The Dark Side of ETFs The ETF Vortex

Published on
August 19th, 2017
42 minutes

The Dark Side of ETFs The ETF Vortex

The Interview ·
Featuring Steven Bregman

Published on: August 19th, 2017 • Duration: 42 minutes

In the third and final part of this special interview with Steve Bregman, he explains the misconceptions about diversification in the ETF complex and the importance of having aligned interests. In considering why people struggle with the concept of 1,000% returns, Steve also offers a roadmap, to avoid being trapped in the ETF Vortex. Filmed on June 29, 2017, in New York.


  • RW
    Ryan W.
    15 November 2019 @ 06:31
    I love that notion to invest .25% to take a chance of ending up with zero or 1000%. I'm convinced now I should continue buying my lottery tickets as well as a bit of a bitcoin. I may be underweight lottery tickets.
  • WA
    Wissam A.
    9 November 2019 @ 14:12
    This 3 part series with Steve Bregmen hit me like a 10 ton brick. I am lost for words! Very sobering to say the least and absolutely brilliant you folks at RV for doing this. Please bring him whenever you can.
  • HM
    Holland M.
    4 November 2018 @ 19:23
    Lost me on BTC.
  • RJ
    Russ J.
    18 September 2017 @ 08:26
    Wow, this interview series blew me away. Thanks so much RV. I wonder ifwe could get a follow up with more discussion around how he thinks one should allocate a $1mn portfolio.
  • DJ
    Dan J.
    15 September 2017 @ 10:05
    It was not clear to me if he sees the phenomenon of concentration risk in ETFs arising mainly from the natural evolution of a market cap-weighted index (i.e., the ETFs are creating a feedback loop with their own trading activity) or if ETFs themselves are manipulating fund-specific rules (or inventing new reference indices with the same effect). As for commenters' observations about a market crash affecting everything: If it is true that the ETFs have created a class of high-quality low-liquidity orphans with mainly long-term investors, the orphans should be somewhat sheltered from the market effects of a rush for the exit in the ETFs.
  • AB
    Andrew B.
    27 August 2017 @ 09:16
    Familiar with Steve Bregman's ETF arguments through reading the Horizon Kinetics quarterlies over a long period. I disagree with him on BTC mainly because the replication factor in the 800 other crypto's erodes his limited supply argument. However, I am in vehement agreement on where to look for "active stock picking" opportunities - I loved the Norwegian shipping analogy (which I found independently) and other common stockholdings like Bollore and Associated Capital which HK own and fit the Bregman description. I thought part 3 was compelling, because it provided answers, not just questions. Well done Grant and Steve
    • RH
      Rob H.
      13 September 2017 @ 01:34
      You make a valid point with the other 800 Crypto's, yet we also have many metals to invest in yet Gold has always held the test of time for some reason. As the crypto space plays out I think we will start to see clear leaders and Bitcoin being first to market is already seen as the Gold of Crypto. I agree with Steve on how to game the risk by using a small size. It's a flyer for sure.
  • RH
    Rob H.
    13 September 2017 @ 01:24
    I thoroughly enjoyed these and can't wait for the follow-up interviews.
  • RA
    Robert A.
    23 August 2017 @ 00:09
    I have been with Real Vision almost since inception and it has literally, slowly and over time, changed my approach to investing. These interviews with Steve will move me incrementally back into active managed small cap funds outside of the ETF vortex----and THAT is a big statement for someone who has been a Vanguard devotee for 30 years.
    • PC
      Peter C.
      29 August 2017 @ 01:11
      you can have both
  • AS
    Aki S.
    28 August 2017 @ 08:44
    Why did it take apparently at least 2 months for this to air here!?!?!? I think 2-3 weeks would be acceptable. It isn't like it takes even that to edit this kind of filming. I would be very pleased if we subscribers got more up to date videos!
    • AS
      Aki S.
      28 August 2017 @ 08:46
      Othervise superb stuff!!! Much appreciated! Just so important info that I want to see these asap! :)
  • WM
    Will M.
