The Bull of Wall Street #35 - Jan van Eck, CEO, VanEck (recorded 07/28/25)

I think this Genius Act, the stable coin bill is one of the most dramatic pieces of bank regulation in US history. I call it the third most important.

Thank you. It's always fun.

I think that's generous of you. It's a summer anyway, right?

Yeah. I mean, I'd love to just give a little bit of background on VanEck and our investment philosophy. We're just celebrating our 70th anniversary. We were founded 1955. And we've always been a firm that's basically been looking around the world for big macro economic, political or technological trends and then trying to have a conversation with advisors and with end investors about what might be additive to their portfolios. So, you know, my dad made his name by starting the first gold fund in the United States when gold was pegged at $35 an ounce. Obviously, that fund did extremely well when gold went up to $800 an ounce. And so we're basically looking for other kinds of trends like that today. I would say off the top of my head, number one is obviously AI and the impact on corporate profitability. That's not unique there, but semiconductors has been a great way to play it. In no particular order, number two, the federal budget deficit. Again, big macro issue, but it's been propelling gold and bitcoin this year and over the last two and a half years. And then my big international trend that I like to point out is the rise of India. India has got sort of all the macro momentum that you would like and they did a lot of pro-business reforms several years ago under Modi. I wanted to say Modi, not Momani, who's our mayoral candidate. Slap myself on that. And in 10 years, India is projected to be the fourth largest consumer market in the world. So it'll be the US, Europe, China, and India. And it really helps companies get a global competitive edge and a cost advantage if they can be sort of incubated in a large domestic consumer market. So anyway, those are some of the trends that are top of mind that we're talking to clients about.

Uh, we have a couple of solutions. I would say the dynamics of India are basically a deregulation and then joined with a very important thing which is basically the cost of mobile phones fell so hard that almost everyone in India can afford one. So everyone is on a digital platform. They have a free digital payment system that's national and a digital identity system. And so the example I like to give is during COVID, they basically said you could open a brokerage account without needing physical identity papers. You could use a national ID, and that stimulated — there's one brokerage firm alone that was opening a million accounts a month.

That's huge. So now those account values are probably pretty small, you know, several hundred dollars, but they're getting that system. And actually the other thing I'd like to point out about India is that the returns of the Indian market over the last 5, 10, 20 years are very comparable to the S&P. You know, when you hear emerging markets, it's not a question of whether you run away, it's how fast you run away, right? But India's actually been an exception to that, and I think that shows what a pro-business environment, a pro-equity environment can be in a country.

Yeah. Well, China is very interesting. I just spent two full days last week with some Chinese economists out of Shanghai's Jiaotong University. I would say it's been a depressed environment for equity investors, right? Because of the over-competition situation with many industries, really with every province wanting to get its hand in the game and having their own AI compute center, technology center, EV manufacturer, whatever it might be. The question is, will that turn around anytime soon and reward equity investors? I'm not so sure it's going to be a super pro-equity climate anytime soon. I wouldn't be underweight. But on the fixed income side, it's actually potentially more interesting. So there, listen, we never know what the future's going to be, but there is a scenario which I think is underappreciated where there's a big trade deal between the US and China. And the unlock is really not probably that China opens itself up widely to foreign competitors, but that the Chinese consumer is a little bit more unleashed. I mean, effectively because of the Shanghai lockdowns, because of the property depression, Chinese consumers have been doing nothing but putting their money in the banks. The amount of cash in Chinese banks is astounding. And so Scott Bessent, our Secretary of the Treasury, has been talking about maybe some kind of unlock. Now added to that, you could actually see and probably should see an appreciation of the renminbi, which would be very good for our terms of trade, right? We would be having more exports to China. China would be a bigger consumer around the world with a stronger currency. So that's a scenario. And one of my colleagues can see a doubling of the value of their currency over a 5-year period. I'll just put that out there as a thought experiment. So it's listen, it's no one knows. We could just be stuck in the status quo for a long period of time, but it's something that should be on people's radar screens as a possibility and to kind of reposition.

So, blockchain, sorry. Yeah. No, you're good. I don't know about Japan and blockchain per se, but I think this Genius Act, the stable coin bill is one of the most dramatic pieces of bank regulation in US history. I call it the third most important. We got Alexander Hamilton, we got FDR's reforms and the '33 by putting in deposit insurance and trying to make banks so that they don't blow up. And the stable coins bill, what it does is it allows technology companies or anyone to compete against the banks in terms of the payments infrastructure in the United States.

And the stable coin bill is really allowing some very powerful companies with hundreds of millions of consumers to compete. So I think, you know, when I look at blockchain, obviously Circle, the stable coin companies rallied dramatically since its IPO over the last two months. Ethereum and Solana, which are likely to be used heavily by stable coin companies, have rallied dramatically. So we'll see how it plays out. So not sure about real estate in Japan.

And there are some like the banks and the credit card companies that could see a little pressure.

