AI Makeup, Genetic Analysis for Obesity, and Targeted Soundbeams

Plus our first look at the new Bitwise spot bitcoin ETF

Ric Edelman: It's Thursday, January 11th and it is a very big day for the investment community. It is the introduction of the new spot bitcoin ETFs. I'm sure you heard that yesterday. The SEC granted approval for the launch of these products, and they trade for the very first time today. As you're listening to this, that's probably already underway. And so with 11 of these ETFs now coming onto the marketplace for the very first time ever, we're going to be presenting to you here on this podcast a series of interviews with the different ETF sponsors so that you can learn about these ETFs and how they differ from each other. We're also going to be providing a series of webinars with each of these ETF sponsors over the next week or two. So lots of content for you, plus our Investor and Advisor Toolkits to help you learn more about all of this. The link to all of that is in the show notes.

And we're going to begin these interviews with Bitwise Asset Management, one of the very first of the ETF sponsors making these bitcoin ETFs available. But before we get to Matt Hougan, the Chief investment Officer of Bitwise, I want to share with you first some more cool product innovation technology being announced here this week in Las Vegas at CES, the Consumer Electronics Show.

And we're going to begin with L’Oréal. You know, I'm a guy. I just never gave it any thought. It would not have occurred to me that a cosmetics company would be heavily engaged in technology. But that just shows you how dumb I am. So L’Oréal made a series of announcements this week of new product launches. They introduced a new beauty genius. This is a virtual advisor that you talk to like Alexa or Siri. It gives you fully personalized AI solutions. You take a picture of your face, and it automatically uploads. And then the software uses augmented reality and facial recognition technology to identify not just your skin tone, but your skin type. Dryness, circles, wrinkles, and it gives you a personalized diagnostic and a set of product recommendations specifically for you. And it shows you what you'll look like after you use the products. It doesn't give you a cartoon or an avatar, but you see a photo of yourself with the benefit of having used the products. The skin and pigment diagnosis is highly accurate, and the entire experience feels like you're talking to a real person.

L’Oréal also introduced a new technology for the application of coloring your hair. It's a colorsonic brush. Yeah, you just brush on the hair coloring. It takes just five minutes. There's no waste and no mess. This is really quite incredible. You don't have to worry about how much hair color to apply because the hairbrush does it for you automatically. Particularly important when you're trying to put the application on the back of your head. Right? Trying to do calisthenics, to look in a mirror to see what's behind you, and so on. You don't have to do any of that nonsense. You just brush it into your hair and the hairbrush automatically applies the correct amount of hair coloring. Pretty incredible.

And for people with limited mobility, L’Oréal has now introduced this week HAPTA. It's as a new makeup application device. If you have limited arm or hand movement, say you have a shaky hand. HAPTA lets you apply makeup and lipstick smoothly and easily. It compensates for your hand shaking so the application is perfect. It has sensors and a self-leveling system that adapts to your motion. They're selling it under the brand name Le.com. L’Oréal has also introduced a new shower head. It cuts water usage 69%, but even though it uses less water, you actually get a bigger, better flow of water because the droplets are smaller. So it actually feels better and does a better job of washing your hair and massaging your head. L’Oréal is installing these at 100,000 hair salons worldwide over the next two years.

And finally, L’Oréal is introducing the first new hair dryer technology in 100 years. Yeah, apparently, we've been using the same kind of hair dryers literally for a century. You know what that big fat device is? It's a big, huge unit. And the way it works is it heats up and then it pushes the air out along cylinder. 

These hair dryers use massive amounts of energy, and they damage your hair if they get too hot. But now, this new hair dryer that L’Oréal introduced this week, it's called the AirLight Pro and it uses. For red light to heat the air, it heats it up 30% faster and it uses 28% less energy. To give you an idea of how advanced this hairdryer is, L’Oréal got 150 patents for it. Pretty amazing.

Now, let me tell you about the DNA Corporation. They've got an AI powered big data solution that helps doctors diagnose obesity based on genetic analysis. You can buy a DNA test kit online, and you get in-depth reports on genes that are highly related to obesity. Those reports go directly to your doctor.

