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Dave Nadig
12:59
Good afternoon folks, thanks for joining the special Friday edition of ETF.com Live!
1:00
As always you can ask questions in the window below, and I'll answer what I can in the next 30 minutes or so.
We'll have a transcript up shortly after right here as well, in case you miss something.
With that, lets get started:  I'll fend off the weekly question on soundtrack.
1:01
Mellow acoustic mix from Spotify today, nothing radical: https://open.spotify.com/user/spotify/playlist/37i9dQZF1DXb9LIXaj5WhL?...
Macey
1:01
Hi Dave, How important/accurate is SPIVA as a measurement?
Dave Nadig
1:01
Hi Macey.  So, the S&P Index vs. Active scorecard is what SPIVA stands for.
And you can find it here:
1:02
And what it does is measure how the community of actively managed funds does against a naive benchmark in each of a dozen or so categories.
So right now, for instance, it would tell you that on a 5 year basis 82% of large cap U.S. equity managers have underperformed the S&P 500.
1:03
Unsurprisingly, it shows year after year that active managers -- as a class -- don't beat the market.
Occasionally you get a bright spot like "aha!  International small cap managers had a good year" but over long time periods, it's been pretty consistent.
As for importance -- high -- everyone reads the report and it gets a TON of media coverage (we tend to cover it here quarterly or so).
1:04
Accuracy: the methodology is very good and corrects for all sorts of biases.  the biggest problem is the benchmarking
because it really uses a handful of buckets, I would argue there are pockets where you need to take it with a grain of salt.
This is particularly true in fixed income.  The FI funds are put up against benchmarks that often aren't really relevant to the funds stated strategies.
So what I'd love to see is like 5X as many buckets.
1:05
But in general, I'm a big fan, and it's always good reading.
Princess SparklePony
1:05
Is there any way to exploit what's going on with the China trade war via ETFs? Or will there actually be a resolution soon?
Dave Nadig
1:05
Plenty of ways to play the China thing: certainly you could simply go long (or short!) china ETFs, of which there are dozens.
1:06
but honestly, with anything THIS well covered you have to ask yourself what's not priced in.
Whatever the value of a given chinese stock is right now, it represents the culmination of all investors thoughts about the situation.
1:07
So, much like fed watching, you have to ask "is the market pricing this because they think things will drag on? or because they will resolve?"
and then ask if your opinion is different.
I tend to think (and have thought for some time) that this trade war is actually going to be a long term benefit for China, because they are using it as cover to make reforms internally (shadow banking, overinvestment, etc.)
So I'm actually personally quite bullish on CHina/Asia right now.
Hermione Grainger
1:08
Will Brexit happen? Why doesn't the UK just hold another referendum and roll this back?
Dave Nadig
1:08
Boy, this is the bar-bet of the century isn't it.
THere are, as I see it, a few potential outcomes.
1:09
The lest likely to me is "the EU grants a delay until the elections in may, and the UK negotiates and approves a deal by then"
that seems VERY unlikely
The other option is the EU gives the UK LOTS of time.  This strikes me also as very unlikely.
Or, they could use a delay to do a new referendum.  I don't believe there's the political will to do this, and it would be a huge lift.
1:10
So the unthinkable option is the EU tells the UK to pound sand, and doesn't grant an extension, and that leads to a hard no-deal exit in two weeks.
While that's somewhat terrifying, I personally believe its the most likely outcome.  Not like 90% this is what happens, but I think its more likely than any other single outcome.
1:11
I got asked htis morning "so what do you do with that" and my short answer would be "short the pound."  But I don't have the conviction to actually put the money there.  So take that for the namby-pamby answer it is.
Todd Rosenbluth- CFRA Research
1:11
Hi Dave. Do you think the asset managers that focus on active or smart beta will bring pricing down in response to recent cap weighted moves? Or focus more on what exposure makes them unique.
Dave Nadig
1:11
Welcome back Todd!
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