The Dark Side of ETFs – The Truth in ETFs

Published on
August 19th, 2017
Topic
Liquidity, ETF
Duration
40 minutes
Asset class
Equities

The Dark Side of ETFs – The Truth in ETFs

The Interview ·
Featuring Steve Bregman

Published on: August 19th, 2017 • Duration: 40 minutes • Asset Class: Equities • Topic: Liquidity, ETF

In part two of our extended interview on the hidden dangers in ETFs with Steve Bregman, Grant Williams digs deeper to look at the scarring effect that 2008 had on investors, as well as the lengths ETF providers go to construct products that work specifically against the best interests of investors. This is something that all investors need to understand. Filmed on June 29, 2017, in New York.

Comments

  • BF
    Brad F.
    19 August 2017 @ 12:57
    Amazing series, I am completely hooked. Quick question: the annualised stock market returns mentioned at the end of this section. Are they inflation adjusted?
    • JG
      James G.
      19 August 2017 @ 16:33
      Anxiously awaiting the answer...great question
  • WM
    Will M.
    19 August 2017 @ 17:36
    Ok, i am going to forget about shopping and lunch with the wife ........ and watch the final installment with sardines on toast.
    • JH
      Jesse H.
      20 August 2017 @ 06:05
      Gotta love sardines on toast! : )
  • PB
    Pieter B.
    19 August 2017 @ 19:51
    One of the best, if not the best piece so far!
  • PB
    Pieter B.
    19 August 2017 @ 20:08
    Ok i just finished it: for me this is THE best piece so far on RV.
  • BF
    Bruce F.
    19 August 2017 @ 23:29
    Brilliant. Consider GDXJwhere they recently changed the rules. Note what happened to the shares dropped
  • DR
    Daniel R.
    19 August 2017 @ 23:46
    Excellent! This answers and confirms what is really going on in the markets. The macro perspectives and historical context are enlightening and frightening. Now what do we do in this age of investing
    • JH
      Jesse H.
      20 August 2017 @ 06:04
      Absolutely. My two cents, for what it's worth: buy gold, hold / spread cash, buy real physical assets and make yourself and your life as physically resilient as possible to the next inevitable (and possibly much uglier) downturn.
    • EF
      Eric F.
      20 August 2017 @ 23:08
      Surely there are also shorting opportunities here Jesse, or too risky / hard to time?
    • JH
      Jesse H.
      21 August 2017 @ 07:44
      Eric - yes, I think there are, but I like put options over shorts. I would say, to your point, that most shorting opps are too risky and hard to time - your sizing and timing have to be picture-perfect and you also need a very strong stomach, as I believe that when you short a stock, the losses are theoretically unlimited. If you're asking me where I would go short: I am contemplating buying puts on some of the main US indices at this stage, based on the DD I've done (via RV, Gundlach, Bloomberg, my own thinking, etc.). To be clear, I am not a professional investor, and I do not provide investment advice in any form or fashion, so you will need to do your own homework and arrive at your own conclusions. But, it's my view that we have a high probability of some type of correction within the next 6-12 months.
  • MR
    Marten R.
    20 August 2017 @ 00:23
    oh dear. Wall street has done, what Wall street does and turned something like the concept of indexation into a monstrous inversion of itself. Like mortgages... indexation was supposed to be relatively lower risk (market risk vs. security risk), low cost and therefore relatively better returns.... BUT.... now ETF's are rigged. the automatic bid devours the favoured and destroys the illiquid. Just like... turning AAA rated paper into stinking piles of excrement. This time S&P is the facilitator. Last time, it was the ratings agencies... Rhetorical question... what happens when inflows... become outflows. I'm tipping a no bid market. As Buffett famously said, in response to a rising tide lifts all boats... 'when the tide goes out, you get to see who's been swimming naked...' The liquidity tide WILL go out... and then the entire market it seems... will be nude. I feel sick. MR
  • AE
    Andy E.
    20 August 2017 @ 03:13
    Great series of interviews!! Fascinating!!!
  • JH
    Jesse H.
    20 August 2017 @ 06:01
