The transcript from this week’s MiB: Jan van Eck, Van Eck Associates, is below.
You can stream and download our full conversation, including the podcast extras, on Apple iTunes, Spotify, Overcast, Google, Bloomberg, and Stitcher. All of our earlier podcasts on your favorite pod hosts can be found here.
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(VOICE-OVER): This is Masters in Business with Barry Ritholtz on Bloomberg Radio.
BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, I have an extra special guest. His name is Jan van Eck and he has really a fascinating background and history.
His father built Van Eck Associates in 1955. He never expected to go into the family business, kind of wandered about aimlessly. In the podcast portion, we talked about the overlap between our backgrounds. It’s kind of amusing to me.
But eventually comes in to the business which was about $1 billion in AUM and here it is, some 28 years later, and they’re up to $56 billion. He’s the CEO and basically runs the shop with a team. It is an ensemble practice. They were very early into the world of ETFs and they do a lot of really interesting thematic funds.
If you are at all interested in international investments or thematic investments or ESG investments, then you’re going to find this conversation to be quite fascinating. So, with no further ado, my sit-down with my friend Jan van Eck.
(VOICE-OVER): This is Masters in Business with Barry Ritholtz on Bloomberg Radio.
RITHOLTZ: My special guest today is Jan van Eck. He is the CEO and Director of Van Eck Associates where he has worked 1992. Van Eck manages about $56 billion in assets, 80 percent of which is in ETFs for which the firm has won numerous awards.
Jan van Eck, welcome to Bloomberg.
JAN VAN ECK, CEO, VAN ECK ASSOCIATES: Thanks so much, Barry.
RITHOLTZ: So, you and I know each other from a few different overlapping entities probably inside and ETFs is the one that the entire San Sebastian crew of ETF.
VAN ECK: Right. Through Jim Wyeth (ph). Yes.
RITHOLTZ: Right.
VAN ECK: Yes.
RITHOLTZ: Through ETF folks. Let’s talk a little bit about your background. You worked for a think tank, a newspaper. You go to law school. You get a degree from Stanford. What were you doing wandering the fields for so long? Didn’t you just think it was inevitable you’re going to end up in the business that coincidentally has your last name on it?
VAN ECK: In my own mind, Barry, no. I really had no idea what I want to do. I graduated with a degree in Economics and …
RITHOLTZ: What was your undergraduate? Where did you go?
VAN ECK: Williams College.
RITHOLTZ: Right. And so, you come out with an Econ degree and doesn’t that suggest business and/or finance or …
VAN ECK: It does but I did the minimum to get my degree in Econ …
RITHOLTZ: Understood.
VAN ECK: … and I really enjoyed liberal arts, I took as many classes, and I did something that I think a lot of people should do and does not done enough which is audit classes. I mean, there’s so much great stuff at the college like Williams. So, art history, history, photography, philosophy, lots of things, off piece (ph).
RITHOLTZ: Now, people have a tendency to do that later in life. You did that when you were 19 and 20?
VAN ECK: Yes. It’s free. You sit in for a course for an hour or two during college and you never pay the tuition. So, the professors love to have more students or at least in a smaller school.
RITHOLTZ: And today, you can audit classes from Yale or MIT or NYU or anyone of the hundred schools online for free.
RITHOLTZ: Are you still doing that?
VAN ECK: Well, I love to listen to podcast and get information all kinds of different ways.
RITHOLTZ: Do you think they’re going to catch them?
VAN ECK: Yes. Maybe.
RITHOLTZ: All right. We’ll see. We’ll see if they get together.
VAN ECK: Can I answer your question?
RITHOLTZ: Yes.
VAN ECK: Right. I didn’t know what I wanted to do when I graduated and there’s this great podcast I have read on the book, on the book “Range,” right, and just experiment as much as you can when you’re young. So, I did …
RITHOLTZ: Good advice.
VAN ECK: … an internship at the Washington Post Metro desk while I was in law school. I worked for a prosecutor one summer in the Eastern District of New York. I worked for corporate law firm during M&A deals. In interned in Germany one summer at a bank.
I mean, just try as many different things. But the thing that triggered my love of business was actually working in Silicon Valley and …
RITHOLTZ: Who you’d worked for in Silicon Valley?
VAN ECK: I actually — after Brookings …
RITHOLTZ: That was the think tank you were at.
VAN ECK: That was the think tank. I realized I did not want to get the PhD in Economics. Academia was not for Jan. And so, I put my stuff in the car and drove cross-country and volunteered on a political campaign, which we don’t need to go into.
RITHOLTZ: What year was this?
VAN ECK: 1986.
RITHOLTZ: OK.
VAN ECK: It was a Senate campaign and it was a losing Senate campaign. So, but I learned …
RITHOLTZ: I assumed.
VAN ECK: … a lot. And most importantly, I met some entrepreneurs in Silicon Valley. I just love the attitude of I try something, it doesn’t work, I try something else, it went public, I’m doing all these different things. Just the creativity I didn’t perceive, even though I grew up in New York City area, looking at the banks and going up the rung of management, I did not perceive that level of creativity.
So, that’s when I fell in love with business and then decided to go back to that region for law school, just lucky enough to get into Stanford. But that’s …
RITHOLTZ: Which is a fabulous, fabulous school. That’s a little more than luck. That’s good undergraduate grades, good recommendations and good LSAT score.
VAN ECK: Yes.
RITHOLTZ: Are you a good standardized test taker?
VAN ECK: I must be.
RITHOLTZ: We’ll talk more about that later. So, even as a son of a financier, your dad opened and launched Van Eck Associates in 1955, you never assumed, well, I’ll end up in investing in the family business one day.
VAN ECK: Look, it’s a psychological thing I can’t go through but I’ll tell you two things. The door was always open. So, my father — and my father always said, do what you want to do because your happiness is more important than whether this business is there or not.
So, how those things add up? I’ll let for third parties to decide. But my father was very no pressure to come into the business.
RITHOLTZ: So, one of the questions that I like to ask people who come from a family background in finance is what are some of your earliest memories about money and investing. Do you remember the first stock you ever bought or based on what you’re saying now, you’re not that guy who was running a lemonade stand to buy shares in GE when you were nine?
VAN ECK: It’s kind of interesting. I was never a portfolio manager and I wasn’t the guy to buy shares. But when I looked back in high school, I would buy Coca-Cola from the distributors and resell them by the bottle. I worked — probably didn’t have to, I worked …
RITHOLTZ: So, just a pure arbitrage for …
VAN ECK: … in food service. Like I said, there was something about wanting to do stuff to make money. That was definitely early on for me.
RITHOLTZ: Quite interesting. So, Van Eck was one of the first asset managers to offer U.S. investors access to international markets. How did that affect the company and how much overseas and investment does Van Eck currently do today?
VAN ECK: We’re an American firm based in New York but we always have had a very international orientation, not only was the first fund that my father launched in an international equity fund. The idea was to take advantage of the rebound in Germany and Japan after World War II. That was the investment thesis at least.
RITHOLTZ: 1950s.
VAN ECK: Yes, 1950s.
RITHOLTZ: There was going to be Marshall plan and a whole European and Asian rebound.
VAN ECK: Right. And cheaper valuations as well. We’ve heard that before or …
RITHOLTZ: Still to this day. Right.
VAN ECK: So, that was really the story. And so, our perspective has always been international. Also, he later put that fund into a gold fund and resources investing was very internationals as well whether at the time of South Africa, Australia, Canada. Always the majority of our perspective and assets were not in the U.S.
RITHOLTZ: Quite interesting. You guys have some really fascinating investment funds. The one you launched a few years ago that caught my eye, the VanEck Vectors Video gaming and eSports ETF, which I know has won a number of ETF awards, Best Thematic ETF, Best — but what was the thinking behind an eSports ETF?
VAN ECK: Well, what we try to do is look from a longer-term perspective. We don’t want to just chase fads, right? There’s a lot of ETFs on micro themes and …
RITHOLTZ: Give us an example.
VAN ECK: On micro themes?
RITHOLTZ: Yes.
VAN ECK: I mean, like lots of things. Healthcare industry, for example, has been sliced and diced into cancer drugs and this and that.
RITHOLTZ: So, really narrow.
VAN ECK: Or even like 5G, like — I mean, it’s an interesting thesis but what happens when 6G comes out.
RITHOLTZ: Then they’ll change the name of the funds.
VAN ECK: Exactly. Of course. There’s always a solution when …
RITHOLTZ: Right.
VAN ECK: … AUM is on the door.
RITHOLTZ: Right.
VAN ECK: But — so, I try to think like five or 10-year view and one of the things that’s happening now, so, we’ve had the smartphone for 10 years, is the virtualization of life and …
RITHOLTZ: Virtualization, meaning we exist in a virtual world of software as opposed to in meat spaces.
