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Dave Nadig
3:12
I don't think you're missing a thing!
3:13
Fact 1: Countertarifs from China have a huge impact on (particularly) Soybean farmers.
Fact 2: The admin is going to buy a lot of Soybeans using taxpayer money.
3:14
Now, one could say "yes, we're collecting money from the tarifs we put on though!" to which my response is "yes, but that ultimately still gets paid for by the american consumer."
So essentially, we're taxing with the left hand, and spending it on soybeans nobody wants to buy on the other.
it's not that surprising.  Also not that economically sensible long term.  It never makes sense to subsidize something people don't want to buy.
(my opinion, im not an economist)
Jerome P.
3:15
What types of ETFs are subject to k-1 tax forms? I've heard those are onerous. Would investors do best to steer clear of any funds that require those?
Dave Nadig
3:15
Hi Jeromer -- so K-1 partnership forms are what you fill out when you are a partner in something.  Technically, most commodities funds are actually structured as limited partnerships.
So thats the short answer: commodities pools.
3:16
However, there are now a lot of commodity ETFs which get around this by structuring themselves as 40 act mutual funds which sit 75% in cash, and invest 25% in a cayman islands subsidiary, which in turn buys the underlying commodities futures, with enough leverage to give you notional 100% exposure
So your dollar of investment = a dollar of exposure.
THey do that to avoid the K1.
3:17
But its worth pointing out that the K1 is really just a once a year headache.  It's not lethal.
Charles B.
3:17
In your ETF 101: Back to Basics webinar yesterday, one of your slides said: “Transparent? Creation/redemption requires transparency.” So: 1) do the new nontransparent active ETFs not require creation/redemption? 2) What is the benefit to an issuer in offering nontransparent ETFs? Wouldn’t they want investors to feel their vehicle is transparent (also since that’s supposed to be one of ETFs’ the key features)?
Dave Nadig
3:17
So there is for sure some nuance here.
3:18
First, Vanguard is not, by my definition, transparent.  Because their ETFs are share classes of mutual funds, they generally only disclose quarterly.
3:19
(And again, some nuance, because their ACTIVE ETFs -- their factor etfs -- do disclose daily).
And the new non-transparent funds wont disclose to US daily, but they will disclose to the special "agent" who sits between the AP and the Fund.
3:20
So it's getting a bit trickier.
But its fair to point out that while historically, C/R required transparency, it's been chipped away at so we now have some exceptions.
But overall, we now EXPECT ETFs to be transparent, and if they're not for some reason, it's the oddball one.
OK, going to wrap up with this last one:
Freedom Fighter
3:21
Any thoughts on the new FRDM etf?
Dave Nadig
3:21
Love love love this new launch, which is from Life & Liberty Indexes in combo with Alpha Architect.
3:22
The core idea here is pretty simple: one of the big concerns about emerging market investing is that you end up with a lot of unintended consequences -- investing in places you might not want to, investing in giant state owned companies, etc...
and many EM countries are in fact problematic, for all sorts of reasons.
The L&L index that FRDM is based on looks at measurable data around freedom - economic freedom, freedom of the press, capital movement, personal freedom, etc etc...
and it creates country weights based on that, then it picks the top 10 companies by size in each country, excluding anything state owned.
3:23
What you end up with is a local-large cap EM portfolio that differs quite dramatically from most Em ETFs.
We have a great article up on this fund right now here:
3:24
Over time, this is a strategy that really delivers so far, lowering risk and increasing returns by just enough to really be worth looking at.
Over the last year, for instance, it beats EEm by about 2%.  Over 5 years, it turns EM from an 8% loser into a 6% winner, etc....
3:25
(and yes, that's not live, as the fund just launched, but the indexes have been kicking around for quite some time.  This isn't a whacky new idea.  They've been developing this for YEARS, and it's had it's tires kicked by some of the very best quants in the biz)
So overall: big fan.
3:26
OK, that's a wrap for today.  Thanks everyone for joining us.  We should be same time/same day next week.  Have a great long weekend everyone!
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