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Dave Nadig
2:59
Howdy!  And welcome to ETF.com Live!
You can enter any questions you have in the box at the bottom of the page, and I'll get to as many as I can in the next 30 minutes or so.
3:00
A few housekeeping notes: I'll be at the Wealthstack conference in Arizona starting this Sunday, so please do come up and say hi.
Also, I'm doing a kind of "live on video" version of this as a webinar in two weeks with my colleague Cinthia Murphy. We'll be tackling ETF analysis issues in realtime, showing the tools we use both on ETF.com and elsewhere, as a kind of "how to."
(That's on September 18th, at 2PM Eastern)
And last but never least: today's soundtrack is Amanda Palmer's newest:
So let's get to the questions!!!
John
3:02
Hi Dave, thoughts on the latest passive critic saying passive is like CDOs during the Financial Crisis? Aren't ETFs just a wrapper to access securities just like a MF? How can there be a bubble in something that is not an asset class?
Dave Nadig
3:02
We got a few about this.  First, here's the story in question:
I think this mostly got traction because of who's saying it, not what's being said.
3:03
It's pretty much the same "index funds are evil" argument we've been hearing for quite literally half a century at this point -- maybe a few years shy.
The point Burry is trying to make (and it was from an interview, he didn't write a manifesto) is essentially: index investing is dumb money that has inflated the overall level of the markets because everyone just buys everything.
3:04
and at the same time, there's no price discovery anymore, so the market's not working correctly.  Price discovery is eroded.
The problem with this line of thinking is that the math suggests its wrong.  single stock volumes have skyrocketed, the dispersion between the winners and losers in the S&P is as wide as its ever been, etc...
3:05
At the risk of just paraphrasing it, here's a link to a great, lengthy take down of this from Ben Carlson
I was literally outlining a rebuttal article and Ben posted it, so I threw mine away.  He makes almost all the points I'd make here.
3:06
Where I'd quibble with Ben is just in this: if all your assets are in 5 ETFs, instead of in 500 individual securities, and you decide to sell and go to cash, then it's now slightly easier for you to express that opinion.
3:07
Ben makes an odd claim that theres no market impact.  I guess I see his point, but of course -- if everyone heads for the exits, there's market impact, but that's really not a point in this debate.  That's true if everyone sells their contrafund too.
People always try to make this too complicated: if investors all decide to sell, prices go down.  The vehicle is irrelevant.
Lydia
3:07
Do you think ETFs/indexes make tactical asset moves easier and cheaper?
Dave Nadig
3:07
Hi Lydia: Yes!
3:08
Back to the point about being "passive" -- the most active traders I know -- the ones who make 20-30 trades a day, and try to go home flat.  They all lean HEAVILY on ETFs.  They probably aren't using SPY, they're using sectors and thematic funds and maybe leverage.  But they're using ETFs with the occasional "name play."
3:09
So if you're trying to, for instance "call Brexit" (which I certainly wouldn't recommend, but I know people are doing it), it's a whole lot easier to do that with a GBP ETF, or a UK equity ETF, than it is trying to figure out which specific London names you want to trade, waiting for the market to open early in the morning, etc....
3:10
Of course, the counter argument is that "easy and cheap is bad."  That's the argument Vanguard's Bogle used to make regularly.  That ETFs made it too easy for bad investors to make bad decisions.
(Personally, I think choice is good).
Nemo
3:10
Is there any functional difference with First Trust's defined outcome etfs tracking SPY instead of the S&P 500 price index like innovator's version?
Dave Nadig
3:11
So, while I'd need to read very very carefully, to my eyes, both strategies use FLEX options to create capped/buffered positions.
So the differences (when the FT products actually launch) will be about the nature of the caps and buffers, expenses, and trading more than anything else.
3:12
I am quite sure there are nuances in the way the portfolios are constructed when we see it all live, but fundamentally, these will be two sets of products using the same underlying to create similar results for investors.
(I should disclose: Flex options are traded on CBOE, the parent company of ETF.com).
Wyatt
3:12
Re the VanEck/SolidX bitcoin ETF, is this going to get approved by the SEC soon, or what’s the status?
Dave Nadig
3:13
So, you probably saw this news:
3:14
which is that Van Eck is making shares of their underlying trust available over the counter to qualified institutions (100m and up).
There's a ton of deep nerdy plumbing I could get into, but importantly, no, this is not the launch of a bitcoin ETF.
It's very similar to what Grayscale does with GBTC, although its coming at it from a slightly different angle.
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