‘Blow Up’ Volatility: Could China Trigger Q4 Market Chaos? | Will Rhind
Summary
Market Outlook: The podcast discusses potential volatility in Q4, driven by geopolitical concerns, inflation data, and Federal Reserve rate decisions.
Investment Themes: Gold is emphasized as a significant alternative investment, with its rising value reflecting its status as a hedge against currency fluctuations and inflation.
Federal Reserve Actions: The expectation of rate cuts by the Federal Reserve is highlighted, with implications for market performance and investment strategies.
Company Performance: Large tech companies in indices like the NASDAQ and S&P 500 have shown strong earnings, contributing to market strength, while small caps face challenges due to interest rate sensitivity.
Investment Opportunities: Granite Shares' ETFs, especially those focused on gold, leveraged single stocks, and options-based yield products, are gaining traction among investors seeking diversification and income.
Inflation and Tariffs: The podcast explores the complex relationship between tariffs and inflation, noting that the impact varies across different sectors.
Bitcoin and Gold: Both assets are discussed as alternatives to traditional investments, with Bitcoin's rise attributed to its finite supply and appeal as a non-mainstream asset.
Risk Management: Strategies for managing market uncertainty include diversification and hedging, with a focus on maintaining exposure to quality assets.
Transcript
the number one competitor is actually gold itself. Um, you've had the rise of Bitcoin, people want an alternative to mainstream assets. If China walks away from the table, that's reflected in the market in terms of where stocks are today. But again, all of that can change with almost one one tweet or one announcement. Or do you think it's a an indicator for more volatility in the stock markets war perhaps? Well, I think we're joined today by Will Ryan, CEO and founder of Granite Shares. There's a lot of interesting developments happening in the markets and Granite Shares has a lot of ETFs that cover all corners of the markets including precious metals, stocks and now a play on volatility itself. We'll talk about whether or not volatility is coming for the fourth quarter. Welcome to the show will good to see you again. Good to see you David. Always a pleasure. Let's just start with that volatility. Before we get into the products themselves, uh volatility is a theme that has somewhat disappeared in the last couple of months given how high everything's gone. And so usually when things are booming and moving up, there's less volatility. But we mustn't forget that liberation day happened in April, there was a massive correction in uh the beginning of August for a lot of commodities before they were rebounding. So there is still volatility to the downside and upside. It's just that throughout the Trump presidency in terms one and I guess the first year of term two, things have rebounded after a dip. Is that kind of the theme for the rest of the Trump presidency? You think you think just buying the dip is that going to keep working? Yeah, I mean I think it's um not necessarily the theme of this Trump presidency, but the last few years um that's been a trade that's worked. I mean, one thing we know is that uh the volatility comes with the territory. And you know, in terms of whether it's trade wars, um whether it's tariffs, whether it's uh you know, Federal Federal Reserve, etc., there's always room for um some kind of volatility, some kind of sort of shakeup um as this administration does things in a in a very unconventional way. What do you think should be the key data points that investors should watch for the remainder remainder of 2025? I think it's still comes down to the inflation numbers. Um because that that's really tied into whether we get a rate cut and not just whether we get a rate cut, how many rate cuts, severity of that coming into year end. I was going to say the the jobs data, but I think that's now um you know pretty firmed up and I don't think that that will necessarily be any there'll be any new news on that front. You know there was a significant revision. I think the labor market, you know, clearly is softening. So, it's really now the I think the the data on the inflation side is kind of the key thing here. This is an article uh published by Fortune magazine. The Fed desperately wants to avoid a recession because it doesn't want to get blamed and put its independence at risk. Now, we're speaking right ahead of the Fed meeting uh this week. It's expected that they'll be cutting rates uh at least 25 basis points. I think the Federal Reserve desperately wants to avoid that kind of outcome. He said uh says Mark Xandy of Moody's Analytics. Uh obviously nobody wants a recession but also in the context of Fed dependence they really don't want to get blamed for going into a downturn because that would impair their ability. Uh perhaps the jobs numbers show that we are already in a recession says uh Mr. Danny from Moody's. What do you think? I wouldn't go that far. um that I understand the the point on that, but I I find it still difficult to to use that argument or to to really give that argument much merit given that we're at all-time highs in the market and other asset classes. Although the labor market is suffering softening, we still got employment at or near, you know, highs. um inflation is sort of in check at least as far as the market is concerned and interest rates sort of coming down. Growth is growth is good. So it's difficult to say we're in a recession at the moment but I understand the logic around softening labor numbers being you know a potential canary in the coal mine that you know not everything is is going great. Well on the subject of inflation since you said inflation should be one of the most important things people are watching. Trump tariffs are fueling inflation, says the chief of the congressional budget office, Philip Swaggel. Uh he said that $3.3 trillion of revenue and then $700 billion of averted debt costs. That would be a big reversal in terms of the deficit in terms when he's talking about the projection. Uh but um yeah, they're they're pinning the uh rising inflation as you know 2.9% was the latest number up from 2.7% the month before. the uh the Congressional Budget Office is pinning inflation on tariffs. Um what do you think? Is this is this political or are they right? Um I I just think the topic of inflation and tariffs is hugely complicated and people want there to be a simple answer to it. In other words, do tariffs cause inflation? Yes or no? And while the simple answer, you know, is always the most attractive, I think what we found out is this is a hugely complicated question. And the answer is not uh uniform across the board. There are some sectors of the of the market, some industries where uh I think there's no doubt that tariff policy will or has caused inflation and then there are others where it hasn't and will not and almost have the opposite effect. And so again, I think it's going to be very specific. Well, the bullish argument for the remainder of the year is that as the Fed now is turning into an easing cycle, uh even though inflation is still hot, but the labor numbers are weak. That's why they're easing. We should stay long uh