    19 August 2017 @ 19:39
    I have been familiar with some of the negative comment about ETFs from others for about a year now. This was an excellent conversation about their drawbacks. I think the Exxon and FAANG stories from an earlier part really should bring the issue home to all RV viewers. Of course like anything else its all a question of when does a bubble get finally burst. Having witnessed the dot com fiasco and then the mortgage debacle, i read several good articles of individuals shouting that this was all a disaster waiting to happen countered by even more folks claiming it was a new era or the statistics didn't support the wild overvaluation claims. We all know what happened next. The market could easily soar to 30,000....but eventually it will crash down wiping out baby boomers and probably Gen X at the same time. There will be no time to recover. This series just provided yet another reason to be very very careful indeed. When this dam bursts, it will worse than dot com and mortgage bust put together. This next time sovereign debt will collapse and the only thing left may be initially cash notes and gold which which to get back into the game at the bottom. Great stuff Grant. Love RVT.
    • MO
      Mike O.
      19 August 2017 @ 22:45
      As far as the bubble bursting, I have been hearing that it may likely involve the bond market (e.g. Alan Greenspan's recent interview on Bloomberg warning of a bond market bubble) ... particularly the sovereign bond market. I wonder how that will play out, if in fact this is what transpires. Some speculate that this money will simply flow into other investments, e.g. precious metals and miners (at least those who promote and follow these things say so). An interesting comment that I heard recently by Craig Hemke (aka Turd Ferguson) is that the ECB is running out of bonds to buy and the Fed balance sheet reduction will simply allow the European bank (and maybe BoJ as well) to buy US assets ... so, a bursting that might have happened sooner could be postponed since the assets will simply be moving location instead of rolling over. I know so little about these markets (e.g. bonds) and their dynamics (which is why I subscribed to RealVision TV in the first place). Hopefully, others with more insight into these things can share as I wait for a critical mass of understanding to develop from watching these videos. I'll look forward to your comments.
    • JM
      Jay M.
      26 August 2017 @ 11:59
      Mike, I was an institutional bond trader and I would like to share with you that ECB is in the business of following its own mandate and the BS reduction in the US has very little to do with that specifically. Here is the definition of the ECB bond buying program: "The expanded asset purchase programme (APP) includes all purchase programmes under which private sector securities and public sector securities are purchased to address the risks of a too prolonged period of low inflation." (...) "Monthly net purchases in public and private sector securities amount to €60 billion on average. They are intended to be carried out until the end of 2017 and in any case until the Governing Council sees a sustained adjustment in the path of inflation that is consistent with its aim of achieving inflation rates below, but close to, 2% over the medium term." Here is the link, where you can read up on the mandate: Whenever I hear or read something I am not familiar with, I hit the Web and put in my work to further my own understanding. The bond market is called the "smart money". The yield curve leads other markets in a significant way. Learn about it imo and learn about determining where an economy stands currently ito of its business cycle to drive your investment approach and timing. Cheers mate - JM
  • FB
    Floyd B.
    25 August 2017 @ 22:21
    somewhat interesting but two criticisms, challenge on the Bitcoin,thought you believe Bitcoin is a bubble and Steve could have discussed his ETF concerns in half the time with better and more specific examples and no discussion of liquidity of ETF's ,leveraged ETF's as concerns. Going to give it a thumbs down, sorry
  • MS
    Matt S.
    25 August 2017 @ 13:13
    yeah it was good although I don't think BTC is going up 1000x ever again. Perhaps he also included alt-coins in his analysis.
  • SD
    Stephen D. | Contributor
    25 August 2017 @ 05:20
    This was a remarkable and somewhat terrifing series of interviews, as always brilliant;y stewarded by Grant Williams. I profoundly agree with Steve's comments about avoiding the agency problem by focusing on founder owned businesses. However, very minor quibble, Steve Jobs was not one. In his second stint at Apple, and at his death, he owned more Disney stock than Apple- due to Dinsey's takeover of Pixar.
  • NH
    Nigel H.
