How to Think About Inflation (and Other Stuff) With Jim Bianco

and stocks. You had both bonds and stocks going down. Inflations are inflation fears are getting stronger, and Jim tweets about this quite a bit. And so this dynamic of inflation and how it will affect people's portfolios is one thing. And the other thing I think is ARC, and ARC to me is probably the poster child of some of these stocks that are counting on low rates right um low rates there is good for these sort of high valuation stocks. And also the fears around ark and concentration risks.

And I've seen him to be about this a lot as well. And so these are two major stories that are really dominating the past couple of weeks in my view, And and he's somebody who thinks about this stuff constantly. As long as we're gonna talk to him about inflation, we gotta, I think, also ask him about bitcoin, because that's the thing a lot of people think is a hedge to inflation, and there's all this chatter around bitcoin ETFs. Yeah, and I can tell you from from following him that

he's thinking about that a lot. And what I like about Jim is he's, um not dismissive. You know, there's people who just dismiss bitcoin, They dismiss arc, they dismiss they're just very dismissive. Um, he's not. He kind of tries to figure it out, understand where it's coming from. And I think that that's an asset as an analyst this time on trillions, how to think about inflation, I mean, other things with Jim Bianco. Jim, welcome at Trilliance. Hey, thanks for having me. So Jim, I gonna ask you,

what what what do you do? What's the you know, your your president of Bianco Research, obviously doing a lot of analysis, but like break it down for us, what's your job? Whatever? I wanted to be. Uh, That's why I like it. But seriously, I'm a macro researcher and I'm an independent person. So I tend to look at the macro space by saying, Okay, what isn't being emphasized enough? What do I think people have wrong that I should explain?

What do I think they have right that I think needs to be amplified, And so in within the macro realm, I tend to kind of find those topics, uh and uh, you know, choose which one I want, and I can

be very colectic, you know. In the fall, Uh, there was I was doing a lot with polls on the election and about how I thought that the election was going to be far closer than people thought it was going to be um you know, and my big whipping boy back then was Nate Silver, who was giving um Trump something like a nine percent chance of winning the election. I still thought it was gonna lose, but I thought it was more like a race than it was a

nine race. Uh as as well too. I my Bailey Wick has always been the bond market, and it's all I always kind of start there because it's kind of the most natural market for a macro researcher because it brings in policy and it brings in economics, which I spend a lot of time doing as well too. What I don't do a lot of as a macro researcher is individual securities. So if you're looking for que SIPs or tickers, I might not be your guy. I've got some, but not really as as my big Bailey Wick And

who are your clients? Institutional investors around the world. I am affiliated with a brokerage firm called Arbor Research and Trading out of Chicago here and they've got offices you know, in Chicago and New York and in London and salesman in Chicago, New York, in London, and so we have

clients all over the all over the world. Uh. And we also sell our research as part of a research subscription basis if you don't want to subscribe to it as a or you don't want to do brokerage business as an institutional UM manager And so, Jim, I see you tweeting about et s now and then they seem to be worked into your workflow. Um, how are they

related to you? Are you? Are they a natural investment tool for the people you're writing research for or are you more looking at them as ways to read sentiment and get intel from the market and investors both. I think that there's a number of institutional investors and we have a number of wealth managers. I like, I love to tell this story. We have a number of wealth managers as clients. And I was talking to a wealth

manager on the West Coast. This is, you know, four or five years ago, and he was saying to me, uh, yeah, I like high yield and I've instructed my desk to buy high yield. I was like, really, you've got a desk. You're a wealth manager, got a desk. And he goes, well, it's kind of my wife on a PC and I told her to buy me some h y G you know.

