| Welcome to ETF IQ, a weekly newsletter dedicated to the $14 trillion global ETF industry. I'm Bloomberg News reporter and anchor Katie Greifeld. For a noted cryptocurrency skeptic, Nouriel Roubini makes some compelling points in favor of Bitcoin. The economist, who runs Roubini Macro Associates, expects that President-elect Donald Trump's policy proposals could keep price pressures on the boil in the months and years to come. Specifically, tariffs on imports from China, Canada and Mexico would push up the cost of goods, while "massive deportation" of migrants would reduce the supply of labor and lead to hotter wage growth. As such, investors need to prepare for that potential reality, Roubini told us on Bloomberg Television's ETF IQ this week: Inflation is going to be gradually higher, economic growth could be lower, so therefore you have to find a hedge against a world in which bond yields on the long side could be much higher than 4%.
 Nouriel Roubini, chairman and chief executive officer of Roubini Macro Associates Inc., during a Bloomberg Television interview in New York Photographer: Victor J. Blue/Bloomberg To Roubini, that looks like positioning the just-launched Atlas America Fund (ticker USAF) to benefit from a steeper yield curve while also loading up on gold. But as Bloomberg Intelligence's Eric Balchunas points out, many of Roubini's arguments could be applied in favor of cryptocurrencies. Indeed, many Bitcoin bulls have pointed to an inflationary environment and Trump's desire for a weaker dollar as a reason to load up on digital assets. But those arguments amount to little more than hot air, in Roubini's opinion: I'm skeptical for lots of reasons about cryptocurrencies and Bitcoin because they're not currencies. They're not units of account. They're not a scalable means of payment. They're not a stable store of value. And if you want wealth generation rather than high volatility, you have to stay away from those types of assets.
There's plenty of people buying, though. Even though Bitcoin just can't seem to break above $100,000 per coin, US-listed spot Bitcoin ETFs took in a record monthly sum in November in the wake of Trump's election win. One of the benefits of the ETF wrapper is that it's a vehicle for investors big and small to efficiently gain exposure to previously difficult-to-access markets. At a certain size, the ETF itself can sometimes be influence on the underlying assets. One such asset class where that holds true is the corporate bond market — both in terms of trading dynamics and pricing. As reported by Bloomberg's Josyana Joshua and Isabelle Lee, portfolio trading — where investors can buy or sell scores of corporate bonds in one fell swoop, enabled by the boom in credit ETFs — is giving rise to mega bond trades. Specifically, Barclays Plc data shows that transactions of more than $500 million account for nearly a quarter of US corporate bond portfolio trading activity this year as of October. That compares to less than 1% as recently as 2018. "The depth and the breadth of liquidity in the US corporate bond market has really improved," according to Barclays' Zornitsa Todorova. "Portfolio trades add new volume to the market, and as that depth increases, so does the ability of the market to absorb these large volumes."
The growth in fixed-income ETFs is having a particularly visible impact in the collateralized loan obligation arena. Assets in CLO ETFs have exploded from $120 million in 2020 to over $19 billion today, lead by the $15.5 billion Janus Henderson AAA CLO ETF (ticker JAAA). That boom has injected new liquidity into CLO primary and secondary markets, according to an S&P Global Rating report written by Kohlton Dannenberg and Tom Schopflocher, while inflows to the products have likely contributed to recent spread tightening. But there's some cause for caution, they write: the sector has yet to endure a true stress test in the event of a meaningful economic downturn. A group of one dozen US Bitcoin exchange-traded funds is on the cusp of a record monthly net inflow, bolstered by the digital asset's historic surge toward $100,000 on President-elect Donald Trump's embrace of crypto. Wall Street prognosticators tend to huddle around the consensus, afraid to stand out for fear of being wrong. Then there's Tom Lee.
With a crypto-friendly commander-in-chief returning to the White House, Wall Street is ready to unleash a new generation of speculative products across the $3.2 trillion industry to sate investor appetite — from institutional newbies to die-hard retail traders. In this week's Drill Down on Bloomberg Television's ETF IQ, Aptus Investment Strategist and Portfolio Manager Brian Jacobs stopped by to talk about the brand new Aptus Large Cap Upside (ticker UPSD). It's an interesting twist on the options craze: the fund aims to provide more than 100% of market returns during the good times, but less than 100% during downtrends. To do that, UPSD's portfolio consists of low-volatility stocks married with derivatives. According to a press release, the fund increases equity exposure during bullish periods, but "collects put option premiums when conditions are favorable."
With UPSD, what we're really trying to do is create a product that can slide in directly for an equity holding to have more than 100% upside exposure if markets are normal and less than 100% if markets are deteriorating. So from an allocation standpoint, we're really looking to be a swap one-to-one with equities while maintaining or increasing the overall return profile. UPSD launched in late November and charges 0.79% annually. Anna Paglia of State Street Global Advisors, Cboe's Rob Hocking and Jason Jsu of Rayliant Global Advisors join me, Eric Balchunas and Scarlet Fu on Bloomberg Television's ETF IQ on Monday at noon ET. Watch on Bloomberg Television, on the Bloomberg Terminal at TV <GO> and on YouTube. | 
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