The Compound and Friends: It's a bull market and nobody drinks anymore.
On episode 255 of The Compound and Friends, Downtown Josh Brown and Michael Batnick are joined by Todd
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The Compound and Friends: It's a bull market and nobody drinks anymore.
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Show notes (from RSS)
On episode 255 of The Compound and Friends, Downtown Josh Brown and Michael Batnick are joined by Todd Sohn, Chief ETF Strategist at Baird Strategas, to discuss the record-breaking ETF boom, the rise of thematic and leveraged products, buffer and option-income ETFs, AI and compute as emerging investment themes, and where investor money is flowing now.
They also get into the battle for ETF brand loyalty, whether $1 billion is the new benchmark for a fund that matters, prediction-market ETFs, the outlook for crypto and small caps, healthcare’s comeback, and the trillions of dollars still sitting in retail money-market funds. Plus, why professional sports franchises are starting to look a lot like the stock market—and what Wall Street might package into an ETF next.
This episode is sponsored by VanEck. To learn more about RAAX, visit https://www.vaneck.com/RAAXCompound
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Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management.
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Transcript
A: So, Todd, this is like a year for you.
B: Quiet on set.
Todd Sohn: I'm.
B: A year's perfect. Even if it was two years. I don't care.
A: Wait, what are we talking about here? I'm saying 2026 has been a year.
B: Oh, I thought you meant since the
A: last time you were on the show.
B: I don't need it.
Michael Batnick: No, no, no, no.
A: You guys, no, I meant 2026. Like ETF of Palooza. Oh my God. Like, you are having a moment.
B: It's nice.
Michael Batnick: It is the biggest launch year by ticker. It's gotta be up there.
B: 900 funds year to date.
Michael Batnick: And we're going to 900 new ETFs.
B: Yeah, we're going to pass last year pretty soon.
Michael Batnick: Last year was a thousand years.
B: Like 1100 maybe. Dude, I wish. A third of them are levered. Which we'll get into.
A: I don't know that this is. I don't know that this is temporary.
Michael Batnick: I don't.
B: Well, unless you get a really bad bear market.
A: Well, yeah, sure.
Michael Batnick: No, it's not temporary because the cost of launching is. Is much lower. Right?
B: Yeah. Oh, yeah. It's like. It's like.
Michael Batnick: And the cost of maintaining a fund that doesn't catch on.
B: ETFs have turned into Napster. Or just like, hey, come to my shed where I have a recording studio and we'll lay down the tracks and do it for you. Everything else for you.
A: It's like a mix track.
B: Yeah.
A: Like everyone. You just make one for your friends. You make one etf.
B: Yeah. And you ship it out.
Michael Batnick: I was involved in two ETF launches this year. In. In the same.
B: Oh, yes.
Michael Batnick: In the same week. In the same week. In the same week, yes. I didn't promote either one of them. You don't have to promote them. I don't need to promote.
B: You do whatever you want.
Michael Batnick: No, no, no. But like, just like, as a. As an anecdote of how much activity there is, there's a. I've never been involved in an ETF before now in
A: this U.S. dude, Duncan's about to launch one.
B: Photography. What is it? Photography. Etf. I have books for you, by the way. If we're doing. Are we live?
Michael Batnick: Yeah, yeah, we're always.
B: I usually bring you real books. These are my books.
Michael Batnick: What do you mean you're. Oh, you wrote a book.
B: I didn't write a book.
Michael Batnick: Like, save it for the end.
B: Okay.
Michael Batnick: Save it for the end.
B: They're ETF related, though.
Michael Batnick: Let me show you a chart. Can we put a chart up yet?
A: Which one?
Michael Batnick: Do you want msgs? Msgs? This is Madison Square Garden Sports. Wait, this is the Knicks. This is the. Dude, can we look at this?
A: How did I miss this?
B: I actually wanted to talk to you.
Michael Batnick: I'm not invested in this.
B: The sphere. And can we talk about this Lakers price?
Michael Batnick: Well, that's what I wanted.
B: This has nothing to do with ETF. Lakers for 12 billion.
Michael Batnick: No, no, no. So leave this on the screen. This, what we're looking at is the market cap and enterprise value. This is a share price, but I'm saying Market cap is 10 billion. Enterprise value. So add back the debt is 11 billion. If the Lakers are worth 12.4 billion, what should the stock be trading at? Way higher understanding. There's a discount because Dolan said he doesn't want to sell.
B: The building's involved with this too.
Michael Batnick: I think it's the building and the Rangers.
A: So they're splitting. By the way, the Rangers on this Knicks are going to split. I understand, but you're right, this makes sense.
Michael Batnick: This should be 30 to 50% higher right now.
A: Okay. Are you going to buy it?
Michael Batnick: I might. I mean, look how much it's up. I feel like the biggest idiot that I don't own it.
A: So you know, it's going higher. I can't buy this either.
Michael Batnick: It's too much msg.
B: You could buy the Braves.
Michael Batnick: MSG expects to complete the spinoff of the Rangers business from the Knicks into a distinct publicly traded company by the end of October. Tax free transaction. A tax free distribution to shareholders. So they'll spin it off like they'll give you stock. If you own one, yeah. You'll get stock in the other and then they'll change the tickers via Knicks.
B: I just want.
Michael Batnick: You're going to buy the Knicks.
B: How do you not buy the Knicks?
Michael Batnick: You're going to buy this when the Knicks is a stock. Right?
A: I missed it.
Michael Batnick: No, I know.
B: What if they, if they repeat though?
A: But you know what, it's so interesting how this happens. If you told anybody two years ago, hey, you could buy the Knicks in a liquid wrapper and it's three and a half billion dollars. You would say like done deal. The Knicks worth way more than 3 billion.
Michael Batnick: Well, it's. I mean that thing that I just showed you is in and of itself a spin. I get it.
A: Right.
Michael Batnick: Here are the top 10 professional sports franchises in order by what. And tell me if you think Lakers at 12 and a half billion moves any of these up and down number. We'll start with 10 New England Patriots. Oh, I don't have a number for this one. Los Angeles Clippers is number nine. Seven and a half billion because of the new arena investment.
A: He paid two for it. Remember when he paid two? It was a Twitter thing. People were like, what an idiot.
Michael Batnick: They're not worth 2 billion. Yeah. What a moron.
B: They are cursed, though.
Michael Batnick: Atlanta Falcons, 9.78 billion.
B: Really?
Michael Batnick: So then if that would be right, if that's the number, then maybe the Lakers should be higher.
A: Wait, the Falcons have to be that way because do they play all, like, the Rose bowl games there or the college football playoffs? There's got to be because of the stuff.
Michael Batnick: All right, uh, New York Knicks, 9.9 billion. We know that's way low.
B: That has to be.
Michael Batnick: I don't know how low. It has to be higher if The Lakers are 12 and a half for the Knicks, 15, especially this year.
B: I would have said. If you asked me, I would have said 14.
Michael Batnick: You think the Lakers have a bigger international brand? Oh, yeah, because that's what this is about. This is about selling way bigger, way bigger. Selling merchandise. In China, it's Lakers and selling the streams and selling, like, if the Knicks
B: go on and on a run here,
Michael Batnick: the Knicks were a dynasty.
A: No, no, no, no, stop. It's not. It's not even debatable. The Lakers are more valuable than the Knicks.
Michael Batnick: All right, this one sounds way too low to me. New York Yankees, 9 to 10 billion. No way. No way. That should be 20.
B: That's the highest base. What did the Dodgers go for?
Michael Batnick: I don't know. That's not even on the. In the top 10. So maybe this top 10 is flood.
A: You know how I know they're worth more? How much is like a Jersey Miter?
Michael Batnick: They just did a transaction. The Yankees just did a transaction with Apollo, right?
B: Yeah.
Michael Batnick: Is that this week?
B: Yeah.
Michael Batnick: What was it?
A: I missed that.
Michael Batnick: What was that? $2.6 billion financing agreement with Apollo Sports. It's credit and equity. And I don't think. I don't think there's valuation talk publicly. I could be wrong, but it's. It's a mix of, like, here's some. Here's some credit.
B: Steinbrenner sell.
A: No.
Michael Batnick: I mean, no. What are they. What's their. What is their identity? Without the Yankees, then what, being rich? All right, really rich. Lakers, they had a 10. It went for 12 and a half. Golden State Warriors, 11.33.
B: Sounds right.
Michael Batnick: Sounds right.
B: Sounds right.
Michael Batnick: No. Steph Curry takes 2 billion right off the price.
