Transcription
All right, let's bring our guest up. We have a guest in the building. What's going on, brother? How you doing?
>> Yes, sir. Oh, my brother brought out the suit. Good to see you again, my guy.
>> Suit and tie today. I'm in the office, so
>> Okay, okay. Well, pleasure to have you. Bilal Little, ETF strategist, Wall Street veteran, um capital markets leader. I know [clears throat] you have a show. Ian was on your show recently. Um and somebody that's that's been a a voice when it comes to investing for a long period of time. So, looking forward to this conversation. Thank you for joining us. Appreciate it.
>> No, thanks for having me, man. I'm so um I'm so inspired by what you guys continue to do with the uh direct-to-consumer market and uh the education and support that you guys provide people, man. It's uh it's needed and uh I think it's a testament to you guys picking up the call and being that beacon of hope for people.
>> Appreciate it. You heard that last segment, man. What you think about our companies?
>> [laughter]
>> Uh true. I was waiting for you, man. I thought you were going to throw out some, you know, you could have ran with the Palantirs, you could have ran with the Oracles of the world uh as complimentary pieces. Um but I thought it was good. I thought it was a good segment. I thought it was good.
>> [laughter]
>> Um so, okay. So, let's talk about um ETF in as totality cuz you obviously you're ETF strategist. So, for people Let's start at Let's start at this level, right? For people that are just getting into the stock market or people that's already been in the stock market, what in your opinion makes ETFs attractive and why should people consider ETFs as opposed to just having all of their money invested in just individual stocks?
>> Okay. Sorry about that. So, so my point of what I was saying is like the ETF investment vehicle is just innovation to the entire space of investing. The most important thing for people to understand and know is they they get the same level of professional advice and exposure through the ETF rapper that they used to get with mutual funds. And you get to build in more precision into what you want to hold in investments. So, here's my example uh to the question that you guys were talking about before. The concentration of the S&P 500 today, 40% is basically your mag seven of the S&P 500. You're talking there's 500 or so plus names in that. When you look at the Qs, the exact same thing. The concentration is north of 45 50% in information technology. The market right now is priced in for perfection. Meaning everyone's know everyone knows what's going to happen with the AI trade. Most companies have basically provided guidance on what they're doing and not why they're doing it. But if I'm a general person and I'm concerned about what's going on in the market and there's a slight miss on any of those top companies, that will have a material impact on the overall index, both the S&P 500 and the Qs. So, if I'm a general person just starting out and I say, "You know what? I want to buy these same companies that everyone's talking about." You can just buy the index. I don't need to trade the individual securities on a day-to-day basis. So, that's why the ETF is so important. More More importantly though, it's completely transparent. You know exactly what's inside of these investment vehicles. Right? That That's critical for people to say, "Okay, I know exactly what I hold." Then, I'll give you another opportunity to think about something else. Because it's so transparent, I can see what other companies that might be on the up and coming that I want to trade in the future that you may not be privy to that that even falls into a specific sector. So, I just think like the ETF rapper should be seen as innovation to the entire industry. And it creates space for the retail investor to participate. If that makes sense.
>> Oh, let me just follow Can I just follow up on that cuz you just said something that was insightful. Cuz when I used to be a financial advisor and we do a lot of mutual funds. Are mutual funds essentially over?
>> I [laughter] was going to I was going to say that. Yeah, yeah, I was going to say that. I was thinking the same thing. No one even talks about mutual funds.
>> to explain it. I'm like, you know what? There's no point.
>> I mean, look, [laughter] for for from an industry perspective, most asset managers Do you guys hear that?
>> That was That was Ian's mic.
>> Most asset managers are not launching new new mutual funds. Very seldom do you see a money manager say, "I'm going to launch a mutual fund." And it's because of the structure. So, here, let me just break down a couple of things of the mutual fund that makes it a little more archaic. So, one, if I'm an investor of a mutual fund, and let's just say the mutual fund has $10 million in it, and a large investment or trade comes in to sell a million dollars. So, you're talking about a tenth of the overall assets want need to be sold to liquidate. What happens is whatever positions that are held in that mutual fund, the gains or losses will need to be sold in the fund, and then those are passed off to the investors. Well, why does that matter? Why is that important? Well, if I didn't sell my fund, I don't want to pay capital gains on an investment that I was hoping like could be more tax efficient. So, historically, the mutual fund provided exposure, institutional management, low fees, and all these benefits that we typically didn't have. But now the innovation of the ETF, because of the structure of it, it's more tax efficient. People don't need to participate in the buying and selling of other people in the fund. More importantly, fees have come down. And then to your point, transparency is another important aspect of it, Belal, because mutual funds actually report like 30 days or 60 days or even a quarter behind to show what securities they hold. That was one of the benefits of the money managers. So, we kind of have seen basically uh passing of the torch. I don't want to say that they're completely but it's a passing of the torch that the ETF is a more efficient vehicle for the future.
