Welcome to the Facts Versus Feelings podcast. I'm your host Ryan Dietrich and I'm joined by my co-host Sonu Vargis. Cutting through the noise in 30 minutes each week with Ryan Dietrich, chief market strategist and Sonu Vargis, VP global macro strategist. Taking out the boring and helping investors focus on what really matters. A quick note before we start the show. Investment advisory services offered through CWM LLC, an SEC registered investment adviser. Carson Partners, a division of CWM LLC, is a nationwide partnership of advisers.
Well, everybody, buckle up. Episode 155, a Fact Versus Feelings is here. Sonu, we recorded this a couple weeks ago live from Excel, although it was live in a room with nobody there. So, you know, is it live? Is it dead? It was live. But we were so excited to be joined by Jan Van Eck, the CEO of VanEck. Just an incredible conversation. You're going to love this. Sonu, without giving too much away and making this quick, if you remember what we talked about from a few weeks ago, how good was this one?
That was fantastic. And one word comes to mind, which is gold. So, I didn't know that Jan's father started the first gold fund in the United States in the late 60s. So, you know, between that, we talked about obviously we talked about gold, but we talked about crypto and portfolio diversification and all of that is such a good conversation. I need to go back and listen to it.
No, he's a pure titan, true titan of our industry. Just so many stories, just the way that VanEck has been on the cutting edge of so many different trends in our industry that honestly I wasn't aware of. So with all that everyone, you're going to really, really enjoy this week's Facts Versus Feelings, episode 155, talking gold, crypto, and more with Jan Van Eck.
Coming up right now, hello. Welcome to the latest Facts Versus Feelings with Ryan and Sonu. Sonu, this is a very special one. We're once again in Arizona at Excel, our 40th Excel. Carson Group has an amazing conference with over a thousand people, all of our amazing partners all over the United States. And who is our special guest? So, we're recording this again. By the time people listen to this, it'll be like a couple weeks happened a month ago.
Yeah. So, just remember that. But we're super pumped about our guest today.
Yeah. I've been very excited about this personally as well. I know Ryan and me together, we've talked about this a lot.
Jan Van Eck, welcome. Pleasure to have you here. We love titles. So, and you know, just as an introduction, maybe you can give your title as well.
My title, I'm CEO, but I also sit on our investment committee. But you can make up any title you want.
Yeah. And head of VanEck, ETFs, all of that. No, from a compliance place, but thank you for being here. This is really exciting to have you on.
No, it is. There's so many different ways to start this. Let's start just kind of, you know, high level.
You were in California earlier this week, right? Did you go out to the Future Proof and now you're here? So, how was that?
Very interesting. I mean, you know that the Ritz holding guys have kind of helped put that conference together and I feel like for myself it's really one of the leading independent conferences for RIAs. I would say what are the topics — the topics were AI, AI, AI. What I think the interesting thing I don't think is enough in the AI conversation is related to longevity. Meaning, you know, we think of AI in the financial sphere but if you think about some of the research they're doing with proteins and, you know, maybe it's 10 years out, but protein therapeutics — what if our clients' lifespans get another 20 years or 30 years? That's probably not in our model.
And what does that mean for the economy? So, Omar Carson, our founder and chairman of the board, he's talked before on stage and he mentioned like what if someone were to just go to the bathroom and literally if there's any cancer in your cells you know that day and that again this is down the road. I remember he mentioned that a while ago, where that's coming potentially and just the changes that could make to the world, how long we all live, our health — just is truly fascinating.
I mean to that point, like you said, therapeutics and the way medicines are designed and drug therapies are designed, it's always been iterative. You learn from, you know, what's happened in the past and probably what's not worked in the past too. And as new things come on. But now with AI, yeah, I'm trying to think that could happen, you know, much faster. Yeah, we've identified way more proteins with the AI machines than we knew evidently. So, it's not my area of expertise, but yeah.
So, you know, we definitely were talking about ETFs and all the stuff going on. One we just were talking before we came on — the idea of excitement, right? We're in a bull market. Markets are doing well globally. US is doing well. I get to travel the country, present. I never get asked a question from most retail clients — hey, how high is this going to go? How good are things? It's always what's wrong, what's bad. One thing I want to ask you about, we are seeing a lot of big IPOs. The two ones getting recommendations, Circle, there's a couple more coming out in September and October and these stocks have done really well. Now we remember the late 90s, even 2021 when SPACs and IPOs are doing really well. That's one thing that gets me. What's your take on market sentiment maybe overlaying with those IPOs that have been very successful the last five months or so?
