And some of the ETFs, especially in commodities and on the short equity side, appear to be almost fraudulent both in construction and representation, and are often more instruments of manipulation and raw speculation for extracting wealth from the less sophisticated than investment vehicles.
The great story of this financial era is the same of all the control frauds that have preceded it: leverage founded on paper claims, asymmetrical information, and the calculated mispricing of risk.
And when the ETFs fail it will be an echo of the market failure of 1929 when firms like Goldman Sachs enjoyed spectacular growth, promoting investment trusts, that blossomed late in the paper speculation of the 1920's, and became a major source of kindling for the flames. Enough so that John Kenneth Galbraith devoted a chapter to Goldman and the Trusts in The Great Crash of 1929.
"For a long the the New York Stock Exchange looked with suspicion on the investment trusts; only in 1929 was listing permitted. Even then the Committee on the Stock List required an investment trust to post with the Exchange the book and market value of the securities held at the time of listing and once a year thereafter to provide an inventory of its holdings...
It is difficult not to marvel at the imagination which was implicit in this gargantuan insanity. If there must be madness something may be said for having it on a heroic scale."
John Kenneth Galbraith, 'In Goldman Sachs We Trust,' The Great Crash of 1929
I do not know if we are done with bubbles. We might see another yet again. It almost seems likely given the reckless apathy of the public and the passionate resistance against reform fostered by the powerful few..."
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