VAN ECK: Yes. Social media, right? Before you and I met in real life, I was listening to your podcast, I was commenting (ph) to you on social media.
RITHOLTZ: You and I have swapped tweets although you’re pretty …
VAN ECK: I’m pretty constraint.
RITHOLTZ: You’re pretty low key on the Twitter.
VAN ECK: Right. So, the entertainment world is going through that revolution. First of all, as we get wealthier as a society, more people enjoy sports, entertainment, betting. That’s a growth industry.
But it’s also transforming from the traditional professional football, basketball, hockey into online gaming and the creation of teams competing against each other and that’s just — that could just continue to grow. And the dimensions now, right, it’s not just the playing of the game, there’s the watching of the game and there’s — the replaying of those things on YouTube and people watching games.
And now, audience participation, Barry, is likely to happen, right, where you’re watching a game and as a spectator, you can vote on the teams or advise them. I don’t do that but …
RITHOLTZ: So, let me ask you about that.
VAN ECK: … those are — there’s a longer-term shooter is my point.
RITHOLTZ: So, that blows my mind. My frame of reference is decades ago, when I was on a trading desk, one of my favorite things to do each Tuesday night was once everybody was done with their blotter and their P&L, which you had to save to a disk and then walked to the head trader’s office, that’s how long ago it was, the quote server would become a quick server and all the traders would jack in and we would have this giant multiplayer game of Quake, which was so immersive. I would look up and I’m in trouble, it’s past 10 o’clock. I’ve been doing since 4:30, and I found it fascinating.
I cannot imagine watching other people play e-games. This is going to be a giant burgeoning industry.
VAN ECK: It is already and I think the only thing that we don’t know, the story that hasn’t been written is the monetization of all that traffic and crowds. So, we know that people are doing it, way more people watch these eSports world championships that walk to the Super Bowl.
RITHOLTZ: The purses are giant, , right? I mean, some of the …
VAN ECK: Yes. And kids, sorry for the expression, they’re making five million bucks for winning one of these things.
RITHOLTZ: Amazing.
VAN ECK: All the — a lot of owners of professional sports teams own eSports teams as well.
RITHOLTZ: Makes sense.
VAN ECK: So, it’s — life is a racket, right? So, they know the next trends and having an ETF just allows the rest of us, normal people, to participate the trend.
The other thing that’s really worth noting is Asia. It’s a huge cultural thing in Asia, right?
RITHOLTZ: Sure.
VAN ECK: Not just in China but in South Korea and Japan and it’s just being culturally. A lot of stuff is being — their life is being lived online.
RITHOLTZ: That’s amazing. Let’s talk about something that I’m fascinated with, the VanEck Vectors Green Bonds ETF, the obvious question, what’s a green bond?
VAN ECK: Well, so, green bond is very simple. It is money raised by a company or government that is supposed to go to improve operations that have a better effect on the environment.
RITHOLTZ: So, give us an example.
VAN ECK: So, it’s a bond by bond’s decision. It’s not a company decision. So, the dirtiest commodity company in the world could issue a green bond if it was improving its processing to reduce the use of water for example.
RITHOLTZ: So, if you’re a coal-fired electrical plant and you want to raise money to transition to natural gas, would you consider that a green bond?
VAN ECK: So, it’s not — luckily, it’s not us making the determination. There’s a third party that certifies these green bonds and it’s a big source of financing. It’s grown.
RITHOLTZ: And these have become pretty popular, haven’t they or they’re starting to ramp up?
VAN ECK: They’re starting to. I mean, our fund is not huge. I think what people sometimes say is I want perfection in my, I’ll call it values-based or ESG investment.
RITHOLTZ: Sure.
VAN ECK: And perfection doesn’t exist. There are trade-offs in life. So, the issue is, OK, I get that the environment is getting better but I may not like the issuer. It’s a China government entity or it’s a polluter that has some other kind of practices I might not like.
So, I mean, in the U.S., we have several environmental funds and I think you have to stack those values. And so, we say, OK, if you care about the environment more than the other factors then this is a good allocation for you.
RITHOLTZ: For ESG investors, the old maxim, don’t let the perfect be the enemy of the good can very much apply, can’t it?
VAN ECK: I think so right now. It’s hard to figure out how to optimize everything.
RITHOLTZ: So, let’s talk about something that’s not so green. Two of your biggest funds are the Gold Miners and the Junior Miners. I’ve — and that’s, what, about $20 billion I was told.
VAN ECK: Yes.
RITHOLTZ: I noticed back in the day that when there were signs of inflation or signs of deficits, a lot of fund managers wanted an instant hedge on inflation and so they would all pile into the Junior Miners.
That behavior kind of changed when the GLD ETF came out. Why does anyone need the execution or managerial risk of a mine and its management team and expenses when you could just buy GLD and there’s your hedge? Am I oversimplifying that or has GLD, as one of the biggest ETFs out there, changed the dynamic around the Gold Miners and Junior Miners?
VAN ECK: Yes, but let me give you some more historical context.
RITHOLTZ: Please.
VAN ECK: Right. So, we’ve had two big commodity booms in my lifetime in the 1970s and then in the oughts.
RITHOLTZ: Right.
VAN ECK: And they were very, very different for the operating companies because in the 1970s, commodities gold went from $35 to $800, oil went up, all that stuff. But the cost of manufacturing, all these commodities did not change.
So, the companies were like options. I mean, all the — the revenue would go up and the cost would really not go up. And so, I mean, the stocks were fabulous, I mean, fabulous.
RITHOLTZ: So, when the prices have …
VAN ECK: So, the gold fund that we had in that decade would go up like 100 percent, 150 percent a year.
RITHOLTZ: We’re going to talk about that gold fund later but the key is when the prices …
VAN ECK: So, now …
RITHOLTZ: … of the commodities went up, the company generated a whole lot more earnings.
VAN ECK: Right. But now, in this last cycle in the oughts, that was not the case. The cost of manufacturing for a variety of different reasons, the cost would go up as well.
RITHOLTZ: High inflation, falling dollar. Really problematic in the 2000s.
VAN ECK: A lot (ph) of manufacturing costs. So, energy wasn’t growing. So, that was an input in mind that lose a bigger factor. You have to dig way more dirt per ounce of whatever you’re pulling out whether it’s gold or copper or whatever.
So, there’s just a lot of different factors. So, the last cycle, there wasn’t as much return leverage, which is what you’re asking about, as in the 1970s. So, now, where are we today?
Gold is hitting all-time highs except in the U.S. dollar and I would agree with you, if you want a hedge against sort of the current monetary system and you’re a little bit nervous about central bankers flying around in capes trying to fix every problem, including the coronavirus, then you probably want several different hedges.
You want gold mining shares. You probably want gold bullion. But you also want to look at bitcoin. And that …
RITHOLTZ: Really?
VAN ECK: Yes. So, that is the alternative asset for the younger generation. I mean, coin base has between 30 million and 40 million U.S. American – American customers.
RITHOLTZ: How do you deal with the fact that something like a third of all bitcoins that have ever been mined have either been lost in the terms of being misplaced or literally hacked and stolen? How do you — how does an investor manage that?
VAN ECK: Well, custody is a major issue. There are a couple of issues around bitcoin. Custody, I think, is being sold (ph) because you do have major institutions like Fidelity, the New York Stock Exchange getting involved and offering bitcoin access, having taken that custody issue away from you.
As far as some — what they call whales or people owning a lot of bitcoin or …
RITHOLTZ: North Korea.
VAN ECK: … it being lost or whatever and then the background of the mining community, our point — and we’ve got a lot of slides on our website to show it, the diversification of ownership, trading and mining is so much these days. I don’t think it’s a practical concern to say that this is one just big manipulated market by one entity or something like that.
RITHOLTZ: I’m not saying it’s manipulated. I’m saying people seem to be — when one out of $3 or even if it’s one out of $4, in bitcoin, it seems to have vanished, it kind of raises a question for me.
Maybe it’s still early days and a little bit of the wild west and they’ll eventually wrestle that into submission. But I think that scare some people.
VAN ECK: All of these assets have their pros and cons, right? I just say buy a basket because if there is a big scare to the system, what’s going to — all we care about what goes up more, we don’t know. Bitcoin could go up way more than gold shares or go bullion.
RITHOLTZ: Right.
VAN ECK: So, if you can solve the custody issue for yourself, then I think I don’t care about your concern.
RITHOLTZ: Quite interesting. Let’s talk a little bit about the company that you joined in ’92 and I want to focus on the era in the 1970s where your dad had an extremely prescient call into gold in a very inflationary era. But more than just being a pundit who said, gold’s going up, he made a giant bed on that. Tell us about it.
