YouSaid · the spoken record

Tom Lydon

lines on the record: 103
first: 2018-06-11
most recent: 2018-06-11
sittings or episodes: 1
sources: podcast

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“Wrap it up and come home if you want to, and that's what I did when I landed at Fidelity, or I'd still be selling cough drops if I didn't take the risk.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“We're all conditioned. Got to go to school, got to get good grades. You know, you play some sports. You're a good participant in the family. You need to have a well-thought-out career. My first job out of school was working for Richardson Vicks, selling cough drops and nyquil and oil of a lay. I took it because I had it. I got the job in February of my senior year at school. It was nineteen eighty two and we're coming out of recession and I was really lucky to get the job. It paid well, I got a car, I got an expensive port. My first area was Westchester County, Queens and Harlem. Not that bad, but I got a promotion to handle North and South Dakota, western Wisconsin, and the state of Minnesota, selling cough drops, not that difficult. And after three months, I called my dad and I said, I'm not doing anything. He said, you got a good degree.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's somewhat similar to the last one, which is you need to take risks. And I really encourage people to take risks. The best thing you can do is take a risk and fail because that's the fear of failure is the number one thing that holds people back. And early on,”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“Think started my own business, and you know, there are a lot of people that just have a tough time making that move. So I would just encourage folks today because things are changing so fast. Technology is changing so fast. Time goes by really quickly. And I used to be in this business, the young guy, they could stay out till midnight. And, you know, at the conferences and this and that, I just can't do it these days. And when I sit around people and inevitably I'm at 58, the oldest by far Can't get that time back. So I would just say, look, if you're thinking about something and you have conviction, go for it.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“One, you really need to listen to. Right, right, right. But I like on the weekends. Going down to the beach and I walk for maybe two or three hours. I listen to you. I listen to Meb favor. I listen to Patrick O'Shaughnessy. And a handful of you guys really get it right. And it may be not just the investment aspect, but you're finding out about people and real people. And I think that means something. And now I'm taking it to I'm on the plane or I'm driving in a car. I'm reading all day long. We're at our computers. We got all the screens going all day. It's kind of my personal time and I really, really enjoy it. So congratulations to you and everything that you're doing, Ted.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, some of the liquidity providers in the ETF space, the Susquehanna's, the Walk Beths of the world, the Cannon Fitzgeralds, do a good job in giving a daily tally of what's gone on in the marketplace relating to ETFs? And if by chance you're interested in ETFs and you can get on those lists, they're really telling because they go through the market in one page and kind of talk about what's been going on. So I love that. But actually, more importantly, and it's kind of related, it's back to this podcast thing. I've become like a podcast freak.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“They just make it a priority. And boy, you know, I think sometimes in business, we're fortunate to meet a lot of people and we're at conferences. And I stumble sometimes, but I look at them and still they're in their 80s and they're in great shape, knock on wood and it's just really great to see that they continue to do this. And we've learned from that and my kids learned from that. And I just think that forget about the business aspect of it. Just the human nature of it, it really means something.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“My mom and dad are some of the nicest people in the world, and one thing that they always do when they see people is they look them in the eye, they shake their hand, and they always remember their names, and they always remember something about them. And these are qualities that they've taught my brother and sister and I, and I don't do it enough. We really try to teach our kids this, but it's just basic kindness. But remembering names, and I'm challenged with that”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“And part of it is, I mean, I feel like if we can put a man the moon in 1968, we can figure out a way to find ETFs into 401k plans because that change in expenses from 10 basis points to 80 basis points is just huge. It means a lot to individuals. And I talked to young people all the time. I encourage them to participate in the 401ks, but most importantly, allocate the right way. And I just think we could do a better job”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“I feel strongly about this because I think all the good things that ETFs have to offer, they fallen short in making their way into defined contribution plans of 401k plans. They're available to some degree, but just to give you an example, out of every dollar that goes into Fidelity Mutual Funds, 75% go in via 401k plans.