because we don't know how many times exactly that they're going to ease. Morgan Stanley has three times by the end of the year. Uh we just know that they're going to start easing and so it we shouldn't be fighting the Fed. Stay long, perhaps even leverage up on the long side. Does that thesis make sense to you? I think that's where I'm at. between now and the end of the year. Um, you know, again, I think laying out the points for why the market is in is in good shape and clearly the market's reacting positively to statements by the Fed chair, the Fed more broadly that um they're ready to start cutting rates. It's just a question now of of how many rate cuts we get um between now and year end. And clearly the data on the labor market side perhaps is leaning to more cuts um or deeper cuts than we had suspected a month ago. So I I'm inclined to to go with that view that um the data seems good. And again going back to fundamentals here, you know, we've got to remember that um companies particularly large tech companies that make up the bulk of the major stock market index um you know have reported very strong earnings this year. And that again you know the growth we saw of Oracle even last week projected forward growth is incredibly strong. So propelling the market higher. Well the uh large tech companies especially the ones in the um uh NASDAQ and the S&P 500 have performed well this year like you mentioned. However, if I'm looking on the screen here and I want to share um my screen with you. Here we go. This is my This is my screen where I show the S&P 500 versus the Russell. Uh the Russell here is uh the bar chart and the pink or purple line here is the S&P 500. On a year-to-ate basis, the S&P has still been outperforming. On a one-year basis, it's been outperforming. And actually, on a 5-year basis, it's been outperforming. Um people have been talking about this theme for a while. how the major uh stocks in the index have been the mag sevens have been lifting up the entire index and to some extent the entire index is overvalued but if you actually look at the uh the rest of the market the midcaps and the small caps that's more reflective of actual economic growth so which is true that the large caps are overvalued or the small caps are undervalued I mean they're both true but for very different reasons um you know I think when you let's talk about the small caps first you know in a in a market where you have still high interest rates from a historical perspective. That smaller companies are more sensitive to interest rates than large companies and particularly the large tech companies where interest rates are really not necessarily a factor that influences you know their sort of forward valuation and their businesses overall. the Russell I think I believe around a third of the companies in the Russell um are actually not profitable and are very sensitive to to rates more broadly given the amount of debt levels that are carried by that group. So I think it's again it's a it's less about the the entire market as a whole and it's more about good quality companies versus bad companies and that happens in large caps as well as in small caps. There's no doubt that your large caps have been the place to be. Those are the companies, those the largest tech companies. They're the ones that are benefit benefiting most from AI, from crypto, etc. And smaller companies, it's not to say that it's, you know, a bleak outlook or anything for smaller companies. I think the reason why you've seen that index coming up is because, you know, in interest rates are coming down and therefore in a market where the economy is getting stronger, you know, smaller companies should benefit as well. It's just there are no companies um that are able to lead and be you know leaders in their particular sectors like we see in the large indices. Uh I like talking to you because your company Granite Shares has a whole suite of ETFs that if you just take a look at the volume it could be a proxy for the entire market when it comes to sentiment. So let's start with the equities first. You have commodity ETFs and equity ETFs uh long and short for various takers. I'm just curious uh will which of your products have gained the most traction in the last couple of months when it comes to investor interest volume sentiment or both? So you've got here for example Apple long um and AMD long uh Alibaba you've got Coinbase um Meta so Mara now I I see you've added that um and then on the commodity side there's uh gold of course uh and uh you have other things including um platinum and the Bloomberg commodity broad strategy. So yeah, I'll let you just, you know, help us out here by telling us what in your product suite has been more most interesting for investors so far. I I think it's really three things. So let's start with gold. And you know, although that's one of our oldest products, gold, as we know, has soared to all-time highs again or certainly near all-time highs. And if you think about a de facto investment to the dollar or a de facto alternative to the dollar, I think gold has become that. And you know, we see the reserves of gold, I mean, in terms of uh central bank reserves and held assets um now surpass the euro. So that you really I think cementss gold's position as the de facto alternative to the dollar. And with markets going higher all the time, you get some people uh looking for a diversification play and gold's been it. So gold has definitely been a big one for us. Our leveraged and inverse single stock offering that you mentioned some of those stocks there that continues to be super popular. Um because this is a market where yes, directionally we're going up in terms of the broad index, but we're going up in a nonlinear fashion as always is the case. And so stocks exhibit some big volatility within that moves down to up and people are looking to to trade those by using leverage single stock ETFs on the short side and the long side. And then the last thing I mentioned is that um within that volatility, we have a huge amount of interest in a product range that we have called yield boost, which are options based ETFs designed to create very high uh levels of income or yield and those convert volatility into income, if you will. So by selling options you generate high yields and when we say high yields we're talking about a range of say 50% peranom on the low side to 180% peranom on the high side and so this is creating a lot of interest from investors who are looking to a generate income and do so on a weekly basis. If you were to make a case for why volatility will return in the last quarter I know we've talked about staying in the long side. What would that case be? I mean, I think it could be a number of things, David, but you've got geopolitical concerns, which, you know, to some degree, given how crazy the state of the world is, um, seem to be put on a back burner. Um, but they could flare up at any point. You have inflation data that I I mentioned is being, you know, held in check by the market, meaning that inflation, official inflation is higher than where the Fed wants it to be, but it's not high enough where it's causing a problem for the market. But clearly any sort of resurgence in inflation would be a problem and particularly uh anything on a lagging basis. And then ultimately you've