The Compound and Friends - The Relentless Bid

Episode Date: November 5, 2021

On this week's episode of The Compound & Friends, Michael Batnick and Downtown Josh Brown are joined by Eric Balchunas (Senior ETF Analyst for Bloomberg) to discuss: the relentless bid, commission-free trading, direct indexing, the Bitcoin ETF, tapering, and much more! Invest in fine art with Masterworks. The Compound & Friends subscribers can skip the waitlist with this link: https://mw-art.co/compoundandbalchunas. See important information: mw-art.co/x Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

The Vanguard mutual ownership structure is the root of everything. I still – I've read about the mutual fund structure a million times and I still don't necessarily understand exactly what it means. Excuse me in English. I'm five years old. What is this? All it is is that the funds own Vanguard. Right. But what does that mean?

Basically, it means that the investors get to elect the board instead of – And why is that so powerful? Because then whoever they send to the board is going to fight for the investors, not the shareholders. So I was talking about the mutual structure of Vanguard, which I've heard the story a million times. The funds own the company, but I still like – so to me, my question to Eric was what are the implications of that? So what? It eliminates the conflict. Yeah.

There's nobody there trying to have the fund company profit more. you know how you can almost say it is looking at the other two structures which is privately owned usually the owner wants to make a shitload of money like fidelity so the yeah and then publicly on where the investors invest in vesco is public yes Public, yes. Dude, I love this. It's cool, right? I love this. Because you know why? For me? My elbows rest on the arms of the chair,

and then my fingers are in position. I just like that it's not like, yeah, it's so much better. You know what I had just now for lunch? Underrated. It's just so stupid to say it's underrated. It's overrated and underrated at the same time. Sweet green. You ever eat that at the same time. Sweet green. You ever eat that?

Uh-uh. Sweet green? You're nodding your head. You love that place, right? It's not underrated. It's jam-packed all the time. They have a valuation of like $7 billion, so it's probably worth it. It's going to go public in the next two weeks, I think.

They have roast chicken that's like hot and like juicy, like ready to drop right on the salad when you order it. What's that place in Grand Central that we used to get? That's good because – Chirp and chicken. Chirp and chicken. Chirp and chicken. Wait, chirp and chicken. So what –

There's no way that's still there. Is it still there? No. What type of bed of salad do you get? Are you like a mixed greens guy? No, I'm an arugula. Oh, spicy. I like the peppery.

Yeah, I like that. That's what No, I'm an arugula. I like the peppery. That's what's happening. Anyway, not underrated, but underrated in my world. It's new to you. Where's Sweetgreen? Is there one around here? I'm not familiar. This one is in between Herald Square and here. There's one right across the park from us.

Okay, I think they're... Hold on. Mugato is texting me about... Didn't they just... Aren't they going public right now? Yes. I'm thinking the next... Yeah, yeah. Yeah, yeah.

Look. Are these edible? Yeah, yeah. They've been here for like three years right now. No, no, no. High turnover mints. Okay. We're heavily minted.

Sweetgreen is going public very soon. I might buy it. Oh, you're a chewer. What? You're fucking just popping those Altoids and chewing them. Oh, you're a chewer. What? You're fucking just popping those Altoids and chewing them. Yeah, I can't wait. That's interesting. I'm not a waiter.

I don't know. Same thing with cough drops. Honestly, I've never seen that before. You just pop and chew immediately. I respect that. I mean, a cough drop, I will suck for maybe like 10 seconds. No, not for bullshit. You ever see that move?

Just a pop and chew. Did you see that? Yeah, I pop and chew. Yeah, I feel like a curb You ever see that move? I know. Just a pop and chew. Did you see that? Yeah, I pop and chew. Yeah, I feel like a Curb episode here. That's what I do. I can't wait. Alright. Did you know that Portillo's Portillo's went public?

Oh, the Chicago place. The Chicago hot dog place. Did you know this? That's public? It's obviously a chain. It can't be a billion. That can't be a billion. What am I reading here? That can't be a billion.

Yeah. It sounds like a microcap. Oh, no, no, no. They just filed, but it's about to come public. It does IPO. Let's see. What are they talking about? This is funny.

First of all, am I pronouncing it wrong? I think it's Portillo's. Portillo's. Okay, okay. 405 million IPO. That's reasonable. Confirming its intent to launch more than 600

restaurants in the U.S. over the next 25 years. Short. 625 years. Was it hot dogs? We ate there one time. It's like hot dogs and roast beef. It's roast beef. Hot dogs are like, the Chicago-style dog is the main event. Like the pickle. I liked it. It was good. But it's like steak sandwiches.

It's good. Sausages. You would eat it. Yeah, probably. It's a fun time. I'm not crazy about all these regional like favorite things. What's regional in Philly? All have to be spread across the whole country. I feel like it loses some of the magic.

Wawa in public. People love Wawa. That's a good brand. It's a good brand. We're going to get a Wegmans in New York City. That's what everyone's carrying on about now. That's in South Jersey. My mom loves good brand. We're going to get a Wegmans in New York City. That's what everyone's carrying on about now. That's in South Jersey. My mom loves that place.

And my wife, yeah. So we don't have one down here, but we're going to get one. Yeah. Yeah, Wegmans are great. I mean, they're kind of almost like – I'm not an expert in food stores, but they seem like a bigger version of Whole Foods and Acme combined. But like they're not as like – I don't know if the word is like high cost I guess and organic. No, but it's similar to Wawa in that it has like this special connection to the people who like grew up with it in their local area. It's an upstate New York thing.

So it's like one of the few things that didn't start in Manhattan. And then when it comes to Manhattan, anyone who's been upstate and been to a Wegmans, it's like an event to go to Wegmans. I don't think I've ever been to a Wegmans. Oh, yes, I have in Cortland. I think Cortland or Rochester. You would know. You would never be the same after. Wegmans.

Wait, it's just a supermarket, right? I was at – Yeah, but they almost have like a restaurant and it's – They put out samples. They like break new foods into people's lives. It's almost like Walmart but a high-level Walmart for food. I was going to say it's nothing like Walmart, but a high-level Walmart for food. I was going to say, it's nothing like Walmart.

I know, but it's like, in other words, they have everything. It's massive. Yeah, yeah. Like, you could get, like, lobster, and then you could also get, like, your lunch. Oh, I've been here. I've been here. You could get coffee. But it's Whole Foods. No?

But bigger, and I think more Acme-ized. I don't know if Acme ShopRite-ized. So I was with. Like, I don't think it's as high cost and like organic-ish. I was with the former CEO of Whole Foods earlier this week. Not to brag. I mean he's a good friend of mine. He's an amazing, amazing person.

But he's telling me a funny story about why Whole Foods has to carry toilet paper. Because he's just like – you think about somebody's typical grocery shopping list, there's toilet paper on it. So they like resisted for a while. Yeah. And now I'm sure they have a 365 brand, you know. I'm sure. But like Whole Foods having to carry toilet paper

just because people are only going to go to one supermarket, you know, that week. They're not going to go to two because one has one item. It's annoying. In Philly on 10th Street, there's an Acme right across from a Whole Foods. What is an Acme? An Acme is like ShopRite.

I don't know, what's your, you know, the big food store. Stop and shop. Yeah, you stop and shop. And so we and everybody in the neighborhood, we go to Whole Foods for some stuff and then go to Acme for the rest, including toilet paper.

Which is so annoying. Yeah. But it's lucky when it's next door. Imagine go to Acme for the rest, including toilet paper. Which is so annoying. Yeah. But it's lucky when it's next door. Imagine having to get drive to the other store. That's annoying. Right. But then – so then like Whole Foods, oh, well, all right, fine. We'll have paper towels.

Yeah, of course you should. Yeah, I know. It's a big deal. What's the big deal? Was he proud of that or more like, oh, I didn't like that I folded and finally said, okay, toilet paper. I forget how it came up, but he's fine. Everyone – What's that guy?

Is that guy named John's – what's his name? Walter. Everyone involved in Whole Foods is very, very fine. They are one of the greatest like American business stories of the last 25 years I would say. So, all right. So you've not been here before. We start off with a dance routine. Oh, no.

We do ball on the floor. We do ball on the floor. And then we get into this very elaborate, and you'll pick up the steps. It's sort of ritualistic. Yeah, yeah. You could call it. You better be clapping, though. Duncan, where's the clap?

I got to do this first. All right. What is this? White balance? Yeah. Look at you. You do a little theater? Yeah, no, I used to help on movie sets and stuff.

Eric's a thespian. What movie set did you help on? Hold on, let me guess. Rudy. No big movies, but like... Ghostbusters 2. I was like, there was a time... Ghostbusters 2? I thought you should there was a time – Ghostbusters 2. I thought you should keep going.

You're going to hit it. What did you help with? That is such a specific guess. What did you help with? Were you lighting Sharon Stone's cigarettes? What were you doing? No, no. Like one time there was – I was doing the Philly Fringe Festival for a while and then

in order to get better at filming some of our little videos, I volunteered to work on a movie set. And so these guys who are on the Sopranos producers made a short film in Trenton about a boxer and it didn't go anywhere, but just being on that set. And also this guy at Bloomberg, who is a film, we've done some videos internally for Bloomberg, uh, is really good at camera. So I just learned white balance through him. That's how the ETF was born. You have to do white balance. Otherwise like it just doesn't look right. Duncan, what's white balance? Quick definition. It's to tell the camera what white should look like. That's solid. White should look like Batnick.

I used to teach photography and film. I had to explain this a lot. Do we base the whole thing on Michael? On Michael? I mean, yeah. Winter is coming. My winter skin is super pale. Yeah, there are plenty of comments about Michael's complexion. Listen, if that's all that comes here. Do you read the comments?

That's how you want to start this off? I mostly stopped. Yeah. There's not bad comments about you. Okay. No, there really isn't. Let's clap. Let's fuck.

I delete them. All right, here we go with the claps. Here comes number two. The Compound and Friends episode. Bang! Welcome to The Compound and Friends. All opinions expressed by me, Michael Batnick, and our castmates are solely our own opinions and do not reflect the opinion of Ritholtz Wealth

Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Last week, Mark Zuckerberg introduced us to his future vision of the metaverse. He explained that if you die in the metaverse, you actually die in real life. And the same, Duncan, goes for your portfolio. If you want to perform the S&P 500 for more than two years, Janet Yellen will literally kick in your door, waving the four by four. Generating alpha, especially in this market, it's hard. Listen, I bought Zillow. It's hard. But despite popular belief, you don't always need to take big risks

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So is he here all the time? No, just for the show. Okay. No, he's here. Duncan's like part of the... You are. And do you do investing too? I mean, I do my own stuff.