And how about this you're sitting in your cubicle at the office. You're on a zoom call. You don't want people around you to hear the conversation. So you've got to wear headphones, right? Not anymore. A company called Focusound now delivers sound the way a spotlight directs a beam of light. The audio only goes to the targeted listeners. You don't have to wear headphones anymore to keep your conversations private. Somebody could be literally standing right next to your computer monitor. They wouldn't be able to hear what's going on. Or you could be at home watching TV. And even though there are a lot of people in the room, you're the only person who can hear the television. The baby won't wake up and your spouse can be enjoying some quiet for once.

And let's say you have a statement that you want to record. Plaud has introduced this week a ChatGPT empowered AI voice recorder. And not only records your spoken words, it then transcribes them and perfectly summarizes the notes using ChatGPT. It's just 159 bucks.

And you might have noticed that I haven't said too much this week about crypto innovation at CES, but yeah, they're here to talk. TokNox is one example. It's a tokenization platform that uses the Algorand blockchain to notarize, store and sign any kind of digital file. Each file is uniquely registered as an NFT. The blockchain tracks the file's history, ensuring secure storage, and it provides a transparent, unalterable record of authenticity. This is file management like you've never seen before.

Those are just some of the really cool tech that I've discovered here at CES. This week. I'll be bringing you some more cool innovations tomorrow, including a car that drives sideways.

While the future has arrived, the spot bitcoin ETFs have now been approved by the SEC after a long ten-year effort and struggle to get the SEC to say yes, they are now trading and we're very, very excited about it. So starting right now and all through next week and beyond, we're going to be bringing to you the details of the new spot bitcoin ETFs. And we're beginning right now with my good friend Matt Hougan, the CIO, chief investment officer of Bitwise Asset Management, which is one of the companies that has now launched a spot bitcoin ETF. Matt, great to be with you. Good to see you, my friend. 

Matt Hougan: Thanks for having me on this historic day, Ric. 

Ric Edelman: And congratulations. This is something you've been working toward for as long as Bitwise has been in business. You're one of the leaders behind this, and quite frankly, the immense frequency of meetings you've held with the SEC, the incredible amount of paper work that you have filed, the reports and data and research you have submitted, I believe was instrumental in helping the SEC learn about this technology, understand the role it can have in the ETF world, and that comes from your decades of experience in ETFs having run ETFs.com back in the day and inside ETFs the biggest ETF conference. So you got to be feeling pretty good about all this. 

Matt Hougan: I'm feeling great. Yeah, we've been at it with the SEC for over five years now. We've submitted 400 pages of research. We've been going after this ETF because we know that people want it. We know that it will be helpful for investors. We knew that it would lower costs, that it would raise peace of mind. And it's, uh, it's just incredible that we finally have gotten across the finish line. For a while, it didn't feel like we would keep vanishing in the distance. Uh, but we're here, as you said, the future is now. It starts right now. 

Ric Edelman: Literally. Today is the first day of trading for these ETFs. And I have to do a little bit of bragging here. My prediction has proved true. You heard me make it many times Matt. With you on stage at conferences all over the country, I've made the prediction that we would see the spot bitcoin ETF within 18 months. And here we are. I am correct, but of course I've been saying that for six years. 

Matt Hougan: So that’s true. But give yourself some credit. You also consistently said it's a matter of when and not if. And that turned out to be true as well. So yeah. 

Ric Edelman: So I'll take a little bit of, you know, being accurate even though I was a little bit maybe premature. But here we are. And it's very exciting. So let's get right into it. Give us the basics on BITB. That is the ticker symbol for the new Bitwise Spot Bitcoin ETF. Give us the details. What do we need to know about it. 

Matt Hougan: We're really excited to launch this ETF. It does a very simple thing, but it does it well. It holds bitcoin in an institutional regulated custodian. So you can gain access to it without all the challenges of remembering passwords etc. One thing we're particularly excited about, it's the lowest cost bitcoin ETF in America. Indeed, I believe in the world, the total expense ratio is just 0.20%, and we're actually waiving that for the first six months. Fees matter a lot in ETFs. And so we've tried to drive the fee down as much as possible. But at the same time this is an ETF backed by a crypto specialist. Bitwise has been in this market for seven years. We've been running crypto funds for seven years. We work with thousands of advisors around the country. So you're getting extremely crypto native work on this ETF, but at a price point that's familiar to and friendly to everyone. 

