Hi, I'm Keith McCulla and welcome to another conversation. It's become a bit of a rarity that we get a first-time guest on the real conversations that many of you keep asking me for. So finally we got Jan to say yes. I'm sure many people know you through your last name and the ETFs that you engage with and provide. I thought it was a good opportunity for them to put a face to the name. Thanks for making the time to be here in person.
Oh, it's great to be here, Keith.
Yeah, you've built a phenomenal business. There are so many ways we could start, but I think the best place is at the beginning. Just give people a sense of coming out of World War II. I love what I've read as an introduction to your story, how you came to be.
Yeah. Well, my father started the firm in 1955 and his investment philosophy was to look at the big trends going on in the world because that will affect the financial markets. A lot of people study the financial markets and look at correlations, but he said take a step back because these big long-term trends will be like a magnet pulling the market in a certain direction. His first move was to start an international fund in 1955 investing in Europe and Japan after World War II. His biggest call was switching that fund to gold. Gold in 1968 was fixed at $35 an ounce. He was in his 40s with two kids at home. He studied under an Austrian economist at NYU, and Austrians are hardcore monetarists. He said there would be inflation, so he bought gold mining shares, which performed well during the depression. He was very patient because it took several years, but ultimately gold delinked from the dollar and went up to $800 an ounce, and that fund was the best performing fund in the industry in the decade of the 70s.
Which is awesome. And I know you like market structure. There are a couple of interesting stories. Why not gold bullion? Why didn't he invest in that? It was illegal for Americans to own bullion because FDR had basically said you can own coins but you can't own bullion. There were no ETFs back then. People started trading Krugerrands and everyone had futures contracts to trade commodities in the 70s. The industry was very different.
He had it in a mutual fund form. I call it the first thematic fund because no one was going to put 100% of their portfolio in gold. He wasn't saying that either. He was just saying what are the asset classes you should consider for your portfolio, and he said you really should have gold. So that's the history.
That was massive. Just to understand that during stagflation, no human could have predicted the protracted nature and how that uniquely impacted gold to the upside. Initially he saw that, but for that to last so long, that's a hell of a run.
Well, he has that historical perspective. If you take the right time frame, no country has ever supported a paper currency forever. Only gold has stayed around since human history. He said sooner or later the dollar will go the way of everyone else. Timing is everything. We've been waiting for Japan to implode for a long time, but the perspective is really interesting.
Well, it's a story that's told because it's true. When I wrote my senior thesis at Yale about Warren Buffett and why he struggled during the 1970s, the answer was stagflation. You were seeing the purchasing power of people decline and cost structures going up, so margins compressed and equities kept getting cheaper. He ended up with a phenomenal cost basis coming out of the 1980s. Timing is everything. When I was in the stacks trying to find an alternative to that strategy, I didn't hear about your dad.
He was obviously there. This story is not trumpeted like Buffett, but there are periods for everything.
Right. Now that you're so big, you have so many different things that could work or not work at the same time. Is it true that he didn't have many people that did what he did?
He was the only one. I think Franklin eventually started a gold fund, and Fidelity, but no one was doing it. It became a mania. Gold behaved like Bitcoin. The cost of production didn't go up in the 2000s super bull market because of China. You see the same cycle today because most discoveries have been found. Gold mining shares were like options. Every dollar increase in the price of gold meant more profits. That was the way to play it. He went on Merv Griffin when gold was so hot. When late night shows talk about gold, that's when this bull market is going to go over.
Yeah. I was a sheltered Canadian living in America, so I missed the pop culture. But he became popular for a couple minutes. I constantly find it a healthy reminder of history. You guys are so well grounded in long-term cycles and how Americans are having a panic attack all the time about their stocks. But there are these epic commodity and gold cycles. We think of gold as a currency and the rest as commodity. It's fascinating because a lot of people have fought this breakout in gold and are now chasing it and getting whipped around, not understanding it at all.
Yeah. Last week I started calling it the worst traded bull market ever. In 2023 we were pounding the table on gold, and I'm not a gold bug. Most of my career, gold has gone down. But we were pounding the table and no one wanted to look at commodities. Gold mining shares were down 90% from 2011 to 2016. In 2023, no one liked gold. Now it's been rallying quietly until recently. There were redemptions out of GDX last year, but bullion inflow has started. I think it has a long way to go. It's a paradigm change. The world is decentralizing. India is rising and will be the size of Europe in ten years. We'll have less of a US-centric economy. China and India don't want a dollar-centric currency. Gold is reemerging as the world's leading currency. After we seized Russia's assets, that set it off. Our current president reminds people that you don't want to be vulnerable to the US president's whims. They'll just keep gold in their vaults.