No, okay. We have two producers. John is in Brazil. Yeah, no, Duncan's a certified financial planner. That would be epic. And in his spare time, he's producing podcasts. Duncan is our creative director. So everything that you see us put out,

whether it's video, podcasts... Music. social media, like his eyes are on it and his fingers are very often doing the typing and he's amazing. So don't – are you blushing back there? Yeah. All right. Shout for Duncan. We love you. All right. We are here with Eric Balchunas.

Eric Balchunas is a longtime friend of The Compound from even before we were calling this The Compound. And Eric is, in my estimation, the very finest ETF reporter in America. What do you think about that? Is that too much? No, I'll take all of that, except I'm technically an analyst, although I do reporting. Can you imagine? But wait, hold on. We also love, there are others. He is the finest analyst who does reporting.

He is on the Mount Rushmore. Let's put it that way. You definitely are. You're in the top five. 100%. Top 20. I'll take it. Top 20, probably.

But I'm an analyst. No, but you have this roving, you have this, so you're at, well, let's set this up first. So you're at Bloomberg. How long have you been at Bloomberg? 21 years. Whoa. That's incredible. Yeah. Okay. So you're at Bloomberg. How long have you been at Bloomberg? 21 years. That's incredible. Yeah. Okay.

99? 2000. 2000. Yeah. So I'm very good at math. And you have one of the best podcasts in all of finance, not just ETF specific, and it's called Trillions. Tell us about Trillions.

It's a podcast I do with Joel Weber, who's editor of Business Week. Shout out to Joel. And he is not an ETF guy. So he sort of tries to keep us you know speaking normally yeah so it's kind of a half etf nerd half normal person podcast and we just try to simplify etfs for people and etfs are fun because they send you everywhere that's why i look like covering so we cover everything basically that's so that's such a great point covering etfs ETFs means covering business. Yes. And all of everything that's going on. Yeah. Because there are ETFs related to every segment of corporate America and the economy.

So you really have a big breadth of information. I like to say you kind of have to be a mile deep and a mile wide. Some jobs you just need to be a mile wide and an inch deep. Yeah. Or a mile deep and an inch wide. You do it very well. wide and an inch deep. Yeah.

Or a mile deep and an inch wide. You do it very well. And we were talking before, the last time I saw you was inside ETFs 2020. Oh, man. January 2020. Yeah. Okay.

Michael's got two-factor authentication. He's trying to get into the doc. So if Michael's very quiet, that's what's going on right now. We'll give you some time, champ. So I saw you there, and then the conference thing, just the curtains dropped and then there were no events. It was over very, very abruptly. Everything went dark.

But what I want to say is you're part of this like roving band of ETF geniuses. routine that you do where any conference that's at all related to asset management or ETFs, if they call you guys, you get on stage and it is easily the most fun, most informative part of whatever conference it is. Talk about that crew. Who's in that crew? It's a good crew. Tom Lydon. Tom Lydon, he calls it the ETF nerds. It's Lydon, Elizabeth Kaschner, FactSet, Ben Johnson, The Morning Star, Dave Nadeg, Matt

Hogan. Murderers. All murderers. I'm missing somebody. Did you say Todd? Todd Rosenbluth, of course. Can't forget Todd. Biggest nerd of all.

Todd's the one that will hear this and call. I know. Todd's – I love Todd. I don't know. We click and also we're not really bound by the way an asset manager is bound on stage. They can only say certain things. They got their PR person right there. We're pretty free.

Is Jeffrey on the panel or no? No. No, Ben is. Ben stage. They can only say certain things. They got their PR person right there. We're pretty free. Is Jeffrey on the panel or no? No, Ben is. Ben is. Yeah. Ben. Yeah. Ben, I guess. He's the understudy when Ben Johnson can't make it. Right. Well, Ben's at most of them. And sometimes only three of us show up. Like we might do a Canada event and there's like maybe three of the six or seven people. Who's like the Michael Buffer of the ETF industry? Michael Buffer? Yeah. Who's like the – Hogan.

Hogan, that's right. It's not going down if Hogan is not like announcing it. You know what I mean? Yeah. Hogan, yeah. I think Hogan and Nadeg, in particular those two guys, I think were – they were doing all this ETF stuff and in this informal fashion way before anybody cared. In fact, that's how I got into it. I was listening to their podcast in like 2005.

Wait, what? Who? Matt Hogan and Dave Nading. No shit. There was a podcast in 2005? About ETFs. And they would get on and kind of rip each other a little bit, and then they'd get into these details about ETFs.

Rip each other? Yeah, I mean, like, well, they, you know. How many ETFs were in 2005? Was there 20? Podcasts weren't that informal back then, like at least financial ones. Now it's more like normal to do that, but I found their informalness and also their ETF knowledge and just their whole vibe was, was, I could tell it was like 20 years ahead of his time. How many ETFs were around in 2005? Not a lot. Probably like, I don't know, a thousand. Now there's almost 3000. Oh, there's still more indexes than stocks?

Remember that nonsense? Yeah, that chart is – well, first of all, there are technically 3.7 million indexes. A bunch of share classes. Yeah, look. There's no money invested in any of them. So my – Meb Faber has a famous way because everybody freaks out about that chart. Like 3.7 – this will end well. Inflation.

Yeah, and then they're like – he's he's like well there's also more words than letters true oh i would go with music too how many notes are there nine ten yeah and how many songs have been written right yeah but not my metaphor though is also a badass only like you know a handful will actually matter yeah right so the rest are just just like the songs and the words i bet we probably only lose like three percent of words i'd say the same thing for, you know, they say you only use 20% of your brain. You only use 20% of your indexes. What a shame because those other 80%. All right. So you guys, so you guys, that line from wedding singer, you only use 20% of your heart. So you guys, uh, you guys are the ETF geniuses. And when did you start

covering ETFs for Bloomberg? At 2006, I was in data and I was doing mutual fund data. Right. And the woman who covered ETFs went on maternity leave and never came back.

So they were like, hey, can you now cover ETFs too? And I, I just sort of, you know, kick the tires on them. And that woman was Janet Yellen. Tell the whole story.

All right, go ahead. No, her name was Amy Samalowicz. Okay. Our loss, your gain. Really cool. Anyway, so I started covering them, and I was like, these things are pretty cool. And then I went to a conference or two, and I just heard some people talk. And I just read up on them, and I'm like, wait a second.

These things kick ass. They're like five evolutionary steps ahead of a mutual fund, not just one. i i was like this is a wave that's gonna break let me get ahead of the wave and i just became an expert i read everything i could how much money was in the etf complex at that time 500 million less than a trillion less than a trillion yeah oh 500 billion yeah so i'd say maybe 500 billion something like that really yeah. So now what is it? $7? $7 trillion. Holy shit. Eric, did you – well, actually, this is a great segue.

Josh, tee this up. You know what? I'll tee it up. You have – you are writing a book. I thought it was going to be called The Big Long. That's not the working title. You don't have to share if you don't want to. Do you want to share or no? Sure.

A Big Long is a chapter in the book. Okay. I was going to do a whole book about that, but I ended up using it as a part of a bigger book, which is called the Bogle effect. The Bogle effect. Yeah. Which is, I sat down with Jack Bogle three times for over an hour in the five years before he passed away. We exchanged emails. I had like a lot of material sitting here and I was just like, I really want to get this out. And I also felt as someone watching flows all the time, I'm like, man, every, almost every dollar invested today, you can kind of trace back to Vanguard and the mutual ownership

structure. And so I was like, let me try to really capture all that in one book. And then you could say, if I, if somebody was like wanting to learn about funds or what, how we got here, I can say here, read The Bogle Effect. And if you want to run ETFs, read my other book called The Institutional ETF Toolbox. So I feel like The Bogle Effect covers everything beyond the ETF, which ETFs kind of came in 93. But he was doing all his things starting in 74. And I also found it interesting that nobody has copied the mutual ownership structure since.

You get this large asset manager and I was like, why? And so I interviewed all these people and they were like, well, because there's no economic incentive to do it. So then I was like, well, why did he do it? How could I pay myself less? Yeah, somebody wants to drive a Volvo. Nobody goes to Wall Street to drive a Volvo was one of the quotes I got, which is really good. Well, because why? Because it only works at scale.

And how do you scale that? Even then, nobody would willingly turn over all the future profits like that so back to the shareholders yeah it just it's it's like it's almost like started that way though they did started that way and and that's the difference then you're not turning anything over nothing exists nothing exists well in the end the first dow is basically like a dow but with like a very very powerful jack bogle really calling the shots for many years yeah i mean the structure actually happened through this really insanely quirky serendipitous situation where he was fired and so he was pushed up his back was by wellington and so he he needed to come up with a solution

to this major rift in between him and his partners who were trying to get rid of him. And the one thing they would let him do was run this dumb little back office company that was owned by the funds. And that ended up – that was Vanguard. And so at the time – but he could have left and started a company and tried to make money. Like he could have – I think that's what most people would have done. The idea that you would willingly stay there first of all and then make this company that's owned by the funds. That was his idea is unique. And so he needed their infrastructure and their backing to launch something.

I bet there's somebody out there who was the legal mind who said to Jack Bogle like, no, no, no. Here's how you do it. Because how did he think of that? The person would be 90 years old right now. Yeah, you're not going to find them. His Princeton thesis has a lot of this sort of fun industries to serve the investors. There was some groundwork laid early on

and he claims he had thought about the two masters problem before this situation. Who were the two masters? The two masters, he thought that- Obi-Wan Kenobi. Yeah. No, this is something different. God and people.

Admittedly, I didn't read the – I didn't do the required reading for this segment. No, it would be the two masters being the shareholders and the investors. So those are usually – there's a tension between their two desires. Shareholders want money and the investors arguably want more return. And so those are usually two different parties. They are at every asset manager. There, they're the same. And so once he got locked into that, he really became an evangelist for it.

But look, the reason I wanted to write this particular book was the interviews I had, but also just the idea that my premise is the Vanguard, that structure, which continues just – the bigger it gets, the cheaper it gets, is powerful, and it is really the root of everything. Can you just describe when you say that structure? Indexing to me – in other words, if indexing hadn't come around, right, Vanguard would have had five basis point active funds or they have very cheap active funds, let's say, and they would start beating all the other funds. They would be the biggest active shop

three times over right now because they bring a gun to a knife fight because they're so cheap. So it isn't really the indexing revolution. Indexing really was a perfect partner to the mutual ownership structure, but it would have been big regardless. And now it might move into other areas.