So that's kind of there's a lot of there's a lot of institutional managers that when they say that they're long a particular sector, short of particular sector, they're talking about the e T s that they've bought or sold as well too. And they provide a tremendous resource into sentiment by looking at the creation and deletion of shares and looking at the n A V premiums and discounts as well too, you can get a lot of glean a lot of information about the psyche of the market

as well. So they work for me on both ends in that respect. So let's talk about ARC, which is the E t F topic of the moment. You've been following ARC. I have, we all have. I mean, you can't take your eyes off of it. When you see a company go from three billion to fifty billion in a year, it's a amenon. You know, are craze. We have many terms for it, but I just want to

get your just first overall. Take I think right now the big debate is, Okay, this company has killed it, They've grown fast, and now you've got this sort of a bunch of warriors, not totally clear their motive, but

people are talking about, oh, there's concentration risk. Some of the stocks that the funds own, they own, you know, more than twenty of the SHARE's outstanding, could be a dozen of those roughly, and so they're worried, well, what if there's outblows, there's gonna be a liquidity issue and potentially, and I heard one guy today was like, ARC is gonna is the new long term capital management, which so you're really seeing a lot of hyperbole as well. What's

your take on it right now? Well, first of all, at the top, let me disclose that I own all five of the ARC funds, so I am a big fan of Cathy Wood and the structure of ARC. So keep in minding my comments come from an admirer of the fund. Now that I've said that, I think there's a lot of people that are very they're very jealous. They're jealous of the performance of of ARC. Might be jealous of of Cathy as well too. Um, I won't say that they're sexism, but I just did as well too.

But but let me let me be, let me be a specific. Yeah, they've got an issue with with the concentration. So did Warren Buffett in the nineteen eighties. He was as concentrated as she was by having a you know, a handful of of companies that he owned that he was He sat on the board of most of them as well too, So we've not this is not new, And yes it does pose a risk, and no less than ARC and WOULD themselves are regularly putting out YouTube

videos in research explaining that risk. And yes they do disclose every day what they're doing in their fun they have to buy law because they're an e t F and they go the extra mile by emailing out all of their trading every day as well too, So it's a very very transparent fund. Uh. As far as the idea that it's going to get so bad and that the outflows out of ARC are gonna get so bad, and that there's a bunch of people that are gonna say I told you so, I got news for you.

If it gets that bad, it's gonna get that bad for you too. It's not. ARC is not gonna blow up and the SMP is gonna just sit there and go sideways while that's happening. If you're talking about ARC being in a long term capital type of problem, the SMP is gonna look a lot like last March as far as what it will be doing at the same time. So I I don't understand this this hatred. Yeah, you could make the case if you want, that this the

sector that she's playing in, is overdone. There might be a stiff pullback there was last week as we are talking about, and there might be further downside. That's one story. But to say that they're going to come on glued is essentially in my mind saying the whole market's gonna come on glued because there is a strong correlation between those stocks and the rest of the market. They're not going to go down and fall apart while everything else

you're just gonna sit there and do nothing. Yeah, Jim, I completely agree with you. I just want to had a couple of little tidbits here. One is that ARC also owns some pretty big names. They're able to sort of manage liquidity, and they've only seen a week of outflows and those outflows were one point five percent of the assets. And like you said, when if if she if her and her phone went down last week, well,

a lot of things were down last week. And this reminds me of a lot of ETF issues where you can create these scenarios on paper and they really end up with you have to be able to you might have like a World War three scenario before that plays out. Uh. And I think people do try to isolate it instead of just sort of considering it is one thing in a bigger picture, because also fifty billion isn't that big um.

But we have looked also at e t F s that have really risen up this quickly, and typically outflows do not come out as fast as they went in because there's people who are waiting to buy the dip. You know, she got a big core fan base, so there could be a tug of war, there could be a rebound, and there are also could people who just forget they bought it or are just in for the

long term. So I think this scenario that all of a sudden, there's going to be a run on her e t F and the flows are gonna be so bad she gets stuck in a liquidity issue and you know the and somebody even said she's gonna have to be bailed out. I mean, this is getting pretty ridiculous. I think it's the worst case scenario. If everything's going

to hell. It's possible she could have a little trouble with a couple of stocks and it could trade at it's like discount, if there's a pull on the e t F to get out, But I don't know, I just don't see anything worse than that. What it would be your worst case scenario, Jim, You know, looking at some of the e t f s in the in the credit space, especially h y G. Let's talk worse

case you remember there's payment in kind. If things get bad enough, you could just hand that you just in redemption, you can just hand them the shares, is what you could do. You don't have to liquidate the shares and hand them and hand them cash. That's if you get into the worst case scenario. So there is not necessarily that case. We've seen that with UM, Like I said, in is a matter of fact. With h y G they high yield e t F. That's an actual strategy