>> I agree with you. I really like what you said about finding new companies. I remember going inside of SMH maybe 6 years ago and just looking at the allocations and that's where you Well, what is TSM? Oh, let me go study what that company is cuz it's the number two allocation. Oh, wait. Wait. Texas Instrument. Wait, I I used to get that as a calculator. Like, oh, that's a good And so, you start finding companies. ETFs have, I mean, just blown up. I mean, it They're They're everywhere. What's at the forefront of a lot of people's minds right now these leveraged ETFs. We talked about a little earlier when we talked about South Korea. People will tell you it's too risky. And from your expert opinion, is there a way that they can be used in a beneficial manner for
>> So, first is I think we need to just answer what is a leveraged and inverse product, right? To tell people and give them like scope of what's going on. And then the second thing is we need to just cover the entire ETF ecosystem at in in totality. So, I'll start with the second question and then dive into the inverse. So, one, there are 5,500 ETFs in the market. 5,500. That's more than the publicly traded stocks that are out there. Like, let's just be clear about that. So, how do you determine which one is the appropriate one for you? So, that's a big question. The second thing is um ETFs are pulling in around 1.2 to 1.5 trillion dollars a year. That means people are allocating a lot more to ETFs than they've ever done before in history. So, because of that, now we say, well, how many issuers are in the place in the marketplace like the BlackRock's of the world or the Direxion ETFs. There's about 500 ETF issuers that are coming in and they're launching products for people to invest in. So, that's the size scope of the market. When it comes to leverage and inverse space, they basically launched back during the financial crisis and they were basically built for banks and institutional investors and traders, right? So, they were liquidity um trading tools. They've evolved really, I would say, up until um I would say what is it 2020 when the whole COVID situation happened and retail really came to market. So, what it's we call L&I or leveraged and inverse, there's only about 500 levered ETFs in the market and maybe about 120 inverse ETFs in the market. And the way that these products are structured, I'm going to say some terms that I don't want to lose people. I know you guys get it, but I don't want your audience to lose it. Uh we're going to just talk about derivatives for a moment. Everyone knows derivatives because they trade options. I'm sure your audience, you guys have done a phenomenal job of educating people. They trade options. The second derivative that people should know about is futures. Well, a lot of people trade futures, so I don't think that's too complex for people, either. The third one, which is not talked about as much and why leveraged ETFs make a lot of sense for people, is because we use swaps. Swaps are institutional bank contracts or basically an agreement between two counterparties that one pledges to get exposure through the contract of said underlying security. However, you don't have to commit so much capital to get that exposure. So, an example would be our SpaceX 2X leveraged ETF, LOFF. We basically have a swap counterparty. They give us and pledge us basically 2X exposure to SpaceX. However, we don't have to commit all of the capital to buy a bunch of SpaceX to get that exposure. Does that make sense? So, why is that important is because what we've seen is an explosion of sector and single stock ETFs because people really want to lean into the concentration opportunities that you guys were just talking about before. Can I get 2X exposure on Microsoft? Can I get 2X exposure on Nvidia? Can I get 2X exposure on Micron? Because I've been following the trading pattern. I see what the opportunity is. I believe these levels from a technical perspective make a lot of sense. But now let me really show the precision of my conviction in this trade. So an example would be last week when Micron reported, we have a two we have a 2x levered Micron ETF as well as an inverse ETF. I'm just giving you raw numbers here. Micron was up 14%. That ETF that we had was up 28%. So if you said, "Hey, Micron going in, Micron's going to beat earnings, but you really wanted to lean into that trade." You could actually had an ETF to get you the exposure that you wanted and the performance that you probably were looking for. Now those products, meaning levered and inverse, they are designed to be daily traded products. I want to be very clear the education, daily traded. They are not designed to be held, bought and held like long-term investment solutions. Because there are other risks associated with them because the leverage that you exposure on the way up is the same leverage that you exposure that you get on the way down. And I think the audience should be familiar with that no matter what inverse or leverage product they buy.
>> Um in your opinion on the institutional side between let's say AI crypto space, private equity, which thing do you think is most overrated private equity right now?