got the the Federal Reserve and again while everyone expects the Federal Reserve to cut rates uh they could disappoint in terms of not cutting enough um or delaying a cut uh beyond market expectations. So there there just a a small example or small few examples of things that could happen um that could certainly bring more volatility to the market. The fact that gold has risen to above $3,600 and actually we're talking today on the 15th of September it's at $3,700. You know closing in on $4,000. I remember when I was talking to you a couple of years ago when I first started interviewing you $4,000 forecast were seen as crazy and now we're $300 away, less than 10% away. uh it's not so crazy anymore. The fact that it's run up so high, is that a precursor to higher inflation as gold has seen by some has been seen by some as an leading indicator for inflation expectations or do you think it's a an indicator for more volatility in the stock markets? War perhaps is another theory or perhaps it's responding to something that's already happened and not leading anything in particular. Why do you think it's gone up? Well, I think if I go back to the start of my career where, you know, in London and this is still the center of the the world's gold market that many people who have now since retired from the business, but at that time, you know, people that were had been involved in the gold market their entire lives couldn't foresee a day when gold would trade over $1,000 an ounce. And I think part of the reason for that was that, you know, gold had been, you know, really cast aside as an asset in the world of sort of modern monetary theories, new economic experiments that were being conducted. And if you think about gold's status at that time, you know, nobody talked about gold. It wasn't something that investors had exposure to. Central banks weren't buying gold. they were selling gold uh in large amounts and you know the dollar was just absolutely dominant in terms of a global currency and there was no perceived need for any alternative. Um debt levels from governments as well at that time were obviously way more contained um than they are today. So fast forward 25 26 years or whatever and you have a completely different world and you have a world now where you know government debt is the highest that it's ever been on a global basis. You have a situation where there is now some competition to the US dollar genuine competition and not just from traditional currencies but I think the number one competitor is actually gold itself. Um you've had the rise of Bitcoin, cryptocurrencies more broadly, but Bitcoin in of itself, the main argument for holding Bitcoin is another sort of de facto alternative to dollar argument. And you know, all this put together means that gold status today is just completely different than it was, you know, 25 25 years ago. Central banks are buyers of gold today, not sellers. Investors are buying gold. you know, this is a mainstream asset to be held in a portfolio. 25 years ago, you were a fringe, you know, investor to say the least if you had exposure to gold. Um, now this is mainstream. This is not taboo anymore. And it's only increasing with the need for diversification and the need to find alternatives to stocks and bonds. What roughly is an appropriate allocation to gold in a modern portfolio in 2025? I mean first the first answer is that it's going to be different for everybody but I think the first thing is it needs to be significant to your portfolio meaning mathematically significant. In other words, if you got 1% then you know gold has to move in a in a massive way for it to mathematically do anything to the value of the rest of the 99% in your portfolio. So that means you need to hold a mathematically significant number. Now, that could be sort of 5%ish on the lower end or it could be north of 10% the higher. That will depend on your individual circumstance. But I think the most important point is if you're buying gold, then it needs to like any asset in the portfolio, it needs to have some significance. I see. And um can you make the same macro argument for why Bitcoin has run up to new all-time highs as well, surpassing $110, $115,000 as we're speaking today? I can because in a different way it's a similar story. Now I'm not going to say that Bitcoin is the de facto alternative to the dollar because clearly that's that's not the case. But the argument for buying it for some people and I would argue the majority of people is very similar. In other words, people want an alternative to mainstream assets namely stocks and bonds and obviously currencies as well. And moreover a asset class that has a finite supply and in terms of demand um the future demand is you know people can model it out at different different rates but you know the net result is there is expected to be more demand than there is supply but I think it's that you know scarcity factor which attracts people the idea that it's not stocks it's not bonds and it's not the US dollar and something that is independent to that and again not managed by a central authority like a central bank or or a government. Is there a reason um I want to finish off on your Bitcoin and gold forecast uh towards the end of the interview so stay tuned for that but is there a reason um correct me if I'm wrong uh if that that shares hasn't released a Bitcoin ETF yet? We don't have a Bitcoin ETF directly. The only reason why is because that was a race that um just was dominated by so many large firms and we didn't feel like we had an edge in terms of providing just vanilla Bitcoin. We have a number of adjacent investments where we provide for example leveraged exposure to Coinbase to other um crypto stocks like Micro Strategy or Strategy B now in the ecosystem. So we have that on the leverage single stock side. And on the yield boost side, we have um yield assets or options based ETFs that are linked to crypto companies like Coinbase as well. So very very high yielding opportunities in Bitcoin. So we don't have the plain vanilla, but we have a lot of adjacent sort of ecosystem investments. Uh you have long uh and short for example u MSTR two times short, two times long. Have the long products or short products been more popular or interesting from investors of late? The the the long products are always more popular and it's not just because markets at all-time highs. It's because I think philosophically um investors just think about investing more in terms of buying something low and ultimately selling something high. It just I think feels more intuitive than buying something and hoping the price goes down. So you always get more interest in aggregate in the long than the short. But that being said, you know, there are certain shorts, Tesla for example, that will always attract uh a lot of interest on the short side. So irrespective of what the market's doing. So let's go back to the volatility story. when volatility does come, I'm not saying it will, but you know, at some point, when it does return, um what should investors be doing? So, walk us through the yield product one more time and then maybe describe to us some other products or some other asset classes that have historically done well when there's been a lot of market volatility for the equities. Yeah. So, the the yield products work off