VAN ECK: So, my father started the firm in ’55. He actually started it later in life. And so, in the ’60s, he had just gotten married. He was just over 50 years old and he was getting a degree at night at NYU in Economics and one of his professors was an Austrian economist called Ludwig von Mises.
And if you know anything — he’s famous, right, but Austrians were never really accepted into academia in the United States.
RITHOLTZ: They’re a little strict.
VAN ECK: So, he actually was not a full professor. He was just sort of an adjunct. But anyway, my father — they are a sort of hard-core monetarist and they really focus on money supply …
RITHOLTZ: Yes. Hard money.
VAN ECK: … and it was basically, look, guns and butter were happening in the 1960s, my supply was exploding and eventually that was going to break into inflation and the way to make money off of that was to invest in gold.
Now, as you said, I really think it’s amazing the risky talk at that point in time because gold had always been fixed against the U.S. dollar for the entirety of history. So, almost …
RITHOLTZ: Why government mandate?
VAN ECK: Yes. For almost 200 years of our history, gold had been fixed. He said, this paradigm is going to break and that’s really the philosophy of our firm, which is you can’t just look at the four corners of the financial markets, you have to look at technology trends, political trends and major economic trends. And several years later, so, having (ph) a lot of patience, that broke.
RITHOLTZ: By the way, for folks who may not be familiar with Ludwig von Mises, he’s one of the most famous of the Austrians, wrote a number of books, and really well known. If you’re more interested in more of that, just go Google von Mises.
But I’m fascinated by the gold trade. Your father puts how much money into gold at that point?
VAN ECK: So, he had an international equity fund and he went to shareholders and he said, I’m doing this, and he converts 80 plus percent of the fund and buy gold mining shares.
Now, you couldn’t buy gold. So, that’s — he was a little bit — to your point before, he was forced into …
RITHOLTZ: Right.
VAN ECK: … buying the shares.
RITHOLTZ: No GLD and if you want to buy actual gold, you’re buying futures and its leverage and it’s time …
VAN ECK: They didn’t have futures then.
RITHOLTZ: That’s right. We’re talking ’70s.
VAN ECK: Yes. So, it’s really …
RITHOLTZ: So, totally different era.
VAN ECK: Exactly.
RITHOLTZ: Right. So, three quarters of $1 billion more or less into gold or this was …
VAN ECK: No. No. My God.
RITHOLTZ: This was way before that.
VAN ECK: My God, the fund was teeny.
RITHOLTZ: Yes. How big was the fund?
VAN ECK: The fund was teeny. I mean, it was way less than $100 million.
RITHOLTZ: OK. Eighty percent of which goes into gold.
VAN ECK: I mean, no one wanted international vestments in the 1960s. It’s kind of like today.
RITHOLTZ: Right.
VAN ECK: Right. I mean, don’t want to even talk about it.
RITHOLTZ: So, he piles into gold in this small formally international equity fund. It does nothing for two or three years to — what are clients saying, what are investors saying when you have us in gold and not only is it doing nothing but thanks to inflation, it’s actually worthless each year?
VAN ECK: Well, yes, gold was less. I think the companies were OK. I haven’t looked at performance over that time period. But the industry was so small, Barry, right? The industry exploded in the late ’70s because of money market funds …
RITHOLTZ: Right.
VAN ECK: … when the rate you get on banks is regulated. So, it was a cottage industry and what ended up happening though because the performance was so tremendous, that fund was the best performing mutual fund in the industry in the ’70s and …
RITHOLTZ: That decade.
VAN ECK: That decade.
RITHOLTZ: Fund of the decade.
VAN ECK: Yes. Peter Lynch, everything.
RITHOLTZ: Peter who?
VAN ECK: Yes. Exactly.
RITHOLTZ: Buying companies. He should have been in gold.
VAN ECK: And he would have done (ph) Merv Griffin. I mean, it was …
RITHOLTZ: Get out of here.
VAN ECK: Inflation was such a big deal back then. It was popular culture, right? I mean, interest rates were going into the teens and, yes, I remember …
RITHOLTZ: Sounds like the late 1990s.
VAN ECK: … nervously at home watching my dad with Merv Griffin and I’m like, please, don’t embarrass us.
RITHOLTZ: And so, obviously, that had helped the company is from the time gold explodes when we no longer on the gold standard is, what, ’73, ’74?
VAN ECK: Yes. Early ’70s. Yes.
RITHOLTZ: So, almost 20 years later, you come into the company in 1992 and the firm is up to $1 billion in assets.
VAN ECK: Well, it got to 2 billion.
RITHOLTZ: Yes.
VAN ECK: And right at the peak. So, right in 1980 and then Paul Volcker comes in and …
RITHOLTZ: Breaks the …
VAN ECK: … and so gold went down to $200 an ounce in the early 2000s.
RITHOLTZ: So, here’s the really big question. Post gold, you’re there in ’92, the firm is now 1 billion from 2 billion. Today, it’s 50 times the size. How did you manage to grow the firm over 30 years 50X?
VAN ECK: Well, first of all, it’s not first person singular. There are a lot of people. It was a team. One of whom was my brother who passed away 10 years ago but he was part of it. But there are a lot of other colleagues as well.
And it was building up other mutual funds and then really before I was, what I’d call, ETF guy in 2006, we — for 10 years, we had a hedge fund business and we had two hedge funds that we rose about $4 billion. And so, we had some good strategies there for a while.
RITHOLTZ: Quite fascinating. There’s a quote of yours I really like and I have to start the segment on investing with this, quote, “the investment world is broken up into two types of people, historians and statisticians.” Discuss.
VAN ECK: Well, anyone that’s not just doing a market cap exposure fund tends to have some kind of bias and they look to do asset allocation as well based on that kind of bias.
And I think there’s been a lot of quant work done and a lot of the investors — let’s take value investing for example, right? A study comes out that says value is the way to go. I’ve done — I’ve looked at the fundamentals of the company and those with the cheaper price-to-book, that’s going to work, right?
RITHOLTZ: Because it worked historically.
VAN ECK: Because it’s worked historically. It’s giving you some kind of added return over the market return. And then it doesn’t work and it doesn’t work and it hasn’t worked for 10 years.
RITHOLTZ: Right.
VAN ECK: I like to point out how little we know. Really, I feel like we’re in the caveman era of investing, Barry. I know there’s been a lot of innovation but there’s so little we know.
What is there — is there an academic theory that says growth versus value? No. No one can time growth versus value. It’s an ongoing debate. Yet, there’s trillions of dollars at very prestigious firms that have this value tilt that have now been underperforming.
Anyway, so that’s kind of my perspective that you just can’t use these mathematical tests and a mathematician — that’s insulting. You really have to call them statisticians whatever that means.
But basically, you can’t just use mathematical ratios to say they are forced, there is an investment opportunity. And the current one that’s floating around today is emerging markets value stocks have underperformed and they’re cheap.
RITHOLTZ: For a long, long time.
VAN ECK: And they’re cheap and therefore, mean reversion, the statisticians say, that’s great value. My perspective on the world is that of historian. The world is changing so much all the time. So, let me just take emerging markets.
Emerging market index is so different today. China dominates Asia, 80 percent of that index. So, it’s basically everything else you can ignore. Ten, 15 years ago in emerging markets index, it had Thailand, Malaysia, Singapore, Korea, remember like Brazil, Mexico.
It’s just not even the same thing. So, to take that statistic and say, I’m going to do a study and give you an investment recommendation, look, that’s a school of thought.
I’m in the, what I call, historian school of thought, which is there’s so much change, look at all the change that’s happening.
RITHOLTZ: If only there was an ETF that was emerging markets X China, that would be fantastic.
VAN ECK: It wouldn’t be important in the world, right?
RITHOLTZ: No. But it could actually see some long-term growth not dominated by one single company.
VAN ECK: Yes. We filed for one. Don’t worry.
RITHOLTZ: That’s why I brought that up. I wanted to toss it out. The other thing you and I briefly discussed a long time ago over wine and I want to continue the conversation, we’ll see if you remember this, there are many ways to measure value, price-to-book being only one of them, and people kind forget.
The days of having a book value with giant factories or thousands of miles of rail tracks or fiber-optic cables whatever may not really be so applicable to companies like Apple or Google or Facebook and you point out they have intellectual property, the algorithm of Google search and how to monetize ads, is not exactly the sort of book value that we saw in the days of steel manufactures and railroads and automobile companies.
VAN ECK: Right. Well, I think — as I was implying before, I think there are these things that people observe in the markets and then they kind of go away after a while for whatever reason, maybe their arbitrage in a way or whatever.
RITHOLTZ: Right.