as far as uh UM. You know, payment and kind in for in terms of handing shares and receiving shares as part of the trading strategy of that fund as well too. So that would be you know, I think

under the worst case scenario. But let's also remember I know she was much smaller, but one year ago, one year ago, her strategy was she was buying a lot of big liquid names, you know, the Microsoft's, the Apples of the World and stuff, and then in the sell off in March, liquidated those names to pick up a lot of the lesser liquid, higher flyer names as well too. And I've seen some of her research thing that's the strategy I want to employ in the next downturn. And

then finally, I'll say one other thing too. In the last two weeks, she's come out repeatedly and said she expects a stiff correction in the market. So I think part of the thing about them getting in trouble is they're caught flat footed and something they don't anticipate. Well, she's been anticipating a correction in the market, so I have to believe that. You know, she's been strong positioned for it, been ready for it. It's not shocking her.

She's not staring at the ceiling at night wondering what's going on because our funds are are are selling off. Is bad because it was literally two weeks ago she said she was ready for something like this. So, Jim, I want to actually take a moment and like talk about the fixed income world, since that's something that you're you're deeply rooted in as well. How existential of a

moment is this for for fixed income and bonds. I think it is fairly existential because my view, and it's becoming more of a view in the mark it is we're about to turn tact here and start to see something we haven't seen in maybe thirty years and that is inflation. We're now really openly looking at that idea. Over the last twenty five or thirty years, we there, we've had bouts where people have talked about inflation, but it really hasn't materialized to any great degree. And in fairness,

as of right now, it hasn't materialized. But I think the evidence is the strongest that's ever been that we're going to see inflation, and that is going to be a big game changer. I think in the fixed income space that a lot of people are not ready for it. For instance, inflation is historically not good for equities. I don't everybody says it is good for equities. They said that in the early seventies when we first got inflation

to the best hedge for inflation was equities. By the late seventies, we realized it was one of the worst and hedges company can't raise prices as fast as their input costs, and their margins get squeezed. That's what typically happens in terms of inflation. And the other big one for inflation is the sixty forty portfolio, the bedrock of

the wealth management business. And why you see these really, I believe why you see these relentless inflows into fixed income ETFs is based on the idea that you don't have inflation because they tend, stocks and bond prices tend to move opposite each other in the lack of inflation, you know, or yields and stocks moved together. I'm saying the same thing again, and we've we've even coined a

phrase for risk on, risk off. Well, in an inflationary environment, you have not a sixty forty portfolio, but you have a hundred zero portfolio. Either both stocks and bonds are going up together or both of them are going down together. And we started to see the beginnings of that happening, especially last week. Both stocks and bonds went down together

last week as well too. If this inflationary environment comes, then the whole basis of a lot of wealth management strategies has to be rethought because that forty leg stops working and then they're gonna have to figure it out. One last thing, I remember why a person goes to a wealth manager. If you're bullish, you just go buy ARC or you buy the SMP. You don't need to

go see a wealth manager. You go see a wealth manager because you you want to participate in the market, but you're afraid, so they're they're ready made answer, and it's not been a wrong answer has been the sixty forty portfolio or some variation on that. Well, if that stops working, then all of these clients that wealth managers have are going to start asking questions, why is my portfolio falling as fast as the market if both stocks

and bonds are falling. I thought that forty leg was supposed to protect me, because it certainly didn't help me when the market was going up. I always left behind the big rally in stocks. So I think that there there is going to potentially be an existential point with the bond market if we were to see this inflation materialized like I think we are. Let me be Devil's advocate here, and you know there's that You ever heard

that Rolling Stone song? It's just your nineteeh nervous breakdown, sure, sort of making fun of, Oh, here's here you come again with another nervous breakdown. I feel like I've seen this movie nineteen times. Before rates start going up, how to prepare for rising rates, rising rates, rising rates, and then stocks start to go down a little bit. Everybody freaks out and the FED comes in and says something that just makes it all good. Rates decline, stocks go