Ric Edelman: And, you know, to be quite honest with you, Matt, I am surprised at how inexpensive you were able to price this ETF because let's face it, bitcoin is not as cheap to trade as ordinary. You know stocks in the S&P 500. So I would have assumed that the cost would have been higher. The fact that Bitwise is now the low-cost provider at 0.2%, makes it not only as cheap as a lot of other ETFs, it's actually cheaper than a lot of other ETFs; radically so. And the cheapest of all these brand-new spot bitcoin ETFs. So kudos to you for making sure you are highly competitive in the marketplace and delivering value to investors, because I think that's one of the most material differences as we look at the landscape of these 11 different new ETFs that have come onto the market all at the same time. So that's really, really important. But what's equally important, Matt, I think to elaborate on for everybody is the importance of the fact that this is now the first-time bitcoin is inside an ETF wrapper. A lot of people have been really curious about bitcoin, or even more so interested in investing in it, but were held back because of the complexity of buying bitcoin. You alluded to it a moment ago when you talked about passwords. You know, private keys, digital wallets, crypto exchanges. Which are often expensive to deal with. All of that goes away with the ETF structure. So elaborate on all that. 

Matt Hougan: That's exactly right. You can now buy this ETF in your brokerage account right next to Apple stock right now, next to ETFs like SPY and GOLD. You can buy shares with a push of a button. And behind the scenes, the ETF takes care of the challenging work it takes to acquire the bitcoin. It works to securely custody it with a registered, regulated third party custodian. You have KPMG providing tax and audit on top of it. It’s an incredible package, but from an investor perspective it makes it very easy. It's just like investing in any other asset. Although as you mentioned, it's cheaper than even many traditional ETFs. So it's really a win-win for investors. 

Ric Edelman: You mentioned tax and audit, but I want to turn that tax word into a more practical application for the individual investor. Crypto taxes are complicated. Uh, not all the crypto rules have been written by the IRS as yet. And that's been another daunting area of compliance for advisors and investors. But all of that goes away in this ETF format. So elaborate on the, uh, I'll call it wonderful simplicity of tax reporting using the ETF wrapper. 

Matt Hougan: Yeah, that's the beauty of ETFs. You get a simple tax form. And again similar to other assets. These are tax forms that people are very familiar with. And it does away with the challenges that we've had. One way to think of ETFs is they're almost the simple button for investors looking to get exposure. And they're definitely a tool that drives down the cost. So that's working across multiple aspects of this launch. We're really excited about it. 

Ric Edelman: And that's something everybody really needs to be paying attention to, is that you don't have to become an expert in crypto anymore. You used to have to be pretty knowledgeable about crypto to engage in it, but the ETFs eliminate that. And that's why I've always been calling these ETFs the Holy Grail of crypto. This is what advisors have been waiting for. It's what millions of investors have been waiting for, because the ETF format just eliminates all the complexity it uses a product you are already using in your portfolio. I bet you're familiar with it. You're comfortable with it. It has all the advantages that we're familiar with that make it the most popular investment vehicle in America, and you don't have to worry about any of the complexities that exist. It's kind of the same as the stock market. A lot of people don't want to buy and sell stocks and trade stocks and research them and analyze them. You just buy a stock ETF, call it a day, let the ETF manage it. And that's what now Bitwise is doing for you with bitcoin. It's a really, you know, a chocolate and peanut butter scenario. 

Matt Hougan: That's right, I love that. Yeah. Trades on the New York Stock Exchange. Easy to buy in any brokerage account. We're excited to have it trading. 