VAN ECK: And I do think that in the new economy, I’m nothing growth will outperform value forever, I’m not saying you should tilt your portfolio that way. But I definitely don’t think — you have to look at the measures these days.
So, the one that we have as a firm that we like is the wide moat philosophy which is look at the earnings on a forward-looking basis. OK. So, it’s not just looking at all the statistics on Yahoo Finance or Bloomberg.
RITHOLTZ: Right.
VAN ECK: But — and that’s produced by Morningstar equity research. And then — so that will estimate the profitability. So, even if a company like Facebook is not making money, which it wasn’t at that point in time, we know the potential is there then we included.
And then the second step is to make sure that you’re not overpaying for that because that, I think, is of real value that doesn’t exist in all ETFs, which is that valuation discipline of kicking out companies if they just become too expensive.
RITHOLTZ: So, you’re really talking about GARP, growth at reasonable price, is that what you’re implying?
VAN ECK: Yes, I would say.
RITHOLTZ: OK.
VAN ECK: The proprietary version of GARP. They would not like that but I think that’s fair.
RITHOLTZ: So, let’s talk about some of the ETFs you’ve launched. You guys are not known for plain vanilla beta. How do you think about developing a new strategy? How do you put together the philosophy behind a new ETF? And then how do you decide here’s how we’re going to market this because you guys have been very successful with this?
VAN ECK: I’d like to call it like handcrafted beers. Every one of our ETFs, we really try to think about the underlying structure, the asset class and the market and how to construct and exchange traded vehicle to take advantage of that.
So, for fixed income, if I could talk about that, for — we have several high-yield funds, you want to make sure there’s enough liquidity in that. So, for our high-yield muni fund, we make sure a SLUG was in BBBs so that there would be enough liquidity, in our view, throughout the market cycle for that product.
Also sticking with fixed income, again, this is the Vedic philosophy, right, look at the macro trends and market structure in the industry. So, what’s happened over the last 10 years has been the growth of BBBs as a percent of the overall investment grade market, right?
So, the lowest level of rating for investment grade is now 50 percent of all investment-grade and BBBs today are greater in the issuance than all of investment-grade debt 10 years ago.
RITHOLTZ: So, let me wrap my head around this, the weakest investment-grade bonds are now half of investment-grade portfolios.
VAN ECK: Correct.
RITHOLTZ: So, in other words, we’ve kind of worked the way down the risk scale to get a little more return, is that the thinking behind that?
VAN ECK: Yes. Companies are — so, it’s natural companies are optimizing. They’re saying, listen, I can keep my borrowing costs down if I just keep — stay a little bit above junk. And then in a low interest rate environment, I’ve got all this money at two percent. What not to love?
RITHOLTZ: And the spread between investment grade and high yield or junk has really narrowed over the past couple of years.
VAN ECK: Well, because we’re awash in money. So, that’s a separate thing. But anyway …
RITHOLTZ: Well, let’s address that because it’s a fascinating topic. Whether we’re looking at venture capital or private equity or pretty much everything else, there is just an ungodly amount of capital coursing its way through the system.
VAN ECK: Absolutely.
RITHOLTZ: And what is that mean?
VAN ECK: Well, like I say, for 2020, don’t worry, be happy.
RITHOLTZ: Right.
VAN ECK: I mean, you can’t fight central banks.
RITHOLTZ: Don’t fight the Fed.
VAN ECK: Well, and look at China, that’s my thing that I think a lot of people don’t look at. You have to look at what’s going on in China and the narrative in China is also right now mildly stimulative. So, I can go into that if you’d like.
RITHOLTZ: Well, let’s talk about that because you had something I thought was pretty insightful leading into the fourth quarter of 2018 when we saw a 20 percent temporary correction and you said, hey, China was looking at a hard landing, they were slowing down which is why we soar our weakness and they figured it out and started stimulating again. How do you offset that here in the first quarter of 2020 against the coronavirus which doesn’t seem to be coming to a natural end yet?
We assume they’ll eventually wrestle this into submission like they have with other pandemics like Ebola or Zika or go down SARS or swine flu or pick one. But this is still very much an unknown and how much is this going to impact their GDP and how much is this going to impact the rest the globe’s economic activity?
VAN ECK: Look, I think you can look through — I think the markets have looked through the coronavirus. So, what I’d like to say is that I — I won’t say we live in China’s world but we are in the same life raft together and to answer your question, if China’s economy goes through super hard landing, every aspect of the financial markets will get affected.
I mean, obviously, commodities, the commodities fly through — affects high yield as well because energy bonds have a lot of issuance. It will affect U.S. equities as well.
Right now, I’d say both Chinese equities and U.S. equities are saying this coronavirus will work itself out. Chinese equities are right where they were a month or two ago.
RITHOLTZ: So, people buying China stocks don’t think that this is going to have lasting precautions (ph).
VAN ECK: Again, I have to oversimplify, what is the central bank in China doing? So, two years ago, they were slamming on the brakes because they were worried about debt but they have since taken their foot off the brake. They’re not gassing it but they are giving enough oxygen to the economy that I don’t think we really need to worry about global growth. And that does assume that the coronavirus doesn’t go crazy but that’s what the markets are assuming.
RITHOLTZ: So, let’s move from China but stay international. You guys have offices in Australia and in Frankfurt, Germany. Why expand internationally and why those countries?
VAN ECK: What we found with our ETFs is that buyers around the world were using it. I mean, it was amazing like GDX.
RITHOLTZ: Really?
VAN ECK: Like literally, people from a hundred different countries were buying and trading U.S. ETFs. It’s a really great invention and we were lucky to be part of it. And so, when we saw that, of course, we wanted to chase our clients.
RITHOLTZ: Right.
VAN ECK: Expanding internationally is not as easy as I thought it might be. But because we had clients in Europe and Australia, we thought, hey, let’s provide local opportunities for them and because our industry is regulated and taxes are different, we basically had to set up shop in those countries.
RITHOLTZ: We have been speaking to Jan van Eck of Van Eck Associates. You and I know each other for a couple years. We’re not complete and total strangers. And as I was researching you, I found a couple of interesting things, our backgrounds are shockingly similar in that we both came out of college, we both didn’t know what the hell we wanted to do, we both sort of wandered the Earth trying a bunch of things, some startups, some this, some that.
My joke has been, well, if you are a Jewish boy from Long Island and you don’t know what to do with your life, you go to law school. You don’t have a whole lot of choice in the matter, it’s the law. And it sounds like you had a similarly non-Long Island experience.
VAN ECK: Yes. It took me a while to figure out what I want to do. But law school was the backup. So, it did eventually punch that ticket.
RITHOLTZ: And the other question which I didn’t get to ask during the broadcast portion, when I was doing my research into Jan van Eck, how do you transition from being a 14th century Flemish painter into a career on Wall Street? And that’s about as esoteric a question as I’ve ever asked.
VAN ECK: That is really amazing. Well, funny, my grandfather did the research and we’re not related.
RITHOLTZ: No relation.
VAN ECK: Not related.
RITHOLTZ: I mean, that is not an unknown painter in the world. My wife taught design and illustration and fine arts and so I’ve been to every museum in the world, just about it certainly feels like I’ve been dragged to every museum. But when I first started research and I’m like, why is that name so familiar, that’s right.
VAN ECK: Well, you knew — I knew in college when people were taking that class because they were like, Jan, did you know that there was an artist called Jan van Eck and I was like …
RITHOLTZ: Granddad, of course.
VAN ECK: Yes. Great, great, great granddad. That’s pretty hilarious.
And it’s funny because when — in a lot of Google searches, he’s got much better SEO that you do. So, that’s kind of interesting. So, there are a handful of questions I did not get to that I have to ask you about prior to getting to our favorite questions of which I have a few bonus ones on that I didn’t warn you about. I’m going to surprise you with.
Let’s talk a little bit about the ETF world and the question I really didn’t get to during broadcast that I wanted to is 2006 is pretty early days in the world of ETFs. What motivated the move into ETFs? It’s obviously been wildly successful but tell us what that ramp up was like and how did you make the decision, hey, this ETF thing is going to be big one day.
VAN ECK: I think my background is more of a business person who works at an asset manager rather than a portfolio manager and like a lot of car engineers run car companies or used to, that mindset really matter.
So, ETFs were clearly there and they were growing and the question is do you latch on as a person to those new and interesting and growing and maybe better things or do you not. And so, we latched on and then also saw, wow, if — since we were the gold mining fund leaders, if someone does an ETF on gold mining, we’re dead.
RITHOLTZ: Right. So, you have to get that.
VAN ECK: People love to trade gold and this is a way better vehicle and we were — thank God, we got there first.
