Skip directly to Accessibility Notice
September 09, 2021Approaching the Fed “Balloon”, Energy Transition and Crypto Disruption (8:54)
Jan van Eck
Jan van Eck
Chief Executive Officer
CEO Jan van Eck shares his views on the potential for rising interest rates, as well as what he believes are the two most interesting investable trends of the moment: the energy transition away from fossil fuels and the disruption of financial services by cryptocurrencies and blockchain technology.

Jenna Dagenhart: Joining us now with his quarterly outlook on inflation, markets, monetary policy and more, we have VanEck Chief Executive Officer, Jan van Eck. Jan, great to have you back with us. Let's start with rising price levels, which seem to be driven by supply chain issues now, more so than demand. Do you think inflation will be transitory as the Fed (Federal Reserve) has indicated? And what are your thoughts on wage pressure, given this labor market that really just keeps surprising us?

Jan van Eck: Jenna, great to see you. Let's just replay it back to the beginning of the year a little bit, when we saw the economy as a car going 200 miles an hour with China and the U.S. hurtling forward, the U.S. with a lot of stimulus. The risk was, could the car slow down to 70 miles an hour and not put too much pressure on interest rates or anything that would upset the financial markets? We call that, what are the risks to Goldilocks? Inflation is the big question. I think we don't know now, so it's a little bit unsatisfying. But if you want to call it the halftime score, right now, it's looking a little worrisome.

Jan van Eck: The big question is always what the Fed does. And let me unpack that. What we worry about more with respect to inflation is wage inflation, not lumber prices or natural gas prices, although, of course, they matter at some level. But wage inflation tends to be stickier. In the long run that can really affect long-term interest rates, 10-year interest rates. If interest rates go up, of course, that's bad for both stocks and bonds. I would say the inflation side of the argument is winning so far, because as you said, whether it's supply chain issues or labor market issues, we're still talking about these things, I think, way longer than the transitory camp would like. I don't think we'll know until next summer, for sure, but it is something to keep an eye on. The biggest risk to Goldilocks, as we talked about three months ago, is higher interest rates by the end of the summer.

Jan van Eck: Now, the problem is, it's really hard for us to figure this all out, because the Fed has inflated this balloon and is the biggest effect, both on the stock and the bond markets. Just for example, the Fed buying a bond, it bought more TIPS (Treasury Inflation-Protected Securities) last year than actually were issued. So, what really are the 10-year rates? We don't know until the Fed starts tapering. That's the big risk to the portfolios, both stock and bond portfolios. I like to say, I wish I could give you a one-month or three-month outlook, but I really don't know whether we'll know what the answer is until about a year from now.

Jenna Dagenhart: That makes sense. And what about greenflation?

Jan van Eck: Well, that's another one of these surprises that's affected commodity prices. The globe is growing. Our world economy is growing. As demand for commodity grows, it's actually hard because of ESG policies to increase supply, which means that there is this multi-year trend of price pressure. One of my colleagues cleverly called it, as you said, greenflation. It's hard to find a new copper mine, or lithium mine, or gold mine, or other places to do this activity because, to a certain extent, it's environmentally unfriendly. That will be an underpinning of commodity prices and is why, I think, that commodity-related equities are an interesting investment and people should have them in their portfolios.

Jenna Dagenhart: You're not the only one keeping a close eye on inflation. Of course, this is key for the Fed as well, as it weighs when to start tapering. How are you monitoring monetary policy and rates?

Jan van Eck: It's really hard to do. I think, again, it's like the Fed has inflated this balloon. Bank of America came out with a great study, that we were talking about, which is that a lot of the S&P [500]'s performance has come from the Fed's balance sheet expansion. That's really amazing over the last 10 years.

Jenna Dagenhart: Rather than earnings, which would typically be the case.

Jan van Eck: Right. Right. Yes. Then the risk is, of course, some bad shock happens, like in March and April of last year, but then just the Fed pushes more air into the balloon. That's why markets are so incredibly overvalued these days on the price-to-sales and price-to-earnings basis. It's really a bet on the Fed. I personally think it's not bad to keep some money on the sidelines and wait until prices get a little bit cheaper.

Jenna Dagenhart: On that note, it seems like unicorns aren't that rare anymore. You're seeing an awakening of zombie stocks as well. Should investors be afraid that valuations have gone too far?

Jan van Eck: The 0% interest rates that the Fed has happened has meant that there is overvaluation in the private markets as well as the public markets. It's great that IPOs are happening again. But the fact is they're coming to market at very rich price-to-sales. Private companies are going for 20 times price-to-sales. They're growing super-fast. But that's like a market valuation. When they finally go public, my example is Uber, they go public, they're great businesses, but the stocks are like zombie stocks. They're disconnected from the profitability and revenue growth of the underlying company. I think investors have to be aware of being able to last several years, where the business catches up with the zombie stock.