Yeah. I don't know if you can show the central bank buying chart. It's as clear as day. The biggest buyer in the world is going to be everyone. The more you piss them off, the more they'll do that. As a Canadian, it's easier to understand. We're taught this in elementary school. Whether they're liberals or conservatives, they all agree they don't want to be the 51st state.
So that's the central bank buying chart going back a ways. There was a point of entropy. I oversimplify: there's only one thing happening in financial markets — the emerging markets are reemerging. The developed world — US, Europe, Japan — has borrowed too much money, so they are weaker. Europeans sold gold out of their central banks 20 years ago, but since that petered out, developed market countries are buying and will do so for decades. India, China, etc.
Do you think it's nuts? For central banks, it's a core asset allocation, the currency they believe in. Meanwhile, Americans in their 401k have this 60/40 which never includes gold or GDX. GDX has been a top three performer in my long-only retirement account for the last year. But Americans get screwed. The inability of old Wall Street to evolve... If governments of EM countries can figure it out, why can't our own? You wouldn't mandate it, but there should be flexibility.
Yeah. There are so many things about the financial services industry that are art, not science. There's no evidence for 60/40. Someone just did math on risk-reward optimization. The only theory I believe is that Jamie Dimon likes the fees. It's financial incentives, not returns. And safety too—we have to default to something. At Van Eck, we say you can't have an ahistorical view. If you didn't want gold 15 years ago, I get it, but now the wealth of the world is shifting to emerging markets. You've got to play that. Gold has a double benefit: it hedges the biggest risk, which is high fiscal deficits in developed markets. When we were at a 6.5% deficit as a percent of GDP, that's banana republic territory.
Well, gold is a pretty well-known story now. It had its volatility moment. It started to act not like a currency. GVZ, the gold volatility index, has only been above 40 a few times.
If you go back to when your dad started this, four times. The 2011 top came on a gold volatility spike above 40. The pandemic spike was higher, almost 50. Last week it had a couple days at 44-45, peaked at 46, then dropped 10 points. The reason I call gold a currency is it doesn't have that kind of volatility. For two to three days, it acted differently.
So for two to three days, there's a chance it's no longer that, but today there's a big down move in volatility. What do you think?
I think long-term it's a 10-year hold. It's really hard to trade. Now that people are getting excited, if it has a big correction and hits the 50-day or 200-day moving average at $3,800, no one will buy it. They'll say gold is over. But I say look at what's happening in the world—these are longer term trends. That's the marketing thing for crypto: every time it breaks, you go to the lower 200-day. The 200-day is not broken.
But for somebody who is lasered on crypto, let's go to that. People can be fanatic about anything. That's fine. But when you look at the current performance, gold did a hell of a lot more. Now Bitcoin and crypto are collapsing with massive leverage. We talked about the pumpers like Tom Lee and BitMEX. You're just layering leverage upon leverage. You have to be really stupid to do that when you can buy the ETF.
We think the ETF is better. But what do you think about the divergence? It's short-term. Everything else is going vertical and crypto is tanking. I think of them as the same store of value, but Bitcoin is like a child growing up. We were the first ETF firm to file for a Bitcoin ETF in 2017. It took until 2024 to get it. I did a deep dive, read the white paper. Gold investors were buying Bitcoin for volatility. They've shifted back to gold now. I do believe in Bitcoin, but it's an evolving asset. Central banks are not coming on board. It's highly correlated with the NASDAQ since COVID. People don't need more Q's. I'm a long-term Bitcoin bull, but that's a negative. We use the GEO framework: G for global liquidity, E for ecosystem leverage, O for on-chain activity. The four-year halving cycle is the killer. Bitcoin historically is the best performing asset for three years then down 80%. 2026 should correct a lot if you believe that cycle. I think it started earlier, so I'm not surprised it's down this year. I called for that in our quarterly outlook.
You did? You get the commensurate hate mail. Let's talk about that offline. I think when you have a bear market every four years, it doesn't solve itself in a month or two. It has to work its way through in 2026. Maybe it ends earlier, but that's a whole other matter.
Yeah. I love frameworks like that. At a bare minimum it forces you to be consistent and not get thesis drift. You have to evaluate the rates of change. You can't say it's like gold for scarcity and not incorporate the halving events. The digital gold thing—thank God you didn't say it—it's not gold. Something physical takes 10 years to discover versus digital. They are two different things. Like what's up with that? Prior permabull crypto cases are under duress due to gold doing this and Bitcoin going down. That is our perspective. I said at the end of last year: it's a store of value asset, but they are related like silver and platinum. They trade together but are very different. Silver has more physical demand. You have to underwrite every investment thesis and look at risks. At the end of last year, quantum computing was a risk. People became concerned. You can't be so in love with the thesis that there are no risks.
