00:00Todd Sohn, he is an ETF strategist over at Strategas, rather, joining us on set.
00:07Todd, it's good to see you.
00:08It's great to see you both.
00:09So the SpaceX IPO, obviously this is going to be a colossal moment for the equity markets in general.
00:15But talk to us about this moment specifically in ETF land.
00:19Because as Eric laid out, we do have some ETFs that do manage to hold SpaceX right now.
00:24But then you think about all of the index fund changes that are coming,
00:28how quickly they're going to add this stock.
00:30How is it going to arrive in our industry?
00:32I do think it's a little peculiar how you have this changing of the rules.
00:37I know Eric is going to love this.
00:39For this one stock, right?
00:41It's almost to me like saying the three-point line in basketball is not going to be worth four points.
00:45Or we're just completely removing it, right?
00:46I get it.
00:47Markets change.
00:48IPOs get bigger.
00:50But this one seems very odd that we're just entirely throwing away the rulebook from the last few decades
00:54to get this one name into an index.
00:56Well, let's go to the three-point line.
00:58Some people say the NBA is getting very boring because all they do is jack up threes.
01:01So Steve Kerr wants to move it back.
01:03They might.
01:04It might make the game better.
01:06In this case, the mega caps, let me make the case for them.
01:09This is not normal.
01:10It is not normal for an IPO to come out at like $1.7 trillion.
01:13It would be the sixth biggest stock in the S&P if it were to come out of that number.
01:17So shouldn't they bend the rules given the fact that this is a completely new phenomenon,
01:21that they're waiting this long to go public?
01:22Of course, but I just find it very odd that you're taking decade-old rules and completely wiping them away,
01:29just to lower the velvet rope to get this name in.
01:31And it's not even going to be that big of a weight at the end of the day.
01:34I know the Nasdaq's putting a multiplier on it, but for the S&P,
01:38you've got to wait for all these lockups to happen in order for it to get up to a substantial
01:40weight.
01:42And it's also going to be very, I think, frenzied, right?
01:455% of the float, thousands of ETFs wanting to get into this thing.
01:49I don't know how that's going to go.
01:49And just one more follow-up on that.
01:51It'll be interesting, right, if the S&P, okay, if they change the rules, they're still going to wait six
01:57months.
01:57The other indexes are going to be, like, pretty quickly, like within five days to 15 days.
02:01So even if the S&P changes the rule, if they don't, this gets worse,
02:04which is the dispersion amongst these passive indexes anyway.
02:09So this could really kind of bring to light that passive really isn't, like, passive in many cases.
02:14We are blurring the lines between passive and active.
02:16Totally.
02:17This has completely blurred it.
02:18And in a way, a microcosm of this is what's happening in EM,
02:22where South Korea is sometimes an emerging market, sometimes it's a developed market.
02:26And the dispersion, disparity between those ETFs is massive right now because of what's happening in that market.
02:32Well, it is going to be fascinating to see what actually happens.
02:35And it's going to be really interesting to see if S&P does follow through with their own real change.
02:41But, I mean, if you imagine a world where they don't, you know,
02:44where you have all the other indexes adding SpaceX, but you don't have the S&P,
02:48I mean, how does that sort of change the game for some of the active managers who are, you know,
02:53evaluating this market?
02:54I think it's great for active.
02:56If they are bullish SpaceX and they can get a hand on it, it's a great way to produce alpha.
03:01If they think that this is producing and adding to some sort of bubble and they stay back and it
03:06ends up being right,
03:06it's great for active, too.
03:07So I think we see it in the flows, we see it in the product launches,
03:11that active is making a massive comeback, especially in a world where we have the index providers twisting rules
03:17and the 10 largest stocks at 40% of the index.
03:20So active does own a lot of SpaceX, Fidelity and Barron in particular.
03:24This is really fascinating.
03:26Fidelity Contra Fund has $8 billion of SpaceX and Fidelity's own this for, like, years.
03:30So they've seen a lot of gains.
03:33Guess what?
03:33All these mutual funds that own it, outflows.
03:36Nobody cares.
03:37I mean, that is brutal.
03:38Yet these ETFs that are very unknown, people are, like, all over it.
03:42This is a structural issue in a way, I think.
03:44What do you think?
03:45The ETF is just easier.
03:47It's cleaner.
03:47It's access.
03:48It's transparent.
03:49Well, besides valuing the stake, right?
03:52This is exactly why everyone is floating to ETFs, plus the capital gains part of this, right?
