Full Transcript: Jan van Eck on the Outlook for 2026
Why Visibility May Mean Risk On
Justin: Hi Jan. Welcome to Excess Returns. Thank you. It’s great to be here. As CEO of VanEck, you oversee a innovative and a very influential ETF and asset management firm, you’re home to some of the industry’s well-known and widely used ETFs, including the VanEck gold miners, ETF, the VanEck wide moat, ETF, and many other stock bond and crypto ETFs and investment strategies, you’ve described and semi semiconductors.
Ha, that’s the biggest one. That’s right. But yeah, a lot of different, I mean, dozens of, I think ETFs and strategies and some of the first, in some of these, I think more, I would say a little bit more focused areas of the market, but areas that advisors and investors clearly want exposure to and are important in terms of building diversified investment portfolios.
So what we want to do with you today is kind of have you on, I mean, you’re sort of a, like this. You know, very influential person in the ETF landscape and sort of talk through how you’re thinking about the markets, how you’re thinking about developing ETFs and building new investment strategies and sort of cover, I think, a wide range of topics with you today.
So thank you for taking the time and sharing, your time with us and our audience.
Jan: Yeah, it’s my pleasure,
Justin: my honor. So you’ve described the firm as having a few different very important key pillars that inform the macro perspective and how you go about trying to take advantage and exploit these global trends in the market.
And those are government spending or fiscal policy, monetary policy and technology. So I thought to start, it would just be good, like kind of a little inside baseball to hear how a firm like yours. Sort of takes that macro view or that orientation and sort of translates that into how you think about product development and themes that you’re trying to take advantage of.
Jan: Yeah, sure. Thank you. Let me try to elaborate on those, on those words a little bit because I, everyone talks about government policy and technology, right? I think what we bring is because we appreciate history, we think the future can actually change much more radically and much more quickly than people think about.
So I don’t know if I can, sort of describe it. Well, I still don’t have the greatest words, but we try to look at some of these macro forces and I think more, like the rise of China as this huge like magnet. It’s a reality outside the financial markets, but it will pull, and stretch the financial markets.
So anyway, that’s maybe a little bit more description on, on how we look at the world. And I guess from an investor perspective, the phrase, that people key in on is sort of asset allocation is really important to returns, right? And so, but like we, like at VanEck, like to point out some asset classes didn’t used to exist.
Like when I started my career, emerging markets wasn’t an asset class. People look at real assets and gold. Sometimes they, some people think of it an asset class, some people don’t allocate to them at all. So what we like to do is engage, and hopefully we’ll get into it today with clients, investors, just how they’re thinking about those very, very important things to their portfolio.
Justin: Yeah. That’s great. No, I think we will get into a lot of that today. But where I think we wanted to maybe start with you is you recently put out your. 2026 Outlook. And the title of that piece was Visibility Should Mean Risk On. Is the title of that piece was Visibility Should Mean Risk On. So maybe what is creating that visibility and why are you optimistic as we sort of head into this new year.
Jan: Yeah. Maybe those words were dead on arrival faster than any other quarterly outlook I’ve done. Not that I’ve changed my view, but they require a lot more explanation given some of the headlines that have been hitting the, the newspapers. So primarily, if, if you look at. Government spending monetary policy and technology.
We, do know a lot about what’s going to be happening in 2026 already. So as far as government spending is concerned, there’s not gonna be a big bill outta Congress. The big, beautiful bill comes into effect this year and the trajectory as we see it, of fiscal deficits, federal fiscal deficits as a percent of GDP is on a healthy downward trajectory.
So it peaked, over north of six and a half percent. Two years ago, it was just south of 6% last year. We think it’s gonna be below 5.5%. Going into this year. So that brings us out of like the fiscal danger zone, that we had a couple of years ago, kind of emerging markets over type of overspending towards a trajectory that’s becoming much more easy for us to swallow, meaning our debt levels will become less of a stress on the markets.
And so you saw the 10 year interest rates, which are a good measure of that last year, end up the year sort of at the 4.1, 4.2 level as opposed to the 4.8 level, which was much higher. Okay? So that’s government spending monetary policy. Okay. You could say, oh my goodness, we’re gonna have a new fed chair who’s gonna take office in May.
But I think Scott Bessent at the end of last year, through an article and then numerous interviews, gave a very, very clear roadmap of a Federal reserve that’s gonna be less interventionist. And he sort. I would say made fun of the Fed during the post COVID era, saying that was a gain of function fed, meaning that government stimulus balance sheet, sorry, monetary stimulus and the Fed balance sheet was way too big for too long, supporting the financial markets leading to inflation.
And in any case, what, what I’m saying is that for the new Fed chair, they will follow the Trump Bessent philosophy of a smaller, less interventionist fed. I bet they’ll probably be saving some money on their renovations, on their building as well.
Justin: The interesting thing with the, the Fed’s intervention is that it sort of goes back to like the financial crisis where they came in, they kind of saved the financial system, and then the markets sort of, it’s almost like, and then you had COVID and obviously what they did. There, but it’s like investors have almost come to expect that the Fed is going to be there as a sort of rescue mechanism for the markets when things get tough.
And obviously Bessent is, is signaling something very, very different, based on what you’re hearing?
Jan: Well, he said let, look, let, let me be clear. He did say that if there’s a liquidity crisis, the Fed needs to step in. Okay. And he quoted a European central bank, said it’s great. They did that for two or three months.
But we did that for two or three years. And as every American knows, that drove asset prices up, drove the stock market up, but it drove the prices of houses up a lot too and a lot of other things. And so, I mean, whether where the finger pointing should go, I don’t know. All I’m saying is Bessett really laid a sound.
Coherent foundation for what’s gonna be the Senate needs to approve Trump’s nominee for the Fed. And he gave a really good philosophical explanation there, which I think really does matter at the end of the day. That’s, that’s kind of my read. And regardless of who they end up picking, the philosophy of who they pick, I think is also gonna be clear.
The thing that’s crazy and may very remarkable about, one of the things that Bessent said as well though, is he said, interest rates today are normal. And what that suggests to me is that he was not laying the groundwork for someone to come in and drive short term interest rates from 3.5% to 1%, which is.
