Growth of ETFs

Lots of new products. No one issuing ETFs can try to compete with the MERs of Vanguard. The game is over in terms of cost-cutting for ETFs.

Today there are more ETFs listed on the ARCA of the NYSE than there are single stocks. So the ETF world is growing rapidly. But almost all the new products are innovative and thematic. They're charging management fees that are 70-150 bps. But they're doing things that are different. There's also more work and thought involved than just replicating the biggest index in the world.

Here's an example of an ETF he likes to use, RSP, at 20 bps. It's an equal-weight S&P 500. ProShares recently launched an ETF called URSP -- ultra, which means it's 2x the upside and 2x the downside risk when you're wrong. URSP carries an MER of 95 bps.

Fixed income's been dead forever with falling interest rates. But it's one of the fastest-growing areas in the ETF world. Active strategies are growing rapidly versus passive strategies. Why? Because the average management fee on  passive is very low, and no one wants to compete with the Vanguards. But you can compete if you have an active strategy, while earning more in MERs. Many are worth it, but some are not.

At his conference in California this morning, he pick up a fact sheet for DDTS. For 79 bps, it gives you 10% upside on the S&P over the next year and 10% downside. If it goes down more than 10%, you're at risk, but you can't get more than 10% on the upside. Lets you make money on both sides of a market, but you are paying that higher MER.

Plunged 18.5% today on weak full-year guidance. Costco could be disrupting LULU's business with rival clothing at a fraction of LULU's cost. LULU is -56% this year. Costco's Kirkland brand is masterful in offering quality products at decent prices. The fall in LULU signals that Americans want value, not status or want value as well as status, but not feeling duped for paying full price just for a brand name. LULU should lower its price to please main street, not Wall Street.

Why Investors Like Dividends: Dividends Get You Back to the Basics

In today’s high-speed investment environment, and with trading platforms that have used gamification features such as Robinhood Financial, it is surprising how many investors do not really know what they are buying. Many don’t even care, as long as it goes up, as evidenced by the meme-stock trades that pop up — and crash — every now and then. Dividends can help remind investors what they actually own: a portion, however small, of an actual operating company. Owning shares means you are an owner of a company. As an owner, you should be entitled to some of the profits, and this is exactly what dividends are. Knowing this, you might be inclined to keep your shares longer, if the company is doing well. It can help an investor ascertain the difference between company performance and stock performance, as we are sure you are aware that these two factors often diverge.
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He looks only at companies that are fundamentally sound, with businesses that will substantially increase in value over the next number of years. Looks for catalysts that aren't yet recognized in the stock price, so they're cheap on certain metrics. His team's view would be different than the consensus view.

That strategy works well over time, and it works well in slowdowns.