RITHOLTZ: Why not put out GLD yourself or when you’re looking around the world, how long has GLD had been around, it’s 10 years, 12 years or did they — so, in — it wasn’t around in ’06 I think.
VAN ECK: No. It was not. It came afterwards. So, yes, the gold bullion in — Barry, we’ve made so many mistakes. But one is not being more aggressive earlier in thinking that the SEC would approve a gold bullion in ETF.
RITHOLTZ: Right. Hindsight bias is always 20/20. I mean, who knew. Sometimes you got to just roll the dice although one would imagine that’s an expensive risk to take saying they’ll never approve this but let’s spend $2 million anyway.
VAN ECK: On lawyers. Right.
RITHOLTZ: Right.
VAN ECK: And that was — we didn’t have that money back then.
RITHOLTZ: Right. So, that’s kind of …
VAN ECK: Right. That helps, too, I guess in explaining the past.
RITHOLTZ: By the way, if you — there’s a fantastic Wall Street journal story about the history of GLD, it came out a couple of years ago, and the background was the World Gold Council created the ETF. Because they had too much gold built up in warehouses, it was just a way of, hey, what are we doing with all this yellow crap? We got to get some of it out and it was not very pressing in philosophy, it just worked out fantastic.
VAN ECK: Correct. And even worse, we knew those people, of course.
RITHOLTZ: Really?
VAN ECK: Because all the gold-mining companies are members of the World Gold Council. Yes. I don’t go there.
RITHOLTZ: So, let’s talk a little bit about the operations of ETFs. How do the flows in and out of index funds affect the underlying securities? Is this something that you have to plan and manage especially if some of the junior miners are a little less liquid than the bigger gold miners? How do you deal with that?
VAN ECK: Well, as your listeners probably know, the function of ETF is usually that you can take in-kind delivery of the securities.
RITHOLTZ: Right.
VAN ECK: So, for the vast majority of U.S. equities and other securities, actually, we don’t have to worry about it. It’s the trading community that has to worry, say, OK, I anticipate I’m going to get this price for the ETF. I’m going to deliver this bundle of stocks or bonds. And, so we don’t actually have to trust them — touch it. That’s one of the geniuses.
Where we get involved is index rebalances. And that is something where our portfolio managers pay a lot of attention because, especially, if you have a larger ETF and the trading community knows, VanEck has got to buy 100 million or 200 million of the stock, it’s very important that we game them.
So, we may buy it before the index ask it, we might buy it afterwards. And there’s enough volatility in the market that hopefully, the trading community is not taking advantage of shareholders because that’s our number one job.
RITHOLTZ: Quite interesting. Our mutual colleague, Dave Nadig, is a big advocate of direct indexing. What are your thoughts on this? Is this a challenge to thematic investing or ETF? So, is this really just a niche product? Although, there are some companies with Pinnacle has couple of hundred billion dollars in direct index.
VAN ECK: Right. Which is another form of SMA, right? it’s an index form of SMA and I think — so there are slight advantages to that. But one of the — I think one of the limitations, as you can’t really do that for fixed income. Every one said, there’s SPDR, SPY. everything is transparent.
This is not true. Ninety percent of bonds do not trade on a given day.
RITHOLTZ: Right. That’s right.
VAN ECK: And so, that’s the — I think that’s one of the beauties of fixed-income ETFs. Say, disadvantages, one of the advantages is you’re getting way better liquidity, like we have an emerging market local currency bond ETF. You way rather trade that ETF, the penny wide, than you would the underlying bonds.
RITHOLTZ: There so many …
VAN ECK: Right? It’s insane.
RITHOLTZ: … more bonds than stocks, people don’t realize the vast number of bonds. The joke is, the Wilshire 5000 is what, 3,700 bonds (ph) something like that? I think the last time I looked at it, it’s something like 40,000 or 60,000 bonds that trade at least once a year, some crazy number like that.
There are tons and tons of bonds out there. Every local municipality, every corporate, in all sorts of different years, in all sorts of different tranches, you would much rather trade the funds than the specific bonds.
VAN ECK: Absolutely. And that’s why — that’s one of the limitations of direct indexing. The thing I’d like to point out as well, what’s happened to our careers, right, is fixed income is the last holdout for voice broking.
So, all equity …
RITHOLTZ: Say that — say that again? Voice …
VAN ECK: I’ll explain that.
RITHOLTZ: Being able to pick up the phone and say buy me 10,000 …
VAN ECK: No, the only way to trade it is by picking up the phone.
RITHOLTZ: It’s that way. You can’t — there’s no electronic version.
VAN ECK: Well, there’s text messaging. It’s the same thing, right?
So, all equity trading has gone electronic.
RITHOLTZ: Yes.
VAN ECK: Not true when we came out. All options trading is electronic.
RITHOLTZ: Right.
VAN ECK: Basically. All commodity futures trading is electronic. Fixed income is still a minority of trades. Even most generous calculation is 33 percent of investment-grade trades last year were electronic.
RITHOLTZ: Wow.
VAN ECK: So, that just shows you that there — the fixed income, you can’t just do things and I think people look at direct indexing and other things like, yes, the whole world is electronic. Everything is simple because I can see it at my Yahoo! Finance. Not true.
RITHOLTZ: Isn’t the U.S. Treasury Bonds — aren’t they trading electric …
VAN ECK: Yes. They’re electronic.
RITHOLTZ: I mean, they’re the deepest, most liquid markets. And you have a very, very specific run of dates. Everybody knows what each vintage is. But beyond treasuries, things really start to get a little squirrelly, don’t they?
VAN ECK: Absolutely.
RITHOLTZ: So, one of the other questions I had to ask you that is kind of — kind of intriguing, tell us about — by the way, this is the worst segue from electronic — nonelectronic trading bonds to this, what is the VanEck Forest?
VAN ECK: So, not really related to me. It was my own — or our firm, I should say. So, I don’t want to take any credit.
Buy my uncle, Fred, who never married gave all his money to charity when he passed away and he did something super creative. So, he loved trees and what he did is bought redwood forest in Northern California after it had been clear cut. So, there was no commercial value.
RITHOLTZ: Wait. Back up a sec. So, you take a redwood forest, are we using redwood for commercial uses?
VAN ECK: Yes.
RITHOLTZ: What are we doing with that?
VAN ECK: My God. So, redwoods are beautiful trees.
RITHOLTZ: Spectacular (ph).
VAN ECK: Ninety-five plus percent of all old-growth redwood — I mean, these things are beautiful. They …
RITHOLTZ: Thousand-year-old trees. Yes.
VAN ECK: You have 1,000-year-old trees were cut down. Ninety — I think it’s 98 percent.
RITHOLTZ: Really?
VAN ECK: … we’re cut down to build San Francisco and other things.
RITHOLTZ: Right. And they just left …
VAN ECK: Amazing, no one said stop. I mean, John Muir said stop.
RITHOLTZ: Right.
VAN ECK: But it took a while. But all the damage was done. We’re like why didn’t you stop at 50 percent or 60 percent. Like, it’s just a complete disaster.
So, anyway the — but trees grow back. So, he …
RITHOLTZ: Slowly.
VAN ECK: He was a great value investor. He just bought all these redwood forest for almost nothing. And guess what? Twenty years later, the redwoods are growing.
So, what he did is basically create a sustainable redwood forest.
RITHOLTZ: This is Fred?
VAN ECK: Fred Van Eck. He was a director of our company, but otherwise not involved, and he created a sustainable forest. So, what he said is I’m not going to — I’m going to give the income to charity. So, it was the largest gift to Purdue University ever.
But I’m not — I’m not going to allow people just to cut the trees down. I’m going to do something called selective harvesting.
RITHOLTZ: Right.
VAN ECK: Which is basically like weeding a forest. And what happens if you weed a forest, it actually grows faster.
RITHOLTZ: Grows better. Sure.
VAN ECK: So, that’s managed by the Pacific Forest Trust. And then, what they did as well is because California has carbon credits, they qualified the forest, the Van Eck Forest for carbon credits. So, it was the first property in the U.S. to qualify to get carbon credits which they sold to Arnold Schwarzenegger and Nancy Pelosi.
RITHOLTZ: No kidding?
VAN ECK: It’s such an interesting story.
RITHOLTZ: Wow.
VAN ECK: But I take absolutely no credit for it. I mean, we helped a little bit …
RITHOLTZ: When I told you I — we do deep dive, if I’m finding out about the — but actually, it was mentioned somewhere on your corporate website, if I remember, unless it was just my shocking …
VAN ECK: Yes. We mention it.
RITHOLTZ: … Google skills. Yes. So, that’s pretty — that’s pretty intriguing.
And final question before we get to our standard questions is what did you learn from your dad about leadership and running an investment business? You worked with him for how long? How was the overlap?
