According to reliable sources, the total investment in exchange-traded funds (ETF's) is about to catch up with the amount invested in active funds, if it hasn't already. There are several issues here, all mind-boggling, but we'd like to draw your attention to just one. What happens when short-sellers jump all over falling ETF prices in the upcoming stock market supernova? With individual companies, total shares outstanding quantify a limit around which our intrepid G-Men at the Securities and Excuses Commission have attempted to draw regulations to at least take a stab at theoretically protecting the basically helpless public from utter destruction during the ensuing criminality. ETF's offer no such metric, in fact, issuing whatever number of shares it takes to keep up with changing demand.
Can Wall Street Crime Families issue that total to themselves on the short side when doomsday arrives? More? How much more? What, exactly, holds the amount of mafia short-selling pressure in check under severe turbulence in an ETF market price? Will expanded arbitrage become a powder keg for the mob? If so, where does that fit in?
This is a brand new factor, criminology fans, short-sellers jumping all over falling ETF prices. Your ETF roster wasn't all that big a factor during the last go-around. Near as we can tell, who among us gets carved up, and how, loom as issues yet to be understood by your journeymen informed investors.
Too bad we'll have no clue until Lollapalooza Investigation Time arrives.
