The factors that brought about the tech bubble, the collateralized debt obligations crash and the rest are being replicated with ETFs: floods of cash and tidal surges of ingenuity in the markets advancing faster than the regulators’ event horizon.
via Fair exchanges?, Inside Investor Relations, 6/29/2011
‘ETFs, indexes and ‘closet indexers’ among mutual funds already make up about 40 percent of the market, I’m told that if you get up to about 60 percent, there really is no market anymore,’ Bob Monks points out. Others disagree. Additionally, Jon Lukomnik says ‘indexes provide active ownership discipline: where you can’t use exit, you use voice.’
See the FSB five page advisory report entitled Potential financial stability issues arising from recent trends in Exchange-Traded Funds (ETFs) found through Why ETFs give an uneasy sense of déjà vu, ft.com, 5/5/2011.