back up. We're partying again. And what what makes you think we're not going to go back to that again? And this is a new paradigm. You're right, this is this is a story that we've heard in the past. Now, in defense of me, I only became an inflation east last summer, so I'm fair lead new to this. I was a big bond bollum until last summer as well too. But what I think is changing now is the perception of inflation itself, modern monetary theory, universal basic income. We're

mailing people money as well. We're talking about checks and an extra three hundred dollars of unemployment insurance going out. And by the way, I understand completely why we're doing it. But what I've often argued is if there is no consequence to us mailing out all of this money, that we pass the stimulus package and the poor get some help, and the unemployed get some assistance to their next job,

and the rich to find the rich. As anybody owns equities or assets, if you want to even draw broader, see the value of their portfolio go up. Everybody wins, so let's do another one, and let's do another one. Why wouldn't you do another one. If you pass a big stimulus package and you mail checks and everybody wins, then do another one and you you you enter kind of a U B I m MT world. And that's where I think you get the stimulus for inflation. So

that's been my argument. Now I've also argued you don't have inflation. Now, it is a bet that it's coming immediately ahead of us in the next sixty days. Is what economists called the base effect. In April and May of last year, when the shutdowns happened, the prices of everything plummeted because everything was closed, and then everybody had supply and there was no customers, so they were cutting prices to move inventory. That rolls off in the next

one or two inflation reports. So the year over year change of inflation is going to jump dramatically. Everybody knows it. Chairman Paul has said it a million times. It's going to happen. Be don't be surprised. So you've got your ready made excuse for higher inflation over the next sixty days.

My bet is that in the second half of the year, we're gonna start looking around and going, well, that base effect didn't go away, and maybe it didn't go away because we've got all of this stimulus that we've put into the economy. One last off for you. A lot of economis say you can't have inflation without wage inflation, and there isn't really much in the form of wage inflation. Well that's true for now, But what I've argued is

you have personal income inflation. Astounding number is personal income is a total income you make. Wages is a big part of it. You know, unrealized gains on your securities is a big part of it. Twenty five of that number comes from government transfers. That is, stimulus checks, unemployment, social Security, disability, veterans benefits, whatever else the government mails.

It's an astounding number. Used to be pre pandemic, around eight or nine percent a quarter of the income of the United States is mailed to them from the government right now, and the savings rate is tremendously high, well over right now. So that's given everybody a ton of money. So that as soon as they get their vaccine and as soon as they feel a little bit better, and

everybody says we're gonna come roaring back. They've got money to burn, and I think it will show up in the form of inflation, and if it doesn't, then the argument will be, we'll send some more money out. It was all good. We sent them all money out, and only good things happen and no bad things happen. So we'll just keep going until we eventually get there. That's the basis of my inflation argument now. And you're right,

there is various variations of this. There was a variation of this and O eight when we said with que there was a famous letter that was signed by about sixty people on Wall Street that Jeremy Bernaki, you're creating hyper inflation with all this qui and it never happened. And so I get it that there there is that skepticism and it could be wrong again too. Uh. So we'll see how this plays out for the second half

of the year. When you think about um uh, this inflation talk, Jim, I mean, it's it's very easy to picture it as this boogeyman like like we had in the seventies, right, But it's also part of what you're saying here is like we we don't necessarily know how big of a boogeyman this could be too, right, Like, it could be a little bitty version of of that boogeyman.

But because we haven't had it for so long and we have no sense of how this whole thing could get metered, we don't know how big this of a phenomenon, this inflation talk could turn into. You're exactly right. So one, when I say I'm an inflation east there's two thoughts that come through people's minds. If you're a little bit younger, you say, okay um Zimbabwe or Venezuela, so we're going to one million percent on inflation or something like that.

