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Dave Nadig
3:00
Good afternoon and welcome to ETF.com Live!
As always, you can enter your questions in the box below.  I’ll get to as many as I can in the next 30 minutes or so.
After we’re done, well post a transcript at this same address, in case you missed anything.
With that, let's get rollin'
D. Cartwright
3:01
Hi Dave, So what are the chances another spectacular blowout like the recession of 2008 will happen again?
Dave Nadig
3:01
OK, we'll start with a non ETF question, but I have an ETF thought as well.
I don't personally see the same kind of blowout we saw in 2008, mostly because I don't think we have the kind of structural flaws we had going on back then.
3:02
THere's no question we have a very long-tooth bull market, and markets don't go up forever.  A correction will happen before I retire in 15 years, no question.
But I don't see an immediate, violent catalyst right now.
Of course, one could appear - geopolitically in particular.
The unasked question here is "what would it mean for ETFs" which I get pretty much every week at events.
3:03
And my pat answer is: the same thing that always happens.  A lot of people in active funds pull their money out because of either underperformance, or because they were sitting on gains before, and now aren't.
When that money comes back, it follows the flows patter we've seen for 15 years -- into low cost beta, not back into active.
Gina Putnam
3:04
Are all ETNs as risky as the ones from Lehman that failed?
Dave Nadig
3:04
So, great article today by Lara Crigger highlighting the demise of the Lehman ETNs.
3:05
The short answer is: there is always default risk with any piece of debt.  I don't see any of the existing issuers right now that have anything like the warning signs we saw on Lehman
But a trick you can do is to look at the issuer of your ETN and then go check what the CDS market thinks about insuring that bank's debt.
If its 5% a year or something outrageous, be worried.  If I recall Lehman spiked over 10?  Can't fully remember.
3:06
Here's that article:
The other ETN issue is that sometimes the issuing banks get cold feet and close them for new issuance
that happened just last week with MORL.  In those cases, the ETNs become essentially broken, and often trade to a premium.
(Which is likely a good opportunity to sell and move on. )
Dahlia Fenton
3:07
Is the only reason ETFs close because they haven't accumulated "enough" in AUM over a certain period of time?
Dave Nadig
3:07
That's for sure the biggest reason.  For years we kept a list of closed ETFs and not one had over 20 million in assets when they shuttered.
Then Blackrock bought iShares and they closed, if I recall one or two funds that had 40-50mm in assets that we're sort of edge case total return products.
3:08
But small+illiquid is a good formula for predicting a closure.
Of course, some firms basically never close ETFs, and if they are part of a complex (say, a suite of sector funds) they will often let a small one linger forever.
3:09
I think SSgA may have closed a big fund in the last few years too.  Usually its a "poor fit" thing in those kinds of cases.  Not part of the bigger strategy.
Drake T.
3:09
Was there any backlash/pullback from investors when ETFMG changed LARE to a pot fund (MJ)? Does it state in prospectuses that issuers can do this? Do you see this as common going forward?
Dave Nadig
3:09
Man, what a story that was.  As Drake says, the board of the fund just voted to completely change the fund entirely.
3:10
Here's a link to when it happened, great story: https://www.etf.com/sections/features-and-news/when-etf-changes-its-ex...
There's a great quote in there from the largest shareholder at the time, let me paste it in:
"I think it's a little scummy what they're doing," said Peter
DeCaprio, portfolio manager and principal at Crow Point Partners, in  Hingham, Massachusetts. Crow Point is the largest investor in LARE, owning a 22% stake, according to most recent 13-F filings.
"But as long as they have support at the board level, if they want to change up the strategy, then they can," he added.
3:11
I mean, that pretty much sums it up in its entirety.  Ultimately shareholders outsource all of these decisions to their fund boards.
Was their backlash? Well, it's hard to cry too many rivers for ETFMG - just look at the asset flows into MJ, the resulting fund.
Certainly they would never have seen those assets in LARE.
3:12
But people in the industry definately took notice.  It's the only example I have ever seen of something like this in 25 years.  Sure, change an index from Vanilla to French Vanilla, but this was from PIstachio to, well, Weed.
no one
3:12
can you buy an ETF that gives me stock/bond exposure, one-stop-shop... are there ones with different stock/bond exposures... buy and hold question???
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