Ric Edelman: Now we do have to acknowledge we've alluded to it a little bit, that you're not the only spot bitcoin ETF out there. The SEC did something really smart, really beneficial for investors. They approved 11 ETFs for launch today, not just one. That's bad news for Bitwise, but it's good news for the investor because it creates market competition. We now have 11 different products to choose from. And they're all doing one fundamental thing the same. They're all buying bitcoin. So Matt, how do investors choose between them. And more particularly, why should somebody choose Bitwise's Bitcoin ETF over one of the others? 

Matt Hougan: A great question, Ric. You know, the main thing in ETFs is to keep the main thing the main thing. And that main thing is typically fees. That's one of the reasons why we're so excited about having the lowest cost ETF across this bunch. But there's more to an ETF than fees. You want to find someone who is an expert in the crypto market, so they know how to do diligence custodians and they know how to trade and handle bitcoin transactions. You want to find an expert who's supportive of the crypto environment. We're actually donating 10% of the profits from this ETF to open-source developers and the bitcoin community. And you want an issuer that you can turn to when you have questions. If you're an advisor and you allocate to bitcoin today, that's fantastic. But when the next big news event happens, do you have someone you can rely on who's been in the market for multiple years through big up markets and big pullbacks? Who can help answer the questions your clients have? I think that combination is going to be a winning combination. 

Ric Edelman: Yeah. I'd like to elaborate on that because I think it's a really important point. There are 11 different companies that have launched their bitcoin ETFs today. They range from companies like Bitwise, which is a relatively new crypto-only provider with very deep space in the crypto field and a lot of experience and expertise, to some companies that are really big, been around for decades, managing trillions of dollars in assets. And frankly, they don't have any other crypto products. They don't have any other real deep expertise or frankly, they're not paying a whole lot of attention to the crypto marketplace in all cases. And some folks are arguing that these big ETF providers are just doing a land grab. They recognize this is an opportunity to gain market share. The market is interested in this product, and they can provide it. And so, hey, why not do that? And in some cases, they're charging a pretty hefty annual fee in order to provide that service. So I think it is really worthwhile to the investor to pay attention to who's behind the curtain. Who is the sponsor of this? How much are they paying attention to crypto? How deep is their knowledge, expertise, experience - because I think that can translate into more effective, efficient results that you're looking for as an advisor or an investor. 

Matt Hougan: I love that. Well said, I agree. 

Ric Edelman: So one additional question. We've got a few more, but I just can't hesitate to ask you this one, and we'll see if you dance around it. How big, Matt, are these ETFs going to be? And in the context of that question, I have to point to what Jim Cramer just said two days ago; he said bitcoin is topping out. And I was thrilled when Jim Cramer said it on CNBC because Jim Cramer is always wrong. So, is the wrong this time? Is this a “sell the news” event or is it a “buy the news” event?

Matt Hougan: It's very hard, as you know, to forecast bitcoin's price over any day, week or month. So I don't know what will happen in the immediate aftermath of launch. But these are going after a large market. We've done our own study. I do have a number for you. We think these could pull in $55 billion in net flows in the first five years. There are others that are more optimistic than us. I was looking at AllianceBernstein. They expect close to $100 billion in the first two years alone. These are opening up a major market. There is major demand for it. And, uh, and that's very exciting for bitcoin. It's worth remembering bitcoin's price is determined by supply and demand. You and I know that the amount of new supply is going to fall in half in April, taking $7 billion of net new bitcoin out of the market every year. And this ETF is a positive demand shock. More demand, less supply is a pretty good combination. I think Jim Cramer's streak may stay intact. He may be wrong on this as well. 

Ric Edelman: Yeah. That's my bet. And in fact, I'm even more bullish about the asset flows than Alliance Bernstein is. I think we're going to see $150 billion within the next two years. And I'll share you share with you quickly how I get to that number. In independent registered investment advisors manage about $8 trillion in assets. And according to your surveys, Matt, you just released one at Bitwise last week and several other surveys from Eaglebrook Advisors, from a survey that we did in conjunction with McKinsey and Lionsoul. We found that 77% of advisors say that they plan to allocate to these new ETFs with an average allocation of 2.5%. So if you just do the math, $8 trillion times 77% times 2.5%, you get about $150 billion of flows. It's going to take a couple of years to have that happen, because advisors are going to need time to integrate this into their practices. But I think we're going to see some pretty astonishing numbers. And that doesn't even include the wirehouses or the institutional investors or the retail investors. So I think we're going to see a pretty impressive amount of flow into this asset class. 