Or if you're a little bit older, you think the seventies, we're going to double digit inflation. And I'll then turn around and say, no, I actually might target on inflation core PC. A FED favorite is two point six per cent. That's not inflation. That's what the FED wants. And I've said no, Wait, two point six percent is a twenty eight year high in the inflation rate. So let's start with a sustained two point six percent inflation rate. What I mean body sustained is you'll probably get there in

the next two months off the base effects. But then will you stay at somewhere near that level after that as well? And if you do get to two six and the market starts to think, wow, this is kind of like the new new level for inflation, and we start getting positive real rates, you have a three percent thirty year three percent excise the tenure UH probably pushing a four percent thirty year in the bond market. With all the leverage that's in the bond market. That is

a very painful move for the bond market. Look at the way that the market wobbled over the bond marketing one point five percent last week. You double that over the next several months or year or so, and I think that that could be very painful wall streets, Right, it's not the surprise. It's the surprise is not that rates are going up. It's the speed at which rates

are going up. But that's what's got me worried, is that I think that the only way rates go up is with a quick speed, because it is a realization that we've got inflation coupled with a very lever bond market, and that will put the whole fixed income market, you know, in a bad place and If the bond markets in a bad place, all markets are in a bad place. So that's the risk that I see in the market right now. So what's an investor supposed to do? I've

got that breakdown? What am I supposed to do with that forty? Call your call your wealthare manager and ask what you're supposed to what you're supposed to do with it? I guess what you need to what you need to do with the forty is start to ask yourself what is a natural hedge to the stock market? See, the great thing about the forty used to be the bond part is that bonding stock prices moved opposite each other, so yet SI equities And when it went up, you

made some you know, you participated. You wind up, not as much as if you're a pent, but you wind up. But when the market fell apart, bonds were supposed to rally to cushion the downside. That hasn't happened. So what's the investors supposed to do? Here's the hard part. What's not corel what's negatively correlated to stocks? If we get inflation? And the answer is not much at all. In terms

of where we are. You're in some kind of a hundred zero environment, you might think about, you know, reducing your risk, maybe running an eighty percent portfolio with twenty in cash. Um, you know, just running higher cash levels because you know you're mark you'll go up and down with the market, as opposed to a sixty forty with

zero cash, sixties equities forty bonds. That might be one way to look at it, or another one is is maybe something that is negatively correlated will emerge, But right now everything is said in such a state of flux. I'm not sure that there is anything that is negatively correlated to equities like bonds and been for the last

twenty years. So um. You know, this is where I think alts have a time to shine, because we have seen all e t f c s or e t f that do something market neutral where they have a short side to them. Those are have been completely ignored. And even in the hedge fund space, if you're like a true alt, you tend to not see any flows. Only the ones that lean towards stocks or beta tend to get flows. So there's this sort of beta vortex

forming no matter what the strategy is. But the people who do the pure things like a deep value or an all E t F that have been totally ignored and live outside of the beta vortex. Does it make sense to think about those as a portfolio diversifier now before it starts raining, so to speak. Absolutely, And I'd also throw into that mixed the smart betas as well too. I'm a big fan of the smart beta concept as well.

And I know it's gotten in a bad rap because the smart betas you know, they've they've lagged the market. But there are men has always been that over a complete cycle that they'll they'll do better for you. It smart beat. Again. It's still the same five hundred stocks in the SMP, but instead of waiting it by market cap or price, you waited by some fundamental measure like price to earnings ratio or price to book value or cash flow, so that the companies with the better valuations

get bigger waitings. You just don't always have Apple as your biggest waiting because it's the largest company as well. Too. They're not doing as well in the up because all the racy stocks go up, but they do better in the down. So that's another one. But yeah, I think that those types of strategies might be better strategies for people that are worried about risk, are worried about corrections

in the marketplace. If indeed, as we continue to move forward from here, the bond market does not exhibit that negative correlation that we all wanted to to make it the natural heads for the stock market. Now there was you had quote tweeted Cathy coming full circle here, and she had said something like, bonds are are pretty much over the new forty Is bitcoin or crypto? Um? You quote tweeted that, And I want to get your take on that position, because I think it seems to me

and proved maybe I'm wrong. This is my gut instinct. Bitcoin is a plaything of a bull market, in other words, and we saw this last week when the candidate bitcoin ETF launched up there. It traded like crazy is seeing like two fifty million dollars of flows the first couple of days. Then Bitcoin got smacked and the equity market declined at the same time, and then it went down to volume. Because when when it starts raining, people they don't think about that stuff. They go to the core.