Jenna Dagenhart: Finally, with historically low yields and these record-high valuations, many people are really just looking for places to park their money. It seems like more investors are dipping into alternatives. Where are you finding opportunities right now?

Jan van Eck: Well, everyone is looking for yield. Two of the themes that we're focusing on, I think, are multi-year trends. One is the energy transition, which is basically moving away from fossil fuels. This is being driven by a lot of innovation in the private sector. It's not just the Green New Deal and government policies, which I think people tend to lose track of. In our resources portfolios, besides finding a ton of value in some of those commodity equity names that I mentioned before, we're also looking for innovation, disruptive companies in the multiple sectors that need to be more energy efficient. One that we like to focus on is agriculture, which emits about as much CO2 as, actually, the energy sector. So that's one trend.

Jan van Eck: Then another high-conviction theme, investment theme, that we have is blockchain, crypto, or whatever you want to call it, and just the fact that this open-source database technology can really provide a lot of financial solutions at much cheaper prices, sometimes 90% cheaper, in transmission. That fintech revolution that goes hand in hand with crypto, we think is really exciting. Again, there are some overvalued companies, but we think it's a really, really interesting multi-year trend that investors should be involved with.

Jenna Dagenhart: Well, it should be an interesting quarter, Jan. Thank you for joining us.

Jan van Eck: Great to see you again.

Jenna Dagenhart: Thank you for watching. That was CEO Jan van Eck. And I'm Jenna Dagenhart with Asset TV. To receive regular updates from VanEck experts, please visit

- - - - - - - - - -


Please note that VanEck may offer investments products that invest in the asset class(es) or industries included in this video.

The views and opinions expressed are those of the speaker but not necessarily those of VanEck and are current as of the video’s posting date. Video commentaries are general in nature and should not be construed as investment advice.

This material has been prepared for informational purposes only and is not an offer to buy or sell or a solicitation of any offer to buy or sell any security/financial instrument, or to participate in any trading strategy.

Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. References to specific securities and their issuers or sectors are for illustrative purposes only.

ESG investing is qualitative and subjective by nature, and there is no guarantee that the factors utilized by VanEck or any judgment exercised by VanEck will reflect the opinions of any particular investor. Information regarding responsible practices is obtained through third-party reporting, which may not be accurate or complete. Socially responsible norms differ by region. There is no assurance that the socially responsible investing strategy and techniques employed will be successful.

Cryptocurrency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but it does not have legal tender status. Cryptocurrencies are sometimes exchanged for U.S. dollars or other currencies around the world, but they are not generally backed or supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional currencies. The value of cryptocurrency may be derived from the continued willingness of market participants to exchange fiat currency for cryptocurrency, which may result in the potential for permanent and total loss of value of a particular cryptocurrency should the market for that cryptocurrency disappear. Cryptocurrencies are not covered by either FDIC or SIPC insurance. Legislative and regulatory changes or actions at the state, federal, or international level may adversely affect the use, transfer, exchange, and value of cryptocurrency.

Investing in cryptocurrencies comes with a number of risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks. In addition, cryptocurrency markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing. There is no assurance that a person who accepts a cryptocurrency as payment today will continue to do so in the future.

Investors should conduct extensive research into the legitimacy of each individual cryptocurrency, including its platform, before investing. The features, functions, characteristics, operation, use and other properties of the specific cryptocurrency may be complex, technical, or difficult to understand or evaluate. The cryptocurrency may be vulnerable to attacks on the security, integrity or operation, including attacks using computing power sufficient to overwhelm the normal operation of the cryptocurrency’s blockchain or other underlying technology. Some cryptocurrency transactions will be deemed to be made when recorded on a public ledger, which is not necessarily the date or time that a transaction may have been initiated.

Investors must have the financial ability, sophistication and willingness to bear the risks of an investment and a potential total loss of their entire investment in cryptocurrency. An investment in cryptocurrency is not suitable or desirable for all investors.

Cryptocurrency has limited operating history or performance.
Fees and expenses associated with a cryptocurrency investment may be substantial.
There may be risks posed by the lack of regulation for cryptocurrencies and any future regulatory developments could affect the viability and expansion of the use of cryptocurrencies. Investors should conduct extensive research before investing in cryptocurrencies.

Information provided by Van Eck is not intended to be, nor should it be construed as financial, tax or legal advice. It is not a recommendation to buy or sell an interest in cryptocurrencies.

All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future performance.

No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of Van Eck Associates Corporation. © Van Eck Associates Corporation.

Van Eck Associates Corporation
666 Third Avenue, New York, NY 10017