Kris’ note: It’s easy to underestimate their influence…
But they are among the most traded assets on the stock exchange.
They are so large, that the top four of these, if they were individual companies, would rank the 17th, 22nd, 25th, and 26th largest in the U.S.
Today, the largest of these is second only to Tesla (TSLA) in terms of the total value traded.
That’s no mean feat.
We are, of course, talking about exchange-traded funds (ETFs).
The successor to the mutual fund, ETFs offer diversification and low costs, both in terms of trading and management fees. Plus, their value fluctuates based on market supply and demand, meaning they trade much like stocks.
Yet, as an investment, it’s hard to get excited about ETFs.
There isn’t really anything unique about them… they generally don’t have an exciting story to tell… and it’s hard (impossible, even) to develop an emotional attachment to them.
But they are arguably among the most important and, again, the most traded assets on any given day.
In fact, the top four ETFs have a combined market capitalization of around $1.3 trillion. By comparison, market darling Nvidia (NVDA) has a market cap of $1.2 trillion.
It’s for these reasons and others that colleague Teeka Tiwari is so bullish about the impending launch of the world’s first bitcoin ETF, and an opportunity that could be even bigger than that.
In today’s guest essay, Teeka explains what it will mean for investors today. It’s an exciting insight. Take a look below.
First, let’s check in on today’s market action…
Market Data
The S&P 500 closed down 0.1% to end the day at 4,550.64… the Nasdaq fell 0.2% to close at 14,258.49.
For individual stocks, Microsoft closed down 1% to $378.85… Apple ended lower by 0.5% at $189.37… and Tesla ended the day at $244.14, a 1.1% drop.
In commodities, today’s prices and the gain or fall over yesterday, West Texas Intermediate crude oil trades at $77.75, up $1.34… gold is $2,066.10 per troy ounce, a $24 gain… and bitcoin is $37,725, down $406 from yesterday.
Without further ado, here’s Teeka …
On November 18, 2004, the U.S. Securities and Exchange Commission (SEC) made a big announcement.
It approved the world’s first gold ETF.
ETFs are investment funds that we trade on stock exchanges. They provide investors with an easy way to invest in an index, sector, commodity, or other asset.
By the end of that year, the fund was worth $1.3 billion… Seven years later, it had become the world’s largest ETF.
Like other ETFs, GLD is a security that trades like a stock. The fund’s goal was to expose more people to gold ownership.
It was an immediate hit…
By the end of 2004, it had already accumulated $1.3 billion in assets. That was just the beginning.
By year-end 2005, it had accumulated $4.3 billion in assets. By 2006, it climbed to $9.3 billion. And it would go on to top $84 billion in assets in August 2020.
In fact, the gold ETF became the world’s largest private owner of gold bullion.
And gold prices followed. From $442 at the launch of the ETF, gold rose 89% and stood at $834 by the end of 2007.
What’s interesting is that the majority of participants in the gold ETF had never bought gold before.
It’s estimated that 60–80% of GLD buyers were new to gold.
GLD’s success shows you the impact regulatory approval can have on an asset.
I’m telling you this because we’re seeing a similar situation play out in bitcoin. Just like GLD, it will send a flood of money and new investors into bitcoin.
Before I get to it, let me show you why ETFs act as railways that funnel billions of dollars into an asset class…
The Railway to Trillions of Dollars in Capital
Today, there are roughly $8.1 trillion in assets held in ETFs. The ETF market has grown to this size for two simple reasons:
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They’re cheap: The average equity ETF has a fee of just 0.16% compared to stock mutual funds averaging 0.47%, according to ETF.com.
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They give investors easy access to assets: ETFs give you exposure to entire industries and asset classes. For instance, you can buy ETFs that give you exposure to tech companies or banks… or other asset classes like commodities or precious metals.
You can think of ETFs as a railway system into the financial world. And Wall Street announced it was building one of these “railways” for crypto on June 15.