I just feel that, you know, I'm not so short-term oriented. I just feel like there's this long, decades-long gravitational pull away from the dollar. And so when I was talking about the rise of India, it's not like a negative thing for the dollar per se, but the Chinese and the Indians have absolutely no interest in having the dollar be part of their economic ecosystem. And so the role of the dollar will just be declining. And then secondly, I do think the rest of the world looks at some of our policies, whether it was the seizure of Russian reserves after Ukraine or some of our tariff policies, as just a less predictable ally. And that has just led to this ongoing bid for gold bullion from central banks and also from the private sector. So I think this dedollarization is going to be a tailwind for international investing overseas. I can't tell you the immediate impacts of that. That's pretty hard. I mean, people could say interest rates in the US are bound to fall sooner or later and that would make the dollar less attractive. But I think GDP growth is actually a better intermediate-term indicator, and we're slowing a little bit but nothing so bad relative to the rest of the world. You raise a good point, especially with rate differentials, because there's a huge divergence between the US policy rate and others, and the dollar has been going down in the face of a higher policy rate. So I think that resonates there. But you started to talk about US plays, sectors, if we do believe and I tend to agree with the US dollar weakness thesis. I mean, our foreign counterparties including central banks have been diversifying away from the dollar for years. That's not a new trend. But what would be a couple of sectors that you would point to for US-based investors if they didn't necessarily want to buy India or China?

I mean, I guess it really comes down to I would say international is probably going to matter a little bit less than AI. And I'm very curious as to how this quarter's earnings plays out in terms of profitability. I don't know if you know this firm called CO2, but they had a chart in their investor deck about a month ago that showed how Microsoft's employee headcount and there was actually just an article in the Journal today about this where some of the large cap companies' headcount have flattened but their revenue is growing, which is just like a dream world for equity, right? Because margins are expanding, profitability is growing. So I think the question is, will that affect large caps more than small caps? And I kind of have to think yes. I hate to lean back into the S&P 500, but I kind of feel like that's where it's going right now. If you don't, the example I use is, VanEck has about 500 people globally. We don't have a lot of people doing the same task. It's very hard to use AI when maybe there's two people or three people doing the same task. But if you talk to the CEO of a big bank, they don't have two people, they don't have 20, they don't have 200, they have like 2,000 people doing the same task. That is prime for efficiency methods and AI since a lot of that's moving data around, right? So that would benefit the large caps again. So not maybe dramatically disproportionate against the smalls, but yeah, I mean, it's just I hate to be the person defending the multiples of the S&P 500, but a year ago, honestly, I was pretty negative on Nvidia when it was selling at 50 times revenue. But I find it hard. I don't feel like we're at some kind of extreme here. It's really the fundamentals could be coming through in a way that's an equity investor's dream.

Yeah. Well, I mean, obviously the suppliers to the industry like the semiconductor companies have explosive revenue. And then all the ancillary cheer point, I call it the 'advance,' like the phase 2 beneficiaries of this trend, right? So it's the demand for infrastructure. So yeah, we have a diversified nuclear ETF that's been benefiting tremendously. We have some natural gas companies, right? Because in the intermediate run, it takes a while to get nuclear up and running. Natural gas will be a beneficiary. So, yeah, we're definitely 100% into that theme. I mean, valuations are pretty rich right now, but it's hard to know because with nuclear, the counter was coming into the year is that we've seen this before with alternative energy solutions that take five years to become profitable, and we got destroyed in wind and solar, right? And that was the risk with nuclear. But on the other side, it's just a global trend and there are so many projects going that these companies posted good earnings in the second quarter. It's just kind of amazing. And then you had this huge push from the administration. So I think it's almost an issue at the top of national security where we need to get our energy production going. I heard our president talking over the weekend that he wants to have as much addition to energy capacity by the end of his administration as China, which would be, even if it's a stretch goal as they say, it shows you the direction of momentum. And it's funny, I was just having lunch with some of our summer interns and the IT intern was just saying about how much compute he's adding to one of our colleagues that's doing a lot of AI. So, sorry, long-winded way of not answering the question about revenue, but still.

And the last area where I'm not a big consumer, thank God, is health care. But my god, the customer experience is so awful in healthcare, right? There are so many inefficiencies there that I think would, and frankly people don't consume enough of health care sometimes from a diagnostic perspective. So sorry, I'm going to do a very quick sidebar. There's something called a calcium CT scan. I don't know if you've ever heard of it, but it's not prescribed by your doctors generally speaking. But what it does is measure calcium buildup in your veins. And a friend of mine basically locked out and had one of those tests right before he was about to have a massive coronary event. And why are medical? It's a $200 test. I asked my doctor about it and he goes, 'I don't normally prescribe that.' I'm like, 'I just want to take it. My friend told me to take it.' So, that's my passing it on now. To get a calcium CT test. Anyone over 40 should have this. And anyway, sorry, that's a little bit on the side of maybe there's revenue opportunities in the health care system, right? If you start getting better experiences because some of these things right now are just disappointing.

Well, you're contributing your data and your brilliant mind to the large language models that you're using.

It's simply important because I make that point because it could be a winner-takes-most industry structure. Again, we invested in a startup that was a financial use of AI. So it was supposed to be a Bloomberg killer, but they basically had to pivot because the models that get the more questions are the Perplexities and the chatbots, and their models will give better answers because they're getting more prompts. And so it's like again, the winners are the big firms. The traffic matters, the networking effects, in this case it's large language model learning. Are those the scale winners?

We don't work for the computers.