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Dave Nadig
3:28
Hi Herve!  Love Larry.  One of the best thinkers we have on markets, honestly.
He wrote a really good piece for Alpha Architect really going into the weeds last year.  One sec ...
3:29
Put simply:  we're becoming a more global economy, and that means that correlations rise, and they often rise just at the wrong times (when something bad happens).
That makes it harder to effectively diversify.
It's actually one of the core investing problems of our time.  The question is what to do about it.
3:30
And that's part of why we see a lot of focus on things like liquid alternatives and bitcoin and so on  -- they are potential diversifiers, where EM and EAFE aren't as useful anymore.
Donna Lui
3:30
I keep reading opposing views about whether we’ll have a U.S. (or global) recession this year. What’s your opinion? How might such an event impact ETFs?
Dave Nadig
3:30
With the HUGE caveat that I am not an economist, and generally don't believe I could successfully make a timing decision on something like this, as an investor.
3:31
I actually do think we have a rough year (whether its actually negative GDP or not, who knows).
But the impacts of the trade war are real, and even if we had a solution tomorrow and a big relief rally, I think there's long term damage being done that won't get wiped out in a one month rally.
So I think it could be a pretty rough year or so.
3:32
at least from a corporate perspective.
FactorCity
3:32
Why is momentum investing such a popular strategy?
Dave Nadig
3:32
Well, the annoyingly pat answer is "people like owning winners."
3:33
The slightly more nuanced answer is that momentum investing is pretty much the first thing you learn when you're becoming a student of the market from a technical perspective.
While a sophisticated technician (which I am certainly not) employs all sorts of tools to analyze and implement strategies, the core is "find the trend" and an upward trend (momentum) is the easiest to spot, and pile into.
3:34
The challenge with any momentum strategy of course is timing.  At some point, a momentum stock or a momentum index stops being momentum, so you need to get out and do something else.
this is whats behind "flipper" funds like the Pacer Trendpilot series, or just a plain old self-run 200 day moving average strategy.
Jeremy T.
3:35
Are there any “given” attributes that predict ETF fund performance one way or another?
Dave Nadig
3:35
Only one I know of: Cost!  All else being equal, the cheaper fund outperforms the more expensive one.  It's quite literally the ONLY thing you know for sure 100% in advance.
3:36
It would certainly be nice to say something like "momentum" or "relative value" or something.  But ultimately, every quick stat or rule of thumb is imperfect.  That's part of why really really boring passive strategies are so popular -- at least they do what they say they're going to do!
OK, lightning round, going to do a couple here very quickly:
ETF_Fan_22
3:37
Anything surprise you in BBH’s latest ETF survey?
Dave Nadig
3:37
Yes!  I was surprised that ESG rated stronger in the US than in the rest of the world.  Also I was surprised by how strong the appetite was for smart beta.
3:38
Here's the link:
Terry Falchuk
3:38
I not only frequently read (and learn from) your articles, but like the art you use on your site. Especially your Valentine’s Day image in today’s Hot Reads. Keep up the good work, all around!
Dave Nadig
3:38
Thank you!
Gavin
3:38
Thoughts on yesterday’s headline: “ETFs Offer A False Haven From a Nonexistent Storm”?
Dave Nadig
3:39
So that was a Bloomberg article.  here's the link.
That was actually coverage of the BBH/ETF.com survey I linked above
They were pointing to the strength of demand for Smart Beta and singing a cautionary tale that the strategies can be complex, and require some real understanding.
3:40
I agree with that part -- Smart Beta is far from a Panacea.
But I also believe investors in those strategies are smart enough to do a little reading and understand what they're buying.  So I thought it was a bit of hyperbole.
John
3:40
Is there a white label provider that is willing to sponsor for a flat fee instead of a % of AUM?
Dave Nadig
3:41
Not that I know of.  I think that would be a hard business to run.  It's possible that folks like ETC will just "rent" you their umbrella with no upside, but I suspect you'd have to pay more up front than you might be willing to do.
AUM based fees let you lower the front end costs ... its a tradeoff.
Direct Indexing
3:41
Hi Dave, at InsideETFs, you discussed Direct Indexing. For US equity, I get it. But, won't it be hard to do it with Int'l & EM equities?  You can Direct Index with ADRs but many brokerage firms don't have access to all securities in say IEMG or VEA. If this trend take hold, could it be the case where a good portion of the investors allocation is still in ETFs, i.e. Int'l, EM, Bonds?
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