I get that, but I've always viewed that as mechanistic - because you buy the ETF in real time (just as if it was a stock, for trading purposes), the premium/discount should alternate if you're in a dollar cost averaging, regular buy (or sell, for that matter), schedule.

What Burry is saying - at least as far as I can glean - is that low price per share/low volume stocks are tougher to accurately value and could potentially be this "bubble" - and I say, only if they are all overvalued. If (much like discount/premiums) in the aggregate, they wash out (which without researching I must assume happens over time) and zero out each other, it should be the rare time when someone gets badly screwed. And a handful of folks getting screwed occasionally isn't a bubble.

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Posted by LSUcam7

Member since Sep 2016

7918 posts

Posted on 9/6/19 at 11:36 am to Ace Midnight

The only thing standard index ETF purchases do poorly is reward overvalued stocks and under appreciate companies that have better outlooks versus current market “vote.”

The tax efficiency, costs, liquidity and structure make up for some of these shortcomings.

And to the poster who said ETFs don’t own the underlying stocks, not true. SPY owners actually have ownership in the underlying securities. Highly liquid ETFs carry a tight spread on premium/discount, so unless you get a bad execution price, arbitrage in the markets remove the risk of paying way above/below NAV.

ETA: If there is any excess or bubble right now it’s the perceived safety of 0% or negative yielding bonds across the globe.

This post was edited on 9/6/19 at 3:52 pm

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