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“Those of us who are Red Sox fans look back on those times that we were with our loved ones who are no longer around, and it really meant something. I had my three kids sign contracts on the day that they were born to be Red Sox fans and to be with my oldest son who was nine and”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I think I mentioned I grew up in the Boston area, and most people in Boston have had some pain over the years. But in 04, when the Socks, I know, I realize I'm on Yankee territory right here. You are. Okay, go ahead. But in the story is this. It was not just great for the win. New England Sports Network did a documentary on what it meant to families and for generations. So when I grew up, my grandfather died when I was four. My grandmother moved back in with two of her sisters that never got married into the house that they were born in. And when we were over there during baseball season, The TVs would be on the radios would be on, and there were just huge Red Sox fans. They lived into their 90s and they weren't around.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“Since then we've really taken it on to be one of the leading educators for financial advisors and institutions on ETF strategy. So we do that not only through our content, but we do it through webcasts. We do more webcasts on ETFs than anybody in the world. We do virtual conferences. We'll have 3,000 advisors show up for a five-hour virtual conference. a lot of fun there because again when you look at the average advisor that's embraced ETFs It's not the one that's still stuck in mutual fund land. It's the one that has younger people, embraced technology, thinking about growth, thinking about risk. It's the new wave and we want to communicate with them that way. So we've, even though I'm old, I'm trying to embrace social and get some young people in there to keep all that stuff going. We do a lot of videos. I've written a couple books.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah. So it all came out of our advisory business. We began shifting from mutual funds to ETFs in the early 2000s. People are saying, well, what's an ETF? We developed ETF trends with the idea that just to educate clients and prospects. And then all of a sudden, the more we wrote, the more people showed up. ETF issuers started coming to us and saying, can we advertise on your site? And we woke up one day in the publishing business. So this was 2005, right? So a long time ago, we're thankful to be ahead of the curve.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“Everybody is looking for research and for guidelines and ideas and ETFs. The media is playing a big part of it. What you're doing with podcasts, what we're doing with social media as far as discussion, videos. And it's not just like modern media like CNBC and Fox, but you're seeing advisors pop up on YouTube all the time talking about different strategies via seeking alpha. So there's just a huge amount of resources that are available and advisors are finding those resources that they like the best themselves.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“The story about explaining ETFs to Chuck. Now ETFs were very disruptive to Schwab because Schwab had this mutual fund platform where they were making a killing. And when Chuck came back, he sat everybody down and said, hey, we need to pay attention because this is what we're all about. It's tax efficiency, it's diversification, it's liquidity, it's low fees. We need to embrace that. It's going to be painful. And they did it and they've just done a great job. So I think that's another area that we need to research. So it's amazing how...”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, like you said, obviously the issuers, and there's more competition within that space. We're seeing a lot of M&A going on in the space already. There are a lot of managers who were late to the game. And rather than create it themselves, they'd want to go in and buy somebody. So it's hot right now and managers are paying premium prices for established ETF shops, even if it's small. So look out for that. The platforms, the schwabs of fidelities, the TDs of the world, where they made a ton of money in the past and their mutual fund platforms, they now have no transaction fee ETF platform. So you can buy and sell ETFs through Schwab for no fee, and that's subsidized by the relationship with the ETF issuer. So they're paying to be able to have that, which is great. I mean, I can remember meeting Chuck Schwab's manager, one of his money managers in San Francisco. And he told me.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“What are the businesses that have really thrived and will in this space? So you've mentioned the big index providers. So we know that those are big businesses. And we know that that's concentrated. But you have all these products that probably aren't that big. So as you look at that whole ecosystem, the fund management providers, you mentioned strategists, advisors, where do people who think that ETFs are going to continue to grow and explode over the next 10 years? How do people plug into that and provide value to their clients? And who are going to be the winners in terms of the business?”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“If you're looking for alternatives or commodities and all those different choices, but they really haven't accumulated a lot of assets up to this point. Eventually, just like the fund industry, when something's hot, all the money will flow in. But you can't say that you didn't have choices there.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“There are a lot of choices right now, which is fantastic, except there's not a burning desire for them. What tends to happen, and Ted, you know, people always buy it after they already needed it, right? So right now, rising rate environment, we've been talking about it for five years. Are we finally starting to feel the pain? Maybe. So there are definitely alternative strategies in that space that I think can do very well. On the equity side as well, long short, we'll probably have a period of time in the next three to five years where it might be able to show some alpha. Fantastic. Commodities. They've been on love for an extended period of time. And there are a lot of choices in that space that you can slice up even agriculture. They'll have wheat, they'll have corn ETFs. So all the choices are there. You know, you're like a kidnapper.