>> It's not even a question. So here's here's why. Here's why. So private equity right now, a lot of the firms are are are basically seeking additional capital through loans to pay back investors because they need to meet redemptions. So a lot of the private equity firms are basically going out getting these private loans specific for private equity to make sure that they can pay back some investors. That's one. Yeah, yeah, yeah, yeah, yeah. It's basically special financing. You've probably read in the news all over the place that a lot of these have redemption issues. Why would you possibly have redemption issues?
>> Yes.
>> Right? You would have redemption issues if you're not willing and ready to actually go price an asset back in the market where you think you can get the rate of return that you need to not only make your gains, but also to pay out your investors. So, that is a major issue and concern. Over the last 5 years, you've seen private equity try to tap into the wealth management space like you've never seen before. Because what happens with uh maturing assets is they tend to then go to the retail public as a way to provide liquidity into the marketplace. So, right now, you think about the amount of private equity investors and people that you have and I'm not saying all, I'm not speaking for the entire category. I'm just saying from what we think where we are in a late stage cycle. Does private equity have the ability to pass off the cost of an investment and get the premium that they want to meet the redemptions that they need? I just don't think so in the marketplace where it's already priced at to perfection. So, what are they going to offload? Where would they offload? Who's going to provide the liquidity? At the end of the game, this is liquidity conversation, right? So, that's why I think and then if you go So, now let's just look at the other assets asset [clears throat] classes that you asked me about. Take crypto. Crypto's been beaten up pretty pretty bad. I'm not a Bitcoin maxi or anything like that. We provide trading vehicles so you can trade whatever you want. But, if crypto's beaten up to where it is, the market has kind of turned its back on it. You also have an administration that's extremely supportive knowing that we need to win the crypto rails just like we need to win the AI rails of the digital infrastructure of the future.
>> Mhm.
>> Something tells me that has a little more life in it than uh private equity fund and or a vehicle, right? That's at the later stages of an investment cycle. Think about the concentration right now in the marketplace. You guys are just talking about it, right? It's highly concentrated in the whole AI trade. After you get away from that, it kind of breaks down fairly quickly. So, that's why I I the private equity trade is is a little long in the tooth.
>> If I can do a follow-up, why isn't this a bigger scale? Cuz the way you put it I mean, if you read, you knew, but if Michael Burry heard this, he would be forming a short right now. Why do you think some of this information is hidden? For those who don't know, if they can't pay out the redemption, then they're getting a loan. If we did that
>> Correct.
>> it would be unfavorable, to say the least. Why do you think this isn't a bigger news story financially?
>> because they are Oh, I got to be mindful cuz you guys putting this up on YouTube.
>> [laughter]
>> Uh Um
>> Be careful.
>> Yeah, so so let's just look at it from a commercial perspective. The biggest selling point that President Trump and the administration is talking about is possibly having the ability to put private investments into retirement accounts and into uh more retail uh into the hands of retail. So, just think about that for a second. With that being the case, you need a positive tailwind and storyline to make sure that the market absorbs that uh in an appropriate way. That's really, really important. So, I think they have an administrative support system to help commercialize why private equity is still a really attractive opportunity for people.
>> [laughter]
>> Well played. Um we didn't we didn't get a chance to talk about like your bio in depth, but can you explain like even how you got here and your role? Cuz I know in the past you had leadership roles at BlackRock, Harbour Capital, uh New York Stock Exchange. You recently served as a director of exchange-traded funds at the New York Stock Exchange. As I said, you're you're the leader. I think your current your current position is um global [clears throat] ETF strategist. So, can you walk us through your career your career journey and um and how you got to this point?
>> Thanks. Thanks for the setup, Alau. Um love the name, brother.
>> [laughter]
>> I like that.
>> good name.