B: Yeah. No, Steph. All right, Steph's a billion.
Michael Batnick: New York Giants, 12 billion.
A: Okay, I suppose. How?
Michael Batnick: I don't know. A horrendously run franchise. Louisiana. Rams, 12.7 billion. That sounds.
A: That's so fi.
Michael Batnick: But that just sounds wrong too.
A: It's so fast to me.
B: That sounds high.
Michael Batnick: That sounds high.
B: A team without. I mean, they're. Yeah, they're in la.
Michael Batnick: It's a decent team. They're in the playoffs. They're in the playoffs. All right. And then the Cowboys again. This predates the Lakers news. Sportico has the Cowboys at 15.5. I'm going to say the Cowboys and The Yankees are $20 billion franchises.
B: Wow.
Michael Batnick: That's what I'm going to tell you.
A: Well, how about this?
B: How high do these go?
Michael Batnick: We're finding out. Chart on the Lakers.
A: You know what the. Guys, you know what this is? It's the stock market. Throw up the. Throw up the sports team chart. All right, so I had Claude make this. These are all the transactions in the NBA going back to when Steve Bomb approaches the Clippers for $2 billion. Then you got the Rockets at 2.2. You have the Nets at 3.3. There's some in between. The Sun's at 4. Celtics just sold for 6. Lakers sold for 10aminute ago. Now they're up for 12.5. The freaking Trailblazers are 4.25. You know what this is? It's the stock market. Where do you think Josh Kushner's wealth is coming from? It's AI.
Michael Batnick: It's. It's open. AI. Right.
A: He has a $15 billion position on OpenAI. Now, I know, I know that's not his money, but whatever. Like all of this, all of this upward trajectory. It's the top 1% of the 1% getting so rich.
Michael Batnick: Yeah.
A: And that's what this is, the Celtics number.
Michael Batnick: I agree with that. I agree with that. 100%. This is not people that make. Made their money in shipping like the Steinbrothers. This is straight up, like shareholders in the 100 largest companies in the world.
A: It's the stock market.
Michael Batnick: Yeah.
B: The Celtics at 6 has to feel slighted now.
Michael Batnick: All right, so some of this Data
A: wolves at 1.5, like five years ago,
Michael Batnick: I would say that the Mets at 3.3 billion could be the first franchise in history to resell at a lower price. Stop. Like in modern history. Where are the.
A: The bucks aren't on here, dude.
Michael Batnick: I think Steinbrenner bought the Yankees from CBS in the 70s for like $6 million.
B: It was nothing.
Michael Batnick: I think that's What? I literally think that's what it is.
A: All right, so I have a new rule, a new rule proposal that will never pass muster, although maybe it will. You don't want NBA teams being flipped. Now, I know there's extenuating circumstances. We don't know everything about what's happening with the owner, but he's under investigation. There's. There's some smoke there, but there needs to be a five year holding period. Because if this is just about money and flipping the teams, this is not going to be great for the fans. Like, there needs to be some stability at that point.
Michael Batnick: What do you think about minority stakes? Because that's the new thing.
A: So I didn't realize Kushner owned a piece of the Grizzlies. He had to sell that to buy. He was a 5% owner in the Miami Heat. Obviously, he has to sell that.
Michael Batnick: Don't you remember? Don't you remember we had David Adelman here who explained Michael Rubin had to sell his piece of the Sixers, and that's how he was able to buy that piece. Like, that's because if you want to get into gambling, for example, or if you want. Or if another franchise opportunity comes along in the same league, you got to sell.
A: But if this is just about flipping to make a couple hundred million dollars in a few years or whatever that's gonna be, it's not gonna be good for the fans. If they are purely looking at this as how do I make more money? There's gonna be some nasty side effects.
Michael Batnick: The private equity guys are all in. If they put the word sports on the wrapper of a fund, it sells out.
B: This is it. Future Sports. What's this company that's gonna be there to help hedge on sporting events and stuff like that? Not a prediction market.
Michael Batnick: Hedge on the value of a team.
B: It's something I'm probably butchering.
A: Is there an ETF for that?
B: There will be, guaranteed.
Michael Batnick: I took the pitch from Eldridge, which is Todd Boley's firm. It's private equity. He's made a ton of money at, like, Guggenheim or whatever. And they own the Dodgers and not flipping, but like, they're out with a deck and they're gonna buy Indian Premier League cricket teams, they're gonna buy soccer teams. They're gonna buy. By the way, it's as big as the NFL.
A: What is?
B: I had no doubt.
Michael Batnick: Indian Premier League cricket. What about in half? In the other half of the world that we don't live in is as big as the NFL.
B: Pillow fighting championship, ESPN all right, you're out of here. Your son's taking his nap.
A: It's a great story. It's a great story.
B: He's posing.
Michael Batnick: Have you ever seen anything like.
A: Justin, what are you doing?
Michael Batnick: He's like a. I'm telling you, this kid's been laying down. He laid down on the train on the way in. He laid down in my office just now. He's laying down in the studio.
A: What did you think of the stock exchange?
B: Would you have a Baconator?
Michael Batnick: He's like, no, I took him to Keens.
A: Oh, first time? No.
Michael Batnick: Right? Tell. Tell him what you said. Tell them what you said. Exchange. Why isn't there a couch? Shut up.
A: God.
B: Someone tell Jay Woods.
Michael Batnick: He's like a stuffed animal, this kid.
A: Unbelievable.
Michael Batnick: All right, let's. Let's do the show.
B: Let's start it up. Compound and Friends, episode 255.
A: This podcast is brought to you by Vaneck. Look, we're in an era of rising debt, deglobalization and a massive physical build out to power the AI economy.
Michael Batnick: No, you look. That means more demand for energy, raw materials and infrastructure. Historically, that's been a really strong backdrop for real assets.
A: And Vaneck has an ETF for that. It's called Racks. The VanEck Real Assets ETF.
Michael Batnick: It's actively managed and shifts exposure across gold, energy, infrastructure and natural resources based on what the macro environment is actually doing, not just what it's done in the past.
A: RAX is your one stop shop for real assets. Head over to Vanec.comRax compound to learn more.
Michael Batnick: That's VanEck.comRax compound compound. Oh, my God. 255. Man, what a. What a treat you guys are in for. Returning champion Todd Sohn in the house could not be more excited. Todd is. Todd is one of the best. When my inbox says Strategus Todd Sohn, I'm reading it. I know you feel the same way. And a lot of Todd's charts make their way into compound content because we're such huge fans. Todd Sohn is the chief ETF strategist for Baird Strategus and Strategicus Asset Management. He leads strategicas ETF research, examining industry trends and how investor flows fit with or against the consensus. He is also the author of Strategus Asset Management's monthly ETF Field Book, a compendium of charts focusing on the growth of the ETF industry. Thank you so much for coming by.
Todd Sohn: Thank you.
Michael Batnick: We were so excited for this episode.
B: This is the field book.
Michael Batnick: What is that?
A: Give it here.
Michael Batnick: Why is it a field book and not a field guide?
B: Because other folks use the word guide guide to the market. We just called the field book. I did a market research.
Michael Batnick: Do you know what a field guide is? Okay.
B: How to get through the forest.
Michael Batnick: If you're a bird watcher, as Duncan is, you would go out into the field with your equipment and a book, and the book's a field book.
B: This is the book. You go book on ETFs.
Michael Batnick: Are there birds in here?
B: No.
Michael Batnick: How often are you producing these?
B: This is monthly.
Michael Batnick: Wow.
B: And this goes out to.
Michael Batnick: This is dope, man.
B: Strategus. Clients, investors in Strategus. ETFs are our products. And it's meant to just be everything you want to know about the ETF world.
Michael Batnick: I love it.
A: Feel good.
B: Feel good.
Michael Batnick: I love it. Is it available as a trapper keeper?
B: Yes.
Michael Batnick: All right.
B: Awesome.
Michael Batnick: All right. So we were talking as we walked into the studio. I've never seen this many ETFs launched.
B: It's nuts. Busier than ever.
Michael Batnick: But say more besides it being nuts, because everybody seems to be making money. If you launch a fund and it's a dud, it's almost like, who cares? Move on, launch 10 at once. Okay. But it's not haphazard. It doesn't feel that way. It feels that different issuers have different game plans for what parts of the map they want to cover. And to me, it just. It feels. I've seen spaghetti Cannon Moments with ETFs. I was around in 2010, 2011, when they were launching all the commodity ones and all the. And there was agriculture, a lot of nonsense. The ones that are coming along, I'm not saying they're all good, but there are some really great ideas coming, coming out.