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“Most because of this bull market and stocks and the bull market and bonds, people haven't needed that. I think they will need that in the future because you're going to need people to help guide you through the trends, the ups and the downs. So I think we'll see that. The ETF issuers are in fact creating their own portfolios as well, not only using their own ETFs, but using their competitors' ETFs within portfolios. And they'll make them available too. So that's kind of the next wave of kind of portfolio management in the ETF space.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think a couple things. First of all, ETF strategists are a whole ecosystem unto themselves. They are in fact advisors who manage money for their own clients and created portfolios of VTFs with specific strategies in mind. They made them available to other advisors and to individual investors and now their policy. And you want a specific strategy and you don't want to have to make all the calls yourself, you can actually now see published returns that go back, you know, five and ten years with some of these folks.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it will. I think we will see chasing hot managers. I would say robotics, for example. There's a robo global that had been around for five years, hung under a hundred million dollars. And then all of a sudden people got it. And now they're at three billion in another year. That's not going away. I think we're going to see that in the technology space. And we saw this in the technology space in the 90s. Remember the hot fund managers that were out there? They built fun companies all around different technology spins. Huge amount of money. And then poof, it went away. But it's not 1999 today. Valuations seem to be very much in line.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“ETF issuers start to promote and educate more about spreading outside the major market indexes. I mean, you look at gunlock, he's got a great portfolio, but he's got over 50% in mortgage-backed securities, right? Now, that wouldn't have worked back in the financial crisis, but he's okay with doing it right now, right? And as long as people trust your active manager, great. Will he be there and being able to protect you in the next downside? Yeah, I love the fact that there's more active coming to the space, but we will, as we point out, eventually go get full circle because those advisors want to have guys like Gunlock and Gross on their bench.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“The key is can they outperform the indexes? They think they can and they've actually had some periods of time of outperformance. Will we see that continue? You know, I think so to a great degree. And I think we'll also see”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“So the great thing is the Bill Grosses and the Jeff Gunlocks of the world have found at home in the ETF space. We've seen the beginning stages of rising rates. We've seen active managers like Gross and Gunlock and now we've got some rock stars in the ETF space back to what it was. Right.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, similar to what we talked about in the equity world, then the fixed income world does have this, whether you call them factors or they're different types of security ETFs. And you mentioned active fixed incomes. What's happening there?”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“is doubled since that period of time. We're now in a situation where institutions and advisers still are tracking the Barclays Ag, and many don't realize those important aspects. We know that treasuries in a rising rate environment get whacked pretty hard. So why, if you've got all the tools to kind of construct your own index, why aren't you not necessarily buying treasuries but buying the corporates, buying bank loans, buying foreign bonds to kind of create your own index? And some advisors and institutions are in fact doing that and using ETFs as a tools to do that.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“Not tested yet. We just haven't seen it. So really it was a drop in the bucket in assets that we had. Very few fixed income offerings back in 07 through 09, but there were some and they were notably affected if we go through another period of time like that with that much more money in the ETF space will it happen? But, you know, it's a different world. I mean, the banks are that much more secure today. So I'm with you. I think, hey, we always want to look out and see where those potential landmines. What I really like about the fixed income space is there's more choice. So there's so many asset classes now in fixed income via ETFs. The Barclays Ag is not the Barclays Ag that it was at the end of the financial crisis, right? So the credit rating is a lot less today than it was back then, number one.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“In emerging markets, for example, both on the bond side and then the equity side, with the valuations, the diversifications in mind, somebody like a rob are not that I talk to on a regular basis who personally has fifty percent of his individual money in emerging markets and said, you just don't see valuations like this with PE ratios around 12 right now. I think you're going to see it's the normal markets, it's the ebbs and flows. And the cool thing about it is emerging markets have really stepped up and more of these developing markets see the opportunities to get more of US money. I think it's going to continue to improve, but we're always going to see those anomalies where some underline is going to go under or be affected. Is that ETF and that index diversified enough? Will it really smart and hurt bad? Will it put a bruise on the industry?”