We how you could interpret some tweets that come out of President Trump’s account. Right? So if he thought they were already normal, then maybe the market is correctly expecting a quarter point, half a point, three quarters of a point on the short end. So again, my point is pretty much the market, that’s what the market expects.
We have a lot of visibility. There shouldn’t be some kind of adverse, extremely tight monetary shock.
Justin: Do you have any sense if, if that is true about the Fed being, you know, less interventionist, if that’s the right word? Do you have any sense about how that kind of trickles down into the areas of the market that it might impact?
Like I’m thinking maybe, maybe active strategies might do a little bit better if that is in fact the case, or just how does that flow through in terms of the way investors should maybe be thinking about it at like a portfolio level?
Jan: Yeah, I don’t know. That’s a great question, but if, if, if the tenure doesn’t change a lot and the short term only drifts down a little bit, I don’t think, I mean, that should help the financials on the margin, but otherwise, I, I’m not really sure it’ll have a big sector impact.
So I would say probably not.
Jack: I love, by the way that you’re, you’re clearly a podcast guy in researching you because, it talks about you listening to a lot of podcasts, and I think that part of what you, the best in interview you talked about was the all in one, on the All In Podcast, which, yeah,
Jan: that’s the one that got my attention.
And I sometimes when, yeah, I, I really, I, I, I shy that out on social media and I, and I listened to it like three times because I was like, I really think this is very important, right? When Secretary of the Treasury writes an article, repeats the same message over and over again. You gotta listen to him. My, one of the things I learned from my father is just when important people say something, listen.
‘cause they’re really likely going to do what they say. I mean, you know, most people are,
Jack: and it’s cool too. ‘cause we’re used to, you know, when I was growing up in markets, it was like these two minute soundbites on CNBC. And now we can people, these, you can hear these people who are making policy decisions like talk for an hour.
It’s just really cool. You learn so much from doing that.
Jan: I, I love, yes, I love the long form content. And also, a lot of what I try to fight against in my quarterly outlooks is the headlines we see in the media all the time, right? What does the media wanna talk about? is it Kevin? Which Kevin is it?
Like who exactly is being picked? And there, if you just take a little bit of a step back and you realize all those candidates fit within one philosophy, it would kind of know what’s happening and focus a little bit less on the personalities. That’s why I think the long form content really helps. You mentioned
Jack: the, fed renovations and, and that sort of gets to a broader issue of independence.
We’ve been talking about a lot in the podcast, which is, you know, we’ve had some guests who were extremely worried about fed independence, given what’s going on. And we’ve had some guests who said, you know, it doesn’t really matter in terms of policy that much. We’re all talking about it a lot, but you know, it probably won’t change the Fed’s policies that much.
Do you have any thoughts on that?
Jan: yeah, I’m, I’m, you know, if you look at the history of the, of the Fed, and it’s only been around for 110 years or so, there’s always politics around interest rates and things like that. So none of this. It’s, it’s a little bit bare knuckled politics, but nothing like, I, I, I am not worried about it because listen, at the end of the day, the Senate needs to approve the Fed chair and the Fed chair is only one vote on the open market committee.
So what’s more important is are they persuasive? Not, you know, it, I, I just don’t see a major restacking of the Fed that’s been proposed. Before we dig into
Jack: your outlook a little bit more, I wanna take a high level, I wanna talk about it at a high level. ‘cause one of the things you did that was cool in here is it’s very clear you guys are thinking in very long term timeframes.
When you think about macro, you’re thinking about long-term trends, like, you know, comparing and contrasting your outlook with other ones. I’ve read, like you’re thinking about 10 years, 20 years, 30 years down the down the road. And what are these big trends and how can we take advantage of them? So can you talk about like why you think that way?
Jan: Yeah, because I think some of these longer trends actually give you higher conviction. So the one, one of the ones I talk about is the projections that India at their current growth rate will be the size of continental Europe in 10 years. That that is a profound reshaping of the world, right? The world economy, but also political power and monetary systems.
It’s, you know, they keep doing free market reforms. I mean, sure it, it could not happen, but I think the chances of that happening are super high. Now let’s compare that to something that’s shorter term. Do we know what the Indian stock market is gonna do in January of 2026? No idea. Q1 2026. Really no idea.
So I think when you focus on the few number of really important trends in the world, and I think for a longer time you can just have much greater. Conviction around that. Then maybe shorter term predictions and you know, at, as I said at the beginning of our, our discussion, should it affect your asset allocation?
and, and in that case, I would say yes, right? Because most people will allocate to international markets based on some of a current day index, not kind of where things are going. And so, yeah, I like to overweight India. That’s the, I guess, the bottom line of that rant.
Jack: Yeah. And you had some other great trends, which we’ll talk about as well in, in the outlook.
And it, it is just interesting because all of us get wrapped up in this, you know, was inflation 0.5% up or 0.5% down and all this stuff we’re seeing on CNBC every day. And it is important to look at these global trends and say, alright, 10 years from now, what do I think is gonna be happening? Because that, that in the end will probably be a lot more important than whether inflation is, you know, 0.2% one way or the other.
A hundred percent. How do you think, you mentioned the deficit before and you mentioned that it’s getting better. Like, what do you think is causing that? I mean, I guess to some extent economic growth is good for the deficit. Tariffs have have generated some revenue. Like, do you think those are longer term sustainable things that we’re seeing in terms of the deficit going down?
Jan: I, I think that, yeah, it’s, it’s, it’s, it’s really just what you mentioned, but tariff revenue. But let me talk about something that, people, I don’t think, talk about all that was, I was thinking about this weekend, which is the Ukraine war, right? I mean, I just think that the Trump administration is trying to save money wherever it can.
It hit this sort of political brick wall with Doge, and so they don’t talk about it at all. But think about the Ukraine war, right? We used to be lending money to Ukraine or sending them weapons. That was ca we were writing checks for the Ukraine war. We’re not writing checks anymore. Europe is writing checks.
So we’re saving that money. Now, I don’t know where that money savings is going. But that was like, you know, tens and tens of billions somewhere between, I think the, the number was somewhere between 50 and a hundred billion a year. That’s a lot of money still for the United States. Right. So I just think that that, you know, and whether the fraud, the, some of the welfare fraud adds up to a lot of savings.
