Andrew Racz
Director of Research
300 East 54 Street, Suite 26C
New York, NY 10022
Phone: (212) 319-6949
Fax: (212) 753-1944

Financial Transactions in the Digital Age


May 15, 2013

Alternative strategies may offer investors a number of unique benefits. However, such strategies were out of reach for the average investors.

The 21st Century is characterized by the success of mass marketing of a popular product. Never before has a company like Netflix built itself up not only to $12 billion in market cap but it acquired 30 million customers and management is quite enthusiastically talking of 100 million subscribers.

Apple Computer broke into the whole world with its iPad and iPhone having a market cap of $400 billion and cash accumulation of $165 billion. To some extent Apple Computer can double or triple in the next 10 years. It has ample customers and new product lines in the technological age combining telephone and television is a market of a trillion dollars. Needless to say, both Netflix and Apple Computer are international. Starbucks, an ordinary coffee marketing company in America is now breaking into China and other countries where obviously the number of customers for coffee related items like tea are basically unlimited. If every person in China spent $1 per day for coffee for 300 days a year the resulting revenues would equal 20% of the U. S. budget deficit.

General Motors has revenues of $44 Billion. It represents less than 20% of the world’s automobile production. In 1929 it represented over 60% of the world’s automobile market. In 1929 the chairman of General Motors stated in a famous interview “what is good for General Motors is good for the country”.

After tremendous ups and downs in 2013, General Motors has a market cap of $44 billion; it delivers about 6 million cars a year, however, it is a moderate segment of the world’s automobile market. We have 100 million new cars a year. This is the digital age.

Obviously, when you deal internationally in marketable products, transact export and import financing, the stock market reflects it . In January 1980 I interviewed the Chairman of Bache, Harry Jacobs. The Chairman in reviewing his operations stated that in 1981 or ’82 Bache would be operating in an 80 million share markets. Today, in 2013, 2 billion a day is in order and occasionally hits 3 billion shares exchanged a day. The stock market has to follow the development of the whole world. We have 1 ½ billion Chinese, 200 million in Indonesia, 200 million Russian, 50 million Poles, 100 million Brazilian and they each create goods in their local markets and more often than not they list their stock on the New York Stock Exchange. The key is to operate efficiently, large scale, and cheaply. 30 years ago the commission on the stock exchange was about 25 cents. It broke down to 5 cents and increased the efficiency of the transactions. Subsequently, the mutual fund industry which until 10-15 years ago dominated the so-called institution market, reached $8 trillion. However, the public was seeking additional vehicles. The ETFs have many unique features. After forming an ETF it is easy and cheap to increase or decrease the size and it is tradable on the New York Stock Exchange; therefore it is marketable, particularly notable is that the cost of going in and exiting an ETF is miniscule.

In 2013, there is $1 ½ trillion in ETFs – 15% of the size of the mutual fund industry. The internal structure may indicate that in the next 5 years the ETF industry will go over $10 trillion and will be the dominant, non-brokered vehicle for the public to buy securities.

An ETF can be formed for everything. The two biggest gold ETF’s have a market value of $10 billion. Recently, bond ETFs both domestic and overseas have reached several billion dollars and it is not impossible to envisage that at the end of 2013 the size of the bond related ETFs domestic as well as overseas will be $1 trillion.

Country ETFs are growing but they are miniscule. The largest is the Japanese of $6 billion. But of course we have 200 country-members of the United Nations.

In the next commodity boom which is likely to come because of the size of civilization and the demand of people, can create ETFs in the corporate market bigger than gold. In other words, the ETF industry is a phenomenon itself. It is representative of both commodities, countries or configurations – all can be listed on the New York Stock Exchange and because of the communication network of the world, can be traded internationally.

If the mutual fund industry can reach $10 trillion surely the ETF industry can reach $20/$30 trillion. The valuation of the phenomenon on the stock market has not reached its full potential.

In the United States there is only one publicly owned so-called ETF Holding Company, namely Wisdom Tree which has 120 million shares at the price of $12 plus has $1.5 billion market value.