VAN ECK: Well, I mean, we talked — he talked about work at home.
RITHOLTZ: Right.
VAN ECK: So, almost …
RITHOLTZ: So, most of you are …
VAN ECK: So. Yes. Most of my life.
RITHOLTZ: Right.
VAN ECK: So, and then into my 30s, he, luckily, had a long life. He passed away ’98.
RITHOLTZ: That’s some good genes.
VAN ECK: My dad was an economist.
RITHOLTZ: Yes.
VAN ECK: OK. He was not a businessman and he was not really a portfolio manager. So, his — he had this view of the world, like look at what’s going on and then take advantage and then implement. Right?
RITHOLTZ: Right.
VAN ECK: So, just that perspective and that risk-taking is really what I learned from him, is question the structure. The world is changing. What’s changing and do — does that give you opportunity or risk in your portfolio?
So, that’s really what I learned from him. He was very — he was very much a gentleman. He was very collaborative within the firm and he knew what he didn’t know. So, the first thing — the first person he hired to run the gold fund was a geologist. So, that’s one of our histories is having real people from industry as part of our portfolio management team.
RITHOLTZ: Quite — quite fascinating. Any major topics I didn’t get to before we get to my favorite questions?
VAN ECK: Well, we’ll get this some other time. But the fact that the explosion of passive means that ownership of corporate America is in concentrated at some very big firms …
RITHOLTZ: Let’s talk about that because I’m astonished at some of the myths and discussions that have risen around this. Do you look at passive as a challenge to your core business model or do you look at passive as a lazy person’s approach to investing? How do you think of passive?
VAN ECK: Well, I think …
RITHOLTZ: And you know my bias. So …
VAN ECK: Yes. Cheap market exposure passive has been fantastic for investors, right? It’s lowered costs. They …
RITHOLTZ: Dramatically.
VAN ECK: Dramatically. And it’s, in a way, not our business. We try to do value-added or different exposures. What I would say is it’s also been a perfect environment for that. One of your questions is what do you wish you had known 30 years ago? Well, I wish …
RITHOLTZ: Don’t tell everybody.
VAN ECK: I wish I’d known that interest rates were going to fall my entire career because financial assets have had this huge tailwind, really, for since 1980.
RITHOLTZ: I’m going to — I’m going to stop you right there and I have to stop you because the person responsible for that, is it 40 years, ’82 to 2020, almost 40-year bond bull market and falling interest rates. And to this day, they’re still falling. Where was the 30-year last week?
VAN ECK: Oh, my God.
RITHOLTZ: One-five-five. Something crazy.
VAN ECK: Yes.
RITHOLTZ: … was Paul Volcker.
VAN ECK: Right.
RITHOLTZ: Who, on occasion, am I remembering this correctly? Did your dad have lunch with Paul Voelker on a regular basis?
VAN ECK: No. Not regular basis. Once.
RITHOLTZ: Once. And …
VAN ECK: And I was luckily to be invited. So, someone thought it was funny, probably someone with your type of your personality, say, hey, this guy got solved the inflation problem in the U.S. and gold got killed for 20 years afterwards. They should meet each other. And because …
RITHOLTZ: Is that my sense of humor? I don’t know if that’s my sense of humor. To me, any opportunity I get to meet a Fed chair, I’m going to take that.
VAN ECK: Well, you like to put it …
RITHOLTZ: And stick them with a — yes.
VAN ECK: You like to put interesting people together.
RITHOLTZ: A 100 percent.
VAN ECK: And there was probably a little humor associated with this particular combination.
RITHOLTZ: OK.
VAN ECK: In any case, so …
RITHOLTZ: Who arranged that lunch?
VAN ECK: I don’t — I don’t remember. It was sort of a vague associate of my dad’s. I think it was someone who ran a fixed income shop, like we didn’t know — we didn’t know that person well.
RITHOLTZ: Right.
VAN ECK: Anyway, so I tagged along and it was …
RITHOLTZ: How old were you at the time?
VAN ECK: Wow. I — probably in my 30s.
RITHOLTZ: OK. Did you appreciate the gravity of …
VAN ECK: Yes. My God.
RITHOLTZ: By the way …
VAN ECK: He’s a rock star, right?
RITHOLTZ: Superstar. Absolute superstar. I think he deserves much more of the credit for the so-called Reagan Revolution than he’s gotten. Because Reagan did a bunch of things that I think were very helpful but none of which would’ve happened with that …
VAN ECK: And he didn’t appoint Volcker, I don’t think either.
RITHOLTZ: No. In fact, he — reminder, when Volcker’s term was up, Reagan replaced him with some guy name Alan Greenspan.
VAN ECK: Right.
RITHOLTZ: So, that’s another reason to be a little miffed at Ronald Reagan. He fobbed that — I won’t use any curse words on the air — but I blame the crisis — the great financial crisis had a lot of inputs and a lot of factors that caused it. But towards the top of that list is Alan Greenspan both as a monotheist and a regulator.
He messed up — I’m trying to keep it G-rated. He messed up on two different ways, but avoid — let’s avoid that digression. I got to meet Tall Paul (ph) at — I think it was ’08 at Chris Whalen’s election party and I found him to be absolutely charming. He just passed away …
VAN ECK: Right.
RITHOLTZ: … last year. What was your lunch with him like? What was your experience like? And were you aware that you were having a brush with greatness?
VAN ECK: Yes. I mean, of course. I mean, he — this is sort of like — like you said, he had a major effect on …
RITHOLTZ: Everything.
VAN ECK: … on everything, right? The structure of financials and everything. So, yes. There was — it was great meeting him. He was more disengaged from the financial markets at the time than my dad which that was just odd.
RITHOLTZ: Disengaged …
VAN ECK: With the day to day — OK. So, again, my dad was like a pencil, sharp economist.
RITHOLTZ: Right.
VAN ECK: And he was obsessed with money supply growth. And I think they were talking about Japan at the time, that was the hot topic.
RITHOLTZ: Right.
VAN ECK: And this was the beginnings of Japan’s …
RITHOLTZ: So, was this in …
VAN ECK: … the end of the bubble …
RITHOLTZ: … the ’90s?
VAN ECK: The end of the bubble, how to deal with the bubble. And before this long-period of disinflation or whatever you want to call it …
RITHOLTZ: Right. Deflation. Yes.
VAN ECK: Deflation in Japan. And my dad knew this — I didn’t — just the statistics of last month, money supply growth in Japan and Volcker was like I had no interest in this topic, whatsoever.
RITHOLTZ: So, money supply is part of this huge list of economic and market indicators that people use to track obsessively because they thought it would help them figure out what’s going on with the market.
VAN ECK: Yes.
RITHOLTZ: And one by one, because if you think about it, hey, the money supply is expanding, all that will eventually work its way into the stock market and stocks will go higher until that just completely stopped working. It was a coincidental correlation for a long time or maybe it was an input factor, I don’t know.
We look at so much — we used to look at some of the odd lot datapoint and I know guys who used to, and it was all guys, who used to track that stuff obsessively in the ’90s and it just stopped working.
Charles Biderman ran TrimTabs that used to check money flow in and out of mutual funds. This market has done more or less nothing but go up for over a decade. And at the same time, money flows out of funds, something like a half a trillion dollars have left mutual funds, not left mutual funds to go into ETFs. They’ve left the building and the market continues to go on.
VAN ECK: Well, that’s a separate — that’s a separate podcast on. I don’t believe flows affect the prices.
RITHOLTZ: But for a long time, people — it was gospel.
VAN ECK: Here’s my point. It used to be that all money would go through the central bank into commercial banks. Now, there’s so much money — so much lending happening outside the banking system, right? Only half of the lending is happening inside our banking system. They’ve got hedge funds, lending the companies …
RITHOLTZ: Private equities.
VAN ECK: Private — but credit. I’m just talking about credit. So, you’ve got a totally different world. That’s why we don’t care about that stuff is because the transmission …
RITHOLTZ: Right.
VAN ECK: … is totally different. That’s why the central bank has to go and buy bonds and stock — even stocks and ETFs in different countries to affect the markets because they’re not able to transmit through reserve ratio requirements.
RITHOLTZ: Right.
VAN ECK: Remember all that kind of stuff.
RITHOLTZ: Right. All these indicators are gone and we used to call that the shadow banking sector and it’s not in the shadows anymore. It’s …
VAN ECK: It’s huge.
RITHOLTZ: It’s now the banking sector. They’re just non-bank lenders.
VAN ECK: Right.
RITHOLTZ: Which is very different than when it seemed a little subversive and a little illicit. It’s not. It’s just a different form of credit.
VAN ECK: Right.
RITHOLTZ: Quite fascinating. All right. So, let’s get to our favorite questions.