of options. So they sell options to generate yield and buy options to provide some downside protection. And if you think about what options really are, they're proxies for volatility. So if you think of volatility as an asset class, if you sell an asset when it's high, then you generate more money than selling when it's low. And so with an increase in volatility, that typically means that you have an increase in what's called implied volatility of the options and therefore the principle and the yields that are paid out or the principle that's paid out. So options products can do well in volatile environments because typically that means that the yields are high and that's one of the things where it's attractive to people because they're just buy and hold products that will generate weekly income um and sort of almost irrespective of what the market's doing. If volatility is there then you'll get the potential for for high payouts. I think if you look at just asset classes or or ETFs more broadly that can do well when you have volatile environments as you talked about gold has been one of those for for the longest of time and I think we'll continue to to play that role and then the the short ETFs to the extent that um people are looking to hedge certain aspects of the portfolio that's something to maybe consider in terms of providing some some hedging activity for the portfolio. I've noticed that uh the product the option product or one of them sells put options but doesn't sell calls. Can you explain that? Yeah, so selling calls and the sort of covered call concept uh has been very popular but when you sell a call option typically those strategies do not have any protection for the downside. So the trade-off is you sell a call which is against typically a growth stock and while it generates income you have 100% exposure the downside. So you might get some good income but those products can suffer nav erosion sort of over time. Whereas with yield boost you sell a put so economically you get similar exposure but we think there's more value in selling a put than a call. And by buying a put, you generate some downside protection as well if the underlying drops in value. So the the idea is to provide high yields, but at the same time provide some downside protection. Uh well, what's um what's something that the Trump administration or just you know the government has done this year so far that maybe has surprised you and were other market participants and um maybe moved in a direction that you haven't anticipated? Well, I think the tariffs um situation was something that surprised not just us, but surprised everybody um in terms of the severity of the tariff and perhaps the the the seemingly erratic nature of the tariff discussions in the first half of this year. Um and so that's something that I think again, you know, continues to play out in its own way. It's just that the noise signal from tariffs has gotten uh quieter, you know, with every month that passes. But we see some news today that we might be close now to a deal with China. But all of that could blow up again, you know, if China walks away from the table. Um, and you know, certain tariff deals fall out of bed. So, at the moment, I think the administration's making the progress that that they want and that's reflected in the market in terms of where stocks are today. But again, all of that can change with almost one one tweet or one announcement. As an investor, how do you prepare for uncertainty? I'm not talking about volatility. I'm talking about uncertainty. Could be on the upside or downside. Like you said, policy changes surrounding trade and tariffs happen all the time. And we still have unresolved conflicts in the Middle East and Ukraine. I I I think look, the only way really is twofold. Either you ignore it and you just buy the dip or you're just exposed to the market and time is your friend or you have to diversify and you have to have hedges in your portfolio that can provide some protection uh if the market sells off or if there's some kind of event. So there's really the only the only two ways other than not participating in the market at all. Um but I think it boils down to that. Okay, good. Uh well, what uh I'll finish off on this. $3,700 gold, $115,000 Bitcoin. If you had to take out your crystal ball and place a number on it, where would the uh where would these numbers head by the end of the year, early next year? Well, I think certainly let's let's talk about gold first. Um, you know, maybe maybe $4,000 is maybe too much uh in terms of this year, but um certainly $4,000 gold I think um is certainly achievable given the runup that we've had and given the reasons I think for for holding gold at this level. Bitcoin is is is just one of those things where I just don't really I I don't have any sort of crystal ball on that front. Um because you know once you have a situation where you know you believe that Bitcoin and at the end of the day it's an asset with no intrinsic value is worth something other than zero the number could be anything. And I think there's certainly good logic to suggest that um if you have more buyers than sellers then you'll have a price that will continue to go up albeit with a lot of volatility. But, you know, we've had what, two or three crypto winters so far. And, you know, if we get a recession or if we get, you know, bad economic news, a selloff, you know, that could affect Bitcoin as well. But I think, you know, if things sort of stay the way they are, in other words, the the attitude for both people on the gold side and the Bitcoin side, I think we see a higher price on the Bitcoin side and a higher price on the gold side. Well, given that, you know, like you said, Bitcoin could be any number. Um what we can do is take a look at proxies. So one proxy that people has used or have used for for the Bitcoin price is the NASDAQ index. I'm looking at my screen right now. The Bitcoin price is shown here in the bar chart and the NASDAQ is in the purple line. And as you can see just over the last I'm just taking one year but over the longer time horizon too there there's been a bit of a correlation there. Um can we assume two part question that this correlation will hold until next year? And if so, can we just use your outlook for tech stocks as a proxy for where Bitcoin may be headed? I think you can use it in the sense of the reason why there's a correlation is because Bitcoin is fundamentally a risk asset versus gold is a riskoff asset. So if you trade with risk, you're going to be highly correlated to other risk assets. NASDAQ being one, you know, tech stocks obviously being a component of the NASDAQ. So in a world where you have higher tech stocks or higher NASDAQ then you see I think at the same time higher bitcoin prices. Well thank you very much. Uh where can we stay up to date with you and granite shares? Yeah please come to the website if anybody's got any questions on granwiches.com and otherwise it's graniteshares onx is probably the main way to find us. Okay. We'll put the links down below so make sure to follow will there. Thanks again. We'll speak again soon. Thanks for coming back. Thanks David. Always a pleasure to see you. Thank you and thanks for watching. Don't forget to like and subscribe. Follow Granite Shares and Will in the links down below.