So it's just beginning. So the mutual ownership structure, just to like visit that topic. So basically the shareholders who own the funds, the investors de facto own the company that provides the funds, which is why you don't have this layer of people paying themselves $5 million each to like administer this fund company. Correct. Okay. Cause everyone is aligned. Yes. Yeah. What, what, what if we did that as an RIA? We're not going to, but what, what if we, um, what if we said we want our clients to own the firm and, you know, we'll own the firm along

with them. What would that, how would that look for a business that's not a mutual fund but is clearly – has the capability to be a customer-owned partnership? Well, I think it would come down to if you had a big year and you had more revenue and profits, the question is how to spend those. And if – NFTs. Yeah. I mean the question is answered, my friend. So how would you spend them? So I guess-

Well, you have a board that makes that decision, you're saying? Yeah. So the board would be made up of executives and clients of the firm? People represented from the investors that they elected. Okay, so a lot of firms in our industry are starting to put together advisory boards of their clients, which if I were a better CEO, I would have done this already. of their clients, which if I were a better CEO, I would have done this already. But I do think there's a lot of value in having your clients have representatives who are among them, have a seat at the table, not to dictate to us what to do, but just to tell

us, like we do surveys and stuff, but like just to be like a voice for the rest of the clients. I should probably set something like that up. I feel like that's powerful. Yeah, I agree. There was a story- What's with the whole thing on chain? Like, I feel like we could do it very efficiently.

Yeah, I think you should do it. I mean, I always thought the NFL, and I have an NFL shirt on, but sports should have fans every time they sit down to figure out what to film, how to do it. I think that you should always listen to the people who are consuming the product.

I swear I can run the Giants better than Gettleman. Yeah, they really should have more of this across every single industry. But that's why the fans fall in love with the owners that come from among them. Somebody like Mark Cuban, he's obviously not a common man, but somebody

like Mark Cuban who was rabidly He seems like a fan well he was a massive basketball fan which is why you feel it that's why he built broadcast.com so he could watch i guess indiana university games or something so like if you if you think about like some of the most beloved popular owners in sports a lot of them like the fans really can relate to and they feel like this guy is on my side even though they're obviously the owner of the team, they're not. So I think there's something to that. All right, Eric, so you're writing this book, The Bogle Effect, and this sort of idea has been in place for a long time. I can't believe, I want to read something from Josh's post. I just

got stuck. His post, The Relentless Bid. This came out, Josh, you wrote this in March of 2014. Do you remember this post? I'm busy taking a bow. Go ahead. This is 2014. Let me just read the first quick three paragraphs. You hear it all the time these days. There is a relentless bid underneath this market, just waiting to buy every single dip. And you can't really argue with the statement itself. The dips have become shallower and the buyers have rushed in more quickly each time. Sell-offs took months to play out during 2011. Think of the April-October peak to trough 21% decline for the S&P. In 2012, these bouts of selling ran their course in just a few

weeks. In 2013, a few days. And thus far in 2014, just a few hours. It's rather extraordinary. I've been thinking about the reasons why for a long time now, and I believe I've got my answer, my unified theory of everything, so to speak. I'll lay it out below. So Josh did that in 2014. And it's funny because this is when, I mean, in October of 2014, I think the first time I remember, holy shit, these V bottoms, like they just keep happening was the Ebola scare. Remember that? Yeah. Was that 14? That was October, 2014. That V bottom was so insane. And I was like, that caused me to look back on this post and on the history of what's happening. So what happened and what's still happening seven years later? Well, so I think ETFs play a really big role in this,

the way in which they're used by advisors. And you would agree, most flows are directed by advisors in the ETF land, right? Yeah, I think maybe 75, 80%. Right. So what are the ramifications for the stock market when every advisor is going from being a transactional stock slinger, which is what I used to be, becoming an asset allocator instead, and more importantly, automating the schedule on which they're going to buy and sell based on something other than what's going on in the market. And that's, you get this relentless bid, and it doesn't mean that the inflows are positive every month, obviously, but you get this relentless bid that comes from advisors pressing a button and buying the stock market for 500 clients all at the same time and doing that on a regular schedule, which I think contributes to those V bottoms and at least the speeding up of the processing of bad news.

So the juxtaposition of my piece was as brokers turn into fiduciary advisors, that bid's not going anywhere. And it looks like it turned out that way. I would agree. If you look at the Fed, the Fed, well, the Fed is major. Of course. I think they've almost eliminated tail risk or at least the feeling that there's tail risk. That's super top. Yeah. You shouldn't say that on my podcast. Okay, sorry. Go ahead. I mean, I polled this. I said, do you think, I actually asked everybody,

I was like, do you think that if there's a really bad sell-off, the Fed will step in? I think 80% of people said yes. Why did you do this? I just polled Twitter, I don't know, maybe two months ago, three months ago.

But what is a really bad sell-off? In 2020-ish, something like that. 2000. Oh, so we know they will, because they did. Yeah, but I mean- Good poll. I don't think anybody is like 5%. In 2020-ish, something like that. 2000. So we know they will because they did. Yeah. But I mean – Good poll.

I don't think anybody is like 5%. I think that's why Powell can talk about like tapering and doing all this stuff. I think at the end of the day, they know he will bail them out. So I don't even care what you say. Yeah, he's data dependent. The data is the fucking 200-day moving average. But as long as you feel that they'll step in, it's like there's really no reason to panic or to diversify even or like hedge or short or do anything. Or worry about leverage. Yeah. Right.

So I think this whole relentless bid is a little more Fed driven. I'll tell you why. Because even though ETFs take in money, rain or shine, a vanguard, even during sell-offs, they tend to have net flow of positive inflows. Over the last, I don't know, five, six years, the money out of active equity mutual funds has been about the same as the money into passive ETF and index mutual funds. And in fact, in the last two years, they were still net negative on equities. So I think a lot of the ETF flows honestly are a format change, but still, I think people, like you said, are much more dip buying and they've been rewarded for buying the dip.

Isn't there a demography story there though? Because like, I remember reading, I don't think it's Savita, who at Merrill Lynch does the flows? Heartnet? The flow show or whatever? I just remember every week, like the update on the flows

in and out of Merrill Lynch accounts. Yeah. And they break it up. They do hedge funds. They do retail. I forget what the third category is. Maybe just regular institutions. And somebody – like I was like writing blog posts utilizing this data, trying to understand who's buying, who's selling, like a dog chasing his tail.

And somebody finally sat down and said, hey, idiot, that's Merrill Lynch. Everybody there is 70. Of course, it's net outflows. They're living on the money. Yeah. So I was going to say that. Josh nails it. So it's not, do you think the money coming out of active is going into indexes? Because I don't, I think the money coming out of active is going to bonds. I think it's going to the supermarket and medicine. I agree with that. Because where bond inflow is coming from. Yeah. so I do agree because there's this misconception that active equity outflows, because sometimes their net over months and years

is rebalancing. It's a natural effect in a bull market, right? You get your percentage equity goes up, you need to sell and buy bonds. I agree, and I think you're right. There's probably boomers and older people who are cashing out of their active equity mutual funds. I don't know if they're putting it into ETFs. All I'm saying is it is offsetting to a degree number-wise. But I'm with you. I think the younger RIA-

Yeah. At this point, you're not going to- But stock prices are going up, so it can't be fully offsetting. It has to be biased toward more. Well, this is a question I post to Twitter, and I'm honestly not totally sure I've got different answers, is if fund flows in the equity world are generally flat, how is the stock market moving up so much? And I've received many different answers. Well, not all the money coming in is from funds. That's the easy answer. Yeah.

Let me do this. This is Nick Colas at, you know Nick? Yep. I mean, I don't know him well, but I know who he is. All right. I think he's like one of the better. I think he's a brilliant guy. Yeah, he works for the Minneapolis Fed.

So Nick's at DataTrack, which is his own research company. This is what he's saying about flows recently. For the week ending October 27th, fund investors bought $9.9 billion of U.S. equity funds. That's mutual and ETFs. Okay? $9.9 billion? Yeah. Okay.

In a week. Okay. This was the second straight week of solid inflows. Last week was 9.4 billion. The prior four-week average is essentially zero, 68 million a week. So the last two weeks are notable considering they're coming in at new highs for US large caps. So what are we to make of that? I know it's happening. So what are we to make of that? I know it's happening. So basically- The flows accelerate at a high for the market after being quiet.

Yeah, so we divide flows into ETFs used by retail, buy and hold, like Vanguard, Schwab, iShares, and ETFs used by traders. I think what he's acknowledging is that the trader crowd has come back in and they tend to be momentum-ish. If the market starts coming back, they're gonna just pour a bunch into SPY. And there's institutions who might equitize cash with SPY.

They get something in, they just buy SPY. So SPY and the Qs are probably where a good chunk of that $9 billion is coming from. But if you take that away- That's money not like chasing the high. Yeah. That's like, I call it hot money. That's it. Right. If the market's about to make a record high, which it just did, that's the money that can't be left behind. Yeah. In fact, I know. I just looked at the flows last week. I think SPY, the Q's, IVV, those are the ones that are taking the most money now. That said, if you stripped all that away, that's more like a sort of volatile flow pattern. Yeah. You're still going to find money coming into VTI and VU like rain or shine, like clockwork. So can the relentless bid or can the big long money,

like the advisor money that's coming in, the 401k money every two weeks, can that dampen a sell-off when it gets really violent? I think so. I think that's exactly what it has been. People think it's gonna amplify it. Yeah, yeah, I agree. So I have a chart in the book.

I go into some of the worries. When's it coming up, by the way? Not till April. Okay. But I'm just about finished the last version. Takes like a couple months to get everything together. Anyway, I have a chart showing GE. Remember when GE had that nasty sell-off in 2018, I think it was?

It went down like 56% in like half a year. Yeah. We have a chart showing GE going down, and then we have a chart of all the ETFs and index funds that hold it. Right. So the bars of the flows are real high, but GE is tanking. So that sort of proves that the tail isn't wagging the dog. That said, GE might've been down 65%, 64%. So I do think that index funds are creating a natural bid to maybe buffer sell-offs. And my theory is in the

next sell-off, what we're going to have happen, and we saw it in 2020, all the people who own active mutual funds are going to bail. It could be two trillion out in a year because in March, 2020, their cost basis, their, their old, their older, that one, they're older. They were probably put in the fund by somebody. They didn't buy it voluntarily. So there's no loyalty. And so they're just like, look, I got to get out of here. And so in March, 2020, it was unbelievable. The intensity of outflows, there was 350 billion that came out within like four weeks. And so we wrote a note saying easily a trillion will come out, but then the Fed stepped in. So I have a bigger theory that the Fed- The Fed bigfooted anyone's wildest dreams.