That’s when BlackRock – the world’s largest asset manager, with almost $10 trillion under management – stunned the world by filing for a bitcoin (BTC) spot ETF.
Unlike previous bitcoin ETF applications, this filing went to great lengths to appease the SEC’s concerns over manipulation in the spot BTC market.
When we look back on this period in crypto history, we’ll see that the BlackRock filing will have marked the end of the bear market and the beginning of the bull market.
It all has to do with gaining easy access to the asset…
Once the SEC approves the BlackRock bitcoin ETF – and I believe it’s a matter of “when” and not “if” – millions of investors will be able to own bitcoin without the headaches that come with it.
They won’t have to worry about how they’re going to securely hold the asset… or about the fear of losing their nest egg if they accidentally send it to the wrong address.
Wall Street knows this. That’s why firms like BlackRock are rushing to securitize crypto assets through ETFs.
And these financial titans aren’t doing this out of the kindness of their hearts. They’re doing it because they’ll rake in billions of dollars in custody fees.
Today, 86 commodity ETFs trade in the U.S. with over $131 billion in assets under management, according to Bloomberg.
Wall Street generates nearly $1 billion each year from commodity ETFs. That’s a handsome fee for simply giving investors easy access to an asset.
Don’t get me wrong… I’ve been pounding the table on the new crypto bull market since BlackRock filed for the bitcoin ETF this summer. This is a huge catalyst for crypto adoption.
But while the mainstream media is focused on the approval of a spot bitcoin ETF… It’s completely missing a trend that could be 150x bigger.
A $100 Trillion Trend
Although a spot bitcoin ETF will be a major boost for this asset class, it will primarily impact bitcoin, which has a market cap of about $720 billion.
But I believe there’s a catalyst coming by the end of this year that could be orders of magnitude bigger than a spot bitcoin ETF.
According to my research, it will unleash a $100 trillion opportunity that I call the Third Wave.
That’s almost four times bigger than the entire U.S. economy. So the Third Wave could be the biggest crypto trend ever.
The First Wave of massive profits came after bitcoin established itself as an asset.
Nothing could kill it… not government regulations… not the traditional financial industry… not malicious actors like hackers.
Bitcoin’s existence paved the way for a new generation of altcoins. So it acted as a “railway” into this asset class.
Once I realized this, I started recommending a series of altcoins in 2016. My readers had a chance to turn $1,000 into as much as $367,000 and $534,000.
The Second Wave started during the depths of the 2018 Crypto Winter. Despite all the price destruction, an entirely new innovation came to market: crypto income generation.
These crypto payouts are similar to stock dividends. However, instead of projects paying out in dollars, these projects paid users in more of the underlying crypto.
Anyone who followed one of my income coin recommendations had a chance to turn $1,000 into almost $55,000. On top of that, they had the chance to collect almost $9,000 in automatic payments.
But I believe this Third Wave will be even bigger. That’s because this new trend is set to transform everything in the markets… stocks, bonds, ETFs, mutual funds, commodities… you name it.
It could impact every single 401(k) and retirement account in the United States. I believe it will even impact your checking and savings account, no matter where you bank.
And the venture that will create this $100 trillion opportunity will launch by the end of the year.
On Wednesday, December 6, at 8 p.m. ET, I’ll tell you what this venture is… and share details about five tokens I believe are best positioned to ride this wave.
I’ll also give you the name of a coin that could potentially 8x your money during the Third Wave… completely free of charge.
Just click here to reserve your seat.
Friends, this event will only happen once. If you wait, you’ll be left out.
All the biggest players on Wall Street have started to move their assets to the technology behind this Third Wave.
But do you think Wall Street is just going to open its doors, roll out the red carpet for you, and welcome you with open arms?
No, it won’t. It doesn’t want the little guy to join in on this. That’s why nobody is talking about it.