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, first of all, and emerging markets have, as you know, they've come a long way in the last ten years. And these countries, they want participation, they want money, so their accounting methods have stepped up, their technology has stepped up, and then the issuers that are putting these underlying indexes together are testing them to make sure the liquidity is in place. Is that always going to hold? Who knows? Is there exposure there? Maybe there is. Is there a chance that at one point in time we're going to see an underlying bank and an emerging market fail where that's going to affect the pricing? Probably, and that's the way the markets work. Today, would you stay away from emerging market bond ETF because of the possibilities there? Man, the yields are great. The valuations are awesome, and I still can't believe in talking to advisors when we talk about the opportunity.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so those are trading desks. That's not mom and pop getting sent a whole bunch of munib bonds. Correct. Okay. How about pricing distortions? So with more and more money coming into these ETF index funds, particularly in some, not the SPY, but in an emerging market bond index or something, you hear about if the particular bond is in the index, that price can get marked quite differently from a similar bond that's outside the index. How does the ETF ecosystem think about that”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“Have very liquid underlying, and they do a good job in making sure that happen. Okay, now there was an exception. 2015 had a little bit of a sell-off in the Muni market. A lot of people can remember that. What was interesting is funds were being sold, individual issues were being sold, ETFs were being sold. And for the first time, and we hadn't seen this happen before, some redemptions were actually met in kind. So rather than getting the cash, you actually got the bonds themselves. Kind of cool because funds have always had that in the prospectus. They can redeem in kind, and that's going to deter trading to some degree. But some of these desks, these authorized participants, didn't get the cash. They actually got the bonds themselves. And this was just a short period of time. But this is one way that we can, I think, have confidence that there'll be liquidity.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“Part of that is most of the indexes and most of, so we're going to talk a little bit about active fixed income maybe in a minute, but most of the traditional index-based strategies and tools that are out there in the ETF space.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“And when you hear about it, you really hear this notion of this sort of liquidity mismatch. You hear mostly about high yield bonds and maybe emerging market, high yield or emerging sovereign bonds. How does it reconcile that you have underlying instruments that are just not as liquid as the vehicle itself?”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“Who are trading bonds on a regular basis that said each yefs are the best thing that happened to the marketplace as far as price discovery. Price discovery in stocks is pretty easy. There's a high level of confidence. On the fixed income side, still kind of a little loose, but actually because there's more liquidity in the ETF space, we've seen better price discovery because ETFs have come into the marketplace. And part of that is because even though funds have been around for a longer period of time, there's not as much trading. Tends to be more trading in fixed income related ETFs and especially those underlying that are tied to those indexes.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, my radar's up all the time because we're huge fans of ETFs and I feel obligated to the advisors and individuals that we try to educate on a regular basis try to expose great opportunities at the same time where are the risks. One area that pops up is fixed income. People say, hey, we got a lot of money here. There's going to be a problem when there's a sell off in the bond marketplace. It's all going to be on the ETF market. Okay, so a couple things. First of all, there's about 700 billion dollars in fixed income related ETFs. There's probably $4 trillion in fixed income mutual funds. So just to kind of put things in perspective, if there's going to be a sell-off in funds ETFs, there are going to be a lot more funds that are being sold than ETFs. Number one. Number two, there are a lot of people...”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“They've got to sell, right? And the more they buy, the more it affected the price. And on top of that, you had a couple other VIX ETFs that were actually having to go and do the same thing. Not to that extent. And once it's all settled in a 15-minute period of time, and you can imagine what that looked like if you're on a desk, right? Then all of a sudden in 15 minutes, 95% of the value declined. The ETF itself was trading at about $98 at the close, and it opened up at about six bucks.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“Let's walk through this really slowly to make sure I understand it. So you're at 359. The VIX is at 40. This short Vick's product has a billion dollars of orders to sell that VIX, but they haven't executed it yet. So, what do they do”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“until after the close. And you can actually settle up until 4.15. So can you imagine in the futures market going in and having to buy futures and a billion dollars worth, it just was a shit show. It was crazy. So the more they bought, the more they got away.