    24 August 2017 @ 12:04
    A great series but would have appreciated even more depth... what about all the synthetic ETFs that track indices? If you are a UK or EU investor wanting specific EM exposure in your SIPP then only broad index physical ETFs are available... there are no other offerings (unless trading in margin a/c). Anything China or India specific is a "synthetic ETF", e.g. these products from SocGen/ Lyxor: "...the performance of the ETF is generated by a Performance Swap, which is provided by Societe Generale Corporate & Investment Bank (SGCIB)"
  • IP
    IDA P.
    20 August 2017 @ 12:47
    I like this interview, but his gold / bitcoin comment is contradictory. He states that when gold demand goes up so does supply, while Bitcoin supply is limited. However he doesn't consider that blockchain technology is not limited, that if there is strong demand for bitcoin, other cryptocurrenices will be created , as is already happening, so why should one prefer Bitcoin to gold if not other for illegal tranactions?
    • TM
      The-First-James M.
      21 August 2017 @ 11:29
      To move into and out of Gold with dramatically decreased transactional friction (via storage operators who accept and offer Bitcoin (BullionStar being one). That's one use case anyway.
    • ns
      niall s.
      22 August 2017 @ 20:19
      Very good point by Ida , the only reason Bitcoin has any value at all is that it "says on the tin" they can only create a limited amount . This has created enough interest that those who bought in early for pennies are now rich , and the bitcoin community now has to find others to help out the people that bought for say 1000 $ to get them safe .I doubt if I will be parting with 3 or 4K $ for a bitcoin as I am perfectly happy with my daughters virtual farm animals which only cost me forty bucks , before I disconnected her Zinga account from my Credit Card .
    • PN
      Paul N.
      23 August 2017 @ 23:42
      In the early days of the internet people argued that online businesses would never have any value because anyone can make 1000 copies. Yet today the online world consists of several virtually unbreakable monopolies like Google & Facebook. Now people are making the same argument about bitcoin and it is flawed for the same reasons. You can copy the code but you cant copy the infrastructure, users, miners, businesses, and 2nd layer tech. It's all about the network effect.
  • DG
    Daniel G.
    23 August 2017 @ 17:07
    Where are parts 4-6? I need more of his vision
  • SS
    Sam S.
    23 August 2017 @ 15:00
    This three part series makes me feel like I'm part of something special before the crowds arrive. RV has a way of accomplishing this critical part of getting it right before the crowd blows it up. Like being a fly on the wall with a camera and a microphone. Thank you Mr. Bregman and Mr. Williams!
  • TH
    Tim H.
    20 August 2017 @ 23:05
    I am not really sure I understand the 'big reveal'. We are in a bubble - yep, pretty sure the vast majority of sane individuals know this. Real Vision have been telling us since ithey launched, over three years ago now. ETFs do not represent what the buyer thinks they do - I am not sure on this, their holdings are easily downloadable. This is not hidden information - they are not lying, so why the big conspiracy? As far as I am aware - and correct me if I am wrong - QQQ is weighted the same as the Nasdaq 100 index. SPY is weighted as the S&P500 is. XLF is weighted the same as the S&P 500 Financials Index etc. etc. How is this news? With regard to ETFs creating additional risk in the system - did we not learn this in August 2015? Once again, not sure why this is being presented as news....
    • EF
      Eric F.
      20 August 2017 @ 23:14
      Food also has to list ingredients on labels, so you could apply the same argument there. But I'd argue you're wrong and junk - be it food or finance - is often marketed as something it isn't. Also, how many people actually read the labels / check the listings? Not many I suspect.
    • TH
      Tim H.
      20 August 2017 @ 23:31
      I just checked QQQ and SPY quickly, they are both the same as the Nasdaq 100 and S&P 500 indices respectively. I am not wrong, he is just arguing something that is not particularly 'big reveal' worthy. There is no conspiracy here or important point to take home - every ETF has its holdings listed, that one can read before investing.... The fact fund managers are making daft decisions based off incentive is not news either, has always been the case and always will be. One of the first lessons Munger teaches - understand incentives first. There are trillions of dollars worth of sovereign debt trading at negative yields - yep, we have known about this for a year or more now - so what? Nothing is priced correctly due to the suppression of interest rates - this is not news either. Bitcoin might go really high - gee, have not heard that before on RVTV. Once again - August 2015 provided a pretty clear demonstration of what can go wrong with the ETF universe... Not really news. Once again this is simply an RVTV series that screams 'There is a big bubble!' - I do not doubt it, but that has apparently been the case for over three years now. Market still goes up regardless.