>> Yeah, man. Yeah. So, look, I started in the career uh my career in 2006 at uh Neuberger Berman when it was a subsidiary of Lehman Brothers. So, you know, probably similar to when you became an advisor back back then, I was just getting in the game and I just wanted to get in the game. Uh and we were working in the mutual fund business. And then in 2010, after the GFC, I moved out to California with the company to consult financial advisors. So, you'll get a kick out of this, B. I was a wholesaler. So, I would actually go to the financial advisors and I was the advisor's advisor. I was consulting them on the different investment vehicles, solutions, and portfolio construction ideas that they needed to have to not only build durable portfolios, but also think differently about what they currently have. So, I did that for 15 years. Uh I was in business school at USC. I did the executive program while I was out in California and then I joined BlackRock in 2015. While I was at BlackRock, I was there for 7 years. I was a director. I was a top sales rep. I had a wonderful run there. But, my curiosity pulled me down the crypto rabbit hole during I would say COVID in 2020 and really around George Floyd uh Floyd's murder and what I realized was this was the complete future of security and um I would say accounting. Right? If we like think about what it's used for from a utility perspective. And when I saw it, I couldn't unsee it. So, I was at BlackRock. I'm like, "Hey, can I work in crypto?" They're like, "Absolutely not. You raise money really well. So, please continue to raise capital." So, no problem. I said, "Okay, well, I I left and I went and did some things in tech. So, I went and built a tech startup with a buddy. I also worked for a crypto startup. And then I had an opportunity to pursue uh a role at the New York Stock Exchange. When I went to the New York Stock Exchange, I already had amassed a bunch of tools, meaning my background in crypto, my background at and the ETF space at BlackRock, my background of going to school to where the opportunity was just basically right for me to come in and do well. In the sense of I was still me, my commercial self, if you will, but I had the technical background to really support the engine that was growing behind ETFs. So, last year, obviously, we raised 1,100 ETFs launched that uh in the market this year. It's probably going to be over 1,100 or 1,200 new ETFs. But, I got to Direction because our CEO actually ran the ETF business at the New York Stock Exchange before I got there. And he and I were uh very friendly, and he actually recruited me to accept the role as global ETF strategist here at Direction. And effectively, what that means is I'm sitting between our marketing department, our sales and distribution department, and our product development department to commercialize some of these complex stories and ideas, and simplify them as we go out and communicate to the retail trading public.
>> There there definitely is an ETF boom, and obviously, you you just laid out the the measurements for it, right? You said 1,200 listed last year, probably around 1,200 this year. We're we're watching them being created, and we can kind of see a theme, right? Like I feel like every year, maybe every few years, there's a theme. Memory for sure is the theme this year. I wonder as you look at it from your landscape, is there a a category or a sector that you see has the potential to be the next boom? Like is it infrastructure? Is it energy? Or do we look at how software's been beat down and saying, "You know what? Software has the potential when it gets to that level of the AI story to have a real
>> No, a good question, Troy. Look, I think the way the investor public should think about uh the theme of the day is that AI infrastructure, that's the compounders. Like that's not going anywhere. You're talking compute, memory, and power. Those are the three pillars it's going to stand on. Like it's going to be broader because you have the semiconductor conversation. You have like these additional layers that are important. But that fad, that theme is not going anywhere. So we just need to like put that on the table. The second thing I think there's a part of the theme that's really important is you have the hyperscalers, the megacap tech, whatever you want to call them. That 800 billion dollars of capital deployment it takes time to work through the system. The infrastructure needs to be built. So everyone's worried about and you guys were talking about Microsoft as an example. Um their cash numbers, their their numbers are ridiculous. Their free cash flow may seem to obviously come down a little bit, but they've put a major investment or capital commitment to building out more cloud and more obviously compute power and support for their current user base. So those themes should be intact, Troy. That the AI theme is here. I think the play that's a deviation away from that would be the energy sector. And how do we continue to fuel and cool these chips? So that's the narrative that I think you'll see come up next. So it's going to be okay, is it going to be liquid net gas, right, LNG? Is it going to be nuclear? We need more sustainable power. Because the draw on the energy grid is just too much. So what you saw with the memory side was a bottleneck being exposed. Right? That bottleneck was there's only a handful of chip providers. That's how we got the AMDs, we got the Nvidias of the world. And then you said what? Here's the pivot. Where's the memory opportunity? The memory opportunity was your Microns of the world. Yeah, SK Hynix, right? And and your Samsung. And then um and your SanDisk. And then after that it's going to be like, well, where's the power play in the support behind the infrastructure because we know what we can compute. Now we're going to have a supply demand imbalance when it comes to energy and support.
>> [snorts]
>> I would give you another sector that I think is really attractive and I was talking to Ian about this is health care. I think that's another area that we really should lean into because every single person here that's going to listen to this conversation is going to say, "You know what? What do I do with my leisure time? I'm not sitting out drinking and partying and hanging out. I care much more about the infrastructure of my life and my health." That's why people are leaning into more drug use in a positive way. I'm talking peptides and other
>> [laughter]
>> Right. Right. But, they're leaning into other opportunities to figure out where do we see growth and Nvidia's made some announcements. Some of these other companies have made announcements in their support for health care. And I think that could be a deviation that you can see pop up some
>> Uh from an institutional standpoint, what is the outside of the hyperscalers? What is the software sector need to do in order to rebalance and regain dominance? We talked about Intuit, ServiceNow. There's some companies that are really beaten up, Adobe. When you guys are looking at things to potentially invest in, what would you need to see as a catalyst to then invest in something like that?