‘Blow Up’ Volatility: Could China Trigger Q4 Market Chaos? | Will Rhind
Summary
Transcript
the number one competitor is actually gold itself. Um, you've had the rise of Bitcoin, people want an alternative to mainstream assets. If China walks away from the table, that's reflected in the market in terms of where stocks are today. But again, all of that can change with almost one one tweet or one announcement. Or do you think it's a an indicator for more volatility in the stock markets war perhaps? Well, I think we're joined today by Will Ryan, CEO and founder of Granite Shares. There's a lot of interesting developments happening in the markets and Granite Shares has a lot of ETFs that cover all corners of the markets including precious metals, stocks and now a play on volatility itself. We'll talk about whether or not volatility is coming for the fourth quarter. Welcome to the show will good to see you again. Good to see you David. Always a pleasure. Let's just start with that volatility. Before we get into the products themselves, uh volatility is a theme that has somewhat disappeared in the last couple of months given how high everything's gone. And so usually when things are booming and moving up, there's less volatility. But we mustn't forget that liberation day happened in April, there was a massive correction in uh the beginning of August for a lot of commodities before they were rebounding. So there is still volatility to the downside and upside. It's just that throughout the Trump presidency in terms one and I guess the first year of term two, things have rebounded after a dip. Is that kind of the theme for the rest of the Trump presidency? You think you think just buying the dip is that going to keep working? Yeah, I mean I think it's um not necessarily the theme of this Trump presidency, but the last few years um that's been a trade that's worked. I mean, one thing we know is that uh the volatility comes with the territory. And you know, in terms of whether it's trade wars, um whether it's tariffs, whether it's uh you know, Federal Federal Reserve, etc., there's always room for um some kind of volatility, some kind of sort of shakeup um as this administration does things in a in a very unconventional way. What do you think should be the key data points that investors should watch for the remainder remainder of 2025? I think it's still comes down to the inflation numbers. Um because that that's really tied into whether we get a rate cut and not just whether we get a rate cut, how many rate cuts, severity of that coming into year end. I was going to say the the jobs data, but I think that's now um you know pretty firmed up and I don't think that that will necessarily be any there'll be any new news on that front. You know there was a significant revision. I think the labor market, you know, clearly is softening. So, it's really now the I think the the data on the inflation side is kind of the key thing here. This is an article uh published by Fortune magazine. The Fed desperately wants to avoid a recession because it doesn't want to get blamed and put its independence at risk. Now, we're speaking right ahead of the Fed meeting uh this week. It's expected that they'll be cutting rates uh at least 25 basis points. I think the Federal Reserve desperately wants to avoid that kind of outcome. He said uh says Mark Xandy of Moody's Analytics. Uh obviously nobody wants a recession but also in the context of Fed dependence they really don't want to get blamed for going into a downturn because that would impair their ability. Uh perhaps the jobs numbers show that we are already in a recession says uh Mr. Danny from Moody's. What do you think? I wouldn't go that far. um that I understand the the point on that, but I I find it still difficult to to use that argument or to to really give that argument much merit given that we're at all-time highs in the market and other asset classes. Although the labor market is suffering softening, we still got employment at or near, you know, highs. um inflation is sort of in check at least as far as the market is concerned and interest rates sort of coming down. Growth is growth is good. So it's difficult to say we're in a recession at the moment but I understand the logic around softening labor numbers being you know a potential canary in the coal mine that you know not everything is is going great. Well on the subject of inflation since you said inflation should be one of the most important things people are watching. Trump tariffs are fueling inflation, says the chief of the congressional budget office, Philip Swaggel. Uh he said that $3.3 trillion of revenue and then $700 billion of averted debt costs. That would be a big reversal in terms of the deficit in terms when he's talking about the projection. Uh but um yeah, they're they're pinning the uh rising inflation as you know 2.9% was the latest number up from 2.7% the month before. the uh the Congressional Budget Office is pinning inflation on tariffs. Um what do you think? Is this is this political or are they right? Um I I just think the topic of inflation and tariffs is hugely complicated and people want there to be a simple answer to it. In other words, do tariffs cause inflation? Yes or no? And while the simple answer, you know, is always the most attractive, I think what we found out is this is a hugely complicated question. And the answer is not uh uniform across the board. There are some sectors of the of the market, some industries where uh I think there's no doubt that tariff policy will or has caused inflation and then there are others where it hasn't and will not and almost have the opposite effect. And so again, I think it's going to be very specific. Well, the bullish argument for the remainder of the year is that as the Fed now is turning into an easing cycle, uh even though inflation is still hot, but the labor numbers are weak. That's why they're easing. We should stay long uh because we don't know how many times exactly that they're going to ease. Morgan Stanley has three times by the end of the year. Uh we just know that they're going to start easing and so it we shouldn't be fighting the Fed. Stay long, perhaps even leverage up on the long side. Does that thesis make sense to you? I think that's where I'm at. between now and the end of the year. Um, you know, again, I think laying out the points for why the market is in is in good shape and clearly the market's reacting positively to statements by the Fed chair, the Fed more broadly that um they're ready to start cutting rates. It's just a question now of of how many rate cuts we get um between now and year end. And clearly the data on the labor market side perhaps is leaning to more cuts um or deeper cuts than we had suspected a month ago. So I I'm inclined to to go with that view that um the data seems good. And again going back to fundamentals here, you know, we've got to remember that um companies particularly large tech companies that make up the bulk