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Bitcoin Is The Only Asset That Survives What’s Coming
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Investors interested in alternative assets, ETFs, and macro-economic trends should watch this discussion.
TL;DR
Jan Van Eck, CEO of Van Eck, discusses the current state of Bitcoin adoption, the risks and opportunities in private credit and BDCs, and the continued growth of ETFs. He highlights the undervaluation of asset management stocks and the historical volatility of gold mining shares, while emphasizing the importance of asset class diversification.
Key Takeaways
- Private credit markets experienced significant fear and sell-offs, with BDCs trading at a 20% discount to NAV, implying a 10% default rate, far exceeding high-yield defaults.
- Despite fears, the US economy and corporate America are in good shape, suggesting a lower likelihood of widespread defaults and making discounted private credit issuers attractive.
- Publicly traded asset managers like Blue Owl, previously overvalued, are now undervalued with high dividend yields, offering upside potential and stability in a growing industry.
- The ETF industry continues to grow, providing accessibility to underserved asset classes like fixed income, though many ETFs remain small and vulnerable to market dislocations.
- Fixed income ETFs are a distinct category, with only a small percentage of underlying bonds trading daily, making them less liquid than often perceived during market stress.
- Van Eck's diversified asset allocation, with significant holdings in gold, precious metals, fixed income, and natural resources, offers a comprehensive suite for investors.
- Gold mining shares experienced extreme volatility, with GDX down 90% from 2011-2016, highlighting the decimation in natural resources and the need for diversification.
- The initial decision of which asset class to invest in is paramount, with gold offering various investment avenues from physical holdings to mining and royalty companies.
In This Video
- 00:00Bitcoin's Evolving Adoption Story
Bitcoin's adoption hasn't changed significantly, with limited institutional and corporate involvement beyond financial investors via ETFs.
- 00:42Conversation with Jan Van Eck
Introduction to Jan Van Eck, CEO of Van Eck, discussing Bitcoin, gold, ETFs, India, and strategic investing.
- 01:15Concerns in Private Credit Markets
Discussion on fears surrounding private credit, BDCs trading at a discount, and potential default rates compared to high yield.
- 02:50Excitement in Private Credit Issuers
Jan expresses excitement for private credit issuers like Blue Owl, noting their stock's decline and attractive dividend yield.
- 04:32Explosion of the ETF Industry
The ETF business is a growth area in financial services, offering accessibility to underserved asset classes like fixed income.
- 06:09Van Eck's Asset Allocation
Van Eck manages $200 billion across equities, gold, fixed income, and natural resources, reflecting a well-rounded approach.
- 06:48The History and Volatility of Gold
Van Eck started with a gold mining fund; gold shares are volatile, and diversification is key for revenue streams.
Questions & Answers
Why would Bitcoin's price change if adoption hasn't?
The speaker notes that central banks, corporations, and significant institutional investors haven't adopted Bitcoin, with only some financial investors through ETFs. Since adoption hasn't dramatically changed, there's no reason to expect a big price change.
What are BDCs and why were people worried about them?
BDCs (Business Development Companies) are part of the private credit market. Concerns arose due to two frauds and fears of systemic problems, leading to a sell-off and a 20% discount to NAV.
What is the current default rate for high yield vs. BDCs?
The high yield market is defaulting at about 2.5%. In contrast, the BDC market was pricing in a 10% default rate, indicating a significant disconnect.
Why is Jan Van Eck excited about private credit issuers like Blue Owl?
Despite market fears, Blue Owl's stock price dropped significantly, offering a high dividend yield (around 9%). The speaker believes the business is stable and growing, making it an attractive investment.
Are there more ETFs than stocks?
Yes, there are more ETFs than individual stocks. However, the speaker notes that the vast majority of ETFs have less than $100 million in assets under management, making the statistic somewhat misleading.
How has Van Eck's business evolved since its founding?
Van Eck started with a single gold mining mutual fund. Now, it manages around $200 billion across various asset classes including US and international equities, gold, fixed income, and natural resources.
Key Terms
- BDC (Business Development Company) — A type of closed-end investment company that invests in small and medium-sized businesses, often traded on public exchanges.
- NAV (Net Asset Value) — The per-share market value of a fund, calculated by subtracting liabilities from assets and dividing by the number of shares outstanding.
- ETF (Exchange-Traded Fund) — A type of security that tracks an index, sector, commodity, or other asset, but which can be purchased or sold on a stock exchange like a regular stock.
- GDX — An ETF that tracks an index of gold mining companies, often used as a proxy for the gold mining sector's performance.