You know there's probably something a bit quixotic about the crusade to warn of an eventual blowup in the high yield ETF space. I've been railing against those products for years - long before Heisenberg was Heisenberg.
The blowup of the short vol. ETPs reignited the debate and there's certainly a sense in which the wipeout of the Seth Golden crowd seemed to presage something - although what that "something" is isn't yet clear.
The obvious conclusion to draw is that to the extent damn near everything has become an expression of the increasingly ubiquitous short vol. trade, XIV and SVXY were just the tip of the proverbial iceberg. But that's kind of an endless regression. I mean, don't get me wrong, I've been predisposed to shrieking about things that represent "implicit" short vol. strategies, but the waterfall effect doesn't affect all of those strategies equally and if you're not careful, you can wind up in the crowd that spends their time penning short vol. manifestos that read like Revelations.
When I talk about the high yield ETF space, I generally focus on the underlying liquidity mismatch which, to me, looks incontrovertible. Howard Marks and Carl Icahn have var
Please support this website by adding us to your whitelist in your ad blocker. Ads are what helps us bring you premium content! Thank you!