Wall Street WARZONE
Exchange-Traded Funds: Bogle warns, “ETFs are Brokers’ Gold Mine!” Worse, Big Commissions Guarantee ETFs UnderPerform No-Load Index Mutual Funds!
by Paul B Farrell, JD, PhD
| Discuss | Print | 5/12/2010

Noah’s Ark is one of my all-time favorite stories. A few years ago when the exchange-traded funds market began spinning out-of-control, Noah, the Ark and the flood became a metaphor for the insanity in the ETF market: Listen: “Help! The ETF zoo is flooding, launch Noah’s Ark! Forget all those congenial twosomes on the Ark. There’s mayhem in the menagerie. The zoo’s run amok. The animals are taking over, they’re in charge. We got hundreds of index mutuals, now we’re loading on ETFs with cute names like Spiders and Qubes, Webs and Vipers, Diamonds and Holders. And new actively traded ETFs.  Too many! Help! We’re taking on water, we‘ll sink!” Exchange-traded funds, ETFs, are at a flash flood warning stage. They’ve only been around since 1992. By 2001, after their first decade, Morningstar said ETFs were still a modest $75 billion compared to $325 billion in index mutual funds and $8 trillion in all funds. By 2006 the ETF market was washing over the dam, flooding the financial world with well over a half trillion assets. Today, it’s double that, as their breeding cycle accelerates. (More)