They think of their equity and bond positions, and it almost seems like bitcoin will just go down with a risk off sell off and provide no hedge. Am I wrong? No, you're right. Um, the concept that Cathy said that maybe bitcoin is the forty I'm with her on that idea up but we're not there now. The problem is bitcoin

is still positively correlated with equities. You know, so if you if you open a coin based account and buy some cryptos or bitcoin in particular, Uh, it's going to go down when the stock market goes down like last week, and it will rally back when the stock marker rallies back. So it's not providing that negative correlation that people think that it would provide, or you know, it does its

own thing to help give you some kind of a diversification. Now, maybe over time, if it becomes more accepted as a legitimate asset class instead of a speculation that it would be an asset class, it could evolve into that. That's where I think then makes case. But I think it's too early right now to put it into that category. Uh, that it is a natural fit for a portfolio diversifier.

It's a speculation. I own some cryptos. I don't own bitcoin at the moment, but I own some others and but very very tiny amounts that if I lost all my money, it wouldn't change anything UM for me. And I'm doing it to more learn about the space than anything else, and I understand what's going on in the space, but it's still too early to start thinking about that space as another asset class to compete with stocks and bonds.

So it does seem like just of late, it's really turned a corner Bitcoin specifically in terms of just having a certain zeitgeist among institutional investors. And I'm I'm curious, ay what you what you hear from your clients regarding bitcoin and then sort of like what your what the your your long term view on where you think it could go? So um, You're right, it has seemed to

turn a corner. And I've referred to this as the adoption rally because what you're starting to see not only with Tesla and micro strategies UH and the new um Pulsey tf in in Canada, but you're seeing companies now embrace a squares as square as another one as well too that is starting to embrace and starting to look at these as a potential UH corporate strategy to own some kind of a cryptocurrency as well. My clients, there's

still somewhat mixed. Um, there's a fair number of them that screened tulips and that we've lost our mind and what are we doing trading a bunch of bits and bites that have no value in pretending that they do. And then there's others and I kind of put myself into this camp too. Oh No, this is the leading edge of a huge financial disruption. Now, this disruption is not happening this year, next year, but it's coming, and especially in the space of centralized financeer defy. I think

that it is a big deal. What is coming down the line, and what we're seeing is version one point oh of that change. Yeah, it's the buggy version that has problems. But there will be a two hour and a three oh, and it will get better and it will get better and then it will come more into focus that it will compete with what the crypto space called ci FI centralized finance, which is what we have right now as well, that it will become a new era for us. So it's risky, and the biggest risk

you have. I've I've said to people, I personally believe that this is going to be a big disruptor and game changer. But there's so many protocols and there's so many coins that are competing to be the winner in that space that I don't know which one will win.

So I've said, it's like you've stumbled on a racetrack and you know there's a horse and there are a bunch of horses at that racetrack that can win you money, and quit talking about whether or not they're going to close the racetrack down and try and learn about what the horses are doing and try and figure out which horses are gonna win. And so that's kind of where my clients are. Some of them think we've got to close the race track down, and the other ones are saying, well,

which horses do you think might might emerge? Is the winners out of this big race that we're having right now that speaking of horses and horse race, you know, one of the big debates in the e t F NERD community is whether they're going to approve a bitcoin ETF and I guess I want to get your take on the odds of that, whether it's a good thing, and then finally, what do you think the SEC should do? Because if they approve one, they just they're kingmakers. They're

gonna make those people rich instantly. We now know there's probably gonna be about ten to fifteen billion in in like a couple of weeks into whatever one's out first, or should they approve you know, five six seven at once to give a level playing field. Well, the big game changer there is Gary Gensler. So Gary Gensler is the UH Biden administration's appointee to be SEC chairman. UH.

He is a big crypto advocate. He was a professor in m I T and taught a class on blockchain in cryptocurrencies as well to the head of the crypto area of the SMP, the I can't remember name, but the woman who um you know investigates crypto and behalf of the SEP now will report directly to the chairman. So this has got the hype going that we got the guy in place that will approve it. If anybody's gonna give it its blessing, it's gonna be Gary Gensler.