B: It's about, if you're an issuer, what's your brand, what's your target market and what's hot. Right. If your brand is. You're a legacy fund manager from the 1940s, you're coming out with just core stuff. Right. Plain vanilla.
Michael Batnick: Is there an audience for that, though?
B: They go for the advisors. You know, maybe there's always advisors who
A: are looking for something different dimensional and avantis.
B: Dimensional, Avantis. Systematic.
Michael Batnick: So you can still do something vanilla and hit hater.
B: It's going to be more of a grind, though.
Michael Batnick: Okay.
B: You're not going to wake up and it's like, oh, my God, I have a billion of my assets overnight.
Michael Batnick: The way that happens is only one way, really. Either an extremely high income or a theme.
B: Theme.
A: Dram. ETF of the Year.
B: That's the best example. Oh, it's easy.
Michael Batnick: ETF of the Year thematic. That's the way to wake up with a billion dollars in your account.
A: What a launch. Holy shit.
B: Yeah, the Wynn Hulk guys are great. They're doing excellent work now with photonics. They have a big one now. It's probably 200 million, not billion, 200 million.
Michael Batnick: Or maybe. What is a photonic?
B: I don't even know what a photonic is. It's another layer of the AI.
Michael Batnick: It's a lazy.
A: Have you heard of their Halo etf?
B: Of course I know the Halo etf. But the problem is I keep typing in the ticker. Halo, which is a pharmaceutical company, you know, mahalo.
Michael Batnick: They really need to buy. I think Halo is a pharmaceutical company's ticker.
B: So I keep typing that in.
A: Just buy them and spin them out.
Michael Batnick: It's like Halo Therapeutics or something.
B: Something.
Michael Batnick: All right, so, well, they have loha, which is not even Halo backwards. Really?
B: Loha.
Michael Batnick: It's just sort of some of the same letters.
B: I can't even pronounce it.
Michael Batnick: I didn't come up with the ticker, but I do like the approach. And I think what's interesting is that Round Hill launched Halo, which is the antithesis of their hottest fund.
B: Oh, absolutely.
A: Literally.
B: I think it's a great strategy, right?
Michael Batnick: Well, for them it's like a balance.
B: It's a correlation thing. Right on one day and you can structure a portfolio like that. One day, my memory stocks are up. The other day, my anti AI stocks.
Michael Batnick: By the way, if the FBI is listening, I'm not promoting ETFs here.
B: This is not a.
Michael Batnick: Please don't buy it. I really don't buy it.
A: You know what's different about 2026 though? It's not just the number of new issues, it's the number of new issuers, at least. For example, do you. Have you ever heard of a company called Corgi?
Michael Batnick: I'm aware of it. I have no idea who they are or where they come from.
A: So I only just found out about it kind of recently. Tell us their story.
B: Okay, so Corgi. And if they're listening, I apologize if I butcher their backstory. They are a Y Combinator backed company. I don't know Y Combinator, Silicon Valley money.
A: Wait, sorry, Y Combinator backed an ETF company?
B: Yeah, something like that.
Michael Batnick: That used to be a badge of honor. Now they have graduating class of 9,000 companies. I don't know, whatever.
B: That's where the money comes from. And the folks there are basically saying, we still think fees in certain segments are too high. Levered ETFs and thematic ETFs. So they are going to launch everything under the sun and they're just gonna try and scale it up. So they did 30 different thematic ETFs. Everything that we know, they're copying the
Michael Batnick: most popular funds, but for a lower
B: price, for half the cost. About 35 basis points.
Michael Batnick: What a great pitch. And they don't have to make money. They just have to sell it to some other schmuck.
B: Scale it up.
Michael Batnick: Yeah, right.
B: And it's kind of the Hollywood box office approach. I release 10 films in a year. Seven are flops, three are hits.
Michael Batnick: And the hits will pay for the flops.
B: The hits pay for the flops. And they're doing it with levered ETFs too. Single stock and index based. But at 50 basis points, levered ETFs are usually, what, 90 to 120?
Michael Batnick: Do the other ETF issuers look at them like, guys, what are you doing? We have great businesses. Why are you racking our business?
B: I think there's a little consternation. I applaud them for trying to do something different on the fees basis. But it's also a distribution game. If you don't have the distribution, then you're not going anywhere.
Michael Batnick: There used to be ETF conferences. Yeah, I feel like this would be a knife fight.
B: Oh, it's definitely a knife fight.
Michael Batnick: Like if we were all at the Diplomat Hotel and this was 2016. Oh, yeah, this could get ugly.
B: And it's interesting because their thematic funds are actively managed, but I think it's probably more AI managed than portfolio managers.
Michael Batnick: How's the performance where it's too soon.
B: They're too soon. Okay, they're too soon. They have now they also have a Photonics ETF that has 400.
Michael Batnick: I might have one. Do institutions care that they've never heard of Corgi or would they ever trade it? Or does it need. It needs three years seasoning?
B: No, I think if they were to become the liquidity dominant vehicle in a theme, they don't care.
A: I think it's the basket of stocks. There's liquidity there. I don't think people care. If you're trading $100 million, it's different.
B: You want the liquidity.
Michael Batnick: Wait, what do you mean? You mean as long as the underlying stocks trade?
A: I don't think the brand name matters like it used to in 2018 of
Michael Batnick: the issuer to a hedge fund. No, but to a financial advisor, yes.
A: Yeah.
B: Financial buyers care. I'll give you an example. And I'm staying on this. Photonics. Even though none of us have any idea what the hell Photonic is.
Michael Batnick: Michael's going to Google.
B: There are five photonic ETFs right now. They've all launched in the way.
Michael Batnick: And there are three photonic stocks.
B: Yeah, exactly. They got to get watered down.
Michael Batnick: They just have different proportions of each. Yeah, they're all.
B: What's the big one? All right.
A: Photonics. They target optical networking, lasers and silicon. Photonic.
Michael Batnick: I know what you're.
B: It's a fricking laser.
Michael Batnick: Fricking laser.
A: I don't know what it is.
B: Okay, There were four of them previous to the last week. Corgi, Cuddle and two others I cannot remember.
A: Off top of my head Round Hill, Tema. Who's Tima?
B: Tema.
A: Tema.
Michael Batnick: There's a timu. Etf.
B: Teemu. Etf.
A: Teemu. Emu.
B: The four of these were around and they were doing some volume. Roundhill launches their photonics fund and takes all the volume. And it's only three or four days old now. They're already doing more volume than the other four combined. Do you understand?
Michael Batnick: So are the active thematics gonna be 10 basis point products by the time this is done?
B: I think by the end of the decade. It's not unreasonable.
Michael Batnick: Will the incumbents fight back and cut prices?
B: They're gonna have to. They're gonna have to. Especially once these funds get seasoned and aged. And if you're seeing that there's no tracking error between them, then you have a problem.
Michael Batnick: You know what's nuts? There's no referee.
B: No.
Michael Batnick: Yeah, like free market. If you rip people off like this, in some other business, you're gonna go to court, you might. You might prevail. But there's no referee saying that ETF looks exactly like a different ETF. You can't just do what they're doing.
A: Remember in 2017 when hack was mogged? Our friend, what was? Andrew.
Michael Batnick: Well, right. And everybody was like.
A: Everybody was like, this is. This is not right. This is bullshit. Boo that, man. This is unethical. Nobody cares.
Michael Batnick: Well, it's two different things. He had an ETF stolen from him. Allegedly. Allegedly. Allegedly. He created an ETF and then he got booted.
A: You're right, it's not.
Michael Batnick: They found a way to get. They found a way to get rid of him. What we're saying is like, if hypothetically. If hypothetically somebody came along and said, look, I just invented. I just invented ChatGPT. No, you didn't. It exists already. You can't call your product like there's nobody coming to rescue these incumbents as they. As they get.
B: If you can build a great product at a cheaper price, they will come to you.
Michael Batnick: Don't you think this just ends at 3 basis points?
A: Not for the leverage stuff. Because nobody cares.
B: Yeah, leverage stuff is different. Just because it's supposed to be data stable.
A: Like Nobody's going from one that's 59 basis points to one that's 37. Because nobody cares. You're trading it anyway.
B: Unless you are a brand loyaltist. I think this is gonna be a great test of brand loyalty. Roundhill has developed their brand. People know the brand. These other upstart issuers who are trying to get in the space. You gotta work on it.