of the major stock market index um you know have reported very strong earnings this year. And that again you know the growth we saw of Oracle even last week projected forward growth is incredibly strong. So propelling the market higher. Well the uh large tech companies especially the ones in the um uh NASDAQ and the S&P 500 have performed well this year like you mentioned. However, if I'm looking on the screen here and I want to share um my screen with you. Here we go. This is my This is my screen where I show the S&P 500 versus the Russell. Uh the Russell here is uh the bar chart and the pink or purple line here is the S&P 500. On a year-to-ate basis, the S&P has still been outperforming. On a one-year basis, it's been outperforming. And actually, on a 5-year basis, it's been outperforming. Um people have been talking about this theme for a while. how the major uh stocks in the index have been the mag sevens have been lifting up the entire index and to some extent the entire index is overvalued but if you actually look at the uh the rest of the market the midcaps and the small caps that's more reflective of actual economic growth so which is true that the large caps are overvalued or the small caps are undervalued I mean they're both true but for very different reasons um you know I think when you let's talk about the small caps first you know in a in a market where you have still high interest rates from a historical perspective. That smaller companies are more sensitive to interest rates than large companies and particularly the large tech companies where interest rates are really not necessarily a factor that influences you know their sort of forward valuation and their businesses overall. the Russell I think I believe around a third of the companies in the Russell um are actually not profitable and are very sensitive to to rates more broadly given the amount of debt levels that are carried by that group. So I think it's again it's a it's less about the the entire market as a whole and it's more about good quality companies versus bad companies and that happens in large caps as well as in small caps. There's no doubt that your large caps have been the place to be. Those are the companies, those the largest tech companies. They're the ones that are benefit benefiting most from AI, from crypto, etc. And smaller companies, it's not to say that it's, you know, a bleak outlook or anything for smaller companies. I think the reason why you've seen that index coming up is because, you know, in interest rates are coming down and therefore in a market where the economy is getting stronger, you know, smaller companies should benefit as well. It's just there are no companies um that are able to lead and be you know leaders in their particular sectors like we see in the large indices. Uh I like talking to you because your company Granite Shares has a whole suite of ETFs that if you just take a look at the volume it could be a proxy for the entire market when it comes to sentiment. So let's start with the equities first. You have commodity ETFs and equity ETFs uh long and short for various takers. I'm just curious uh will which of your products have gained the most traction in the last couple of months when it comes to investor interest volume sentiment or both? So you've got here for example Apple long um and AMD long uh Alibaba you've got Coinbase um Meta so Mara now I I see you've added that um and then on the commodity side there's uh gold of course uh and uh you have other things including um platinum and the Bloomberg commodity broad strategy. So yeah, I'll let you just, you know, help us out here by telling us what in your product suite has been more most interesting for investors so far. I I think it's really three things. So let's start with gold. And you know, although that's one of our oldest products, gold, as we know, has soared to all-time highs again or certainly near all-time highs. And if you think about a de facto investment to the dollar or a de facto alternative to the dollar, I think gold has become that. And you know, we see the reserves of gold, I mean, in terms of uh central bank reserves and held assets um now surpass the euro. So that you really I think cementss gold's position as the de facto alternative to the dollar. And with markets going higher all the time, you get some people uh looking for a diversification play and gold's been it. So gold has definitely been a big one for us. Our leveraged and inverse single stock offering that you mentioned some of those stocks there that continues to be super popular. Um because this is a market where yes, directionally we're going up in terms of the broad index, but we're going up in a nonlinear fashion as always is the case. And so stocks exhibit some big volatility within that moves down to up and people are looking to to trade those by using leverage single stock ETFs on the short side and the long side. And then the last thing I mentioned is that um within that volatility, we have a huge amount of interest in a product range that we have called yield boost, which are options based ETFs designed to create very high uh levels of income or yield and those convert volatility into income, if you will. So by selling options you generate high yields and when we say high yields we're talking about a range of say 50% peranom on the low side to 180% peranom on the high side and so this is creating a lot of interest from investors who are looking to a generate income and do so on a weekly basis. If you were to make a case for why volatility will return in the last quarter I know we've talked about staying in the long side. What would that case be? I mean, I think it could be a number of things, David, but you've got geopolitical concerns, which, you know, to some degree, given how crazy the state of the world is, um, seem to be put on a back burner. Um, but they could flare up at any point. You have inflation data that I I mentioned is being, you know, held in check by the market, meaning that inflation, official inflation is higher than where the Fed wants it to be, but it's not high enough where it's causing a problem for the market. But clearly any sort of resurgence in inflation would be a problem and particularly uh anything on a lagging basis. And then ultimately you've got the the Federal Reserve and again while everyone expects the Federal Reserve to cut rates uh they could disappoint in terms of not cutting enough um or delaying a cut uh beyond market expectations. So there there just a a small example or small few examples of things that could happen um that could certainly bring more volatility to the market. The fact that gold has risen to above $3,600 and actually we're talking today on the 15th of September it's at $3,700. You know closing in on $4,000. I remember when I was talking to you a couple of years ago when I first started interviewing you $4,000 forecast were seen as crazy and now we're $300 away, less than 10% away. uh it's not so crazy