I just think that it’s. The healthcare thing, right? They didn’t agree. In the fourth quarter, they risked a government shutdown, the Trump administration, to not extend the increase in benefits in the a CA program that Biden put in place. So everywhere I look, I see them trying to save a $10 bill, $20 bill.
That kind of adds up. The biggest, by far, the biggest seismic change is the tariff revenue. ‘cause that’s like 300 billion. Or, or, or, or more. But anyway, so that’s, I think what’s bending the curve and we’re, we’re way out there. Like I personally, and you know, in, in the numbers I put in my outlook are way more, you know, more positive on that number being smaller, sort of below 5.5%, even 5.3% of GDP this fiscal year that ends in September.
But who knows? But we’ll see. But, you know, we’re, we’re the more bullish people on Wall Street.
Jack: So when you think about the economy, I mean, are you bullish as well? I mean, it seems like we have pretty reasonable growth right now. It seems like inflation, it’s above target, but it’s not that high. I are, you pretty are.
Do you feel good that we’re kind of in this Goldilocks environment going down the middle right now?
Jan: Yeah. So again, going back to fiscal and monetary, I used to say after COVID VI, we had two feet on the gas pedal. We were spending a lot of money and the fiscal policy was both, they were both stimulative, right?
And so remember when the Fed raised rates in 2022, everyone said, we’re gonna have a recession. We’re gonna have, you don’t have a recession when you have both feet on the gas, right? The government was stimulating in both dimensions. And so, you know, through, through QE and, and government spending, what we’re having now is we’re having this slight trade off.
I thought it would be faster, but it’s a slight trade off, right? Fiscal, stimulus is coming down as a percent of the economy and the monetary stimulus is slightly going up, right? This interest rates are slightly going up. So it’s just a slow moving kind of shift. That I don’t think net net will be negative for the economy.
No. And it’s, it’s much healthier in the long term, right? To not be spending so much money.
Jack: So I was excited to talk to you about AI ‘cause I know you’ve looked into it a lot and, it’s something that excites me, just ‘cause I’m using it so much on a day-to-day basis. And I, and I think all of us have this tendency to maybe try to rank these things in history, railroads, the internet, ai.
But I know you rank AI towards the top, I believe you said it was the second biggest, technology in American history after railroads. So can you just talk about how you’re thinking about AI and, and what it’s gonna mean for the economy and for all of us.
Jan: Yeah, I think the, the one thing I would say is remember, like the VanEck philosophy is look away from the financial markets.
What’s actually happening on the technology front and on the technology front to over sim simplify it. Token demand is exploding. And, I don’t think those numbers are, released a whole lot anymore by the hyperscalers, but, I think it was like 38 times from the summer of 2024 to summer of 2025.
So it’s, even CEOs will just say, we can’t predict it. It’s insane. So basically the demand for this compute is, is huge. So that’s really what, that, that’s what drives our thinking is the amount of, you know, the, the, the compute demand. And if you look at the quarterly numbers, like last week we saw TSMC, right?
The, the company in Taiwan that makes all these chips. Again, a positive earning surprise and their stock is at all time highs. I don’t think, you know, based on what I’ve heard on your pod, I don’t think that really surprises the people that are, you know, playing close attention. There is a compute, an acute compute shortage, and if, if TSMC is printing record earnings, guess Nvidia, who’s locked, right?
They, they’re locked together, they’re gonna have a good quarter too. So if you just look at the biggest players in the space, that, that, that’s, I think where you’re seeing, you know, as I said, consistent with what you all have talked about on your pod. Let me just quickly also talk about Q4. Because, you know, I don’t know if you’re gonna ask, but let people say, oh, what about open ai?
And I’m like, that’s great. The marginal players in this compute phenomenon, they got their teeth kicked in, in Q4, Oracle stock core, weave stock, the Bitcoin miners, all the people at the, at the, maybe the, the riskier, more leveraged end of the compute build out the stock market. I, I like Josh, Brown’s expression took out its own trash, right?
You thought, you know, it repriced the risk associated with the open AI kind of ecosystem, open AI part of the AI ecosystem. So I, I, I, I’m happily a buyer and I’m happily a buyer of Nvidia because as its earnings goes up and its stock price stays flat, it’s getting cheaper on an, on an earnings basis.
Jack: Yeah, and I think you definitely could argue what happened in Q4 was healthy, right?
I mean, if in in a bubble, that’s not the type of stuff you see, you don’t see differentiation between companies. You just see everything going up. You know, you see pets.com and stuff like that. So it’s probably healthy long term for AI that that’s happening. Differentiation between the players?
Jan: Yeah. The way I put it, everyone is talking about the AI bubble in Q4 while the bubble burst, right?
I mean, if that could, that could very well be true. If you look at those stocks down 50%, that feels like a bursting bubble. If you’re, if you’re along those names. This, this question
Jack: has no answer, but how do you think about this from an economic perspective? Because I was listening to a tech podcast the other day, the Ddu Kesh podcast.
I dunno if you’ve ever listened to that. It’s, it’s kind of a hardcore tech podcast, but it was like two hardcore tech guys. And one of ‘em was arguing, you know, this is gonna like double GDP growth over time, ai. And the other one was arguing, well, we’ve had a million innovations in history and GDP growth has kind of ended up in a, about the same place.
So it’s probably not gonna have that much of an impact. I mean, do you just think like, at an overall economic level, there’s so many things that we’re thinking about productivity, unemployment, like do you have any thoughts on like an overall economic level? What do you expect this to do? I,
Jan: I guess, a reasonably high conviction that we won’t get a dramatic employment shock.
So you can never invite me back if I’m wrong in 2026. But the reason I say that is if you look, and I include this in the quarterly output output, I, I borrowed, I stole some. Or borrowed some charts from Morgan Stanley that look at different jobs like administrative assistance, and it really takes decades for the complete trend to work.
You don’t really see a big jump, even though that’s being automated, that job’s being automated away, or retail. Remember you have used to have cash registers now everyone’s checking themselves out. You just don’t have dramatic jumps in employment. A futurist I listened to talked about, can you imagine if 40 million jobs were dumped onto the US economy, what employ unemployment would look like?