Wow. Yeah. Well, we at VanEck do a lot of investing in the, you know, we call it crypto, but you really have to break that down into a couple of different subtopics. That industry was really frozen out of the US financial markets and a lot of private equity-backed midcap companies that are very significant have been now able to go public. There's a lot of pent up demand, pent up activity. Very much. But over the next 12 months, I think what we're going to see in that industry is unbelievable change. First of all, you used to have, you know, kind of crypto exchanges over here and securities exchanges over here. They're going to merge in the next 12 months. Like the model to me is Robinhood. And so, yes, we have the IPOs, but then I think there's going to be, Ryan, a lot of consolidation. So, they're kind of liberated, they're like out of jail. But then I think there's going to be a lot of severe competition and restructuring that's going to happen.
And then the second thing I have to mention relative to Circle is just the stablecoin legislation. I call it like the third most important piece of banking regulation in US history because it allows tech companies to get into basically the payments industry whereas it always ran through banks and the banks are already pushing back. So what does that mean? It means that a lot of gross margins for operating companies are going to be affected over the next two years. I don't think anyone should really care about it too much because it's really B2B activity and so what, but it's still going to reduce costs on an aggregate and that's good for business.
So one more for me and we'll just go all over the place. Maybe I'm jumping ahead here but I always heard Ethereum was the internet, Bitcoin was AOL. I don't know if that's true or not. That's what I heard from a lot of smart people a long time ago. And you're kind of talking about some of the financing. I know Tom Lee, shout out to Tom. Obviously, he's been on our podcast. He's been big into Ethereum talking about how it's changing things and going to open up for financials just like you talked about. Why financial stocks maybe are even doing better now is because Ether's growing. Can you talk a little bit about Ethereum versus Bitcoin big picture and from a 101 basic level?
Well, yeah. So, again, Bitcoin we look at as digital gold. So we'll talk about gold later and put Bitcoin aside. My feeling about the rest of the software industry relating to this open blockchain world is that it's really impossible for the average person to follow. And so what we've done actually is said we have an actively managed ETF. Let someone who follows this all day long do that allocation. So when we launched our Ethereum ETF last summer, I basically said, what's ETH's market share? You know, people are very — I bet Tom Lee doesn't know what ETH's market share is, right? Because how would you even define market share, right? And so I don't want to go down. But it just gets so competitive so fast. I would say that basically American companies, financial companies now have to make stablecoins available. Stablecoins are just digital dollars. So if you think of your bank app, you've got checking, savings, credit card. Maybe you can send it in and out of your brokerage firm. You're going to have a fourth item there. It's going to be stablecoins. So they're going to be using software to get there. I think it's too boring to talk about how, but I do think if you want to play that innovation, go with someone who's following it on an active basis.
I want to pick on that stablecoin thing because to your point, I do think what's happening with stablecoins is very underrated. I think it has the potential to change a lot of things how we basically just go about our daily lives because a lot of us — you know, back there was a time when I used to hold a lot of cash in my wallet, I don't use credit cards — right? But there's an intermediary fee and all of that associated, you know, my bank accounts, things like that. And transfers — it's amazing how much of a pain that still is, transfers, wire transfers, limits, and even Venmo and Zelle that they've stepped in to sort of fill that breach. But I feel like stablecoins is sort of like you said, it's basically a digital dollar, right? If instead of me giving you like a dollar cash or, you know, a dollar bill or a $20 bill and give you a stablecoin and then that's a — there's a finality to that transaction, it's immediate as well, right? So, how big — tell us how big you think this will be?
Well, I think it's very hard number one for Americans to understand because our financial system has been basically stable or bailed out by the US government, right? So you've really never lost money from having your deposits in the bank since FDR, right? So we don't even think or worry about that. The rest of the world, especially some countries really worry about it. And they're big users of stablecoins.
I mean the same — like my family is in India. I know India is a whole other thing with crypto, but set that aside. If you have somebody overseas, it's a bit of a pain to send money abroad.
But stablecoins just completely changes the game. It's already dramatically changing the game.