Michael Batnick: Well, who else in that second and third tier? I don't mean that as a term of disrespect. I mean, not blackrock, Vanguard, State Street. So in that middle class.
B: Yeah, yeah.
Michael Batnick: Cause I felt as though WisdomTree had a brand, right? It had like its adherents and you know, the Jeremys and who else do you think has a real. I mean, not how much could they sell the company for, but who has a brand that. Cause I know you could sell anything now.
B: It resonates.
Michael Batnick: You could start a company last year and sell it right now.
B: But the brand that I think resonates the most is direction. Vaneck.
A: I was about to say Vaneck. I was about to say Vaneck. I'm so glad you said that. Smh.
B: Smh.
A: There's nothing rocket sciencey there, but they've got the stranglehold.
B: They have the best ticker in the world of ETFs.
Todd Sohn: To me.
A: Racks.
Michael Batnick: No HODL. They have buzz. They did the social media one.
B: Yeah, yeah.
Michael Batnick: The meme stock one shut down. I think gdx. GDX is a huge product.
A: Why do you think Van AK has a brand?
B: They play their social game really well.
Todd Sohn: It's.
B: The intern is on the. Whatever that is. I don't get the joke. Van Eck. Intern is their social media account and it just tweets out random.
A: It's actually Jan.
B: It's Jan. You're right. They do the ties. The ties are great for folks like me who wear a tie and I respect that.
Michael Batnick: Pacer ETFs
B: good products.
Michael Batnick: Do they have a niche or do they have a brand?
B: They have a really good sales force.
Michael Batnick: Good sales force and First Trust. I've met those guys.
B: Pacer and First Trust. Just relentless. Boots on the ground.
A: Salesforce gifts, like meals, meals, meals.
Michael Batnick: Baseball tickets.
B: Yeah. And they build products, right? They build quality for the most part.
Todd Sohn: Products.
B: But I don't think of them in terms of, like, going viral.
Michael Batnick: Granite. Granite shares direction. Crane.
A: I mean, there's a million.
B: Yeah, I mean, there's.
Michael Batnick: I think, like, I do think advisors care about brands because they have to answer for these products to their clients.
B: Yeah.
Michael Batnick: And I think having logos that are recognizable in an investor presentation does. I don't know if it helps raise money, but I think it helps clients feel good about what they're about to commit to the brand.
B: I mean, the ticker, sometimes, depending on who you're talking to, some people like the exotic tickers, and some people are like, well, I can't have this on
Michael Batnick: a. I'm agnostic type. I'm not one of these people that's like, oh, it's cutesy ticker.
B: As long as you can buy it, explain it. But the brand and then how does the ETF work? Is it a quality product? Cause there's products out there that are like, what is this?
Michael Batnick: All right, let's do the chart. This is the annual number of ETF launches. This is a strategus chart from Todd. This is getting difficult to keep up with. So what do you mean by that? Because you have to write research on all these products.
B: I try to keep up with what's going on. People want to know, hey, what new products are coming out, when new ETFs are coming out, and just kind of keep track of everything.
Michael Batnick: And especially you could drop coverage of things that don't matter anymore.
B: Yeah, yeah. But, you know, a lot of our clients always want to say, hey, what are you seeing out there that's unique, different, not necessarily hot, because they all know about the Hot ETFs. It gets written up a thousand times.
A: There's like 20 a week.
B: Yeah, yeah. But they just want to know, like, is someone doing something that's really interesting that we need to be aware of? And I'm talking the big institutional players that do not want to miss out on the next big whatever.
Michael Batnick: So if there's something thematic or active,
B: auto callables are coming up more huge. Coming up more in my conversation.
A: Billion dollars already, Calam.
B: There's more of those popping up. I am not an auto call expert. I can do auto call kindergarten.
Michael Batnick: Yeah, I am. I'll explain it to you off the air. So what's your process to keep up? You read the news or do you have a Filter.
B: I've got the software, Bloomberg ETF Action. Just going through everything each day. Most of the time you can figure
Michael Batnick: out what it is.
B: It's pretty vanilla, like oh, 2x this or thematic that. But I also keep track of whenever a new filing comes in, new registration for an etf, I'm digging into it. Just commit it to memory.
Michael Batnick: Okay. And then how do you decide which ones you want to write about? You're focusing on the volume. Like are people involved in this or should I not waste my time?
B: It's just me. I don't do pay to play.
Michael Batnick: Okay.
B: You know, of course, if you're a strategic client, maybe I'll give you an edge. If I'm going to make a list of 10 tickers I think you should pay attention to. And you're a strategist client. Of course I'm going to be preferable to the non paying strategies client. Right. But I also want to know, hey, where are the assets? I can't put some that's $10 million on a list in a note. I want to know the volume, the liquidity, what's it doing? Is it paying out capital gains? That's a kind of a no no for me. Yeah, there's these terror cases of that, but it's a little bit of just due diligence.
Michael Batnick: What's the new floor? Because I remember people used to say 100 million.
A: It used to be 100.
Michael Batnick: Well, I thought, I thought it used to be 100 and now it could be a billion before something is like this thing is real.
B: So we've within strategus, right. We have our ETFs with SAMT, we're getting pushback on. Hey, call us when you get to a billion.
Michael Batnick: Right. That's what I'm saying.
B: 890 million right now they're like, call us when you get to a billion.
Michael Batnick: I think a billion is the new 100 million.
B: Yeah, exactly. Yes.
Michael Batnick: In terms of like this is something we could put into an allocation and not look stupid in six months or a year.
B: Yeah, they don't want to get burned. There's too much money at stake and there's too many other established products.
Michael Batnick: Can I tell you one thing that is funny? I thought, and I was wrong, you might have agreed with me or not agreed with me. I really thought direct indexing was gonna halt the etf. Maybe not the size of the market. I just thought it would calm things down.
A: I don't think you thought that.
Michael Batnick: I did think that.
B: I just, I don't think you're wrong
Michael Batnick: maybe for core products. I basically thought custom indexes will probably capture 10% of the wealth management business. And what that will mean downstream is that there'll be less ETFs. What a horrible opinion. It's just 1000 ETFs a year.
B: It's just easier to buy a ticker. I want memory exposure. I buy the memory ETFs that are out there and I just do it real quick.
Michael Batnick: Retail doesn't care about custom indexing.
B: Custom indexing to me is a wealth management product issue.
Michael Batnick: High net worth like Vanguard Fidelity, they all tried to push that in front of and nobody wanted it. We tell investors, I'm sure some people using it, but you're right, it's not. I don't. People are not climbing over the walls to get into customers.
A: Let's, let's look at, let's look at the categories because there's one that's not here that's going to prevent this from slowing down if it's only going to accelerate. Next chart. Todd has the annual number of ETF launches by exposure. And it's pretty diversified. There's obviously a lot of leverage. There's equity as usual. Fixed income buffer is now a real category. Option income is a real category. Crypto is smaller, but commodities are still doing it. I mean, there's a lot going on here. Here's one category that you're going to see. I don't know when. Predictions.
B: Ooh, yeah.
A: Okay, here's my thesis. Mike Maubouson and Dan Callahan wrote a paper last week about prediction markets and all markets and the wisdom of the crowds and how it works. And they showed a line between what Kalshee predicts, like what's implied in the odds and what actually happens. And it's basically one for one up until the right. The market is usually right. The betting market is usually right. However, there's something called the long shot bias, which means that people are more, structurally, people are more likely to better the long shot that will not win. So the long shots are overpriced, but the heavy favorites are slightly underpriced. So if you are minus 900, nobody's taking that bet, right? Who the is risking $900 to win $100? Right. Nobody does that. So the heavy favorites are slightly undervalued. Okay, hear me out. If there was a market, a basket, an index, an ETF that only buys the heavy favorites and set the line where it's an 85% chance to win. All right, so there's a 50% upside, there'll be some slippage. Right. But that is a structural.
Michael Batnick: 15% is great.
A: That is a structural impairment for an investment product.
Michael Batnick: That's great.
A: So it's. Now it's not fun. It's not fun, but who cares? So if you take every heavy favorite across, not just the NFL and the NBA, but across the Oscars, whatever the betting market is, and you say we bet on every heavy favorite, minus 850 and above, when there's $10 million in liquidity or whatever it is, that's going to be an etf.
B: It's already been filed. Who's doing it? Subversive.
Michael Batnick: That sounds perfect. It's the company that's literally the company
B: who did the Democratic And Republican trading ETFs, like the Cruz and Nancy.
A: But you're going to see a million of these. Nice.
B: I think it's subversive.