Well, it happened. Women joined the workforce after World War ii, and you could, there’s not one chart you can find where you see that actually impacting things. So I think the point is we have such a dynamic economy and jobs are being redefined so consistently that it would be surprising to me, and this is again, going to the great visibility into this year if we had an unemployment shock.
Now that’s obviously, I’m not saying No, I’m just saying I think the odds are against it.
Jack: I’m just curious. I, I always like to ask guests how they’re using it personally. Like are you, is this a big part of your life now? Do you use it a lot personally during your day to day?
Jan: Oh, yeah. I mean, I use it like a sort of, knowledge worker replacement for search. You know, I, my colleagues, we, we kind of gave licenses to all my colleagues and we’re using it at work. Basically the way the industry is. What I would say is sort of like a year ago, a lot of it was glorified search, but now people are deploying agents and as you know, you can, the, the prompts are four times as long as they used to be.
They, they take like three to four times as long to process. And what’s shocking to me, I i, I kind of caught up with some of my colleagues a month ago, is how bad old software is. Meaning to create a blog on our website requires so many hours of work. It’s crazy. And I, you know, so I think really what software, we just have this great new version of software that’s going to eat old software.
Jack: Yeah. And every time I think I’ve learned everything, it’s just like, there’s, there’s just so much to learn. Like I, I’m just starting to get into Claude Code, now you may not have used that yet, but, it’s, it’s crazy even for somebody who’s not, like, I’m, I’m somewhat of a coder, but not a hardcore coder.
And it’s just amazing what this can do when you, when you put your, you know, when you put the time in to learn it. Well, we’re, we’re certainly using it here at VanEck.
Justin: Do you, do you, is there, is there like, do you tend to lean into one a little bit more than the other? Are you using kind of all of them equally?
How, what would you say? Like, I’m, I’m, I’m definitely more tied into chat GPT as my main one. So what about you?
Jan: corporately we went with chat, yeah. Because we had to, we have to protect our data, right. But now we’re getting an enterprise version of Claude as well. And, I know we’re also looking, people love, Gemini and the integration with all their productivity tools like spreadsheets and word and email and things like that.
So I think it’s, it’s a lot of flowers are blooming, I would say, at this point. And, and, you know, they’re leapfrogging each other as well. Mm-hmm.
Jack: This gets back to what you were talking about in Q4, but you talked in the outlook about this transition from phase one of AI to phase two and, and I think we’re kind of seeing that now.
So can you talk about that and sort of what it.
Jan: Sure. I mean, well, we talk about AI 2.0, we started using that phrase last year. It’s, it’s more industries that will benefit from, from ai. The most obvious ones are in the, electricity generation area. Sometimes people call it energy, which is like a pet peeve because it’s electricity that we’re short of.
Not necessarily nat gas. We’ll have enough nat gas to last our lifetimes. So yeah, so that’s, that the nuclear ETF, we thought because I call another catchphrase, the solution to electricity is QR code. So it’s quantity, but also reliability. People leave out the reliability part, and that’s where alternative energy, you know, electricity, was not, good enough for the, the AI cycle.
Right. So nuclear has been a big beneficiary of that trade. We, we, we think the complex of companies that are leaning into this electrification and compute, demand, like Bitcoin miners, and, and some of those kind of things that, the RAs, some of the IPPs, like they’re, they’re leveraged into that electricity shortage space are gonna do well, Chevron even, and you can do both old school energy and new school electricity, is, has a whole bunch of gas turbines that they’re looking to, to repurpose to become electricity provider.
Jack: Yeah. It’s just so cool to see all the innovation in energy now. I, I feel like for a while we didn’t really have the pressure that would create, like, the need to have this innovation and AI seems to be creating it. So like batteries, you mentioned nuclear. I mean, there’s so much going on that’s really cool that probably like in a decade is gonna, you know, create things we can’t even think of right now in terms of energy.
Jan: Yep. It’s, it’s, there’s a political risk element as well, right? Because people don’t want to pay higher utility bills, just because they want to use, clawed, right? So there’s a, there’s a tension in, in, in who pays for, this increase in com electricity. Jack: Do you have any thoughts on this overall AI CapEx build that’s going out?
Like we, we’ve talked about this a lot in the podcast, and you have some people who think, you know, there’s never gonna be any revenue or enough revenue to justify this much of a spend, and a lot of other people are thinking they’re not spending enough, like, this is such a great innovation, this is gonna generate so much for the economy that we need to spend more.
Like, do you have any thoughts on this? And I know you’ve studied, you talked about railroads before, you’ve studied historical things where we’ve spent a lot of money on CapEx. Like do you have any thoughts on this? Think relative to those types of things and, and whether you think the benefit will come?
Jan: yeah, I mean, I think, you know, a couple, I’ll use a couple historical analogies, but basically the question is. Was the US equity market last year when 10 companies were 40% of the market cap. Was that some kind of fundamental distortion or did that actually make sense? So, the, that distortion, we, we talked about the technology before.
So I’m not gonna go into the kind of demand side, but the distortion has happened before it happened in the railroad era where the railroads were a huge, and I would argue more transformative technology than ai. But, you know, they were a huge part, the largest sector in the economy. I think they grew to like 60% of the economy.
So that has a precedent. But what’s amazing, and I think really underappreciated, is that these mega cap companies are profit, unbelievable profit machines, right? Their revenues keep growing. And they, they, their head count has basically been flat for a couple of years. And if you, through the efficiencies of ai, right?
Claude is writing its own Claude competitor. They can, they can drive their costs down. And so that’s just a crazy sort of, you know, chart. You know, that we have in our outlook, just what their profitability is. Now, listen, they’re so lucky, right? Because the, the hyperscalers, these big companies are solving a very high level.
We’re a consumer economy. And they own the American consumer, right? And now here’s yet another technology ai, where they have a competitive advantage. Why? Because they have the traffic, right? The models that get the most traffic are going to be the most effective again, so they’re just incredibly lucky.
I, I want to, maybe this is too much of a sidetrack, but you know, someone else who was really lucky in history was Rockefeller, right? Because here he was this entrepreneur making kerosene. And you know, then what happened? The car was invented, right? So they needed more refined oil product. So he was just sitting there.