Wall Street is greedy. It wants to keep all the profits to itself. But I’m here to kick down the doors – just like I did for my readers during the First and Second Waves of crypto.
So come join me on Wednesday, December 6, at 8 p.m. ET. And let me help you get your piece of the pie.
Let the Game Come to You!
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Big T
P.S. If you haven’t already, I encourage you to upgrade to VIP status for my event now.
As a VIP member, you’ll receive a free bonus: a special report called The $0.50 AI Coin That Could Triple Your Money in 2024.
This coin is part of a new breed of cryptos called artificial intelligence (AI) tokens.
According to consultant firm PwC Global, AI is the largest megatrend of our generation… And it estimates it will create $15.7 trillion in new wealth.
As a VIP, you’ll also receive complimentary text alerts about this event to make sure you don’t miss our strategy session.
To upgrade, it’s very easy and free. Click here to learn more.
Unconnected Dots
Our main task at the Daily Cut is to try to “connect the dots.” That is, we help you figure out what events are about, what makes them important, their consequences, and what it all means for you.
But sometimes, we see the individual “dots,” but can’t yet figure out how they connect to anything. Maybe they never will connect to anything.
Regardless, if those unconnected dots feel as though they could be important, we’ll mention them here. And we’ll let you draw your own conclusions.
Today’s unconnected dots…
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Is this more proof the bull market is back? This report from Bloomberg suggests it could be:
[General Motors (GM)] on Wednesday announced its biggest-ever stock buyback plan – $10 billion in total – as Chief Executive Officer Mary Barra promised better days are ahead. GM also boosted its dividend by 33% and reinstated earnings guidance after accounting for the costs of its new labor contract.
Higher interest rates… A new and expensive labor deal… Fears of higher unemployment. Still, General Motors feels confident enough about the future to hand a whole bunch of cash out to stockholders.
This news of buybacks called to mind something our colleague, Phil Anderson, mentioned in a recent update to his paid subscribers.
His comments were related to U.S. banks, but they’re relevant here too.
He told his subscribers:
Now, as interest rates go up, it allows banks to improve their profits. Now, the worry there sometimes is, of course, it doesn’t necessarily mean higher margins, which the markets worry about sometimes.
But once the banks are more profitable, the first thing they’re going to do is pay their owners, which is the shareholders. So they start doing buybacks. You’ll see HSBC has already started that. A few other banks too.
The buybacks help the owners return capital and increase their earnings. Once that happens, you start to see a bit of a fight for market share from the banks and then they find creative ways to increase lending.
GM isn’t a bank, but it still has to attract investors. GM clearly feels it has to do more to get investors excited about its stock.
Buybacks and a higher dividend are a good way to do that. Earlier today, the stock price was up around 10%. When companies are coming up with ways of helping “juice” the stock price, it likely means a bear market won’t be upon us just yet.
You can find out more on Phil Anderson and his 18.6-year real estate theory – and how it influences stock prices – right here.
More Markets
Today’s top gaining ETFs…
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First Trust NASDAQ Cybersecurity ETF +1.8%
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SPDR S&P Semiconductor ETF +1.5%
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Siren NASDAQ NexGen Economy ETF +1.5%
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Invesco Dorsey Wright Technology Momentum ETF +1.4%
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First Trust Technology AlphaDEX Fund +1.3%
Today’s biggest losing ETFs…
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KraneShares MSCI China Clean Technology ETF -2.4%
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Global X MSCI China Consumer Staples ETF -2.3%
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Global X MSCI China Consumer Discretionary ETF -2.1%
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iShares U.S. Healthcare Providers ETF -1.9%
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First Trust Emerging Markets Small Cap AlphaDEX Fund -1.8%
Mailbag
If you have any questions or comments for our experts here at Legacy Research, we’d love to hear from you.
Write to us at [email protected] and just type “Daily Cut mailbag” in the subject line.
Cheers,
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Kris Sayce
Editor, The Daily Cut