Submitted by Tyler Durden on 06/15/2012 - 12:04 Blackrock Exchange Traded Fund GETCO
Overnight, Goldman's Robert Boroujerdi released a report whose conclusion we have been warning about for the past 3 years, which also happens to be its title: "ETFs: An Imperfect Hedge?" Goldman's findings in a nutshell: "The rise of investor usage of ETFs as hedges continues. In a bid to gain quick exposure to evolving markets, avoid single stock M&A risk or take sector views, we believe the use of “blunt force” hedging via ETFs may impair portfolio returns and potentially create negative alpha." Read that again: not zero alpha, i.e., same returns as market, but negative alpha. In other words, the great cottage industry that has been the basis for so many riches for the likes of BlackRock, and that has ensnared so many gullible retail investors, is essentially a guaranteed money losing get rich quick scheme?
Who da thunk it.
What is more curious, are Goldman's observations on historical cross industry correlations because they show that in the grand scheme of things, virtually everything trades as one!
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http://www.zerohedge.com/news/when-everything-trades-one-goldman-declares-war-etfs-says-may-generate-negative-alpha
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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