Was, was he running around saying, oh, I think I’m building too many refineries? I don’t think so. You know, the first 10 or 20 years into. And to the auto revolution. So, sometimes these companies get lucky. I think they’re kind of lucky to be able to use their scale and pivot into this AI technology. And, and so far, no.
To answer your question of 10 minutes ago, you look at mean their balance sheets are still pretty strong. I don’t love the SPV vehicles that some of them are using to, to fund the data centers, but I don’t see anything that’s sort of crisis alarming.
Jack: Yeah, and it’s interesting ‘cause I think one of the things people miss when they compare this to the fiber build out is that those were not strong cash flow generating companies.
You know, you, you were using a lot of debt back then. It is just a different situation. You’ve got a lot of spending now, and maybe we will start to see the debt phase of this now, but so far, I mean a lot of this has been done by very profitable companies that have a lot of cash flow to spend on this type of thing.
Jan: Right? Which is not to say that people won’t always try to cut costs in producing this AI sort of compute. Right. So models have gotten much more efficient. Nvidia chips have gotten much more, efficient from an energy electric, from an electricity usage, perspective, right? He’s, Jensen Wong talks about dropping energy demand cost per ch per compute unit 90% a year.
I don’t know if you can do that. People will be shifting some of the compute more towards inference and doing, being more efficient in inference use or, or memory use. That will definitely happen. So there, there will be slight bumps on the road. I mean, this is a very dynamic, you know, technology, but I think big picture right now, the finances don’t seem to be risky at all.
Jack: One of the things I’ve been thinking about a lot with these, these huge companies is, you know, if you look through history and you look back by decade, you’ll see like the top 10 companies in the s and p 500 and you go forward the next decade. They’re usually pretty different. Like a lot of times you think these companies, you know, have a moat that can’t be broken, and then it does.
But I wonder if these companies are different. I’m thinking about it a lot. Like, I’m thinking like 10 years from now, are we gonna see these same big companies as the biggest companies in the s and p 500 and that law will sort of be broken, or are we just gonna, or am I just living in the moment and not realizing that there’s gonna be something that’s gonna come from behind and overtake them?
Do do you have any thoughts around that?
Jan: yeah, so of course, I mean, of course it’s very hard. That’s why I kind of, I have two comments, right? That’s why I said that thing about Rockefeller. He was so damn lucky he was in the right spot, already had a great business, and then the car was invented and people needed gas lead for their cars, right?
I think the other thing about the ai, you know, kind of industry so far is open AI here is a company startup basically out of nowhere. That because of its chat product in 2023, went way to the top of market share for ai prompt. Right, and not only did it grab the consumer market in the United States, it also partnered with Microsoft to get after corporate America.
So OpenAI in a way has the ability to compete head to head with an Amazon in the following sense, right? You can shop through both portals and both if, if OpenAI partners with Shopify, like they’ve talked about, or, or Walmart, they’re getting the delivery, the logistics, and the payment infrastructure, right?
So who would’ve thought like 10 years ago or five years ago that someone could actually try to compete against Amazon, yet here’s a company, hundreds of millions of users, monthly users with. Potentially the ability to compete against Amazon. So it’s such an interesting case. We don’t know how that’s gonna end up, right.
But, but I think that’s a, that’s a really interesting question and obviously hotly debated on podcasts and in the industry. That’s
Jack: what we do here. We do hotly debated podcast topics. Another thing, I guess another hotly debated podcast topic is, is this idea that, you know, if you, going back to my example of the fiber, you know, the companies that built out the fiber network were not the biggest beneficiaries of the internet.
Obviously the companies that sat downstream were, I mean, do you think that’s the way it’s gonna play out here? Or do you think maybe these builders, you know, the Mag seven type companies that are doing the building will be the primary beneficiaries of this whole thing?
Jan: yeah, I, that, that’s a great question.
I, my, my, my telescope doesn’t go that far into the future, I would say. It’s just hard to know. Um. I, I don’t have a high conviction on where the mags seven go. I will just say though, ‘cause we do spend a lot of time thinking about semiconductors ‘cause of SMH. I, I, I listen to Jensen Wong, and here’s a guy who made it by competing in a very tough, cutthroat commodity part of the business, right?
And then, and now he kind of owns the main, I call it, owns the mainframe. He owns the whole ai compute infrastructure. And I can tell you as someone who has done both themselves at a much smaller level, that once you’ve tasted, you know, some kind of business traction and gotten away from having to compete just on price or the next product, want to have the stickiness around that ecosystem.
And so whether he has to do a deal with grok or whomever, like I, I really think. NVIDIA’s in a very, very good situation right now. It’ll take a long time, for, for them to, to lose significant market share. And so I think they’re cheap at the price, right? Their earnings, their forward price to earnings ratio is kind of near where it’s been at at multi-year lows.
Jack: Do you think
Jan: about that,
Jack: like in terms of semiconductor demand in general? Like, I think like one of the things we’ve seen throughout this whole thing is everybody keeps saying, oh, Nvidia can’t possibly keep growing at this rate, or semiconductors can in general can’t be possibly be growing at this rate.
But then people inside the space, inside of technology are like, we can’t get enough of these things. Like these, these need to grow at a faster rate. We need more of them. Like, do you think this is, as we think forward, you know, into the future years, into the future, do you think this demand is just kind of insatiable right now?
Jan: Listen, I think we have visibility, just like one of your recent guests of two, two years of compute shortage, right? It just, it’s very unlikely for that. So I, I kind of like, well, will the. Will the demand for tokens intersect with the building of capacity and cross at some point in the future? Sure. But I’m not sure we need to worry about that right now. You know, we’ve got, I think two years of this, this phenomenon still happening. At least that’s the view of my expert colleagues.
Jack: You talked about one of the risks we’ve talked about in podcasts, in your outlook, this idea of private credit and, you know, we had tricolor, we had first brands. There’s some people who think those are just, you know, one-off type situations due to specific events and it really has nothing to do with private credit in general.
And then there’s other people who call them cockroaches, which is I think what you refer to ‘em in the outlook as well, like where they could be a sign of a system systemic problem in private credit. Do you have any thoughts on that?