    • JH
      Jesse H.
      21 August 2017 @ 08:38
      Tim - interesting points. It sounds like you're quite familiar with the ETF market. If so, would be interested to get your thoughts on the manipulation of P/E calcs, which Bregman describes in Part 1. My background is as an engineer, and the "massaging" of the P/E data set my BS alarm off. For example, harmonic means are used when considering distortions in AC electrical waveforms, but why are they being used to describe ETF P/E's?! Welcome your thoughts here. There is either some nuance I am missing or this is pure financial "innovation." Secondly, I agree that this series was missing a punch line -- there were many threads that contributed to the "spuriously sold, misunderstood, overvalued" story of ETFs, but to me this wasn't news either. The P/E manipulation and mispricing of ETF constituents were details I wasn't fully aware of, but what I found brilliant about the series was the narrative Bregman and Grant were telling together, describing the entire ETF story and providing an in-depth look at the evolution of ETFs within a historical framework. Thirdly, you make the point that incentives are key to understand first (Munger). I respectfully disagree: my life experience suggests that you need to start with a man's motives, and then you will see where the incentives lead him. In my experience, character drives motives, which in turn drive how we approach incentives. This is one of the core reasons (if not, THE basic driver) for the 2008/9 financial crisis, in my view -- if we had had a warped incentive system (large financial rewards), but operated by a group of people with character like Bregman's, they would have either walked away (as he did, in fact, when faced with an analogous decision) or changed the rules because they would have had the internal character to reject excessive financial rewards at the expense of investors. Granted, I may be oversimplifying a bit here, as there are herd effects of large incentive systems which impact the decisions even of individuals with strong character. But, on a deeper level, when it comes to key decisions, I firmly believe that incentives are secondary, while it's the heart of a man that drives him.
    • TH
      Tim H.
      21 August 2017 @ 10:51
      I am certainly not familiar, more an interested observer. I have traded a few ETFs and downloaded the holdings prior to doing so, if I am doing that I expect most others would be. Frankly anyone who has had an RVTV subscription for a couple of years should be aware of those issues pointed out, with the possible exception of the P/E calculation. I guess that would depend on how seriously one takes the P/E measure, there is a famous quote from PTJ that sums up that argument pretty well for me. With regard to calculating P/Es, I am not sure there is a right answer is there? Do you simply average by weight? If there are negative P/Es, how would you calculate them? Perhaps that is the real problem here? If one downloads the holdings and does a bit of quick research, one could easily calculate the P/E as they see fit. Again, whilst it might be a grey area - I am not convinced of any great conspiracy here. To me the series came across as an attempt to promote active managers, I notice a couple are recommended further into the video. Not sure how that would really change anything, weren't most active managers in the same securities prior to the crisis? Lots of sheep and group think, no? Does not seem that dissimilar to the situation with ETFs.... The ETFs are much cheaper to own mind you, which is a big problem for active managers who have been under performing for a long old time now. Perhaps I am being overly critical, but prior to watching the series I read the comments and they seem to suggest this was something revelatory. Perhaps I am more cynical than you, but I find it hard to believe that was the sole reason Bregman left. Indeed if his character is as you suggest, he would have marched in with his lawyers and demanded change, would he not? Instead he went off and created his own fund - almost sounds like the reason he needed to go it alone more than anything else.
    • AV
      Alex V.
      22 August 2017 @ 06:54
      Tim, if you recall the 2007/8 crisis, there were warnings as far back as 2005 from the likes of Prof Steve Keen and William White in 2006. Yes, RVTV guests have been early as always, and it does feel like they've been wrong for the past 3 years, but eventually they will be proved right. The inevitable has been delayed longer than usual due to the unprecedented amount of coordinated Central Bank tampering this time round.