And he hasn't been approved yet, but he should be shortly, and once he is, then you know, start the countdown clock until we start to see some um, crypto et s and nine answers. Sure, why not. We've got we've got volatility e t f s, we've got inverse levity t ffs. As long it is it is disclosed as to what you own and what you don't own, I don't see a problem with with any of that, as

long as you don't pull a tether. And what I mean by pull a tether, that's the cryptocurrency that's supposed to be a stable coin tied to the dollar, and they were supposed to have a trust. So for every uh cryptocurrency that was out there with one dollar, there was one dollar in a bank account. There was no

money in a bank account. Uh. So as long as you don't pull something like that, yeah, I think it would be it would be perfectly fine, and that people will understand and um, you know, embrace what they're what they're gonna do. And you're right, there's there's all kinds of people on the runway that are ready to do it. And I understand why too, because you want to own it in a regulated account, because you've got some of the protections that people are comfortable with in the in

the crypto space. I don't know if you guys have a crypto account, and if you've if you've got more

than one crypto account, I've always loved this. If you've got one one crypto account and you try to transfer money between one account and the other, you've got to make sure you're on the right network, you've got the addresses right, and they give you literally quizzes and about eight warnings if you don't do this right and you mix, you know, mix or get the addresses wrong, or mix the networks you're sending from one to the other, that you can't do. As soon as you hit send, your

money vaporizes. It's just gone, and don't call us up whining that you lost your money. And so that scares the hell out of a lot of people that they want to go into that space and deal with that potential mistake. As I once was joking with my wife when I was trying to transfer money. The cat jumped up on my desk, I says, she steps on the keyboard, my money disappears forever and stuff. So yeah, I'd like

to keep it in my regulated securities account. So if the cat steps on the keyboard, my money doesn't disappear. So that's the allure of the bitcoin et F and why so many are so lined up and everybody wants to jump into him. I think that should be the commercial. That should be their commercial. The super Bowl ad is the cat jumping on the keyboard and it's all gone, and it just says like Bitcoin E t F the cat.

My bitcoin is definitely going to be a meme. Speaking of means just lastly to have a little fun here and to talk about something that is wildly entertaining, but hard to see how much consequence the meme stocks right game stopped early this summer, and I also saw you were all over Dave Portnoy. He was able to sometimes move some of these smaller names like cruise ships and not.

What's your take on this sort of populism, democratization, commission free trading movement where retail investors seemingly are able to unite a little bit, develop cult followings and push stock prices around. Um, do you think this is here to stay or just the pandemic phenomenon and a bullmarket phenomenon that will go away when people start getting out more or there's a correction. No, it's here to stay. It's

definitely here to stay. Now you're right. Once once the weather warms up and we're allowed to go back out again and um, you know, commune with other people. There might be a little bit of that backing off, but it's not it's not going to go away. Means, you know, let's be honest. Memes kind of drive the world. Narratives drive the world right now, and the way that people

live their lives and now they invest. And I think that a lot of other people in the traditional financial markets are also a little slow to understand the powerful network effects that things social media have. You know, Wall Street Bets is the top of the list now that

everybody's looking at. Uh you know that. I've I've heard people, you know, traditional financial people say, yeah, well, there's a bunch of influencers to use a modern term for that what they were saying about them, that are suggesting on Wall Street Bets, we should do this or that, and then there's a bunch of sheep that just do what they say, maybe because they've had a hard hand. I was like, isn't that kind of what professionals do on

Wall Street too. There's a couple of you know, well known hedge fund managers that come out or Warren Buffett, and they wagged their tongue that they like this or that, and then all of these highly paid professionals run into the same idea as well. Why is that any different than what we're seeing on social media? Oh but there's

only these people only have five dollars in their account. Yeah, but multiplied by millions and throwing options trading, and the network effect is tremendously large on this, and the benefit, the economic benefits are there. They've got zero commissions, they've got fractional shares uh as well too, So they're no, there's no disadvantage to being small. There's no disadvantage, you know, don't worry. If if Amazon's you could buy a tenth of it for three bucks, and you could do it

on zero commissions. And if you if you're really bullish on it, you could buy one option on it for zero commissions as well too. In this whole community is out there um to help you. So I think this is the new way. And we've got the internet so that you know, take your pick of your favorite most sophisticated hedge fund manager. He doesn't have any more information

