ETF Poppycock
Dave Nadig
<p>The new mob mentality on ETFs is missing a key point: They're a drop in the financial bucket.</p>
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ETF Poppycock - Blog
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ETF Poppycock
By Dave Nadig | September 30, 2010
Page 1 of 3
The new mob mentality on ETFs is missing a key point: They're a drop in the financial bucket.
It would sound like hyperbole to say, "The media is after ETFs," if CNBC weren't literally running footage from Frankenstein. Enough's enough.
I don't know if you caught it, but my friend and colleague Matt Hougan was defending ETFs on CNBC two weeks ago. While I could comment on Matt's slightly damp appearance (he ran across town, literally, for the spot), what's most shocking is the smear campaign perpetrated in the piece.
"A monster in the making" is how Herb Greenberg described ETFs, right in the opening minute. What follows is a mishmash of accusations crammed together, one after another: ETFs caused the "flash crash"; ETFs are responsible for rising asset correlations; ETFs are an "illusion." All this peppered with footage from Frankenstein featuring torches and pitchforks. And all of this, theoretically, because, "ETFs are feeding from the same trough."
Last week, the smear campaign got into high gear again. This time the horrible specter of short-sellers somehow magically breaking the ETF creation-redemption mechanism was raised, clearly by people who understand neither how short selling is reported, nor how ETF creations and redemptions work.
Here's a brief survey of some of the great ETF scare-tactic headlines of the last few months. See if you can guess which ones are mainstream and which ones are from bloggers:
Ten Shocking ETF Charts from the "Flash Crash"
Risks Lurk for ETF Investors
ETFs Causing Volatility? Here's The Real Problem
Problems With Energy Sector ETFs
Why ETFs are "starting to scare" one financial advisor
When Sector ETFs Are a Bad Bet
Can a[n] ETF COLLAPSE?? Very Scary!! Make sure you have physical!
Scary ETF Stories
Market warned about permitting risky ETFs
The thing that's startling to me is that despite all this hype, nobody's making any apt comparisons. If ETFs are single-handedly causing all this high-correlation structural risk and threatening life as we know it on Planet Earth, then surely they must be a dominant pool of assets, right?
Wrong.
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