    • TH
      Tim H.
      22 August 2017 @ 09:58
      But that is sort of the point, is it not? Eventually everyone who predicts a crash will be proved right, does not really mean anything though does it? The next crisis will have those such as ZeroHedge claiming victory, means nothing.
    • WG
      Wade G.
      22 August 2017 @ 15:02
      I can't conceive of a rationale for computing a harmonic average rather than simple weighted average. The harmonic approach will underweight outlyer PEs, and since the distribution will be positively skewed, it will underweight high PEs. But there's no rationale for discounting that data; it's intentionally misleading. It's grossly compounded by the simple set aside of components with no earnings in the calculation of that average. Obviously a company w/ no earnings has a nearly infinite PE. If you think its misleading to choose an arbitrary high number for purposes of calculating an average (say, avg PE of other sector companies w/ lousy, but existing earnings), then why not something like this: Simple weighed avg PE = XX for 85 of the component stocks; 15 stocks excluded because they have no earnings and a PE can't be calculated. That's simple, accurate and clear. It avoids the conveniently forgiving tactics employed presently. Or maybe something more blunt: "85 of the companies in the ETF that actually have earnings produce a simple weighted avg PE of XX. The price you pay for the other 15 components buys zero earnings, hence the valuation metric used, PE, does not exist for them. The point is that the presently used tactics and description were designed to paint a more favorable picture than exists in reality.
    • TH
      Tim H.
      23 August 2017 @ 12:22
      Maybe - I am not sure either way, but let's assume you are correct and they have deliberately made the P/Es on this product look lower than they actually are. A couple of things I would note - firstly there does not appear to be a generally accepted way of calculating P/Es on these products, secondly the P/E is only one variable one can use to determine whether a product is worth buying or not. I just do not see the big fuss personally, it is like when Apple claim their iPhones are life changing or what have you, is that really true? I prefer to look at it as dodgy marketing rather than something more sinister. Not that this makes it right, just my opinion.
  • TM
    The-First-James M.
    21 August 2017 @ 11:49
    I would love it if Realvision could arrange a Bitcoin merits/demerits debate between Steve and Jim Grant (who doesn't get it at the present time). I think it would be a fascinating discussion to be a fly on a wall of...
    • PU
      Peter U.
      23 August 2017 @ 08:39
      Add Howard Marks to that debate. Howard believes bitcoin is a sham.
  • CM
    Carl M.
    23 August 2017 @ 02:50
    ....And yet again, another, entirely new perspective...BRILLIANT!!!
  • PO
    Paul O.
    23 August 2017 @ 01:44
    First, I very much appreciate the RV crew giving Mr. Bergman the time and space to walk us through these issues as I think that it is one of the most important issues facing investors today. What I would like to see in a follow up piece is an explanation of what happens to the supposed liquidity of an ETF when the machines sell. I am not quite sure I understand the mechanics of how an ETF can lose 35% of its value if the underlying NAV is only down 2.5%, which is what happened to iShares Select Dividend ETF (DVY) in August of 2015. Is it the over-weighting to a few stocks? Is it that the turnover of ETF is exponentially higher than the turnover of the underlying stocks? Again great interview!
  • WS
    William S.
    22 August 2017 @ 17:29
    Great interview..a question: Take Vanguard as an ETF example, aren,t they based intrinsically off their mutual funds? So do these funds then have the same underlying problem - just what are you buying?
  • JD
    Josh D.
    22 August 2017 @ 16:45
    What is going to stop the flows into etfs by the swiss bank? Or population at large? This is the central question that needs to be answered
  • Sv
    Sid v.
    21 August 2017 @ 16:29
    Bit coin can't ever be stolen, hacked, defrauded, etc. Do you really believe this?
    • CH
      Crag H.
      21 August 2017 @ 19:56
      Can it be stolen? Yes. It's digital cash. Keep your wallet safe. Can it be hacked? Participants in the ecosystem (exchanges, wallet providers etc) can and have been but bitcoin itself have never been successfully hacked since inception. Can it be defrauded? No. You cannot create fake bitcoins or spend coins that you don't own.