Yeah, we're very involved in that. We actually hired the two people out of Circle to run a venture fund for us last year. So they did about 100 deals at Circle. So we know very much what's going on, but it's again too detailed and boring in a way. But what I will say what matters to Americans is that what I call web two companies. So the big consumer-facing companies like an Uber.
Let's compare Uber and Starbucks. This is how your world may change. Right now you have to move money into your Starbucks app, right? They have a Starbucks here in the hotel and that's how you pay for things. So guess what's happening to — like I looked at, I hadn't opened my Starbucks app in a while. There's 90 bucks in there. Guess who's earning the interest on those 90 bucks? Starbucks shareholder. It looks like you're buying coffee as soon as we off the stage.
Or I should buy for the whole — or I use Apple Pay for example, and then, you know, Apple's getting a cut or whatever that is and then there's Visa and Mastercard taking the cut as well. Yeah. Exactly. So if I go to Uber however, they're all doing everything through credit cards which means that someone is losing 3%. Right. There's no reason for that. And now they have a green light and Dara Khosrowshahi has talked about using it. Now, will it change your margins dramatically? No. But why not move money onto your Uber app and save some money for Uber and for yourself at the end of the day?
No, I think that's very interesting. Now, one thing related to that is, you know, for the stablecoin to be stable basically, it's backed by treasuries, right? So, isn't it kind of ironic? I find it a little ironic that stablecoins will be backed by the full faith and credit of the US government. So how do you think about that? Like, you know, I know like the US has kept the system stable since, you know, FDR and FDIC insurance and things like that and then we have the bailouts and I'm curious how you think because crypto is supposed to be outside of the system and now it's — I don't know if co-opting the system is a way to think about it.
I think it's just an unbelievably good piece of legislation to be honest. In a way, it's revolutionary and deregulatory. Like I said, now tech companies like Apple can compete with the banks, but it does provide this sort of — only the way to do it is to have treasury bills back it. And, you know, in the crypto world, there's crazy bad behavior. At least from an investment perspective, meme coins, all this kind of stuff, and some crazy algorithmic stablecoins. So to have it be as simple as possible I think is also very, very liberating because the last thing you want in a system is for people to rely on something and then —
Along those lines, the Melania coin I think it's down what, 98, 99%? Like a lot of people get into these exciting — well, exciting might be the wrong word — but these well-known coins and then that happens, they lose faith. But what you're talking about, there are a lot of reasons to clearly have faith, just don't go all in the next time there's a Melania coin, right?
Oh, no. Don't do that at all. Right.
No, it's just to — well, you already mentioned Bitcoin being like digital gold. Right. So, I do want to touch on gold here. And congratulations on gold miners. I think you all had the first ETF in 2006.
2005, something like that.
2006. Yeah. And this year it's up, you know, 100%. Again, this is not a recommendation by any means, but you all can check out the VanEck Gold Miners ETF. I think it's up 100, 102% as of the time you're speaking in early September. But yeah, congratulations on that. But why do you think gold is doing well?
So, a little bit of background on VanEck if I can for people who haven't heard it. Just long story short, the firm is 70 years old and my father probably made his name by starting the first gold fund in the United States in 1968 when gold was pegged against $35 an ounce. And so, he basically said the inflationary forces are going to cause a break in that peg, which happened four years later in '71 under Nixon and gold went from $35 to $800 an ounce. So, you can imagine a great time to have gold in your portfolio and that started.
Was that like a mutual fund?
It was a mutual fund and I've started calling it the first thematic fund in America because really funds back then were just US equities, very diversified. And anyway, so it was natural for VanEck to launch a gold miners ETF and for us to get involved in Bitcoin because they're all part of the same tradition, if you will. So our view of investing is look at these big long-term trends and figure out what do you want to have in your portfolio to benefit from it. So a thematic approach. So let's talk about gold to answer your question. Basically two years ago especially we started pounding the table and saying we think that both gold and Bitcoin are really attractive here and have long-term sort of opportunities. And I'll tell you what I'm enthusiastic about for gold is not what you might expect, which is monetary policy, fiscal policy. It's actually the rise of India.
And you're going to be like, Jan, that is totally — We were just talking about that even — you're playing to the —
No, I'm not playing to my host here. I actually really don't like him. But my name kind of means gold as well.