Who all have people who work at the Fed and vice versa. I have to think they're all communicating being like, look, we're going to have to halt redemptions. So I think you could almost argue that active bond mutual funds are the new too big to fail. You can't let them fail. The stock market drives monetary policy. Well, I also think active bond mutual funds, because you remember during that time, the Fed, it seemed like equity mutual funds were seeing outflows pretty bad, but it wasn't until the bond mutual funds started getting hit hard. They saw 180 billion out in two weeks. And I was thinking to myself, at some point, they're not going to be able to sell bonds and they're going to have to say, we can't redeem you. The ETF can still trade and people can yell about the discount,

but a mutual fund is at some point, I think, going to have to halt redemptions. And if they do that, I think that would create panic. Is this the silver lining of the revolving door between policymakers and large systemically important financial institutions? Well, also the- That they're all friends? Yeah, I think I called my, my phrase for it is the boomerati. Okay. That's what I call it.

Because what, like Trump and Biden are clearly on the same page. Powell is on the same page, and they're from very different parties. But I think also if you look at the stock market, and you have charts on this, who owns the stock market? Boomers. What do they own, like 80% of it? Yeah. It's their retirement savings, and they're in power. It's the whole generation is riding on it.

Yeah, why would they let it fall? Let me ask you this. We were talking about how – This is just my – it's a little bit of a, I know I sound a little crazy with that. No, no, no, no, no. So all the flows in the world can't save a bad business, right? GE was a $300 billion stock, however big it was.

All the flows in the world can't stop it. But what about at the smaller end? Do you see flows impacting stocks on the smaller end? Stocks that just get included into the Russell 1000? A little. Not in 2021, but in 2019, 2020. Like they could definitely- Well, ironically, Cathy's active though. Right. Yeah. So Not in 2021, but in 2019, 2020. Like they could definitely- Well, ironically, Cathy's active though.

Right. Yeah. So yeah, certainly if a big fund, I have another section in the book where I call medium fish and medium ponds or medium fish and small ponds. Sometimes an ETF will be supposed to be small, like, I don't know, the junior gold miners.

And for some reason it just catches root and it gets too much money and it becomes like a medium fish in a small pond. I think then the index has to expand to make like room for bigger cap stocks in there, which is what the junior gold miners did. There was a case with Tanger Factory Outlets, which was over 50% owned by Passive.

Wait, what happened? I remember that story. What happened to the GDXJ? Did they put Apple in there? They just increased the size of the index. Yeah, Apple. Yeah. Well, Apple. Yeah. Well, one last thing on this, and then we got to move.

I feel like we could spend an hour talking about this. I know. This is probably boring for most people. I love it, but – What about – it's definitely not boring for most people. The people that listen to this podcast are here for this. Okay. this. Okay. What about the role of 401k being so much, so indescribably larger than it was during prior bear markets? And I think this is a big volatility damper and I talk about it all the

time. So you have, how much money did you and Ben figure out financial advisors have? Oh, 20. Oh, it was you. 23 trillion. Okay. No, I got the right number. I talked to Cerulli. It's 25.7 trillion. I was stuck on 13. So thank you. I'm going to forget my thought. So 23 trillion is basically financial advisors all knowing their clients are staring at the same actuarial math. The market pulls back 5%. They pull the lever more equities because it's what everyone's clients need and nobody's making money bonds. So that's happening.

And then on a parallel track, 401k money every two weeks, I don't know, a hundred million Americans get paid and money regardless of conditions in the market. We have definitive proof that nobody f***ed with their 401k allocations during the last crisis. Yeah, Vanguard showed that.

So that money comes in as the ultimate volatility damper. It's coming right out of paychecks. The majority of people have no idea that the VIX is up and that comes in and it is a price blind, completely fearless purchaser of stocks. Okay, to a point, but if you take the 401k money that's in sort of the Vanguardian lane and you take in, say, the RIAs who use Vanguard ETFs. Fidelity, it's huge.

Okay, let's even add in Fidelity. We're probably at about, I don't know, 15% of the stock market. There's households own 40, 45% of the stock market. I always say, everybody's worried about ETFs. There's households own 40%, 45% of the stock market. I always say like everybody's worried about ETFs. Like what about these households? What do we know about them?

Like they're really – I mean they're half the market. But Eric, how big were 401Ks 20 years ago? I agree. They're bigger and – More meaningful. Yeah. But is there anything – I mean I'm not sure if there's anything wrong with that. I think the bigger question is that should the stock market be America's retirement savings? Too late.

Too late. If not what? If not this, then what? Yeah. Well, then it would be like a defined benefit situation. You want to go back to pensions? Yeah, that worked out well. That didn't go well.

So in fact, one of the things in my book I'm looking at is why has international markets not been as quick to adapt passive investing? It's because they're just not as good at consuming. And part of the reason Americans are good at consumption in the investment world and have sort of moved over to the sort of like fee-based advisors and to passive is because they sniff a good deal because they're used to looking at their finances because of 401ks made everyone learn, like learn how to like at least analyze a couple funds. Whereas in Europe, they don't have to do any of that. So there's a lot more – there's less interest in the markets in general. In Europe, if you're rich, you own land.

You don't care about the stock market. They're largely with commission-based brokers still, and they're largely in active funds. So passive and the Vanguard effect has been a little slower over there because there hasn't been that consumer culture. Canada's like us. Germany has an ETF savings plan now, though, as part of their retirement system, which you probably know more about than I do.

They all want to be like us, I think. I think it's just hard to get there from where they are. And I think that's why I think ultimately the whole globe will end up looking like us. But this is part of the sort of- The gatekeepers in Europe have kept Passive out more successfully because the families that have money there, it's sitting at the same bank that their ancestors have been dealing with for 500 years. Like in Amsterdam, they have 500-year-old banks in Italy. So – And they get charged like 2%.

They don't even call themselves financial advisors though. If you sell mutual funds to a bank client in europe you call yourself a fund selector that's the nomenclature i'm not even kidding right so they don't view they don't have rias yeah like it's nothing like here at all uh i want to do this thing on commission-free trading and direct indexing let's start with this let me ask you a question okay like you guys are all right here would you like do you ever think about expanding into another country or like – Rotterdam. Twice last year. We think about it all the time, but there's no avenue to really do that, right?

We – But I did hear – when I talked to people about this, some people were like, well, there's no evangelist like a Bogle over here. There's nobody really shaking things up. Like with Canada? Well, no. This is in Europe essentially when this person was talking about this. You know who I was interviewing who gave a lot of, it was Robin Powell,

who you guys know. Yo, if- He's an evangelist. He is. Yeah. First of all, if Bogle was doing what Bogle did here in Europe,

the Illuminati would have gotten him. Didn't you see Da Vinci Code? There would have been like a ceremony. There would have been sex involved and they would have cut his head off. Robin Powell actually probably should get full-time protection. I don't think that that will ever get shaken up. It's like this ancient thing.

I love that he got told to leave. He was asked to speak at a conference. He said, oh, I think indexing is good. And they were like, oh, excuse me, sir. You have to leave. Yeah, but very politely. Yeah, very politely. We love Rob.

Let's get into this topic. Here's a good way to get into it. So Jared Dillian likes to kick the horse's nest. I love him. I didn't hear this podcast, so maybe this quote is taken out of context, but I don't know if it needs context. Here's what Jared said. Quote, zero commissions has been the worst thing that happened to retail investors in my lifetime. LOL.

I want to hear the rest of that now what podcast was he on it was with meb i didn't i didn't so so eric what's your take i could already i already know what he was saying though i interviewed jared for my book and i have that almost that exact quote he said the same thing to me all right so contextualize that for us he's basically like fees aren't necessarily bad and also i talked to dan egan who studies psychology and he made this point that when you go from like very cheap to free, people lose their minds. There's something with that. So you could make the argument that five bucks a trade is actually healthier than zero. I totally think it is. Yeah. And so, but the bigger point here is these investors just, they haven't had their ass handed to them

with a real sell-off because it all started after the Fed came in in 2020. If they get a down market, they're going to sing a different tune. Plus they're young. They don't have a mortgage. They don't have – they're probably not married. They don't have kids. So I was looking – in the book, I go into 1999. If you read Fortune and Forbes article from 99, they sound exactly the same.

It's like these chat rooms and everybody's getting rich and quitting their job at whatever store. And then that ended. And a lot of those people ended up becoming like buy and hold boring investors. You know what the difference is? This time it's 10 times bigger. Like it's so much bigger. We have trillion dollar companies.

We have, they're going to bring this fucking Rivian public next week. Yeah, but wait, hold on. The numbers are bigger. The story is the same. But not everybody's trading like they were in 99. Everybody in 99 was trading, don't you think? Everyone now is trading. You think so? Yes. Actually, I would bet

it's even more widespread during the pandemic. So Larry Tabb at Bloomberg Intelligence, his awesome data, basically 20% of all the equity volume is retail. That's nuts. But that is up from 10% 10 years ago. But guess what? It was 14% in 2020 before the pandemic.

So it literally jumped from 14% to 20% immediately after the Fed stepped in. That's when it – so I think it's probably at an unnatural elevated state. It would probably come back down if there's a sell-off. How much of that was Portnoy? Definitely a piece. If I had to rank, I would put the Fed way above Portnoy. Sure, sure, sure. Do we know what those numbers were in 99?

Or do we not have them? I got to look. Do you ever speak to like – It was low. Do you ever speak to like 20-something – I do all the time. Do you ever speak to 20-something traders? What do you mean you do all the time? I do all the time. You ever speak to 20-something traders? What do you mean you do all the time? I do all the time.

All the kids from my neighborhood, their older brothers. So on Trillions, we- I'm telling you, I have conversations with 20-something traders. You know what they say? When you mock the crypto or how they're trading on Robinhood,

they're like, all I know is I was watching the news and I never watched the financial news. And I just heard them talking for five minutes about how the Fed was able to like magically make a trillion dollars out of thin air. And you're saying that my shit is bullshit. Like they are smarter than I would have given them credit for. I'm not saying it's like cerebral. They just don't have respect for any institutions.