>> to punt on this one, Ian, and I'm going to just tell you why. So, the way that we structure the investments here at Direction and and I think it's important like I I shared this about sort of who we are and the way we think. We launch products for investors to trade. We're not making the call of saying like, "Hey, this sec- this sector's going to recover versus this sector." We are saying, "Can we build [snorts] in a trading vehicle in an area that's going to trade a lot?" So, some of those areas I think um some of those businesses I'll just kind of share my two cents of what they need to do is I think you they're going to need to either explore M&A opportunities with some of their cash to actually go out and maybe become a little more more in the space or they really need to invest in R&D or R&D [clears throat] to pivot their business. And we already know the sales cycle and how long that could potentially take. So, right that the term that everyone was talking about
>> [clears throat]
>> that we all grew up on was MAG 7. Well, the MAG 7 has now matured to the MANGOs. Right? Right? So, so so so that's the whole compartment that's the whole part of the business where if Meta and and I think we talked about this yesterday, uh Ian. If Meta, Microsoft, and some of these companies that we love, they own the cloud in the software space. But guess what they're doing? They're being beaten up [clears throat] because they're making investment for the future, but they have to make that investment for the future. And at the same time, they're also laying people off. Right? So, we got to be mindful of like what that looks like. So, we don't launch products based off of um what these companies should do. We launch the products based off of where the trading opportunities are for the market.
>> Um what's your what's your feel for the market? Are you bullish? Are you bearish? Do you think that we're in You said something regarding late stages. Uh do you feel that this is the late stages of a bull market and um we're ripe for a bear market in the near future?
>> Uh so, the old adage is bull markets don't die of old age, right? They There's usually a catalyst that make them stop running. And what I would say is for us, our view is that the market still has tailwind because of the support around earnings, but again, it's priced to perfection. And what I mean by that is if any companies have any small disappointments, you're going to see disruption and volatility. That's just kind of where we are. And I also alluded to the concentration that we see in the marketplace right now. So, in a late stage area, one of the things that I think investors all need to consider and do is they need to actually broaden out the diversification. Meaning pivot to maybe like equally weighted exposures versus these concentrated exposures. That's a very important point and here's why. Because if you have any major headwind that hits the mag seven, your ETF, your exposure, your stock, your option trade, it's going to go the other way and it might go against you. So, you might want to consider a way to balance out the risk of the Qs as an example and maybe hold QQQE, which is a equally weighted ETF versus just holding the Qs. And then someone's going to come back and say, well, should I hold QQQM? That's more of a momentum that's still concentrated bet. That's going to put you right back where you were. Should I hold QQQI? That's going to be more income base. If you just looked on par, you're not getting the exposure that you want. You're trying to clip a coupon with that particular product. So, if you're going to say, "Hey, where do I get my exposure today?" You should be thinking about broadening out your risk and understanding that, you know, we're going to be a little probably choppy for a little while.
>> Can you just explain it for the audience, people that might not be familiar as far as like you're saying equally weighted as opposed to
>> Yes, so
>> And you you can use QQ as an
>> Yes, so QQQ, most of the indices, the way that they're created, they're created with what is called market cap weighting. So, based off the size of the company, that will be basically the percentage that they get inside of the ETF. Because I'm using Qs for the sake of this narrative and conversation, that's the Nasdaq 100. So, it's the top 100 tech companies for the most part. If you look from a sector perspective, the majority of those stocks fit into the information technology space, so it's heavy tech weighted. Because the mag seven has such a concentration of the top positions, your risk is concentrated in just how those four or five stocks do. Right? That's simple. Equally weighted just basically is an ETF in which the one that I just shared is TQQE. It's actually 1% exposure across the board for every uh security that's in that index. So, that's 100 securities, 100 positions at 1%. Why does that matter? Because now we spread out the risk, and then we get exposures to other positions that might do well. And one of the names that I kind of shared on a call the other day was uh Palo Alto Networks. That's not in people's top 10. Nobody's holding that. But, if you look inside, that's a nice position. It's actually had a really strong run. They have really good covenants. They have really um good relationships and good free cash flow. That's somewhere that people might want to get exposure to, but they're not getting exposure to that. So, that's why a TQQE in a late-stage cycle would make more sense opposed to just trying to capture capture the run-up of a concentrated position.