I’m interested to hear about some of your answers and I have to start out with what was the first car you ever had?
VAN ECK: First car. My God, my brother and I, in college, shared a cheap — I don’t know. And I know you’re a car guy, but it was like an Oldsmobile that had 500,000 miles on it and …
RITHOLTZ: Five hundred. That’s a lot of miles.
VAN ECK: Well, it didn’t. But I mean …
RITHOLTZ: So, let me …
VAN ECK: … happy to reach our destination.
RITHOLTZ: Let me switch it up on you. What do you — what are you streaming in terms of video on Netflix or Amazon Prime? What are you downloading in terms of podcasts and listening to? Tell us what you’re entertaining yourself with.
VAN ECK: Well, I’m a little bit of a junkie in podcast. So, I don’t really watch a lot of video. So, I listen to about seven hours of podcasts. I love …
RITHOLTZ: A day?
VAN ECK: A week.
RITHOLTZ: OK.
VAN ECK: Sorry. A day, it would be hard to get anything done. I’ve learned a lot from, I’ll call it the stars in our industry.
RITHOLTZ: Give us some names.
VAN ECK: Well, yours truly. Patrick O’Shaughnessy, Ted Seides, Capital Allocators, and a little bit offstream, I love Kara Swisher.
RITHOLTZ: She’s so much fun. I had her at — not only did I have her as a guest where she chewed the scenery, but if you listen to Pivot with her and Scott Galloway …
VAN ECK: Yes.
RITHOLTZ: So much fun.
VAN ECK: Yes. The — so I learned a lot. I did my bitcorn learning in 2017. So, I learned a lot from Patrick O’Shaughnessy. I learned a lot from Pump (ph) and this Australian guy, Stephan Livera. But I would say the podcast episode of the …
RITHOLTZ: Bar none.
VAN ECK: … in my podcasting career was when Scott Galloway predicted the takeover of Whole Foods by Amazon or Kara Swisher’s podcast. So, I remember I was just coming finishing a run and I was like, wow. Because everyone …
RITHOLTZ: It’s a ballsy call.
VAN ECK: … in business is always looking at FANGs going how is this going to impact my business.
RITHOLTZ: Right.
VAN ECK: Right? Is Amazon going to come in to finance, all this kind of stuff. And he just nailed it.
And then literally, it happened. And I’m like, wow. There are a lot of smart people out there.
RITHOLTZ: I think he’s been a guest four times on the show. She — he’s just been a ton of fun to interview and, man, you got to give him credit for being way out there. His background in branding and marketing really helps him. But that was just such a pressing (ph) call.
VAN ECK: Yes.
RITHOLTZ: So sharp. What’s the most important thing people don’t know about Jan van Eck?
VAN ECK: It’s important, but my first language wasn’t English.
RITHOLTZ: What was it?
VAN ECK: It was German.
RITHOLTZ: Really?
VAN ECK: My mom is German and she just came over to the U.S. shortly before they got married. They met in Germany. And so she spoke German at home and that’s what I learned and what was funny about it is that the elementary school thought I was not fast because I was learning English at the same time.
RITHOLTZ: Right.
VAN ECK: So, they want me to repeat a grade.
RITHOLTZ: Did you?
VAN ECK: So, my parents said, no, we’re out of here. We’re going to the suburbs. New York City is too ridiculous.
RITHOLTZ: And you were gone.
VAN ECK: I’m gone.
RITHOLTZ: Isn’t Van Eck a Dutch name or …
VAN ECK: Yes. Well, my dad’s side was Dutch.
RITHOLTZ: OK.
VAN ECK: But my mom’s side was German.
RITHOLTZ: Quite interesting. And speaking of your dad, who are — who were some of your early mentors? And I assume your dad looms large in that.
VAN ECK: Yes. I talked about my dad. I would say the one person I would mention is the Stanford Law School professor Joe Grundfest.
RITHOLTZ: Yes. That name sounds familiar.
VAN ECK: I don’t know if you know him. He was an SEC Commissioner.
RITHOLTZ: OK.
VAN ECK: And he does — he’s involved in a lot of stuff. He comments in government — governance work at Stanford as well. But in a class I was taking with him and I was his research assistant as well, he basically made fun of active managers. He’s like, that is like a dinosaur and I was — he was probably the first person who said that to me.
And I think that’s also when I saw the ETF trend, it triggered that — well, this actually might be the future. So, he would — I would put him in that category.
RITHOLTZ: Quite interesting. What investors influence the way you approach investing?
VAN ECK: There, I go back my father. I think — Barry, I’ve learned so much from so many different people. So, I just can’t really do a shout out. But I love the people that are talking about how the world is changing today, who are forward-looking because I think the market structure is changing. And so, you that’s — there’s just so many people that are good at that, I think, it would be unfair to pull one person out.
RITHOLTZ: Fair enough. Let’s talk a little bit about books. What do you read? What sort of books? What were some of the most recent books you’ve enjoyed?
VAN ECK: So, I’m — I don’t have a lot of time. In our industry we consume, so much content and it’s hard to get through books. But I’ll mention two. One is “The Overstory.” I don’t know if you’ve heard about this.
RITHOLTZ: Overstory?
VAN ECK: Won the Pulitzer price. It was written by Richard Powers. And it’s basically about trees where it’s — it’s a fiction book where trees play a major part in it. And it’s long book but I would — I really enjoyed it and it really made me appreciate forests. If I had to give you one take away from a fiction book which is weird, that that forests are really environments. That you know they go beneath the ground, the trees interact with each other and it’s so much more complex than the way I look at a single tree sitting in my front yard all alone. That’s not the way to look at trees.
So, if you’re interested in that …
RITHOLTZ: Fascinating.
VAN ECK: Can I give you my second one?
RITHOLTZ: Sure.
VAN ECK: Out of the blue. So, I have these enthusiasms — I try to reach — read a biography on every American president then I ran out of …
RITHOLTZ: Ran out of president.
VAN ECK: … ran out of energy. I’ve ran out of energy than ran out of presidents.
But one of my favorites is Jean Smith’s “Grant” biography.
RITHOLTZ: yes.
VAN ECK: So, I got to believe no one’s talked to you about Ulysses S. Grant on your podcasts and …
RITHOLTZ: I wouldn’t make that bet so quickly.
VAN ECK: All right. Well, the two — my two takeaways …
RITHOLTZ: What’s the name of that book?
VAN ECK: It’s just “Grant.” I don’t know …
RITHOLTZ: Just “Grant.” There it is.
VAN ECK: But I’ll tell you why. Number one, Grant helped win the war. I mean, we focus on Lincoln. But if Lincoln — if we had lost the — if the north had lost the Civil War, the United States is a completely different country.
RITHOLTZ: Sure.
VAN ECK: And he was so celebrated — he gets such a bad rap when it comes to history that he was an alcoholic and this and that. He was very magnanimous as he could be when he was president towards the south and towards — towards the blacks that he really, I think, deserves a lot more credit for those two reasons.
The second element of the reason I love this book is when you go to college and you read about these historians, you get kind of a view of history. And what you don’t realize is that those schools of thought, right, and that — and this book was a revisionist school of thought, like people get trashed by historians and then their reputations come back and I didn’t realize that dynamic went on so much in academia.
Every natural biology and we know that’s changing all the time and it’s not the same as it was 30 years ago, but that’s true for history, too.
RITHOLTZ: Quite interesting. When I said don’t — don’t assume so quickly, I was mostly wrong. Someone recommended a grant book but it was the Chernow Grant book, not the smith Grant book.
VAN ECK: Yes. His books are so long. I mean, can you really read that?
RITHOLTZ: I don’t know. Everything I’ve read of his has just been spectacular.
VAN ECK: No, it’s good. I know.
RITHOLTZ: He’s fantastic.
VAN ECK: I’ve been given that book five times.
RITHOLTZ: Really?
VAN ECK: Well, because I talk about Grant. So, I should read it.
RITHOLTZ: So, if you read presidential biographies, did you read any of the turn at Chernow Washington or Jefferson or any of the other Chernow presidential things or are they just too long for you?
VAN ECK: I own them.
RITHOLTZ: Yes. Right. Hey, listen, I don’t want to about how many books I have at home, my …
VAN ECK: I’m a Hamilton fan. I’ll just put it — I’ll put it out there. So, I don’t know if you know that we design our own ties.
RITHOLTZ: That I know.
VAN ECK: So, I’m wearing a Hamilton …
RITHOLTZ: … a Hamilton tie.
VAN ECK: So, that’s my — I’ll defend Hamilton.
RITHOLTZ: Before I saw the show, again, not a recommended I get the annotated Hamilton lyrics.
VAN ECK: Yes.