They watch institution institution topple like look at the cdc it's it's a clown show so now you want these people to respect the traditions we have of commissions and uh buy and hold and like prudent investing they're like look at the world you built it's crumbling it doesn't apply the other thing i'm starting to hear from crypto a little bit, which is interesting, is they normally go after gold. But they've started to go after the S&P 500 a little bit. It's not enough. It's not enough for them. Well, because it's like this is a Fed pumped up.

The valuations make no sense. It's not real. Why would you encourage somebody to buy that now knowing that the valuations are – I don't know if they're at all-time highs, but they've got to be close. The Bitcoin people don't give the Fed any credit for $60,000? Well, no, they do. What they're saying is you shouldn't – like I think the idea of encouraging investors to just buy a Vanguard S&P 500 fund now they think is almost like a pyramid scheme, like just get the younger people in so we can sell because we know it's also inflated, which I still, I love my stocks, but I see that point a little bit in that you could argue that trying to get people to buy

into stocks now is the top or at a point where it's almost ridiculously high. But young people are dollar cost averaging a little bit every two weeks they're not they don't have a lump sum to drop in at the top so it's like a moot point well also the crypto tends to be like anti-fed like they're basically like this is like real value and the fed has just made everything worthless in the dollar so this i think ties into that narrative they're not all wrong like yeah no there's good points here i i have gotten to know the crypto crowd a little more since the ETF came out, and I've been reading up on it, and it's fascinating. I definitely give it much more credit and interest than I did before. And also, we were talking earlier, they're fun.

They meme. They have a sense of humor. Some of them are out of their minds. Yeah, they really make investing entertaining to a degree, and I like that too. In the 12 months through June, the 11th largest U.S. retail brokerage has collected $2.2 billion for selling customers' options orders. Oh, that's from your boy. That's from Larry. That's Larry Tab.

That's payment for order flow. That was 60% higher than their take from selling equities orders. Why are options so lucrative? The spreads are wider, so that's why they want to pay for those. Also, meme stocks, the spread on AMC... And the trading is more reckless. You know what the spread on AMC was during the whole thing and GameStop? It was like 20 basis

points. That's like 20... In a stock? Yeah, that's why they were paying up the nose to get that flow. I don't think the apes cared. But by the way, there is... The apes? The whole thing about day trading. So back to the Bogle book, just because it's fresh in my mind. He did a study.

We're going to link to it. A lot of people are going to buy it. Don't worry. He did a study that was basically saying that in 1999, he wrote this article about the day trading. He claims that day traders only get 65% of the stock market return, and that's even worse than active mutual funds, which he claims get 75%. So he said obviously in index you get 100%, but he thinks it's even worse. And he hates active, right, or he is trashing active his whole life, that the day trading gets – but I don't know if they care. Are you glad that he didn't – not that he's gone, but that he didn't have to witness what went on last year? I asked people what he would have said, and some of the comments were really funny. They thought he would have been like – he probably would have – somebody said his head would have exploded.

I met him for the first time three months before he died. He – for some reason, he agreed to take a trip up to New York from Pennsylvania, and he was at the Tiburon CEO Summit. He was like the keynote speaker. It's like a room full of CEOs only of like wealth management companies and asset managers. And it was a Q and a, he didn't have to do like a song and dance, but, uh, I just like, I never met him before. Barry's met him a bunch. So like, I just, he's sitting on a stage. He's got his cane. It took a big effort to like get him up the steps to the stage. So I just like went 10 feet away from him and just like right in his line of sight.

And I just said, I just wanted to tell you like how much I appreciate everything that I've learned from you and that you've done for the industry. And he gave me – I don't want to say he winked because that's bullshit. But he kind of did like a nod and there was like a gleam in his eye. I think he probably was a little bit aware of me maybe. And that honestly, that would like made my month. Well, he loved that. In fact, in the book, part of what I explore is he seemed to be immune to money,

but he definitely couldn't get enough of praise. So I think that some people have different things that feed them. That's such a good point. And so while he wrote a book called Enough about corporate greed and all this, he had some kind of – but normally people who don't care about money don't go into Wall Street. That's what makes him unusual. He probably would have made more sense in a different industry.

So he was almost miscast because of that internal need for praise over money. Could you imagine if he went into a different industry? Like he went into like Chipotle and he was like making the guac free and the customers owned the food. I have a theory that he almost went into hotels. Okay. Yeah, because the reason he went into funds is because he was looking for a thesis in the Princeton Library. And he just happened to pick up Life magazine. And in there was this article called Big Money in Boston.

So he read it and he goes, okay, this is cool. I'll write my thesis on that. Then he got a job at Wellington. The rest is history. I was looking at other magazines that month in that year, which I believe was 59. And Time Magazine had Conrad Hilton on the cover. So I was

just imagining, you know, A, how big a part luck plays in one's career. If he picked up Time and was like, yeah, this hotel business seems pretty good. Let me go into that. The only reason I'm sitting here is because my dad played golf with a stockbroker and I didn't have a job. So yeah,

a hundred percent, a hundred percent. And don't even ask how Michael got here. So obviously this is like asking a barber if you need a haircut, but the chief legal officer, Dan Gallagher from Robert and, and we don't need to go into him, but not that I have anything to say.

I don't even know why I said that. Payment for order flow coupled with technology has helped make people – has helped make investing less expensive and more attainable for millions of investors of all backgrounds. True. Yeah, I think that what I would push back on that and what I also look at in the book is the difference between like betterment and how they're trying to get you not to trade. Yeah. And Robinhood, which is trying to get you not to trade. Yeah. And Robinhood, which is trying to get you to trade. It's made by the same, you know, the people who make other apps that are supposed to be addicting.

So it almost seems like Robinhood is almost made like a cigarette. Yeah. And what Betterment and some others do are trying to get you off of smoking. I found that, that sort of juxtaposition. All right, fine. I'll say it. I'll say it. All right.

So, so speaking of that, like the smoking part, this is- Angel and devil on your shoulders. Hold on. This just reminded me of Thank You for Smoking. Remember that movie? Yeah, great movie.

So Dan Gallagher got paid $30 million by Robinhood last year. Hold on. What's his title? He's the chief legal officer. How many hours a night of sleep

is he getting on average? They paid him $30 million. That's like Steph Curry money. Do you think that he has an entourage? Like the chief legal officer of Robin Hood sweeps down the hallway with like uniformed security. You know how like when a president goes in, he ends up like with way more gray hair. They age so quickly. I feel like that's the same deal with that job.

Like you have to be so overwhelmed. It has to be. With Steph and you probably have a four-year. Or a complete and total sociopath. Could go either way. But wait, here's another thing. So what Robiter did with zero free trading is obviously they steer their customers to trade. We know that.

But it opened up the door to direct indexing. When we were working with Canvas, with our Shaughnessy's, we were trying to figure out our model. Like how is this going to work? Because it was asset-based pricing. It was not cheap. And they bust the doors open and broke the dam for us. So to explain that to the viewers, if you're doing custom indexing, you're trading every day, a lot of it for tax loss harvesting. If that's on a commission basis, you're basically like

churning up an account. You can't do it. So you have to request what's called asset-based pricing, which is basically like how much are the assets in the account? Okay, we'll bill based on that, which is not the norm for our industry. That was 20 basis points-ish. Yeah. And for a big – it could be real money. So then they go no commissions. Well, it depends on where you go, right?

If you go to Schwab and you do that. We were at TD and Schwab. They both simultaneously said no commissions. And then it's like, oh, this canvas thing does make sense now because it's my two pushbacks on that or my questions for you guys is if the trade's free obviously in schwab the way they would make money is taking your uh leftover cash and moving it to yeah we don't have we don't have leftover okay so then you're the worst client on earth okay we cash manage yeah okay so take that away and then there is also the spread of the stocks don't care don't care

take it somebody's gonna take it i don't care yeah but if you look at sell my order flow to china it depends how much you're buying no but no but i mean i'm talking in order to buy those stocks all like that's why the etf i would argue has a point on that is that it's typically one basis point and the basket whatever it tracks unless it's large cap equities is going to be a little usually a little more even a large cap basket i think would be like two or three bips. So we don't care about that. But somebody who's allocating like a $10 billion trade.

Yeah, it's fine. I get it. No, they care. And if you can make up more on the tax part of it, it would totally overwhelm that. I get it. Although that does run out, doesn't it? I think the future.

At some point. And also if you're doing all this tax loss harvesting, my question is, are you getting, is it getting confusing with, oh, now I'm not tracking the index because I sold this, bought this. Like you're able to completely maintain. It's pretty wild.

Perfect tracking. Well, no, no, no. It's not perfect, but it's pretty damn close. It's close. It's more than close enough. Okay. Have you kicked the tires on any of these things yet? Yeah.

No, we, we, I get, I think for certain clients, this is a great thing who have drill into taxation. Not for everybody, obviously. Yeah, but I think generally I've – and Ben Carlson of your shop I think is all into simplicity. Yeah. And I think if you look at where all the trends are going, they're going to simple, cheap, and passive. Yeah. This goes the – this reverses all three at once. And anything trying to dislodge VTI or Vanguard from the –

Oh, it's not going to dislodge VTI. Eric, here's what it does. It's not trying to do that. It's not going to. It's not sentient. Go ahead. Finish your thought. Well, I guess my question is, if you're going to go into direct indexing, right, that would be the core of the person's portfolio, right? Yes. If it made sense for that person. Right. Of course. Yeah. So I guess my point is, I don't doubt that it will grow. I tend to give my case to things relative to hype. There's been a couple of people really hyping this up. And I'm like, we even have parametric CEO on our podcast. And I asked him and

he said, we'll probably be five, 10% of the quote passive market. Now you think bigger, we'll see. No, no, no, no, no, I don't, I don't think lower. Of the wealth management passive market. Yeah, maybe something like that. So what would 5% be? That'd be a trillion? Yeah, that would be a cool $500 billion or a trillion. This is not going to take ETFs out of the hands of do-it-yourselfers, retail investors. That's not what this is. I do think when you have a Schwab or a Vanguard getting involved or a BlackRock. They're coming. But I interviewed BlackRock's head of ETFs for the book as well, and I asked him about this, and he had two comments. He goes, one is we've been doing this for a long time.

For institutional investors. and I asked him about this and he had two comments. He goes, one is, we've been doing this for a long time. It's called SMAs. But the zero commission is what's new and the technology is miles ahead. What was his other comment? His other comment was, look, when I walk onto a lot, I'm fine with the six choices of cars. I don't need my own personal car. Oh, he must not live in America.