anymore. The fact that it's run up so high, is that a precursor to higher inflation as gold has seen by some has been seen by some as an leading indicator for inflation expectations or do you think it's a an indicator for more volatility in the stock markets? War perhaps is another theory or perhaps it's responding to something that's already happened and not leading anything in particular. Why do you think it's gone up? Well, I think if I go back to the start of my career where, you know, in London and this is still the center of the the world's gold market that many people who have now since retired from the business, but at that time, you know, people that were had been involved in the gold market their entire lives couldn't foresee a day when gold would trade over $1,000 an ounce. And I think part of the reason for that was that, you know, gold had been, you know, really cast aside as an asset in the world of sort of modern monetary theories, new economic experiments that were being conducted. And if you think about gold's status at that time, you know, nobody talked about gold. It wasn't something that investors had exposure to. Central banks weren't buying gold. they were selling gold uh in large amounts and you know the dollar was just absolutely dominant in terms of a global currency and there was no perceived need for any alternative. Um debt levels from governments as well at that time were obviously way more contained um than they are today. So fast forward 25 26 years or whatever and you have a completely different world and you have a world now where you know government debt is the highest that it's ever been on a global basis. You have a situation where there is now some competition to the US dollar genuine competition and not just from traditional currencies but I think the number one competitor is actually gold itself. Um you've had the rise of Bitcoin, cryptocurrencies more broadly, but Bitcoin in of itself, the main argument for holding Bitcoin is another sort of de facto alternative to dollar argument. And you know, all this put together means that gold status today is just completely different than it was, you know, 25 25 years ago. Central banks are buyers of gold today, not sellers. Investors are buying gold. you know, this is a mainstream asset to be held in a portfolio. 25 years ago, you were a fringe, you know, investor to say the least if you had exposure to gold. Um, now this is mainstream. This is not taboo anymore. And it's only increasing with the need for diversification and the need to find alternatives to stocks and bonds. What roughly is an appropriate allocation to gold in a modern portfolio in 2025? I mean first the first answer is that it's going to be different for everybody but I think the first thing is it needs to be significant to your portfolio meaning mathematically significant. In other words, if you got 1% then you know gold has to move in a in a massive way for it to mathematically do anything to the value of the rest of the 99% in your portfolio. So that means you need to hold a mathematically significant number. Now, that could be sort of 5%ish on the lower end or it could be north of 10% the higher. That will depend on your individual circumstance. But I think the most important point is if you're buying gold, then it needs to like any asset in the portfolio, it needs to have some significance. I see. And um can you make the same macro argument for why Bitcoin has run up to new all-time highs as well, surpassing $110, $115,000 as we're speaking today? I can because in a different way it's a similar story. Now I'm not going to say that Bitcoin is the de facto alternative to the dollar because clearly that's that's not the case. But the argument for buying it for some people and I would argue the majority of people is very similar. In other words, people want an alternative to mainstream assets namely stocks and bonds and obviously currencies as well. And moreover a asset class that has a finite supply and in terms of demand um the future demand is you know people can model it out at different different rates but you know the net result is there is expected to be more demand than there is supply but I think it's that you know scarcity factor which attracts people the idea that it's not stocks it's not bonds and it's not the US dollar and something that is independent to that and again not managed by a central authority like a central bank or or a government. Is there a reason um I want to finish off on your Bitcoin and gold forecast uh towards the end of the interview so stay tuned for that but is there a reason um correct me if I'm wrong uh if that that shares hasn't released a Bitcoin ETF yet? We don't have a Bitcoin ETF directly. The only reason why is because that was a race that um just was dominated by so many large firms and we didn't feel like we had an edge in terms of providing just vanilla Bitcoin. We have a number of adjacent investments where we provide for example leveraged exposure to Coinbase to other um crypto stocks like Micro Strategy or Strategy B now in the ecosystem. So we have that on the leverage single stock side. And on the yield boost side, we have um yield assets or options based ETFs that are linked to crypto companies like Coinbase as well. So very very high yielding opportunities in Bitcoin. So we don't have the plain vanilla, but we have a lot of adjacent sort of ecosystem investments. Uh you have long uh and short for example u MSTR two times short, two times long. Have the long products or short products been more popular or interesting from investors of late? The the the long products are always more popular and it's not just because markets at all-time highs. It's because I think philosophically um investors just think about investing more in terms of buying something low and ultimately selling something high. It just I think feels more intuitive than buying something and hoping the price goes down. So you always get more interest in aggregate in the long than the short. But that being said, you know, there are certain shorts, Tesla for example, that will always attract uh a lot of interest on the short side. So irrespective of what the market's doing. So let's go back to the volatility story. when volatility does come, I'm not saying it will, but you know, at some point, when it does return, um what should investors be doing? So, walk us through the yield product one more time and then maybe describe to us some other products or some other asset classes that have historically done well when there's been a lot of market volatility for the equities. Yeah. So, the the yield products work off of options. So they sell options to generate yield and buy options to provide some downside protection. And if you think about what options really are, they're proxies for volatility. So if you think of volatility as an asset class, if you sell an asset when it's high, then you generate more money than selling when it's low. And so with an increase