FYI: These are the two statements you most often hear about liquidity and ETFs:
ETFs are only as liquid as what they own.
ETFs are only as liquid as what you see on the screen.
Both of these are fundamentally flawed, and interact in interesting ways. And nowhere are there more histrionics about these issues then junk bonds and their ilk (say, bank loans).
The hand-wringing seems to be coming back in vogue, as articles start popping up about the looming crisis in corporate debt (say, these comments from Greg Lippmann at LibreMax) or Scott Minerd from Guggenheim (who’s both extremely bearish and a lot smarter than I am) suggesting at the Milken conference this week that everyone pull their money from bank loan ETFs because of liquidity issues.
So what’s the truth here? Like most things, it’s complicated.
Regards,
Ted
http://www.etf.com/sections/blog/next-bond-crash-etf-story?nopaging=1