than you or I or anybody else, does he? Might have more knowledge and how to use that information, but we all have the same information um right now, so I think that this is transforming the way that investment is going. And then throw in one other thing too. These tend to be younger millennials or maybe even gen wise or maybe even thirteen year old kids for all we know that are doing a lot of this stuff. And what do they want to invest in? They to

invest in what ARC is investing in. Um. You know, they call it Kathy Bay for a reason, Bay B, B, A E before anybody else, you know, is what the BAY stands for as well. So they want to invest in the next generation. Well, a stay in money manager who's got an office in Boston, he's not investing in a lot of those stocks if he's an active manager. SMP five hundred. What we just got Tesla into the index right now, A lot of these stocks aren't in

the SMP five hundred. Oh maybe some of them are in the in the triple queues, but that's dominated by the big fang stocks anyway. So now they're saying, this is what I want to invest in, the next generation, the disruption. So, big Boston active manager, where's your disruption fund, and you know their disruption fund is, well, let's buy some Microsoft and Apple. And that's not what I'm looking for. Index. Do you own this stuff? No, not really. I could do it myself and I've got a community that i

could communicate with. In terms of social media, it's not just read it. It's Twitter, it's stock twits, it's motley Full, it's Seeking Alpha. There's a lot of places that people can go to get this information. So you think it is a big change, it is. It's it's fascinating. And uh, I yeah, I just pretty much agree with everything you said today. I think, Joel, how about you high I'm not I'm not gonna I never tell a source you know, uh that I'm all in on everything that he said.

But I do appreciate, um, your your assessments. Um, I think they're they're they're definitely some of them are provocative and and um a few of them are also grounded. And I think, um some reality that it does when you can do some attempts at analysis like you're paid to do on be half of your clients, like it all makes sort of rational sense. Jim. Also, the lack of dismissiveness of the new. I think that's really important.

I think that's something that um, the old guard takes a long time for them to adjust to this kind of stuff. I can speak from experience. UM, but yeah, other analysts are adapting way faster and give it more credibility. There's a there's a meme that goes around, UM showing an old Homer Simpson and it says, you know, old man shakes fist at cloud. Uh, you know, because the

world is passing him by, and he gets angry. And I like to say, look, we're all eventually gonna be that old guy shaking our fist at the crowd at the cloud. Let's just not get there right away. Let's not be in a hurry to get there right away. But you're right, this is this is as old as time. That change comes in. The old guard, especially in the financial sector, has evented vested interest in the status quo, and when you start talking about things, especially in the

crypto space, that strikes right at their heart. Look, it's one thing to kind of make them the argument that Uber is going to disrupt the taxi industry in Manhattan. We'll find I'm not a taxi driver. I don't own taxis. It's interesting to watch. I'm find taking an uber. But when you say to them, oh, deef, I is going to change the basic structure of banking hold on time out a minute here, that affects me directly. And then they pushed back on that much harder as well too.

So that's what you're fighting against with a lot of this change. Okay, Jim closing question, Uh, one that we ask a lot of people. Favorite E T F ticker? Oh probably UFO. I think that's just such a wonderful too. There was not even a pause. Yeah, yeah, not only not only UFO, but did you see what it did too right after ARC announced that they might get into space as well too? I mean what it became a

UFO right after Yeah, it grew fourfold. It went from like forty million to a hundred and forty million just on a filing. I've never seen that. Yeah, if I had to pick, if I had to pick a silver medal as she you know, the one that with all women that Yeah, that's another that's another good one as well too. See. And he said he wasn't good with tickers. He knows his tickers, Yeah, I mean she is, uh, and that one hasn't been sort of on the front

burner for about five years, so that's impressive. That's sort of like a deep cut on an album that was popular ten years ago. Yeah, very nice, jo all right, Jim Bianco, thanks for joining us on Trillions. Thank you. Thanks for listening to Trillions until next time. You can find us on the Bloomberg terminal, Bloomberg dot com, Apple Podcasts, Spotify, and wherever else you like to listen. We'd love to

hear from you. We're on Twitter, I'm at Joel Webber Show, He's at Eric Baltunas, and you can find Jim at Bianco Research. This episode of Trillions was produced by Magnus Hendrickson. Francesca leap is the head of Bloomberg Podcast. Bye.