Michael Batnick: So this sounds like a company that's going out of their way to.
B: Yeah. Now things that the SEC put the brakes on. These things for now they're open for comment. Because once you open up prediction market ETFs and have 50 of them, we're going to be doing it.
A: It's going to be insane.
Michael Batnick: We are inventing new and exciting ways to lose our money grind, our portfolios.
A: You will not be disrupted by AI. You are safe.
Michael Batnick: Yeah, I hope so. People need you.
B: But. So. So the idea, though, behind ETF was to hire a professional, like sports betting manager, who finds value in the lines.
A: So there'll be that too. Yeah, like an actively managed hedge fund of betting.
B: You're talking about, like, what's Matt Damon's character in Rounders?
A: Not Worm.
B: Him in an etf.
Michael Batnick: Worm is Norton.
A: Yeah.
B: Mike something.
A: Oh, yeah, yeah, Mike.
B: Yeah, him. Him. Managing an ETF is basically Rounders two. Is it?
Michael Batnick: What? Oh. So can I ask you. Can I ask you about Buffer ETFs?
B: Yeah, of course.
Michael Batnick: This is the breakout. This is the breakout category of the last two years. Probably not crypto. Buffer ETFs years ago.
B: Buffer. Or you could argue option income. Both. They're both options based.
Michael Batnick: Well, the covered call ETFs have been around forever.
B: True. Yeah. The first one came out in 2010
Michael Batnick: maybe, but they got sexy, they got real stuff. Oh, that's like Jeppy and.
B: Well, Neos.
A: So actually, great topic. So Neos and Bruce Bond's company, both
B: of these categories were acquired by Goldman.
A: Wait, what's Bruce's company's name? Why am I talking about Innovator? So Innovator And Neos were both bought by Goldman.
B: Yeah. $4 billion worth of.
Michael Batnick: What is the Goldman ETF strategy?
B: I know it's more.
Michael Batnick: I know it's more.
B: If we asked six months ago, I would say, I have no idea.
Michael Batnick: Because they were like, now you know. Now you know.
B: Now it's too. Okay, so they acquired a buffered ETF shop Innovator, which for the. For the uneducated, the uninitiated, it protects you on the downside over the course of the next 12 months. Caps you on.
Michael Batnick: These are like the old school structured products that brokerages used to sell.
B: Right, okay. And then they also acquired Neos, which does option income, ETFs, S&P, covered call funds. Right.
Michael Batnick: So let me tell you, I ran into Tom Lyden at the New York Stock Exchange today. The goat? The goat, Six months ago. He's with the guys from Neos.
B: Yeah.
Michael Batnick: And I don't even know. I don't even remember the guys. Some of them didn't even speak English.
B: He find the Lakers?
A: Tom Biden?
B: Yeah, yeah, why not?
Michael Batnick: I mean, so he goes, hey, man, you ever hear these guys? You should check these guys out. He's like, I'm just sort of helping them out, making introductions, right? But these guys have a great product. People love it. And I'm like, all right, yeah, I'll look into that. What I should have said is, tom, I don't care what it is. Please can I have 1%? Like, what do I need to do to buy 1% of this? Because this guy is, like, just striking gold every three years.
B: Goat.
Michael Batnick: He's a goat.
B: He's a great, great guy.
Michael Batnick: We love.
B: So they bought an income provider and structured outcome provider. You guys know this timeout.
Michael Batnick: Stop.
A: 2.
Michael Batnick: $2 billion.
B: 2.3 for both of them.
Michael Batnick: 2.3 billion for NEOs.
B: 2.3 for NEOs. I forget Innovator was like, 2 something.
Michael Batnick: And what was the AUM for NEOs?
B: 30 ish.
Michael Batnick: Low. 30. 30 billion.
A: Well, we don't. We don't know what the terms of the deal are. 2.3 is probably like, if this happens and if this happens and this happens. There's probably a lot of ifs, but great for that.
Michael Batnick: What are we wasting our lives doing?
A: Yeah, Tom, you want to run the show?
B: We should do it.
Michael Batnick: Should I make Tom the CEO of Ritholtz?
B: I mean, given his magical touch, then
Michael Batnick: yes, he'll sell this company for $100 billion. Anyway. It's enough glazing.
B: Tom, Lyde, they are catering to the. What I believe is the aging demographics of America. They want yield, yield, guarantee, or downside protection.
Michael Batnick: It's so brilliant.
B: That's my guess.
A: Goldman. On the recent call, Solomon was talking a lot about leaning into wealth. Now they're trying to. They're doing the custody thing, but I did not see this one coming.
B: No, me neither.
Michael Batnick: It's smart, though, because if they're really gonna do RAA custody, it can't be for basis points on trades. It's gotta be a purpose. And the purpose is to get more asset management revenue. And this is the product that makes it make sense. These are products that people in their 50s and 60s want.
A: These products have legs. And it's sticky. The Aum is sticky.
B: Oh, it's definitely sticky.
A: Nobody's selling these.
B: It's not hot theme money.
Michael Batnick: You know what else? You know what else? Vanguard's not in these categories. Or at least not meaningful.
B: You want my hot take? And I think I'm probably wrong, but I think Vanguard will get into them. They have to.
Michael Batnick: Yeah, he's probably taking meetings about this every day. I mean, they're in the ETF business.
B: Like, why wouldn't you.
Michael Batnick: They're not gonna buy.
B: No, they would just do it themselves.
Michael Batnick: They'll do it themselves.
B: I just think it's a matter of time. Like, this is where the money is going and the growth areas.
A: I can't believe they missed this.
Michael Batnick: So wait, so then does that make. Does that make Goldman regret its decision? If Vanguard comes in and Hoovers up 80% of the market or not really.
B: Then it becomes a. Our wealth platform versus your distribution mechanism.
Michael Batnick: I can't believe Vanguard's not in the RIA custody business. Oh, that's a whole other conversation I just can't.
B: I'm thinking about from the ETF landscape. Vanguard is low cost core.
Michael Batnick: Yeah.
B: Not derivatives.
A: Tom. I saw Tom. Todd, not Todd.
Michael Batnick: We can't stop thinking.
A: What the hell's her name?
B: Call me whatever you want.
A: I saw this today from James Seyfart. I like this.
B: Our guy.
A: All right, so James is great. Today we have ETFs from Harvard Capital launching. They'll be actively managed funds that specifically target each firm's ecosystem. I love this. I think it's a great idea. Josh, tell me what you think about this. So, for example, did you look at the holdings? No. So tell me about it.
Michael Batnick: I don't understand.
A: Let me tell you. SpaceX AI Lab Ecosystem ETF is an ETF incorporated in the United. Okay. The fund seeks to provide exposure to the portfolio eligible companies Most directly linked to the Space X AI artificial intelligence ecosystem. So imagine, imagine you want to be in the Nvidia business. You want to own the ETF of all the companies, core weave, whatever, all the companies that do business with Nvidia. I think it's a great idea.
B: It's. It's interesting. The largest one, I looked at the holdings. The largest in the open air ETF is SoftBank. So what is, what's.
Michael Batnick: Wait, so what's in the Google DeepMind? Google, like how much over. There's going to be a lot of.
B: There's a lot of overlap to other.
Michael Batnick: I like the. I like the concept.
B: Interesting.
Michael Batnick: I gotta. I have to be honest with you though. I think we're in a very specific market moment where like mom and pop investors are waking up and turning on CNBC and making money and, well, listening to Leslie Picker very like, specifically explain who's buying chips from who. Yeah, People are not going to be that interested in this in a year or two. It's. People know way more about this than I've ever seen people understand because the media is so fascinated. And I'm not saying it's a bad thing. I think we're gonna move on.
B: That's usually what happens.
Michael Batnick: That's always what happens.
B: Think about it. Six years ago we were like innovation and disruption.
Michael Batnick: I have to tell you that I was in this business when people would go on TV and with a screwdriver, take apart a tower, a computer tower, and point out the intel chips in it.
B: You used to do that with the iPhone, Right?
Michael Batnick: Right. So I was gonna bring you up to modern times. But early in the game, they would take a Compaq or a Dell, they would open it up and they would say, look, it's a Pentium chip from Intel. And that was like the investing theme. And people grew tired of that really fast. And then they did it with the iPhone. And I remember there was this whole suite of stocks like Skyworks and this one and that one. These guys make the glass, these guys make the antenna. People got bored of that. They're going to get bored of this. I think it's clever and I'm sure they'll make a lot of money. I don't know.