It had 12 billion under management in the year ended 2011; 18 billion in the year 2012 and has reached 30 billion in May 2013. In other words it is projected to reach maybe 70 billion in the current year and could under favorable geography and market conditions, reach 100 billion sometime in the year 2015.

The profile of the company is very promising. In December 2012 Wisdom Tree managed $18 billion. A year before the assets under management were only $12 billion. On May 15, 2013 there is $30 billion under management. We are projecting $70 billion at the end of 2013 and over $100 billion for the year ended 2014.

Wisdom Tree AUM ( assets under management in millions)

ETF AUM ( a/o 5/14/2013)


Quarter to Date (a/o 5/14/2013)


Average ETF AUM


Average ETF Fee


Net ETF Inflows ( a/o 5/9/2013)


Month to Date


Quarter to Date


Year to Date


First and foremost, the 10 largest ETF’s which are trading on the Exchange are listed in the Table below. Four out of the ten, Wisdom Tree managed. We have to consider that even the current size of 30 billion is miniscule compared to the industry which is 1.5 trillion. We are projected doubling of this industry size in 2 to 3 years.

Name / Ticker

Net Assets ( Mil)


PIMCO Total Return ETF/ (Bond)


U.S. fixed income

PIMCO Enhanced Short Maturity/MINT


U.S. fixed income

Wisdom Tree Emerging Markets Local Debt/ELD


Emerging-markets bond

Wisdom Tree Asia Local Debt ETF/ALD


Emerging-markets bond

First Trust North American Energy/EMPLP



Wisdom Tree Emerging Currency/CEW



Guggenheim Enhanced Short Dur Bond ETF/GSY


U.S. Bond Income

Ranger Equity Bear ETF/HDGE



Wisdom Tree Chinese Yuan /CYB



PIMCO Intermediate Municipal Bond ETF/ MUN


U.S. municipal bonds


 Wisdom Tree has grown this year to 30 billion from 18 billion and if the record of the company indicates Wisdom Tree can reach 100 billion in two years. 

What we are really saying is that the age we live in there are phenomenal growth of opportunities for companies with solid and imaginative structural and marketing format. With vast increase of the size of the business such as Netflix, such as Wisdom Tree, the numbers can jump and continue to grow at the rate which is very difficult to envisage in an ordinary business.

If Wisdom Tree becomes a $100 billion company, it would not be difficult to envisage that Wisdom Tree could raise $250 or even more on the market. Thus, a company has emerged in less than 10 years because in the digital age growth, if it is coupled with performance and delivery, far outgrow the ordinary history of a business.

It is ironic to mention that the Chairman of Wisdom Tree Jonathan Steinberg’s father was the legendary Saul Steinberg. His past is reflective of the path of Wisdom Tree. Mr. Steinberg had a computer leasing company which has grown over 100% a year. Raising money and making acquisitions, it became a multibillion dollar insurance company.Actually, the father didn’t have the opportunity of a phenomenal growth that Wisdom Tree and his son has. However, its Board of Directors and structure of the ETF industry may give Wisdom Tree the opportunity to create a multibillion finance vehicle which can match Saul Steinberg’s legendary past.


Information contained herein is based on data obtained from recognized statistical services, issuers reports or communications or other sources believed to be reliable. However, such information has not been verified by us and we do not make any representation to its accuracy or completeness. Any statement non-factual in nature constitutes only current opinions which are subject to change. BERAL INC. or their officers, directors, analysts or employees may have positions in the securities or commodities referred to herein, and may as principal or agent buy and sell such securities or commodities. An employee, analyst, officer or a director of BERAL INC. may serve as a director for companies mentioned in this report. Neither the information nor any comment expressed shall constitute an offer to sell or a solicitation of an offer to buy any securities or commodities mentioned herein. There may be instances when fundamental, technical and competitive opinions may not be in concert. This firm may from time to time perform investment banking or other services for or which investment banking or other businesses from any company mentioned in this report.



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Andrew Racz. 300 East 54 Street, Suite 26C, New York, NY 10022
Phone: (212) 319-6949 Fax: (212) 753-1944. E-mail:

Copyright © 2011 Andrew Racz. All Rights Reserved.