How many f***ing mustards are there on the shelf at Whole Foods? Well, there's – okay. This country is about customization. There's about 10 cheap beta ETFs though. But Eric, what we're doing with clients is we're not opening up the backend and saying, tell us what you want. We have our model portfolios. Yeah, understood.

Right? Yeah. So – but it is going to be interesting. When Schwab brings us to retail, that's going to be interesting. So let's set this up. Charles Schwab sets in motion. So let me play Rick Ferry for a minute too and push back on this. Please don't.

Please don't. Not here. Charles Schwab sets in motion monetization play for the ages to nudge zero fee trading assets into fee-based accounts, a blurring of lines between self-directed and advised assets. So that's the RIA biz take. But the real thing that's happening that they're talking about is the CEO of Schwab, Walt Bettinger, has repeatedly trumpeted next year's rollout of

proprietary direct indexing as a sort of killer app that wins index and do-it-yourself assets alike. I don't see it that way. He may end up being right. He knows more than I do. I really think this is going to be something for multimillion dollar accounts, specifically in two cases. One, there's a very big taxable liability in the form of like a concentrated position. And you're both tax managing that and trying to offset it with different exposures. So I think that's really where it makes the most sense. And then the ESG angle or the advisor who's like talking about EVs to their clients and stuff like that's the other two big use cases. I think the retail side can be huge. I think that people are going to really love their S and P and get to say, I don't want financials. I don't like energy. I, I hate Facebook. I think people are going to be really, that's what Schwab thinks will happen. Two things on that. A, we'll cover it like it's a fund.

So we're not like only ETF analysts. We cover everything. So it's not – I just personally think that the ETF issuers live in a virtual hellscape competing with Vanguard, and they all serve up three – all the things you get for those three bips. Oh, it's the best. The value prop is so strong that I think for the majority, that's fine. Totally. And I also think the other thing on the-

But there's so much money. The other thing on direct indexing is, you know, if you go direct indexing and the client starts saying, ah, I don't want oil even though I drive a car. I don't want this

even though, you know, I shop at Amazon. And then all of a sudden, their returns will deviate. And we all know they'll probably underperform. Will they get upset 10 years down the road because now you're active?

We're not letting them do that. Fair point. But I think that even if it's such a small market share, even if direct indexing gets 2%, that's still a lot of money. Yeah, absolutely. Like I said, I think 5% to 10%. If you put it in dollar terms right now,

passive's $11 trillion, active's another $8 trillion. That's $20 trillion's 20 trillion. So a trillion, a trillion or two. Schwab has 13,000 RIAs on the platform. How many of them do you think in the next year are going to sit down once Schwab launches its product? How, what percentage of that 13,000 firms is going to get the, the, the them. Okay, here's this new thing. All of them. All of them. All of them.

Yeah. It's Schwab TD combined. Yeah, all of them. Yeah, it's possible. I just, again, I'm skeptical that people need that level because Schwab does have these cheap ETFs and you can have four items on your- Nobody needs anything. Nobody's selling SPY, SPY, or VTI to go into a direct index.

Yeah, I agree with that. They're going into it fresh. Right. Yeah, understood. Yeah. But you still, there is a, you could have gone into SPY. I think so. So you are kind of competing for that core.

The core is a tough spot to be because that's where Vanguard lives. That's why if I was bullish anybody, I would be bullish of the people who already made it in the core. So to me, I call it the core wars. It's the most brutal place to compete on earth because you're fighting BlackRock, Vanguard, and Schwab. So if those companies who already competed for the core and won and live there, I'd be bullish on them. It's companies like Morgan Stanley that have never competed there. And they're trying to almost like go around that whole pterodome. I think that's, those are the ones that are going to struggle.

Why would they want to compete there? There's no no money left in it if you're not doing it with trillions of dollars why bother right but you could use other people's etfs or launch your own like uh jp morgan has a line of they don't morgan stanley they've never done etfs they've never done cheap beta no no no not not cheap beta they're building core portfolios internally they just happen to favor active managers because there's payment for shelf space and lots of stuff we're not going to talk about. Do you see advisors launching their own ETFs as a thing? I don't. Well, we've already seen it.

I know Cullen did. Cullen did. There's been about 12. So that's not a lot. But do you think we're going to see like 100 next year? Not 100. I think it's a little tiny little, a little trend over here, nothing major. But I think if you're an advisor and you could use the ETF and really use that

sort of like creation redemption, it makes sense from a tax efficiency perspective. Let me give you two hypothetical scenarios. And you don't need assets. There's not that pressure to feed in the terror dome because you already have your own assets. So anybody, he wants to follow you and invest. Hey, that's just gravy. Let me give you two hypothetical scenarios. I want to hear how you would answer these. Scenario one, you're my client. You worked at Microsoft. You come to me and you say, all right, I have $8 million.

I need you to invest for me. $5 million is in Microsoft. In that situation, doesn't that make sense for me to say, okay, this is the way we're going to handle it. We want to give you broad market exposure, low cost, index, maybe a little bit of a tilt towards something. But in the end, I can't put more Microsoft in your account. It's almost malpractice. I literally had that conversation today. Okay.

So we're having that conversation now, Eric, on almost a weekly basis. So in other words, you would, instead of buying VTI, which has a 1.5% waiting to Microsoft or whatever it does. Let's do SPY. How big is Microsoft and SPY? Let's say, we'll call it 3%. Yeah.

3.5%, something like that. Should I give you that? Well, okay, let me go over this. So the idea is that to avoid that 3.5%,

we're going to recreate SPY X Microsoft. It's not 3.5%. Think about it. Microsoft, Apple, Amazon, it's an asset class in and of itself so we would also we would we could also potentially eliminate x tech yeah well we would not x gigantic nasdaq bellwether like we we can't give you more microsoft you could buy an equal weighted s&p i'm

trying to lower your microsoft holdings and tax loss harvest equal weight and that would that would defangize your – Well, talk about deviating from an index. If I equal weight, you're going to hate my guts. Yeah, no, look. If that – and also, if that client feels good about that, it makes sense to me. Okay, second scenario. You're a financial advisor now.

Now you're on the other side of the table. How many people work at Microsoft and are like millionaires? I mean I guess there's a handful. A lot. Are you kidding me? A lot. Like tens of thousands. Okay, fine. But there's I guess there's a handful. A lot. Are you kidding me? A lot. Like tens of thousands? Okay, fine.

But there's 350 million people in the country. Yeah, but there are more millionaires than ever before. And most of that money is in the stock market. I did think that Microsoft, people bring up that with direct indexing. I'm like, okay, fine. For that 0.01% of the population, probably makes sense. We have a client who works in legal at one of the large oil companies. Do you think he should have more oil in his portfolio so this is many examples i can

give you but let's do the other version now you're the financial advisor and i'm a prospective client i have to address this if you bought an index fund and it had a it had a little bit of that oil company or microsoft i would not consider that malpractice now if you bought and you just doubled up on oil and bought XLE for the guy, I'd be like, that's crazy. But an index fund is so diverse. I almost like, it's such a small issue.

We agree, but you're either doing high touch financial planning and wealth management or you're not. Agree. Okay, so put that one aside. That will trump all this. Yeah, we'll just, you and I will agree to agree that I'm right.

The second scenario, you're now the financial advisor and I'm your client. And I say, Eric, it was great meeting you. I'm so glad we were at the same charity regatta eating shrimp cocktail. And I just feel so comfortable with you. But here's the thing. He's getting a little too. No, no. He's getting like a voice going.

Yeah. I don't know why I'm doing that. It's fucking weird. Duncan, can you change that to my regular voice? We just met. Look, I mean, come on. Let me have a couple more glasses of wine. Eric, I'm so glad we met, and I feel really comfortable.

I want to turn over my portfolio to you, and I know you're going to do the right thing by me. But here's the problem. I met with two other people just like you. One is an RIA, one's a Morgan Stanley, and you guys are basically all giving me the same thing. And I could, frankly, I can do this by myself. Why do I need you? The advisor has been in that position for four or five years now. And then all of a sudden, something massive has changed. They can literally custom tailor a portfolio that is better or can at least potentially be better than what they would otherwise have to do.

And you're going to tell me that's not going to catch fire in this industry? I agree. This is Michael Kitsis. He's very bullish for the same reason, and he knows that advisors control a lot. That said, that seems like a move that's good for the advisor, which I can't deny it is. If you can tie it at the same cost, great. If I were an advisor in that situation, I would say what I could do for you is I can be an ear. I can do planning, and I would go over all the other things that I would do.

Just about the portfolio. Well, yeah, I mean, maybe I would say something like, well, look, we have a core portfolio, but I'm up on all the latest stuff. I can actually, you know, decorate it with some things, whether it's crypto or ARK or whatever. I can sort of keep that part moving. I can get, I know how to get funds

that have a special way to get income. I know you're looking for that. But I would feel weird saying I'm going to like deviate from a cheap 60-40 beta just because it's different. I would just be like, well, I'm not going to serve you then. about you and your life and your financial plan that require me to think a little bit differently than the index committee at S&P Dow Jones. Sure. Yeah, I do agree with that. I just. Where can I send the paperwork? See how I did that? The only the only part to that is, will they ever come back and say, well, compared to the 60 40, I underperformed? and say, well, compared to the 60-40, I underperformed.

Well, you'll win some, you'll lose some. That's anything you do. So the SPY portfolio wasn't so hot from 2000 to 2009, and then everyone came back to it eventually. So that's going to be the case no matter what. Last thing on this. You're right. You've made all the, I think, the strongest cases for direct indexing,

and I think it will take root. I'm not bearish. I'm just bearish versus the ETFf killer hype me too but we haven't even really spoken about the taxless harvesting that's a big one but does that not run out why what do you mean every year yeah i know but at some point you're you're how many if the stocks keep going up how many losses are you really going to have 30 of stocks in a given year down okay so okay okay fine but at some point- It's already closed. You're now selling past the close. I am transferring his IRA as we speak.

The last thing on this, I don't think, people might get mad at this. I honestly don't believe that a sub $100 million RIA can or should do this because I know, and Michael knows how much manpower goes into setting up each account, monitoring what's going on. This is like not easy to do, both in terms of the complexity,

but also the time involved. And I really don't think that sub $100 million RAs are staffed up to really be able to do this right now. Maybe Schwab's tools will be amazing. Maybe Vanguard's going to launch this probably the end of next year. That'll probably be great. I don't know. I'm just saying, as it stands, I wouldn't try to do this without a lot of staff.