Matt Hougan: I love that. Well, it's been an asset class people have had intense interest in. And now you have this familiar, low cost, easy wrapper to get access to it that gives you peace of mind and solves many of your challenges. I think your flow estimates could be right.

Ric Edelman: So let me ask you the practical, tangible question, the one that's on every investor's mind and investment advisor. How does bitcoin fit into a portfolio? What do people need to know before they invest? 

Matt Hougan: Yeah, I mean just look at its characteristic as an asset. You and I have talked about this. It has high potential returns, certainly high historical returns, the best performing asset in the world over the last three, five and ten years. It has low correlation to other assets. Correlation to the S&P 500 is about 0.2. And it's liquid. What do you do with an asset that's volatile has low correlation but real potential and is liquid. Well you add a small amount to your portfolio. You mentioned that 2.5% figure I think that's a great number. We see allocations from our clients of 1 to 5%. And you add it to your portfolio. You rebalance it like any other asset. And studies will show historically that it has significantly contributed to risk-adjusted returns. People put this label on it; bitcoin and it scares people off. If you just look at it from an asset class perspective, with its returns and its correlations and its liquidity, it's pretty attractive. 

Ric Edelman: So what's the next step? What should advisors be doing next? What should investors be doing? 

Matt Hougan: Yeah, it depends on where you are on your bitcoin journey. I mean many people will want to rotate into these low-cost ETFs. It's very possible that you have an allocation to bitcoin already that's at a substantially higher fee. I know there even within these ETFs our ETF is 86% cheaper than another ETF coming to market. So there are big differences in fees. If you're in that bucket, take the opportunity to save that money. That's more money for you and less money for the for the issuer. And that's a win. If you're still early, you can do your research. There are great resources, DACFP, Bitwise the CFA Institute. There's now professional high-quality research on bitcoin. You can do that and then be ready to allocate. But the important thing is the sort of old excuse that you couldn't gain access to. This is no longer true. Now you have low-cost ETFs that are trading on the New York Stock Exchange and related exchanges. It's a huge win. It's a huge opportunity. 

Ric Edelman: And to the point Matt just made, we are producing a large amount of educational content. We've produced an Advisor Toolkit and an Investor Toolkit. Both of them are available right now. We've got the links in the show notes for you so you can easily obtain them. And in this toolkit are a wide variety of educational materials. And I think the most important tool of all, a one-page chart that compares all of these 11 ETFs against each other. And what you're going to discover when you look at this, as Matt has said, not only is Bitwise the low-cost provider, it is radically lower than several of the other ETFs that are now on the market. This is a huge opportunity for financial advisors to demonstrate value to their clients, to be able to say to your client, do you own this other ETF? Because if you do, I can show you how to flip from that into this, saving you an incredible amount of money and thereby boosting your profits, and at the same time, increasing the amount of assets under management that the advisor handles on behalf of their clients. 

So this is a tremendous opportunity for advisors to improve the service and value they provide to clients while improving their own business. And for investors who are trying to figure out how do you proceed in crypto? The tool we have, the Toolkit we have for investors as well, is really helpful. Again, you can get all of that in the link to the show notes that we've got for you today.

This is something that is going to become a bigger and more common conversation. We are beginning to see the mainstreaming of crypto into the investment community. And I think it's going to be really exciting. So, Matt, congratulations again for the leadership that you and Bitwise have provided. That led us to today with the launch of the new spot bitcoin ETFs. And I know how excited that you and your entire team are. And I encourage investors and advisors to take a close look at BITB, that is the spot bitcoin ETF issued by Bitwise Asset Management Matt Hougan always a pleasure to be with you on the program. Thanks so much. 

Matt Hougan: Thanks for having me Ric.

Ric Edelman: Hey, be sure to listen to my wife Jean's podcast today. You can listen at Self-care with Jean.com. The link is in today's show notes. See you tomorrow. 

-----