Killer ETF

Posted: July 7, 2017 in Uncategorized

While everybody uses and loves the raise of ETF (also I do), if you were if you were to ask me what keeps awake at night I would answer Exchange Traded Funds (ETFs).

The ETF provide instant diversification on any market (also in the not so tradable ones) and the are easy to buy and sell and now represents a large part of the trading on the market.

Something similar happened in early 2000 on commodities.

In the early 2000s investors discovered that commodities were providing good diversification so they started to use commodities swap (which were covering a commodities index from sugar to soy bean to gold).

During the 2008 people in panic and in order to cover the losses of the market started to sell commodities swap. As it was easy and covering an index -all commodities fell by 60% without differentiation.

And contrary to the stock market, most commodities never bounced back.

If panic ensues in the stock market, this time it will be worse than 2008 and it will not recover for a long while. As a chain reaction the market will destroy itself.

Logically, as long as you know it, you can play a different game.

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