    Awesome stuff - Bregman has to be one of my all-time favourites so far. Such clarity, but also a completely unassuming way of presenting and distilling the data and conclusions. He has a certain Atticus Finch manner about him of honesty and dignity which I find totally refreshing. The selection of historical periods through which to look at returns is quite sobering -- and something that strikes me as the hubris of modern humanity: the hockey-stick charts of 8% CAGR showing how saving money and investing it in the market is "always good" for retirement. Nothing could be farther from the truth -- all it takes is a spreadsheet and some arithmetic to show that where you invest in the cycle hugely impacts your total return over time. Those who don't know / understand history are condemned to repeat it.
  • SS
    Sam S.
    20 August 2017 @ 15:24
    Bubble for sure, but very complex. Love this stuff. It's incredible. Going back in time to uncover the real data was awesome. Grant you spent so much time listening and it was fantastic as though you were sitting with us in the audience being blown away.
  • GF
    George F.
    21 August 2017 @ 03:20
    He brings up McDonald's valuation. He also says most of historic returns are from dividends. But these days McDonald's is not valued on the basis of its PE. It is valued on it's dividend of 2.5%, which is thought to be secure and growing. Once you accept the US long bond is 3%, Coca Cola at PE 48 becomes tempting because of the 3.5% yield, which has been growing since 1962 atleast. So these shares make sense atleast to the people who buy them.
    • tk
      tim k.
      21 August 2017 @ 16:03
      This is exactly why TGT has sold off in the way it has. Retail would be the opposite of everything he said. The Exxon Mobil reference is beautiful. I remember looking at it a while back saying something doesnt seem right. Great vid
  • LV
    Liam V.
    21 August 2017 @ 21:48
    For those of you who don't follow Horizon Kinetics frequently, their quarterly commentary is on their website for free in a similar manner and always a great read (usually 15-20 pgaes)
    • VV
      Vanessa V.
      24 August 2017 @ 03:01
      Thank you for the recommendation :)
    • AW
      Anak W.
      22 September 2017 @ 22:13
      thank you for your recommendation.
  • MC
    Michael C.
    22 August 2017 @ 02:15
    Excellent interviews. It really does feel like we are reaching the limits of how this works. The unwind promises to be interesting...
  • HJ
    Harry J.
    24 August 2017 @ 02:41
    Shit storm comming. Cash and gold may loose for a while but not compaired to the losses when this crazy market unwinds. Shit storm........
  • RP
    Roberto P.
    28 August 2017 @ 15:43
    House don't generate cash flows, however we have seen time and again prices going up because rates going down. Can we apply this logic to the stock markets ?
  • MC
    M C.
    29 August 2017 @ 19:59
    He's conflating global central bank policy - interest rate, asset purchases etc with ETFs. While I'm sure he is a very smart and well intentioned person, when it comes to ETFs he is not well informed on some very basic, fundamental points of who, what, how of ETFs. There is some really good research out there...dont waste your time on this
    • AW
      Anak W.
      22 September 2017 @ 22:12
      i am new to finance but know all the basic. would you mind explain you points? i am very persuaded by his interview, so i would love to hear from different perspective on etf.
  • NB
    Nils B.
    31 August 2017 @ 12:52
    Which study is he citing towards the end? I can't really hear the name. While I agree with the sentiment of his point it almost sounds like he's quoting the highs and the lows, in which case his point wouldn't be quite as strong since looking at the S&P500 over the last 100 years for example, between the high in 1929 and the low in 1982, you'd actually see a negative (geometric) average annualized return. A few years here or there make a huge difference.
  • AW
    Anak W.
    22 September 2017 @ 22:09
    wow.
  • CM
    Chris M.
    8 October 2017 @ 20:10
    Abelson and Siegfried study on collecting stock prices for last 100 years or so.
  • CR
    Cristian R.
    16 May 2018 @ 09:47
    Oh good, my under-performance the last couple of years is because I'm clever.

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