Oh, it does. Sona is a Hindi word for gold. Wow. Sona is a term of India that comes out of that. But yes.
No, but let me explain why. So, India has done all these economic reforms and on the trajectory that it's on, it's going to basically shape up to be the size of Europe in 10 years, let's call it. And you don't need demographics. You just need the economic growth. So, if that's true, it'll be like the fourth largest consumer market in the world. And when I look, it's good. The US share of the global economy will shrink even further. And two of the — well, three of the big four, right? Europe, China, India are not dollar-centric. They won't be dollar-centric. And so what we see is global demand for gold is very high. Partly it happened after we seized the Russian reserves after they invaded Ukraine. But just in general, there's no other good currency in the world. No one's going to take the renminbi. It's not going to be the euro. It's not going to be —
And nobody wants a rupee either, right?
No, but they don't want dollars is my point. So what's the common second choice? It's gold. And so you just actually — foreign central bank reserve holdings of gold are now higher than US treasuries. So but I see this as a 10-year trend. You know, I really see a lot of potential.
Dive in there. So these are approximates. The gold market they say is about $22 trillion. Bitcoin's approximately $2 trillion, maybe two and a half trillion. Does Bitcoin catch up to gold? Do they get even, one to one? What will that look like if both are still in bull markets, let's say for five years, which I think maybe you agree there. Does Bitcoin catch up or how's that look?
Well, no one knows, Ryan. Since I did my kind of original deep dive in 2017 when Bitcoin was about 3,000, right? So, we've been following this for a long time and writing about it in our research. I basically have just used the rule of thumb there'll be half the market cap of gold. Got it? So, that number keeps going up. That's 400,000. That's 500,000. But, you know, I think it'll start becoming boring, too. Like, it's not surprising the volatility has come down, but I do think there's still a lot of people that don't invest in Bitcoin globally.
So, Oh, we see the surveys and I know you do, too. The idea of private equity being allowed to go in 401ks, potentially Bitcoin being a lot easier to go in 401ks. What's your thoughts on some of those changes or potential changes we're going to see here sooner and later?
Yeah, there's a ton of interest in this area in the wealth space. We actually launched an ETF that invests in the fund companies that offer private credit and private equity. The general partners like KKR and Apollo and Ares and things like that and it launched earlier this year. It's amazing how much people want to talk about it like every adviser instantly gets it because they're getting all these emails from all these private companies.
Better being a general partner than a limited partner. Talk about that.
Yeah. So philosophically, we actually ran $4 billion in hedge funds before we started our ETF business. And I'm a believer that a lot of those higher return opportunities have limited capacity. Meaning the funds should not be too big. Now there might be some exceptions to that like for private credit where you have economies of scale, but that's my sort of inclination. So we have two totally different businesses at VanEck, right? We've got ETFs, which are an economies of scale business. We're always — not always, but every year we cut the fees on some of our ETFs. That's just the way they — luckily they're growing and we can afford it, but that's just part of that dynamic. So I think you have to be willing — at least we always are willing to cap the size of the private funds that we sponsor. Okay. So, I just think you have to be thoughtful of what you're adding to something like a 401k and if you're doing it at scale. Now, again, I think some of the alternative credit shops that can write a billion dollar check for a data center, I get it. They have a competitive advantage and maybe that makes sense. And what I just said is an exception to that. So, the one question Ryan I'd ask you is we're sitting here in 20 years — looking younger because of some therapeutics, right? Being smarter because of some of the therapeutics. And some of the people roll out of these target date funds after they have a 10% allocation.
Who's providing liquidity for those private equity holdings?
Right? They have people are retiring the target date. They're like, okay, now I want to actually spend the money on my retirement. Like, so that's how I — there's no problem putting the money in,
Okay. And I think it's going to be delayed a long time, but that's just one thing I'd point out.
Like it. Yeah. I think matching liquidity to your duration.
Yeah. Right. I mean, you want to make sure they always match and that's something we always talk to our advisers about. And I think our advisers generally do a pretty nice job about asset allocation, right? You have like — our advisers use buckets, right? There's bucket one for immediate short-term needs, bucket two for maybe 3 to 7 to 10 years, and then your long-term bucket. But yeah, but that's assuming you have the adviser, right? A lot of people by default to your point is like, oh, I'll just put it in the target date fund. Right. And now the target date fund has something that's really illiquid and you can probably get out of it. The question is at what price.