Jan: Yeah, I mean, I was looking at one area called business development companies or BDCs, and these are effectively pools of loans to midsize companies, that trade every day on the stock market and are run by the same firms that run private credit, you know, private, private credit funds that you can’t redeem.
I, yeah, I, I think that, that those, those vehicles are a great thing to look at, in terms of sometimes they’re gonna be cheap and sometimes they’re gonna be expensive. So BDCs, like a closed end fund, could trade at a premium to the value of its underlying loans or at a discount. If the market’s very concerned about the quality of those loans, it’ll trade at a big discount.
Like during COVID, about 20, 25%, in the fourth quarter of last year, they went from like a 10% premium to a 10% discount. So I said, listen, if you think this is. Gonna be a big disaster, then you should sell and you can because they’re liquid. But if not, then it’s, they’re probably a good buy. Now, when I look at, corporate balance sheets, they’re shrinking as a percent of GDP household debt is shrinking as a percent of GDP.
So, you know, the, the, the really, the big, big borrowers in our country is the federal government down in dc So, am I really worried about private credit? No. You know, people freaked out a little bit. Jamie Diamond said, well, there’s one cockroach is gonna be more. So far we haven’t seen more. And so, I slightly favor BDCs because they have daily liquidity and if we see something, it can get out.
But they also give you good buying opportunities.
Jack: You’re probably the perfect person to ask this next question too, because one of the things we’re gonna see with these private assets is we’re gonna see a lot of people, and we have to some extent already see a lot of people try to bring these into ETFs.
And you’ve got one argument saying, we’re democratizing access to these types of things, and you’ve got another argument that you can’t put illiquid things inside of an ETF. It just doesn’t work. So how do you think about that?
Jan: I think you’re right. It’s, it’s really important to match, the liquidity of the underlying, with the liquidity of the structure.
And so, you know, something that does work is, you know, like an interval fund or a a, a tender offer fund where not all the money can go out the door on day on one particular day, right? That’s really what we’re talking about, a closed end fund structure as well. No one has the right to take the money out of that fund on any particular day.
A again, can trade to premium or discount. There is a big demand for access to the private markets and. You know, we don’t talk about it a lot, but VanEck has an early stage venture fund, and also invests in private, you know, private equity. So we do have experience in those asset classes. And to your point, there’s a lot of demand for the SpaceXs of the world.
Do you think it will ever, like on
Jack: large scale, do you think this will ever come, I mean, it’s in ETFs a little bit right now, and obviously we’ve got these liquidity problems. Do you, do you think this will ever be like something that’s offered in a lot of ETFs?
Jan: Lemme put it this way. Not at, not at VanEck.
I completely would agree with you. Illiquid assets should not be in daily liquidity vehicles because not only, you know, there’s a hidden cost as well, right? So certainly you can say, oh, I’ve got some illiquid position in an ETF. Let’s say it’s 10% of that ETF, which is, allowable under the rules pretty much of mutual funds and ETFs.
But what you don’t also know is that the bid ask spread or the kind of. I’ll call it the cost of transacting in that ETF can also be high. And sometimes that’s not very visible to investors. So I, it’s just what we seek is a, the highest possible degree of liquidity in our ETFs and the lowest transaction costs.
And that would be a conflict.
Jack: Another question you ask in your outlook is, did I miss gold? And for me the answer is yes. Unfortunately, yes, I did miss Gold. But I’m wondering, it just seems like whatever’s driving gold and it’s, it’s a bunch of different factors. It, it seems to just keep going, you know, despite everybody saying, you know, this run has to end.
Like, what do you think about the factors driving gold and sort of how are you thinking about it going forward?
Jan: yeah. A again, with with India being a major economy, I just think gold is reemerging as the world’s leading currency. It’s just like the world was a hundred years ago where every currency.
Was only valuable in quote unquote because it was pegged to gold. And in a world where no one can agree, like who the boss is, is it the US or China, or is it India? Gold, I think is gonna be the default. You know, it started under the Biden administration when we seized the Russian assets after their invasion of Ukraine.
But like, no one wants to be vulnerable to the, you know, having the US decide one day we don’t like them and somehow having their assets or their money trapped. And gold is, you know, it’s you, you have it physically, it’s, it’s yours. So I, I kind of really think it’s a 10 year. Just shift or shift back to the way the whole world is going to be.
If you look at China and India, big parts of the global economy, they’re not dollarized economies. They don’t want to be, I mean, the, the re is a little bit linked to the dollar, but India doesn’t want to have a dollar linked currency. And so I do think, there’s this big shift towards wealth in the developed markets and they’re, they’re on the margin.
As they, as they get wealthier, they buy gold. So I think we often make a mistake by trying to take our US perspective and say, oh, US inflation means I should buy gold and stuff like that. I mean, last year should have blown up those per, you know, perceptions, right? Gold hit all time highs and inflation actually went down over the course of the year.
So we don’t live in a US world. We live in a global world, and I think it’s a super long term trend. Now, having said that, could it make. Big corrections, 20, 25% corrections a absolutely. But we’re trying to encourage our clients to, you know, to allocate. And if they, we, we run some allocation models ourselves.
If they can’t bear to buy goals, put, put them in our allocation models and, and we will take that pain for them.
Justin: What do you think is driving the overall, like price of gold, the thesis of it? What is the core sort of thrust of it? Is it like investors are waking up to this asset class that has long been maybe ignored to some extent? Is it central banks? Is it a host of variety of reasons? What’s your overall thought?
Jan: Yeah, I mean, look, it’s a variety of reasons. I, I think if you look back maybe over the last 30 years, 30 years ago, US was on top of the world economy and everyone was linked to the dollar and basically the old world, sorry, the old world, meaning Europe, the developed world. Used to be linked to gold, and now they were like, oh, we live in the Dollar World.
You know what they did? They sold their gold. So for like a whole decade, U the UK sold its gold at like $250 an ounce. Like they nailed the bottom right? And so the developed market said, we live in a paper world. We live in a dollar world. I don’t need gold anymore. And then about 10 years ago, the, the world’s wealth has dramatically shifted on the margin towards emerging markets, China, all over India, globally, Eastern Europe.