And here's one more question I have for you is, if you are putting the whole client in this platform, does it give you any unease that you're basically handing all your money over to one asset manager versus, say, as an advisor, you might pick a couple different issuers? So we think that we're in bed with the best. We spent a lot of time with our team. We do spend a lot of time with our team, and they are the best in the business. But we don't have any clients where the core portfolio is the only strategy we run. Right. So we're running ETF strategies alongside of this

that are meant to accomplish something else. And then we have another asset manager doing bonds. Like this is not- Yeah, because this is equities only, first of all. And it's not, is it only domestic? Well, no, no, no, it's not, it's not, it's not. It's international? It's global and it's also, we do have fixed income ETFs.

Oh, we gotta get, we can't have you here and not do the Bitcoin ETF conversation because you probably- I mean, we can skip it if you want to spin. No – we can't have you here and not do the Bitcoin ETF conversation because you probably – I mean we can skip it if you want. It's been – No, I can't skip it. That's why you're here. It has not been beaten to death.

Tell us what the latest is because I feel like it's just heating up right now. I feel like it ended, but it was really just beginning when they approved Biddo. I was exhausted eight years. Anyway, it traded a lot the first couple of days. It's come down a little bit, and assets plateaued. So I think what I'm seeing with Biddo is it's being used as a trading tool. The way I put Biddo is it's almost like the USO of Bitcoin, not the GLD. Oh, interesting. Who's trading it? Advisors? USO is the oil ETF.

Yeah, I think retail investors are trading it. Plus there's now options on it. And we've been looking at some of the call option activity. This is the first time a lot of retail investors can actually do option trading on but that part is fun but what retail traders are trading biddo why wouldn't you just trade if you're going to trade bitcoin why don't you trade bitcoin to me well if you look at biddo how much is it to trade one basis point that's the spread compare that to any exchange coinbase is still what one percent pros trading biddo or retail? I think it's mostly retail. Because the pros are set up at Coinbase. They don't need this.

It depends. If, again, if – let's say you're a pro. Eric's saying Coinbase is expensive. Yeah. The fee is in and out. Even if you're a pro, I think, what is it? 20 or 30 basis points? Time out.

EEM is expensive and IEMG exists, but they all – No, no, no. That's the expense ratio. Different. So I agree. The cost is the cost. No, he's talking about the transaction, like the spread, the trade. Like if you're trading it or need to move a bunch of money into it quickly, institutions and traders love ETFs for that.

You can get in and out at a basis point. No one sees you. You don't even move the market. Express a trade in two seconds. Coinbase, that would be bad if you're trading, I think. But Coinbase, probably better if you're going in long term because that's only a one-time trading fee. The expense ratio of Biddo and the roll costs will damage you long-term. So I see Biddo as like a trading tool, not a long-term investment. So do you think, what do you think happens with the spot Bitcoin ETF?

But people underrate that spread, by the way. Which spread? If you compare one basis point to trade Biddo to whatever they're charging at Coinbase. So I use Coinbase Pro because I try to do like the automatic deposit to Coinbase. It's expensive. I think it's like, it's at least 1% fees. Just to trade it. To trade, at least.

So that's 100 times cheaper. Right. That's powerful. Yeah. And so I- That's a big deal. So people were saying like, I admitted crypto rocked the ETF world, but I think ETFs are going to rock the crypto world a little.

I think if you're charging- Ooh, spicy think if you're charging a lot of money, this sort of- Duncan, pull that for us. ETFs are democratizing crypto. Well, I think they're going to put cost pressures on the exchanges in particular. Can we put this on screen? This is our ETF hearsay.

Duncan, can we put this up? Oh, I know this guy well, Henry. Grayscale Bitcoin ETF ETF 19B4 filing. What the hell is that? What's a 19B4? Here, there it is. Yeah. It basically, it's something-

Wait, it's a podcast. People aren't seeing this. Grayscale Bitcoin ETF 19B4 filing noticed by SEC. Starting clock for the conversion of Grayscale Bitcoin Trust to an ETF. First possible date for approval, barring SEC extensions, is December 24th. Christmas Eve? I know.

Are we getting an ETF for Christmas? Only if Gary Gensler has like a Scrooge moment. That's my theory. Unless he has some kind of epiphany, no way. This will never happen. Son and Shine's not getting a Christmas present? No.

No? No, the reason is Gary Gensler doesn't think crypto – the outer crypto markets are regulated enough. And so he will never approve a spot ETF. It's ironic. At some point, I think if maybe there's some legislation or some kind of a regulatory framework or maybe it matures enough or he – maybe Biden loses and he gets replaced. I don't know. At some point, we will have – Do you think advisors are waiting for the spot ETF?

I don't think they are. I think they're agonizing over it. They're going to Biddo. I don't think they care. The spot ETF is what's called microstrategy. That is the spot ETF. What does that trade on? No, but if you look at the correlation-

It's not that high. It's like 0.74. Biddo is 99. That's a market inefficiency I'd like to take advantage of. Well, a microstrategy or a blockchain ETF that has equities, I think that's probably a decent way to do it because it will move generally with Bitcoin, but not totally. It's almost like gold miners and gold.

What do you think happens if a spot ETF were to launch tomorrow? What assets in the first month? Month? $5 billion. Wow. And I think my theory is in the course of, Saylor was on this morning basically suggesting it would, Bloomberg had a conference that was innovation.

We had a lot of Bitcoin people. And he was saying that the reason the ETF is huge is you can plug it into everything. And he thinks that when a spot comes out, he suggested it would be a trillion dollars. Yes, it's going to be 2% of every portfolio. A trillion? Well, think about it. The 2525 trillion just in the U.S.?

What if 2% of that? It'll happen that month. What's 1% of 25? $2.5 trillion? No. No, $250 billion. Wait, stop. Don't do it to me. Don't do it to me. I'm doing it to myself. Hold on. $25 trillion,

10% of that would be $2.5 trillion. 1% would be $250. That's $500 billion just if 2% go in. Plus, you've got a general retail demand and maybe perhaps institutions. So just the advisor level could be $500 billion. Retirement accounts, IRAs. Yeah, if you go into IRAs. Everyone says, oh, I'm going to do 2% into crypto because my son made all this money.

I'm going to do 2% into crypto because my son made all this money. I'm going to do the same thing. So I have a question for – and I know you guys work with OnRamp. But I think this is the dilemma I see advisors having is with Biddo on the market, if a spot launched, I think they'd be like, sold. Let me just do this. We're all set. But Biddo, it's like, ah, roll cost. But we don't use commodity ETFs anywhere else in our portfolio, and that's what this is. Right, but I guess what I've been hearing is that advisors are feeling pressure from clients to get something going and that they're basically feeling career risk with the crypto thing, and this may push them to just use Biddo and hold their nose. That's a good point.

You know what that comes back to? What kind of expectations did you set when you onboarded the client? What did you tell them that you were going to do? If you gave them the impression that you were going to run around chasing shiny shit for them, then yeah, you do have pressure. I think there is pressure on the advisors to have a great mousetrap. And we're working on it. And everyone's thinking about it and working on it, but it doesn't exist yet.

So it's not real pressure. When it exists, you're going to see a lot of dominoes fall. That's, that's my prediction. You're going to see a lot of people very quickly adopt whatever they just heard somebody else did. So, so, and we're actually betting on that. What about, what about the, some of the derivatives, like not going to make it or never going to make it? What about that ETF? What happened with that? Oh, NGMI. That's not the ticker, but everybody thought that should be the ticker. Oh, it wasn't? No, I just did a poll and that everybody, NGMI. That's not the ticker, but everybody thought that should be the ticker. Oh, it wasn't?

No, I just did a poll and everybody picked NGMI. Because when I first tweeted it. What was that? The bearish ETF? Yeah. Wait, tell people what NGMI. By the way, crypto bulls are so bullish that they got pissed off that that was even filed. They were like, how dare an inverse.

I'm like, it actually might help the market. I thought it was good because it would create more liquidity. But they were like, who would ever bet against crypto? This is why I'm like, it actually might help the market. I thought it was good because it would create more liquidity, but they were like, who would ever bet against? This is why I'm bullish on Bitcoin. It is a religion. It is a religion. Forget about the finite amount of supply, right? We'll know all about that. But not only is there only so many Bitcoin, but the people that own Bitcoin are never selling ever. Like these maniacs, it could go to, and I mean that in a polite, in a, in a complimentary way, it could go to literally $250,000 of Bitcoin. They're like Nick fans.

And they would not sell. Yeah. They have no intention of selling. Price be damned. But how much of the Bitcoin market is now tourists that will panic and sell if it sells off like a risk asset? Those are the people moving the price because those are the buyers and sellers. What do you think the price would be? It's a small piece.

Yeah. Like sometimes I will do this with ARK. How much is Cathy's base versus the sort of performance ch chasers and i've tried to come up with a formula for that what would you say that is for bitcoin i would guess 10 it's 90 percent hodlers really i would say 10 is people who lost their passwords or their coins like tom brady it might be more it might be more yeah i think it's like 30 you think it's i know i i think in terms of that's still complimentary 70 is core that's a good core no i think it's – I know it. That's still complimentary. 70% is core.

That's a good core. No, I think it's like 95% core. But in terms of the activity, it might be 50% Taurus. There are still Jets fans. Do you understand? Boy, guys, this is a big distinction. We play the Jets this year. I'm so psyched.

It's like an easy win. I'm saying 10% – the whales, let's say 10% own 95% of the supply. But of the trading, maybe 50% is the tourists. Yeah. Yeah. Because the whales are not trading. If anything, they're only just buying. It's funny.

I used to think like the hodlers have a lot in common with the sort of Bogle philosophy. There was this guy who was on Dogecoin and he came on to this TikTok and he was like, you buy the Doge, you hold the Do the dodge you buy and then you hold it and he was like you do not sell it how hard is this bitcoin bogle and i was great i know i know well there's a guy on bitcoin bogle there is his name's um at crypto bogle head or something is he funny is he funny i i don't know if he's funny per se but i know he's not funny because he didn't go with Bitcoin Bogle. Yeah. So that's – I already know he's not funny.

