From the category archives:

The Hagans View

I read The Reformed Broker‘s recent post, ETF Inflation and Brown’s Law of Wall Street Product Creation, with some interest, as we cover so many new ETF launches here at ETFdb. By the way, although you could call this post a rebuttal to that link, I do have a lot of respect for The Reformed Broker–it’s in my Google Reader subscriptions–and recommend it as daily reading. But in this case, I don’t agree with the opinion of Joshua Brown, who pokes fun at the ETF issuances this year by referencing Brown’s Law of Wall Street Product Creation: “Wall Street products decline in quality, popularity and necessity with each iteration after the original.”

Now, I can’t argue with the overall sentiment of Brown’s Law. But I don’t think it’s universally applicable: did mutual funds decline in popularity after their initial wave of popularity? And can we really conclude that ETF issuances are overdone, when, until recently, our ETF choices for exposure to the investment-grade corporate bond market–a huge sector of a huge asset class–total a whopping one single fund?

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“The first rule of investing is don’t lose money; the second rule is don’t forget Rule No. 1.”

Those who took Mr. Buffett’s words to heart were better protected in the past year’s drawdowns than those of us who chased returns. Of course, asset allocation’s reputation as the basic capital preservation tool has taken quite a beating, the naysayers claiming “correlations go to one in times of stress” and “buy and hold is dead.” [click to continue…]

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When the economy tanks, Treasury bills become a very popular investment. The downside is, when you combine increased demand for government bonds with very low inflation, these same Treasury bills pay extremely low rates of return. So low, in fact, that their real returns would virtually wiped out (and possibly turned negative) should inflation return […]

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