00:00There's no let-up in the pace of issuance, clearly, and I believe the Wall Street Journal called it an
00:04ETF crazy train,
00:06barring Eric's pension for pop culture references.
00:08What do you chalk this up to?
00:11I think it's really a confluence of factors.
00:13We have a market that continues to defy gravity.
00:17You know, the more we talk about concerns about valuation, concerns about concentration,
00:22the more we buy some of the leaders, the more they lead.
00:25Anytime they reset, we buy more of the dip.
00:28So it's a market that keeps on going.
00:30I think it keeps feeding this momentum, and momentum is great for not only product innovation,
00:35where more asset managers want to come into the game.
00:38It leads to more trading.
00:39Folks are looking for more opportunities, and so it just keeps going and flows.
00:44I think we're a little bit like the Mag-7 now.
00:45If we don't exceed expectations by a wide margin, it's such a letdown that we're just going to keep feeding
00:50this machine because we have to.
00:54Last year's ETF in-depth, I said, is this as good as it gets?
00:58Because, again, it's just a rare thing to break all three records.
01:03The volume record is interesting to me because typically volume only goes up if there's a crisis.
01:08It's correlated to the VIX.
01:10A massive sell-off.
01:11Yes, because people start tweaking their portfolio, SPY, and these ETFs see a lot of volume.
01:15So what do you make of the volume?
01:17My theory is that there's just so many more products, and you've got all these legacy asset managers coming in,
01:22so it's just way more activity.
01:24And also marches under Trump have been really crisis central, so there has been a little crisis.
01:29But I think that is what is lifting the volume up, that and maybe bigger investors using ETFs.
01:35So that notional number goes up just because there's bigger investors using them.
01:38Do you have any theory on the volume?
01:40Yeah, I wonder if it has something to do with we spent the last couple years talking about 60-40
01:45no longer work,
01:46so all of a sudden we created this 20% to 30% sleeve that has to go somewhere else.
01:52And maybe folks are moving that money around trying to figure out what is the right mix now that is
01:57no longer a 60-40 mix.
01:59And, I mean, look at all the leverage stuff.
02:01I mean, have we ever talked about leverage this much?
02:03So leverage is all about daily trading.
02:06So how much is the volume we're seeing associated with those types of tickers too?
02:10So, again, just different forces, I think.
02:13And to your point, so many more products on the menu.
02:17Maybe folks are more eager to reposition and trade than they were before.
02:21And people are holding on to ETFs and buying and holding for longer as well,
02:25including people that you don't necessarily think would do so.
02:28We spoke with Ed Yardeni of Yardeni Research on Friday on Bloomberg Money,
02:32and we're asking him about how he invests his personal investments.
02:36Take a listen to what he said.
02:38Well, I found over the years that I can't really trade.
02:43I can't really manage my own money because I'm too busy doing my day job.
02:49So I try to basically stay in ETFs and keep things somewhat liquid,
02:55but also have stocks and bonds, but mostly in an ETF portfolio.
03:00So Ed Yardeni talking on Bloomberg Money.
03:01Eric, I feel like that's not something you would have heard a couple years ago necessarily.
03:05Yeah, or at least they would be in the closet still.
03:07Because I remember when I wrote my book on institutional use of ETFs,
03:11I would interview these CIOs from big institutions and endowments,
03:14and they'd be like, oh, well, I hire active managers for our fund,
03:18but in my personal account, I'm all into ETFs.
03:21And I find that to be true in the financial industry in general.
03:24I think they were used sort of like secretly, not secretly, but in personal accounts,
03:29but now they're seeping into regular accounts.
03:32And yeah, I think there's more products, but generally this person who just spoke here,
03:37I think they're probably in Voo.
03:41He's probably Voo-ing and shilling.
03:42I mean, everybody is, honestly.
03:43As should everybody, yes.
03:45Let's shift gears here to speaking of Voo.
03:49You have Voo.
03:49It's S&P 500.
03:51All you talk about it or you hear about it is concentration.
03:54I think the top seven or eight stocks make up like 40% of the index now.
03:59People are worried.
04:00Now there's equal weighting.
04:01Equal weighting is always this temptation.