But they have a lot of like we're not selling is very Vanguardian in a way because they never sell. Could you explain this to us real quick? So the GBTC premium has collapsed a little bit. It's now only 15%. What happens – how quickly does that go to zero if an ETF conversion happens? Instantly. who are we talking to that so if you if you own it and they convert you're made whole that's crazy so why isn't everyone buying this because it made it well that when will it happen the timeline is unknown

it's a discount i'm saying the discount collapses to zero so that's a 15 free trade so you have so you have a 15 automatic yeah that's why it's enticing people because it was at 20 a little while ago and now it's at 15 the question is when will they be able to convert and let's say other 33 act spot etfs come out first and the sec just makes them wait will that hurt it so therefore you actually could lose money but if you're in it for the long haul like and somebody asked me like if you think about it um gbtc would be a better long-term investment than bito because gbtc probably will at some point at some point might take five ten years i don't know you don't think you go to you get that but then and and biddo will constantly corrode because the expense ratio and the roll cost what if grayscale just

says okay you approved five other funds before us. Forget it. Here's everyone's Bitcoin back. Then you get that 15% anyway. It's redemption. We're closing the fund. So that's why people would buy it. I can't understand why that is persistent. The question is, how long do you want to wait? It could be a while. Well, arguably, look at the closed-end fund market. How many – not anymore. But there were bond funds, leveraged bond funds for years trading at 10% and 12% discounts to their NAV. Like that doesn't exist really anymore because of what the Fed did. But like this discount should not persist the way it has. There's something else that we don't understand fully, I think.

Well, I just think it's right now the people are worried that more people will bail, go to the Bitcoin ETFs that exist, and the discount will go down further. The same discount in Osprey, by the way. So there's two versions of this. Again, if you're going in five years, who cares if the discount goes down more? Yeah. You just wait. But I don't know if everybody wants to wait. Think of it like a bond that's going to mature selling under par.

That's a good way to look at it. So we found out that Kevin Durant is launching a $200 million SPAC. Why not? Does the taper kill stuff like this? Is that going to slow things down? Kevin Durant is going to beat the shit out of you. Don't go to anywhere near Brooklyn. This guy responds to people too on social media.

I'm not trolling. What? You said – wait, what did you say it again? Does it kill stuff like this? What did I say? I don't know. What did I say it again? Does it kill stuff like this? What did I say? I don't know. What did I say? What do you mean stuff like this?

Nonsense. Now you're dead. All right. Kevin Durant is probably a bad example. He crushed it. A bad example to use as nonsense. He crushed it. He crushed it.

Because this guy invests like for real. His portfolio is on fire. So no disrespect to Kevin Durant. Look, you've heard my view on the taper. I think everybody taper this, taper that. I think all that is meaningless if everybody thinks the Fed will bail them out if the stock market and everything goes to shit.

Then it doesn't matter if they taper or not. I would say that what would kill all this is if like Ron Paul or AOC becomes Fed chair. You'd need somebody really different to be like, screw the Fed. This is ridiculous. There are some people in politics who think the Fed has just made all this froth

and everybody rich and the wealth effect has gone crazy. We almost had one of those people, Judy Shelton. Trump liked her because she was saying crazy shit. But then when he heard what she was actually saying she's like a gold standard person he probably like looked at Don Jr. and said that's not good for us is it and Don Jr. said

no we don't want a gold standard we want to keep doing tax cuts that are unpaid for or let's say a Gen X or millennial when that generation comes up and you have somebody who's just like, it's not my money. I feel like those people can always be bought in the end. Probably, but I don't think –

You get some Joan of Arc that wants to come in and clean up the Fed. I feel like they're going to want to make speeches for money after, and you can corrupt those people too. Probably right. I do also, you know, with the crypto, you know, there's that whole theory of like the people who have the coup going on end up being just as like awful as the king that they overthrew eventually. Well, he got there. Yeah. There is some truth to that. It's a circle of life. And crypto, I think, also makes so much money for the machine, especially with the fees we're talking about on the exchanges and Wall Street.

It's completely co-opted it. Can I answer before we go on to favorites? But one more thing on the Fed. It's not in my opinion it's not taper it's when people will stop feeling like the fed will bail them out when things get bad when that feeling because i we interviewed the janice 20 guy on trillions and he's not bill gross no no um scott i forget his last name it wasn't bill gross no that was this is like in the 90s. Anyway, I was like, you know, when the market obviously crashed,

the internet bubble burst in 2001, he was running the Janus 20 and it was, life was bad for this guy. Yeah. And I was like, did you ever think like the Fed would come in and just sort of like help everything? And he's like, that thought never crossed my mind. Right.

And it's interesting that now that the opposite of that thought would never cross your mind. Yeah. I can't imagine a world in which the Fed steps away and says, no, let it burn. Let it burn. Fix yourself. Because the stock market used to be influenced by the economy, and that's now backwards. All of the money being spent in CapEx by tech companies, for example, is because their stock prices are selling at 30 times earnings. So stocks are the driving force behind the economy.

Therefore, that's the only data that the Fed needs to be dependent on. How is the stock market reacting to what we're doing? And don't forget the bond market. If rates raise, if they taper and rates go up too much and stocks start selling off, again, that would be the law. And if they don't step in,

that would obviously be a sort of downward spiral. It's only two days, but rates are coming down since they announced the taper. It's hilarious. Hilarious. Again, because – Everything is backwards always. I almost think the market is like, yeah, look, go ahead and have your little hawkishness. Talk like you really like – are like independent.

We know. We know. Wink, wink, nod, nod. I think they just feel – back the day when bernanke said taper people like shit he's gonna taper i just don't think they really think that even if you do taper you would ever let us down in the end what a world so so let's let's end on that note that very that very hopeful conspiracy tinge note well if you have money the stock market is hopeful it's the boomerati.

Love it. My guy. I'm with you. We're going to do favorites. I'll do mine real quick. Paki McCormick's thing on Rivian is pretty spectacular. I made that on the train. So I won't spoil it for you, but there might be a truck.

There might be a pickup truck. I didn't really know much about this. I just always lumped it in my head with like Lucid and Nikola and all. But really, this is something very special. I'm not saying buy the stock when it comes out, but I understand why it's going to be valued at 60 billion out of the shoot. And I understand why like Bezos met this guy and was like, I'll buy a hundred thousand vehicles from you. I'm in next week. Yeah. So if you're not subscribed to Paki McCormick, then you're not getting the not boring letter where he does these kinds of uh foreshadowing of things that you need to know about so highly recommend you subscribe to not boring and read this

rivian thing it's really really well done uh what do you got for favorites today i'm so happy curb is back and i'm behind i only saw the first episode but i'm gonna watch it tonight i can't wait you gotta get you gotta you gotta get the whole thing done in time for Sunday. Did you see it last week? Oh, yeah. I watch it live. It's the only thing I watch live. It's so good.

It's so good. Yeah. I'll stick with comedy shows. I'll do Netflix, I Think You Should Leave. Okay. So I've been really deep in this book. And when, you know, you guys have both written books. The best thing is like an hour of like ridiculous comedy.

And this has really hit the spot after long editing sessions. This guy is whacked, Tim Robinson. And you almost have to – I watched it twice. It actually gets a little better the second time. Who's Tim Robinson? He was on SNL, but he didn't do well. OK. And Netflix gave him this show called I Think You Should Leave.

And it's deranged, but in a really fun, funny way. You know my sense of humor. Will I like it? I think so. Just give it a chance, though. I'm going to watch it on the train home now. Wait, just give it a chance, though. Makes me sound suspect. Wait, is that in the pictures?

The reason I would say that is because it's... It's an acquired taste? I think there's almost a touch of avant-garde where it can almost be too weird. But James on my team likes it. Half of his friends like it. So I think it's – I see people tweeting about it. James on my team.

Not – no. Oh, okay. Safer. I'm a fan of James' work. If it's good enough for him, I'll check it out. Different team. Eric, listen. You are the best and the brightest in your lane.

I don't know if you listen to Animal Spirits, Michael's podcast. Literally, he's referencing you every— I do. And people email me. They're like, hey, man, Batnick mentioned you. Batnick's talking about Balchunis. James listens to every second of your podcast. I mean, he is—

I love James. He's like your number one fan. He puts out great work. Eric just skims for his name. I think that Eric might have the record for the most tweets that we've ever used. Oh, really? Animal Spirits. Yeah, definitely.

Wow, I'm honored, man. It has to be. Listen, we think you're amazing. So it's great to see you. I love you guys. Yeah. The Red Holtz is all through the book. I reference you guys a lot.

Interviewed a couple of you guys. Yeah, we're going to. Is that up for pre-order yet or it's too soon? It's on Amazon. But it's so far from now. I'm just not going to really do much marketing until it's like a month away. I'm not going to overwhelm you. We're going to have you come back when it's like full-blown marketing time.

We'll sell a ton of copies of the book. Hey, man, I won't argue there. All right. You know, when you publish and you're not like Michael Lewis, you got to hustle. 100%. 100%. Believe me. I've done three books. percent. A hundred percent. Believe me. I've done three books.

I did my last book. Trust me. By the way, when I interviewed you for the other book I wrote, I remember you had just finished that one and you were like, yeah, I'm not writing another book. Yeah. I think you were a little – I know the feeling now. I did all the hard work, frankly. Not Dave Portnoy, the other – Oh, yeah.

Right, right, right. Yes, yes. We're not going there. All right. Hey, we love you. Thank you for coming. So glad you survived your first pandemic. I knew you would.

You were on my list of people that would definitely be on the other side of it. And welcome back to the world, I guess. We'll see each other at conferences this year, next year. Hopefully. Yeah, man. Thanks for having me. This is great. You going to have me back on stage at Bloomberg or are you just a little nervous? Yeah. No, dude, you're the,

you're the greatest. Yeah. Fair enough. Every, every event needs a Josh Brown. All right. Cut, cut, cut that soundbite out. We're going to use that later. All right, Eric. Thank you guys. Don't forget. Don't forget. Ben Carlson has a new show on the YouTube channel. So it's youtube.com slash the compound RWM. Ben Carlson is answering your questions. Literally three to five questions every Thursday. Submit a question. And if we use it on the air, you get the official compound laptop sticker. How many of those have we sent out, Duncan? A bunch, right? They're in the process of being sent out. I just made that up, but I know they're on the way, right? Yes, I have them in the onboard.

Why are you letting those build up? Are you going to do a big batch? Yeah, I got stamps today. All right, fine. I promise you're going to get a laptop sticker, though. That part is true. Also, don't forget, new Animal Spirits every Monday, every Wednesday. What are your thoughts every Tuesday night?

We will see you guys very soon. Thanks so much for listening. I need one of those. You feel warmed up? You ready to do this? Yeah, you ready? Let's go. Was that fun? Yeah. That was really good.

Yeah, we could go on. It's ridiculous. We thought we were going to get to none of their good topics, but we could have gone for so much more. We skipped the shit that doesn't really matter.