>> You you you've had an extensive career in finance. I wonder if there's something that you learned as a professional that changed the way you invested personally, right? Like, for a retail investor who's new, there's obviously things that you've seen and you have access to that you're like, "Wait, I wish people would have learned that about trading."
>> Yeah. Um so, let me I got to I got to preface this. So, you guys actually have more freedom than I have. And below, you know this from having your security licenses. Right? I have my I have my Series 7. I have my 63. I have a bunch of security licenses that I can't trade anything for the most part. We have to submit through compliance. So, you have more flexibility than I have. The one thing that I've learned um is the the math matters on the downside. It matters more on the downside than even capturing the upside because the impact of losses so great. However, greed and fear are two most innate characteristics. And you know this. You ain't made no I'm going to say I'm going to speak like us. You haven't made any positive decisions when you been emotionally charged. All right? Like it never happens. So So, my key takeaway from like my career is that just staying in the game is better than trying to win the game. And that's what people tend to forget. So, when the market gets volatile, they tend to sell, right? We just have the same terrible buying behaviors. We tend to sell. We think it's going to, you know, the shoe is dropping. It's, you know, the sky is falling. So, my ability to stay in the market and control my emotions have been the um most supportive aspect of winning.
>> [snorts]
>> I get uh from a diversification standpoint to be equally weighted. That tells me you may see somewhat of a correction, but how long do you stay equal weighted for though?
>> I think the equally weighted could be a core position and it's complementary position. So, let me just give you a couple of different ways to think about it. Most people, if they're going to hold uh two core ETFs, they're going to hold likely QQQ and VOO, right? Like just give me a head nod if we're right. Okay, we're on the same page.
>> Yeah.
>> So, one, you're already starting to get some overlap between the two positions anyway, right? Just as far as information and tech goes. But now, what I'm thinking is you want beta when you know the market is going to have a strong tailwind and run up. So, you had we had beta from 2015 to 2020, then it got real volatile, and then what happened? Excuse me, the beta trade was on at the bottom of 2020 and 2021. You're like, get in the market. Didn't matter what you had. The AI trade is the exact same. So, right now, it's all run up, it's all pulled up together. But now, what are we seeing? We're seeing now more of a trader's market where the opportunity to find dislocations is actually supportive of the environment. So, you can trade as an example. Everyone was excited How could you not be excited about Micron's earnings? Micron's earnings are through the roof, but look at the stock price. Stock price is back at $1,100.
>> Yeah.
>> The peak was 1250. It's not even back at its peak, and it's crushed it. So, it's not even strong enough to pull the entire space up. So, being that the case, now I want to start to think the market is saying, "Hey, should I go out and find a new asset class and or another area that I can buy to gain value?" That's the storyline there. That's what you should feel. That's what you should sense. That's what you should see. The market rewards the surprise to the upside and or making sure that you meet the objective that you set out. It does not like negative surprises, and the negative surprise, in my opinion, just looking at that is, "Well, we're not being rewarded anymore for that holding right right now where we are. So, now can we pivot and place capital elsewhere?"
>> Well, place capital elsewhere, the next question [laughter] would be where, but
>> Yeah, I got to ask B, I got to ask you that.
>> Yeah, for real. But but but but I want to ask you about crypto, too. Cuz you you mentioned crypto early, and it has been beaten up. Specifically, you know, Bitcoin is something that has a lot of people nervous because there's there's there's still talk that it could it could go down even further than it would than it has been. And during this whole AI run, during the Nasdaq run, during all of this stock market run, uh crypto has not gone up at all. And Bitcoin's down 50%, but if you look at XRP and Ethereum, they're down worse than that. Solana,
>> Yeah, there you go.
>> and then, you know, now you're starting to It just happens all the time. Now you're starting to hear people saying that crypto's a scam, and there's no point in Bitcoin. It has no incentric no incentric value. Even Mark Cuban, I think he's No, was it Mark Cuban, or was it No, the guy that owns um Barstool.
>> Uh Dave Portnoy?
>> He said that Yeah, he's saying well, he's like, "Maybe Bitcoin is going to zero." So, what is your thoughts on on the crypto space? Bitcoin.
