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What people fail to see with this is that Fidelity (and other large money managers) effectively control supply. You think "oh great zero ratio!" but in reality
by bitxbit 8y ago
What people fail to see with this is that Fidelity (and other large money managers) effectively control supply. You think "oh great zero ratio!" but in reality the cost of having these market concentrations far exceeds a few basis points to individual investors. I would argue that the next financial crisis will be very much linked to ETFs and related beta products.
- ttul 8y agoYes. For instance one way they make money is by lending shares for short selling.
- sdinsn 8y agoFidelity has stated they make no income from lending shares for these funds
- refurb 8y agoControl supply of what? The index fund? If you can find investors, you can create one. Also, Fidelity is one of many index fund owners and my understanding is that their market share is lower than competitors.
- cwkoss 8y agoYeah, ETFs are basically a herd-following strategy. When a higher proportion of traders aren't herd-following, this is an efficient strategy. However, as the proportion of herd-followers increases, the information held in a company's stock price increase is less indicative of faith in that company and more of faith in the overall sector. This has led to our current bubble, where everyone is buying stock, so the price goes up, so everyone wants to buy stock. No clue where the top is going to be, but it feels like this one is going to be uglier than 2008.
- 1stranger 8y ago> No clue where the top is going to be, but it feels like this one is going to be uglier than 2008. Pretty sure an asset bubble (which we've experienced many times in the past) will not be worse than the entire financial system melting down.