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Dave Nadig
3:13
The problem is the naysayers believe that somehow the advertised price of the bonds -- that aren't trading -- is somehow correct, but the ETF price -- which is trading -- is incorrect.
The opposite is true.  In situations like this, the ETF becomes the price discovery, and when the bonds trade, they trade where the ETF suggests they should.  We've seen this dozens of times, and it always plays out like clockwork.
3:14
Even when Egypt closed for a month, the ETF traded, and was price discovery when the market reopenned.
So its mostly just not understanding the information vectors for pricing.
Travon
3:14
Are ETFs an asset class, like commodities or equities? If not, will they become one?
Dave Nadig
3:14
ETFs are JUST a wrapper -- like a mutual fund, a separate account, a variable annuity, etc.
In fact most ETFs are just mutual funds under the hood.
3:15
So its really dangerous to think of the wrapper as the thing itself.  You wouldn't consider tupperware a food group.
Tupperware can hold kale, or cookies.  So is tupperware "good for you?"
3:16
ETFs are the same way.  An ETF can contain the S&P 500 stocks, or it can contain triple inverse wheat futures.
So, long answer short: Nope, they're not an asset class, and they never will be one.
Dennis Martinez
3:16
Why are ETFs so allegedly tax efficient?
Dave Nadig
3:16
So, two main reasons.
3:17
1: most ETFs are index based, and most indexes have very low turnover.  Not selling often means minimal chances for a taxable gain that would need to be distributed.
2: most ETFs use "in-kind redemption."  That just means when someone wants their money out in size (a market maker) the ETF doesn't sell stocks to raise cash, they simply hand the market maker a bunch of securities.
3:18
Since they can pick which tax lots they want to hand out, they tend to hand out those witih the lowest possible basis -- those securities that would generate a gain if sold.
Over time, this means the basis for the positions in the ETF goes up and up, minimizing any gains when the manager does have to sell for some reason, like an index reconstitution.
3:19
the end result: the VAST majority of equity ETFs have never made a cap gain distribution.
Bond ETFs sometimes do, because many bond ETFs have maturity requirements (like, it only holds 5-10 year bonds) -- that creates some forced selling now and then.
But even then, the record is pretty great -- bond etfs are generally still more tax efficient than their mutual fund counterparts.
Anonymous
3:20
What asset classes saw the most outflows/inflows this year? What do you project for 2019 in that regard?
Dave Nadig
3:20
We actually just posted our big flows rundown here:
3:21
But to summarize:  US equities pulled in 135 Billion for the year - and 15B in december!
So for all the turmoil, it turns out people still want in - at least ETF investors.
Second place was US fixed income, but interestingly, a lot of shorter term stuff -- thats your safety play there.
3:22
Funds like SHV/SHY from ishares - short term treasuries -- had big flows in December.
As for losers -- basically no asset class -- but some specific funds.  "Old guard" ETFs like SPY, EFA, LQD and JNK all had negative years.
3:23
In many cases, offset by flows IN to competitors like IVV, IEFA and so on.
Jane Franks
3:23
Hi Dave, In your opinion, when financial gurus make predictions that have turned out to be wholly false, do they seem less likely to go on the record making more preducitons?
Dave Nadig
3:23
Interesting question!
3:24
My anecdotal experience is that pundits who make big calls tend to get flushed pretty quick when they're wrong.
I think big bold predictions are kind of just a media game.  I mean nobody KNOWS the future, right?  The economists and financial writers I most respect wrestle directly with that uncertainty
3:25
instead of pretending.  But big bold predictions (see Rogers above!) make for better headlines.  And it's understandable.  I know I read them too!
And sometimes there's meat under the headline.  Rogers point, for instance, is less about the end of the world, and a bit more about how it's often small unnoticed things (like Iceland) that are the canaries in the coal mines.
Todd Rosenbluth - CFRA Research
3:25
Happy new year Dave! My 2019 prediction was for the first Zero fee ETFs to launch https://www.etf.com/sections/blog/get-ready-zero-fee-etfs. Anything you want to share with us to kick off the year?
Dave Nadig
3:26
Hi Todd!  I saw that.  I actually disagree honestly.  At least any meaningful launch.  I just dont think it works the way it does in Mutual Funds.
But as for my OWN big predictions?  Mine aren't too controversial.
I DO think we see non-transparent active (assuming the SEC gets to go back to work) in 2019.
3:27
I think we remain highly volatile, and probably flat for the year.  THats my "big" market prediction, but as I pointed out, I'll probably be wrong.
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