To add to the “against camp”, Zerohedge just published a
post, citing Eric Peters, the CIO of One River Asset Management:
“The people who are
indexing now are the same ones who were selling in 2009,” continued VICE,
agitated. “I just spoke at a conference filled for wealth advisors from all the
major players. They say the same thing - today’s buyers are not long-term
investors.” They’re guys who put $1mm into index ETFs.
“When they lose 6%-7%
and decide to sell, who will be on the other side of those trades?” And the
stocks that will be savaged worst will be the ones that lagged the indexes on
the way up. “It reminds me of 2000, when people piled into the QQQs.”
“I don’t know when the
next major crisis will hit, no one does,” admitted VICE. “But I do know that
even in the next normal correction, the market’s losses will be amplified
enormously by this move away from active management.”
This means that ETF actually increases the market
volatility, especially during a downturn.
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