  • GM
    Gerald M.
    21 August 2017 @ 15:29
    Excellent interview! There is always more than one viewpoint to a story and that seems to never get discussed (we always get a one-sided view, which is OK). As Steve said, fundamentals don't matter. It's important to recognize the environment you are in and not fight it (you will lose - everytime). The world has changed and the market doesn't care what anyone thinks. There is still a boatload of money in active that can move to passive. The Central Bank can but stocks (they have unlimited resources and haven't even started). The baby boomers have to reach for yield and so they will. Millenials, a larger cohort than the baby Boomers are stepping into the market. Basically, trade what you see and not what you think you know. To the frustration of many, this ETF thing could go on for the investable lifetime of the Babyboomers.
  • AC
    Andrew C.
    21 August 2017 @ 05:29
    You've gotta interview Josh Brown or Barry Ritholtz for a rebuttal (I believe they are pro-indexing enough!)
  • TF
    Terry F.
    21 August 2017 @ 03:01
    Excellent interview, Grant. Home run. Especially the third part. At first, I thought this was going to be a discussion about how heavy ETF ownership would dramatically affect the eventual market unravelling. I think this was touched on slightly in part one, but overall I guess it wasn't discussed. You might wan't to put on a short video on how the large scale ownership of index ETFs would impact a bear market. That would be interesting. This interview is a good example of why I subscribe. Thanks.
  • NI
    Nate I.
    21 August 2017 @ 01:02
    Steven is right on the money with the owner-operator concept. I have used it very successfully for decades. Insider ownership is my #1 screening criteria in stock selection. It often requires great patience, but the rewards almost always come through. Good interview Grant. Thanks.
  • RS
    Rick S.
    20 August 2017 @ 20:11
    Great series. I appreciated the way you saw a topic of true interest, and allowed a knowledgeable speaker the opportunity to present the case. Thank you.
  • js
    jacob s.
    20 August 2017 @ 09:52
    holy shit. blown away. was not expecting him to touch on bitcoin.
  • JH
    Jesse H.
    20 August 2017 @ 07:55
    Excellent series, Grant. One of the top five I've watched so far, the others that stand out being the first interview with Daniel Want of Prerequisite Capital Management and Raoul's interview with Mike Green, which totally blew my mind. The only part I found disappointing was that the depth of his analysis and his thoughtfulness in discussing ETFs were belied by the brief and relatively glib conclusion that he doesn't see a market crash / correction coming. He seemed to provide very limited explanation of this key conclusion, and I think this discussion could have been fleshed out more. This conclusion struck me as rather ironic, as there are reams of evidence from the first two parts of the interview that the ETF market is a proverbial house of cards. This doesn't mean a crash is inevitable, but in a very real sense it means that instability is being artificially increased in the markets via these product offerings and the effective "automatic bid" underpinning them. And, crashes are not just about things being overvalued or fraudulent products being offered, both of which he shows are now happening with ETFs. Crashes in my view are about the probability of systemic risks weighing on an already unstable and fragile system. This is the nature of a physical system collapse or divergence, which is always non-linear by the way; and this is mirrored in financial systems and even in human behaviour (e.g. when your spouse blows up at you over something tiny...but it was the 3 things that happened before that and your mild comment was the final straw! : ) Any factor or product which has an automated buy/sell, absorbs significant liquidity, and which significantly increases instability because it is so poorly diversified, is likely to result in greater market sensitivity to triggers, and therefore a greater probability of a systemic correction (or collapse) at any time. To quote Mike Green, whose grasp of this stuff is just mind-boggling, an automatic bid can very easily become an "automatic sell" with the backdrop of factors we see now in the markets and indeed, the world.
  • SP
    Steve P.