B: It's all about the distribution game now. Right. Interesting ideas.
Michael Batnick: So who's the distributor?
B: It's Harbor Capital, I think.
A: Right?
B: No.
Michael Batnick: Who's the investor in this? I'm asking.
B: I think it's a retail.
Michael Batnick: What do you think buying this?
A: I like the idea. I don't think this is going to get traction.
Michael Batnick: Me either.
B: I would tend to agree.
Michael Batnick: We will delete this if it does.
B: Yeah.
A: No, I hope it doesn't.
Michael Batnick: I want everybody to win.
A: But Josh is right. This is also a bull market. Activity like this type of shit does not find a bear.
B: Obviously, you don't see this at bottoms.
A: No.
B: Or at the start of cycles.
Michael Batnick: But it's also, there's a fatigue that sets in. Even if there's no crash as a result of this, it's like, oh, I'm exhausted. You're going to see somebody come on Twitter and be like, remember we used to talk about the ecosystem of OpenAI? Like, it's gonna feel stupid. I don't know if that's in three years or six months.
B: Their challenge would be, why do I need this over a regular tech etf, Right. If the holdings are the.
Michael Batnick: Wait, John, they're not sponsoring the show, are they? Who is this? Harbor?
A: All right, Todd, what do we see in the levered universe over the last couple of weeks during the washout?
B: Oh, yeah. Okay. So speaking of AI semis. Right. We had a moment in July. Things got shaky. And you talk about tightening monetary tightening. Korea decided to tighten their market significantly, not through interest rates, but through saying, no more 2x. You cannot launch more 2x single stock funds. And if you want to trade them, you got to go through driver's ed. And they're serious about it. So that was a different form of tightening. But what I find interesting is, wait,
Michael Batnick: they made them take a course.
B: They're putting in place all these different regulations now. You have to go through a. I think it was a week worth of simulated trading now to trade leverage ETFs.
A: I love that.
B: So, yeah, makes sense.
Michael Batnick: Korea is very. Is a very homogenous culture. Right. It's different than America. The Koreans are Korean. They have the power and they have the cultural buy in. If they all decide this is what's best for our communities and our families and our future retirement hopes and dreams, then we're gonna hear it's like the opposite. It's like, what can I bet on next?
A: I think what you're trying to say is they're very dim. Some. What?
Michael Batnick: No, no, I'm making the point. We don't have that kind of cultural buy in. If you get one person says, I want to ban this, there'll be another person right next to them.
B: You don't want to be shamed.
Michael Batnick: I want to do five times the amount of this.
B: Oh, yeah, yeah, Right.
Michael Batnick: We don't have A culture we all agree on.
B: Yeah, we don't have a shame culture.
Michael Batnick: So now the default is like, can we gamble on it? And will it sponsor podcasts?
B: Yes.
Michael Batnick: And these are the only two requirements for something to happen.
B: So they tightened their market levered long AUM. The leverage space got up to $200 billion, which was new high water mark, $500 billion in notional new high watermark. People started to get real uncomfortable, I think in terms of their exposure there, specifically counterparties doing the swaps.
A: Yeah, the air gets pretty thin up there.
B: Yeah. And as much as it was a rough July for a lot of those stocks, the assets in levered long products only went down about 25%. That's not that much. And given the action today, like SanDisk was up, I don't know, silly amount 15%. We're about to go right back to that high. I know that this situational awareness, fellow situational hairness I think you were doing the other day. That was great. Yeah, he got off the field. He's going to come right back on. And I think we're going to be back in the same place pretty soon.
Michael Batnick: I called that very quickly. Like, this kid will be managing money tomorrow. They think this is a scandal. It's not. This is. This is what Silicon Valley guys love
B: the demand for leverage, as much as July was a reprieve or respite, whatever you want to call it is coming right back. We're not. We're not through this yet. And your son's asleep. I mean, am I that boring?
Michael Batnick: We're talking about ETFs for three and a half hours. I can't believe it.
A: Fantastic.
Michael Batnick: What is this? So much. What is this? Retail cash.
A: This is interesting, what you got. I get a lot wrong, but sometimes I get things right. And this is one of them that I said early on when interest rates went all the way up and all the money went into cash, that this money was stuck, not literally stuck, but it was going to stay put, that it was not going to come out in the event of a stock market boom. I did think probably if you said, well, what if the 10 year is at 4.9? I probably would have said, yeah, then it'll probably go into bonds. Nope.
B: No. You need fed funds below 3%. I think for this to unstick so
A: that I couldn't have foreseen that you would have the stock market boom, you would have interest rates going higher, you would have the fed funds rate coming lower. And still it's not leaving.
B: Yeah, yeah. I Think get down to 3% or a massive stock market correction like you
Michael Batnick: know, real does in this line. Does this line go higher in a correction?
A: No, I think the opposite.
B: When you. So let's just say this market, do
Michael Batnick: people get scared and they pull it into their bank out of the money market?
A: No, no. I do think that this generation of investors will not run out of the stock market.
Michael Batnick: Wait, so for people listening, this is $3 trillion in total retail money market funds. And for retail, retail for context, it was 1.5 trillion the day before the pandemic started, which is six years ago. A little more than six years ago.
A: I think if you get a 40, if you get a 35% meltdown of the S&P 500, money will come out of money market funds and go into the stock market. And that's probably never happened before.
B: I could see that.
Michael Batnick: And then if you were saying the same thing here, we're saying Dow 100,000, all it has to do is fall 30% first.
A: Yes.
Michael Batnick: Is that what it's saying?
B: Basically, if you told me fed funds rates were going to be below 3% along at that, then yeah, that moving is coming out. That's what happened in 2007.
Michael Batnick: What if it still doesn't move? What if it just never moves again?
B: People just got lazy. I don't know.
Michael Batnick: A lot of the economy runs on borrowed money versus spent money. It's very different. Now I'm not saying that's good, but I am saying people are doing things with their assets without their assets having to be sold.
B: Like buying the Lakers, basically.
A: Kaisey has a question. So The S&P 500 is at an all time high today. I'm not even sure where the Dow is. Is the Dow at 56,000? I really have no idea.
Michael Batnick: Do you want to know? Exactly.
B: I'm not a big Dow guy.
Michael Batnick: Well, I am.
A: Well, you just said Dow 100. That just reminded me. I really don't track it.
Michael Batnick: No, I think it's 48,000. But hold on.
B: I get interested when stocks are kicked out of the Dow.
Michael Batnick: You think what?
B: I get interested when stocks get out of the Dow. Unless you were talking to Michael.
A: The dow is at 54,054 and the market is healthy. Todd, we've got a dashboard from Chartkin. Matt, throw this up, fellers. All right, how about this? Energy leading the way.
B: I'm a fan because it's anti beta to the S and P now. Energy's beta has collapsed 2% of the market. Yeah. And so, okay, so if you don't want to take a big swing. You buy natural resources etf, where you're going to get energy and materials and maybe some other stuff. But energy's beta is negative to the S and P. It is just a complete collapse. So it's a hedge necessarily, especially when bonds aren't hedging.
A: Wait, health care.
B: I said I'm talking about energy.
Michael Batnick: Okay, so energy.
A: So here's what we're sorting by RSI over 70. So healthcare is working. It's been a while. It was really shitty in the first half of the year.
B: Healthcare has been the bane of my existence.
A: Why?
B: For the last year and a half, two years, the case has been the same thing for healthcare. A massive money out of healthcare ETFs. Okay, I start to think contrarianly, temperature's very cold and relative performance that is in its bottom decile. So bad, it's so good. So that's an interesting combination. Bottom decile performance. Healthcare outflows. People hate it. So the contrarian to me starts to say, oh, look at this. And it's finally starting to work. The joke I always use is healthcare took a GLP1. It went from 16% to 8% of the S&P500.
Michael Batnick: I think people hate it as a sector, but they love some of the individual stocks because while that's going on, what you're describing, Lilly became one of the 10 largest market caps in the world. So I think in healthcare, more so than energy. Energy is one trade. Now we have some stocks on our best stocks in the markets list from the energy sector. Marathon, Valero, HF, Sinclair, what's called Phillips 66. So all three are refiners. We have Baker Hughes, a few. But if I look at the energy sector on any given day, they're probably gonna be all red or all green. Cannot say that about healthcare. Healthcare is very diverse, extraordinarily diverse in terms of the number of industry groups. And then on a stock, by stock basis, we're talking about, you get a drug approved or not approved, it could mean 30% market cap instantly.
