Over the last year, a barrage of new investors has arrived at the New York Stock Exchange. They are injecting billions of dollars into financial markets, pumping up stocks, and spawning new investment trends. The finance industry has monitored the situation closely and noticed an opportunity to peddle new merchandise on a plethora of neophytes. The exchange-traded fund (ETF) market is a prime example of how adaptive and innovative the sector is by releasing a treasure trove of products with the intent of making many people rich (or poor) based on how savvy of an investor they are. Do you feel the FOMO – the fear of missing out? There is an ETF coming soon to a brokerage firm near you.
Feel the FOMO
Did you miss out on the March 23, 2020, bottom? Did you fail to make a quick profit in the meme stocks? Are you kicking yourself for not noticing the special purpose acquisition companies (SPAC) sooner? Do you lack time to spot emerging trends? Do you lack the skills to time the market?
Collaborative Investment Securities recently announced a FOMO ETF that is in registration. The investment product will keep an eye on “securities that reflect current or emerging trends.” It will not concentrate on a specific sector. Instead, the ETF will be an all-you-can-eat buffet that includes just about everything: leveraged and inverse ETFs, SPACs, derivatives, highly volatile stocks, and anything else you would discover on Reddit’s Wall Street Bets page.
The pool of securities will feature both momentum stocks and equities that have had their “butts kicked.” The company says the FOMO ETF will stay relevant and be successful at catching trends by rebalancing each week. According to Matthew Tuttle, CEO of Tuttle Tactical Management and the individual who runs the actively managed fund behind FOMO, the portfolio will employ market trends and counter-trend models and methodologies to stay ahead of the game:
“You have SPACs, you have Cathie Woods stuff, GameStop stuff. If you are an average investor, you can try doing it yourself and look at many different products, but there is nothing that pulls it all together. We are going to be in social media, hedge funds, SPACs, ETFs, and stocks.
“We want to ride momentum, but also whatever has had its butt kicked, we want to buy into that as well. Having countertrend methodologies smooths out sudden moves in the other direction.”
Be warned: The ETF will not be tax efficient.
TGIF, BUZZ, UFO – OMG!
Last year, the global ETF industry exploded to more than $7.7 trillion in valuation, producing and overseeing approximately 5,000 ETFs worldwide. The demand is there as investors – armchair and institutional – prefer the ease, convenience, and flexibility of these investments. Young investors who made a killing from their YOLO (you only live once) trades on their BANG (BlackBerry, AMC, Nokia, and GameStop) picks want to find a place to park their windfall while still capturing the magic of the market.
Here is a list of some of the most notable ETFs that have recently entered the marketplace:
- VanEck Vectors Social Sentiment ETF (BUZZ): 75 stocks with a market capitalization of more than $5 billion that enjoy positive social media attention.
- Procure Space ETF (UFO): A fund that invests and tracks companies involved in space-related businesses.
- Horizon Kinetics Inflation Beneficiaries ETF (INFL): An ETF that finds companies that rally in an inflationary environment.
- Defiance Next Gen SPAC Derived ETF (SPAK): A fund that tracks the performance of SPACs and companies derived from SPACs.
- Horizons Psychedelic Stock Index ETF (PSYK): An ETF that gives investors exposure to companies becoming players in the emerging psychedelics health care sector.
Will a bitcoin ETF be next? The Canadian financial market already has a handful of these products. WisdomTree is attempting to become the first American company to have a bitcoin ETF approved by the Securities and Exchange Commission (SEC). If it does, it becomes one of the most valuable ETFs on the market.
Opportunity or Bubble?
While more choice is always a positive thing, no matter how much Paul Krugman disagrees, a market observer cannot help but wonder if this is all part of the everything bubble. Is it a coincidence that as the Federal Reserve floods the economy with several trillion dollars in less than a year that these products arise? The blank-check frenzy, the almost daily Dow Jones record highs, and the Reddit trade are spawns of an ultra-aggressive central bank whose new mandate ensures the stock market never crashes again. The best way to achieve this is through ultra-low interest rates, ample liquidity in the system, and keeping professional and retail traders hooked on gains. The euphoria is addictive.
Read more from Andrew Moran.