>> Yeah, so one I think, you know, investors should think two think about it twofold. If you're a trader, right, then just identify your best opportunities to trade within the space. Just is what it is, right? I'm not going to I'm not here to tell you which asset class is going to be in favor for a week or two. If you're a trader, you should continue to trade the asset classes if liquidity is there and the opportunity for you to have conviction in the trade. So, that's one. The second thing is I think you should have to there's has to be
>> [snorts]
>> bifurcation in crypto versus Bitcoin. Just because of the the the association of Bitcoin, right? Bitcoin is seen as a store value, all these other components of it that you already know. The other thing is it's not sticking with the narrative that it outpaces inflation. That's the bigger question and challenge. Right? It's like, okay, who owns it? It was in the Epstein's emails. Like, who's the to There's a lot of different things. I I saw something recently like people are calling for Satoshi to move his wallet or do something over the next 12 months. There's a lot of headlines associated with Bitcoin. So, whatever you're going to do, you should just trade it. Have your options there. When it comes to the rest of the ecosystem, I think the one question we all should ask and it should be the only question is is there utility? Is there utility in the project? That's the number one question. And then if you start with that and then you look at to say who has real contracts, real partnerships the same way that we're currently evaluating a lot of these crypto uh these uh AI projects today. You should look at crypto the exact same way because even if we have let's just say a a cloud system that's hyperconnected. That's more data, you're have more devices that you're connected to. I got two laptops, I got two phones. Security is the number one threat to everyone, which means we need accounting systems that are structured, that are transparent, that are secure. So, if we're moving data, if we're moving assets, if we're moving anything on these rails, you want them to work for the institutions. Now, think about what's happening in crypto. While I was at the New York Stock Exchange, we announced an alternative trading system or network, which will be trading tokenized securities. You see every exchange announcing what? Tokenized securities. You see more support around banks and tokenized treasuries because we want to remove the friction and we want to support the movement of assets freely. Now, I'll I'll tell you, I think this is the dot-com bubble for moment for crypto. There're going to be clear winners and there're going to be clear losers. I think so in the next in the in the near future, absolutely. Because we have to get the washout moment. People forget like Amazon was down 90% during the dot-com bubble.
>> [laughter]
>> People forget that. Like today is a staple, it's a hallmark, like we can't think of life without it. But that's where we are, I think, in the maturity of this particular asset class.
>> Washout moment is upon us. That's
>> I think that's a fair moment. I think that's a fair fair assessment of where we are.
>> Yeah. Fair assessment. Yeah. I got to start thinking about AI in the in terms of how disruptive it's going to be, right? We know education, we know healthcare, for good reason. I wonder what you you your thoughts are on financial services and at some point will will we have AI managed ETFs, right? Like because I feel like institutional has always had algorithmic ways to trade and now you're intensifying that by having artificial intelligence. So, what do you see the future of financial services with this disruptive technology?
>> with the the haymakers on these?
>> [laughter]
>> so so so two things. Uh the first is I think Let me Let me take financial advice. I think people will will want to speak to people when markets get volatile and choppy because there's emotional connection to it. And and and and be you being a former advisor, you know like the hand-holding that is required. And you guys have did been dealing with people already, right? So, the market when markets are good, everyone's making money, everyone's quiet. Markets going to be choppy, people are going to be on your phone, you'll see your numbers go up considerably because they're looking for guidance. So, that's one. I don't think AI can step into that human component just yet, uh Troy. The second piece when you think about the ETF side of active versus passive, it can be a rules-based strategy with an active overlay. Meaning, rules-based meaning we're only going to hold equally weighted positions in the ETF, and then apply a sector rotation to it based off of the fund manager. So, that's a conservative way to run a active portfolio. Right now, when you think about what's happening in active and passive, nine out of 10 dollars that are uh launched or products that are launched are active. So, every time 10 new ETFs come to the market, nine of them are active. Active has actually starting to outpace passive. Why? Because the market is becoming dislocated, and you're being rewarded for making your concentrated bets where they are appropriate for the trading side of things. I still believe information, and Troy, this is go it's goes directly to your point, information still moves through conversation. I'm not sure how AI will be able to interpret and deploy that based off of me having a conversation with you guys right now. Let's just say I was at Oracle, and I'm a technical founder, and we're doing some stuff, and we're getting ready to release some new announcements, but we're having a conversation. The AI is not going to be able to take that just as quickly right now from this conversation, and then go deploy that with future projections. So, I think it's still some time for for to sort of work through the system. But I do believe it's it's a critical component of service. So when you think about if you have a financial advisor, if I can prepare my documents for my client better with their meeting notes and clear tasks for them to work through their estate planning needs, I think that's a value. So I think it's going to actually make it better for the client experience, but I don't think it's going to be managing the capital just yet.
