Trillions

UBS recently acquired its troubled neighbor, Credit Suisse, creating a Swiss megabank. How it all went down led to an avalanche of headlines, with a few interesting angles for investors in things such as exchange-traded notes and CoCo bonds. 

On this episode of Trillions, Eric Balchunas and Joel Weber discuss some of the takeaways with Alison Williams, a senior analyst who covers investment banks and the asset management industry for Bloomberg Intelligence, as well as ETF analyst Athanasios Psarofagis.

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In barely a week, three banks a lot of people had never heard of—Silvergate, Silicon Valley and Signature—suddenly became toast. The US government found itself playing backstop to prevent an escalation as whipsawed investors hoped the worst was over.

But is it? And in what kind of funds can these banks stocks be found? How will they affect performance? Hint: It would have been a good week to short some of Jim Cramer’s top picks. 

On this episode, Eric and Joel speak with reporter Katie Greifeld and Athanasios Psarofagis and James Seyffart of Bloomberg Intelligence. They discuss which exchange-traded funds saw the most action and why, the impact on returns and volume, and some of the less obvious ripple effects.

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Jim Cramer—the host of Mad Money on CNBC—makes a lot of investing calls. It’s part of his shtick. And as you can easily divine from social media, not all of them pan out. The new Inverse Cramer Tracker ETF (SJIM), which might be one of the most entertaining exchange-traded funds ever imagined, is aiming to turn Cramer’s “Midas touch” into big returns by shorting stocks he’s bullish on. It also goes long on Cramer’s bearish bets. For good measure, there’s also a Long Cramer Tracker ETF (LJIM).

On this episode of Trillions, Eric, Joel and reporter Katie Greifeld speak with the man behind the ETF, Matt Tuttle of Tuttle Capital Management. We learn how the products work, what’s in the portfolios how much cable television Tuttle has to watch.

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The Exchange ETF Conference was recently held in Miami Beach with more than 1,000 people in attendance. While the gathering was as popular as ever and networking in full bloom, the vibe was a little more subdued—likely a reflection the recent bear market. 

On this episode of Trillions, we run through snippets of several interviews with attendees, covering topics including how the conference has evolved, international investing, the rise of active, industry growth projections, crypto, gold—and even advice on how to break a full-court press from a legendary NCAA basketball coach.

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The rise of index funds, exchange-traded funds and passive investing in recent years has been nothing short of momentous, as investors across the US and around the world learn to rely on slow-and-steady returns. But there’s been rising concern over the potential side effects of this sea change in the way stocks are bought and sold. The new worry is that, because index funds (and ETFs) are so cheap and easy to access, more people will use them—and this will push down future expected returns for everyone. 

On this week’s episode of Trillions, we talk to Martin Schmalz, professor of finance and economics at the University of Oxford, about his latest paper on the topic, “Index Funds, Asset Prices, and the Welfare of Investors.” We discuss and debate his paper as well as some other concerns, such as common ownership, and whether any public policy is needed. 

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SPY wasn’t just a hit product, it was an inspiration for an entire industry to take off. But it didn’t happen overnight. It took about 10 years for the ETF structure to be utilized for other asset classes and strategies, which today seem normal but at the time were revolutionary.

On this installment we look at many of the game changing products that followed, including the first bond ETF, the first gold ETF, Vanguard’s entry and the rise of smart-beta, which was active management’s way to get into the action. 

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SPDR S&P 500, or SPY, is the world’s largest ETF today with about $240 billion in assets, but it wasn’t much to look at when it debuted in 1993. Some days it was on “volume life support,” trading as little as 18,000 shares; there was even talk of pulling the plug. Yet true believers, guerrilla marketing, and a booming 1990s stock market helped the product gain favor. And once SPY took off, the markets were forever changed. This episode also explores how SPY soon inspired a host of other ETFs, from international and sectors to fixed income and gold.

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Just as Steve Jobs and Steve Wozniak weren’t the only two geeks in a garage working on a computer in the 1970s, the AMEX wasn’t the only exchange looking to get a market basket instrument listed. The late 1980s saw multiple attempts to create something like an ETF, including SuperShares, Equity Index Participation Shares, Cash Index Participation Shares and the Toronto 35 Index Participation Units. 

Ultimately, SPY gets – and deserves – the lion’s share of the credit as the first ETF. But by no means was AMEX alone in the race; they were just the winners. This episode looks at the race, the players involved and why their products became historical footnotes. 

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When the SPDR S&P 500 Trust (SPY) was submitted to the SEC in 1988, George Michael’s "Faith" was the No. 1 song and Magic Johnson led the Lakers to another NBA Championship. By the time SPY finally launched in 1993, Nirvana had ushered in the grunge era and Michael Jordan had taken over the NBA. While the SEC wrestled with this unique product -- which was almost like a foreign object that had landed on their desks -- the whole culture had changed.

In those four long years, there was much back and forth between the SEC and the SPY teams over logistics, structure, and the creation-redemption process, which was inspired by commodities warehouses. The patience and labor paid off for the ETF's creators, who figured out how to keep fees low and also earn some unintended windfalls, such as the products’ tax efficiency.

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Government reports are known more for curing insomnia than providing inspiration for revolutionary products. The October 1987 Market Break Report might be an exception. A paragraph deep in the SEC's 800-page white paper happened to outline a “product” for trading baskets of stocks. On this episode of “The ETF Story,” you'll learn how those words gave Nate Most and Steve Bloom the idea for what would become the exchange-traded fund. You'll also hear from Vanguard founder John Bogle, who passed on Most's pitch -- and who may have shaped the ETF in the process. 

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