And so what’s happened is they all, as they got wealthier, started buying gold. So this isn’t like an overnight thing, it’s just that they’ve been doing it. And now with the US being so politically, unpredictable, I’ll call it, they just want more gold. Like every political headline, gold goes up, another percent.
And so, you know, will that change it with a new administration? I, I don’t think so. And I just think it’s a multi-year trend. That’s why did I miss gold? I don’t think you did. Now it’s very hard to persuade people to buy into a bull market, but, you know, that’s, that’s, that’s the dilemma we face. And I, I, I feel pretty strongly that, you know, this is a very long-term trend
Justin: and explain the difference between if you’re an investor, you could invest obviously in the physical or ETFs that hold the physical commodity as in gold.
Or you could get exposure to gold through some of the mining equities. And I think as we mentioned at the outset, I mean, one of your larger, maybe not the largest ETF in your ETF family, but a very large one is, I believe this gold miners ETF.
Jan: Yeah. Um. So the mining industry has gone through, what a lot of natural resources did, which is, investors said, Hey, you know, I’ve got this AI company over here, and then Jan, you’re offering this mining company.
And this mining company isn’t finding a lot of new gold. And even worse, you have to dig more dirt every year to find the same amount of gold. So it’s, it’s like the opposite of a tech company. This is like the least desirable company I could even create, in my mind. Right? And so they basically went down a lot over the last decade and people said I’d rather own bullion. For a variety of reasons. Last year there was a big turnaround. I think finally investors started saying, I like the fact that I do believe gold’s going up. And I like the fact that gold mining companies. If their costs are basically stable, I should be making a lot more money and their stocks should be going up as a multiple of the gold price.
So that’s the basic thesis that I’m sure you’re familiar with. The, the, one of the reasons I’m bullish on gold is we actually got about three or $4 billion out of our gold to mining ETFs in the first quarter of last year. And it wasn’t because people said, oh, gold went up. I think I’m gonna make, you know, sell and make, sell and realize my profits instead.
I think sophisticated investors were short those gold mining shares for many years and they’re like, I don’t know about this. Maybe gold will be going up here. Maybe I’ve made all the money I’m gonna do, which is exactly what I think happened. So demand to the, the demand for shorting gold mining companies went down substantially last year.
But that just, that doesn’t mean there’s a ton of demand for them, it just means there’s a less hatred for them, which is part of my thesis is that gold is still kind of undiscovered or, or not super popular from, from the perspective of US investors. So, like gold, like gold mining shares is the bottom. You know, there are other parts of the precious mails ecosystem, like silver is going absolutely bananas right now. So, you know, just. I would just like, it’s hard. It’s hard to know. I wouldn’t be buying silver right now. ‘cause it’s gone up so much. But anyway, so that’s a couple of our thoughts on that.
Justin: Yeah. Two questions somewhat related to family and I think you’ll get where I’m going with this. So when you look across your entire ETF lineup today, is there any theme or strategy and maybe we’ve talked about already, but that gets you like most excited And the reason I say that’s like a family is ‘cause it’s like, it’s hard to pick like your favorite kid, right?
It’s, you know, you don’t want to pick favorites. But if you were to key in on, and you know, maybe we’ve discussed some of these from your Outlook or whatever, but I’m just wondering ‘cause there is a, the VanEck lineup is a very diverse lineup. You have your commodity related stuff, you have your crypto related stuff, you have your equity in terms of, we already mentioned the moat, so is there anything that gets you really jazzed up for the next, you know, 12 to 18 months?
Um. Or what would you say?
Jan: Yeah, I don’t, I, I mean, as I said, a lot of stuff corrected in Q4 that we do find is relatively attractive, right? Mm-hmm. Some of the, the, the company’s most leveraged to the AI compute space, like the Bitcoin miners. We have an actively managed ETF, called node that has about half of its assets.
Di you know, basically in this kind of compute shortage play. There’s nothing that’s so screamingly hated. I will say that, you know, people don’t really like India. India went up again last year for the 10th year in a row, but it underperformed emerging markets. So I guess, there’s some investments sometimes that have been really disliked.
I can’t, nothing really occurs to me, you know, kind of right now. But, India would probably be one of the least liked and, and it’s underperformed relative, as I said to em. So if you like my overall 10 year thesis i’d, I’d say India.
Justin: Yeah. Some, some con not a little bit more contrarian in nature stuff that hasn’t really kept up necessarily with maybe the broader, you know, EM universe.
Yeah. And the, the, the, the, the one other family question I wanted to ask you is, VanEck is a family owned and operated business. So what adv, you know, talk about the advantages that you think a firm that is family owned, given the size of VanEck is able to have maybe over others.
Jan: Sure. Well, just to go a little bit into history, so my, my dad started the firm 70 years ago and he started investing overseas, but he really made his name by starting the first gold fund in the United States.
And. When gold, gold was pegged at $35 an ounce and then it went to $800 an ounce. So it was the best performing mutual fund in the industry in the 1970s. But gold can go down, gold shares can go down. Just to give you a number from after the financial crisis, people like gold but didn’t do anything. And it, it corrected.
And from 2011 to 2016, gold mining shares went down 90%. Now when I joined the company, that’s all we did is manage gold mining funds. So think of the Van Act corporate revenue going down 90%. It’s a lot easier, to have a little money in the bank. We had not much money in the bank back then, but to have some money in the bank and allow for these market fluctuations and not have to lay people off in your client relations team or in your portfolio management team.
So I’d say that’s the profound. Advantage, which is not having to work worry at all about quarterly earnings and, you know, just do the best you can with the funds that you’re offering your clients, making sure they’re well managed despite, despite quarterly, you know, kind of profits. So, I would say that’s the biggest thing by far. We have a profit share kind of compensation structure, so it’s definitely not just Van X, you know, making money at VanEck. So those would be the, the kind of two, two things I would say. And, and you know, a lot of the giants in the mutual fund industry are family owned, I mean, fidelity investments.
That’s true. Franklin, Templeton, you know, you’re talking about third or fourth generation there, so we’re, we’re just early in the game. I’m the second generation.