Well, those managers just have to be conscious of that, right? And, you know, I mean, BlackRock had an issue with their BREIT fund a couple of years ago, if you remember that.
Oh, yeah. And you know they suddenly got two billion out of a pension fund to provide that liquidity. But these — like California — these interval funds can get into a downward spiral where if people feel they can't get out it's sort of like an ATM that stops working then everyone's going to the ATM going I want my money and that's a bad cycle for some of these interval funds.
So, we've hit about the halfway point of Facts Versus Feelings. Ryan and Sonu joined by Jan Van Eck at Excel out in Arizona. I do want to talk about your dad a little bit. Let's kind of go there. Obviously started the company 70 years ago. What are some things that you learned from him leading a business, being in the financial industry, I assume your whole life because you grew up in it. Just talk about your dad. What are some cool things about him? Maybe you've never even said before. Some things that we could take away from all the amazing things he did.
Describe who he was. So his father was Dutch and that's why my name is so Dutch. And he actually — my grandfather started Shell Oil's operations in the United States.
He didn't invest in tulips, did he? That was a couple generations before. I get it. I get it. But yeah.
No. So my grandfather started Shell Oil in the United States. But what was he really? He was a salesperson. He was just trying to sell their oil. So it wasn't anything super glamorous. And their business there actually was based out of California. So my dad was born in San Francisco in 1915. My grandfather rose through the ranks.
When was the big — wasn't there a big earthquake in 1906 —
Then the financial crisis after that and all was San Francisco, right? I mean it was all out there.
Well then the Fed came and saved the day. Exactly.
So 1913 was when we got the Fed, right? Exactly. Oh, we can do some history. Okay. Yes. So, but just sticking with that narrative. So, I guess, he got an MBA at Harvard Business School, went into the energy industry and really didn't like it. He said, I think Americans should invest in Europe and Japan as they recover after World War II. So, he actually in 1955 there were only two companies that had an international equity fund. One was Franklin Templeton, John Templeton, and the other was John Van Eck. So anyway, but he was very much a historian. I would say less of a salesperson.
And so, you know, Templeton's assets were on a different trajectory than VanEck's assets. But then, like I said, it's actually really interesting — late in his 40s, with two jobs because the AUM of the company wasn't big enough, he had to write research on the side. Two little kids at home. What does one say? 'Oh, I got so much free time. I'm gonna get a PhD at night.' So he went to NYU and started studying. And he studied under an Austrian economist called Ludwig von Mises, who basically said inflation's going to be a problem. You should get into gold. And that's what he did. He sold 85% of that international equity fund and put it in gold.
The ballpark — what year was this?
Oh, it was '68 when the fund started. Understood. Okay.
And so some context here. So it was a conversion — I mean, it was really an international equity fund that became a gold fund.
Yeah. Fascinating. And why was it gold mining shares and not gold bullion?
Well, it was gold mining shares and not gold bullion. Oh, because you couldn't — because of the restrictions. It was illegal. It was illegal to invest in gold. You could invest in gold coins, which was — during the 1970s bull market, people would invest in the VanEck International Investors Gold Fund, futures contracts, so a lot of brokers had Series 3s, and there were no ETFs back then. And coins — Krugerrands and maples — that was what happened in the '70s. Anyway, so that's basically the history. I think that historical perspective — VanEck still has this macro perspective where we look at what are things on a 10-year basis, like the rise of India or the rise of AI, that are going to affect financial markets.
Do you get back to Holland much? Do you go — is there any reason, travel?
My mom's actually German, and we have business in Europe, so yeah, I've traveled a lot globally.
At university one day, this roommate just showed up and he was from Holland. Buddy Rob. So I spent the summer in 2000 there. And I'll never forget — it was, I guess, the Euro Cup probably — but how everybody wears orange. I mean, like, how many people live in Holland? 10 million, maybe 12. It's about the size of Ohio, where I'm from, but every one of them had orange on. I thought it was really cool the way they love their football team and really get into it.
I'm a big fan of soccer and my favorite team is the Dutch soccer team. So, and really, ever since I started watching soccer back in the mid-1980s.
Yeah, that's fascinating.
