on everyone’s mind

The third annual Inside ETFs conference got underway yesterday, but most attendees didn’t get into town until today. Now we’re in full swing.

I’ve been talking to people from the fund sponsor side as well as the market-making and plumbing people who facilitate millions of ETF trades each month. Here are the topics on everyone’s mind at the moment…

  1. The dollar is wrecking everything. Canada’s currency has plunged 40% vs the greenback, which is fairly unheard of. And that’s just a nearby case in point. All over the world, countries trying to maintain dollar pegs are watching their reserves go up in smoke.
  2. China hard landing is now consensus. Two years ago, consensus was that China had some debt and economic issues but would be okay. One year ago, the Shanghai Composite was signaling a degree of success in the handoff between infrastructure spending and consumer spending. Now everyone’s thinking we’re a few innings into a collapse. If the consensus wasn’t right before, why would it be right today?
  3. Oil is the key to the everything. Everyone needs it higher – governments, stock markets, industrial companies, producers, credit investors, etc.
  4. Late August was a sneak preview of what we can expect the next time there is a global panic overnight and the futures go limit-down. The market-makers seemed to have made money by restoring efficiency to the ETF market that morning, when bid-ask spreads blew out and prices were between 10 and 15% away from true net asset values. They are now split in their opinions about whether or not something similar will happen again – particularly in junk bond ETFs. There’s lots of talk about instances where there are simply no bids at all for the popular high-yield ETFs.
  5. Sentiment is terrible. No one in plain vanilla index ETFs made money last year for their clients. There are 2200 attendees registered for this conference, with the majority being financial advisors. It hasn’t been an easy time for the beta bet.

I’ll have more later. I’m heading down to hear what Jeff Gundlach has to say about the US economy. Watch for my CNBC hit at around 12:15 if you can.


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