Justin: Nice. Well hopefully there’s many more generations that come after you. Maybe what, hold on, let me just gather my thoughts here. There was one question I was gonna. Just one second. Something around, oh, are there any developments that you see happening in the market that either excite you, in terms of like, new technologies? And I’m talking like kind of trading like market structure a little bit. And the reason I’m thinking of this is because I just saw, I think today that the New York Stock Exchange is going to, I don’t know if it’s like an experiment or, or what they’re doing with, with tokenization and trying to put forth, you know, using blockchain to, you know, tr try to possibly develop a, you know, 20, 24 7, you know, trading week, where through the tokenization the stocks would be able to trade or certain equities, you know, vehicles would be able to trade, you know, 24 hours a day.
So. I’m just curious, I’d be curious your comments on that or, and is there anything else that you’re seeing coming down the pipe with new technology that either you’re like, whoa, wait a minute, that doesn’t seem, or that, that excites you?
Jan: Sure. Well, so VanEck was the first ETF sponsor to, get behind a Bitcoin ETF in 2017. Of course we all came to market at the same time, but been looking at, kind of blockchain related technologies for a long time now. So very excited about them. I think last year the stable coin bill was. Really dramatic in the context of US history. I like to say that there’s three big things that happened in the US financial system.
Hamilton helped create it. FDR saved the banks during the depression. And I think the stable coin bill enables tech companies like a Coinbase to compete directly against banks when it comes to your wallet, right? That your, our financial lives would always be open a checking account and then everything goes through your checking account.
Well, you know, technology, can now companies, like a Facebook or whatever can now compete directly against the banks. And I, and I think that’s a dramatic change. So I’m very excited about that. Tokenization, which is what you were talking about relative to New York Stock Exchange, is something that we’re definitely looking at.
I kind of like to say honestly, last year we, we started suggesting that people invest in are actively managed. I’ll call them crypto or stablecoin or blockchain funds. ‘cause so much is happening so quickly. It’s, I, I find in, in, and when I was talking to finance, when I talked to financial advisors or whatever, maybe people understand Bitcoin, maybe Ethereum, but when it comes to Solana or Avalanche or all these other kind of things, they, they really have no idea. And so anyway, so that’s kind of, I would say we’re excited, but it’s a lot of the plumbing of Wall Street, where I think the, the funnest stuff, I guess I would say is happening at Robin Hood, right? Where Robinhood is enabling access to, prediction markets, which I think are very interesting and obviously very into tokenization in crypto.
And I think they’re really setting the, the, the pace for a lot of, retail, or, or individual oriented, financial applications.
Justin: And their customers will eventually be the ones that hold the wealth in this country. So to some extent, you know, it’ll be interesting to see how that sort of shakes out over time.
Have you done a a, a prediction market podcast? We haven’t yet. And that’s something, Jack, we gotta kind of go on our, you know, we gotta get on that. Actually. It’s, it would be, it’s interesting to, I know
Jack: very little about those, so a lot of questions. Yeah. And yeah, and
Justin: I’m, I’m like one of those guys that I like to like, try to like, use what, it’d be great if I could like, get in there.
‘cause I haven’t done any of the prediction market stuff. I’m my, for my own, you know, my myself. So I think if I got in there and started, you know, doing a da dabbling in it, I would be, be more well versed in it, obviously, you know. But yeah, that’s the one we gotta put on the, on the future. I think
Jan: we have to just because there are, it’s not, I don’t know if it’s a of institutional scale yet, but there are risks that people try to hedge.
That I think are expressed better through prediction markets than traditional financial instruments. But
Justin: yeah. So Jan, thank you very much for your time today. We really appreciate it. We always like to end with two standard closing questions for all of our guests. And the first one is, what is the one thing you believe about investing that most of your peers would disagree with you with?
Jan: Yeah. I don’t know if they’d fight me on this, but so much of the mistakes that are made in finance are based on psychology. It’s recency bias, right? And, you know, all we see are charts and charts generally are shorter term, and it’s literally feeding into one of our bigger behavioral mistakes, right? So, when, when I finally realized that I, I would say the VanEck perspective is take the longest chart possible because usually people are focused on data that’s just too small.
And, and if you go back, I, I always say I love multi-decade charts because, you know, that gives you a better perspective whether you’re really at an extreme or not, whether it’s something that you should be paying attention to or, or, or not. So I wouldn’t say that peers would fight me on it per se, but just in terms of all the information that we consume, it’s of this potentially misleading nature.
Right. And, and, and, and then just that. The, the world can change so quickly. You know, it’s kind of the flip side of that. That’s, that’s really what that is.
Justin: I love that because it reminds me of, I was at an investment conference, this is years ago, and Corey Hof team was on stage who’s been in the pod, friend of the friend of ours, been on the podcast multiple times, and the shout out to Corey here, but he was, talking about back tests when back tests were used a lot more in the industry. You know, especially early days ETFs, because a lot of people didn’t have real live track records. And Corey, you know, was on stage and he said, you know, if somebody shows you a back test and it, you know, never underperforms tell them that they needed to, you know, they need to run it over longer periods of time because all investment strategies go through periods of underperformance. But yet, you know, we’re never seeing a bad back test. So anyways, I think that’s a great, great point there. And
Jan: a lot of our tools, you know, weren’t built until the nineties. And so if you wanna look at how, like this 1970s, which was a big inflationary period. Like, your charts don’t go back that far.
Right? Like you, like, you know, let you know. Now they actually, now with, with ai you can get a lot more historical charts than, but not, they’re not really available on, you know, what’s available in, in the industry.
Justin: And the last question is, based on your experience in the markets, what’s the one lesson you would teach your average investor?
Jan: well, I guess, trial and error with a lot of, a lot of history and a lot of context to, to how things are changing if you can. It, it, it’s hard. It, it takes quite a while to, to kind of get that history, but I would say, our, the philosophy of some money managers used to be, put your money in the fund and don’t trade individual stocks.
I think. Trade, trade, individual stock. I mean, I don’t become a day trader, that’s not my point. But there’s nothing like losing money to, to accelerate your learning. Right. And I think, you know, that, that kind of stuff, I would, that’s what I would tell my younger self.
Justin: This has been great. Thank you very much.
We really appreciate it. Y Oh, that’s great.
Jan: Thank you guys.