03:57The mutual funds, they can get outflows, and you're still going to get a tax bill.
04:00Back to your point, though, about the ownership, how much juice is left in the tank?
04:04This company's been private for 20 years.
04:06So I don't know.
04:07I could be completely wrong.
04:08It could double from here.
04:08But you do have to wonder, once it goes public, is how much juice does it have left once it
04:12hits a $2 trillion valuation?
04:13Well, it's also going to be interesting to see if that sort of Elon Musk premium that's been built into
04:18Tesla shares sort of transfers to SpaceX, which has some interplanetary ambitions here.
04:24But I do want to rip us away from the SpaceX conversation to talk a little bit about a scoop
04:29that CityWire had yesterday on Dimensional Fund Advisors.
04:33I'm not sure if you caught that.
04:34But basically reporting that Dimensional is exploring a sale, potentially working with Moellis.
04:41This is, again, according to CityWire reporting here.
04:44And I just wonder, you know, we've started to see some M&A pickups, some consolidation when it comes to
04:50the asset management landscape.
04:52I wonder whether or not you're expecting more of it.
04:54I would think so.
04:56ETFs, just look at any chart of ETFs versus mutual funds in terms of flows.
05:00They are complete 180s.
05:01Everyone wants a piece of an ETF issuer right now.
05:04Dimensional's been around for decades.
05:05You take a look at some of the smaller issuers right now who are launching maybe single-theme ETFs and
05:09are gathering billions in days.
05:11Why wouldn't you want a piece of that?
05:13It's the products, it's the flows, and it's the distribution, too.
05:17I mean, Dimensional has a massive distribution network, so I'm sure someone can leverage that pretty well.
05:20Eric, I would actually love to get your thoughts on this, too, because you think about Dimensional, a storied asset
05:26manager at this point, a trillion dollars in AUM.
05:30I mean, who could even buy them?
05:32Yeah, I mean, we were talking offline, and, you know, JPMorgan comes to mind.
05:36Goldman just made a big acquisition.
05:38I believe Jamie Dimon said he's got $20 billion ready for some kind of acquisition.
05:42And so you could afford Dimensional with that.
05:45And I think they are two kind of, I would call them, like, upper-shelf, classy, active managers.
05:52They seem like they would fit culturally versus, like, JPMorgan buying, like, I don't know, like, granite shares.
05:57Yeah, that wouldn't make sense.
05:59But this could make sense.
06:00And remember, JPMorgan, they want to be the king of active.
06:03So if somebody wants to, like, shoot up the leaderboard and own active, Dimensional would be attractive, I think.
06:08Can I bring it back to basketball?
06:09It's going to be 2012 Miami Heat vibes.
06:13So what does that mean?
06:14Bringing the big three together of basketball players, basically bringing big active together.
06:19That's when LeBron tried to, like, recruit a bunch of all-stars so he could finally get a ring.
06:23Okay.
06:24That means a lot to me.
06:26Okay.
06:27So might expect more consolidation here.
06:29We'll see, of course, if these CityWire reports about Dimensional do bear fruit.
06:34But, I mean, you look forward to the scope of the rest of the year.
06:37And I wonder, you know, when it comes to the ETF industry, what is your biggest conviction right now?
06:42We're just about halfway through 2026.
06:45I think it is a great time to diversify because tech is taking over the world.
06:49And there's three ways I would do that.
06:51Manage futures and alternatives.
06:53Natural resources and energy.
06:55And strategic a systematic opportunities, ETF, S-A-M-T.
06:58We take single themes.
06:59We pile them together.
07:00It's a way to invest in strategic research.
07:01I know I'm an ETF industry guy, but I've got to score one for the home team, too.
07:04It's all about diversification right now.
07:06I know I know I know I know I know I know I know I know I know I know
07:06I know I know I know I know I know I know I know I know I know I know
07:06I know I know I know I know I know I know I know I know I know I know
07:06I know I know I know I know I know I know I know I know I know I know
07:06I know I know I know I know I know I know I know I know I know I know
07:06I know I know I know I know I know I know I know I know I know I know
07:06I know I know I know I know I know I know I know I know I know I know
07:06I know I know I know I know I know I know I know I know I know I know
07:06I know I know I know I know I know I know I know I know I know I know
07:06I know I know I know I know I know I know I know I know I know I know
07:06I know I know I know I know I know I know I know I know I know I know
07:06I
Comments