One Manager Warns: “Today’s Weapon Of Mass Destruction Is A 3-Letter Word: ETF”

“The weapons of mass destruction during the Great Financial Crisis were three-letter words: CDS (credit default swap), CDO (collateralized debt obligation), etc. The current weapon of mass destruction is also a three-letter word: ETF (exchange-traded fund). When the world decides that there is no need for fundamental research and investors can just blindly purchase index funds and ETFs without any regard to valuation, we say the time to be fearful is now.”

Look! More Crazy ETF Charts

“It’s not entirely clear when the “enough is enough” moment will come in terms of highlighting charts that illustrate the epochal (and increasingly dangerous) shift to passive versus active management, but I don’t think we’re there yet.”

3 Weekend ETF Charts: Any Questions?

Two of this week’s most popular posts were about ETFs. Which isn’t surprising because after all, ETFs are becoming so ubiquitous that one is left to wonder whether they’ll eventually be the entire tape. I, for one, think this is a really, really disturbing trend. It’s not that passive, low-cost investing isn’t a good thing.…

Here We Go Again: The ETF “Volume” Fallacy

Here we go again. We do not pretend to be ETF sponsors (we’re not) and we do not pretend to be APs (we’re not), but we do pretend to understand a very simple concept which Howard Marks explained as follows more than two years ago: The ETF can’t be more liquid than the underlying. That’s…