Yeah. We went long QTUM, the quantum ETF. UFO for space. It's amazing to interact with the two communities. We have institutional clients and self-directed investors. I don't like calling them retail because it's an insult. If they're Van Eck holders, they are macro-aware. Your north star is macro and themes. Themes are powerful because people want to believe in something. The more you simplify, the more they'll buy and baghold it. I need a crowbar to take it out of their hands.
But that's really not the history of thematic investing. There are huge cycles up and down. How do you deal with that? We try to identify the long-term strong magnetic forces. We don't swing at every pitch. You don't have to have a call on everything. When you look at thematics like AI, we look at the underlying demand for tokens. If demand for AI processing goes up, the thesis is solid. We think in 2026 and 2027 there will be a huge compute shortage. Microsoft and Meta are spending more on compute buildout. That's part of the thesis. Follow-on trades like AI 2.0, nuclear energy for electricity shortage, play the companies building out capacity.
Yes. For those who don't know, NLR is an ETF we've had our community buy. It's nuclear/uranium. SMH has been the most bulletproof non-volatile play on AI because those getting the orders do better than those who have to earn a return on capex.
That's pretty straightforward to us. And then you got the software ETFs which are, we're short plenty of them, but those are disasters.
SMH, is SMH your biggest ETF?
How big is that thing now?
I don't know. It's like, it's like 35 billion or something like that.
I don't look at it because you know, easy come, easy go. Here I am, I'm like little mucker starting his ETFs. I'm like, we have to get over 35 billion for the economics of this ETF to make sense. This guy's 35, I don't know, 35 billion.
Yeah. But that's that's luck. But that's a phenomenal success story.
Like as if you look at the, like what I going all the way back to like when I'm citing why Buffett couldn't make money in the 70s, your dad's making money in the 70s. You look at the history of financial products. SMH has to be right up there in terms of like the most successful.
It's amazing. But but but Keith, part of it is um and I know you do this like look at industries and how they change, right? And how they emerge. So let me just give you one example and we'll get back to SMH.
Um alternative asset managers, so private credit managers, right? Private equity managers, Blackstone, KKR, those companies didn't used to be public. Okay, now they've gone public. Enough of them have gone public so you can create an ETF. So that's what we did last year. You know that is a big part of the market, they manage trillions in assets right and so that's a thing now, whether they're expensive I would think they're expensive but or cheap you can play it as an ETF.
So getting back to SMH, what happened to semiconductor industry is unbelievable. It used to be a commodity business when Jensen Wong was like first started, invidia commodity you know products like when I lived in Silicon Valley if a product lasted 18 months right it was a fastest disc drive or memory chip or whatever. That was great, right? It was just a sort of like a rabbit trail that you had to kind of keep fighting to get your revenue. That's totally changed, right? The semiconductor business became one where they killed each other off and the survivors are in SMH, right? That's only the top of that industry and they all have competitive modes and now Nvidia is like I call it the mainframe of the AI era. They're not just building a chip. They're building the whole ecosystem and so it won't last forever but for now they're in a great spot.
What's so does SMH dynamically reweight for performance in semis or at?
Yeah, it's just the top market cap and it's just the most liquid. But those big ones were the winners. Yeah. Right. The smaller ones kept, you know, basically not going out of business but losing market cap.
I mean, if you look at I mean, it's all these index managers or bench huggers, you know, like midcap, you know, midcap US stock market investors, 90% of them couldn't beat their bogey last year because Palunteer was in their bench. Now it's out of their bench. Yeah. But it was eight like eight some some ridiculous, you know, 70 80% of the return, you know. But you have these things. They're just like we call them like the significant seven now instead of there's the bag seven, you know you got Microsoft would be in that.
And then you got names like SanDisk and Western Digital and Micron, these things are just like vertical man so those things that's the way that it works as they go vertical up the market cap list, yeah they get reweed in the SMH.
So you're just riding winners all the time.
I mean because of tax laws like you have to sell when it becomes too big so when because you have a max position size. Yeah. Yeah. Well, you know that diversified they have to be diver, you know, well, even if they're non-diversified, it can't be more than 25%. The largest company can't be more than 25%. So, we've got a different waiting regime for SMH, but that's that's the structure.
Well, this like um this is a thing people struggle with. Like the entire hedge fund community, if they're stock pickers, are still stuck in cap I call them captain stock picker because I used to be captain stock picker. Mhm. If I did my job the way I did it at Dawson Samberg or at any hedge fund I worked at as an analyst and a PM, I'd be dead. Like I would the last five years I wouldn't have made any money because you're just sitting there. You don't respect the flows. You don't the flows into passive ETFs, the impact on single stocks of those passive flows, active flows inactive ETFs like the entire flow of the machine fundamental you know former fundamental only hedge fund managers have been left behind whereas riding winners which is the best strategy in the history of strategies.
