• 28:33
  Speaker 3: To call out any one of these, but you so, Eric,
• 28:37
  Speaker 3: you don't think one of them can drop forty without
• 28:41
  Speaker 3: an exogenous event. I could see it happening.
• 28:44
  Speaker 2: It would have to be it would have to be
• 28:45
  Speaker 2: something specific to like micro Strategy or Navidia, But Navidia
• 28:50
  Speaker 2: has got so much going on even if it sells off,
• 28:52
  Speaker 2: it might solve twenty per I mean, it's not going
• 28:53
  Speaker 2: to self eighty percent unless the whole thing's a fraud.
• 28:56
  Speaker 2: Micro strategy Okay, I mean what we know everything about
• 28:59
  Speaker 2: Michael sit he's clearly into bitcoin.
• 29:01
  Speaker 5: What if he got a new interest maybe I don't know.
• 29:05
  Speaker 2: Micro Strategy is high beta to the stock market, and
• 29:08
  Speaker 2: these are high bata to micro strategy. So the key
• 29:10
  Speaker 2: is the stock market. If the stock market goes into
• 29:12
  Speaker 2: a COVID freefall, then micro strategy is really in trouble
• 29:16
  Speaker 2: because bitcoin is high beta to the stocks. So that's
• 29:19
  Speaker 2: my point on you got to really have a negative
• 29:21
  Speaker 2: view of the stock market having a COVID like month
• 29:24
  Speaker 2: to think this is going to blow up.
• 29:26
  Speaker 4: I will just add if you look in December the
• 29:28
  Speaker 4: leverage micro strategy ETFs, those are down like forty percent
• 29:31
  Speaker 4: plus and that was just a run of the mill pullback.
• 29:34
  Speaker 4: In the broader market.
• 29:36
  Speaker 2: Negative went up forty percent and that these people already
• 29:41
  Speaker 2: love that. That's like a good day for these traders.
• 29:44
  Speaker 2: But again it would take us sustain like a couple
• 29:47
  Speaker 2: of days, a couple of weeks I think, before this
• 29:49
  Speaker 2: thing's But that's why I'm not betting steak dinner, Nate.
• 29:52
  Speaker 2: I would just say I would take the under.
• 29:53
  Speaker 4: Okay, So how about we bet we bet a nice
• 29:55
  Speaker 4: glass of wine along with the steak dinner.
• 29:57
  Speaker 5: On this one?
• 29:58
  Speaker 2: Okay, dessert there any I'll get you. I'll get you
• 30:02
  Speaker 2: a Chief's cake. No, not a whole cake, just the
• 30:06
  Speaker 2: slice with the Chiefs colors. He's cake, He's look. The
• 30:11
  Speaker 2: Chiefs are the new Yankees and Duke the most annoying
• 30:13
  Speaker 2: sports fan on earth are aren't you sick of Patrick
• 30:16
  Speaker 2: mahomes stupid snake farm commercials? And then Andy Reed completely
• 30:19
  Speaker 2: embarrassing himself coming in, Oh, where's the chicken nuggets? It's like,
• 30:23
  Speaker 2: get these people off TV?
• 30:24
  Speaker 5: Yes, all right, hey, Jola.
• 30:26
  Speaker 4: Fun fact is that Eric has lost another bet to
• 30:29
  Speaker 4: me in the past, and I am the proud owner
• 30:31
  Speaker 4: of a Patrick Mahomes.
• 30:34
  Speaker 5: That's why I'm like, I am bloodthirsty.
• 30:37
  Speaker 2: All right?
• 30:38
  Speaker 1: On that note, Nate Jracy, thanks so much for joining
• 30:41
  Speaker 1: us on Trillions, Phil Donna, welcome back.
• 30:43
  Speaker 3: Thank you go Bills.
• 30:50
  Speaker 1: Thanks for listening to Trillions. Until next time. You can
• 30:53
  Speaker 1: find us on the Bloomberg terminal, Bloomberg dot com, Apple Podcasts, Spotify,
• 30:59
  Speaker 1: or wherever you'd like to listen. We'd love to hear
• 31:02
  Speaker 1: from you. We're on Twitter. I'm at Joel Webber Show.
• 31:05
  Speaker 1: He's at Eric Balchunas. This episode of Trillions was produced
• 31:10
  Speaker 1: by Magnus Hendrickson. Bye.