B: I think that's also why sector investing needs to evolve. You can't just buy XLV or XLI because industrials are super diverse. You're buying transports, you're buying power generation
Michael Batnick: or airplanes or Uber.
A: Right.
B: So you're seeing more, not necessarily niche, but subsector ETFs, launch thematics. It's the Maddox and that's the kind of.
Michael Batnick: The sectors are very artificial. They come from the 1930s, 40s, 50s, they're not applicable.
B: Antiquated.
A: It's Visa discretionary and not a financial.
Michael Batnick: It's a tech or tech.
B: No, it's a.
A: Exactly.
B: I should know this.
A: Exactly.
Michael Batnick: It's in the xlk, isn't it?
A: You might be right.
Michael Batnick: It shouldn't be.
B: Well, what index provider we talking about? Because now you're getting into index providers. Is it S and P? Is it footsie?
Michael Batnick: You know what's funny about this msci? One of the big things, like with financial tv, one of the tropes is like what sectors are you overweight? What sectors you want to do it. It's just it. It's just not helpful to. I understand. It's a good conversation starter.
B: Of course.
Michael Batnick: And maybe with tech or with oil, it makes sense because that is sort of thematic. Yeah, but like, what do you think of consumer? Discretionary? I don't know which one?
A: No, tech doesn't work anymore. Software versus semis.
Michael Batnick: Yeah.
B: Can we talk discretionary for a moment? And consumer.
A: Oh, I brought one of your charts.
B: Is it the weight chart?
A: No, attract to it. Oh, where did the consumer go? Yeah, yeah, it's great. Chart nine. I love this.
B: This is interesting to me because the consumer's such an important part of our economy and yet both discretionary and staples, weight in the S and P is evaporating. Staples. We know it's right. It's a bull market. Nobody drinks anymore. They're four and a half percent of the S&P 500. That is a.
Michael Batnick: It's a bull market and nobody drinks anymore.
A: Dude. But you know what this is? This is Google and Nvidia growing up faster.
B: That too.
Michael Batnick: Why are there big alcohol weights in here? Is this like alcohol tobacco?
A: No, it's the denominator. The S and P is outgrowing.
B: Yeah. If it's not risk off, there's no reason to only own staples. And especially in the option income world we're in, I don't need staples for Yield. Discretionary below 10% is rare. That's interesting to me. That usually happens in tougher economic environments of which is not the case right now. And that kind of speaks to how dispersed that whole sector is.
Michael Batnick: But is which one discretionary?
B: Discretionary. Yeah. Because you got hotels, Amazon, home building, Tesla.
Michael Batnick: Is Tesla in there?
A: Yeah.
Michael Batnick: Why is Tesla not an industrial? Am I like, shocking?
B: Why is SpaceX not an industrial? It's in communications.
A: Yeah. How is Tesla discretionary? You're right.
Michael Batnick: I think throw all of that shit out. It's from another era.
B: Can you name me one person who works with GICs.
Michael Batnick: No.
B: You know a lot of people, right?
Michael Batnick: No, it's probably some sort of cabal.
B: I don't even know who is on the gix.
Michael Batnick: Who is gix?
B: Who is gix?
Michael Batnick: I don't know.
B: I don't know.
Michael Batnick: It could be some Skull and Bones thing.
B: Yeah, it's like. What's that Simpsons episode, the Skull Whatever.
Michael Batnick: Yes.
A: What's going on with small caps or anybody buying them? You've charted this for a while.
B: Small caps. There's money coming back into small cap ETFs. But I just get the sense that people are like, yeah, we're dabbling back in after three years of being out. I think there's a lot of reluctance. I think. I think though, following this Russell Reconstruction, the next six to 12 months will be interesting for small caps because they had Bloom energy, which was $100 billion market cap. That's never happened in the Russell 2000 before.
Michael Batnick: Right.
A: How come they can't update their rules? Okay.
B: Yeah, Well, I think they make it semiannually now.
Michael Batnick: Great.
A: Yeah. But if a stock is two and a half times larger, if number one is two and a half times larger than number two, it gets out of there. Draw a line somewhere that you should
B: be an index provider.
A: It's common sense.
B: Batnik indices. That would make sense.
Michael Batnick: I want to ask you about.
B: Great.
Michael Batnick: Though I want to ask you about the crypto ETF race. Is it still a race or has it been won? And what like, is anyone going to give up?
B: Okay, crypto, the money. Money's leaving. Crypto ETFs.
Michael Batnick: Interestingly, leaving is going into. It's obviously not going into crypto.
A: Wait, I thought they were coming back.
Michael Batnick: Are these people just buying. They're just buying AI stocks.
B: Buying stocks. Or maybe somewhat.
Michael Batnick: Can you blame them?
B: Yeah, they got.
Michael Batnick: They thought they owned the innovation of the decade and now they realize they don't.
B: It's ice cold. The amount of crypto ETF products still got stupid. I mean, we were doing 2x dogecoin.
Michael Batnick: Why nobody wants it.
B: The one that interesting to me is hyper Liquid because I actually have a tangible feeling for like I can go on a computer and say, look at hyper liquid. This is neat.
A: I think that's super cool. So for people that don't know about it, explain it quickly.
B: It's a perpetual futures exchange. So you were able to trade SpaceX synthetically on hyperlink before it IPO'd and
A: it got it right?
B: Yeah, it's the market. Yeah. Yeah. It might be not the Most liquid market, but it's growing.
A: Crude oil over the weekend, during the
B: week, you can trade crude oil. On the weekend, you trade Bitcoin, whatever you want. It's an exchange disruptor. That's interesting to me. But all these other random crypto ETFs of which I'm naive and don't understand, like, okay, chainlink's so honest.
Michael Batnick: Be honest and say they're penny stocks.
B: They probably are.
Michael Batnick: They're chain ladder stocks. Why can't we just be honest with each other? They were supercharged because of the existence of Twitter and Reddit, which did not exist in prior penny stock bull markets. But that's. It was penny stocks.
B: Majority of advisors will buy the brand name, which is Bitcoin.
Michael Batnick: Yeah.
B: Some smart ones will say, oh, I like this.
A: I don't know exactly.
B: Whatever.
Michael Batnick: I don't know. We had a financial advisor sitting in your seat talking about Ethereum.
B: Yeah, I love him.
Michael Batnick: I have no idea what he said.
B: He's one out of 100.
Michael Batnick: I have no idea. Like, I don't know if he does either, but it was great. All right. I want to ask you about international ETFs. I haven't heard a peep about any. There's. I guess like Robinhood Retail doesn't care about foreign stocks.
B: There's no AI. There's AI, but. There's no but.
A: There's em.
Michael Batnick: You have Korea and that's it.
B: There's Korea. Little Japan, Korea and Taiwan jacked up emerging markets, which is interesting to me.
Michael Batnick: But. So are you saying if there's no AI, there's no flows.
B: There's no semi. I mean, they get flows only for model allocations. Like the real boring msci.
Michael Batnick: IFA stocks have not been bad.
B: Japan's a great. Japan has been excellent. Europe has been surprisingly good.
Michael Batnick: Right.
B: Korea. China's the kind of the disaster, frankly. But that's always the case.
Michael Batnick: Okay.
B: Nothing new there, but people just don't seem to care.
Michael Batnick: Are you surprised that commodity stocks never worked to this day? Have never worked. Commodity stocks, they have their.
B: Oh, like the actual.
Michael Batnick: I mean the funds, they come with
B: futures roll problems and they come with tax problems too. Right. If it's not. If it's in a partnership, a commodity pool, you get a K1. Nobody wants that.
Michael Batnick: I know I won't buy these things, but I guess my question to you is, are you surprised? As somebody who follows this industry more closely than anyone, why did nobody figure this out? So you have this. You had the futures roll problems with Contango and too Boring for me to even get into. Yeah, the right. The tax side, the way it's classified, the gains are classified.
B: There are some successful actively managed commodity ETFs out there.
A: Yeah. How about this? The sponsor of today's show racks. No kidding.
Michael Batnick: They figured it out.
A: So they have over a billion dollars in that fund.
B: Yeah, that's a real fund. A purpose in a portfolio, as a diversifier, as an inflation hedge. If that ever becomes a thing again and you have someone at the wheel, I think it's David Shasta.
Michael Batnick: So that's different. You're talking about managed.
B: Yeah.
Michael Batnick: What I'm saying is like what never worked is like I just want an ETF product that will go up and down with crude oil. I don't want to hear about. I don't want to hear about backwardation ever.
A: How come gold works?
B: Because you can store it.