in volatility, that typically means that you have an increase in what's called implied volatility of the options and therefore the principle and the yields that are paid out or the principle that's paid out. So options products can do well in volatile environments because typically that means that the yields are high and that's one of the things where it's attractive to people because they're just buy and hold products that will generate weekly income um and sort of almost irrespective of what the market's doing. If volatility is there then you'll get the potential for for high payouts. I think if you look at just asset classes or or ETFs more broadly that can do well when you have volatile environments as you talked about gold has been one of those for for the longest of time and I think we'll continue to to play that role and then the the short ETFs to the extent that um people are looking to hedge certain aspects of the portfolio that's something to maybe consider in terms of providing some some hedging activity for the portfolio. I've noticed that uh the product the option product or one of them sells put options but doesn't sell calls. Can you explain that? Yeah, so selling calls and the sort of covered call concept uh has been very popular but when you sell a call option typically those strategies do not have any protection for the downside. So the trade-off is you sell a call which is against typically a growth stock and while it generates income you have 100% exposure the downside. So you might get some good income but those products can suffer nav erosion sort of over time. Whereas with yield boost you sell a put so economically you get similar exposure but we think there's more value in selling a put than a call. And by buying a put, you generate some downside protection as well if the underlying drops in value. So the the idea is to provide high yields, but at the same time provide some downside protection. Uh well, what's um what's something that the Trump administration or just you know the government has done this year so far that maybe has surprised you and were other market participants and um maybe moved in a direction that you haven't anticipated? Well, I think the tariffs um situation was something that surprised not just us, but surprised everybody um in terms of the severity of the tariff and perhaps the the the seemingly erratic nature of the tariff discussions in the first half of this year. Um and so that's something that I think again, you know, continues to play out in its own way. It's just that the noise signal from tariffs has gotten uh quieter, you know, with every month that passes. But we see some news today that we might be close now to a deal with China. But all of that could blow up again, you know, if China walks away from the table. Um, and you know, certain tariff deals fall out of bed. So, at the moment, I think the administration's making the progress that that they want and that's reflected in the market in terms of where stocks are today. But again, all of that can change with almost one one tweet or one announcement. As an investor, how do you prepare for uncertainty? I'm not talking about volatility. I'm talking about uncertainty. Could be on the upside or downside. Like you said, policy changes surrounding trade and tariffs happen all the time. And we still have unresolved conflicts in the Middle East and Ukraine. I I I think look, the only way really is twofold. Either you ignore it and you just buy the dip or you're just exposed to the market and time is your friend or you have to diversify and you have to have hedges in your portfolio that can provide some protection uh if the market sells off or if there's some kind of event. So there's really the only the only two ways other than not participating in the market at all. Um but I think it boils down to that. Okay, good. Uh well, what uh I'll finish off on this. $3,700 gold, $115,000 Bitcoin. If you had to take out your crystal ball and place a number on it, where would the uh where would these numbers head by the end of the year, early next year? Well, I think certainly let's let's talk about gold first. Um, you know, maybe maybe $4,000 is maybe too much uh in terms of this year, but um certainly $4,000 gold I think um is certainly achievable given the runup that we've had and given the reasons I think for for holding gold at this level. Bitcoin is is is just one of those things where I just don't really I I don't have any sort of crystal ball on that front. Um because you know once you have a situation where you know you believe that Bitcoin and at the end of the day it's an asset with no intrinsic value is worth something other than zero the number could be anything. And I think there's certainly good logic to suggest that um if you have more buyers than sellers then you'll have a price that will continue to go up albeit with a lot of volatility. But, you know, we've had what, two or three crypto winters so far. And, you know, if we get a recession or if we get, you know, bad economic news, a selloff, you know, that could affect Bitcoin as well. But I think, you know, if things sort of stay the way they are, in other words, the the attitude for both people on the gold side and the Bitcoin side, I think we see a higher price on the Bitcoin side and a higher price on the gold side. Well, given that, you know, like you said, Bitcoin could be any number. Um what we can do is take a look at proxies. So one proxy that people has used or have used for for the Bitcoin price is the NASDAQ index. I'm looking at my screen right now. The Bitcoin price is shown here in the bar chart and the NASDAQ is in the purple line. And as you can see just over the last I'm just taking one year but over the longer time horizon too there there's been a bit of a correlation there. Um can we assume two part question that this correlation will hold until next year? And if so, can we just use your outlook for tech stocks as a proxy for where Bitcoin may be headed? I think you can use it in the sense of the reason why there's a correlation is because Bitcoin is fundamentally a risk asset versus gold is a riskoff asset. So if you trade with risk, you're going to be highly correlated to other risk assets. NASDAQ being one, you know, tech stocks obviously being a component of the NASDAQ. So in a world where you have higher tech stocks or higher NASDAQ then you see I think at the same time higher bitcoin prices. Well thank you very much. Uh where can we stay up to date with you and granite shares? Yeah please come to the website if anybody's got any questions on granwiches.com and otherwise it's graniteshares onx is probably the main way to find us. Okay. We'll put the links down below so make sure to follow will there. Thanks again. We'll speak again soon. Thanks for coming back. Thanks David. Always a pleasure to see you. Thank you and thanks for watching. Don't forget to like and subscribe. Follow Granite Shares and Will in the links down below.