RITHOLTZ: “Hamilton: The Revolution” is his annotated version of the lyrics to the show. Lin Manuel Miranda’s lyrics and it’s really quite fascinating how he explains everything.
VAN ECK: Yes.
RITHOLTZ: And annotates how there’s so many different interesting references. But given your predilection for biographies, do you read anything like McCullough’s book on the Wright Brothers or anything along those lines?
VAN ECK: Haven’t gotten to that.
RITHOLTZ: So, good.
VAN ECK: There’s so much stuff. Yes. I’ve heard — he’s a great popularizer of American history.
RITHOLTZ: Rght.
VAN ECK: OK. Lehman Trilogy.
RITHOLTZ: Someone else recommended Lehman Trilogy.
VAN ECK: It’s coming back to Broadway and if you like history and you know finance, you have to see that play.
RITHOLTZ: OK. I’m in.
VAN ECK: That’s a must.
RITHOLTZ: The Lehman Trilogy.
VAN ECK: Yes. It was here briefly. Started in London. It’s just theater. So, maybe they make a movie, I guess. I don’t know. But I really recommend that if you like history.
RITHOLTZ: All right. I’ll put that on our list. Tell us about a time you failed and what and what you learned from the experience?
VAN ECK: So, lots of failures. I think what — the one that resonates the most with me is when we were launching different mutual funds before ETFs, we launched some international fixed income funds that invested in high-yielding European debt.
RITHOLTZ: Right. Well, it’s not like it was Russian debt.
VAN ECK: No, but it turned out to be like it. So, basically as a money manager, whenever you can sell a yield, you can get flows. And we were getting a ton of money into this fund.
And this was the time where European exchange rates it’s — it’s sort of the pre-euro environment where change rates were linked and as George Soros famously predicted and made a lot of money on, that link was going to break. And that link broke.
And so, our funds, as did a lot of others, but are funds lost a lot of NAV value and one of the principles I take away from that learning experience is it’s so important to try to identify the risks of an investment along with the potential return. And you know in a prospectus, you can put down 20 risks.
You don’t get any points for identifying a risk in the prospectus. You’ve got to put up and center say, hey, listen. This is a major risk to this fund and we really try to get better at that. And whenever there’s been funds that we could’ve launched, that’s been in my mind and there are a lot of funds we haven’t launched because of that experience.
RITHOLTZ: What do you do for fun? What do you do when you’re not in the office?
VAN ECK: I love to travel. I learned so much from traveling and thanks to my wife who likes to travel as well. It was on our honeymoon that we went to Hong Kong and I saw what was going on in China. It was never in the paper then. You can learn so much from contextualizing through travel.
So, there’s a lot of — the Van Eck forest, frankly, my wife dragged me out there. I wasn’t — I was dying to go look at a bunch of trees, but you learn so much from that experience and got more involved.
Tennis. And then the last thing …
RITHOLTZ: How long have you been playing tennis for?
VAN ECK: So, one of my sons plays tennis for Brown. He starts on the varsity team and …
RITHOLTZ: So, he’s got to be good.
VAN ECK: You’re sitting in these cold tennis courts in Long Island on the middle of February and I’m standing talking to the dads and all of them had played college tennis. And I was like, whatever, I was such a hack athlete at everything and I was like, OK, but I know he’s genetically related to me. I can’t be that bad, so I picked up tennis about 10 years ago and I’ve enjoyed playing that.
And then I like to host dinners. I mean, I know you do that, too.
RITHOLTZ: Yes.
VAN ECK: I love to brainstorm with — bring people together when I can. So, I try to do that, three or four times a year.
RITHOLTZ: There’s so much intellectual capital here in New York.
VAN ECK: In New York.
RITHOLTZ: How do you not take advantage of — you can’t swing a dead cat without hitting a noble laureate, a billionaire, someone who’s really insightful, and they got to eat also.
VAN ECK: And the world is changing. That’s what’s cool, right? I mean, that’s what — you just can’t go out and read a book because some of these changes haven’t been documented.
I found out a lot with China, that’s why I traveled there 50 times. It’s like you couldn’t read about what was going on in China.
RITHOLTZ: Right.
VAN ECK: You had to see it.
RITHOLTZ: And I know other people do these idea dinners where it’s an attempt to sell something. We sit hours up and I know you do the same where there’s no agenda, it’s just let’s get eight really interesting people in a room and have a conversation and see where it goes. There’s no sales pitches, nobody ask anybody to do anything. It’s just, hey, let’s talk about what’s going on in the world.
VAN ECK: Yes. Absolutely.
RITHOLTZ: It’s quite — quite fascinating. So, within our industry, what are you most optimistic about and what are you most pessimistic about?
VAN ECK: Optimistic, I have to be optimistic as I said before, there’s so many unsolved problems. I think in understanding how financial markets work and I know you’re doing research in that area, so I’m optimistic about all the innovations that will become.
I think the pessimistic thing about our industry, we — what do you and I do? We manage money for people who have money. Why do they have money? Because they’ve said or someone gave them money, right?
RITHOLTZ: Or they started a business that ended up being very successful or even …
VAN ECK: But half of — half of Americans, and we talk about this in our industry, but half of Americans don’t save. They don’t …
RITHOLTZ: Don’t have stocks, don’t save.
VAN ECK: They don’t know how to save, they don’t know how to open a brokerage account. We just let investment in a company called Financial Gym which is just oriented around that, like getting physically fit. And it’s just like the gym, like you don’t want to go, you think you want to go, a New Year’s resolution then you don’t go, and there are just real-life people who have found ways of engaging and they’ve got unlimited demand because a lot of people need financial advice.
RITHOLTZ: I’m intrigued by the Robin Hood concept of rounding up whatever you spend on a credit card and sending it to a savings or brokerage account. And you wouldn’t think that rounding up is a lot of money, but it can be. I have a jar of loose changed. It’s probably $900, weighs 100 pounds that I just come home and throw the change out of my …
VAN ECK: There are a lot of apps out there. There’s a lot of tools, but a lot of people don’t even — they don’t think about that need and their consequence is stress. If you don’t have money, you have stress in your life.
And that’s — like, we’ve all lived through periods of stress and …
RITHOLTZ: Right.
VAN ECK: And that’s so — when I think about our industry collectively, I hope that business people can help solve that problem a little bit.
RITHOLTZ: Quite intriguing. And our final two questions, what advice would you give to a recent college graduate who was just beginning their career and interested in either finance or asset management?
VAN ECK: It’s what we talked about before. Try a lot of different things. David Rubenstein said — I saw him last week. He said what you do before your 30 doesn’t matter. And so many people I know who are younger, in college, are so concerned about their career track and I get that. But you really have to know what you like to do and can succeed in.
So, that is — that is the — that’s the big thing, is try and try different things. Because I don’t know how you can figure out whether you like something if you haven’t tried it.
RITHOLTZ: You’re from the same camp as I which I don’t know what the hell I wanted to do when I was 19 or 25 or by 30 I started to having an inkling. I get the sense you traveled a similar path.
VAN ECK: Yes. More of the kids don’t do that enough these days.
RITHOLTZ: And a final question, what you know about the world of investing today that you wish you knew 30 years ago? Thirty years ago, let’s call it — yes, ’92, 30 years ago.
VAN ECK: Wow. I don’t have a great answer to that. I guess I wish I knew interest rates were going to come down the whole time. I think there is …
RITHOLTZ: Was there any sign in ’92 that this was a see-change in the world of inflation and yield or did it — was it just — remember the …
VAN ECK: I don’t think so.
RITHOLTZ: It’s like ’89. When did — when did Volcker — I’m sorry — ’79, ’80 was when he caused the …
VAN ECK: Yes.
RITHOLTZ: … double dip ’80 and ’82, the double-dip recession. He broke the back of inflation. So, you were barely a dozen years into that?
VAN ECK: Right. Yes. So, I wish I’d known that. I really — that — when you have lower interest rates, that helps stock market valuations, and obviously, helps fixed income. And I think we’re now in the spot, well, what is the next 20 years going to bring us?
I want to know what’s happening in the next 10 years, Barry.
RITHOLTZ: That is the trillion-dollar question and I’ll tell you afterwards.
VAN ECK: OK.
RITHOLTZ: We have been speaking with Jan van Eck, CEO of VanEck Associates. If you enjoy this conversation, well, be sure and look up an inch or down an inch on Apple iTunes where you could see any of our prior 300 plus conversations. You’ll find that on iTunes, Spotify, Google, Overcast, Stitcher, wherever your finer podcasts are sold.
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I would be remiss if I did not thank the crack staff who helps put these conversations together each week. Sam Shivraj is our producer/booker. Mark Siniscalchi is our audio engineer. Michael Batnick is my head of research. I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.