Is all of a sudden they almost like talk down to me oh you're a trend follower like what the hell like I know I had the lowest SAT score yelling, but that doesn't Are you talking down to me? Like, oh, you understand the value in all these things that don't go up and I'm just long the things that are going up.
What do you think about that?
I think so. We had hedge funds actually before we had ETFs. The biggest enemy is the short time frame. Okay. Right. So, I think you're liberated, right? You call it trend following or even talking about the retail investor, right? The individual do-it-yourself investor. He's there to make money in the investment and if you have conviction you don't get shaken out by some VAR model if the stock goes the wrong way because Fidelity is selling or something like that. So I think that the difficulty is in getting time frames right. Right. So the VADC investment philosophy is look for those big the market's efficient. So when you're deviating from the market and doing a thematic play, you've got to believe that there's some trend not just technical I think but also fundamental that's pulling the market in a certain direction right for a long period of time like the rise of these developed markets China, India and their demand for gold. Let's go back to that right and so if you have that conviction I'll give you an I love India.
And I was just talking to a colleague so we've been talking about the Indian market more.
Uh we have we have two um one is uh GLIN uh which is sort of growth leaders India and then we have DGEN DG GIN which is the digital leaders in India.
I got to get I've been going with your competitor's ETFs and I was not happy with the experience so I'm going to go with yours next. Finally got well yesterday I mean all of a sudden all the Indian ETFs started popping yesterday I'm sure you noticed that right not that there's any inside information before the tariff news but you know it was like.
Um so the macro story for India is just fabulous. The problem is I started talking about it the wrong time which is after the election in 2024 so the market has gone down basically over the last year and a Yeah. And it's always an expensive market. We always say that PE ratios are high in India. But I think it's the market the equity market 324 has actually matched the S&P for like 5 10 20 years. So it's a really and it's going to there's no sorry I shouldn't say this but there's no guarantees ever but there it just seems very clear that India is going to continue to prosper. It's an equity culture and they're pro business. Yeah. And they want to get wealthier as a country and so they keep implementing better policies like last year they changed the bankruptcy laws and the labor laws to modernize them, they're always trying to tweak their systems, it just didn't get rewarded in the stock market but nothing is super cheap these days Keith in the markets but India I think is pretty attractive.
I like, I always like, I just said I mean expensive gets more expensive when you have the fundamentals right. I mean it's like I was taught the opposite you got to buy, you got to go to business school, you got to figure out how to buy cheap stock.
And there's two companies in India, by the way. So, we have the Mag 7 or whatever they are here. There's the they in India, what happened is they dropped the price of cell phones so cheap that everyone could afford them. And there's again two kind of winners there. And those companies, they realize, hey, I'm not just selling handsets. I want to get into the software subscription game, too. They have compute platforms they're building. They're doing like everything you would do. So those two companies are the core of this digital India fund that we have. Yeah. And it's just that thesis and what's cool about the markets in the world is technology is getting adopted so quickly. What country uses ChatGPT more than any other? India. You know what old economy stocks are getting destroyed in India. You know what are the new ones? The digital insurance companies all that they're the growers. And so it's really cool just to see, you know, it's not like this old image of an emerging market, you know, where I'm just, I don't know, the phone company or whatever. It's just like the boring stocks. These are very exciting companies.
That's great. I mean that guys if you show a G20 table for what we call the quads.
I mean India we cap we we ended up capturing all the upside turned it went to the short side. So I wasn't shorting your ETFs. I was shorting INDA.
Okay. And ESN which is a small cap India ETF but on that table I'm not going to go through this with you because you probably don't care but the um.
You know again India like any cyclical economy is going to slow and when it slows that's when you get multiple compression or you did yeah. But now we're setting up to reaccelerate against those base effects yeah. You know because it's just a growing economy just like a growth stock you know you cycle against the peak of your cycle which was India's performance was it 2023 2024 against China it smoked. Um and but going forward, I mean now you have EM pinned up here exchina. And you got India down here. So if you think EM is going to keep going up, which we do, then you got to get long India because it's the laggard, right? Does that make sense?
Okay. Well, you mean you guys are also how how did on the topic of EM.
Yeah. The amount of I mean I'll show you after this conversation but we definitely impact the trading volume on your EM or on most of your ETFs when we say okay ETF pro is our big product if we put it in there.
Um so like tons of you have like a lot like you have Vietnam, you have Indonesia IDX VNM, I'm sure we can go down the entire list but I mean you have a lot, you were first into a lot of these things because to me they're the I mean first of all there's a long time series so I know that they've been around for a while.
Yeah. Um, no. Well, I would say yes. We were the first to some of those countries, but only because we hustled. Okay.
Um, other, you know, the big that one of the big giants had a lot of country funds, but they missed Russia. They missed, you know, Vietnam. They missed like they missed some of these countries. I'm like, why?