04:03It's now outperforming this year.
04:05Is this just a red herring and market capital take back over?
04:09What's your take on those two?
04:10Because we see flows into both, but of course, way more flows into the S&P 500 ETFs.
04:15Yeah, it's one of those things where we keep pushing the narrative
04:20that concentration should not work anymore.
04:23As long as it keeps working, we're going to keep seeing money going into that.
04:27Right now, this year, equal weighting is delivering.
04:29I mean, equal weighting really doesn't work well when you have a really narrow market leadership,
04:33as we know.
04:34So now with the broadening of the performance, with the earnings really talking a lot about
04:40the 493, as we call them, and the earnings growth being stronger in the 493 than it is
04:46on the MAG-7 going forward, forward earnings.
04:49So there is a potential for equal weight to really make an impression here.
04:54It's outperforming this year.
04:56But as we know, the moment it goes to narrow leadership, we all kind of forget about equal
05:00weightings.
05:01But funds like RSP is on top flows this year.
05:04You have QEW.
05:06Now we have ProShares that just launched an equal weighted leverage queues.
05:10So, I mean, when we're leveraging equal weighting, I mean, talk about a moment in time when we're
05:16trying to combine all the forces driving the market.
05:19So here we are.
05:20Leverage equal weighting is pretty funny.
05:22It's like, how into this premise are you?
05:25Exactly.
05:25Why don't we go all the way?
05:26How many different ways can you tweak the existing formula and then double down or triple down on
05:30it?
05:30I mean, it feels like whatever market theme exists, there's a bunch of ETFs that crop up
05:35for it the next day or even before it begins trading in the case of a couple of prominent
05:39IPOs.
05:40Eric, you posted recently on social media the top launches of ETFs ever.
05:45And if you take a look at the list, I guess it's not a huge surprise what's top of list,
05:50which is DRAM, which is, you know, a theme ETF, right?
05:54Theme investing, which at its day, but has continued to do very well because of the momentum behind
06:00that trade.
06:01It feels like everything is ETF-able, if that's a word.
06:05Absolutely.
06:06Theme ETFs tend to not be at the very top.
06:08They're always scattered.
06:09But DRAM is a total phenomenon.
06:11I mean, shocker.
06:12$27 billion.
06:13And then IQMM is this sort of money market fund.
06:15That's a lot of pro shares own money.
06:16So a lot of bespoke stuff usually ends up at the top.
06:19But DRAM, again, I just think this is, again, the biggest ETF since Ibit, really, in terms
06:24of flows, and people aren't really shaken out.
06:27It's had a little bit of a downturn, but people still keep coming in.
06:29What do you make of that?
06:30Yeah, I think it's really the story of the bottlenecks.
06:33So memory is the bottleneck, the current bottleneck on the AI story.
06:37So if you're bullish on the AI story, that is the point where it has to grow dramatically
06:42or the AI doesn't materialize.
06:44So it's a great bottleneck.
06:45It's a really strong theme.
06:46I think the next coming up is photonics.
06:48We had two photonics ETFs launch, which is carrying data through light waves, right?
06:55Because the copper cables aren't capable enough for the kind of data we need.
06:59So the point is the bottlenecks make really powerful themes within the AI story, which
07:06I think has been a really interesting phenomenon.
07:08Remember we had Athanasios on, and he's our curmudgeon?
07:10He saw there's a speed of light ETF, and he's like, I'm out.
07:14He can't handle it.
07:15But yeah, there's about-
07:15He just dismissed it entirely.
07:16Yeah, there's 30 or 40 AI ETFs filed.
07:19DRAM really just like, everybody's like seeing that and-
07:22And they're like, how can I come up with my own version of DRAM?
07:25Yes, absolutely.
07:25Photonics is clearly the next one.
07:27A lot of spaghetti.
07:28Yeah.
07:29Just throwing it at the wall.
07:30Some of them stick.
07:31Yeah.
07:31But they're all parts of what?
07:33The AI infrastructure story.
07:35So I think there's like something like a real physical supply limitation here that can't
07:40meet demand.
07:40So it's a real case of supply and demand here.
07:43So I think it has grounds.