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“Inversed VIX. So you basically short the VIX. So, as you saw the VIX double in a certain day on the upside, you're thinking, hmm, probably going to settle tomorrow. So I'm going to go in and buy some of that. And then if it does settle, and VIX moves from 40 back to 20, I got a chance to make some money pretty quick, right? And everybody who had the same brilliant idea that I did, they were absolutely right because that did in fact happen. The next day, the market came back, the Vic settled. However, one important component was a settlement of the ETN, which was the Credit Suisse XIV. The ETN is a little bit different. The event underlying bank, and it really is a debt instrument. Their only obligation is really, at the end of the day, to settle the trades. Throughout the course of the day, even though money was coming in and there's estimates at almost a billion dollars, he'd come into the space in the last few hours. They had no obligation to do any buying into the market.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“And I think it's a great case study, and I actually am one of those knuckleheads that actually went in and bought that thing in the final hour. And it was crazy because, in fact, so to set the case, we're February 5th, the market's declining. The VIX went from like 20 to 40 in a very short period of time. A lot of people felt that overnight markets will settle. We'll probably get some type of rebound tomorrow.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, why don't we go a little bit through what happened? I think people who care probably understand it at this point, but why don't you talk a little bit about what happened? I'm really more curious about what's waiting in the wings for the next problem like this.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“Choices. Yeah, I just feel like in a capital markets world where everyone is always complaining about everyone being too short term, this is like the worst of the worst, right? But that's fine. Let's talk about landmines. So we just saw this VIX ETF, which is similar dynamic, right? Highly levered, probably the people who owned it or were shorted or whatever didn't really understand it, but highly levered vehicle. You have a move that was different from the pattern over the last year up in the VIX. And the next thing you know, the ETF blows up. What's waiting?”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“And they feel deep down. I'm doing great because I'm short. And then they don't pay attention. They look at it for a couple months, right? So it's like anything. A, you got to look under the hood. And B, if it's something like that, you have to look at it every day. You have to understand it. And I have to give these companies a little bit of credit because early on maybe they didn't do as good enough a job trying to educate. But if you look at, and I'm not just talking about disclosure stuff, I'm talking about white papers. You know, don't do this, don't do that. I think they're doing a decent job. But that negative compounding over time, it just can absolutely kill you. On the other hand, if you're a short-term trader, there's huge opportunities there and a lot of different choices.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“Paper about this like seven years ago. I think that most of the people that buy them. that the rebalancing effect from day to day just eats you alive over time. So you go through a 2008 and be 2x short and lose money if you held it for four or five months. And I just think a lot of the people that I've seen buy these things don't understand that math.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, can I paraphrase what you said with strong bias, clearly? Yeah. and that the Leverity TF only makes sense for someone who believes that they have a trade they want to make in a short term market timing way. Absolutely.”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“Into other areas that are a little bit more esoteric in the inverse and leverage space. You say, geez, you know, why in the world would you ever want to do that? The cool thing about ETFs, they're not going to bring them to market unless a group of people haven't come forward and said, hey, I really like to do this. Could you build it?”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“It doesn't matter because when you look at the underlying volume, it's tripled. So more and more advisors and institutions are using them. Self-directed investors, there's some that are more sophisticated in using them. Again, when you get into the two and three times leverage, if you're not using them over a short period of time, that negative compound infect really works against you. But, you know, on the other hand, if all of a sudden there's a huge valuation opportunity in gold miners and you see a huge sell-off in the market 7 or 10% in a given day and you say, hey, look, I think there's a swing opportunity here. I'm going to go in for two or three days rather than buying the individual issues or buying an actively managed gold miner mutual fund. That's something that you can watch inner day. And if inner day something happens, you can get out as opposed to the mutual fund itself. So I think you can always make the case for it. And then when you get...”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source
“Right. And that's it. But for the average individual investor, it's dynamite. They're going to blow off a toe or something like that because it just ends up promoting bad behavior. However, their institutions, their advisors who do a really good job using them. And even though the asset growth in inverse and leverage ETFs haven't really kept up with overall asset growth in ETFs in general,”
2018-06-11 · Capital Allocators · Tom Lydon – ETF Trends (Capital Allocators, EP.56) · IDENTIFIED FROM THE TRANSCRIPT · source