    20 August 2017 @ 02:54
    Superb interview Grant. I'm sure a great learning curve for most of us. Talking bitcoin was an outlier though. My big question with bitcoin is this - with now no way out of over indebtedness for the western world except through the historically accepted method of fiat currency debasement via the printing press, will governments allow bitcoin to upsurp their respective fiats knowing that the door closes for future devaluation opportunities. I don't believe governments/central banks could live with a bitcoin standard longer term. Historically, various governments have rescinded their gold standards to circumvent the money printing cap and if one thing in history can be taken for granted it is this; that governments will always overspend to woo voting constituents thus building up debt obligations. This eventually leads to attempts to print their way out of the dilemma that over indebtedness creates. It's never different this time and for this reason alone I don't think bitcoin will ever be a widely accepted median of exchange.
  • PS
    Peter S.
    20 August 2017 @ 02:30
    Brilliant. I couldn't help but binge watch the whole series. Going to be a fantastic buying opportunity once all of this sorts itself out. Unfortunately I'm still not sure the best way to cross that rubicon.
  • MR
    Marten R.
    20 August 2017 @ 01:02
    Big thumbs up. Great series. Well done RV and Steve Bregman / Horizon Kinetics team. Very deep dive and great job at 1. identifying all the 'dots' in this mystifying market puzzle and then 2. connecting them. Brilliant. But... on a personal level... i see the puzzle... but I can't solve it. It's a bit like one of those 3d pictures you have to stare at to see the picture, within the picture (to this day, I have never been able to see a single on of those...). So, great - indexation has been corrupted. ETF's are rigged. The automatic bid levitates 'the market' within which there are the liquid favoured few and the illiquid disregards. Let's say I go ahead and buy some quality companies at 50c on the dollar. When the liquidity tide goes out (when, not if)... ALL stocks will get hammered, including the ones in my portfolio. Relativity is important I guess. Cash is a real asset class and a high allocation to cash would be wise at this juncture. Great optionality. It's important to be liquid when the market is not. I'm not sure what (or when) will disrupt the liquidity tide to such a degree that there is a tipping point... but I know it's coming.. The more time that passes without such an event... the closer it is. When the biggest bubble in history bursts... the biggest opportunities in history... will present themselves. But for now, we wait for a pin. MR
  • HK
    H K.
    19 August 2017 @ 22:43
    mixed feelings on my side: Positive: By far the best criticism of the 'phenomenon' I heard so far including deep dive into index construction. Negative: I am not really convinced by his solution or rather way around. As he points out, indices/ETFs need two things in stocks to be able to scale big time, 1/ decent Float MCAP and 2/ decent liquidity. Everything above a certain threshold you would (bit simplified) put in broad market index. So Steves advice to go outside the ETF world essentially means use stocks below those thresholds as per his mentioning of the micro/very small cap guy (forgot the name). But when a crash occurs (and I am not good at market timing), I would rather own a cheap broad market ETF. I assume (using his examples) I would rather see a bid on FAANG, McDonalds, etc. compared to Micro Caps or other pockets that don't make it into the indices. Interesting that he (his firm) is also in the index business (at least if I understood correctly in the end). But again - for sure tons to think about and great insight. Thanks RV and Steve.
  • GS
    Gordon S.
    19 August 2017 @ 18:07
    Good interview. There were some interesting points discussed and although I agree with most of them, I found some points to be exaggerated a little too much for my taste. I guess most retail investors don’t look at the components of their ETF, but I hope that any more “advanced” manager figures out the holding components? We were not presented with complicated models and deeply hidden things here… Selling BTC as a 1000x story may be a little too optimistic? I agree with investing a small part of your wealth into it, but BTC at a market cap of $700 trillion? Hum… A 1000x for smaller ICOs? Maybe, but then you are back at being a venture capitalist. In conclusion, when does Steven Bregman bring out his anti-ETF-ETF? :) P.S.: By the way, I was surprised not to hear Russel Clark talk more about his ETF strategy in his RV interview, as described here: (or later from Goldman Sachs: )
  • AM
    Artur M.
    19 August 2017 @ 15:56
    No voice on the last minute of this last section. But greats interview!
  • as
    andrew s.
    19 August 2017 @ 15:36
    No sound on Grants summary