Michael Batnick: That's it? Yeah, that's the whole thing.
A: Crack the code.
B: You can't store copper, so you have
Michael Batnick: to use the futures for like, I don't know, agricultural products. Because you can't store wheat forever. It'll go bad.
B: It goes bad. Yeah.
Michael Batnick: That's all it is. That's the whole thing.
B: It's always get stored somewhere.
A: This whole time?
Michael Batnick: This whole time. That's a great answer though. Why? Like why is it, you know, it's so funny.
A: Josh is gonna be saying this for the rest of his career.
B: It just goes in a vault and it just sits there.
Michael Batnick: I never understood. No, I never understood why they couldn't give me oil and gas. Or gas.
B: Yeah, those are harder to store.
Michael Batnick: Who is working on the COMPUTE etf, which you know is coming.
B: Oh, there's a whole bunch of them. Proshares, Roundhill, maybe Defiance.
A: Wait, what do you mean by compute?
Michael Batnick: Like the stuff literally will track the price of compute not. We will buy Korean memory stocks.
B: That's the next.
Michael Batnick: Oh, I know it is. Rat race and the price of chips.
B: There's. I have a list somewhere of all the thematic launches coming out, including compute. And it's getting stupid. But there's a question.
Michael Batnick: How many compute ETFs will we see by year end? Let me back this up. So the big thing that happened this week, which we talked about already on. What are your thoughts this week? People that missed it. There was a CNBC infomercial. I can't describe it any other way.
B: Oh, with the CEOs I would.
Michael Batnick: This is on closing bell overtime, which I think is on at 4 o'. Clock.
B: Something like.
Michael Batnick: Yeah, so I think they called the Network and said, would you be interested in Jensen Wang? And they said, I'm listening. Would you be interested in Jensen Wang? David Solomon, Apollo Blackstone? Would you be interested in all of them?
B: A lot of security.
Michael Batnick: They did a roundtable at the Nasdaq announcing a $500 billion partnership. And they said you could have the rest of the afternoon if you want it.
A: A roundtable of circular financing.
Michael Batnick: Right.
B: It's like Knights of the Round Table.
Michael Batnick: So now that is. Gentlemen, start your engines. Everybody on Wall street watched it. It was 34 minutes. I watched on YouTube. So now you have to assume you're gonna get futures markets on the price of compute, and then you're also gonna get an ETF product.
B: There is already registrations out there for compute funds.
Michael Batnick: So who do you think has the most compelling idea or who do you think will get out the door first?
B: I don't know who gets out the door first off the top of my head. Depending on.
Michael Batnick: Did they all file at once at the same time?
B: I think they've all filed pretty close together. So then it comes down to brand loyalty. Who has the best brand loyalty out of the thematic space? Right now, it's Roundhill.
A: This should be the top.
Michael Batnick: But it's not thematic. It's a commodity. It's like electricity. It's like betting on the price of.
B: If you're catering to retail, to allocators, that's a different story. You know, if BlackRock does a BlackRock Compute ETF, that's a much different story.
Michael Batnick: Okay, so the CEO of BlackRock, Larry Fink, was part of this roundtable. He's the only one that didn't come in person. I think he thought they were all going to get whacked. Opening scene of the Godfather 3.
B: Can I tell you about an ETF that got filed today?
A: Spoiler. I never saw that.
B: Speaking. You want to know what was filed 1989? You want to know what was filed today?
Michael Batnick: Yeah.
B: Jensen Huang interview etf.
Michael Batnick: Stop.
B: I'm not kidding.
Michael Batnick: Who's launching this? You know, I want to know, is it our sponsor?
B: No.
Michael Batnick: Okay, wait. What is it? What does it do?
B: Companies he interviews are in the portfolio.
Todd Sohn: What?
B: I'm a little.
Michael Batnick: Who does he interview?
B: I don't know.
Michael Batnick: Is he Jay Leno?
B: Maybe it's the people who make the coat, the lever.
Michael Batnick: Hold on. So they said during this roundtable, though, that computer's a new asset class, wealth management, blah, blah, blah.
A: Todd, I don't know if you heard there's a shortage of it, but.
Michael Batnick: So how do I do Computer. So hear me out.
B: How do I do that?
Michael Batnick: Is there a world in which in three years, financial advisors are showing a model asset allocation and there's a slice for compute or.
B: Yeah, it's a new commodity. Why not?
Michael Batnick: But so, like, It's. Here's my 1% allocation to gold.
B: There isn't, because.
Michael Batnick: And here's my 2% compute sleeve.
A: All right, stop.
B: There's a. No, there's a. There's electricity futures in an ETF now also, so.
Michael Batnick: Okay, I like that.
A: I heard that pitch. I thought that made sense.
B: Ticker of it in my day, you
Michael Batnick: could buy the utility stocks. Just saying.
B: Not anymore.
A: Wait. The price of electricity is not going down.
B: Should be going up ever. It's not sexy enough to buy utilities anymore. I can buy covered. Call on Bitcoin. Why don't I need utility?
Michael Batnick: What's your. What's your. What's your fall winter outlook as far as, like, what people are going to be doing? What people are going to be talking about for ets?
B: Yeah, I think the resumption of leverage.
Michael Batnick: Well, no, I was going to ask you about Broadway.
B: Yeah.
A: Literature. What's your outlook? Any hot novels coming up, Todd?
Michael Batnick: Like what? Give us, like, tomorrow's headlines today. What do you think is going to be big stories?
B: I would not be surprised if we start reading about how some of these thematic funds are kind of falling on their face. Cynically. Cynically. I say it cynically because there's so many of them. There's not enough money to go around.
Michael Batnick: Okay.
B: It is still very much a bull market for stocks. That's not a critical.
Michael Batnick: You know what's funny, though? If you do an IPO for a company and the stock falls on its face, people get hurt because they bought it at the IPO price and it gets cut in half and there's no interest, and the analysts downgrade it or don't even cover it with a failed etf, so long as it accurately tracks what it's meant to track. If it doesn't attract assets, nobody gets hurt. Who gives a shit?
B: Yeah, a couple investors in it. But that's.
Michael Batnick: No, but why do the investors get hurt? In other words, they bought it. Hear me out. Hear me out. They launch 10 compute ETFs, let's say, between now and the end of the year, and the price of compute actually goes down and the ETFs actively track the price of compute. You might have lost money as an investor on the bet, at least temporarily, but the ETFs did their job.
B: Oh, exactly. They're packaged product.
Michael Batnick: Now here it is in the opposite direction. They launched 10 compute ETFs. The price of compute goes up.50% of those 10 ETFs. Eight of them don't raise any money. They're flops. Yep, that would be. The price went up of the. Of the vehicle. But the product is a fail.
B: Yeah, Nobody want it.
Michael Batnick: Who gives a shit though?
B: That's.
Michael Batnick: Nobody loses money.
B: That's what happened in this with tanker shipping. ETFs things up like a thousand percent, but it's not taking any money.
Michael Batnick: Right. So is it a flop or did it do its job?
B: It's doing its job. It's just. Nobody wants it.
Michael Batnick: Nobody made money.
B: Yeah, nobody wants it. Or people could be making money. They just don't need the allocation for it.
Michael Batnick: Did you have fun on the show today?
B: I always have fun in the show.
Michael Batnick: Okay. Are you unnerved by this or. It's okay.
B: Your child or Michael or boy.
Michael Batnick: He's adorable, right?
B: I like the pillow.
Michael Batnick: Shout out to the nugget. All right, Todd, we want to thank you so much for all the unbelievable work you do all year. You are my primary conduit for. It's like three people on the ETF side.
B: I appreciate that.
Michael Batnick: You're the vessel and you're in there. It's Baltunas. It's you. I would have to think long and hard about the third person. You really.
B: He's a great guy.
Michael Batnick: You cover it. You cover it really well. I want to tell people how they could learn more about Strategus and potentially become clients of what you guys do.
B: Institutions. BairdStrategas.com or if you'd like to invest with us, Strategus ETFs.com. okay.
Michael Batnick: How many ETFs do you have now?
B: We have three. And if you're invested, if you're interested
Michael Batnick: in only three out of 900 launched, what are you guys so busy doing?
B: You're working on it.
Michael Batnick: All right.
B: If you want Strategus in an ETF samt.
Michael Batnick: All right, Todd, thank you so much. We appreciate it.
B: Thank you.
Michael Batnick: Hey, thanks to everybody for listening. Thanks for watching. We appreciate you. Leave a rating, Leave a review. Talk to you soon.
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