>> Okay. I meant to actually uh this last night on Stock Club call, but
>> Yeah.
>> you met a lot of people in your career. Who are two people that gave you the best pieces of advice in your career and what were those pieces of advice?
>> person is Reggie Brown. If you guys don't know Reggie Brown, he is known as the Godfather of ETFs. So you guys got to get him at some point. I know you guys get a lot of big hitters. Reggie is a partner at one of the largest market makers, which is GTS. They have maybe 700 ETFs that they trade. He's a brother. He's super dope. He's from Philly. And Reggie told me around decision-making, he said, "Make sure your life is interesting." And when you when you think about that, interesting means do you have something to say when you're in the room? Is it complimentary to the audience? Can people learn from it? Can people grow from it? So that was one. So is your life interesting? Which is a question I ask myself all the time when I'm kind of studying or reading. The The next person um that I met that I think was critical for me was actually the CEO of this particular firm, Direction, which is Doug Yones. And Doug spent time building Vanguard's ETF business in Tokyo and Hong Kong. So he lived in Hong Kong for years.
>> [snorts]
>> And then he ran the stock exchange for nine for nine years. And he told me, um, to remove the complexity out of your life and keep it simple. And I'm like, I thrive in complexity. But when he's like he's like, "When you're more senior and you're leaning into a lot more of, um, the infrastructure around our business and our industry, you don't have the capacity to go down the rabbit hole of every single thing that you're curious about." So, he said, "Hey, remove the complexity and you'll have more peace." And I'll be honest with you, my life has been
>> [laughter]
>> And we talked about this, I've been a little more peaceful the last couple of years, uh, than I've been in a long time since I met Doug. So, I think those two things are important is because you guys get bogged down with really helping people save for retirement, think about these very difficult conversations that they need to have around, "Hey, do we have enough for retirement? Are we going to buy a house? Like, do we do this for our kids?" You guys do a lot with 529 plan conversation Like, you guys are doing a lot. Most people can't absorb all the things that you guys are sharing. So, being able to remove some of the fil- like, being a natural filter would actually help more people to complete simple task to get to where they're trying to go. So, I think those are the two things. I think they're fair.
>> Well, Malau, I want to thank you for coming on. Greatly greatly appreciate it. Um, I know you have a show. Anything that you want to tell the audience?
>> Um, yeah, the one thing is I I'll I'll share this, um, personally. I think people right now are trying to figure out what's the most important things to them. And you guys spend a lot of time talking about the aspects of financial services. I think it's equally critical to make sure that people's mental head space is right. And that's fathers, that's men, that's women. Everyone's looking at, you know, the comparison tool right here of who's, you know, who's who. I think right now make making sure that people feel comfortable in their own skin and confident that they're doing what it takes for them to be happy is is foundational for us all to have success in the future. So, that's the most important thing. You can find me on social at Bilal S. Little. Um I'll be down at Invest Fest to support you guys. Um you know, go check out our um our website. Anything that I've discussed today, you can see all of our leverage products. We're the largest leverage uh ETF issuer on the planet and the uh website is direction.com.
>> And we dropped a classic at ETF Central. Top five all
>> Where we at? We top two now? Where we at?
>> ever all time videos viewed on the New York Stock Exchange's platform. So, next I got to get you guys on, man. I I love what you guys have been doing. So, we got to make sure that we collaborate as well.
>> Absolutely, man. Let's do it.
>> Where you Where you from originally?
>> From Stamford.
>> New York?
>> Yeah.
>> Connecticut?
>> Stamford, Connecticut.
>> Stamford, [laughter] stand up.
>> All right, All right, my brother.
>> Thank you guys for having me, man. Seriously. Yep.
>> Talk soon.
>> I appreciate you, my brother.
>> All right.
>> Great conversation. Good brother. That's very intelligent brother, man.
>> Yeah.
>> Yeah. He He him and Bottom went to me are twins intellectually. They just focus on different things and then I believe in correlation. I got to find another Bilal to do business with cuz I'm two for two. I'm [clears throat] two for two. So, if there's another Bilal in the finance space, shoot me a message, man.
>> Direction is uh he's not lying when he's talking about the amount of ETFs, man. They they're usually the first ones to to come forward with an ETF in new space. So, yeah. That's dope that that we got that conversation.
>> Yeah. For sure. For sure. Shout out to him.
>> Yeah.
>> [music] [music]